Category Archives: Technology

Diverse Strategies As Insurers Embrace Digital Innovation

The routes to a digital future are many and varied, but for insurers the question is how to get there?

A new survey by Willis Towers Watson of 200 senior-level insurance executives offers some insight into the way forward.

The findings suggest that M&A and partnerships are likely to trump internal investment as insurers look to deliver digital transformation.

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Almost half (45 percent) of respondents to the survey signaled a clear preference for acquisitions as the way forward to gain digital capabilities.

By contrast, fewer than one in five insurers (17 percent) said they have a preference for internal development.

That’s not to say that internal innovation efforts have no place at these insurers, according to Willis Towers Watson, it’s more about getting the balance right between organic and inorganic growth.

Well over one-third (38 percent) of survey respondents say they have no preference between the two routes. In other words, they will use both acquisitions and internal innovation as the circumstances suit.

As insurers embrace a more outwards-looking approach to innovation, the survey suggests that traditional M&A deals are not the only option.

As Willis Towers Watson says:

“Many insurers are investing in a disparate range of technologies via venture capital funds – either through their own in-house venture capital arms, or third-party funds. This may be an attractive way to make a number of small bets on nascent innovations, rather than betting the house on an as-yet unproven technology.”

The survey found that one-third (31 percent) of respondents from the property/casualty insurance sector have set up a corporate venture arm already, while another third (32 percent) are considering doing so.

Innovation was a key topic of discussion at the Insurance Information Institute Property/Casualty Insurance Joint Industry Forum held yesterday in New York. For coverage of the forum go to the I.I.I. website.

WEF: Collaboration Imperative On Global Risks

The World Economic Forum (WEF) is calling for a redoubling of efforts to protect and strengthen systems of global collaboration in the face of increasingly disruptive risk trends.

In its just-released Global Risks Report 2017, the WEF warns that risk drivers such as income inequality, polarization of societies, and climate change need to be addressed collaboratively if solutions are to be found to the world’s most complex problems.

Nowhere is cooperation more urgent than in addressing climate and environmental risks, the WEF said. While important strides have been made in the past year, the pace of change is not fast enough and more needs to be done.

The WEF cited the Paris Agreement on climate change now ratified by 110 countries, and the landmark agreement to curb CO2 emissions from international aviation as important examples of global cooperation in 2016.

But political change in the United States and Europe is putting this progress at risk.

“This is a febrile time for the world. We face important risks, but also opportunities to take stock and to work together to find new solutions to our shared problems. More than ever, this is a time for all stakeholders to recognize the role they can play be exercising responsible and responsive leadership on global risks.”

The environment dominates the global risks landscape outlined in the WEF report, with extreme weather events emerging as the single most prominent global risk and climate change the number two underlying trend this year.

Society is also not keeping pace with technological change, the WEF noted. While new and emerging technologies can provide solutions they also exacerbate risks.

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Artificial intelligence and robotics were identified as having both the highest potential for negative consequences and also the greatest need for better governance in this year’s risk survey.

The private and public sectors need to work together and collaborate to address the challenges of the Fourth Industrial Revolution, the WEF said.

“It is critical that policy-makers and other stakeholders – across government, civil society, academia and the media – collaborate to create more agile and adaptive forms of local, national and global governance and risk management.”

Distracted Driving? There’s An App To Prevent That

Is Apple liable over a fatal car crash involving FaceTime? That’s the question being asked in a lawsuit filed against Apple by the family of a five-year-old girl killed in a Texas car crash.

Moriah Modisette was killed and her father seriously injured when driver Garrett Willhelm plowed into their car at 65 mph on a Texas highway on Christmas Eve 2014.

As reported by Fortune, Willhelm was chatting on FaceTime at the time of the crash, and the app was still running as rescue workers tried to extricate the injured passengers from the mangled car.

In the lawsuit, the family claims that Apple had failed to install a “lock-out” feature on FaceTime that would prevent drivers from using the app while on the road.

The lawsuit underscores why liability insurance and product liability insurance are important for businesses.

After years of decline in road fatalities, numbers were up 8 percent in 2015. Many believe the rise is due at least in part to distracted driving.

In 2014, 3,179 people were killed in distraction-affected crashes, and 431,000 people injured, according to National Highway Traffic Safety Administration data.

But apps are not all bad. Several app developers are working to create ways to help make your cellphone a tool in the fight against distracted driving, rather than a cause of it.

Check out DMV.org for distracted driving apps that incentivize safe driving by keeping your attention off your phone and on the road.

USA Today reviewed other apps aimed at preventing distracted driving here.

