I usually approach conferences with mixed emotions, whether attending, learning and networking or speaking. Ultimately, for me, conferences and events are about connecting people and ideas and moving the debate and understanding forward. To this end, I was delighted to join some great folks over at EXEC Insurtech in Cologne, which for me ticked all the boxes. It had a really interesting mix of folks attending, old and new, a serious number of VCs (AXA Strategic Ventures, Commerz Ventures and many more), There were angel investors and more and, importantly, a whole host of new start-ups, many very early-stage. There were some really great ideas from outside the U.K. market, so new to me personally. And it's always great to see SPIXII, RightIndem and other graduates from the InsurTech StartupBootcamp in London with Sabine VanderLinden. See also: InsurTech Boom Is Reshaping Market   In addition to a number of panels where I was able to share the latest views from the Capgemini 2016 World Insurance Report, I was asked to share some perspectives with the group on InsurTech. I wanted to share the same here.

1. We are in a bubble. By "we," I mean, those who are here at EXEC InsurTech and see the opportunity. Not everyone sees the world this way, yet! Many of you know I'm a firm believer that disruption is here and now, coming at us thick and fast.
2. Stand out. Whatever reports you read, be it the tech journals, insurance news or the traditional annual reports from existing carriers, they all talk to the disruption of the traditional insurance carrier (following the "unbundling" of the banks). There are now hundreds of start-ups in this space. It always amazes me to hear Sabine and theStartup Bootcamp team talk to how many start-ups they talk to prior to shortlisting to their final cohort. Make sure that when you are on stage and you have three minutes to pitch, you stand out. Don't be the me-too.
3. There have been no really big failures yet. There is excitement and buzz around what people are up to, where disruption is coming from and what part of the insurance value chain people are attacking (sales, underwriting, distribution, etc.). Given this, there has been record investment in the sector; the prize is huge, with a $5 trillion market opportunity. Matthew Wong and the folks over at CB Insights continue do an amazing  job at tracking deal flow, more than $1 billion so far in 2016. The example nearest to a failure that I called out was Zenefits, given its recent re-valuation. Another one was mentioned from the audience -- CSS in Switzerland, I believe, but please correct me if I have this wrong.
4. Partnering is key.  Given the history, tradition and especially the speed of the industry, my view is it's best to partner and work with the traditional players as opposed to going all out head-to-head today. This may, of course, change over time. There are some really great examples of partnership already.
5. Evolution or revolution? This is one of my favorite topics. Unlike banking, where I believe #FinTech has unbundled individual services ofmatthew  a bank, insurance start-ups have taken a different approach. Underwriting, for example, is not a category all unto itself nor one that I have seen folks go after in isolation. All need other parts of the insurance value chain to be successful. There are great examples of start-ups evolving each part of the value chain, across products, distribution, sales, etc. Matteo Carbone put together some good thinking a while back on this with his mental framework covering awareness, choice, purchase and use, as did Venture Scanner here in a series of visuals. For now, we are primarily digitizing and simplifying the existing approach and process.
6. Product mindset. We simply need to move away from this. It will take generations for a complete mindset change. It will happen, in my view, when start-ups move to an "all risks" or truly customer-centric approach (not just better service experience). My two golden rules here remain: relevance and convenience. At what point does insurance become frictionless?
7. Every carrier is partnering. Pick your partners carefully. I was talking to one of the start-ups that has now engaged in 30-plus pilots. While this is really encouraging and great for the start-up, every carrier is a) partnering, b) building a lab c) working with an accelerator. Make sure you don't become part of a badge-collecting journey. Are your and the insurance carrier's ambitions, culture and outcomes aligned? Make sure we are all walking into these partnerships with eyes wide open and with a clear plan of what happens if a partnership is successful.
8. AI/data/bots are big and cool. That is all! There are some great use cases and examples developing here. We heard from SPIXII and Insuragram, just two examples of how AI and bots are looking to solve some of the business and engagement challenges.
9. Don't be the fad. See #7 and #8. Over the last few years, I've seen the rise and rise of big data. Then came digital. Now it's blockchain and chat bots. My point here is that these are all great technologies. But don't be the technology looking for a business problem to solve -- sage old advice you will hear again and again.
10. Beware of the silos. Many start-ups are working with global carriers. Just because we work with them in one country doesn't mean they all talk, are connected seamlessly internally and exchange ideas and key learnings. The same is true for in-country and across lines of business. Many people operate in silo'ed P&L models where you may end up doing multiple different engagements with the same global carrier. Joining the dots may not always be right for you. Think speed! You're in a relay race. Moving parts of an organization to the start line is often easier than moving the whole team at once. As the saying goes,"think big, start small, act quickly."
11. Customers (end customers) need to be ready.  With all these cool new ideas and apps that can disrupt traditional insurance, our challenge is often not whether something can be done but whether customers will be ready. We know it can be done; everything is possible! But there are many reasons why customers take a while, often a long while. Telematics is 25-plus years old, but it's only now becoming more widely adopted. Even now, take-up is still relatively slow (except in Italy).
12. Talent. Above all, there is an arms race for talent out there. Bringing together InsurTech and traditional insurers is one of the best ways of ensuring (no pun intended!) that we continue to attract and leverage some of the greatest talent in the marketplace, promoting Insurance along the way as a great place to excel and challenge the status quo.

See also: InsurTech Forces Industry to Rethink So back to one of my initial comments -- what conferences do for me. At this one, particularly, I was delighted to meet with so many folks looking at the market from different angles. Conversations about Europe were especially interesting given the recent U.K. BREXIT decision. Finally, getting to exchange ideas with Matteo Carbone of Bain and Florian Graillot of AXA Strategic Ventures in person was the icing on the cake. Gentlemen, until next time. My thanks to Robbie Boushery, Moritz Delbrück and the team at Pirate Summit for bringing this all together. So what do you think? Good sage advice? Something missing? What would you add/remove from my list? Looking forward to continuing the debate!

The insurance sector, which is considered to be fairly traditional and resistant to change, is currently being overtaken by a macro trend of digital transformation. This is causing institutions with hundreds of years of tradition to rethink their insurance business models, by identifying modules within their own value chain that need to be transformed or reinvented with the help of technology and data usage. InsurTech represents a macro trend destined to take on an ever-growing relevance in a world that tends toward hyperconnectivity and the infiltration of technology into all aspects of society. The insurance business will become more InsurTech-oriented, and technology will have a decisive role in reaching strategic goals. This applies to insurance companies, reinsurers, intermediaries and newcomers. During 2015, InsurTech start-ups received around $2.5 billion in funding, according to LTP.

