General

Revolutionizing insurance: The Internet of Things (IoT) era

The internet has changed how we live, work, and connect with others. Now, with the proliferation of connected devices, we are entering a new era—the Internet of Things (IoT).

The Internet of Things encompasses a vast array of interconnected devices imbued with sensors and sophisticated software, empowering them to seamlessly gather, analyze, and exchange data.

This intricate web of connectivity enables devices to communicate with each other creating a dynamic ecosystem where information flows freely among various endpoints.

IoT in insurance

The integration of the Internet of Things in the insurance sector brings forth a plethora of advantages. From efficient customer service to simplified claims processing, IoT not only prevents risks and losses but also significantly reduces operational costs.

By utilizing data from internet-connected devices, IoT-connected insurance refines the understanding of risks. For instance, in auto insurance, risk assessment is usually done using historical data and actuarial statistics to establish a customer’s risk profile, ultimately determining the premium.

Now, with IoT devices like vehicle sensors and smartphone apps, real-time data can be collected, recorded, and processed leading to more accurate premiums.

IoT applications in insurance

• Telematics in auto insurance

Telematics, a prime example of IoT implementation in auto insurance, utilizes sensors installed in vehicles to collect real-time data on driving behavior. This data enables insurers to personalize premiums based on individual driving habits, promoting safer driving practices and reducing the risk of accidents.

Using Snapshot, a telematics program by Progressive, the insurer gathers real-time data to understand the driving habits of its policyholders. Premium discounts are given to drivers who drive safely.

• Smart home devices in property insurance

In property insurance, smart home devices such as security cameras, motion sensors, and leak detectors have revolutionized risk mitigation. By continuously monitoring homes for potential hazards, these devices help prevent damages, minimize losses, and enable insurers to offer tailored coverage to homeowners.

Since 2015, American Family has partnered with Ring Video Doorbell to offer homeowner’s insurance. If you install the latter’s doorbell equipped with a Wi-Fi-enabled camera as part of your homeowner’s coverage, the company will reimburse your deductibles in case of burglary.

• Wearables in health insurance

Health insurance has embraced wearables like fitness trackers and smartwatches to promote wellness and reduce healthcare costs. These devices monitor users’ vital signs, activity levels, and overall health, allowing insurers to incentivize healthy behaviors and provide personalized coverage plans.

As an example, John Hancock Life Insurance Co. includes a Wellness Incentive Benefit Endorsement. With it, policyholders can benefit from premium savings, Amazon gift cards, travel discounts, and more by engaging in health and wellness activities like regular exercise while using an approved fitness-tracking device.

• Drones in crop insurance

Drones equipped with high-resolution cameras and sensors conduct aerial surveys of agricultural fields, capturing detailed imagery of crop health, moisture levels, and pest infestations. Insurers analyze this data for accurate risk assessment, identifying potential hazards like drought or flooding.

Today, drones and specialized software like Pix4Dfields are used to assess crop damage in agricultural policies backed by the Risk Management Agency under the U.S. Department of Agriculture.

In addition, loss adjusters can swiftly assess affected assets and survey hard-to-reach places using drones, reducing claims costs by up to 30 percent, as reported by Forbes. As a result, claims are expedited and costs are reduced, leading to increased customer satisfaction and profits, respectively.

In conclusion

Despite the remarkable advancements, the integration of IoT in insurance comes with its own set of challenges. From data privacy and security concerns to the need for standardization and interoperability, insurers must navigate this complex maze of unfamiliarity to achieve gains brought by the Internet of Things.

Traverse the social sphere: Building brand presence for insurance companies

In today’s digital age, social media platforms have become invaluable tools for businesses to connect with their audience, foster brand loyalty, and ultimately drive growth. For insurance companies, leveraging social media effectively can be a game-changer in building brand presence and engaging with customers.

1. Know your audience

Understanding your target demographic is crucial for any marketing strategy, and social media is no exception. Insurance companies should research their audience demographics, preferences, and pain points to tailor their content and messaging accordingly. Whether it’s millennials seeking health insurance or homeowners looking for comprehensive coverage, knowing your audience allows you to create content that resonates with them.

