Future of Insurance

September
2020

The insurance industry is under pressure from all sides. Disruptive technology. New entrants from non-traditional sectors, like Tesla. And demographic trends towards older and less fit consumers causing problems for underwriting. The pandemic simply adds additional stress.

Coronavirus: to save businesses, we should pioneer an unusual kind of insurance

The COVID-19 outbreak has triggered a collapse of revenues in sector after sector: transport, hotels, restaurants, tourism, recreation and culture, consumer durables and numerous others. This economic shock, equivalent to a 10% or greater contraction in demand worldwide, is larger than that which triggered the 2007-09 global financial crisis. In a rare professional consensus, economists of all schools agree that a major fiscal stimulus is required to offset this collapse in spending – and governments are acting accordingly. In the US, Steven Mnuchin, the treasury secretary, has obtained congressional approval for a US$2 trillion (£1.7 billion) stimulus that includes a US$500 billion (£426 billion) fund to support American businesses and plans to hand out thousands of dollars to households around the country. Rishi Sunak, the UK chancellor, has announced that the UK government will pay 80% of the wages of employees who would otherwise be made redundant, adding an estimated £78 billion to the measures he announced previously. In Germany, the cabinet is aiming to mobilise €500 billion (£463 billion) of state funds – 14% of GDP – to rescue companies hit by the outbreak. These measures are welcome but imperfect. For example, the UK plan to pay workers’ wages will not cover enough company overheads to prevent a large number of bankruptcies and lay-offs. Besides this, the UK government is also considering bailing out certain struggling companies, such as IAG, the owner of British Airways. This raises the prospect that taxpayer money will again be used to bail out wealthy corporations while the little people are left with the crumbs from the table. There are similar issues in America, where one key reason for the congressional delay over the stimulus package was that the Democrats feared it would do too much for some companies and not enough for others. Then there is the American plan to send up to US$1,200 to each adult and US$500 to each child in the country – the much-touted idea of “helicopter money”. The trouble here is that economic impact of the pandemic is very uneven. Online retailers and producers of household essentials will get a generous helping of this money, while shuttered local restaurants and taxi firms will get nothing. To help with these difficulties, I want to suggest a scheme that I call retrospective insurance. It would generally be an addition to governments’ existing plans, while replacing certain measures with something better.

The insurance deficit

In theory, firms could actually have protected themselves financially if before the crisis they had taken out business interruption insurance to cover pandemic risk. In practice very few firms have such insurance. In a sense, this absence of insurance cover for pandemic business interruption is what is threatening systemic, structural damage to our economic system. To address this lack of cover, an appropriate response by governments is to retrospectively take on the role of pandemic risk insurers and effectively pay out what companies would receive if they had been covered in advance. Such payments should be made to all businesses large and small – as well as to non-profit cultural, social and religious organisations and to people who are self-employed. I propose to calculate this as follows. First, you would look at each organisation’s drop in revenues for 2020 compared to 2019 and you would say that 10% of this is effectively an excess that the organisation has to cover. My logic is that any business should be able to absorb a 10% revenue decline without collapsing. I then suggest a pay-out equal to 80% of what would normally be paid in wages (the UK plan), plus 100% of rental costs for business premises, plus 50% of lost profit. I would base this profit calculation on what accountants call EBITDA, or earnings before interest, tax, depreciation and amortisation. This then allows firms and other organisations to pay wages, rent, interest, tax and other essential outlays, and avoid being forced into bankruptcy. I have applied my suggested payout ratios to the example of the airline group IAG, using its lost revenues as a rough proxy for calculating how much it will lose in terms of an economic measure known as “value-added”. This refers to the total amount of extra economic value that a business adds as a result of its activities. For various reasons, it makes sense for retrospective insurance to focus on restoring this. In the case of IAG, if we assume a 75% fall in the company’s 2020 revenues, the payout it would receive works out as 42% of its value-added. If we were to assume that IAG is typical and that UK GDP falls 10% overall this year, I calculate that retrospective insurance would cost the country only 4% of GDP – something like £100 billion. If, say, the pandemic shock were bigger, costing 15% of GDP, the retrospective insurance would cost 6% or around £150 billion. To offset this, IAG is actually probably being hit harder than the average firm. If so, the total payout across the economy would come down. At any rate, with governments contemplating total extra spending of 10% of GDP to counteract the crisis, retrospective insurance could sit alongside other measures. It would also largely negate the need for proposals like helicopter money, since job losses should be kept to a minimum.

