Tag Archives: revolution

5 Hurdles to Insurtech Success

We like to joke that we started an insurtech because we wanted to make money as slowly as possible. It’s an exceedingly painful joke.

We were asked recently to discuss issues that insurtech companies face. We came up with five things that stand between insurtechs and success. Here they are, but, please note, your mileage may differ.

1) The math – All insurtechs have one super-challenging math equation to overcome –

Risk = Bad

Insurtech = Risk

Therefore, Insurtech = Bad

Insurtechs are busy trying to make themselves more inventive. Which only makes them riskier. As this equation shows us, that’s a bad thing. Much more attention needs to be paid to how insurtechs can de-risk themselves and make it easier for insurance professionals to rely on them.

2) Insurtechs are talking revolution to an industry that makes evolution look fast. Most insurtechs believe that they are going to revolutionize the insurance industry. Unfortunately for the revolutionizing insurtech, insurance has been around for 300 years without them and can probably be around for another 300 years without them. Insurance is an incremental improvement industry. It’s evolution over revolution.

3) Insurtechs don’t understand who they’re selling to. If you’ve never been to an insurtech pitch-fest, it’s filled with T-shirt and torn jeans entrepreneurs pitching to suit-and-tie-wearing insurance executives. We’re not saying that the insurtechs should be wearing suits, but a nice pair of pants and a coat wouldn’t hurt you. And we’re not even broaching the subject of industry knowledge here.

See also: Insurtechs Are Specializing  

4) Insurance companies are slow. When an insurance company talks about doing something this year, the earth will revolve three times around the sun before that something happens. They’re called insurance-years. They’re like dog-years but in reverse. Insurtechs have to plan for their first real sale being three years away, not three months. Blaming carriers for their slow sales cycles means you haven’t prepared properly.

5) Even the best mousetrap will not cause insurers to beat a path to your door. Insurance companies and the law of large numbers work together very well to make money. It’s very hard to break through the status quo, even with the latest and greatest whatever-it-is. Insurance employees aren’t normally rewarded for taking chances on something unproven. This lack of urgency to do something different can kill your insurtech.

Success IS possible in insurtech! Between new data, new processes and interesting technologies, insurtechs ARE winning. By understanding some of the hurdles you’ll face before achieving success, you might be able to shave some time off one of the most daunting sales challenges ever invented – selling to the insurance industry. Good luck, and we’ll see you in the marketplace!

This article was originally published on HazardHub.

Focus on Evolution, Not a Revolution

Of all the shiny new tools piquing insurers’ interest, blockchain is among the shiniest: 46 percent of insurers plan to use blockchain within two years, and 84 percent say it’s reinventing the way they engage with new partners, according to research by Accenture.

But while blockchain presents enormous potential to revamp claims and contract management, detect fraud in real time and more, most insurers aren’t ready to adopt blockchain. Why? Because they struggle to leverage less shiny digital technologies to create a more seamless claim processing experience, a fundamental aspect of policyholder satisfaction.

Focusing on a technical evolution rather than holding out for a complete revolution, with claim processing at the center, will position insurers to make deep gains in performance now that can continue seamlessly into the future. It’s an approach that offers strong potential to increase not only policyholder satisfaction, but also profit.

How can insurance companies make the right technology plays for an elevated claim processing experience? Here are three strategies to consider.

Expand self-service options via a mobile app—and ensure staff support an all-digital experience.

Mobile apps are an easy and fairly inexpensive digital innovation with high return: 42 percent of auto insurance policyholders use mobile apps to upload photos or videos of vehicle damage directly to their insurers, a J.D. Power survey found. And when insurers use these images, policyholder satisfaction surges. The problem is, insurers only use these images about half the time they are received. When this happens, the delight policyholders gained from self-directing the claim experience diminishes, and satisfaction plummets, the survey found.

