In 1859, a massive solar storm fried the U.S.'s telegraph network. Even weeks later, when someone touched a piece of equipment, it still carried so much charge that he was thrown across the room. 

Think of what such a storm would do today, when we've gone far beyond a baby network of telegraph systems. It would do trillions of dollars of damage to the electric grid that we rely on for our daily lives and to the internet, which we rely on for just about everything, including so much of our commerce. 

And we're due.

Historical records show that an 1859-level storm happens once every 150 years, and it's been 165 years since the last one. In 2012, the sun emitted the sort of gigantic plasma cloud that it had in 1859, but it just missed us. If the storm had happened a week earlier, it would have scored a direct hit. And we're in the part of the 11-year solar cycle that is most likely to produce major storms; the peak part of the cycle will come next July. It already produced one severe storm, last December, that, fortunately, missed us.

The odds of a massive storm at any given time remain low. Just because a coin has come up heads six or seven times in a row doesn't mean it's more likely to come up tails next time. But the odds are still high enough that I think it behooves insurers to do two things. 

First, they should review policies and make sure they're accurately pricing for a truly catastrophic event -- think, homes and businesses without power for years and business interruption for several quarters. They should also make sure that they're only covering the risks they intend to cover -- I'm thinking of the insurers that wrote general liability policies and were surprised to find in the early days of cyber attacks that the policies covered hacking.

Second, and even better, if the industry can do it, companies should work with clients to make sure they have backup plans to keep themselves and their businesses safe. They should also work with utilities, internet service providers and governments. Those entities are already aware of the possibilities of solar storms, but they don't necessarily understand all the downstream devastation that a major storm could cause -- and that's the sort of risk analysis that the insurance industry specializes in. 

For the sort of detail I don't have room to provide here, I recommend two articles.

The first is one that we ran following the 2012 scare. It provides a great overview of the phenomenon, as well as considerable color about the effects of the 1859 storm, now known as a Carrington Event. It also suggests some approaches to scenario planning for such an event -- including the seemingly obvious, but often missed, observation that whatever replacement costs might run you now and whatever timelines you could meet now won't be close to what you'll face if a whole region or a whole country goes kerflooey at the same time. 

The second is a recent piece published by our colleagues at the International Insurance Society. The article, by David Piesse, chief risk officer at Cymar, is far more detailed, including a list of major storms dating back to 660BC and a depressingly thorough analysis of all the equipment that would likely fail in a Carrington Event. Imagine having 10% of the world's satellites all fail at once -- and there's a chance they'd all fail.

Piesse concludes on a pessimistic note: "Warnings that the world needed to prepare for a pandemic were largely ignored, and threats from space weather in a technology-dependent world are only getting patchy attention." 

I realize the odds are that we'll skate through this solar cycle, as we did the last one and the one before and.... But I also know that we'll have less than a day of warning between the time we see the sun emit a giant plasma cloud and the time it strikes Earth, so anything that's going to be done has to be done well in advance. And, as things now stand, we're just not ready. A Carrington Event would be catastrophic. 

The old Eagle Scout in me keeps whispering in my head: Be Prepared.

Cheers,

Paul 

Sci-fi author William Gibson's famously said, "The future is here; it's just not evenly distributed yet," and that line seems to apply to insurance. Often, that observation suggests promise—we can see innovation in various spots that will surely percolate through the whole industry. But sometimes it doesn't—in particular, as we see natural catastrophes, abuse of the legal system and other problems hit major markets and can be sure the problems will spread.

To try to get a glimpse of what may be in store for the rest of us, I connected for this month's interview with Michele Coolidge in southern Florida. Michele, who has been actively involved for years with the CPCU Society at The Institutes, is the risk manager for the Marsh McLennan Agency, Bouchard region. 

The picture she paints isn't entirely grim, but she says, "It's just really tough out there."

Perhaps coming soon to a market near you....

Michele says premiums for homeowners have risen so much that, "in an effort to save money, people are taking on risks that they may not be able to afford if something happens. They might have deductibles they won't have the cash to cover. And I think the problems are spreading."

California and Louisiana leap to my mind as deeply troubled markets for homeowners, but Michele said the problems are much broader.

"A friend of mine in Iowa told me that six homeowners carriers went under there," she said. "They're calling Iowa the new Florida. And you don't want to be compared to Florida when you're talking about homeowners insurance. It's not just hurricanes. It's the wildfires and the tornadoes and all this stuff that's happening everywhere."

On the plus side, Michele said legislative reforms in Florida are starting to help—the state had suffered for years from laws that gave attorneys and roofing contractors almost carte blanche to go after insurers, irrespective of whether a home had actually suffered damage.

She also said that carriers are communicating more with policyholders about ways to harden their properties.  

There's more, too, including about how her agency is coping with the fact that "there are a lot of new people in our industry. On the one hand, this is fabulous. But there's a lot of bench strength and old knowledge that is not here any more.​" 

I think you'll find the interview interesting. The future is here in many ways, for good and ill, and it seems to be hitting Florida early.

Cheers,
Paul

HOW INSURANCE BROKERS CAN STAY COMPETITIVE

Paul Carroll

With a lousy hurricane forecast this year, even more people than usual are thinking about you guys in Florida. How are things looking there? 

Michele Coolidge

Well, we did our disaster claims training a few weeks ago, but let’s hope there are no storms, and we won't need that. 

The legal reforms are kind of starting to work, but it’s going to be a while before we have the really great market we had before. It's just really tough out there. 

We have some clients choosing to go bare, others who are choosing very large deductibles or different types of programs. Sometimes, it's just not affordable to get the coverage people want. 

On the personal lines side, I think it's more dire because, in an effort to save money, people are taking on risks that they may not be able to afford if something happens. They might have deductibles they won't have the cash to cover.

And I think the problems are spreading. A friend of mine in Iowa told me that six homeowners carriers went under there. They're calling Iowa the new Florida. And you don't want to be compared to Florida when you're talking about homeowners insurance. 

It's not just hurricanes. It's the wildfires and the tornadoes and all this stuff that's happening everywhere. 

Paul Carroll

Yes, in Northern California, we think about wildfires a lot. 

What has been changing in terms of what you're seeing as the risk factors that you need to watch out for on behalf of the agency?

Michele Coolidge

On behalf of the agency, it's making sure that our clients are involved in what we're binding and that we are all in agreement This is what we as the agency have offered. This is what you as the client have said you want documented. 

