If you've watched "The Good Place" — and you should, if you haven't already — you saw an enactment of a deep philosophical question known as "the trolley problem." The notion is that you're on a trolley heading down a hill, and the brakes fail. If you keep going straight, you're going to kill five people. You can throw a switch and head off onto a siding, but then you're going to kill one person. 

Do you save the five people and accept the responsibility of killing someone? Does your thinking change if that one person is a friend of yours?

The trolley problem may seem like an odd one to include in a comedy, but the handling is extremely funny, and, of course, no character stays dead. 

And the problem neatly exemplifies one of the issues that companies will face as they roll out AI that touches customers directly. If, like Chidi, the moral philosopher in "The Good Place," you make a spur-of-the-moment decision, you are given some grace because you're only human and can only process so fast. But AI doesn't get that grace. Someone sat down ahead of time and programmed or at least developed the AI, so whatever decision is made is treated as well-thought-out — and has to be defended.

AI is held to a much higher standard than we humans are. You can't just decide your AI is good to go once it outperforms your current approach when dealing with customers. You have to account for what people expect out of AI. 

The higher standards for AI have shown up recently in a spate of articles complaining about drones that use computer vision to inspect roofs. The technology sometimes says there is moss or some other problem that warrants denial of coverage when there is, in fact, no problem. 

The systems already do a better job than could be accomplished by having a host of inspectors climb ladders and tromp around on roofs, but homeowners aren't using the current system as their benchmark. They've been led to believe that computers are nearly infallible and that AI is close to magic, so they don't tolerate errors — and often complain to reporters, who share many of those attitudes and are happy to ding AI when it messes up. 

Phil Koopman, a professor at Carnegie Mellon who has a popular newsletter on driverless cars, writes: "It’s simple: people over-trust too soon, and backlash too hard just as quickly after adverse news."

While nearly 41,000 people died in accidents on U.S. roads last year, I'd bet that none got as much attention as the non-fatal accident involving a Cruise autonomous vehicle. The accident was gruesome: Although the AV was initially blameless, hitting a jaywalking pedestrian who was tossed into its path when another car hit her, the AV then pulled off to the side of the road, unaware that the pedestrian was underneath the car and was being dragged 20 feet. But the involvement of the AI greatly heightened the industry and the willingness to find blame — among other repercussions, the CEO of Cruise lost his job, and Cruise lost its license to operate autonomous robotaxis in San Francisco.

My second caution about AI is that, as an article in The Byte expresses it: 

"So-called 'automated decision-making' is being heralded as the next big thing  — but it turns out that many consumers are disgusted by the idea of AI making choices for them."

The article cites a survey that isn't specifically about insurance; it's about job hiring, banking, renting, medical diagnoses, and surveillance. But it's pretty easy to extend the survey results apply to insurance. 

Just as customers want a human making decisions on their loan or job applications, I'd bet that customers don't want to be told that they were denied coverage by AI or had a claim lowered or denied by AI.

AI will increasingly be used to make decisions that touch clients — as it should be — but, at least for now, I'd suggest having humans make the final call and communicate those decisions.

You'll still be required to defend the AI's role in decisions, and people won't give you the benefit of the doubt that they might give to a human acting under time and other pressures.

But at least you won't have to deal with the theatrics that the Ted Danson character summoned for poor Chidi.

Cheers,

Paul

P.S. Here is the trolley scene from "The Good Place." Watching it will be the best three minutes of your day.

The US P&C insurance industry faces many challenges as it struggles to get a handle on a changing economic, social and climate landscape. The list of perils seem to grow every year from the increasing frequency and severity of catastrophic and other weather related events to social inflation, population shifts and regulatory rate hurdles to expanding competitive pressures.

Carriers have little control over these external forces. Typically, they resort to using the conventional levers including extensive rate increases, dramatic changes to eligibility requirements and product changes that eliminate coverage. While these approaches can alleviate some carrier issues, the new truth is that they are not enough to make a positive impact for the business.

The industry is rife with stories of carriers going insolvent, soaring reinsurance costs and entire sections of the US having unprecedented struggles accessing basic insurance products. US insurers are in need of forward-thinking, data-driven solutions to help them grow profitably all while achieving adequate, fair underwriting practices and increasing accessibility. 

One potential solution to the problem is advancing our knowledge of individual insureds and their needs. 

Understanding customer behavior and risk tendencies enables insurers to better predict outcomes and make targeted decisions that support profitable growth. Today, most carriers rely on predictive modeling to stay competitive. The industry recognizes the power of analytics in categorizing insureds into broad groups based on factors like credit scores, claim-free periods, and residential zip codes. However, advancements in technology have confirmed that the traditional variables are too broad, too bulky and do not provide the stratification we need to fairly and accurately assign risk.   

Person-level behavioral insights involve a big data approach to evaluating an individual's propensity for some target variable based on their behaviors and actions. By using a vast amount of information including but not limited to a specific insured's interests, purchasing behaviors, media consumption, and associated brands, these newer and powerful AI models are able to more accurately predict frequency, severity, loss and other insurance related outcomes. Insurers will be better equipped with these insights to navigate market volatility, more accurately assign risk, avoid adverse selection, and achieve underwriting profitability and growth.

