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The Last Analog Generation (and Other Stories of the Dead and Dying)

The Last Analog Generation—let’s call them LAGgards—are departing, and in their wake a fascinating new world is emerging.

I’ve been surprised lately, when meeting with the nation’s leading financial service providers and discussing the tsunami of intergenerational wealth transfer that is upon us. The generation that is now entering (or will soon enter) the work force stands to receive something like $30 trillion of personal wealth over the next 20-30 years. That’s a staggering figure by any measure, but what’s really surprising is the apparent lack of preparedness and stunning dearth of appreciation for the opportunity – and potential threat – this massive wealth transfer represents to stalwart companies and even entire industry sectors.

For context, according to research, there exists roughly $230 trillion of personal wealth around the globe. That’s both financial wealth, like cash and its numerous equivalents, and real and personal property; the figure does not include corporate or public holdings. To give some sense of perspective to the enormity of that figure, just consider that the gross world product (the combined market value of all the products and services produced in one year by all the countries in the world) totaled approximately $85 trillion in 2012. Thinking about the number another way: To accomplish the transfer of $30 trillion over the next 30 years would mean that more than $1.9 million would have to change hands every minute.

By the time the last baby-boomer has shuffled off this mortal coil, about 13% of all global personal wealth will have changed hands in one form or another. Understanding some of the techno-societal distinctions between the bequeathers and the bequeathees should be a discipline required for anyone who aspires to make sense of the opportunities or threats attendant to the wealth transfer.

Because we develop a sort of digital life for the things in our users’ lives (by collecting and digitally managing all the information about those things), Trōv is becoming a technological bridge between the LAGgards, who were born before the digitization of everything, and the emerging generations who are indisputably “born digital.” In our interactions with users and the service providers that are precariously dangling between these two distinct constituencies, we are developing a sense for both parties. A couple of the big thoughts that seem to aptly describe what influences the perspectives of two groups are at once technological and sociological: the death of privacy and the power of information symmetry.  

Privacy is dead

LAGgards are concerned that their personal information remains private. Okay, this should neither surprise nor irritate any of us. However, the norms for what is considered private are being entirely redefined by the constant revelations of breaches (both nefarious and national) – and the new (ab)normal boundaries of self-disclosure regularly displayed on the massively adopted social media platforms like Facebook, Twitter and their do-alikes.

Just take a peek (if you have the stomach for it) at Instagram’s ersatz cult of spoiled children referenced as #richkidsofinstagram. Photos are regularly posted depicting the profligate lives of a generation of an über-wealthy and unbelievably overexposed generation reveling in their latest acquisitive binge or imbibing impossibly costly libations.

As Robert Scoble, one of the oracles for the emerging generation of Digital Natives, intimated to me, privacy is all but dead, and it is no longer a core issue of the emerging generations. So what? Self-disclosure and widely available information about all connected people and institutions will make a profound impact on reputations: personal, corporate and governmental, and if you’re attempting to engage the new generation of wealthy, transparency is mere table stakes, at best.

Information symmetry — your advisor is dead (he just doesn’t know it, yet) 

Information symmetry will be the death of intermediated businesses. When Netflix started shipping CDs and DVDs to homes throughout the U.S. in the late 1990s, the writing was on the wall for the leading distributors of home video. And, as cloud storage and high-bandwidth digital pipelines became ubiquitous and increasingly affordable, Blockbuster (as a proxy for all things analog) scuttled its storefront retail business – bowing out because its distribution channel was obliterated by technology’s relentless march.

Retail auto sales have undergone a somewhat similar coming-of-(digital) age, as well. For years, LAGgards have been subject to the demeaning process of haggling over price, because details about costs were kept intentionally opaque, giving the salesperson the information advantage. (This imbalance in access to data is sometimes referred to as information asymmetry). The sales process was successfully upended when data from the likes of Carfax and Kelly Bluebook were made instantly accessible to anyone with an interest and a browser. 

For roughly similar reasons, LAGgards have grown dependent on trusted advisers, various specialists and brokers to make decisions about many of their important investments, risk, spending and even medical choices. Data asymmetry is at the very center of the LAGgards’ dependence on these data-equipped intermediaries, and models for business — even entire business sectors — have been built on its expected continuation. 

But make no mistake, these intermediated, information-unbalanced businesses are (or soon will be) in trouble; their added value questionable. With massive data availability, the information-scales are being leveled, and with instant, mobile connectivity, the generation-digitalis is no longer apt to transact or make decisions through a human intermediary. The generations of Born Digitals demand immediate, hands-on, intermediary-free access to nearly all aspects of their lives. 

So what? If your livelihood assumes that your clients will be dependent on you because you alone hold the magic elixir of unique information, beware. You might need to consider embracing the new models of info-egalitarianism rather than resisting them. 

To wit, we recently began testing an in-app capability to insure a newly acquired item at point-of-sale with literally the push of a button. This action alerts the broker-of-record to information that had been previously unavailable and carries tremendous customer-retention and quality-of-service implications (not to mention risk management and potential revenue upticks).

