DIFFICULT CONVERSATIONS

Group, an Allied Universal company. Difficult conversations are her bread and butter and have been since she completed a psychology degree 30 years ago and entered the British police force. As a young officer, she says: ”I immediately fell in love with the job – talking with different types of people on the street and finding ways to connect with them”. And she developed a particular interview style, based on her belief that ‘you can still have compassion when advising someone that they’ve done something wrong’.

Her excellent conversational skills caught the attention of her superiors. “By that stage I had built a reputation as a police officer of being able to negotiate with people whilst ensuring no one got hurt in the process. Of c ourse, I think the psychology fed into that capability, that kind of mind set. But I can honestly say I feel naturally blessed with that ability also,” she says.

Shelton passed the tough assessment to enter the most high-stakes conversation of them all – enrolling in the police national hostage negotiation course. She went on to deal with cases of international extortion, kidnap and ransom, as well as other major incidents, shouldering a terrifying degree of responsibility where every carefully weighed word mattered. “But I absolutely loved it,” she recalls.

When Shelton left the force after 15 years of service in 2008, she talked herself into a new but not entirely unrelated career as Founder and CEO of i-Cog, helping insurance firms – who in the UK face an estimated 300 bogus claims a day – navigate conversations with customers who might, or might not, be trying to defraud them.

“i-Cog’s business plan started on the back of a Post-it note in a Starbucks in Leamington Spa,” says Shelton. “It was based on the idea that in my opinion, claimants deserved a better customer experience when engaging with anyone asking questions of them about their claim.”

This approach set out to help insurers identify those customers who were giving misleading information while simultaneously improving insurance companies’ overall customer service ratings with those customers who had nothing to hide.

Shelton’s firm achieved this feat via three key services: claims validation, claim investigations, and staff training. Technology was instrumental in the delivery of i-Options, the suite of services the firm would release back in 2014 – but it was in Conversation Management where i-Cog would excel. Here, Shelton’s background in handling potential wrong-doers the right way made all the difference.

“If you think of our natural human behaviour, no one discloses information they wish to keep private to those they don’t trust, especially if that person is perceived to be in a position of authority,” she says. “If you intentionally courts, is a remarkable result from one single conversation.

“At the time, the market did not see how that was possible,” Shelton says. But with her involved, 42 per cent of policymakers, on average, asked to withdraw their fraudulent claim. Some insurers accepted this offer, some invoked the fraud condition, but all had their policies voided.

Success in resolving claims with little adversity put Shelton on the insurance market map. Doing it with an unprecedented 0.4 per cent complaint ratio made it an unmissable feature of the risk identification landscape. While it would be an oversimplification to say that the secret ingredient was compassion, it’s clear that i-Cog’s innocent-until-proven-guilty approach won the hearts of insurer clients.

Insurance fraud is a thorny and hugely costly issue within the global industry. In 2022, The Coalition Against Insurance Fraud estimated that fraudulent claims cost US consumers $308.6billion a year. It’s no surprise, then, that insurers invest at least £200million a year on technology to identify fraud.

Economic Factors

Whenever families struggle to make ends meet, as in the current climate, insurers face an inevitable increase in fraudulent claims. But will they know it?

or unintentionally make a claimant feel like a suspect when working in that space, you’re never going to get to the heart of the matter. But if you make customers feel safe, they’re more likely to disclose insurance fraud to you. They will emotionally and morally connect with you and will be more likely to say, ‘actually, I think I’ve made a mistake – what should I do?’.”

That about-face by claimants who might otherwise have doubled down on executing fraud, perhaps costing them their reputation, cash and even their liberty, while the insurance firm picked up a huge bill for investigating and prosecuting them through the

“Often, an external threat creates scenarios in which people do something they usually wouldn’t contemplate,” explains Shelton. “They’re under pressure and need to find money, as money pays bills. People can think, ‘I’ve never claimed on this insurance policy, if I claim on it now it’ll tide me over and I can breathe again.’ It’s a thought process experts call ‘fraud rationalisation’ – rationalising doing something wrong as a necessity to survive when financial pressure truly exists.” i-Cog’s goal was to make the assessment of claims commercially viable, regardless of their value. That meant rapidly settling genuine claims, using intelligence sources to check each one against risk triggers and fraud indicators, while riskier claims would be handed over to Shelton and her expert handlers, where her Conversation Management techniques would kick in. the most impressive credentials, but that same doctor still cannot take an image from inside your body like MRI technology can. We need technology to be able to do things that we, as humans, can’t. We are naturally swayed by prejudice and bias, no matter how hard we try not to be.”

