Carriers can be wrong in being right. Governments too. Time to get benefits to SMEs.

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Fiduciary duty or duty of care?  What a quandary for insurers this business interruption insurance situation continues to be.  Easily a trillions of dollars concern in western economies alone, more each day as the mandated shutdowns continue.  The author has previously noted the tension between repudiation/denial of BI claims and the drumbeat of public and government pressure to afford cover; is there also a public duty of care insurers hold to ensure there’s an SME business community to insure once the permission is given to restart the economy?

Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

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  • No one anticipated COVID-19 in the manner in which it came.
  • Few SMEs had excess cash set aside for this dark of a day or bad business weather.
  • Few insurance policies were sold that covered BI losses that were not precipitated by direct physical damage.
  • Even fewer insurance policies afforded BI cover that was prompted by government or other indirect reactions to a pandemic.
  • Very few insurance proceeds have reached the street.

All the efforts have been focused on defensive postures by carriers, concerned outreach by SMEs to government, plaintiffs’ bar attorneys aggregating clients who have suffered economic losses due to shutdowns and loss of clientele from social distancing, and constitutional challenges proposed by US elected representatives.  Oh, and for U.S. SMEs, plenty of effort collecting business records for applications for stimulus loans.  Lots of actions, few results.

 

At this time there must be a recognition that posturing does not resolve anything, nor does it get recovery funds to the street.  Government and litigation trying to force insurance companies to foot a trillion dollar plus bill for BI losses is truly a fools’ game.  The full capitalization/available cash from insurers would be insufficient to resolve BI claims, if the claims could be accurately calculated, and if the claim period was known (which at this time it is not.)  What would be accomplished is the functional failure of the risk financing industry as it’s known.

That being said, can the insurance industry simply build a defensive wall of policy terms and deny claims and any duty to mitigate the costs of risk for the SMEs?

Sure they could, and a large portion of the Before COVID (BC) cohort will fail, and the existence of a significant driver of business would sunset, along with the need for those firms’ insurance policies.

 

One wonders if SMEs can wait for government sponsored programs to get up to speed, or if sufficient funding will be available to address the needs of even a portion of the many millions of businesses in need.  In what way can insurance companies step in- without compromising uniform application of policy terms- and shine a little light on these dark days?

There are many P& C carriers providing givebacks, rebates, credits, and other premium forbearance (see the curated list by Nigel Walsh here), the vast majority being personal motor/auto benefits.  By the author’s calculation of available and applicable US auto premiums the $8-10 billion total being rebated or credited to individual insureds falls about $6 billion short per month of what excess premiums calculate to.  It’s a start, for sure, but a closer look is needed.

 

In contrast, what is in the press are reports of not only denials of business insurance policies’ coverage for business interruption, but uncertain positions carriers may be taking in supporting those denials- see mention of one carrier in this Business Insurance article, “Most small UK businesses not insured for pandemic: Watchdog”, and the FCAs position that carriers will need to be self-regulating for confirmation of pandemic policy cover.

Having ten US states to date with legislative proposals to change insurance contracts ex post facto to include BI cover for pandemics is an expression of frustration of the part of those states in there not being a better resolution for the economic shortfall.  Passage of any of the bills will prompt litigation focused on Article 1, Sections Nine and Ten, of the U.S. Constitution that expressly forbids alteration of contracts after the fact.  Other countries have different treatments and brief research for this article finds the UK Parliament might have the right to pass such a law stipulating insurance companies being responsible ex post facto existing insurance contracts, due to the doctrine of parliamentary supremacy allowing Parliament to pass any law it wishes (https://en.wikipedia.org/wiki/Ex_post_facto_law ).  No matter the legal handling the outcome of any actions would potentially take years (months at minimum) for benefits to flow to insureds.

Slow admin of government programs, little or no coverage for SMEs within insurance policies.  SMEs shuttered, tens of millions unemployed.  Who will provide confidence that SMEs’ rents can be paid, benefits can be maintained, TAXES PAID, and confidence that the end of the shutdowns is not ad sundown for SMEs?

Carriers can take action without compromising any legal positions re: insurance contracts.  Governments can take actions.

Consider possibilities:

  • Reduce policy premiums to a minimum– $10, or 10 euro. Get regulators on board.  No need to change policy terms, risks are lower since businesses are shuttered.  Backload renewal premiums into 2021.
  • Rebate some premiums for April– same support as above.
  • Governments- provide some tax credits to the carriers for the premium forgiveness.
  • Carriers, brokers, agents– make a specific and comprehensive effort to review the provisions and endorsements of every policy to confirm there absolutely is no room for BI cover. Policies are worded differently- direct physical loss, direct physical damage, direct property damage, damage due to a covered risk, etc.  Spend time on finding cover in concert with efforts spent denying/defending against cover.
  • Collaborate with peer companies in establishing recovery funds that are dedicated to SME benefits. Not policy benefits, but support benefits.
  • Reach out to every customer to suggest recovery resources that may be of benefit to them. Actually know what those resources are.
  • Suspend payment of firms’ sales tax and withholding taxes until the shutdown ends and cash flow begins.
  • Find clever ways to accelerate acceptance, review, and funding of loans. Want to pass meaningful law changes?  Look at the CFR that stipulates SOP for the SBA (how about those acronyms?)  The persons who can make this happen know what the acronyms mean.