2. Consistent branding

Maintaining a consistent brand identity across all social media platforms is essential for building brand recognition and trust. Use consistent colors, logos, and messaging to reinforce your brand’s identity. This consistency helps customers recognize your brand amidst the clutter of social media and fosters a sense of reliability and professionalism.

3. Engaging content creation

Insurance may not be the most inherently exciting topic, but that doesn’t mean your social media content has to be dull. Get creative with your content by sharing informative articles, engaging infographics, client testimonials, or even behind-the-scenes glimpses of your company culture. Interactive content such as polls, quizzes, or live Q&A sessions can also encourage active participation from your audience.

4. Utilize visuals

Visual content tends to perform better on social media platforms than text-only posts. Incorporate eye-catching visuals such as images, videos, and animations to grab users’ attention as they scroll through their feeds. Whether it’s showcasing the benefits of a particular insurance plan or explaining complex concepts in a visually appealing way, compelling visuals can significantly enhance your social media presence.

5. Provide value

Rather than bombarding your audience with promotional content, focus on providing value through educational and informative posts. Share tips for saving money on insurance premiums, advice on risk management, or updates on industry trends and regulations. By positioning your brand as a trusted source of valuable information, you can establish credibility and foster long-term relationships with your audience.

Conclusion

Building a brand presence and engaging with customers on social media requires a thoughtful and strategic approach. By understanding your audience, maintaining consistent branding, creating engaging content, providing value, actively engaging with your audience, and leveraging influencers and partnerships, insurance companies can effectively navigate the social sphere and cultivate meaningful relationships with their customers.

Unveiling insights: The intersection of data analysis & the insurance industry

In today’s data-driven world, businesses across various sectors are harnessing the power of data analysis to make informed decisions, drive efficiencies, and unlock new opportunities. Among these industries, the insurance sector stands out as a prime example of how data analysis is reshaping operations, mitigating risks, and enhancing customer experiences.

1. Understanding the data landscape

The insurance industry is inherently data-rich, with vast amounts of information collected through policy applications, claims processing, underwriting, and customer interactions. This wealth of data encompasses demographic details, risk factors, claim histories, and more. Analyzing this data provides insurers with invaluable insights into market trends, customer behaviors, and emerging risks.

2. Predictive modeling for risk assessment

One of the key applications of data analysis in the insurance sector is predictive modeling. By leveraging historical data and advanced analytical techniques such as machine learning, insurers can assess risk more accurately. Predictive models help identify patterns and predict the likelihood of future events, enabling insurers to price policies effectively and optimize underwriting decisions.

3. Fraud detection and prevention

Fraudulent claims pose a significant challenge for insurers, leading to financial losses and reputational damage. Data analysis plays a crucial role in detecting and preventing insurance fraud. By analyzing various data points such as claim histories, transaction patterns, and behavioral anomalies, insurers can flag suspicious activities and investigate them further, ultimately reducing fraudulent losses.

4. Personalized pricing and customer insights

Data analysis empowers insurers to move away from traditional one-size-fits-all pricing models towards more personalized approaches. By analyzing customer data, including demographics, lifestyle choices, and previous interactions, insurers can tailor pricing and coverage options to individual needs. Additionally, data analysis provides valuable insights into customer preferences, enabling insurers to enhance their products and services accordingly.

Conclusion

In conclusion, data analysis is revolutionizing the insurance industry, driving innovation, and transforming traditional business practices. By harnessing the power of data, insurers can better understand their customers, manage risks effectively, and improve operational efficiency. As the industry continues to evolve, data analysis will remain a cornerstone of success, enabling insurers to thrive in an increasingly competitive landscape.

AM Best: Recent insurance layoffs not primarily due to AI

AM Best doesn’t think that Artificial Intelligence (AI) is the main reason why so many people have lost their jobs in the insurance business recently.

