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Thought Leader in Action: Chris Mandel

Back in the ’70s, Chris Mandel quite literally stumbled into insurance, as a result of a racketball injury at Virginia Polytech Institute when he suffered a detached retina. After two months of lying flat in a hospital bed, he had to forego his post-graduate job in retail management and start looking for employment in D.C. — he began an unexpected career in managing claims at Liberty Mutual.

Mandel excelled in his job but realized a career in claims management wasn’t what he wanted. So, in the early ’80s, he moved to Marsh brokerage for five years and set up a risk management program for an AT&T spinoff that evolved into what is now Verizon. He then left Marsh to be Verizon’s first risk manager — building its program from scratch.

By the ’90s, he landed in several top corporate risk management positions at the American Red Cross, Pepsico/KFC and Triton Global Restaurants (YUM Brands). Mandel also began his six-year volunteer stint as the president of RIMS (1998-2004), after serving in many different key RIMS leadership roles. He earned an MBA in finance from George Mason University along the way.

By 2001, Mandel was on several advisory boards (i.e. Zurich, AIG, FM Global and Liberty Mutual), before making a career and geographic move to the USAA Group in San Antonio. There, he built an enterprise risk management (ERM) program because he saw a “broken traditional approach” to risk management. After nearly 10 years of developing an ERM program lauded in the industry (including by AM Best, Moody’s and S&P), Mandel was promoted at USAA to head of enterprise risk management, as well as president and vice chair of Enterprise Indemnity, a USAA commercial insurance subsidiary. While at USAA, he was recognized as Business Insurance’s Risk Manager of the Year (2004).

His dream was to be a corporate chief risk officer, but he saw that title more often going to “quants,” (like actuaries), rather than risk professionals. So, as a well-known and sought-out industry spokesperson and visionary, Mandel moved on from USAA in 2010 to found a Nashville-based risk management consulting group, then-called rPM3 Solutions, which holds a patent on a game-changing enterprise risk measurement methodology. Then, in 2013, he moved to Sedgwick as a senior vice president. He is responsible for conducting scholarly research, driving innovation, managing industry relations and forging new business partnerships.

In early 2016, he was appointed director of the newly formed Sedgwick Institute, which is an extension of the firm’s commitment to delivering innovative business solutions to Sedgwick’s clients and business partners — as well as the whole insurance industry. In 2016, Mandel was awarded RIMS’ distinguished Goodell Award (see video below).

When asked what he sees as critical strengths for someone entering risk management, Mandel said: “I try to hire managers who can think strategically and who can convince C-suiters and boards of the value of being resilient in addressing a company’s risk profile. Progressive leaders understand the strategy to leverage risk for value.”

A holistic approach, as he describes it, “seeks a vantage point that can assess both the upside and downside of all foreseeable risks.” He believes true innovation evolves from a company’s risk-taking. “It’s not so much identifying what or when adversity is going to happen, it’s how a company responds to risk in order to minimize disruption,” he said.

In assessing his personal strengths and accomplishments, Mandel feels that a person needs to be “emotionally intelligent” — able to adapt to different people in organizations. He doesn’t consider himself a people person but says he learned to be one the hard way. He advises: “Team spirit is putting other people first and helping them succeed. … Admit your failures and build trustworthiness from your mistakes.”

Besides writing, teaching, speaking and (still) playing racketball, he serves an active role as an advisory board member of Insurance Thought Leadership. He and his wife also serve in church ministries, where he often plays guitar alongside his grown children, who are ordained ministers. Mandel said, “I’m blessed by a Creator who’s had my back.”

InsurTech: Golden Opportunity to Innovate

The insurance industry has remained much the same for more than 100 years, but over the past decade it has seen a number of exciting innovations and new business models.

As part of PwC’s Future of Insurance initiative, we’ve interviewed numerous industry executives and have identified six key business opportunities (illustrated below) that incumbents need to take advantage of as they try to meet customer needs while improving core insurance functions.

See Also: Key to understanding InsurTech

Because FinTech offers substantial promise to take advantage of emerging opportunities, funding for start-ups is surging. Increased funding activity not only demonstrates venture capitalist investors’ interest but also indicates how incumbents may leverage FinTech to address their specific business challenges.

The insurance-specific branch of FinTech, InsurTech, is emerging as a game-changing opportunity for insurers to innovate, improve the relevance of their offerings and grow. InsurTech, has seen funding in line with FinTech investment overall, and we expect investments to increase as new players and investors enter the space.

