News and Views: Argo, Tesla, Aon

Matthew Josefowicz

Matthew Josefowicz on reports that Aon is in talks to sell its employee benefits outsourcing group.





Chuck Ruzicka

Chuck Ruzicka on Tesla’s win with federal regulators and why it’s just the first of many battles for self-driving car manufacturers.





Mitch Wein

Mitch Wein on Argo Risk Tech Solutions and the future of commercial and personal lines insurance.





Aon May Benefit From Pivot Back to Core Market

Matthew Josefowicz

Yahoo News reports that Aon is in talks to sell its employee benefits outsourcing group. Aon bought Hewitt for $4.9 billion in mid-2010, when large brokers were under pressure to diversify into non-commission businesses after the financial crisis. Some interpret this as a signal that Aon wants to focus more on insurance and risk management businesses. With the large commercial insurance world being transformed by new entrants from the capital markets and new technology, and with the employee benefits market under pressure from the growing percentage of the labor force operating as freelancers, Aon may benefit from a tighter focus on its core market where disruption may create opportunity (as well as threats).

Tesla Gets a Win from Federal Regulators, But More is Still to Come

Chuck Ruzicka

Federal regulators gave Tesla some good news this week when they cleared the automaker’s “Autopilot” system of responsibility for a fatal crash in 2016. Instead, the U.S. National Highway Traffic Safety Administration found the driver of a Tesla car that collided with a truck (the article says the car “drove itself into” the truck) ignored warnings by Tesla to keep control of the car at all times. This is certainly a victory for autonomous driving systems — the opposite finding would have been a major setback for Tesla — but not the end of the war.

Like seat belts, autonomous driving vehicles will reduce accidents and fatalities, not eliminate them. And Americans are litigious. Apple is being sued for not doing enough to prevent texting while driving, even though texting while driving is explicitly against the law. Companies with deep pockets, like Tesla, Apple, and Google, will continue to attract litigators, and insurers who provide product liability coverages to autonomous auto industry should not start cutting prices. However, auto insurers should anticipate reduced frequency and severity of accidents as safety features continue to be improved.

All of that being said, this week’s ruling is an indication that our society accepts this research and technology direction. Autonomous cars offer significant benefits to portions of our society that have disabilities and to the elderly who can become riskier drivers, not to mention the potential large-scale benefits of improving traffic flow and reducing air pollution. Lastly, with this decision as precedent, the profit potential for the winners in this space will continue to drive research and innovation.

Argo Risk Tech Solutions a Step Towards IoT-Powered Commercial and Personal Lines Insurance

Mitch Wein

The recently-launched Argo Risk Tech Solutions looks at common causes and locations of accidents, like slip-and-fall, in the workplace. The idea is to use IoT devices like sensors to communicate to the employees to modify behavior and identify areas of risk like a wet floor, hot soup bowl or items blocking the halls. The IIR article indicates that companies using this technology have seen accidents reduced substantially over a period of time. This positions insurers not just to transfer the cost of risk to them for the cost of premium to an employer, but to actually prevent the risk from ever materializing. This in turn reduces the overall loss experience and allows the premium to be reduced. This approach will be adopted in more and more areas of commercial and personal lines insurance and will be widespread by the 2020s. Over time policy holders that do not deploy these types of sensors will be penalized by being put in different risk pools from those that have the sensors. It will no longer be an option but a requirement. Even further out, the analytics tied to the collection of this data from IoT devices might proactively communicate what to do and when to do it to minimize risk (ex. a commercial truck taking an optimal road to minimize an accident weighed against the time it takes to do the journey). There could be some backlash, however, as people may start to feel the technology is too invasive and not want to provide data or work with a company that does.

