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Data Breaches’ Impact on Consumers

Data breaches are perhaps more harrowing an experience than many realize. In the latest, the vast majority of LinkedIn users—about 92%—have been affected. Experts say it’s not just the magnitude of this breach that’s worrying; it’s the type of information compromised that should give LinkedIn users pause. The breach was announced June 22 by the alleged hacker, offering the data of 700 million users for sale. The breach reportedly contains email addresses, full names, phone numbers, physical addresses, geolocation records, LinkedIn username and profile URL, personal and professional experience or background, genders and other social media accounts and usernames. It’s easy to imagine creating a digital profile impersonating any of the 700 million victims. 

As urgent as this sounds, most breach victims do very little, if anything, in response. Some may find slight solace in the fact that many others (and, by many, we mean millions) have also been affected in the same way. This feeling can sometimes help to dampen the blow, along with the fact that most consumers are realizing there is virtually nothing they could have done to prevent the breach from happening in the first place: Data breaches are just par for the course in today’s digital world. 

But this limited consolation offers nothing to protect victims from the uncertain, but very real risk of future identity fraud. Over time, with breach after breach, the uncertainty grows, consumer trust in businesses weakens and new anxieties take hold. There’s an oft-overlooked psychological aspect to it all that even consumers themselves may not realize is happening. 

Living in a constant state of worry about being affected by identity theft can be exhausting. And while it may not be a frequent topic of conversation—and breach notifications often aren’t triggering specific precautions to be taken—we still know it weighs heavily on consumers’ mental state. Customer trust in organizations is eroding, and it’s happening rather quickly. Customers no longer have confidence that corporations can safely house the data they’re asking of customers. 

Moreover, there’s a subconscious pleasure that comes with feeling loyal to and cared for by organizations that one chooses to spend money with; all that goes away when the company experiences a data breach. The consumer no longer feels appreciated or valued and may be left wondering, are there any organizations left that I can trust with my data? Sadly, the answer may be an unstated but emphatic “no.”

See also: How Machine Learning Halts Data Breaches

The more definable and palpable sentiments of the consumer are still telling, though. Over the last few years, we at Generali Global Assistance have been keeping our finger on the pulse of the consumer to gain a better understanding of the consumer mentality. Earlier this year, we released findings from our second market study and found that, since 2017, concerns about identity theft—and especially about cybercrime—have continued to increase.

The very large majority of consumers (90%) believe that becoming a victim of identity theft or cybercrime is something that could happen to them at any time; this is up five points from 2017. Eighty percent of consumers said that they’re often scared by the number of ways in which their identity may be compromised, which is up 6 points from 2017. And 76% of consumers agreed that companies and institutions are not doing enough to protect their personal information. A holiday survey of ours in 2017 showed that 40% of consumers believe that businesses are not doing all they can to protect their personal information. The rate at which this gap has widened is striking.

Outside of the psychological impact, we must not forget what it actually means when one’s personal data is exposed. While a leak of your email address may leave you shrugging your shoulders, the combination of your name, address and birthdate can be ample data for a fraudster to do damage. It’s the aggregation of years’ worth of mega breaches that are leaving consumers wildly exposed. We already got a sneak peak of that this past year when unemployment fraud reached frightening levels in the midst of the pandemic—in our Resolution Center alone, we saw a 5,630% increase in employment-related fraud from 2019 to last year. Unfortunately, that may have been just the beginning. 

So while a singular data breach may not have an immediate effect on the consumer, each one chips away at the security of their identity. Data point by data point, our identities will be left in such a fragile state that the resulting fraud will not only be inevitable, but difficult to come back from. 

At the risk of sounding trite, the time is now for consumers to take action. It’s true that one cannot prevent hackers from infiltrating the companies they choose to do business with, but there are certainly ways to strengthen their identity so that any potential damages are greatly reduced.

How Infrastructure Is Reshaping Insurtech

My first job after serving in the Peace Corps was working at Levi Strauss on technology, data and vendor supply chain projects. I remember hearing the famed story of how Levi Strauss had the foresight and innovation to tackle the gold rush from the picks and shovels angle, building out infrastructure that far outlasted the explosion of miners rushing to California to seek fortune. People often drew parallels between Levi Strauss and the tech boom, but it wasn’t until recently that I truly connected the dots.  

I went on, like many others, to join the tech sector, eventually jumping into the excitement of insurtech — a legacy industry faced with the growing challenges of modernization. My last company, Sheltr, which I co-founded with Praveen Chekuri, provides homeowners with routine preventative maintenance service and diagnostics to offer data-driven care to catch issues before they become costly repairs. After Sheltr became the first acquisition made by insurtech unicorn Hippo, we decided to leave homeowners insurance and build payments infrastructure on the commercial side.

