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Powering the Recovery

At last week’s Global Insurance Forum, Swiss Re Group CEO Christian Mumenthaler said the industry has been in a sort of hibernation for the past year and a half to two years, in terms of big deals and bold moves – but is about to wake up.

“I think we’re in for a very interesting two or three years, with lots of change in the industry,” he said at the virtual event, “Powering Recovery,” held by the International Insurance Society.

Roy Gori, CEO of Manulife, said insurance has “an opportunity to change the paradigm of how people think about our industry.” He described the opportunity as “once-in-a-lifetime.”

Mumenthaler, Gori and many of the other speakers at the three-day event –videos of which you can see here — said the industry had managed a stunning pivot to digital in the face of the pandemic, almost overnight. But they also pointed to numerous challenges and opportunities for the industry as the world gradually puts the pandemic behind us.

Gori, for instance, said the pandemic has underscored the role that insurance plays in creating personal financial stability, while also creating the opportunity for the “complete digitization of every aspect of our business … to eliminate the friction that makes insurance an unattractive proposition sometimes.” He said Manulife has “done more in the past 18 months than in the prior 18 years” in digitizing and has seen the benefits — e.g., straight-through processing now handling 81% of claims, up from 68%.

He sees a major role for insurance in the sorts of public-private partnerships that will be necessary to implement the infrastructure bill that, in some form, seems likely to pass in the U.S. Congress soon. Insurers can also help with what appears to be a new emphasis for global supply chains — while companies have spent many years optimizing them for efficiency, the pandemic has made clear that companies need to build much more resiliency into them.

He cited two other key challenges/opportunities: “Cyber crime is up 600% in the pandemic,” he said, “and 100 million people have been pushed back into poverty…. What can we do to close the income gaps that have been created?”

Mumenthaler said the Swiss Re Institute measures the protection gap — the gap between the economic losses in the world and the insured losses, across all lines of business — and saw a 6% increase during the pandemic, to $1.4 trillion. He said there “should be an obsession to close that protection gap.”

He said he sees an opportunity to apply behavioral science to not only better understand customers but to work better with governments to address massive problems like future pandemics, major terrorist events and large-scale cyber attacks.

“The big events are entirely foreseeable,” he said, citing a 2007 paper by 20 chief risk officers that not only said a pandemic was coming but that laid out almost all the repercussions we’ve experienced in the past year and a half. “Very few risks are totally off the screen,” he said. But insurers can do a better job of helping governments to not only see the risks but to “pre-finance” responses, when actions are far less costly, rather than wait until disaster hits.

Dan Glaser, CEO of Marsh McLennan, agreed with Mumenthaler that supply chains need to focus far more on resiliency. “The world was in a hyper-efficiency mode,” he said. “But the hyper-efficient companies shouldn’t be viewed as best in class. We have to see that risk-adjusted returns are more import than actual returns. Companies need to be asked: How prepared are you?”

The IIS’ Global Priorities Report, released in conjunction with the forum, underscored the challenges facing the industry. The report, based on surveys sent to nearly 10,000 executives worldwide, found that “changing customer expectations during these crises can result in insurer frustration, as consumers may not fully understand how their insurance policy works and what it covers. One executive noted the challenge of correcting ‘how insurance is viewed by the general public. It is not meant nor intended to cure all ills, yet it is often expected to.’ This was especially true during the pandemic.”

The report found that the biggest worry is about competition from outside the insurance sector: “Executives worry that digital engagement has taken over and that the industry faces disruption from new entrants with ‘better-organized data and a stronger consumer orientation.'”

I could go on and on. There is an awful lot of meat both to the videos from the three days of the forum and to the Global Priorities Report — which I encourage you to view and to read. But I’ll just cite two more of the speakers, whose comments I thought were especially insightful, then let Marsh McLennan’s Glaser bring us home.

As we’ve seen, ESG (environment, society and governance) has become a hot topic as companies are being pressed to be better corporate citizens, and that emphasis is likely to increase coming out of the world-shaking pandemic. Neeti Bhalla Johnson, president, Global Risk Solutions at Liberty Mutual Insurance, said insurance has a unique role to play in many aspects of ESG, notably climate change, because the industry has both “the asset and the liability side of the balance sheet.” In other words, the industry carries the risk, while also have enough capital to help address it. She said ESG could also help address the industry’s talent gap, because new types of people will want to join forces with insurers to tackle big ESG problems.