2017 Magic Ball on Insurance

It’s that time of year when insurance predictions for 2017 are being made, and as we look ahead, it’s clear that these are innovative times for our industry.

First up, Insurance Networking News with 10 Insurance Tech Predictions for 2017, based on a research report by Strategy Meets Action (SMA). Karen Furtado, SMA Partner and co-author of the report explains: “In many cases, the 2017 trends reflect a move by insurers to operationalize strategies that have been in development or early phases in the past couple years.” Predictions include: insurtech remains sizzling hot and 2017 will be pivotal for its future; digital transformation will expand; and telematics starts a new growth phase.

Keeping it hot, next up is The Financial Brand with Top 5 InsurTech Trends for 2017. Check out #1 Micro-Insurance to Handle Usage-Based Needs which highlights the growth of micro-policies covering specific risks for specific durations of time. At #3 Emergence of Blockchain as a Key Driver says smart contracts are emerging as the ideal way to automate claims management and underwriting creating billions of dollars in savings. It tips the B3i partnership between Aegon, Allianz, Munich Re, Swiss Re and Zurich as one to watch in 2017.

Talking of specifics, there’s Fast Company with 5 Fintech Startups To Watch in 2017 and pay-per-mile auto insurer Metromile headlines the list. “Insurance investors say Metromile has become an important proof point for the industry’s hottest topic: Measuring observable behavior in order to get more granular about risk.” Fast Company describes insurance is a “massive opportunity” in fintech in the year ahead.

And as we ring in 2017, CB Insights takes stock with a look back at some of the most notable partnerships, hires and financing rounds in insurance tech in the past year. Of particular note are the 29 startup-insurer partnerships in 2016, a reflection of insurers’ growing participation in the tech startup landscape. Insurance Information Institute’s Insuring California blog writes more on this here.

How To Cover Electronic Aggression, or Cyberbullying

Recent events have reminded us that cyberbullying is not limited to children, with at least one survey indicating that 73 percent of adult internet users have seen someone harassed online, while 40 percent have personally experienced it.

For example, professional golfer Paige Spiranac last week spoke about the harassment she and her family experienced following her professional debut last year. The recent U.S. Presidential campaign has also highlighted the increasing prevalence of cyberbullying that targets adults.

Electronic aggression is the definition used by the Centers for Disease Control and Prevention (CDC) to describe any type of harassment or bullying that occurs through email, a chat room, instant messaging, a website (including blogs), or text messaging.

And the National Conference of State Legislatures (NCSL) defines cyberbullying as the willful and repeated use of cell phones, computers, and other electronic communication devices to harass and threaten others.

NCSL notes that cyberbullying differs from more traditional forms of bullying in that it can occur at any time, its messages and images can be spread and shared instantaneously to a wide audience, and perpetrators can remain anonymous, often making them difficult to trace.

Adult cyberbullying often takes the form of trolling where someone posts inflammatory messages in an online platform, such as on Facebook, or Twitter or in a chatroom or blog, with the sole intent to provoke a reaction from other users.

While there are many examples of cyberbullying against celebrities or public figures, any adult who uses the internet is increasingly at risk.

Social media platforms, including Instagram, Twitter and Facebook have responded by introducing new tools aimed at combating cyberbullying.

Just as technology is changing the way we interact with each other, so insurers have been moving to provide insurance coverage that can mitigate the financial loss and emotional harm suffered as a result of a cyberbullying incident.

For example, earlier this year Chubb made cyberbullying coverage available to its U.S. homeowners customers. The coverage provides up to $60,000 in compensation to clients and family members for expenses related to harassment and intimidation committed via personal computers, telephones or mobile devices. It can help mitigate the cost of wrongful termination, false arrest, wrongful discipline in an educational institution, or diagnosed debilitating shock, mental anguish or mental injury.

From the perspective of businesses, most traditional commercial general liability policies would not cover electronic aggression or cyberbullying claims. Specialist media liability policies developed by insurers may cover social media activities and industry experts say the number of insureds and insurance brokers looking at this type of coverage is increasing.

Specialized cyber policies developed by insurers may also be tailored to incorporate social media coverage. Check out the Insurance Information Institute white papers Cyber Risk: Threat and Opportunity and Social Media, Liability and Risks for more on this topic.

Growing P/C Innovation Amid InsurTech, Trump Disruption

The pace of innovation in the U.S. property/casualty industry will accelerate in 2017, as technology advances and the growth of InsurTech raise customer expectations for greater innovation and new business models, according to a new report by Ernst & Young.

In its 2017 U.S. Property/Casualty Insurance Outlook, EY says the industry is at an inflection point, as continued economic headwinds provide little support for insurers plagued by shrinking investment incomes, escalating claims costs and rising regulations.

