Tag Archives: InsurTech

Selling Where Life Happens

Every moment of every day, retail operations are under scrutiny. Executives and management teams for grocery stores, gas stations, big box home goods, home repair and department stores are obsessed with merchandising. Product placement is always in flux. Endcaps are changed for a season or a weekend. Special displays are constructed as demand is anticipated.

And now executives are equally obsessed with their digital storefronts – the digital version of the physical store – highlighting new products and sales and suggesting items to customers based on their behaviors and engagement. 

A great deal of thought goes into both the digital and in-store experience – the same questions, just addressed differently. What is the flow like? Can we drive the flow of our store offerings to add more impulse purchases? How can we construct our checkout process to make it quick and easy? Can we accommodate for visual space for products at the point of purchase? May we suggest something else that may go with the purchases? In some cases, this results in a mini-maze just prior to checkout, where by chance some last glimpse of something will trigger an additional sale at the point of purchase. Do I add a warranty? Should I get a Starbucks gift card for my neighbor who took care of watering my plants? At the point of sale – whether in person or digitally – the retailer buys the space that’s in our heads. We advertise to ourselves. We make the decision.

And the process works and creates growth opportunities for retailers that are rapidly moving to offer both in-person and digital, like Walmart, to meet customer needs and expectations. When Walmart recently announced second-quarter results – crushing the numbers! – it said e-commerce sales in the U.S. shot up by 97% and same-store sales grew by 9.3% as customers had packages shipped to their homes and used curbside pickup. This was the biggest earnings surprise in 31 years for Walmart! A company that disrupted retail decades ago and was in the crosshairs of disruption by Amazon is reinventing itself once again.

Walmart is leveraging its massive store base – which is accessible by nearly every person in the U.S. – with investments in its e-commerce platform to expand reach, engage customers and grow the business. If you go on the platform, you will see brands that you don’t see in the store — partners selling through Walmart. And with this platform Walmart is now looking to expand by adding a membership service. This traditional retailer has reinvented itself to meet the expectations and needs of customers and create an experience – like Amazon – that creates loyalty and deepens the relationship with the customer as the place to buy and manage different aspects of their life. 

Which makes us wonder, what if life insurers reinvented themselves to be obsessed with the point of purchase – digitally and in-person?

In 2020, life insurers, annuity providers and voluntary benefits providers should remind themselves that, when it comes to point of purchase, this new retail mindset can be a game-changer. This is the very first step in establishing the need for a flexible, ecosystem approach that will fit as comfortably at any digital checkout queue as it will at the adviser’s office. If we can establish the points of life where purchase can be seamless, easy and almost frictionless, then we’ll drive growth – something that has been elusive the last few decades.

The Point of Purchase

In Majesco’s latest thought-leadership report, Rethinking Life Insurance: From a Transaction to a Life, Health, Wealth and Wellness Customer Experience, we take a closer look at what is driving buyers of life insurance and other related products to cross the line and make the purchase. In our analysis, we identified some indicators regarding product location and the easiest ways to construct simplified purchase experiences. Digging deeper, we looked at how we can help customers sell to themselves through new digitally enabled opportunities, which may still be connected to in-person engagement.

To better understand just how people’s life experiences relate to their potential life insurance transactions, we surveyed consumers, asking them a range of questions related to health, wealth, wellness, life insurance and purchasing habits. The details of the survey results highlight a rapid shift, particularly by millennials and Gen Z, to wanting a lifestyle experience rather than just a transaction.

This blending of the purchase experience into the life experience is the key to unlocking the point of purchase in insurance.

See also: Reigniting Growth in U.S. Life Insurance

Trends in Life Insurance Ownership

Ownership of life insurance has seen significant declines over the last 50 years. In our survey, the older generation segment, Gen X and Boomers, has overall lower ownership than the younger generations, Gen Z and nillennials, as shown in Figure 1. Across the three categories of traditional, universal life (UL)/variable life (VL) and annuity, the younger generation’s total ownership level is 35% more than the older generation, reflecting a potential upswing in the life insurance market as the younger generation matures and expands their need for insurance. Most interesting is that both generations clearly gravitate to traditional insurance – term and whole life – as opposed to investment-backed products such as UL, VL and annuities by a factor of three to nine times, depending on the product. 

