Lessons from the Super Bowl: Why Insurance Products Fail (and Four Tools to Avoid the Same Fate)

Breaking into the insurance industry can be intimidating for new entrants, venture capital firms looking to invest in insurance startups, the startups themselves, and even established businesses looking to embed insurance into the goods they sell. One of the most important aspects presented by the insurance industry is the unknown cost of the insurance product itself. When key variables are still unknown during the insurance product development stage, estimating appropriate risk poses a challenge.

For most trades, the cost of the final product is understood before the goods are sold or the services provided. However, in the insurance industry, the cost of the indemnity itself is very much unknown when the product is initially sold. It may be years before an insurance carrier has a good handle on the costs of the underlying insurance product. Additionally, the majority of an insurance product’s expenses, such as commissions, acquisition costs and taxes, are tied directly to the cost of the underlying insurance product. 

Actuaries do their best to estimate the frequency, severity, and timing of claims using historical data or other proxies. With so many variables, determining accurate indemnity costs is extremely challenging. Even with a statistically significant set of reliable data anticipated to be predictive of future events, actuarial estimates are exactly that: estimates. 

Our insurance product development experts possess decades of experience helping insurance carriers assess risk to protect profitability. Here are some of their insights into why insurance products fail – and how your organization can sidestep costly consequences.

Lessons from a Streaker

We’ll begin by examining an industry that faces similar cost uncertainty. Specifically, the world of professional gambling. 

Like the insurance industry, casinos and sportsbooks make estimates related to the likelihood of Team A beating Team B, or the two teams scoring over or under certain point totals. Accurate estimates mean the money wagered on each side of the bet will approximately even out. Sportsbooks are acting more like market makers, primarily making a profit by matching bettors on opposite sides of the ledger. 

However, if their estimates are off – and people placing bets know this – then more dollars will bet on one side versus the other, and the sportsbooks’ likelihood of losing money increases significantly.

Sportsbooks tend to offer many unique and unusual bets for the Super Bowl. Prior to the start of Super Bowl LV in 2021, a sportsbook offered a wager that would pay +750, (i.e. a $100 bet wins $750, plus a return of the original wager) if a fan ran onto the field during the game.

Unfortunately for the sportsbook, there indeed was a man who ran onto the field during the game wearing not much more than a pink leotard.

This streaker, however, had done his homework. He and his friends made a series of bets, totaling around $50,000, that someone would streak the field during the Super Bowl. With the odds on this bet being +750, he was looking at a payday of over $370,000 – all because he knew more about the likelihood of this event than the sportsbooks did1.

This example outlines another challenge presented to insurance carriers: we live in a world of imperfect information. The purchaser of an insurance product may know more about their likelihood of needing to use the coverage than the carrier selling it. In the same way the sportsbook was tricked by this Super Bowl streaker, insurance companies must account for a similar unknown. 

Historical Premium Information Isn’t Enough

Let’s shift to another example: pet insurance. The policyholder pays a premium calculated based on factors such as pet type/breed, pet age, etc., in return for a policy that covers veterinary procedures. 

If a dog owner discovers their pet needs a $3,000 surgery, and their insurance policy has a monthly cost of $100, the pet owner could easily save $2,900 and shift that burden to the insurance company. Theoretically, the pet owner could then cancel the policy immediately after the completion of the surgery. 

This example shows that historical premiums are not adequate to cover the prior claims. Actuaries reviewing such data may suggest increasing the product’s overall premium level.

However, increasing the premium discourages owners of healthy pets from purchasing coverage, continuing this cycle and eventually leaving only the owners of unhealthy pets as the entirety of the market participants. At some point, the premiums get too high, even for the owners of unhealthy pets, and the product completely fails, causing significant losses to the insurance industry.

Strategies to Overcome the Unknown

Thankfully, there are some ways to address the issue of imperfect information head-on:

Define Coverage Limits

Insurance products typically apply limits of coverage (both per claim and in aggregate), contain deductibles, and/or require coinsurance. It is important to clearly define how much the policy will pay an insured for each claim and how much could be paid in total (aggregate) throughout the policy period. 

