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Insurtech: An Adventure or a Quest?

Insurtech making your head spin? Perhaps it’s because of the confusion whether insurtech is a “there and back again” project or more of a paradigm shift?

No one can deny the great impact that J.R.R. Tolkien’s books and movies have had on our culture. He’s been called the father of modern high fantasy literature. Not that money has the final say on one’s success and impact, but in 2009 he was ranked by Forbes as the fifth top-earning dead celebrity.

From my perspective, Tolkien’s books are fabulous and intensely engaging. I was listening to a literature professor talk about Tolkien, and he made a most interesting observation on how very different his books were. He described “The Hobbit” as an adventure, while “The Lord of the Rings” was a quest.

He went on to say that “The Hobbit” is a “there and back again” adventure story, where you go out, experience thrilling events and then come home again. But “The Lord of the Rings” was a quest; you leave home and are fundamentally changed by the events you experience. In a quest, you may physically return home, but you are so altered that in a real sense you never return home.

I had never thought of the books in this way before. As a matter of fact, “The Hobbit’s” official title is “The Hobbit, or There and Back Again.” At the end of “The Lord of the Rings – The Return of the King,” Frodo Baggins returns to the Shire but never quite feels at home and eventually leaves Middle Earth with the elves and Gandalf.

See also: Core Systems and Insurtech (Part 3) 

Insurtech can be looked at in a similar way. Do we view insurtech as a journey, or is it a quest? Is insurtech a “there and back again” project that has a start, middle and end, or a more fundamental paradigm shift in our thinking?

Is insurtech to be bandied about as yet another consult-speak hype-phrase added to web pages, slide decks, articles, polls and white papers so we can be 100% buzzword-compliant? Is it hurriedly tacked on as yet another topic on an already bloated agenda of items to be covered? Or is it something substantially more?

There are more insurtech lists, companies, conferences, accelerators and analysts than you can shake a stick at. There are more than 1.2 million results when you Google “insurtech.” You could make it your life’s work just tracking insurtech.

Using the “there and back again” definition, the vast preponderance of what is labeled today as insurtech is a journey, and there is nothing wrong with that. Within the insurance industry, we definitely need incremental new products, ideas and solutions that gradually move the needle when it comes to process streamlining, reducing costs and greater customer engagement. We applaud their efforts and wish them all success.

But the number of insurtechs that can earn the quest moniker is much smaller. While many web sites and brochures purport to be a game-changing quest, most are actually a journey in quest’s clothing.

So, how do we make sense of it all?

First, figure out if the insurtechs you are working with are on a journey or a quest. Here are six marks of an insurtech that is on a quest. You don’t have to exhibit all six to be on a quest, but four is a minimum:

  • Big Audacious Dream – Sometimes referred to as the BAD idea, this visionary and emotionally compelling future state is dramatically different than anything yet proposed.
  • Multiple Directors – There are not only numerous users that employ the solution, but it directs multiple stakeholders both inside and outside multiple organizations.
  • Revenue Diversity – Income comes from numerous different users, stakeholders and sources; the quest is not tied to traditional license/use fee revenue streams.
  • Elongated Delivery – Because the quest is by nature long and complicated, quick deployment is not possible; delivery will take time and significant investments.
  • Lots of Data – While functionality is important, large amounts of data from various sources are brought together in new and compelling ways that transform traditional tasks into new opportunities for customer satisfaction, additional sales and revenue opportunities.
  • Numerous Detractors – Few will understand or initially identify with an insurtech quest, thinking it outlandish and outrageous; most will immediately dismiss it or continually poke fun at it.

Second, it’s more than OK to be engaged with multiple insurtechs that are on an adventure. As a matter of fact, it’s wise not to put all your insurtech eggs in a single basket. Some will make it, others will not, so hedging your bets is a good thing.

Third, an insurtech on a quest is not for everyone. You can probably only deal with one at a time. They will take longer to develop and deploy than an adventure insurtech.

Fourth, you should periodically reevaluate the insurtechs you’re involved with, eliminating some, adding others.

P.S – if you are an insurtech that is on a quest, welcome to the club!