Interestingly, this strong interest in traditional products aligns with the growth of non-traditional, fluidless, rapid-issue life insurance from companies like Haven Life, Ladder Life and other insurers. The two are increasingly compatible.

Figure 1: Types of life insurance owned

Even more interesting and encouraging is that the younger generation believes more strongly than the older generation in the importance of life insurance, at 79% versus 69% (Figure 2). The key will be to meet their expectations in the risk product, customer experience and value-added services areas. 

Figure 2: Importance of life insurance

Interestingly, 70% of the younger generation who do not have life insurance still believe it is important – indicating a strong market opportunity for insurers who can meet their needs, demands and expectations. In contrast, only half (49%) of the older generation who do not have life insurance believe it is important.

With the value and importance of life insurance established, what will prompt each of the generations to purchase life insurance? Our research has shown that the younger segment has more life event needs on the horizon that would motivate them toward a life insurance purchase. They are interested. They find it to be important. So…

Why aren’t many of them acting on their need at common moments of impulse? 

Something is standing in the way of the insurance purchase. There is an understood need. There are relevant life events. So, something within current product offerings or the sales and engagement process does not align with their expectations. A hint emerges when you compare preferences for coverage periods.

For typical term insurance, everyone still favors monthly payments. However, coverage for a specific event or short period – on-demand insurance – is of higher interest to the younger generation and on par with the other payment options.

What this indicates is the need for different options to meet different needs at any point for life insurance, whether planning for a long-term coverage for death, or meeting the need for short-term insurance for an activity like a vacation. It is all about need and placement. The younger generation is poised to purchase at the point of need – and likely digitally.

Validating these assertions, we found that the younger generation is significantly more engaged in activities that would cause them to buy insurance. Nearly a third of the younger generation participated in a sport or activity that could result in injury or death as compared with 8% of the older generationMillennial and Gen Z generations participate more in extreme sports, they travel more, they do more shopping online. They are the generations that value experiences over ownership, which makes them highly likely to want to protect themselves and their experiences. This sheds new light on ways to capture and grow new customer relationships. 

With the Gen Z/millennials valuing and showing interest in buying life insurance, where and how will they buy?

Unsurprisingly, members of the younger generations are open to buying life insurance from a wide array of options, as highlighted in Figure 3. Agents and insurer websites are at the top, but, of the 16 options we included in our survey, seven of them exceed the 50% level of interest (a rating of three on the five-point scale), with the balance of them within just a few tenths of a point of this level – and a majority of these are digital, focused on the point of sale. In contrast, the older generation has only three of the 16 options at 50% interest or greater. 

The acceptance of a wider range of purchase options highlights the need for insurers to consider how and where they interact with the younger generation, and to be there with timely purchase prompts. This is where having partnerships and an ecosystem becomes very strategic in helping insurers expand their reach and presence to where their customers will be.

Figure 3: Preferences for different life insurance purchase sources

The Case for Point-of-Purchase Preparedness

If customers are interested and willing to purchase insurance from so many different sources and in so many different ways, then we can begin to innovate around what it will take for insurers to place their products in any place at any time – including their own digital platform. Walmart and Amazon are proving that product sales are most effective when they are multi-channel, multi-delivery-type and easily accessible. They are placing related products, such as warranties and accessories in front of buyers at precisely the right times. Each of them is successful because they understand their market’s purchase patterns and customer behaviors and they customize the purchase process to fit – with a digital platform that also uses sophisticated data and analytics.

See also: Fundamental Shift in Life Insurance?

When the process conforms to the person, retailers and insurers alike will be able to relax and know that they are not just capturing the up-and-coming generations, but, like Walmart and Amazon, they are giving the best service possible to every generation.