Extra details

The most obvious practical challenge is how to get payouts immediately, when you can’t properly calculate how much is due each organisation until you have final profit and revenue figures for 2020. But this is not as big an issue as it first appears. For one thing, schemes already announced, such as the UK’s plan to pay 80% of wages, would still go ahead. Additional payments due under retrospective insurance would come later. Also, because firms will know that they are covered for additional losses and will receive payouts down the line, they can – if necessary – borrow to cover the cost of critical bills such as interest repayments or maintaining factory equipment in the knowledge that this can be straightened out a few months later. Finally, there is the urgent problem of the self-employed, who have been left out of the government’s wage scheme. My system needs a different formula for them, but this is not insurmountable. Instead the payout just needs to be geared to covering these people’s critical personal expenses, including food and essential travel.

Author: Alistair Milne, Professor of Financial Economics, Loughborough University

This article originally appeared in The Conversation.

Coronavirus: to save businesses, we should pioneer an unusual kind of insurance

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To help with these difficulties, I want to suggest a scheme that I call retrospective insurance. It would generally be an addition to governments’ existing plans, while replacing certain measures with something better.

“

The most obvious practical challenge is how to get payouts immediately, when you can’t properly calculate how much is due each organisation until you have final profit and revenue figures for 2020.

THE FUTURE OF CLAIMS: Delivering at the moment of truth

Like most industries, property and casualty insurance has been upended by disruptive technology and rapidly changing customer expectations. Customer experience is now one of the primary ways companies of all types differentiate themselves and compete. For insurers, it’s become the key driver of innovation and is shaping the future of claims.

Claim handling is the insurer’s moment of truth. It’s when they fulfil the fiduciary promise of the policy and where customer loyalty is won or lost. After a loss, customers want to be made whole as quickly and easily as possible. That could mean quick resolution after clicking a few buttons in an app, a conversation with an adjuster to better understand the claims process or getting alerts as the claim moves through an expedited process. Some carriers are progressing towards this future state by investing in automated technologies. But others are lagging and lack the technological capabilities and resources to deliver on rising policy-holder expectations.

Covid-19 has only accelerated the pace of change – and exposed gaps. While early adopters were already implementing innovations such as virtual inspections and were able to quickly pivot early in the pandemic, others are having to scramble to catch up and remain competitive. Now, the pressure is on. The future of claims is about elevating the customer experience, and carriers that aggressively pursue digital enablement today will be primed to excel tomorrow.

Keeping pace with change

When stay-at-home orders swept across the nation earlier in the year, it was a time of reckoning for insurers. Just prior to that, claims teams had on-site inspections scheduled and field adjusters were poised to go to the scene of accidents. That all changed in an instant. For some, it simply meant ramping up virtual inspections. For others, it became a time of uncertainty and concern. We’re working with carriers from different spectrums of their digital maturity, helping them transition to virtual inspections through video collaboration with policyholders. By mid-Q2 2020, more than 90 per cent of simple claims at the largest insurers were adjusted virtually, and customer satisfaction had improved.[I]

Enhancing backend efficiencies

Covid-19 has revealed deficiencies in operations that enable digital claims experiences that engage policyholders on their terms and keep insurers’ claim management standards intact. Digital transformation requires deep data stores and powerful analytics to process and analyse disparate inputs and pathways of every claim scenario.

For example, in a bodily injury claim, predictive models can analyse a claim’s attributes at intake and provide a severity score to quickly triage the claim to the appropriate handling unit. From there, the claim can be analysed against historical company data to generate an accurate general damages assessment. And if the claimant obtains a solicitor, legal analytics can provide insights on the defence’s case outcomes to help adjusters determine whether to settle or litigate. These capabilities require the right combination of data and technology to enhance efficiencies. Those components are also critical to another important area of the future of claims – fraud detection.

