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Six Things Newsletter | August 18, 2020

Are Sharknados Next?

Paul Carroll, Editor-in-Chief of ITL

Many years ago, when I watched “Biloxi Blues,” the Neil Simon play about a young draftee suffering through basic training in Biloxi, Mississippi, I laughed hard at the way actor Matthew Broderick whined the line, “Man, it’s hot. It’s like Africa hot. Tarzan couldn’t take this kind of hot.”

I’m not laughing now. I can’t swear that Tarzan couldn’t take the “kind of hot” we’re experiencing in California, but I’m certainly struggling. The high temperatures in the Central Valley have exceeded 110 for several days now and are expected to be between 100 and 110 for as far as the eye can see on weather forecasts. Even in the Lake Tahoe area, where I’ve spent many a pleasant summer, temperatures are so high and wood so dry that four fires have produced the Reno, Nev., weather station’s first report of fire tornados — they literally turned into tornados of flame and laid waste to tens of thousands of acres.

What’s next? Sharknados? And what, if anything, can we do?… continue reading >

Winning With Smart IoT in P&C

Brett Jurgens, CEO and co-founder

What if I told you that insurers could attract customers with smart home devices that generate interaction seven to 10 times A DAY?

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SIX THINGS

COVID: Chance to Rethink Work Comp
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As insurers worry that the pandemic is depressing premiums, here is a way to rethink workers’ comp — and two entirely new product ideas.

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Why COVID-19 Must Accelerate Change
by Alex Zukerman

According to a survey, insurers are 50% behind consumer demand for service via online chat and 25% behind on service via website.

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COVID-19 Sparks Revolution in Claims
by David Lupinsky

The pandemic has pushed workers’ comp toward telehealth, which is revolutionizing the claims process in four key ways.

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Optimizing Care with AI in Workers Comp Claims


In workers’ compensation, we’ve all seen seemingly basic claims morph into catastrophic claims.This free on-demand webinar, sponsored by CLARA analytics, lays out a tangible solution that realizes the promise of AI.

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5 Hurdles to Insurtech Success
by Bob Frady

Here are five things that stand between insurtechs and success — but, please note, your mileage may differ.

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Watch for This 1 Word on Customer Needs
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Use this simple technique to uncover customer needs, drive innovation in customer experience and keep your business ahead of the curve.

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An Inconvenient Sales Truth
by Kevin Trokey

It is no longer enough to show up with a fancy spreadsheet, promises of better service and a capabilities presentation.

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Are Sharknados Next?

Many years ago, when I watched “Biloxi Blues,” the Neil Simon play about a young draftee suffering through basic training in Biloxi, Mississippi, I laughed hard at the way actor Matthew Broderick whined the line, “Man, it’s hot. It’s like Africa hot. Tarzan couldn’t take this kind of hot.”

I’m not laughing now. I can’t swear that Tarzan couldn’t take the “kind of hot” we’re experiencing in California, but I’m certainly struggling. The high temperatures in the Central Valley have exceeded 110 for several days now and are expected to be between 100 and 110 for as far as the eye can see on weather forecasts. Even in the Lake Tahoe area, where I’ve spent many a pleasant summer, temperatures are so high and wood so dry that four fires have produced the Reno, Nev., weather station’s first report of fire tornados — the fires literally produced tornados of flame and laid waste to tens of thousands of acres.

What’s next? Sharknados? And what, if anything, can we do?

Well, there certainly doesn’t seem to be a break coming any time soon, and not just in California. While I whine about highs of maybe 113 in Northern California and the rolling brownouts and blackouts, Death Valley recorded 130 degrees down south, thought to be the world’s highest temperature since 1931, and forecasts are for the heat wave to be unrelenting. Meanwhile, in Iowa, a derecho — a wide line of fast-moving storms characterized by winds that can reach hurricane force, by tornados and by heavy rains — devastated 12.4 million acres of soybeans and corn early last week. A city council member in Cedar Rapids, Iowa, said trees are piled six to 10 feet high along streets — “It’s like driving through a tunnel of green.” The East Coast is facing its 11th named tropical storm so far this year, forming in the Atlantic, even though the 11th storm usually isn’t named until well into October. (Storms are named when they reach a certain threat level.)

While the U.S. gets most of the focus just now, Siberia has had a crazy heat wave of its own. A town named Verkhoyansk just recorded a temperature of 100 degrees. That may not seem that extreme, but the town is in the Arctic Circle. It was previously known for tying the lowest temperature on record, at minus-90.

