Is pandemic insurance a contradiction in terms?

The answer could lie in public-private risk-sharing mechanisms and innovation

A fast post-Covid economic rebound is highly coveted by businesses, consumers and the government alike – and cancellation insurance could be key. Although many of us are ready to splash out on holidays, sport events and festivals, we are unwilling to gamble and lose on such things in case – heaven forbid – another lockdown hits.

Cancellation insurance policies, nevertheless, are few and far between. You could, for example, insure against the risk of not being able to visit someone if you, your travel companion or a dependant is taken ill by Covid. But coverage against a national or regional lockdown is non-existent.

To be fair to insurers, providing a cover against fire risk while the house is already burning might not appear commercially sound or even sensible. Understandably, the government’s quasi-guarantee that restrictions will irreversibly be lifted by the summer also falls short of convincing insurers to take on such an immense risk.

Even more so because, a year after the breakout of the pandemic, insurers are still left in limbo about the full extent of their Covid-related payouts. The most contentious cause of this ambiguity is the scope of business interruption (BI) policies.

Business interruption (BI) revisited

BI cover typically comes with property insurance. It is meant to keep a business afloat while it’s temporarily closed as a consequence of physical damage, whether caused by fire, flood, theft, vandalism or something else.

Little wonder then that the first sticking point between insurers and authorities representing the insured – such as the FCA in the UK – has been the ability of the coronavirus to cause structural and tangible damage to equipment and properties. Legal cases in the US were built on the virus lingering on surfaces for 28 days, thus necessitating “remediation to clean surfaces.”

What has put defendants to a disadvantage has been the fact that, in the wake of the 2003 SARS epidemic, which in comparison was a minor and rather contained public health crisis, insurers went out of their way to add virus waivers to their BI policies.

About one-third of businesses take out BI covers, and only a fraction of them come with infectious and notifiable disease extensions. Although Covid had been added to the list of notifiable diseases at the beginning of the pandemic last March, unless the cover is for unspecified notifiable diseases, Covid will be an exclusion.

In the US there have been a slew of lawsuits in an attempt to force insurers to pay out for Covid losses, but about four times as many have ruled in favour of the insurers than against them. Currently, seven states also have pending legislation that could get insurers to retroactively pay for BI losses incurred by coronavirus lockdowns. If enacted, they will mandate the redefinition of property damage sustained by SMEs to include the presence of a person infected with Covid-19 in the policyholder’s premises, or in the same municipality or state.

The Supreme Court in the UK, meanwhile, has also widened the scope of BI policies that have to pay out. It ruled, among other things, that the pandemic, as well as the government and public response to it – that is, the lockdown, whether partial or complete, mandated or only instructed without the force of law – were all perils that will trigger compensation.

According to the FCA’s estimate this ruling will throw a lifeline to approximately 370,000 business, while critics argue that the judgement applies only to a particular wording in certain clauses of some contracts and will only be a drop in the ocean of six million British businesses.

Getting insurers to indemnify losses that they – in many cases – didn’t underwrite at all is a tricky sell. On the other hand, having spent hundreds of billions on protecting jobs and businesses, as well as fighting Covid, the UK government’s “nudge” to the insurance sector to pull its weight sounds like a legitimate endeavour.

But how can insurers – once bitten, twice shy – be incentivised to develop pandemic products in a post-Covid era, when these insurance events are almost impossible to predict and, for the scarcity of data, difficult to model? (The complexities of assessing this type of risk are well demonstrated by the fact that the Economic Forum’s Top 10 list for pandemic preparedness was led by the US and the UK in 2019.) A risk is deemed insurable only if it’s statistically assessable and independent from other risks in terms of time, geography and the type of risk – which a pandemic, by definition and experience, is not.

The new index-based insurance model

Pandemic insurance is not a new concept, though. San Francisco-based disease outbreak prediction start-up Metabiota, having teamed up with Munich Re and brokerage Marsh, put one on the table as early as 2018.

This offering wasn’t the kind of traditional insurance product that, for a set premium, gives the insured protection against losses they incur. Rather, it adopted an alternative, so-called parametric or index-based model which covers the probability of a predefined event occurring: if the water level reaches seven metres, for example, you’ll get paid.

The event triggering payout in a pandemic could include metrics such as mortality rates or border closures in an area. As cover is highly personalised and accommodates the risk appetite of the insured, cover events may vary from policy to policy. And as claim adjustment is eliminated from the process, payout is fast, which is great for the solvency of businesses caught up in a health or natural crisis.

Insurance experts with an orthodox approach argue that the parametric model should be regarded as a financial derivative rather than a type of insurance. Others, despite parametric pandemic insurance’s pre-Covid failure to sell, have high hopes of this new model filling in the grey area of BI insurance that the current pandemic so forcefully exposed.