While this won’t define an exact cost of offering insurance, these coverage restrictions give us a better idea as to the expected cost to the provider. 

In the pet insurance example, had the policy contained a $2,500 per event limit, with a $100 deductible and a 25% coinsurance, the cost to the insurance company would have been reduced from $3,000 to $1,800 [= ($2,500 limit – $100 deductible) x (1 – 0.25 coinsurance)].

The application of policy limits, deductibles, and coinsurances has the added benefit of encouraging policyholders to shop the market to locate a vet who will perform a similar, but less expensive, surgery. In the example above, the insurer pays $1,800 and the remaining $1,200 is the responsibility of the pet owner. 

Say, for example, the owner shops around and finds a vet willing to do the same surgery for $2,000. In this scenario, the insurer will be responsible for $1,425 = [($2,000 procedure – $100 deductible) x (1 – 0.25 coinsurance)]. While the insurance carrier’s costs are reduced by $375, it’s the policyholder who receives most of the benefit, as their costs drop down to $575 vs. $1,200 previously.  

Outline Policy Prerequisites and Coverage Triggers

A policy prerequisite allows the insurer to establish a condition or series of conditions that must take place before coverage is provided. Policy prerequisites act as an additional form of underwriting and can dissuade customers from purchasing coverage for a specific event they know will take place. Similarly, a coverage trigger allows an insurer to reduce coverage to only certain pre-specified events or otherwise specifically exclude coverage for a pre-determined list of events.

A policy prerequisite for pet insurance could require a diagnosis from a qualified veterinarian to identify the pet’s pre-existing conditions. From there, policy exclusions can list any procedures that would not be covered by the pet insurance policy. This would exclude coverage from the surgery presented above.

Enact Coverage Waiting Periods

An insurance company can also establish a coverage waiting period between the date a policy is purchased and the date coverage is enacted. This waiting period can keep an insured from purchasing a policy immediately before they know a covered event will take place.

In the case of the pet insurance policy, a coverage waiting period could possibly have prevented the insured from buying a policy as soon as they found out surgery on their pet was required.

Establish Fully Earned Premiums 

One final tool in an insurer’s arsenal is to fully earn the policy’s premium, where allowed by statute. This prevents a policyholder from canceling coverage – and, more importantly, receiving a return premium – just after a covered event triggers. This is more common for policies such as warrantees, extended reporting periods on claims-made coverages, special event policies, etc.

In the end, the streaker from Super Bowl LV did not get his winnings as his bets were voided by the sportsbook after he bragged a bit too loudly about his master plan. Although insurance companies need to account for instances where the policyholder knows more about their likelihood of using an insurance policy than the carrier does, insurers do have some tools and strategies to prevent a situation like the sportsbook example above.

Can your insurance products can stay afloat and ward off metaphorical Super Bowl streakers?

Contact the insurance product development experts at Perr&Knight today to help. 
  1. https://sports.yahoo.com/super-bowl-streaker-says-bet-211422994.html?guccounter=1

7 Reasons to Perform a Mock Market Conduct Exam Right Now

Operational gaps and regulatory compliance violations are a constant threat to agents, insurers, InsurTechs, managing general agents (“MGAs”), third-party administrators (“TPAs”), and others operating in the U.S. property and casualty insurance market.
Compliance penalties are serious and can include cease and desist orders, consent orders, fines, license suspensions, or the loss of the company’s certificate of authority. Internal inefficiencies, lack of proper controls, insufficient analysis or testing of processes, and/or unfamiliarity with regulatory requirements are often the cause of the violations resulting in penalties.
However, those operating in the insurance market are not sitting ducks for regulatory action. Avoiding these risks – and mitigating their consequences – is possible through mock market conduct exams.
Here are seven reasons why you should undergo this valuable self-assessment as soon as possible.

1. Identify risks before regulators do

Regulators expect you to understand insurance regulatory requirements and be able to demonstrate compliance. Mock market conduct exams compare your processes, procedures and output, such as premium and claim files, to requirements to validate compliance or to identify gaps and provide recommendations for remediation.