A new Trump administration raises the prospect of further economic and regulatory change and with the P/C industry in flux, this is a good time for CEOs to think through their future business strategies, EY suggests.

As insurers look to adapt to disruptive market shifts, EY expects companies will do more to develop a culture of innovation in 2017:

“The Internet of Things, telematics, artificial intelligence, driverless cars and blockchain have the potential to transform industry fundamentals and even redefine the nature of risk. In the future, competing for market share will be increasingly dependent on technology, data and analytics.”

With more than 1,000 InsurTech startups in operation, the pace of P/C innovation will speed up next year.

For example, in 2017 InsurTech startup Trov plans to roll out on-demand insurance that will enable customers to use their smart phones to turn coverage for personal belongings on and off. Trov is an example of how product innovation directed towards millennials could disrupt the P/C insurance model, EY says.

“Incumbents will be watching this space closely, creating venture funding groups that are actively monitoring and investing in InsurTech initiatives.”

Insurers will take digital transformation to the next level in 2017, expanding their use of robotics and advanced analytics across most aspects of their business, from claims handling and underwriting to customer relationship management (CRM) systems and risk management, according to EY’s outlook.

See our earlier blog post for latest data on the InsurTech sector.

Read about the top InsurTech deals of the year as reported by Insurance Networking News here.

Prepared for #CyberMonday and #GivingTuesday?

With Cyber Monday and Giving Tuesday rounding out the Thanksgiving holiday digital spending and giving are expected to reach record levels, which means businesses and individuals need to be prepared for cyber threats.

In 2015, Cyber Monday was the largest e-commerce sales day ever with online orders totaling $3.07 billion and experts expect this year’s total will be higher still, according to a post on the The U.S. Chamber of Commerce’s Above the Fold blog.

It cautions businesses to be vigilant, especially when it comes to payment card protection, and offers the following tips:

—Change your passwords and make them strong: just as you would lock the doors before leaving, lock this door too. Make sure employees know this too.

—Install software updates known as patches that your payment service provider sends you for your payment systems: install updates, just as you would on your phone, so your payment system is protected.

—Keep business information private: keep passwords, user IDs, or other details for payment systems private. Confirm an unexpected call or email separately with the supposed caller or sender before proceeding.

Even digital philanthropy can bring out cybercriminals. According to the Identity Theft Resource Center (ITRC), in recent years there has been substantial growth in web-based giving or mobile donations.

In fact one of the first global-scale events that brought attention to mobile donations was the 2010 hurricane that struck Haiti. The Red Cross received millions of dollars in donations from cellphone users who simply texted the word “HAITI” to a five-digit number.

While it feels good to give, the ITRC says it’s important to remember to do your homework and check out a charity before clicking on a link or responding to potentially fraudulent email requests claiming to be a part of Giving Tuesday.

One cause you might consider supporting is The Insurance Industry Charitable Foundation’s Early Learning Initiative (ELI) which provides an opportunity for every young child – regardless of means – to learn to read and write.

Join your insurance industry colleagues in the worldwide #GivingTuesday movement by contributing $5 for ELI here.

Check out the Insurance Information Institute’s facts and statistics on corporate social responsibility here. The I.I.I. white paper Cyberrisk: Threat and Opportunity has the latest information on the current exposure and how insurers are responding.

InsurTech: Outlook Positive

Investors are expected to become more confident in the FinTech sector, including InsurTech startups, as fallout from the Brexit vote in the United Kingdom and uncertainties associated with the U.S. Presidential election stabilize.

A quarterly report from KPMG and CB Insights says that while many investors in Europe and North America took a break from deploying capital in the third quarter of 2016, fintech investment is expected to regain momentum in the fourth quarter of the year and into 2017.

In the third quarter of 2016, venture capital-backed fintech companies raised $2.4 billion across 178 deals, accounting for 83 percent of the $2.9 billion in overall global fintech funding.

Both the number of deals and value of investments were lower than in the second quarter of the year, and when compared to the third quarter of 2015.

Still, the outlook is positive, with InsurTech and other sectors flagged for growth, the report said.

“Over the next few quarters, artificial intelligence is expected to gain more investor attention in addition to RegTech, InsurTech and data and analytics.

At the same time, fintech areas that have emerged over the past year (particularly blockchain) may receive more scrutiny as investors assess when and if investments will deliver returns.”

(RegTech refers to technologies that reduce the cost of regulatory compliance and improve risk outcomes for financial institutions.)

InsurTech VC-backed global investment activity totaled $204 million across 22 deals in the third quarter of 2016, KPMG and CB Insights noted.

