Tag Archives: connectivity

4 Ways Connectivity Is Revolutionary

The Internet of Things (IoT) is predicted to support more than 20 billion devices by 2020, according to Gartner. This is a market that covers 60% of consumers worldwide, creating huge opportunities for industries to connect and engage with their customers.

Connecting with consumers hasn’t always been easy. Contact typically took place at points of sale, during claims and during renewal periods. Now, with the use of wearables, smart homes and telematics, insurers are connecting with customers on a continual basis and providing valuable feedback – and prices – based on activity levels. The business of insurance is complex, with core factors such as risk evaluation, long-term contracts and unpredictable settlements. However, the benefits of insurtech and the unlimited availability of new sources of data that can be exploited in real time have fundamentally altered how consumers interact with their insurance providers.

IoT devices are helping consumers and insurers get smarter with each passing day as these technologies bring promising results in helping insurers reshape how they assess, price and limit risks and enhance customer experience.

See also: Industry 4.0: What It Means for Insurance  

Connectivity and Opportunities

Numerous technologies have shown how improved connectivity can generate opportunities in the insurance industry beyond personalized premium rates. If implemented properly, IoT applications could possibly boost the industry’s customarily low growth rates. It may help insurers break free from traditional product marketing and competition primarily based on price to shift toward customer service and differentiation in coverage.

Several technology trends that are increasing connectivity in insurance include:

Extended Reality (XR) — XR technologies are altering the way consumers connect with society, information and each other. Extended reality is achieved through virtual reality (VR) and augmented reality (AR), which aim to “relocate” people in time and space. Eighty-five percent of insurance executives in Accenture’s Technology Vision 2018 survey believe it is important to leverage XR solutions to close the gap of physical distance when engaging with employees and customers.

Wearable Sensors — Reports indicate that the average consumer now owns 3.6 wearable devices. These technologies can mitigate claims fraud and also transmit real-time data to warn the insured of possible dangers. For example, socks and shoes with IoT apps can alert diabetics on possible odd joint angles, foot ulcers and excessive pressure, thus helping in avoiding costly disability and medical claims and even worst-case scenarios such as life-changing amputations.

Commercial Infrastructure and Smart Home Sensors — These sensors can be embedded in commercial and private buildings to help in monitoring, detecting and preventing or mitigating safety breaches such as toxic fumes, pipe leakage, fire, smoke and mold. This increases the possibility of saving insurers from large claims and homeowners from substantial inconveniences such as lost property or valuables. Savings can be passed to insureds who use these sensors.

Usage-Based Insurance (UBI) Model — Cellular machine-to-machine (M2M) connectivity and telematics link drivers and automobiles in entirely new ways. Traditionally, auto insurance has relied on broad demographic features such as gender and the driver’s age, plus a credit score, to set premiums. Now, through IoT devices, insurers can not only offer reward-based premiums but can provide a connected car experience to customers with feedback on weather, traffic conditions or driving habits.

See also: 3 Ways to an Easier Digital Transformation  

Strategy will play an important role in connectivity as insurance carriers transform legacy core systems into digital platforms that support deeper connectivity with their customers. This strategy must address a carrier’s ability to handle, process and analyze the new types of data that will emerge from the use of these technologies. Artificial intelligence will also have a big impact.

According to a recent study, 80% of insurance customers are happier and more content when they can connect with their insurance providers through various channels such as phone, emails, smartphone apps and online. Through the use of the IoT and connected devices, insurers will improve customer experience by shifting from reaction after an event has occurred to preventing losses digitally.

A Tipping Point for Commercial Lines

It is no secret to commercial lines insurers that the market is hyper-competitive and has been so for years. There is very little to suggest that this is going to change. But there are other changes afoot, as evidenced by the new entrants, from the ranks of both traditional insurers and reinsurers as well as startups leveraging leading new technologies. And these new entrants are changing the commercial lines landscape. The startup impact was especially noticeable at the InsureTech conference in Las Vegas in October.