You can decide for yourself just how severe climate change will be and how quickly it will occur, but trend lines on heat certainly suggest to me that this won’t be the last summer when I complain about Tarzan-level heat and when my friends on the East Coast have to batten down the hatches in the face of a string of hurricanes.

The only thing I know to suggest is to prepare. We had authors predicting a bad hurricane season last spring, such as in this article from May 10. We’ve also published extensively on better ways to understand wildfire risk, including in a three-part series whose first piece, dated July 6, is here. The articles describe what seems to be a promising way to correlate various risks, even when the areas involved are not near each other.

I’d love to be able to offer ways to head off the sort of devastation that, say, Iowans are facing, but I don’t imagine it’d do much good for me to tell the sun not to shine and the winds not to blow. So, better preparation is about all we can do for now.

The sorts of improvements in modeling described in those articles on hurricanes and wildfires can help. So can better sensors. Tiny, inexpensive weather stations dotting the countryside might pick up the signs of a derecho or other major storm faster than we can now.

Technology is also starting to help us react faster once tragedy strikes. Reports from the devastation in Iowa came in quickly, thanks to aerial surveys by drones, so recovery can started promptly. Parametric insurance policies or provisions written into standard policies can make a certain percentage of a claim available almost immediately, helping the insured get back on his or her feet faster.

There are even the beginnings of hope on prevention. Strings of small satellites that various companies are launching will monitor the Earth in real time and spot blazes when they are far smaller than most are when identified now. But that’s mostly theory at this point. It’ll take some time to implement.

This will be a slog. We’ll do our best to keep you updated on promising developments and hope you’ll pass along any ideas you have.

In the meantime, stay cool, stay dry and stay away from those fire tornados.

Paul

P.S. Here are the six articles I’d like to highlight from the past week:

COVID: Chance to Rethink Workers Comp

As insurers worry that the pandemic is depressing premiums, here is a way to rethink workers’ comp — plus two entirely new product ideas.

Why COVID-19 Must Accelerate Change

According to a survey, insurers are 50% behind consumer demand for service via online chat and 25% behind on service via website.

COVID-19 Sparks Revolution in Claims

The pandemic has pushed workers’ comp toward telehealth, which is revolutionizing the claims process in four key ways.

5 Hurdles to Insurtech Success

Here are five things that stand between insurtechs and success — but, please note, your mileage may vary.

Watch for This 1 Word on Customer Needs

Use this simple technique to uncover customer needs, drive innovation in customer experience and keep your business ahead of the curve.

An Inconvenient Sales Truth

It is no longer enough to show up with a fancy spreadsheet, promises of better service and a capabilities presentation.

COVID-19: The Long Slog Ahead

While sorting through the latest studies and projections about the path of the coronavirus this past week, I was hit in the face with a veritable two-by-four by this piece in Medium by my old friend and colleague Sam Hill. Sam, an all-around smart guy who may be known to some of you because of some high-impact consulting he’s done in the insurance world, writes that, even under the best of scenarios, we’re probably looking at the end of 2021 before the world might return to normal.

Let that sink in for a minute. More than 16 more months of this, in one form or another.

In some ways, Sam’s piece strikes me as quite optimistic. He is counting on having three viable vaccines for the virus in the market by the end of this year.

But it will take months to manufacture and distribute enough to vanquish the virus. Some vaccines may not work or may have disastrous side effects, leading to caution both among public health authorities and among those of us considering getting the virus — “In 1976,” Sam writes, “one person died of a flu strain that appeared to be like the 1918 flu. We rushed a vaccine through. It killed 250 and paralyzed 500.”

Even if the vaccine works, it may only be 50% to 60% effective, not 90%, as we’ve come to expect with smallpox, measles and polio, so a lot of people would be left vulnerable.

By the time you crank in all the steps that have to be completed before life returns to normal, Sam puts the over/under at roughly the end of 2021.

And that’s the best of the three scenarios he lays out.

As long as I’m quoting people this week, here are the two smartest observations I’ve seen recently on how to navigate these crazy times. Both come from Kevin Sneader, the global managing partner at McKinsey:

“The first piece of advice I’d offer a CEO is, forecasts are out, dashboards are in. The notion that you can now forecast the economy, healthcare and other aspects of what can disrupt life, I think, is gone. Now we’re in an environment where we’ve also learned that what you really need to have a handle on are the metrics, insights and what’s actually happening on the ground—the dashboard of daily life.

