Blockchain, blockchain, blockchain! What does that mean for insurance? No one knows yet, but that doesn’t stop blockchain from being one of the hottest topics in the insurance industry right now. This week, I take a look at the direction this puck is heading. Hype or reality? Last September, the World Economic Forum published a report titled, Deep Shift – Technology Tipping Points and Societal Impact. The report is based on surveys with more than 800 executives and experts about new technologies and innovations. The point of the report is to identify deep shifts in society that result from new technologies. These include areas such as 3D printing, driverless cars, wearables and artificial intelligence. I was drawn to shift No. 16, simply called “Bitcoin and the blockchain.” By 2025, 58% of these experts and executives believed we would hit the tipping point for Bitcoin and blockchain. This was defined as: “10% of global gross domestic product will be stored on blockchain technology.” To put that into context, the total worth of Bitcoin today in the blockchain is about 0.025% of today’s $80 trillion global GDP. Also of interest, especially given that it looks like Tunisia will be the first country to issue a digital currency on a blockchain, shift No. 18 was called “Governments and the blockchain.” Here, almost three out of four in the survey group expected that “governments would collect tax via a blockchain by 2023." It’s a reality then! It’s certainly looks that way. And $500 million of venture capital money in 2015 can’t be wrong, can it? The prospect of a seismic shift on a par with the impact of the Internet is compelling. That explains all the attention, predictions and excitement about blockchain. But, if we use the evolution of the Internet as a benchmark, the development of blockchain today for commercial use is equivalent to the Internet in, say, the mid-1990s, at best. The debates on Bitcoin, on whether private or public blockchains will be used, on Sybase vs Oracle (oops, wrong century) are yet to play out. The ability of the Bitcoin blockchain to scale to handle massive volumes at lightning speed remains unproven. Now, just as it was in 1995, blockchain technology is at an embryonic stage. Still finding its way, it has yet to prove it is a viable, industrial-strength, large-scale technology capable of solving world hunger. That is why I am going to focus on the use case for insurance rather than the technology itself. (For one explanation of how blockchain works, go to Wired.) The smart insurance contract This is getting the most attention right now. The notion of automating the insurance policy once it is written into a smart contract is compelling. The idea that it will pay out against the insurable event without the policyholder having to a make a claim or the insurer having to administer the claim has significant attractions. First, the cost of claims processing simply goes away. Second, the opportunity for fraud largely goes away, too. (I hesitate here simply because it is theoretical and not yet proven.) Third, customer satisfaction must go up! One example being used to illustrate how these might work came from the London Fintech Week Blockchain Hackathon last September. Here, a team called InsurETH built a flight insurance product over a weekend on the Ethereum platform. The use case is simple. In the 12 months leading up to May 2015, there were 558,000 passengers who did not file claims for delayed or canceled flights in and out of the UK. In fact, fewer than 40% of passengers claimed money from their insurance policy. InsurETH built a smart contract where the policy conditions were held on blockchain. Using the Oraclize service to connect the blockchain with the Internet, publicly available data is used to trigger the insurance policy. In this case, a delayed flight is a matter of fact and public record. It does not rely on anyone’s judgement or individual assessment. It is what it is. If a delayed flight occurs, the smart contract gets triggered, and the payout is made, automatically and immediately, with no claims processing costs for the insurer and to the satisfaction of the customer. Building on this example and applying it to motor, smart contracts offer a solution for insurers to control claims costs after an accident. A trigger that there has been an accident would come to the blockchain via the Internet from a smartphone app or a connected car. Insurers are always frustrated when customers go a more expensive route for repairs, recovery and car hire. So, with a smart contract, insurers could code the policy conditions to only pay out to the designated third parties (see related article by Sia Partners). So long as the policy conditions are clear and unambiguous and the conditions for paying are objective, insurance can be written in a smart contract. When the conditions are undeniably reached, the smart contract pays. As blockchain startup SmartContract put it, “Any data feed trusted by a counterparty to release payment or simply complete an agreement can power a smart contract.” To understand this better, I asked Joshua Davis, the technical architect and co-founder at blockchain p2p InsurTech Dynamis, to explain. He said: “You need well-qualified oracle(s) to establish what 'conditions' exist in the real world and when they have been 'undeniably reached.'  An oracle is a bridge between the blockchain and the current state of places, people and things in the real world.  Without qualified oracles, there can be no insurance that has any relation to the world that we live in. “As far as oracles go, you can use either a single trusted oracle, who puts up a large escrow that is lost if they feed you misinformation, or many different oracles who don’t rely on the same POV [point of view] or data sources to verify that events occurred. “In the future, social networks will be the cheapest and most used decentralized data feeds for various different insurance applications.  Our social networks will validate and verify our statements as lies or facts.  We need to be able to reliably contact a large enough segment of a claimant’s social network to obtain the truth.  If the insurance policy can monitor the publishing or notification of our current status to these participants and their responses accurately confirm it, then social networks will make for the cheapest, most reliable oracles for all types of future claims validation efforts.” Is this simply too good to be true? Personally, I don’t think it is. Of course, a smart contract doesn’t have to be on the blockchain to deliver this use case. However, what the blockchain offers is trust. And it offers provenance. The blockchain provides an immutable record and audit trail of an agreement. The policyholder does not have to rely on the insurer’s decision to pay damages because the insurer has broken its promise to keep the client safe from harm. As the WEF report states, this is an “unbreakable escrow.” The insurer will pay before it even knows what happened. There’s another reason for going with the blockchain: cybersecurity! With the blockchain sitting outside the corporate firewall and being managed by many different and unconnected parties, the cyber criminal no longer has a single target to attack. As far as I’m aware, blockchain is immune to all of the conventional cyber threats that corporations are scared of. What happens when you put blockchain and P2P insurance together? In December, I published a two-part article on Peer 2 Peer Insurance (here are Part 1 and Part 2). When you put the P2P model together with the blockchain, this creates the potential for a near-autonomous, self-regulated insurance business model for managing policy and claims. Last year, Joshua Davis wrote an interesting white paper called “Peer to Peer Insurance on the Ethereum Blockchain." He presents the theory behind blockchain and the creation of decentralized autonomous organizations (DAO). These are corporate entities with no human employees. The DAOs would be created for groups of policyholders, similar to the P2P group model with the likes of Guevara and Friendsurance. No single body or organization would control the DAO; it would be equally “controlled” by policyholders within each group. All premiums paid would create a pool of capital to pay claims. And because this is a self-governing group with little or no overhead, any float at the end of the year would be distributed back among the policyholders. Arguably, this makes the DAO a non-profit organization and materially increases the capital reserve for claims costs. The big question mark for this model is regulation. There still is no answer to who will maintain the blockchain code within each DAO when regulations change. But, what does seem a dead certainty is that someone, somewhere is figuring out how to solve this. Blockchain offers the potential for new products and services in a P2P insurance model. It should also open insurance to new markets, especially those on or near the poverty line. For now, we must watch to see what comes from the likes of Dynamis, which is using smart contracts to provide supplementary employment insurance cover on Ethereum. Innovation will come from new players It has been my belief for some time that, in the main, incumbent insurance firms will not be able to materially innovate from within. As with Fintech, the innovation that will radically change this industry will come from new entrants and start-up players, such as: Dynamis SmartContract Rootstock Everledger (see previous article on Daily Fintech) Tradle Ethereum Frontier Codius (Ripple Labs) (update: Codius discontinued) This is particularly true with blockchain in insurance. These new age pioneers are unencumbered by corporate process, finance committees, bureaucracy and organizational resistance to change. Besides, the incumbent insurance CIOs have heard this all before. For decades, software vendors have promised nirvana with new policy administration, claims and product engines. So, why should they listen to the claims that blockchain is the panacea for their legacy IT issues? But,  that is a subject for another post … watch this space!