See also: 3 Techs to Personalize Claims Processing  

Bringing customer service representatives and claim adjusters on board with an all-digital claim processing experience ensures policyholders get the seamless experience they crave. Make sure staff understand the importance of using the information policyholders provide—including images of damage incurred to their vehicle or property. Seek to limit duplicative inquiries, and continually look for ways to raise the bar around the digital experience. One survey points to five factors that distinguish outstanding mobile apps for insurance from those that are just so-so:

  • Ease of navigation
  • Appearance
  • Availability of key information
  • Range of services
  • Clarity of information

Also critical: digital tools that offer timely, highly personalized guidance and support real-time customer interactions.

Leverage data intelligence to speed claim processing.

A McKinsey study found insurers could reduce claims expenses by 25 to 30 percent by automating claim processing—an approach that also boosts accuracy. Three opportunities for insurers to explore include:

  • Intelligent case management. Machine learning automatically determines the next step in the policyholder’s claim processing journey, such as the need to schedule a repair appointment. Then, data-driven tools enable policyholders to perform these tasks digitally.
  • Digitizing complex tasks. Using data analytics can simplify and standardize tasks such as estimating the value of a loss. When these tasks are performed annually, amounts can vary by claim adjustor—a major dissatisfier for policyholders.
  • Automating front-end and back-office processes. Digital frontrunners use automated tools to send estimates for damage, verify repair invoices, and reimburse policyholders or service providers according to their preferred method of payment.

Make the move to electronic claim payment.

Claim payment is the final step in claim processing and adjudication, and it’s the single aspect of the claim experience policyholders remember most. But insurers overwhelmingly default to paper-based payment, even as check-based payments in other industries continue to decline. The positive impressions gained from digital touchpoints at other points in the claim journey are erased when policyholders must:

  • Wait days for a paper check to arrive in the mail
  • Physically transport paper checks to a service provider or bank for payment or reimbursement

Making the move toward electronic payment—which is 10 times cheaper than paper checks—speeds processing time and payment receipt

How can insurers build the right digital claim payment strategy—one tailored to the needs of individual policyholders and service providers? The right solution should include more than one payment option for policyholders, such as ACH, push-to-debit or check. For service providers, payment options may include ACH, virtual card payments, or checks.

See also: Transformation of Roof Claim Processing  

Some insurers have the expertise to build an electronic payment approach internally. Others purchase digital payment technologies or partner with banks and/or fintechs to provide this service. Determining the right approach involves careful consideration of cost, time to market (speed is critical), options for expanding services as new payment modalities are introduced, and the ability to protect sensitive policyholder data and comply with financial regulations.

A Tried-and-True Model for Innovation

As policyholders demand a standout digital experience, there is a temptation among insurers to build out their blockchain strategy. Blockchain generates a lot of hype for its potential to unlock significant value by simplifying complex, highly manual processes. However, there are challenges to blockchain adoption, including around scalability and deployment. Instead of waiting on blockchain, putting claim processing at the forefront of a company’s innovation agenda now empowers insurers to transform key capabilities today, setting the stage for more advanced technology adoption in the future.

‘Age of the Customer’ Demands Change

The music industry is in chaos. It’s a dinosaur stuck in the tar of old vinyl. Musicians are no longer knocking on record labels’ doors, asking to get their album out there. Consumers are no longer buying their music from record stores. And, with Taylor Swift withdrawing her entire catalog from Spotify, things get even crazier.

The Age of the Customer continues. And if you don’t acknowledge this — whether in music or in just about every other industry, including insurance — you could end up loved as much as a set of tangled headphones.

You Really Got a Hold on Me
In a time not so long ago, musicians had no choice but to go through record labels to even think about reaching their audience. The industry had a three-step process:

  1. Song creation
  2. Marketing
  3. Distribution

This meant artists created their album with the record label’s supervision; the record label then marketed it via in-house or through a third party; the radio stations then played it; and then, finally, customers could buy it at their local record stores. Thus was created a multi-layered model that greatly benefited the record labels.