Innovation network InsTech London’s Parametric Overview 2021 set the coverage that the insurance industry should be able to provide for a future pandemic at $200bn (£143bn), equivalent to the total of all losses insurers pay in a bad year of natural disasters.

But in order for BI insurance to turn the page after Covid and become revitalised, the state as the re-insurer of last resort will most probably have a role to play too. Not unlike after 9/11 – another historic loss event, when the US government passed the Terrorism Insurance Act (TRIA) to ensure the viability of the terrorism insurance market with a federal backstop – insurers will need some state guarantees as incentives to kickstart the pandemic insurance market.

TRIA originally was a three-year federal programme but has been extended several times – most recently in 2019 (until 2027). With a similar safety net provided by governments, insurers will be able to come up with new data analysis and modelling methods, as well as innovative BI and cancellation products that can help the global economy roar back to life. There needs to be a way forward. After all, the Great Fire of London, which devastated central London in 1666 with an estimated loss of £1.5bn in today’s money, resulted in, among other things, the world’s first property insurance policy.

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Zita Goldman

 

 

 

 

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Helping insurers break away from legacy systems with future-ready technology

Tech companies need to give the public a reason to trust them – or have governments do it for them

In the past few weeks we have seen a watershed in the march of new technology, as Google and Facebook squared up to another powerhouse of the modern world, the older and gnarlier nation state.

The stand-off between the two tech giants and the Australian government was inconclusive – it is clear that both sides would have lost heavily from a prolonged confrontation, and that neither was in a position to deliver a knock-out punch.

What has come out of this quarrel, however, is the simple truth that behind the electronic networks that power technological progress lies a much more complex network of trust. Technology needs the cooperation of many different players in society – not only through legal obligations such as GDPR, but also from the “court of public opinion”.

This network of trust needs as much investment and maintenance as any electronic network. Take, for example, something as simple as the transmission of medical records from doctors to insurance companies – something that is essential for the life insurance and critical illness markets.

The current, heavily paper-based system is slow, inefficient and prone to mistakes that can compromise both consumers’ privacy and their ability to obtain the right kind of cover. It wastes the time of GPs as well as insurers and financial advisers.

But the range of stakeholders needed to make data-sharing a reality is formidable, including thousands of GP practices, patient advocates such as the UK’s National Data Guardian, data regulators, financial services regulators, underwriters, financial advisers and, of course, the public itself.

The methods of building trust needed to bring stakeholders together are being developed, but they have not yet reached full maturity. They include:

• Real transparency, which means being peer-reviewed through a rigorous governance process, not just setting out pages and pages of terms and conditions that everyone knows will never get read. For insurers, this means building transparency around how they use data into their business model, product development and communications, and not seeing it simply as a compliance exercise

• Understanding the effect that technological change has on society – and, as professionals, engaging in debate about how to mitigate the negative impact of technology. Facebook and Google may feel that they should not be responsible for subsidising news networks whose traditional channels are less attractive to advertisers than social media or search engines. However, if technology is changing the balance of power in an economy, there will always be consequences for the winners as well as the losers For insurers, this means understanding the impact on those who may not gain from technological change, such as high-risk groups who may find themselves excluded from insurance as risk evaluation becomes more sophisticated, and people who are less able to move from face-to-face to virtual channels

If companies do not manage their trust networks as carefully as they manage their tech, they will find that there are plenty of governments, regulators and NGOs who are willing to do it for them. Even more seriously, without investment in our society’s network of trust, the potential of technology to improve the lives of consumers will never be met.

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The digital future: the time to adapt is now

Andy Fairchild, CEO, Applied Systems Europe

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Virtually overnight, the pandemic changed the way companies in every industry do business, challenging businesses large, small and everything in between to re-evaluate their processes and their paths forward.

But the strategies that worked before may not work as well today, or in the future. In the current climate, companies from all industries are looking to technology to innovate, to optimise operational workflows and ensure premier customer experiences.

As we look to the future, it is important to remember lessons from the near past that can help guide us. In 2008, we saw the start of the Great Recession triggered by a global financial crisis. Global GDP fell from 4.3 per cent in 2007 to -1.6 per cent in 2009. While the economic upheaval certainly was a global crisis, there were positive aspects that resulted. Companies had to find new, less costly ways to run day-to-day operations – one of the results of this was the birth of cloud computing.

The old way of doing IT was expensive, rigid and slow. The economic crisis spurred demand for a new way to access computing power. This paved the way for companies such as Rackspace, Amazon, Microsoft, Google and others to pioneer novel and less expensive ways for companies to digitise and quickly scale their businesses in the cloud.

