Tag Archives: crawford

Global Trends 1H 2017: Upside Potential

Key Highlights

External influencers: mixed macroeconomic signals

  • Uptick in global growth and rebound in employment levels, if
    sustained, will have favorable implications for the sector.
  • As central banks turn cautious, bond yield improvements are likely to slow in the near term, implying limited investment yield upside for insurers.

Sector trends: hurricanes to set course

  • Supported by a strong bull run, global insurance stocks continued
    to rise as several large insurers saw improved investment and
    underwriting results.
  • Pick-up in long-term buy recommendations for U.K. and E.U. insurers reflect improved analyst expectations.
  • Natural catastrophe (NatCat) losses: Active hurricane season is
    expected to halt the relatively benign period of losses and limit
    further pricing weakness that has persisted after 2012.

See also: Insurance Technology Trends in ’17, Beyond  

Tech disruption: blockchain rising

  • Addressing the evolving nature of risk through innovation is a key
    imperative for insurers.
  • Blockchain has now progressed beyond pilot stage, with early
    adopters looking to gain significant advantages.
  • EY has taken a strong lead in helping insurers create a blockchain-based new-age information infrastructure.

Regulatory landscape: insurers prepare for impact

  • Insurers need to initiate implementation plans to
    effectively address the changes introduced by the new accounting regulations (including IFRS17 Insurance Contracts).
  • General Data Protection Regulation (May 2018): With more than
    half of the two-year post-adoption grace period now over,
    insurers will have to act fast to address the impending challenges.

You can find the full EY report here.

Insurtech Is Ignoring 2/3 of Opportunity

Fifty-six cents of every premium dollar is indemnity (loss costs). A further 12 cents is needed to assess, value and pay those losses. Given that two-thirds of the insurance industry economics are tied up in losses, it would be logical that much of the innovation we are now witnessing should focus on driving down loss costs and loss adjustment expense — as opposed to the apparent insurtech focus on distribution (and, to a lesser extent, underwriting).

This is beginning to happen.

What do you have to believe for loss costs and adjustment expenses to be a prime area of innovation and disruption? You have to believe that the process (and, thus, the costs) to assess, value and pay losses is inefficient. You have to believe that you can eliminate the portion of loss costs associated with fraud (by some estimates, as much as 20%). You have to believe that there is a correct amount for a loss or injury that is lower than the outcomes achieved today, particularly once a legal process is started. You have to believe that economic improvements can happen even as customer experience improves. And you have to believe that loss costs and adjustment expenses can decline in a world in which sensor technology starts to dramatically reduce frequency of losses and manufacturers embed insurance and maintenance into their “smart” products.

See also: ‘Digital’ Needs a Personal Touch  

Having spent years as an operating executive in the industry, I happen to believe all of the above, and I am excited by the claims innovation that is just now becoming visible and pulling all of the potential levers.

We are seeing an impact on nearly all aspect of the claims resolution value chain. Take a low-complexity property loss. Technology such as webchat, video calls, online claims reporting and customer picture upload are all changing the customer experience. While the technologies aren’t having a huge impact on loss adjustment or loss costs, they are having profound impact on how claims are subsequently processed and handled.

One such example, as many have heard, is how Lemonade uses its claims bot for intake, triage and then claims handling for renters insurance. Lemonade’s average claim is a self-reported roughly $1,200 (low value), and only 27% are handled in the moment via a bot as opposed to being passed to a human for subsequent assessment. Still, Lemonade certainly provides a window to the future. Lemonade is clearly attacking the loss-adjustment expense for those claims where it believes an actual loss has occurred and for which it can quickly determine the replacement value.

More broadly, Lemonade is a window into how many are starting to use AI, machine learning and advanced analytics in claims in the First Notice of Loss (FNOL)/triage process — determining complexity, assessing fraud, determining potential for subrogation and guiding the customer to the most efficient and effective treatment.

While Lemonade is the example many talk about, AI companies such as infinilytics and Carpe Data are delivering solutions focused specifically on identifying valid claims that can be expedited and on identifying those claims that are more questionable and require a different type of treatment. These types of solutions are beginning to deliver improvement in both property and casualty. New data service providers — such as Understory, which provides single-location precision weather reports — can be used to identify a potential claim before even being notified, which can reduce loss costs through early intervention or provide reference data for potentially fraudulent claims.

Equally interesting is the amount of innovation and development appearing in the core loss-adjusting process. Historically, a property claim — regardless of complexity — would be assessed via a field adjuster who evaluates and estimates the loss. Deploying technical people in the field can be very effective, but it is obviously costly, and there is some variability in quality.