2. Protect your reputation

Beyond the lost time and high costs of state Department of Insurance (“DOI”) penalties, negative findings from regulatory bodies can jeopardize your reputation with policyholders, shareholders, your current and potential customer base, and the industry at large. Operational gaps and compliance violations may also bring damages in possibly the most impactful form, that of long-term reputational risk and negative financial impact, such as devaluation of stock or a downgrade in AM Best rating. Conducting regular mock market conduct exams enables you to move forward with confidence that your company will stand up to regulatory scrutiny in the event you undergo an examination.

3. Be proactive with DOIs

Most states encourage you to report issues you surface internally and often allow you to do so in a confidential manner. By conducting self-assessments, and reporting as appropriate, there is often a longer runway for completing the remediation process which allows you to take a more deliberate and planned approach instead of disrupting workflow by shifting your teams’ attention to responding to regulatory requests, which are most often more time sensitive.

4. Reveal “what you don’t know”

Mock market conduct exams are particularly useful for InsurTech companies or companies that are new to the insurance space. The insurance industry contains many regulatory requirements (both obvious and obscure) that can require comprehensive operational protocols and controls. Working with an experienced insurance compliance services partner fast-tracks the awareness and correction of compliance and operational issues that may have otherwise remained hidden until identified through the hands of regulators.

5. Remove blind spots

Compliance is a top consideration for most who operate in the insurance market, but it’s often difficult for internal business units to conduct detailed reviews of processes in which they are already deeply immersed. “Business as usual” is great for achieving day-to-day efficiency, but internal teams may be unaware of their own blind spots. Working with an outside insurance compliance services provider on a mock market conduct exam brings an independent perspective that can reveal previously unseen procedural weaknesses and/or compliance gaps.

6. Correct issues before they become problems

Small issues tend to quietly compound until they become complex, costly problems. Mock market conduct exams can identify if you have correct, efficient processes in place to address regulatory requirements and/or inquiries from regulators or alert companies to ineffective processes that could lead to violations down the road.
For example, a review of policy files may identify that the rates and rules loaded into the policy admin system and/or forms issued to the policyholder are different than those on file with the regulatory authority.
Identifying gaps and/or non-compliance ahead of a DOI inquiry or action enables you to correct these issues before they cause widespread non-compliance. 

7. Prevent costs from spiraling

Mock market conduct exams are controlled investments that protect you against expensive DOI examinations. When examiners from regulatory authorities perform a desk exam or arrive on-site to administer an exam, your company will be on the hook for their time and travel expenses. DOI exams can be more than three times more expensive than conducting a mock market conduct exam with an experienced insurance compliance services partner. Time, fines and reputational harm impact your bottom line; mock market conduct exams improve the likelihood of shorter exams, less business interruption and fewer regulatory actions.

Partner with experts

At Perr&Knight, our depth of operational and compliance knowledge enables us to conduct thorough mock market conduct exams that are relevant to today’s regulatory landscape. We also offer related services including Operational Process and Documentation Reviews and DOI Exam Preparation / Response Training and Guidance.
Performing a mock market conduct exam allows you to proactively obtain an understanding of your operations before gaps and compliance violations result in regulatory action.

Contact the insurance compliance experts at Perr&Knight to discuss your operational needs or schedule a mock market conduct exam.

A&H Insurance Advertising: Rules & Compliance Overview

Advertisements are an integral part of any A&H insurance marketing plan. Insurance companies must find ways to get and keep the attention of a prospective insured. Given that the average American sees more than 4,000 advertisements each day, insurance companies look for creative ways to attract prospective insureds. However, it’s not as simple as writing a clever ad. Insurance companies are subject to various levels of regulation and process requirements.

What is an advertisement?

An advertisement is any material that is published, printed, scripted, or displayed to a consumer. This includes, but is not limited to, postcards, electronic communications, billboards, radio or TV ads, and websites. It can also include sales talks and presentations for use by agents, brokers, producers, and solicitors.
Advertisement includes advertising material sent with a policy when the policy is delivered and material used in the solicitation of renewals and reinstatements. It also extends to the use of all media for communications to the general public, to the use of all media for communications to specific members of the general public, and to the use of all media for communications by agents, brokers, producers and solicitors. The definition of advertisement casts a wide net.