Cloud computing unleashed unprecedented innovation, creating new business models and reinventing old ones. Millions of jobs were created and unemployment quickly declined to less than 4 per cent. Productivity gains increased significantly as people learned to use technology to do more in less time. Shares in leading cloud companies became more valuable, driving a record bull market.

Ultimately, cloud computing – and the cloud platforms we rely on today – brought the power of at-scale R&D investment to high-street businesses that wouldn’t have been able to do it on their own at an affordable price. Out of the initial fear and economic devastation of 2008 came world-changing innovation and digitisation that made businesses more:

• Productive: lowering the cost to produce, market, distribute and sell
• Intelligent: capturing the power of data to compete more skillfully
• Simple: knowing customers better, simplifying the customer experience
• Valuable: growing more profitably by meeting more of their customers’ needs

In 2020, the pandemic spurred a similar digital inflection. Within a matter of months, companies accelerated their digitisation strategies in what would have taken years pre-pandemic. The insurance industry is no different. Brokers have had to speed up digital adoption timelines in order to create new digital experiences for both staff and customers.

In order to become more resilient and emerge as a stronger, more valuable business, brokers must invest in their digital future. The time is now to take the necessary steps towards becoming a digital broker. By adapting to the new norm, brokers will build stronger bonds with customers, equip employees with the tools they need to work more intelligently and productively, and build more resilience and value into their business.

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Click here to learn how to adapt your business to the new digital norm.

Deliver on your digital promises: the Future of Insurance

The future of insurance is already here. Drones can assess accidents without putting agents at risk by capturing footage and inspect damage. Sensors, plug-ins and cameras enable usage-based insurance models, such as offering discounts for safe driving. AI-powered algorithms can deliver claims in seconds.

This tech completely redefines how we think of insurance. It’s exciting stuff, to be sure. But the insurance companies who will thrive in five, 10 or even 30 years from now won’t be distracted by shiny tech – they’ll be focused on delivering a superior human touch, enabled by technology.

Future-proofing your insurance organisation requires you to master the basics and make your customer experience the centre of all you do. In the end, it all comes back to data.

Insurance represents a $1.3 trillion market filled with colossal swirls of processes, people and content. Ninety-five per cent of American homeowners have some form of home insurance. Eighty-seven per cent of car owners have some form of auto insurance. At Adlib alone, we facilitate 90,000 claims per day and 24,000 new policies a month for our enterprise insurance customers. And it’s only going to grow.

You can’t delight without managing your data 

Leveraging technology to harness and optimise the collection of people, processes and content is what winners in the insurance market have in common. Unlocking your unstructured data – complex documents such as claims, contracts, proposals, agreements, scanned or uploaded images, and more – allows technology to deliver the essential fuel that powers market-leading customer experiences.

Humanising insurance

The value of all this shiny tech isn’t its “cool factor”. It’s the way it works behind the scenes to humanise the insurance model. When’s the last time you interacted with your insurance company on a good day? Your customers deal with you when life happens: accidents, theft, natural disasters, hospitalisations, death of loved ones.

The best insurance companies will deliver fast, empathetic, light-touch support for customers dealing with emotional life experiences. AI and automation allow insurance companies to let humans do what they do best: be human.

Many of today’s insurance processes are often email-based and highly manual content flows. Eliminate those friction points and increase transparency with the data you already have. It’s not the sexiest or most exciting part of what technology can do, but the best products I know are the ones that just work. You don’t have to think about them. Technology allows you to deliver the right information at the right time to the people and systems that need it, without manually navigating multiple systems. Prioritising digital transformation in insurance allows you to deliver the kind of customer experience that will differentiate your business.

The ability for an organisation to mobilise and connect legacy content and the future nirvana of bots, drones and IoT will be key to delivering the best customer experience now and into the future.

Serve both sides of the customer experience equation

The most common approach to the customer experience focuses on your external customers. But what about your agents and call centre staff that handle everyday challenges? Your internal “customers” are just as much a part of delivering the end result as the technology is. It’s not a wholesale replacement of people – it’s about equipping them with the tools and time they need to do what they do best. And cobbling together legacy systems using duct tape and glue isn’t going to cut it.

Capturing the right data automatically can simplify compliance, improve the customer experience and eliminate tedious data-entry and error-prone manual efforts.

Keeping up with the pace of innovation

Insurance companies need to start thinking of themselves as technology companies that deliver insurance products and services. With greater control over your data, your insurance organisation can: 1. Build products and services that are dynamic 2. Move more quickly to serve your customers 3. Realise the value of new and exciting technologies Once a strong data foundation is in place, you can close the gap between customer expectations and reality, fulfilling the digital promises you make to your customers.