Innovate for the Future

Will your products one day sell on auto screens? Will they sell through smart homes? Will they be as easy as a tap on an Apple Watch? Will they be part of another purchase – like buying a home and getting a mortgage?

Your best life ideas will come from watching lives and lifestyles and thinking, “We could place ourselves right there.” It all begins with insights and the initiative to transform the insurance model from a transaction to an experience.

AI in Commercial Underwriting

Today’s underwriters have more variables to contend with, more submissions, more competition and more data of all kinds to deal with than ever before. That’s why more and more insurance firms are deploying AI in commercial underwriting.

Machine learning (ML) and AI are incredibly well suited for helping to deal with the masses of data that underwriters now face. These technologies are changing underwriters’ working lives for the better and delivering huge benefits to businesses and the insurance industry as a whole.

In this article, we’ll explore five key ways you can implement AI and ML in the underwriting process and the results they can achieve. Without further ado, let’s get started.

1.  Processing underwriting submissions

Although efforts have been made to streamline submission processing, many lines of business in the insurance industry still have to deal with large volumes of documents that need to be processed manually. Until now, that’s just been part of the job — and a time-consuming, laborious one.

New applications of AI in commercial underwriting can give great assistance in extracting information from PDFs, printed documents, emails and even handwritten documents, reducing the amount of work underwriters need to do by hand. Optical character recognition and natural language processing are now sophisticated enough to identify the required data in a document, extract it and even perform a degree of evaluation. These advances in text extraction and analysis are opening up efficiencies in underwriting processes, expediting workloads that had previously been a burden to insurance professionals. Time saved on submissions processing is time gained for more rewarding work that makes better use of underwriters’ skills and helps to develop the business.

2. Making risk appetite decisions

As you know, reviewing submissions for viability is another task that can take up a lot of an underwriter’s time. Analyzing the submission and all the related risk data, making the decision whether to underwrite it – it all takes time and effort. And it’s another area where you can deploy AI in commercial underwriting to achieve great results.

Machine learning can now offer underwriters valuable assistance in the decision-making process. Using data on previous applications that have been approved or rejected, these systems build an understanding of which are likely to be viable and which aren’t. The systems can automatically decline certain activities described in the application as free-form text, if deemed too risky or otherwise unviable. Using text classification, these activity descriptions can be automatically mapped onto their corresponding industry codes, based on a given standard. If an application is found to be viable according to the system’s judgment, it can also recommend the most appropriate product according to your historical data. Once again, this valuable assistance can be a real asset for time-pressed underwriters.

3. Submission assignment and triage

Some underwriting submissions, in certain lines of business, require extra attention during processing. They need to be prioritized, but, unlike with other submissions, this can’t be done using simple, blanket rules such as their policy effective date. Underwriters need to look in greater depth to decide their priority.

Using AI in commercial underwriting can help here, too. Optimization and forecasting technologies can assist in assigning these submissions to the most appropriate underwriter. Predictive modeling can also rank submissions according to their estimated closing ratio or some other key performance indicator (KPI). For instance, AI could decide to rank one application highly because you’ve recently been successful at closing business with that broker. These innovations have a tangible impact on how well your business operates and your bottom line: Submissions are allocated more effectively, and your overall closing ratio improves.

See also: ‘3D Underwriting’ in Life Insurance

4. Evaluating risk profiles

To evaluate the risk involved in a submission, underwriters must often invest considerable time in research. They must research and weigh all kinds of information to properly evaluate these risk profiles. Sifting through the wealth of information available, in myriad formats, can be like searching for a needle in a haystack — until now.

Today’s intelligent tools can search through many types of structured (processed and labeled) data as well as raw, unstructured data and aggregate relevant information for underwriters to use. For instance, an underwriter may use this system to search through a database of property inspections, to compare similar cases of structural damage and their results. These systems also make it far easier to retrieve similar past applications to see patterns and learn from earlier experience. Now your business never has to make the same mistake twice.

