Why responsive risk transfer (or insurance)? An example…

Insurance and reinsurance, as a product set, are not particularly responsive today.

Yes, it (the product set) can meet the broader expectations of billions of consumers and hundreds of millions of businesses around the globe, as financial tool to transfer risk.

Or at least they think it does, based on what little they often know about it.

But is the insurance or risk transfer product actually serving their needs, when they really need it most?

Following on from my thoughts on rethinking and redesigning re/insurance for the modern age, where I questioned whether insurance, reinsurance and risk transfer really responds to its users needs (at the right time and in the right way).

I thought it might be interesting to dive a bit deeper into the responsive angle.

In that post I wrote:

Given the way our lives and businesses work, in this fast-paced and rapidly changing environment, we need something new and more responsive than this.

Something more responsive to our needs, that dovetails into the cycle of our lives, businesses and communities.

What we need are shock-absorbers: financial and risk protection products that smooth out the bumps in the road that might otherwise have knocked our life or business off course.

Products that respond right when we need it, providing just enough in terms of recovery to push us back on track, helping us to help ourselves right at the point it’s most needed.

Insurance can become this shock-absorber for our lives.

Insurance and reinsurance is often more like a time-delayed source of risk capital, with benefits only coming at the point the pain has already become so significant that it can often prove too late anyway.

But we’re used to this now, particularly in the business world, where insurance can payout after it’s too late and too little to help a firm avoid significant financial impacts and sometimes even bankruptcy.

In the majority of use-cases, insurance and risk transfer should be about responding at precisely the right point in time (when it’s first needed and can be most helpful) and in precisely the right way/amount required (no more, just enough to steer you back on-course).

The right time and right amount/way are both key.

Get that wrong and you’re over-paying (expensive), or over-complicating the product itself (confusing & disappointing for the customer), and likely also over-burdening the insured during its time of recovery (cognitive load is high).

Better to deliver only what is required, but most importantly at precisely the point it can be of most use to the insured.

But how to be this responsive?

To have an almost sixth-sense for when a claim is set to be needed/made and then delivering just what is required to smooth out the volatility (to life or business) that is being experienced?

Of course it largely comes down to data, access to it and the ability to understand/use it.

The more of it (data) the better. The more granular the better. The more real-time it’s delivered, on an ongoing basis throughout the policy term, the better. The more localised and personalised it is to the particular use-case in question, the better.

This is where I get excited (nerd alert) about anything that can provide real-time data insights to inform insurance, reinsurance and risk transfer responsiveness.

Enter the sensor.

Sensors and the data they provide are going to become key tools and inputs that allow for better risk transfer product design and development in the first place.

Insurance and risk transfer products are often created in what seems like the dark, with little visibility of what could or may happen. So decisions on pricing, triggers, responsiveness, are all taken using historical data and information derived from analogues and synthetic models of reality.

But, with sensors and the data they provide, you could be updating underwriting information, risk metrics, pricing, triggers, tweaking the responsiveness of the risk transfer product all in real-time, creating something that really does offer the kind of responsive experience users demand (or should demand) from finance today.

Enter Cloudleaf (https://www.cloudleaf.com/about), an interesting start-up that I first heard of a while back, but it caught my eye again the other day.

Cloudleaf just raised a $26m round of funding (congrats!) and provides sophisticated digital and analytical solutions for better supply-chain improvement.

Internet of things (IoT), artificial intelligence, machine learning, Cloudleaf uses them all.

Buzzword heavy but for the right reasons, as these advanced technologies enable its services to map and understand, even predict or forecast, where the pain points are and how to optimise supply-chains for large organisations.

That’s interesting alone.

But given the IoT angle, which involves sensors and the resulting data that flows from them (don’t you know), Cloudleaf can deliver real-time intelligence into how a supply-chain is performing, for a single organisation but of course (extrapolated out) that could also provide intelligence on an entire industry chain as well.

Which leads me back to the future of insurance and risk transfer, as I strongly believe supply-chain disruption related business interruption coverages can be better designed and made responsive to organisations needs, through the use of sensors and advanced data analytical services + parametric inputs to risk transfer triggers.

Cloudflare could (should), if it isn’t already, speak to the likes of the world’s largest reinsurance firms in this regards (they may reach out to it anyway after reading this).

As, an integrated data analytics, sensors, AI and risk transfer approach to delivering business insurance coverage for supply-chain related risks could really be a responsive solution fit for the future.