Centres of excellence – quickly becoming beacons of innovation – can help insurance companies quicken their pace of innovation and get one step closer to fulfilling their digital promise.

Adlib can help deliver your digital promise

Adlib bridges these two worlds. At Adlib, we create intelligent data that amplifies human potential and maximises business performance for hundreds of global insurance customers. How do we get there? Our Content Intelligence, Contract Analytics and Content Transformation solutions make it easy to discover, standardise, classify, extract and leverage clean structured data from complex unstructured documents. In doing so, our global customers unlock the power of their data to build seamless customer experiences and achieve a whole new level of performance.

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1. Deloitte: Insurance industry drone use is flying higher and farther 2. McKinsey & Company: Digital ecosystems for insurers: Opportunities through the Internet of Things 3. McKinsey & Company: Insurance 2030 – The impact of AI on the future of insurance 4. Statistica: Value of insurance premiums written in the United States from 2009 to 2019 5. Policygenius: Homeowners insurance statistics

Spotting liars is hard – but our new method is effective and ethical

Most people lie occasionally. The lies are often trivial and essentially inconsequential – such as pretending to like a tasteless gift. But in other contexts, deception is more serious and can have harmful effects on criminal justice. From a societal perspective, such lying is better detected than ignored and tolerated.

Unfortunately, it is difficult to detect lies accurately. Lie detectors, such as polygraphs, which work by measuring the level of anxiety in a subject while they answer questions, are considered “theoretically weak” and of dubious reliability. This is because, as any traveller who has been questioned by customs officials knows, it’s possible to be anxious without being guilty.

We have developed a new approach to spot liars based on interviewing technique and psychological manipulation, with results just published in the Journal of Applied Research in Memory and Cognition.

Our technique is part of a new generation of cognitive-based lie-detection methods that are being increasingly researched and developed. These approaches postulate that the mental and strategic processes adopted by truth-tellers during interviews differ significantly from those of liars. By using specific techniques, these differences can be amplified and detected.

One such approach is the Asymmetric Information Management (AIM) technique. At its core, it is designed to provide suspects with a clear means to demonstrate their innocence or guilt to investigators by providing detailed information. Small details are the lifeblood of forensic investigations and can provide investigators with facts to check and witnesses to question. Importantly, longer, more detailed statements typically contain more clues to a deception than short statements.

Essentially, the AIM method involves informing suspects of these facts. Specifically, interviewers make it clear to interviewees that if they provide longer, more detailed statements about the event of interest, then the investigator will be better able to detect if they are telling the truth or lying. For truth-tellers, this is good news. For liars, this is less good news.

Indeed, research shows that when suspects are provided with these instructions, they behave differently depending on whether they are telling the truth or not. Truth-tellers typically seek to demonstrate their innocence and commonly provide more detailed information in response to such instructions.

In contrast, liars wish to conceal their guilt. This means they are more likely to strategically withhold information in response to the AIM instructions. Their (totally correct) assumption here is that providing more information will make it easier for the investigator to detect their lie, so instead, they provide less information.

This asymmetry in responses from liars and truth-tellers - from which the AIM technique derives its name - suggests two conclusions. When using the AIM instructions, if the investigator is presented with a potential suspect who is providing lots of detailed information, they are likely to be telling the truth. In contrast, if the potential suspect is lying then the investigator would typically be presented with shorter statements.

The experiment

But how effective is this approach? Preliminary research on the AIM technique has been promising. For our study, we recruited 104 people who were sent on one of two covert missions to different locations in a university to retrieve and/or deposit intelligence material.

All interviewees were then told there had been a data breach in their absence. They were, therefore, a suspect and faced an interview with an independent analyst. Half were told to tell the truth about their mission to convince the interviewer of their innocence. The other half were told that they could not disclose any information about their mission, and that they should come up with a cover story about where they had been at the time and place of the breach to convince the analyst of their innocence.

They were then interviewed, and the AIM technique was used in half of the cases. We found that when the AIM technique was used, it was easier for the interviewer to spot liars. In fact, lie-detection accuracy rates increased from 48% (no AIM) to 81% – with truth-tellers providing more information.

Research is also exploring methods for enhancing the AIM technique using cues which may support truth-tellers to provide even more information. Recalling information can be difficult, and truth-tellers often struggle with their recall.

Memory tools known as “mnemonics” may be able to enhance this process. For example, if a witness of a robbery has provided an initial statement and cannot recall additional information, investigators could use a “change perspective” mnemonic – asking the witness to think about the events from the perspective of someone else (“what would a police officer have seen if they were there”). This can elicit new - previously unreported - information from memory.

