Tag Archives: time magazine

What Gig Economy Means for FinTech

Earlier, I discussed the implications of the gig economy on the insurance industry. We concluded that the existence of “crowdworkers” in the gig economy creates four main opportunities for insurers: a faster flow of information, claim process efficiencies, information customization and cost efficiencies.

We at WeGoLook believe all industries must take notice of the disruptive gig economy to remain smart and streamlined, adapting to consumer needs.

What I want to do today is focus on the traditional finance industry, which includes insurance, and the new disruptive trend in fintech. When you combine two major disruptive shifts (fintech and the gig economy) the results are game-changing.

The Fintech Disruption: The picture we can already see

Fintech is an umbrella term for an array of new financial sector services that were once monopolized by large financial institutions. This is a good thing. The change is forcing traditional banks to adapt and may even keep those pesky banking fees to a minimum!

Goldman Sachs predicts these fintech startups will capture as much as $4.7 trillion in annual revenue from traditional financial companies and $470 billion in profit.

These fintech companies include budgeting platforms such as Mint and Acorns, automated investing services such as Betterment or lending services such as Lending Club, OnDeck and Kabbage. What these companies are accomplishing is the decentralization and democratization of financial services like loans, banking and investing.

These fintech companies are making traditional services more accessible to consumers. Remember, the gig economy — or what some people term the “sharing economy” — is all about access.

See also: ‘Gig Economy’ Comes to Claims Handling  

In 2015, the Economist declared fintech to be a “revolution” of the finance industry, and Time Magazine stated banks should be “afraid” of fintech.

The Role of the Gig Economy in Fintech: Flexible workforces

In the gig economy, intermediaries disappear. But don’t ask me — ask your local taxi owner, hotelier or car rental agency if Uber, Airbnb or Turo have affected their way of doing business. This is a rhetorical question; of course there’s been an effect. This is a good thing, but how we react will define our businesses in the years to come.

When discussing what fintech means for the traditional finance industry, Barry Ritholtz, a Bloomberg columnist, aptly said: “What is much more interesting to me is how the traditional money-management industry will respond to and adopt the latest technologies for helping it operate more efficiently and with greater client satisfaction.”

This flexibility is something most industries, including the financial sector, have yet to fully embrace. There are a number of gig economy companies out there that have access to thousands of on-demand workers who can perform a number of tasks that were traditionally in the wheelhouse of full-time employees.

Why would an insurance company or other large financial institution have tens of thousands of employees across the country to verify assets when they can leverage a stable of trained, vetted and professional gig workers? This is the gig economy, where people with spare time are self-identified as willing to complete on-the-ground tasks in their location.

See also: The Gig Economy Is Alive and Growing  

Gig economy companies aren’t just a vendor service — they can be part of the process. Need we get into the amount of money this can save a company?

Let’s dive into a specific sector of fintech — online lending — as a case study of how the gig economy can enable and complement the lending process.

Gig Economy Case Study: A flexible workforce and online lending

Online lending, including peer-to-peer lending, is an old concept reinvented for a digital age. Entrepreneurs, business people and citizens have always borrowed and lent money, but only in recent history has that become much more sophisticated and accessible through online marketplaces and fintech services.

Foundation Capital predicts that more than $1 trillion in loans is expected to have originated through these new lending marketplaces by 2025. Let that number sink in for a second.

Indeed, fintech has enabled a safe lending environment between people and businesses through innovative screening and credit checking. Investors and businesses of all stripes can now lend and borrow through internet platforms without traditional bank applications or even the need to physically exchange documents.

In most of these cases, however, asset or document verification are still requirements.

Take, for instance, common financial loan transactions, such as vehicle financing or refinancing, property financing and business loans. All these transactions require some form of physical verification that an asset exists and is “as described.” Whether that is a car, property, business or some other assets, someone needs to fulfill lending requirements.

Gig economy companies such as mine, WeGoLook, have access to thousands of workers across the U.S. who are ready and trained to travel to a specific destination to complete asset verification tasks.

