The Sandpiper — and the Insurance Industry

Sandpiper In.JPG

Sandpipers are tiny, somewhat top-heavy birds that, per Wikipedia, “eat small invertebrates picked out of the mud or soil.”  The shorebird variety — which I am observing daily, and humorously, whilst here on vacation at the ocean on Fire Island, NY — picks its prey from the wet sand. The waves crash on shore and, as the surf recedes, the sandpiper frantically rushes in, picking into the rich sand for its “small invertebrate” prey, only to then reverse course and run away quickly as possible to avoid the next wave that inevitably comes crashing in.

Sandpiper Out.jpg

Birds of a feather, the sandpipers do flock together. But, no mistakes about it, this is not a cooperative endeavor; what each bird pecks out of the sand, he keeps (and eats) on the spot. Sandpipers do not share. They will rise in the air and fly together when necessity strikes, but they do so unwillingly; their wont is to stay aground, avoid the incoming wave, allowing their feet to get wet but keeping their bodies dry.

Sandpipers are thus the great exemplar of “getting your feet wet” – but only your feet! And in this respect they strike me — I know, I know; you are on vacation; why are you even thinking about this!? — as the perfect metaphor for how the few thousand companies in the U.S. insurance industry, in particular the peer leaders in both P&C and Life and Annuities, react to each and every latest technological and marketing innovation. This is not the stretch it may seem; trust me, or let me explain:

Back in the mid 90s, “We have to ‘get’ a Web site!” Why and to do what? “We’ll figure that out but we gotta’ have a Web site!” [Guess what, fans? Fun Fact: They all “got” Web sites, and in due time they got Web sites galore. Today, everyone in the industry admits that after two decades of Web site development and endless re-designs and redevelopment, they cannot explain succinctly and convincingly just what all those Web sites are for. But that’s another story, for another day.]

Oh, yeah: There is that other domineering metaphor: Table stakes.

And so it goes with Direct Sales Online. “IBM and all these consultant guys are telling us that unless we start selling our products online we’ll be ‘disintermediated’… that Google and Amazon are coming for us!… Of course, we’ll have to careful here, ‘cause we don’t want to ‘disintermediate our intermediaries’”! [How quickly they picked up the lingo!] “Yeah, but we can find something to sell online… We can sneak something out…”

And so it goes with Social Media. “We have to be on Facebook!” “Or maybe we should be on Twitter!” “No, we need both.” “How about… Pinterest?” “I don’t think so, maybe, maybe not, but Videos! — we need videos, Vines and Periscope and stuff!” “Well, I don’t know what kind of videos we could do, but we gotta be on Linkedin for sure, you know, recruiting and stuff! Branding!”

And so it goes with The Cloud: “At least we need to get our feet wet with The Cloud… None of our important systems, of course; God forbid putting the Client System(s) [the Crown Jewels] – on The Cloud!… But we’ve got to get something on The Cloud!”

And so it goes with Big Data! “We need Big Data!” [(Don’t we already have too much data? But that’s why we need Big Data, and Big Data Analytics!] ) “And Data Scientists: Good Grief, we need Data Scientists and I can’t even stand the Actuaries!” Why? Because:

There are very powerful trends coming together to cause serious industry disruption. That can be a big threat, but if insurers start responding now and embracing the change, it could also be a big opportunity, said James Dodge, Senior Consultant, Advanced Analytics & Data Solutions, Milliman.

And IoT, Internet of Things. What does that mean for us in the Life business? Dunno, maybe it means Fitbit.

Blockchain! “No, truthfully I have no idea what that is, but we better get somebody to look into this Blockchain thing!”

And so it goes with Digital! It’s not enough, say the consultants, to use Digital; you must Be Digital

What have I left out? A dozen fads, and some other genuinely change-productive developments: SaaS, CRM Systems, CMS’s, advertising online, cross marketing, Drones, MarTech systems, Ad Tech systems, Programmatic, Machine Learning, AI…, und so weiter: We’re there, we’re (kind of) doing it; we’re getting our feet wet, and we’re (kind of) doing okay. We’ll survive; heck, like the consultants say, we may even thrive!

Okay, so sandpipers, as I was saying, are under a certain aspect humorous creatures. And in their own inimitably delightful ways, so are the insurance companies that put themselves through these continual frantic and frenetic gyrations when they’re confronted with the next inevitable wave of technological and marketing innovation. “We need to get our feet wet… But only our feet!”

As the Frenchman said: It is to laugh…

But: Not so fast: The sandpiper’s behavior is indeed humorous from the Olympian point of view: Rush in, rush out; repeat. Repeat all day long. Repeat every day.

But, hey, let’s not miss the reality that this works. The sandpiper does a hard day’s work; he survives; he thrives; he prospers. He lives off the ocean, but not in it; he gets his feet wet, but he’s never swallowed by the waves, no matter how strongly and unpredictably they buffet the shore. The sandpipers were here last year; they’ll be here next year, and all the years after, until maybe climate change dooms them once and for all. But for the foreseeable future they’re here to stay.

And maybe, just maybe – and oh, how I regret even to think this, let alone say it out loud! – maybe the same can be said for the insurance industry!?

A little (true) story: Back in February 1997, shortly after the premiere of on the Web, I (the “Webmaster”) sat in a room surrounded by the full complement of senior executive officers, “invited” by the CIO and mandated by the CEO, to listen to VP John Patrick of IBM preach the gospel of the Internet. This was thought of by them, when they thought of it at all, as simply the latest craze, as the next CB radio, or perhaps the next Hula-Hoop, to stretch back into their likely memory space. (Ironically, but not too surprisingly, Mr. Patrick’s gospel had much more success with IBM’s many customers than it did within IBM itself. That’s another different story to tell.)