Strengthening perimeter defence

It’s estimated that one in 10 claims may contain some element of fraud.[II] With fraudsters constantly pressure testing carriers to discover which have weak defence systems, a strong perimeter defence is critical.

Imagine this: your insured was involved in a car accident where the claimant was injured. Your adjuster receives a medical package and damage photos from the claimant. As the adjuster enters claim information in your system, fraud analytics flag the claim and recommend further investigation based on a triggered fraud scenario. Meanwhile, image forensics reveal that the loss photo was taken prior to the date of loss. The claim is referred to SIU and managed through an automated system to speed resolution.

Those types of insights and tools are vital to helping prevent insurers from paying suspicious claims, as well as providing necessary checks to quickly process genuine ones.

The future: imagine new possibilities

The same data and technology that can expedite claims processing and detect fraud have the potential to catapult insurers to a new level of innovation – proactive claim prevention.

As weather analytics automatically determine which policy-holders are affected by a hailstorm, insurers may immediately deploy aerial imagery to identify damage to insured property, notify insureds and instantly start the claim process for them. This type of innovation can redefine insurance companies, from being organisations you contact when something goes wrong to becoming innovators that deliver proactive customer service that improves the quality of life.

The future is possible today with Verisk. We power, develop, and accelerate digital transformation with unmatched data, integrated technology, and deep domain expertise. Let us show you what’s possible.

For more information, visit our website or contact cbarr@verisk.com.

THE FUTURE OF CLAIMS: Delivering at the moment of truth

Why is Tesla selling insurance and what does it mean for drivers?

In the past year, Elon Musk and Tesla have fascinated the world with new innovations like the Tesla Cybertruck. There is excitement about most new Tesla products, but one hugely important one has been largely overlooked. With far less fanfare and no stage performance by Musk, Tesla started offering car insurance last September. In the long run, this is going to have a major impact on most of our lives – perhaps even greater than Tesla’s more eye-catching innovations.

Tesla Insurance is only available for Tesla vehicles in some states of the US at present. It will expand the number of territories gradually over time. But as with the Tesla Cybertruck, the company first wants to see how the business holds up to whatever is thrown at it and whether it cracks under pressure.

For those eligible for Tesla Insurance, the company claims to offer premiums 20% to 30% lower than rivals. Yet even if you are in an area where you can request a quote, Tesla won’t necessarily make you an offer. It sometimes still refers drivers to a traditional insurance partner instead. It may be that Tesla chooses the clearer, less risky cases and sends more complex ones to insurers with more experience and appetite to handle them.

So why is Tesla selling car insurance? For one thing, it has the real-time data from all its drivers’ behaviour and the performance of its vehicle technology, including camera recordings and sensor readings, so it can estimate the risk of accidents and repair costs accurately. This reliance on data may well mean it never branches into selling insurance to drivers of other manufacturers’ cars.

At the moment, Tesla is offering insurance premiums calculated with aggregated anonymous data. In future it could roll out more customised services, like the ones offered by insurers using telematic black boxes, to offer drivers (cheaper) quotes based on how they actually drive.

Every time there is an accident, Tesla has instant access to data about the driver behaviour that led to it. One attraction for the company is that it can evaluate how some of its technologies, like autopilot, stability control, anti-theft systems and bullet-resistant steel, can reduce risk.

Another motivation for Tesla is that some insurers charge a relatively high premium for Tesla cars. One reason is that they still don’t have much historic information about the cost of repairs of electric vehicles. By vertically integrating insurance into its offering, Tesla brings down the price of owning its products.

At the same time, insurance is a barrier to many innovations that Tesla is targeting for the future. With the insurance taken care of, it will be easier to sell self-driving vehicles or send people to Mars (with sister company SpaceX). Like many things Elon Musk does, this both solves a short-term problem and fits the longer-term strategy. It’s a little like how Tesla focused on producing luxury vehicles first to finance the infrastructure for selling cheaper cars like the Tesla Model 3.