The Gig Worker Landscape: What that means for fintech

Technology allows us to direct our “lookers” to capture the correct on-site data and perform tasks in a consistent manner across the U.S. (and now in Canada, the U.K. and Australia). The benefits of this gig model are numerous, and a looker, or gig economy worker, can now:

  • Replace multiple vendors;
  • Augment or supplement employees in the field;
  • Augment, supplement or replace employees dispatched from a bank to verify assets or perform a task;
  • Provide faster task completion at a lower cost; and
  • Capture and store all data in the same place and format.

For an example of a real estate report we provide to many of our banking clients, click here.

Because of the flexibility inherent in gig work, there is a significant increase in flow of information to clients. For instance, companies like mine can provide an electronic “live” report, which allows clients to review photos and information prior to receiving a traditional report.

There is also the ability to support video, enabling a walk-through of a property, a demonstration of a piece of equipment in operation — and much more. This walk-through can also be done live with the client, if needed.

In the past, a customer would need to bring documents to a bank and work face-to-face with a branch employee for notarization and paperwork completion. This is no longer the case.

Gig employees can now immediately travel to the customer’s home or place of business. The gig worker can take photos of the asset, deliver documents, notarize originals, deliver them to a shipper and submit all relevant information via an electronic report.

This allows the bank to view all information and verify all documents are properly signed. The bank can then fund a customer before the FedEx or UPS package of original documents arrives.

See also: On-Demand Economy Is Just Starting

All this flexibility allows for faster turnaround times, the elimination of multiple vendors and a reduction in lag time waiting on a customer to try to get to the bank during business hours.

In the end, what we have is a smarter and faster process, which is important, particularly when a loan rate guarantee is in place.

Changing entire industries takes time, but the gig economy and fintech are rapidly altering the landscape of the traditional finance industry. As discussed, all three of these industries aren’t mutually exclusive. Traditional financial services can embrace the better use of technology through fintech and greater efficiency through the gig economy.

What Gig Economy Means for Insurers

I consider myself extremely lucky. I have a front row seat to a monumental shift in consumer behavior, which translates into important opportunities, and risks, for traditional insurance providers.

I don’t plan on sitting back and watching the show from a distance, I’m getting involved. Although for the record, I am not a good actor. Maybe I’ll take a gig with the stage crew.

The shift I am referring to is the so-called gig economy. Some use synonyms like the sharing economy, access economy or collaborative consumption. The list goes on. All of these terms boil down to one important reality: the ability to turn otherwise unproductive assets into income-producing ones through micro jobs, or “gigs.”

These assets include cars, homes, consumer items, hobbies and spare time.

As a vote of confidence to this new trend, Merriam-Webster added the term “sharing economy”: Sharing Economy (Noun): economic activity that involves individuals buying or selling usually temporary access to goods or services, especially as arranged through an online company or organization. 

According to PricewaterhouseCoopers (PWC), the estimated value of the sharing economy sector by 2025 will be $335 billion. For 2013, that same number was $15 billion. In just more than 10 years, then, PWC predicts that the value of the sharing economy will skyrocket by more than $300 billion.

See also: How to Insure the Sharing Economy

recent TIME Magazine study reports that 45 million American adults participate in the sharing economy. This is 1 in 5 American adults! Let that number sink in for a moment.

You good? Okay, let’s continue.

The explosive growth in the sharing economy is occurring amid a backdrop of larger social, economic and demographic trends. These include:

  • Increasing urbanization (people have less space)
  • Aging demographics (older people have less money and need more services)
  • A shift in consumer behavior from ownership to access

In an excellent 2015 Insurance Thought Leadership article, Neil Howe concluded that, “although some dismiss the gig economy as a fad, a hard look at the numbers shows it’s both large and growing, with profound implications.”

So, business is booming, consumers are participating and socio-demographic trends support the growing sharing economy sector. What does this mean for the insurance industry as a whole? A lot.

Let me explain.

