Our most philosophical president, Lincoln, once said, "The good thing about the future is that it comes one day at a time." If our friends at McKinsey are correct in their assessment of how insurance will work in 2030, this is indeed a blessing. We will have a good many major changes to wrap our heads around. McKinsey's new report, "Insurance 2030", shows us a world very different from anything we are used to. Let's sample a few of their predictions.
They suggest that underwriting, as we know it today, will cease to exist. Granted, their focus is on smaller, retail commercial risks, but their analysis makes it clear that, even where complex corporate risks are involved, most of the heavy lifting will be done by a combination of AI and machine-based deep learning operating against a constantly evolving array of highly detailed data sets.
Insurance will be usage based. Auto, for example, will not only be priced on a premium per mile by type of vehicle, it will also roll in surcharges or discounts based on the actual routes driven day by day. Insurance regulators will effectively be regulating algorithms, not rate tables.
Most claims will be handled with minimal or zero human touch since the data will be instantly accessible. An auto collision claim, for example, will use the data from the vehicle's on board reporting functions, a database describing the details of the location and the weather, and a few smartphone images of the actual damaged vehicle*. The vehicle's systems will report the incident, the driver will approve the report, and the claim will be paid the same day. Note that all of the pieces for this process are already in place. New trucks have ELDs (Electronic Logging Devices which work like the black box in airliners) right now thanks to recent Federal regulations. Only the "interesting" claims will require significant human involvement.
New and enhanced data will drive much improved risk monitoring, loss mitigation and prevention beyond what we see today. Systems will be able to intervene in real time in many cases, not unlike the automatic braking assist or lane-minding technology you probably have in your new car right now.
The McKinsey report makes a great, short read which will help you (re)conceptualize risk management to take best advantage of the developments coming down the road. These things will happen, ready or not. A different philosopher, Oscar Wilde, observed that "the only difference between the saint and the sinner is that every saint has a past and every sinner has a future." Unless you are a saint, we suggest getting ready to embrace the future. It's all we have.
*Your humble correspondent reviewed in some detail a new A/L intake application two years ago which can completely adjudicate most auto collisions within minutes of the initial notification. This is real.
COVID Up Close and Personal
We've all heard the old Indian saying not to judge another man until you have walked a mile in his moccasins. Well, that isn't really an old Indian saying at all. It comes from a poem, "Judge Softly," written in 1895 by one Mary T. Lathrap. Nevertheless, Ms Lathrap was on to something. We are notoriously bad at understanding events that happen to other people. It's easy to underestimate or misunderstand at one or two removes.
That's why we recommend a short essay on what it's actually like to have long duration COVID written by Peter Rousmaniere. Peter recently retired from a long career of writing about workers' comp for Workerscompensation.com and other industry rags. He appreciates the ins and outs of how COVID intersects workers' comp and he is an excellent writer.
Peter's first-hand account will tell you more about the day to day realities of suffering from long duration COVID than any clinical study written by healthy docs about their sick patients*. As he notes, this is a survey with a sample size of one, but we think the immediacy of his account will help any comp program manager see the off and on, physical and mental aspects of this affliction and understand what this means as you work with your own employees who encounter COVID.
Most comp claims involve one or two diagnoses from a very small array of common musculoskeletal issues. COVID, and especially long duration COVID, takes us to a very different place. We don't know what to expect. There are no "usual suspects." Peter breaks out the "brain fog" we hear about in COVID cases into useful subcategories and tells us what functions are impaired and what the process of recovery looks like.
Events here and abroad strongly suggest that COVID and its aftermath will be with us for some time to come, in spite of our remarkable progress with vaccines. Ms Lathrap was spot on. Take a walk in Peter's moccasins. You will understand so much more.
*But a very recent update of new clinical research on Healthline provides some excellent background. "Brain fog" is very real and blood tests show objective evidence of very untoward events taking place in the brain itself.
Quick Take 1:
Some people collect stamps, some coins. We hear that some folks still have their collections of Beanie Babies (remember them?). Here at the GB Journal we gather statistics and we just added a real gem to our extensive collection: according to the trade publication, Infosecurity Magazine, the average IT cyber security team gets about 174,000 alerts every week. That's around 25,000 every calendar day. And you think your email inbox is full?
