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5 InsurTech Trends to Watch

Bill Diaz, CEO of Ventiv Technology, distinguishes the InsurTech trends you need to know.
By: | March 6, 2017 • 5 min read

“[INSERT LATEST TECHNOLOGY HERE] is going to revolutionize insurance and risk management!”

Without a doubt, if you’ve been part of the insurance industry for a while, you certainly have heard this claim many times before.

But despite the relentless hype, some new technologies have had a profound and lasting impact on the industry. And while there is no shortage of technology options, what’s needed is the ability to distinguish meaningful InsurTech trends from less important fads.

Bill Diaz is an accomplished technologist and insurance industry veteran with the experience and industry knowledge to help identify and develop these trends.

With more than 20 years of experience in data analytics and claims administration, Diaz has led the global insurance technology businesses at Marsh ClearSight, FIS and Oracle with solutions spanning property/casualty, life/annuity, and health.

Now, he’s recently become CEO of Ventiv Technology, which provides innovative software solutions to P&C carriers, TPA’s, brokers and risk managers.

“For too long, innovation within the insurance industry has lagged. Finally, we are seeing rapid change enabled by technology. The question is who will be able to adapt and thrive under these new conditions,” he said.

According to Bill, the 5 most important InsurTech trends are:

  1. Digitization

Bill Diaz, CEO

“Digitization is an incredibly hot topic in the industry today,” Diaz said.

For the most part, digitization has helped to remodel distribution processes but can “carry across any part of the insurance value chain, from buying through to servicing,” he said. True innovators in digitization are more focused on creating on-demand products offered through mobile applications, so they can get the right product or service in front of customers at the right time.

Take travel insurance as an example. Based on location services from their mobile phone, a carrier can offer travel insurance when a potential client enters the airport.

“Carriers with a location-aware app can provide a transactional buying experience that is much easier and faster for the end customer. Insurance buying is becoming more transactional and innovative carriers or agents can take advantage of those opportunities,” Diaz said.

Of course, improved customer experience is not the only driver of digitization. Amid a continuing soft market, insurers are constantly looking for ways to cut down on administrative costs and increase efficiency. Digitization offers a way to do just that.

“Many processes within insurance are still paper-based, so it’s a very ripe area for digitization to be an effective tool,” he said.

  1. Disruption of Traditional Channels

Technology also enables new, non-traditional players to get into the insurance game, blurring the lines around traditional roles and processes.

Alternative pools of capital in the form of private equity investments or peer-to-peer insurance, for example, put pressure on carriers to differentiate themselves in the market and refine their value proposition.

Technology also changes how service providers connect with customers, allowing them more direct access to end users and more leverage with carriers. Technology companies can now more easily expand into areas served by traditional service companies.

“Don’t be surprised if you see providers move into what’s historically been considered service or distribution areas. Technology is forging these new channels between insurers, service providers and customers,” Diaz said.

“Carriers have to be able to define their value, and that value has to go beyond geographic borders or compliance, because technology is breaking down barriers and making it easier for smaller, non-traditional players to compete,” he said.

  1. Fight for the End Customer

As technology enables more direct interaction between the marketplace and end consumers, competition for customer attention is getting fierce.

“Whether you’re an insurance carrier or a broker, everyone is fighting for access to the end consumer,” Diaz said.

The primary strategy to gain that consumer’s attention is to create a unique buying experience with proprietary tools, technologies and underlying services. This appeals especially to millennials, who increasingly are the end insurance buyers, even in the B2B world.

Brand loyalty doesn’t matter so much to millennials as much as partnering with a company that’s doing something new and transformative. They’re the perfect fit for the unique services, ease of use and quick communication that insurers are striving to offer.

“It’s a challenge for carriers and brokers. Everybody is trying to make a name for themselves and create some level of distinction. Just saying that you’ve been in business for 150 years is not enough for the new generation of consumers,” Diaz said.

  1. Focus on Loss Control

The advances in insurance technology that get the most buzz are those that aim to re-tool distribution. Emerging companies have differentiated themselves by offering policies direct to the consumer through web-based apps, making the process easy and fast.