What rules apply?

Insurance advertisements are subject to federal, state, and in some cases, local statutes, regulations, and ordinances. At the federal level, insurance companies must review HIPAA marketing regulations and the CAN-SPAM Act.
The HIPAA regulation defines marketing materials as a communication about a product or service that encourages recipients of the communication to purchase or use the product or service. Applicability of the act depends on the recipient and the service or product in the communication.
CAN-SPAM sets the rules for commercial email, establishes requirements for commercial messages, and provides penalties for violations.
In addition to the federal requirements, most states have adopted some version of the NAIC’s Advertisements of Accident and Sickness Insurance Model Regulation. This regulation defines advertisements and sets forth requirements for content, control, and filing requirements. Most states require insurance companies to file Medicare Supplement and long-term care ads, but some states require that all advertisements be filed. At the local level, city and county ordinances control signage, such as those seen in traffic medians or attached to light poles.

Who controls advertisements?

Insurance companies have a duty to maintain control of their advertisements, whether those ads are created by a home office employee, a broker, or an independent agent. Insurance companies must have procedures in place to establish and maintain a system of control over the content, form, and method of dissemination of all of its advertisements.
According to our insurance support services experts, best practices include a formal advertising approval process, tracking, and record retention. States rely on insurance companies to self-monitor their advertising procedures and require a signed certification of compliance each year with the annual statement filing.
While A&H advertising requirements can be overwhelming, it’s also important to note that most states have adopted the same basic requirements with respect to content. It’s usually not necessary to create 51 versions of an ad, although there are almost always state variations.

Next steps

Whether the advertising campaign is one jurisdiction or fifty-one jurisdictions, insurance companies must understand requirements for content, filing, and distribution. Contact the insurance consultants at Perr&Knight to learn how we can provide insurance support services for advertising review and the development of processes and procedures to manage advertising.

Pioneering Insurance Automation

The automation of time-consuming manual processes has unlocked ever-increasing levels of efficiency for businesses across the insurance industry. At Perr&Knight, we have long recognized the value of offloading process-heavy tasks to machines in order to free up actuaries, agents, and filing teams to focus on tasks requiring human judgment.
Let’s take a look at how our own automation evolution has opened up greater efficiencies internally, as well as for our clients.

A Breakthrough in Automation: Ratefilings.com

Anyone who has been in the insurance industry a few decades shudders to think of the inefficient early process of obtaining publicly available insurance company filings from the Department of Insurance for competitive analysis.
Perr&Knight was the first in the industry to aggregate these filings on RateFilings.com. In the early days, we physically sent someone down to the state department of insurance (DOI) building, equipped with a scanner. The rep would spend all day buried in the stacks, scanning documents until the job was done. From there, the person would head back to our office and transfer the scanned PDFs to the Data Entry Department, then spend hours manually entering metadata into the database. The average number of documents that could be entered per day was capped at about thirty per person.
Around 2005-06, NAIC launched the System for Electronic Rates & Forms Filing (SERFF), which greatly reduced the number of paper filings requiring scanning. SERFF also standardized many formats, further streamlining the process by increasing the uniformity of filing requirements.
As DOIs posted publicly-available filings to their websites, we did less scanning and more and more downloading – itself an important time-saver. The new downloadable, standardized SERFF format enabled our Data Entry department to copy and paste data instead of manually typing it out, further increasing accuracy and speed.
The massive breakthrough in automation came in 2008, when we developed “The Auto-Indexer,” a PDF parsing software program that could read a PDF document and copy and paste the data from the PDF directly to our RateFilings.com database.
Now, instead of entering the data, our human staff member was tasked only with auditing and validating that the data entered by the system was correct. Though all filings were reviewed by human eyes, the computer could automatically process straightforward filings as long as there were no errors. Complicated, high-priority filings received closer scrutiny from our staff.
With this advancement, productivity skyrocketed by 1,000%. We could now complete up to 300 rate filings per day per person, instead of a mere thirty.