As we said earlier, AI is the master of dealing with large volumes of complex data, so, when it comes to locating and surfacing valuable items of information like this, AI is in its element. The benefits for underwriters and businesses are huge here: They can be better informed and more confident in their risk evaluations.

5. Coverage recommendations

Toward the end of the underwriting submissions review process, it’s time to make a judgement: what coverages will be recommended? AI-powered systems are capable of assisting end-to-end, so they have much to offer at this point, too.

Recommender systems can help with coverage judgments. By analyzing previous applications, they can get a sense of what the appropriate coverages, with limits and deductibles, might be and offer suggestions the underwriters can use to make their final decision. On a business-wide scale, this means your product and coverage recommendations will be better aligned with clients’ needs and their risk profiles.

Ready to deploy AI in commercial underwriting?

All the use cases we’ve outlined here are available to businesses right now, so if you want to start deploying AI in the underwriting process, you can start obtaining the benefits without delay.

As the industry evolves in the coming years, we’re certain that AI will become an even more useful assistant to underwriters all over the world. And, as new applications of AI in commercial underwriting are developed, we look forward to telling you all about them.

This article was originally published here.

How to Minimize Flood Losses

The Weather Network reports that “the first three months of the 2020 Atlantic hurricane season have featured numerous… records” as we enter the official peak in September. Hurricane Hanna, the first of the season, brought heavy rain and flash flooding that, according to Karen Clark & Co. (KCC), caused $350 million of damage to Texas automobiles and properties, The Insurance Information Institute (III) reported that Hurricane Laura, which hit on Aug. 26, caused insured wind and flood losses “well into the billions of dollars.

It’s vital for insurers to understand the flooding impact of hurricanes vs. the tropical storms they develop into after they hit land. In June 2020, the federal government stated, “New NOAA-funded research finds that across all major Atlantic hurricanes affecting the southeastern and eastern U.S. during the twentieth century, the largest areas and heaviest intensities of rainfall over land occur after major hurricanes become tropical storms, not during hurricanes or even major hurricanes.” Therefore, if more record-breaking hurricane seasons occur, the losses to insurers from tropical storms are likely to be the biggest risk.

Many insurers now publish flood plans that can be used by homeowners or businesses and encourage the use of flood defenses and other resilience measures to mitigate losses. However, losses continue to mount, which for many is due to the quality of flood warnings they receive. 

National and local flood warnings currently have two weaknesses: lack of detailed information on the precise locations at risk of flood and too many false alarms. The weaknesses are caused by weather’s unpredictability, with every storm being different. For instance, Hurricane Laura’s flood warnings predicting flooding to 20 feet high and 40 miles inland did not materialize because the eye of the storm hit 40 miles east of the forecast’s prediction.  Such traditional forecasts use library-based approaches, which do not consider flow routing processes. As a result, they have very low levels of accuracy and are unable to provide depth or time forecasts. 

Over the last 19 years of university and commercial research, in conjunction with the U.K. government, the next generation of flood forecasting has been developed. This uses a live modeling approach, which solves the library-based problems by using hydrodynamic modeling, explicitly routing flood water over the landscape. This new forecasting technology has been proven globally, including against Superstorm Sandy, which hit New York City in 2012, where the model had 90% accuracy. These results prompted Loughborough University to commercialize the service through a spinout business, Previsico.

See also: Now Comes the Flood Season

This new approach provides real-time warnings at an individual property level, with a new forecast generated every three hours that predicts flooding up to 48 hours ahead of time. Critically, this approach works for storm surge and river and surface water flooding, including flash flooding.

Case studies show, for instance, that two New York art galleries that incurred $6.3 million in losses in Superstorm Sandy would have had no losses if the new approach had been in force, providing a timely warning to move the art work to safety. 

Lloyd’s Lab case studies show that reducing flood losses from immovable assets can range from 10% to above 90% if the property has protection such as flood defenses and other resilience measures. While many hurricane victims may have some flood protection, they need accurate warnings to ensure the protection is in place in time.  