It was a true “Come to Jesus” meeting:

It’s good that you guys have a Web site now – but that’s just table stakes. I’m here to tell you, within the next five years, you and your blessed agent sales force are going to be out of business! You will either use your Web site tomorrow to sell directly online to customers, or in five years you’ll be history! I know, I see it in your faces, you don’t believe, you doubt: But you must get used to the idea, to the reality, that your agents are today already historical relics. The new world is the Internet and your old world — recruiting and training agents to sell face-to-face over the kitchen table — is disappearing as we speak. The Internet will disintermediate your business within the next five years!

That’s not an exact quote, of course, after all these years, but it’s damn near exact; it was the very essence of Mr. Patrick’s deliberately shocking sermon. (I’m so happy I was there to be able to witness in person the look on the collective face of our senior execs: They were incredulous; they were indignant; they were besides themselves; they were, as it were, to use the alien but most appropriate metaphor, gobsmacked. As a moment, it was for me… a Priceless memory.)

But guess what? That. Did. Not. Happen. New York Life’s vaunted sales force didn’t get disintermediated in the next five years, by 2002; and it hasn’t been disintermediated 20 years later, in 2017. And realistically it just isn’t going to be disintermediated any time soon. It. Will. Not. Happen. (any time soon)…

Not to say that everything at New York Life is just as it was prior to Mr. Patrick’s sermon. Quite the contrary; not everything, but most everything, did change, in myriad minor and, in some cases, major ways. There was no “Internet wave” that the company did not consider carefully, elect or reject, nor participate in intelligently when elected, if only so often half-hardheartedly and hence half-successfully. We definitely got our feet wet and we never got crushed by any seemingly seismic Internet waves.

And the same is, of course, by and large true of the insurance business generally. Today’s business world is indeed quite distinctly different from the insurance world of 20 years ago. And the “Internet” has indeed had and – prophesying here! — will continue to have a mindbogglingly major impact on how that biz does biz. But, so far at least, Google and Amazon and “the Internet” have been way too busy with other things to disintermediate and eviscerate the insurance biz. And the insurance biz itself has been way too busy getting its feet wet and to be fitfully, painfully learning – against all its instincts, it must be said — to allow itself to be disintermediated, to be eviscerated, by “the Internet.”

This business, with virtually all its various business models tweaked and transformed in so many different and simultaneously reluctant and skeptical and beneficial ways — by the Internet and many other undiscussed developments — still does a heck of a lot of profitable business. And I still more than kind of wish that Mr. Patrick had been proven to have been more prescient, let’s say mostly right, because the insurance business, even after 20 years of tortured turmoil, of dipping in and out of every technological phenomenon that spills onto the shore, still needs that kind of kick in the ass.

So don’t get me wrong; I’m not an apologist for the industry, God forbid, and I am not preaching any kind or degree of the triumphalism manifested by those dimwitted empty suits unwillingly sermonized at New York Life in 1997. But, let’s face it, Mr. Patrick was just dead wrong back then, and 20 years later his prediction — if it is ever to be proven — cannot be proven any time soon. And that goes even for the whole phenomenon of Insurtech – even for the exultantly self-satisfied Lemonade! — which, I think and predict, in the manner of John Patrick — will be swallowed whole, with all that’s wholesome incorporated, while the unsavory is spit out.

No, like the sandpiper, frenetic and silly as it seems viewed sub specie aeternitatis, the insurance industry survives – and thrives – with its feet wet but its top-heavy body mostly dry and intact, however fearful it must continue to be of the ever-rising technological and marketing surf.

Say it ain’t so, Joe. But, no, (I believe, I think) it’s so.

Posted in Advertising, Consultants, Digital, Disruption, IBM, Innovation, Insurance, Life Insurance, Marketing, P&C, Social Media | Tagged , , , , , , , , , | 1 Comment

Nobody Knows Anything

“Nobody knows anything,” William Goldman famously said of Hollywood. I think the same is true of Baseball: Nobody knows anything.