Such claims might take the form of organised fraud, when a policyholder does something deliberate to make a claim, such as intentionally destroying property. More common though, is opportunistic fraud, whereby a policyholder may exaggerate a legitimate claim with the intention of pocketing the pay-out. These are harder to spot.

While organised fraud is associated with criminality, opportunistic fraud is often regarded as a one-time behaviour from those whose profile wouldn’t usually raise red flags with insurance firms. Such opportunism is also harder to identify because the amount claimed tends to be low and the claimant does not possess a previous claims history.

Trained hostage negotiators may know how to talk someone down from making a critical mistake, but they aren’t mind-readers. Nor is the latest fraud-screening technology, for that matter.But with the release of a unique, AI-enabled voice analytics technology from Clearspeed, introduced to the UK insurance market by Allied Universal in 2021, Shelton designed a new offering from The Cotswold Group called ‘i-insight’. ‘i-Insight’ is a beep you understandably are followed up with by an agent. That follow-up process is what my years of experience and The Cotswold Group are there for. Combining technology and highly trained humans is the perfect marriage for a customer-centric claims validation process.”

That ‘airport beep’ is dependent on oral answers provided to a few questions, which claimants can complete at any time, in any place and in any language. With an above-97 per cent accuracy – unheard of in the industry, according to Shelton.

The benefits of i-Insight for genuine claimants, meanwhile, are as important as the technology’s risk identification prowess. “It’s all about convenience for the customer,” says Shelton. “If you pose no risk, you’re going to remain with your existing insurer, because you feel satisfied with the speed, convenience and self-serve approach.”

This chimes with Shelton’s compassionate interview technique – but will technology eventually come to replace it?

“There’s a danger in seeing technology alone as a silver bullet. Technology can lead to faster settlements on valid claims, but I don’t see it ever replacing the unique human skills of being able to display empathy, build rapport, earn trust and i-Cog was utterly delighted to join The Cotswold Group in April 2020, with Shelton supervising her company’s integration under the title of Head Desktop Solutions. She felt the entire organisation of Allied Universal perfectly mirrored her morals, integrity and work ethic. i-Cog was by now a long way from that Starbucks Post-it note. The Cotswold Group has been providing claims investigation and intelligence services since 1990, working across all insurance industry sectors. The firm counts some of the world’s largest insurance companies as clients, delivering market leading results by using its desktop investigation process.

As a valued member of The Cotswold Group, Shelton is looking at how technology can be further leveraged to improve the claims validation process because, despite her focus on empathetic, human communication, she’s no Luddite.

As she puts it: “You can have the most qualified doctor in the world and who has revolutionary three-stage, end-to-end claims process that has been roundly hailed as a game-changer for the global insurance industry.

Deploying Clearspeed’s technology at Stage 1 through an automated voice questionnaire, it simply and accurately performs the task of risk assessment, providing unique risk insight that complements existing data. As Shelton explains, this Stage 1 provides an initial screening of any claim to determine whether it requires escalating to i-Insight’s Stage 2. And with impressive results to date, The Cotswold Group is wholeheartedly shaping the market.

“Think of a metal detector at the airport: if it doesn’t beep, you’re safe to fly. If it does then morally influence the fraudster to make the right choice. Technology will, in my view, never be able to plan, hold, manage, assess and conclude a difficult conversation alone,” she says. “You cannot decline a claim based just on data. You still need an expert human to make those important decisions.”

The i-Insight process is breaking new ground and is impressing both insurers and their genuine customers alike. “I can see it becoming standard, the must-have across the industry. Why would you not want a process that meets customer’s self-serve expectations, clears claims to pay with superior accuracy, positively impacts customer surveys and removes all blind spots on opportunistic fraud?” says Shelton.

KEY TAKEAWAY: With capital in shorter supply, insurtechs will have to focus on generating revenue rather than hitting softer KPIs if they want to qualify for the next funding round

ECONOMIC SLOWDOWN With inflation in high single or double digits across many of the world’s economies and a real risk of many entering, if not already in, recession, insurers will continue to be feel the blowback throughout 2023. One consequence of the cost-of-living crisis across all lines of business will be that the recent increase in fraudulent customer behaviour is likely to be sustained – both legitimate claims being exaggerated as well as an increase in falsified claims, particularly for lost gadgets. The challenge here for insurers who are focussing heavily on driving down settlement times, is how they put fraud mitigation in place so that legitimate customers are fast-tracked ahead of the others – and all without causing undue friction for a potentially innocent claimant.

As insurers put greater emphasis on automation to address the problem, we are likely to see a shift in the way that people are deployed across areas such as first notice of loss.