Of course, there are important questions pertaining to bias when assessing this level of information on an individual. With modern statistical techniques, these models must be built with stopgaps and intense scrutiny on their potentially disparate impacts to protected groups.  Luckily, these techniques exist within the behavioral insight industry and have even been proven to improve the biases the insurance industry sees in its existing underwriting processes. 

Overall the goal of integrating behavioral insights into modern insurance is to create a more targeted, profitable, available and less-biased product. As the industry evolves, carriers that embrace behavioral intelligence will be better equipped to face uncertainty, proactively respond to challenges, and secure their position in the market. In an era where the stakes are higher than ever, the ability to accurately assess and manage risk will distinguish the leaders from the laggards in the insurance industry.

About Devyn McNicoll, Pinpoint’s Head of Actuarial

Devyn McNicoll a traditionally trained actuary with over 10 years of experience helping companies grow profitability in the P&C insurance space. She is an Associate of the Casualty Actuarial Society (ACAS), a Certified Specialist in Predictive Analytics (CSPA) and holds her Master’s degree in Statistics from North Carolina State University. She deeply values the role of data analytics and mathematics in the industry. Prior to Pinpoint, she was in an executive leadership role at an MGA offering Homeowners and Commercial Property products. She has extensive experience in actuarial pricing, reserving, filing, modeling and leadership at several large national insurance carriers. In 2023, she was one of two actuaries who represented the US in the Young Actuaries World Cup as a semi-finalist in the competition.

Sponsored by ITL Partner: Pinpoint Predictive

Insurance agents are at the forefront of handling sensitive health-related, personal, and financial data. They are thus prime targets for cybercriminals at a time when cybercrime is expected to cost the global economy more than $10.5 trillion by 2026 and when the global cyber insurance market is expected to soar by nearly a factor of six by 2032, to $120.47 billion. 

Agents must remain attentive; recognizing the scope of their risks strengthens security.

Types of Cybercrimes and Their Prevention

Cyber risks are growing more complex. Here are typical forms of cybercrime and how you can safeguard your agency.

1. Malware

Malware, or malicious software, intends to penetrate and destroy systems while frequently stealing important data. It can take many forms, including viruses, worms, and trojans. Email attachments or USB devices can spread it.

Prevention Tips:

• Install and update antivirus software: Do not forget to renew your antivirus software because it is always the first step to detecting new malware.
• Educate your team: Teach your employees to recognize unwanted emails or connections and avoid downloading unauthentic software files. In addition, ensure spreading awareness about emails with attached files received from an unknown source.
• Regularly back up data: Always back up your data to prevent data loss due to malware infecting your computer.

2. Phishing

Phishing attacks are socially engineered techniques in which an attacker spoofs as a trusted entity. Phishing aims to deceive people into disclosing sensitive information, tempting them with convincing calls to action or offers to click on dangerous websites. These URLs are often distributed via email, SMS, or calendar invitations.

Prevention Tips:

• Check whether the sources of the email are verified: Always check if the sender's address is correct and watch out for odd requests.
• Get multifactor authentication (MFA): Extra security measures prevent unauthorized access, even if the login credentials are exposed.
• Use spam filters: Use enhanced spam filters to block phishing emails before they reach your inbox.

3. Ransomware

Ransomware is software that encrypts files and demands money for their release. Ransomware potentially causes irreversible data loss as well as financial and operational destruction.

Prevention Tips:

• Make regular backups of your data: This creates a safe copy of your data that you can retrieve after ransomware breaches.
• Always keep your software up to date: Secure your operating systems and applications by keeping them up to date. Ensure you fix all the vulnerabilities that ransomware can use.
• Set administrative permissions to the least level: Another best way to keep ransomware from spreading through your network is limiting user privileges.

4. Insider Threats

Insider threats emerge from within an organization. They can be deliberate or unintentional. Any current or former employee, contractor, or business partner can misuse their rights. They can steal data or fall for a phishing scheme, resulting in a cyberattack.

Prevention Tips:

• Set access controls: Enforce policies so employees only access the information necessary for their job. Also, update the roles that people currently hold.
• Administer employee activity: With the monitoring tool, you can discover unusual actions that suggest an imminent insider threat.
• Positive work environment: Having many dissatisfied employees may lead to the likelihood of insiders committing fraudulent activities.

Implement preventive steps and stay current on prevalent cybercrimes to considerably lower insurance agency breaches. Staying up to date on cybersecurity defenses can secure your business and clients from online threats.

Best Cybersecurity Practices for Insurance Agents

Insurance agents must prioritize their clients' information with robust cybersecurity practices:

1. Comprehensive Security Training

Ensure that your employees are frequently trained in how to identify forms of cyber threats and how to handle them. This will provide the first level of protection against attacks and makes most tasks within your agency secure.

2. Using Digital Certificates

Insurance agents should use SSL certificates to keep clients' sensitive data secure. These data include names, addresses, emails, and Social Security numbers. SSL certificates create a secure layer to share data between the user and server.

Using HTTPS maintains your business reputation. When an insurance company or website does not use an SSL certificate, Google flags that as a non-secure site, which can affect your brand identity.