Meanwhile, Lorenzo Chan, president and CEO of Pioneer Inc., used the pandemic to make a bold step toward addressing the protection gap by, as he put it, going down the pyramid. He said that everyone typically goes for the best prospects, at the top of the pyramid, but he aimed at the “micromarket” in the Philippines. He says lots of people had negative associations about insurance — slow to pay, tricky in the fine print, etc. — so he looked for partners he could work with who were trusted by a broad market of the less wealthy. He wound up working with supermarkets, motorcycle distributors and, in particular, pawn shops.

“We unlearned everything we knew in traditional insurance,” Chan said. But, in the process, Pioneer went from 180,000 customers in the micromarket to 18 million, and Chan thinks there is still considerable room to grow.

Talk about narrowing the protection gap.  

As Marsh McLennan’s Glaser looks at the challenges ahead, he says: “In my 40-year career, it’s always been thus: There have always been things on the horizon that look dangerous. We’re one of society’s ways of sensing those dangers.”

He adds: “Insurance is a noble business. It’s hard to think of a business that does more for society.”



P.S. If you’re at InsureTech Connect in Las Vegas this week, please stop by and say hello. I’ll mostly be hanging out at The Institutes’ booth, #1117 on the expo floor. I may be off doing some video interviews for a series we’re pulling together, but I shouldn’t be gone long. I hope to see you there.

Insurtech 2020: Trends That Offer Growth

The insurance industry has undergone a transformation over the past five years. Once manual and paper-based, insurance professionals now recognize the overwhelmingly positive impact technology has had on efficiency and customer relationships.

We can expect the acceleration of tech-enabled customer experiences that promote dynamic customer interactions and empower the insurance industry to deliver tailored solutions and products to meet customers’ personal risk advisory needs. Here are a few of the innovations we will see take off in 2020.

  • Pay-as-you-go car insurance. This unique approach to car insurance is especially appealing for urban consumers who own a car but rarely drive it. Rather than forcing occasional drivers to spend money on the same caliber of coverage as someone who drives every day, on-demand insurance means car owners can activate coverage only when they need it or pay per mile. The program requires a significant investment in technology that provides direct, self-service options for consumers, but we’ve already seen Liberty Mutual and Metromile offer this flexibility. We can expect many of the larger brands to begin offering similar options.
  • Self-service capabilities. Sometimes it’s just not feasible to call an agent when a need or question arises. Modern consumers increasingly want the convenience of DIY options to allow them to secure coverage or access information on their own schedule. To meet that demand, we’ll see self-service portals offer a wider range of features, including risk rating, on-demand premium quotes, home inventory solutions and claims processing. There’s also a growing demand for virtual adjuster technology and drone/satellite integration that help speed claims processes. Many agencies aren’t aware that their carrier partners even offer these tools, so be sure to ask.
  • Smart home claim avoidance/prevention tech. You’re probably already familiar with tools that track driving habits and offer discounts on auto insurance. A similar tech is emerging to help homeowners head off costly insurance claims on some of the most common mishaps. For example, a large portion of claims are related to water damage, such as a pipe bursting or an old water heater that fails. By implementing smart home sensors, automated controls and other Internet of Things devices, insurers can help homeowners mitigate the damage. For example, a sensor installed on a water heater can help monitor its structural integrity and remaining useful life, giving homeowners a heads up if it looks like a leak is imminent. In addition to offering premium discounts for participating in such a program, carriers might also provide incentives for replacing risky appliances ahead of time to avoid the risk of claim. Other solutions might involve installing a flood sensor or automated water control valve, which would send a mobile notification if a pipe bursts while no one is home, or even automatically shut off the water to prevent major damage. Some carriers already offer smart home kits for free to avoid these types of claims, and, while some homeowners might be a little concerned about privacy issues at first, I expect we’ll see this become table stakes soon.
  • Deeper data insights to drive business growth. With threats of a potential economic slowdown beginning to percolate, we’re starting to see signs of a hardening of the market in commercial lines. In many cases, premiums are rising, and business customers are looking at all options to save money and reduce costs. Agencies need quantifiable data and insights from smart analytics to help commercial customers strike the right balance of risk, coverage and cost.