Every effort is needed to cut the Gordian knot of admin barriers that delay getting benefits to the SMEs.

There will be a lot of financial resources spent developing and defending positions in court; why not calculate the cost of helping vs the cost of defending?

The insurance industry, regulators, governments, insureds, capital markets and banks have a vested interest in continuity of SMEs’ viability, finding practical solutions for the current crisis, and planning for the next pandemic or economic outcome of systemic risk effects.  Planning must begin now, and efforts are underway, e.g., the Ten C’s Project.  Government programs initiated on an adhoc basis are not adequate response vehicles, and laying the burden upon the shoulders of insurance is not a prudent path to follow.  We need to collectively mitigate the current effects and collectively solve how future economic occurrences will not be like what COVID-19 has wrought.

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No Elephant is an island- resources maketh the beast

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No one can know all in an industry, and surely that thought applies to insurance and InsurTech.  The Insurance Elephant knows the business is comprised of many parts that in aggregate lead to the insurance customer.  It’s the end of 2019 and as such seems an apt time to list and appreciate the many persons who are resources for me, and surely can be resources for all.  Please do review the list, gain an understanding of the unique contributions each in the list brings.

 

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

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Here are my 2019 InsurTech/Industry respected resources, in no particular order, and certainly not an exclusive list:

  1. Kate Stilwell– CEO and founder, Jumpstart Insurance, earthquake parametric cover, advocate for disaster preparation and resilience. https://www.linkedin.com/in/stillwellkate/
  2. Kobi Bendelak, CEO- InsurTech Israel. Big brother to Israel’s many start-ups, advocate and investor.  https://www.linkedin.com/in/kobi-bendelak-a7011230/
  3. Hari Radhakrishnan- insurance broker, consultant and Socrates figure for the Indian insurance industry https://www.linkedin.com/in/hari-radhakrishnan/
  4. Robert Collins– Crossbordr brokers and consultant, Asia InsurTech guru, has forgotten more about insurance than most know. Poser of good points. https://www.linkedin.com/in/robertcollinsinsurtech/
  5. Amber Woullet– insurance marketing whiz, hangs out with Penguins, rocks insurance videos. https://www.linkedin.com/in/amber-wuollet/
  6. Mica Cooper– CEO and President, Aisus/InsureCrypt, insurance systems and cyber tilter.   https://www.linkedin.com/in/mica-cooper/
  7. Lakshan De Silva– Partner and CTO at Intellect SEEC, knows the depth and breadth of the SEEC data lake. First to build a restaurant rating algorithm.   https://www.linkedin.com/in/lakshan-de-silva-8908172/
  8. Anand R- senior researcher at Lucep, facilitator of conversations and cheerleader for omnichannel customer experience methods. https://www.linkedin.com/in/anand-r-b305a8146/
  9. Hugues Bertin– CEO at Digital Insurance LatAm, knower of all happenings in the growing LatAm InsurTech world. Brings the global perspective to LAtAm.  https://www.linkedin.com/in/anand-r-b305a8146/
  10. Grace Park and Cole Sirucek– co-founders, DocDoc Pte , patient intelligence company, advocates for patient knowledge, connecting optimum providers, and spreaders of the word regarding same.  Have innovated from their young daughter’s needs backwards.  https://www.linkedin.com/in/graceparksirucek/, https://www.linkedin.com/in/cole-sirucek-044290/
  11. Karl Heinz Passler– wearer of many InsurTech hats, speaks of InsurTech/incumbent collaboration. Also has day jobs as product manager and insurance startup mentor (he knows things).  https://www.linkedin.com/in/karlheinzpassler/
  12. Nigel Walsh– co-host of the InsurTech Insider podcast (cohost Sarah Kocianski of 11:FS, https://www.linkedin.com/in/sarahkocianski/ ) and partner at Deloitte. Knows things. Travels widely but loves all things London.  Is wise to let Sarah lead the podcast convos.  https://www.linkedin.com/in/nigelwalsh/
  13. Denise Garth– SVP at Majesco, Strategic Marketer. Prepares articles of depth and breadth on the InsurTech industry, insurance, and what is coming next.  https://www.linkedin.com/in/denisegarth/
  14. Walid Al Saqqaf– founder at InsureBlocks, knows more than I ever will on practical insurance applications of Blockchain, video selfie guy, biggest smile in the InsurTech space. https://www.linkedin.com/in/walid-al-saqqaf/
  15. Matteo Carbone– founder, IoT Observatory, co-founder Archimede SPAC, 150 trips per year guy, advocate for insurance use of IoT. Challenger of the irrational exuberance of insurance startups. https://www.linkedin.com/in/matteocarbone/
  16. Hugh Terry– founder of the Digital Insurer, insurance blog that grew into the global virtual meet up that is Livefest. Finger on the pulse of Asia InsurTech https://www.linkedin.com/in/hughterry/
  17. Shefi and Avi Ben Hutta– Coverager,   keeper of the InsurTech companies’ data, hoster of industry get togethers, challengers of marketing pitches, cheerleaders, probers of BS, innovators in their own right.  Sibs, not married (don’t make that mistake!) https://www.linkedin.com/in/shefibenhutta/, https://www.linkedin.com/in/avi-ben-hutta-a62a1429/
  18. Robin Kiera– founder, Digital Scouting, consultant, attention hacker, video blogger of the first degree. Able to interview a dozen influencers in one session.  Wearer of blue shirts.  https://www.linkedin.com/in/dr-robin-kiera-33536931/