On behalf of the client, we have to make sure, Did we offer everything, and did we go everywhere? If last year we had an option without wind, did we shop for wind coverage this year? Just because you didn't have it doesn't mean the client doesn't want it, and maybe if it's available, even if it's pricey, they might want it. Who are we to decide? 

The other thing is that there are a lot of new people in our industry. On the one hand, this is fabulous. But there's a lot of bench strength and old knowledge that is not here any more. We do our best, but you can’t have an experienced person sit all day, every day with an inexperienced person. Do we know what we need to do and why we need to do it, and are we going through all the steps? If you shortcut something now, it may prove to be devastating later. I'm worried that we have a lot of inexperienced people, not just in the agency, but at the carrier level, underwriting, claims, reinsurance, really everywhere. 

Paul Carroll

Could you describe the kind of problem that might happen because there just isn't that bench strength? 

Michele Coolidge

Sure. There is a danger of not understanding the importance of gathering all of the information or perhaps a reluctance to go back to a client and ask for more information. Sometimes people think they are bothering their clients. We should have set the stage that we need a lot of information, but newer insurance professionals can be nervous to go back to the client, and to admit if they don't know something. So we try to have a culture where it's okay to say, "I don't know, can you help me?", or, "Let's talk through this." 

We're human beings. Everyone can make a mistake, and everyone does make a mistake. That is okay as long as we discuss it and admit it and fix it, and you don't wait until it's a big fire. 

Paul Carroll

How do you guard against that big fire?

Michele Coolidge

I emphasize an open door policy. Anyone can come see me with any question, and it doesn't matter. Call me, hit me up in Teams, stop by my office, whatever. Let's talk through it. Every opportunity to learn is important, and it's also going to help someone later. 

We do some auditing, as well. We have some core procedures, and there are certain things that must be followed, and we check those. 

Paul Carroll

How much are you co-located these days, and how much is remote? 

Michele Coolidge

We require everyone to be in the office two days a week, unless there's a reason, and then some people are remote. Even before COVID, some people had been remote. Some people come in a lot more than two days a week. Accounting is always in the office, and our commercial team is in pretty regularly. Management is in a lot. 

Wednesday seems to be the day the parking lot is full. I love coming in on Wednesdays because it's so much fun with all of the energy from everyone being there. 

It's interesting. When COVID happened, the [financial] numbers kind of stayed the same. Then a year or two in, the numbers went down. And when we came back to the office, the numbers shot right back up.

We are social creatures, and the first couple of months back in the office weren't the most productive days because we were all just catching up after missing each other. But now it's all good. I think it makes a difference, being together.

Paul Carroll

If I’m a homeowner in Florida, what are you seeing that is changing in terms of risk factors and how I ought to be dealing with them? 

Michele Coolidge

I think the risk factors aren't really different, but people are much more aware of them because there is a direct correlation to their premiums. You still should make sure you have a good solid roof and be aware of your elevation, and do you have hurricane-rated windows? 

The COPE information—Construction Occupancy Protection Exposure—has always been important,. but before, the premiums were okay. and people really didn't care. Now if you have a roof that's 15 years old, we can't cover you until you get a new roof. People are more aware of their risk factors simply because of the renewal premiums that they're receiving.

Sometimes it is a new roof. Other times, it's getting an appraisal or four-point inspection to prove to a carrier that I have five years of roof life left, and my windows are good. 

The other thing that's always been a problem but never was such a big deal is the valuation. What is your home worth? What is the replacement cost of the home? 

That is a whole science. There are engineers and appraisers who have designations and certifications and special internet programs to figure that all out—and that we don't have access to. We can't tell someone what value they should purchase. They have to tell us what coverage they want. So there's kind of a rub there. 

They actually passed a law in Florida that forbids agents from giving a replacement cost estimate to a bank or to a client. Even if we have a tool that lets us ballpark estimate a value, we can't share that with the client. That's difficult. 

Paul Carroll

Do you think rising insurance costs are starting to show up in home prices?

Michele Coolidge

I think so, and for condos, too. After the Surfside situation [the condo building collapse three years ago that killed 98 people], there are laws to make sure any deficiencies in the building are fixed, and a lot of people who own condos are being assessed a huge amount of money. 

Paul Carroll

How much are carriers communicating with policyholders about how they can lower their risks and, thus, their premiums?

Michele Coolidge

In Florida, we have what's called a wind mitigation form for residential and commercial residential. It must be completed by either a building contractor or general contractor. A roofing contractor can't do it, because it might be a conflict of interest. The wind mitigation form goes through the roof and the windows and the clips. Carriers are required to offer credits for certain features, and people are paying for those inspections.

Paul Carroll

Am I right that people often underestimate replacement costs? They consider a situation where their home is hit but not where a whole community is hit at once, meaning contractors and supplies are in short supply, so costs soar, and the timeframes for repairs go way out.

Michele Coolidge

Yes, and we have seen carriers on the homeowner side scaling back, like the Coverage D additional living expense, which isn't good. And Coverage C and your personal property are often not even 50% of coverage any more. I think we need to be aware of that, because a Hurricane Ian situation could mean you’re not in your home for a year or 18 months. $3,000 in additional living expense isn't going to get you very far. 

Finding carriers that have all the coverages like they used to be is good, if you can, and then you have to explain to the client how important this additional coverage is.

Paul Carroll

Is there anything I didn't ask you about that you think might be of interest to our readers? 

Michele Coolidge

There are a couple. 

Obviously, cyber is a huge deal, and everyone is affected by it. On the commercial side, a lot of crime forms aren't covering it. You need a separate cyber policy. So we want to make sure that our clients have the right coverage. And what clients sometimes don't understand is that along with these policies also come the pre-loss assessments. Those assessments help you get stronger and show you where there are deficiencies or vulnerabilities in your networks, and they’re free. For that reason alone, businesses should be buying this coverage. 

There's another coverage that's been very popular. It makes me sad that it's so popular but I think it's very important. It is active assailant coverage. 

I'm really proud of our industry, because active assailant coverage didn't exist until we started having these terrorist events. The coverage used to be called active shooter, and it was for people coming into places with guns. Then, some years ago, people were driving big vehicles into Christmas markets in Europe, and the industry took a look at the coverage forms and said, Our policy wouldn't respond to that. So they adapted the coverage. Now, it covers you if you’re in a school or at a place where kids are or where people gather. It’s very broad coverage.

Paul Carroll

Those cyber assessments sound great. My background is writing about technology for the Wall Street Journal, and I go back far enough that I saw some of the early cyber attacks. My approach has always been, Insurance is great, but how about if we stopped the attacks? 