  • Hit it up the middle.
  • Hit it on the ground.
  • Hit it in the air.
  • Hit it where they ain’t. (Wee Willie Keeler)
  • Swing hard in case you hit it. (My Little League coach and a million others)
  • You can’t hit what you can’t see. (Walter Johnson)
  • He’s got to concentrate on that pitch.
  • You can’t think and hit at the same time. (Yogi)
  • You can’t hit and think at the same time. (Yogi)
  • How the hell can you think and hit at the same time? I never said it. (Yogi)
  • That’s a wormburner.
  • Baltimore Chop.
  • Frozen rope.
  • Can o’ corn.
  • Duck snort.
  • Line drive clothesline.
  • Chuck and duck.
  • Snow cone.
  • Pitch him inside.
  • Pitch him on the corners.
  • Chin music.
  • Make your strikes look like balls and your balls look like strikes. (Greg Maddox)
  • It helps if the hitter thinks you’re a little crazy. (Nolan Ryan)
  • It’s outa the park.
  • It’s outa here!
  • That’s foul!
  • That’s fair!
  • That’s on the line.
  • That’s off the pole.
  • That’s over the fence.
  • That’s over the wall.
  • That’s off the wall.
  • That’s in the corner.
  • Two-thirds of the earth’s surface is covered by water; the rest is covered by Garry Maddox. (Harry Kalas)
  • He dropped it!
  • He’s pitching out of a jam.
  • He’s looking tried.
  • He’s finished.
  • Stick a fork in him; he’s done.
  • He’s getting (killed, shellacked, shelled, murdered… )
  • It ain’t over till it’s over. (Yogi)
  • This is a real slugfest.
  • This is a real pitchers’ duel.
  • This is a hitting contest.
  • He muscled that one…
  • A walk’s as good as a hit.
  • Go with the pitch…
  • Good cut.
  • Bad swing.
  • Fooled on that one…
  • He didn’t get fooled on that one.
  • Just missed that one.
  • He didn’t miss that one!
  • He missed a bad pitch.
  • He missed a good pitch.
  • He’s seeing the ball well.
  • He’s not seeing the ball well.
  • He took a good cut at that one.
  • Didn’t have a good cut at that one.
  • That’s a home run!
  • That’s an out.
  • That’s a home run in any other ball park.
  • Easy out.
  • Kiss that one goodbye.
  • He had his best stuff today.
  • Didn’t have his best stuff today.
  • He’s looking confused at the plate.
  • He’s seeing everything today.
  • Good hitting beats good pitching every time, and vice versa. (Yogi)
  • It’s deja vu all over again. (Yogi)
  • I never blame myself when I’m not hitting. I just blame the bat and if it keeps up, I change bats. (Yogi)
  • His stuff is flat.
  • His stuff is electric.
  • He’s hitting the corners.
  • He’s lobbing it in there.
  • He’s steaming it in there.
  • The Eephus pitch!
  • He’s trying to overthrow.
  • He hits in the clutch.
  • He doesn’t hit in the clutch.
  • He just missed it.
  • Even if he caught it he couldn’t have thrown him out.
  • That’s gonna get the job done.
  • That’s not gonna get the job done.
  • He needs a hit bad.
  • He needs a strike bad.
  • He needs a strikeout.
  • He needs a popup.
  • He walked him.
  • It’s up the middle.
  • It’s down the line.
  • Is there a more valuable (pitcher, hitter, pinch hitter, catcher, first baseman…) in the game today?
  • Busted bat, base hit.
  • Dying quail.
  • A moonshot!
  • He broke his wrists.
  • He didn’t break his wrists.
  • A perfect bunt.
  • A bad bunt.
  • He can’t bunt.
  • They’re playing in.
  • They’re playing shallow.
  • They’re playing deep.
  • They’re playing no doubles.
  • They’re playing the corners.
  • They’re playing for the bunt.
  • They’re playing for the sacrifice.
  • They’re playing for a ground ball.
  • They’re playing for a double play.
  • They’re playing for an out.
  • They’re playing for the big hit.
  • He’s a doubles machine.
  • He’s a strike machine.
  • He’s a singles hitter.
  • He’s all or nothing.
  • He a heavy hitter.
  • He’s a hit or miss hitter.
  • He’s a classic lead off hitter.
  • He’s a classic clean up hitter.
  • He’s five tools.
  • He’s a classic knuckleballer.
  • One base at a time.
  • Grand slam!
  • Small ball.
  • He cleared the bases.
  • He left the bases loaded.
  • He popped it up.
  • He can’t buy a hit.
  • He can’t make an out.
  • He struck out the side.
  • He can’t buy a strike tonight.
  • He couldn’t strike out my grandmother.
  • He couldn’t hit my grandmother.
  • He’s a gamer.
  • He’s a horse.
  • He’s carrying the team on his shoulders.
  • He’s not on his game.
  • He’s painting the corners.
  • He’s wild.
  • He’s wild in the strike zone.
  • He’s unhittable.
  • He owns this guy.
  • He struck out swinging.
  • He struck out looking.
  • He struck out again.
  • He never strikes out.
  • An error.
  • ANOTHER error.
  • What other sport not only kept a stat as cruel as the error but posted it on the scoreboard for everyone to see? (Chad Harbach, The Art of Fielding)
  • Exit Velo
  • Launch Angle
  • WAR
  • VORP
  • OPS
  • Spin Rate
  • WHIP
  • Can’t anybody here play this game? (Casey Stengel in re: the Mets)
  • Cold as ice…
  • He is HOT!
  • This team has fallen asleep.
  • This team is waking up.
  • The Yankees are my daddy. (Pedro Martinez)
  • It’s getting late early. (Yogi)
  • You know, i was in New York on business so I had to listen to the Yankee announcers call the games, and one of them kept talking about “regression to the mean” and at first I thought here’s this guy just making excuses for this team’s that just really not doing all that well right now. Fucking Yankees, but then i thought, no, well, he’s right: .330 hitters who aren’t historically .330 hitters just can’t keep up that pace, they slack off or whatever and eventually return to being the .260 or .270 hitters they historically have always been. But then how do you account for guys who don’t regress to the mean? Guys in the game sometimes DO hit .330 when everything in their past says they shouldn’t be able to do that. (And of course in today’s game we assume they’re on some steroids.) Maybe, but maybe they redefine, for a time at least, their “mean.” And the same goes for teams: this team should be like 80-80 but maybe everything goes right for them and they end up 95-65 and win the Division. Nobody knows anything is what I think, especially when we think we know everything because we have stats on everything. Maybe everybody regresses to the mean except when they don’t. (Self-described “Red Sox Nation fan” calling in to a TV talk show, best as I can remember his rant.)
  • “The United States Office of Strategic Services sent former major league baseball catcher and OSS agent Moe Berg to attend the [Werner Heisenberg] lecture carrying a pistol, with orders to shoot Heisenberg if his lecture indicated that Germany was close to completing an atomic bomb. Heisenberg did not give such an indication, so Berg decided not to shoot him, a decision Berg later described as his own ‘uncertainty principle'”. (
  • That’s baseball, Susan. (David Cone)



Posted in Personal, Uncategorized | Tagged , ,

Lemonade, Inc.: Part Deux

Well, it’s not everyday you publish a Blog post about a relatively new company within the insurance industry, and a couple days later the CEO of said company offers an interview in which he says, among other things, You, sir, have your head up your, uh, in a dark place.