Investors liked B2C #insurtech I saw > potential on B2B2C to concretize innovation@Minh_Q_Tran which is your view? pic.twitter.com/g6F6VOMMQn

— Matteo Carbone (@MCins_) 25 March 2016

The number of innovative initiatives is growing exponentially, raising interest for all phases of the customer journey and all steps in the insurance value chain. This reveals a very crowded map of innovations that were introduced by the incumbents of the insurance sector or by start-ups. The innovations can be divided into seven macro areas: awareness, choice, acquisition, use, recommendation, Internet of Things (IoT) and peer-to-peer (P2P). One of the main challenges for analysts, incumbents, start-ups and investors is identifying the degree of relevance that these innovations represent for the insurance sector. See also: InsurTech Start-Ups: Friends or Foes? After many discussions with venture capitalists and insurance thought leaders, I’ve come up with my own answer for the following question: What is the potential of each InsurTech initiative? My approach is based on four axes related to the fundamentals of the insurance business:

• Profitability: Impact that an innovation may have on the level of profitability of the insurance portfolio, acting on the loss-ratio level or on the cost level without an increase in volume.
• Proximity: Contribution for creating improved relationship that is based on numerous touchpoints during the customer journey. Bain’s international research reveals that the customer satisfaction (measured with the Net Promoter Score approach) of those clients that have interacted directly with the insurance company is markedly superior to those who have not. Obviously, there is a predictable relationship between satisfied clients and their economic effects.
• Persistence: The reach of the new initiative in terms of renewal rate increase, and thus of stabilization of the insurance portfolio.
• Productivity: Evaluation of the contribution that a certain InsurTech approach can have at the top-line insurance level in terms of client acquisition, cross-selling or additional fee collection for services.

These considerations refer to a specific innovation initiative and are not absolute. On the contrary, they should be customized to each specific market, line of business and client segment. In a similar manner, an insurance company has to make these considerations by taking into account both the contribution brought toward the achievement of strategic priorities and the coherence with its distribution approach. I am convinced that evaluating InsurTech opportunities based on this pragmatic approach clarifies the rationale behind each innovation initiative. It facilitates the prioritization of initiatives and ultimately helps focus investors’ and innovators’ efforts. If we consider some connected-insurance use cases, it is easy to understand the reason why the World Economic Forum identified connected insurance as one of the main insurance innovation trends:

• Profitability: From this perspective, the experience of the Italian insurance market in motor telematics (which is the most advanced market at an international level, with a 16% penetration for private use vehicles) shows how this approach is able to generate actual value for the insurance bottom line by acting on risk selection and the claims management process.
• Proximity: Nowadays, within the connected car line of business, there are dozens of different services based on data collected from black boxes—services that the insurance company offers to the final client. By focusing instead on health insurance, the Chinese insurer Ping An has built an initiative based on connected health that recently raised a round A financing of $500 million, with an valuation of $3 billion.
• Persistence: The experience of Discovery Holding in the field of protection has shown relevance when it comes to reducing the lapse rate by using the Vitality approach—which works by identifying and rewarding healthy behaviors.
• Productivity: The data recorded by sensors represents a great opportunity for getting to know customers and to send personalized offers at the best moment possible. This potential, which is yet to be explored, is precisely the driver that helped create the start-up Neosurance, recently awarded the IoT Newcomer award at the Insurance IoT Europe Summit.

These insurance approaches suggest the use of sensors for data collection for different business lines. This data refers to the status of an insured risk, and to the telematics for remote transmission and informatics management, alongside the insurance value chain of the collected data. These approaches represent a great opportunity for connecting the insurance sector with its own clients and their risks. See also: Secrets InsurTechs Need to Learn Italy is today one of the most advanced ecosystems of connected insurance, encompassing 4,9 million auto insurance contracts, which include a box provided by the company, and almost 50,000 home insurance contracts, which are characterized by the use of sensors communicating with the company. In this context, the Connected Insurance Observatory was born: a think tank dedicated to spreading the culture of insurance innovation. I put together the Observatory at the beginning of 2016 with the support of the Italian National Association of Insurance Companies (ANIA). The Observatory has made it possible to unite 30 primary Italian and international insurance groups and some 15 other interested players to bring a contribution to the InsurTech story in the making. https://youtu.be/yYIfhe6f0pQ?t=42s

Amid the merry-go-round of new objectives, targets and budget allocation that keep many a leader of an insight team busy, there is a question of “Who?” Who will do the work? That is probably accompanied by “how many people will there be in my team?” and “do they have the skills and motivation they need?” At first, this can all feel rather daunting. But it will be helped by, first, being clear on your goals. If you know what matters most and why, you're in a better place to make those ever tricky people decisions. Staffing your team has more potential options than in years past, with more data, analytics and research agencies, consultancies and contractors. Determining which route to take requires some thought. In my conversations with leaders, it sounded like different businesses favored different resourcing models, but it was unclear which was most popular. For that reason, we ran a survey among our readers about customer insight team resourcing models. Thanks to all of you who took part. The time has come to share those results. First, we asked about how customer insight leaders currently resourced their four technical teams that make up holistic customer insight:

• Customer Data: For this team, as you can see, most leaders (67%) replied that all members of the team were employed by their company. The only alternative resourcing approach captured was a mixture of employed and contractors — but still all part of an in-house team. Perhaps it's the greater ease of recruiting these skills, or the sensitivity with regard to customer data, but this team doesn't appear to be a focus for outsourcing at the moment.

• Customer Analytics: For this team, there was a similar picture, with an even bigger majority of leaders (80%) stating that all the members of the team were employed by their company. Once again, the only other alternative captured was a mixture of employed and contractors as part of an in-house team. These results were perhaps more surprising, given the much-touted difficulty recruiting analysts or data scientists. Perhaps many businesses are still recruiting rounded analysts rather than the more limited pool of data science graduates. The result certainly flies in the face of advertising by many outsourcing analytics providers.

• Customer Research: Here, we began to see a slightly different picture. Only 50% of leaders replied with the most popular resourcing model thus far, that all the members of the team were employed by their company. The other half were split between outsourcing their research provision entirely and a mixture of both approaches. Sadly, this doesn't surprise me. I've found many a CMO or CEO who assumes that research is an ideal candidate for outsourcing and just asks the agency to “do more.” Sometimes, this is down to the internal team not demonstrating clearly enough the value they provide, so they are simply being perceived as “research buyers.”

• Database Marketing: Last, but definitely not least, is this commercially focused insight team. This category showed the most variation in resourcing models. More leaders (40%) still chose the most popular option; all the members of the team were employed by their company. But all the options we have seen so far were also used — contractors, outsourcing and a mixture of all of them. Given the more visible dependency that most businesses have on this team to hit income targets, I was slightly surprised by this.

As always in business, past approaches are no guarantee of business strategy, funding priorities or resourcing model preferences going forward. So we added a couple of questions to capture personal preferences. Experience has taught me that the preferences of two key parties tend to influence the way customer insight teams are resourced. First is the CEO and any recruitment policies he mandates; second is the customer insight leader who is leading the recruitment. See Also: Leveraging the Power of Data Insights So, how did you vote for those two personal preferences in resourcing models, and does that give us any clues as to how customer insight teams may be resourced now?

• CEO preference: This reflects that CEOs value customer insight and view it as a potential competitive advantage, so the majority prefer all the members of the team to be employed by their company. There were also votes for use of contractors within in-house teams, a mixture of both and “no preference” (it depends on the team). This appears to be a continued opportunity for customer insight leaders to build on in 2016, to demonstrate to their CEOs that they offer that competitive advantage and are a key internal skills within their business.

• Your preference: So, we finally come to the resourcing model that customer insight leaders themselves favor. What has given them the best results, that they would prefer to have at their disposal to achieve 2016 targets? Well, based on votes, it would seem the answer is definitely in-house teams. 60% favor all the members of the team being employed by their company, with the other 40% voting for a mixture of employed and contractors making up this internal team. For what it's worth, that was my own experience, too. Growing your own talent internally worked best.