Today, I want to plant a seed. Well, as a matter of fact the seed has already been planted, a number of times by a number of entrepreneurs. What we are doing today is watering those seeds. The insurance industry is thirsty for disruption, and this is a good thing.

Insurance Industry, Meet Sharing Economy: An Introduction

In January, I wrote about my company, WeGoLook, and its applicability to traditional insurance operations. Specifically, we discussed the challenges the industry faces because its slow processing of claims can’t continue in an age where customers demand immediate access to information, as well as the opportunities that the demands create for innovators like WeGoLook. Thanks, millennials!

Today, I want to delve deeper into the disruption of this new gig economy, or sharing economy, in an effort to unpack some of the opportunities that are staring directly at us.

The insurance industry is currently at a technological and innovative crossroads. To take the correct path, strong leadership is required. Lucky for us, you don’t have to be an industry expert to be an industry leader.

The founders of Airbnb quickly began competing with (and surpassing!) large hotel chains, with zero knowledge about the accommodation industry — except being proficient at inflating air mattresses. Similarly, Uber quickly disrupted the taxi and transportation verticals with no industry experience. We live in an age where we either adapt or risk getting left behind as technology marches on. So, it’s imperative that we as industry experts fully understand how to incorporate new business models in our value chain.

See also: ‘Gig Economy’ Comes to Claim Handling

That’s what I hope to achieve in my business; to help lead us into a new era where innovation is understood, adopted and refined. I believe this is your goal, as well; after all, you are a subscriber to Insurance Thought Leadership.

So how can the new gig economy plug into traditional carrier business operations?

The Gig Economy: WeGoLook and Flexible Workers

Slowly, we are realizing that the insurance industry as a whole is one of financial arbitrage, rather than logistics. Why would a large insurance firm employ thousands of boots on the ground nationwide when gig economy companies such as mine have access to a flexible and ready workforce available at the tap of a smartphone? B2B crowdworkers can quickly gather information for underwriting and claims processing. These workers also have the ability to retrieve police reports, notarize documents, pick up salvage items, deliver documents and much more.

Remember, the sharing economy is about leveraging underutilized assets, including spare time, to fulfill both consumer and business requirements.

Crowdworkers offer four main benefits to traditional carriers:

1. Faster Flow of Information

As we all know, processing claims requires time and patience to gather relevant information, photographs and a myriad of other documentation. Getting the right information and accurate documentation can take even longer.

Yet, commercial policyholders need to know how quickly they will be receiving funds from a claim so they may, in turn, inform their customers. Similarly, individual policyholders need a claim settled without delay so they can return to normal life. This is just good business practice.

Digital and mobile platforms provide a faster flow of information. They also allow for the easier integration of crowdworkers while making sure that the right information flows into the right hands at the right time. For example, the WeGoLook mobile application directs our Lookers, those gig workers we were talking about earlier, to capture on-site data in the form of photos, video, measurements, answers to specific questions and more.

2. Ordering Efficiencies for Claim Handlers

While carriers worry about the massive rework that needs to be done to update back-end systems for the demands of today’s customers, a system like ours can be used as a front end that obviates the need for much of that work. For instance, once an order has been uploaded, WeGoLook will contact the policyholder to schedule an on-site inspection appointment, removing the task from the carrier’s workflow. The claim handler at the carrier can easily make special language or expertise requests, such as the requirement for a Looker who is also a notary, and not have to worry about logistics. WeGoLook technology allows for the claim handler to view video and photos within the report — even when the carrier’s back-end does not support video.

For good measure, because new systems are written from scratch and don’t carry all the baggage of legacy systems, users of our ordering dashboard can place an order for a Looker within an average of four minutes, compared with 12 minutes in traditional systems used to dispatch field assignment representatives.

See also: On-Demand Economy Is Just Starting

3. Customization and Security

Writing from scratch also lets new companies customize reports to the needs of clients, letting them view data however they like. Nothing changes, no matter the location of the policyholder or asset.