There are various types of security certificates based on the needs of businesses. Companies can choose from multiple certificates like domain validation, wildcard SSL certificate, and extended validation.

3. Multifactor Authentication (MFA)

Implementations relying on or only using passwords for the authorization of the systems are not solid enough. Integrating MFA takes security to the next level and can be done simply:

• Login Verification: Ask your employees and clients to enter a secondary code sent to their mobile devices after they enter their passwords, or have them unlock their devices with a fingerprint. 
• Hardware Tokens: High-level employees who might have to deal with sensitive data can use hardware tokens that generate time-sensitive codes that allow access.

4. Regular Data Backups

Backing up should be considered in the same way as an insurance policy for your data. Backing up relevant data often enough means that you can get back into operation in a short time after a cyberattack or failure of IT systems. When it comes to backups, go for several tiers of backup, such as local, offsite and cloud-based.

Types of Backups:

• Local Backups: Use external hard drives or NAS devices.
• Offsite Backups: Consider tape or remote server backups.
• Cloud Backups: Use AWS, Google Cloud, or Microsoft Azure for scalable, automated solutions.

5. Controlled Access to Data

Not every employee working in your agency requires access to all the data available with the organization. It is necessary to enforce information security policies that would limit the accessibility of specific data to a few individuals. This helps reduce the harm coming from internal threats and minimizes the possibilities of a leak of the firm's information.

6. Secure Communication Channels

Security will always recommend the use of encryption when it comes to communications. Make sure that all data are encrypted, while they are being transferred, as well as during storage. This helps to eliminate instances where third parties may be intercepting and decoding your information.

7. Engage Security Professionals

It could also be wise to seek help from professionals as a viable strategy. Whether you hire your security team or consult cybersecurity specialists, it is always beneficial to have someone knowledgeable guide you when assessing and addressing risks.

8. Network Traffic Monitoring

Surveillance of the network must be done keenly. Network monitoring lets you identify suspicious activities likely associated with a cyberattack. It is also important for organizations to learn to prevent a breach from happening in the first place or at least provide early alerts.

9. Incident Response Planning

Even with the best efforts, you can still find yourself facing a breach. In the event of a security incident, your team must have a clear copy of the response plan. This can greatly reduce the time it takes to recover from an attack and minimize data loss.

These security measures effectively safeguard sensitive data and protect your agency.

In the ever-evolving landscape of insurance, detecting fraudulent claims is critical yet challenging. Traditional methods have often fallen short, leaving insurers vulnerable to sophisticated fraud schemes. However, advanced artificial intelligence (AI) and machine learning (ML) techniques are revolutionizing this space, notably by using cohort analysis to identify and mitigate fraud.

The Power of Cohort Analysis and AI to Detect Fraud

Within fraud detection, cohort analysis emerges as a powerful technique that revolutionizes the way we identify suspicious patterns and behaviors. By grouping claims with similar characteristics, this approach unveils subtle anomalies that might elude even the most seasoned claims adjusters. Its multifaceted benefits collectively enhance the efficacy of fraud detection models.

One of the primary advantages of this method is its ability to detect emerging fraud trends. Through the continuous comparison of cohorts over time, AI systems can swiftly identify and address new and evolving suspicious claim activities, ensuring that fraudsters cannot stay ahead of detection mechanisms. This dynamic monitoring capability is complemented by the opportunity to tailor detection algorithms to specific patterns and behaviors unique to particular groups. Such refinement significantly boosts the accuracy and effectiveness of fraud detection, allowing for a more nuanced approach to identifying potentially fraudulent activities.

Perhaps most crucially, cohort analysis provides invaluable contextual insights. By understanding a claim within the framework of its cohort, outliers and unusual activities become more apparent, warranting further investigation. This contextual understanding is the key to uncovering fraudulent behavior that might otherwise slip through the cracks, making cohort analysis an indispensable tool in the arsenal of modern fraud detection strategies.

Key Capabilities of Effective Fraud Detection Systems

Effective detection systems have become essential for safeguarding the integrity of claims processes. Here are the core features of advanced fraud detection:

• Cutting-Edge AI and Machine Learning: Advanced fraud detection systems use state-of-the-art AI and machine learning technologies. These models are trained on industry-specific claims data, ensuring that the system is tailored to the unique challenges of insurance fraud detection.
• Continuous Learning Framework: Such systems employ a continuous learning framework, keeping models up to date with new data and adapting to emerging patterns of outlir claims. This ensures that insurers stay ahead of potential threats.
• Network Analysis: A standout feature of this approach is advanced network analysis, which uncovers connections among attorneys and providers and creates a heat map that highlights potential fraud networks. This method reveals hidden relationships that contribute to various fraudulent schemes, enabling claims leaders and adjusters to identify which providers and attorneys to avoid.
• Integrated and Interactive Fraud Detection Platforms: Modern fraud detection systems are not standalone tools but integrated components of broader platforms. This ensures seamless data sharing and dynamic updates across the system, enhancing the insights derived from fraud detection. Integration with other products deepens the connections discovered, unlocking additional insights on provider and attorney scoring. Adjusters receive not only information on suspicious activities but also suggestions for alternative options in the same area.
• Seamless System Integration: Fraud detection systems are most effective when they integrate smoothly with existing claims workflows, ensuring easy adoption without overhauling current systems. An API-driven architecture allows for customization and scalability, catering to each insurer's unique needs and accelerating time to value.