  19. Lutz Kiesewetter– PR and vendor relations, Deutsche Familienvesicherung (DFV_AG), unabashed marketer of the firm’s path through InsurTech, IPO, and digital customer experience. Speaks of a model other firms should imitate. https://www.linkedin.com/in/lutz-kiesewetter-mba-5aa600134/
  20. Nick Lamparelli– CUO of rethought Insurance, knows a thing or two on underwriting and reinsurance, listens to my babble on parametric, part of the foundation of the Insurance Nerds, podcaster extraordinaire. https://www.linkedin.com/in/nicklamparelli/
  21. Juliette Murphy– CEO and co-founder, FloodMapp, advocate for resilience, flood awareness and tech, social do-gooder, engineer from Down Under who pivoted to being an engineer who is trying to build understanding of flood risks. https://www.linkedin.com/in/juliette-murphy/
  22. Assaf Wand– CEO and co-founder, Hippo Insurance, building an insurance org (great staff) that is customer proactive, holistic approach to insurance service, also a lover of large gray animals. https://www.linkedin.com/in/assafwand/
  23. Rahul Mather– consulting analyst at Accenture, tireless info tracker, keeper of startup data, preparer of longitudinal reports, stats guy. Eager sharer of what he knows (which is a lot), eager listener to tenured industry folks.  https://www.linkedin.com/in/rahul-jaideep-mathur/
  24. Daniel Schreiber– CEO and co-founder, Lemonade Insurance, thick-skinned point man for the firm, adherent to the principle of Ulysses contracts. Neophyte (not so much now) in the insurance world but unafraid to learn.  Discusser of AI innovation for customer benefit.  Defender of the Magenta.  https://www.linkedin.com/in/danielaschreiber/
  25. Christopher Frankland– InsurTech Partnerships at ReSource Pro, InsurTech everyman (who doesn’t know him?) Founder at InsurTech Heartland, industry expert at ‘getting it’.  https://www.linkedin.com/in/csfrankland/
  26. Frank Genheimer– consultant with New Insurance Business, actuary (what!?!?), owner of the best hair part in InsurTech, podcast host (field settings with Influencers- cool!) https://www.linkedin.com/in/frankgenheimer/
  27. Ekrete Ola Gam -IKON– (this is his acronym- I don’t know his proper name ?? )- @olagamola in your Twitter feed, Nigerian economist/insurance guy, cheerleader for regular folks having insurance, for regulators and legislators to do their jobs, for the industry.
  28. Tony Canas– (can’t get that ~ to place over the ‘n’)- client advisor with the Jacobsen Group, Insurance Nerds Super Man, dynamo, all the alphabet items after his name. Supporter of all, never a discouraging word.  https://www.linkedin.com/in/tonycanas/
  29. Sridhar Subbaraman– Managing Director, Oasis Insurance Group, greenfield builder of an InsurTech Hub, United Arab Emirates, builder of insurance business model consensus. https://www.linkedin.com/in/sridhar-subbaraman-73ab7345/
  30. Pat West– Managing Partner, Hedge Quote, agency/agents’ thought leader, see-er of the need for a change in the insurance sales paradigm. Frank speaker, veteran of the big carrier sales machine.  https://www.linkedin.com/in/patrick-west-977501102/
  31. Adrian Jones– Deputy CEO, SCOR, really smart business strategist and understander of the arcane but interesting financial make-up of insurance companies.  And now a happy NYC dweller.  https://www.linkedin.com/in/adrianjo/

There are so many more who I respect and follow, learn from every day.  You know who you are.

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Wildfires and disasters- ecosystem opportunity to leverage InsurTech and innovation

Image Take a US $8 billion dollar insurance business that serves more than 7 million customers annually regarding residential real estate assets valued at more than US $5 trillion, that’s working in a regulated, politically hyped environment and one might see opportunity for innovation.  Throw in significant exposure to regional wildfires and urban area earthquakes, […]

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Wildfires and disasters- terribly good opportunity to leverage InsurTech and innovation

Image Take a US $8 billion dollar insurance business that serves more than 7 million customers annually regarding residential real estate assets valued at more than US $5 trillion, that’s working in a regulated, politically hyped environment and one might see opportunity for innovation.  Throw in significant exposure to regional wildfires and urban area earthquakes, […]

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InsurTech efforts and the customer- who is being served with tech?

image The customer- easily overlooked on innovation’s path, and the continuous need for insurance companies to keep the customer as the ultimate focus of any innovation efforts. It’s a good week to revisit a favorite topic of mine; after presenting sessions on mobile claim applications to adjusters at the Property and Liability Research Bureau’s regional […]

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Have the horse before the cart- problem first, then innovation solution

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TLDR Insurance is not complicated, say compared to sending a man to land on the moon, but it’s big, and its current challenges are like finding the proverbial needle in the haystack.  Innovation, digitization, virtual sales and service, and so on.  Not unlike the elephant in the fable, insurance is perceived differently by each beholder- is it tail, ear, leg, trunk, sales, or underwriting, claims, accounting, actuarial, or customers?  What is to be innovated?

