2025 did not start well for weather-related disasters. Early estimates from JPMorgan show that overall economic losses and insured losses from the Los Angeles wildfires could make it the costliest disaster in California's history. 

This is particularly jarring as we come out of 2024, which held the unfortunate distinction of having an above-average number, when compared with the prior four years, of weather or climate disaster events with costs that exceed $1 billion in the U.S. This spotlights a critical crisis: the increasing vulnerability of American households to the financial implications of natural disasters. 

The financial aftershocks of a natural disaster can include lower credit scores and more debt in collections, and over half of people who experienced a weather event in the past year (57%) faced increased household expenses.

Despite these risks, many households have inadequate insurance coverage due to factors including cost and complexity that can lead to confusion around insurance policies. Behavioral science can help insurers support consumers in overcoming these challenges through a greater understanding of consumer decision-making. A recently released Insurance Behavioral Design Guide highlights innovative practices that insurers can consider to support financial stability for individuals and communities as they navigate the financial fallout from natural disasters.

Behavioral Barriers to Coverage

Only 59% of households in the U.S. reported feeling confident that their insurance policies would cover them in an emergency in 2024. This lack of confidence can be due to a number of factors, including being underinsured -- but why do people not choose greater coverage? Behavioral science offers several clues as to what may be holding households back.

First, consumers may experience friction in accessing coverage, especially if they find their options for policies to be too numerous or complex. The mental load of having to sort through confusing options or too much information can throw people off track. This friction can be compounded by status quo bias, making change more difficult.

People's perceptions of their need for insurance are also influenced by the availability heuristic, which describes how the recency of an event (like a natural disaster) influences how likely a person thinks it is to happen again. In some cases, though, people may not take action toward coverage because they want to avoid uncomfortable information altogether -- a phenomenon known as the ostrich effect.

Perceptions of insurance costs can also be an obstacle, and high premiums are a commonly cited factor for policyholders who drop their coverage. This decision can also be influenced by loss aversion—people's preference for avoiding losses over seeking gains makes paying for a policy for which they may never make a claim unappealing. Insurers can drive higher uptake by strategically addressing these behavioral barriers.

See also: 'Predict & Prevent' Can Rescue Insurance

Market Innovations to Drive Engagement

Newer entrants to the insurance market (insurtechs) and the larger incumbent insurers alike have developed innovative strategies that could overcome some of these behavioral barriers, making coverage more accessible and promoting financial resilience.

1. Alternative Premium Models

Adding flexibility to premiums shows promise for reaching more consumers. For example, auto insurtech Hugo developed a pay-as-you-go premium model that allows customers to purchase increments of coverage, including policies as small as three days. This can appeal to consumers with variable incomes, giving them greater control over their expenses. Or consider how Ladder, a life insurance provider, offers adjustable coverage: Policyholders have the option to increase or decrease their protection based on life changes, like purchasing a home. These flexible options help consumers to know that their insurance policies can easily evolve with their changing lives and needs.

2. Building Customer Trust

Nearly 30% do not believe they are valued customers, feeling that insurance companies are not interested in serving them. Lemonade's innovative "giveback" program aims to counter this mistrust by aligning its interests with those of its customers. Under this program, it donates unclaimed premiums to causes that its customers choose, promoting loyalty and trust, which are key drivers to ensuring consumers feel confident in their insurance policies.

3. Simplifying Uptake

Finding an insurance policy can be daunting for consumers as they encounter a large volume of choices and friction. Root Insurance has a partnership with Carvana that enables customers to apply for auto insurance while purchasing a used car -- eliminating much of the friction to finding coverage. Similarly, AXA's pilot with Western Union offers life and disability insurance alongside remittances. By embedding insurance with existing services, these partnerships remove some of the complexity of finding coverage.

4. Using Motivating Messaging

Marketing can play a pivotal role in helping people to overcome the ostrich effect and engage with insurance. It may be unsurprising that many individuals without life insurance (nearly one in five) report that they have avoided life insurance because they don't want to think about death. MassMutual developed their "Uncomfortable Truths" campaign to address this discomfort head-on, acknowledging difficult topics with an approachable tone. This type of approach can encourage people to take action to protect themselves and pursue financial resilience.

5. Helping Customers Choose Their Policies

When consumers are uncertain about what coverage they should get, they may avoid the decision altogether and end up uninsured. Insurers can take inspiration from tools that guide consumers by providing key information as they search for plans. For instance, Washington D.C.'s health insurance marketplace, DC Health Link, offers a personalized comparison tool and calculator for users that estimates costs and benefits of different plans. Even simple tools like this can help consumers to identify and enroll in the right coverage for their needs.

See also: Insurers Must Lead Disaster Risk Awareness

Promoting Financial Resilience

Accessible insurance solutions are more critical than ever to supporting consumers' financial resilience. As extreme weather events continue to rise, more consumers will face the financial fallout of natural disasters. Insurers can deliver critical protection by applying behavioral insights to overcome some of the barriers consumers face to accessing adequate coverage. Leveraging behavioral science in the design and delivery of insurance products can not only foster financial stability but also build customer satisfaction and loyalty. Research has shown that customer satisfaction triples when customers see their financial institutions taking action to support their financial health.

Leveraging behavioral insights isn't just beneficial for insurers; it is essential for relevance and growth. From innovating premium models to simplifying the process of finding or enrolling in insurance, companies can narrow the insurance gap and contribute to more resilient communities prepared for the storms ahead.

Adverse selection in commercial insurance is a burden on all stakeholders. It drives higher average premiums and lower availability of insurance for businesses. Underwriters are saddled with time-intensive and manual online research. Without the right sources, they may struggle to bring relevant insights about their policyholders' businesses to light.

With a world of information at their fingertips, how do insurers filter through the noise to source truly useful insights that give them a reliable outlook about a company's risk?

Underwriters may hesitate to adopt new risk assessment tools because they don't want to overprocess their workflows or overburden themselves with more information. However, the most beneficial risk assessment technology doesn't just pump out more information; it focuses on data that fills the gaps and helps insurers make decisions.

Don't Suffer From More Data, Benefit From Fewer Decisions

Insurers need better data to better evaluate risk. But better data does not necessarily mean more data. Some underwriting engines may offer the entirety of the internet on a platter but not pick out the seeds and bones by proofing the outputs. Having acres of bad data can be much worse than having too little data.

Many seasoned underwriters burn a lot of time evaluating businesses because they don't trust the data they can access; outdated online business listings and quick on-site visits only scratch the surface of the true nature of a business, particularly as the nature of companies continues to evolve in complexity. For example, traditional underwriting methods may find it extremely difficult to distinguish between a landscaper that offers tree trimming services and one that doesn't. In contrast, a more modern underwriting approach that flags when a business offers new products or services can keep pace with the shifting currents of commercial risk.