How insurance is changing

Tesla has one more reason for offering insurance, which is that the sector is changing: a tech company disrupting it fits the zeitgeist perfectly. My research at Loughborough University has looked into this disruption. I evaluated 32 insurance providers around the world including Tesla and found that artificial intelligence, big data, the internet of things, blockchain and edge computing were all rewiring insurance, both literally and metaphorically.

Broadly speaking, the work of the insurer is shifting from local human expert underwriters to automation driven by big data and AI. The existing industry players that I evaluated essentially fell into three categories. Some had recognised they cannot compete with tech companies. They were focusing on interacting with customers, branding and marketing, while outsourcing everything else to companies with the relevant skills.

Other insurers were trying to add new technologies to their existing business model. For instance, some are using chatbots that apply machine learning and natural language processing to offer live customer support. Yet another group had more fully embraced the new technological capabilities. For example, life insurers like Vitality and Bupa now encourage customers to use wearable monitoring devices to offer them guidance on improving their health and avoiding accidents.

Alongside all these were the new breed of insurers, with Tesla perhaps the best example. Others include Chinese giants Alibaba and Tencent. Just like Apple and Google are making incursions into banking and finance, these are tech-savvy companies with many existing customers who are adding insurance to their portfolio of services. In every case, the capabilities of AI and big data-driven automation have acted as a catalyst.

What it means for drivers

In the short term, Tesla drivers can look forward to insurance that is arguably more seamless and convenient and may well be cheaper – particularly if they clock up fewer miles and drive safely. (Drivers should still compare prices with other insurers: the likes of Progressive and GEICO are among those that insure Tesla vehicles.)

In the longer term, this is a sign that insurance – like banking, road tax and many services – will be driven by real-time data. It will probably change our behaviour for the better. We will probably drive slower, eat healthier food and exercise more – even if libertarians will be uneasy.

This shift will challenge our attitudes towards personal information privacy. Some of us will value the benefits of being open and transparent with our personal information, while others might seek solutions that keep their data with them. Edge computing has potential here, since it allows some data processing to be done on your device so that your personal data doesn’t need to be sent to a central server.

So Tesla and Elon Musk have not just added another revenue stream to their many successful endeavours. They are also helping to fundamentally change the way that we interact with insurance providers. In the future, insurers will be more like a partner on our journey both by car and on foot – both on Earth and beyond.

This article originally appeared in The Conversation.

By Alex Zarifis, Research Associate in Information Management, Loughborough University

Why is Tesla selling insurance and what does it mean for drivers?

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Tesla drivers can look forward to insurance that is arguably more seamless and convenient and may well be cheaper – particularly if they clock up fewer miles and drive safely.

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Some of us will value the benefits of being open and transparent with our personal information, while others might seek solutions that keep their data with them.

How to avoid technological upheaval: three suggestions for (re)insurance brokers

by Greg Boutin, CEO of Relay

The risk-placement function is a specialised one. Many insurance carriers have created specialised “ceding” functions for reinsurance, but have yet to displace the brokers themselves. In fact, we see a counter-trend at play for “reintermediation”, which Relay is more in favour of, by allowing brokers to move deeper “inland” into their client operations, to optimise and package previously unsupported placements.

Relay helps brokers structure placements at their origins alongside their clients, animating the whole value chain to work more collaboratively. Brokers, alongside ceding departments where they exist, are the natural users of Relay.

We first conceptualised Relay, then called Parachute, as a placement tool to “tech-enable” brokers. While I ran with the idea, I have to give credit to our investor – Highline Beta’s Ben Yoskovitz, who co-authored Lean Analytics – for suggesting it.

Equipped with Ben’s idea, our next step was to speak with brokers themselves. They told us that until we had an actual product and some of their clients on board, they weren’t interested. Brokers are not tech ventures, they said, and they have little time to play with product concepts.

So we followed their advice. We built the best platform in the market for fac reinsurance, for both cedents and reinsurers first. We made it visual, fast, and easy to sign up for online – which apparently no other platform had done until then.

We quickly expanded this platform to B2B insurance placements, and enroled insurance brokers. We took an investment from NFP Ventures, the VC arm of US brokerage NFP. And we finished our broker module for both fac and insurance, with help from NFP and other brokers.

