The Future of Risk

I just returned from the inaugural “Future of Risk” conference sponsored by The Institutes and held in Chicago.  Although there is considerable hype over “Insurtech” and “Risktech” in recent months, much of it is pie-in-the-sky aspirations that will not survive in the real-world of commerce.  This conference didn’t ignore the hype but it refreshingly balanced it with innovations that are already bringing benefit to the risk management and insurance industry, as well as the customers we serve.

Blockchain received significant attention at this conference, no doubt owing to the fact that The Institutes has taken a leadership role with the formation of the RiskBlock Alliance consortium that is preparing to launch a few of its earliest use cases and a software development kit for third party developers in just a few months.  I had the good fortune to participate in some workshop sessions discussing the next blockchain (or more accurately in this case, distributed ledger technology) use cases for the industry.  Certificate of insurance use cases are definitely gaining traction – and that’s good news for this element of the insurance industry that is best described as a necessary evil for many of us.

Other emerging technologies that will have great impact on RMI include artificial intelligence, machine learning, robotics, internet of things, quantum computing, and the common threads of security and privacy.  Of particular interest to me is the concept of quantum computing that promises computing power that is an order of magnitude more powerful than anything available heretofore.  The 128-bit password keys that we all rely on to keep our data safe today because it would take even a super computer several years to hack them, will be cracked in milliseconds by a quantum computer.  This means that new methods of security and authentication will need to be developed.  The good news is that they are!

In terms of technologies already making a difference, I attended a session on claim fraud investigation in the age geospatial social media.  We all know (or should know) that we must be careful with our privacy settings on social media platforms, and even then, we must be careful about what we post.  Fortunately, insurance claim fraudsters who cause higher insurance costs for everyone else, are not usually so careful.  It was amazing (and sobering) to learn how much meaningful information to combat fraudulent claims can be gleaned from Twitter, Facebook, Instagram, YouTube, Venmo, and others.

I could go on but I will conclude by saying that it was an enlightening conference that I plan to add as an experiential learning option for our Ferris State RMI students in the future.  They will be the lucky ones to use and further develop these technologies in their risk careers.

MAIA 2019

Five Ferris State students joined Dr. David A. Brown for the 2019 MAIA Convention at the Amway Grand Plaza in Grand Rapids, Michigan.  Students attended sessions to learn about resolving insurance coverage and claim disputes, the future of “InsurTech,” and privacy issues.  In addition, they participated in a networking happy hour, and heard from industry leaders on tax issues and innovation in the insurance industry.  The convention concluded with a trade show exhibition featuring dozens of insurance carriers and service providers.

My Insurance Career Story

A few days ago, I shared a YouTube video of “JB” from The Insurance Nerdery, along with a brief message to “tell your story,” which also happened to be JB’s main message in his video.  February being #InsuranceCareersMonth, those of us who have built successful careers in this industry need to share our stories more often and more vividly with young people who are trying to find their career path.  So here’s my story.

Like most young people, I wasn’t sure what I wanted to be when I grew up.  I began my college journey as a communications major, having great fun with my own show on the college radio station.  I envisioned a lifetime of playing rock-and-roll tunes on radio stations around the country.  By my senior year at Michigan State University, I had recognized the inherent career insecurity of being a “disc jockey” and had changed my major to “socioeconomics” – a blend of business, economics, and political science.  I began haphazardly interviewing for various business jobs at the MSU career placement office with no idea where I would end up.

One of those interviews was for a commercial underwriting trainee position with CIGNA, who was at that time a property and casualty insurance company.  Before the interview, I had to investigate what an “underwriter” actually did, and when I arrived for the interview I still wasn’t completely sure what the position was all about.  In spite of my insurance ignorance, my potential must have resonated with the interviewer as I won a second interview at the firm’s Grand Rapids office, and later an employment offer.  I accepted the offer, and another unintentional insurance career was launched.

The analytical aspect of the underwriting job was very attractive to me, and I dove into my training enthusiastically.  I developed a few of my own analytical tools as I learned to underwrite commercial property, liability, and workers compensation insurance.  The 1980’s also happened to be the dawn of the personal computer era, and I had developed some basic programming skills which I put to use in my early underwriting career.  That caught the attention of CIGNA managers who had me apply those personal computer skills to a few projects for the regional Director of Marketing and Underwriting Programs.  Before I knew it, I had earned a promotion less than two years into my career and earned a very nice bonus payout from the home office in Philadelphia.  I realized that this insurance career was not only interesting, challenging, and fun – but also lucrative.

