Tag Archives: Breading

Insurtech: Where’s the Beef?

In 1984, Wendy’s introduced an ad campaign with the tag line “Where’s the beef?” The campaign was so successful that the phrase “Where’s the beef” made it into the vernacular as a way to question whether there was any substance or any tangible result from an activity. The insurtech movement is enjoying enormous success in terms of new startups, venture capital, partnerships, and pilot projects. But it is fair at this stage to ask, Where’s the beef?

Let me be clear that this is not a putdown or dismissal of insurtech. In fact, I am somewhat of a cheerleader for the movement. There is a great deal of innovation generated by insurtech, in the form of new business models, new products, new distribution platforms, new ways to revolutionize the customer experience and many new options for leveraging emerging technologies. Insurers, venture capitalists and others are enthusiastic about the potential of insurtech to transform the insurance industry. And 2017 was a banner year for insurtech, with the number of startups around the world roughly doubling to more than 1,300 (by SMA’s count), with a raft of insurers setting up venture arms and allocating billions to invest and with new partnerships and projects being announced daily.

However, if insurtech is to truly transform insurance, it must ultimately affect the key financial metrics of the industry. Premium volumes and policy counts should rise. Expense and loss ratios should decrease. Life/annuity companies should finally gain traction in the middle market. Overall industry profitability should increase.

There are individual projects at specific insurers where insurtech partnerships have begun to move the needle. There are also some individual insurtech companies that have been quite successful, securing large investments, multiple insurance customers and positive results. But in the context of the roughly $5 trillion global insurance industry, insurtech has not perceptibly changed any metrics.

See also: 10 Insurtech Trends at the Crossroads  

So, what is likely to happen in 2018 (and beyond)? My prediction is that we will start to see “the beef.” This is not exactly a prediction that is going out on a limb. Investors and insurers have a sense that there is a lot of “beef” coming in the future. And not just as a junior hamburger but a double or triple cheeseburger. The hundreds of partnerships, POCS and pilot projects that were begun in 2017 and prior years are likely to begin paying off.

To be sure, there are many insurtechs that will probably fail. It will not be a surprise to see quite a few shut down in 2018. But with 1,300-plus and growing, there is a lot of room for market rationalization and for hundreds of winners to emerge. The proof in the pudding will be if many more use cases start to become visible and have quantitative results associated with their success (sorry for mixing the food metaphors).

But any way you slice it, 2018 is likely to be an eventful year for insurtech. The momentum should continue and begin to translate into solid business results.

Possibilities for AI in P&C Insurance

Artificial intelligence (AI) is a term for a very broad array of technologies that mimic human cognition and activities; They can also discover patterns and relationships that go beyond anything humans are capable of. Depending on your view, AI will either be a great boon to human society and business or an existential threat to humanity. Or you may believe that the whole area is hyped and won’t have these dramatic implications. Whatever you believe, it is important to understand how AI applies to the property/casualty industry and where the greatest potential lies for harnessing the technology.

See also: Strategist’s Guide to Artificial Intelligence  

A new research brief by SMA, based on a survey of insurance executives, provides some insights into these areas. AI in P&C Insurance: Potential and Progress covers personal and commercial lines, revealing significant differences between the sectors. AI has potential in P&C to address many business issues across the enterprise for every sector of P&C. Today it appears in use cases here and there. Over time, AI will contribute to solutions everywhere in P&C.

Insurers are experimenting with and implementing AI technologies such as robotic process automation (RPA), chatbots, data and text mining and machine learning. Underwriting rules engines and solutions for claims fraud are being enhanced with newer AI capabilities. Underwriting and claims are two areas that have been using earlier forms of AI (case-based reasoning, rules engines) for some time. These areas still offer great promise for using AI in the future, but now AI is being applied to customer-facing areas as well as other operational areas (e.g., marketing, distribution, policy servicing). For example, insurers are now using AI technologies to improve the customer experience – in fact, personal lines insurers see that as the area to reap the most value from AI overall. Commercial lines insurers tend to expect more value from a better understanding of risk and more efficient operations.