Insurers can also use modern data tools to achieve greater clarity about like businesses through detailed comparisons to better understand their risk differential, harnessing a host of online insights to look through a macro lens at how a business compares with its peers within their category or location. Not every Starbucks location has the same risk propensity, so having this precise and contextual data can inform better decision-making.

Predicting Tomorrow's Risk Means Better Understanding Today's Risk

Underwriters need an accurate, real-time view of diverse data points like business classifications, operations, performance and customer feedback to confidently write policies. The more comprehensive their view of current risk is, the better prepared they are to predict future business risk.

Imagine that a customer leaves a review that a restaurant's floors are slippery. Although that business might not have an open claim yet, that hazard is a strong indicator that an injury claim lies just over the horizon and must be a critical consideration when evaluating its risk. Risk management technology that brings filterable predictive scores and indexes to underwriters' fingertips is essential for future-proofing their policies.

Although accuracy and foresight are critical for underwriting intelligently, the speed of these insights is equally important.

Don't Sacrifice Time for Accuracy

Reliability and speed are the cornerstones of great data, so having a data suite that is cleansed, categorized and standardized for rapid incorporation is essential. If the underwriting technology insurers invest in is clunky or does not integrate with their current workflows, then it may add even more work for underwriters, and adoption will likely falter.

Underwriters who spend too much time evaluating and verifying risk attributes will often miss out on optimal policies and find it more difficult to justify niche markets, aggravating adverse selection.

Combat Adverse Selection With Credible, Curated Data

There is a great deal of pressure on underwriters to efficiently quantify complex risks in less and less time, but that only leaves teams more vulnerable to overlooking significant risks, contributing to their growing adverse selection problem. Rather than shying away from opaque markets or opportunities with historically smaller margins, insurers that harness credible, curated data sets will be better positioned to combat adverse selection and adapt to the continually shifting market conditions.

By harnessing reliable information and embracing automation, underwriters can offload the tedious, time-consuming research tasks and focus more on assembling the complete picture of a business before binding a policy. These advancements allow carriers to get the first pick on the best risks and foster better relationships with their insureds while avoiding unnecessary uncertainty.

Kirsten Mickelson leads the cyber practice group at Gallagher Bassett, which offers claims and risk management expertise to navigate the rapidly expanding cyber market overseeing cyber, technology, privacy, and data security matters, specifically focusing on cyber incident response, data breach response, privacy class actions, and data privacy compliance issues.  Prior to joining Gallagher Bassett, Kirsten was a senior team manager and counsel at Coalition Inc., where she counseled customers in preparing for, and responding to, data breaches in their network infrastructure. She also served as senior claims counsel at Hiscox, where she worked with affected cyber policyholders to respond to hundreds of cyber incidents and third-party claims involving data breaches, cyber extortion, ransomware, DDoS attacks, and business interruption losses. Kirsten has been awarded the Fellow of Information Privacy (FIP) designation by the International Association of Privacy Professionals (IAPP) and is a Certified Information Privacy Manager (CIPM).

Insurance Thought Leadership

The cybersecurity landscape morphs so rapidly. What emerging cybersecurity threats should organizations be prepared for?

Kirsten Mickelson

We're going to see a huge shift in the coming year in terms of the magnitude of existing attack types. Our most typical attacks are business email compromises [BECs], wire fraud where someone misdirects funds to a fraudulent account, and ransomware attacks. These three types of attacks typically lead to data breaches requiring notification of affected individuals and sometimes evolve into class action privacy lawsuits. These attacks will be amplified significantly, leading to bigger paydays for threat actors and more negative press and scrutiny for victims.

The threats are evolving because threat actors have noticed that organizations are increasingly reluctant to pay ransoms during ransomware attacks. We never advise organizations to pay -- no one wants to pay a criminal -- and there's now even more government scrutiny around ransom payments. Organizations are also becoming savvier about properly securing and backing up their data for business continuity, allowing them to restore from backups rather than paying threat actors for decryption tools.

In response, we'll see threat actors shift their tactics. They'll not only encrypt data in ransomware attacks but also exfiltrate data and threaten to publish it if the ransom isn't paid -- creating a double extortion scenario. Some might skip the encryption process entirely and simply steal data, threatening to publish it if a ransom isn't paid. This is more efficient for them because they don't have to provide continuing support during the decryption process.

Another emerging tactic is that threat actors are showing more patience before striking. They're slowly exfiltrating data to avoid triggering EDR [endpoint detection & response] tools and alarm bells that would detect large data transfers. They're getting into systems and observing email traffic, reading communications, identifying key players who approve large wire transfers, and reviewing documents to understand if there are lucrative opportunities like M&A deals that they can exploit for higher ransom demands.

We're also going to see continued exploitation of zero-day vulnerabilities -- bugs in software or tech products that threat actors find before organizations can patch them. This is particularly effective for scaling attacks and extorting more money, especially with so many organizations relying on SaaS [software as a service] products and outsourced tech.

Finally, we'll see an increase in supply chain and vendor attacks. With organizations increasingly connected and reliant on outsourced tech solutions, vendors become lucrative targets. A single point of attack can affect hundreds or thousands of downstream customers. We saw this last year with Change Health and CDK Global, and now with PowerSchool, and threat actors are very aware of how these attacks can leverage higher payouts by having downstream customers pressure the victim to pay, because their businesses rely on that victim's services.

Insurance Thought Leadership

I’m seeing that artificial intelligence both helps with cybersecurity prevention and with enabling threat actors to conduct more sophisticated attacks.

Kirsten Mickelson

Yes, threat actors are using generative AI to create more convincing social engineering text. These are more believable phishing emails that have a tone and style like that of a trusted colleague. Threat actors are also using AI to translate these more credible phishing emails to scale -- in French, German, Chinese, and other languages to increase their attack surface. Before AI, these phishing emails were easy to spot. They had lots of red flags, with grammar errors, low sophistication, and mismatched fonts. Now, AI is removing those easy-to-spot flags, enabling more seamless social engineering.

Over the holidays, we saw a perfect example. A company that uses an HR management system for time tracking received a sophisticated phishing email. The email claimed that an employee's time-off request had been denied and asked them to review the reasoning by clicking a link. It wasn't unusual to get that type of email in their organization. When clicked, the link led to a fake landing page that looked exactly like the real one -- no mismatched fonts, no red flags. Once credentials were entered, the threat actor gained access to the system.

In the ransomware space, we're seeing threat actors using AI to review documents more efficiently. They're using it to quickly locate and identify financials, P&Ls, and cyber insurance policies so they can make credible demands. Before, threat actors had to manually review documents to figure out who the key players were, but AI accelerates this process.

We're also seeing threat actors using AI to automate the process of finding zero-day exploits and vulnerabilities before they can be patched. Some are using AI to write malicious code for ransomware attacks, which is making the ransomware industry more accessible to less technical actors.