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As Figures 2 and 3 show, activity around early-stage InsurTech companies has generated considerable buzz. Moreover, experienced insurance executives have joined start-ups, including Insureon and Lemonade, to help them develop new types of products and services, like small business aggregators and peer-to-peer insurance models. All of this indicates that investors and the industry are eager to get on board with early stage start-ups to meet the six areas of opportunity we illustrate above and describe in detail as follows:

1) Meet changing customer needs with new offerings – Customer now expect personalized insurance solutions. One size simply does not fit all any more. Usage-based models are partially addressing these expectations, but the sharing economy also is challenging existing, more traditional insurance products. New players are able work from a clean slate and leverage a variety of available resources to fill market gaps. For example:

  • Metromile, a start-up, has developed a customer- (rather than risk-) centric value proposition for occasional drivers. It offers a low base rate and then charges a few cents per mile driven. Metromile also offers an app that provides personalized driving, navigation and diagnostic tips, and can even remind drivers where they parked. Furthermore, the company has entered into a partnership with Uber that allows drivers to switch from personal to Uber insurance.
  • USAA has invested $24 million in Automatic Labs, a telematics platform that claims it will “connect your car to your life” and provides a full suite of integrated apps (including wearables).
  • In the life sector, Sureify has developed a platform that allows insurers to underwrite life insurance based on lifestyle data inputs they obtain from wearables.
  • In the peer-to-peer space, Lemonade claims to be the world’s first peer-to-peer carrier, but other companies like Guevara and InsPeer have been exploring variations of the same model. Bought by Many, a start-up that uses social platforms in its go-to-market strategy, helps individuals join or even create affinity groups, as well as find insurance solutions for their specific needs across different product lines. Of note, leading Chinese insurer Ping An has partnered with Bought by Many to create personalized travel insurance by leveraging social media data.

Some large insurers have decided to develop start-ups in-house. For example:

  • MassMutual is using internal resources to build Haven, a new, stand-alone, direct-to-consumer business.

2) Enhance interaction and build trusted relationships – Established carriers have to manage increasing customer expectations and provide seamless service despite their large and complex organizations. In contrast, new market entrants are not burdened with large, entrenched bureaucracies and typically can more easily provide a seamless customer experience – often using not just new technology but new service concepts.

For example, self-directed robo-advisers are convenient, 24/7 advisers that provide ready access to information that can empower consumer decisions about financial planning and investment management. And investors have taken notice:

  • Northwestern Mutual acquired Learnvest, a leading robo-adviser with an estimated value of more than $250 million.
  • Other robo-advisers, such as FutureAdvisor, have been part of important deals, while others (including Betterment, Personal Capital and Wealthfront) have raised funds above $100 million.

Moreover, disintermediation and the emergence of new online channels is occurring in all lines of business:

  • The Chicago-based start-up Insureon has created an aggregator that specializes in micro and small businesses. It taps into existing profit pools that personal and commercial carriers are trying to reach.
  • To become a B2C player in the digital small business market, ACE Group has recently taken a 24% ($57.5 million) stake in Coverhound, which enables customers to directly compare coverage options and pricing from various carriers.

3) Augment existing capabilities and reach with strategic relationships – The insurance industry historically has included intermediaries, service providers and reinsurers. In most cases, the carrier has led the business relationship because of its retail market position and scale. However, companies increasingly are peers. Accordingly, joint ventures and partnerships are a good way to augment existing capabilities and establish symbiotic relationships. For example:

  • BIMA Mobile has partnered with mobile telecom companies to provide life insurance solutions to uninsured segments in less developed countries. It offers simple life, personal accident and hospitalization insurance products on a pay-as-you-go (PAYG) basis for a set time period (usually just a few months). Policyholders can obtain a pre-paid card and activate and manage their policy from a mobile phone.
  • AXA has acquired an 8% stake in Africa Internet Group for EUR75 million, opening opportunities for the company in unpenetrated markets.

New B2B2C entrants also are helping forge mutually beneficial relationships:

  • Zenefits was one of the first to create channels to connect insurers, brokers, employers and employees.
  • Flock, which features broker managed benefits where plans can be designed to cover a range of options from enrollment to life events, offers what it says are “absolutely free” HR and benefits solutions.

4) Leverage existing data and analytics to generate risk insights – Established insurers traditionally have had the advantage over prospective newcomers of being able to leverage many years of detailed risk data. However, data – and new types of it – now can be captured in real-time and is available from external sources. As a result, there are new market entrants that have the ability to generate meaningful risk insights in very specific areas.

  • Several Internet of Things (IoT) companies, including Mnubo, provide analytics that generate insights from sensor-based data and additional external data sources like telematics and real-time weather observation. The promise of the better risk assessment and management resulting from this model is likely to appeal to personal and commercial carriers.
  • Facilitating this real-time data collection are drone start-ups, including Airphrame and Airware. Drones provide the ability to analyze risk with embedded sensors and image analytics. They also can operate in remote areas where it has traditionally been difficult for humans to tread, thereby saving time and increasing efficiency. In fact, American Family’s venture capital arm is investing in drone technology to explore new approaches to access and capture risk data.
  • In the life space, P4 Medicine (Predictive Preventive, Personalized and Participatory) offers insurers better insights that they can apply to life and disability underwriting. Lumiata is offering the potential for better predictive health capabilities, while Neurosky is developing next-generation wearable sensors that can detect ECGs, stress levels and even brain waves.