“You really do have to think like an attacker all over again. Even if you were the incumbent, even if you were the leader before this pandemic, you’re now the attacker, so you must take the steps that attackers take. Think very differently. Look for new opportunities, new markets. Reshape the portfolio and, yes, look at mergers and acquisitions. Plan to do things quite differently as the future unfolds.”

Stay safe.

Paul

P.S. Here are the six articles I’d like to highlight from the past week:

Why Work-From-Home Threatens Innovation

Non-insurance competitors such as Amazon, Google, Tesla, Comcast, General Motors and many others are not standing still, and neither should insurers.

How Insurers Are Applying AI

Insurers should not invest in technology-driven projects; instead, look for use-case-driven projects.

‘Scalable Compassion’ in Workers’ Comp

As much as claims representatives want to help individuals, there has been no feasible way to provide compassion at scale.

Panic Pricing May Be a Bad Idea

While raising rates might be how the industry has responded to uncertainty in the past, there are reasons not to do so now.

The Problem With Virtual Events

People routinely consume TED talks online and love them — because they don’t bear any resemblance to boring, low-energy Zoom presentations.

5 Things Here to Stay, Post-Pandemic

While responses to where and how people work have varied, several effects on workplaces from the pandemic will persist even once it subsides.

A Way Forward on Flood Insurance?

In the mess that is flood insurance in the U.S., a bright spot emerged late last month when First Street Foundation released a major report on the issue, along with a model that will go a long way toward making assessment of flood risk more accurate and transparent.

The report serves first and foremost as a wake-up call. It says, for instance, that 70% more homes are within a “100-year” flood zone than are designated as such by the the Federal Emergency Management Agency (FEMA). That means 6 million households face flood risks they don’t anticipate, yet aren’t eligible for the National Flood Insurance Program. In Chicago, 13% of properties are at risk, according to First Street Foundation’s report, while FEMA puts that figure at less than 1%. The report says Washington, D.C., and Utah have five times the risk that FEMA sees, while Wyoming, Montana and Idaho have four times the risk.

Those sorts of figures are quite the clarion call, but First Street Foundation goes even further by providing the beginnings of a solution: data. Its model evaluates the risk for 142 million properties in the continental U.S., based on an exhaustive array of different inputs that not only are as accurate as possible for today but that project how risks will develop because of climate change. The model lets you search any address for free.

The model from First Street Foundation, a nonprofit research and technology group, should provide short-term benefits while laying the groundwork for smarter long-term policy decisions.

In the short run, potential buyers will understand their odds better and can either pass on a higher-risk property or can mitigate the risks by buying insurance or retrofitting the building. Banks will see the risks more clearly when writing mortgages — and some 30-year mortgages written today will still be in force in 2050, by which point the report projects at least 11% more properties will be at substantial risk of flooding. Insurers will price more accurately. Government — the 800-pound gorilla on flood policy — will have a better handle on what public works to undertake to protect vulnerable areas and what areas to steer clear of because the flood dangers are just too high.

(My entirely unrepresentative check on homes where I’ve lived over the decades struck me as spot on: All were ranked at the lowest level of risk, except for a condo I owned in Hoboken, N.J., that included the ground floor and that, in fact, flooded twice in the decade I owned it.)

In the long run, better information should allow flood risk to be allocated in a mostly rational manner, with homeowners and insurers mostly splitting the liability, but with government in the background to help with out-of-the-blue catastrophes.

We’ve all heard the stories about homes on the coast that get wiped out by storms, then rebuilt, only to be wiped out again, sometimes more than once. Having more accurate data should lead, in time, to underwriting decisions and government policy that reduce or even eliminate such craziness.

First Street Financial describes its report and model as a necessary but insufficient first step. That sounds right. The report is insufficient on its own because lots of other companies and groups will have to finetune the group’s data and, in general, deepen our understanding of flood risk. At ITL, we’ve long appreciated the work done by reThought and Hazard Hub, among others, but many firms will have to step up. And regulators, not known for turning on a dime, will need to become comfortable with using data that exists for each individual property, rather than thinking in broad, imprecise terms like flood plains.

But the report is a necessary, and very welcome, first step.

Stay safe.

