Tag Archives: customer satisfaction

What’s in Store for Blockchain?

Blockchain, blockchain, blockchain! What does that mean for insurance? No one knows yet, but that doesn’t stop blockchain from being one of the hottest topics in the insurance industry right now. This week, I take a look at the direction this puck is heading.

Hype or reality?

Last September, the World Economic Forum published a report titled, Deep Shift – Technology Tipping Points and Societal Impact. The report is based on surveys with more than 800 executives and experts about new technologies and innovations. The point of the report is to identify deep shifts in society that result from new technologies. These include areas such as 3D printing, driverless cars, wearables and artificial intelligence.

I was drawn to shift No. 16, simply called “Bitcoin and the blockchain.” By 2025, 58% of these experts and executives believed we would hit the tipping point for Bitcoin and blockchain. This was defined as:

“10% of global gross domestic product will be stored on blockchain technology.”

To put that into context, the total worth of Bitcoin today in the blockchain is about 0.025% of today’s $80 trillion global GDP.

Also of interest, especially given that it looks like Tunisia will be the first country to issue a digital currency on a blockchain, shift No. 18 was called “Governments and the blockchain.” Here, almost three out of four in the survey group expected that “governments would collect tax via a blockchain by 2023.”

It’s a reality then!

It’s certainly looks that way. And $500 million of venture capital money in 2015 can’t be wrong, can it?

The prospect of a seismic shift on a par with the impact of the Internet is compelling. That explains all the attention, predictions and excitement about blockchain. But, if we use the evolution of the Internet as a benchmark, the development of blockchain today for commercial use is equivalent to the Internet in, say, the mid-1990s, at best.

The debates on Bitcoin, on whether private or public blockchains will be used, on Sybase vs Oracle (oops, wrong century) are yet to play out. The ability of the Bitcoin blockchain to scale to handle massive volumes at lightning speed remains unproven.

Now, just as it was in 1995, blockchain technology is at an embryonic stage. Still finding its way, it has yet to prove it is a viable, industrial-strength, large-scale technology capable of solving world hunger.

That is why I am going to focus on the use case for insurance rather than the technology itself. (For one explanation of how blockchain works, go to Wired.)

The smart insurance contract

This is getting the most attention right now. The notion of automating the insurance policy once it is written into a smart contract is compelling. The idea that it will pay out against the insurable event without the policyholder having to a make a claim or the insurer having to administer the claim has significant attractions.

First, the cost of claims processing simply goes away. Second, the opportunity for fraud largely goes away, too. (I hesitate here simply because it is theoretical and not yet proven.) Third, customer satisfaction must go up!

One example being used to illustrate how these might work came from the London Fintech Week Blockchain Hackathon last September. Here, a team called InsurETH built a flight insurance product over a weekend on the Ethereum platform.

The use case is simple. In the 12 months leading up to May 2015, there were 558,000 passengers who did not file claims for delayed or canceled flights in and out of the UK. In fact, fewer than 40% of passengers claimed money from their insurance policy.

InsurETH built a smart contract where the policy conditions were held on blockchain. Using the Oraclize service to connect the blockchain with the Internet, publicly available data is used to trigger the insurance policy.

In this case, a delayed flight is a matter of fact and public record. It does not rely on anyone’s judgement or individual assessment. It is what it is. If a delayed flight occurs, the smart contract gets triggered, and the payout is made, automatically and immediately, with no claims processing costs for the insurer and to the satisfaction of the customer.

Building on this example and applying it to motor, smart contracts offer a solution for insurers to control claims costs after an accident. A trigger that there has been an accident would come to the blockchain via the Internet from a smartphone app or a connected car. Insurers are always frustrated when customers go a more expensive route for repairs, recovery and car hire. So, with a smart contract, insurers could code the policy conditions to only pay out to the designated third parties (see related article by Sia Partners).

So long as the policy conditions are clear and unambiguous and the conditions for paying are objective, insurance can be written in a smart contract. When the conditions are undeniably reached, the smart contract pays. As blockchain startup SmartContract put it, “Any data feed trusted by a counterparty to release payment or simply complete an agreement can power a smart contract.”