Another interesting development is that threat actors are targeting legitimate AI agents themselves. As more organizations implement AI chatbots for customer service, we're seeing injection attacks on these agents. Threat actors are using these compromised agents to get victims to disclose sensitive information, reset passwords, and even transfer money. This poses a huge challenge for insurers, and not just cyber insurers.

Insurance Thought Leadership

When I spoke at a recent INSEAD seminar in San Francisco, a fellow panelist shared a scary story about sophisticated neighbors who were scammed by fraudsters who used a deepfaked voicemail of their son saying he desperately needed bail money. How frequently are you seeing deepfakes being used beyond email-based fraud?

Kirsten Mickelson

We're seeing deepfakes frequently, and I don't expect that trend to slow. For instance, in Zoom calls, threat actors are mimicking photos and images of credible people who appear to be your colleagues, even commandeering their voices. If someone who looks and sounds like my senior executive calls into a meeting and tells me to do something, I'm likely to comply.

We've seen this particularly with wire fraud. There was a significant case in Hong Kong where an organization's financial person received instructions from what appeared to be senior executives -- all deepfaked -- directing them to wire several million dollars to a Hong Kong bank. The employee complied. 

I was recently on a panel with a Secret Service agent who said he and his colleagues had experimented by taking his voice and creating a deepfake saying things like, "Hey Joe, do wire that money" -- and it sounded exactly like him.

We're also seeing threat actors playing panicked voices of customers to victims, often vendors. They'll say something like, "Your customer is telling you to pay this ransom, otherwise they'll make this demand or sue you."

Insurance Thought Leadership

Cyber insurance premiums appear to be declining despite increasing cyber threats. Is this because premiums were initially set too high, or are companies becoming more effective at preventing attacks with help from insurers?

Kirsten Mickelson

From the claims perspective, I can say I've seen a lot of new entrants into the market. Also, particularly on the standalone cyber insurance side, insurers are requiring organizations to implement specific security measures before they'll even underwrite them.

They have to have MFA [multi-factor authentication] not just implemented but enforced at all times, in addition to processes such as dual authentication before wiring funds, before insurers will even consider the risk.

Insurance Thought Leadership

The bad guys collaborate all time, but insurance companies need to be careful about antitrust laws and, of course, don’t want to give up a competitive advantage. How can the industry collaborate better?

Kirsten Mickelson

We're seeing that with CISA [the Cybersecurity and Infrastructure Security Agency], which strongly encourages reporting if you’re exploited in some way. The goal is to enable government to aggregate data to go after these bad actors. We are seeing partnerships developing.

Insurance Thought Leadership

Has there been a shift in the geographic origin of cybersecurity threats? I know Russia has historically been a prominent source of attacks.

Kirsten Mickelson

Definitely. For threat actors to receive payment under U.S. insurance policies (and U.S. law), we have to run it through OFAC [Office of Foreign Assets Control]. Payment cannot be sent to a sanctioned entity on the OFAC list.

Before the conflict in Ukraine, many threat actors were operating out of Russia and Eastern Europe. While Russia as a country wasn't on OFAC, there were organizations and individuals within Russia on the list. However, following the Russian invasion of Ukraine, the U.S. placed all Russian financial institutions on the OFAC list, which triggered a massive shift.

Many large ransomware gangs broke up and reformed in new locations. We're now seeing more attacks originating from the Asia-Pacific region, as well as increased activity from Southeastern Europe.

Insurance Thought Leadership

What else should we be thinking about for 2025 that we haven't discussed?

Kirsten Mickelson

I think there's another important trend regarding new tactics. With the ransomware-as-a-service model, the barrier to entry is going to be much lower. This means we're likely to see the threat actor ecosystem expand, unfortunately.

One way this will manifest is through the rise of initial access brokers. In the ransomware-as-a-service world, everything can be outsourced, even finding access to exploit. Access brokers go out and find entry points, then sell them to their customers -- the threat actors who deploy the actual ransomware attacks. These initial access brokers view themselves as less malicious threat actors, though they're still criminals. Because this role doesn't require as much technical knowledge, I expect we'll see a significant rise in initial access brokers.

Insurance Thought Leadership

This is super informative. Thanks, Kirsten.

Digital transformation affects every corner of the insurance industry, but one area has not kept pace. The payment process still holds untapped potential. In many cases, payments remain an antiquated and complex process, standing out in a modernized industry where seamless digital transactions are expected, and customer satisfaction hinges on user-friendly interfaces. 

This presents both an opportunity and a challenge to insurers as they work to offer fully digitalized payment experiences across the ecosystem, from the first premium payment to claims payouts. A fully digitalized payment experience means moving away from antiquated processes like paper checks and ACH bank drafts to instant, real-time payment options encompassing everything from credit cards to Apple Pay to cryptocurrency. Offering a modernized digital payment experience is no longer a nice-to-have feature, rather, it has become a necessary part of every insurer’s modernization strategy to improve customer satisfaction and retention while driving long-term growth.

The Growing Demand for Digital Payments in Insurance

The perception of insurance has changed in recent years. It is no longer just about policy and coverage options — it is now about the experience. Consumers, especially younger generations, expect digital-first, seamless, simple customer experiences from every digital interaction, including from their insurers. Policyholders want the convenience of making premium payments online, anytime, and research found that 81% of respondents want to use a mobile app for routine tasks. 

For insurers, there are several significant benefits of digitalizing payments including: 

Enhancing the customer experience. 

Customer satisfaction is closely linked to convenience. In fact, research shows that customers who have the opportunity to engage with multiple channels with their insurers have a 25% higher retention rate. By digitalizing their payment workflow, insurers can reduce friction and delays in the payment process and help ensure customers have a positive interaction at each touchpoint. Policyholders appreciate the convenience of making payments when they want, using whichever payment method they prefer. 

Insurers can reduce the potential for billing-related complaints by modernizing the process. Digitalizing payment workflows reduces human errors, eliminates bottlenecks, and shortens cycle time, improving customer satisfaction and loyalty. With an omnichannel payment process, customers can manage their premium payments through self-service channels, saving time and increasing satisfaction.

Improving operational efficiency and reducing costs.

Processing payments manually, including handling time, processing fees, and reconciliation errors, drive up costs and cycle times. Digital payments, however, streamline the entire payment lifecycle from start to finish. Automation reduces manual data entry, saving time and costs, and digital payments often have lower processing fees than traditional methods. Delays in processing new business payments, NSF transactions, and processing paper checks on premium payments all have negative consequences for insurers by providing coverage when funds may not be available, extending policy cancellation windows, and increasing earned but uncollected premiums, all impacting loss ratios. 

Competitive edge from omnichannel payment flexibility.

Research shows that consumers who use multiple channels to interact with their insurers are 21% less likely to cancel their policies. Consumers prefer flexibility and the option to choose how to engage with businesses they work with, including their insurers. This flexibility can be built into the payment process in various ways, such as offering multiple payment methods and structures or allowing customers to set up auto-pay or make a one-time payment. For many insurers, the capability to offer a consistent, transparent experience often stands out in the competitive marketplace. 