In a very short time, there are very interesting new models emerging that reimagine the way insurers handle claims.

Snapsheet is providing an outsourced solution that enables a claimant of its insurance company customers to use a service that is white-labeled for clients. The service enables the claimant to take pictures of physical damage, which is then “desk adjusted” to make a final determination of the value of the claim, followed by a rapid and efficient payment.

WeGoLook, majority-owned by claims services company Crawford & Co, is using a sophisticated crowd-sourced and mobile technology solution to rapidly respond to loss events with a “Looker” (agent) who can perform a guided process of field investigation and enable downstream desk adjusting process, as well.

Tractable provides artificial intelligence that takes images of damaged autos and estimates value (effectively a step toward automatic adjudicating). Tractable — like, Snapsheet and WeGoLook — has made great strides. Aegis, a European motor insurer, is rolling out Tractable following a successful pilot. In each of these instances, the process is much improved for customers — whether it be self-serving because they choose to do so (Snapsheet), rapidly responding to the event (WeGoLook) or dramatically reducing the cycle time (Tractable). All provide material improvements in customer experience.

See also: Waves of Change in Digital Expectations  

Obviously, each of these models is attacking the loss adjustment expense — whether through a more consistently controlled process of adjusting at a desk, using AI to better assess parts replacement vs. repair or improving subrogation, among other potential levers.

Today, all of these solutions are rather independent of each other and generally address a low-complexity property loss (mostly in the auto segment), but the possible combination of these and other solutions (and how they are used depending on type and complexity of claims) could begin to amplify the impact of technology innovation in claims.

‘Digital’ Needs a Personal Touch

The insurance claims process is rapidly being transformed from analog to digital as industry economics and customer expectations demand it and as technology enables it. Not only does digitization provide impressive cost savings and satisfy the expectations of a growing number of “always connected” consumers, but it delivers a host of other benefits. Insurtech providers of many types have emerged seemingly overnight to provide a dizzying array of new technologies to support claims innovation within established carriers and enable new insurance entrants at the same time.

See also: Let’s Keep ‘Digital’ in Perspective  

Examples include:

  • CCC Information Services, a leading U.S. information provider to the automotive, insurance and collision repair industries, is working to combine auto injury causation software with telematics expertise and overlaying casualty claims management assets to meet the needs of the rapidly transforming auto insurance claims industry.
  • DropIn provides an on-demand, live video platform for more precise underwriting, speeds claim resolution, enhances damage estimate accuracy and reduces indemnity and loss adjustment expenses. Users can access streaming video and high-resolution photos captured directly by customers or via a crowdsourced independent contractor network using commonly available insurtech tools, such as smartphones and drones, to achieve insight into the complexities of auto and property damage for enhanced decision-making.
  • EagleView provides aerial imagery, data analytics, property data and GIS solutions related to millions of residential and commercial properties for local and federal government agencies as well as the infrastructure, insurance, solar and construction sectors.
  • Livegenic provides cloud-based, real-time patented video solutions to property and casualty insurance organizations connecting every part of the claims ecosystem. The Livegenic platform streamlines communication between in-house and external adjusters, appraisers, contractors and policyholders, provides field video loss documentation capabilities, and delivers customer self-service solutions.
  • OnSource provides insurance companies with claims and underwriting photo inspections through intuitive smartphone apps and a mobile website. Policyholders and claimants use self-inspection apps, Instant Inspection’s chat website or its managed network of thousands of photo field inspectors and quality assurance analysts.
  • PartsTrader, an automated repair parts bidding and procurement platform, connects thousands of collision repair shops with repair parts suppliers of all types to reduce the cost and cycle time in the $15 billion U.S. repair parts market segment. The PartsTrader platform allows repair shops to search and compare multiple suppliers at the same time and to work with suppliers competing for their business.
  • Snapsheet uses proprietary technology to optimize virtual auto physical damage claims operations, giving insurance adjusters the tools they need to provide a seamless experience to their claimants.
  • WeGoLook, in which Crawford recently acquired a majority interest, provides on-demand field inspection and verification services. Using its web and mobile platform the company empowers a 30,000-plus mobile workforce, known as Lookers, to collect and verify information and fulfill custom tasks for businesses and consumers alike in insurance and other verticals.

While this is all good news – and inevitable – what is at risk of being overlooked in this rush to a more efficient, streamlined claim process are the individuals who buy and use insurance services and at critical times require the reassurance and comfort of a personal touch.

Auto claims are a case in point. Many claims processes, mainly those that take place in the background, are well-suited to the cold efficiency of technology, automation and digitization. But the auto claim is frequently preceded by a totally unexpected, disorienting and sometimes traumatic accident. This is the moment when the consumer most needs and depends upon the insurance carrier….and a human touch.