To understand this better, I asked Joshua Davis, the technical architect and co-founder at blockchain p2p InsurTech Dynamis, to explain. He said:

“You need well-qualified oracle(s) to establish what ‘conditions’ exist in the real world and when they have been ‘undeniably reached.’  An oracle is a bridge between the blockchain and the current state of places, people and things in the real world.  Without qualified oracles, there can be no insurance that has any relation to the world that we live in.

“As far as oracles go, you can use either a single trusted oracle, who puts up a large escrow that is lost if they feed you misinformation, or many different oracles who don’t rely on the same POV [point of view] or data sources to verify that events occurred.

“In the future, social networks will be the cheapest and most used decentralized data feeds for various different insurance applications.  Our social networks will validate and verify our statements as lies or facts.  We need to be able to reliably contact a large enough segment of a claimant’s social network to obtain the truth.  If the insurance policy can monitor the publishing or notification of our current status to these participants and their responses accurately confirm it, then social networks will make for the cheapest, most reliable oracles for all types of future claims validation efforts.”

Is this simply too good to be true?

Personally, I don’t think it is. Of course, a smart contract doesn’t have to be on the blockchain to deliver this use case.

However, what the blockchain offers is trust. And it offers provenance. The blockchain provides an immutable record and audit trail of an agreement. The policyholder does not have to rely on the insurer’s decision to pay damages because the insurer has broken its promise to keep the client safe from harm. As the WEF report states, this is an “unbreakable escrow.” The insurer will pay before it even knows what happened.

There’s another reason for going with the blockchain: cybersecurity!

With the blockchain sitting outside the corporate firewall and being managed by many different and unconnected parties, the cyber criminal no longer has a single target to attack. As far as I’m aware, blockchain is immune to all of the conventional cyber threats that corporations are scared of.

What happens when you put blockchain and P2P insurance together?

In December, I published a two-part article on Peer 2 Peer Insurance (here are Part 1 and Part 2). When you put the P2P model together with the blockchain, this creates the potential for a near-autonomous, self-regulated insurance business model for managing policy and claims.

Last year, Joshua Davis wrote an interesting white paper called “Peer to Peer Insurance on the Ethereum Blockchain.” He presents the theory behind blockchain and the creation of decentralized autonomous organizations (DAO). These are corporate entities with no human employees.

The DAOs would be created for groups of policyholders, similar to the P2P group model with the likes of Guevara and Friendsurance. No single body or organization would control the DAO; it would be equally “controlled” by policyholders within each group. All premiums paid would create a pool of capital to pay claims.

And because this is a self-governing group with little or no overhead, any float at the end of the year would be distributed back among the policyholders. Arguably, this makes the DAO a non-profit organization and materially increases the capital reserve for claims costs.

The big question mark for this model is regulation. There still is no answer to who will maintain the blockchain code within each DAO when regulations change. But, what does seem a dead certainty is that someone, somewhere is figuring out how to solve this.

Blockchain offers the potential for new products and services in a P2P insurance model. It should also open insurance to new markets, especially those on or near the poverty line.

For now, we must watch to see what comes from the likes of Dynamis, which is using smart contracts to provide supplementary employment insurance cover on Ethereum.

Innovation will come from new players

It has been my belief for some time that, in the main, incumbent insurance firms will not be able to materially innovate from within. As with Fintech, the innovation that will radically change this industry will come from new entrants and start-up players, such as:

Dynamis

SmartContract

Rootstock

Everledger (see previous article on Daily Fintech)

Tradle

Ethereum Frontier

Codius (Ripple Labs) (update: Codius discontinued)

This is particularly true with blockchain in insurance. These new age pioneers are unencumbered by corporate process, finance committees, bureaucracy and organizational resistance to change.

Besides, the incumbent insurance CIOs have heard this all before. For decades, software vendors have promised nirvana with new policy administration, claims and product engines. So, why should they listen to the claims that blockchain is the panacea for their legacy IT issues? But,  that is a subject for another post … watch this space!

‘Gig Economy’ Comes to Claims Handling

Why is this taking so long?!