How do you eat an elephant? One bite at a time. What an old joke with a great premise. No matter how big the task, taking things one bite at a time makes any daunting task seem easier to swallow. Take the big data challenge. By and large, insurance companies and traditional businesses are used to relying on paper files, mailrooms, fax machines and call centers as incoming data streams. Designed to handle internal data collected from limited sources, the systems showed their first hint of trouble with an inability to incorporate emails and SMS text messages into policyholder and claim files. Inefficiently integrated best-of-breed IT environments further complicated the issue by putting data in silos and restricting access to users. Today, integration of systems has improved, and the move toward suites has enabled additional collaboration and data sharing benefits. However, big data, marked by its volume, velocity and variety, still has insurers stymied. And the move toward omni-channel distribution, the Internet of Things (IoT) and the connected world has amplified the need for insurers to incorporate even more data streams (both internal and external) into the risk assessment process. Cue the analytics software and reporting solutions, neither of which alone will make a legacy system more able to digest information from new data sources for rating and underwriting purposes. Meanwhile, the big data behemoth is growing into the proverbial elephant in the room. The problem is no longer just Incorporating this data; analyzing it and acting on it are equally incomprehensible. Buying data from traditional data sources –including motor vehicle reports (MVRs), historical flood data and credit reports on the property and casualty (P&C) side or health and medical records or test results on the life and health side is expensive. Furthermore, traditional data sources don’t allow insurers to pick and choose what may be most useful based on line of business, let alone product or policy type, geographic area or purchasing preferences. Alternative data sources such as social data exist, but the unstructured nature of the information makes it especially difficult for insurers to internalize. Consider that today’s consumers, who are both existing and potential new policyholders, are creating mountains of data that could contribute to better risk decision making, but right now that data doesn't make it to the underwriter’s desk. Social data is a silver bullet that can provide a predictive enhancement layer for traditional data sources, leading to more accurate underwriting and making insurers better able to select the best risks. By breaking the traditional data collection and utilization mold as it relates to risk assessment, insurers can integrate social data with core administration systems, making unstructured social data both accessible and actionable across all industry segments and lines of business. By capitalizing on the explosion of social data as a resource for better insurance risk assessment, insurers can improve underwriting, streamline the claims investigation process, decrease loss costs and potentially make insurance relevant to a whole new generation of insurance consumer. The scope of the big data problem is just dawning on insurers. In an effort to not bite off more than can be chewed at one time, insurers can start to consume and absorb big data by incorporating social data into rating and underwriting. But keep in mind that social data is just the first bite of a very important meal.