Michele Coolidge

Yeah, the best loss is the one that never happens, right? 

Now we have to figure out to stop the hurricanes.

Paul Carroll

This is great. Thanks, Michele. 

About Michele Coolidge

Michele is the Agency Risk Manager for the Bouchard region of Marsh & McLennan Agency, LLC (MMA). She manages E&O claims, analyzes and maintains risk data, and manages contracts, legal matters, and compliance matters. She develops continuing education classes for Bouchard colleagues and serves as a technical resource for all positions. Michele serves on the MMA Enterprise Diversity Equity & Inclusion (DE&I) Council and the MMA Learning & Development (L&D) Council, and serves as the Bouchard Region legal liaison and compliance liaison. She is currently in the third year of her three-year term on The Institutes CPCU Society Leadership Council. She was invited to serve as an at-large member of the Executive Committee in 2024. She is a CPCU in Good Standing. In 2020, she obtained the National Diversity Council’s (NDC) premier diversity certification, the NDC Certified Diversity Professional designation (NDCCDP). In 2021, she earned the University of South Florida’s Diversity, Equity, and Inclusion in the Workplace certification.

In the ever-evolving landscape of insurance fraud, the integration of Generative AI (GenAI) and machine learning models alongside human investigators is proving to be a formidable tool in detecting and responding to novel fraud schemes. The dynamic partnership between AI technologies and seasoned fraud investigators is not just enhancing efficiency but is crucial in adapting to new fraudulent tactics as they emerge.

Understanding the Role of the Investigator in AI-Enhanced Fraud Detection

Let's consider a rising fraud scheme involving e-bikes to illustrate why human oversight remains indispensable in leveraging GenAI. In this scheme: - Individuals purchase an e-bike online and subsequently reject home delivery, thus avoiding payment or securing reimbursement. - Despite not receiving the bike, they obtain a legitimate invoice and insurance since they opted for these during the online transaction. - Soon after, they file a claim alleging the bike was stolen, aiming to profit from the insurance payout.

Tackling New Fraud Schemes with GenAI and Human Insight

In responding to such a scheme, the first step involves detection markers such as "e-bike," "causetype: theft," and "claim shortly after inception." GenAI can play a pivotal role here by extracting detailed information from the submitted invoices, such as shop details. This enables investigators to verify critical aspects like whether the product was actually reimbursed.

Moreover, AI can assist in reducing false positives by analyzing the type of shop involved—distinguishing between local and online retailers, for instance, to assess risk levels associated with the claim.

However, it is the fraud investigator who must decide the subsequent steps, determining the necessary data points for an effective investigation. They might require the insured to provide the bike lock keys or a police report to substantiate their claim. This illustrates that while AI can handle data extraction and initial analysis, the human element is crucial for nuanced judgment and decision-making.

The Iterative Loop: Human-AI Collaboration

This process is not linear but iterative. As investigators interact with AI tools, they provide feedback and insights that enhance the AI’s algorithms. This continuous loop of interaction and learning allows both AI and human investigators to adapt swiftly to new fraud patterns.

For instance, GenAI could draft communications to shops to inquire about reimbursement statuses, based on investigator inputs. Each case not only feeds into the AI’s learning database, enhancing its predictive accuracy, but also sharpens the investigator's approach to similar future incidents.

Human insight and artificial intelligence are setting new benchmarks

The fight against insurance fraud, particularly with new schemes surfacing, requires a blend of advanced AI technologies and human expertise. While GenAI provides the tools necessary for rapid data processing and pattern recognition, it is the human investigator who interprets these findings and guides the investigative process. This partnership not only enhances the effectiveness of fraud detection but also ensures that as fraud evolves, our methods to combat it evolve just as rapidly. Together, human insight and artificial intelligence are setting new benchmarks in the insurance industry, making it tougher for fraudsters to succeed.

Written by Christian van Leeuwen

Sponsored by ITL Partner: FRISS

Although the insurance industry has been relatively slow to adopt digitization, today we’re seeing brokers, carriers and the organizations they insure converge in a digital marketplace. When this industry transformation comes to full fruition, we’ll see a level of collaboration — and efficiency and transparency — that we’ve never seen before. 

How did we get here? 

Digitization has become table stakes throughout the financial services industry. This wasn’t always so, particularly for the insurance sector, which was among the slower segments to evolve. Yet with its enormous repositories of data and customer demands, the insurance sector had been well-suited for digitization for some time. And from the dawn of e-banking and early direct-to-consumer insurance products, most stakeholders in insurance and the financial services sector in general have believed that policyholders expect — and deserve — better transactional experiences.

The organizational shift from “lagging” to “leading” in commercial lines, and how more collaborative marketplaces and initiatives are helping us get there, can be seen in the timeline below:

The 1980s: The dawn of digitization. Carriers start digitizing their processes, adopting computer systems for policy management, claims processing and customer data management.

The 1990s: The advent of the internet. Carriers begin establishing direct-to-consumer, online channels for customers to price, compare and purchase insurance through portals and aggregators. 

The 2000s: Going mobile. With the popularity of the smartphone, carriers develop mobile applications to quote and bind coverage and even submit claims. There isn’t a universal birthdate for insurtech, but at some point in the era of digitization and personalization the tech-adept and tech-deficient insurers are pitted against one another. Digital transformation becomes both an internal and external reckoning point.

The 2010s: A “space race” in insurance. The sprint toward insurtech and digital insurance becomes frenetic, competitive and investment-heavy for early adopters that can launch test balloons. It’s lucrative (even if only temporarily) for unicorn-status disruptors and laden with unknowns for the rest of the industry. Companies become fast followers or decide to wait and see.

The late 2010s: Carriers are still relying on antiquated home-grown systems for core processes, while their employees feel stuck in the Stone Age. Being able to “insurtech” as a verb becomes a competitive advantage, and then a cultural and talent advantage. Those that can’t innovate on their own acquire solutions or partner with more digitally savvy brands.

The history of digitization in insurance is a case study of what happens when you imbue an age-old industry such as insurance with Silicon Valley DNA, and when generations of policyholders become digital consumers.

See also: Accelerating Product Innovation

Insurance today: A golden era of collaboration

While the road to a digital landscape was laden with pain points and lessons learned, the biggest takeaway in 2024 is a shift toward a more unified industry, where digital synchronicity is expected and everyone has a seat at the table.

