The time-tested axiom in risk management: “If it’s predictable, it’s preventable,”¹ holds true today in the business of property and casualty insurance claims. What’s impressive is that we can take that axiom and energize it with artificial intelligence, machine learning, and natural language processing.
The insurance industry has long struggled to effectively serve Small-Medium Business (SMB). The cumbersome and inefficient process of buying business insurance doesn’t suit the needs of SMB’s, nor does it suit the expense structure of insurers and brokers. Consequently, affordable and convenient insurance options for SMB’s are limited.
When reviewing the options for SMB’s, it seems most insurers are focused on coverage rather than convenience. It’s a natural instinct – coverage is what they do. But, do most customers really care if they have $150,000 of Valuable Papers coverage instead of $100,000? Coverage is not necessarily customer-centric.
Although there are a number of options now for SMB’s to buy insurance online, it’s not actually that much easier. There are still lengthy applications to complete, small underwriting “boxes” that delay quotes, complicated proposals to review, wait-times for policy documents and archaic payment options. The same cumbersome buying process has simply been moved to the digital world. Almost everything an SMB needs to operate can be purchased instantly. If a small contractor needs equipment for a job, the owner can simply drop by Home Depot on the way to the office. Likewise, if a consultant needs data to complete an analysis, a few minutes researching on Google will find numerous sources that sell data subscriptions. Time for lunch? Delivery can be arranged with practically every restaurant in the city.
So why can’t insurance be purchased the same way– instantly, as needed, and without any hassle?
On-demand insurance will do just that! In fact, the first product from Slice for SMB’s will be cyber insurance. It’s not just a policy, it’s a program. Even with insurance, claims cost money in terms of deductibles and lost time. The cyber product rolls together insurance and loss prevention to minimize “Total Cost of Risk.” The result: fewer claims, fewer deductibles, less time spent on insurance and lower premiums for SMB’s.
Key things to look for with “On-Demand” Insurance:
Here’s how easy it is to buy insurance through some very exciting innovations:
Here’s a secret: the application form can only benefit the insurer. It is not customer-friendly. Most of the information required on the form is either pointless or available from other sources. The purpose of the application is to get a signature to a warranty statement to use against the business at the time of a claim.
Rather than being forced into an annual insurance policy with an inconvenient renewal cycle, SMB’s can subscribe to their required coverage month-to-month. No more renewal questionnaires and no more premium finance contracts and the interest fees that go with them. Plus, at any time, the SMB can buy additional coverage on a temporary basis to address specific needs. Then, cancel at any time without penalty.
Insurance policies are short and written in plain English. Confusing insurance terms and legalese are eliminated. Policies are easy to read, easy to understand and easy to buy.
On-Demand insurance will not only make getting insurance easier for SMBs, it will have a huge impact on the industry as a whole.
Get all of your insurtech news and insights on the SVIA Blog.
The future of insurance is well and truly here: the only way insurance carriers will be
able to survive and thrive is by utilizing big data, including new and emerging data
sources.
In an interview with Mad Money’s Jim Cramer on CNBC, Chubb Ltd.’s Chairman
and CEO Evan Greenberg commented: “We spend a billion dollars a year on
technology. We’re in a world that’s going from analog to digital…if you remain analog,
you’re history.”
Greenberg wasn’t just describing digitizing an industry that has historically adopted
technology at glacial speeds, but how harnessing big data can help insurers actively
predict and prevent loss, rather than only deal with the financial aftermath.
“Loss costs rise every year by four to six percent,” explained Greenberg. “There is always
inflation on liability, property, repairs, labor, and so on.”
This is where technology, especially AI and machine learning becomes an advantage,
not just the latest industry buzzword. Traditionally, insurance carriers use legacy data
sources across all lines of business and some, like Chubb, are using new and
alternative data sources to alleviate systemic problems. These alternative data sources
include social media and publicly available online data and have been proven to
mitigate loss cost, among many other benefits.
In the interview, Greenberg specifically mentions claims and underwriting as areas to
better serve their clients. For example, the existing process for pricing, quoting, and
underwriting small and medium-sized businesses is predominantly manual, time-
consuming, expensive, and not ideal for the carrier or consumer.
“Right now, if you’re a small business, to underwrite you we ask you about 30
questions. For Chubb, over the next 18 months, that’ll come down to about seven
questions, because we can just scrape the answers from data that is publicly available.
[We] don’t need to bother you with that,” he told Cramer.
By using this type of new and emerging data, carriers can complete the picture of new
business and streamline their intake process by prefilling profile data and standard
eligibility questions with validated data. But why would a carrier only evaluate the
business once during the policy’s lifetime?
“Until now, carriers have looked at data at a single point in time, at the underwriting
stage or the first notice of loss or injury,” says Max Drucker, CEO, and Co-founder of
Carpe Data. “But now we live in a world where data can be accessed continuously, it’s
fluid—data is a stream. So we can see when business is offering a new service, or
when an apartment building added a pool as it happens, rather than waiting for the next,
undetermined point of time when a carrier may check a database.”