5) Use new approaches to underwriting risk and predicting loss – Protection-based models are shifting to more sophisticated preventive models that facilitate loss mitigation in all insurance segments. Sensors and related data analytics can identify unsafe driving, industrial equipment failure, impending health problems and more. More deterministic models, like the ones that now exist for crop insurance, are starting to emerge, and new entrants are offering both risk prevention (not just loss protection) and a more service-oriented delivery model. For example:

  • The South Africa-based company Discovery has a partnership with Human Longevity. They are teaming to offer whole Exome, whole genome and cancer genome sequencing, to clients in South Africa and the UK. Gene sequencing can identify risks before they manifest themselves as problems, but also raises ethical questions. It has the potential to completely disrupt life underwriting and places certain responsibility on the company to help customers manage genetic risks (while being careful about actually mandating lifestyle choices). But, on the whole, managing genetic risks in advance can benefit both the end-consumer and the insurer because, if they work together, they can better manage or even avoid long-term health problems and associated expenses.
  • On the automotive side, Nauto, a San Francisco- based company, offers a system that provides visual context and telematics with actionable information about driving behavior, including distracted driving. The company claims that its system can help insurers design new pricing strategies and pinpoint areas of premium leakage that they otherwise may not notice.

See Also: InsurTech Trends to Watch For in 2016

6) Enable the business with sophisticated operational capabilities – Effective core systems enable insurers to operate at a large scale. Because of cost, establishing these systems has traditionally been a barrier to market entry. However, access to cloud-based core solutions has facilitated scalability and flexibility. Developments like this, combined with new developments like robotics and automation, have provided new market entrants compelling differentiators.

As just one example, underwriting automation is now available in life and commercial lines (notably for small and medium businesses). Some carriers have adopted simplified processes and “Jet” underwriting, in which they leverage external data sources to expedite approval. This has resulted from the availability of risk insights that support new underwriting approaches. Several companies are offering to optimize and augment processes via improved collaboration, artificial intelligence and more. For instance:

  • OutsideIQ offers artificial intelligence solutions via an as-a-service underwriting and claims workbench that uses big data to address complex risk-based problems.
  • In addition, automating claims can improve efficiency and also effectively assess losses. Tyche offers a solution that uses analytics to help clients estimate the value of legal claims.

Implications: Think like a disruptor, act like a startup

In a time when societal changes, technological developments and empowered customers are changing the nature of the insurance business, established insurers need to determine how InsurTech fits in their strategies. The table shows the various approaches insurers are taking.

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More specifically, insurers are:

  • Exploring and discovering – Savvy incumbents are actively monitoring new trends and innovations. Some of them are even establishing a presence in innovation hotspots (e.g., Silicon Valley) where they can learn about the latest developments directly and in real time.

Action Item: Plan an InsurTech immersion session for senior management. This should be an effective eye opener and facilitate sharing of relevant insights on desired InsurTech solutions. Subsequently, FinTech analyst platforms can keep management up to date on the latest developments and market entrants.

  • Partnering to develop solutions – Exploration should lead to the development of potential use cases that address specific business challenges. Incumbents can partner with start-ups to build pilots to test in the market.

Action Item: Select a few key business challenges, identify possible solutions and find potential partners. A design environment (“sandbox”) will help boost creativity and also provide tools and resources for designing and fast prototyping potential solutions. This approach also can help establish the baseline and approach to building future InsurTech solutions.

  • Contributing to InsurTech’s growth and development – Venture capital and incubator programs play an important role strategically directing key innovation efforts. Established insurers can play an active role by clearly identifying areas of need and opportunity and encouraging/working with start-ups to develop appropriate solutions.

Action Item: Define a strategy to direct startups’ focus on specific problems, especially those that otherwise might not be addressed in the short term. Incumbents should consider start-up programs such as incubators, mechanisms to fund companies and strategic acquisitions. (N.B.: It is vitally important to protect intellectual capital when imparting industry knowledge to start-ups.)

  • Developing new products and services – Being active in InsurTech can help incumbents discover emerging coverage needs and risks that require new insurance products and services. Accordingly, they can refine – and even redefine – product portfolio strategy. This will result in the design of new risk models tailored to underserved and emerging markets.