An article in that other journal, the Wall Street one, has a very informative discussion of how organizations are coping with this tsunami of alerts by forming semi-automated fusion centers where raw alert inputs are consolidated and evaluated with specific, on point warnings then being forwarded to members of the fusion center. A number of government entities as well as corporations have set up fusion centers recently.
The article uses a center established by Mastercard as an example. "It's like a web of fusion-center connectedness," the Chief Security Officer of the company said. "As our fusion center sees something that affects one of our partners, we will share that with the partner, and our partners will share what they see with us." If you are not familiar with the burgeoning use of fusion centers, you might want to check out this article. Facing the growing onslaught of zero day exploits is not something you want to do alone and one center operator noted that centralizing the various IT, security and legal functions needed in a fusion center saved four FTEs, as opposed to each unit going off on their own.
Of course, you could try to parse those 25,000 alerts yourself. You won't need a hobby if you do.
Quick Take 2:
What if Your Supply Chain is All Weak Links?
Supply chain risk is a topic we have covered several times recently. In our own small way, our Journal may be one of the whole chorus of canaries in the US industrial coal mine. Supply chain risks seem to be cropping up everywhere. COVID has made a hash of carefully constructed supply mechanisms, including being a major factor behind the current critical shortage of chips. We are now beginning to see the ripple effects of the Great Texas Deep Freeze on supply chains and the picture is not pretty.
The Wall Street Journal has pulled together a neat overview of the knock-on impacts in one highly useful article. This and related accounts of the materials mayhem rolling out as we type this item are well worth your study if you have any complex supply chains in place, without which your finely tuned manufacturing operation becomes a very large paperweight.
One often subtle aspect of supply chain risk which the current slew of problems emphasizes is geographic location. Certain types of industries - like plastics in this example - tend to clump together for a wide variety of usually good reasons. But some major forms of risk, like weather, pandemics, and earthquakes, tend to take out entire regions. You might have a primary plastics supplier and two other secondary suppliers on-line in case your primary stumbles. But if all three are lined up along the Houston ship canal, you could be in big trouble right about now.
Geography remains a serious component of risk. Have you mapped your supply chains, the physical places and routes? Even more to the matter, are there common risk overlaps in the supply chains of your suppliers*? From what we can tell, our educational system does not seem to teach much about geography nowadays**, even while the threat of geo-risks seems to escalate every year***. Maybe we should all invest in some really big, detailed maps.
*Take a look at your iPhone as an example. 42 different countries were involved in making all of the components you hold in your hand, or 43 if we include the box it came in which was made in the Czech Republic.
**In the most recent (2015) US National Assessment of Educational Progress, three quarters of all eighth graders tested below proficient in geography. See above.
***The current Biblical flooding around Sidney in New South Wales illustrates yet another aspect of supply chain interruption. Both residences and commercial facilities on high ground are being swamped with snakes and spiders, many of them highly venomous, which are escaping the rising waters. The good news - your shipment's ready. The bad news - there's a banded krait curled up on the boxes. Whoops.
Say It Isn't So...
It is indeed a different world today:
The California Attractions and Parks Association, which represents Disneyland Resort, Knott's Berry Farm and other top amusement parks in the state, says screaming, shouting and hollering will need to be "mitigated" on roller coasters and other rides when parks reopen in April. (The Sacramento Bee)
Remember the tagline from Alien* - in space no one can hear you scream? Looks like we're there.
*Ridley Scott's original Alien movie (1986). If any of you millennials haven't seen it, check it out. Remember - real risk managers don't close their eyes in the jump scenes.
Words to Remember
In case you don't know the poem we quoted earlier, "Judge Softly," here is the last stanza:
And remember the lessons of humanity taught to you by your elders.
We will be known forever by the tracks we leave
In other people's lives, our kindnesses and generosity.
Take the time to walk a mile in his moccasins.
~ by Mary T. Lathrap, 1895