That means the demand for industry-wide data analysis will grow substantially, as agents and carriers need measurable and accurate insight into what’s going on across industries — what customers in similar business sectors are buying, what the risks are and what are any potential gaps in coverage. Combined with their experience and knowledge, comprehensive industry analysis tools will enable agents to see the big picture and give business customers data-backed recommendations to ensure they receive just-right coverage.

See also: Is Insurtech a Game Changer? It Sure Is  

The future is tech-enabled

In the coming year and well beyond, consumers will increasingly demand greater transparency, a higher level of service, and on-demand solutions from their insurance carriers and agents. This means adopting innovative technology will become a norm rather than a novelty as the industry digitizes to provide a more modern experience.

The good news: A wide array of insurtech solutions are now available, providing accessible and affordable tools for even the smallest independent agencies. Adopting insurtech solutions can not only improve agency efficiency, allowing agents to spend more time with customers, but also help agencies spot opportunities for growth. This powerful combination can deliver substantial ROI for investment and position your agency as a modern, tech-savvy partner for both consumer and commercial customers.

The Connected World: How It Changes Claims

Automation is transforming claims processing in myriad ways. Damage appraisals that are completed in only a few hours are becoming the norm―shaving days off cycle time and making the claims process easier than ever before. Insurance customers are getting comfortable with snapping a few photos of their damaged vehicle and sending them to their insurer via a simple mobile claim app. Drones are often dispatched to inspect storm damage on a home, allowing property adjusters to complete virtual damage inspections. Data delivered electronically early in the claims process is revolutionizing the claims workflow, simplifying claim reporting and providing a wealth of actionable data to expedite claim settlements.

What do customers think about the advent of claims automation? How can insurers leverage today’s technology and real time data to wow their customers? These are just a sample of the questions we wanted to answer with our Future of Claims panel of experts at the LexisNexis Customer Advisory Meeting on Sept. 11, 2018, in Scottsdale, AZ. This session, which I moderated, included experts Dave Pieffer (P&C practice lead with J. D. Power & Associates), Jimmy Spears (AVP auto experience with USAA) and Lily Wray (VP emerging technology operationalization with Liberty Mutual).

See also: 3 Techs to Personalize Claims Processing  

Data from the 2018 J. D. Power Claims Customer Service Survey, presented by Dave Pieffer, informed our discussion around the following four themes (with the customer perspective for the themes shown in quotes):

  • Show Empathy―“Listen to Me”
  • Streamline Customer Communications―“Simplify for Me”
  • Improve Service Speed―“Prioritize Me”
  • Optimize and Balance Self-Service Options―“Empower Me”

Show Empathy

The survey found that showing empathy (“Listen to Me”) ―expressed as “ensuring the customer feels more at ease”―scores low, with an industry average of 66%. Pieffer shared that the only empathy category scoring lower was “taking the loss report in 15 minutes or less”―with an average of 59%. The panel explained the importance of listening to customers as a first priority and improving FNOL scripts to be more natural and conversational versus impersonal (such as simply providing a list of questions). Jimmy Spears emphasized the importance of adopting a user-friendly self-service claims reporting process. He introduced the term “digital hug”―an immediate digital response to a customer’s electronic claim report or message. Spears shared that often customers who report electronically will immediately also call to ask, “Did you get my report?” Providing a digital hug gives customers the assurance that they have been heard and action is underway. The panel audience participated in the session by answering real time electronic polling questions from their phones, and in this case responded that simplifying the FNOL process with fewer questions was the most important way to increase customer empathy.

Streamline Customer Communications

On the topic of streamlining customer communications (“Simplify for Me”), Spears explained that “pro-active communication is the key to success.” Pieffer shared statistics showing that customers are most satisfied when the insurer updates them with claim status information. The survey results supported this information through scores indicating deteriorating satisfaction when customers find themselves having to call their insurer or repair facility. The panel agreed that getting the claim to the right person quickly and avoiding multiple handoffs was critical to improving customer communications. This was confirmed by survey data that showed consumer ratings drop by 133 points when customers are asked to repeat information during the claims process. The audience’s real-time polling indicated that typically at least three claims employees touch even the simplest claims.