Meanwhile, motor insurers face a unique set of problems. Second-hand vehicle prices have already risen significantly, by more than 40 per cent in some cases. This, coupled with a shortage of parts, such as electronic sensors, is driving up the cost of vehicle repairs. But when a market is in recession, it’s difficult to raise premiums as consumers focus more on saving money and getting covered than finding the most appropriate cover. This is likely to result in an increase in the number of uninsured vehicles on our roads, which leads to a whole other set of problems when prosecuting claims.

TALENT SHORTAGE Insurers will spend this year looking outside of the industry for tech solutions that are being used to address similar challenges to their own. They will also focus on attracting people from other sectors who can view existing propositions and processes through a new lens. That said, it’s always been a challenge to position insurance as an exciting career opportunity. And while insurers are broadening their recruitment strategy, they are also likely to see an even greater proportion of younger staff exploring other opportunities that give them greater job satisfaction and flexibility. How they address that brain drain will be a key factor this year, especially as the trend for very senior people to take early retirement shows no signs of slowing. Many have moved into more of a portfolio career, spreading their time across multiple businesses – although we are seeing a huge increase in the number joining insurtechs as advisors on a part-time basis, so there is a ‘win’ there.

GROWTH STRATEGY With capital in shorter supply, insurtechs will have to focus on generating revenue rather than hitting softer KPIs if they want to qualify for the next funding round. We are likely to see some early-stage companies being acquired by cash-rich insurtechs as they try to develop more end-to-end propositions. At the same time, legacy insurers will take the opportunity to capture cash-strapped startups as they focus on developing propositions that are more relevant to customers, particularly younger consumers and the gig economy, which they find hard to reach and service.

KEY TAKEAWAY: Insurance companies adopting AI in the most strategic ways will excel across many areas of their business

The rapid adoption rate of AI is what I am most excited to see grow in 2023, not just in insurance, but in all industries. Whilst I don’t foresee robots replacing employees, perhaps the humans (and companies) best utilising AI will replace those who aren’t.

Insurance companies adopting AI in strategic ways will excel across many areas of their business, from underwriting, claims processing, fraud detection and personalised pricing, to enhanced chatbots and virtual assistants.

It’s important to note, AI technology can be complex and difficult to understand, and AI systems are only as good as the data they are fed, so there is a risk of bias or incorrect assumptions if the data is incomplete or inaccurate.

There’s also the ethical debate around AI in insurance to consider. At the Insurtech Insights conference at The O2 in London on March 1 and 2, I’ll be joined by the Chartered Institute for Insurers for a live sparring session with ChatGPT, the advanced conversational chatbot that redefined what AI assistants can do when it was released in November 2022. ChatGPT was followed in February by the soft launch of Google’s Bard, which uses similar next-generation capabilities and Microsoft’s Bing. These will raise the stakes in AI-assistance.

We’ll follow the ChatGPT demonstration at the show with a discussion on the broader issues of fairness, bias and morality which those companies and industries that embrace AI must now address. It’s an important debate that we all need to engage in.

KEY TAKEAWAY: Hot technologies will be software as a service (SaaS) or distribution solutions that focus on client experience

We all saw the mess that SouthWest Airlines got itself into following Storm Elliott, which brought severe weather to the United States in December and was estimated to have caused $5.4billion in insured losses across 42 states.

Around 60 per cent of SouthWest’s flights remained rooted to the ground, thanks to a technology meltdown that wrecked internal communication and left tens of thousands of passengers stranded. Six months before, it had made what turned out to be a fatal decision to close its call centre in favour of automated assistants – who couldn’t handle the crisis.

It was a lesson for all CEOs: if you get it wrong by investing too much or too little corporate venture capital (CVC) in digital initiatives, no one will blame you as we are all just trying to figure out this whole insurtech/fintech space. But if you get your client experience wrong, then there’s a direct impact on your bottom line, your retention and, if it plays out on social

KEY TAKEAWAY: 2023 will be the year where a shift from being a static-based industry to a dynamic-based industry catalyses media, your reputation. Then it could be the senior leadership’s jobs and pensions at risk, as several at SouthWest may find following a Senate hearing this month (February).

We can focus on technology, product and business model advancements, however, I’m starting to observe patterns that are macro in nature but which tend to be buried deep in the roots of the industry and contribute to the fog of innovation.

So, my top prediction is that the current forces of economic environment, frequency and severity of events and capacity constraints will propel us to burn off that fog and unearth this rooted trend. 2023 will be the year where a shift from being a static-based industry to a dynamic-based industry catalyses.