The Real Value of AI-Driven Fraud Detection

The true value of AI-driven fraud detection in insurance lies in its synergy with human expertise. These systems augment fraud investigators' skills with sophisticated tools and insights, creating a collaborative environment where human intuition and machine precision work together. This empowers claims adjusters to make more accurate referrals to special investigations units (SIUs) with clear rationales, streamlining the investigative process.

AI's advanced capabilities, especially in network analysis, allow for early identification of potential fraud that might elude even experienced adjusters. By uncovering hidden connections and patterns, these systems capture suspicious activities that traditional methods might miss, enhancing overall fraud mitigation efforts.

Ultimately, AI-driven fraud detection elevates the entire fraud detection ecosystem. In a sector where fraud can have significant financial implications, advanced fraud detection systems offer cutting-edge solutions that go beyond traditional methods. By leveraging cohort analysis, network analysis and advanced AI technologies, these systems provide a proactive and integrated approach to fraud detection. This not only enhances the accuracy and efficiency of identifying fraudulent claims but also supports a collaborative environment where human expertise and AI work together to protect insurers from sophisticated fraud schemes.

As first seen in Global Fintech Series.

New research from Majesco shines a light on the challenges the insurance industry is facing, and the necessary strategic initiatives and investment priorities insurers must prioritize to succeed in the future.

Read Now

Sponsored by ITL Partner: Majesco

This past year was a good one for innovation, as demonstrated by the large number of stellar nominations we received for our second year of the Global Innovation Awards, which we collaborate on with the International Insurance Society. 

The nine finalists chosen by our panel of distinguished judges show, in particular, how AI is moving from theory to practice, how insurance is stepping up to some of the biggest societal problems, and how the industry is finding opportunities in the Predict & Prevent business model, moving beyond the traditional repair-and-replace approach. 

Let's have a look.

We'll start with the three finalists in the Predict & Prevent faculty because that's my favorite category and, after all, I'm the one writing this. In no particular order, they are:

Praedicat's CoMeta, which takes the analysis used in predictive models for natural catastrophes and applies it to the problems that liability underwriters face to help them spot major issues before they become major. 

Wouldn't you like to know what will become the next asbestos? Praedicat was founded to address that question and says they can help you with the answer.

Roadzen, which uses computer vision and AI to monitor driver behavior, provide real-time feedback, and prevent accidents. 

I've seen a number of approaches like this, and I'm in favor of all of them. This one seems especially sophisticated. 

Far too many accidents still occur, and far too many people die.

Whisker Labs, whose Ting device plugs into wall sockets and detects electrical malfunctions that can be addressed before they can start a fire. Insurers have offered Ting free to more than 2 million policyholders because of the potential for preventing fires, and the devices are deployed in more than 700,000 homes. The devices can also report to utilities on malfunctions in the electric grid. 

We're big fans of Whisker Labs at ITL — for instance, here is a Future of Risk interview we did with the CEO late last year. Our parent organization, The Institutes, has been spreading the word, too, through a newsletter and podcast on Predict & Prevent (which you can sign up for here). Here is a podcast with the CEO of Whisker Labs from May 2023. 

They're worth a look.

Now for the three finalists in the Life, Health and Retirement category:

Aon "combines machine learning, terabytes of market claim data and expertise from Aon’s analytics, actuarial, clinical and reinsurance teams to predict over 50% of future high-cost [healthcare] claimant exposures ahead of time," their nomination says. 

I've become a big believer in triage as a way to become more efficient and solve a lot of problems, even if we can't solve all of them, and healthcare claims can run so high that getting some warning can make a huge difference.

Hannover Re has partnered with healthOme to use genomics to screen for cancers, laying the foundation for an array of sophisticated diagnostic tests and then for an approach to treatment that helps patients make informed decisions.

It's still early days for genomics, but it's incredibly powerful stuff, and offerings like Hannover Re's hold the promise of breakthroughs.

RGA has begun offering "simplified issue" policies for health and life insurance in South Korea, where many struggle with the traditional, full underwriting process, which requires a medical checkup. RGA merely requires answers to three yes/no questions.

Assuming those questions paint an accurate enough picture, "simplified issue" could make a big difference in a nation that is historically underinsured.

Now for Property/Casualty (likely the favorite for many of you):

Gallagher Bassett uses AI to screen workers' comp cases for those that are likely to need extra care and then provides a concierge service for those injured workers. 

Again, I'm a fan of this sort of triage approach, and AI is perfect for identifying the patterns that lead to complications. The Gallagher Bassett approach could be a great way to head off expensive cases while getting workers the help they need — and quickly.

Liberty Mutual is moving beyond offering maintenance advice to its homeowner customers and is tapping into "insights from our own internal operations, compelling offerings from our strategic partners and even novel capabilities from portfolio companies in the Liberty Mutual Strategic Ventures fund [to provide] new digital tools and experiences to help customers effectively manage and mitigate risks in their homes," according to the nomination.

I've always felt that maintenance reminders might really be a way to generate business for some contractor — I'm cynical that way — but reminders about the pool, the trampoline, the gutters, and so on could benefit a lot of people, especially if everything is in one place.