Here’s my dark place post: Lemonade Inc.: Hype, Trust, Transparency, Mutuality. Since I can’t count on you having read the piece, here’s the gist: (And I must note, the piece is about a lot of stuff besides this):

Lemonade, Inc. is more of a P2P (peer-to-peer) company with AI (Artificial Intelligence, Scripts, Chatbots and, of course, Big Data) bells and whistles, than it is an AI company with a sexy P2P front end.

Why does that matter? Well, maybe when all this comes out in the wash, it doesn’t matter at all — but if it does matter it’s because P2P seems suspiciously like what the insurance biz has historically known as Mutuality — the recognition and even celebration of mutual interests of insureds and insurers. And as something with those particular historical legs, that could matter, to both Lemonade itself and to the insurance business in general.

I’m confident about my evaluation of Lemonade but I admit to feeling totally blindsided when Lemonade’s CEO, Daniel Schreiber, said, a couple days after my post, Meh…, No, we’re really all about the AI, screw the P2P, it’s not really important.

Here in his own words:

We’re actually using that term [peer-to-peer] less. Basically, when you buy Lemonade insurance, we ask you to choose a charity that is near and dear to your heart. We create a group, in a sense, of peers who are defined by their common cause. The “peer” element is using the member’s premiums to pay claims and if there is money left over, it is given to their common cause. We had expected it to be something that would help people understand the model, but it generated more questions than answers. We decided if it’s not helpful, we won’t ram it down anybody’s throat (emphasis mine; KJH) — we’re not hooked up on one title or descriptor.

Now, it’s interesting, if admittedly nitpicking (though not from a philosophical perspective, which is actually what we’re talking about here: What is the essence, the purpose, the point of this company?), to notice that Schreiber does not say that “the model”– P2P — has actually changed, but rather because “people” don’t necessarily seem to understand P2P very well, it’s “not helpful” to promote it in that way or “to ram it down anybody’s throat.” Which I take to mean: We’d rather market ourselves as AI than P2P; AI works better than P2P from a marketing (“people understand”) POV.

So I really can’t take Schreiber’s seeming about face vis-a-vis P2P and exaltation of AI (plus Behavioral Economics) all that seriously. If he thinks that AI can work marketing miracles that P2P can’t, or hasn’t so far, so be it. He’s certainly in a better position than am I to judge the marketing power of P2P for Lemonade so far — and note that we’re talking about a few scant months of experience at this point  but he has not said that “the [business] model” of Lemonade has been fundamentally altered. Rather, we’re just going to emphasize AI from now on. (Like, we got a whole lot of really great pub whiz on our three-second claim turnaround so let’s go with that rather than try to ram P2P down anyone’s throat…)

Well, FWIW, I think he’s wrong. He’s the CEO and I’m just an observer, but: Nobody really cares about paying claims in three seconds, except insurance pundits who now set the theoretical claims-paying bar at three seconds and must then, consequently, look for  two seconds, or instantaneous claims-paying — which I think is  actually nobody, including the guy who got the three second satisfied claim.

Do I want a Chatbot? Yes! Do I want a quick claim turnaround? Yes, of course! But if that’s what I want — if that alone satisfies me — and if I don’t give a damn about the nature of my claim and how it will impact the “cause” I’ve chosen to identify me as a Lemonade customer (that “charity that is near and dear to [my] heart”) — then woe betide Lemonade’s reinsurers, because they’re going to get fucked, excuse the expression, big time, and so too then will Lemonade, in short time!

To think that I, as a Lemonade customer, will identify more with the purely transactional nature of its smart and fast onboarding and claims processes rather than its P2P or affinity or mutuality business model — well, that’s a bridge too far, and I think it’s a bridge too far even for our caricatured Millennials who, yes, indeed, want fast and smart and want it on their phones. Nope, your tech is great, fast is cool, and I love it, but that’s ultimately not why I’m buying from you. Can I explain to Mum what P2P is? Probably not, but I think I kind of get this cause thing, and I know damn well I can’t explain the Artificial Intelligence stuff to her any better…

Another point: Mr. Schreiber says:

Lemonade is an insurance company built on artificial intelligence and behavioral economics. Those are the two pillars of our business.

So much for “we’re not hooked up on one title or descriptor.” Yes, you are, one way or the other. Every CEO knows s/he must be able to articulate the company in “one (or maybe a few more) title or descriptor. That’s the least of what you’re there for, for goodness sake.

And then let me ask: What is the point of Behavioral Economics when you take away P2P and are left only with AI to explain your value prop? I suspect that Dan Ariely, the Chief Behavioral Economics Officer, is now asking himself that very question. (Hope you kept your academic position, Dan.) Face it, all those BE principles really only make sense with the P2P model and are effectively irrelevant to the AI. OK, technically, there’s some crossover there with how you design some of the onboarding and claims processing stuff online, but you really wouldn’t want to hang your job security on that… (What’s the position of a BE guy in a non-P2P AI company? Unemployed.)