The credit rating agency recently said in a report that “it is too soon to cite AI as the leading cause of the job losses, at least at this nascent stage.” He said that the layoffs are more likely to be in “the cyclical, rather than the structural, category.”

The rating agency said that structural unemployment is when jobs are lost because of changes in the system, the use of technology, or a mismatch between what the business needs and what the workers can do. Employment changes caused by the business cycle are called cyclical unemployment. AM Best said, “This seems to be the case in the insurance industry.”

Recently, Liberty Mutual, American Family, and GEICO all said they were cutting staff. This new information comes after those companies. According to AM Best, the most recent layoffs have an impact on personal lines insurance the most. This will have the most impact on personal lines insurance because loss ratios and underwriting margins are being pushed down by rising climate risk, loss cost inflation, and reinsurance capacity and price.

The commentary stated that the recent layoffs by insurers alone do not indicate any pressure on ratings

AM Best did say that advances in artificial intelligence will slowly change the job outlook in the insurance business. AM Best stated that many insurance companies are testing generative AI because they think it could help them with customer service. They also said that the level of industry disruption will depend on how fast AI develops in the coming years.

AM Best also mentioned that it’s still not clear what effect generative AI will have on jobs, but it will probably change the way society works as current workers learn how to use the power of this new technology.

The Bureau of Labor Statistics says that insurance companies and other related businesses have slowed down their hiring to about 1,100 jobs in October. This was less than the number of new hires in September (3,900) and July (8,300), according to the BLS.

There have also been layoffs at insurance technology companies. Earlier this year, Hippo, Branch Insurance, Corvus Insurance, and Pie Insurance all said they were letting people go. Thimble, NEXT, Lemonade, and Root were some of the insurtechs that cut staff last year.

Understanding the role of a Managing General Agent

Without having to incur the usual costs of expansion, MGAs can provide insurers with an affordable way to enter new or niche markets.

What is a managing general agent? This piece will focus on giving a clear definition of managing general agents (MGAs) instead of going into detail about their uses, history, and growth.

The following list of factors determines whether a person or thing is an MGA:

1. Anyone or any group that manages all or part of an insurance company’s business, such as the restricted administration of an insurance company’s division, department, or underwriting office; and

2. Acts as an agent for that insurer by doing the three things below, either by themselves or with other companies; this is true no matter what the agent’s title is (e.g., “agent,” “MGA,” etc.) or whether the MGA is authorized by the insurer to do these things.

A. Writes gross direct premiums equal to or greater than 5% of the insurer’s policyholder surplus (as shown in the insurer’s most recent annual statement for any given quarter or year); or

B. Underwrites gross direct premiums equal to or greater than 5% of the insurer’s policyholder surplus (as shown in the insurer’s most recent annual statement) in any given quarter or year; or

C. Either

i. Changes or pays out claims worth more than $10,000 each; or

ii. Negotiates coverage on behalf of the insurer.

In general, look at MDL 225, which is the NAIC Managing General Agents Act.

In short, an MGA is a person who oversees how an insurer does business, writes some of the insurer’s business, settles or adjusts some of the insurer’s claims, and either works with the insurer to arrange reinsurance or brings in new business. Things aren’t always so simple, though.

Unique aspects of each state

All 50 states, the District of Columbia, and the Virgin Islands may have different rules and thresholds than the Model Act. This is because the above summary is based on the Managing General Agents Act (the Model Act) of the National Association of Insurance Commissioners (NAIC, id., § 2(D)).

Based on California law’s description of MGA, for example, it looks like a person or business can be considered an MGA just by negotiating reinsurance (Cal. Insurance Code §769.81(c)). On the other hand, Texas law has a very different—possibly more literal—definition of an MGA. It only looks at whether the person or organization can accept or process policies made and sold by other agents and whether they have control over an insurer’s local agency and field operations (see §19.1202(3) of the 28th Texas Administrative Code). Surprisingly, though, the New York rule sticks much more closely to the Model Act’s description of MGA, with no clear differences – check out N.Y. Comp. Codes R. & Regs. tit. 11, §33.2 – it lowers the amount of money that can be paid out for adjusting and changing claims from $25,000 to $10,000, which is what the Model Act said.