The Insurance Development Forum's Tripartite Programme tackles a truly worthwhile cause on behalf of the industry: "developing a series of meaningful and effective climate risk financing and insurance programs to help the populations of countries in need," as the nomination puts it. 

The program has rolled out projects in more than 23 countries, with 64 million beneficiaries, backed by offered risk capacity of $5 billion from insurance industry partners.

I told you these finalists were impressive.

The winners will be announced at the IIS' Global Insurance Forum, being held Nov. 17-19 in Miami. I hope to see you there.

Cheers,

Paul

In 1966, Ronald Reagan shifted from actor to politician as California’s 33rd governor, later becoming known as the Great Communicator. Reagan leveraged transferable skills to change careers.

While I’m no movie star or politician, dramatic career moves are something I appreciate. I have worn many professional hats in fields like engineering, tax management, and, now, insurance. I’ve also worn a few pairs of dancing shoes that helped, as well, and continue to teach dance and run a successful studio while working in the insurance sector. With President Reagan’s experience as something of a guide, I also brought forward talents and abilities learned in my other professional incarnations to help launch and sustain a successful insurance career.

After several years of growing my career and helping develop Across America’s talent profile, I have found looking outside the industry for those with varied backgrounds like my own can bring talented, multifaceted individuals with fresh perspectives into insurance. As the industry struggles to fill a continually growing talent gap, thinking outside the box may be an answer.

See also: What's Causing the Insurance Talent Shortage

Dancing My Way Into Insurance

We often hear insurance is a relationship business. For those of us who find – or are recruited to – the industry after careers elsewhere, there is no truer statement.

I was discovered on the dance floor. I had been teaching dance classes for years. One of my students, a lovely and graceful young woman, was the daughter of insurance entrepreneur Harish Kapur. During her time as one of my students, our families became friends. A few years after, in a casual conversation, Harish mentioned he was looking to hire someone with executive potential. He had built a successful model by bringing in non-insurance professionals with an acumen for business and then training them on the nuances of the industry. While I did – and still do – love dancing, I felt I had been searching for my professional home for years. With a background in engineering and tax management, I wondered if he would consider taking a chance on me. What could I bring to the table?

Transferable Skills

Insurance is an industry where many skills can translate and prove useful. Math, proficiency with technology, administrative talent, actuarial science, sales ability, management experience and other skills all feed into a range of roles within insurance, not just as nice-to-haves but rather as critical, backbone requirements. As the industry continues to experience a talent drain as Baby Boomers retire, candidates with nontraditional experiences outside of insurance can provide a bountiful well of potential talent.

Working in different industries, I was an example of that nontraditional, potential insurance professional with transferable skills highly sought by the industry. With a degree in engineering, I am hard-wired to solve problems. When faced with any task, I need to understand the root of the assignment and create my own workflow rather than just following a predetermined process.

Working at my family’s powder metallurgy unit in India, I managed the accounting and led the company’s quality control over both our products and the company’s workflow processes. That experience taught me the value of communicating clearly in different languages and dialects because our workforce and vendor partners were made up of diverse talent pools, including individuals of varied education and experiences. I learned the importance of making my interactions personal and meeting people where they want to be met.

Having supplemental degrees in industrial and tax management gave me an appreciation for and an ability to implement actuarial science practices, which helped me further develop an aptitude for solving problems.

And, of course, there was dancing. I have taught traditional Indian dance for decades, concurrent with my various day jobs. My experience as a dance teacher has helped me refine my appreciation for entrepreneurship, as well as the importance of time management, patience, flexibility, empathy and nonverbal communication.

A New Routine

Once Harish understood my skills were not restricted to dance, he saw how my experiences would serve as a foundation for a role in insurance. I had transferable skills critical to the industry. If I could be taught well and diligently strive to learn the ins and outs of insurance, it could work. He took a chance and hired me.

The hours worked well for me back then, as they do now, and afforded me the opportunity to continue to pursue my first love – dance – while also balancing my family responsibilities. Also, I’d come to know Harish and his family well. They valued hard work and intelligence and prioritized family while also bringing a little fun to everything they did. It was the right move for me.

My first official role with Across America Insurance was as an executive assistant, later becoming an executive manager, where I worked on tax management and operational tasks for the company. As I continued to prove myself, I earned additional responsibilities that provided a crash course in the more technical side of the industry. I learned the fundamentals of insurance, thanks to company leaders who allowed me to gain a thorough understanding of industry definitions and the technical processes.

I also learned processes and procedures on various action items such as filing taxes. I learned the claims workflow, learned to understand how to identify and implement technology to cut down on redundancies, and more. My background, the training and support of our leadership team, and old-fashioned, real-world experience helped me grow my insurance career from executive assistant to my current role as vice president of captive operations for Across America.

I remember one of my first big projects with the company was to manage a coverholder program with Lloyds of London. That work taught me a great deal about the industry. It can be both straightforward and complicated, which for me offers the kind of challenge I enjoy. I appreciated that kind of environment as a dance instructor and dance studio owner. Even back in my family’s business, marrying complexity and clear process always captured my imagination. But it was insurance that brought it all together for me.