But with traditional carriers implementing similar technologies, it’s unclear how these InsurTech startups will fare in the future. The real value of insurance technology, Diaz argued, lies in loss control.

“Our core value as an industry is to help customers identify what’s happening in their risk management programs around risk control, avoidance and mitigation,” he said.

More and more, investors are realizing the benefit of loss prevention in order to reduce claims and lower insurance premiums in the longer term. The growing popularity of wearables, fleet telematics and corporate wellness programs demonstrate this shift in thinking.

  1. Analytics

“The transformation in analytics is progressing at an incredible pace,” Diaz said.

Previously, companies took a very broad approach to data, where an analyst could take all of a company’s structured data and sort through it to identify trends and drivers. But this isn’t so much “analytics” as it is standard business intelligence and reporting.

True analytics involve pulling information from multiple sources, both internal and external to the company, to develop unique insights.

“There’s been an explosion of data, whether it’s email or social media or data that exists on corporate servers. It’s so exponential that people struggle to make sense of it and see the value,” Diaz said.

The sheer amount of data has necessitated a shift from a generalist approach to a specialized approach. Data analysts now must focus on a specific domain where they have expertise.

Ventiv Technology is at the forefront of these trends, with solutions for everything from claims administration and safety management to analytics and data transformation. To learn more, visit http://www.ventivtech.com/.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Ventiv Technology. The editorial staff of Risk & Insurance had no role in its preparation.




Our people, software, and innovative solutions empower organizations to achieve optimal results of their risk, insurance, and safety programs. Through the depth and breadth of our software solutions, global capabilities, and domain expertise, we are the proven leader in supporting virtually every type of industry and the largest and most complex companies in the world. Ventiv Technology proudly partners with over 550 organizations and 300,000 users in more than 40 countries.

Black Swan: Cloud Attack

Breaking Clouds

A combination of physical and cyber attacks on multiple data centers for cloud service providers causes economic havoc. Even the most well-prepared companies are thrown into paralyzing coverage confusion.
By: | July 27, 2017 • 10 min read

Scenario

By month 16 of the new presidential administration, the Sunshine Brigade is more than ready to act.

Stoked by their anger over rampant economic inequality, the mostly college-educated group of what might best be called upper-middle-class anarchists — many of them from California, Oregon and Washington State — put in motion the gears of a plan more than two years in the making.

Their logic, to them at least, is unimpeachable. Continued consolidation of economic power into the hands of fewer and fewer corporations is creating a world where the rich increasingly exploit and shut out the poor.

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The rise of the techno giants is accelerating this trend, according to the Sunshine Brigade’s de facto leader Emily Brookes, an All-American rugby player and a graduate of Reed College in Oregon.

With a new presidential administration seemingly bent on increasing the economic advantages of the rich with no end in sight, nothing to do then but break things up; and in so doing break the hold of this technology oligarchy.

As Emily Brookes so forcefully put in her instant messages to the other members of the brigade: Break the Cloud.

With more than 500 members, many of them with ample financial and technical resources, the Sunshine Brigade is very capable of delivering on its plan for a two-pronged attack.

It is also radicalized enough to justify the loss of some human life, even its own countrymen, to “save” — in its collective logic — the tens of millions of global citizens that are living as virtual slaves in this callous, exploitative global economy.

With websites and digitally connected services large and small down for days, irritation turns to fear.

The first wave in the attack is an attempt to infect and shut down the data centers for the top three cloud service providers. It takes months to set up this offensive.

Rather than rely on a phishing scam from outside the firewalls of the service providers, The Sunshine Brigade uses its social and business connections to place three members on each of the cloud provider’s payrolls. An infected link from someone you know, someone in the cubicle right next to you, seems like an unstoppable play.

It only partially works. Only one of the cloud service providers is harmed when an unsuspecting employee clicks on a link from their traitorous co-worker. The released malware manages to cripple a major cloud service provider for 12 hours.

With millions of users affected, the act creates substantial disruption and garners global headlines. Insured losses are around $1.5 billion. But this is just the beginning.