See also: Why #Insurtech Doesn’t Matter  

It’s easy to become discouraged and think you will never succeed. Take heart. Here are five encouraging Tolkien quotes from “The Lord of the Rings”:

  • “The quest stands upon the edge of a knife. Stray but a little, and it will fail, to the ruin of all. Yet hope remains while the company is true.” Galadriel, “The Lord of the Rings: The Fellowship of the Ring”
    • There will be days when you are convinced that your quest is teetering on the edge of failure. It’s at times like this that you need to seek encouragement from your team and supporters.
  • “The Ring-Bearer is setting out on the quest of Mount Doom.” Elrond, “The Lord of the Rings: The Fellowship of the Ring”
    • There will be days when your quest seems destined for financial failure and industry embarrassment. Listening to your detractors is a recipe for certain defeat. If necessary, recalibrate your goals and move forward with your team and supporters.
  • “This quest may be attempted by the weak with as much hope as the strong. Yet such is oft the course of deeds that move the wheels of the world: Small hands do them because they must, while the eyes of the great are elsewhere.” Elrond, “The Lord of the Rings: The Fellowship of the Ring”
    • Leadership is vital on a quest, but more is accomplished not by the great or brilliant, but by average people. Do not overlook their value or contributions.
  • “What is to be my quest? Bilbo went to find a treasure, there and back again; but I go to lose one, and not return, as far as I can see.” Frodo, “The Lord of the Rings: The Fellowship of the Ring”
    • To succeed in your quest, you need to have an attitude of abandonment, willing to lose to win. You will need to hold loosely those traditional things that have given you stability and success.
  • “But do you remember Gandalf’s words: Even Gollum may have something yet to do? But for him, Sam, I could not have destroyed the Ring. The quest would have been in vain, even at the bitter end. So let us forgive him! For the quest is achieved and now all is over. I am glad you are here with me. Here at the end of all things, Sam.” Frodo, “The Lord of the Rings: The Return of the King”
    • When you have succeeded, you will look back and remember people whom you thought were your supporters and friends but turned out to be your enemies. Don’t harbor anger and bitterness.

Work hard and enjoy the quest.

A Reflection on the Las Vegas Slaughter

You just never know.

Wednesday, Jan. 16, 1991. I was on a flight to the West Coast when Desert Storm started. The pilot came on and told us about President Bush’s speech. He asked us to pray for our solders in harm’s way and for our country.

Tuesday, Sept. 11, 2001. I was at a conference in Disney World when a trickle of news reports quickly turned into the media tsunami that forever changed the trajectory of our culture. We gathered in the hotel ballroom to address questions as a group. Over the next couple of days, I had customers and friends melt in my arms, overcome with grief. We comforted one another as we struggled to try and make sense of the terrorist attacks, making arrangements to get people home, renting cars, vans and buses.

Friday, July 20, 2012. I was driving to a speaking engagement when I received a panicked call about the shooting in Aurora, CO, where our son and his wife live. They were safe, but he had to report to the scene immediately because some airmen in his charge were in the theater.

See also: Time to Mandate Flood Insurance?  

Sunday, Sept. 10, 2017. Hurricane Irma cut a wide swath of damage and flooding through central Florida, where we live. Our normally quiet small town is still abuzz with electrical and phone crews feverishly working to restore normal operations, making permanent repairs. Many homes in our area are a patch quilt of blue tarps. FEMA contractors are still removing debris as a convoy of trucks and equipment rumble through neighborhoods.

Monday, Oct. 2, 2017. Today, I’m in Las Vegas only to be awakened to the horrific news that we know all too well. I’ve received numerous messages over the entire spectrum of electronic communications, asking about our safety.

In these and other events, we will want to learn as much as possible. We want to know the who and struggle with the why. Much will be uncovered over the next hours and days. There are so many open questions waiting to be answered. There is so much that we don’t know.

But there is one thing that I know for certain, and I say this in all seriousness and respect. Insurance will play a vital role in the coming days, weeks and months, helping to rebuild lives, families and businesses devastated by this heartbreaking and senseless tragedy.