Workers’ comp insurers are applauding wearable tech initiatives as a potential way to monitor and reduce workplace accidents and injuries. But some observers are asking at what cost to privacy. AIG recently announced its strategic investment in tech startup Human Condition Safety (HCS). The start-up, a spin-out of Human Condition Labs, develops wearable technology that incorporates artificial intelligence, building information modeling and cloud computing to try to prevent workplace injuries. The company is targeting industries that hold the highest risk for workers, including heavy manufacturing, energy, warehousing and distribution, mining, transportation and construction. Because state laws require businesses to provide medical coverage, rehabilitation services and lost wages to injured employees through workers’ compensation programs, coverage in this area is one of the insurance industry’s largest product lines. By decreasing employee injuries and deaths through wearables, the industry believes it may be able to lower costs and increase profits for itself and its clients. Employers have many incentives to test these products in their work environments. But before concussion-detecting sensors in hard hats or fatigue-monitoring wristbands become widespread for workers, the tipping point may be that issue of privacy. Experts in workers’ comp say companies must first investigate employment legalities and may need to negotiate with labor unions. As a result, insurance defense law firms that defend workers' comp claims will want to pay close attention to emerging technology trends such as wearable tech and other similar innovations for the following reasons:

• Any safety initiatives that may reduce the number and severity of claims will reduce the number of claims that need to be litigated.

• There will be privacy implications for both employees and employers. When it comes to granting access to individuals’ behavior and health information, law firms need to familiarize themselves with the type and purpose of data being collected, as well as the protection of that data.

• Insurance carriers will continue to evaluate how new technologies might eliminate claims and reduce claims costs.

Wearable tech is still in its infancy because employees need to be convinced that the information collected for the safety of the greater good is worth it. Pilot programs underway may take a year or more before they are actually put into practice in workers’ compensation insurance programs, but insurance defense law firms will want to demonstrate an understanding of these technology trends to better serve the needs of insurers and their insureds. Read more news about the insurance defense market at www.insurancedefensemarketing.com.