The National Flood Insurance Program (NFIP) provides buildings and content insurance support to businesses and homeowners alike. However, this still leaves insurers exposed to business interruption and automobile claims when hurricanes hit. 2017’s Hurricane Harvey brought 20 trillion gallons of rainfall, the equivalent of nearly 1 million gallons per person living in Texas, according to the federal government. Thousands of businesses were affected and incurred billions in losses that could have been avoided. For instance, Big Star Honda in Houston lost 600 vehicles and had to cease operating for five days. With actionable flood warnings, the cars could have been easily moved to safety.

The U.S. private flood insurance market is growing, as Lloyds and re-insurers offer capacity to try to fill the $40 billion U.S. flood insurance gap. This is important because the National Association of Insurance Commissioners found that 50% of flood losses are outside FEMA’s high risk areas, and 99% of properties that fall outside the zones have no flood insurance. The insurance gap is only going to increase, as NOAA states that, “With future warming, hurricane rainfall rates are likely to increase, as will the number of very intense hurricanes, according to both theory and numerical models.”

See also: A Way Forward on Flood Insurance?

Flood insurance is a substantial opportunity, with gains possible across a carrier’s business, especially in a hardening market. Underwriters can manage loss ratios more effectively by agreeing with customers on their responsibility to manage use flood warnings and plans. Marketing can offer flood warnings as a value-added service to customers, and claims departments can respond to flooding more efficiently. Finally, boards armed with a real-time property-level flood loss estimate can manage their exposure.

3 Industry Ideals, Via Claims Payments

Instacart, Netflix, Zoom. It’s hard to imagine our lives without the companies that provide digital experiences and services so we can continue with our everyday lives amid the pandemic. Almost overnight, in-person, paper and manual processes became obsolete, forcing industries like insurance to embrace and reprioritize digital transformation across all business functions at an accelerated speed and as a new reality, rather than just an out-of-reach goal.

Yet, despite advancements in digital payment technologies and offerings, there still has been minimal adoption across the insurance landscape when compared with other industries. Even before the pandemic, the majority of customers preferred instant payments, but just 11% of insurance claim disbursements were paid instantly last year while 52% were sent via paper check. Within P&C, carriers mail paper checks for more than 75% of their claim payments, which can take weeks even without the recent U.S. Postal Service delays.

The most obvious reason to ditch this antiquated, siloed and inefficient approach for a digitized payments process aligns perfectly with insurance carriers’ core focus: their customers. By giving policyholders the options they’ve come to expect from nearly every other company they interact with, carriers can provide a seamless customer experience for added satisfaction. And providing the best payment experience and digital payment method helps carriers because digital payment platforms can cut transaction costs by a whopping 10X compared with paper checks. Leveraging a digital payments platform also enables carriers to achieve industry ideals such as automation, transparency and centralization to create simple, cost-effective outcomes for everyone involved.

Automation streamlines pivotal moments in the payments process, decreases cycle times and reduces payment creation effort.

Today, 85% of businesses believe automation helps prepare for future business continuity needs. Not only are carriers looking to automate sub processes, but they are also embracing this new environment to revisit the entire end-to-end process and imagine the value and operational capacity that automation can unlock. 

  • Carrier-branded, automated payee enrollment better engages beneficiaries and claimants, while driving adoption of digital, real-time payments.
  • Digital authorizations and releases with e-signatures enable a faster, fully digital claims settlement and payment workflow. 
  • Inclusion of third-party processes into the claims file automation removes excess touchpoints, communication and manual payment entry—increasing the velocity of the payment process, payment posting and claim closure. 
  • Automated verification of claimants’ tax information, as well as digital payments issued to multi-party claimants, vendor plus claimant and law firm plus client payee scenarios, increase a carrier’s digital payment universe and allow for greater overall digital adoption.    

Digital platforms and payments make the lifecycle of a payment more transparent for claimants and carriers alike.

Another critical component of achieving claim payment transformation is transparency. Leveraging digital payments platforms instead of manual processing provides an inclusively transparent experience for both carriers and their claimants. 