I hope you found the results useful. Do they accord with your experience? One final thought, if you are seeking to build a strategic insight capability within your business, one that will empower your company for years to come, are you thinking long-term? Rather than be at the mercy of whether the jobs market has the candidates you require or graduates have the skills and aptitudes you're seeking, why not shape the latter? I know a couple of businesses that have seen real value through building strategic partnerships with local universities. See Also: A Wedding's Lessons on Customer Insight If you are fortunate enough to have a local university with a good reputation for numerate graduates (from business school or maths/stats faculties), why not work with them? Are there opportunities for internships to try out potential future employees? Would it benefit the university for you to go in and speak to students, even teaching them some of the skills they will need within business? How much better would it be for you to know  that students are being trained in the skills you require? A great example of building this kind of partnership was the Data Talent Scotland event. I'm proud to have delivered a workshop at this gathering of data science students, academics, industry experts and businesses, helping to forge the kind of partnerships customer insight leaders will need. Please let me know if you have built a sustainable pipeline of talent to resource your insight team for years to come. What's working for you?

In a previous article, we discussed how there has been a rapidly accelerated emphasis on insurance technology, data and distribution. But are we as an industry spinning our wheels? The answer is a big “yes.” Why? Because we haven’t asked the right questions and aren't trying to solve the right problem. Here’s how distribution breaks down: A Painful Process Our customers have many issues around running and growing their businesses. Insurance empowers customer to do just that — hire employees, comply with regulations, etc. — but the way we go about it is asking endless questions (multiple times over). We focus on what we think doesn’t work instead of what DOES work about their businesses. We are the Negative Nellies. We turn little things into big things, over-analyze them and then use them as reasons to charge higher rates. An evolved distribution would:

• On the back end:
  • Draw on information in data bases and simply ask the customer to validate that nothing has changed.
  • Handle everything electronically ONCE. (And, no, email doesn't qualify!)
  • Use publicly available information to fill in the blanks.
  • Leverage class and big data to price and only use underwriting to manage exceptions.
• On the customer-facing side:
  • Stop sending apps we have to print out, fill in and fax back or, even worse, writable PDFs that don’t save (we have to fill it out over and over until we get it completed on one run through) and then come back and tell us we need to fill out yet another app for another market. It’s like Groundhog's Day, and we don’t have time for it.
  • If we DO have to fill something out, let us know what information we will need ahead of time so we can have it ready. Right now, we have to stop and start as we have to go look for stuff — and, frankly, we just don’t have time for it.
  • Let us know what the cost is ahead of time. We know you don’t want us to shop our policies — we don’t want to either — so do us a favor and don’t make us. We don’t like being painted into a corner, and we'll continue to look for a partner who respects that.

See also: 3 Skills Needed for Customer Insight Pain About the Purchase Have you ever bought a house and thought about the real estate agent collecting a fat check? Have you gotten a knot in your stomach because you know you paid to fund that? What about the finance guy at a car dealership? You sign on the dotted line because you need to, but you know he's pulling down a check for that signature, and it bothers you. Insurance buyers feel the same way. Even though we will tell you we are their “trusted advisers,” the reality is that customers more often than not (and no matter how much they like their agent) can’t answer the question, “What do I pay my agent for?” That’s a problem. Distribution should look at ways to be more transparent, to help customers clearly understand what they are paying for and what they can expect to receive and when. More importantly, customers should feel like we appreciate their purchase. Often, they ask us to bind, and the next thing they see is a bill (even before a binder). How about a “Welcome to our company,” “Thank you for your trust” or, even more importantly, “Tell us about your experience.” Allow customers to benchmark costs and give them a level of comfort that what they are paying is in line with others — and, if not, why. It’s a simple question that deserves a simple answer. For us to have the vast data stores that we have and not be able to answer a simple benchmarking question is nothing short of unforgivable. Just a Promise to Pay? Customers want more than just a promise to pay, and distribution could provide meaningful value to the customer beyond the policy placement. Does the customer have conditions that are raising their price or limiting their ability to get coverage? Educate them, provide tools, help them become a better business and, by extension, a better risk. In that way, we drive value to them instead of wasting valuable time. Look for ways your products could help them sell more and gain a competitive advantage. Take risk out of growth and provide overall out-of-the-box solutions. Provide them with tangibles, even if it is as simple as a portal where they can manage what they have, manage their exposures and communicate with their account team. See also: How to Redesign Customer Experience Conclusion It’s clear that customer experience is the key to success. By giving your customers some control over the process, you can remove the typical painful buying experience and make your customers feel good about their purchase.

What do most businesses do when competitors steal their customers? Copy them. That’s the natural, logical tendency. If competitors have a new killer feature, we copy it. If they have a new killer marketing message, we copy it. If they have new killer sales system, we copy it. Sooner or later, we all start looking the same. (And, yes, consumers can hardly be blamed when they think this insurance is a commodity. Looks like one…acts like one…well, quack!) And that – the copycat strategy – is among the most dangerous, destructive things we can do. In fact, the massive amount of copying witnessed in the retail insurance industry just might be the early ringing of the death knell. “But if we don’t copy what is successful for others, then what should we do?” Of course, agents and brokers read the reports on market share erosion. They see the billion-dollar barrage of advertising from alternative distribution systems. They read the forecasts and predictions about innovators, disruptors and new, well-financed outsiders poised for the kill. They know consumer behavior is changing rapidly and question whether they can keep up. There is -- naturally -- a deep, underlying anxiety about the future of this system. These current and impending attacks on what has so long been our safe harbor frighten agents and brokers. They need a strategy. And, far, far too many have simply chosen the wrong strategy. They see, hear and read (daily!) GEICO’s message about “price, price, price,” and they see that train only picking up speed. Naturally, what do they do? Copy it. They advertise on price. They give “quotes” and hope the price is attractive enough to win the business. If it’s working for the opposition, it should work for us, right? Wrong. See also: Integrating Strategy, Risk and Performance   Three reasons never, ever to copy Business coaches tell us that “success leaves footprints,” so, what’s wrong with following those footprints and copying a successful strategy? At least three things: 1. We copy what we see. We don’t copy the important behind-the-scenes business processes and systems we don’t see. Staring at “footprints,” we very rarely see the whole story. We see the surface. Beneath the surface, there is an entire alignment of complex business processes and systems that make that surface shine the way it does. You think you can see Starbucks' strategy for being the most successful coffee house on the planet, right? It’s right there in the open. But, behind charging more and delivering a reliable, delightful customer experience are billions of dollars invested in sourcing, roasting, shipping, presenting, training and other systems that we never see. Following part of a recipe is a sure way to end up with a plateful of garbage. 2. Generally, following is in itself a bad strategy. The best you’ll do is a weak second place. Unless your strategy offers something different and something that matters, those you are following have the advantage of leadership. They own that niche in the mind of the customer. Of course, if you have massive resources, you may be able to leapfrog your leading competitor. With GEICO alone investing a cool billion a year on advertising, that will not and cannot happen. Those resources simply do not exist in the agent-broker channel. 3. Copying strategy means that you’re skipping the hard work of strategy: clear-eyed analysis of what’s happening in the real world and how you can unleash your best assets to win there. As every serious student of strategy knows, good strategy is based on an unflinching analysis of internal and external forces, and disciplined choices about where to play and where not to play. And here, we get to the serious flaw in the most common copycat strategy performed by agencies and brokerages. We see the consumer being “brainwashed” with the incessant pounding of “price, price, price,” and we witness the loss of market share in our channel, and what do we do? Copy that strategy...and try to sell on price. And, herein, lies the most dangerous part of trying to copy your way to success. A good strategy for one company or one distribution system is almost always a bad strategy for everyone else. How can we win against our well funded competitors? Small armies beat big armies. In fact, very, very small armies beat very, very big armies. You would expect a military that is 10 times the size of its adversary to demolish a small opponent. But no, military historian Ivan Arreguin-Toft has shown us that the 10X behemoth loses 30% of the time. That’s right. 30% of the time, an army that is 10% the size of the opponent wins. How does the smaller army win? By fighting a “different war.” (In fact, since 1950, smaller armies have won 55% of the time.) The same is true in business. We can only win by fighting a different war. We cannot copy strategy. What's wrong with selling on price? Isn't that what the consumer wants? Here are four reasons why independent agents and brokers should never sell insurance on price. 1. Our channel is more expensive. So selling on price is just plain dumb. Sure, you'll find exceptions. Even the slowest lion picks off the slowest gazelle. But in the long run, put your resources where they have the best chance of winning. The price-shopping insurance customer -- and, yes, there are millions of them out there -- will seek and find a home. And billions in advertising dollars are helping them navigate their way. I recently analyzed four years of AM Best industry data and, not to my surprise, discovered that the independent channel was an average 2.3% more expensive to operate. And, with the direct channel's massive commitment to advertising, a lot of the expense gets consumed there, and proportionately less in other expenses. Moral of the story: when you're more expensive, don't compete on price. 2. Selling on value wins more than selling on price. Researchers from Deloitte, led by Michael E. Raynor and Mumtaz Ahmed, analyzed data on more than 25,000 companies covering 45 years of activity. Their five-year study began with a statistical analysis to identify which companies have truly exceptional performance, 344 in all. They discovered that the most successful companies -- based on a thorough examination of return-on-asset performance -- followed three strategic rules:

• Better before cheaper. They rarely compete on price.
• Revenue before cost. They drive profits through price and volume, not thrift.
• There are no other rules. Everything else is up for grabs, and they are willing to change anything to remain true to the first two rules.

Of course, selling on value can't just be another empty advertising jingle. Agents and brokers have to deliver value. They have to add value as the product passes through their hands to the consumer. That may be a new demand for many agents and brokers today. Perhaps in generations past, selling the product was sufficient. But, as today's consumer is offered a growing array of choices, this is no longer an option. Especially as the consumer progressively sees more and more of insurance products as a replaceable commodity, value must be added at the retail level. The inherent and unique strengths of the independent channel -- the benefits of relationship -- must be leveraged to the consumer's advantage. Modern communication technology makes this much, much easier. And i's costs are fractional compared with additional payroll. 3. Selling on price is the ultimate race to the bottom. First of all, selling value costs more. You must do something extra, something more. And that usually costs money. When you're selling on price, you're killing your profits. From what bucket do you draw to create that extra value? If, let's say, you have a 20% profit margin, and you backed everyone's premium down by a mere 10 points, that's half your profit. Price selling results in a self-inflicted spiral down the drain. First, you sell for less. In response, you invest less in your support staff and systems. Then, your customers feel less satisfied… on and on it goes. Price selling may result in short-term wins. You'll sell a few policies that you wouldn't have otherwise. It’s much, much easier than investing in the blood, sweat and tears work of creating new value. Training staff. Monitoring behavior. Managing new systems. And so forth. Moral of this story: The industry has matured far beyond the "lifestyle" stage where the retail sector merely acted as "sales reps" for manufacturers. They absolutely must add value. That is what grown-up businesses do. 4. Surprise…consumers don't care about price nearly as much as you think they do. Price never completely goes away as part of the overall value proposition. But according to  astute research by Bain & Company, consumers are largely compelled to make their insurance buying because of one of these two values: price or peace of mind.

• The price-driven customer is perfectly suited to the direct channel. The peace-of-mind-driven customer is perfectly suited to the agency/broker channel. As industry-wide analysis will show you, the price-driven customer is expensive to get and easy to lose.
• The efficiencies of the direct channel are well suited and well designed to generate value from that demographic. The opportunities for depth of relationship and value-added communications make the peace-of-mind customer perfectly suited for the agency broker channel.

See also: Capturing Hearts and Minds   But doesn't price still matter? Yes, of course, but perhaps not nearly as much as you may think it does. My friend Brady Polansky from EzyLinx, shared what many may consider to be shocking statistics based on a massive study of consumer behavior. 57% of consumers who call independent agencies do not take the lowest quote provided. Rather, they choose insurance that costs between 19% and 53% more than the lowest quote provided. (Imagine what that could do to your top-line revenue!) Moral of this story: It's a naive assumption to think that all consumers are the same. They're not. Pursue the ones who best fit this channel: the people who actually care what insurance does. Remember when we took pride in saying that "insurance is a relationship business?" The top 5% or 10% of your customers probably feel that relationship. But recent research from Deloitte makes one thing very clear: The majority of an agent's customers don't feel that relationship. Agencies have simply outgrown the old-school methodologies of getting and keeping relationships. It's too expensive. Besides, that's not how customers relate to business anymore. Consumers expect a well-crafted digital communication strategy with their vendors. And agents and brokers can use today's digital channels to deliver value. Using modern technology, they can nurture their customers. They can help protect them. They can make them smarter insurance consumers. They can help prepare them for disasters. They can help prevent accidents, injuries and casualties. They can offer useful products. And they can follow each customer, one-at-a-time, and guide their customer journey, from the "I want a quote" to "I love my broker." Price marketing is fine…for the direct channel. Don't copy them. A winning strategy for their channel is a losing strategy for ours. But, if relationship and value are the pillars of our promise, deliver on it. Today's tools let you deliver on that old school promise…with new school technology. The Ultimate Solution for Maximum Growth  Is this an impossible situation for the leader of a modern insurance agency or brokerage? If we don’t have "price" in our quiver, just how do we make a difference in the lives of our customers? See also: Checklist for Improving Consumer Experience   If, in fact, they value relationship – that sense that they have an advisor and advocate in their corner – how do we deliver that? The days of glad-handing our clients around town are over.

• The old methods – one-on-one marketing and nurturing – are over. Those methods are dreadfully expensive.
• Most agents and brokers of today have a book of business that’s much larger than the average firm of a generation ago. It’s folly to think we have a traditional relationship with them. (How many times have you passed a customer in the vegetable aisle and they didn’t know you…and you didn’t know them.)
• Besides, the last thing today’s consumer wants is a random telephone interruption from their insurance agent. (They want you there…when they want you there. Not when they’re at work. Not when they’re having dinner.)
• The answer is simple. Our competing channels – the direct channel and the emerging digital channel – uses technology against us. But, today, agents and brokers can fight back. Using their own technology. Technology that delivers meaningful communications. Technology that treats everyone like an individual. Technology that strengthens your brand. Technology that deepens relationships. Technology that connects the data in your agency management system to a marketing system that fulfills the inherent promise in the agent-broker channel: that we’ll be there…that we’ll protect…that we care.To learn about how marketing automation can transform the way you communicate to your clients – and make your clients love your agency – download a copy of Buyer’s Guide: Marketing Automation For Independent Agents & Brokers. Readers may get a free copy here.