The Key to Agent Automation: Knowing What Your Agent Needs

Keith Raymond

Keith Raymond

Automation that enhances the agent experience and ultimately their selling and service capabilities is fundamental to enabling their success. But with so many potential areas to focus on, from portals to licensing and contracting to mobile, it can be challenging to know what to prioritize. Here are some best practices to help CIOs and business partners focus attention on the most value-added elements of agent automation:

  • Know your agent: A successful agent is someone who puts the needs of their clients first, has a positive impact on the people and community in which they serve, and takes pride in being counted on by their clients. Knowing the motivations of an agent provides a good base for understanding where you can get the most value from your investments.
  • Create an inventory of opportunity: Given the complex array of systems that provide support for the agent, a significant step is creating an inventory. There are a mountain of touch points that leave a lasting impression for an agent.To fully realize areas of opportunity, CIOs and their teams should develop a process map covering the agent interactions with all the touch points during the course of a business day.
  • Define metrics for success: The measures of success are likely to be a combination of things like improving the efficiency of submission to commission process, straight-through processing, aggregating access via single sign-on, and reducing agent onboarding times. Whatever the ultimate metrics may be, the process of working with agents and business partners to develop the metrics helps bring all parties together.
  • Understand mobile use cases and value: Mobility for agents has grown beyond calendar and contacts to more of a full agent “mobile office.” Depending on the use case, agents may be looking to access all of their data and applications from any device from anywhere at any time. A well thought-out and well executed IT strategy can support mobile applications by leveraging an open, service-oriented architecture.
  • Consider the impact of emerging technology: For most carriers, using today’s widely available digital technology and approaches will have the most immediate value in agent automation. But there are several emerging technologies, like gamification and wearables, whose potential values should be considered for inclusion on carriers’ roadmaps for the next few years.

Agents are heavily dependent on automation for every aspect of the engagement and service functions that support the ability and sell and service a client. The more CIOs can enable them through technology and process simplicity, the easier it is for them to do what they do best: develop relationships and provide peace of mind.

For more on this topic, see my recent CIO Checklist report: http://novarica.com/agent-automation/

CIOs Should Not Underestimate the Potential of XaaS

Chris Eberly

Chris Eberly

Some technology trends are just that: trends. Others have the potential to change the landscape of the IT industry landscape. A deep review and understanding of XaaS (“Anything as a Service”) puts the practice on a parallel with similar industry sea changes of the past, like the PC movement of the 80s, the web movement of the 90s, and the sourcing movement in the 00s. Here are our thoughts on what the best practices are for CIOs moving forward with XaaS implementation:

    • Review current business processes with a critical eye: Whenever a CIO embarks on replacing any major platform, the first caution is not to recreate what already exists into another system, unless the business is completely satisfied with the current platform which quickly begs the question; why move? Assuming there is a need to move because the existing platform is complex, not scaling appropriately, doesn’t support current compliance requirements, lacking modern security
      capabilities, costing too much to maintain, or any other similar reason, the first step should be to review what functions are being supported, what value is behind these functions, and are these functions generic to the industry.
    • Define value add processes and align to benefit targets: It is important to define value-add processes and take the step to align benefit targets to each of these processes. This analysis will need to start with a top-level agreement between CIO and COO on value benefits, cost of non-standard process, and success metrics before moving into discussions and process planning.
    • Implement Rent vs Buy vs Build model: A very old question that is outlined in just about every IT strategy is the philosophy direction of Buy versus Build. XaaS adds a new dimension of whether the function or service should be rented? In other words, can the company pay per user, pay per customer or pay per policy instead of making the significant investment, to buy or build a platform?
    • Prepare for organizational shift, not just technology shift: There is clearly a technology shift in moving to XaaS which includes all the challenges and opportunities with implementing a new platform. One aspect that isn’t as apparent is the need to make an organizational shift from a focus on development and application maintenance to vendor and product management. Specific consideration might include QA focus more on regression testing using business use cases instead of feature testing focus, a shift from focus on intra data center design to inter data center design, and architecture with greater focus on data, data management instead of interconnecting applications within data center.
    • Shift primary focus to data and analytics capabilities: Many IT shops spend most their time and resource maintaining, developing, and servicing existing platforms, which leaves little ability to address the huge data frontier. By fully taking advantage of XaaS, IT shops can reallocate resources to focus on unleashing the power of data into the whole enterprise.

Lessons learned and experience from previous sea changes lead us to review XaaS as part of the IT strategy roadmap. XaaS is not simply a new technology but rather a clear move and opportunity that requires a full assimilation into IT shops. At a minimum, adopting XaaS should create the opportunity to bring IT and business teams closer together.

