Insurers are aware that technology will help to reduce claims drastically and therefore finally run premiums down to unsustainable levels.
Time to move on
“Insurance is a cornerstone of modern life. Without insurance, many aspects of today’s society and economy could not function. The insurance industry provides the cover for economic, climatic, technological, political and demographic risks that enables individuals to go about their daily life and companies to operate, innovate and develop.” Source: Insurance Europe
I fully support this, but the way this cornerstone fits into modern life needs attention. It’s time to move on.
Twenty years ago, I set up the first digital insurance. Ten years ago, I set up (again the first) mobile insurance Now we’re heading for the third wave: connected insurance.
Real connected insurance with the new opportunities that technology brings is what I (with a few former colleagues) believe in and have been working on for some time now.
Of course: “IoT,” “data science,” “AI,” “customer-centric” and “on-demand” are the buzzwords. But let me add two: “holistic” and “transversal.”
“Holistic” refers to the complete modern household with a connected lifestyle and “transversal” to the consumer who is completely not interested in our industry verticals.
Insurance has to stay but with an overall and fresh approach. Hundreds of insurtech initiatives are currently taking pieces and add sometimes compelling features. See the Sherpa-Neos-Interpolis-Trov-CBien-Metromile-Vitality-Clark-Knip-PolicyGenius-Lemonade-Inshared-like initiatives.
The real challenge is to bring it all together to a compelling, simple, transparent and engaging full service offer to the customer.
Focus on prevention
The new insurance is no insurance — meaning the focus should not be on pushing insurance products but on offering prevention services.
For this we developed an international concept for smart protection called InConnect, with the household as hub connecting all smart devices, vehicles and wearables and with technology and data used to improve prevention.
Safety and Peace of Mind
Unbiased personal risk management tools (Primes) help reduce insurance to what is really needed in one universal personalized policy without redundancies and gaps, dynamically adjusted to the actual situation and needs with:
Built-in loyalty and reward system
Ready connections for sharing cars, rides and homes
Easy combining or splitting households
Privacy and cyber risk recognized
and backed with a one of a kind insurance and claims IT platform.
The overall concept is quite ambitious. Although we’ve successfully done ambitious businesses before and have qualified people and technology on our side, we’ll start on a controllable scale. A startup will kick off in three European countries with home, motor and travel.
As soon as we’ve completed our search for the right partners, we’ll start proving the concept, do the learning and keep you posted. Of course we’re always looking for enthusiastic and good individuals. Feel free to give me a buzz.
As with many modern businesses, Blue Marble Microinsurance began with a question-the same question entrepreneurs and innovators ask themselves every day: What can we do differently that will eliminate inefficiencies and redirect resources to a more value-accretive cause?
The underlying mission of Blue Marble is tied to the recognition that insurance is important to economic development around the world. Without prefinancing losses, societies are vulnerable. Following disasters, people who show potential for emerging into the middle class frequently fall back to the bottom of the economic pyramid.
With the knowledge that fortifying the economic progression of the poor would add untold benefits to the global economy, to our industry and, of course, to the poor themselves, we asked another simple question: What needs to change in the insurance and reinsurance industry to make it relevant to the poor?
To examine this question further, Blue Marble’s founders needed to be open-minded about doing things differently and having a willingness to learn while leading. Only by researching the facts could Blue Marble articulate the problem that the founders set out to solve and establish a mission backed by a business model.
The problem was clearly identified in research literature. For example, Swiss Re reported that in the last 10 years, cumulative total damage to global property as a result of natural disasters was $1.8 trillion-only 30% of which was insured, resulting in a protection gap of $1.3 trillion. This gap is even wider when general property risk such as fire, water damage and burglary are considered. And the gap is likely to continue to grow as a result of trends such as global warming and urbanization. While this research covers a scope broader than microinsurance, we have identified the significance of the protection gap and its ever increasing trend.
Other research has underscored how uninsured losses eventually become the responsibility of governments and society at large, resulting in a drag on the economic growth of nations. In emerging nations, 80% to 100% of disaster losses are uninsured, according to Swiss Re.