In an increasingly digital world, the modern day update to the old real estate refrain of "location, location, location" may be "communication, communication, communication." It may also be true that companies are only as good in the customers' mind as the quality of their last transaction. That is particularly true when there are infrequent transaction, thus limited opportunities to make up for mistakes. In financial services, banks may have daily transactions with their customers, but insurance companies have far fewer transactions, many of which are associated with unfortunate events. Finding a way to make the most of these interactions can be important in retaining customers for the long term, in a world of low switching costs and lots of transparency. I was reminded of this when I got an email alert from my personal lines property and casualty carrier. Like much of the East Coast, we found ourselves dealing with a winter wonderland over the weekend, which included icy roads, snowy hillsides and falling trees. Many people lost power. In any event, the email alert reminded me that our carrier was aware of the potential implications coming from the storm and was ready to help. The message included various forms of contact info and was an opportunity to remind me of the benefits I can gain from the relationship. As my thumb moved to delete the message, I was reminded of the value of the coverage, and I realized this was one of the few messages I've gotten that didn't convey a billing increase or some other "bad" information. I had been thinking that the renewal would be coming in four months and that I probably needed to begin shopping for coverage to see what the market looks like, in anticipation of another premium increase. Getting the email reminded me that insurance is not just about rate but also about what happens when the world goes sideways. This realization leads back to a challenge – which is to say an opportunity – for carriers to start thinking differently about the form and frequency of interaction with customers. Different demographic cohorts may have preferences for different communication channels, but one likely universal truth is that individuals want to know that they have the opportunity to do the same thing that other "smart people" like them are doing. Amazon, of course, does a remarkable job with this. The retail brokerage investment company I deal with is nearly as good, and, as a consequence, there is little chance I will ever look to move assets. Conversely, the life insurance company I have had a relationship with for three decades only has a dialogue with me when sending documents required by regulation. In fact, when I have chosen to initiate dialogue with the carrier, it has proven to be both painful and incredibly time-intensive to get things done. The recent example with my homeowners insurance was a pleasant surprise. It might even cause me to slow the shopping process or be more accommodating of the rate increase, which is no doubt coming. All of this has potentially significant implications for the marketing and technology organizations for insurance carriers. Increasingly, the competition is not against other, similar companies. The issue really becomes how well carriers operate against a customer service standard that is being framed by retailers and financial institutions that are more transactionally intensive. As the lines between traditional industries and products families become blurred through the use of better technology, carriers will need to up their games considerably to maintain relevance.  Checking in on customers after an unfortunate event is a step in the right direction.

Successful businesses continuously draw on their strengths – and their people – for growth. How do you describe the strengths of your business now? How would you describe the strengths that you’ll likely need in a year? In a few years? And how do these strengths translate into the skills your people will need in the future? For most companies, the answers to these questions are always evolving, as disruption increases and the pace of business picks up. We’ve seen the recent evolution of companies’ capabilities -- like fast-food chains rolling out deluxe coffee-shop menus, or utilities delving into smart home appliances. A lot of organizations have solid processes for evolving their business strategies. But as sound as the development and approval process is, it often leaves out an important aspect: Can your people evolve, too? Most CEOs aren’t certain that theirs can. In our latest CEO survey, nearly 80% of U.S. business leaders say they’re concerned that a lack of key skills threatens their organizations’ growth prospects. This stat raises the question: Are some of these organizations taking their growth strategies too far afield, beyond their core strengths, in a desperate search for faster growth? In Strategy+Business Magazine, we recently wrote about how companies that deliver sustainable growth remain true to what they do best and take advantage of their strongest capabilities—what we call a capabilities-driven strategy. It takes a substantial effort. As we say in the story, “If you respond to disruption by changing your business model and capabilities system, you can’t dabble. You have to commit fully.” That level of commitment is only possible, of course, with the right people to step up and deliver on your company’s greatest strengths. Think of the potential talent issues at hand for so many businesses: How does a legacy technology company avoid disruption and commoditization? How can a fast-food chain turn up its café side of the business without trained baristas on hand? How can a utility amp up the tech-savvy talent needed to design Internet-and-data-fueled thermostats and security devices? They’ll all need to align their talent strategy with their business strategy. In our advisory work with clients, we are in frequent talks with companies that need to make these moves. And talent is at the top of the priority list. Before preparing to grow your strengths, think about the capabilities in your current ecosystem of people and where gaps might pop up:  People strategy, leadership and culture: Does our people strategy support our growth initiatives (and, more importantly, is there a strategy)? Is the right leadership development system in place, including a robust global mobility program? Will our culture support the execution that’s required?

1. Reward: Does our compensation and benefits strategy still fit? Is pay competitive? Are there areas to be restructured that could free capital for re-investment?
2. Talent acquisition: Do we need to pull in brand-new talent by strategically hiring from the outside or by making strategic acquisitions?
3. Organization design and operating model: Have we designed an organizational structure and operating model that have clear links between all our capabilities?
4. Change management and communications: Do we have the right program management structure and strategic change methods for execution? Do we know who the real information brokers are in the organization who will informally drive the change?
5. Technology: Do we have the right technology to support the kind of employee experience our people need? Are we leveraging workforce analytics to retain our top-performing people, and are we conducting frequent employee surveys to understand the pulse of the organization?