4. Cost Efficiencies

Finally, while I am the first to acknowledge that an on-demand workforce does not fully replace technical or specially certified field personnel, such as claims adjusters, a flexible workforce can be dispatched at the click of a button and can certainly augment, and in some cases, replace the need for full-time field staff.

Efficiencies emerge in the form of salary costs, fleet vehicle costs, travel expenses, labor costs and much more.

Yes, there will always be the need for an experienced field adjuster to be present under a number of circumstances. However, this is not the bulk of required work, and traditional carriers are wising up to this fact.

Conclusion, for Now

We believe that insurance should be smart and streamlined and adapt to customer needs. And these needs are changing rapidly within our disruptive environment. Insurers need to make their workforces more flexible by taking advantage of the gig economy.

The seed has been planted. The question now is, will the landscape become an innovation desert. Or, can we help foster and develop a fertile growing climate, reminiscent of the Oklahoma grain farms I grew up with.

I strongly believe it is the latter. I’m carrying a watering can and have my gardening gloves on.

Good luck, and don’t forget to water regularly!

100 Ideas That Changed Insurance

Recently, I bought a copy of Time magazine’s publication, TIME 100 Ideas That Changed the World: History’s Greatest Breakthroughs, Inventions and Theories, in an airport book store while on a business trip.

It was certainly a compact and interesting read, highlighting amazing innovations that we now accept as the norm of human existence on Planet Earth, from the discovery of germs to the foundation of a seven-day week to the building of the World Wide Web. I was amazed as I read through it and was reminded of how human existence since the beginning of recorded history has been truly shaped through ideas turned into game changing innovation results.

The purpose of this blog is not to get philosophical about our evolution as humans but, rather, to relate it to the world we live in every day: insurance. So of course, after I paged through the Time book, my wheels started spinning around the 100 ideas that have changed insurance – and I started to reflect on how we as an industry got to where we are today.

The history of innovation in insurance has largely been shaped by advances made in technology external to the industry. As markets, businesses and consumers start to access better ways of doing business, insurance companies adjust to meet those demands. The same can be said for many other industries. But insurance is unique because its very core concept is to protect our customers’ assets from loss and mitigate risks. So, inherently, the insurance industry will always adapt in some form to technology changes to assist the customer. That is what we do every day – we adapt – though some days we don’t necessarily remind ourselves of the core mission.

I started to ask myself, if we had to make a list, what would be the 100 ideas that changed insurance? I think it would be too hard to classify, in terms of the entire evolution of our ecosystem, because the last 100 years have changed so much. So let’s just focus on the last 40 years from a technology perspective: mainframes … client servers … personal computers … development of core systems and automated business processes … data processing to information systems … typewriters to the fax machine, copiers, printers, scanners and even email … our world on the World Wide Web … mobile phones … web applications … smart phones … big data … telematics and even some of the emerging technologies like Internet of Things, wearable devices, artificial intelligence, semantic technologies and even drones and aerial imagery. The list of maturing and emerging technologies does just go on and on. It might be hard to pare it down to just 100 ideas, even by looking at just technology.

The point is, when we talk of ideation and innovation, sometimes we forget to reflect on where we have been. Forty years ago, if someone described writing a blog for you that you could read on your mobile device, you may have seriously questioned their sanity. Today, it is commonplace.

As we move rapidly through 2015 – look at plans; take the time to reflect on successes; take the time to reflect on where we truly have been. Sometimes these reflections are the seeds of new ideas, new ways of doing business and new ways to gain an edge. Just think, for every great solution out there, there is a better one possible. Innovation should be inspiring our work, and I am excited to see where it leads us.

What Is a Year of Life Worth? (Part 1)

Most conservatives and liberals agree that we should not consider cost in deciding whether people should undergo medical procedures that have the potential to save lives and cure diseases. Unfortunately, most conservatives and liberals are wrong.