Haiti, the poorest country in the Western Hemisphere, is an example that warrants examination. The United Nations World Food Program reports that 75% of Haitians live on less than $2 a day. In January 2010, the dire situation was worsened by a magnitude 7.0 earthquake. According to the Inter-American Development Bank, about 230,000 people died, and nearly 1.5 million Haitians were displaced. Economic losses were estimated at about $8 billion- approximately 120% of GDP—with insurance penetration at around 0.3% of GDP.
In another example-the recent earthquake disaster in Nepal-we estimate the damages at 35% to 50% of GDP, with little to no aid delivered as of yet. The effect of the protection gap on developing nations and the consequence on the poor is crippling.
The poor, with no safety nets other than informal systems of caring for each other, are disproportionately affected by catastrophes. The safety nets break down in a village or community following a disaster, thrusting complete communities to the bottom of the economic pyramid for years to follow. In Nepal, communities rich with heritage and dependent on tourism are now struggling to survive with a safety net under stress. Without mechanisms for prefinancing risk, smallholder farmers, shop owners and artisans who lack savings fall deeper into poverty.
With an understanding of the problem that Blue Marble planned to address, a business case for the consortium was established. The problem was viewed as significant and the solution relevant to the global economy, our industry and the poor.
A Role for the Insurance Industry
The potential solutions include charity and public-private partnerships, but what role might the insurance industry assume? While some companies have attempted to enter the microinsurance market in hopes of providing risk protection to the poor, few actually succeeded. Some have been able to show profitability, but most lacked evidence of the double bottom line: the ability to deliver protection that also creates incentives and enables the poor to make better economic choices in their lives.
This is a crucial point. Risk protection, in and of itself, will not enable economic progression. Incentives embedded in the risk protection are the key drivers. Policies should be designed to encourage growth and expansion. For example, by creating a more certain outcome, a policy can enable the smallholder farmer to cultivate two hectors of land as opposed to one hector. Another example is enhancing a micro-entrepreneur’s willingness to expand his or her sewing business-to buy another sewing machine and hire an employee-all enabled by a reduction in the fear of theft.
Making It Work
A review of prior experiences-many unsuccessful-suggested that Blue Marble needed a different business model. The business model needed to recognize the vast array of talent required to address the protection needs within the context of poverty entrapment. From within the insurance industry, expertise was needed to support product development, regulatory environment and risk pricing. Other areas of expertise likely found outside of the industry included an understanding of the poverty ecosystem and how to partner with entities in the supply chain of the poor.
At the same time, the business model had to address the many barriers to success in microinsurance:
A long-term commitment was needed, yet our traditional business models were anchored on immediacies and benchmarked against such metrics as payback periods.
Financial literacy and trust needed to be established.
High distribution costs result in prohibitive frictional cost, making the protection unaffordable. The cost of innovation to address this frictional cost was high.
Understanding why the poor consistently made suboptimal economic choices even when given access to the means was critical.
Recognition of the barriers to success in microinsurance and the need for a unique talent model led Blue Marble to a collaborative approach: the formation of a legal entity owned by eight significant insurance entities with a dedicated management team supported by employees from the consortium members. Through collaboration, we would share the cost of innovation and be able to “mutualize” talent from within and beyond the industry. By stepping forward and collaborating among the eight, we developed a public-private outreach partnership with a shared goal.
Blue Marble was established as a legal entity owned by the eight but with a long- term focus. A dedicated management team was retained to give focus to the problem at hand and was backed by a governance model involving senior leaders from the consortium members.
The talent model was unique: The eight consortium companies represent 250,000 employees operating in 170 countries. A virtual business unit was established giving Blue Marble access to talent from the consortium members on a secondment basis. The win-win is that Blue Marble has access to both strategic and technical talent on an as-needed basis. For example, if a Spanish-speaking actuary with knowledge of agriculture risk in Peru is needed, we can identify the person and gain access to her expertise for a limited time. Likewise, Blue Marble facilitates reverse benefits in terms of employee engagement and an appreciation for the relevancy of our day-to-day work.
Why the Name Blue Marble?