In 2016, there were about 190 million registered passenger vehicles on the road in the U.S. More than 15 million auto accidents occurred involving 18.5 million vehicles. Stated another way, about one out of every 10 cars on the road was involved in an accident. On average, every driver can expect to experience an auto accident once every 10 years, most minor in nature but others involving serious injury or even death. Sadly, there were 40,200 traffic fatalities in 2016.

We are never fully prepared, nor do we know exactly what to do when involved in a traffic accident. The experience is unfamiliar and confusing. A battery of questions immediately come to mind – how much is this going to cost me? – was this my fault? – could I have prevented it? – how will I get where I was going? – who should I notify first? – is anyone hurt, including me? And so on.

Historically, a police officer would typically show up, review the scene, ask the drivers several questions, make some notes and direct the vehicles off the roadway to a safe location or if necessary call a tow truck or an emergency vehicle.

Then you would need to follow an often frustrating, protracted claims and repair process; call your agent or carrier; get the car to a body shop, arrange for a rental car; make numerous calls to the shop and the adjuster to see when your car will be ready; and then reach into your pocket to pay your deductible even after paying your insurance premiums faithfully for all those years.

But this scenario will soon be a thing of the past. For one thing, police in many urban markets are no longer responding to auto accident calls. Law enforcement budgets are shrinking, and police officers are busy handling higher-priority tasks such as criminal investigations. We can’t rely on the police always showing up in the future.

Insurance companies are addressing some of their challenges by using new technologies to make the auto claim and repair process simpler and faster. Many carriers offer smartphone apps that include claim-reporting capabilities enabling drivers to take photos or videos of the accident damage at the scene (or later from home) and upload them to the carrier, which assesses the damage and schedules the repair, often in minutes. Some companies are paying drivers electronically on their smartphones and closing out the claim in mere hours.

However, for those who believe that younger policyholders prefer technology to human contact, the recent J.D. Power 2016 U.S. Auto Claims Satisfaction Study reveals that only 7% of millennials prefer digital channels to report their claims and concludes that technology cannot fully replace humans during the claims process, even among millennials.

The one missing piece is what happens immediately after an accident occurs and before your insurance company starts to process your claim. Not everyone has a smartphone, is tech-savvy enough or understands the importance of reporting the accident immediately to the insurance company. Auto accidents can be traumatic. Many people can be involved, in your vehicle and in other vehicles. Differences of opinion between drivers about the facts or what caused the accident are not unusual. Without the presence and authority of a police officer, people are left to cope with all of these issues on their own. And, because almost 80% of vehicles damaged in auto accidents are safely driveable, there’s no logical reason to have to stay at the scene once your information is exchanged with the other driver(s).

See also: Do You Really Have a Digital Strategy?

To address these new realities, innovative programs have emerged to bridge the gap between the accident and the claim report. One such solution is the Collision Reporting Center (CRC). These facilities provide drivers with the assistance, advice and support they need at the critical time following an accident. The CRC is a partnership between local police departments and privately managed reporting centers. The model initially emerged in Canada 20 years ago when the insurance industry and police joined forces to solve a mutual challenge. Today, the operation manages 32 Collision Reporting Centers in partnership with 53 police departments across Canada and serves 80% of the Canadian auto insurance industry. Recently, the operator expanded into the U.S., opening its first Collision Reporting Center in Roanoke, VA, in the fall of 2016, with plans to open several more centers soon.

At the Collision Reporting Center, drivers involved in an accident provide their individual accounts of what happened and other information while professional staff take digital images to document damage. The information is reviewed by an on-site police officer at the CRC and is immediately sent to the driver’s insurance company, where a claim is initiated and processed. Drivers are provided with a customized instructional guide from their own carriers describing what to do next and a private room where they can make a phone call to their insurance company or family members. The Collision Reporting Center provides a comfortable and safe environment, eliminating the need for drivers to wait on the roadway.

As we move toward self-driving automobiles and the elimination of most accidents,, we will see many innovative accident and claim management programs emerge that can bridge the gap between the auto accident and resolution of the claim process. Collision Reporting Centers are an excellent solution to these needs – they provide personalized customer service and a human touch with the power of technology making the auto accident reporting process as non-intrusive as possible into our busy lives.

Will Startups Win 20% of Business?

Headlines about the insurtech disruption are split between issues like improvement to the customer experience and how traditional carriers expect to be affected. The situation is reminiscent of the days when Wal-Mart announced that a store was coming to a small town, and local retailers began screaming that the sky was falling.