Security, privacy, and compliance. 

Data privacy and security concerns increase during any digitization project. Insurers should create processes and safeguards around protecting policyholder data, remaining compliant, and preventing fraud. Best practices around securing data include using encryption methods, tokenizing secure payment details, and adhering to industry-wide compliance standards, especially data governed by PCI-DSS. Policyholders need clear communication about security and data privacy measures to feel confident that their data is safe, and transparency builds trust. 

Immediate claims payments. 

The claims process is part of the insurer fulfilling its promise to the policyholder to pay covered losses. However, it is often a slow process to issue and mail a paper check, with the potential for delays and frustration for policyholders. Digital claims payments, including multiple options like instant deposit, digital wallets, and payment cards, offer significant improvements to cycle time and customer satisfaction and transparency that allows policyholders to track the status of their claim or payment in real-time. This is a critical step as almost 60% of respondents say they would switch insurers to get an automated service that would tell them exactly where their claim is in the process. 

Embracing a Digital Path Forward For Insurance Payments 

Digitalizing the payment process is critical to an insurer’s modernization path. Digital payments improve the customer experience but also help streamline operations, reduce errors, and lower cycle time. For policyholders waiting for a claims payout or wanting to make a premium payment, convenience and transparency are important. For insurers, delivering secure, seamless, omnichannel payment options can be a competitive advantage in a crowded marketplace, improving retention and brand loyalty. Embracing a digital-first payment experience is the way to meet customer expectations while improving service and preparing for the future in an increasingly digital world. 

External Link: 

1.         https://www.forbes.com/sites/jefffromm/2023/03/16/gen-z-is-impacting-customer-experience-forrester-gartner-experience-dynamic-execs-share-insights/

Sponsored by: ITL Partner: insured.io

China's DeepSeek has rocketed to the top of Apple’s App Store charts in the U.S., dethroning OpenAI’s ChatGPT as the most downloaded free app. The supposedly super-efficient, open-source software is raising some serious questions about the stock market valuations of key tech giants, including the chip maker Nvidia, whose stock got crushed Monday.

Designed for solving complex problems, DeepSeek’s new R1 reasoning model reportedly performs as well as OpenAI’s o1 on certain benchmarks. R1 was built on the V3 LLM, which the company claimed is on par with GPT-4o and Anthropic’s Claude 3.5 Sonnet, but cost less than $6 million to develop. By contrast, OpenAI CEO Sam Altman has said GPT-4 cost over $100 million to train. 

See also: How AI Will Transform Insurance in 2025

The big question that's causing most of the concern is whether the entire industry has been wildly overspending and investing. DeepSeek is also raising profound questions about how China may have undercut America’s (and emerging U.K., Europe and likely other markets) most critical economic advantage on A.I. by making its technology free.

There's so much to unpack and some massive questions to answer about the true cost, model implications, trust, how DeepSeek can be harnessed from a business point of view, the censorship people are already reporting and on and on. Until we have more information, it will be very difficult to get to the bottom of any of these things.

While DeepSeek has reported some impressive results, we don't yet have much of a handle on its performance. These models often return different results on multiple uses, with pretty varying performance.

It is certainly way too early for any stock market calls. Let's hope the trading algorithms don't get carried away. Another "fake" market move is exactly what we don't need. Once we start getting more information and answers we can start to form more considered views.

For now, we need to keep exploring all of these models. For most of us harnessing multi-AI agent strategies, we need to look in-depth at everything in this space and ask more questions of our technology foundations, data models, security and so on.

These systems are, at the moment, hard to protect or control, which makes it harder to stop them from doing something wrong, or at least interrupting some output. By the way, these systems will potentially be operating at massive scale. 

See also: Who's Getting Results From AI, and Why?

Existing regulatory frameworks even now make the accountability and responsibility pretty clear.

That's why insurers, for example, need to think super hard about designing AI systems differently, and designing their businesses around these technologies differently, as well. 

They have huge societal implications. People, finances, vulnerability, risk understanding, health and so on are all potentially affected.

We need to be human-centered. We need to think really hard about how we build core systems and foundations that can harness the AI, keep humans in the loop and in control, allow multi-agent strategies to be realized, and make it easy to keep pace with the rapidly changing AI landscape.

The AI you are using and adopting today will become defunct in the next year. We know that processing speed and intelligence are set to rapidly change. And we know that countries are pouring billions into this technology.

Keeping pace will require huge amounts of core adaptability, in infrastructure like energy, as well as in the way businesses are built. This sort of required enterprise design change rarely exists in insurance.

There will be a lot more to follow on this as people begin to explore trust, usage and acceptance and really what's behind DeepSeek.

It has definitely put the cat among the pigeons.

While my main takeaway from the NFL conference championship games over the weekend was that I'm soooo ready to move on from the Kansas City Chiefs — anyone with me? — I was also struck by the fact that the four teams went for it on fourth down again and again and again... and again and again. They went for it 14 times in all.

For those of us who grew up with football in the ’70s and ’80s, that's a stunning number. If a team was even inches short on fourth down back then, they'd try a field goal or punt. "Take the points." Or, "Kick it away and rely on your defense."

The four teams didn't just go for it deep in their opponent’s territory, in desperation spots late in the game, or on fourth-and-inches, either. Kansas City went for a first down from its own 39-yard line. The Washington Commanders went for the first down twice on their opening drive. The Philadelphia Eagles went for it on fourth-and-5.

The analytics types have actually known for a very long time that teams should go for it on fourth down far more often than they do. In fact, the data says NFL coaches are only maybe a little more than halfway to where they need to get in terms of going for it. (The numbers say to keep your offense on the field on fourth-and-1 even on your own 9-yard line, if you can believe it.) 

Yet head coaches have been slow on the uptake even though their win-loss records are such a stark report card, even though at least five of the 32 head coaches lose their jobs every year, and even though the reward for being a head coach is a salary that starts at some $3 million a year and can reach to $20 million a year if you're Andy Reid and keep taking your goshdarn team to the Super Bowl seemingly every year. 

That it's taking the NFL literally decades to adapt, despite all the incentives to do so, makes me think about all the impediments to innovation — including in insurance. 

If these highly paid NFL coaches struggle, maybe the insurance industry is getting a bit of a bum rap when people complain about the slow pace of change. And maybe we can adapt a tad faster if we understand what's holding those NFL head coaches back — and what is finally breaking them loose. 

The big holdups for NFL coaches have been tradition and its sibling, potential embarrassment. By the late 1990s, Moneyball was revolutionizing the use of statistics in baseball, and football coaches had plenty of analytics available to them, but tradition said that you punted or tried a field goal on fourth down. If you ignored tradition and got a first down, the success was treated as an unnecessarily risky one-off. If you failed... well, Barry Switzer saw what happened when he went for it inside his own 30-yard line as head coach of the Dallas Cowboys in 1995. Headlines included, “Switzercide,” “Fourth-and-Dumb,” and “Bozo the Coach,” according to this interesting piece in The Ringer about the evolution of fourth-down strategies.  