The benefits of moving forward as a united industry in a digital marketplace are numerous. Some of the most significant advantages include:

Collective product development and enhanced customer experience: Through collaborative efforts, insurers can offer personalized and seamless solutions, accessible 24/7 through digital platforms. Having a baseline expectation of digital-first customer competencies improves insurance’s trustworthiness and relevance in the eyes of today’s policyholders. By integrating chatbots, virtual assistants and mobile apps, insurers can provide round-the-clock support and empower policyholders to manage their insurance with ease.

Unified advocacy and fraud prevention: Pooling resources and expertise, insurers are leveraging automation and analytics to streamline operations and combat fraud more effectively. By integrating risk management capabilities, insurers can enhance operational efficiency and reduce costs across the board. 

Combining research and development resources on complex technological advancements: Tech-enabled insurance is fertile ground for technological advancements such as artificial intelligence (AI), Internet of Things (IoT) and blockchain. By collaborating on research and development, insurers and tech partners can harness these innovations to optimize processes, improve risk assessment accuracy and ensure transparent transactions.

Shared data-driven decision making — especially in underwriting: Insurers are uniting to leverage the power of data analytics and combining once-proprietary feedback from claims and risk management to identify risk patterns and market trends. By sharing data and expertise, insurers can make more informed underwriting decisions that drive pricing accuracy, risk assessment and strategic growth.

Improving model accuracy and interpretability: While sophisticated models may deliver superior predictive capabilities, they often sacrifice transparency, leaving stakeholders unclear about the reasoning behind model decisions. Partnering across the industry toward more easily explainable models improves trust and stakeholder buy-in.

See also: 2-Speed Strategy: Optimize and Innovate

The broker: From isolation to integration

At Neuron, the digital trading platform recently launched by WTW, “seamless connectivity” is a fundamental pillar for a connected digital market. In our research to identify the biggest hurdles to commercial lines efficiency, the heaviest burden on brokers is raw client data.

Brokerages — and the underwriters they partner with — rely predominantly on the unstructured data (both historical and current) they receive from end-insured clients. It continues to be the broker’s responsibility to format this data into a structured submission for one or many markets to provide quotes. In many ways, a submission is only as good as the quality of data received from the insured. Brokers must frequently plug any and often all gaps in client data so the correct quotes are returned from the market.

Without a universal repository for structured insured data, inaccuracies and miscommunications contribute to an inefficient, and often unnecessarily time-consuming, quote process. Many submissions are sent to carriers via email with the supporting data included as attachments. Sometimes a broker may have a portal where carriers can securely retrieve the submission data. But it often doesn’t provide an efficient mechanism for capturing primary data for client benchmarking and better decision making throughout the insurance value chain.

As many commercial brokerages ramp up efforts to establish proprietary broking platforms, they’re solving for one half of the transactional equation. Often, line-of-business-level data standards and mapping to back-end broking systems differs significantly from those of the carriers. The result is translation issues when it’s time to connect to a carrier, whether directly or through an application programming interface (API). Broking platforms are not always configured to seamlessly communicate submissions to insurers’ intake systems.

By gathering business and technical requirements in isolation versus collaborating with carrier partners, brokerages could be missing the big picture. The time and expense to rework these translation layer pain points could be avoided through early collaboration among a trusted group of carriers.

Once a carrier receives a submission via an API, the ideal state is for carriers to return quote responses directly back to the broker’s interface. Quote negotiations and versioning would be maintained in the interface instead of the traditional back-and-forth emails.

The ability to compare multiple carriers’ quotes in one interface is also imperative. Carriers that can connect to this functionality will be able to differentiate themselves early in both the eyes of the broker and the insured.

Co-creation, collaboration and community will serve the industry in ways “go-it-alone” competition never could. Pooling strengths to navigate challenges and serve customers is how this industry will create and seize the opportunities of the future.

Love them or hate them, you have to credit the “Big Tech” companies, such as Amazon, Google, Meta, and Apple, for consistently engaging their customers. Their strategic use of omnichannel customer engagement, personalization, self-service, and leveraging customer data help them stay in constant contact with their customers, building deeper relationships that deliver big ROI. They are successfully attracting younger customers with this strategy, ensuring the longevity of their companies. After all, younger consumers are the future of any industry. 

What can mid-sized insurance carriers learn from the Big Tech customer engagement models, particularly when courting Millennials and Gen Z? Here are five key takeaways from the tech giants that carriers can apply to their customer engagement strategy.

1. Create a digital experience that aligns with customer preferences. Forcing customers to interact with you on your terms instead of theirs is a surefire way to experience customer churn. This extends to your mix of risk products and services, how customers find you, how you price your products, and how customers send and receive information. It’s always a good idea to invest in some market research to truly understand the unique needs of your target market, and Millennials and Gen Z are no exception. They are not the same as their parents or grandparents, which will inform the customer experience you provide for them. Find out what motivates them to evaluate or buy a risk product in the first place. Are they just entering the workforce? Did they just get engaged or married? Are they expecting their first child? Remember that this generation is very sensitive to a “one size fits all” engagement strategy. Younger insurance customers may want to purchase personal insurance, such as auto, homeowners, or rental insurance policies. Yet, many young people own their own businesses and are looking to purchase commercial insurance. It’s up to you to know your target customer and respond accordingly. 

2. Provide customers with choice. It’s not enough to have multiple engagement channels or to start a TikTok channel just for the sake of having one. The bigger question is, Are your channels the right ones for your target audience? Consumers want specific channels that suit their unique needs. For example, the customer contact center was once the gold standard for customer service in insurance. However, today’s younger consumers don’t want to spend time on hold while waiting for an available agent to answer questions. In fact, they don’t want to talk on the phone at all. Research confirms that 26% of Millennials and Gen Z consumers say they “actively ignore” phone calls, and another 20% find it “weird” to receive calls. It’s more important than ever for carriers to offer a wide choice of channels, including text messaging, self-service customer portals, and Interactive Voice Response (IVR) systems. These real-time, synchronized channels go a long way with younger customers who want to quickly get the information they need without speaking to a live agent. Our own research shows that by adding SMS text messaging to the mix, carriers can reduce policy cancellations by 52%.