In early 1990, I noticed that Meijer had posted a professional risk management job opening in their corporate office.  Curious about the risk management function in a major corporation, I applied and accepted the position.  I was fascinated by the broad scope of risk management which encompassed a multitude of risk control activities throughout the company and also the intricate risk financing and self-administration of liability and work comp claims at Meijer.  I worked on several exciting projects, including several that further honed my technology skills, as I met some wonderful professionals in my time at Meijer.

By the mid 1990’s I was ready for a new adventure, and my inner entrepreneur was beginning to emerge.  I decided it was time to try self-employment by selling my technology skills and risk management and insurance (RMI) expertise as a free agent.  Management Technology Services, Inc. was launched and I found no shortage of work opportunities managing risk management information and claim system implementation projects at several Fortune 500 clients.  I was able to travel all over the U.S. and engage in a variety of projects and interesting work at insurance companies and Fortune 500 risk management shops.

I also picked up a few custom software development contracts along the way.  I developed an audit management system for a large manufacturer, and a vendor compliance management system for a retailer.  The latter project evolved into a business process outsourcing platform that I used as the backbone of my next firm, Periculum Services Group. With Periculum, I was able to establish client relationships with many prominent risk management professionals in some of the largest companies and government entities around the USA, as well as a strategic partnership with a risk management firm based in Sydney, Australia, who proceeded to use Periculum technology in the Aussie marketplace.

I eventually sold Periculum and accepted an executive position with the acquirer, while I simultaneously turned my attention to a bucket list goal: earning my Doctorate in Business Administration.  Shortly after completing my doctoral studies, Ferris State University revived its Risk Management and Insurance academic program and needed faculty to coordinate and teach the program.  Great timing.  Here I am, nearly six years later, thoroughly enjoying this opportunity to encourage young, talented students to create their own RMI career path.

As I look back over my 32 year career, I can see just how fortunate I was to stumble across fantastic opportunities and meet some amazing people and valuable mentors along the way.  Like many, I truly did “fall into insurance accidentally” simply because CIGNA saw raw potential in an awkward but highly analytical 22-year old kid.

I’ve been able to do interesting, challenging, and meaningful work, that has directly and indirectly improved people’s lives.  At the very heart of risk management is the notion of protecting people and property from adverse outcomes.  That’s very noble work in which I take great pride.  I’ve been able to travel to 46 states, and enjoyed overseas travel to some exotic locales such as Udaipur, India and Sydney, Australia.  Although I spent several years of my career self-employed, I never had a shortage of billable client work.  I can testify truthfully that I have never had a day in 32 years when I was “unemployed.”  And at the risk of sounding immodest, this career path has blessed me with ample compensation over the years.  I continue to work today because I want to, not because I have to.

Such is the nature of the RMI career opportunity:  Neverending and varied opportunities, wonderful people, rewarding compensation, and noble work.  Imagine if I had pursued this career path with greater intention and preparation.  What more might I have achieved?  I am excited for the young students that actively seek this career path today.  The possibilities ahead of them are vast.

That’s my story.

-Dr. David Allen Brown

 

Insurance Innovation is NOT an oxymoron

As #InsuranceCareersMonth gets rolling, it is important to recognize that the risk management and insurance (RMI) industry is very active in developing innovations that keep people and property safer and improve the customer experience.  In spite of the stereotypical perception that insurance is reluctant to change and “clings to its paper,” there are some amazing things happening in the industry.  Although the industry continues to require new talent for claims, underwriting, and sales/marketing, some of the hottest RMI career opportunities exist among the science/technology/engineering/math (STEM) disciplines.