What finally lit a fire under coaches? It took a stunning call by Bill Belichick, a trick play by the Eagles in a Super Bowl, and then a steady stream of success by increasingly emboldened coaches. So two shocks, and then a track record.

The Belichick shock came in a game in 2009 between the New England Patriots and the Indianapolis Colts when he left Tom Brady on the field with 2:08 left in the game on a fourth-and-2. The ball was at the New England 28-yard line. They were leading 34-28. Brady completed a quick pass, but the running back was tackled a hair short of the first down. The Colts took over on downs, and quarterback Peyton Manning threw a touchdown pass with 16 seconds to go. New England lost 35-34. 

Even former Patriots players were outraged at Belichick's decision, one calling it the dumbest decision he'd ever seen. The thing is: Everybody knows Belichick isn't stupid. He is likely the best coach in the history of the game — as hard as that is for this diehard Steelers fan to write — and among the most cerebral. So as the debate about his decision raged for weeks on TV and talk radio, people gradually began to look at the analytics — and realized Belichick had made the right choice. 

New England had roughly a 60% chance of getting a first down, which would have ended the game. If Belichick punts and gives Manning the ball back, the Colts have a better-than-even chance of winning. Belichick had added at least 10 percentage points to his chances of victory. 

The extended debate won some converts.

Then came the Eagles in the Super Bowl after the 2017 season. They eschewed a field goal try toward the end of the first half on fourth-and-goal from the 1-yard line. Instead, the Eagles ran a trick play now known as "the Philly Special," scored a touchdown, and went on to beat the Patriots 41-33. (That play deserves some love: NFL Films described it as "a play that the Eagles had never called before, run on 4th down by an undrafted rookie running back pitching the football to a third-string tight end who had never attempted an NFL pass before, throwing to a backup quarterback who had never caught an NFL (or college) pass before, on the biggest stage for football.")

That play opened even more eyes to the wisdom of going for it on fourth down, and it was followed by more and more attempts and more and more successes. The hot head coaches in the league today include the Commanders' Dan Quinn and the Detroit Lions' Dan Campbell, who are as bold — and successful — as they come. The Eagles, on their way to their third Super Bowl in eight seasons, run a quarterback sneak they call "the Brotherly Shove" that they trust will get them at least a yard anywhere on the field.  

Just look at the games over the weekend. While the teams went for it on fourth down 14 times, they punted only seven times and attempted field goals only five times. They succeeded on 10 of the 14 fourth-down attempts and were oh-so-close on two others. If you saw the same game I did, it sure looked like Buffalo Bills quarterback Josh Allen got a first down late in the game against the Chiefs. There just wasn't clear enough evidence to overturn the call on the field. On the final fourth-down attempt, a Bills receiver dropped Allen's desperation pass. 

What are the lessons for innovation in insurance?

To me, the biggest is that we should recognize how much tradition can limit us. I can't tell you how many times I've talked to founders of impressive startups and asked who their competitors are and had them respond that they're mostly up against inertia. "This is how we've always done it" should disappear as a justification for an action. That hardly means that we need to change everything overnight, just that inertia can't be a justification for anything. 

I've also found that looking for those shocks matters. We can't all have Bill Belichick create a national debate for us that raises awareness of a key issue, but we can look for successes such as the Philly Special and can highlight instructive failures like the one Belichick himself experienced. When we find a good lesson on innovation, we need to communicate it again and again.

In addition, we can follow the probabilities more than we do now. We’re great at doing and trusting the math when it comes to underwriting and claims, but, like most companies in other industries, can be hit-or-miss when it comes to innovation. Especially in this fast-moving AI phase, we need to be disciplined about identifying big opportunities, testing ideas inexpensively, weeding out the losers quickly and scaling the winners. And we need to gauge success on a careful evaluation of whether an effort increased our chances of winning, not simply whether we got a first down or a touchdown. Probabilities did okay for Belichick, and he has six Super Bowl rings to prove it. They can help us do better, too.

The final lesson I'd draw is that innovation is hard. Really hard. So maybe we can cut ourselves some slack for a bit about the pace of change in insurance — right before we get back to work.

Fly, Eagles, fly.

Paul 

The insurance landscape is in a state of flux, with the hard market conditions seen over recent years becoming the new normal. Small insurance agencies, often lacking the resources of their larger counterparts, feel the impact of these shifts more severely.

Customers are quick to shop for new policies, leaving agencies struggling to maintain their retention rates. To be successful, agencies need to rely on technology to ease the burden. Unfortunately, when small, local agencies hear the word "insurtech," they may automatically assume that it's not meant for them. They may think, "We can't afford this," or "We aren't big enough to need this." But insurtech covers a myriad of different solutions big and small, including comparative raters.

Comparative raters, also known as commercial lines quoting tools, are digital platforms that empower agents to obtain quotes from multiple insurance carriers simultaneously. By inputting client data once, agents can generate side-by-side comparisons of coverage options and premiums from a wide range of carriers, eliminating the tedious and time-consuming process of navigating individual carrier portals. This "one-to-many" quoting approach is revolutionizing the way small agencies conduct business.

In today's dynamic market, characterized by fluctuating carrier appetites and evolving customer needs, comparative raters have emerged as a vital tool, enabling small agencies to not only survive but thrive.

Expanding Access to Carriers: Leveling the Playing Field

Historically, small agencies often found themselves limited to a small pool of carriers due to the logistical challenges of obtaining multiple quotes. This constraint meant clients might not have been presented with the most comprehensive or cost-effective coverage options. Comparative raters dismantle this barrier by providing access to an expansive network of national and regional carriers, effectively leveling the playing field for small agencies.

This expanded access is particularly crucial in challenging market conditions, such as the hardening market observed in recent years. As carriers tighten their underwriting guidelines and pull back from certain markets, the ability to quickly and efficiently compare options across a broad spectrum of carriers becomes paramount. Small agencies armed with comparative raters can navigate these shifts with agility, ensuring they can still offer competitive solutions to their clients even when the market constricts.

Time Savings and Error Reduction: Amplifying Efficiency and Accuracy

Beyond expanding carrier access, comparative raters dramatically enhance operational efficiency and accuracy. The traditional process of manually gathering quotes from multiple carriers was not only time-consuming but also prone to errors. Data had to be re-entered into each carrier's system, increasing the likelihood of mistakes and omissions, potentially leading to costly errors and omissions (E&O) issues.

Comparative raters streamline this process by enabling single-entry data input. The information entered into the comparative rater is automatically populated across all carrier quotes, eliminating the need for redundant data entry. This not only saves agents countless hours but also significantly reduces the risk of human error, safeguarding the agency from potential E&O claims.