The U.S. led the way with 10 InsurTech deals and $104.7 million in investment activity, followed by Germany with 4 deals and $47.2 million in investment.

The top InsurTech deals in the third quarter were pay-per-mile auto insurer Metromile ($50 million in funding), cybersecurity analytics services provider Cyence ($40 million in funding) and insurance brokerage app FinanceFox ($28 million in funding).

Year-to-date some $10.3 billion has been deployed globally across 612 fintech deals through the first three quarters of 2016, according to the report.

Read about the top InsurTech deals of the year as reported by Insurance Networking News here.

More stories on InsurTech over at the I.I.I. Insuring California blog here.

Cybersecurity and the Presidential Election

Insurance leaders say the upcoming U.S. presidential election could impact a range of issues, including healthcare and international trade.

Cybersecurity is another insurance-related issue that next week’s election is likely to impact. Forrester even predicts that the new U.S. president will face a major cybercrisis within 100 days.

A new Insurance Information Institute (I.I.I.) white paper notes that governments are facing an unprecedented level of cyber attacks and threats with the potential to undermine national security and critical infrastructure.

The I.I.I. paper, Cyberrisk: Threat and Opportunity, also highlights rising concerns over how hacked information may be used to influence a political outcome:

“Hacks of both Democratic National Committee and Republican National Committee emails during an election year have raised concerns that groups are attempting to influence the outcome of the 2016 U.S. presidential campaign.”

Just last Friday U.S. government officials accused Russia of trying to interfere in the 2016 elections, including by hacking the DNC computers and other U.S. political organizations.

And on Tuesday Microsoft said the Russian hackers believed responsible for hacking the DNC computers had exploited previously undisclosed flaws in its Windows operation system and Adobe’s Flash software.

The Wall Street Journal reports that apparent Russian attempts to disrupt the U.S. election highlight more mundane risks as well as a new weapon in information wars: the disclosure of hacked information to influence policy or public perception.

Meanwhile, cybersecurity experts have warned that the election systems in the U.S. are vulnerable at the local, state and manufacturer level.

The mounting concerns have prompted the Department of Homeland Security (DHS) to consider whether the U.S. voting systems should be classified as critical infrastructure.

Currently, there are 16 critical infrastructure sectors, such as the U.S. power grid and water supply, whose systems and networks are considered so vital to the U.S. that their incapacitation or destruction would have a debilitating effect on national security and public health or safety.

In fiscal year 2015, there were around 295 attacks on critical infrastructure control systems in the U.S., a 20 percent increase on the previous year, according to DHS figures cited in the I.I.I. paper.

What IoT Cyber Attacks Mean for Insurers

The massive global distributed denial of service attack (DDoS) against internet infrastructure provider Dyn DNS Co. that left over 1,000 major brand name sites including Twitter, Netflix, PayPal and Spotify, inaccessible Friday has implications for insurers too.

While the nature and source of the attack is under investigation, it appears to have been (in the words of Dyn chief strategy officer Kyle York) “a sophisticated, highly distributed attack involving tens of millions of Internet Protocol addresses.”

As Bryan Krebs’ KrebsOnSecurity blog first reported, the attack was launched with the help of hacked Internet of Things (IoT) connected devices such as CCTV video cameras and digital video recorders (DVRs) that were infected with software (in this case the Mirai botnet) that then flooded Dyn servers with junk traffic.

The World Economic Forum (WEF) recently warned that failing to understand and address risks related to technology, primarily the systemic cascading effects of cyber risks or the breakdown of critical information infrastructure could have far-reaching consequences for national economics, economic sectors, and global enterprises.

As the IoT leads to more connections between people and machines, cyber dependency will increase, raising the odds of a cyberattack with potential cascading effects across the cyber ecosystem, the WEF noted.

While IoT connected devices have the potential to transform how businesses and individuals—and their insurers—conduct, manage and monitor their operations, workplaces and their homes, clearly there are embedded risks that insurers need to consider.

Over at Celent’s insurance blog, Donald Light, director of Celent’s North America property/casualty practice, says the Dyn DDoS attack has a number of potentially serious implications for insurers.

Light writes:

“An insurer with a Connected Home or Connected Business IoT initiative that provides discounts for web-connected security systems, moisture detectors, smart locks, etc. may be subsidizing the purchase of devices which could be enlisted in a botnet attack on a variety of targets. This could expose both the policyholders and the insurer providing the discount to a variety of potential losses.”

If the same type of safety and security devices are disabled by malware, homeowners and property insurers may have increased and unanticipated losses, Light suggests.

The Insurance Information Institute white paper on cyber threats and opportunities is available here.