Tag Archives: auto industry

Start-Ups Set Sights on Small Businesses

When start-ups jumped into insurance, many focused on the personal auto industry. Not surprising, considering it is arguably the least complex line of insurance and is often the first to be disrupted (going back to Progressive in the ‘90s). Now that InsurTech investment is at an all-time high, more start-ups are entering the market and have become increasingly confident in their ability to tackle complex lines of business. If recent start-ups like CoverWallet and Next Insurance are any indication, small commercial business is the next line to face aggressive disruption. If carriers want to stay competitive and grab profitable market share, they will have to adapt to today’s standards for the customer experience.

Small Commercial an Obvious Move for Startups

Targeting the small commercial business market makes sense, given a recent McKinsey study that calls the line “one of the few bright spots in P/C insurance.” The study points out that, since the 2008 recession, the number of small businesses has grown, and 40% of sole proprietorships don’t have insurance.

Unfortunately for the traditional carrier, the majority of small businesses are also open to purchasing policies online. But remember that saying you’re open to purchasing online and actually purchasing online are two very different things – especially if we use the recent past as an indicator.

See Also: So Your Start-Up Will Sell Insurance

Google Compare terminated operations after sluggish growth across the U.S., with many of their leads failing to purchase. This is not atypical for this insurance shopping method. Several years ago, Overstock also tried selling insurance online outside of personal auto – including commercial business – and that closed down quickly.

That two business giants failed doesn’t mean online purchasing won’t eventually catch on. Start-up culture is largely a test-and-learn environment.

But these initial growing pains do indicate that traditional insurance still has a chance to stay alive amid disruption if they provide an efficient, engaging consumer experience.

Consumers Want Both Confidence and Efficiency

It’s not that consumers don’t want to work with carriers and agents, it’s that the customer efficiency of 30 years ago is no longer an appropriate benchmark. Of course small business owners are open to purchasing online, because traditional insurance has not yet given them the experience they desire. According to a PIA study from last year, small commercial businesses would much prefer the personal attention from agents (and by extension the carriers they work with) as long as they do a better job of adapting to technologies and the Internet. From the customer’s perspective, an experience with an insurance carrier isn’t compared only with other carriers – but to other companies they do business with regardless of industry. Whether it’s Amazon, Apple, Google, etc., your customer experience will be rated against the companies leading in the modern, digital world.

This explains many of the start-ups entering the space now and why they have the potential to gain the upper hand.

To achieve better communication, carriers need to think more broadly about their usage of data and predictive analytics. You have to gain an incredibly detailed view of your customers, their behaviors and their responses to your communication and product offerings. We always recommend an incremental rollout of analytics to get your feet wet before diving in. At the same time, it’s critically important to be ready to build off that early momentum and develop an overall predictive analytics strategy that seamlessly merges with business goals. Recognize that this evolution to becoming more data-driven is as much about organizational change as it is about technology.

When carriers understand how predictive analytics benefits them, they can confidently make data-driven decisions that improve every aspect of their business – including the customer experience. For example, using underwriting analytics to achieve real-time insights into pricing policies doesn’t just help a carrier’s bottom line – it also greatly streamlines and expedites the communication chain between consumers, agents and carriers.

At the recent Dig In insurance conference, a panel of InsurTech CEOs discussed how start-ups dissect insurance data – in ways that differ from traditional insurers and agents. A member of the audience asked, “Why are start-ups so combative in their approach?” It was an intriguing question that highlights the digital divide in terms of how the industry thinks about evolving versus how technology and Internet entrepreneurs think about playing in industries ripe for disruption. What feels “combative” to the incumbent is often seen as “customer-centric” to the new entrant.

It’s important that carriers understand that there is a way to co-exist, but counting on new entrants to accept the status quo is a bad bet. Think of start-ups as an advocate for a better customer experience, and see those that fit your business as innovation partners. Adopt the mantra that the customer always wins, and you’ll remain relevant in the customer value chain.


Microinsurance Model in Non-Standard Auto?

In the spring session of the Texas Legislature, I listened to testimony about the impending House Bill 335, which would have prohibited the sale of Named Driver auto policies in Texas.

So what does this have to do with microinsurance?

A recent development, microinsurance has primarily been considered to offer solutions in life insurance, credit insurance and agricultural insurance and is being marketed primarily outside the U.S. to low-income individuals and families. See the recent article by the CPCU Society in its Insights publication as an excellent primer on the relatively recent development and use of microinsurance in these foreign markets.