Statefilings.com Expands the Scope of Automation

Perr&Knight’s StateFilings.com shares a similar history, but took automation even further. When StateFilings.com was launched in 2003, we would manually enter filings, objections, responses, and all correspondence into the system. Then we used similar parsing technology from the Auto Indexer to automate much of the data entry.
Further building on our process, Perr&Knight began talking with the NAIC, ultimately becoming the first vendor to integrate a new RESTful API developed by the NAIC into our StateFilings.com software.
Not only did this drastically reduce the amount of uploading and manual labor required to enter data, but the updates were virtually instant. The API also gave us easy access to granular filing data. For example, forms and rules could now be broken out from the filings. As such, Perr&Knight was the first company with an automated, real-time forms library and rule library.
Our clients could now access and search DOI documents and company forms instantly from any web-enabled device. The fees our clients paid to license the software were offset by time savings and ease of searching and segmenting data from a single, cloud-based location.

The Future of Automation at Perr&Knight

In the coming years, we envision increased use of automation for two-way data exchange.
As of right now, using the SERFF API, we have the ability to extract data from the DOI websites, but the information flow is limited to one direction. With two-way integration, we’ll begin to automate the filing creation process. Imagine one-click Bureau adoption filings and auto-generated actuarial support for rate change filings.
Perr&Knight is continuing to develop software tools that will ultimately become a bridge between Statefilings.com and an insurance company’s IT systems thus eliminating the need for manual handoff and reducing the chance of errors.
Working with rate filing teams, actuaries, and IT departments, we’re developing and brainstorming new software and systems that offload more time-consuming burdens to machines, so valuable human teams can direct their focus where it’s needed most.

Looking for ways your company can streamline state filings or other operational procedures? Our insurance technology experts are here to help.

The Race to Autonomous Vehicles

The $2 trillion global automotive industry is ripe for disruption from autonomous vehicle technologies that make driving safer, more energy-efficient and more convenient. Driver error causes more than 9 out of 10 crashes.  Autonomous vehicles are robots on wheels that eliminate driver perception, distraction and incapacitation errors. While cybersecurity risk poses a safety threat, there is little doubt that robots can drive better than humans under normal conditions. Most autonomous vehicles are powered by eco-friendly, zero-emission electric batteries, and they are designed to drive safely and efficiently. Autonomous vehicles offer limitless opportunities for convenience by changing the driver into a passenger.
Following several years of product and strategy improvements along with making progress in gaining regulatory approvals for road testing, the major players are emerging in the race to commercialize fully autonomous vehicles. To name a few, Waymo started as Google’s self-driving car project and is a self-driving taxi service currently operating in Phoenix, Arizona with a pilot program for employees in California. Waymo is the largest active self-driving company in terms of daily miles driven. General Motors’ Cruise provides an autonomous ride-hailing service for its employees in San Francisco and recently unveiled plans for its fully autonomous Origin with no steering wheel or pedals. Volkswagen and Ford have made large investments in self-driving software company Argo AI with plans to implement Argo AI’s software in new vehicles in the early 2020s. Uber is heavily investing in replacing its human fleet with a driverless fleet. Startups like Optimus Ride and Pony.ai have launched self-driving ride-hailing services in designated areas of cities like Brooklyn’s Navy Yard.
These companies have really smart people, breakthrough technologies and deepening pockets. And they are all watching Tesla whiz by in the race to commercialize autonomous vehicles.
Here are several reasons why.