We are now expanding Relay to reinsurance brokers, as well as Programs (in the US sense of the word, i.e. MGA/MGU/TPAs) and Treaty – both of which companies can already pre-sign on to and experience. We think having all risk transfers in one engine will be revolutionary, and we are rapidly proving it.

Along the way, I learned a few things that are relevant to brokers:

Recommendation #1: embrace technology specialists to expand your brokerage’s reach. You will save time and money by working more effectively with insurtech ventures (such as ours).

Many brokers are more worried about disintermediation than they should be, if experiences in fintech or real estate are any guide. This insecurity can drive defensive behaviours, including a lot of money spent on internal platform builds. While internal platforms are sold by their proponents as the only way to achieve control, we have proved that Relay can have brokers digitise faster, better and cheaper while integrating with other systems and retaining control, through our new white-labeled or co-labeled solutions.

Recommendation #2: do not embark into multi-year transformations, but favour agile solutions that will adapt to rapidly changing conditions. Correspondingly, identify internal change agents who are inherently incentivised for tangible results and make them transformation leaders and champions.

Brokers are not a uniform bunch. Even within the same brokerages, we find pockets of progressive brokers who understand that in the 21st century, speed and agility will drive more business than focusing on control and creating more siloes. Find those practitioners and put them in charge, supported by the right external technology partners. Avoid establishing permanent internal transformation roles, rewarded for building the longest, largest initiative possible, and often moving to a new role during the project.

Recommendation #3: broaden your talent pool, and welcome inputs from non-traditional industries and backgrounds.

While brokers are not a uniform group, they lack diversity, just like (re)insurance in general. And that certainly impacts creativity, as countless studies have shown. Hire with a view to greater balance in gender, cultures, ethnic backgrounds and sexual orientation, among others. Don’t just open your systems, open up your mindsets and entire organisations.

Major opportunities are being lost right now by brokerages both large and small, to adapt to changing conditions. Pick bold partners, and go for rapid changes, even if some mistakes are made along the way – innovation rewards those, but not regrets.

I’d very much welcome your perspective – reach me at greg.boutin@relayplatform.com

Industry View from Relay

How to avoid technological upheaval: three suggestions for (re)insurance brokers

People often ask us if Relay is meant to disintermediate (re)insurance brokers. It makes me chuckle every time, based on what I have observed in the industry so far, and how we came up with the idea for Relay. The risk-placement function is a specialised one. Many insurance carriers have created specialised “ceding” functions for reinsurance, but have yet to displace the brokers themselves. In fact, we see a counter-trend at play for “reintermediation”, which Relay is more in favour of, by allowing brokers to move deeper “inland” into their client operations, to optimise and package previously unsupported placements.

The two trends that point to the future of the insurance sector

by Jeffery Williams, senior analyst, Forrester Reports

The rapid advancement of digital technology is ushering in new ways to sell, buy and administer insurance and service customers. And new entrants, with their nimble, digital-first operating models, are challenging the status quo. In the next five to ten years, two themes will emerge that will shape the insurance marketplace.

Insurers will focus on personalisation

Digitally empowered customers are seeking better, more personalised experiences. Nevertheless, product-oriented strategies handicap most insurers. Today, customers want confidence and security, yet insurers sell them loss-recovery contracts. To stay relevant, insurers will need to become solutions providers that offer value-added services that wrap around the underwritten coverage. This will involve:

Providing personalised advice on reducing risks. The insurers of tomorrow will provide their customers with personalised assessments of, and advice on, risk. Auto insurers such as Allstate and Progressive offer programmes that allow customers to monitor driving habits and tendencies and that track driving speed, mileage and driving time. Life insurers such as Great Eastern Life help customers understand their health and give customers relevant tips, discounts and incentives to bring them closer to their specific health goals. But it’s not just about incumbents. Insurtechs are bringing innovation too. For example, Life.io offers a platform that rewards customers for learning how to improve their well-being.