If this is the case, our new technique could become even more accurate at being able to detect verbal differences between truth-tellers and liars.

Either way, our method is an ethical, non-accusatory and information-gathering approach to interviewing. The AIM instructions are simple to understand, easy to implement and appear promising. While initially tested for use in police suspect interviews, such instructions could be implemented in a variety of settings, such as insurance-claim settings.

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Cody Porter, Senior Teaching Fellow in Psychology and Offending Behaviour, University of Portsmouth

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This article is republished from The Conversation under a Creative Commons license. Read the original article.

Evolving through the era of insurance technology

Advances in technology are driving major changes in insurance, but ultimately what consumers want is to pay a fair price to having their losses dealt with quickly and easily.

Thirty five years ago Direct Line was launched as the first ever telephone insurance company, selling directly to consumers. Eighteen years later, in 2002, the first insurance comparison website, Confused.com, enabled us to rapidly find the best price.

But not much happened in insurance for the next 10 years. Innovation had paused. Then suddenly, in 2013, the insurance world discovered its first unicorn, the billion-dollar start-up Zhong An, China’s first fully digital property insurance company. It underwrote over 630 million insurance policies in its first year. Two years later it was valued at $10billion. Insurtech had arrived.

After decades in the shadows, insurance now seemed ripe for disruption. Around the world entrepreneurs young and old, often spurred on by their own poor customer experience buying or claiming on insurance, identified opportunities to take on the incumbent insurers. In the last few years investors have committed more than $5billion to insurtech, creating new insurance companies, or funding the start-ups building the technology, data and analytics to power them.

The need may be there, but it’s proving hard for outsiders to break in, particularly to the established, highly regulated mainstream insurance businesses such as property or motor insurance. Despite the challenges, the shape of insurance is starting to change.

Forty years ago 80 per cent of the value of the largest global companies was defined by their physical assets: property, plant, inventory. Today every major company has massive exposure to technology – both their own and through increasingly widespread connectivity to trading partners. Combine this with the power of social and mainstream media, the value of intellectual property and the escalation and vulnerability of brand value, and the result is that today 80 per cent of these companies’ value is represented by intangible assets. Cyber is the best-known risk, and the fastest growing area of new insurance products. Intangible assets are much harder to insure. New ways to measure risk mean a need for new tools and an opportunity to find new approaches for offering insurance.

What does this mean for the future of insurance? Insurance traditionally has been split across multiple types of risk, broadly categorised by the industry as property, casualty, life and health. For centuries insurers have promised to pay for an infrequent loss in return for smaller regular payments. Each type of cover has been assessed independently, with a broker controlling the relationship between the policy holder and the insurer.

Much may be changing but two characteristics of insurance are likely to stay the same for a long time: we still want to be compensated for our losses and no one enjoys buying insurance. Many of the best-known technology companies have been successful because they have developed products that make our lives easier. The success of companies such as Direct Line, Confused.com and Zhong An suggest that insurance is no different. Expect to see one or more of the following shifts in how we buy and use insurance in the next decade:

Companies self-insure

 As companies grow in size they are increasingly able to use their capital base to absorb all but the largest catastrophic losses themselves. With exponentially more data becoming available each year from cheap, widely deployed sensors, companies will be able to perform sophisticated analytics on their own risks. With greater knowledge, and more capital than their insurers, it will make more sense for large organisations to self-insure rather than give away premiums to third parties.

Insurance shrinks then vanishes for most of us

 If we are confident we will get compensated for a loss, we don’t care too much who pays us. Already today we can buy a car with insurance built in (Volvo), a train ticket that includes cancellation cover (The Trainline) and a laptop with damage protection (John Lewis). At some point, probably led by Amazon, insurance protection will be bundled in with everything we buy and disappear altogether. What purpose will individual insurers play then?

Or will it be “one insurer, everything covered”?

One of the biggest challenges for many people when buying insurance is understanding what is, and what is not covered. Too often people receive no, or only a partial, payment because their cover was not as comprehensive as they expected. Look out for the first insurer that can offer a “one-stop” solution with no exclusions, giving us the certainty that we are covered for any loss irrespective of whether we damage our car, lose a camera, need healthcare or flood our house.

Insurance will benefit from better data, analytics and technology. But consumers don’t care too much about blockchain, artificial intelligence or machine learning. What we want is to get on with our lives in the confidence that when bad stuff happens, we’ll be taken care of – quickly, fairly and easily. That will be the future of insurance.

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Embracing change: customer experience as a business driver

As consumers increasingly turn to digital solutions, supplying a flexible, personalised and unique customer experience is essential. Are you ready?

Lockdowns, social distancing, capacity restrictions, supply chain delays… you name it. Welcome to the new normal: the antithesis of good business.

