The March/April edition of Claims Magazine included an article entitled, “The Top 10 Risks for P&C Insurers in 2023“. If our golf game were better, we might think about it more. But it isn’t. So, we don’t. Nevertheless, key risk factor #1 was digital exhaustion. That made us think about why our golf game isn’t better than it is. The answer, like answer to digital exhaustion, is the approach shot.

Let’s start with the article, which says this about digital exhaustion:

Digital transformation in the industry has been underway for many years. The pandemic and changing customer expectations have further elevated the journey to the digital enterprise. Most in the industry have graduated from thinking that digital is only about customers to recognizing it spans the whole internal and external ecosystem. In practice, this results in dozens or even hundreds of projects to address the process, technology, data and organizational aspects of transformation … Managing the transformation has become a challenge at best and a nightmare at worst. Recent roles such as chief transformation officer, chief digital officer and others are providing strategy, governance, and senior-level accountability for digital initiatives. However, there is a sense of exhaustion among many at the pace of change and implementation challenges.

That’s what led us to wonder: What if insurers had made better approach shots to digital transformation?

Let’s Hit the Links

Simply put, the approach shot in golf is any shot intended to put the ball on the green, typically from a distance of at least 100 yards, and ideally in a position from which you can putt the ball into the hole. Unless you’re Bryson DeChambeau — or you have a Howitzer in your bag — that definition of approach shot typically excludes tee shots on par 4 or par 5 holes. In other words, if you’re expecting to get from the tee into the cup on anything other than a par 3 hole, you’re setting yourself up for disappointment and failure.

To extend the analogy, if you approach digital transformation recognizing you won’t be able to get from Point A to Point Z in one shot, the incremental steps comprising Points B through Step Y will be easier, far less frustrating, and much more likely to succeed. That’s why it makes sense to start with a suite that’s already fully digitized, from which you can then digitalize everything from your distribution channels to your customer experiences.

Bruce Crampton, a PGA Tour pro from 1961 to 1975, once said, “Golf is a compromise between what your ego wants you to do, what experience tells you to do, and what your nerves let you do.” The same can be said for digital transformation in insurance.

If you balance your ego and your nerves, we’ll bring the experience and help you master the approach shot.

The man depicted here was born 200 years ago. What’s that? You don’t know him? If not, don’t worry. It’s not terribly surprising. And it’s okay. History can tend to obscure such people after a while.

His name was James Goodwin Batterson. He was born in 1823 in either Bloomfield or Windsor, Connecticut. The accounts vary. After working for a time at a print shop in Ithaca, New York, Batterson returned to Connecticut, at age 23, to found New England Granite Works. Though the business began as a cemetery monument business in Hartford. But Batterson soon established himself as a stone dealer and a building contractor. He introduced mechanical granite polishing when he created a lathe that produced round, polished stone columns.

Batterson was an artist, a historian, a scientist, and a lover of languages, becoming proficient in Greek and Latin. He spent several years in Egypt, becoming honorary secretary of the Egyptian Exploration Fund. He spent time in Europe, studying art and writing poetry. He was among the founders of the Hartford Arts Union and a trustee of the Wadsworth Atheneum for 40 years. In addition, he served as a member of the committee that created Hartford’s Bushnell Park.

During the Civil War, Batterson was chairman of the Connecticut State War Committee, serving as a construction consultant for the Union. As a result, President Lincoln appointed him building contractor for the Library of Congress building in Washington D.C. He also constructed the Masonic Temple in New York City, the Connecticut State Capitol in Hartford, the Connecticut Mutual Life Insurance Building in Hartford, the Mutual Life Insurance Building in New York, the Equitable Life Insurance Building in New York, and William K. Vanderbilt home, Marble House, in Newport, Rhode Island.

So, What?

Why should we know, let alone care, about James G. Batterson? While traveling in England, Batterson became impressed with the record and the success of the Railway Passenger Assurance Company. As a result, he determined to found a similar business in the United States. The Travelers Insurance company received its charter from the State of Connecticut on June 17, 1863. And Batterson is credited for introducing casualty insurance to the United States. As legend has it, on March 1, 1864, a local banker, James Bolter, jokingly asked Batterson how much it would cost to insure him up to $5,000 against accidental death for Bolter’s journey from the post office to his home. Batterson replied, “Two cents.” Bolter paid what amounted to The Travelers Insurance Company’s first insurance premium. Those coins have been kept by the company ever since. Batterson headed The Travelers until his death in 1901 at the age of 78. He he was posthumously inducted into the Insurance Hall of Fame in 1965.

Given achievements, it’s definitely arguable that James G. Batterson planted the roots of what’s become the property/casualty insurance industry in the United States. Consequently, he’s given the rest of us who fly in and around the industry the wings to do so.

He’s also given us an example of a very full life, very well-lived.

Matteo Carbone, an insurance industry strategist with a specialization in innovation, wrote a post for Insurance Thought Leadership called, “Lemonade: No Sign of Disruption Yet“. In the post, Carbone pointed this out:

Lemonade has written almost $370 million in premiums (showing 42% growth from 2020) … with a combined ratio (gross of reinsurance) above a 150% combined ratio in 2021. This means that, for each dollar of premium paid by the client, the companies’ risk transfer approaches a cost of more than $1.50. Almost the same has happened over the past three years. For each dollar of premium, claims cost 90 cents, including the loss-adjustment expenses … To acquire this (underpriced?) business, Lemonade invested almost 60 cents in marketing for each dollar of premium. All other costs add almost 40 cents. It doesn’t seem that behavioral economics, charity and storytelling have made any dent in the insured risks.