Offering personalised coverage that is dynamically priced. The future of insurance will be increasingly personalised and customisable, rather than one-size-fits-all. Established insurers such as Allianz, AXA and Liberty Mutual, as well as new entrants such as Clearcover, Metromile, and Root Insurance, use telematics devices to monitor driver behaviours and price premiums accordingly. Insurance policies will eventually mould themselves around a customer, becoming living contracts, with contextual advice and add-ons to reflect customers’ changing risk conditions.

Insurers will form new partnerships to create value and drive growth

Today, most insurance companies serve only one small slice of their customers’ overall ecosystems, inherently limiting their opportunity to identify and meet their end-to-end needs. Tomorrow’s insurers will pivot their strategy to a fundamentally outside-in, customer outcome-focused mindset as they envision insurance not as a set of products and services, but as part of a broader digital ecosystem. This shift will enable insurers to:

Leverage acquisitions or partnerships to encompass customer needs. Insurers should identify the most important ecosystems for their customers and ensure their company is part of these ecosystems. For example, MetLife recently acquired Willing, a leading digital estate planning service, which allows it to not only provide life and health insurance, but also the digital financial planning services many of its customers prefer.

Use data insights to innovate and become more relevant. Insurers have traditionally worked with third-party data providers that generate and stockpile data such as credit scores and vehicle accident data, to understand and serve customers. The internet of things (IoT) will enable insurers to underwrite more effectively, and contextually sell dynamic insurance solutions. For example, American Family recently partnered with Neos to offer its customers a line of smart home products that can help identify problems in advance and connect customers with home service professionals that can make repairs.

The velocity of change in insurance is only going to increase. New technologies and new competitors will fuel innovations that will touch customers, employees, and partners and make a difference to insurance business models. Insurers need to scan relentlessly for the innovations and ecosystem partnerships that can create better customer experiences, increase efficiency, reduce costs, and drive business growth.

The two trends that point to the future of the insurance sector

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Jeffery Williams (pictured) is a senior analyst at Forrester Reports, serving financial services digital strategy professionals, helping them evaluate the implications of digital innovation on their businesses. To read his article click the “OPEN” button on the right.

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Tomorrow’s insurers will pivot their strategy to a fundamentally outside-in, customer outcome-focused mindset as they envision insurance not as a set of products and services, but as part of a broader digital ecosystem.

Guiding an ageing population

by Matthew Connell, Director of Policy and Public Affairs, CII

Anyone who has worked in a client-facing role will be familiar with this scenario: they are talking to an elderly client who is unsure of what they need to ask for or even how to navigate the client verification process. In the background, a helpful voice is prompting them with information and helping them frame their questions.

Is this financial abuse? Is the elderly person being exploited? Or are they being given vital help, without which they would not be able to manage their finances? What is the legal and regulatory situation? How can the client’s data be protected, while still facilitating their request?

A wrong move, such as not treating the security implications seriously enough, or not being sufficiently helpful to the client, will result in a serious loss of trust between the client and financial services professionals.

This is only the most basic challenge facing the profession as it learns how to serve an increasingly ageing population. Overcoming each of these challenges requires a strong act of imagination and empathy on the part of professionals to achieve a good outcome for their client.

The kind of knowledge and skills that are needed to service an ageing population rely not so much on technical knowledge about insurance and financial services, but rather on empathy and an awareness of how other people live their lives.

Insuring futures

This kind of insight is at the heart of the Chartered Insurance Institute’s Insuring Futures initiative. It aims to build a picture of the risks people face in their lives, and how the services provided by financial advisers, insurers and the wider community are relevant to these. The first phase of Insuring Futures looked at the lives of women in the UK and how their financial futures were affected by the career choices and caring responsibilities they took on, as well as how they were saving for retirement and how family life affected their ability to save and protect themselves.

The next stage of Insuring Futures will look at the ageing population. It will look at how people build and maintain independence throughout their lives. This means looking not only at financial independence, but also health and mental and social wellbeing.

For many people, retirement can be a time of unparalleled independence – they may have enough savings to afford not to work for the first time, giving them a huge amount of leisure time that they can use to encounter new challenges and experiences, deepen bonds with their family and widen their social circle.