The drum beat of innovation is in some part fashion, but a large part reality- insurers need to evolve with their customers.  But there’s the rub- what evolution is meaningful, useful, profitable, doable, and able to be integrated into a carrier’s strategy, tactics, and admin superstructure?

This week’s discussion- who is useful to consult when you want to do it, or how to tackle it, innovation idea-wise.

I had a very useful conversation this week with an insurance veteran, Joël Bassani, founder and consultant at jinnbee who is now looking to share his knowledge gained over years with the insurance industry.  Our discussion reminded me that there are many aspects to insurance, many lines, covers, regulations, regions, etc. that one must deal with in the globally interconnected insurance world.  And how does one determine what path to take from that which one is on to one that leverages innovation or change?

What Joël told me as a foundational message resonates well- it’s not necessarily knowing the tech to apply, but it’s knowing what problem you have and working from that to what innovation has to help you.  In his opus of an InsurTech study, Joël notes early on, “An InsurTech is a solution, you need to focus on your Problem!”

And how do you know your problem?  Simple- you ask your customers, both external and internal and you strive to #innovatefromthecustomerbackwards .

What jinnbee has compiled for the industry is a compendium of InsurTech purposes:

You have an insurance problem, jinnbee’s analysis can help find an InsurTech solution from organizations that exist, are experts in their fields, and are available.  So you don’t have to create the wheel, you simply need to know the makeup of the wheel and jinnbee will help find a fit.  Do you make the innovation in house, or connect with an InsurTech?  Jinnbee will help lead your decision matrix.

And as comprehensive a study as jinnbee has produced, there are other organizations who have blazed a trail in terms of aggregating InsurTech organizational data, firms’ purposes, an ability to play ‘matchmaker’, and in providing accessible data. The two most prominent examples are Coverager, and Insurance Thought Leadership .

Coverager

I asked Coverage founder Shefi Ben-Hutta what synopsizes Coverager’s business model, what is the ‘elevator pitch’ that would best describe her firm’s approach:

  • Focus on tech, strategy, and alternative insurance distribution
  • Create and curate coverage (news, not lines of insurance)
  • Address the needs of insurance professionals, those who need access to information regarding how to address their unique problems (sound familiar?)

If the reader has yet to access the Coverage website (or better yet, subscribe to Coverager’s daily email), rest assured you will not be disappointed by a simple blast of information.  Coverager approaches information sharing with a wry tongue in cheek, occasional snark, but always best in class, topical information.  The firm’s web splash page gives an indication of the depth of coverage and information:

Everything from an encyclopedic source of insurance company information, a searchable database of InsurTechs, hosting of industry events, and to the latest marketing scheme or the scoop on a company that has gone off path.  As Shefi recounted, their purpose is:

  • Learn from the past
  • Understand the present
  • Better bet on the future.

Insurance Though Leadership

Take Coverager’s avant-garde approach to InsurTech assistance and look to a somewhat organizational opposite, and one finds Insurance Thought Leadership (ITL).  ITL approaches InsurTech advisory services with more of a formal suit, but with no less breadth of information as Coverager.  ITL has developed through the efforts of its founder, Dave Dias  into a premier source of innovation source/need connections, and a premier host of innovation education.  And the firm is the home of the man with a knowledgeable grasp on the innovation world, Guy Fraker, AKA the man with a thousand sneakers (runners, athletic shoes).  Insurance company C-Suites are encouraged to subscribe to the matchmaking service, and the organization’s excellent editorial staff keeps the industry appraised of the latest concepts.  A look at the Innovator’s Edge page of ITL website provides the searcher an idea of what the firm can offer:

Three very good sources to search and consider, and there are other InsurTech informational resources, e.g., GR Capital’s recent summary article, Why Next Year Can Be a Turning Point for Global Insurance Innovation, and industry influencers who can make connections from personal experience, including those in this list, or this one, or even this one (companies).

 

But it still requires the asker to know what innovation problem needs to be solved, what the customers are expecting (maybe it’s no change?), and how efforts are to be focused.  Innovation is not fashion, it’s strategic application of resources and there are good resources at hand.  And in most cases it’s not part of the elephant, but consideration of the whole beast.

 

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

 

 

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InsurTech and Innovation news- a great banquet but fill your plate wisely

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TLDR   The volume and variety of insurance/InsurTech news is almost too much to keep track of, even if one tries to keep focus on one insurance line, one region, one company, legacy vs. innovation, etc.  And of course, I like to keep up with all.  Foolishly, because a jack of all trades remains a master of none, even in the digitally aware environment. 