We did this because we saw a pattern. Insurtech continues to receive huge amounts of attention and investment. In Q1 of 2021 alone, insurtechs raised $2.2 billion across 110 deals. But much of this insurtech investment has been focused on distribution-related companies aiming to sell insurance directly to customers by promising a better product, novel ways of acquiring customers and improved end-customer experience. A big piece was missing.

The unsolved problem in insurtech

While many billions of insurtech investment dollars have flowed into insurance, this has primarily centered on companies trying to reinvent insurance businesses from the ground up. The insurtech community hasn’t focused enough on improving the critical infrastructure and tooling that insurance carriers and distributors need to be successful in today’s competitive, digital world. 

While some strides have been made, we’re still in the early stages of insurtech infrastructure. Embedded insurance, usage-based insurance (UBI), advanced telematics are all emerging trends that will no doubt continue to evolve in the years to come. However, many of the most critical pieces of insurance infrastructure remain untouched. Behind the elegant customer experiences of distribution insurtechs is technological shoe-string and duct tape holding it all together. Said bluntly, infrastructure has not kept pace with customer expectations in insurance.  

See also: How Digital Health, Insurtech Are Adapting

Why have we, as an industry, fallen behind in meeting what our customers need from us? As with many legacy industries, established incumbents with millions of customers have a hard time moving quickly and adapting–and this is especially true in sectors where expenses have to be prioritized on compliance and risk. But innovating insurance infrastructure is also a challenge for startups. As I’ve learned working at various early stage companies, the customer-facing interactions are always tackled first, while behind the scenes is an operational mess. What’s happening at the macro-level with insurtechs — dealing with the front end before dealing with the back end — parallels what happens at most startups at the micro-level.

As an industry, we reached an inflection point, where everyone on the distribution side — from brokers to agents to carriers — suddenly had no choice but to digitize. All aspects of insurance including underwriting, distribution and servicing are moving from offline to online. This affects all consumers, both personal and commercial. We increasingly expect high-quality experiences in our professional lives just as we do in our personal lives — and this growing sentiment was put in overdrive when COVID-19 hit.

Where to start?

Recognizing the need for infrastructure innovation is the first step, but how one goes about implementing and executing a fully end-to-end digital infrastructure solution is critical. 

Payment is the first logical step. Payment is one of the most under-innovated and complicated pieces of any insurance system. As a consumer, it’s no secret that paying for insurance is much harder than buying nearly anything else in 2021. Imagine buying groceries and not knowing who to pay (the brand or the retailer), how often to pay or when to pay (when you eat the food or when you take it home), then having to write a paper check to mail off. Payment is also laborious and expensive for the sellers and backers of insurance. Just thinking about the amount of hours spent by agencies, managing general agencies (MGAs), wholesalers and carriers reconciling transactions is likely making some of you want to walk away from your computers. 

The second step is to listen and pay attention. The question shouldn’t be who will win — incumbents or startups — but rather how can we deliver the best customer experience and sustainable product? How can we pay attention to successes and failures so that, collectively, we can get closer as an industry to meeting the needs of our modern customers? Easier said than done, but we will get there. 

The dangers of ignoring infrastructure

The reason why we, as an industry, will undoubtedly find ways to innovate is that the risks of not doing so are too high. Companies that don’t adapt and build proper infrastructure for their core actions — such as payments transactions — will ultimately fail to meet rapidly evolving customer expectations. You can only go so far with a facade of streamlined customer experience because, at scale, you’ll eventually need a robust digital back end to support your systems and stay competitive. 

You’ll need the picks and shovels.

Gaining an Edge in Commercial Insurance

Sometimes it’s difficult to see the trees of opportunity amid the forest of competition. This is especially true for carriers looking at commercial markets as the U.S. emerges from the grip of the COVID-19 pandemic.

Despite the insurance industry’s overall surge toward digital transformation, technology also has the ability to substantially influence the competitive landscape. Carriers have huge opportunities to harness the power of data, optimize distribution management and advance the agent experience in commercial lines. Those firms that do will likely open a gap that will last months, if not years, and potentially create a significant boost in share-of-market.

Comparative rating

The biggest immediate insurtech opportunity lies in comparative rating for commercial insurance. On the consumer side, comparative rating has revolutionized insurance by enabling agents to generate rates from multiple carriers in minutes, with a few clicks of a mouse. This game-changing capability, however, is only beginning to reach the commercial segment. 

For independent agents, no third-party rating platform has yet scaled to provide the broad carrier access needed. As a result, most agents are forced to visit multiple carrier websites individually to generate competitive quotes. Each time an agent is presented with a policy opportunity, data must be entered and re-entered into each carrier’s quoting system. This one-by-one, manual data entry not only is inefficient and repetitive but also circumvents the agency’s internal Agency Management System (AMS). Agents can spend hours, even days, preparing customer quotes for coverage.