Imagine a system that can forecast where pain is set to emerge in the system, calculate the potential impacts, release capital based on triggers calibrated using the data and supply-chain network health information, releasing just the right amount of insurance payment at just the right time for the customer.

That’s the idea of responsive risk transfer as a volatility-smoother, responding when its needed to even out the cycle of business (or our lives). A shock absorber, even a predictive and preventative one, for our lives and businesses.

That’s of course just one idea on the future responsiveness of insurance, reinsurance and risk transfer. But to me it’s a particularly compelling one that solves a coverage gap that exists today.

It also shows how data can enable responsive risk transfer and insurance product design, to deliver entirely new solutions that better meet client needs.

Thinking laterally similar models can fit to different challenging areas of the business world.

But, taking a step back, it’s the responsive model of delivering the financial protection in the right amount and at the right time (instead of the all or nothing of many re/insurance products) that I find a particularly interesting concept for the future of the industry.

That doesn’t always need sensors or ‘bigs-of-data’ to achieve it, sometimes it just needs someone to go back to basics, look at the user needs, design products appropriately for it.

It means more efficient use of capital for re/insurers, as well as opportunities to open up entirely new sectors and really work on closing gaps in protection.

More responsive re/insurance and risk transfer products can be created today.

In the future responsiveness should be a design tenet of every insurance and risk transfer product this industry creates, as it’s just a more satisfactory delivery model than the ‘claim and pray’ process we see today.

Risk financing based on intelligence, simplicity and user needs, intelligence furnished with data to design products that better meet the demands of our businesses and lives today.

More on the concept of risk transfer and insurance becoming more responsive in posts to come…

The risk transfer relationship: Connections & touch-points (an interface)

Everyone always talks about the importance of the “relationship” in reinsurance and risk transfer.

While it’s often over emphasised as a key market driver, it’s still absolutely the case that relationships really do matter in this industry.

But perhaps a little too much still, while other parts of the risk to capital chain are overlooked and their importance under-emphasised.

Market chains can be thought of like an interface.

Dotted with many and increasing numbers of connections and touch-points, some of which are more effective or important than others.

The relationship is one of the key connections in the world of transferring risk.

But these connections between parties are set to become increasingly abstracted away from the physical, with ownership increasingly fluid as a result (I believe).

Hence, maybe we’re better off thinking about the different connections along the risk-to-capital value chain of the insurance and reinsurance sector as interaction opportunities.

Chances for parties to generate value for their clients and as a result generate some loyalty in return.

Historically, the “relationship” was seen as the all-powerful route to owning a client, especially in the reinsurance or large commercial insurance sector.

Brokers “owned” their client’s placements, which often meant an entire program.

Despite the fact that one broker may be perfectly good for one risk or layer, but another better for the rest. Historically that hasn’t always seemed to matter.

Loyalty generated by years of transacting together has, in some cases, led to less than optimal placement results though.

I regularly speak with ceding companies, insurers or reinsurers and large corporates or sovereign protection buyers, who say they aren’t being given access to the full-range of innovative risk transfer arrangements, or capacity sources, by their brokers.

Sub-optimal placements mean renewing the same old program, at hopefully increasingly favourable terms and that’s often enough for ceding company executives.

But perhaps the placements could be much more highly optimised, if a fresh look at the placement and strategy was taken.

Especially if a fresh look was taken at the many connections along the risk-to-capital-chain and work undertaken to identify how to optimise each touch-point, to transfer risk more efficiently and at lower-cost.

The relationship is just one connection or touch-point that can be optimised in insurance, reinsurance and risk transfer, albeit one that is repeated along the market chain (agent, broker, wholesaler, insurer, MGA, reinsurance & retro placements etc etc).

In some cases the relationships are so numerous that there are clear opportunities to make more direct connections in the chain, to transfer the risk more effectively.

Connecting risk to capital more efficiently and directly is something I write about all the time over at www.artemis.bm.

In fact it’s a bit of a pre-occupation, as when almost any new initiative or start-up (insurtech or otherwise) emerges in reinsurance and risk transfer, one of the first things I ask is “could this be done more efficiently.”

That means efficiency in terms of speed, directness, cost, effort, as well as cognitive load on the client.

That last one is kind of key as well.

Cognitive load is something I’ve worked to reduce for users throughout much of my career, having led large teams of frontend design and development at internet companies, in addition to my work in risk and reinsurance.

Making it easy for people (users/customers) to achieve their goals is absolutely vital in every single industry today, although this is something that risk, insurance and reinsurance is really only just beginning to understand.