In any case here’s a sampling of what caught my attention during the past week:

Auto telematics help inform driving decisions for the elderly (and maybe create a sales opportunity for scooter sales  What was rolled out originally as an app to measure driving habits for taxis and fleets by Orix Auto Corp evolved into a clever tool for the elderly and their families to broach the subject of safe driving, and whether a person has requisite driving skills.  In turn, many who choose to surrender their auto driving rights have found a measure of freedom using motorized wheelchairs or scooters, e.g., devices rented by Whill, Inc.    Japan Today   Thanks, Robert Collins

InsurTech builds a market for a complementary product.

Equipment breakdown claims grow in a booming economy

“Equipment breakdown now rivals fire loss in both frequency and severity of claims, driven by the booming economy and human influence, according to an FM Global analysis of large property-related losses greater than $3 million released Tuesday.”

Sure, it’s one firm, but what??? Rivals fire losses for frequency and severity???

“Lack of maintenance was a factor in two-thirds of equipment breakdown losses in 2018, while nearly half had a significant human element impact or influence, FM Global said.”

InsurTech opportunity– IoT devices to monitor equipment performance, maintenance, automated repair, and controlled shut down.  Keep in mind equipment failure equates directly to loss of use and profitability issues.  This speaks to changes in underwriting, policy forms/exclusions, changes in indemnity paired with parametric for a new sort of indexed parameter.   Business Insurance

AIG unit off the hook for non-property damage arising from flood

“A flood sublimit in a property policy applied to all losses arising out of a flood, not just property damage, a federal appeals court ruled, reversing a lower court’s ruling against an American International Group Inc. unit.”

An AIG insured filed suit for loss of use (time element) claims, a contention the appeal court said was unfounded as the policy sublimit was deemed to include all claimed losses, not just direct property losses.  Policy provision/endorsement wording and existing case law- insureds need to understand and/or ensure their broker does.  While this is an insurance ‘due diligence’ issue that is not new, this is another innovation opportunity- policy language/unstructured data analysis.  Chris Cheatham of RiskGenius has done yeoman’s work in providing a service to allow companies to “better understand policy language and create more efficient underwriting workflows,” but that does not force a company to understand what coverage applies.  Business Insurance

InsurTech opportunity- automated learning from denials of coverage– this flows both from the insured to the carrier, and vice versa.  Same principle applies to analysis of litigation- learnings for all.

Which P&C Insurers Made the 2019 Fortune 500?

Let’s not consider the 500, let’s consider the top 100 companies on the list, of which 7 are P&C insurers.  Why care for this article?  Well, the seven firms represent $535 Bn in annual revenues, and employ in total 658,000 insurance professionals (not including those populating tens of thousands of agencies).  That’s a lot of financial clout, and 658K pros (estimated one million with all carriers included)?  Innovation opportunity– Think what the input from an informed constituency of that size could contribute to insurance innovation and the industry’s future but are in whole discouraged from doing so. (roll this up to the global top ten- $917 Bn capitalization, hundreds of thousands of staff)

Unleash the innovation Kraken, P&C industry, free the staff! – the only real problem that would be had will be what to do with all the great ideas.  PropertyCasualty360

GetSafe CEO Predicts Lemonade Will ‘Struggle’ In Germany

“Lemonade will have to struggle in Germany,” GetSafe co-founder and CEO Christian Wiens told Carrier Management vie email. “The market is regulated and complex, and the domestic InsurTechs are in no way inferior compared with Lemonade.”

“While Lemonade is a fantastic storyteller, they concentrated on their brand and not so much on their product and technology,” Wiens said. “Germans, on the other hand, prefer to do it the other way around.”

First sentence- seems the industry cognati agree- plenty of DE innovators already in play across all covers.

Second sentence- not so sure.  Lemonade has been a mostly transparent sharer of the principles behind its policy form, and certainly speaks a lot of its favorite bot, Maya.  GetSafe is no technological slouch as its easy app and MGA-based operation has brought together backing (Munich Re) and leverage of changing customer needs in its property insurance platform.

InsurTech opportunity- harken back to business school– what are your market threats, and who is manifesting a potential competitor’s novelty, and can you iterate more effectively based on what new entrants are bringing to your base?  Lemonade’s substantial financial backing can help them bring a ‘square peg’ to a DE ‘round hole’, so why not shamelessly and fashionably imitate?  Don’t denigrate the disruptor of the disruptors- re-disrupt (is that a word?)   Carrier Management

Plenty to see here, as they say, but don’t rest too long on one news feed- too much of one good thing could cause info-indigestion.

Best approaches I have found- watch what your respected connections watch and watch what smart persons in tangential industries watch- there are bound to be meaningful overlaps.  Don’t limit yourself to one region’s news, don’t limit yourself to one line of thought.  Read the contrarian’s point of view.  And understand that the next best thought may come from an unexpected source/country/post/medium/neophyte/expert/anything.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

 

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A Declaration of Innovation- Happy 4th of July

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“When in the Course of financial operations it becomes necessary for people to disrupt the legacy bonds which have connected them with insurance and to assume among the powers of the industry, the separate and equal station to which the technology and innovation entitle them, a decent respect to the opinions of mankind requires that they should declare the cause(s) which impel them to the separation.”