Declaring the idea of cost-effectiveness a “forbidden topic in the health care debate,” Aaron Carroll shows just how averse we are to the idea of comparing money cost with health outcomes. It’s even written into the Affordable Care Act:

“… We in the U.S. are so averse to the idea of cost-effectiveness that when the Patient Centered Outcomes Research Institute, the body specifically set up to do comparative effectiveness research, was founded, the law explicitly prohibited it from funding any cost-effectiveness research at all. As it says on its website, ‘We don’t consider cost-effectiveness to be an outcome of direct importance to patients.’”

He gives another example:

“Take the U.S. Preventive Services Task Force, which was set up by the federal government to rate the effectiveness of preventive health services on a scale of A to D. When it issues a rating, it almost always explicitly states that it does not consider the costs of providing a service in its assessment.

“And because the Affordable Care Act mandates that all insurance must cover, without any cost-sharing, all services that the task force has rated A or B, that means that we are all paying for these therapies, even if they are incredibly inefficient.”

Here is the brutal reality: We don’t have an unlimited pile of money to spend on anything. And if we don’t pay attention to what we get for the money we spend (which has historically been the case for government regulatory agencies), we will end up spending money in ways that actually reduce life expectancy for the average American. In a 1996 study for the National Center for Policy Analysis, Tammy Tengs found that:

  • By spending $182,000 every year for sickle cell screening and treatment for black newborns, we add 769 years collectively to their lives at a cost of only $236 for each year of life saved.
  • By spending about $253 million a year on heart transplants, we add about 1,600 years to the lives of heart patients at a cost of $158,000 per year of life saved.
  • Equipping 3% of school buses with seat belts costs about $1.6 million a year, but this effort will save less than one life-year, so the cost is about $2.8 million per year of life saved.
  • We spend $2.8 million every year on radionuclide emission control at elemental phosphorus plants (which refine mined phosphorus before it goes to other uses), but this effort will save at most one life every decade, so the cost is $5.4 million per year of life saved.

Tengs, along with Professor John Graham and a team of researchers at the Harvard Center for Risk Analysis, systematically gleaned from the literature annual cost and lifesaving effectiveness information for 185 interventions. Some of these interventions had been fully implemented, some partially implemented and some not implemented all. The researchers then asked: What if we reallocated funds from regulations and procedures that give us a low rate of return to those procedures that give us a high one?

  • The 185 interventions cost about $21.4 billion a year and saved about 592,000 years of life.
  • If that same money had been spent on the most cost-effective interventions, however, more than 1.2 million years of life could have been saved — about 638,000 more years of life than under the status quo.
  • Implementing the more cost-effective policies, therefore, could save twice as many years of life at no additional cost.

This same principle applies to health insurance. Unless you want your premium to go through the roof, you should choose an insurer that follows a reasonable standard for what care is covered. But that brings us back to Carroll’s point. How are you to know what standard your insurer is using if the whole subject is a “forbidden topic”?

A few years ago, Time Magazine reported that $50,000 for a year of life saved is

“… the international standard most private and government-run health insurance plans worldwide use to determine whether to cover a new medical procedure…. Nearly all other industrial nations — including Canada, Britain and the Netherlands — ration healthcare based on cost-effectiveness and the $50,000 threshold.”

But a Stanford University economist calculated that the threshold for kidney dialysis for Medicare enrollees should be $129,000. Mark Pauly and his colleagues suggested a standard of $100,000 in Health Affairs. Economists generally believe that such standards should be based on the implicit values people reveal when they make choices between money and risk in the job market and make choices as consumers. Studies show that the implicit “value of a statistical life year,” to use a term of art, ranges from $50,000 to $150,000. As Pam Villarreal, Biff Jones and I explained in Health Affairs:

“This is not the amount of money that people would accept to give up their lives. It is instead the implicit value that people place on their lives when making choices between additional risk and money, when the risks involved and the amount of compensation needed to induce people to accept those risks are both small.”

For the many problems involved in arriving at a figure, see a review by Ike Brannon. For an extension of the idea to “quality adjusted life years,” or QALYs, see Aaron Carroll’s discussion and links to the literature. The main point there is that a year spent on a respirator shouldn’t count anywhere near as much as a year doing normal activities.