Working in insurance since 1972, I’ve been humbled over and over again to be part of an industry that helps people. While my career has been on the technology side of the business, there is a quiet assurance, knowing that what we do will help restore lives.

At the tender age of 19, I had my first “data processing” interview. It was for a junior terminal programmer trainee position at a large insurance company that no longer exists, paying an exorbitant $7,500 a year. After the interview, I walked to the bus stop and wondered about working for an insurance company. I replayed all the jabs and jokes that we know all too well in my mind that surround the insurance industry. Was I somehow going to be tainted by being a part of a profession that had a reputation equal to that of gas station attendants (true statistic)?

See also: Harvey: First Big Test for Insurtech 

There have been opportunities to leave the insurance industry over the years. But I kept coming back to the reality that there are precious few professions that can have such a direct, positive effect on the lives of so many as insurance.

Yes, we have our problems and detractors. Yes, we can sometimes be our own worst enemy when it comes to public perception. Yes, we could do a better job at communicating to and servicing our customers and the public as a whole.

But I count it a personal honor and privilege to serve in the insurance industry. I hope you do also.

May the Forms Be With You!

“Star Wars” first appeared in theaters on May 25, 1977, unleashing one of the great, galactic pop culture tsunamis ever seen. And while there has been an explosion of technology and innovation since that time (one that would rival the explosion of the Death Star), virtually nothing has been done regarding the way insurance information is shared via forms, certificates of insurance, driver ID cards and the like.

Workers’ compensation may be leading this backward trend.

It’s no wonder that workers’ comp insurance draws a lot of attention. Covering more than 90% of the workforce, with more than $45.5 billion in total premiums from both private carriers and state funds and a combined ratio of 94%, workers’ comp is one of the few bright spots within the commercial lines market.

With payrolls rising $316.5 billion by year-end 2016, not to mention $1.16 trillion in construction projects, there will be billions of dollars in new premiums for workers’ comp coverage. If economic growth and hiring continue as projected, workers’ comp exposure is likely to remain among the faster-growing major commercial P/C lines of insurance in 2017 and beyond. And this positive outlook takes into account that workers’ comp fraud is 25% of the P&C industry-wide annual fraud problem of $34 billion.

Many are investing heavily in new systems and technology to reach this rich marketplace. Carriers, brokers, agents and third-party service providers are all positioning themselves for a larger slice of the workers’ comp pie through innovative and forward-thinking technology.

However, with all the technology available within the workers’ comp ecosystem, it consistently takes a giant leap backward when it comes to requesting, generating and delivering proof of insurance. Form-based certificates of insurance are universally produced and passed like a hot potato between different stakeholders, yet they provide no real proof of insurance. As one industry pundit put it, “At best, it’s just a piece of paper that shows proof of coverage at the time it was issued. At worst, it’s fraud.”

Some are touting the ability to request proof of workers’ comp coverage from a mobile device. Yes, through an app, you can request a workers’ comp QR code that can be used to request a certificate PDF. But this PDF has all the usual limitations: no updates, no notice of cancellation, no ability to compare data with coverage needs, no exception processing.

See also: How Should Workers’ Compensation Evolve?  

Because the form-based certificate of insurance has been the forum for exchanging dead data, people have been attempting all sorts of subterfuge to require wording on the certificate in a vain attempt to make it say something that is not in the workers’ comp policy. It’s important to realize, from a business and insurance standpoint, that a certificate has many inherent limitations and weaknesses. For example, a certificate CANNOT:

  • Extend or modify policy conditions or rights to the certificate holder. The insurance policy is a contract, and changes to those terms can only be accomplished by following proper procedure as outlined by the insuring company. Extending policy rights, such as additional insured status, can only be accomplished by properly endorsing the insurance policy in question.
  • Guarantee a policy will not be canceled in accordance with the conditions of the insurance policy. Cancellation of a workers’ comp policy is controlled by state statute and cannot be modified by a certificate.
  • Provide insurance coverage to the certificate holder. The insurance certificate only indicates coverage found in place on the policies in force at the time the certificate is issued. A certificate of insurance coveys no insurance coverage to the certificate holder; only proper endorsements to the insurance policy can achieve that.