The question is: Can we learn from foreign microinsurance programs to help solve an insurance dilemma closer to home–how to make automobile insurance accessible and affordable to foreign-born, non-licensed residents in the U.S.

Evaluating the Need

During the testimony on proposed Texas HB 335, insurers and other interested parties repeatedly argued that the Named Driver product was needed to provide an option for “low-income households” in Texas–the very argument made on behalf of microinsurance in foreign countries (where, of course, the definition of poverty may be quite different than in the U.S.). Only we don’t have to go to a foreign country to find potential customers.

An estimated 3% of the current U.S. population is individuals who have immigrated, not only from Mexico but from Central America, South America, Europe and Asia. Isn’t this population ideal for microinsurance?

Foreign-born potential customers have behavior patterns and attitudes toward personal risk management and poverty that have followed them to the U.S.

This group needs to assimilate and follow U.S. laws of financial responsibility. But as far as any evidence of prior insurance, any credit history, the availability of driver history and the ability to pay, this market differs from the typical U.S. consumer.

Striking Parallels

I find striking parallels between what is being attempted in Texas with the non-standard market and the goals and concepts espoused in microinsurance.

Based on my experience in the non- standard market, my assessment is that the industry has attempted to capitalize on the burgeoning market, but the question is –has it done so in a manner that is consistent with the principles of effective microinsurance?

I would submit that we have not yet matured in our approach to providing auto insurance to the low- income, non-licensed immigrant population. Perhaps now is the time to take a step back and focus on both goals of effective microinsurance: 1) to help the poor and 2) to make a profit.

Explosive growth in the non-standard market indicates that insurers have seized the opportunity. But couple this positive impact with the confusion and outrage over issues like the Named Driver policy debate, and the 2014 legislation that forced insurers to more clearly inform a consumer that he is purchasing a policy that has strict limitations of coverage in Texas. We may have a long way to go.

As an industry full of collaboration, expertise and innovation, why should we draw the attention of the state legislature? Surely, we can come up with better solutions.

We have an obligation to look “beyond the profit” and consider the societal implications of the programs we implement.

It may be helpful to illustrate some examples of exactly how the non-standard auto market meets, or falls short of achieving, the goals of microinsurance. This might lead us to actions that could improve access, affordability and quality of auto insurance to the foreign-born, low-income, non-licensed resident in the U.S. This might also shed some light on the challenges ahead.


Accepting the challenge of Chmielewski and others, let’s view the non-standard auto market through the lens of microinsurance. Because the concept of microinsurance only arose in the 1990s, it may be helpful to restate the definition according to the Microinsurance Center:

“Microinsurance is risk-pooling products that are designed to be appropriate for the low-income market in relation to cost, terms, coverage, and delivery mechanisms.”

We can employ the framework suggested by Chmielewski that effective microinsurance should have the following characteristics: It should be Simple, Understood, Accessible, Valuable and Efficient, or SUAVE.

Is the Non-Standard Auto Product Simple?

Most of us grew up on the standard ISO Personal Auto Policy. Even so, we are continually challenged to correctly analyze and interpret coverage terms, insuring agreements, exclusions and conditions. Even today, articles are being published educating us about whether our personal auto policies cover rental cars! Insurance contracts are complex.

If we are challenged with our years of experience, how then might we expect a non-English speaker to understand non-standard policy language in insuring agreements, exclusions and endorsements? Imagine how the foreign-born consumer must struggle to understand the coverage restrictions and limitations that vary from one non-standard policy to another.

An example of this complexity in coverage terms can be seen in some non-standard auto coverage offered under Part D Damage to Your Covered Auto. Agents and purchasers of non-standard Physical Damage Coverage may approach this coverage according to traditional assumptions. That is, that Part D is first-party coverage being purchased for the insured’s financial protection against loss to the insured’s property itself as a result of a collision or a comprehensive-type loss, like theft or vandalism.

However, although a premium is paid, non-standard policies may not provide Physical Damage coverage under certain circumstances—such as when the person driving the vehicle is not named on the policy. The vehicle may not be covered for theft if the person who last had custody of the vehicle is not a listed driver. Permission to drive the vehicle is not a relevant factor.

This Part D coverage is often restricted by endorsement, and the interpretation of the endorsement itself is often the subject of discussion and disagreement by those selling the endorsement.

And yet we expect the non-English speaker with most likely limited education to fully understand that if he allows his resident brother who is not listed on the policy to drive his vehicle, and the car is totaled, that he may have NO collision coverage? In addition, the lienholder is often surprised that there may be no coverage for the lienholder either in this scenario.