But I actually think Dan’s safe for now. Lemonade’s still a P2P company — for now. If Mr. Schreiber really wants to deep-six that, though, and hang his company’s hat instead on cosmically super fast AI — or insurance company as insurtech rather than insurtech that enables a more meaningful insurance company — then perhaps all the talk and expectations around Lemonade will turn out to be, well, just what it seemed to be at the beginning:


But if that’s truly the case — that Lemonade is not really an insurer at all but just another insurtech — then put yourself up for sale, for goodness sake, let the VC guys recoup their investment. Just spitballing here, but wouldn’t this be a nice little investment for, say, Allstate? Or maybe, say, the Guardian? Not your type of business now, but rental and homeowners with sexy AI — three second claims-paying! — could be an excellent entree to the elusive Millennial market. Just sayin’…

Posted in Disruption, Innovation, Insurance, Marketing | Tagged , , , , , , ,

Lemonade Inc.: Hype, Trust, Transparency, Mutuality

I’ve been excited by the advent of #Lemonade Inc. since I first heard about it early last year. If you’ve had any experience in the insurance biz over the past few years, when insurtech became a thing — or over the last several decades as you’ve watched life insurance in particular become less and less of a standard financial backstop (at the least) and more and more of an endangered financial species — how could you not be excited by a peer-to-peer (P2) insurer with an essential reliance on Artificial Intelligence (AI) — not to mention a boatload of new VC investment? If you follow developments in the insurance biz to any serious degree, you had to be excited by Lemonade (if not perhaps equally optimistic about its disruptive success).

But that’s exactly been my problem with Lemonade. From the rumors first circulating about it to its first official press release, we’ve been victim to an unending cascade of breathless:

And it’s wearying; it just wears you down after just the first dozen or so articles, blog posts, excited conference talks, social media musings, etc. Some of this, of course, is just your standard hype of anything new, even about the insurance biz, about which, frankly, who gives a damn  except insiders (and that’s more likely to be us pundits than the insurance execs able to actually do anything about it — like, understand it and intelligently assess its true innovativeness and capacity for serious disruption)? Most of it, I believe, however stems from insurance folk with deep-seated inferiority complexes who’ve been captivated by all the greater and more bombastic hype thrown up in the Banking Industry: Hey, bankers and fintech guys, we’ve got some pretty interesting insurtech stuff over here — we’re catching up to you, maybe, you know?

Warning: BIG DIGRESSION here on banking vs. insurance and fintech vs. insuretech. By all means, skip way down if you wish to avoid this. If not… then let me state flat-out: The trope that, in respect to Technological and Digital Transformation, “Banking is years ahead of its overly conservative and cautious and blinkered (or head-in-a-dark-place) Insurance brethren,” well, that’s BS. While it’s repeated endlessly on the insurance side and just arrogantly assumed and not usually worthy of comment on the banking side (beating a dead horse?), it just ain’t true. Yes, the hype in re: banking disruption and innovation is greater, louder, more persistent, and greatly more self-assured than anything you see and hear in the Insurance biz — but it’s still hype and it’s still BS.

Take a look at “These are the top trends that will define the insurance industry in 2017,” a fine and fully representative example of year-on prognostication of “top trends” and “what you need to know” in re: the insurance biz from Business Insider. Since not all these prognostications are directly relevant to my BS accusation, I’ll spare you the entirety, but there are several points that are quite relevant and those I list below.

2. Midsize and larger insurers are making massive investments to transform their businesses into digital service providers. This transformative process is impacting not only legacy systems, but also decisions about which firms—including insurtech vendors—they invest in, partner with, or purchase.

4. Highly skilled advisors that help clients through uncertain times with complex solutions will become more difficult to find and retain…. They are looking for advisors able to consistently execute on being a trusted advisor to client senior management teams while also selling the full product solution set.  

5. Artificial Intelligence (AI) will evolve from a buzzword to a critical capability that helps drive better outcomes for clients (e.g., advice tailored to their specific and complex needs), increases efficiency for insurers, and solves for talent shortfalls in insurer advisory skills…. While low-value clients may receive digital self-service AI advisory interfaces, higher-value clients will still be relationship managed. 

6. Blockchain is moving from prophetic transformational hype 18-24 months ago to a medium-term reality. 

8. To compete against specialist providers, insurers will purchase, license or develop their own smart analytics to suggest appropriate solutions, leverage known data to prepopulate/streamline applications/new product set-ups, and wrap it all together with easy-to-use integrated dashboard analytics.

9. The balance of power will shift, with insurtechs aggressively seeking out insurance partners the same way insurers were aggressively courting insurtechs not long ago. 

11. End users will benefit from the ability to aggregate data across multiple providers. Insurers , meanwhile, face the risk that a insurtech or other provider will become the front-end interface, relegating the insurance providers to commodity processors or utilities.

Now, hold on: Am i saying that any of this isn’t accurate or true of insurers —  that consensus does not exist within the industry that these trends are real and happening? No, not at all: Actually, quite the contrary. All of this is indeed happening in the insurance biz. But here I must admit I’ve played a little trick on you, Dear Reader: The Business Insider article copiously cited from above is actually entitled “These are the top trends that will define the banking industry in 2017.” It never mentions insurers or insurtech at all. I just changed out the words banks for insurance companies/insurers and fintech for insurtech and, what do get but the exact same stuff written every day about the insurance biz?

It would seem, if my little trick holds water, that banking, per Business Intelligence, has been and is currently grappling with many of the same issues and challenges as insurance, experiencing many of the the same “disruptive” trends, and dealing with much of the same kind of VC-financed tech vendors and “solutions” as is insurance. In sum, the banking industry is apparently no further along in dealing with any/all of this than is the insurance industry. Apparently future banking imperatives are largely identical in nature (if not perhaps in scale) to those of the insurance industry, and banking is no further along in realizing them. Meaning no disrespect to the banking industry; no, my point is simply that insurance folk should take a more realistic perspective on their industry’s challenges and the progress being realized.