The morning after, the Sunshine Brigade unleashes a far more devastating and far more ruthless Round Two.

Using self-driving trucks, the Sunshine Brigade smashes into five data centers; three on the West Coast, and two in the Midwest. Fourteen employees of those cloud servers are killed and another 23 injured; some of them critically.

This time the Brigade gets what it wanted. The physical damage to the data centers is substantial enough that it significantly affects three of the top four cloud service providers for five days.

With websites and digitally connected services large and small down for days, irritation turns to fear.

Small and mid-sized banks, which host their applications on clouds, are shut down. Small business owners and consumer banking customers immediately feel the brunt. Retailers that depend on clouds to host their inventory and transaction information are also hit hard.

But really, the blow falls everywhere.

In the U.S., transportation, financial, health, government and other crucial services grind to a halt in many cases.

Not everyone is disrupted. Some of the larger corporations are sophisticated enough in their risk management, those that used back-up clouds and had steadfast business resiliency plans suffer minimal disruption.

Many small to mid-size companies, though, cannot operate. Their employees can’t get to work and when they can, they sit idly in front of blank computer screens connected to useless servers.

For the man on the street, this is hell.

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Long lines blossom at the likes of gas stations, banks and grocery stores. A population already on edge from a steady diet of social media provocation becomes even more inflamed.

By nightfall of Day Five, the three major cloud service providers are recovered, and digital “normalcy” begins to creep back. But for many small and medium-sized businesses, the recovery comes way too late.

Economic losses promise to register in the tens of billions. It’s not being too imaginative to think that losses could hit the $100 billion mark.

Two multinational insurers based in the U.S., three Lloyd’s syndicates and a Bermuda insurer signal to regulators that their aggregate cyber-related losses are so great that they will most likely become insolvent.

Emily Brookes and her cohorts were willing to kill more than a dozen people to promote their worldview. In their youthful naiveté, they could not know just how much suffering they would cause.

Observations

For some commercial insurance carriers, the aggregated losses from a prolonged disruption of cloud computing services could be catastrophic, or close to it.

“It’s on a par with any earthquake or hurricane or tornado,” said Scott Stransky, an associate vice president and principal scientist with the modeling firm AIR Worldwide.

AIR modeled the insured losses for the Fortune 1,000 were Amazon’s cloud service to go down for one day. They came up with a figure of $3 billion.

Now consider that most businesses in this country are small businesses, with not nearly the risk management sophistication of the Fortune 1000. Then consider a cloud interruption of five days or more.

Mark Greisiger, president, NetDiligence

“Almost any company you talk about today would rely to some extent on the cloud, either to host their website, to do invoicing, inventory, you name it — the cloud is being used across the board,” Stransky said.

“It’s a significant issue for insurers and one we think about a lot,” said Nick Economidis, an underwriter with specialty carrier Beazley.

“Should a cloud service provider go down, everybody who is working with that cloud service provider is impacted by that,” he said.

“Now, pretty much every software maker is on the cloud,” said Mark Greisiger, president of NetDiligence.

“In the old days, someone would come in and install software on your servers and come in annually for maintenance. That’s all gone bye-bye. Everybody who makes software is forcing you onto their private cloud,” Greisiger said.

The aggregation risk for carriers is complicated by the degree of transparency they have into which insured’s applications are hosted on which cloud provider.

Now here’s the even trickier part. Clouds outsource to other clouds.

“It’s almost becoming a spider’s web of interdependencies on who has access to what in terms of upstream and downstream providers,” Greisiger said.

Determining which of their insureds is hosted on which cloud, and in turn, where that cloud is outsourcing to other clouds can be very difficult for carriers to determine.

Even if a company is careful to diversify the risks they’re taking, they might not realize that a high percentage of insureds are even with the same cloud provider. They could be hit with devastating losses across their entire portfolio of business, said an executive with BDO consulting.

AIR’s Stransky said his company launched a product in April, ARC, which stands for Analytics of Risk from Cyber, which is designed to help carriers gain that much needed transparency.