 

For more on this topic, see my recent CIO Checklist report: http://novarica.com/best-practices-for-xaas-strategy/

As More Insurers Look to Big Data, Expect Regulators to Pay Attention

Mitch Wein

We have written previously about the ever increasing importance of data in Insurance. A related area of interest to insurers is the growth of predictive analytics. Modern predictive analytics solutions are capable of providing deep insight into a wide range of business areas such as underwriting risk, product profitability, and financial projections. However, maturity and adoption of predictive analytics solutions vary widely among insurers. As more carriers prioritize data strategy, usage of this potentially disruptive technology will grow rapidly. Data is a major component of Novarica’s “Hot Topics” for insurers, which include social, mobile, analytics, big data, cloud, digital, and Internet of Things/drones. Data is being utilized to speed up underwriting, utilizing external third party data (e.g. prescription information, telematics information for driving), improve actuarial models (e.g. data collected from drones, the National Weather Service), and help to process claims (e.g. data generated from devices, commercial vehicles, health devices). Over 25% of insurers ran big data programs last year in order to gain insights from large volumes of data with high variety (structured and unstructured) and velocity. This article from the New York Times discusses the increasing concern of regulators, mostly in Europe and the UK, that access to large amounts of data may ultimately lead to a decrease in competition by freezing out smaller firms who can’t get at as much data as large firms like Amazon, Google and Facebook. The article mentions the case of IBM, which is combining internal data with customer data in order to train Watson AI software for a wide variety of tasks in fields ranging from medicine to finance. Some insurance carriers are working with IBM’s Watson software to develop underwriting, claims, and actuarial modeling. Data will continue to grow in importance even as it grows in volume. It is inevitable that regulators will start looking more at data and access to it as we move forward into the 2020s.

Are Young Insurance Agents Too Optimistic About the Future?

Rob McIsaac

A recent survey of younger agents highlighted a generally optimistic view of the future. In addition to reflecting positive sentiments about economic prospects, they also appear to feel good about the security of their positions, given the significant number of current producers that are expected to retire from the labor force. The average age of an agent in the United States is greater than 59 and there are forecasts of up to 25% of the current population of agents planning to retire by the end of 2018.

While there may well be room for optimism for those who properly frame a career in insurance distribution, the likely reality is that carriers will need far fewer agent relationships in the future. Increasing focus on self service capabilities, desires from consumers to be able to have direct interaction with the companies they do business with and greater commoditization will all put pressure on the industry to do things in a more efficient, less labor intensive, fashion. Distribution will hardly be the only function to experience this pressure. More automated underwriting and automated claims adjudication are two other examples.

This also ties to research Novarica recently competed on Millennial consumers. As a generation, Millennials will represent half of the US labor force by 2020. As a group, they have a strong preference for DIY capabilities.

This doesn’t mean that the agent role will become extinct but rather that it will morph and evolve. There are likely to be far fewer, but on average more highly skilled, producers in the future. They will be experts on dealing with complex and difficult situations which don’t lend themselves to a do it yourself model. That could be a very good place for producers to be, albeit with a substantially different business model, than is currently the norm. Carriers will want to be preparing for these changes sooner rather than later, given the speed with which consumer preferences can be influenced by the likes of Google, Amazon, Facebook and Apple.

News and Views: Lemonade’s Instant Claims, NYS Cyber Regulations Delay, UnitedHealthcare Motion, and BMW’s Self-Driving Cars

Matthew Josefowicz

Matthew Josefowicz on why Lemonade’s instant claims processing is most impressive when looked at from a user experience standpoint.





Mitch Wein

Mitch Wein on the delayed implementation of New York State’s new cybersecurity regulations.





Tom Benton

Tom Benton on UnitedHealthcare Motion and the future of wearables in wellness programs.





Chuck Ruzicka

Chuck Ruzicka on BMW’s entry into the self-driving car market and the importance of learning in innovation.





Instant Lemonade Impressive for Flavor more than Ingredients

lemonade

Matthew Josefowicz

Lemonade got some great press this week with their instant claims payment for a small property loss on a renters policy.

While Lemonade is spinning this a miracle of AI, it’s really more a miracle of intelligently-designed processes. Many insurers do rules-based, auto-adjudication for small property losses, but few have the ability to translate those automated decisions into real time payments.

The other thing that Lemonade has done successfully here is focus on the desired customer experience, and exploit the industry’s lack of willingness to do so.

Now if Lemonade can do the same thing with a $25,000 liability claim on a small renters policy, that’s a different story…