The 2020-21 pandemic has changed how consumers buy, how they interact with your business, and how you interact with them. It hasn’t been the best year to create a winning customer experience (CX).

The most successful online businesses, however, are enjoying huge profits based on a simple premise: conveniently give locked-down consumers what they want.

For everyone else, the past months have been about ensuring there’s no “physical contact”. And that means no customers. Those with existing digital solutions have fared better.

This doesn’t just mean supplying an online offering, it means creating products that boost the in-store experience (and promote social distancing), such as digital kiosks, item location apps and even virtual assistants.

CX is a journey, not a one-off trip. It’s why your business must prioritise investment in and focus on developing strategies and solutions that promote and enhance the customer experience.

2020 has shown that keeping customers happy and loyal is a must. In its recent State of the Connected Consumer report, Salesforce found that 73 per cent of consumers expected companies to understand their needs and expectations, while 84 per cent said that “experiences are as important as the actual products and services”.

It’s essential to understand both a customer’s expectations at every step of their journey with you and why you need to continuously collect their feedback and test your products against what they want.

A good customer experience leads to more purchases, increased satisfaction, and deeper brand loyalty. Done well, it can deliver a valuable competitive advantage.

This requires five things:

• Understanding the needs and wants of your customers

• Evaluating how your business, services and solutions engage with them

• Adopting strategies and solutions that emphasise and optimise their experience

• Comprehensively testing your solutions to meet customer expectations

• Putting your customer first in every decision.

Only then can you develop seamless continuity across every touchpoint within your business – ensuring you can quickly adapt your products (or create new ones) to supply the best experiences for your customers.

Many businesses are already developing such solutions, from mobile experiences to premium apps for brand enthusiasts and augmented reality services.

The question is, how to ensure your products deliver what your customers want and meet their ever-changing needs?

The importance of testing

Testing helps improve the reliability, performance and quality of your products. But it’s also an essential tool for developing a personalised experience alongside user research and customer journey maps.

However, while spending on CX technologies is expected to reach $641 billion by 2022, many organisations simply aren’t focusing enough on testing. “It is very important to make testing a priority, and ensure testing happens throughout every step of the lifecycle,” says Philipp Benkler, CEO and Founder of Testbirds.

To create a solid customer experience, testing is essential. And one well-suited method is crowdtesting, where a diverse, and diversely located, group of end-users tests your digital product using multiple devices.

A crowd tester acts like your customer and can often find problems you didn’t know existed or didn’t think were problems – an essential when talking about CX.

“In the latest years, the customer’s behaviour has changed – we are doing more and more in digital channels instead of physical ones. This development has sped up due to Covid-19, and is likely to continue. In the same pace, smarter and better digital services are appearing and the customer’s expectations of these services have also increased. Nowadays, customers expect that more or less everything can be done digitally, and they do not accept poor service quality. It has become crucial for us a company to focus on user experience in order to understand the customer and their needs, so we can be truly customer-centric and develop services that live up to customer expectations. For companies that do not, the future is not looking that bright. But for companies that do, the future holds huge potential.”

Daniel Regestam, UX Team Manager at Swedbank

Crowdtesting, unlike the more process-by-process nature of test automation, can provide a comprehensive end-to-end look at how your product performs – before your product is released and in hours, not days or weeks.

Crowdtesting can augment your in-house QA testers, giving you greater access to a varied pool of users while freeing up resources. Crowdtesting can also be run as either a managed test by using a partner to help run the test, or by doing it on your own with your own testers.

Overall, Crowdtesting’s flexible, human-centric nature makes it ideal when looking for real-world issues. Test automation, which uses software to test your digital products, is best suited to ensuring actual outcomes are as predicted, not in catching human issues such as localisation differences.

It’s most important to catch issues that create a negative user experience. And going by a PriceWaterhouseCoopers report that reveals 32 per cent of customers stop doing business with a brand they love after one bad experience, it’s important testing ensures that doesn’t happen to you.

Covid-19 and beyond

The pandemic has revealed weaknesses in traditional business. Especially for those with little or no digital presence. It’s also shown that being a fast and agile business is best.

Being able to create lasting relationships using tested solutions honed to create positive experiences has become essential, as will be improving your organisational resilience so you can best embrace change, and resist and rebound from any future business disruptions.

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To find out how to comprehensively test your solutions so they’re fully optimised, error-free and ready to create a great customer experience, visit testbirds.com/remote.

Five things reinsurance execs want technology to do for their businesses

Intelligent Insurer asked decision-makers in reinsurers and brokers which breakthroughs had the potential to revolutionise their companies. Here’s what they said…

1.  Blockchain is seen as the next big thing

“Blockchain will boost networking between brokers, companies, primary insurers and the reinsurance business,” says Michael Rohde, member of Deutsche Rück’s board of executive officers.