Among insureds, surviving an event of this magnitude will depend not only on the sophistication of their risk management department, but on the company’s overall ability to negotiate contracts with vendors and suppliers that will indemnify the company in the case of a cloud outage of this duration.

It will also depend on organization’s understanding that there is no off-the-shelf solution that will prevent an event like this or make a company whole after it.

Shiraz Saeed, national practice leader, cyber, Starr Companies

Experts say contracts with cloud service providers, customers and suppliers must be structured so that a company is defended should it lose cloud access for as much as five days or more.

Best practices also include modeling just what your losses would look like in this area, and vetting your full portfolio of insurance policies to understand how each would respond.

One broker said buyers can’t be blamed if the complexities of the coverage issues at stake here are initially hard to grasp.

“It’s becoming a spider’s web of interdependencies on who has access to what.” —Mark Greisiger, president, NetDiligence

“I think it’s the broker’s job to inform the client of this exposure,” said Doug Friel, a vice president with JKJ Commercial Insurance, based in Newtown, Pa.

“You may have business interruption coverage for direct physical damage to your building. But have you ever thought about your business income if your IT structure goes down?” Friel said.

He said many buyers might not realize there is a difference.

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Large businesses should have the resources to demand from their cloud service providers that they be indemnified for the entirety of a cloud failure event. There will be a fee for that, but it will be well worth paying, Friel said.

“You have to push,” Friel said. “They are going to say, ‘Here is our standard contract, sign it.’ ”

Don’t settle for that, he said, although many do in ignorance, he added.

“Where possible, we would look for clients to negotiate their contracts. These business relationships should be mutually beneficial, even if one of these events occur,” said Shiraz Saeed, national practice leader, cyber, for the Starr Companies.

It’s a partnership, he said.

“It shouldn’t be a zero sum game on either side. I think there should be an understanding of what the potential loss might be and then designing a contract around that,” he said.

While cloud service providers are known for having high grade security systems, most average organizations don’t have the means for that. But no matter what a company’s resources, the first step is modeling where your digital assets are, and what you and your customers stand to lose if you lose access to them.

“Most insureds don’t seem to understand the amount of individual loss that you could be subject to,” said Jim Evans, leader of insurance advisory services at BDO Consulting. “Usually this stuff is measured in hours,” he said. “But what if a cloud provider is out for three or four days?” he said.

“Trying to quantify what you did lose in an event is hard enough. Trying to do a modeling exercise about what you could lose? It’s something that just doesn’t get done enough,” he said.

Once you have an understanding of what you own and what you stand to lose, the next step is prioritizing the protection of the assets you have. That means drilling into your contract with your cloud service providers to get the maximum indemnification.

It also means spreading your risk so that if at all possible, not all of your assets or your customers’ assets are housed by one cloud service provider. Cloud platforms can be public, private, or a hybrid of the two.

Understanding where your assets are in that architecture is crucial. Spending the money to insure that they are protected behind a diverse menu of firewalls is highly advisable.

Navigating the different iterations of business interruption coverage in property, cyber and kidnap and ransom policies is also important.

Make sure your broker can provide clarity on the different types of coverages and tailor them to your needs, experts said.

The concept of design thinking is really what’s in play here. Organizations have to work with vendors in every aspect of their operations to design a risk management system that can sustain this kind of hit.

“Build a better mousetrap to protect yourself,” said JKJ’s Friel.

“Depending on your service, you need to have the best and the brightest designing this stuff. Spread the risk.”

“Don’t be afraid to ask for more,” he said.

Postscript

In engineering an attack on the cloud, Emily Brookes and her cohorts accomplished the opposite of what they set out to do.

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Only the largest corporations with the most sophisticated risk management programs were able to survive the attempt to break the cloud with manageable losses.

Small businesses, the true backbone of the U.S. economy, suffered terribly. Entrepreneurs who put their life’s work into their business lost it in many cases.

Those on the lowest part of the economic scale, the working poor, lost their jobs and their ability to cover their rent and grocery bills. They joined the ranks of those subsidized by the government by the millions.  The attempt to break the cloud resulted in an even more polarized society. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]