These are just a few of the talent areas that are important to understand. Odds are you won’t need to revamp all of them. But a carefully designed and innovative talent strategy underlies the successful evolution to get growing.  To read more details on the strategic changes you may need to make to stretch your growth, read the full article, “Grow from your strengths” in strategy+business magazine.

Why is this taking so long?! The challenge I hear echoed throughout the insurance industry is, “How do we speed up the claims process for customers?” Insurance companies often bear the brunt of frustrations from customers stressed out about delays. As we all know, processing claims takes time and patience to gather information, details, photographs and a myriad of other documentation. Getting the right information and accurate documentation takes even longer. Based on the volume of claims, resources and personnel can become stretched thin quickly. Despite all the efforts within organizations, it’s not uncommon to see claims departments contorting themselves like Gumby to get it all done. Insurance claims are stressful, and relying on customers to reliably and quickly provide information is a challenge -- even when it’s to their benefit. The problem becomes exacerbated following natural disasters or claims in geographic locations where companies have little to no footprint and limited resources to document and gather the information needed. In those situations, companies have to reallocate and sometimes relocate resources, which is expensive, time-consuming and a logistical nightmare. Saving time and improving data quality and accuracy are all key components to avoiding customer frustration and increasing customer satisfaction and loyalty. Traditional Challenges Meet Disruptive Solutions Recently, there’s been a lot of handwringing about the “sharing economy,” the “gig economy” and what it means for traditional lines of business and workers. Will the workplace as we know it change completely? As Tony Canas shared in his Insurance Thought Leadership piece, "What Will Be the Uber of Insurance?," the gig economy is hardly the end of the world, and the insurance industry is probably due for some disruption. What a number of traditional lines of business are beginning to discover is that the gig economy presents an opportunity to leverage the power of crowdsourcing to solve challenges, eliminate inefficiencies and even spark innovation within their organizations. Target and Instacart, GM and Lyft, are great examples of how large, traditional verticals are finding ways to integrate the gig economy into new products and services to attract and keep customers while increasing the bottom line. Now going back to one of insurance’s greatest challenges -- saving time and improving accuracy in the claims process, particularly when it comes to getting information such as photographs, records, police reports and inspections. These tasks sometimes feel like they can go on forever with a single claim as companies try to coordinate logistics with policyholders. What if there was an Uber for insurers? A service that could dispatch an objective third party with a smartphone to quickly take pictures and gather exactly the information needed in the claims process almost immediately? There is. Disruption Gets Good for Insurance Like Uber, WeGoLook is changing the way the gig economy is disrupting B2B by providing inspection and custom tasking services. Building on the strength of the gig economy and using the crowdsourcing model, WeGoLook has built a nationwide network of field agents that provides a nimbleness that is often buried alive in large enterprises. Here's how it works at one of the nation's largest auto insurance companies, where WeGoLook is incorporated into the claims-handling process:

• A claim handler places an order on a custom dashboard and chooses a service: (1) vehicle photos, (2) scene inspections, (3) salvage retrieval, (4) police record retrieval.
• A WeGoLook representative calls the onsite contact/policyholder to verify address/item information and schedule an appointment.
• The “Looker” arrives on-site and captures the data needed for the service/task.
• Data is submitted via the mobile WeGoLook app and reviewed by internal staff at WGL for quality assurance.
• The completed report is sent directly to the claim file.

Turning to the gig economy and its on-demand workforce is generating economic benefits and creating true efficiency. We’ve witnessed the process being replicated in companies both large and small and in a variety of categories. Since starting the company in 2009, I’m continually inspired by the creativity of entrepreneurs and how they’ve found new and inspirational ways to apply crowdsourcing. From crowdfunding, ridesharing, coworking and delivery services to even “pet Airbnb,” the gig economy marketplace is homing in on specific consumer and business needs and delivering.

Though the U.S. insurance industry is entering 2016 well-capitalized and profitable, too much capital capacity does not bode well for pricing as new capital flows in, seeking opportunities and driving pricing competition. Against this backdrop, insurers will be juggling priorities: modernizing their core systems, maintaining profitability within existing portfolios, accelerating their digital transformation and cultivating new products and services.

 

Download the full summary here.

