2020 looks to be one of those years, like 1929 or 1776, which mark major turning points. Obviously, 2020 was the year of COVID. It also appears on track to mark the most costly accumulation of P&C cats ever seen in one year. It will be the year we all learned to Zoom call, mask up and forget shaking hands (or hugging or back patting). But it may also be the year in which the risk business finally went seriously digital and virtual.
The risk business (from underwriting and policy creation through claims adjudication and loss engineering) has been flirting with technology for ages, but in a fleeting manner of a little here and a little there*. We have always had the holdouts, the folks who believe their sharp pencil can still outthink AI applications, that risk transfer has to be based on a face to face, handshake-based transfer of trust, that decades old policy forms just need a few more inserts to be congruent with today's risks, and so forth.
The reluctance to move ahead in the ways that, for example, retail and manufacturing have done in the last decade or so has been a push-me-pull-you contest with clients as well as the whole risk related vendor ecosystem. The result has been a convoy approach, tailored to the slowest ships. Now the exigencies of dealing with COVID have pushed everyone - sellers, brokers, buyers, and all - into rapid change mode.
From what we see here at GB Journal World Headquarters, the urgent necessities of working through a pandemic have brushed aside more "we've always done it that way" objections than anyone would have thought possible on this date in 2019. Let's look at a few of the new, clean horizons.
Virtual thrives - when rooms full of underwriters and fleets of adjusters, and grandma's book club all learned to video conference, the world shifted on its axis. The necessities of working from home, moving at warp speed, and staying off airplanes at long last moved any number of industries, risk management among them, out of the world of postage, phone calls, and wet signatures. This had been happening inch by inch, but this year it moved miles ahead. We begin 2021 with a raft of radically more efficient and faster business processes in place.
AI and enhanced data capture get in gear - the need to rethink and reassess so many processes, from changing risks to policy issuance to claims handling has opened up a much greater movement into accelerating data capture and wringing every ounce of meaning from those data with AI (broadly defined). Doesn't fear of AI begin to seem a bit quaint now?
Cyber risk gets real - working from home, distributed decision processing, ever more complex IT environments have pushed loss engineering for cyber risks to a new height and importance. This is having a huge impact inside the risk business and outside in terms of how we all interact inside our digital ecosystems.
Telematics becomes business as usual - see our discussion of this item immediately below. The progress in this area in one year has been staggering and revolutionary.
We mentioned 1929 and 1776 earlier. Perhaps a more apropos date to describe the changes we have seen in 2020 would be the so-called K/T extinction event 66 million years ago. That was the day the dinosaurs died.
*With a few notable exceptions, of course, such as certain types of claim handling which have made a big push into smartphone apps, AI, and client reporting.
Seriously, Sid, this is gonna change how we manage risk big time.
The Roundup at the Telematics Corral
Late in the year is a time for looking back. We may want to list the famous folks who have died during the year (short answer - too many), we may want to look at new milestones (most of them seem to be COVID-related this year), or we may want to call out emerging trends. If we push COVID out of the way, we can make a pretty good case that 2020 has been the year that telematics became a real force in P&C insurance. The practical use of telematics has come to the fore in retail insurance, especially auto, but we strongly suspect that commercial insurance applications are bubbling up across many lines of coverage around us and will become significant in 2021 and beyond.
Let's take a quick look at what happened in 2020 while we were all masking up*.
Ford and Verisk Data Exchange collaborate to offer telematics data to insurers
LexisNexis Risk Solutions launches a product to deliver telematics data at point of quote
Volkswagen Car-Net selects CCC information Services as exclusive provider of telematics services
Ford-State Farm, Ford-Metromile, Honda-Verisk among insurer OEM telematics connections
General Motors aims to transform the auto insurance industry with OnStar Insurance
Oh - and I had a Progressive driving reporting chip installed in both of my cars this year. (But NOT my motorcycle - so there. We still have a few secrets.) Is there a pattern here?
The implied question for risk management is: how can we work with carriers, TPAs, and tech vendors to find other ways to apply telematics? The concept goes right to the heart of the insurance concept - the cost of risk transfer is based on the actual behavior of the risk activity instead of an underwriter's best guess based on often partial use histories or questionable comparisons (does anyone else drive like me?). As 2020 has taught all of us, actual use can vary dramatically during the course of a year, lowering some risks and sending others sky-high.
In what other ways can we measure risk by actual use? Note also that as we put more and better metrics to risk activities, we also capture reams of data for loss control analytics, allowing us to reduce the cost of necessary exposures even further. This is a dramatic win/win which can make risk transfer radically more cost efficient going forward.