See also: State of Commercial Insurance Market

These inefficiencies affect carriers, as well. Industry research shows that, due to time constraints, agents typically present just three to four quotes to customers. Many carriers lose out. Some don’t enjoy top-of-mind awareness among agents for a particular risk; in other cases, agents consider a particular carrier’s website too difficult to navigate or, conversely, prefer other sites offering tools that make quoting easier. Where carriers land amid these issues can make the difference in millions of dollars in aggregate business each year.

Efficiency through automation

Solutions, however, are emerging from insurtech providers. Real-time, automated quoting platforms are simplifying the submissions process with systems that enable agents to auto-populate forms in seconds, directly from their AMS. Up to 80% of the typical commercial submission form is pre-filled, allowing agents to quickly generate quotes from multiple carriers.

Commercial quoting solutions can reduce the time needed to prepare small commercial submissions by up to 60%, with similar reductions in errors. Quoting time for mid-to-large commercial submissions are typically reduced by 25%, with overall quote times that are 50% faster—a major improvement in efficiency for agents and carriers alike.

Carriers can position themselves for success in this environment by engaging with comparative rating solutions from multiple insurtech providers and by investing in appetite, quote and bind APIs. This will position them for success when a market leader emerges because agents will no longer have to visit multiple carrier websites for a quote, and the probability that more carriers will get a look at every submission will increase.

Quoting solutions also offer new opportunities for wholesale business among managing general agents (MGAs). The world is changing, and lines of business are opening up for new risks, such as data loss and privacy. Carriers often turn to MGA wholesalers for these niche markets, and adding connectivity via rating platforms will create a more complete, self-contained, digital ecosystem that supports more lines of business while delivering greater value to all stakeholders.

Comparative rating for specialty lines will likely follow the initial success of rating for standard lines. Insurtech leaders will likely be the ones to drive this emerging opportunity between carriers and MGAs, especially in the early stages of development. Carriers that solidify partnerships with distribution insurtechs now will have a leg up as the industry slowly but surely evolves. 

Leveraging data

Distribution is another prime area of competitive opportunity. Especially in commercial lines, carriers can use distribution data to benchmark their pricing and commissions, be more strategic about selecting distribution partners and identify new markets and products. 

Through data analytics, for example, a carrier may find it can price up and still be competitive. Of course, the success of data analytics depends on multiple factors, including applying data in the right cases and creating an infrastructure that properly collects, stores, analyzes and applies digital information.

It’s time to evolve

To take advantage of the power of competitive technology, carriers should accelerate their investments in APIs for automated quoting. They should also solidify their partnership with insurtech providers that offer distribution solutions. 

The primary goal of insurtech is to improve efficiency in all its forms, from reducing time-consuming manual tasks to increasing knowledge of the customer and anticipating change. A major benefit for carriers, however, is the ability to get a leg up on the competition. Marketplace changes demand that the industry become increasingly nimble and flexible. Agility is a key competitive advantage.

Few, if any, carriers have pulled ahead of the pack in easing the process of quoting and selling commercial insurance. It’s time to seize the moment. A few trees may be obscuring the business view, but a good, insightful look will reveal a profitable path through the woods.

The Need for Speed in Underwriting

From delay born of pandemic to decisiveness borne by leaders with a plan, from anger born of isolation to action borne by people’s refusal to isolate themselves from the world, the authors of the first chapter of post-pandemic life—the writers of this history—are the underwriters of life insurance. The men and women responsible for the expansion of accelerated underwriting deserve their place in history. 

The public has a right to know, and the insurance industry has a duty to promote, what accelerated underwriting is: that new technologies make it fast and affordable to review life insurance applications; that insurers can check prescriptions, driving records and all relevant records in minutes; that this process is safe and noninvasive, free of undergoing a physical or having someone enter a physical premise.

Because of a combination of timing and technology, accelerated underwriting is no longer an option for the few. Because of the times in which we live, accelerated underwriting may become a preference of the many. Because of these things and more, including the need to slow or stop the spread of COVID-19, accelerated underwriting may save lives while increasing sales of life insurance. But people cannot buy what they do not know exists.

People need to know that eligibility does not depend on electability, that they do not have to elect to put themselves at risk so as to have insurers assess the risks of issuing life insurance. What is available online avails insurers the opportunity to earn the trust of consumers. What sustains this trust is what accelerates the means by which consumers can create trusts or tax-free income, thanks to owning life insurance. What makes this trust possible in the first place is accelerated underwriting.

The terms may differ, the terms do differ, but the conditions are the same; that is to say, accelerated underwriting is not conditioned on strangers visiting applicants’ homes. 