While there are several critical success elements, few would argue about whether agents, brokers and MGAs are front and center. Unlike personal lines, where direct-to-consumer channels are growing, commercial lines are still dominated by the independent agent and broker channels. And due to risk complexity and the need for advice, this is not likely to change soon. At the InsureTech conference, Brian Duperreault, chairman and CEO of Hamilton Insurance Group, and past CEO of Marsh & McLennan, emphatically made the point that consumers do not want agents and brokers to go away — they are critical to risk decisions.

See also: The Uberization of Insurance  

Given the imperative of having a strong agent and broker network, commercial lines insurers need to understand what it takes to ensure a successful outcome. Clearly, being easy to do business with is pivotal, and a key component of that is agency connectivity. To gain insight into what this means to commercial lines insurers and distributors, SMA conducted primary research. The recently released report Agency-Carrier Connectivity: Commercial Lines Insurers provides and explores the results.

One thing was immediately clear. 90% of commercial lines survey respondents indicated that by 2020 new capabilities for agency connectivity will be a game changer. No insurer can ignore a game changer, but the road to a successful business outcome is not necessarily an easy one. 67% of survey respondents indicated that improving the agent experience is the No. 1 business driver for investing in agency connectivity. Yet four out of the seven barriers to investment revolve around a lack of business commitment and clarity. The good news about that result is that insurers are in direct control of these barriers!

Survey results show the majority of insurers would prefer an automated exchange of data and information with distributors, with limited phone, paper or email pdf exchange. But legacy constraints, data mapping/inconsistencies and a “spaghetti bowl” of processing problems stand in the way. It would be easy to believe the issue is technology, but survey results point in a different direction. In fact, they point directly at culture and focus. Arguably, the most troublesome problem is that culture — the idea that “We’ve always done it this way” — stands in the way of an automated process. Given the age-old belief that commercial lines are seen as art and not science, culture is a huge issue that must be recognized and addressed.

Acquiring new business is a serious problem in today’s competitive commercial lines market. According to SMA research, the No. 1 stumbling block to meeting production goals is quality and fit of submissions. Given this pressure, it would seem logical that investments would have been made to deal with this. But despite the fact that agency upload and download have been around for a very long time, commercial lines insurers still feel that their needs are either not being met at all or are met in only a limited measure. Important processes such as quoting, binding, policy documents, billing and risk management are either not being addressed through connectivity technology or there is neutral value attached to that technology. And with IT budgets stretched, technology providing only neutral value is tantamount to having poor value.

See also: 3 Ways to Improve Agent/Insurer Links  

More and more, agents’ and brokers’ decisions about where they will place their business are being driven by who is easy to do business with, even though underwriting expertise and claims capabilities will always be very important. Technology for connectivity is central to fostering incumbent loyalty and drawing the attention of a new generation of distributors. It is critical that all commercial lines insurers have a solid road map for investment around connectivity. Understanding what the potential barriers are and what peer company investments are being made will allow commercial lines insurers to move forward faster and with less overall risk.

The commercial lines insurer report can be found here. Before the end of the year, the personal lines insurer view of connectivity will be published, as will the agent and broker view.  So, stay tuned!

Cyber and Physical Threats Are Colliding

Overview

A quarter of a century after the Worldwide Web began to transform the Internet into the indispensable tool we all rely on today, we’re entering a new digital revolution. Over the next four years, the number of connected devices is expected to grow to as many as 50 billion, according to the 2015 Ponemon Global Cyber Impact Report sponsored by Aon. Business is expected to make up a far larger percentage of Internet of Things (IoT) usage than the consumer — IoT is more about smart factories and computer-controlled office systems than shiny gadgets like smart watches and fitness trackers.

The risks are becoming physical. Some of these new devices could cause serious real-world damage. We’ve already seen manufacturing plants seriously damaged by cyber attacks and electricity grids and automobiles shut down by hackers. It’s only a matter of time before such threats become more common and more physically dangerous to both people and property.