While insurers understandably insist on narrowing down the known risk and declare that a premium reduction justifies this treatment of Physical Damage coverage, others may offer that this is form freedom gone awry.

No, non-standard auto coverage is not simple. It fails the test of simplicity. Chmielewski may argue that trying to sell this traditional product to this market is not effective.

Is the Non-Standard Auto Product Understood?

When I meet people who, like me, have spent most of their careers in the standard market and I mention Unlicensed Driver Auto Policies, eyes glaze over as if these policies are a figment of my imagination. (As a point of clarification, these are not policies sold to individuals who have had their licenses revoked or suspended or have a poor driver history. Rather, a foreign-born individual is considered an unlicensed driver because he cannot obtain a driver’s license in some states.)

Not only is the non-standard product not simple, the product is also difficult for judges, law enforcement officers, lawyers, claimants and, yes, even underwriters and other insurance professionals to understand. Exactly how does an individual who does not qualify for a driver’s license qualify for a valid auto insurance policy?

Given the complexity of the product, the uninformed consumer and market reaction, has the industry provided information or training regarding this non-standard product to improve understanding? Does the industry provide adequate training to the agents who are on the front-line selling this product? My experience says: no.

Consumer complaints in Texas forced legislation in 2014 to require insurers selling the Named Driver policy to issue both a written and oral contemporaneous warning to policy applicants at time of sale that the policy has restrictions on coverage for drivers. This law was a significant blow to Texas non-standard insurers. Some have appealed for more lenient requirements, and some left the market.

Why were these drastic measures needed? Because the consumer did not understand the coverage.

Is the Non-Standard Auto Product Accessible?

The change in underwriting eligibility for some non-standard policies has spawned the “No License? No Problem!” business model we see advertised on agency storefronts along Texas highways in neighborhoods where immigrants tend to cluster.

The existence of this type of marketing does appear to make the product accessible. The close-knit characteristic of foreign immigrants and sense of family unit responsibility allows for very effective word-of-mouth marketing. Local agents are accessible for initial personal assistance with applications, payments or policy maintenance. Neighborhood shopping creates a captive customer pool, and there are literally thousands of agents in Texas alone.

The product is also accessible because it is sold with 30-, 60- or 90-day policy terms in addition to a six-month option. One insurer testified at the Texas legislative hearing that, at some point in the year, a significant number of customers experience gaps in coverage due to inability to pay a premium. Offering shorter terms appeals to the buyer.

However, what is often overlooked is that this convenience and accessibility come at a cost, in Texas anyway. While the advertisements for “Liability Insurance for $29.00 a Month!” sound appealing, when a policy lapses, and must be reinstated, Texas allows agents to charge fees that are not regulated. While insurers are quick to say that they do not charge the customer a reinstatement fee, they turn a blind eye to this practice by the agents selling the policies. Selling these shorter-term policies raises ethical issues because agents have the option of collecting new-policy fees more often.

Although the customized payment terms seem to be consistent with effective microinsurance and appear to meet the customer’s need for low premiums, the reality is that a $29 monthly premium does not include policy fees and other surcharges such as substantial one for not having a valid U.S. driver’s license.

Is it time to re-evaluate the distribution channel? Can larger economies of scale reduce the need for policy fees and make total payments more affordable, to the point that applicants might list all drivers?

Does the Non-Standard Auto Product Offer Value?

We can agree that auto insurance should offer peace of mind and protection from financial loss. Even with all its restrictions, a basic level of coverage offered by non-standard forms may benefit the individuals named on the policy.

Maybe we could also agree that, if a foreign-born driver living in the U.S. cannot obtain a driver’s license because state law does not allow it, it may still be advantageous for that driver to have auto insurance. A lienholder would require insurance to protect its interest in the vehicle.

The question of whether the non-standard product is valuable to policyholders might lie in the insurer’s response to claims. Legislators questioned Texas insurers about the seemingly high number of claims denied. However, the data was difficult to interpret, and, because the details are proprietary information, no definitive conclusions can be drawn.

But Chmielewski asks only if the product meets the needs of, or has value to, the low-income customer. Of equal importance is whether the product meets the needs of the public at large in the U.S.. How well the non-standard auto product achieves this goal is up for debate.

Enter the uninsured motorist dilemma…

Unlike the standard form, under the non-standard Named Driver policy no coverage may be afforded for anyone living in the household who may be driving the insured vehicle who is not listed on the policy, and members of an extended family might be living in the same household.