We keep a close eye on insurtech at WeGoLook because, as a leader in the gig economy, we find natural partnerships abundant between our on-demand workforce and innovative insurtech services.

According to PwC Global, many insurance carriers see the potential downside to ignoring insurtech:

  • 48% of insurers fear that as much as 20% of their business could be lost to insurtech startups within the next five years;
  • Annual investment in insurtech startups has increased fivefold over the past three years, with total funding reaching $3.4 billion since 2010; and
  • More than two-thirds of insurance companies say they have taken concrete steps to address the challenges and opportunities presented by insurtech.

Will incumbent carriers accept the anticipated losses or will they fight to retain market share?

See also: Be Afraid of These 4 Startups  

The Standard Market’s Reaction

Traditional insurers have begun to throw a lot of money at the insurtech situation. Many of them have significant venture capital funds.

These steps are not necessarily being taken to compete with the startups that are expected to capture the 20% but to retain control over methods of distribution.

Even though insurtech startups appear to be better than incumbents at creating products and distribution systems, many still rely on their insurance partnership with standard carriers for underwriting and claims administration. New pay-per-use companies such as Metromile and Simplesurance, which are not regulated insurers, sell policies that are underwritten by established insurers.

A Threat to Distribution

Insurtech startups will take a significant bite out of the traditional insurance distribution system. Startups and incumbents will be forced into partnerships because both are vital to delivering products.

Insurers are certainly not blind to the opportunities that have become available as a result of technology that will allow them to learn more about the consumer experience and how the consumer behaves.

We’ve already seen carriers such as MetLife and Aviva found and support startup incubators. And even WeGoLook was recently acquired by Crawford & Co.

And this is a good thing!

If incumbent insurers can embrace and adapt to the innovation, creativity and agility of the startups, the insurance industry will be better positioned to meet the needs of the consumer.

The newly created partnerships are destined to make significant progress in solving the problems of the new economy and bring consumer-centric innovative products to the marketplace.

The New Competition Partners

Some of the startups that have already succeeded in taking a bite out of the traditional distribution system:

Oscar

Founded in 2012 with $750 million in venture capital, and one of the first to establish its presence, Oscar was created as a result of the Affordable Care Act. Oscar relies on technology and data so it can improve the healthcare it offers to customers. With annual revenue of $200 million, the company is currently valued at $3 billion.

See also: Top 10 Insurtech Trends for 2017  

Trov

Also founded in 2012, Trov is a U.S. startup funded with $46 million. The company was established to sell insurance by the piece.

The company will provide insurance on a per-item basis and offer policies on a term selected by the consumer.

Although founded in the U.S., the company first marketed its innovative product in Australia and targeted millennials. Like most other startups, the company partnered with a traditional insurer to handle the underwriting.

PolicyGenius

PolicyGenius is banking on consumers’ preference to have all their insurance products in one place and online.

The company was founded in 2014 with $21 million in capital and has partnered with major traditional players such as Axa, Transamerica and MassMutual.

As a virtual online insurance broker, PolicyGenius intends to make a dent in the insurance distribution system through satisfying the preferences of the consumer.

Metromile

San Francisco-based Metromile has created disruption in the auto insurance market by offering pay-per-mile auto insurance.

Through the use of an innovative app working in concert with the Metromile Pulse plug-in, consumers who use their vehicle on a limited basis will obtain significant savings on auto insurance.

The company offers a full customer service team and 24/7 claims service. All policies are underwritten via its partnership with National General Insurance Company (formerly GMAC).

Lemonade

After promising to reinvent the insurance industry, Lemonade offers home and renters insurance by using bots instead of brokers.

After testing the product in New York, the company launched nationwide in 2017. As licenses are approved on a state-by-state basis, the Lemonade footprint will continue to grow.

Unlike traditional insurers, Lemonade charges a flat-fee commission and then gives back unclaimed money to charitable causes that policyholders care about.

See also: Why I’m Betting on Lemonade  

Lemonade is a perfect example of how insurtech startups are revolutionizing the insurance industry.

But There’s Hope

Although the threat of losing market share is demonstrated by the success of many of the insurtech startups, it’s important to recognize that a relationship can manifest that benefits both traditional insurers and the innovative startup.

New business for one startup doesn’t necessarily mean a loss for another.

Also, traditional insurers are already positioned to raise the additional capital needed to compete with the startups — if they choose to do so.

So, will the 20% market loss actually be realized?

If we play our cards right, probably not.

Headaches Caused by Sharing Economy

The sharing economy, which is made up of consumers and businesses who provide on-demand services, faces particular challenges when it comes to insuring their risk while conducting business.