With the rise of new technology comes fresh opportunity for business — but also new risk. In the workplace, every new connected device represents a new link in the IT chain. With the age of the Internet of Things upon us, what are the new risks and what do business leaders need to know to be prepared?

Projected growth of Internet-connected devices, 2013-2020

Source: 2015 Ponemon Global Cyber Impact Report, sponsored by Aon

In-Depth

New Technology, Big Opportunities 

The benefits of Internet connections are hard to overstate. For businesses, the Internet of Things offers the promise of quantified everything. Employers will be able to track productivity and leverage metrics to uncover new efficiencies. With connected sensors underpinning every square inch of an organization’s footprint — once-siloed data sets can be integrated, correlated and cross-referenced — it will become easier to identify new efficiencies and deliver new value.

See Also: Cyber Threats to Watch This Year

The benefits are immense – but so, potentially, are the risks.

“As we move into having smart workplaces and offices, you’re really talking about a technology backbone that’s driving an organization,” says Stephanie Snyder Tomlinson, a cyber insurance expert at Aon. “What impact can that have on a business? What are the potential losses to an organization if you have a network security breach that results in property damage or bodily injury?”

Digital Threats Turn Physical

An unfortunate side effect to some of the highest-profile recent cyber breaches is that many people have come to regard cybercrime as solely a privacy issue. It can be far more complex than that.

“If there is a failure of network security or systems,” Snyder Tomlinson warns, “there could be a resultant business income loss. It could be intangible loss in terms of loss of data information assets or, especially as we move into relying more heavily on technology and the Internet of Things, it could be tangible loss, as well.”

You don’t need to look very far to get a sense of the potential risks to property and other physical assets when the Internet of Things begins to help run a workplace. As organizations grow increasingly dependent on technology to run their businesses and offices, the attack surface for cybercriminals increases dramatically. Each new device represents an additional access point for hackers.

The scenarios that could result can sound like something out of a science fiction film:

  • Does your building have computerized entry or elevator systems, with smartcard keys for access? Hackers could take control and lock down your building, trapping employees and visitors inside.
  • Computer-controlled electricity or water supplies can be shut down, rendering working impossible.
  • Connected thermostats are becoming increasingly common and could be taken over — shutting off heating in winter or air conditioning in summer, driving temperatures to unbearable levels and making your office unusable.
  • Logistics servers managing orders and deliveries could be hacked, with real orders canceled, false orders placed or essential supplies redirected to the wrong locations, disrupting your supply chain.
  • Factory robots could be set to destroy rather than create your products.
  • HVAC systems in a company data center could be overridden, causing a rise in temperature that could render network servers inoperable.
  • Fire alarm systems could be turned off just as real-world arsonists attack.

These may sound far-fetched, but are already reality. A cyber attack on a German steel mill in late 2014 caused immense physical damage after hackers installed malware on the network.

“It caused the blast furnace to be unable to be shut down, leading to massive property loss,” Snyder Tomlinson says. “The property loss arose from a network security breach. It’s a perfect example of the potential risks when you have companies that are relying on technology to run their business.”

Understanding the level of risk

“There’s always going to be some type of access point into a network, in one way, shape or form,” Snyder Tomlinson says. “You can have the best network security possible, but as everybody says, ‘It’s not if, it’s when.’”

Consequently, many companies are revisiting their approach to cyber security. Organizations previously concerned only with safeguarding client privacy and personally identifiable information are suddenly contemplating a broader loss spectrum.

“We’re seeing more interest in cyber insurance from manufacturers and critical infrastructure companies, because they recognize that their exposure isn’t necessarily just about private information or the liability arising out of a breach,” Snyder Tomlinson says. “We’re going to continue to see growth in the breadth of cyber coverage over the next several years, where we’re getting into the true property space, because there is the potential to have a property loss arising out of a network security breach or a systems failure.”