3. Leverage technology to personalize engagement. Younger consumers respond well to offerings and messages that look and feel personalized. For evidence of that, look no further than Spotify, the popular music and content streaming service. Consumers love Spotify’s personalized playlists and new artist recommendations powered by machine learning (ML). Personalization in insurance is critical to winning younger consumers. They want to see evidence that they are more than just a policy number. It’s your job to find the right ways to engage with them and demonstrate that you’re thinking of them and constantly trying to bring more value to the relationship. Policyholders experience more value from their insurers through proactive communication that helps them solve problems, especially ones they didn’t know they had. For example, a simple text message reminding an insured that their policy is up for renewal can help you retain that customer. Insurers can open a direct line of communication with policyholders by sending links to chat with CSRs and offer helpful information about contacting the insurer, filing a claim, printing ID cards, and tips for risk mitigation. Technology like ML and AI can do a lot of the heavy lifting with this by analyzing your customers’ data and making your agents and CSRs more efficient. AI-driven insights can make it easier for carriers to tailor experiences, offering younger customers bespoke policies that match their unique needs. From personalized coverage options to real-time policy adjustments, personalization strengthens customer loyalty and satisfaction.

4. Make it easy and intuitive to do business with you. Regarding Gen Z, it’s important to remember that this generation of consumers are digital natives. They are used to being able to do everything online, from opening a bank account to getting financing for a large purchase. Younger customers are used to “one-click” experiences when shopping on Amazon. Your first priority as a carrier is to make it as simple and fast as possible for younger consumers to interact with you throughout the buying process. That means providing fast, transparent policy quotes for them to compare, payment options that align with how they make purchases online, and the ability to enroll and renew a policy in just a few clicks. Consider adding tools to make payments easier and reduce your customer’s effort level. Flexible options like autopay, the ability to schedule a payment in the future, and allowing customers to pick their payment date can increase customer satisfaction. Convenient payment solutions that align with preferred customer payment types, like credit cards, EFT, PayPal, Stripe, and other popular systems, are essential to include in your omnichannel system. Avoid making customers re-key information into forms or making them rehash a service question to an agent. Nothing will frustrate them more than an inefficient digital experience. That’s when a carrier is at the greatest risk of churn. 

5. Never stop being innovative. If there’s one thing about the “Big Tech” companies that we can learn from, it’s that they are constantly re-engineering and tinkering with their user experience to improve it. Not every upgrade is a winner, but overall, they make these changes with the customer in mind. It’s no coincidence that Amazon, Apple, Meta, and Microsoft constantly land on annual lists of the “100 most innovative companies.” Big Tech companies must also change and update their user experiences as consumer preferences change. The insurance industry must rise to meet this challenge, too. 

Like Big Tech, carriers can leverage their customer and operational data to achieve all five of these. Carriers are sitting on a gold mine of data that can provide insights into how customers interact with omnichannel systems over time. The most common barrier is accessing this data in real-time. A proper omnichannel customer engagement strategy removes these barriers and ensures that data is interconnected. When your omnichannel strategy is unified, you will have the power to access customer insights and cross-sell products that younger customers really want and need. Big Tech has already figured out that data is the lifeblood of their company. Carriers must take cues from them and understand what works well and what doesn’t in their system.

Sponsored by: ITL Partner: insured.io

In roughly 2000, I sat next to a retired naval officer at a corporate dinner. When I asked him about his career, he ran through a number of positions, concluding, "I retired as commander of the Pacific fleet."

Oh. So he was a four-star admiral responsible for the U.S. Navy's presence on about a third of the world's surface? 

I asked around about him over the next couple of days of the conference and learned that his claim to fame in the Navy was that he had innovated within an environment that makes change hard and slow. When he was the commander of a carrier group, he saw the potential in all the advances in personal computers that had been happening in the '80s and '90s, but the processes for testing, procuring and incorporating them into the sailing of ships and the use of weapons were going to take years--so he bought all his officers a laptop and said, "Go for it." 

His bold move worked and jumpstarted a wave of innovation. A recent article about the lessons the U.S. military is taking from the war in Ukraine suggests that something similar is now afoot even more broadly at the Pentagon -- and that insurers could take to heart as they strive to innovate. 

As a student of military history, I could go on at great length about all the times the generals have been caught planning for the last war, not the next one. I won't. But I'll offer one example to illustrate: the poor French. 

They were routed in the Franco-Prussian War at the beginning of the 1870s and concluded that they should never have retreated, even after a lost battle. In the next war, they would always attack. But machines guns and barbed wire, supplemented by advancement in trench warfare, made attacks suicidal by the time World War I started. The French learned again and built the Maginot Line, a system of forts that would serve as anchors for trench warfare -- but tanks and powerful aircraft made trenches far less effective by the start of World War II, and Germany overran France within weeks.

But every once in a while the military gets a glimpse of the future that makes clear that fighting the last war won't cut it, and the war in Ukraine seems to be doing that for the U.S. armed forces. While the U.S. has continued to invest in the aircraft carriers that let it project power globally and in the tanks, artillery and aircraft that let it defeat Iraq and eventually quell ISIS, the war in Ukraine is a different animal entirely. It depends heavily on inexpensive drones, on satellite surveillance and on electronic measures and countermeasures. 

Multimillion-dollar tanks aren't so formidable when a $1,000 drone can appear out of nowhere and drop a bomb on top of one. Nor do massive ships have much defense against swarms of cheap, low-flying drones that can be dispatched from hundreds of miles away, as Russia has learned with its Black Sea fleet. "Secret" artillery placements and "secret" troop movements aren't so secret when the whole battlefield can be monitored by drones and satellites. 

So I was happy to see a recent article by Washington Post columnist David Ignatius, "The Pentagon Is Learning How to Change at the Speed of War." 

He writes that, despite some agitation for faster innovation, "an addiction is hard to quit — especially one that benefits so many congressional districts around the country. So the military sailed on, spending ever more money on vulnerable platforms that would probably survive only for minutes in a war with China."

But the lessons from Ukraine have been too blatant to ignore, so the innovators at the Pentagon are making headway on cheap drones that can act autonomously, in the face of electronic jamming by an enemy, Ignatius writes. 

The hero of his story, Kathleen Hicks, deputy secretary of defense, said in a speech in January that the “Replicator Initiative” had achieved in five months what ordinarily would take two to three years at the Pentagon. She told Ignatius that the key was "to leap over... the 'valley of death' — the long gap between development of prototype weapons and procurement and deployment at scale. 'Bureaucracies need to be shown that new ways of doing things are possible. That’s what we’re doing,' she messaged me."

The "valley of death" is actually an old, much-used term in innovation literature, but I think what Hicks and others are doing at the Pentagon can serve as inspiration for innovators in insurance, so I encourage you to read the whole article. 

She has the advantage that the war in Ukraine has shown dramatically that same-old, same-old won't work and that the stakes are so high. But she's also operating within an environment that is even more hidebound than insurance. 