We are in the midst of a global public health crisis. The prevalence, growth and wide-scale complications as a result of diabetes have been called the defining moment in the field of public health. Unless a widespread education and intervention campaign takes place, we are looking at a disaster. Currently, 30 million Americans, or roughly 10% of the U.S. population, have diabetes. It gets worse; more than 8 million of these people don't even know they have it. In 2012, another 86 million Americans had what is referred to as "pre-diabetes," up from 79 million in 2010. Without a major education and intervention effort, 33% of all Americans will have full-blown diabetes by 2030. In the year 2000, the World Health Organization (WHO) estimated that 2.8% of the world population in all age groups would have diabetes — that was 171 million people. By 2030, WHO projects that 4.4% of the world population, or 366 million people, will have diabetes. What is also scary is that these estimates are most likely conservative because they assume that the obesity rate of the world population will remain constant. Excuse the pun, but fat chance of that. Obesity is a growing problem both in the U.S and worldwide, including third-world countries, and is a major risk factor for diabetes. Jeff Dachis, CEO of One Drop, a diabetes self-care and technology company based in New York, recently stated at a HITLAB seminar held at Columbia University/Mailman School of Public Health, "Diabetes is hard, but it doesn't have to be." Although diabetes is a very serious health condition with a wide array of potential life threatening complications, Dachis says, "there is no reason a diabetic can't live a perfectly normal, healthy life with proper diagnosis, treatment and enlightened self-care. Diabetes can be completely diagnosed and managed. " He ought to know; he was diagnosed with Type 1, or juvenile, diabetes a few years ago in his late 40s but now is "really good at keeping my blood sugar within normal range 24/7."That is the basic problem: A person with diabetes has too much glucose, or blood sugar. See also: EEOC Caves on Wellness Programs Diabetes is a group of diseases that affects how your body uses glucose, or blood sugar. Type 1 diabetes occurs when your immune system attacks and destroys insulin-producing cells in your pancreas. As a result, glucose builds up in the blood stream instead of being transported for energy to cells that make up muscles and tissues. Type 1 patients must rely on regular insulin shots to survive and avoid long-term complications. Insulin is vital to cell growth and lowers the amount of glucose needed by helping cells use it for energy. The exact cause is still unknown, but diabetes is thought to be a genetic susceptibility to unknown environmental factors. Type 1 can occur at any age but typically occurs in children and adolescents under age 19. Type 2 occurs when your cells become resistant to the action of insulin and the body doesn't use it well. The pancreas itself is not under attack, but it can't make enough insulin to overcome the cells' resistance. With Type 1 or 2, the result is the same: Glucose builds up in the blood stream. Type 1 tends to have more severe symptoms and acts more quickly. Gestational diabetes occurs when pregnant women who never had diabetes end up with high glucose levels due to insulin resistance that develops during late pregnancy. If untreated, or poorly controlled, it can affect the health of the mother and the baby. In these cases, the baby is getting too much glucose and energy and can become what is known as a "fat" baby. This can cause health problems for the baby and a higher risk for obesity and Type 2 diabetes developing later in life. The CDC estimated in 2014 that 9.2% of all pregnancies in the U.S. involved gestational diabetes. The direct health dangers of patients with diabetes include hyperglycemia (high blood sugar), diabetic ketoacidosis (when cells starving for energy break down fat in the body and cause significant weight loss) and hypoglycemia (or low blood sugar). Severe hypoglycemia can be fatal and is often referred to as "diabetic shock." Extreme hyperglycemia can also occur with sky-high glucose levels, when the blood actually turns thick and syrupy -- it is also extremely life-threatening. These cases are typically preceded by an illness of a patient with Type 2 diabetes. Someone dies every six seconds in the world because of diabetes, and it is by far the most expensive disease to treat due to the enormous complications that may result. The American Diabetes Association (ADA) estimated that, in 2012 alone, $176 billion was spent on direct medical care and another $69 billion was spent on reduced workplace productivity, for an annual total of nearly $250 billion. The complications and co-morbidities because of the increased risk of health problems that result  can add another $500 billion per year to the U.S. healthcare system and lost productivity. The increased risk of gradual long-term health complications because of diabetes is profound. There is an increased risk for cardiovascular disease (1.7x higher), heart attack (1.8x higher), stroke (1.5x higher), nerve damage or neuropathy to the lower limbs, serious foot infections that lead to amputations, kidney damage, eye damage from diabetic retinopathy (damage to blood vessels in the retina), cataracts and glaucoma (increased eye pressure) that may lead to blindness, various skin conditions and infections and erectile dysfunction in men. Overall, a person with diabetes (adjusted for age) has a 2.3x higher annual healthcare cost than someone without diabetes. See also: Is Transparency the Answer in Healthcare? Here are other alarming statistics from the 2014 National Diabetes Statistical Report prepared jointly by the ADA and CDC:

• Diabetes was listed as the primary cause of kidney failure in 44% of all new cases in 2011.
• 80% of patients who have diabetes for 20 years or more develop diabetic neuropathy.
• 71% of patients with diabetes over age 18 have high blood pressure or are taking high BP medication.
• 65% of patients over age 18 with diabetes have high cholesterol.
• 60% of the 73,000 non-traumatic lower limb amputations in 2010 were patients with diabetes.
• 29% of all patients with diabetes over age 40 develop diabetic retinopathy.
• 26% of senior citizens 65 years or older have diabetes or 12 million people (both diagnosed and undiagnosed).
• There are 1.3 million children, adolescents and adults in the U.S. with Type 1 diabetes.
• Diabetes is the 7th leading cause of death (*underestimated because of co-morbidities caused by diabetes listed as cause of death. The ADA reports that only 35% to 40% of people who died with diabetes have it reported as the cause of death.)
• 1.4 million new cases occur every year in U.S.
• 282,000 ER visits for people 18 and over occurred in 2012 because of hypoglycemia.
• In 2011, more than 228,000 people with kidney failure because of diabetes were living with kidney dialysis or a kidney transplant.