Snyder Tomlinson says this is why businesses need to take a holistic view of their cyber vulnerability — “Cyber risk flows through an entire organization.” A good cyber risk management framework has three key elements, she says:

  1. Preparation – Identify and quantify your cyber risk exposures. Develop a breach response plan and business continuity plan. Consider taking out a cyber insurance policy, which can assist with the potential balance sheet impact of a breach.
  1. Practice – Speed of response can be vital to limit damage in the event of a breach. Identify the key stakeholders within the organization and perform a tabletop scenario exercise to ensure everyone knows the role they need to play should an incident occur.
  1. Execution – Engaging with appropriate vendors is critical to successful execution. An organization should have relationships with defense lawyers, a public relations firm and a computer forensics firm so that a firm can work with it to mitigate loss in the event of a breach.

With the rise of the Internet of Things, cyber crime is no longer simply about loss of information. Increasingly, you need to consider the possibility that cyber could be just as physically disruptive to your business as a natural disaster or a terrorist incident. This is no longer simply a data issue — today, property and, potentially, lives could be at stake.

The Insurance Renaissance (Part 1)

It was in 14th century Florence that an epic awakening happened. It was all-pervasive. It wasn’t just art that began to thrive. Philosophy, economics, culture and science began rapid change, too.

Education, technology and literature were thrown into a cauldron of modernization, and world-shaking disruption and advancements spread rapidly. Fast-forward to today, and the comparison is striking. As we enter a new era of disruption and change underpinned by new technologies, business models and more (see Future Trends: A Seismic Shift Underway), the past offers an opportunity to guide and inform our future. The insights may help us see opportunities from a new perspective.

We’ve identified dozens of parallels and lessons from the Renaissance that can give insurers and technology experts food for thought as they prepare for this journey. Over the coming months, we will be taking a look at the renaissance unfolding in insurance and reflecting on when the world was shifting from the “dark ages” to a future of opportunities, possibilities and enlightenment.

See Also: The Five Charts on Insurance Disruption

As a preview, consider the original Renaissance and these modern parallels to today’s:

Focus on People

In the dark ages, individuals didn’t matter on the level they did during the Renaissance, when individual thought was cultivated and education encouraged. People gained freedoms to act and create in ways they hadn’t thought of before.

Today, technology and connectivity have brought a new level of individualism to insurance. We are moving from mass standardization to hyper-personalization for everything from marketing to product pricing. The individual voice, rather than groups, matters more than ever.

Universal Access

The Renaissance changed communication. Moveable type and printing allowed communication to be more widely disseminated to the larger population.

In today’s world, we can reach nearly everyone, any time, anywhere and in any way.  Transactions take place on mobile devices. Social media has made it so customer thoughts and decisions are not hampered by distance or hours of operation. The enlightened and prepared insurer has nothing standing between it and its customer. “Trade” has blossomed in the city of the internet.

Reality and Empiricism

Art and science in the Renaissance shared a trait — the drive for a “real view.” Artists approached painting and sculpture from the standpoint of realism, while science began to revisit the idea of research and empirical evidence.

In our era, at least for the last several decades, insurers have also attempted to operate from a standpoint of mathematical certainty — pricing products based on historical data trends. Yet the digital era is bringing with it an entirely new set of real-time data streams and, with those, real-time, personalized analysis, pricing and decision-making. Our new perspectives will soon allow us to see into individual lives and habits with striking clarity. (For more on this, see John Johansen’s blog series on Data Symmetry.) We will enjoy enhanced levels of insight to engage and service customers as never before.  And all of this reality will be brought to us with dramatic speed. Insurers that are prepared with the agility to consume and analyze data in real time will have the advantage over their competitors to better serve their customers.

Money-Driven Innovation

The Renaissance didn’t happen overnight. It was spurred by a convergence of factors, the greatest of which was increased wealth. Trade in Florence had produced a new class of financier who was willing to fund artistic and scientific endeavors. Wealth created ease; ease allowed time for thought and innovation.