Action Item: Take a close look at emerging technologies and social trends that could be business opportunities to define product strategy, determine required capabilities and develop a plan to build a portfolio and seize market opportunities. FinTech has become a buzzword, but whichever way the FinTech/InsurTech market itself goes, the reality underpinning it is not a passing fad. Insurers that are actively involved with InsurTech in any of the ways we describe above stand to gain, whichever way the market moves. They can use their capital and understanding of customers and the market to both inspire and exploit innovative technologies and correspondingly grow their business.

The 5 Charts on Insurance Disruption

The high-level forces (people, technology and market boundaries) are responsible for insurance’s driving influences — new expectations, innovations and new competition that individually exert tremendous transformation pressure on the industry. The forces don’t operate in isolation, however. They are connected and combine to create an even more powerful and disruptive impact on the industry. Majesco developed a model to reflect these forces:

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The combined impact is creating a powerful market shift that brings the three together, creating unprecedented innovation and disruption. It reflects what author Malcolm Gladwell calls a “tipping point.” A tipping point occurs when an idea, trend, behavior or expectation crosses a threshold and spreads like wildfire, changing the fundamentals of business. These are often sudden, as we have seen in other tipping points over the last century, reflected in the move from the industrial age to the information age and now to the digital age. Each move created leaps in innovation and transformation.

People

The makeup of the market is shifting. Insurers who ignore the shift will be challenged to retain their customers, let alone grow their businesses. This shift is being driven by demographic, cultural, economic and technological forces. They present new challenges and opportunities for the insurance industry that will require insurers to rethink their strategies, products, channels and processes to reach a fast-changing market.

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Market Boundaries

The combination of the sharing and platform economy trends is dissolving traditional boundaries and the long-held competitive advantages of incumbents. Just as start-ups can now access technology as a service, they can also access resources (sourcing and crowdsourcing), designing, manufacturing and more as a service, giving any company access to the resources needed to compete. As a result, companies must compete on more than brand, product, price or distribution. They must compete on innovative approaches.

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New Entrants

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Shifts in the Industry

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To download the full report, click here.

A Word With Shefi: Applebaum at ISG

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Stephen Applebaum, managing partner, Insurance Solutions Group, and senior adviser at StoneRidge Advisors, who describes the implications of the “torrents of data that will flow from connected cars, homes, buildings and people.”

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

I provide consulting and advisory services to participants across the North American auto and property insurance ecosystem, which leverage my experience, industry contacts and understanding of innovation and emerging technologies to drive meaningful, measurable improvement in revenue, market share, process, profitability and user and customer experience.

What led you to your career in insurance?

Serendipity, actually. An early management consulting engagement with a technology-based startup providing insurance claims solutions to P&C carriers led to a full-time operational and management role and ultimately a very exciting and rewarding 30-year career spanning several different companies that continues today.

What emerging technology will change how insurance is sold?

Prescriptive analytics applied to the torrents of data that will flow from connected cars, homes, buildings and people – enabled by mobile devices and embedded sensors – will transform virtually every aspect of how insurance products are developed, priced, packaged and sold, and how risk is managed in general.

A carrier you highly value for its innovative culture?

Among the many top-tier carriers that have invested in and developed innovative cultures, USAA stands out because of its highly focused and fierce dedication to pursuing constant improvement and technological innovation in the pursuit of providing superior service excellence to its “members” in insurance as well as the full range of its financial services.

You recently published an article on “Disruption in the Automotive Ecosystem.” What tip do you have for companies looking beyond their core value to offer innovative solutions in the auto ecosystem?

I suggest that auto insurance carriers focus on leapfrogging current incremental innovation around connected vehicle and data technologies and begin designing and developing the auto insurance products and services of the future. These will likely be very different than anything offered today and will be enabled by enormous amounts of data flowing from not just connected cars but the broader Internet of Things. They may include personalized, utilization-based micro auto insurance coverages, ride-and-car sharing insurance solutions for owners, drivers and passengers, risk management services from behavioral driving modification assistance to location-based and contextual alerts for commercial favorites as well as navigational, traffic, roadside assistance and weather conditions.

You’ve had more than 25 years of consulting experience in the P&C space. What piece of advice have you found to always be relevant regardless of the subject matter?

I regularly ask myself, “What am I doing, and why am I doing it, and is this the best possible use of my time and talents?” It sounds so simplistic, but if you do it honestly you will find it very valuable.

You are a frequent chairman in industry conferences. In fact, you are the chairman of a coming event on IoT in Miami in December. Who should be attending and why?

Anyone who plans to work, invest and succeed anywhere in the insurance ecosystem over the next decade and beyond should attend. This includes insurance C-level executives, heads of innovation, strategy, claims and innovation, underwriting, business development, product development, strategy, design and innovation, heads of IT, technology and digital, IoT technology companies and startups and regulators.

When you are not consulting on insurance or hosting insurance events, you are most likely…?

Reading, watching and listening to anything and everything that relates to my work – which is, in fact, also my hobby.