An insurer monitoring emerging data sources can see changes as they occur, giving
them the potential to react sooner to both risks and opportunities, like monitoring
business performance and reacting to material changes that either create new risk or
change eligibility.
Other ways that a carrier can see immediate benefits include being able to act quickly
on inaccurate or missed data that would have been too difficult to discover without
consistent data monitoring, or easing the intake of new business with better pre-fill and
eligibility checks. For instance, a beauty salon adding waxing services, or a cafe that
upgraded their alcohol license from beer and wine to add liquor are scenarios that
create potential upsell opportunities and valid touchpoints for agents with their clients.
In short, a matched business in the hands of an agent together with a detailed picture of
risk is a very compelling sales scenario.
“In the small space of time that these alternative data sources have been available to
carriers, they can now be at the forefront of this evolution by having the ability to
continuously monitor their policies with real-time data, across their entire book,” explains
Drucker.
Being able to underwrite with more than a static picture results in a true return on
investment for carriers, with prevented claims, opportunities to upsell, reduced premium
leakage, and overall processing efficiency.
Get all of your insurtech news and insights on the SVIA Blog.
Blockchain has captured the imagination of the insurance industry. In the past several years, insurance has gone from ignoring blockchain to leading other industries in terms of investment. Individual insurers, startups, and alliances between major insurers, technology vendors and major commercial customers have produced amazing visions and proofs of concept. For all of that work, only a small number of commercially deployed insurance solutions have emerged. So the questions become, with all of the challenges and opportunities insurance faces and all of the other promising technologies at its disposal, is blockchain smart for insurance and if so, where should blockchain be on the priority list?
Insurers’ priorities need to enable them to sustain an advantage in a digitally-competitive market. That market will be empowered by digital ecosystems and platforms. A market-driven and shaped by the same economic and technical forces that created Apple’s App Store, Google, Amazon, Facebook, Linkedin, Salesforce, and Ping An the Chinese giant and the ecosystems it’s creating. These digital ecosystems deliver customer value by making it easy for customers to connect to the people and solutions that best help them achieve their goals. It creates value for ecosystem providers by making it easy for them to connect to customers and partners.
The ecosystems and platforms forming in insurance will give birth to hyper-connected customer-centric solutions, services, and digital business models that join and blur the boundaries between Industries and lines of business in insurance. These next-generation solutions will include data-driven On-Demand and Connected solutions that are tied into the sensors, buildings, equipment, social media activity, and data surrounding that are being generated by insureds. Highly personalized interoperable real-time solutions that help guide insureds’ behavior and decision making to more effectively achieve life and business goals and outcomes.
These ecosystems coupled with emerging technology enable those who take advantage of them to connect contextually to insureds based on what they’re doing and what their needs are in real time. With real-time profile information about the insured collected from those ecosystems, innovative leaders can deliver highly personalized experiences and insurance solutions to the customer throughout their lifecycle and journey.
New Digital Generation Enterprise Architectures and Core Systems are coming to the market. These are solutions designed for the digital industry. They will leverage the cloud and microservices making connections to the digital ecosystems, platforms, data, and services surrounding the customer far easier. They will enable companies to bring smarter, more powerful, highly personalized insurance offerings and core processes to market faster and less expensively.
The highest priority for insurers is creating the digital vision, culture, and infrastructure required to compete in the digital industry. One-off products or solutions won’t be sufficient. There are a number of resources, powerful technologies, and new business models that can help them to do this. The question companies exploring blockchain have to ask is where does blockchain help them address these requirements more effectively than other options.
Blockchain promises to lower operating costs by automating processes, more effectively detecting fraud and by being a more effective and secure transport mechanism for data. Its cryptography, immutable ledger, and consensus validation are designed to Increase trust between parties. It also vows to Improve customer experience by using smart contracts to eliminate paper and accelerate processes, in addition to opening the door to new business models.
The range of insurance POCs is remarkable. They provide tantalizing examples of what blockchain might enable. Companies like Civic are developing a blockchain solution for transferable identity. A number of companies are following the example of Evident using blockchain to manage proof of insurance.
Collaboration in the Life, Health, and Medical space is focused on managing patient records and creating life and health insurance products. More than a few startups are developing peer-to-peer plays in the personal lines such as Umbrella and Addenda out of Dubai. State Farm is evaluating a solution for subrogation claims, while Kasko is developing an ICO-based Marketplace with a complete auto insurance offering. XL Catlin, Zurich, Allianz, and Swiss Re are experimenting with CAT Swap transactions and settlements. Still, others are evaluating ridesharing insurance, trading life insurance policies and securitizing CAT policies for property insurance.
In addition to these POCs, several blockchain solutions are in commercial operation. Examples of supply chain focused solutions include Everledger which supports tracking the providence of diamonds and Maersk the shipping Giant who is working with a number of companies to establish a maritime shipping and trade platform. Solidum Partners has enabled the securitization of reinsurance contracts. And, there are a number of companies that have launched Travel Insurance Solutions.