It is important for insurers to actively investigate AI technologies and how they might apply to strategic or operational business needs. What makes AI so important and applicable to many insurance use cases is the range of technologies that are part of the AI family. Depending on how you group and count them, there are at least a dozen different AI technologies. In addition to those already mentioned, there is image recognition and visioning systems, natural language processing (NLP), cognitive computing, artificial neural networks and others.

See also: Seriously? Artificial Intelligence?  

Over time, various AI technologies will become embedded in many different solutions and be used across the enterprise. Now is the time to explore, experiment and look for alignment to business strategy where advantage can be gained.

What’s Wrong With Life Policy Claims

Recently, I assisted a relative after the passing of her spouse. There were four life insurance policies from three different companies — all with claims to file and distribution options to evaluate. Understanding the terms of the policies and the possible distribution choices were challenging and required advice from a financial advisor, but that’s what I expected. There were tax implications to consider and occasionally the complexities of estate planning to take into account, but I expected that, too. What I did not expect was how difficult it was to connect with the insurers to ask questions on how to submit the claim and get clarification about the options. It seems that the industry still has lots room for improvement when it comes to the customer experience.

When a beneficiary calls to ask policy questions regarding a spouse who has recently died, it is an emotional and extremely important touch point. I was surprised — no, shocked, really — at the responses we got. First, an email with specific questions for one of the agents was answered two days later, and the response was that we should call the insurer’s customer service number. Then, we spent an afternoon calling insurers — only to be sent to voicemail or put on hold for long periods of time. We finally got to a live person, only to be transferred to another person and put on another long hold. From the customer’s perspective, they have been paying premiums for decades, and rarely, if ever, have asked anything of the insurer — at most making a loan request or changing a beneficiary. Now, in their time of need, they are finding it difficult to get to a human who will assist them in a timely, compassionate manner.

See also: Thought Experiment on Life Insurance  

Granted, this is a sample size of one, but my sense, after working with several companies, is that this is not uncommon in the industry. Also, I do understand that most of the emphasis and funding for projects goes into customer acquisition. But, remember, this is the true time of need for life insurance. And there are solutions available to help provide a better experience. There are three suggestions I offer to improve the situation. The first is simply to have the staffing levels to support call volumes so that a customer always gets to a real person when they need it. This is not the place to cut costs. Second, leverage more self-service capabilities that allow claimants to easily get answers to the basic questions. These self-service capabilities should have click-to-chat and click-to-call options so the individual can get more help if needed. Finally, move toward a more omni-channel environment so that information and conversations can be easily transferred between channels, eliminating the need for people to repeat information or start the process all over again every time they talk to someone new.

It’s terrible to make a person who is grieving the death of a loved one have to go through more difficulties or make them wish they had never done business with a company in the first place. In our case, we dealt with three different companies, and all of them gave us an experience that left a lot to be desired.

See also: This Is Not Your Father’s Life Insurance  

Life insurers, take notice. Remember that we are in a new era — one in which customer expectations are higher. Failing to deliver a good customer experience after the loss of a loved one may not seem like one that will ultimately affect financial results, but the ones left behind will share their experiences with others. You may find that you have a lot to lose, too.

Blockchain: What’s the Real Story?

“Blockchain will transform the world…. Distributed ledger technology represents the biggest change to the business world since the adoption of double-entry accounting centuries ago…. Every industry will experience upheaval as blockchain becomes the foundation of the new business environment.”

This type of hyperbole is common today when discussing blockchain technology. The key questions for business leaders are about how much is hype and how much is reality. Insurance executives are asking, “What’s the real story?”

SMA recently asked insurance executives for their views on blockchain to determine the level of awareness in the industry and their expectations about business use and value. The title of a new SMA Research Brief provides the main storyline, Blockchain in Insurance: Awareness Grows, Activity Still Limited. Compared with just one year ago, awareness has increased significantly. This is not surprising because blockchain articles, videos and speeches are a dime a dozen these days. Many insurers have been to workshops, singled out individuals to become subject matter experts and even joined consortiums related to blockchain. Education and understanding are growing steadily across the industry.