This is not only a problem for the driver himself, who may have no coverage if he is not the Named Driver, but a problem for an injured claimant struck by one of these members of the extended family. Just ask the family of Walter Sullivan, who was struck and fatally injured on a Sunday morning. Even though there was a policy in effect on the vehicle, the insurer denied coverage to the driver. The Sullivan family was left to its own financial resources to fill the void created by the wrongful death.

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So the question of value is two-pronged. Is it enough that the policy has value to the policyholder? Should our model of microinsurance as it pertains to U.S. non-standard auto not also assess if the product has value to the driving public?

A dilemma is presented when current non-standard insurers argue that the sale of their policies is the panacea for the uninsured motorist problem. They state that, without these affordable policies, the uninsured motorist rate will surely increase. I would argue that it depends upon how the rate is derived.

Statistics from, say, Texas Sure, report only insured vehicles. But there is no way to track the “functionally insured” — those drivers who are driving a vehicle that is insured, while the driver is not.

Another issue is the restriction on business use contained in some non-standard policies. Standard personal auto policies allow some business, but some non-standard policies exclude all business use.

This treatment of business use raises the question: Are we overlooking the issue of “Who is the customer?” The customer may be the landscaper, construction worker or tradesman who uses his vehicle to carry his tools and drive from one site to another. Often, only after an accident, does the policyholder learn that he has no coverage because the insurer sees a placard on the driver’s door and denies coverage because of “business use” of the vehicle.

This scenario runs counter to the principles of effective microinsurance; the policies restrict coverage so severely that they may have little value to the customer.

Is the Non-Standard Auto Product Efficient?

Efficiency is an area where significant progress has been made in the auto market in general. And the non-standard market has enjoyed these efficiencies. Where premiums are purportedly lower, administrative costs have to be low.

Automation means applications can be generated and signed in the agent’s office on a signature pad, premiums can be collected and credited to the policy instantly to bind the coverage, vehicle photos can be uploaded to the underwriting file, polices can be sent automatically without effort by the agent, and notices such as renewals are automatically generated. Automation also allows for policy self-service via online or by phone, which is encouraged to keep costs down.

Efficiency occurs when insurers encourage agents to sell the policies and leave the customer service— telephone payments or policy changes–to the insurer’s customer service department. Not tying up the agent maximizes cash flow.

The Challenge

Without getting too deep into the political mire: Progress is likely to be hindered by the lack of an immigration policy and inconsistency from state to state on immigration issues. For example, state legislatures decide whether to grant driver’s licenses to immigrants, and the question often evokes emotional responses.

From a business standpoint, licensing drivers would help capture driving history. Traditional underwriting criteria are not useful when there is no DMV record for an applicant or resources for reasonable evaluation of the risk. Driver’s licenses give insurers access to driver information, which allows for each driver to be rated on his driving history, not his nationality.

Neither from a business opportunity standpoint, nor from a social responsibility standpoint, should we ignore the potential of the foreign-born U.S. resident. Some insurers have grown exponentially in this market under the existing policies, terms and lack of underwriting information. But is the kind of growth the industry desires—after reflecting on some of this issues raised in this article?

Consider that these policyholders may eventually rise above the need for minimum-limit, restricted coverage policies. Most of these individuals are here to stay, grow their families and possibly build their own businesses. If properly serviced, a company could develop a pipeline of ready applicants for more standard products, including renters or homeowners insurance and commercial insurance. These customers of tomorrow promise to be untapped potential worth further investigation.

While he was not referring to domestic use of microinsurance, Chmiewlewski ‘s thought-provoking introduction to the topic begs to be given consideration in the non-standard auto market, especially as it relates to foreign-born unlicensed drivers in the U.S. In “Microinsurance 101,” he lays out the challenge:

“Microinsurance products have proven helpful when the product and delivery are tailored to the specific needs of the policyholder, and when the policyholder is educated to understand the value and limitations of the specific policy.”

With no easy answers, this is perhaps a place to start.

Will Fintech Disrupt Health, Home Firms?

The integration of technology in the insurance company’s value proposition is turning out to be one of the main evolutionary trends in the sector, and digital initiatives have been for a couple of years now one of the priorities of insurance groups. Until today, though, they have brought only limited improvement when it comes to the competitive abilities of the insurer.

The best practices at the international level show that, to obtain concrete benefits, the innovation has to be directed toward clearly determined strategic objectives.

An interesting example is the American company Oscar – a start-up that in less than two years has managed to raise more than $300 million at a valuation of more than $1.5 billion. It has radically innovated the customer experience of individual health insurance policies by directing the innovation effort toward two key factors that are crucial for the profitability of the medical spending reimbursement business: deductibles and “emergency” visits.