Hence, thinking of the connections in the risk-to-capital chain of the insurance and reinsurance industry as interactions, touch-points, opportunities to reduce the cognitive load, while improving the user experience and effectiveness of outcomes, is a good strategy to adopt.

These opportunities are many and varied, given the number of touch-points and interactions along the chain in risk and re/insurance.

This is the interface of the risk transfer market, offering incumbents and start-ups opportunities to target, enhance, speed up, or make more efficient, one or more of the interaction points along this still convoluted interface.

There is a wealth of opportunity for incumbents to do things better, generating greater client loyalty in the process and building relationships that matter and that will be rewarded for the right reasons.

I’ve said it before, companies and brands are interfaces, you’ve got to make them simple to use and interact with to generate the best and longest lasting client relationships.

It’s time to move beyond solely relying on the more traditional kind of relationships that the re/insurance market has been built on.

While still important, we need to think differently about these relationships, accept the fact that ownership is set to change and value generated at each touch-point will be apportioned differently in future.

A good way to do that is to start assessing the value you receive (as a client) at every touch-point and interaction with someone who hands you a bill for services along the risk-to-capital chain.

For those handing out the bills, it’s vital you look at your own services and measure the value you’re providing (if it’s none you’re in dire straits).

Savings and efficiencies are there for the taking for the strategically astute.

Perhaps more importantly, so too are innovation, new ways of doing business, more direct connections in the chain, as well as inspiration that will lead to new product design.

More to come on this in future posts…

Brand usability: Your brand is an interface, make it simple to use

This is an old article, just reposting as it’s one that still resonates from my old blog.

Usability refers to the ease with which an interface (be that a screen, device, object or website; basically anything you can interact with) can be used by its intended audience. Usability takes into account how easy or efficient something is to use, how easy it is for a newbie to learn to use it and even how satisfying that experience is for users. I’m passionate about it, anyone working in online industries has to be (in my opinion). The ROI that results from getting usability right is huge and can be the difference between success and failure if you’re designing or creating anything.

Brands as interfaces

Every time a consumer comes into contact with a brand be that online, by walking into a shop, reading about them in a newspaper, receiving a piece of marketing or any one of the myriad other ways you can encounter a brand, an interaction takes place. The places where this contact occurs is the interface, the way that contact manifests itself is the interaction. An interaction can be physical, verbal, mental or social in nature and each interaction can result in success or failure for your brand. What you’re looking for, of course, is for each interaction to be a satisfying experience for the consumer where they go away with a positive impression of your brand. For that impression to be a good one, as a brand you’re going to have to be usable, accessible, communicative and sociable.

Your customers come first

I’m a big fan of getting customer service right. As a consumer myself I get so frustrated when I’m let down by a brand but can easily see how they could have avoided or fixed the issue. As a consumer there’s a journey you embark on with a brand and touchpoints where you interact with them, those touchpoints are the interfaces between you and the brand. Customer journey mapping is a great tool which allows an organisation to document all the touchpoints they have with their customers and audience, measure their success or failure at each touchpoint and then work to improve or optimise the journey. Undertaking this exercise can be eye opening and really shows where you need to focus to make customers interactions with you more enjoyable and successful both for them and for you. In these days where brands are seeking to expose themselves to their audience through social media this seems particularly relevant, it also sounds very much like usability at work to me. Mapping out and optimising a customer journey seems very much like an effort to improve usability.

In this sociable world

We’re seeing a lot of talk about business design lately with a lot of buzz around ‘social business design’ in particular. This new trend of brands trying to be engaging, communicative and open requires the customer (user) experience to be spot on. Given the fact your audience can now discuss you across multiple platforms and media it’s more important than ever that you remove the pain points in your interface to make the customers experience as smooth and hassle free as possible.

Brand usability

So, brand usability. The practice of measuring and optimising a brands user interfaces. It’s a practice that already exists (under many other names) and there are specialists out there who can help you with certain interfaces you want to optimise. However, people who can offer to give a holistic service to help you make your brand more usable are few and far between right now. I think that’ll change. As social becomes the norm and the customer comes back into focus, brands are going to be crying out for help in these areas as they realise they’ve brought all the focus onto their service through trying to run before they can walk in this new sociable world.

Brand usability, social business design or customer relationship optimisation; whatever you want to call it the future seems bright for those who understand these topics and it maybe even brighter for brands who understand the importance of practising them.