There are many large industries that are totally dependent on workers’ comp coverage and proof of insurance — construction, transportation and agriculture, to name a few. Roads, bridges and buildings don’t get built or repaired without workers’ comp insurance. Nothing moves across our highways without workers’ comp insurance. Crops, fruit, cattle and food do not get produced, harvested or delivered without workers’ comp insurance.

As we move forward into a 21st century economy, more companies and workers are shifting into the gig economy where workers’ comp is either not there at all or has substantial holes. Under current definitions, gig economy workers, sometimes called on-demand workers, are neither employees nor independent contractors. If a rideshare driver is attacked by a passenger, sustains severe injuries and cannot work for a long period, how is his or her income replaced? For that matter, if any on-demand worker is injured on the job (accident, repetitive motion injury, etc.) how is his or her income replaced? And with the current state of health insurance, or the lack thereof, how are his or her health bills paid?

While there are a number of instances where coverage verification is needed for workers’ comp alone, many times other lines of business need to be verified simultaneously. General liability, commercial auto, commercial property and other types of insurance also require verification at the same time with workers’ comp, by the same stakeholders. These coverages may be within a single business owners policy (BOP), or they can be spread across multiple policies, written by multiple carriers, with different effective/expiration dates.

See also: Five Workers’ Compensation Myths  

Rather than pushing around forms filled with dead data, workers’ comp deserves a digital ecosystem where all stakeholders can securely connect and share coverage information. Online and continuing coverage verification automatically validates that insurance in force. Additionally, the needs of each stakeholder are evaluated, alerting stakeholders on an exception basis.

It’s time to move forward from, “May the forms be with you” to “Let the data be with you.”

This is GAPro’s vision and mission.

We’re Being Luddites About Verification

There are several seminal moments when I first experienced something that forever changed the trajectory of my life:

–While senior director of research and development at ACORD in 1992, I worked with New Science, a research firm. The insurance industry was heavily investing in the development of AL3 batch data standards via point-to-point dial-up connections. New Science, however, was looking way down the path toward global, online, real-time transactions through a single network connection. Working with New Science was the first time I heard the word “internet.”

–I distinctly remember walking through the Indianapolis airport and seeing someone holding a “brick” next to his head. It was the first time I saw a mobile phone in operation, a Motorola Dynatic 8000X. Priced at $3,995 and weighing in at 28 ounces, the phone took roughly 10 hours to take on a full charge and offered only about 30 minutes of talk time on a highly limited analog network. Some of us remember running off airplanes to banks of payphones to check voice mail and to make calls between connections. Now it’s almost impossible even to find a pay phone.

–My first date with Mary Ann Hildebrand was Oct. 9, 1971. Game 1 of the 1971 World Series featured the Pittsburgh Pirates against our hometown favorites, the Baltimore Orioles. A week later, I held her hand and kissed her for the first time. And, after 41 years of marriage, the rest is history, as they say.

I also clearly remember listening to and meeting Thornton May in 1992 after his scathing commentary, “Luddism Looms Large,” appeared in ComputerWorld. It was the first time I heard the term “Luddite.” The term goes back to followers of Ned Ludd, the late 18th century British antitechnology leader who protested the replacement of human labor and skill with machines. Ludd energized a movement throughout the textile industry as his followers protested by destroying machines and property. Luddism today is a more general term for those who are opposed to technology change.

See also: Key to Digitizing Customer Experience  

When it comes to online verification, the insurance industry is filled with Luddites, compared with other industries. Every time an insurance policy or business relationships changes anywhere in the world, verification of insurance and compliance checking is required. This should happen digitally, right? In this day and age…. Instead, verification is delivered via a form, whether paper, fax or PDF.

All have the same problem: The information in them is as of a point in time. The information is locked, and the receiver can’t do anything with it.