Quick example:  Innovation is alive and well at Lansing-based AF Group. (http://www.afgroup.com/news/af-group-investing-in-innovation-with-focus-on-customer-experience/)

Insurance Careers Month

Today marks the beginning of the 4th annual Insurance Careers Month, and it’s going to be an eventful month.  Next week I will be attending two separate events in Lansing, Michigan that are designed to highlight the many career opportunities in the risk management and insurance industry.  Later this month, I’m taking some of my students to the annual MAIA convention in Grand Rapids.  This is going to be fun.  Stay tuned.  #InsuranceCareersMonth

Sour Lemonade

lemonade

We’ve endured an unseasonably hot Memorial Day weekend here in Michigan.  A nice, refreshing drink of lemonade would seem to be ideal for the early arrival of July-like heat.  Right on cue, my personal email inbox included a message from insurtech firm Lemonade this morning, announcing that their refreshing brand of homeowners and renters insurance is now available in Michigan!  Woohoo!

Being a naturally curious insurance geek, I took the bait and began navigating Lemonade’s “easy” process for obtaining a quote.  Indeed, it is easy.  A few clicks and without many mental cycles consumed on my part and I soon had my monthly premium quote.  Then again, loading a gun is easy.  In the case of a Lemonade insurance quote and a loaded gun, the real danger lies in what you do next.  The untrained and uninformed can do great unintentional damage to themselves and others.

Now hold on… Yes, I realize that no one is going to die from obtaining or acting on a Lemonade insurance quote.  The comparison to a loaded gun is purely metaphorical for the financial harm that can result from making naive insurance purchase decisions.  I am admittedly painting an extreme analogy here.  I also should point out that I am no insurtech neophyte.  My resume is replete with RMI technology consulting experience – so I am by no means anti-technology or anti-innovation, especially when it comes to the insurance industry.

So how did my Lemonade quote experience go?  As I said earlier, it was easy.  In fact, it was fun.  The results, on the other hand, were underwhelming and alarming.  After watching the Lemonade engine at work (it took only a few seconds to “crunch the numbers” as it checked various “municipal databases”), I noticed that it rated my property pretty low for fire protection.  And yet, I am only 2.5 miles from the fire station and have a fire hydrant literally in my front yard.  Lemonade also suggested an insurance limit to “reconstruct my home” that I know to be woefully inadequate.  It also suggested a liability limit of only $100,000.  Far less than I currently carry, and truthfully far less than any middle class homeowner should have in this litigious era.  All of this for a premium 75% higher than I currently pay for my much broader homeowners insurance policy with a well known A++ rated insurance carrier.

Yes, I can manually adjust Lemonade’s offered limits upwards, but the cost goes up accordingly.  How many unwitting Lemonade buyers would do that?  Most of the insurance consumers attracted to Lemonade’s simplicity and slickness are likely to accept the suggested limits, implicitly trusting Lemonade’s obviously flawed artificial intelligence to have their best interests at heart.  After all, Lemonade (unlike those greedy legacy carriers) is the insurance carrier with a heart and a social mission, right?  And how do I go about adding my trust as a named insured since the home is actually owned in the name of my trust?  It also looks like I can add my scheduled property (e.g., jewelry, electronics, collections), but it is clearly a more convoluted process.  Over the years, I have invested time in conversations with my insurance agent, asking questions and discussing coverage options in order to assemble insurance protections that fit my unique risk profile.  I have purchased coverages that others have not, and removed coverages that I did not need.  What the general public (and hype-laden insurtech startups) often misunderstand is that insurance is not a commodity and individual risk profiles are not cookie cutter.  You simply cannot automate the nuances away with artificial intelligence – at least not yet.  And Lemonade, for all its slickness, still has a long way to go.

In the meantime, Lemonade’s marketing hype preys on the blissfully ignorant  insurance-buying public (and smartphone-dependent Millennials in particular) who are lapping up (no pun intended) the Lemonade platitudes.   How many others “take the bait” and without having an insurance background as I do, they bought the Lemonade policy and left themselves insufficiently protected with inadequate limits and perhaps inadequate (or unnecessary) coverage?  If my experience is typical for Michigan, then perhaps the overpriced, inferior coverage result will prevent many from buying the Lemonade insurance product.  But perhaps my quote was an anomaly and other Michiganders are out there today, receiving attractive prices from Lemonade and switching their insurance protection without the benefit of any professional insurance knowledge or assistance – except for “Maya” the friendly and spunky automated “agent” in the Lemonade emails and website.  Sorry, Maya – your Lemonade is way too sour for me.