Improve Service Speed

Customers expect their insurance company to make them a priority (“Prioritize Me”) when they have a claim. While we often think this means fast claims service, Pieffer explained that the survey results indicated that setting an accurate customer expectation at loss report was equally important to processing speed. In fact, meeting customer expectations on time-to-settle increases customer satisfaction scores even more than simply providing a fast claim experience. Spears explained how his company has completely redesigned the total loss claims experience by simplifying not only claims processing but also the car purchasing process via USAA Bank services and the USAA car buying service, which allows customers to be in their next car within a few days versus a few weeks (the industry average). Audience polling revealed that the optimal time to pay a simple claim should be within three days. Pieffer noted that the survey indicated today’s industry average is about six days.

Optimize and Balance Self-Service Options

Our final discussion topic (“Empower Me”) focused on the use of self-service technology. Pieffer shared data showing that Gen X and Gen Y customers (younger than age 50) were most comfortable with submitting damage photos via a mobile app and receiving electronic claims updates. While this was not a surprise, it was interesting to learn that satisfaction with digital FNOL was low for all age groups. The panel spoke about the need to simplify the FNOL process to minimize the clicks it takes to complete a digital FNOL. This was validated by audience polling, which overwhelmingly supported simplifying FNOL apps and minimizing clicks. I shared the value of bringing real-time data into FNOL and self-service applications to electronically verify first-party information to minimize additional inquiry. Furthermore, I noted that real-time FNOL data also allows third-party information to be collected immediately and accurately to simplify the FNOL process and make self-service reporting much easier for customers, which should greatly increase customer adoption.

See also: The Missing Piece for Customer Experience  

The panel discussion and audience poll answers confirm that delighting customers at time of claim is all about listening to, simplifying for, prioritizing and empowering them. As the P&C insurance industry continues to advance in claims automation, these four customer expectations should be front and center to ensure greater customer satisfaction and retention.

What Will Operations Look Like in 2028?

In a 2011 article in Insurance and Technology, Kathy Burger enumerated several big technological changes in the insurance industry since 2001, including the rise of big data, the ubiquitous nature of cell phones and social media and an increased emphasis on data security and privacy.

Seven years later, these once-big innovations are par for the course. P&C insurers and insurtech companies are now positioned to use these tools — which scarcely existed in 2001 and which were only beginning to be broadly embraced in 2011 — as the foundation for the next wave of major changes in the insurance industry.

Now, let’s look at some of the biggest rising insurtech trends today to get an idea of where they’re likely to take us 10 years from now.

Auto Insurance

In July 2015, Jayleen R. Heft published an article at PropertyCasualty360 with the provocative title, “Will the auto insurance industry be obsolete in 20 years?”

Heft cited the work of Deutsche Bank research analyst Joshua Shanker, who argued that by 2030 self-driving cars and ride-sharing services would occupy so much of the automotive market that setting rates based on driving data would no longer be necessary. Instead, the companies behind these vehicles and services would simply “insure their cars like any other product,” Heft said.

While self-driving cars and ride-sharing services like Uber and Lyft are already shaking up the auto industry, predicting the demise of auto insurance by 2030 — or by 2028, even — may be premature. Pay-per-mile auto insurance is gaining popularity. Spearheaded by companies like Metromile and Esurance, the pay-per-mile model charges a base rate, plus a specified rate for each mile driven.

“Each mile usually costs a few cents,” Craig Casazza explains in an article for ValuePenguin. “So if you drive 200 miles per month at a rate of five cents per mile, you would be charged $10.” In addition, Metromile only charges drivers for the first 250 miles driven in any given day in most states.

Tracking Mileage With Telemetrics

Both Metromile and Esurance use telemetrics to track miles driven to calculate each month’s rate. Metromile calls its program the “Metromile Pulse,” and it uses the car’s OBD-II port to track mileage.

Other insurance companies have experimented with telemetrics for a number of years but haven’t connected rates directly to miles driven. Instead, they use the vehicle’s data to adjust rates in a more complex, less transparent manner, Casazza says.

See also: Future of P&C Tech Comes Into Focus  

The pay-per-mile model is increasingly popular with younger drivers, who often have the option to abandon their cars entirely for the convenience of Uber or public transportation, but who are happy to keep the freedom of their own vehicle when they feel they can more directly control its costs. For these drivers, who include a growing number of those currently under age 40, auto insurance may survive into the 2030s — although it may operate in a very different way.