There remains the question of “rationing” and “death panels.” I’ll address that in a future post.

This article first appeared on Forbes.com.

The Truth About Treating Low Back Pain

There is overwhelming medical evidence that many diagnostic tests, treatments and surgeries for low back pain are ineffective and waste many billions of dollars a year in the U.S. alone. Yet treatment appears not only to be continuing but seems to be growing and becoming more aggressive. The aggressive treatment of low back pain has become epidemic.

Medical studies on the problem of low back pain were widely reported in the mainstream media in 2007 and 2008. The Wall Street Journal, New York Times and other national publications like Time magazine reported on the Journal of the American Medical Association (JAMA) study that said Americans, “were spending more money than ever to treat spine problems, but their backs were not getting any better.”

The study documented common mistakes doctors make when treating back pain, including:

  • Ordering excessive X-rays , MRIs and CT scans
  • Performing invasive surgery too soon
  • Failing to educate patients about surgical alternatives
  • Failing to address underlying mental health issues

Also released in 2007 was The State of Health Care Quality report published by the National Committee for Quality Assurance (NCQA). It stated, “back injuries often undergo aggressive treatment when less costly and less complicated therapy may yield similar or better results.”

The NCQA report said that the vast majority of patients with low back pain have no identifiable cause of their symptoms and that less than 1% of X-rays provide useful information regarding the diagnosis of low back pain. Similarly, MRI and CT scanning usually fail to shed light on the causes of low back pain, except when there are red flags such as trauma or indicators for specific diseases. The authors stated that, “Needless tests and procedures that provide no real benefit to the patient can’t do anything but harm.”

The JAMA study also noted the widespread use of needless testing and found that 25% of the patients covered by private health insurance had an inappropriate imaging study, costing, in the aggregate, billions of dollars each year.

There is a wealth of medical evidence that most back and neck pain should be treated sparingly. An editorial in Spine Journal suggested that more than 200 treatments for chronic back pain are currently available in the clinical marketplace and that many of those “do not have a definitive track record in scientific studies.”

The authors of the JAMA study concluded: “If we keep our diagnostic and treatment efforts within well-proven limits, and emphasize the importance of activity and self-care, we suspect we would see better outcomes.”

Yet the total number of some spine treatments — e.g., spinal fusion surgery, spinal injections and the prescription of opiates — has skyrocketed in recent years, according to medical researchers.

There are many potential reasons for this spurt in back treatments, including the heavy commercialization and direct consumer marketing of treatments both old and new. It is hard to read a newspaper, watch TV or surf the Internet without seeing a commercial pop up for the latest treatment for low back pain.

Obviously, there is a lack of definitive evidence regarding many popular treatments, which allows them free rein in the marketplace before the risks and benefits can be scientifically studied and documented.

The JAMA study stated that 60% or more of initial back surgeries have successful outcomes. I am pretty good at math, so that means 40% DO NOT!  The study’s authors estimated that the 40% equates to 80,000 “failed back surgeries” a year.

The researchers also observed that the surgical success rate drops to 30% after the second surgery, 15% after a third and 5% after a fourth. The authors believed that many patients were under the care of physicians, “who are unfamiliar with the conditions leading to back surgery, the types of back surgery available and the best approaches to diagnosis and management.”

The annual medical cost to American businesses because of low back pain was estimated to be $90 billion in 2008.  This does not include the cost of related workers' comp or disability benefits, which also are in the billions, nor indirect costs such as lost productivity.

The medical studies have confirmed what I have known and studied for the past 33 years: Much of the money spent on healthcare — approximately one-third — is wasted on medically unnecessary and potentially harmful procedures.

What has changed in the treatment of low back pain since the release of the studies in 2008?

My bet: Not so much.

In fact, some medical researchers have stated the situation has gotten worse, not better, and that they have not been able to keep up with all the latest trends and back treatments available today.