No, Thomas Jefferson and his peers did not declare insurance innovation as a cause in 1776, and his well-known version of the United States Declaration of Independence is far more articulate than the paraphrased paragraph noted above.  But it’s July 4th, the U.S. Independence Day, and it seemed fitting to have a topic that tips its tricorn hat to the day.

It’s easy to declare a need for separation from the bonds of a multi trillion-dollar legacy industry, but as with any long-standing governance or tradition the declaring is much easier to accomplish than the doing.

Insurance innovation is a heavy lift of a heavy industry.  Insurance is many things, many covers, many types of service, many jurisdictions, many carriers, and of course- billions of customers.  As the Insurance Elephant has previously noted in “The Blind Men and the Elephant, InsurTech and its Many Perspectives” , insurance innovation is comprised of many disparate parts that make the whole beast, yet each person who has motive to adopt a ‘separate and equal insurance station’ perceives the beast as the activity in which the respective ‘each’ is involved.

The industry functions and provides the foundation upon which ownership and finance can rely, yet in its entirety the industry is held captive by the tyranny of technical, organizational and process fealty.  Process inertia and associated data management are ingrained within every aspect of the insurance system with which all are required to comply, and innovation must expend valuable energy in convincing incumbent management hierarchies of its worth.

And there are plenty of data that need to be processed- one by one, by ten, by one hundred, by one thousand, million, billion, trillion forms.  The industry employs millions globally to handle the volume of paperwork/data/forms.  Customers (for the most part), vendors, providers, service persons, agencies, and regulators are accustomed to the paper chase- but will that ensure an enduring, effective industry going forward?

These truths are self-evident- insurance must free itself from the shackles of legacy complacency.

There are many ‘patriots’ resisting the tyranny- companies that have developed clever methods to structure data that exists in native unstructured form, e.g. ExB Labs whose Cognitive Workbench can “search texts and images for content,…also classify, interpret, summarize and evaluate” unstructured data.  Or RhinoDox, whose document management innovations make captured, unstructured data easier to find and use (yes, it’s clear that for now that firm’s focus is on manufacturing innovation, but their heart remains available for insurers).  And insurance process management platforms that have developed-  These are, however, just tools to mitigate the overburden of legacy systems, not the inertia-busting change that is suggested for the long-term health of the industry and its participants.

Consider- there are a whole lot of persons employed in the legacy insurance industry, persons who understand what customers need, how processes function (or don’t), how to workaround systems that are obsolete, ensure customers have the appropriate cover, adjust claims within a patchwork of old and new systems, are subject to operating priorities that vary by the quarter, and are witness to the loss of intellectual capital due to attrition and retirement of tenured colleagues.

Yet despite those self-evident factors these millions are not encouraged to participate in the active dialog of innovation and InsurTech.  Not only is that wealth of staff knowledge generally unavailable, outside of participation in conferences most of those who are putative industry leaders are reluctant to be or missing in the discourse.  The drum beat of innovation is heard in the town square but remains surprisingly mute in many parts of the industry.  In the absence of the light of discourse, the tyranny of legacy insurance prevails!

As with established global governance two hundred and forty some years ago and the onset of the nascent United States, there is optimism for change.  Perhaps it is time to examine if the current indemnity model that exists for many covers has been outpaced by data availability and alternate means of claim reimbursement, e.g., modified parametric plans.  There are plenty of vested interests holding indemnity contracts near, but is a rebellion in the offing?

There are markets that have avoided the need to innovate- those are the digital native markets such as China, or India, or South America, where insurance products have taken hold for hundreds of millions of customers by working from innovation backwards- what does the product need to be to serve the delivery channel the customers expect.  There are niche customer segments that have been found and are being served by new products and new players, but these unique markets are an insignificant (statistically speaking) part of the whole.

So let’s talk about the incumbent markets that have the technical, organizational, and process debt that innovation has yet figured out how to amortize, but that is fodder for a declaration of insurance innovation independence.  A need to cast off the yoke of what has been and find the what can be.

A very heavy lift, indeed.

A Happy Fourth of July to my U.S. colleagues.  And apologies to Thomas Jefferson, et al.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

 

The local insurance agent- insurance ecosystem re-defined

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You don’t have to look very far to find an active insurance ecosystem- just visit the neighborhood insurance agent or contact a commercial broker.  They have been fostering the ecosystem method of serving customers since before the term was moved into the front row at the innovation and InsurTech get-together.

TLDR.  Read any of the volume of current discussion regarding insurance ecosystems and you’ll find references to smart device apps, on-demand, shopping or ride sharing companies that are adding insurance options (Paytm and LIC, Amazon and Acko, Flipkart and Digit) but these are not surprisingly in insurance markets that are developing through a ‘digital native’ business culture.  Ecosystems per se have been a difficult ground up start in more developed insurance markets, e.g., U.S., Canada, and Europe.  But what of the US and Europe- forget being part of an ecosystem?