To this day, I regularly tap into the skills I learned in my former careers to train others, interact with clients, streamline operations, and more. Working for an organization that values outside perspectives and sees the benefit these skills can bring to a business and the people it serves makes the work even more rewarding.

See also: 7 Ways to Innovate With Purpose

Finding My Stride

Today, I work with captives, existing and potential reinsurers and other servicing partners. Among other things, this work demands careful application of the communication skills I honed while leading the quality management certification and overall quality control of products and process flows at my family’s powder metallurgy business. The ability to translate complex products and services into human terms has been key to my success and in building the relationships. Building and maintaining those relationships as the market tightens, something I learned to do when I opened my dance studio, is paramount to ensuring you don’t just secure a transaction but rather continuing business, even in challenging times.

My additional degree in tax management helped train me to think as a problem solver and has allowed me to develop procedures and systems that not only helped me in my earlier days at Across America for filing state taxes but continues to serve as important training for newer team members.

Of course, my teaching skills also remain invaluable as we continue to welcome new talent. Across America has made it a priority to hire beyond the insurance industry. While that practice has brought a wealth of perspectives, it can also require training customized to meet everyone on their level, understanding their perspectives and finding the right fit within the organization. Identifying and training the next generation of talent for Across America and the insurance industry has been a learning experience of its own that continues to help me grow professionally.

Building the Future

Companies across our industry can follow this model to success, as well, particularly as insurers struggle to attract qualified candidates. Consider thinking outside the traditional realm of insurance for your next hire. While a prospect’s job title may not appear relevant, certain core competencies should be apparent, including:

• Patience: As a newcomer to insurance, your new employee may have years of existing experience in a different industry. Keep an open mind. You would be surprised to see what skills end up being relevant to insurance.
• Asking Questions: When adapting to a new industry, there will be knowledge gaps. As your employees identify what they don’t know, it is important to find talent that can put pride aside and ask questions. Keep doors open. Questions from all employees should be welcomed. This philosophy helps eliminate misunderstandings.
• Research Capabilities: Independent research will not mirror the in-depth insights of a colleague with years of experience; however, it will help your employees enter the conversation armed with some foundational information. Finding employees who take the time to learn what they can on their own is important. It showcases a willingness to take initiative and adapt quickly.

Job seekers today face the dual challenge of presenting the right characteristics to employers while seeking organizations with core values that match their own. Characteristics that new employees have found enticing at Across America include curiosity and an interest in helping employees grow, an openness to learning and acceptance of honest feedback from all levels, as well as strong market knowledge of the entire insurance industry and market overall. I’m grateful for the opportunity to have found insurance, and more so for the work culture that helped me become a skilled insurance professional.

Recruiting the next generation of talent is a challenge with solutions in reach. Recruiting individuals for their unique characteristics and willingness to learn rather than strictly insurance-specific experience can foster fresh ideas and perspectives to help insurance innovate and move into the future. We simply need to think on our feet about going beyond the usual practices

As the business world continues to evolve, so do the risks faced by small enterprises. Recent research highlights six key areas of insurance coverage that are becoming increasingly relevant for small business owners. This overview explores emerging trends in cyber, flood, and excess and surplus lines insurance, offering insights into why these protections are gaining importance in the current business climate.

Cyber insurance

The prevalence of cyber risks is rising as businesses become increasingly digital. However, small business owners may be unaware of this risk or of the financial and reputational consequences of an attack until it's too late. According to the Hiscox Cyber Readiness Report, "41% of small businesses experienced at least one cyber attack during the last year. The median cost of cyber attacks for one small business in a year is $8,300."

Madison Williamson, senior insurance product manager at At-Bay ,stated, “As all businesses are forced into the digital world, it is no surprise that small businesses are sometimes ill-equipped to recognize the risks or react with the necessary speed to rectify errors or attacks. While it can be tempting for small businesses to [ignore] the risk of cyber attacks, it is vital for business owners to carefully consider not just the financial impact of lost sales and profits but also the reputational impact of being considered not secure by customers.”

The types of cyber attacks and the associated technologies that cyber pirates use are quickly evolving and dynamic. For this reason, small businesses can be an easy target for cyber hackers, sometimes with devastating effects.

Small businesses usually don't have the luxury of dedicated, trained resources to address cybersecurity weaknesses or rebuild systems. Hackers target smaller businesses because they typically focus less on cyber risk management and have weaker security than enterprise corporations.

According to Mathew Probolus, chief underwriting officer at Berkley Management Protection, "Small businesses are frequent targets of cyber attacks. A recent Datto report found that in the last year 32% of small businesses reported that they dealt with a phishing email or attack. 30% of small businesses reported that they also dealt with a computer virus."

Risk can be mitigated, though not eliminated, by "implementing strong internal controls and procedures, maintaining security controls, and proactive action," according to Chris Hojnowski, vice president, technology and cyber practice leader with Hiscox USA. "Where there are humans, there's vulnerability to cyber attacks. And where there is any kind of sensitive or valuable data, such as customer information, there's a target for bad actors."

See also: Top Global Business Risks in 2024

Flood insurance

According to a recent article by the Insurance Information Institute, "Flooding is the most common and costly natural disaster in the United States, causing billions in economic losses each year. According to the National Flood Insurance Program (NFIP), 90 percent of all natural disasters in the United States involve flooding."