I have been perplexed by some brokers, who appear more concerned about the incremental work that this might create than the expansion and quality of their service. Powered by data accessibility, irrespective of our entrenched operations, the march toward disintermediation is inexorable.

Although these two ideas — personal privacy and disintermediation –- may appear to be distinct families of thought, they are much more than distant cousins. Indeed, they are utterly related and perhaps alone frame the most important distinctions between the LAGgards and the Born Digitals.  

If you depend on your intermediated services and expect them to remain relatively unchanged, you may be setting yourself up for incalculable risk (and you’re most likely a LAGgard). However, if you are comfortable with gobs of information floating around in the cloud and are adopting the tools that help you benefit, then you are likely going to survive the turbulence.

The opportunities arising from the merging of data and disintermediation are just becoming evident – and these trends will entirely reshape seemingly unassailable businesses and entire industries. 

As the fabric of personal information privacy becomes increasingly threadbare, the expectation for transparency in all segments of commercial life will be elevated to a prerequisite for any type of engagement. And as new generations of shoppers, investors and the “serviced” become less concerned about privacy and more connected to — and facile with — data, business as usual will be anything but.

(This article first appeared in JetSet magazine.)

Analytics at the Next Level: Transformation Is in Sight

Although insurance companies are embracing analytics in many forms to a much higher degree than other businesses, adoption by the insurance industry is still only in its adolescent stage. Deployment is broad but inconsistent. The use of analytics may be about to mature considerably, though, based on a recent series of mergers and acquisitions.

Currently, while a majority of large carriers use predictive modeling in one of more lines of business, and mostly in personal lines auto, a smaller percentage use it in their commercial auto and property units. Insurers recognize predictive analytics as a critical tool for improving top-line growth and profitability while managing risk and improving operational efficiency. Insurers believe predictive analytics can create competitive advantage and increase market share.

Fueling even greater excitement – and soon to be driving transformational innovation – is the recent surge of M&A activity by both new and nontraditional players, which have combined risk management and sophisticated analytics expertise with robust and diverse industry database services. The list of recent deals includes:

  • CoreLogic’s 2014 purchase of catastrophe modeling firm Eqecat, following its 2013 acquisition of property data provider Marshall & Swift/Boeckh; a significant minority interest in Symbility, provider of cloud-based and smartphone/tablet-enabled property claims technology for the property and casualty insurance industry; and the credit and flood services units of DataQuick.
  • Statutory and public data provider SNL Insurance’s 2014 purchase of business intelligence and analytics firm iPartners, which serves P&C and life companies.
  • Verisk Analytics’ 2014 acquisition of EagleView Technology, a digital aerial property imaging and measurement solution.
  • LexisNexis Risk Solutions’ 2013 acquisition of Mapflow, a geographic risk assessment technology company with solutions that complement the data, advanced analytics, supercomputing platform and linking capabilities offered by LexisNexis.

Other 2013/2014 transactions that have broad implications for the insurance analytics and information technology ecosystem include:

  • Guidewire Software, a provider of core management system software and related products for property and casualty insurers, acquired Millbrook, a provider of data management and business intelligence and analytic solutions for P&C insurers.
  • IHS, a global leader in critical information and analytics, acquired automotive information database provider R.L. Polk, which owns the vehicle history report provider Carfax. 
  • FICO, a leading provider of analytics and decision management technology, acquired Infoglide Software, a provider of entity resolution and social network analysis solutions used primarily to improve fraud detection, security and compliance.
  • CCC Information Services, a database, software, analytics and solutions provider to the auto insurance claims and collision repair markets, acquired Auto Injury Solutions, a provider of auto injury medical review solutions. This transaction follows CCC’s acquisition of Injury Sciences, which provides insurance carriers with scientifically based analytic tools to help identify fraudulent and exaggerated injury claims associated with automobile accidents.
  • Mitchell International, a provider of technology, connectivity and information solutions to the P&C claims and collision repair industries, plans to acquire Fairpay Solutions, which provides workers’ compensation, liability and auto-cost-containment and payment-integrity services. Fairpay will expand Mitchell’s solution suite of bill review and out-of-network negotiation services and complements its acquisition of National Health Quest in 2012.

Based on these acquisitions and the other trends driving the use of analytics, it will be increasingly possible to:

  • Integrate cloud services, M2M, data mining and analytics to create the ultimate insurance enterprise platform.
  • Identify profitable customers, measure satisfaction and loyalty and drive cross/up-sell programs.
  • Capitalize on emerging technologies to improve pool optimization, create dynamic pricing models and reduce loss and claims payout.
  • Encourage “management by analytics” to overcome departmental or product-specific views of customers, update legacy systems and reduce operating spending over the enterprise.
  • Explore external data sources to better understand customer risk, pricing, attrition and opportunities for exploring emerging markets.                       

As the industry is beginning to understand, the breadth of proven analytics applications and the seemingly unlimited potential to identify even more, coupled with related M&A market activity that will drive transformational innovation, indicates that the growing interest in analytics will be well-rewarded. Those that are paying the most attention will become market leaders.

Stephen will be Chairing Analytics for Insurance USA, Chicago, March 19-20, 2014.