There are plenty of areas in insurance that we all know could operate much better. We can keep focusing on incremental improvement, investing in those aircraft carriers and tanks, or we can take out a clean sheet of paper and imagine what the next "war" will look like.

The clean sheet approach is disruptive, but I think that quite a number of technologies are coming into focus -- AI, sensors, drones, cameras and more -- and that they could not only allow for breakthroughs in efficiency and customer experience but could enable a Predict & Prevent business model that moves beyond the industry's traditional repair-and-replace approach. We just have to put forth the effort and force ourselves to think out a few years, not just a few quarters. 

When I lived in Belgium in the 1980s, I visited any number of battlefields where the French would have won the last one but didn't win the war they were actually fighting. I vote for planning for the next war, not the last one.

Cheers,

Paul

In the evolving insurance landscape, the intersection of technology and innovation continues to reshape traditional practices, particularly within the excess and surplus (E&S) insurance market. This sector has historically provided coverage for unique, high-risk or hard-to-place risks outside the scope of standard risk appetites. As emerging risks and complex underwriting challenges persist in a connected world, the E&S market is experiencing dynamic growth driven by technological advancements and shifting consumer demands.

Admitted vs. Non-Admitted Insurance

Insurance operates within two primary markets: admitted and non-admitted. Admitted insurance, backed by state regulations, ensures that if an insurer becomes insolvent, the state will cover necessary claims. Non-admitted insurance, or E&S insurance, operates under less stringent state regulations, allowing these carriers to assume greater risks. While both types of insurance cater to different consumer needs, the E&S market specifically addresses risks that are either unavailable or unaffordable in the admitted market.

E&S insurers offer coverage for high-risk scenarios such as hazardous materials removal, amusement parks and specialty business lines. This market’s flexibility in customizing coverage for new and emerging risks is one of its key strengths, providing solutions for non-standard, distressed, unique and capacity risks that standard policies do not cover.

See also: Where Insurtech Went Wrong

Market Scale and Growth

The E&S market has seen remarkable growth, with direct statutory premiums written reaching approximately $99 billion in 2022, nearly 9% of the total property/casualty (P/C) industry premium. Historically accounting for about 5% of total P/C premiums, the E&S market has expanded significantly since 2018. From 2018 to 2022, the market grew from under $30 billion to almost $100 billion in direct written premiums, marking five consecutive years of double-digit growth.

This growth is particularly evident in lines characterized by lower claim frequency and higher claim severity, such as liability, fire, earthquake, flood and ocean marine insurance. Conversely, lines with significant captive and risk retention group presence, like medical professional and workers' compensation insurance, have not experienced such substantial growth.

Value Chain and Risk Placement

Surplus lines' placement typically involves multiple intermediaries. Retail producers, unable to find an admitted insurer, refer placements to wholesale brokers who facilitate the placement with surplus lines insurers. Wholesale brokers placed 93% to 94% of E&S premiums over the past five years.

Wholesale distributors use three primary methods to place insurance risks: wholesale brokerage, wholesale brokerage with binding authority and program management by MGAs or MGUs. These intermediaries ensure compliance with surplus lines regulations, conduct diligent searches for admitted market coverage, report transactions to regulators and remit premium taxes to state authorities.

Driving Factors of E&S Market Growth

The E&S market thrives on its adaptability to economic cycles, market shifts and industry changes. When the standard market contracts or becomes overly conservative, the E&S market expands to fill the void. Key drivers of this growth include increasing catastrophe losses and climate change risks, rising jury verdicts and social inflation, the proliferation of cyber threats and the emergence of novel health risks.

For instance, the property market remains in a hard market phase, characterized by limited capacity and higher reinsurance costs. This phase has driven premium growth across all segments, despite rising loss costs due to inflation. In 2023, the U.S. experienced 28 weather and climate disaster events, each causing over $1 billion in losses, underscoring the increasing need for specialized E&S coverage.

See also: Is the Insurtech Era Over?

Regulatory Aspects and Historical Context

The origins of E&S insurance date back to 1890 when New York enacted the first surplus lines law. Over time, other states followed suit, recognizing the need for supplemental specialty coverage beyond what admitted carriers offered. The NAIC continues to oversee E&S insurance through its Non-Admitted Insurance Model Act, ensuring that surplus lines insurers maintain higher reserves and meet specific capitalization thresholds.

Despite being sold by insurers without a regular state license, surplus lines insurance is regulated and taxed by states. Brokers must complete a diligent search of the admitted markets before placing a policy in the surplus lines market. Surplus lines insurers typically have higher financial strength ratings compared with the overall P/C industry.

Digitization of E&S Insurance

The insurance industry has rapidly digitalized over the past two decades, primarily focusing on personal lines and small business commercial lines. However, the E&S sector has only recently begun to embrace digital transformation. Traditionally, securing an E&S policy involved cumbersome processes with lengthy wait times.

Exponential growth in the E&S market highlights a critical need for new industry products and technology. As new industries, technologies and business models emerge, demand surges for innovative insurance solutions. The E&S market pioneers crafting tailored products for evolving risks. Its track record shows an environment ripe for innovative risk strategies.

That requires distribution technology. One example is Annex, a company building an API methodology enabling infrastructure for risk assessment and underwriting without coding, specifically for E&S capacity partners. Annex offers a distinctive underwriting layer serving capacity providers while letting retail brokers write more risk.

Insurtech is democratizing the E&S market by making it more accessible to brokers and customers. Digital platforms enable brokers to quote and bind coverage in minutes, rather than days or weeks.

But incumbents are also investing heavily in tech. Ryan Specialty Group, among the nation's largest wholesale brokers, has an in-house RT Binding Authority platform called one of the biggest nationwide. It provides expedited, secure carrier access with delegated underwriting through binding agreements. Most business consists of high-volume, low-premium policies with defined underwriting criteria for rapid processing while retaining authority for complex risks.

Kinsale, a domestic excess and surplus lines insurer specializing in hard-to-place specialty risks, leverages its tech platform to gather data, analyze trends, mitigate administrative errors and enhance claims and broker responsiveness.

Challenges and Opportunities 

While insurtech presents opportunities for the E&S market, it also introduces challenges. Data privacy and cybersecurity concerns remain critical as insurtech companies handle sensitive information. Furthermore, regulatory compliance and adapting to evolving state regulations can be complex.

Despite these challenges, the E&S market's growth trajectory and the increasing demand for specialized coverage present significant opportunities for insurtech companies to disrupt and innovate within this sector.