Paul

P.S. Here is an intriguing piece from a sister publication, Risk & Insurance, on how insurance could help address systemic problems in police departments. The idea would be to require that police officers carry professional liability insurance. Police departments would cover the average cost of the insurance, but each officer deemed a high risk by actuaries (based on number and type of civilian complaints against them, for instance) would have to cover the additional premium payments. The hope would be to price bad officers out of work before they could do something that would wind up on the news.

I’m not at all sure the idea would work. Institutional forces such as police unions would resist like crazy, and there is surely enough uncertainty about how to weight risk factors that they’d be able to piece together an argument. But I found the idea innovative, so I figured I’d share the article. Maybe there’s a way to build on the idea.

P.P.S. Here are the six articles I’d like to highlight from the past week:

4 Post-COVID-19 Trends for Insurers

It’s not all gloom and doom. A crisis usually functions as a great breeding ground for innovation.

The Case for Paying COVID BII Claims

Is it reasonable to assume coverage for a COVID-19-related BII claim in the absence of a virus exclusion? The answer has to be, yes.

How Risk Managers Must Adapt to COVID

To modernize at the scale and speed required, ​”low-code” application development tools should be incorporated within the enterprise.

COVID: How Carriers Can Recover

Does RFP stand for “Request for Proposal” or “Really Frustrating Process?” Carriers can and must do better.

Strategic Planning in the COVID-19 Era

As insurers develop plans for 2021, the question is, where to start? Traditional processes may need to be supplemented with scenario planning.

ERM Shows Its Worth in Pandemic

Companies with sound ERM practices were better-positioned to deal with the pandemic than those with less sound or no ERM.

What to Learn From the Segway’s Failure

The original Segway, whose demise was announced last week to a chorus of chuckles about mall cops and I-told-you-so’s about the nerd factor, may be the most beautiful piece of design I’ve ever seen. Only the iPhone rivals the Segway, in my mind, in terms of how well the designs anticipated how people would use the devices and in terms of the wow factor when they debuted.

Yet the Segway flopped. Is there then any hope for the rest of us, who lack the design skills that Dean Kamen brought to the Segway?

There is, because he misunderstood or ignored an issue that is key to innovation success: the ecosystem. If you figure out how to plug into and help develop the right ecosystem, you can succeed where even the talented Dean Kamen and his magical Segway failed.

I became acquainted with the Segway shortly after its debut in late 2001. The consulting firm where I was a partner at the time was putting on an innovation-related event and had gathered enough C-suite executives at major companies that Segway sent its president to do a presentation in early 2002. He was slick: He had us set up a ramp so he could bomb down the center aisle on a Segway and up onto the stage. He did the whole talk on the device, darting to some spot on the stage, drifting back to the center and generally showing how the Segway seemed to respond to his thoughts. Just to show off, he’d occasionally do a 360.

He brought a few of the devices with him so the 70 or so of us could take turns experimenting with them in the desert near the resort in Arizona where we were holding the conference. All I had to do was start to think about heading somewhere, and the Segway would do the rest because it sensed my balance shift. Whenever I’d worry about going too fast, the device would sense my hesitation, and I’d slow down. The Segway didn’t have brakes, a throttle or a steering wheel, but it felt like an extension of my body.

I’ll always remember Dan Bricklin, who invented the electronic spreadsheet and who was a fellow with the consulting firm, repeatedly asking people to try to run him over. They couldn’t. They’d build up a head of steam, but then the user would worry as he or she got close to Dan, and the Segway would pull up.

Kamen had already developed a widely used insulin pump and other medical devices, plus a wheelchair that could climb stairs and raise the user to eye height; the Segway was to be his crowning achievement. Steve Jobs said the Segway could be bigger than the personal computer. Venture capitalist John Doerr, who put up funding, said the Segway could be bigger than the internet.

Nope.

The company hoped to sell 100,000 Segways in its first 13 months but sold only 140,000 over the nearly two-decade lifetime of the product. Shutting down production next month only means laying off 21 people.

The key problem was that Kamen and his supporters convinced themselves that cities would be redesigned to adapt to the Segway — a colossally bold claim that, alas, turned out not to come true. In fact, as usual, the Segway needed to be doing the adapting, and it just wasn’t very well set up to fit into the existing ecosystem.

I happen to think that cities need some redesigning — they’re far too car-centric — and the pandemic has provided such a shock to the system that it could accelerate change, but so many trillions of dollars are invested in the current setup that rethinking will take many years, even decades. In the meantime, the Segway was going to have to either fit on the street or on the sidewalk, and it did neither well.