Oscar has created an insurance value proposition based on a smartphone app that incorporates a highly advanced search engine – including a search based on symptoms – allowing the insured to identify and compare the medical structures part of the preferred network. In this way, the client receives support in optimizing direct spending before reaching the deductible; this basically postpones when the insurance company starts to pay and thus reduces the amount of spending (medical reimbursements) by the insurer for the remainder of the year.

The company addresses emergency visits by providing chat with a specialist and a call-back system that the insured can choose at will from inside the network. This represents a comfortable alternative and reduces the number of urgent visits.

Health insurance and connected health

In these last months, I have been considering how to replicate the motor telematics experience for the health insurance sector. Insurance companies see the benefits from a telematics black box and how the return on investment in this type of technology can be maximized by the insurer: This is possible by taking into consideration not only the underwriting of the car insurance policy but by also looking at the services provided to the client, at loss control and at customer loyalty. In health insurance, similar benefits are achievable by using mHealth devices and wearables.

The first element is risk selection, seen in car insurance as:

  • the capacity of auto selection and dissuasion of risky behavior,
  • the integration of static variables traditionally used for pricing with a set of “telematics data” gathered within a limited time and used exclusively for supporting the underwriting phase.

The creation of a value proposition that is focused on the use of wearables and that uses “gamification” makes the product attractive to individuals who are younger and healthier – generating a self-selection effect comparable to the motor telematics experiences. Oscar, since the beginning of January, has been offering clients a pedometer connected to a mobile app. Every day, the app shows a personalized objective that, if attained, means $1 earned by the customer. Each month, the customer can receive a maximum of $20 as cash back from the company.

The second source of value generation is services. The use of telematics data represents an incredible opportunity for offering new health services and for offering a better customer experience: for example, the geolocation of medical structures and doctors who are part of the network, linked to a medical reimbursement policy.

Medibank, of Australia, has integrated in its health policy (using a smartphone app) a series of services built on informative contents and advice. The services are medical – as done by the Italian insurance fund Fondo Assistenza Benessere, using an app called Consiglio dal Medico (an Italian start-up partnering also with Uber) – as well as related to wellness. Medibank, using this package of services, produced 10% growth in the company’s top line. This Australian player has created an app for noncustomers that gives access to wellness discounts and attracts customers who can later be offered other insurance, too.

The ability to provide health services with a high perceived value (from the client’s point of view) can also allow the company to increase the efficiency of guidance inside the preferred network – this is a crucial aspect for controlling the loss ratio of a medical reimbursement product. The loss control actually represents the third area of value creation, just as it does for the auto business.

Within the health industry, it will soon be possible to generate significant economical benefits employing telemedicine to optimize spending with medical reimbursements or to link the reimbursement to the actual observance of the client’s medical prescriptions. In the medium to long term, the objective is to have behavioral and contextual data to prevent fraud and early warning systems that can spot altered health conditions and that allow preventive and timely intervention.

South African-based Discovery has successfully tried out this second approach. It reduced the loss ratio of the cluster of insured who suffer from diabetes – mainly reimbursements linked to complications because of lack of self-control. Discovery provides an instrument for measuring the blood sugar level through a connected app and rewards the insured.

Discovery’s Vitality program represents the international best practice regarding the fourth axis of value creation: behavior guidance, by using a loyalty-based system that rewards non-risky behavior. The South African company has integrated – in its very complex reward system – devices for measuring physical activity and has incorporated their usage among the “rewarded” types of behavior. Discovery’s experience in several different countries proves the effectiveness of this approach in terms of:

  • commercial appeal
  • capacity to acquire less risky clients
  • ability to gradually reduce the risk profile of the single client.

Pricing based on individual risk is the last benefit achievable with the integration of wearables and health insurance policies. Constant monitoring of the level of exposure to risk lets the insurer create tariffs based on the health state, lifestyle and context of a person. As already done in the auto telematics business, this will be a goal to be attained after some years of data gathering and systematic analysis of the historical series together with information regarding medical reimbursements.

Home insurance and connected home

Homes are another area in which, at an international level, there has been experimentation with how to integrate an insurance policy with actual sensors. There already exists a replication of the business model used more than 10 years ago in the auto insurance sector — an up-front discount between 10% and 25% of the insurance premium based on installation of a device at the client’s house and by the payment of a fee for services or a lease for the technology. This approach, which has been adopted in the U.S. by State Farm, Liberty Mutual and USAA and in Italy by IntesaSanpaolo Assicura, BNP Paribas Cardif, Groupama e Poste, is based on two of the five levers of value creation: first, loss control – focused on flooding, fire and theft – and second, value-added services. American companies have even reached the point where they offer clients a wide range of services provided by selected partners (such as Nest) and tied to the home “ecosystem,” which can even include medical assistance services.