The IDC "2016 Global Chief Marketing Officer FutureScape" predicts CMO turnover continuing at 25% per year or higher through 2018. This is not surprising, as marketing continues to be disrupted and reinvented. The CMO must anticipate the expectations of the connected consumer, master an accelerating digital learning curve and negotiate a new role and relationship to the CEO – who himself must come to terms with marketing playing a new position in the organization. While this is true across companies in all sectors, it is a special consideration in insurance, where marketing is emerging from a historical “back seat” role in sales support and becoming the leader of customer-centricity and digital transformation efforts. The CMO is now often expected to be a superhero – one who speedily turns customer-centricity into P&L results … uses technology and data analytics to drive performance … delivers marketing ROI … drives leads to sales channels … and advances capabilities to keep up with marketplace opportunities. She is a leader who gets beyond intellectualizing the need for change and quickly makes change happen. She gets Millennial consumers to flock to the brand. Being data-driven is core to the wiring of the CMO who can accomplish all of this. Being a member of the Millennial generation may be useful, too. But I’m hearing a hunger for even more, from start-ups to Fortune 500 leaders. These leaders are looking for a CMO who demonstrates:

• Strategic, visionary and transformational wiring, with the ability to execute
• Skill at seeding and scaling innovation
• Analytical, technical and creative abilities
• A collaborative style - someone who is a motivator and a networker
• Digital native instincts and intuition
• Links to P&L performance
• A sense of urgency

This profile is a tall order. To find your marketing superhero: Define what marketing means in your business. Marketing can be the high-impact discipline that connects your company’s brand with customers to create growth. If you have defined marketing as the advertising, promotions and research function, my definition proposes a much-expanded view with implications for the broader team, goals and metrics and alignment. Being clear on the function’s role is the basis for picking the must-have CMO qualities. Maximize the CMO’s potential by envisioning a function that can:

• Be immersed in customers’ lives and be the internal advocate for their needs
• Surface, synthesize and apply market insight and data - pushing beyond demographics to a segment-based understanding of attitudinal, behavioral and cross-cultural attributes
• Create experiences that attract customers and strengthen relationships
• Test and learn – acquiring and applying data to get better
• Have a P&L focus - connecting customer behavior to financial outcomes
• Be a collaborator with colleagues, especially technologists and data scientists

Look to the CMO to adapt the mature methodologies that matter, and meld these with what technology and data now make possible. Segmentation, A/B testing and positioning methodologies work and are essential in an environment of channel proliferation and media fragmentation. Apply these alongside customer journey mapping, machine learning capabilities and the best social, mobile, community and other connection tactics to motivate customer engagement. Hold the CMO accountable for metrics that make sense. The best metrics focus on the drivers of prospect and customer behavior that marketing can affect. While awareness, intent to buy and volume of qualified leads are on the list, more rigorous metrics linked to P&L outcomes also belong on the marketing scorecard – accounts opened, sales closed, evidence of loyalty such as repeat purchase and recommendation to others. Be aware of the dependencies beyond marketing, across a multi-functional business, to move these levers. Provide sponsorship. Marketing will continue to transform irrespective of the size or stage of maturity of the business. The function's success increases in a culture of customer commitment and insight, where leaders keep the customer at the center of decisions. Chances are your CMO will be mortal. So, how will she succeed? Whether digital migrant, native or newbie, data-driven or intuitive, CMOs will rise to superhero status when they: 

• Operate with a relentless customer focus.
• Achieve differentiation that matters to your target.
• Build and motivate a diverse team – creating, in effect, the composite superhero marketer.
• Lead with openness, trust and collaboration, self-awareness and humility, clarity of vision and connection to execution.

This post also appears in Amy’s regular column on Huffington Post, Medium.com and LinkedIn.

Sally Welborn wrote a good blog post in The Health Care Learning & Action Network calling on self-insured employers to take the lead in reforming healthcare purchasing. She is senior vice president of benefits at Walmart Stores and is responsible for the design and administration of benefits. She writes, “Fixing the payment system can actually result in limiting the cost increases AND drive quality improvements.” We can’t wait for carriers to fix the fee-for-service system. She writes:

• Most are publicly traded and must consider their shareholders. The amount of money they make directly correlates to how much healthcare costs. The more it costs, the more they make from their customers…us.
• Most consider their provider network to be a key competitive advantage. So by default they must consider the provider community a primary stakeholder they can’t ignore.
• Many have a large volume of business with CMS/Medicare and must have systems and processes that support their largest payer.

“More importantly,” Sally says, “I urge you to consider what you [self-insured employers] can do to move your organization to smarter, value-based purchasing of healthcare.” If true reform is to occur, and such reform is quite overdue, self-insured employers will need to make it happen.