All these alarming facts and statistics can be mitigated with proper diagnosis, treatment, medications, correct use of insulin and self-care, such as diet and exercise. For example, it is estimated that 90% of all the blindness caused by diabetes could be prevented by proper self-care. But this is also the crux of the problem. Jeff Dachis and others in the field of public health are outspoken critics of the current state of diabetes disease management and our healthcare system in general, which is based on treating chronic conditions on a fee-for-service basis and not preventing them in the first place. "Chronic care is expensive, fragmented and inefficient; we need to transform the model to outcomes driven self- care," Dachis stated at the HITLAB seminar series. An alarming observation by Dachis is that "most diabetics are over-dosing on insulin." The dangers of an insulin overdose are real and may be the result of misreading syringes or vials, taking the wrong type of insulin (rapid-acting, short-acting or long-term-acting) and taking insulin without eating -- all of which can lead to lowering blood sugar to dangerous levels. In a follow-up interview, I pressed Dachis for the root cause of so many problems in diabetes treatment today. What I learned is that the "one-size-fits-all" approach not only doesn't work, it can be very dangerous. Dachis stated that the standard treatment is for the treating physician to prescribe a fixed dose of insulin, typically twice a day (morning and evening) to the patient and give her an "I will see you in three months. This approach is dumb, since patients should be checking their glucose levels every three hours and not every three months, and can result in a dangerous insulin overdose." Each diabetic must manage his own blood glucose levels 24/7 through use of emerging technologies developed by new entrepreneurs in the field, such as One Drop. One Drop provides a whole package of self-care tools and real-time coaching to patients to transform diabetes care. When daily insulin injections are set with a standard dose, it does not reflect the needs of that patient at any given time. See also: Healthcare Quality: How to Define It The dose and type of insulin taken should be directly related to what the person just ate, her current glucose levels, how much exercise she did that day, medications she is taking, etc. This way, the patient is maintaining a safe level of blood glucose at all times to prevent both hyperglycemia (too much glucose), which results in gradual long-term chronic conditions, and hypoglycemia (too little glucose), which can be immediately life-threatening. An injection of too much insulin, based on a daily fixed amount, can send a person into a state of hypoglycemia and result in many diabetes patients overdosing on insulin. The One Drop diabetes self-care disease management model includes a free app for the patient (http://apple.co/1lWTvGk), a glucose testing kit, unlimited test strips, an adjustable daily carb ratio to insulin dose capability and customized individual coaching by certified diabetes counselors in a 24/7 chat room. This is part of the revolution that is taking place in healthcare in regard to self-care-utilizing emerging technologies, the internet and mobile apps. Patients can learn how to best control their glucose levels from their own data and from 40 million data points, to learn what others with similar conditions are doing successfully. The One Drop App is free to use. The entire kit and self-care program with 24/7 coaching comes with a monthly subscription fee that can be paid by the health insurer, the employer or the individual patient. The entire goal is to provide these technologies and self-care model at no cost to the patient. One major health insurer has now enrolled and is co-branding the One Drop self-care program. The insurer has put its own medical nurse case managers on the system as part of the diabetes disease management program. For more information, contact One Drop at http://onedrop.today. It is all about the math. People with diabetes "must count the carbs." Glucose levels need to be monitored in real time, 24/7. Dachis noted that people with diabetes should "think of themselves as a regulator, just like setting the thermostat at 70 at home year-round."  Insulin is a deadly drug. It can kill you. It can't be taken orally because the stomach's enzymes would interfere, so it must be injected with a fine needle or insulin pump. That is why we need to empower people to use the internet, mobile apps and technologies, as well as use a preventive self-care model and steer them away from "the sick system" of chronic care. For people with diabetes who don't think they have the time to monitor their glucose levels, think again. Waiting for the complications is a very bad idea. For the eight million people with clinical diabetes who don't know it, it is time to get diagnosed and treated now. For the 86-plus million Americans with pre-diabetes who are a high risk of Type 2 diabetes, you need to get tested and learn how to prevent the onset of the disease. People at high risk of diabetes include those with a family history, who are overweight, who have sedentary lifestyles, who have high cholesterol and who have high blood pressure or cardiovascular disease. The good news is that diabetes can be diagnosed, treated and controlled with proper diet, exercise and medications. People with diabetes can live normal, healthy, long lives with a proper self-care regiment. The bad news is that this global public health crisis is going to get a lot worse, affecting tens of millions of people in the U.S and around the world before it gets better, unless an extensive call to action takes place. A revolution is coming -- just like after the Boston Tea party -- in the form of day-to-day acknowledgment and empowering people to use apps, wear sensors and receive real-time telemetrics as part of a power shift from doctor to patient. One Drop is in the process of conducting clinical outcomes studies and hopes to have its study published later this year. This article is dedicated to my dear friend Scott Sandor, who we lost to a diabetic coma at the tragic young age of 40.

This is a David and Goliath story about how the seemingly insignificant NPI code can fight medical fraud and have a positive impact on workers’ comp medical management. Many in the industry consider the NPI irrelevant. Yet it is a powerful factor in medical management and medical fraud detection. The NPI is the National Provider Identifier assigned by CMS (Centers for Medicare and Medicaid Services) to individual medical providers and organizations that deliver medical services. It is required on bills for Medicare and Medicaid. Individual medical providers and medical groups must include their NPI on all bills submitted. If the NPI is required for Medicare and Medicaid reimbursement, it follows that probably all medical doctors have an NPI number from CMS that uniquely identifies them. The problem is that many workers’ compensation payers do not ask for the NPI, do not require it and, even when the NPI is available, do not record it or transfer it to the next level. Some, but not all, states require the NPI on workers’ comp bills. However, even if it is added to the bill, the use often goes no further. The value of the NPI is that it uniquely identifies individual medical doctors. It carves out individual treating physicians in groups, organizations and facilities. Without the NPI associated with individuals, all those in a group are lumped together under the organization’s NPI or, worse, the entity’s tax ID. This matters. The assumption is that all members of the group practice in exactly the same way. But they do not. The ability to parse individuals from groups in the data is essential to fair performance analysis. Individual differences seen in the data can be distinguished, even when associated with a group with individual NPIs. This is essential to creating quality preferred provider networks and directories. It is also indispensable for leveraging the data to create a teaching platform for improving provider performance in workers’ comp. See also: Easy Way to Spot Workers’ Comp Fraud   Physicians should be given the opportunity to see themselves portrayed in graphic reports comparing their performance to others like them. By nature, they are high achievers, and they want to show well. The graphic presentations are targets or guides for improvement. Simply paying attention to a treating doctor in this objective manner will result in behavior change! Using the comparative data is invaluable, but success depends on accurately identifying individuals in the data using the individual NPI. Another valuable use of the NPI is to assign medical specialties to individuals. Professional specialties can be obtained electronically from CMS databases using the NPI. Specialty is yet another data element missing in much of the bill review and claim system data. If the NPI number is available, specialties can be derived. Specialties are important so that treating doctors are grouped with other doctors who are similarly prepared and licensed. The argument from doctors that they only treat the more difficult cases is nullified when they are compared only with others in their specialty. The best example is pain management specialists, who really do treat the more difficult cases. Their performance should always be compared with other pain specialists. Unfortunately, there are those who twist the positive aspects of the NPI for fraudulent purposes. Close examination of the data reveals that less reputable medical doctors and other providers obtain multiple NPI numbers, using them in different locations or situations to deliberately obfuscate the data. When multiple NPI numbers are fraudulently used, the door is open to undetectable duplicate billing. Systems cannot recognize overall performance for the individual because their performance is fragmented across multiple NPIs. To accurately analyze performance for an individual, all treatment incidences should be combined for one practitioner, thereby creating a critical mass of data for that individual. While some will think the focus on NPI is much ado about nothing, it is not. Individual NPI numbers on all medical bills is essential; payers should insist on it. In fact, reimbursement should be withheld until the correct information is included on the bill as is done in Medicare. See also: States of Confusion: Workers Comp Extraterritorial Issues  Treating doctors not only drive direct medical costs but also indemnity costs, return to work and disability ratings at the end of the claim. They can also influence legal involvement. Consequently, finding the best doctors and avoiding the bad ones is crucial. The way to determine who should be included in quality medical provider networks is to analyze past performance based on the data. The only way to accurately analyze performance is to identify individual treating doctors in the data and evaluate their performance across multiple claims based on the relevant performance factors. Correct NPI numbers included on medical bills are essential. Workers’ comp payers must require correct individual NPI numbers on all medical bills. This is not an outrageous demand and does not add to costs. However, it does require attention to the matter. The benefits are too great to miss this simple yet powerful opportunity. The simple little NPI is a powerful element in workers’ compensation medical management. It is the David that can effectively and affordably fight the medical fraud Goliath.