An interesting and innovative example of the use of such technology for the assessment and risk selection in home insurance is the one adopted by Suncorp with a retail touch to it, and by ACE Group, which focuses more on the insurance needs of high net worth individuals (HNWIs). Both companies have used a partnership with a start-up called Trōv – a smartphone app that allows registering and organizing the information referring to personal objects, including through photos and receipts – to evolve their underwriting approach when it comes to the risk connected to the contents of the house.

Domotics, or home automation, is growing at a high rate even in Italy and represents a material part of the revenues generated by the Internet of Things, according to data provided by the Osservatorio of the Politecnico di Milano. A horizontal domotics solution – with thermostats, smoke and water detectors, sensors present in appliances and other household items, sensors at the entrance and antitheft alarms, sensors spread within the building – would let an insurance company track the quantity and level of exposure to risk. This includes, for example, the periods and ways in which the home is used but also the state of the household and the external conditions to which it is exposed (humidity, mechanical vibrations, etc.).

The insurer could price based on individual risk, adopting pricing logic based on behavior, as already done in the motor sector. This could open up growth opportunities, such as for secondary houses used only for vacation and rarely insured. This scenario, which sees the growth of solutions built on connected objects within the home – if correctly approached by insurers by reviewing their processes to make the most of the potential offered by gathered data – can lead to important benefits in loss control: Some studies have estimated that there is the potential to cut in half the current expenses for claims.

To turn this opportunity into reality, it is essential that the insurer acquire the ability to connect its processes (through adequate interfaces) with the different connected objects. Insurers must create an open digital platform that uses the multiple sensors to be found in the home “ecosystem” – just like those used in the health sector.

The change of paradigm doesn’t only concern fundamental aspects of the technological architecture – like data gathering or standardization of data coming from heterogeneous sources – but affects the strategic choices of the business model. For insurers, it becomes a necessity to define their level of ambition for their role in the ecosystem and for their cooperation with other players to create solutions and services around an integrated set of client’s needs.

It is extremely interesting to see the journey made by American Family Insurance, which – in partnership with Microsoft – has launched a start-up accelerator focused on home automation.

Insurers have to start thinking strategically around how adapt insurance business to IoT, before some new Fintech comers do it.

This article originally appeared in the Insurance Daily n. 749 and n. 750 Editions.

Can We Disrupt Ourselves?

Brian Duperreault, CEO of Hamilton Insurance Group, delivered these remarks to the recent Global Insurance Forum, held by the International Insurance Society (IIS) in New York City.

It’s a real pleasure to be with you at what is arguably one of the most important annual events in our industry.

I was just 18 years old when the International Insurance Society had its first global meeting in Austin, Texas. I entered the industry in my 20s and joined the IIS in my 30s.

Since then, I’ve benefitted professionally and personally from the knowledge I’ve gained and the friends I’ve made at these annual meetings.

Today, I’m going to talk about an issue that represents a distinct threat to our industry. I might even go so far as to call it an existential threat.

But, like all threats, it also represents a great opportunity.

In it could lie the seeds of a legacy of meaningful change for each of us charged with leading our industry.

So I’m going to address the question: Can we disrupt ourselves?

I’m going to start by saying a few words about Twitter.

Bear with me. I do have a point to make that’s relevant to insurance. Twitter has one billion registered users so far… about one human out of every seven on Earth.

Only 6% of Twitter users are over the age of 45. More than 300 million active users—most of them under 45—join Twitter each month.

Twitter started as a platform for sharing personal moments. It’s morphed into an information delivery system that plays a major role in distributing news, marketing products and affecting the outcome of political and social developments.

And this instant, real-time communication comes with the restriction that you can only use 140 characters to get your message across.

Twitter’s simple idea completely disrupted the way we communicate. I used Twitter as an example of disruption last week when I spoke at the Young Professionals Global Forum in London. I called that speech “Risk in 140 Characters.”

Since then, the CEO of Twitter has stepped down amid charges that the platform isn’t evolving as quickly as it should, and there’s been a lot of soul searching about how this disruptive form of social media can keep current in this ever-changing, ever-evolving age of disruption.

In spite of Twitter’s challenges, I believe the metaphor is a good one. It’s time to select, analyze and price risk, faster and more efficiently – the equivalent of risk in 140 characters.