Our modern businesses are also the beneficiaries of affluence. Population and economic growth have created a culture where even many of the economically disadvantaged have access to digital and mobile technologies. Those technologies provide online access to insurance to protect them against a growing array of risks.

Likewise, investments in the 20th century helped insurers become more efficient and more accessible, fueling an improved product and service landscape within the traditional insurance business model.

Today’s renaissance, however, is moving well beyond the traditional model. Significant capital investment in new insurance greenfield or start-up companies is fueling massive innovation in products, services and business models. For reference, simply consult the CB Insights Periodic Table of Insurance TechCB Insights has indicated that Q1 2016 has already topped the record for most early-stage insurance tech deal activity (Seed/Series A). This includes two start-ups: a peer-to-peer insurance company, Lemonade, and a small business insurance start-up, Next Insurance. Interest and investment is also expanding beyond venture investors to carriers and reinsurers such as Guardian Life’s GIS Strategic Ventures investment in health benefits startup, Maxwell Health and many more. For the 130-plus start-ups and private companies in the insurance tech space, CB Insights indicates that more than $3.5 billion in aggregate funding has been raised.  Money is the seed and the fuel for the massive innovation taking hold in insurance.

In the coming weeks, we will dig deeper into the details of the insurance renaissance. We will uncover some of the philosophy behind modernization, while also thinking about the practical aspects of improved operations, digital capabilities and customer service. In each case, we’ll be keeping our focus on agility, innovation and speed so that we won’t just be learning about the renaissance, but we’ll be living out its lessons within our organizations.

How to Resist Sexy Analytics Software

Who’s made the mistake of buying apps or sexy analytics software just based on appearance?

Go on, own up. I’m sure at one time or other, we have all succumbed to those impulse purchases.

It’s the same with book sales. Although it should make no difference to the reading experience, an attractive cover does increase sales.

But if you approach your IT spending based on attractiveness, you’re heading for trouble.

Now you may be thinking. Hold on, that’s what my IT department is there to protect against. That may be the case in your business, but as Gartner has predicted, by 2017 the majority of IT spending in companies is expected to be made by the CMO, not the CIO.

There are advantages to that change. Software will need to be more accessible for business users and able to be configured without IT help, and the purchasers are likely to be closer to understanding the real business requirements. But, as insight teams increase their budgets, there are also risks.

This post explores some of the pitfalls I’ve seen business decision makers make. Given our focus as a blog, I’ll be concentrating on the purchase of analytics software on the basis of appearance.

1. The lure of automation and de-skilling:

Ever since the rise of BI tools in the ’90s, vendors have looked for ways to differentiate their MI or analytics software from so many others on the market. Some concentrated on “drag and drop” front ends, some on the number of algorithms supported, some on their ease of connectivity to databases, and a number began to develop more and more automation. This led to a few products (I’ll avoid naming names) creating what were basically “black box” solutions that you were meant to trust to do all the statistics for you. They became a genre of “trust us, look the models work” solutions.

Such solutions can be very tempting for marketing or analytics leaders struggling to recruit or retain the analysts/data scientists they need. Automated model production seems like a real cost saving. But if you look more deeply, there are a number of problems. Firstly, auto-fitted models rarely last as long as ‘hand crafted’ versions, and tend to degrade faster as it is much harder not to have overfitted the data provided. Related to this, such an approach does not benefit from real understanding of the domain being modeled (which is also a pitfall of outsourced analysts). Robust models benefit from variable and algorithm selection that are both appropriate to the business problem and know the meaning of the data items, as well as any likely future changes. Lastly, automating almost always excludes meaningful “exploratory data analysis,” which is a huge missed opportunity as that stage more often than not adds to knowledge of data and provides insights itself. There is not yet a real alternative to the benefits of a trained statistical eye during the analytics and model building process.