I read the article Nick Lamperelli wrote after attending the Insurance Disrupted conference titled "No, Insurance Will Not Be Disrupted," with his conclusion that there are insurmountable barriers to the "Uberization" of insurance. I’ve developed great respect for Nick’s perspectives. But our team at Insuritas disagrees. We think disruption within insurance (at the Uber level) is emerging. We just need to think about insurance in a very different way, much like how Uber thought about the ubiquitous taxi cab and getting a customer from point A to point B while making sure the customer actually enjoyed the ride. Uber knew a vehicle was a requirement to provide the ride, so they focused on reimagining the role of the driver to deliver a new, and enjoyable, customer experience. There are approximately 234,000 licensed taxi drivers in America – and there are approximately 466,000 licensed insurance agents. Our Perspective When our team thinks about the three primary actors in insurance – the insured, the agent and the carrier – we’ve drawn a couple of conclusions. First, we’ve concluded that the insurance carrier will not be replaced. The scale and immense capital required to insure the unknown is substantial. We believe carriers will continue to transform their businesses. Automated pricing algorithms and streamlined delivery systems will continue to emerge, particularly as the actuarial science and actual claims history affirms that the new algorithms and modified delivery systems work. There will just be winners and losers among the current providers. Some thought leaders have been looking at the disruption in banking, particularly in lending, and suggesting insurance disruptors will try to mimic OnDeck, Kabbage, SOFI and Lending Club. These banking disruptors are making loans by underwriting repayment risk using nontraditional and publicly available data points and algorithms (e.g. "likes" on Facebook, Glassdoor ratings, LinkedIn contacts, etc.) to determine if a borrower is likely to meet her repayment obligation. Until there is a market cycle downturn, no one will know if these new underwriting algorithms using publicly available data will prove to be prescient or a disaster. Some folks are thinking this same type of "disruption" is available for a new generation of insurance carriers. We think it’s important to remember that these new online lenders do risk losing the $100,000 they might lend to a borrower, but they can only lose the $100,000 they lent to a borrower. With insurance, unlike repayment risk, claims risk is open-ended, and the open-endedness of claims loss requires capital levels that make an entirely new model carrier entrant unlikely. Just as Uber concluded that the role of the car should not be replaced in providing the customer with a satisfactory ride, our team has concluded that the insurance carrier will not be replaced in providing the actual insurance. Insurance customers, like taxi cab customers, aren’t happy with the current experience, so just as Uber decided to look at the licensed taxi driver, we decided to look at the licensed agent. Uber and Insurance Uber thought long and hard about the one actor it could reimagine to deliver the customer a simple, comfortable ride: the licensed taxi driver. Uber didn’t disrupt the product – i.e. the car – because it knew people still need a vehicle from point A to point B. Uber simply reimagined the driver experience so the customer got what he wanted. Uber reimagined a new generation of "drivers" operating with elegant new tools to finally deliver a ride the way a customer wanted it, a ride experience the customer would love. That includes: clean and detailed cars because of personal vehicle ownership; technology to better understand each driver’s addressable market; instant guidance on where the customer wanted to go and the most efficient way to get there; ways for the customer to instantly access a picture of the car and driver; the ability to rate, rank and celebrate great service instantly that in turn automatically leveraged more business for the driver; the ability to coordinate multiple riders on a single trip to multiple destinations to save time and money and lower the environmental impact of the ride; and a simple, instant payment method … and that’s just to name just a few. Uber didn’t eliminate the driver. It couldn’t. Uber simply reimagined a driver who delivered the product a customer wanted – a comfortable ride. Consumers responded, and the rest is history. Now, think about insurance. The actors are very similar – just think about insurance rather than a taxi ride:

• the consumer is anxious for a new insurance experience;
• the insurance carriers are like the ubiquitous taxi cab the taxi driver uses – the carrier may be a bit old and clunky with aging operators and legacy distribution capabilities (not as upgradable as a Toyota Camry), but, as the car is needed to get the customer from point A to point B, the carrier is currently the only source for the risk management products the consumer needs;
• the licensed agent, who like our licensed taxi driver is the licensed intermediary who delivers the product the consumer wants. And we think it helps to think of the term "agent" globally – agent, broker, MGA, direct writer, core system, raters, IVANS, ACCORD, LeadGen – the collective delivery system of the insurance products to the customer today. Is it possible to reimagine the agent?