The young professionals I spoke to last week are all digital natives. As Don Tapscott, who studies the digital economy, says: They’ve been bathed in bits since they were born.

They embrace technology and use it to navigate their world, their relationships and their work swiftly and creatively.

These digital natives are mobile, wireless and connected with their peers all over the globe.

Meanwhile, in the other corner, I—and most of my friends here in this room—are digital immigrants. We’ve had to make a deliberate and conscious choice to adapt to digital ways of doing what we used to do on paper, over the telephone, or through other physical or, at best, analog, means.

Even though it was our generation who invented the Internet, many of us have the feeling of being strangers in a strange land. Using search engines and apps to navigate life and work doesn’t come naturally to us.

We digital immigrants tend to shun social media or dabble around the edges, still thinking Facebook, Twitter, SnapChat and Instagram are trendy chat rooms where younger people tell everybody what they’re up to a thousand times a day.

But the truth is that social media, which erupted onto the scene as a means of personal contact, has quickly morphed into a powerful engine of collaboration with profound ramifications for business development.

Digital natives know that. And because they know it, and use that knowledge to great effect, they are leaping ahead of the digital immigrants in our generation.

There’s a term for this: digital lapping. And this lapping of one generation by another is the basis for the disruption that’s blowing apart traditional business models. For digital natives, disruption is the new normal.

You know what I’m talking about. How many music stores saw iTunes coming? How many taxi dispatchers saw Uber coming? How many hotel chains saw Airbnb coming?

How many Blackberry execs even saw the iPhone coming? Well, maybe they saw the iPhone coming, but it’s an understatement to say their reaction was too little, too late.

Pick any industry, and you can see the pattern emerging.

The automotive industry is a telling example. Sergio Marchionne, CEO of Fiat Chrysler, recently said he’s “more determined than ever to pursue industry consolidation lest technology disrupters beat the auto industry at its own game.” Marchionne’s warning came after a meeting at Google and Tesla, and after spending almost an hour in a driverless car.

“The agenda needs to be moved,” he said, “or all these technology disrupters will come in and make our life incredibly uncomfortable.”

Clearly, all industries are facing massive disruptions because of technology. With new models of service delivery, new categories of products and restructured value chains, society and the customer expect far more than traditional businesses can offer.

These expectations represent a potentially bleak scenario for the insurance industry, because in many respects we are way behind the curve as far as technology is concerned.

And we are groping in the dark for an effective solution to attract digital natives to the industry.

Digital natives are the much-discussed, much-researched Millennials.

Born in the eighties and nineties, they’re the offspring of the Baby Boomers. They’re sometimes known as Echo Boomers or the App Generation.

Millennials are the most diverse generation we’ve ever had. In the US, 35% are non-white, and researchers who study generational differences say they are the most tolerant generation yet, believing everyone should be part of the community.

We’ve been studying Millennials for quite a while, so we know a lot about them:

  • They want to be team players.
  • They want their careers to have purpose.
  • They want to build new things that matter.
  • They use social media to collaborate. They crowd-source everything from fundraising to business capital.
  • They fight for worthy causes by alerting each other to things that distress them.
  • They don’t see much difference between work and leisure, and don’t see the point of rigid work schedules and being tied to an office.
  • They see hierarchy as an obsolete impediment to team progress. They need to get things done, and waiting for permission doesn’t strike them as sensible.

Now, does that list describe how the typical insurance company operates? I don’t think so.That’s a red flag that we need to pay attention to. Consider this:

  • Almost half of insurance professionals in the U.S. are over the age of 45.
  • 25% of all the people working in our industry will be eligible to retire in just three years.
  • That means that, in just five years, there will be 400,000 open positions in the U.S. alone.

Five years ago, Accenture warned that it’s hard to attract Millennials to a career in insurance. Accenture noted that “the industry’s apprentice structure—with its long learning curve and slow promotions—in no way suits a Millennial’s expectation of getting rapid feedback, or working in a flat organization that offers dynamic career development.” Since then, more alarm bells have been rung.

Recently, a report found that only 5% of high school and college graduates thought a career in insurance was worth looking at. When asked why, they said they thought the industry was dull and conservative and doesn’t offer much of a chance to make a difference.

For someone whose whole career has been dedicated to an industry that promises to protect, that really hurts. At the very least, we’ve done a terrible job in helping people to understand the value in what we do.

With hundreds of thousands approaching retirement in an industry that’s dismissed as boring and static, and with disruption looming on the horizon, I believe we’re staring into the jaws of a crisis.