Tesla’s autonomous vehicle system primarily uses cameras to identify stationary and moving objects in the vehicle’s surroundings. Radar and other sensors are used to help see in dark and adverse weather conditions. The Autopilot system is a standard feature and currently qualifies Teslas for SAE Level 2 Automation, which means it can handle all aspects of driving under certain conditions, but the driver must be ready to intervene at all times. Tesla deploys the hardware needed for self-driving in all of its vehicles sold to consumers, and they use the hardware to train artificial intelligence systems called neural networks that are designed to automatically improve with new data.
Virtually all major players except Tesla are using LiDAR technology to build autonomous vehicles. LiDAR is a sensor system that measures reflections from laser pulses to build a 3D representation of the environment around the vehicle. Geofencing is used to define spatial boundaries, and detailed maps of the terrain and objects within the geofence are developed. The self-driving car projects the sensor data on top of the map to gather information and determine the safest path.
Proponents of LiDAR argue the technology is crucial to reliably assess and measure the environment around the car in all conditions. Argo AI describes a “street-by-street, block-by-block” mindset[1] underlying their LiDAR-based technologies to make self-driving vehicles safe and accepted by society. The goal of this approach is SAE Level 4 Automation, which does not require any human intervention in limited spatial areas.
Elon Musk, Tesla’s founder and CEO, criticized the use of LiDAR in autonomous vehicles at Tesla’s 2019 Autonomy Day event. “In cars, it’s freaking stupid. It’s expensive and unnecessary…once you solve vision, it’s worthless. So you have expensive hardware that is worthless on the car.”[2] He has a point. Although the per unit cost of LiDAR is dropping, it still costs a few thousand dollars per vehicle. Researchers at Cornell University found that cameras can detect objects with near the precision of LiDAR at a fraction of the cost[3]. Also, developing capacity for LiDAR use by geofencing and mapping communities is costly and slow whereas camera-based systems can be employed in cars anywhere in the world.  Musk’s goal for Tesla is SAE Level 5 Automation, which does not require any human intervention with no spatial limitations.


Training a self-driving car requires a lot of data. Tesla has over 3.3 billion Autopilot miles and 22.5 billion miles in Tesla vehicles[4] from its fleet approaching 1 million units sold worldwide. On an average day, Tesla collects approximately 650x more driving data than Waymo.[5] Tesla feeds the vast amount of data it is collecting into its advanced neural networks, which use the data to improve the vehicle’s ability to predict common behaviors as well as behaviors for rare situations that are difficult to simulate. Although Autopilot is currently intended only for use on highways, Tesla is using the data it gathers in all environments to train its cars how to handle intersections, traffic lights and pedestrians.


Many autonomous vehicle companies are partnering with automotive companies to implement their self-driving platform into new vehicles. Waymo has equipped several types of cars with its self-driving equipment. Argo AI partnered with Ford and Volkswagen to roll out its autonomous vehicle technology in both the U.S. and Europe. Daimler has partnered with Baidu to equip Baidu’s Apollo program, an open-source autonomous vehicle platform, onto Daimler’s Mercedes-Benz vehicles to test self-driving vehicles in Beijing, China.
Tesla is an automotive company and an autonomous vehicle company, allowing the company to fully integrate hardware and software autonomous vehicle specifications into its vehicle design and build processes. Large automobile companies typically source their parts from suppliers all over the world who can meet their quality demands at the lowest cost. Tesla learned the dangers of a global supply chain the hard way when its Model X deliveries fell far short of demand in early 2016 caused by a shortage of parts from a supplier. Tesla has moved many parts manufacturing operations in-house, which has led to new types of batteries, seats, motors, windows and other parts that differentiate Tesla from the competition. Bringing parts manufacturing in-house allows Tesla to be flexible and nimble in pushing improvements into its products. Musk noted Tesla pushed 20+ improvements per week into the product development process of Model S[6]. Tesla’s culture of continuous improvement is key for automation where iterative development is required to make driverless cars safe.