Shanker’s prediction that auto insurance will fade into product liability insurance over the next decade, however, may be prescient. In an October 2017 article in Business Insider, Danielle Muoio explored Tesla’s partnership with Liberty Mutual to sell insurance as part of the purchase price of the company’s vehicles. The plan, called InsureMyTesla, factors in the car’s autopilot feature while setting rates and comes up with a lower cost than other insurance plans as a result, Muoio reports.

Insuring Shared Rides

Similarly, while ride-sharing company Uber currently requires drivers to carry their own auto insurance coverage while also providing supplementary insurance, the company may switch to providing all insurance coverage on its cars as it continues to move into the self-driving vehicle market.

Given Uber’s bumpy ride in producing self-driving vehicles, however, the company’s total abandonment of conventional auto insurance expectations for human drivers may be more than 10 years out, Tech Radar’s Leif Johnson and Michelle Fitzsimmons said in May 2018.

Adding Value and Processing Claims

“Digital technology destroys value,” warned a March 2017 article by Tanguy Catlin, Johannes-Tobias Lorenz, Christopher Morrison, and Holger Wilms at McKinsey & Co. According to the authors, “although digital technology propels some companies to become clear market winners, for many more its impact depletes corporate earnings and the overall value of an industry. Consumers, not companies, are often the ultimate winners.”

To stay relevant, the authors said, insurance companies must “meet customers’ expectations, which have been transformed by digital technology.”

In 2018, insurance companies seeking to stay ahead of the curve often accomplish this task by breaking down their own silos and presenting a quick, clean digital interface that makes it easy for customers to interact with the company and for staff to understand customers’ needs and provide clear, consistent answers.

Bridging Human and Automated Workflows

By 2028, companies are likely to have struck a balance between automation and human intervention — a balance that many insurers are currently struggling to find, Rick Huckstep writes in an article in The Digital Insurer. Automation offers both the opportunity to improve claims response and the challenge of providing the “human touch” that customers also demand, as Roger Peverelli and Reggy De Feniks put it in a December 2017 piece for Insurance Thought Leadership.

The goal will be to use automation in a way that doesn’t feel automated. As AI technology continues to develop, this goal may be fully realized within 10 years.

The automation of many of the current day-to-day tasks faced by insurance agents will, in turn, change agents’ jobs. Some commentators are already predicting that today’s field agents will be obsolete by 2023, replaced by “bionic agents” who have fully integrated digital tools, including AI and machine learning, into their work.

How Automation Influences Customer Expectations

Customers are already demanding the knowledge and flexibility a bionic agent exemplifies. As Jason Walker writes at PropertyCasualty360, “Consumers today want the ability to conduct insurance business anytime, anywhere for simple transactions, while at the same time be able to have a relationship with a professional to discuss complex policy questions or walk them through the claims process.” As this option becomes ever more normalized for customers, the demand for the same experience in insurance will rise. as well.

The result? By 2028, “digital natives” won’t only be insurance customers — they’ll also be insurance agents who leverage technology not only to serve customers but to demonstrate real value in the insurance process.

See also: Key Strategic Initiatives in P&C  

Automation and Claims Processing

Field agents aren’t the only insurance industry professionals who will see their work change dramatically by 2028. The ways insurance companies process claims will change, as well, driven in large part by customer expectations.

For instance, Ben Rossi writes at Information Age that about a fifth of young adult customers (ages 18–24) expect insurance companies to use drone technology to survey property damage and gather information for claims.

This idea “would have been unthinkable as recently as a couple of years ago,” Rossi says. Ten years from now, sending a drone to a damaged building or factory site may be as commonplace as sending a human adjuster has been for the past 10 years.

For many of us, 2008 feels like it was yesterday. In 2028, our memories of 2018 will feel the same — yet the insurance industry is poised to be eons ahead of where it currently stands, and insurtech will lead the way.