Of course, levels of independence are closely linked to health, but changes in health can also be managed to preserve independence. For example, as we encounter losses in mobility or even in cognitive ability as our lives go on, there are many ways that we can access help or reshape our environment to preserve our independence and increase our quality of life.

Usually, we build this independence in a tactical and unstructured way. We embark on a career based on opportunities that present themselves when we leave education, we amass assets such as houses and pension pots along the way, riding the ups and downs of different markets, and pick up caring responsibilities too. All the time, we are bombarded by advice and expectations around health and mental wellbeing that are sometimes sound and sometimes deeply misleading.

Our work on insightful leadership will look at what people can do during every decade of their adult lives to build and maintain their independence, and look at the kind of conversations people need to have with their families, friends and mentors to create more resilience throughout their lives, right into later life.

Diverse needs

The work will build on the insights from Insuring Women’s Futures, and it will be supported by work with focus groups to better understand the diverse needs of people in retirement and later life. These insights will form the basis of a conversation with members, which will lead to guidance and support for professionals in:

• How we design products and communications for older people that resonate with the way they live their lives

• How professionals can structure conversations with clients that are more relevant to the risks and aims they have

• How advisers can advise their clients’ whole family, rather than just the individual, as they grow older and their plans become more entwined with the needs of that family

The CII will be working with experienced insurance and financial services professionals, charities, policymakers and researchers throughout the process, and looking to produce guidance that puts consumers and professionals in direct touch with each other in innovative and engaging ways.

Guiding an ageing population

Matthew Connell is Director of Policy and Public Affairs at the Chartered Insurance Institute, where his focus is to build public trust in insurance through dialogue with consumers, policymakers, influencers, and industry professionals. To read his article click the “OPEN” button below.

PAI: the new health standard for physical activity that can save lives

Sally Powell, General Manager, PAI Health, and Professor Ulrik Wisløff, of the Norwegian University of Science and Technology

According to the World Health Organization, 31 per cent of deaths worldwide are caused by cardiovascular disease (CVD). The American Heart Association estimates that CVD-associated costs in the United States alone could rise from $555 billion today to $1.1 trillion by 2035. In addition, people with CVD and other lifestyle-related diseases are more susceptible to other conditions, such as viral infections and type 2 diabetes.

While insurers often associate innovation with enterprise-wide digital transformation, the rising trend of lifestyle diseases challenges insurers to explore long-term innovations in population health management and engagement. Insurers are increasingly turning to digital health solutions to help guide members towards better health, while leveraging solutions such as wearables to attract new consumers and reframe conversations with their policyholders. These solutions can also make people who were previously uninsurable, because of previous health conditions, improve their health and become eligible for coverage.

Limitations of today’s activity recommendations

Leading health organisations agree that most lifestyle-related morbidity and mortality could be prevented through behavioral changes such as an improved diet and increased physical activity. However, commonly used guidelines – such as 10,000 steps or 150 minutes of moderate activity per week – are not personalised and can be difficult for the average person to adhere to. Even using wearable technology, it can be difficult to know just how much and what kind of physical activity is enough as a unique individual.

The genesis of PAI

The question of how much exercise is enough is one that Professor Ulrik Wisløff, of the Norwegian University of Science and Technology, was trying to solve when he began exploring the relationship between intensity of exercise and long-term mortality. His mission was to find a solution that could help everyday people understand insights from their heart rate, typically captured by fitness trackers and smartwatches. Professor Wisløff and his team developed the Personal Activity Intelligence (PAI) algorithm as the solution, which is based on personal profile and heart rate data, calculating a PAI Score that factors in intensity and duration from the past week’s activity.

A personalised physical activity prescription

PAI tracks the body’s response to all activity and tells the individual if they’re doing enough for optimal health benefits – with 100 PAI being the universal ideal goal.

The PAI metric has been validated and published in several leading journals, with proven results, including a study published in The American Journal of Medicine that showed individuals who maintained 100 PAI or more had on average a 25 per cent lower risk of CVD mortality and an extended lifespan of five years.