The Federal Emergency Management Agency (FEMA) has shared some eye-opening statistics:

• Just a few inches of flooding can cause thousands of dollars of damage. The deeper the flood water, the higher the repair cost.
• From a 2018 press release: "About 25 percent of businesses do not reopen after [natural] disasters. Having an emergency disaster plan and a continuity operations plan in place can reduce that risk and help the business recover faster."
• From a 2023 FEMA fact sheet: "Ninety-nine percent of U.S. counties have experienced a flood since 1998, and over 40% of flood insurance claims come from outside high-risk flood areas."

There's reason to hope innovations in the parametric flood insurance space will help fill some flood coverage gaps in the U.S. in coming years. Flood risk is difficult to price for carriers, so what follows oftentimes is a coverage gap. New tech tools are being developed to improve the accuracy of underwriting data for conventional insurers, which could ultimately help expand access to parametric flood insurance to even the smallest businesses.

See also: "Micromorts": A New Way to Talk About Risks

Excess and surplus (E&S)

According to the International Risk Management Institute, "Excess and surplus lines insurance is any type of coverage that cannot be placed with an insurer admitted to do business in a certain jurisdiction."

In a recent interview, Mark Schauss, executive underwriting officer, small commercial, for Markel, summarized, "The most significant trend in the E&S insurance landscape is the continued growth of the E&S marketplace itself."

According to a recent McKinsey report, "Between 2016 and 2021, the E&S industry has grown by three times as much as the admitted market."

E&S submissions have increased by double digits in the past year, propelled by independent agents and wholesale brokers. Agents have become increasingly reliant on this high-risk insurance coverage tool to ensure their customers' investments are properly protected.

Within the commercial category of E&S, commercial liability and commercial property have made up the bulk of the market. As summarized in a recent Insurance Journal article, "Premiums in [commercial liability and commercial property] lines increased nearly 10% and 32% to about $26.8 billion and $24.2 billion, respectively, in 2023."

We expect this growth in high-risk insurance for commercial markets to continue, at least for the short term.

What factors contribute to the increased demand for E&S coverage?

• Non-admitted markets for high-risk insurance have stepped in for admitted markets

Admitted carriers are not renewing business and are reducing their industry and coverage offerings. Additionally, the increasing cost of claims is leading to the need for admitted carriers to increase premiums. And because of regulatory requirements, it can be difficult to raise those premiums quickly, leading insurers to exit certain markets altogether. Because E&S carriers can offer more flexible premiums where admitted markets can't budge, they have been able to fill the coverage gaps where there are no, or only prohibitively expensive, coverage options.

• Catastrophic events have increased the demand for high-risk insurance

Regions that tend to experience more natural disasters can drive demand for high-risk insurance options like E&S.

• Nuclear verdicts have exceeded expectations

Nuclear verdicts are jury awards or settlements in a liability lawsuit that significantly exceed expectations. Because E&S carriers usually have higher limits, they can be a valuable option in these high-risk insurance situations.

• Flexibility and agility when remarketing

The industry has demanded creative solutions to an ever-changing variety of high-risk insurance exposures, like cyber risk. Those solutions aren't readily available, or have become very expensive, on admitted markets. E&S carriers, buoyed by their financial strength and agile underwriting, have quickly responded with solutions when remarketing was needed, allowing them to capture new business due to their flexibility.

Paul Carroll

I’d like to get into some of the ideas you laid out in your latest book, on the power of collaboration, but let me start by asking for your general sense of where the industry is in terms of addressing the talent gap that’s being created by the wave of retirement as well as the need for new types of talent.

Bryan Falchuk

I think we've made a lot of strides from a recruitment standpoint, but the overwhelming theme that I hear, certainly from people in claims leadership I interact with, is that we're bringing them in but not keeping them. To be fair, I don't get enough exposure to underwriting and some other areas to know what they’re facing, but claims is very difficult because you really get beaten up. You're there to help someone, and everything they've been told is you're there to screw them over. It's one thing to be treated adversarially. It's another to be treated that way when you're genuinely trying to be helpful. It hurts twice as much for someone who's new.

I don't think we've done enough to make new people feel connected and bring them up to speed, partially because of more remote work, partially because the folks who would do that are retiring or have retired. We're not getting people to the point where they could feel expert in their work, and then they're getting pummeled.

So we bring people in, and then, after a year or two or three, they're very disillusioned, and they go elsewhere. That's especially true when the recruitment story is around money. People decide there are other things they can do that make similar money, where they're not being kicked in the face while trying to help people.

Paul Carroll

Do you have a particular tip on how to do better?

Bryan Falchuk

We need to get the older, more experienced people involved with the newer folks, to bring them along. We can’t just throw in the towel and resign ourselves to the current reality.

Remote work, especially in claims, is not a new story, because we have field adjusters. We’ve had people spread across the country, or at least focused on different geographies from the person sitting next to them. We just have to be much more creative about how we bring that knowledge together.