And, to add a digression within this digression — which, I promise, will be relevant to the discussion of Lemonade — we should also note the article’s obligatory and blithe assurance that banking is evolving “into more of a tech industry”  — without of course ever explaining how even massive investment in technology makes banking more of a tech industry than, uh, banking. Same of course needs to be explained (because it is also assumed on the insurance side) how even a massive investment in technology will make insurance into more of a tech industry than, uh, what it is and what it does, namely insurance. Banking remains banking no matter how much money you spend on fintech, and insurance remains insurance no matter how much you spend on insurtech.

Okay, now I’ve gotten this off my chest, let’s get back to why you started reading this post in the first place: Lemonade. Here’s how the company has been described in a recent piece on P2P start-ups:

Lemonade is a property and casualty insurance company that offers a fast, affordable and hassle-free insurance experience. Launching gradually in the US during 2017, the company is a licensed insurance carrier, offering homeowners and renters insurance powered by artificial intelligence and behavioral economics. By replacing brokers and bureaucracy with bots and machine learning, Lemonade promises zero paperwork and instant everything.

There is also a good write-up,  “How artificial intelligence could help make the insurance industry trustworthy,” from The Guardian. Notice they did not write “more trustworthy,” the assumption being that the insurance industry simply isn’t trustworthy at all. Sad to say, Lemonade indulges in that rhetoric as well. More on that below.

Clearly the new venture qualifies as insurtech: You could call it AI insurtech and you wouldn’t be wrong, what with its bots and machine learning and undoubtedly other sophisticated technology (instant everything). But you wouldn’t be adequately understanding it, either, if you failed to note its essence as P2P. That, I think, is what really distinguishes Lemonade from a host of other insurtech ventures and investments, and solidifies its status as an insurance company and not (just) a tech company or insurtech. 

If, as I believe, Lemonade is a P2P insurer with AI and Chat bot etc. technology, rather than an AI tech company with a P2P model, what’s the big deal? Well, consider that the description I quoted above came from an article about 31 P2P start-ups. For all the incessant buzz about insurtech, which is certainly real and not at all to be discounted — it’s still the “with” part of P2P with AI — I think it’s the P2P model that really captures the insurance entrepreneurial zeitgeist.

Marshall McLuhan famously said that we march backward into the future. He was not extending a compliment to the human race in saying so, but rather bemoaning the fact that we continually and erroneously interpret the new, which genuinely puzzles us, in terms of the old, with which we are already comfortable. I admit I may well be guilty of that here. Or perhaps I might be onto something in noting that just as often we fail to understand the significance of the new because of our forgetfulness of the old. Maybe we sometimes fail to understand the new precisely because we have forgotten what it may harken back and give new life to. If that’s possible, I’d like to claim that what is really radically “new” about Lemonade (and many other P2P insurance ventures) is not AI nor assorted other nifty technologies but something very old in insurance, and either forgotten or seriously misunderstood, namely Mutuality, the very basis and historical lifeblood of property and casualty and life insurance in the United States.

“The mutual/casualty insurance industry began in the United States in 1752 when Benjamin Franklin established the Philadelphia Contributionship for the Insurance of Houses From Loss by Fire,” according to the article on Mutual Insurance in Wikipedia. Today, discussions of mutuality in insurance almost always reduce it to one thing that it is not, i.e., it is a form of “private” ownership and corporate structure that is not that of public, stockholder insurance companies. While this distinction is true enough in its own way, it is, however, only trivially true of Mutuality. In fact, this type of financial distinction between mutual insurance companies such as State Farm or New York Life, and public stock companies such as MetLife or GEICO is, fatefully, trivial. Consider a more original, more expansive, more (shall we say) exciting understanding of mutuality offered in an article by Maddock Douglas:

When you consider the use of the word “mutual” in the context of insurance, its origins are less about the corporate form (i.e., mutual versus stock company) and more about the nature of how risk is shared among many people. That’s what makes insurance work. It’s about the idea of mutual interests, mutual things in common and mutual agreement that protecting something is more efficiently done with groups of people versus alone.

You would be hard pressed to find this understanding of mutuality offered today by the mutual insurance companies. Nope, no mutual interests, mutual things in common and mutual agreement — nothing about how risk is shared: Rather, the mutuals’ mutuality is all about what we are not: We are not public companies, we are not Wall Street, no, no, we’re, let’s call it Main Street. In fact, at the advent of the Great Recession in 2008, New York Life, to its chagrin, tried to hang its hat on the slogan We’re Main Street, not Wall Street — I say to its chagrin because the company slogan was immediately and roundly greeted with derisive hoots and, in no short time, the threat of a suit from Main Street regional banks!

I would like to suggest that what’s really exciting about Lemonade is this new old understanding of mutuality: how it doesn’t just underwrite but shares risk with its customers, how it has things in common and mutual agreement with its customers. Consider this statement from Lemonade’s chief underwriting officer, John Peters, in the third of the new company’s Transparency Chronicles:

We have the good fortune of having a strong, rapidly growing base of customers who trust us, and whom we trust too. Together, we are building a company for the long haul, and the early metrics make me feel like we are on the right path.

I’ll summarize those metrics shortly but I’d be remiss not to note the importance of the periodic Transparency Chronicles themselves, three issued within the first 100 days of the company’s operation: Name me a mutual or stock insurance company willing to try anything beyond the issuance of their standard and usually obfuscating Annual Report.