As common as insurance is, most people do not understand this complex financial instrument. According to the Bureau of Labor Statistics Consumer Expenditure Survey (2014), insurance is a consumer’s fifth highest monthly expenditure behind housing, transport, food and pensions. For many Americans, if you add up all types of insurance (auto, health, etc.), monthly total premiums can surpass housing costs. But the insurance industry has its fair share of participants (companies, agents, wholesalers) who thrive on complexity and make sales that do not fit the client's need. There has been a tendency — especially with annuities, life insurance and long-term-care insurance — to introduce insurance products with more options. And each time an option is added, it becomes more challenging to understand that product. Often, this complexity is not a matter of intent; it is simply that even those within the industry or those who participate in the insurance procurement and review process (third party advisers such as financial planners, CPAs, etc.) do not understand insurance. The majority of people and companies do a good job, but there is a significant gap in insurance literacy in this country. See also: Best Insurance? A Leadership Pipeline The Insurance Consumer Bill of Rights was created to provide simple, easy-to-understand guidelines for everyone involved in the insurance ecosystem, including consumers, insurance agents, wholesaler, insurance companies and financial advisers. The Insurance Consumer Bill of Rights is based on the simple premise that insurance agents, wholesalers and companies should place the consumer’s interests first, to the best of their abilities. The Insurance Consumer Bill of Rights provides simple, clear and reasonable guidelines to accomplish this goal. It is a standard of excellence for all in the insurance industry. The importance of this movement is that, for many years, insurance has been a black box, something people know they need, although they have no real, unbiased information about it. And most people do not have the right coverage to fit their needs. In my 30-year career, starting as an agent before making the transition to a fee-based insurance consultant/litigation consultant/author/consumer advocate, I have seen that the situation behind the scenes is often not pretty. However, the majority of these situations could be avoided if all members of the insurance industry followed the Insurance Consumer Bill of Rights. Insurance consumers should have the right to receive any information that they request in a timely fashion. They should also be provided with all relevant information needed to make a decision in an easy-to-understand fashion. The goal is to not flood the consumer with something like a mutual fund prospectus; rather, it is to provide them with useful information. It is always a win-win situation when all parties come out ahead and are on the same side of the table. Truth always has a way of coming out, and, to get ahead in this digital world where there are fewer secrets and more information and choices, those who strive to provide the highest-quality service and information will thrive. See also: Fast and Slow: the Changing Landscape For many years, consumers have ended up with insurance they don’t need, with premiums they either cannot afford or really see no value in paying. It is time to change the conversation so that consumers end up with coverage that fits their needs, with premiums they can afford into the future. The Insurance Consumer Bill of Rights is a playbook for consumers, agents and companies to follow that puts everyone on the same page. Monitoring an insurance policy and making adjustments to an insurance portfolio is something that is almost always overlooked. Insurance needs change. Sometimes, the change is as simple as getting a new car, while other times it can be more complex and overlooked, like having a new child who is not added as a beneficiary to an existing life insurance policy. This is where the Insurance Consumer Bill of Rights matters. Making these adjustments, just like having regular maintenance done on your car, is what will ensure that a consumer has the right coverage in place at the time of making a claim. If the right coverage is not in place at claim time, what is the point of having insurance? While it is not a panacea, and there still would be bad actors and inappropriate sales, the Insurance Consumer Bill of Rights is a call to action and gives guidance to consumers on what to look for, what to expect and what they have the right to. Knowledge is power, and the power should be in the hands of the customer. Having and knowing your rights will protect and benefit consumers, along with calling the insurance community to task when needed and helping consumers and agents optimize insurance coverage and minimize premiums. Join the Insurance Consumer Bill of Rights movement! The Insurance Consumer Bill of Rights movement is gathering momentum, and I want to thank all of its supporters. Recently, the Insurance Consumer Bill of Rights has received numerous mentions in the press:

• Featured Article: It's Time for An Insurance Consumer Bill of Rights — a reflection on how the Department of Labor Fiduciary Rule is a pre-cursor to the Insurance Consumer Bill of Rights.
• As part of a joint effort with Chris Huntley's Whole Life Rebellion that called for signing the petition, Forbes.com's Barbara Marquand stated: “Sign the ‘Insurance Bill of Rights,’ a petition created by Tony Steuer from InsuranceLiteracy.org. Among other things, the bill says agents should act in consumers' best interest and recommend affordable and appropriate coverage. (Click here to view the article.)
• In an article on PTmoney.com titled “The Truth About Whole Life Insurance — Ethical Obligations and the Insurance Consumer Bill of Rights), it states, “Doctors take the Hippocratic oath and financial advisers the fiduciary oath. These are ethical codes professionals swear to live by in the execution of their duties. As of today, the life insurance industry has no such code, which is a travesty. Tony Steuer (InsuranceLiteracy.org) has created the Insurance Consumer Bill of Rights on Change.org, which seeks to implement a similar code of conduct in the insurance industry requiring all agents to act in the consumers' best interest. The desired result would be agents targeting consumers' specific needs to provide them with the most affordable and appropriate life insurance for their unique circumstances. Insurance agents should be held accountable for the advice they offer.” (Click here to read the article.)

And that is just some of the talk. So, what's the next step? Please continue to share the campaign via email and on social media. And you can now contribute to the Insurance Consumer Bill of Rights movement through the petition page on Change.org, or you can support the Insurance Consumer Bill of Rights movement on Indiegogo.

When you add it all up, the insurance industry has many characteristics that make it an attractive target for aggressive investments in innovation. First, it is enormous; it is estimated to be a global market of premiums written of more than $4.7 trillion. Second, it faces multiple challenges that offer opportunities for exploitation by nimble, efficient and innovative competitors, including:

• Low-interest-rate environment: Together, forcing a focus on the core business of insurance, creating enhanced customer experiences and value and rethinking operations to manage expenses are driving the innovation of business models underpinned by an efficient, flexible and variable-cost-based infrastructure.
• New customer attitudes and behaviors: From a move toward owning to renting, looking for niche solutions such as short-term, on-demand insurance or seeking solutions that help to manage risk, there is a growing need for new products and services that may be offered through new business models.
• Changing customer expectations: Fueled by digital technology, data and experiences from other digital companies (Amazon, Google, Facebook, etc.), expectations are radically shifting and driving increased dissatisfaction levels with how insurers engage and interact with customers.
• Traditional insurance is stale and complex: Insurance is seen as an intangible, low-engagement product that customers do not enjoy buying. They are seeking alternatives that make the process simple, quick and painless, with engagement that meets their needs.