Now, do all your fleet drivers understand what "drive through" means?
*For more details, see Stephen E. Applebaum's Newsletter ( email@example.com )
Quick Take 1:
To Vaccinate or Not to Vaccinate - That is the Question
The Washington Post recently published a very nice overview of the issues involved in whether or not employers may require employees to be vaccinated against the COVID virus as a condition of employment. As the Post writer, Jena McGregor, neatly puts the question: "For employers, many of which have kept workers home for months, it has opened a complex set of legal and practical issues: Can they require employees to take a vaccine? Should they offer incentives instead to encourage compliance? And what should they do if employees resist?"
What laws and regs might apply in this case? Fortunately, we do not have a lot of experience with pandemics and useful precedents appear to be thin or missing. We may be getting some guidance from Washington at some point. Christine Nazer, an EEOC spokeswoman, said in a statement the EEOC "is actively evaluating how a potential vaccine would interact with employers' obligations under the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, and the other laws the Commission enforces."
Of course, the EEOC and other government bureaucracies can only speak to their areas of regulation. State and local laws and regs may have a bearing in some cases as well as existing labor agreements or employment contracts and your employer liability policies*. Another wrinkle - the vaccines being lined up today have an emergency approval from the FDA. Does that qualify the question further?
A great many law firms - major big city outfits as well as local shops - have laid off associates, even junior partners, due to the nose-dive of regular legal business brought on by the widespread quarantine shutdowns. Looks like some of those folks may be rehired and soon if vaccination becomes a serious HR and labor relations issue.
There is no vaccine against all the legal questions, alas.
*We make no claims of medical expertise here at the GB Journal, but it may be worth noting that every common childhood vaccine triggers serious side effects in some small number of recipients every year, which is why the Health Resources and Services Administration maintains the National Vaccine Injury Compensation Program.
Quick Take 2:
Speaking of Debris Removal...
Let's interrupt our focus on the future for a moment and talk about an old-fashioned coverage which may be in need of some rethinking. An article in The Claims Journal calls our attention to a subject we might prefer to overlook, but it's right here on our doorsteps (literally):
The riots that took place in the Minneapolis-St. Paul area during the George Floyd protests caused serious damage to many buildings. Several building owners, to their dismay, found their property insurance policies failed to properly respond to the debris removal costs that were incurred to dispose of the damaged property and the uninsured loss owners incurred from the operation of building laws or ordinances, such as demolition costs.
The article goes on to look at a number of specific issues such as the cost of debris removal, demolition costs, rebuilding to new construction standards, and so forth.
The point is that property insurance is the type of "had it forever" policy that may have been rolled over from one program to another without having a thorough rethinking and modernization - until the Molotov cocktail* comes sailing through the window. What about an updated ordinance of law section? Have you ticked that box recently? According to the Claims Journal, it appears that a good number of insureds in the Twin Cities had not had that conversation.
Read the article. If you're on top of these issues, well, hell, give yourself a gold star for the day, go home early, put your feet up, and have your favorite potation. If not, stay late and get it done.
*The bottle filled with gasoline, topped with a crude igniter, like a burning rag, was first used by the Finnish army against Soviet tanks in the early days of WWII. They were called Molotov Cocktails in "honor" of the Soviet People's Commissar for Foreign Affairs, Vyacheslav Molotov, who claimed that the Soviets were actually invading Finland to feed starving people.
Molotov - said to be as close as he ever came to smiling
Say It Isn't So...
One more footstep into a truly different future:
A robot chef makes food for lunch at Minhang Experimental High School amid the global outbreak of the coronavirus disease (COVID-19) in Shanghai, China, December 1, 2020.
Words to Remember
At the tail end of 1699 the aging, one-time poet laureate of Great Britain, John Dryden, was asked to write the lyrics for a "masque"* as part of the royal New Year's celebration. Much like this year, 2020, the entire 17th Century had been one calamity after another. The last couplet of Dryden's last great work, "The Secular Masque", certainly applied to that passing century and, I think we may all agree, it applies as well to the passing of 2020.
'Tis well an old Age is out,
And time to begin a new.
John Dryden, 1699
*A masque was a combination of opera and ballet, usually based on mythological themes and very popular among the aristocrats at that time.
Note: We will be picking up the ongoing drama of risk management this coming January on Thursday the 7th. Until then, remember that a holiday is an opportunity to take the journey within ourselves that daily life usually does not permit. Travel wisely, learn much, return refreshed.