Further efficiency gains are achieved through integration with agency management systems (AMS). Modern comparative raters seamlessly integrate with AMS platforms, allowing agents to prefill quote information with existing client data from their AMS. This eliminates manual data transfer, further accelerating the quoting process and ensuring consistency of information across all platforms.

Enhancing Client Service: Building Stronger Relationships

In the increasingly competitive insurance landscape, client service is paramount. Clients expect quick responses, accurate information and a personalized experience. Comparative raters empower small agencies to deliver on these expectations, fostering stronger client relationships.

• Faster Turnaround Times: By automating the quoting process, comparative raters enable agents to provide clients with multiple quotes in a fraction of the time it would take manually. This responsiveness demonstrates a commitment to client needs and enhances the agency's professional image.
• More Informed Decision-Making: Comparative raters present clients with a clear, side-by-side comparison of coverage options and premiums, empowering them to make informed decisions about their insurance needs. This transparency builds trust and strengthens the client-agent relationship.
• Remarketing: The efficiency gains of comparative raters extend to remarketing efforts. With client data readily available in the system, agents can easily re-quote policies at renewal time, ensuring clients continue to have the most suitable coverage at competitive rates.

Training New Employees: Equipping the Next Generation

The insurance industry faces a talent gap as seasoned professionals approach retirement. Bringing new employees up to speed on the complexities of commercial lines insurance can be a daunting task. Comparative raters can play a significant role in accelerating this learning curve.

By providing a visual overview of carrier appetites and coverage options, comparative raters give new employees a rapid understanding of the market landscape. They can quickly learn which carriers specialize in certain industries or risk profiles, shortening the time it takes for them to become productive members of the team. This is particularly valuable in today's rapidly changing market where carrier appetites can shift quickly.

Embracing the Future of Commercial Lines

Comparative raters are more than just a technological innovation; they are a strategic imperative for small insurance agencies navigating the complexities of today's market. By expanding carrier access, streamlining workflows, enhancing client service and facilitating employee training, comparative raters empower small agencies to compete effectively, grow their business and build long-lasting client relationships.

Embracing these tools is not just about keeping pace with the industry's technological evolution; it's about securing a prosperous future for small agencies in an increasingly challenging and competitive market. Investing in technology to streamline and automate workflows will free staff to spend more time on initiatives that will make an agency stand out.

Brokers, underwriters and administrators often wrestle with hurdles like human errors, slow processes and mounting operational expenses in the fast-paced world of insurance. These issues chip away at customer satisfaction and eat into profitability. 

Reimagining the policy administration workflow can turn these roadblocks into stepping stones. By fine-tuning the process, businesses can unlock smoother operations, improved accuracy and a hassle-free customer journey.

This article explores how insurance policy management software can improve inefficiencies, enhance workflow and harness cutting-edge technology for a smarter, cost-effective approach.

Managing the Policy Administration Life Cycle

Optimizing the insurance policy lifecycle transforms the way insurers and brokers operate. A well-orchestrated administration flow boosts service delivery, trims expenses and keeps customers loyal — all while ramping up internal efficiency.

What makes this process stand out is its ability to weave diverse tasks into a cohesive, frictionless system. Eliminating snags and bottlenecks ensures policies move effortlessly through each phase. Insurers can tackle intricate adjustments, process endorsements and settle claims with fewer hiccups, reducing delays and enhancing turnaround times.

Moreover, the flow's automation capabilities curb manual errors and strengthen adherence to industry regulations, an essential safeguard against operational pitfalls. As insurers juggle numerous policies, insurance policy software ensures smooth operations, drives better cross-team collaboration and delivers real-time visibility into policy performance.

Common Challenges Faced in the Policy Administration Process

Managing policy administration in the insurance industry is no small feat. The process is often riddled with obstacles that can disrupt efficiency and accuracy. Here are some of the most common challenges insurers face:

Manual Errors

Relying on manual data entry or outdated policy management software can lead to frequent mistakes. Errors in client details, premium calculations or policy information cause delays and expose the business to compliance risks.

Inefficient Processes

Legacy insurance policy software and disconnected workflows create roadblocks in key stages like underwriting and claims processing. These inefficiencies drive up costs and result in missed opportunities for timely service.

Compliance and Regulatory Risks

Without a streamlined system, keeping up with ever-changing regulations is a daunting task. Failing to adapt can lead to penalties, operational risks and damage to the company's reputation.

Poor Data Management

Inconsistent or incomplete data hampers accuracy in critical areas such as premium calculations and risk evaluations. It also complicates claims handling, resulting in further inefficiencies.

Customer Dissatisfaction

Delays in processing, incorrect policy information and sluggish claims resolution frustrate customers. These issues erode trust, damage relationships and ultimately lower retention rates.

What's New in Insurance Policy Management Software?

The latest advancements in policy administration software are significant. Generative AI (GenAI) is leading this revolution, bringing transformative potential to every stage of the insurance workflow. Let's explore these innovations and how they reshape policy management.

1. Generative AI for Intelligent Document Handling

GenAI now automates the creation and customization of policy documents. It understands context, generates policy terms and tailors endorsements with precision. This reduces manual effort while ensuring regulatory compliance. Insurers can create hundreds of personalized documents in minutes, making the workflow faster.

2. Conversational AI for Customer Interactions

Modern policy and procedures management software embed conversational AI that powers chatbots and voice assistants. These tools can answer queries, guide users and process policy changes conversationally. Customers enjoy instant responses, and human agents are freed to focus on complex cases.

3. Predictive Analytics Enhanced by AI

Traditional predictive analytics methods have evolved. GenAI enhances predictive models, offering sharper insights into risk patterns and customer behavior. It spots emerging trends, allowing insurers to adjust underwriting criteria and pricing strategies.

4. Smart Workflow Orchestration

Insurance policy management software now features AI-driven workflow orchestration. These tools dynamically prioritize tasks based on urgency and business rules. Claims flagged as high-priority are processed faster, while routine tasks are streamlined in the background.

5. AI-Augmented Compliance Tools

Compliance is a constant challenge, but AI now simplifies it. Advanced algorithms monitor regulatory changes and flag risks in real time. Automated audit trails ensure accountability, while intelligent systems recommend corrective actions for non-compliance.

6. Data-Driven Personalization

Personalization has reached new heights. AI analyzes data from various sources — social media, IoT devices and historical claims — to offer relevant policies. This targeted approach increases customer satisfaction and retention.

7. Self-Service Redefined

Customer portals now integrate AI-guided tools that walk users through policy adjustments, renewals or claims filing. These interfaces are intuitive, making policy management simpler.

8. Smarter Fraud Detection

AI-powered fraud detection tools are more sophisticated than ever. They analyze behavior patterns, detect anomalies and flag suspicious claims instantly. This approach reduces losses and preserves operational integrity.