A quick look at defining an insurance ecosystem finds:

Ecosystem- “An ecosystem is a new business paradigm in which firms use digital tools to leap over traditional industry boundaries or forge partnerships.”  (WHY ECOSYSTEMS ARE THE FUTURE OF INSURANCE, Accenture).

Huh.  Leap over traditional industry boundaries or forge partnerships.

Or this-

“we suggest that middle-market insurers may want to consider expanding their horizon well beyond the standard product and service options they typically offer policyholders (see figure 2). This would involve creating or joining a much broader ecosystem offering a wider range of business support solutions, as well as facilitating educational and networking opportunities for customers.”  (Building new ecosystems in middle-market insurance, Deloitte)

Hmmm.  Offering a wider range of business support solutions, as well as facilitating educational and networking opportunities for customers.

I suggest if we look past the urge to see ecosystems as a new paradigm in developed insurance markets you will find- the agency model.  Not just the independent or captive agents who are churn and burn lead chasers, but the agents who have a holistic approach to building relationships (old school suggestion of recognizing inter-connectivity of business- nascent ecosystems.)

Digital ecosystems such as are noted above typically didn’t begin as systems; they were applications.  WeChat was launched in 2011 as a mobile chat app by China digital giant, Tencent.  Within four years it had developed by the popular demand of users and affiliate companies into being a 200 million users per month- wait for it- ecosystem of users and providers.  The application was adding value to what was originally a form of communication.  It was accessible, easy to use, had features that were meaningful in daily life.  It’s said that WeChat was the impetus behind the explosive growth in use of QR codes in China.

How does that tie into insurance, or insurance ecosystems?

There are tens of thousands of insurance agents in the U.S. alone, each of whom is working to build business, retain customers, increase the actual or perceived value customers find in the agent’s service, in other words- working to sell a reason for the customers to interact with the agency more often than once per year.

Smart agents have figured ways to do this for years before digitization- sponsor little league, be active in the chamber of commerce, bring a dish to pass at the service organization luncheon, donate bicycles to good readers at school (Chris Paradiso !), names on bowling shirts, filling sandbags, holding a customer’s hand when a claim occurs, referring the accountant next door, keeping a bank account in the local 1st National, keeping abreast of business and tech changes, and so on.  Building the value he/she could bring to customers, being a resource.

How is it that agents can be the insurance ecosystems of today?  If in China- have your QR code on WeChat, of course.  Piggyback on the platform Tencent has constructed.  But in mature markets where the insurance industry has tenure, the model has it’s own reference- ‘legacy’- and the availability of carriers is a fractured confusion to customers?

Active agents have the basis- relationships with collaborative businesses/organizations, and a pool of mostly content customers.  How might the agent leverage these resources?

  • What does an agent’s website say when it’s opened? Chances are it says, “I want to sell you something.”  So, people visit the site when they need to buy insurance.  Why not have a splash page that showcases the value/connections/resources that the agent has built over time?  A site that is a resource pool for clients that also serves as a selling tool when needed. (not like that of the Life Insurance Corporation of India– love their resources but the splash page is crazy busy).
  • Collaborate with business partners- what’s wrong with having synchronization of messages within the respective websites? If the agent resides in a smaller community then resources are common, success of one results in success of another, and there’s that synergy thing to take benefit from.
  • Be an active part of social media that makes sense for business. Not just a ‘like’ clicker, but a question asker, expertise sharer (Billy Van Jura )
  • Don’t try to re-create the wheel- link to existing resources customers are familiar with. Have an FAQ link on your site?  Did you know that Pinterest has an insurance info page? The details aren’t too tough to get a link onto your page, and cross-clicks builds your digital presence.
  • Be an easy source of information/links for emergency, weather, and government contacts. Be the source customers want to keep as a favorite.
  • Build a smart device application that makes sense- not a selling tool but a resource for the user that can also serve as a selling tool.
  • Leverage the digital resources your stable of carriers has- they know that being a digital resource is important; some are better at it than others.
  • There’s a lot more that the reader can think of- convert your analog ecosystem into a digital version.

There are agents who are working to perfect targeted ecosystem plays, e.g., cyber insurance (Brett Fulmer, Joe Hollier, Ben Guttman in the US), or in unique SME plans (Michael Porpora ), or in facilitating service tools for high net worth customers (Kurt Thoennessen).  A very good example of building an ecosystem/resource platform is Pat West whose firm, Hedgequote’s primary function is to be a resource for those needing information on insurance and potential firms from which to purchase.

I regret I do not know many agents working outside of the US, but some good examples who are building services beyond the basic sales model include Muhammad Ayodeji working in Lagos, Nigeria, (who in addition to representing insurance well posts traffic and accident updates through Twitter), or Mark Callanan in Sydney, Aus, who investigates crop and parametric options for the farmers and farm landowners in the country.  And one never knows- the transition that German insurer DFV-AG   has forged from being a more traditional carrier to digital expert may lead the firm into digital ecosystem land.