Matters of personal health are a matter of public health, such that people of a certain age or condition do not want to increase their vulnerability or lower their immunity to illness. Put another way, no one wants to die from life insurance, though many want to die with life insurance.

Accelerated underwriting is true to its name, using technology to collect and analyze data. From there, insurers can determine specific costs for specific consumers. The process is efficient and economical for everyone, allowing insurers to write more policies while enabling consumers to compare prices. But again, the information that furthers accelerated underwriting begins with the information insurers give consumers.

See also: Digital Revolution Reaches Underwriting

Accelerated underwriting is a universal good, based on the good of intelligence, for the purchase of goods in the form of life insurance. The result serves the common good, strengthening individuals and families. For this good to flourish, acts of goodness demand swift and secure action. 

Now is the time to accelerate the use of accelerated underwriting, so we may speed up the day when all who want life insurance can have it.

A Changing Vision for Driverless Vehicles

As plans for fully autonomous vehicles continue to get pushed back, the near future is beginning to look like it will revolve around a different acronym: more ADAS, less AV.

Autonomous vehicles, or AVs, will provide many of the technology breakthroughs that allow for advances in ADAS, or advanced driver-assistance systems, which will use a host of new sensors and AI to reduce accidents. But the vision of driverless robotaxis carrying us everywhere and making deliveries looks like it will have to wait a bit, except in carefully circumscribed areas — and maybe even there for a while yet.

The shift to ADAS from full AVs should soften the near-term effects on auto insurers, which have feared a loss of business in a world where individuals aren’t responsible for driving. At the same time, the shift may increase the cost of repairing expensive electronics when accidents occur.

The new focus on ADAS is by no means a statement that the full AV revolution won’t happen. The progress by AVs has been nothing short of astounding since DARPA, a research arm of the Department of Defense, offered a $1 million prize in 2004 in a contest among autonomous vehicles on a 150-mile course in the Mojave Desert. Most of the 15 vehicles chosen to participate were basically golf carts with sensors and computers strapped on to them, and more than half didn’t even make it out of sight of the starting line. The farthest any vehicle went was 7.4 miles. Just 17 years later, we have fleets of sleek-looking vehicles traveling city streets using AI and sensors — albeit still with a safety driver behind the wheel in just about all of them.

Progress will continue, too. A Brookings Institution study found that $80 billion flowed into AV technology investments between 2014 and 2017. That’s just the investments announced publicly and, of course, doesn’t count the prior investments or the money that has flooded into the field since 2017.

The issue hasn’t been that the AV technology doesn’t work — in any given situation, an AV will perform better than the vast majority of human drivers. It’s just that the world around AVs has turned out to be more complex than initial plans allowed for. In particular, we humans do lots of unpredictable things as pedestrians and as drivers — and AVs aren’t allowed to make mistakes.

While we wait for full autonomy, though, plenty of opportunities have opened up to make driving safer, a notion underscored by some recent multibillion-dollar price tags on acquisitions of ADAS companies.

Lidar sensors, governed by always-learning AI, can enhance automatic braking systems — and studies have found that cars are already more than 50% less likely to have a rear-end collision if equipped with such a system. Systems that keep cars centered in lanes will also improve as technology designed for full autonomy is deployed.

Increased communications capabilities designed for AVs will allow for better connections with roads and other infrastructure. When I rented a car last week while on vacation at the Jersey shore, I wasn’t sure what the speed limit was at one point, then realized that it was displayed on my dashboard based on some sort of radio signal from a speed limit sign I’d missed. Cars will also be able to better communicate with each other. If a car slams on its brakes, it will be able to alert the stream of cars behind it so they can instantaneously begin braking, too. Further out, AV technology will even let cars communicate with each other in ways that let them essentially see around corners — even if you can’t see that a car is speeding through a red light and might broadside you, many other cars on the road can, and they’ll be able to alert yours to brake and avoid the danger.

Technology developed for autonomous cars may also find earlier uses in autonomous trucks. Many are looking at having them operate in fully driverless mode on freeways, where vehicle traffic is far more predictable than on city roads and where pedestrians aren’t an issue. Human drivers would be staged at freeway exits, to ferry trucks to and from their final destinations and within cities. Makers of self-driving trucks say they can cut freight costs in half by removing the need for drivers on the freeway portion of long-haul routes.

I remain as optimistic as ever about the outlook for AVs. Since Chunka Mui and I wrote a book on driverless cars in 2013, progress was faster than we expected for a time and now is somewhat slower. As often happens with fundamental innovations like AVs, the development isn’t happening in a straight line. We’re winding up with hybrid forms of the technology in both cars and trucks before we get to the full effects. But we’ll get there.

Cheers,

Paul