The challenge I hear echoed throughout the insurance industry is, “How do we speed up the claims process for customers?” Insurance companies often bear the brunt of frustrations from customers stressed out about delays. As we all know, processing claims takes time and patience to gather information, details, photographs and a myriad of other documentation. Getting the right information and accurate documentation takes even longer.

Based on the volume of claims, resources and personnel can become stretched thin quickly. Despite all the efforts within organizations, it’s not uncommon to see claims departments contorting themselves like Gumby to get it all done. Insurance claims are stressful, and relying on customers to reliably and quickly provide information is a challenge — even when it’s to their benefit.

The problem becomes exacerbated following natural disasters or claims in geographic locations where companies have little to no footprint and limited resources to document and gather the information needed. In those situations, companies have to reallocate and sometimes relocate resources, which is expensive, time-consuming and a logistical nightmare.

Saving time and improving data quality and accuracy are all key components to avoiding customer frustration and increasing customer satisfaction and loyalty.

Traditional Challenges Meet Disruptive Solutions

Recently, there’s been a lot of handwringing about the “sharing economy,” the “gig economy” and what it means for traditional lines of business and workers. Will the workplace as we know it change completely? As Tony Canas shared in his Insurance Thought Leadership piece, “What Will Be the Uber of Insurance?,” the gig economy is hardly the end of the world, and the insurance industry is probably due for some disruption.

What a number of traditional lines of business are beginning to discover is that the gig economy presents an opportunity to leverage the power of crowdsourcing to solve challenges, eliminate inefficiencies and even spark innovation within their organizations. Target and Instacart, GM and Lyft, are great examples of how large, traditional verticals are finding ways to integrate the gig economy into new products and services to attract and keep customers while increasing the bottom line.

Now going back to one of insurance’s greatest challenges — saving time and improving accuracy in the claims process, particularly when it comes to getting information such as photographs, records, police reports and inspections. These tasks sometimes feel like they can go on forever with a single claim as companies try to coordinate logistics with policyholders.

What if there was an Uber for insurers? A service that could dispatch an objective third party with a smartphone to quickly take pictures and gather exactly the information needed in the claims process almost immediately?

There is.

Disruption Gets Good for Insurance

Like Uber, WeGoLook is changing the way the gig economy is disrupting B2B by providing inspection and custom tasking services. Building on the strength of the gig economy and using the crowdsourcing model, WeGoLook has built a nationwide network of field agents that provides a nimbleness that is often buried alive in large enterprises.

Here’s how it works at one of the nation’s largest auto insurance companies, where WeGoLook is incorporated into the claims-handling process:

  • A claim handler places an order on a custom dashboard and chooses a service: (1) vehicle photos, (2) scene inspections, (3) salvage retrieval, (4) police record retrieval.
  • A WeGoLook representative calls the onsite contact/policyholder to verify address/item information and schedule an appointment.
  • The “Looker” arrives on-site and captures the data needed for the service/task.
  • Data is submitted via the mobile WeGoLook app and reviewed by internal staff at WGL for quality assurance.
  • The completed report is sent directly to the claim file.

Turning to the gig economy and its on-demand workforce is generating economic benefits and creating true efficiency. We’ve witnessed the process being replicated in companies both large and small and in a variety of categories.

Since starting the company in 2009, I’m continually inspired by the creativity of entrepreneurs and how they’ve found new and inspirational ways to apply crowdsourcing. From crowdfunding, ridesharing, coworking and delivery services to even “pet Airbnb,” the gig economy marketplace is homing in on specific consumer and business needs and delivering.

Capturing Hearts and Minds (Part 2)

This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.” To download it, click here.

Part 1 of this series explained why retention is so much harder these days. This article explains how insurers can solve the problem.

Know Your Customers

Understand values and behaviors of your customers. Start with available data sources. Augment structured data from traditional back-end systems with unstructured data like those collected through call centers and written correspondence. With these data, you can deduce meaningful patterns and behavior-based customer segments.

Enter into active dialogues to establish meaningful relationships. Use social media analytics and conversations via social networks to increase customer touch points. Use the knowledge gained about their wants and needs to sustain intermittent conversation about things that are helpful to the customer.