Let’s break that down. What does static mean? ‘Lacking in movement, action, or change’. What does dynamic mean? ‘Of a process (or system) characterised by constant change, activity, or progress’. Traditionally, our industry did not have the real-time processing or data available to it, which resulted in all of our processes and functions being built to be static or point-in-time. The transformation of capabilities to be real-time, streaming-enabled (across every function, line of business and segment) has created the ability to continually evaluate precise and identifiable risk at all levels. We have seen traction of this in some areas like usage-based, embedded and cyber insurance. The trend in 2023 will be to extend this dynamic capability deep into the traditional functions and business lines. This will enable much greater adoption of insurtech capabilities with insurance carriers, which will create a platonic shift in creating newly defined products and solutions for society at large.

With that in mind, hot technologies for 2023 in the insurance industry will be software as a service (SaaS) or distribution solutions that focus on client experience, which big carriers can plug in and integrate.

In terms of investment strategy, with the SPAC IPO looking like a thing of the past, many of the 8,000 insurtech founders in our space have had to adjust their exit plans. Venture capital and private equity funding are offering slim pickings, so we will see more founders take the M&A routes. Sherman’s & Co, William Blair, Dowling Hales, Oppenheimer, Stonybrook, and many other insurtech/ insurance investment banking firms will have a record year.

And, circling back to the events that caused SouthWest Airlines such grief, geo-focussed insurtech and customer-service-focussed insurtech in particular will be bid up and purchased.

The Consumer Technology Association’s (CTA) annual trade show is the geek gathering of the year. From lunar terrain vehicles to smart bird feeders, it runs the gamut of disruption, featuring products that are beyond-blue-sky as well as the more banal.

But one particular exhibit at this year’s event in Las Vegas got me thinking about the increasingly important relationship between tech – specifically medtech – and insurance. It was, you might say, a moment of relief. And here’s why.

We are not just teetering on the precipice of a new world where medtech and insurtech walk hand in hand, we are hurtling towards it at breakneck speed.

The medical profession was for a long time locked behind a wall of knowledge, but with the hive mind that we call ‘the internet’, and AI technology on almost every device that we own, doctors are no longer the gatekeepers to information about our bodies. Instead, it’s the multibillion dollar pharmaceutical industry putting up the walls, hiding medtech behind unreasonably inflated costs. In America, getting your heart checked with an electrocardiogram costs nearly $500 if you’re unlucky enough not to have insurance.

But the consumerisation of medtech has started to shake things up, driven by technology companies capitalising on our desire for reliable home diagnostics at an affordable price. There are new devices like the FreeStyle Libre 2, a connected diabetes monitor that anyone can purchase for around £50, or the Ortiv diabetes tester, which instead of using needles to draw blood, utilises a high-powered precision laser for testing.

Although these devices are becoming cheaper and direct-to-consumer, they are niche. Smartwatches however have reached a much wider audience in health and wellbeing. Steps are counted, heart rates are measured, blood oxygen levels are recorded. You can take an electrocardiogram and even see how many times you’ve rolled over in your sleep. And all of this is digitised into tangible data that we can act upon.

The internet is littered with stories about how smartwatches have led to the diagnoses of severe illness, such as that of David Last, who noticed that over a few weeks, his smartwatch recorded a heart rate below 30bpm an alarming amount of times. On visiting his doctor, David discovered that he had a lifethreatening, third-degree heart block, which doctors were able to treat.

Amazing as this story is, smartwatches are still limited to sensors outside the body, and rely on algorithms to fill in the gaps. When we go to our doctor with a serious complaint, they’ll certainly use smartwatch data, but they’ll also look at two other things that would be impractical for a smartwatch to take – your blood and urine, both of which are unreadable without a laboratory… that is, until now.

The Withings U-Scan, has been making a huge ’splash’ in the medtech world since its introduction at the CTA’s Consumer Electronics Show in January. This hockey-puck-sized device sits inside the toilet bowl and analyses your urine for hydration and nutrients as indicators of your lifestyle, sharing reports and recommendations based on its readings to your phone.

But how could this impact insurtech? Companies like Vitality are already using data from smartwatches to tailor insurance products and are offering financial incentives to consumers who keep to an activity goal. It wouldn’t be too hard to think of ways that data from U-Scan could be used to make assumptions about the customer when tailoring insurance products. Data such as alcohol content, hydration levels and even nutrition could all be used as indicators of risk for the insurer, allowing for better assumptions and more tailored products.

Although no company is yet leveraging this advanced technology, it’s only a small leap from where we are now. And, as more medtech that was once confined to a lab is consumerised, insurers would be foolish to ignore the immense opportunity to improve pricing, avoid risk, and build better relationships with customers through its adoption.

Reading room:Advanced toilet tech could give us instant health reports