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.

Because we work in the insurance industry, we do our best to … well … keep up with the insurance industry. Nevertheless, something PwC published earlier in the year — “Next in insurance: Top insurance industry issues in 2022” — managed to get by us, until now.

We were really grabbed by this headline: “The insurance industry is no longer predictable”. As we read on, we found this:

The business of insurance, which once was stable and predictable, isn’t that way anymore … climate change is irrevocably impacting certain risk profiles, distribution needs have become truly omnichannel and customers expect products tailored just for them … industry executives now have to make an array of deliberate and aggressive strategic choices to succeed … Compounding the difficulty of addressing these challenges is how the COVID-19 pandemic accelerated them.

No longer predictable? Was it ever?

How’s This Grab You?

If you consider the variables that have aways existed — market conditions, economic climates, consumer demand (or lack thereof), disasters (natural and unnatural), global conflicts, and myriad other things — that doesn’t feel much like stability or predictability, does it? And since we’re now in the 21st century, there are a few other things to consider. Here’s the short list.

• The internet of things (IoT)
• Telematics
• Mobile technology
• Data analytics
• Machine learning
• Artificial intelligence
• [Fill in your favorites here.]

Those things may not necessarily result in instability. But they definitely interject elements of unpredictability because they’re new and they’re different. New and different are the ways of the world. As long as we have new and different, we’ll have instability and unpredictability. Just make sure you’re prepared to take advantage of them as they became proven.

That’s Life

As hard as we try to avoid it, ignore it, control it, or change it, uncertainty is a fact of life. One could even argue that, without it, there’d be no need for an insurance industry. We’d all be healthy, live forever, and have no accidents. Actually, if everything were predictable and certain (or certainly predictable), there wouldn’t be any accidents. Then we’d all be healthy, live forever, and be bored to tears.

The only thing in life — and in the insurance industry — that’s certain is uncertainty. So, let’s just accept it and make the most of it.

Oh … and pay your premiums.

There was an opinion piece published in May by PropertyCasualty360˚. The title of it is, “Plethora of challenges face the insurance industry on the road ahead”. Most of the piece was fairly predictable. But this caught our attention:

Another troublesome challenge for the insurance industry is overcoming cognitive biases, such as recency or legacy biases. These biases cause policyholders to believe that because nothing bad has occurred, nothing bad will occur — until of course it does. Underappreciation of loss occurrence leads to underinsurance and a lack of resilience. Both are unfortunate, yet preventable.

We get the concept of cognitive bias. But we also recall the notion that insurance is not bought. It’s sold. And if inadequate levels of coverage are being sold because of policyholders’ cognitive biases, doesn’t that constitute greater claims liability for the insurance companies that underinsure their policyholders? There’s a kind of self-defeating circularity to that logic. Rather than cognitive bias, it seems to suggest cognitive dissonance.

Psychic Friction

According to Psychology Today:

In the case of insurance, cognitive dissonance may occur between these two modes of thought in the mind of a policyholder: (1) I live in a flood zone; therefore, I may be susceptible to considerable water damage. (2) I don’t want to pay for adequate insurance coverage to fully indemnify that considerable water damage.

It’s almost a cliché that the insurance industry is slower than most to adopt emerging technologies. But it does adopt emerging technologies, even if it does so at its own justifiably conservative pace. And if there’s anything the insurance industry has in abundance, it’s data, particularly experience data. So, as the insurance industry continues to adopt and assimilate machine learning and AI, it will become better able to predict loss potential. And those predictions will become increasingly accurate as more and more experience data informs the AI.

Looking Ahead

As that predictive capability continues to grow, insurers will be more able to plausibly have conversations like this:

Policyholder: I know I’m at risk. But I don’t want to pay for adequate coverage because I haven’t needed it yet.

Insurer: Yes. We understand the premium for fully adequate coverage seems high. But what will it cost if you don’t have that protection?

If insurers can keep policyholders from grinding their psychic gears now, they can keep them from grinding their teeth later.

Maybe then underappreciation of loss occurrence can become sincere appreciation for insurance.

It’s been a while since we opened the mailbag. But given the volume of cards and letters we get, we’re definitely overdue. So, here’s a selection of our recent fan mail:

Dear Finys,

A vendor recently told me I could have a complete policy administration suite implemented in 20 minutes. Is that true?

Sincerely,

In a Hurry
_______________________________________________________________________________

Dear Hurry,

We do believe that’s possible. But not on this planet. Should such a thing become available, we suggest you review The Good, Fast and Cheap Rule before making any commitments:

Everybody wants everything good, fast and cheap. But you can only have it two ways:

• Good and fast, but it won’t be cheap
• Good and cheap, but it won’t be fast
• Fast and cheap, but it won’t be good.

Good luck.

Finys

Then there was this:

Dear Finys,

My company’s spent $20 million over the past three years for a policy administration system. So far, the only line we’re able to write on the system is igloo coverage in Lapland. Should we consider switching vendors and cut our losses?

Sincerely,

Confused
_______________________________________________________________________________

Dear Confused,

We’re sorry to answer your question with questions, but we have two:

1. How much money do you have?
2. How much time do you have?

If you read our reply to Hurry, you know we can’t implement a new system in 20 minutes. But we can definitely help.

Best wishes.

Finys

And finally:

Dear Finys,

We’re an insurance company that’s been in business since 1820. The policy administration system we use is Old Steamy, shown in the photo to the right. It still works pretty good; although, it gets harder and harder to find people to maintain it. Is it too soon to consider replacing it?

Sincerely,

Wheezy
_______________________________________________________________________________

Dear Wheezy,

We hate to be the bearer of bad news. But we checked the market. The only vendor that promised to provide replacement parts for Old Steamy also promises to implement a new policy administration suite in 20 minutes.

Call us skeptical.

Cheers.

Finys

Until next time, please keep the cards and letters coming. And please let us know how we can help.

Thank you.