Innovation Maturing Into Major Impacts

Maturity in innovation means the innovative approaches taken by companies throughout the ecosystem are becoming more comprehensive and systematic. SMA has acquired a unique historical view of innovation in insurance through our annual SMA Innovation in Action Awards – and we have seen how it has changed over the six years of the program. Small-scale experimentation with a single emerging technology like drones has been replaced by building an entire product or division around advanced technologies like machine learning. Insurers are also taking concrete and proactive steps to establish an innovative culture within their organizations. This year’s award winners provide great examples of these shifts and show how innovation is becoming firmly established in insurance.

An excellent example is Liberty Mutual Insurance, the winner of a SMA Innovation in Action Award for company-wide innovation. They created a sustainable innovation model across the enterprise to successfully deliver transformational value to their operations and customers. Their innovative initiatives include developing a digital, direct-to-consumer insurance product aimed at skiers and snowboarders, multiple skills for Amazon Alexa that break new ground in how consumers interact with their insurance company, and a number of next-generation telematics programs.

See also: Innovation: ‘Where Do We Start?’  

Liberty also implemented cutting-edge analytics and emerging technologies in support of their Liberty Mutual Benefits carrier, winning an award for innovation in a single initiative. Building the data structure from the ground up gave Liberty Mutual Benefits the opportunity to create a data-driven organization with a focus on speed to market and innovative thinking – in effect, an InsurTech within the larger Liberty Mutual structure. Liberty Mutual Benefits leverages the open-source analytics platform Hadoop, artificial intelligence, visual analytics, and machine learning to extract the greatest value from big data and store it in a data lake rather than a traditional data warehouse.

Innovation at Liberty is not only happening within their innovation division, Solaria Labs, but throughout their business, with various external partnerships as well as investments through their strategic venture arm (Liberty Mutual Strategic Investments). Liberty Mutual is demonstrating how innovation as an organizational value can both drive competitive advantage and create new solutions for customers in the digital age.

TAL, Australia’s largest life insurer, took their own approach with an innovation initiative. The first achievement of that program is a new breed of customizable life insurance, CoverBuilder, which won one of this year’s awards. TAL CoverBuilder allows consumers to build their own personalized life insurance policy by adding or removing blocks of coverage. Designed by consumers through interactive online processing and education, new policies can be written without the help of a financial advisor. They can see how each choice they make affects their premium and benefits, and educate themselves about their life insurance options at the same time. As a result, they both understand and value the coverage that they put in place.

TAL’s new product approach is tailored to the self-directed digital consumer. They found that these new customers valued customization rather than simplicity and were willing to learn about many coverage options in order to personalize their coverage. TAL’s nimble pivot allowed them to better serve these customers. They furthered their offering by partnering with Qantas for early rollout, marrying their life insurance expertise to next-generation business models such as wellness programs.

Grange Insurance created an internal practice to institutionalize innovation through cultural change, regular events, and multiple channels. Their formal innovation practice elicits active participation across the enterprise, using an ideation platform for crowdsourcing innovative ideas, regularly scheduled hackathons, gamification, and communal discussion boards. All business and IT associates are incented to participate, backed by strong support from the senior leadership team.

Some of the new ideas, like their skill for Amazon Alexa and an associate mobile app, are already in production. Many others are in the development pipeline following hackathons focused on increasing customer retention and potential uses for chatbots. Grange has also benefited from adapting their cultural mindset to structured, scientific experimentation and accepting failure as a key learning step toward successful innovation and creativity.

Grange’s direct, inclusive approach to innovation complemented their established business practices. The first hackathon dealt with policyholder retention, taking a new look at an old problem. Together with advanced technologies like natural language processing and chatbots is simple, low-tech collaboration: communal whiteboards for brainstorming and communication across siloes, with enthusiastic participation by top executives.

See also: Insurance Coverage Porn  

This year’s insurer award winners are well-established companies with long histories, not greenfield insurers. Together, they have been writing insurance for 335 years. As exciting as the InsurTech world is, it is not the only home of innovation. In fact, the shifts that the winners have taken show how they can take advantage of the best of the new world without giving up their existing expertise. The convergence of these two ways of thinking positions them as Next-Gen Insurers. What is clear from these examples is that these shifts are possible, valuable, and indeed central to the future success of these organizations.

So, we urge insurers of all sizes and lines of business to look closely at these examples of convergence, where innovation complements an insurer’s established strengths. The opportunities are out there in every aspect of your business – and are paying dividends to the business of insurance.