Compare that with these industries:

  • To verify stock price information, you don’t have someone send you a form saying what it was last week or last month. You don’t even have to log onto the individual company websites, or have to go to the NYSE or NASDAQ. You just search for the company, and you see today’s price as it dynamically changes, in addition to historical pricing and a raft of other information.
  • To verify the status of a flight, you don’t have to log onto the individual airline websites. You just search for the airline and flight number and you see the schedule, if it’s on time in addition to city and gate information.
  • To verify my ability to pay, no one takes impressions of credit cards anymore. I do not show paper or PDF versions of my three-month-old credit card or bank statements to prove that I can pay. Nor does anyone take a picture of a check, my face and driver’s license. Someone I’m paying reads my card or check electronically, automatically verifying that funds are available.

I was reminded of this on my most recent speaking engagement. At 4 a.m., I arrived at my destination city. I stepped into a cab and was efficiently whisked away to my meeting location. Cabs no longer take a physical impression of my credit card. Instead, my card with an onboard chip was inserted, read and charged. Boom! Verified.

Unlike other industries that have online verification available, today’s convoluted and wildly expensive verification of insurance is a vortex of manual effort, paper, email, faxes and procedures. Data is both late and locked in certificate forms (paper or PDF). To begin getting our arms around the size of this opportunity, here are three sets of statistics to reflect on:

  • $1 trillion-plus of vehicle loans in the U.S. require verification at least once a year — twice a year if the policy is six months, and perhaps 12 times a year if the insured is paying monthly.
  • 1.2 million companies with 28.8 million commercial trucks and 3 million drivers provide forms as proof of insurance. How many do you think are out of date? Fraudulent?
  • 42.6 million independent contractors provide form-driven proof of insurance when they bid on a job.

Companies that receive data on forms have no assurance that the information is real or accurate or complies with their needs. Even with extensive and expensive manual checking, no one really knows if the data on the form is valid.

We have an expensive, lose-lose proposition.

Trying to fix the problem by addressing the form is like trying to fix cigarettes with a new type of cigarette. Problems with the underlying technology preclude a solution.

See also: Secret to Finding Top Technology Talent  

When a form-based proof/certificate of insurance is shared today, no one asks for a non-disclosure. There is also no password or encryption beyond the PDF format. Insurance rates, rules and forms are filed and approved by state agencies, which by nature make them available to the public. You can also go to web sites to search and view insurance carrier forms.

Insurance verification is not just at origination or signing of a contract. Insurance verification is continuous.

Once it goes on, it goes on and on.

Insurance Coverage Porn

Now that I have your undivided attention.

Justice Potter Stewart famously said during a pornography case before the U.S. Supreme Court: ” I know it when I see it” (Jacobellis v. Ohio, 1964.) The same can be said about insurance coverage porn.

Since the idea of insurance coverage porn may be new, let me explain. I define it as creating a fanatic view of insurance coverage. An over-the-top, exaggerated, excitedly hyped or false illusion designed to distract, distort and divert attention from reality. The result is to leave sanity and common sense about coverage at the door.

Here are four examples that I’d like to explore:

1. Performing “Unnatural Acts” With Coverage

This is where someone tries to make a policy say, do or cover something that it was never intended to. While there are many different people and organizations who dabble in this type of insurance coverage porn, the real addicts are third parties. They require insureds and agent/brokers to include language on certificates of insurance to give them both additional money and assurance that they will be paid and paid first. Sometimes these unnatural acts require additional language on the certificate that is in direct conflict with the policy, not to mention insurance theory or regulation.

In many of these cases, the insured is at the mercy of the third party. Construction can be held up waiting for specific language or punctuation. A subcontractor cannot start work or get paid till the third party is completely satisfied. Truck drivers cannot go onsite until the certificate is signed off.

The simple fact is that the policy is a contract. It is what it is, and no amount of finagling on the certificate will change it. The certificate itself has a warning in CAPITALIZED BOLD print saying that it is informational only and does not amend the policy. Asking it to perform “unnatural acts” is insurance coverage porn, leading everyone to frustration, wasted time, energy and money.

See also: Jurors and Questions on Insurance Coverage  

2. The Big Tease, a.k.a. The Image Has Been Enhanced for Your Entertainment and Enjoyment

Many of our daily tasks and jobs require insurance. To drive a car, you need proof of insurance. To sell insurance, you need insurance. You need proof of insurance to renew many types of licenses.