Most autonomous vehicle companies are intending to provide ride-hailing services. These companies are making big bets on the future of shared vehicles, but they don’t have much choice. Consumers do not want to buy a personal automobile that doesn’t operate outside of the town’s geofence, and the LiDAR-based system is costly equipment to pass on to the consumer. A vehicle-sharing model makes sense in highly congested urban areas where parking space is limited, but it will not displace personal automobiles anytime soon. Car owners value the accessibility and independence of having their own vehicle. Also, in the new era of social distancing and extra health safety precautions, vehicle sharing and ride sharing faces serious headwinds.
In contrast, when Musk and the regulators determine Tesla’s fully autonomous vehicle technology is safe for use, a simple over-the-air software update can transform Tesla’s automobile fleet into a fleet of driving robots with human-driver capabilities.
In 2019, Musk predicted Tesla’s self-driving vehicle technology will be feature-complete by the end of 2020. While this timeframe seems overly aggressive, I hesitate to doubt Musk. After all, one of Musk’s other companies, SpaceX, just became the first private company to send humans into orbit, and the company is seeking to send humans to Mars and beyond. Compared to space travel, teaching robots to drive safely at 55 miles per hour is a manageable problem.
In reality, there will be room for many winners in the autonomous vehicle market. Global automakers like Volvo, BMW, Nissan and Toyota have stumbled out of the gates in building self-driving vehicles, but they continue to invest and will not be far behind. Ride-hailing startups could shift consumer preferences on car ownership if people are able to order a ride on their phone anytime, anywhere. Autonomous vehicles have the potential to be used for a multitude of purposes including for commercial cargo transportation and in vehicles used for urban commuting or long-distance transit.

The time is now to start planning your insurance needs for the autonomous vehicle age.  Contact our product development and product design experts for help.

[1] https://www.argo.ai/2019/09/the-argo-ai-approach-to-deploying-self-driving-technology-street-by-street-block-by-block/
[2] https://www.theverge.com/2019/4/24/18512580/elon-musk-tesla-driverless-cars-lidar-simulation-waymo
[3] https://www.therobotreport.com/researchers-back-teslas-non-lidar-approach-to-self-driving-cars/
[4] https://lexfridman.com/tesla-autopilot-miles-and-vehicles/#:~:text=The%20following%20is%20a%20plot,Tesla%20vehicles%3A%2022.5%20billion%20miles
[5] https://towardsdatascience.com/why-teslas-fleet-miles-matter-for-autonomous-driving-8e48503a462f
[6] https://www.caradvice.com.au/367472/tesla-model-s-gains-20-engineering-changes-per-week/

Six Impacts of COVID-19 on the Cannabis Insurance Market

When the current Coronavirus pandemic finally ends, we’ll have seen that no industry was left unimpacted by its path of disruption and change. This includes the ever-expanding legal cannabis insurance industry in the United States. Below are what I believe to be six impacts of COVID-19 on the cannabis insurance market.

1. Insurers who currently have programs on file are well-positioned to see continued growth in this marketplace.

The good news for the cannabis industry is that it has been deemed an essential service by numerous states; similar to grocery stores, pet stores, and beverage centers, among other businesses. As such, the cannabis industry can continue to grow, sell, and distribute their product in a similar manner as before. And analogous to the large increases beer, wine, and alcohol sales, I would anticipate that the cannabis market will continue to see booming demand during the pandemic.

2. Smaller cannabis manufacturers, processers, and distributors will be negatively impacted.

The recent trend of capital markets drying up for the cannabis industry will only be exacerbated by COVID-19. Additionally, coronavirus assistance through the CARES Act and other federal programs is unavailable to the cannabis industry. This will put further pressure on businesses that were not immediately profitable. With unemployment recipients receiving an additional $600 in unemployment benefits through the CARES Act, many of these smaller businesses will find it difficult to hire new employees. They may need to offer higher wages to entice furloughed individuals to reenter the workforce, further putting a squeeze on smaller businesses. It’s likely that larger companies will buy out some of these smaller entities, forcing consolidation of the industry. Cannabis insurers will need to be cognizant of the market forces impacting certain areas of the cannabis industry.

3. Current insurance carriers will likely more closely focus on the business they have already written, while their expansion plans are put on hold.

The efforts for the cannabis marketplace to continue to expand its presence has been put on hold. In New York, for example, last month Governor Cuomo conceded that it’s, “unlikely marijuana will be legalized in the state this year,” essentially delaying its legalization until 2021, at the earliest. With state governors dealing with more complicated issues, such as when to reduce/eliminate the quarantine restrictions, I don’t anticipate the legalization of cannabis to grab the attention of many state legislatures.

4. It’s likely that the approval of new insurance products offering cannabis coverage will be delayed, while excess and surplus lines carriers continue to enter the market in an effort to scoop up any excess demand for coverage. 