“By using smart contracts, the industry will eventually be able to handle primary and reinsurance contracts in a fully automated way. Claims handling could profit from efficiency gains. It may lead to lower premiums, and faster underwriting decisions and claims management.”

Paul Lobo, deputy general manager of Indian reinsurer GIC Re, says that it is thanks to blockchain technology that cryptocurrencies such as Bitcoin are possible. It can apply to the risk chain in reinsurance, helping maintain transparency in the chain from insurer to reinsurer to retrocessionaire including intermediaries, and potentially managing quotation, placement, endorsement, claims intimation, processing, accounting and settlement.

“As soon as data input is made at the point of origin for a transaction, every participant associated with the transactions maintains a copy of the same ledger,” says Lobo, “and the need for third party involvement to confirm a piece of the transaction is eliminated.”

2. Data is everything – but only AI can truly leverage it

Neil McGeachie, managing director of Barbican Group Operations Services, points out that the industry is awash with data, but that the next great challenge is how to manage and make sense of it for commercial gain and greater efficiencies.

“Technologies such as machine-learning and AI will become vital enablers to support our analytical capabilities and enable us to accurately and effectively grapple with large and granular datasets,” McGeachie says. “The successful adoption and integration of such rapidly evolving technologies will allow us to seamlessly join internal and external datasets to fully harness the power of big data analytics and revolutionise our entire industry.”

Nasser Zagha, chief technology officer of IGI, says: “Reinsurers can gain a competitive advantage by looking at the data science and trying to appreciate how to leverage and utilise the data.

“Data science takes data reasoning, algorithm development and technology in order to solve analytically complex problems. If invested in properly, it could be a game-changer. Business intelligence can also help us to identify profitable opportunities more swiftly.”

3.  Indexes and trading platforms would be the true revolution

The reinsurance industry has long pondered packaging risk in a way that could allow it to be freely traded in the same way as equities and bonds.

“Almost every financial market in the world has an index that tracks the performance of the market,” says Jonathan Prinn, group head of broking at Ed Broking. “These indices provide instant overviews of market trends and allow investors to trade the actual index, or benchmark other investments. For the reinsurance market this type of technology is coming, and it will revolutionise the insurance part of my company and also the industry itself.”

“Indices lead to ‘market trackers’ allowing, for example, individual underwriters to have their own performance benchmarked, in terms of combined ratio and from a client perspective in respect of rate,” Prinn continues. “As these indices appear, our market will be turned upside down by other investors looking to hedge their own investments.”

4. Technology has revolutionised communication

Ryan Jones, head of innovation at BMS, a wholesale insurance and reinsurance broker in specialty commercial lines, believes one approach which could revolutionise his company over the next five years is a change in the way it communicates. “Email enabled the fastest economic growth since the industrial revolution, but it now feels inefficient, slow, and distant,” Jones says.

“Social media platforms are more experimental – sometimes you get unicorns such as Twitter and Instagram, and then our lives and expectations change.”

Now, collaboration platforms such as Slack have found traction as they bridge the divide between email, messaging, and document-sharing. “That open structure means you need to learn how the platform works, but also how you want to use it,” explains Jones. “The next communication technology which changes our game may not even have been invented yet.”

5. Cloud software should be the future

“Cloud software as a service, which has been in use for more than seven years, will continue to revolutionise insurance,” says Bart Patrick, managing director of Duck Creek Technologies Europe. “But systems must not be closed boxes, which are vulnerable to becoming out of date and out of maintenance.”

Patrick argues that a revolutionary system is one that allows insurers to rapidly release new products, analyse customer data and harness insights to make better underwriting decisions.

“It will move with the times, interoperating with other emerging technology such as big data sources,” he points out. “Almost all new insurtech platforms are hosted in the cloud.”

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Access the full whitepaper here.

Cyber-security risks and how to manage them

The Sunburst attack uncovered in December 2020 illustrates the magnitude of the cybersecurity challenge. Hackers were able to breach some of the United States’ top government agencies as well as those of other organisations around the world by compromising updates from one of their software suppliers, SolarWinds. Organisations might make use of hundreds if not thousands of third-party suppliers and contractors through which they could be breached.

While many of these involve third-party suppliers and contractors in the IT realm, in some cases breaches can be caused by third parties that one might not expect. For example, it was reported in 2017 that a casino in Las Vegas was breached through an Internet-connected fish tank. Similarly, in 2014 Target was breached through its air-conditioning supplier. Organisations frequently take on new third-party suppliers and contractors, further compounding the challenge.