See also: Blockchain: Basis for Tomorrow  

A handful of well-publicized projects leveraging blockchain have been undertaken, and some insurers have experimented with the technology, but the vast majority of insurers are in the watch-and-wait mode. Even so, insurers are beginning to see the potential. In addition to the digital currencies such as Bitcoin that first raised the visibility of blockchain, insurers expect the tech to be an important enabler for microinsurance, peer-to-peer insurance, asset tracking and authentication, smart contracts and the exchange of sensitive information and documents. P&C commercial lines insurers see the most potential, given the more complex nature of their products and their ecosystem of partners.

Blockchain may well become foundational to the business world and pervasive in insurance, but it is likely to evolve gradually over the next decade. Ultimately, the technology may become invisible, just a natural part of the digital infrastructure that runs the world, much like key emerging technologies of a prior age. Once-highly-touted technologies such as TCP/IP and HTTP are rarely discussed in business circles today – they are just there behind the scenes as pervasive enablers of the internet and the digital world. A similar trajectory may await blockchain.

So, the real story? Yes, blockchain is vitally important, and it is a technology with the potential to transform the way the world conducts business. But, as its usage evolves and expands across insurance and other industries over the next couple of decades, it will become less hyped and more of a standard building block.

Insurtech and Personal Lines

Insurtech is one of the hottest topics of conversation in the insurance industry with executives and professionals of all types joining in. The insurtech startup movement began in earnest about three years ago and is still trending up in terms of startups, funding and activity. Early insurer participants were primarily the large Tier 1 insurers, but a new wave of activity is reaching companies in the middle and smaller tiers. SMA tracks insurtechs globally (almost 1,200 now); mentors and advises insurtech firms; and assists insurers with insurtech strategies. Our research and analyses include assessments by line of business and business area.

SMA’s recently released research report, “Insurtech and Personal Lines: Examples, Use Cases, and Implications,”analyzes the current state of the insurtech world for P&C personal lines insurers. There are over 600 startups that SMA has identified as relevant for this industry sector. Despite all the activity and investment in insurtech, the debate continues about its implications. Should insurers view insurtech as a threat or as an opportunity? Will insurtech disrupt the industry, or will the movement fizzle out?

See also: 3 Forces Disrupting Personal Lines  

SMA’s opinion is this: Insurtech is important. It is not going away. It will play a major role in industry transformation, and insurers of every size must have an active strategy (even if it is just a defensive one). Distribution is a hot area for insurtechs in personal lines and is already having an important impact. New capabilities for underwriting, claims and other areas of the business are widespread and have great potential to improve operations, the customer experience, products and the management of risks. It is true that many partnerships and activities are in the early stages, and the impact on business results is minimal in the context of the huge insurance industry. But insurtech has been a major trigger for new insurer strategies and will be an important part of the transformation of insurance over the next five to 10 years.

Regarding demographics, about 65% of the startups are tech companies with solutions for insurers or agents/brokers. The remaining 35% are organized as insurance entities: either insurers, agents/brokers or MGAs. About one in five are focused on distribution, either providing new tech-based capabilities for agents/brokers or as digital agents. The MGA model is increasingly popular among this crowd. Many more insurtechs are built around data, especially the real-time data being generated by connected things.

Perhaps more important than the demographics are the partnerships, investments and projects that are underway. Insurer-insurtech partnerships now number in the hundreds, and the direct investment by insurers is in the billions. The positive business results from projects are encouraging, but the full impact will come in increasing measure over the next few years. Ultimately, we expect the personal lines insurance industry to look quite different in 10 years than they do today, and insurtech will be one of the change agents. From an insurer perspective, insurtech partnerships represent a great opportunity to be leaders in the new era of insurance.

See also: Insurtech Takes Aim at Personal Lines  

Note: This personal lines research report is a companion to a recently released report, Insurtech and Commercial Lines: A Surge of New Activity.