Metrics: For now, Lemonade sells renters insurance — what my good friend and industry expert Terry Golesworthy of CRG once called the start-up “crack cocaine” drug of the insurance industry — and also homeowners policies. Active Policy Count from 263 in  its first month of operation (September 2016, New York State only) to 2,223 in January 2017; “The majority of customers insured with Lemonade are actually new to insurance. They had never found an insurance company that they liked, trusted or interacted with, the way they wanted.”; 53% of premium dollars are from renter’s insurance and 47% are from homeowners’ policies; “We celebrate claims when they come in. We’ve had a few (six in 2016, to be precise) – exactly the number we expected based on industry statistics. What is different is that our claims have all been small – way smaller than industry averages.”; 25% of people who solicit a price, buy — “high by any standard and actually increasing”; the quality of risks runs from 42%, excellent; 38% very good; 10% average; 10% below average.

This is really very early days, as Lemonade itself points out, but, hype aside, it seems quite promising. (And please note that having secured approval for these products from the New York State regulators, the company has filed for licensing in 46 states and the District of Columbia: Lemonade Aims to Offer Insurance for 97 Percent of Americans in 2017.) Moreover, as I noted above, just revealing this info is promising from the transparency and trust points of view. So the AI part of the business would in fact seem to be performing well, and should in fact be continually improving. (See Lemonade Reports Insurance Claim Paid in 3 Seconds with No Paperwork, a “world record” already over-hyped.)  As for getting customers new to insurance (the established industry’s holy grail), it seems the P2P structure, it mutuality philosophy, is understood and paying off as well. Here’s a good description from the Guardian article quoted previously:

To demonstrate transparency… the insurance startup publicizes how it divvies up the premiums in running its service. Lemonade makes money by keeping a flat fee of 20% of a customer’s premium. It sets aside 40% mainly for buying reinsurance from firms such as Lloyd’s of London to cover major claims that exceed what the premiums can cover. The remaining 40% will cover claims, with whatever is left going to a charity of the customer’s choice at the end of the year. The company, which is registered as a public benefit corporation, includes the charity component to show it’s not just about making profits.

The charity component also helps to minimize fraudulent claims, said Lemonade CEO and co-founder Daniel Schreiber. “When they have a common cause that they’re raising money for, the thinking is that if they make a fraudulent claim, they aren’t hurting the insurance company but rather the charity or organization they have chosen to give back unclaimed money to,” Schreiber said, adding customers could feel extra guilty if they are raising money to benefit their communities, such as a school library or soccer field.

So, let me stop at that. By all means read the three Transparency Chronicles on the Lemonade Blog. Read Insurance as a Social Good there, as well. Yes, it’s very early days for Lemonade, very early days for P2P insurers (and insurtech). But old times also, at least in Lemonade’s reinvigorated understanding of Mutuality and, just quite possibly, too, the tiniest beginning of a new blossoming of trust and transparency in the insurance industry — should the established players in the industry choose to learn from all this.

Posted in Disruption, Innovation, Insurance, Life Insurance, Marketing | Tagged , , , , , , , , , , , | 3 Comments

New York Life and Slave Insurance

So… I was lunching with a friend the other other day when he asked me — knowing I had spent some 25 of my life working at New York Life Insurance Company — what I thought of the recent front page Times article about the company having established itself as a slave insurance company. Well, I was certainly disturbed by his bizarre question, with its not-so-subtle hint of schadenfreude. I’m a pretty religious reader of The New York Times and I hadn’t seen any such article, front page no less; couldn’t imagine why the Times would be digging up this old history (not the history itself, which is clear enough, but presenting it as “news” today); nor how you make the leap from the sale of some 500 slave life insurance contracts by the Nautilus Mutual Insurance Company, New York Life’s forbear, to New York Life as a company established through slave insurance. (Not to mention how the guy once in charge of what we called the News Prevention Department could not have managed to quash such a piece.)

Well, my friend was right about one thing: The Times had indeed published, on its front page, an article about New York Life and slave insurance. Here it is: Insurance Policies on Slaves: New York Life’s Complicated Past. How I missed that on December 18, 2016 is beyond me. What is also quite beyond me is why this should have been published as “news,” let alone front page news. I’m usually pretty good at figuring out any agenda behind Times articles but I remain, to this moment, stumped on this one. The “news” about New York Life slave policies was broken to the wider public in 2002 when the then-CEO formed a partnership with Rainbow/PUSH Coalition One Thousand Churches Connected to provide student scholarships, financial services education at local churches, and an educational Web site supporting both. (I was the businessperson in charge of Internet endeavors at that time, so my guys created the site. I was also intimately involved with the finserv curriculum, which we created in partnership with what we’ll call “a major New York City-based bank.”)

The slave policies were indeed news in 2002, though it had always been known within the company and would have been discoverable by anyone outside it who did a modicum of research. (Google “history of new york life.”) In fact, the reason why this became news in 2002 was that in 2001 New York Life donated to the Schomburg Center for Research in Black Culture its archive of slave policies issued by Nautilus, along with a substantial donation — I no longer remember exactly how much but, yeah, it was “substantial” — to set up a scholarship program dedicated to studying the history of slave owners buying insurance policies on slaves. (Uh, it’s not like it was only Nautilus that did this; see also Harvard, Georgetown University, JPMorgan Chase, Well Fargo, Aetna, US Life — all dutifully mentioned in the Times article. “More than 40 other firms, mostly based in the South, sold such policies, too.”)

This was, in other words, news that was quite deliberately revealed by New York Life. Did the general public or the great majority of New York Life policyowners in 2002 know anything about what the Times in 2016 chose to call its “complicated past”? No, certainly not, or at least we must honestly presume they did not. But nothing about that past had been hidden or denied and the company itself chose in 2001 to make it an issue. After this, New York Life funded two PBS series, one on Jim Crow and another on Slavery and the Making of America, along with supporting Web sites (both of which still exist on Are we talking about “transparency” here? If so, I don’t know how the company could have been more transparent. New York Life effectively created the transparency about its slave policies. Or are we talking about reparations? Well, I don’t presume to be the expert on that, but I think everything mentioned above (and much more accomplished by the company in subsequent years) would count toward reparation, although I must leave it to others to determine what adequate reparation would be).