So what happened to this model?

They Say You Want a Revolution
The Internet happened. By the late ‘90s, when the Internet started to catch fire, people began realizing its potential power, such as the ability to digitalize entire music catalogs. This ultimately led to the birth of music piracy, which drastically cut into record labels’ pockets, creating a rippling effect felt throughout music – within the industry and among music lovers.

But when the iPod was introduced in 2001 it shattered the traditional model of the music industry. Musicians could now bypass all the old steps and start putting out their own music through digital sites like iTunes, opposing music piracy and giving royalties back to artists. Then, fans starting getting into the act.

As record labels worked to stay relevant, they had to offer artists new partnerships, such as 360° deals. A 360° deal assured artists a share from their music, concerts, merchandising, publishing and licensing income – ultimately creating a five-step model:

  1. Recorded music
  2. Merchandising
  3. Fan sites and ticketing
  4. Broadcast and digital rights management
  5. Sponsorship and management

Any Way You Want It
Enter the Age of the Customer. To combat piracy, stream-based cloud services began to emerge (see news on Spotify and Beats Music). Consumers now have the option to listen to any of their favorite songs, on multiple platforms, any time they want – for free even, if you’re willing to put up with commercials.

So now consumers can choose to pay to download a song, buy CDs or records, stream their favorite radio stations or stream their favorite music without breaking the law. This, once again, is shattering the music industry’s business model.

And, boy, the times they are a-changin’. Consumers now connect globally to their favorite bands through the Internet and bypass exclusive record label channels. The majority of consumers don’t buy albums, they download songs.

There’s been a greater attendance at concerts (Live Nation’s ticket sales are up 17%) . Fans seem to be more loyal. Consumers have it made right now, and things seem to be getting even better.

Spotify, the online streaming service, started contacting record labels for a possible negotiation. The labels offered a share in their company for a band’s catalog. The big boys started jumping on board, giving listeners gold record bands, such as Led Zeppelin and Pink Floyd – for free.

And the record labels are happy, because it’s the first time someone has offered them equity for their band’s music. Which means that, if Spotify goes public, well, it’s more money for them. Everybody wins.

However, not everyone is happy with the online streaming service, especially Taylor Swift. After “trying” her music out on Spotify, she decided it wasn’t the best medium for her music, so she pulled her catalog from the streaming service. She also believed her music wasn’t valued as much, because Spotify has no regulations on who gets what – and lack of earned royalties.

It’s an interesting situation right now. With artists pulling music from Spotify (even Jason Aldean recently joined the Swift bandwagon), the music industry must ask itself – is online music streaming the future of music mediums?

In today’s market, technology has placed the ball back in the consumer’s court. The music industry is reeling and desperately trying to get back in the game, but the game keeps changing. Technology is transforming everything, we all know, but how is your company preparing for the inevitable? Are you creating a customer-centric culture that embraces the new? Or are you waiting to see how your competitors fare?

The Revolution Is Coming! Be Ready

The world, the world of risk and risk in the world will be as different in 2020 as the original 13 colonies were from the U.S. as it is today.

The bad news is that Paul Revere won’t ride through your town alerting you.

So you'll have to settle for me — and I am, in fact, giving you enough warning to design your future, and not just manage toward it.

Understand: When one thing is different, it is change. When everything is different, it is chaos.

Change works for dinosaurs. Chaos doesn’t.

But chaos brings opportunity for those who are prepared, and, if you’ve survived in this industry for any length of time, you are able to adapt. Your only issue is one of willingness.

What follows are the 10 environmental factors that, in combination, are triggers of the coming Risk Revolution. These cultural changes are fissures in the foundation of the “good old days” and render vulnerable all traditional institutions and structures that have done so well for so long.