The point is that ecosystems can be insurance businesses that truly offer a wider range of business support solutions, as well as facilitating educational and networking opportunities for customers.  Perhaps a clever player will build an ecosystem of business connections that is a digital repository of business links.  Ecosystem is still be defined- agents can evolve beyond the world of sales quotas and discussions about premiums.

“Alexa, who does my insurance agent recommend for plumbing repairs?”

 

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

 

Insurers love NPS- can the IoT help show why it remains an important measure?

 

 

TLDR  What to do, what to do, in the InsurTech, innovation insurance world?  Insurance remains a ‘sold, not bought’, product.  Virtual service is not only becoming a demand of customers, but carriers are embracing the concept based on expectations of efficiency and economy.  Will there be a disconnect between service efforts and how customers perceive it?  As customers change their habits, can insurance change theirs?  What is the common thread?

How an insurance carrier performs is typically known only when an adverse situation occurs, i.e., a claim, and service is triggered for the customer, a customer who doesn’t really know what to expect during a claim experience.  So of course the industry knows this and has devised many ways of gauging service performance: from internal surveys, JD Power ratings (Customer Service Index), and most recently, by asking claim customers how they would rate the service they received in terms of one question,

How likely is it that you would recommend this company to a friend or colleague?”  

 The answers to that clever question are the basis of the calculations for a ‘Net Promoter Score’ (NPS), a service (loyalty) measure devised by Fred Reichheld and other clever minds at Bain and Co.  How does this tie in with InsurTech principles?  Seemingly through another three-letter acronym, IoT (Internet of Things).

 

What are you talking about, you say- NPS is a survey administered measure made available to but a fraction of insurance customers, is but one question, and disregards the experience of the majority of the customers.  IoT speaks to connected devices, ostensibly meant (to many in the insurance world) to detect adverse conditions, track adverse conditions, determine behaviors that might predict adverse circumstances, and by extension reduce carriers’ exposure to claims. One measures experience, and one works to predict experience.

Well, I’m here to say that the two concepts couldn’t be more intertwined, and as innovation within the insurance industry becomes more practical, and as IoT becomes more ubiquitous, the interplay of NPS and IoT will become clearer.

At its root NPS was developed as a means to measure what the folks at Bain found as the key driver of business growth and success- customer loyalty.  Loyalty has been a proven factor in business growth and businesses who foster customer loyalty not only retain those customers’ business, but those same customers are motivated to bring other business along.  Enhancing customer loyalty, adding value to the customers’ lives, and refuting the contention that “loyalty is dead” (see Mr. Reichheld discussing that here ) is the foundation of NPS.  And everyone touts their NPS results, don’t they?

So along comes IoT principles as part of the InsurTech wave, and its primary advocate in the InsurTech world, Matteo Carbone. (In an odd coincidence as with Mr. Reichheld, Mr. Carbone is also a Bain alumnus.)  Mr. Carbone has espoused the concept that “all insurers will be InsurTech”, but in addition to that his IoT Observatory has become a central authority regarding insurance effects of connected devices in autos, houses, and to some extent, wearables.  And a main principle he covers within his recent article, “Smart Home Insurance Strategy 101”, is loyalty :

This way of enhancing proximity and interaction frequency with policyholders (connected devices and value addition) – while creating new customer experience and expanding relationships – is one of the reasons for adopting IoT in home insurance. These interactions with customers are one proven way to earn higher loyalty and allow the differentiation from competitors.”

There’s that word- loyalty.  In an insurance world where virtual service is becoming the holy grail for carriers, how will loyalty remain a factor that can be influenced by carrier service?  Even the InsurTech poster child, Lemonade, has to have concerns that as long as NPS remains an important measure of customer service (Clearsurance may have ideas about that), interactions with insureds must remain focused on maintaining or building loyalty.  Can a bot do that?

IoT programs have that opportunity to integrate technology, virtual service, and value addition that can build customer loyalty, for example, value-added services as noted by Mr. Carbone.  “But the real opportunity is to solve customer problems by delivering enlarged value propositions for their homes. (Some) services enabled by home IoT are:

  • Safety/Security: remote monitoring and emergency services to provide peace-of-mind to the homeowner;
  • Efficiency: tracking and optimization tools to contain the expenditures (energy and water) at home;
  • Property services: concierge with a platform of certified service providers (such as plumbers, metal workers, carpenters, construction workers or electricians) for home administration;

Seems any or all of those points would serve to build customer loyalty in the absence of direct service from claim staff.  And what of agents?  Insurance sales and servicing of policies remain a predominantly agency-driven proposition in the US and Europe- agents/brokers are beginning to recognize the need for provision of more to customers than just quotes.  In markets where ecosystems and smart device access are the primary entry for customers to insurance, loyalty may be even more fragile as ecosystem change is simply an app away.  In all matters the focus must remain on enriching customers’ lives, on #innovatingfromthecustomerbackwards.

NPS and IoT- the concepts can’t make insurance a more ‘bought, not sold’ proposition, but effectively focusing on IoT in an increasingly virtual insurance world can help maintain or build loyalty, and as the architects of NPS found, that is the foundation of an effective growth strategy.  The two principles have previously marked different paths but are now on intersecting courses.

 

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Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).