As the insurance landscape continues to evolve, the convergence of insurtech and the E&S market is poised to reshape traditional practices, providing innovative solutions for emerging risks and complex underwriting challenges.

About seven out of 10 customers expect personalization from businesses they transact with. Delivering on this front promises higher customer loyalty, increased revenue, greater trust and ramped-up customer satisfaction. However, when dealing with a data-intensive industry such as insurance, organizing customer data is a major challenge. Insurers have to collect a wealth of structured and unstructured data, organize it and process it to offer personalized policies.

This is where customer relationship management (CRM) platforms can help. While they have been around for a long time, their role in the insurance industry continues to evolve. Today, insurance CRM solutions are the backbone of personalization. They capture customer data, likes, dislikes, preferences and more so insurers can finally realize their personalization goals.

Here’s a look at the role of CRM insurance services in closing the personalization gap.

See also: How to Customize Insurance for Gen Z

Deliver Seamless Omnichannel Experience

An omnichannel presence powered by CRM in insurance is a shortcut to personalizing customer interactions.

How?

Different customers have different preferences when contacting their insurers. For instance, 28% of seniors and 67% of millennials prefer online modes. Even within the realm of online interactions, the mode varies. The older generation would prefer emails and ticketing systems, while the younger ones would demand to be serviced via live chat or even social media.

Establishing an omnichannel presence ensures that your insurance business can cater to your clientele’s communication preferences. Even if the customer were to switch platforms, the experience would remain seamless, continuous and personalized. At the same time, with CRM acting as a hub of all omnichannel communications, all the data gets collected at a centralized location, allowing for a 360-degree view of the customer.

Targeted Personalized Messaging

Insurance CRM integration not only allows businesses to reach out or be accessible over the policyholder’s preferred channels, but it also provides for targeted messaging.

Here, the focus lies on embedding increased value into the business outreach messages by personalizing the message. Insurance CRM solutions capture information related to the customer’s demographics, lifestyle, behavioral data and more. Moreover, they allow businesses to categorize customers into segments for targeted messaging. As a result, it becomes easier to deliver personalization at a granular level that goes beyond addressing them by name.

Insurance businesses can leverage customer insights derived from personalized CRM platforms to send highly relevant and timely messages that resonate deeply with the recipients. Such a strategy drives engagement and satisfaction by making the customer experience highly relevant and contextual.

Driving Personalization With Predictive Analytics Using AI

Delivering personalized customer experiences relies on two factors.

One, understanding the customer’s present needs. Two, anticipating the customer’s future needs.

The former lays the foundation for service and product personalization while the latter stretches it over time. Today, most CRM solutions for insurance come equipped with the capabilities of artificial intelligence (AI), which churns out predictive insights into changing market conditions, customer behavior and preferences. The predictive analytics framework is fueled by the data collected onto the CRM, allowing the AI algorithm to forecast customer requirements and customize solutions dynamically.

Moreover, the combination of the two technologies sets the stage for a continuous improvement and continuous learning setup where AI-driven insights enrich CRM data and vice versa.

See also: How AI Can Humanize Insurance

Enhanced Collaboration to Deliver Consistent Service Quality 

Collaboration is often an understated element in delivering personalized experiences across the customer's journey. However, CRM insurance services highlight collaboration's untapped potential by weaving together the different departments and teams in insurance and laying the groundwork for cross-functional collaboration.

To facilitate this, insurance CRM solutions populate a centralized repository for customer information and interaction history. Such a system brings all the teams onto the same page about their understanding of the client. Additionally, it sets up integrated channels for internal communication, such as through team chats and document sharing, to allow teams to work together. This destroys organizational silos or knowledge gaps, allowing teams to make concerted efforts while addressing customer inquiries and resolving their issues promptly and accurately.

In short, customers can expect a universally consistent and personalized experience regardless of the department they interact with.

Automation-Driven Efficiency to Reduce Turnaround Time

Insurance CRM consulting providers often perform a comprehensive assessment of the business model before recommending the best implementation plan. While evaluating your insurance business for operational efficiency, they might discover routine, repetitive or mundane tasks that can be easily automated using CRM.

Insurance CRM solutions can autonomously handle tasks like policy updates, claims processing and customer onboarding, allowing insurers to focus on more complex and value-enriching tasks. At the same time, they offload human resources, allowing for greater scalability, sustainability and productivity.

Having digital process automation (DPA) tools in CRM solutions for insurance expands the applicability of the system, allowing insurers to deliver a rich, branded and automated experience.

Closing Thoughts

Insurance CRM solutions play a vital role in delivering service and product personalization across various facets of the customer journey. Whether it is marketing and outreach, policy underwriting, claims settlement or customer support, every segment of the customer lifecycle will benefit immensely through insurance CRM integration.

Insurers must explore the possibility of using advanced CRM solutions for insurance to make communication omnichannel, personalize messages, predict customer requirements, collaborate internally and harness the power of automation. 

Such an approach will not only help them meet their current customer expectations but exceed them not just now but also in the future. Such tangible benefits will pave the way for a profitable and sustainable insurance business in a highly competitive landscape.

Carriers are admitting that this has been the hardest market some have ever worked through, and there’s been a lot of volatility over the last three to four years. Between drivers’ behaviors shifting in a post-COVID world, to higher spikes in frequency, elevated loss cost severity and a sustained increase of inflation, there’s extreme pressure on the sector’s technical sustainability even with a net combined ratio improvement to 105% in the third quarter of 2023 from 112.1% a year earlier.

Telematics has grown significantly over the past three years, and there is broad consensus among U.S. insurance carriers that the use of telematics is a necessary capability for auto insurers to succeed. However, telematics hasn't made a dent in mitigating these sector issues because it has not yet been used in the right ways. 

See also: Have We Turned the Corner on Distracted Driving?

There are at least four major issues to solve to unlock the full potential of telematics:

1. Agents aren’t UBI promoters. Their income is a commission on premium: Would you be excited as an agent to sell a product where the only communicated benefit is the potential to reduce insurance premium - and also agent income - by 30% or even more? At the same time, there are many friction points around “selling” a telematics program to new policyholders.
2. Accurate match between risks and rates only happens at policy renewal after a monitoring period.
3. Data is mostly used to evaluate risks instead of also helping to reduce them.
4. Telematics has been used only for new policyholders, versus also offered to a carrier’s existing book of business (limiting by design the number of risks that can be addressed with this innovation). 

In relation to the first point, mastering the usage of telematics data allows the opportunity to unlock a significant amount of value. Carriers should optimize the sharing of this value with both customers and their agents. 