Millennials are not only our future workforce, they’re our future customer base. And our industry, quite simply, is not prepared to attract the numbers we need, with the skills we need, to take charge of the disruption we know is coming.

The men and women in this room have presided over some of the great developments in our industry: Catastrophe modeling, deregulation and globalization all happened on our watch.

We’re not strangers to bold moves. Innovation isn’t a foreign concept.

But collectively we don’t seem to know how to crack this nut: How do we attract hyper-connected, entrepreneurial digital natives into the generally old-school world that so desperately needs them?

I know there are pockets of energy devoted to finding a solution to this problem.

MyPath has been established by the Institutes and affiliates as an industry-led effort to raise awareness of insurance as a career, and to provide information about the industry as well as job opportunities. Hamilton USA, the US operations of Hamilton Insurance Group, is one of the industry partners participating in MyPath.

And there’s Tomorrow’s Talent Challenge, an awareness campaign established by Valen, which provides predictive analytic and modeling capabilities to the industry.

Valen is so concerned about the lack of interest the digital generation is showing in insurance that it created Tomorrow’s Talent Challenge “as a rallying cry for the insurance industry to band together to sell exciting, innovative careers in insurance to Millennials.”

These are laudable efforts – driven by the same sense of urgency that I’m outlining here.

But they’re not enough.

We need a focused, coordinated strategy embraced by some of the major players in our industry.

We need a collaborative commitment like the one announced a few months ago.

In January, as many of you know, a consortium of eight companies from our sector announced a far-reaching initiative to provide insurance to the underserved. My company is proud to be one of the partner companies.

We referred to the new entity as the Microinsurance Venture Incubator – or MVI. Quite a mouthful.

This morning, we announced that the venture has a much better name.

After inviting more than 100,000 employees in our partner companies to help us name the MVI, we chose Blue Marble Microinsurance. This is a great name. It really captures the spirit of our venture. It reminds us of how connected we all are – ever more so in this digital age.

Blue Marble Microinsurance takes a holistic view of our world, planning to extend protection to a broader portion of the population by providing insurance in a socially responsible and sustainable way.

It offers people on the wrong side of the digital divide the stability and potential for growth that insurance makes possible.

Blue Marble Microinsurance’s company partners know that the ability to manage and finance risk is critical to the development of society – any society, but most urgently to those struggling to gain a stable toehold in their pursuit of education, jobs and a prosperous future.

Research and development enabled by Blue Marble Microinsurance will bring affordable insurance products to the developing world.

Technology is at the base of this global project, using innovative apps to connect consumers and products on a micro level – but what drives it is our industry’s collaboration, our sense of purpose and our focus on the future.

What we learn from Blue Marble Microinsurance could truly shift the insurance paradigm.

Yes, it has the potential to reduce the cost of risk analysis and product distribution and delivery. And, through reverse innovation, the application of that knowledge in the developed world could be one of the most enduring legacies of this project.

I have to admit to a huge sense of satisfaction at watching this concept unfold. It was three years ago – almost to the day – that I addressed the annual IIS meeting in Rio and outlined a plan for a coordinated industry effort focused on microinsurance.

At the time, I said that this wasn’t the sort of project that could be tackled by one company. Many had tried, but none had succeeded.

I’m delighted that Joan Lamm-Tennant is now leading the development of Blue Marble Microinsurance.

Joan poured her heart and soul into taking an idea outlined in Rio in 2012 and making it a reality three years later.

This initiative is a shining, innovative example of what happens when we work together to find creative risk solutions.

So if we can find a way to offer coverage to literally billions in developing markets around the world, I know we can figure out how to redefine our work environments, our human resources policies and our recruiting programs in such a way that digital natives will be beating down the doors to join us.

Last week, I challenged the leaders of tomorrow to take charge of their destiny and find ways to attract Millennials into the insurance industry.

Today, I’m inviting you, as today’s leaders, to work together to develop a strategy for our disruption, leveraging the talent and skills of the digital generation.

As I said last week, insurance should be catnip to a Millennial looking for a purpose-driven career.

Let’s invite these digital natives in, make them feel welcome and give them the benefit of our considerable experience and expertise.

Then, let’s step aside and let them lead the way.

We have one of those rare opportunities to leave a lasting, collective legacy – one that ensures the insurance industry stays relevant and innovative and becomes the No. 1 career choice for any young person who wants to make a difference, be part of a team, keep the world working – for generations and generations to come.

Blue Marble Microinsurance is proof that, when we collaborate, exciting things happen. Let’s take a disruptive step to the future – together.