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Build an environment where sharing data creates mutual benefits for customer and insurer. Transparency is key. Create and publicize a “customer data policy” that specifies how and when you will use data shared directly or generated through means such as “big data gathering,” and how customers will benefit. Use shared data to create extra customer value, as detailed in the next section.

Offer customer value

It is no surprise that customer value – that is, the value that a customer derives from the relationship with his or her insurer – drives customer loyalty. In a previous study, we defined customer value as the adequate response to customers’ changing needs. How can insurers translate this to understand which value drivers influence retention?

The fairness zone: The first component of customer value we will discuss is – again – price. For most of our respondents, the absolute level of premiums mattered less than individual perception of price fairness – a too-low price has the same negative effect on loyalty as one that is too high (see Figure 5). This means that a customer to whom the price seems right is two to three times less likely to switch in a given year. The fairness of premiums is also an emotional component that insurers need to get right (and tools like social media analytics can support this).

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What is the power of brand? The second value factor we examine is brand. What is the retention value of a good brand? According to our data, it’s less than expected. Only 21% of our respondents name “reputation” as one of the factors that cause them to stay with their chosen insurers. Could brand still be an implicit value driver?

Our recent consumer products industry study, “Brand enthusiasm: More than loyalty,” showed that brand consciousness and brand loyalty are changing, and our data echoes those findings. Only 12% of respondents have a high brand consciousness, and that is the only bracket where it has a strong effect on loyalty in the insurance world (see Figure 6).

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This suggests that an extra investment in brand creates limited loyalty returns; a great brand only matters if your customers belong to the few who are brand conscious to begin with. Moving customers to the “high” consciousness bracket might prove difficult to achieve.

So how can insurers, many of whom already have a strong brand, make this work to their advantage? We propose adopting the concept of “brand enthusiasm.” Brand enthusiasm is influenced by the level of customer engagement, which we will explore in the next section, and again leads to the increased emotional involvement with the insurer that we call “heart share.”

Transparency, not complexity

Last but not least, we examined other product-related value drivers. We suspected that the often high complexity of insurance products has a negative effect on loyalty, but our data proved this hypothesis wrong. Although product complexity might be a deterrent to purchase (which was outside the scope of the survey), even those who perceived the product they bought to be highly complex did not show a higher propensity to switch.

In contrast, transparency about the product strongly influences loyalty in a positive way. Transparency leads the customer to understand and be more comfortable with the product (and the insurer) even when it is complex. Seventy percent of respondents who reported that their product understanding was high expressed high loyalty – almost three times as many as those with low product understanding. High transparency leads to rational involvement: the “mind share” in our study title.

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What current technology can help insurers promote customer value? To give customers an emotional connection and involvement with a fair price and a transparent product, telematics is ideal. Regarding fairness, customers can see that the rate is based on their personal risk and influenced by their personal actions. Examples include a “pay-how-you drive” auto product or the use of exercise tracking devices in health insurance. Transparency of this sort of auto product is high, and for many telematics offerings, there is an additional fun factor by seeing how well you drove, thus competing against yourself for better driving scores.

Recommendations: Offer value

Support your customers in areas they personally value, even if they are not directly related to your core business. Offer information to your customers in useful areas that are widely related to their coverage: for example, traffic or weather information for auto insurers. Create communities of interest – in social networks or directly hosted by you – to share news, tips and enhance exchange among like-minded individuals and your organization.

Add risk mitigation or prevention into your products and services. Commercial insurers have been doing this for years. Start offering these at the outset of the contract relationship. Later, add tracking via telematics, plus assistance services.

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Personalize offerings and provide pick-and-choose product options. Product flexibility starts in the back end. Your application architecture must enable a modular approach to products and services. Build a roadmap for flexibility using industry standards such as IAA. From the front end, add in-depth analytics to flexibly balance the offered options with market needs.

Fully engage your customers across access points

Incumbents at risk

One characteristic of the Millennial customer is the desire for omni-channel shopping for their goods and services. For insurance shoppers, this extends well beyond using traditional insurers – many Millennials are open to using adjacent providers and new entrants into the market (see Figure 7).