Employees of all participating companies were informed about the microinsurance consortium initiative, and their ideas for names were solicited. The communication heads for each company coordinated the outreach and then narrowed the submissions. The board ultimately selected “Blue Marble.”
The name was nominated by Denise Addis, an executive assistant from Guy Carpenter. Addis wrote: “Blue Marble is a nickname for our planet…Technology and social media have made the world an even smaller place, and the planet itself has become a community more than ever before. I think this venture will expand that community.”
The Blue Marble name captures our holistic view of our world. Underscoring our mission to extend insurance protection to a broader portion of the population and to advance the role of insurance in society in a socially responsible and sustainable way, it reminds us that we all share the planet. It is up to us to connect with citizens around the world to make life better for us all.
This article first appeared in Carrier Management. Joan Lamm-Tennant spoke to Carrier Management about Blue Marble Microinsurance during a videotaped interview at the IICF Women in Insurance Global Conference in June. Excerpts of the interview are presented below.
What is microinsurance?
Lamm-Tennant: Microinsurance is risk protection for the poor-artisans, small- scale farmers, shop owners. We address their specific risk protection needs and enable them to have stable consumption, which allows them to invest, improve productivity and grow through the economic pyramid.
What are the greatest benefits for carriers that take part in the microinsurance consortium?
Lamm-Tennant: It’s an opportunity to have an impact, to be relevant, to work in public-private partnerships and solve the protection gap. By solving the protection gap and being a part of the financial inclusion initiatives, we in fact enable a massive emerging middle class…
Today, we have seven billion people in the world. The middle class is only 1.8 billion. We could double that in the next 15 years.
The opportunity is also significant in terms of solving our own problems within the insurance industry. It’s an opportunity to be forced to innovate because being successful in these markets is not about lifting and shifting products that are on our shelves. It’s about being more efficient, being more focused on the value proposition within our products, and it’s about new distribution channels.
Because we’re forced to innovate, we’ll have the opportunity to reverse innovate. Last of all, we have a talent challenge within the insurance industry. The Millennials are not necessarily interested in investing their brilliance, their talent, in our causes. So this is a way in which we join them in their cause for relevancy.
Exactly how does the collaboration work? How do carriers share the costs, premiums and claims? Whose paper are policies written on?
Lamm-Tennant: We’re a service entity. Our objective is to prepare a complete turnkey, cost-efficient package for the carriers so that they can enter the market…
What are the component parts of that package? It could be everything from policy design to distribution mechanisms to social impact metrics. In essence, by delivering this package to the carriers, they then will have to add risk capital, using this enabler to enter the market. Their goal is to create the market.
Yes, one of them will lead, and that’s a part of our governance structure. Collectively, among the eight carriers, we have licenses in many markets. A lead, perhaps, would be somebody who is already present with a license…Within and among the eight of us, to fill the demand, our goal is to engage local carriers and other partners. [What] we’re trying to do is make it cost-efficient, by sharing the development cost, so that they can enter with risk capital at a profitable level.
In what areas do you expect microinsurance carrier participants to innovate and reverse innovate?
Lamm-Tennant: Success will not occur by simply reducing a few zeros off the line and saying, “Here, we’ve made this a smaller product. So won’t you buy it?”…There has to be a clear value statement…
The second part is our distribution mechanisms have to be efficient. I’m not suggesting abandonment of the agency distribution system, [but the question is] how do we enable that system to be very efficient with technology?
The third is how we measure success…If we truly want to be relevant, let’s put some broad measures of social impact in our products and not carve it off into a CSR initiative.
Those are three platforms that are going to be critical to our success and create an opportunity for the carriers to then rethink similar issues in their traditional business.
How are microinsurance products distributed?
Lamm-Tennant: We’ve seen some success in some markets with the distribution through utility companies, mobile phone operators, even seed manufacturers. [But] the embedded distribution costs are quite high…Some of these products distributed on those platforms could have a claims ratio of 10 or 20 and a distribution cost of 50 or 60. So we can’t just roll ourselves into those platforms.
We have to think about how to utilize those platforms yet still do it in an efficient way and not impose such distribution costs. Having said that, we are an arm’s throw away. It is within our reach that the poor will move from mobile phones to smartphones…
How will you measure the success of the venture?