We’re not judging Lemonade, but this is what happens when insurtechs put the tech knowledge before the insurance knowledge.

It Sounds Good on Paper

According to Investopedia:

Insurtech refers to the use of technology innovations designed to find cost savings and efficiency from the current insurance industry model:

Theoretically, that all sounds pretty good. Bring in some new technology to innovate and disrupt a stodgy old industry. But as Albert Einstein said, “In theory, theory and practice are the same. In practice, they’re different.”

The fact is most carriers can’t afford to purchase premium at such high rates. Instead, they need to employ technologies that will work for them and for their particular business models. The good news is we have time, and time will tell whether the Lemonade business model will work. While we’re watching, though, focus on strategies, business models, and technologies that work for you now.

If it sounds too good to be true, it might be … at least until it’s proven.

In our previous post, we wrote this:

The new normals are change and uncertainty. That means The Great Awakening isn’t a one-time event. It’s necessarily ongoing, evolving, and unpredictable. We can evolve with it — embrace it, roll with it, and learn to make the most of it — or not.

Since publishing that post, we read this article — “Inside Twitter as ‘mass exodus’ of staffers throws platform’s future into uncertainty” — which was intended to present a number of ostensibly unintended consequences in the wake of Elon Musk’s acquisition of Twitter. The article, intended to be a how-not-to condemnation of Musk, said this, in part:

Scores of remaining employees at the social media company on Thursday appeared to reject owner Elon Musk’s ultimatum to work “extremely hardcore,” throwing the communications platform into utter disarray and raising serious questions about how much longer it will survive … a mass resignation effectively occurred … Hundreds of staffers appear to have called it quits … A similar series of events unfolded in the Slack channel earlier this month as Musk eliminated roughly 50% of the company’s then 7,500-person workforce … “Elon is finding out that he can’t bully top senior talent. They have lots of options and won’t put up with his antics.”

Taken at face value, it appears Musk attempted a power play and it backfired. That may not, in fact, be the case since Musk had this to say, “How do you make a small fortune in social media? “Start out with a large one.”

What If …?

Maybe what Musk did was a deliberate paring tactic. Given what he said, maybe he wanted to reduce bureaucratic overhead and create a smaller, more nimble organization. We don’t know. But we do know this:

If you want to grow an organization, keep it nimble, keep its morale high, keep its people motivated to contribute, and manage its growth strategically, you have to do five simple things:

1. Have a leader with a purpose and a vision, who’s able to articulate the purpose and the vision clearly, and who’s capable of finding capable managers who’ll subscribe to the purpose and share the vision.
2. Turn those managers loose to cascade the vision throughout the organization and inspire people to support it every day.
3. Let people in the organization act like owners, giving them the responsibility and the authority to make decisions, allowing small failures on occasion if the failure constitutes a valuable lesson.
4. Let people connect with the others in the organization with whom they interact constructively, and with whom they achieve efficient productivity.
5. Recognize and reward people for their contributions to the success of the organization.

Before we rush to judge Elon Musk, let’s manage the change and uncertainty in our own businesses. The best ways to do that are to communicate openly with people, to listen to them, to trust them, and to enable them to do their jobs and contribute, in the appropriate roles, to the best of their ability.

Let’s get to work.

Today is Halloween. Most of us expect to be scared today in some form or fashion by someone or other. Ghosts, gremlins, and goblins lurk about, waiting to yell BOO! when we least expect it.

If you have anything to do with software, you know ghosts, gremlins, goblins, and glitches have to be contended with every day. But if you think you have it bad, check this out, as reported by UTOR, a software-testing firm in Ukraine:

An extraordinary case happened in 2003 in a hospital in Grand Rapids, Michigan. A software bug in the patient database declared 8,500 people dead. All of them were safe and sound, but it was detected only after the investigation by insurance companies. The thing is, after a patient dies and a corresponding record appears in the hospital’s database, an insurance company receives a notification with the requirement to cover the treatment costs and pay compensation for the family.

We’d imagine, along with health insurance treatment claims, some insurance company also gets a claim for the death benefit on a life insurance policy for person who hasn’t yet bought the proverbial farm. Halloween or not, that’s pretty scary.

Frightening Numbers

If you’re tempted to wonder at the cost of software glitches, that information — along with almost anything else you might want to know these days — is surprisingly available. Here’s just one example: Raygun, a New Zealand firm dedicated to detecting software errors, reported:

According to the Consortium for Information and Software Quality, poor software quality cost US companies $2.08 trillion in 2020. These losses span all business sectors and include costs from operational failures, unsuccessful projects, and software errors in legacy systems.

Compared to losing more than $2 trillion to glitches, the prospect of facing ghosts, gremlins, and goblins one night a year doesn’t seem quite so daunting.

The remedy, of course, is arcanely known as The Two Ts — Trust and Test. If you trust your vendor and test the software to verify it’s free of bugs (along with ghosts, gremlins, goblins, and glitches), you’ll increase your chances of positive outcomes precipitously.

No tricks. All treats.

Happy Halloween.