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In the short run, offerings like Google Compare mainly replace existing aggregators; insurers still cover the actual risk. In the long run, online service providers – given their good customer knowledge across many products and services – could start to accept risk themselves. In this case, customers’ already-stated willingness to switch would become a real threat to incumbents.

In addition, the reason respondents gave for considering those providers should be troubling to insurers: They describe non-traditional providers as faster, more transparent and easier to reach (see Figure 8). To counter this, carriers need to engage with their customers across a broader range of access points than ever before.

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The age of mobility

One option is to be more accessible on the go. Ninety-six percent of our respondents own some form of mobile device, most often smartphones (owned by 82 percent of respondents) and tablets (owned by 49 percent); they have become commonplace modern accessories throughout the world. Still, only 13 percent of respondents who bought their insurance online, either directly or via an aggregator, used their mobile devices to buy. On the other hand, 29 percent of all respondents stated they would like their insurers to offer an option to buy through a mobile device, and that this would increase their loyalty.

Expanding mobile offerings outside of searching and buying is an instant accessibility increase with potential loyalty gains. The biggest effects would be in submitting claims (42 percent) and in simple communication (43 percent). Many insurers have already invested in apps for claim submission, but again, they seem to be either unknown or too hard to use.

The effect of expanded mobile offerings differs widely by country, with the more empowered customers in developing markets increasing their loyalty more (see Figure 9). Still, given the larger market sizes in mature markets, investment in mobile services are still expected to generate returns.

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Connecting everything, everywhere

Looking toward the longer term, insurers will also need to consider investing in the Internet of Things (IoT) to enhance customer engagement. A growing number of consumers either own or can imagine owning an Internet-connected device like a refrigerator or a washing machine (56 percent of millennials, 36 percent of boomers).

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Currently, only a small percentage of customers told us they would be comfortable with insurers using the data from these devices (21 percent of millennials, 15 percent of boomers.) Still, for those respondents, the greater accessibility and convenience of the IoT would lead to an increase in loyalty. Insurers can make use of the IoT if they sell it right: with high transparency regarding how the data is used (and not used).

Recommendations: Fully engage

Embrace mobile to enable constant access for your customers. For your main set of lines of business, envision “customer journey maps.” These maps document the typical steps a customer must take during the provider relationship, from needs discovery through information gathering and purchase, all the way through after-sales services and claims processes. For each step, identify interaction options to generate a complete picture of potential mobile touch points.

Support decision making throughout each step of the sales process at the convenience of your customers. Create one unified front end for the customer, whether they come in through an agent, call center, the Internet or mobile devices. Make customer data and product information equally available at all touch points.

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Have information available anytime, anywhere to support instantaneous fulfillment of client requests. Equip tied agents, underwriters, claims adjusters and other fulfillment roles with mobile technology like tablets and other handheld devices. This allows you to abandon a fixed workplace in favor of greater fulfillment flexibility – for example, claims can be adjusted directly on-site.

Ready or not – are you capturing the hearts and minds of your customers?

How are you using your in-house sources of customer knowledge? In what ways are you gathering and adding external information, such as that from social networks? How are you combining internal and external information? How is it used to generate greater customer value and loyalty?

Where and how are you using needs-based or persona-based segmentation approaches? How will you deepen your level of understanding individual customers?

To what degree can your customers pick and choose options from your product portfolio? What is your plan to remove the barriers to further customization?

How do you communicate with your customers? What is your approach to staying abreast of the ways they prefer to communicate, now and in the future?

In what ways are you engaging millennials? And how will you stay updated to address the customers of the future, such as Generation Z and beyond?

This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.” To download it, click here.

Game Changer for Auto Telematics

Auto underwriting is no longer a “one size fits all” proposition, and technology – in the form of a telematics data exchange – is bringing a tailored approach to more effectively writing individual auto policies. The exchange is an accessible platform of driving information data provided by automakers, telematics service providers and Internet of Things providers. Through the exchange, insurers now have a single and efficient access point to data about driving information.

A telematics data exchange platform has the potential to transform relationships among insurers, consumers and automakers. The platform aims to complement existing solutions, also enabling insurers to bring their own usage-based insurance (UBI) models or other third-party models to the game.