9. Integration with IoT and Big Data

IoT-enabled devices now feed real-time data into policy management systems. This data powers dynamic pricing and real-time risk assessments. For instance, connected car data adjusts premiums based on driving behavior, enhancing fairness and transparency.

Conclusion

All in all, a modern policy administration system is the secret sauce for insurers looking to boost efficiency, accuracy, and client satisfaction. 

Insurance policy management software solutions provide a comprehensive way to tackle major challenges in policy administration. By integrating every aspect of the insurance process, from premium collection to claim settlement, these systems ensure smooth operations. They enhance data transparency and streamline workflows with the help of advanced analytics and automation. This boosts overall efficiency while delivering a seamless experience for users.

The insurance industry is in a talent crisis. The Insurance Institute of Canada revealed a nearly 50% increase in voluntary turnover between 2017 and 2022. The industry average also sits 30 percentage points over the national average of 12%. In a 2024 Mercer report, insurance and reinsurance were cited as one of the most difficult industries in terms of hiring or retaining employees. While strides have been made in attracting diverse talent—now meeting the national average of 25% representation—retention remains a critical challenge. 

Career advancement and workplace difficulties continue to top the list for people exiting the industry. The sector is attracting, but not maintaining, talent, which affects the broader industry recruitment efforts to bring in new perspectives.

DEI Fatigue: Lack of Mutual Respect and Trust

One systemic issue lies in the overreliance on questioning one's merit when assessing performance—this causes a lack of respect and trust from the onset. A Harvard Business Review survey of 20,000 employees found respect was identified as the leadership behavior that most stimulated greater employee commitment and engagement. Another study conducted in the Memphis Business Journal found 60% of respondents felt that the lack of respect was getting worse. 

The Legacy Business Culture defines respect in the workplace as "an active process of nonjudgmentally engaging people from all backgrounds with the intent to increase your awareness and your effectiveness. It is demonstrated in a manner that esteems both you and those with whom you interact." However, some barriers diminish trust and erode respect, including excessive micromanagement, differential treatment, lack of sufficient autonomy, and exclusion.

See also: We Must Be Diverse by Design

The Cost of Inaction to DEI Fatigue: Undermining Team Resilience

Prominent Canadian insurance leader Colette Taylor understands the importance of DEI fatigue. She was quoted in a 2024 article published by the Insurance Business of Canada, stating, "...attracting diverse talent is crucial, but we also need to invest in their growth and development. It's essential to prioritize this investment so that they gain the confidence, capabilities, and resources needed to advance to senior leadership positions, ultimately enhancing diversity at the top." 

Today, large multinationals are publicly pulling back on their DEI efforts. Canada, too, has seen rising inflammatory rhetoric targeting marginalized groups. This uptick can be counterintuitive to the industry if the right policies are not in place to address subtle biases. In turn, unchallenged biases risk limiting creativity and create workplace environments that may become uncivil, disengaged, or resentful. Business success hinges on how leaders navigate biases—whether toward people, actions, or priorities.

The Organizational Costs of DEI Fatigue: Reputational Harm

Law firm Clyde & Co reported a rise in 2024 Canadian EPL filings citing microaggressions. This follows a similar trend with our U.S. neighbors. Defending these EPL claims costs legal fees, loss recruitment expenditure, and loss of practical knowledge. There are also indirect costs such as stress-related leaves, diminished client trust, reduced employee engagement, and loss of productivity. A survey conducted by Gallup found disengagement has risen annually since 2020. Unconscious bias was also found in a Canadian parliamentary research report potentially contributing to Canada's lagging labor productivity.

A Pragmatic Path Forward: Greater Accountability 

To help reverse the retention trend, organizations must confront discomfort to rebuild trust. As Steven M.R. Covey states in "The Speed of Trust": "Though it's possible to rebuild trust, it's not easy. It takes time, effort, and a willingness to change and prove trustworthiness through consistent action."

One pragmatic solution is changing the oversight of personal improvement plans (PIPs) from a purely frontline management and HR function to mandating leadership accountability at the top, with the local country CEO or global head of DEI (who communicates directly with the local country CEO) directly approving PIPs involving underrepresented individuals. Eventually, this could be rolled out to all employees. This measure achieves two important results:

1. Safeguards organizations from employment practice liability (EPL) claims tied to potential misuse of PIPs, particularly when underrepresented employees are targeted for raising valid workplace concerns.
2. Signals an organizational culture that is more willing to be open to innovation where mistakes, calculated business risks, and career advancement are seen as attainable—without fear of retaliation or reprisal.

See also: The Many Facets of DEI

Working Toward Being the Industry of Choice

The insurance industry stands at a crossroads. It's on the cusp of a major retirement wave with an alarming voluntary turnover rate. Members of Gen Z are more ethnically and racially diverse than previous generations and on track to being the most highly educated generation.

The work being done by the Canadian Association of Black Insurance Professionals (CABIP) and Multicultural (Re)insurance Association (MRIA) shows change is needed. Industry leaders must act decisively to recognize and root out areas where biases may exist, so good talent can thrive. It's time for leadership to take bold steps to build a resilient, respectful, and inclusive workforce that sets a new standard for the insurance industry.

Embedded insurance (also known as IaaS, Insurance-as-a-Service) in the U.S. market is gaining popularity in the age of information and rising consumer expectation of convenience. Insurance products previously purchased in a standalone fashion are now available as an integrated experience. Mature insurance application programming interfaces (APIs) and accelerated underwriting have enabled the integration of insurance with non-insurance digital products, platforms and services.

Embedded technologies allow customers to purchase insurance as part of a process they are familiar with instead of being an ad-hoc event, bringing convenience and ease of use. Embedded insurance is fundamentally changing how consumers engage with insurance and the mode of insurance sales.

However, the conversation about embedded insurance has largely remained within the P&C space over the past years, and for a good reason. In comparison with P&C products, such as warranties, rent insurance, jewelry insurance and even homeowner/auto insurance, personal life and supplemental health insurance are non-compulsory, mostly not use-case specific, require a decades-long financial commitment and are much more complex.

These headwinds make it challenging to embed life and supplemental health products in a way that would attract consumers, and most embedded partnerships for L&H products did not last long.

The first principle of embedded insurance

Before we lose all hope, let's go back to the first principle of embedded insurance. Despite common misconceptions, embedded distribution complements brokers' and agents' channels with the goal of reaching customers inaccessible from the traditional channels, and selling simple digital products may not provide incentives to brokers and agents. Strategically, embedded insurance is about partnering with third-party service providers with lead-gen capabilities that have a large customer base and brand equity.

Embedded enablers, therefore, offer relevant, simple life and supplemental health insurance products digitally through the service providers' digital journey to help their consumers purchase insurance in a frictionless way. Implemented correctly, embedding could help insurers lower acquisition costs and help third-party service providers increase revenue and retention, and ultimately, help end users get protection before they need it.

The foundation of embedded insurance is to create a win-win-win solution by opening up new distribution channels and delivering insurance products in a more economical way.