Yet all you need is a piece of paper that says there is insurance. When I walk into the DMV to renew my vehicle registration, all I need is a driver ID card that says I have insurance. To use the auditorium or gym at the local high school, all you need is a piece of paper that says you have coverage. If you need to show proof of insurance to perform some kind of work, all you need is a completed form.

And the best, or worst, part is that most organizations requiring proof of insurance now tell you exactly what they need on their website. Now I know that this is done to be helpful, but it actually becomes a by-the-numbers “how to” guide to potentially perpetrate fraud. Some of these websites provide step-by-step instructions on what form they require, what numbers they need in specific fields, what wording is to be included.

It is beyond simple to Google and find all sorts of proof of insurance documents. Certificates, driver ID cards, company specific forms, you name it. Find the form, follow the web site instructions and you’re good to go.

One enterprising insured needed to provide annual proof of insurance for the coming calendar year. Taking the current forms, the insured employed Wite-Out to hide the dates and typed in new dates. The form was accepted, until an expert noticed that one of the forms had been out of use for a long time. This insured had actually been using Wite-Out for a number of years. It worked last year; let’s try it again….

Providing a form to prove insurance is one thing, but some organizations require even less. Some only ask that you check a box indicating that you have the appropriate insurance. The bar can be set even lower. One executive told me that while his insurance agency relationship demands that he purchase E&O insurance, the executive’s organization does not ask for any proof or indication that insurance is in place. The organization simply assumes that it exists. I wondered if this is the insurance equivalence of, “Don’t ask, don’t tell.”

3. Coverage Cover-Up, a.k.a. I Buy the Magazines for the Articles, Not the Pictures

Insurance applications used to be on paper. This meant that agents and the insured wrote down information for carrier personnel to rate/quote policies. Agents and insureds could not repetitively manipulate information, trying to get a better price without a paper trail. Today, both agents and insured have direct access to websites and carrier systems to speed quoting, eliminate paper and reduce cost.

Now, no one in their right mind is suggesting going back to paper applications, but think about what is now possible. Whoever is entering information has the opportunity to “tweak” amounts and drop down selections, options and other information to reduce the premium. Unless the software prevents repeated updates, it’s like giving the user an unlimited number of pulls on a slot machine until the right number comes up.

One agent was trying to insure a very nice log cabin home for his customer. You know, the ones pictured in magazine ads. But his traditional insurance carriers would not accept the risk, which was outside normal underwriting guidelines. Finally, out of frustration and needing to get the house insured, the agent changed the construction type from “log” to “frame.” The risk was accepted, and a policy was issued. Later, the home caught fire and burned to the ground. You can imagine the claims adjuster’s surprise, expecting to see the remains of a frame house. Regardless of whether the insured properly stated what the construction type was, the agent knew, so the carrier paid the resulting $540,000 loss. This payment was immediately followed by a claim against the agent under his E&O policy.

4. Scantily Clad Coverage Cover-Up, a.k.a. Bait and Switch

Having an agent manipulate information is one thing, but giving direct data entry to the insured opens up greater opportunities for insurance coverage porn. One study confirms that 51% of insureds are willing to misrepresent their insurance information to get a better personal auto price. Think about that for a moment. What other industry has a business model where more than half of their customers admit to not telling the truth?

Here’s another example. Anonymous national surveys find that about 16% of the general population smokes. So how come, on health and life insurance policy applications, only 7% record that they smoke? Health insurance carriers charge 50% more for individuals who use tobacco on a regular basis. Everyone knows that they have a better chance of being accepted, and getting a lower premium, if they deviate from the truth. This is insurance coverage porn.

See also: Broad Array of Roles for Disability Coverage

With their desire to make writing policies easy for consumers, carriers have invested significant time, energy and dollars into their web sites and mobile apps. And while they are to be congratulated for making insurance more accessible, one unintended consequences is that applicants may be able to manipulate data to reduce the price.

Justice Stewart may have known it when it saw it, but that isn’t enough in insurance, where we need to exercise leadership within our organizations and throughout the insurance community. The “we’ve always done it this way” attitude is an open invitation for another person, another organization to take our customers, marketplace position and distribution channels.