With customer consent, insurers can review the driving history of consumers at point of sale and renewal of auto insurance policies. The exchange can also potentially help manage details of the automaker-insurer relationship, freeing automakers to focus on their core competency in developing advanced vehicles.

In the auto insurance marketplace, there are a few rules of the road:

  • Every insurer using telematics data in determining respective pricing must make corresponding filings with state regulators. As a licensed advisory organization with established filing procedures and government relations, the exchange has the potential to file UBI models and rating guidelines on behalf of insurers, providing faster time to market.
  • Although insurers retain the roles of underwriter and pricing specialist, the data exchange models provide an insurance score, one of the factors that insurers may use as part of their proprietary pricing and underwriting.

The telematics data exchange is a game changer because it brings benefits to insurers, policyholders and auto manufacturers. The power of data and analytics is being harnessed to bring a variety of benefits:

For participating insurers

  • Easy access to telematics data without significant investment in technology and logistical support
  • Improved customer satisfaction through fast, informed quotes at point of sale and renewal
  • Enhanced customer acquisition and retention through innovative UBI programs that potentially attract and retain safe drivers

For consenting consumers

  • Discounted insurance options for lower-risk drivers
  • Portable driving history for ease of insurance shopping
  • No need to plug in a telematics device or use a smartphone

For automakers

  • New revenue from connected-car data
  • Lower total cost of vehicle ownership, which can help boost vehicle sales
  • Additional opportunities for consumer engagement

As use of telematics technology gains acceptance and expands in the marketplace, is it any wonder the game is changing?

Innovation Awards for Solution Providers

Three solution providers have been recognized for truly ground-breaking projects and initiatives with demonstrable real-world impact, following the recognition of three insurers. SMA also published a collection of case studies on all the solution provider award submissions this year, showcasing the remarkable innovation taking place in the industry today.

The insurance ecosystem encourages the holistic spread of innovation, with insurers and solution providers working together to create new capabilities and adopt new technologies. Next-Gen Insurers that are reinventing the business of insurance for the 21st century depend on advances in four main areas: business models, infrastructure, products and services and customer engagement. The solution providers to watch understand and support these changes, helping insurers to actualize the value from the market’s shifts and ultimate evolution.

This year’s submissions for the SMA Innovation in Action Award for Solution Providers demonstrate the strides that solution providers are making in those areas. By developing creative solutions that are embracing new technologies and leveraging innovative approaches to solve important business challenges, the 2015 award winners show what kind of value insurers can gain from their solutions and their partnership.

This year’s solution provider winners are:

Livegenic, which offers a patented, mobile, real-time video platform to help insurance organizations reduce claims handling costs and improve customer satisfaction. Livegenic connects a policyholder with a claims customer service representative through live video without disconnecting the phone call. Claims professionals can see what the customer sees while on the phone, enhancing first notice of loss, underwriting, field operations and supplemental claims.

Social Intelligence, which offers a sophisticated scoring platform that leverages publicly available social media data and the Internet of Things for improved risk assessment. The solution helps insurers by aggregating data and offering access to new predictive, reliable and less expensive data sources. Social Intelligence’s Social Media Risk Scoring provides another layer of risk assessment that insurers can utilize in real time across life and personal and commercial P&C lines of business at critical stages in the policy lifecycle, including point of sale, claims filing, first notice of loss and renewals.

Wallflower Labs, which offers a patent-pending solution to reduce the number of unattended cooking fires and associated claims. Wallflower’s Electric Range Smart Cord and Gas Range Smart Valve enable ranges and cooktops to remind homeowners that they are operating, through smartphone push notifications, and to allow for remote or automatic shutoff. Wallflower solutions can also provide insights into cooking behavior and trends by capturing information about household range/cooktop use to improve how insurers price their homeowners insurance products.

By delivering new tools that help insurers to improve their businesses, the winners of this award are blazing a trail with innovative approaches and raising the bar for solution providers everywhere to provide creative offerings and help insurers achieve real-world value. This year’s submissions for the solution provider awards show the vital role that innovation plays within the industry and offer commendable examples of innovation in action.