Moreover, carriers need to do a better job at articulating the benefits of telematics to their agents. Insurers should design and execute a structured approach for sharing their vision with their agents about the adoption of telematics and benefits to the agent’s business. Those include the ability to satisfy and retain more policyholders, the ability to offer competitive rates and close more deals for the agency portfolio and the possibility of up-selling many policyholders receiving a discount. 

Insurers should also design processes where agents have visibility into the evolution of the usage of telematics and its related services by their clients. This will allow agents to enhance their relationship with their clients and more effectively do their job. 

Friction points associated with enrolling clients in a telematics program can be addressed through agent training, sales support and straightforward processes for program activation. 

Regarding the second point, the industry has progressively understood the predictive value of telematics. It can have a positive impact on loss ratios, retention and customer lifetime value.

Monitoring the behavior of drivers with a promise of potentially greater savings at renewal, based on how the person drives, is an approach that goes all the way back to the early telematic days that leveraged OBDII dongles in cars. All these years have taught us that telematics represents a significant advancement in the evolution of pricing sophistication. 

Telematics enables auto insurance policyholders to receive the best rates based on their driving patterns and vehicle operations (pricing equity). Implementing more precise pricing at each renewal stage across each risk pool defined by traditional variables is enabled by telematics. This strategy entails charging lower premiums for the safest risks and higher premiums for the riskiest ones in each pool. 

The outcome is enhanced customer retention among the best risks and reduction in premium leakage from the riskier pool (if they stay with a carrier). This economic value is necessary to finance both the premium reduction for safe drivers and the telematics program costs.

However, this approach requires monitoring the driver for a coverage period before achieving any benefit from this pricing sophistication. Instead, if the driving score is already available at the point of sale, the insurer is able to better match risks and rates at the time of quote and can attract better risks in each risk pool. 

The evolution of technology facilitates the ability to meet customers where they already are. Consumers already have many apps on their mobile phones that share, with consent, their location data and driving behaviors in exchange for valuable app features and experiences, like crash detection or fuel efficiency. Insurers now have the ability to tap into these consumers and their existing driving behavior history before they even show interest in participating in a telematics program. 

For instance, Arity IQSM network allows insurers to call on existing telematics driving history on tens of millions of drivers to more accurately price customers at time of quote. Much like the way insurers currently request credit information, insurers can obtain near-real-time insights into a customer’s driving behavior at new business. Participation in data sharing for insurance purposes is contingent on consumer consent.

By integrating actual driving data history into the quoting process, insurers can significantly enhance pricing accuracy. This translates into competitive pricing for many drivers and more precise evaluation of higher-risk drivers in each segment; increases customer retention, especially for top-tier drivers; and ultimately improves overall profitability by ensuring that policyholders pay the right premium based on their actual driving risk.

Roads aren’t getting safer - data insights from Arity

Related to the third issue, U.S. roads aren’t getting any safer. Drivers are more distracted, more reckless and more aggressive. More than 40,000 people die on U.S. roads each year, and a lot of the deaths can be attributed to an increase in risky driving behaviors.

We all know that smartphones are contributing to a rise in traffic deaths – it’s the biggest shift in drivers’ behavior over the last few decades. In fact, distracted driving continues to increase year over year. From 2019 through the end of 2023, Arity observed a more than 32% increase in the amount of distracted driving per mile, and recent data shows that it is only continuing to increase. 

Insurance programs that constantly monitor drivers have all the necessary information for improving risks. Instead of using data only to evaluate the risk level of policyholders, insurers can use the driving insights to also promote less risky driving behaviors.

Insurers need to add structured behavioral change mechanisms to their telematics programs to significantly influence behaviors and make roads safer. A 2022 FHWA study empirically demonstrated how frequent and tangible rewards are the most effective elements to nudge drivers in reducing their distraction behind the wheel. 

Finally, in relation to the fourth point, carriers need to move beyond the limits imposed back in the days by OBDII dongles in cars, only making telematics benefits available to new business customers and at renewal. This approach persists today with smartphone-based programs. The societal need to mitigate distraction by introducing structured behavioral change programs would realize its full potential if the usage of a telematics SDK were extended to all policyholders in the portfolio, instead of only making it available to new customers. As Matteo articulated in a recent article, this approach is likely to bring as much as a five-percentage-point reduction of the combined ratio on any auto insurance portfolio.

More broadly, telematics can be strategically leveraged across all insurance core processes – from marketing, to underwriting and point-of-sale pricing, to promoting engagement and loyalty with newly onboarded policyholders and even to supporting customers through crash and claims. 

Arity's multi-year experience has shown that to truly take advantage of the value can have across the entire organization, three things have to be true about telematics data:

• It has to be available on everyone
  • If a carrier doesn’t have telematics data at scale, they’re leaving valuable opportunities on the table. With the largest telematics dataset tied to actual insurance claims, Arity is working toward connecting to every driver in the U.S. and currently has 3X more driving data than the combined total number of users who are opted-in to a U.S. based telematics insurance program today. 
• It has to be integrated across the enterprise 
  • This can be measured in two ways. One, penetration – how many drivers an insurer has telematics data on. And two, usage – whether an insurer is using telematics at each stage of the customer journey. Both of these are important key performance indicators (KPIs_ that all insurers should focus on to improve profitability with telematics. 
• It needs continuous innovation 

Telematics isn’t a one-and-done initiative. Arity has been in the business of collecting and understanding driving behaviors and risks (1.5 trillion miles of driving data and counting) since 2016 – we’ve seen it change. What used to be data collected through plug-in devices has transformed into a lot more data collected through mobile apps and connected cars. And innovation isn’t going to stop there.

Telematics is also about putting the data in context to understand risks more deeply, such as having insight into the types of roadways traveled, the posted speed limit of road segments and the interaction between driving events such as distracted driving and hard braking. Arity’s data shows that if a driver is talking on their phone while driving and immediately follows that with a hard braking event, the potential insurance cost of such an incident is typically 60% higher. That’s powerful insight. And the ability to deliver such insights at scale is critical. Solutions like Arity IQ are enabling insurers to continue to trailblaze telematics. 

Better pricing sophistication to match rate with risks and behavioral change approaches to reduce risk level (especially distraction) are extraordinary opportunities for the future of auto insurance. The insurer of the future, by mastering the usage of telematics data across the insurance value chain, will be able to write profitable business while offering the lowest possible premiums to each policyholder. This will allow many policyholders to pay a lower premium, which will directly improve the availability and affordability of insurance coverage.