  • Through a digital payments process, customers have more visibility into claims payment choice, settlement posting and real-time payment status—ultimately increasing payees’ satisfaction with their insurers and decreasing inquiring phone calls and emails to carriers.
  • Increased insight and access to granular payee response and experience data helps carriers inform decisions around their payee experience based on behaviors.
  • Additional data inside the claim system and carrier staff visibility outside of claims increases transparency and actionable information to the entire organization. 

See also: Payments at the Speed of Light

A centralized platform enables all payment types, engagement and reconciliation to serve as the source of truth for an entire organization.

Adopting digital payments lets insurance companies leverage payment platforms to achieve centralization of multiple workflows and use cases. Carriers need a centralized payments system to ultimately maximize benefits and efficiency across all business, payment and system channels. 

  • Centralized payments systems empower carriers to leverage economies of scale and add claim types, policies, premium refund and reinsurance payments with incremental effort. The systems also allow carriers to maximize their existing third-party partners such as bill reviewers to streamline and automate system reconciliation and the payment process. 
  • Multiple payment options and payee self-service allow customers to select their preferred payment method for multiple use cases and reuse that profile in the future. 
  • Duplicate payment checks, payee identity validation and a unified payment channel reduce losses from payment duplication and fraud. 
  • Centralized digital payments platforms provide payees with a consistent, engaging and digital process no matter the creation path, line of business or core system limitations.

We may be living in uncertain times, but the pandemic has made one thing clear: The digital future is here. While insurance carriers are recognizing the need for digital transformation and ramping up efforts in certain areas, the industry as a whole has a long way to go, and digitizing payments is a critical part of that process. By embracing a fully digital payments process, the insurance industry can provide innovative, streamlined and convenient experiences that all parties involved expect today, while positioning for the future.

Crucial Technologies for P&C During COVID

Technologies like machine learning, the Internet of Things (IoT), robotic process automation (RPA) and natural language processing (NLP) were already hot topics in P&C insurance before the world was turned upside down in 2020 due to the pandemic. These and many other “transformational” technologies have great potential for insurers in the rethinking and optimization of distribution, underwriting, claims and many other parts of the business. So, it is important to ask the question – how have the initiatives that leverage these technologies changed due to the pandemic?

Are personal and commercial lines carriers still moving forward with projects in 2021? Do executives still have the same expectations about the potential of these technologies to transform their business?

We answer these questions in detail for 13 specific technologies in two new SMA research reports, one covering personal lines and the other covering commercial lines.

However, I won’t leave you hanging in this blog, wondering about the answers to those questions. The short answer is yes – P&C insurers generally plan to move forward in 2021 with projects that leverage various technologies that have the power to deliver significant results and competitive advantage. The technologies we follow closely and have profiled in our reports have been organized into three strategic planning horizons: short-term, near-term and long-term.

For both personal and commercial lines, technologies in the AI family play heavily in the short-term category. Machine learning, NLP, RPA, computer vision and new user interaction technologies all rank high in terms of their potential to transform and in the level of activity underway or planned by insurers. Technologies that fall into the near-term or long-term horizons include wearables, blockchain, voice, AR/VR (augmented reality/virtual reality), 5G and autonomous vehicles. All have potential in insurance and will likely be incorporated into projects by innovators over the next couple of years but will not make it into broad, mainstream application until midway to late in the decade.

Our research on transformational technologies, when viewed in concert with our SMA Market Pulse surveys, shows that in some cases proofs of concept (POCs) and new projects have been put on hold in 2020, but all indications point to full steam ahead in 2021. Major projects already underway are continuing, and insurers state that they do not want to lose momentum for foundational projects like core systems. Projects that include transformational technologies needed to address digital gaps that were exposed during the pandemic have been raised in priority.   

See also: AI in a Post-Pandemic Future

In many ways, the pandemic is accelerating digital transformation across all industries, including insurance. Transformational technologies will play an outsized role in that transformation and look to be important components of insurers’ plans for 2021 and beyond.