The rapidly evolving nature of the risk makes it difficult to assess, and all organisations are currently struggling with how to manage cybersecurity risk. New threat actors and types of attacks regularly emerge. For example, we are seeing the advent of AI-enabled attacks. In one highly publicised instance, cybercriminals tricked an employee into transferring money to them by using AI to imitate the CEO’s voice.

Current approaches to managing cybersecurity risk have significant shortcomings. Risk assessments tend to rely on “risk matrices”, which use a grid to compare the likelihood of the risk and the severity of the impact. The numerical values assigned to the likelihood and severity ratings tend to be ambiguous, meaning that they can assign the same numerical values to threats that are quantitatively quite different . This can cause organisations to incorrectly prioritise threats and thus allocate resources in a suboptimal manner.

 

A role for cyber-insurance

Increased use of cyber insurance could significantly improve cybersecurity risk management. It helps organisations by transferring the risk to insurance providers. Quite importantly, it could also incentivize organisations to improve their cybersecurity levels, through insurers offering customers a discount in exchange for improving security measures.

Yet cyber insurance is still underdeveloped for a number of reasons. Insurers face difficulty in accurately assessing an organisation’s cybersecurity risk. Unlike in other domains that have similarly elevated levels of risk – such as pandemics – there is limited historical data to draw on. A contributing factor to this lack of data is that organisations are reluctant to disclose that they have been attacked due to reputational concerns. Moreover, an organisation’s risk profile at the time an insurance policy is issued may differ considerably several months later.

These issues are compounded by an acute shortage of experienced cybersecurity underwriters, whose job it is to decide whether to issue a policy to a prospective client.

Another challenge is “accumulation risk”, in which a single incident can spread to other parts of an insurer’s portfolio. It is particularly difficult to evaluate accumulation risk in the cyber realm. In the physical world, a hurricane or other natural disaster may trigger a surge in claims, but these claims are limited to a particular geographic area. In cyberspace, a cyberattack can result in claims around the world. For example, the WannaCry ransomware attack infected some 200,000 computer systems in 150 countries, severely disrupting major organisations such as FedEx and the UK’s National Health Service.

A related issue is “systemic risk”, in which one incident could cause a cascading failure that triggers the collapse of an entire system. For example, a cyberattack that takes down the power grid will impact sectors ranging from transport to communications to healthcare.

Improving our understanding of cyber-risk

To address these issues, in our new book we propose a series of models aimed at helping both organisations and insurers manage cybersecurity risk. They make use of a methodology known as adversarial risk analysis, which makes it possible to better assess the risk that different threat actors pose to an organisation.

These models allow insurers to automatically adjust premiums in response to changes in an insured organisation’s cybersecurity risk. They draw on data provided by third party companies that gather real time information about organisations’ IT infrastructure, security products, and other factors to get a clearer picture of an organisation’s cybersecurity risk at any given point in time. These third-party companies include firms such as SecurityScorecard, Blueliv and BitSight.

One of the models makes it possible to better understand accumulation risk. It does so by breaking out different market segments as separate components in order to isolate, understand, and analyse the accumulation effect of a cyberattack on a given market segment.

The book also describes how some insurers are moving beyond merely selling insurance to assisting customers in improving their cybersecurity readiness. For example, they might share information on security vulnerabilities, assess customers’ IT infrastructure, or help them implement penetration testing of their IT systems and phishing-awareness campaigns aimed at their employees. In addition, they may support customers in responding to cyberattacks, providing crisis management and legal assistance, and helping them get back to business. This is typically accomplished through partnerships with cybersecurity companies, public relations firms and legal firms.

These developments can play an important role in cybersecurity risk management, helping make it possible to create a virtuous cycle where cyber insurance fosters an increase in cybersecurity worldwide.

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This article is based in part on our latest book, Security Risk Models for Cyber Insurance, published by Routledge/Taylor & Francis. It grew out of a two-year project funded by the European Union under Horizons 2020, CYBECO (Supporting Cyber Insurance from a Behavioral Choice Perspective).

Created in 2007 to help accelerate and share scientific knowledge on key societal issues, the AXA Research Fund has been supporting nearly 650 projects around the world conducted by researchers from 55 countries. To learn more, visit the site of the Axa Research Fund or follow on Twitter @AXAResearchFund

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Caroline Baylon, Security Research and Innovation Lead, AXA and Research Affiliate, Centre for the Study of Existential Risk, University of Cambridge and David Rios Insua, Member of the ICMAT, AXA-ICMAT Chair in Adversarial Risk Analysis and Member of the Spanish Royal Academy of Sciences, AXA Fonds pour la Recherche

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This article is republished from The Conversation under a Creative Commons license. Read the original article.