We believe the customer is simply looking for a better insurance experience. And, as with Uber, we are focused intensely on the agent. We see the same challenges Uber saw: Traditional agents and all the stakeholders surrounding them are strongly committed to the notion that there is only one way to deliver a customer/insurance experience, and it is through them.The taxi industry stakeholders were (and still are) insisting, “We have the vehicles, the licensed drivers, the medallions, the ride meters, the street maps, the taxi parking spaces, the taxi license, etc. and thus are the only platform able to deliver the ride the customer needs.” Uber didn’t eliminate the driver; it simply reimagined the work and found a new generation of drivers delighted to deliver a reimagined ride. In that same way, our team is reimagining the licensed insurance agent in America. A Customer Reimagines an Agent What do today’s insurance customers want? The ability to shop, compare and buy all of the risk management products they need to protect themselves, their families and their small businesses in a simple, one-stop, omni-channel, comfortable and advisory shopping experience. They want to be able to buy multiple products in a single shopping cart, make a single payment at checkout and have an online insurance account that stores all of their insurance information so they never have to provide the same information twice, never have to keep paper records and buy and cancel all additional products using their online insurance account. The list would be long, all tied to a simple notion: a trusted, comfortable insurance experience. Now, this is the hard pivot for all of us in insurance. Imagine in 2008 that someone asked you what you wanted from a taxi ride, and you ticked off all of the things the Uber driver actually delivers today, and that list was turned over to the taxi cab industry. Could you ever imagine the taxi industry getting close to delivering what you wanted? Ask that same question of insurance customers, let them tick off everything on their wish list for a great insurance experience, and hand that list over to the insurance industry. The Reimagined Agent  For insurance carriers, delivering their product to the customer requires a three-step process:

• The application – collecting public and nonpublic information (NPI) about the character and collateral of a prospective insured;
• The quote – once an application is complete, using actuarial science to profitably underwrite and price the claims risk;
• The sale – once a price is accepted, payment is collected and coverage is bound.

We can leave it to historians to explain how we got here, but there’s a massive infrastructure, including more than 400,000 insurance agents and a multibillion-dollar lead-generation industry in America, designed to sell insurance products to the customer. It is a system almost as old as the taxi system. Go back to your list of things a customer might want for an insurance experience. How about, "I want a trusted adviser who works for me and gets me what I need in a safe and frictionless environment"? As consumers, we don’t like providing private, nonpublic information to anyone, and we are reluctant to engage with people whose job it is to collect it, period. We never have, whether dealing with insurance agents, mortgage originators, tax preparers, government regulators, auto lenders, nurses, doctors, landlords or attorneys." Is it possible to imagine a new type of licensed agent with the tools (just like the ones the Uber driver has) that would let them provide a transformative insurance shopping experience: a simple, comfortable insurance purchase? Can we imagine a new generation of agent that can instantly access all of the public and non-public information about a customer’s character and collateral, deliver it to a wide stable of insurance carriers in exactly the format they need it, get instant quotes from the carriers that reflect the customer’s risk tolerance and assets to be insured, be available to provide any of the advisory insights the customer might want -- all at exactly the moment the customer has an insurance need? What about a new generation of agents, fulfilled in their work as risk managers and customer advocates, operating in a seamless, frictionless ecosystem in service to the customer? Similarly to how Uber has built a new generation of drivers, we are building a new generation of agents, who are empowered and excited to deliver insurance solutions to consumers, who are operating inside companies that have long and deep trusted brand equity with the customer and that have access to everything a carrier needs to know about their character and collateral, eliminating the dreaded insurance interview and application. Our new agent never prospects, sells or steers a customer; she simply focuses on delivering a frictionless shopping, buying and post-purchase service experience tailored to each customer exactly at the instant the customer needs it. We believe the role of an agent, with a completely reimagined operating environment, is more important and more valuable than ever before. More than 5,000 consumers and small business owners ask our agents for help every month. Our agency owners have addressable markets and underwriting packets on more than five million households and get more than 30 million web visits a month with no cost of customer acquisition and application preparation. Our partners have underwriting packets filled with everything a carrier needs to know about character and collateral, ready to be delivered instantly to the carrier, and our reimagined agent is like the Uber driver who is simply focused on providing a concierge level of service to a consumer who has to buy insurance, making sure price, coverages and support are all frictionless. In 2009, Uber imagined a new kind of taxi driver. In just six years, 162,037 reimagined Uber drivers are at work, earning $6 per hour more than the legacy taxi driver, while self-employed, controlling their destiny and glad to be providing the customer with a safe and comfortable ride. A new generation of agents is emerging, reimagined to reflect what the customer actually wants. We are very excited, as the customer is starting to respond.