Lamm-Tennant: Success to us is having demonstrated evidence that those who are benefiting from our products are benefiting in a sense that they are moving up the economic pyramid-that we’re seeing behavioral change. We’re seeing them put risk aside and invest in their businesses, grow their land, sustain their consumption if it’s a food sustainability motive that we’re looking at.
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.
The devastation resulting from identity theft correlates with the fact that it infiltrates every part of a victim’s life: robbing them of time, privacy and money; possibly requiring both legal and financial action; and affecting victims mentally, physically and emotionally. When someone becomes a victim, so many facets take the toll that victims need a holistic approach to ID protection – one that readily addresses all of those facets so victims can recover from their losses, regain their reputation and rest assured with protection against future attacks.
What does legal assistance have to do with a holistic approach to identity protection?
A victim’s need for legal assistance comes into play, for example, when debt collectors harass the victim about a fraudulent debt, a bank or creditor refuses to acknowledge an account as fraudulent, criminal activities surface because of a thief’s actions or criminal activities are attributed to a victim’s records or when the victim wants to take a fraudster to court. These kinds of legal issues can make the victim’s recovery quite challenging, which is why a well-rounded protection plan should include legal assistance. Legal assistance could be providing referrals for trustworthy attorneys who know how to handle identity theft cases, and who work within reasonable distance of the victim’s location.
How can an identity theft protection plan address financial issues?
Monitoring members’ information and catching thieves in the act will help limit the damage done, but, for people who do find themselves victim to identity theft, an important part of recovery is adjusting to a new financial situation.
Financial repercussions of identity theft may involve fraudsters draining the victim’s bank accounts or racking up debt in the victim’s name, and, on top of that, victims usually spend thousands of dollars trying to get the money back and clear their name with debt collectors. Those are major financial setbacks for any budget.
A holistic approach takes into account the need for financial counseling. Victims will need access to financial professionals, like Accredited Financial Counselors, who can assist them with getting back on track financially. Financial counselors could help them assess and work on things like…
Adjusting budget to any financial losses
Allocating money to restoration needs (e.g. money to pay an attorney)
Restoring bank accounts
How can a protection plan mitigate health issues?
A holistic approach recognizes the health consequences of being a victim and provides assistance to mitigate the issues.
More than one-third (36%) of victims said the identity theft incident caused them moderate to severe emotional distress. Why? Dealing with the evidence of fraud requires research, phone calls, dispute letters and claim forms, police reports, money and a lot of time. The to-do list can get overwhelming pretty quickly.
If victims have a fraud resolution specialist at their side, they have access to professional guidance from someone they can trust to provide the correct materials and next steps for reestablishing safety and privacy.
Getting assistance can alleviate some of the stress involved because members know they’re not alone, and they’re getting confirmation about what to do next. Top-of-the-line assistance would also include specialists who can actually take on some of the tasks that a victim must complete for resolution.
Dealing with identity theft is difficult, which causes a ripple effect of stress infiltrating other areas of life. When victims must race against the clock to repair the damage, they’re worried about the financial losses and stressing over how they’re going to make sure the problem doesn’t happen again.
How is education involved in a holistic approach to identity theft protection?
A checklist of features should also include education, so members can make smarter decisions with the day-to-day activities that may affect their risk of becoming a victim. Resources could include tips, newsletters, articles and webinars with helpful information like…
Understanding what is on a credit report, what’s problematic and how to resolve each matter – whether it’s an error or theft-related
How to file and dispose of paperwork with sensitive information
Extra precautions to take and questions to ask when creating an account or applying for a new credit card
Recent data breaches and who’s at risk
What’s the latest and greatest security software for consumers
A holistic approach includes some sort of education because it helps people protect themselves against future identity theft attacks.
People need a plan that takes a holistic approach to identity theft protection, covering every part of prevention and restoration. They need a plan that addresses fraud in a timely matter to prevent heightened stress, with features like monitoring and alerts for any suspicious activity, quick assistance for anyone who becomes a victim, financial counseling and legal assistance.