Yet insurance is still needed by individuals and businesses to protect them and help them manage an increasingly changing risk environment. As a result, there is a gap between what traditional insurers are providing and what is needed in today’s rapidly changing marketplace. Enter the greenfields, start-ups and incubators that are aiming to innovate insurance. They are seeking to define new business models and processes that create a better way to “do insurance,” capture new market opportunities, create products and services and be at the forefront of the changing market. The nature of this new pressure is characterized by technology, data and very active investment activity as reflected in the new term, InsurTech. The research firm CB Insights is tracking more than 130 start-ups and private companies in the InsurTech space that have raised more than $3.5 billion in aggregate funding. Many insurance companies recognize the importance of not standing idly by while others are reinventing insurance and creating new models, products, services and value propositions. Indeed, a survey conducted by Celent among its insurance panel found that 86% felt that innovating over the next three to five years was critically important (InsureTech Has Arrived: A Primer, May 2016). And, as highlighted in Majesco’s recent thought leadership report, Greenfields, Start-ups and Incubators … Innovation in Insurance Products, Channels, Services and Business Models, a small but growing number of companies are becoming active in this space by establishing venture capital units/divisions; creating start-ups and greenfields; and incubating new products, services or channels. See also: How to Plant in the Greenfields Still, most insurance companies have been hampered by the prospect of needing to do multiple monumental tasks simultaneously: First, continuing to run the current business with existing (and in many cases) outdated legacy systems; second, modernizing those systems to bring the current business into the modern era; and third, innovating/re-inventing the business in the race with InsurTech competitors to respond to the rapidly changing needs, expectations and risk profiles of the customer. Three Boxes This dilemma is not new.  The tension between the current state and the vision of the future state is always there; it is just more pronounced today, given the pace and complexity of change. The companies that are exemplars at innovation are the ones that embrace these tensions and manage them strategically. Consultant and Dartmouth professor Vijay Govindarajan adapted an ancient Hindu philosophy to characterize the required components of this capability in his new book, A Three-Box Solution to Managing Innovation (Harvard Business Review Press, April 26, 2016).

• Box 1 (with Hindu god Vishnu, the preserver, as the metaphor) is about managing the present and keeping the current success of the company going.
• Box 2 (based on Shiva, the destroyer) is about selectively forgetting about and letting go of the past. This includes some of the things that led to the company’s current success, which may not be relevant in the future; they are today’s strengths but may very well be tomorrow’s weaknesses.
• Box 3 (based on Brahma, the creator) is about inventing the future — the game-changing innovations that are going to transform the business for tomorrow.

Govindarajan explains that many companies stay stuck in Box 1 and are afraid of Box 2. In an interview with the Huffington Post, he noted, “Once companies become large and successful, the tendency is to preserve success. The tendency is to focus on Box 1. Box 1 is about managing the present, Box 2 is about selectively forgetting the past and Box 3 is about creating the future. For large companies, success becomes a trap because they tend to focus on Box 1/present.” Successful companies balance activity and focus across all three boxes. For example, a healthy Box 1 is critical to fund the activities in Boxes 2 and 3, which will determine the future of the company. As he said, “Just as the three Hindu gods work in concert to keep the universe humming, a company manager must keep the present business strong and at the same time get rid of outdated enterprises and develop new lines.” Three Steps A Three-Box framework is helpful for structuring strategy for innovation and reinvention, but putting it into action isn’t necessarily easy. In our experience working with numerous carriers on their transformation journeys, we have found the following three tools to be helpful in moving from thinking to action. First, develop a target operating model that defines how to efficiently and effectively operationalize your company’s vision and business strategy for both the existing business and the future business model. The right combination of business processes (process strategy), organizational structure and staffing (people strategy) and technology and data assets (technology strategy) will likely be different for the existing and future models, so ask these key questions: What is your minimum viable product? New operational model? New business model? What areas of the existing business are most critical to keep it funded today and the future? A target operating model can help you define your existing and future business so that you rapidly get results and value. See also: How to Turn ‘Inno-va-SHUN’ Into Innovation Second, create and execute a well-documented, detailed business transformation plan that makes it explicitly clear how the transition from current to future state will occur. The plan should include details on your current state to help drive new efficiencies — including all of the connections, data flows and work flows — and the inevitable bottlenecks and inefficiencies that are costing you money and reducing quality. It should also include details that define your new business model and what you need for the future business, which is likely very different from your current model. To create confidence in how and when you will arrive at the future state defined by your target operating model, the plan must identify and document an appropriate number of transition states that define what the process, people and technology components will look like — and for how long. Third, leverage cloud platforms and partner ecosystems across all boxes to eliminate the need for new infrastructure and reduce the uncertainty around the veracity of future state business model ideas through “fail fast” experimentation and rapid scalability. These three steps combined with the Three-Box framework create the 3 X 3 approach for ensuring your company’s current and future success. 3 X 3 Approach to Reinvent Your Business Reinvention and Transformation: The New Normal The wave of change to a digitally and data-empowered world driven by ever-increasing customer demands is inevitable. And it is a given that there will be constant pressure from both start-ups and established companies to outdo each other in the race to better meet those needs and capture more share of the enormous value presented by the insurance market. For insurance companies, the need to reinvent and transform the business is no longer a matter of if, but when. Together, the Three-Box framework and three-step approach provide a formula to use to develop your reinvention and transformation strategy. But the bigger challenge insurance leaders face is the pace of transformation — because the pace of change is not slowing down. Insurance leaders should ask themselves: Do we have a strategy that considers both transforming the legacy business and creating a new business for the future? Who are our future customers and what will they demand? Who are our emerging new competitors?  Where are we focusing our resources… on the business or on the infrastructure? What can we do to demonstrate to all employees that we must be — and that we are — committed to working in balance across all three boxes?

An omni-channel experience leverages customer behaviors across all relevant sales and distribution channels and provides the basis for a consistent, personalized transaction interaction. Where there is a multi-step transactional experience (completed over time), each relevant channel should recognize the customer’s current process point in the overall transaction fulfillment process, such that customers are able to progress along the transaction process in a transparent fashion. Also implied — but not often mentioned — is the need to gather predictive data so relevant customer-specific marketing initiatives are delivered digitally to the customer’s preferred device (or in hard copy form to their home). The Rationale That Is Driving Omni-Channel Demand From the time a customer logs on to his or her mobile or PC-based site, the customer should find a consistent presentation framework, with personalized offerings based on buying preferences, as well as new content that fits a customer’s purchase propensity profile. In addition, the selection and purchasing experience should be the same throughout a customer’s multi-channel purchasing and associated fulfillment process. With the growth demand for omni-channel distribution, this process paradigm is emerging as a differentiation that often helps a customer decide who to buy from. See also: How to Captivate Customers (Part 4) Omni-Channel Internal Readiness Assessment Based on the broad context and scope required to fully enable omni-channel distribution, key assessment components include: – A broad-based customer purchase and predictive data history that enables predictive and behavioral data modeling; – The ability to standardize processes across all distribution channels; – The capability to store customer transactions that are in-process; – Specific process steps to be fulfilled when the customer reengages in one or many transaction based processes; and – The ability to include bio-metric authentication. Challenges Legacy systems are the norm in most companies, and most have never been set up for this type of customer experience paradigm. Therefore, the magnitude of legacy system changes are often material. Additionally, most companies find they do not currently collect the breadth of data required and do not have the analytical capabilities required for predictive and behavioral data analytics. To the extent the factors above require material software modification, the project delivery cost could be significant — and the delivery time-frame protracted. Regardless, due diligence requires project sizing, costing and delivery time-frame analysis. If the internal project assessment reflects material cost and long project duration, then a package software solution may be appropriate. Purpose-built software for omni-channel distribution often proves to be significantly less expensive and results in a materially reduced delivery timeline. See also: Keen Insights on Customer Experience   Summary Omni-channel distribution is becoming a competitive necessity for many companieThus, primarily consumer interactive companies need to consider the impact of this new process paradigm, and prioritize omni-channel distribution accordingly to maintain their competitive standing.