There are some clear divisions between how InsurTech Startups and Incumbent insurers are planning to use blockchain. Insurtechs for the most part are focusing on using the technology to create new products and services and creating new markets using distributed autonomous organizations. Incumbent insurers are focused on reducing the friction and cost and mistrust of existing processes.
The most exciting thing about these solutions is the industry’s willingness to step outside of its current paradigm. Blockchain enables the industry to look at inherent pain points in insurance business models and solutions with a fresh set of eyes. Additionally Blockchain has opened the door to collaborative innovation and development of solutions through groups like B3i, R3 / Corda, RiskBlock Alliance, and Open IDL. This kind of open collaboration will be critical to companies that want to sustain a leadership role in a Digital Industry.
As exciting as the work going on with Blockchain is, the technology has inherent weaknesses and challenges. Those include scalability, speed, complexity, compute and energy requirements and interoperability. Issues that arise from the foundational architecture of blockchain and how it stores data and transactions. In addition to these challenges, there is much work to be done in terms of laws and regulations surrounding blockchain solutions their ability to be audited.
Ease of use, speed to market, flexibility, scale, real-time processes involving huge amounts of data and transactions and interoperability are critical to the insurance products, processes, solutions and systems that will be needed to compete in a digital industry. To date, these are all things Blockchain is struggling to overcome.
There have been a number of surveys conducted throughout insurance and other Industries to determine when people believe blockchain and distributed ledger technology will become a core part of the technology platform powering industries. On average respondents place that somewhere between five to seven years out.
Let’s start with some baseline assumptions. First, large technology companies and startups are working around the world and literally around the clock to overcome blockchain’s limitations. Where true incremental value can be created at an industry level we will see commercially available solutions developed. We will also see “Blockchain as a Platform” solutions developed that make it far easier for others to build custom solutions. We will also interoperability addressed as Blockchain solutions gain traction in the market.
Every company should start with an overall vision for what a digital insurance industry will look like and what it takes to compete within it. Next, they should look at where they currently are in terms of their digital transformation. Where do they have critical gaps in terms of vision, culture, people, processes, and systems? Once they have, they need to prioritize those and evaluate what the fastest most effective paths are for them to ensure that their customer engagement, products and services, processes, and infrastructure will be competitive in a digital market. Lastly, they need to assess where blockchain’s current capabilities with its limitations are better suited to address their most pressing priorities than any other solution.
Large companies that have a broad and well-funded innovation portfolio can afford to invest in a broad range of blockchain initiatives. Those include internal projects, associations, and investments in blockchain startups that are addressing blockchains limitations as part of the solution they are developing.
Midsize companies should participate in or develop collaborative Blockchain associations that are addressing the strategic priorities they have defined. If they have the bandwidth and budget they should also undertake lightweight POCs that align with their priorities internally with startups and technology companies.
Smaller companies should keep abreast of emerging packaged blockchain solutions that align with their internal priorities. When those solutions demonstrate clear proof of viability and incremental value, they should trial them.
Every company should go through the thought experiment of looking at internal priorities and asking how blockchain’s capabilities might help them create unique powerfully effective solutions. It’s a way to think outside of the box. Even if blockchain isn’t the solution, going through the process can yield new innovative ways to think about the issue and solve the problem. That’s called innovation.
For more blockchain insights, visit our podcast page to hear what some of the top innovators are saying on the subject.
Blockchain startups deliver 3 minute pitches for investments and partnerships. ~ Speaking: Marcus Schmalbach – RYSKEX GmbH | Muntaz Kaleem – BlocKardia | Jonathan Chou – Bee Token | Valentin Bercovici – Pencil Data | John Fohr – TrustLayer | Ravi Kumar – Statwig
Hands-on exec workshop that guides participants through integrating Blockchain and related ecosystems into the company’s overall Digital Insurance, Product & Partnering Strategy. ~ Speaking: Derek Lovrenich – insurEco System | Phil Duncan – insurEco System
Introduces the platforms & consortiums enabling & accelerating industry adoption of Blockchain. Includes discussions on strategic implications & recommended assessment / engagement strategies. ~ Speaking: Christopher Frankland – ReSource Pro | Marcus Schmalbach – RYSKEX GmbH | Irv Latta – Symetra Financial Insurance | Robin Westcott – AAIS
Discusses the legal & regulatory opportunities & challenges for Blockchain in insurance. Includes discussions on strategic implications & timeline. ~ Speaking: Natalie Wood – SVIA | Courtney York – Akin Gump | Keith Schraad – Arizona Department of Insurance | Andy Beal – NAIC
Hands-on exec workshop that guides participants through definition, development & validation of a Blockchain enabled application using design thinking and what is required to launch a first POC. ~ Speaking: Thomas Jennings – AAIS
Discusses how Blockchain can be used to innovate claims / fraud & improve the speed & accuracy of those process. Includes discussions on strategic implications and timeline for adoption. ~ Speaking: David Gritz – SVIA | Ravi Kumar – Statwig | Valentin Bercovici – Pencil Data