Simply put, the sharing economy and the short-term exchange of assets for a fee has created headaches for insurers. Think of the early days of Uber and ride-sharing insurance.

Certainly, one constant challenge that on-demand or freelance workers face, is purchasing insurance protection at affordable prices.

Since on-demand workers typically work on a per project or per task basis, there may not be a need for annual policies. Especially if there is a gap of more than 30 days between jobs.

In the sharing economy, where ride-sharing has become a tremendous service for on-demand workers, the ability to purchase automobile coverage on a per-mile basis may very well become a critical need for those who participate in this new industry.

As the sharing economy continues to expand, the ability to purchase insurance products on a pay-as-you-use basis will become even more important to the members of this new economy.

And, insurance companies will have to respond to the significant insurance implications.

Let’s go a little deeper.

Short-Term Insurance: Pay-As-You-Use

Pay-as-you-use is a fairly common economic precept in today’s technology landscape.

It can only become profitable if the consumer realizes a benefit, values its ease of use, and the variable expenses.

An example is when Metromile introduced its pay-per-mile insurance coverage; it easily appealed to the majority of low-mileage drivers who felt that they would now be treated more equitably.

See also: Insurtech: One More Sign of Renaissance  

Ride-share drivers obviously benefited from the reduction in wasted premium dollars, and they were compensated by the delivery of a personalized experience that made them feel counted.

Consumers are responsible for constructing, through their needs and desires, a digitally keen, on-demand sharing economy.

Innovative sharing economy companies like Airbnb, Uber, and WeGoLook, are turning wasted assets and labor into productive and profitable products and services.

The Insurtech Movement

Just as the Italian Renaissance took hold due to the desires and determination of dedicated stakeholders, insurtech as a concept has grown to be a collaborative movement (or Renaissance) in the insurance industry.

Yes, we just compared the Renaissance to insurtech.

The point here is, as with the 14th-century movement, these cultural shifts serve as a bridge from the old to new.

Insurtech, as a technological movement, branched out from fintech following reports of significant capital entering the market for insurance start-ups.

This massive availability of capital paved the way for start-ups and existing companies to innovate new products, services, and fresh new business models.

These models are the innovative driving force supporting the insurtech movement, and why new and existing carriers are considering new business models to jump-start a fairly stale marketplace.

Short-term insurance products are a part of this insurance renaissance.

Denise Garth’s article at Majesco.com sums this all up eloquently;

“Just like the original Renaissance, today’s Insurance Renaissance is spurred by the converging factors of people, technology, and market boundaries. InsurTech is powered by all three. Within insurance, this new Renaissance represents a real shift with significant business implications beyond legacy modernization. It represents a whole realm of new opportunities via greenfields, start-ups and incubators to cover a fast changing market landscape.”

The Big 3 Areas of Innovation and Disruption: Short-Term Insurance Implications

The sharing economy is certainly a driving force behind the expected innovation coming out of the insurance industry as companies respond to the needs of the on-demand workforce. Three areas that are most important for short-term insurance innovation are:

People

As baby boomers hand-off to Gen X, and then Gen X hands off to millennials, and the sharing economy continues to grow, expectations must be met regarding pay-per-use-products and changes in communicating resulting from technology.

Technology

Consider for a moment how often consumers use their smartphone daily to research, purchase, and access products and services. The resulting expectations that are seeded by technology continually disrupt the traditional insurance marketplace and means of distribution.

Mobile technology is the linchpin of short-term insurance as it guarantees immediate access and information flow between carriers and policyholders.

Boundaries

Traditional borders matter less and less. Technology and globalization generally simply does not value them.

Consider how car manufacturers like Tesla are looking to offer the consumer vehicle insurance as a part of the vehicle purchase.

The new business models being formed will drive additional changes in the lives of consumers leading to new expectations and innovation.

With reduced boundaries and increased information, consumers require on-demand products that suit their personal needs. Short term insurance will be a large part of this discussion going forward.

A Bright Horizon

Today’s insurers are gazing at the horizon that hasn’t been this bright in decades.

Their window of opportunity is wide open for participants to innovate and offer new business models and products to meet the needs of the pay-as-you-go culture that has developed.

See also: A Renaissance, or Just Upheaval?  

Thank you, sharing economy!

Working capital is available for those with the vision, skill-sets, and determination, whether their experience is based on insurance, technology, or other market segments.

Change is on the way, and we’d be wise to get on board lest we get left behind.

Although the growing consumer emphasis is on short term and personalized products, these industry-changing innovations are by no means short term.

They are here to stay!