How PAI delivers value to insurers

PAI Health is focused on making this unique prescription for exercise available to as many people as possible through its software application and API solutions. The company is seeking global partnerships with life and health insurers, technology platforms and public health systems to bring this solution to market in an impactful way.

By integrating with PAI Health, insurers can improve member engagement and satisfaction, as well as develop solutions that enable dynamic risk profiling and science-backed precision analytics. This will allow them to tackle the exponential rise in lifestyle diseases and rising claims costs head-on. This also opens opportunities to appeal to new customers through innovative value propositions and personalised experiences.

There’s never been a better time for insurers to augment their population risk management strategy by starting a dialogue with their customers, leveraging the wearables they are already using and empowering them with life-saving tools.

For more information, please click here.

What’s next?

Industry View from PAI

PAI: the new health standard for physical activity that can save lives

Customer experience is the driver of insurance success, but automation is the engine

Imagine the competitive advantage an insurance firm could have by being able to confidently state that it pays out most insurance claims within seven minutes, and actually have the cutting-edge tech and data to back it up. Thanks to AI-driven automation that begins in the back office, we’re on our way to making that a reality.

Changing market dynamics are driving an automation revolution within an insurance marketplace that competes on two factors: cost, and customer experience. Insurers work to mitigate costs and risks, while savvy consumers demand faster service, increased transparency and greater control over the products they purchase and how personalised their plans are. The ability to deliver on this begins with data – the critical “step zero” of any business process.

Insurers today succeed or fail based on how they process and use data to make swifter and smarter business decisions. Yet the insurance industry continues to struggle with the first mile of data processing, partly because that information is unstructured and enters an organisation in various ways, such as online portals, PDFs uploaded to an email, or physical documents. Classifying this information, extracting the data, and getting it into the correct system of record remains extremely manual, leading to unnecessarily complex workflows, delayed processing times, high costs and increased errors.

Legacy band-aid solutions

If you were to peek under the hood of most major insurers, you might find a complex patchwork of outdated, legacy technology and cumbersome, manual workarounds. Companies today are spending around $60 billion each year on data entry to turn unstructured document data into formats that can be read by various systems. This creates an information and operational bottleneck that prevents customers from getting the experience they demand – and have come to expect – and puts an insurance organisation’s position in the market in jeopardy.

A better way: AI-driven automation

Insurance leaders everywhere are rethinking how they operate to reduce manual burdens, modernise existing processes and unlock a more agile, customer-centric approach. According to McKinsey & Company’s Insurance 360° benchmark, “IT costs per policy for players with modernised IT can be 41 per cent lower than those of players with legacy IT systems.” Intelligent automation technologies that leverage the latest advances in AI and machine learning (ML) will become the critical driver to greater data, fewer errors and faster and more reliable insurance processing – whether that’s processing a life insurance application or handling a medical claim.

Leading insurance companies are already using these innovative solutions to automatically classify and extract data from diverse document types, including those that are distorted, handwritten, of low resolution and more. These solutions continue to learn and improve based on the data they’re exposed to, leading to fewer errors and greater automation over time.

One Global 200 insurer we work with receives more than 20 million pages within its life and retirement business alone each year. Relying on people to manually index, route and key the information was unsustainable from a cost and resource perspective, and most importantly, prevented the firm from responding to customers in a timely manner and maintaining a competitive advantage. After testing legacy, rules-based technology that failed to deliver accurate data, the firm adopted intelligent document processing (IDP) software and was able to reliably automate document processing and data extraction, soon realising a 70 per cent reduction in manual entry – almost 30 minutes saved per transaction. The solution enabled a smoother experience for brokers and customers alike, freeing up critical resources to focus on delivering more innovative products and services and staying ahead of market conditions.

By investing in innovative automation technologies, insurance leaders can reimagine workflows and processes and build a new digital assembly line that seamlessly orchestrates work between software and people, based on the needs of the task and the strengths of each. By enabling the free flow of data, insurance companies can increase the quality of their business decisions, build a workforce more prepared to meet the future, and facilitate a performance-driven organisation with superior outcomes.

Discover the automation platform Global 2000 insurers trust with their mission-critical processes. Learn more.

Customer experience is the driver of insurance success, but automation is the engine