That might mean a bit more travel budget. That's something I've seen in the past year. On the back of 2023 underwriting results, a lot of carriers froze travel, even for training and for continuing ed, but if you aren’t bringing your folks together and giving them the proper training, you don't have the right to complain about how they're not feeling like a part of the organization and aren’t getting trained up.

Historically, you would pop your head up over the cubicle wall or look right or left and ask a question. We haven't really figured out how to duplicate that mechanism now that we don't have the cubicle wall to stick our head over. And when we look right or left, we don’t see a person. (We might see our cat or our dog.)

But a lot of new tools are coming online, a lot of AI type tools, such as generative AI. These technologies provide more of a human interaction. When someone poses a question, the responses are more flexible and situational, instead of rote and hard to understand. The tools have evolved from the more traditional kind of knowledge management tools. They respond more as if I popped my head up and asked a question. Maybe the answer is that we need to get a lot more aggressive in deploying tools like these.

Paul Carroll

What you’re describing certainly matches what’s been happening in the world of journalism. When I joined the Wall Street Journal copy desk as a 22-year-old, way back when, there was a sort of apprenticeship. I’d ask questions of the copy editors who’d been on the desk for 20 or 30 years. For obscure questions about style, the answers had been collated in a light blue binder known as “the recipe book.” Today, all the institutional knowledge has been collected in digital form, and copy editors can ask questions or even get prompted when they misunderstand a rule.

My theory has been that this new generation of AI can take a lot of drudgery out of the document gathering and reading that happens in insurance, especially in claims, underwriting, and in agencies, which should help both in attracting and retaining talent. Does that track?

Bryant Falchuk

I come from primarily an E&O background, so professional liability, where every claim could have a lawsuit lurking in it. Every claim has an 80- or 90-page PDF that's probably a scan, so the information isn’t digital. It’s exhausting to have to go through that as part of the 800 emails, literally, that you're going to have over the course of a claim, and stay on top of it while you have 120 other pending claims on your desk. That's impossible.

So to have something that can parse through the PDFs and emails and keep a sense of what's going on, summarize things for you, help you get up to speed faster, understand when something is popping that might be out of your periphery: That's valuable.

I’ve seen one carrier in particular use Gen AI to go through all their past coverage letters. If the adjuster decides to deny a claim, the AI goes to that knowledge base to look at similar situations and draft the denial letter. Same thing on acceptance of coverage—and they started with acceptance because it's less contentious. That's not an earth-shattering application, but it does save some time. You still have to check for accuracy, but at least you have a draft to start with.

There’s another aspect to what AI can do that occurred to me after I got a new car recently. It's a General Motors product, with its SuperCruise autonomous driving. When people drive, we’re more focused on what’s right in front of us. But the AI is focused on that plus what is well out ahead, perhaps some car that is merging awkwardly that we never would have spotted otherwise. In insurance, AI can look out ahead, see the bigger picture, and perhaps spot issues that will become more important than the specifics of this one letter that's going to drain you for the next hour.

Paul Carroll

I like that analogy.

Tell me a bit about the importance of collaboration, which is the big theme in your latest book.

Bryan Falchuk

That’s key on a few fronts. For one thing, younger generations are more interested in the impact they have, and being part of something. That's collaboration.

Having a more interactive, collaborative, enriching work environment is absolutely appealing to them, and if that helps counteract some of the negative aspects of the work when it gets really tough, fantastic. Collaboration also creates new opportunities in the sense that you may get to work on something that would never have been possible otherwise. And collaboration inherently brings new thinking into the mix. All that makes the industry more attractive.

That can even be as simple as claims and underwriting working together. You've seen enough carriers where they hate each other. Claims will blame underwriting for what they did that's now on claims’ plate, and underwriting will blame claims for spending all the money that underwriting works so hard to bring in.

Actually, they’re both wrong. If underwriting isn't hearing from claims, and claims isn't seeing what's going to be coming down the pike from underwriting, you're missing something.

I see progress in specialty lines carriers, where they are much more integrated and collaborative.

At lots of companies, other departments are referred to like enemies. You will hear things like, “IT did this wrong,” or, “IT didn’t do what we needed.” I'll always ask, “Who is IT? You're talking about them like they're some singular, terrible person.” We can get past those sorts of characterizations if we collaborate.

Paul Carroll

Do you have a favorite example or two of collaboration?

Bryan Falchuk

I have lots of frustrations where it's clearly lacking, but I’ll stick to the positive.

I remember meeting with claims folks at two carriers, where you couldn't keep track of who was in claims and who was in IT. My first reaction was, “Why is IT involved and asking all these seemingly irrelevant questions?” But then I realized that the IT people were thinking through all the system enhancements they were planning to make down the road. They were excited to learn what claims was going to need and were thinking about how they could provide the right tools and connections. The interaction was very symbiotic and supportive.

Paul Carroll

That’s great. Anything else that’s top of mind before we wind up?

Bryan Falchuk

I just go back to where we started. We've been having the same conversation for over a decade, and it's really easy to just keep having it and then get frustrated with the new generation of people. If they don’t stick around, that’s not on them, that's on us. We can’t just bemoan them. We have to understand what makes them tick and solve for that.

If you don’t do that, you’re not going to have any employees left. And we don’t have a lot of time to get this right.

Paul Carroll

Thanks, Bryan.