2. The quick fix of local installation:

Unlike all the work involved in designing a data architecture and appropriate data warehouse/staging/connectivity solution, analytics software is too often portrayed as a simple matter of install and run. This can also be delusory. It is not just the front end that matters with analytics software. Yes, you need that to be easy to navigate and intuitive to work with (but that is becoming a hygiene factor these days). But there is more to consider round the back end. Even if the supplier emphasizes its ease of connectivity with a wide range of powerful database platforms. Even if you know the investment has gone into making sure your data warehouse is powerful enough to handle all those queries. None of that will protect you from lack of analytics grunts.

See Also: Analytics and Survival in the Data Age

The problem, all to often, is that business users are originally offered a surprisingly cheap solution that will just run locally on their PCs or Macs. Now, that is very convenient and mobile, if you simply want to crush low volumes of data from spreadsheets or data on your laptop. But the problem comes when you want to use larger data sources and have a whole analytics team trying to do so with just local installations of the same analytics software (probably paid for per install/user). Too many current generation cheaper analytics solutions will in that case be limited to the processing power of the PC or Mac. Business users are not warned of the need to consider client-server solutions, both for collaboration and also to have a performant analytics infrastructure (especially if you also want to score data for live systems). That can lead to wasted initial spending as a costly server and reconfiguration or even new software is needed in the end.

3. The drug of cloud-based solutions:

With any product, it’s a sound consumer maxim to beware of anything that looks too easy or too cheap. Surely, such alarm bells should have rung earlier in the ears of many a marketing director who has ended up being stung by a large final “cost of ownership” for a cloud-based CRM solution. Akin to the lure of fast-fix local installation, cloud-based analytics solutions can promise even better, no installation at all. Pending needing firewall changes to have access to the solution, it offers the business leader the ultimate way to avoid those pesky IT folk. No wonder licenses have sold.

But anyone familiar with the history of the market leaders in cloud-based solutions (and even the big boys who have jumped on the bandwagon in recent years), will know it’s not that easy. Like providing free or cheap drugs at first, to create an addict, cloud-based analytics solutions have a sting in the tail. Check out the licensing agreement and what you will need to scale. As use of your solution becomes more embedded in an organization, especially if it becomes the de facto way to access a cloud-based data solution, your users  thus license costs will gather momentum. Now, I’m not saying the cloud isn’t a viable solution for some businesses. It is. But beware of the stealth sales model that is implicit.

4. Oh, abstraction, where are you now I need you more than ever?

Back in the ’90s, the original business objects product created the idea of a “layer of abstraction” or what was called a “universe.” This was configurable by the business (but probably by an experienced power user or insight analyst who knew the data), but more often than not benefited from involvement of a DBA from IT. The product looked like a visual representation of a database scheme diagram and basically defined not just all the data items the analytics software could use, but also the allowed joins between tables, etc. Beginning to sound rather too techie? Yes, obviously software vendors thought so, too. Such a definition has gone the way of metadata, perceived as a “nice to have” that is in reality avoided by flashy-looking workarounds.

The most worrying recent cases I have seen of lacking this layer of abstraction are today’s most popular data visualization tools. These support a wide range of visualizations and appear to make it as easy as “drag and drop” to create any you want from the databases to which you point the software (using more mouse action). So far, so good. Regular readers will know I’m a data visualization evangelist. The problem is that without any defined (or controlled, to use that unpopular term) definition of data access and optimal joins, the analytics queries can run amok. I’ve seen too many business users end up in confusion and have very slow response times, basically because the software is abdicating this responsibility. Come on, vendors, in a day when Hadoop et al. are making the complexity of data access more complex, there is need for more protection, not less!

Well, I hope those observations have been useful. If they protect you from an impulse purchase without having a pre-planned analytics architecture, then my time was worthwhile.

If not, well, I’m old enough to enjoy a good grumble, anyway. Keep safe! 🙂