Exceptions. Obviously, the Model Act lets some people and groups off the hook from being seen as MGAs when they might otherwise be qualified for exemptions. To give you a quick rundown of these exceptions:

1. An employee of the insurance company,

2. A U.S. branch manager stationed in the U.S. of an overseas insurance company,

3. An associated underwriting manager who oversees all or part of the insurance company’s contractual activities and whose pay is not based on the number of written premiums; or

4. An attorney-in-fact for a reciprocal insurer or interinsurance exchange subscriber acting under power of attorney.

Because of the large amount of underwriting and production that would usually be too much for one person, many MGAs are businesses rather than people. Because of this, some states, like New York, have done away with the first clause and replaced it with the third one. As for the holding company act protection, it applies to all affiliates, no matter what services they provide to the insurance company (N.Y. Comp. Codes R. & Regs. tit. 11, §33.4(a)). This move gives captive agencies and the insurers that work with them a little more room to breathe. These companies do cost-effective underwriting and claims management in-house. It was likely partly caused by the huge rise in the number of hostage agencies that have been set up and used over the years.

License terms and responsibilities

What does it mean if you’ve proven that you meet the legal standards to be an MGA in at least one state? MGAs need to keep their licenses up to date in the state where the risk is located or where the insurance is based (NAIC Managing General Agents Act, MDL 225, §3).

Granting licenses

The rules for getting a license may also be different in each state. Most of the time, the MGA will need to keep another license in addition to its production license. It might even be necessary to have extra IDs for everyone who works for the MGA. Some states, like New York, don’t have a specific type of license. For example, an MGA’s producer license gives it a license. This means that the insurer is mostly responsible for any extra registration requirements, like making sure that the right MGA-specific appointments are set up and forms are filled out and sent in (see the OGC Opinion from December 18, 2002, and the Department of Financial Services’ Managing General Agent Appointment and Termination).

Responsibility

Becoming an MGA can mean taking on a lot of duties, such as more attention from regulators, binding contracts, and reporting obligations. These may be more important than any new license standards that might or might not need to be met.

As per the Model Act, “the MGA’s actions are taken to be those of the insurer for whom it is acting… an MGA may be examined as if it were the insurer,” (see NAIC Managing General Agents Act, MDL 225, §6. To be clear, that quote is all of Section 6 of the Model Act). It basically tells MGAs that officials will take their duties very seriously. As many who have helped producers through regulatory examinations at the insurer level can tell, these exams are not right for the average producer.

Also, the Model Act has a lot of complicated rules that must be written in every contract that controls the MGA’s services, even though it is the insurer, not the MGA, that is mostly responsible for reporting.

Key points

There are without a question many good reasons to become an MGA. For starters, MGAs can be a good option for insurers that want to get into a new or niche market because they don’t have to pay the normal fees. This means that any MGA that has the tools to let the insurer enter the market in question (for example, having previously approved goods) is in a very good position to make a lot of money.

Because of this, an agent who only brings in business would never want to be seen as an MGA unless they really do the things that a state’s MGA guidelines say they should do. This is why many people are told to get rid of the words “managing general agent” or “MGA” from their insurance policies. That word doesn’t seem to change the fact that someone or something is an MGA, so why even bring up the idea that you might be providing services that are only available to MGAs?

This increases danger and scrutiny from regulators for no reason, even if it’s small. For example, if a regulator looks at an agreement with the wrong title while looking at an insurer, the regulator may investigate the producer’s responsibilities and license status. Also, using the terms incorrectly could lead to confusion about the services covered by the insurance contract when there shouldn’t be any confusion at all.

You should think about this: “Do I underwrite insurance, adjust or pay claims, negotiate reinsurance, or even just manage elements of an unaffiliated insurer’s business?” If the answer is “yes,” you should look over the laws about handling general agents in each state where you have a producer license.