See also: Riding the Insurance Roller Coaster

Why is embedded insurance different for personal life and supplemental health products?

Embedded distribution touches on many aspects of the insurance tech stack. The following is a simplified framework with a premise of a basic understanding of digital insurance distribution in the U.S. market.

Let's start with the similarity between embedded insurance for personal L&H products and P&C products. Effective solutions on both sides consist of similar basic building blocks and offer a similar value to consumers and partners. Specifically, modern technologies and insurance stacks are required to make the embedding process practical and achievable. API connectivity is highly preferred, and the ability to offer a white-labeled solution quickly is a must. The embedded process also has to be context-relevant.

The insurance product needs to bundle with the embedded offering well, and the underwriting process needs to align with customers' expectations. Also, various degrees of access to the existing data are key drivers to a successful embedded solution. 

The similarities between embedding L&H products and P&C products stop here.

Unlike P&C products that have gone through many years of digital transformation, L&H products have just started the transformation processes with a headwind of significant legacy burdens. Few products beyond SI term life insurance have developed the API connectivities required for embedding purposes.

Unlike the existing embedded P&C products with little or no underwriting involved, L&H products' underwriting is still much more involved, even with the options of SI and instant-issued products. Furthermore, the placement ratio is one of the key concerns. Unlike most P&C products that are short-term, compulsory, simple and have a distinct use case, L&H products are non-compulsory and more complex, and consumers often struggle to fully understand their value in making such a long-term commitment.

Unlike with the advent of neo-insurers like Lemonade or Root, which own the end-to-end distribution with the ability to develop their own embedded solution, L&H carriers outsource distribution and are unlikely to develop their own embedded solution, given the operational and logistical limitations. Therefore, there is a higher need for third-party embedded enablers in the L&H space.

By now, it is self-evident that despite the similarities, the difference in L&H products mandates unique ways of implementing an embedded strategy.

The considerations of effective embedded solutions for L&H products

The L&H industry comprises more complex, high-value and low-frequency products, which makes embedding harder.

The implementation of L&H products requires some additional considerations. In addition to the modern and flexible tech stack, L&H embedded enablers also should consider the following:

Generally, the embedded solution enables an insurance delivery as part of a point-of-sale process, such as upon closing a mortgage process, or part of a non-purchase customer journey, such as when consumers are using the digital solutions offered by the embedded (distribution) partners, e.g., neobanks. Each method is distinct in how the insurance value proposition is conveyed to the user and dictates many other embedding elements.

On the one hand, to deliver insurance as part of a POS effectively, the embedded insurance products have to be explicitly tied to the bundled service. Unlike group life and health products on the group chassis, where hard-embedded (opt-out) offering (products are selected by default) could potentially be an option, individual L&H products have to adopt a soft-embedded (opt-in) solution due to regulation. The implication here is that customers have to make an explicit purchase decision when presented with an insurance product when they purchase another product. And the perfect example of such goes back to the use case when airlines present travel insurance just as a customer finishes booking plane tickets and is worrying about logistics problems. 

In the scope of personal L&H products, context relevance and simplicity are key. Customers have a split second to make a purchase decision of insurance products in addition to the monetary commitment they have just made. To add insult to injury, the POS embedding process usually occurs in the low-touch business model, implying there is little either party can do to re-engage those customers who opt out of this product.

On the other hand, delivering insurance as part of a customer journey (imagine embedding the insurance offering in a banking app) requires a very different tactic compared with the option of embedding it into the POS process. Now, without a distinct sales motion like in the example before, customers may not "notice" the embedded offerings or have enough awareness to take action. So considerations need to be given to the placement of the solution. The advantage here is that sales could occur in the future as long as customers initiate the journey at a sufficient pace.

Understanding the nuance above is critical in vetting the embedded distribution partners. For the POS embedded partnership, a modern tech stack on both sides is critical to allow seamless integration, and using existing data to pre-populate the offerings also drives conversion. Insurance products need to be simple, low-cost and offer value specific to the underlying purchase.

For the customer journey-focused embedded partnerships, the key to success is to leverage the frequent customer visits and exposure (high customer touch point of the partners' business model) to generate insurance awareness, interest and purchase decisions over time. Engaging customers this way can catch them before they officially start their shopping journey, entering the customer lifecycle economically and addressing different needs when it comes to product offerings.

An effective embedded solution for the L&H products needs to be data-driven, seamless, cost-effective, personalized, transparent and flexible. Although there is no clear boundary of what defines an embedding partnership, embedding a link on the website redirection is not strictly an embedded solution, and it has not yielded the business results we expected from the partnerships we observed in the past three years. A well-executed embedding strategy is the emergence of bancassurance 2.0, where insurance products are embedded into fintech platforms such as challenger banks. As an example, Latin American challenger bank Nubank launched in December 2020 its life insurance offering in partnership with Chubb.

A successful embedding partnership requires deriving value from distribution partners' existing customer-level data as a means to identify customers' needs, pre-underwriting, deliver a hook to attract customer's attention, and continuous engagement for future upsell and cross-sell opportunities. Of course, there are nuances to each point above depending on the types of channel partners, and the details of such are beyond the scope of this paper.

See also: Predictions, Wishes and the P&C Industry in 2025

Why do we need embedded enablers for L&H products?

People's shopping behavior has been changing faster than ever. Despite all the innovation in L&H insurance products and distribution technology, it is not enough. COVID-19 has certainly reminded people of their mortality, but a one-off demand stimulus like that is not sustainable. Based on the LIMRA survey, the L&H insurance gap still hit another high in 2021. Something needs to change, and meeting customers' evolving expectations is the key.

In the L&H space, carriers have played a critical role in pushing the pace of digital transformation, mostly in the space of underwriting innovation, and recently have moved on to the development of digitally friendly products. Given the historical context of outsourcing distributions to various broker-driven channels or the newly emerged digital distribution partners, most L&H carriers are well-aware of the operational and logistical limits to disrupt distribution directly and eager to explore digital distribution through partnership.

Embedded enablers are here to fill this gap. Embedded enablers can take on various shapes and forms, such as MGA, BGA or pure tech play. Overall, embedded enablers are tech-heavy and data-driven. They bridge the gap between the new digital channels and the insurers. Embedded enablers not only distribute insurance products but, more importantly, use data to build a digital relationship with customers over the long term.

The strategic value that embedded enablers bring is the rapid testing of the distribution channels and embedding method, finding a product-channel fit, assessing the market appetite and bringing that knowledge back to the carriers to drive product-level decisions. Different channels have their unique embedding requirements in data privacy, tech and placement models that require drastically different solutions. This also means that the product requirements are no longer driven by the insurance providers but by third parties facilitated by the embedded enablers. Most L&H products today have not been designed to target broad market segments and customers, which makes it increasingly difficult to resonate with customers who are demanding more personalized products. With embedded enablers as a conduit, insurers can finally make this happen.