The sidewalk would work, in theory, but only in light traffic. In New York City, you don’t gain much advantage from a device that goes 10 mph or 15 mph if you’re dodging pedestrians who are walking at 3 mph to 4 mph (and who are telling you what you can do with your Segway, in that charming way that New Yorkers have). You also, of course, have to deal with the elements for much of the year, while you’d be protected from them if you’re in a car or taking the subway. Even under the best of circumstances, Segway riders were told to wear helmets, knee guards and elbow guards — fine if you’re a kid but not so great for professionals who aren’t willing to live with permanent hat hair.

Streets are a nonstarter. Someone on a Segway would be moving much slower than the rest of traffic and without the protection that tons of metal provide for those in vehicles. Even in a modified bike lane, the bikes and Segways could wind up going at very different speeds and getting tangled up.

There conceivably was a strategy to be had by working from the edges in. Perhaps if Kamen had seeded smaller cities, as Lime, Bird and other scooter companies are now doing (while facing their own troubles), and let popularity build in ways that would attract bigger markets. Perhaps if Segway had gone after discrete markets in controlled environments, such as warehouse workers, tourists in areas without cars and — dare I say it? — mall cops, then built from there rather than expecting cities to completely redo themselves from the get-go.

The good news is that insurers can learn from the Segway mistakes and, based on the thought leadership I see in the industry, are, in fact, beginning to pay serious attention to the demands of and opportunities in ecosystems.

There are three basic ways to do that: 1) join someone else’s ecosystem; 2) invite others into yours; 3) or participate in and foster an ecosystem that has many parts but not a clear leader.

Joining someone else’s would be, for instance, selling microinsurance through a shipping company that would offer the opportunity to bundle your coverage into the cost of carrying cargo. There would seem to be loads of such opportunities to bundle insurance distribution into car and home sales and all sorts of services supplied to businesses.

Having someone join your ecosystem would, likewise, be straightforward. You sell auto insurance, and you invite a roadside assistance provider to bundle its services into yours. You sell home insurance, and you offer security or maintenance providers the opportunity to plug into your relationship with the client.

Participating in or fostering an ecosystem without a clear leader (just yet) is less straightforward. At the moment, I’d say insurers are mostly consumers of information in these ecosystems — pulling in publicly available data to save people time when filling out forms, gathering the full history of construction work on a building, etc. — but, within the bounds of regulations, will become suppliers of information and relationships to others.

If the world of technology is any guide — and it generally is, because all industries are becoming technology industries — participating in ecosystems and forming them will become easier. That’s because business processes will increasingly be connected via software, which means that every action and decision has to be super-well defined (via an API, for application programming interface). Once processes become like software modules, they snap together at least as easily as the apps on your smartphone.

So, competition will increasingly be based on ecosystems rather than on your native competitive advantage. Perhaps your underwriting, combined with someone else’s distribution system (even from outside insurance) and a third-party claims system will compete against some other ecosystem.

The change to full-on ecosystem warfare is probably a ways off, but the change will be profound. Think back to MS-DOS, for any of you unfortunate enough to use it. It wasn’t close to the best operating system, but it had assembled the best ecosystem based on the software that ran on it and on customer relationships, so it beat IBM’s OS/2, all the flavors of Unix and even the Mac — until Jobs assembled an even better ecosystem via the iPhone.

We’ll never be as inventive as Dean Kamen, but that doesn’t mean we can’t be more successful than the Segway was, if we learn the right lessons about ecosystems.

Stay safe.

Paul

P.S. Here are the six articles I’d like to highlight from the past week:

5 Transformations for a Post-Pandemic World

COVID-19 may be the much-needed impetus for change for insurance organizations operating based on decades-old procedures and tactics.

Insurers Can Lead on Addressing Inequality

Apprenticeships can attract talent from among the underserved, and an industry initiative now makes the opportunity widely available.

Ready for Era of Real-Time Payments?

Consumers and service providers increasingly expect the same frictionless payment experiences they have in other sectors of the market.

Ransomware Grows More Pernicious

The emergence of the Maze variant creates a new threat, that stolen information will be released to the public on the internet.

5 Trends Changing Auto Insurance

Will insurers continue to provide traditional insurance in traditional ways until forced down a dead-end path, or will they embrace new trends?

Time to Streamline Group Benefits Quotes

Current, AI-based technology can cut response time for group benefits quotes by as much as 92%.