  1. Loss of innocence: When President Nixon said during the Watergate scandal, “I am not a crook,” he acknowledged the end of command and control. Raw power could no longer sustain the most powerful man in the world. As citizens, we confronted the “feet of clay” of our leaders. What Nixon did to weaken our trust in our political leaders, terrorists in airplanes on 9/11 did to our confidence. We won two world wars and are insulated and isolated from the “evil” out there by oceans on our coasts, but it is not enough. We have to accept we are vulnerable.
  2. Katrina was a “girl” but she was no lady: When Hurricane Katrina hit the Gulf Coast in 2005, it breached levees and created a Mad Max world that none were ready to face. Our institutions – federal, state and local government, the Red Cross, etc. – were supposedly built for catastrophes but failed us. Our confidence in our system of order was lost. We must rethink the world.
  3. “Hell no, we won’t go”:  war protests, burned bras, tie-dyed T-shirts, Elvis and the Beatles, hippies who protested everything except the right to protest. This was the marketplace speaking for the first time. Tomorrow, the market won't be quieted.
  4. ________ – Americans:  African-Americans, Asian-Americans, you-name-it-Americans. We're no longer a homogeneous nation. One size does not fit all. The change will accentuate the world of niches, affinity groups and “verticals” and so fragment the market that mass customization will be required, down to a niche of one. We want it “our way,” and not just in fast food.
  5. The front porch and the back fence are gone: Time and place now have little value, and “pace” is as fast as the buyer wants it to be. The question is: If Gen Y is known for a lack of empathy, how do you sell in a nonverbal world?
  6. Tennis balls and Patty Hearst: Sgt. Gill, an intelligence officer, told me in 1972 about satellites that could read the label on your tennis ball while you were playing. In 1973, Jim, another military intelligence guy discovered that, while his data mining model couldn’t help the FBI find Patty Hearst, he could find everyone in America who was just like her. In an era of satellites/drones/etc. and big data, what happens to privacy?
  7. Miss Hathaway: In the finance department of LSU, Joan always reminded me of Miss Hathaway from “The Beverly Hillbillies.” She told me decades ago, “Mike, this LexisNexis thing is going to be big.” She was talking about the Internet. She was right.
  8. From Ozzie and Harriet to Archie Bunker to the Huxtables to the Simpsons to the Modern Family and maybe to the Jetsons: The world keeps changing, and lots of people don't like that. They want to hold on to the past. Political correctness, shouts of racism and sexism, a bipolar political process, extremes, etc. all limit our willingness to hold hands and sing “Kumbaya.” We are changed forever, and so is our society and its most basic building block – the family. Deal with it.
  9. “If you have all your eggs in one basket, make sure it’s a strong basket.”: That line, from a Volvo ad, circa 1980, applies today because we are betting the economy and our world on technology . What happens if a natural disaster, a terrorist, an enemy or sun spots disables our technology for a week, a month, a year?
  10. Addictions: Addiction to the status quo is the worst. In this most serious form of dependency, we sacrifice everything to do nothing but protect our comfort zone. The insurance industry once owned the world of risk. Now we have done more than “let the camel’s nose under the tent.” We are now sleeping with the camel. When the market demanded innovation, we too often failed to provide it. Instead we gave up our responsibility and let government and others do what we didn’t want to do. Captives, alternative risk funding, HMOs, the ACA, self-insurance and the National Flood Insurance Program are all examples of decisions being made without us. That is the nature of markets. We were too slow, and something else filled the void. We still face two fundamental challenges: Our products are priced beyond the ability of many consumers to pay, and some embrace a “nanny state.”

The trends identified are not all right and they are not all wrong. They just are. What will 2020 bring your world? What will you do to prepare?

Remember the admonition from Peter Drucker, “Whom the gods wish to destroy, they send 40 years of prosperity.” The last decades have been good to us. The next decades can be, too, but only with the right amount of awareness, preparation, discipline and commitment.

George C. Scott, playing Gen. George Patton in the movie “Patton,” said: “In times of war, all other forms of human endeavor shrink to insignificance.” 

Are you ready, willing and able to fight and prevail in the coming Risk Revolution?