Consequently, in 2016, there were no secrets here, no “news,” really, at all, unless your definition of news is news recycled from 2002. Time to shine a fresh light on old news? Apparently the Times thought so. So let’s see if we can puzzle out why. (Hint: I think it’s that it’s become so obvious lately that we are not living in a post-racial society.)

[I]n the span of about three years [1845 to 1847], it [Nautilus] sold 508 policies, more than Aetna and US Life combined, according to available records.

Its foray into the slave insurance business did not prove to be lucrative: The company ended up paying out nearly as much in death claims — about $232,000 in today’s dollars — as it received in annual payments.

So while Nautilus did indeed sell these policies, it’s obvious that it quickly recognized both the business and moral hazards of doing so. The Times author specifically notes that James De Peyster Ogden, New York Life’s first president, described the American system of slavery as “evil.” Writes Lawrence F. Abbot in a history of New York Life commissioned by the company and published in 1930:

During 1845 the Company wrote on an average of forty policies a month. The number written in February, 1846, suddenly jumped to one hundred nineteen. This was due to the discovery by some over-shrewd agents in the Southern states that policies might be profitably written on the lives of slaves — profitably, that is, to the agents….

The Company soon discovered that the acceptance of slave risks was indeed a risky business and in April 1848, after an unsatisfactory experience of only three years, the issue of policies on the lives of slaves was discontinued by the specific order of the Board of Trustees….

The abandonment of slave policies by the New York Life was partly a measure of self-protection but also partly a rudimentary recognition that life insurance is essentially altruistic and is to be conducted under a code of ethics as exacting as the Hippocratic oath of the medical profession.

Despite this, the Times author proceeds to try to build a case — or rather to insinuate a case, since she also provides much mitigating evidence (see below) — that these money-losing policies were crucial to the establishment of New York Life as a successful insurer:

The company had two years to invest or spend much of the revenues from the slave policies before death claims exceeded annual premium payments…. The policies helped New York Life establish an early foothold in the South.

True enough, but is this sufficient to prove that New York Life could not have survived or prospered without them? Well, we have an answer above: Early in 1848, Nautilus repudiated any future sale of such policies — not the policies already sold, claims from which of course had to be paid out in good faith, although doing so could only damage the company’s finances. Virtually concurrent with this repudiation came the “re-branding” of the company from Nautilus to New York Life.

Now, it would be terribly disingenuous to claim that while Nautilus sold slave insurance, New York Life did not — and to my knowledge no one at New York Life has ever made such a (nonetheless technically accurate) claim. I think, however, that it is equally if not even more egregiously disingenuous to ignore the historical facts that the company known as Nautilus, which had sold slave insurance, both repudiated that practice and concurrently re-branded itself under a new name, New York Life.

The best that our Times author could do here is, as I said, insinuate the most damning case: Two years of premiums and an early foothold in the South. She herself, however, conscientiously notes, per company execs, that “slave policies generated only about 5 percent of total revenues during the three fiscal years in which the policies were sold… and did not drive the company’s growth.” Actually, it’s difficult to see how 5 percent of total revenues could ever drive almost any company’s growth: That would be kind of like saying, for example, that the five to maybe 10 percent of Alphabet that is not Google search advertising revenue, has somehow driven the company’s growth. I think if you add this to the historical facts that Nautilus repudiated selling slave insurance and simultaneously re-branded itself as a new company, you pretty much close the books, so to speak, on the damning case.

This said, I do not, could not, would not wish to make light of the company’s history. It is what it is, and it’s nothing to be proud of and nothing deniable. Consider that first president, De Peyster Ogden. Himself “a cotton merchant who grew up in a home tended by slaves, [he] would become a prominent defender of slavery, describing it as an unfortunate, but inextricable part of the nation’s economy.” And yet he also called slavery “evil” and reversed his new company’s practice of selling policies to slave owners. Is that a “complicated past”? You bet it is; it is America’s complicated past. It’s also, unfortunately, America’s complicated non-post-racial present.

I’m not proud of New York Life’s “complicated past,” but I am proud of how decisively the young company dealt with it at the time and how it has continued to deal with it in the ensuing years. (New York Life will celebrate its 172-year anniversary in April 2017.) Not by denial, but by its opposite, transparency. Not by obfuscation, or trying to sweep it under the rug, but by what can only be described as its good works: Indeed, by all means read the Times piece, not simply for its sorrowing personalization of New York Life and its slave insurance history, but also and not least for its brief summary of New York Life’s “efforts to provide philanthropic support to the black community.” And I’ll give the last word here to the company’s PR spokesman, in spite of the fact that he’s a PR spokesman:

While we cannot change our history, our longstanding recognition of it has helped shape our commitment to the African-American community.


Note: The quotes from Abbott are from his The Story of New York Life, published by the company in 1930. As Abbott notes, his account is deeply indebted to that of an earlier company historian, James M. Hudnut, who published his Semi-Centennial History of the New York  Life Insurance Company 1845-1895, in 1895. I am sad to say that The Company You Keep: 150 Years with New York Life, a volume produced for the company’s 150th Anniversary and of which I was one of several proofreaders (but for typos, not historical accuracy), completely avoids the subject of New York Life’s slave insurance policies.

Posted in Insurance, Life Insurance, Politics | 5 Comments