In March, the state of Pennsylvania requested that insurance carriers not submit any “non-essential” filings in their jurisdiction. With the possibility of other states potentially implementing similar restrictions on filings, it is possible that any new program or rate change filings would get further delayed or rejected by the states. This likely means that insurers will have short-term pricing power to increase premiums through flexibility in their rating plans. They will also be able to more closely underwrite their insureds without fear of losing business to the competition.

5. More carriers will strongly consider reducing their product liability exposures for cannabis products

This has been evidenced in the vape pen manufacturers, especially those manufacturers who were sourcing products overseas. The COVID epidemic has begun to expose how underlying health issues are adversely impacting the death rate. It wouldn’t be a stretch to me if insurance carriers draft further exclusions, especially those that specialize in smokable cannabis products. It’s likely that COVID-19 is addressed, by name, similar to asbestos.

6. Reinsurance will be more difficult to find. 

Fear of the unknown has always been a hindrance to the availability of reinsurance markets and the cannabis insurance industry is in the unenviable position of being a relatively new marketplace for reinsurers. The added stress and uncertainty of the future due to COVID-19 will only exacerbate the already tight market conditions for cannabis reinsurance. Hopefully, this will be at least somewhat offset by the natural aging process that an industry goes through, as reinsurers become more familiar with the risks and exposures they underwrite.
When this pandemic finally ends and life returns to “normal” or “new normal”, we should expect to see the cannabis market continue to grow, but with fewer and mostly larger entities. Insurers who understand this marketplace and can quickly adapt to these changes will be able to rapidly respond to its inevitable expanding insurance needs.

Questions about how the insurance industry is being impacted by recent events? Contact us today.

A Message on COVID-19

To our valued clients,
We hope you and your family are healthy and safe. In order to continue protecting the health and safety of our employees, their families, our clients and the greater community, Perr&Knight’s workforce has been working remotely from home since the middle of March.
Our technology allows every individual to work remotely in a secure environment, and our top priority is to continue to provide superior, uninterrupted service to our clients. We realize that your work environment may also be changing, and our team is committed to helping you during this time. We have lots of capacity should you need to outsource additional work.
Please feel free to reach out to us via our contact us page.
Thank you for your business and best wishes for the health and safety of your employees and their families.

Monitor Agent Licensing in Real Time with License Reporter

Maintaining current licensing information for insurance-producers is a crucial but time-consuming task. Many agencies are still tracking upcoming renewals and expirations on spreadsheets housed on internal servers or individual computers. This approach might work reasonably well, provided agents are licensed in a limited number of jurisdictions.
However, when more agents are added to the roster (or an agency expands their services into more territories, or the one person who has been tasked with monitoring renewals for the last decade leaves the organization), keeping track of the details can quickly devolve into a paperwork nightmare.
Perr&Knight has been offering renewals as part of our insurance licensing services for years. Our team submits, monitors and tracks producer licensing in all jurisdictions across all lines of business. Eight years ago, we developed software enabling us internally to track and monitor licensing status. We have recently released an updated version that our insurance licensing clients now have the ability to access via online portal.

Introducing the new License Reporter

LicenseReporter.com is Perr&Knight’s online license reporting solution for our current insurance licensing services clients. This web-based software permits clients to log in via any web-enabled device to check the status of recent, past, and upcoming renewals. While our licensing department team continues to manually manage the submission of forms to state Departments of Insurance (DOI) on behalf of insurance agents and agencies, LicenseReporter.com enables our clients to access a transparent view of the various licensing processes.
Using LicenseReporter.com, license and appointment data can be searched by a range of key criteria, including:

  • Agent Name
  • Agency Name
  • Agency & Affiliated Agents
  • State
  • Expiration Dates (date range)
  • Line of Authority
  • License Type

Increase transparency, reduce risk

LicenseReporter.com provides a new level of transparency into the insurance licensing and renewals timeline on a nationwide scale. By increasing insight into the licensing process, agencies establish more control, thus reducing the risk of information falling into a black hole or becoming trapped in administrative purgatory upon in-house staff turnover.
LicenseReporter.com was developed to increase efficiency for Perr&Knight’s insurance licensing services teams, but also provides the following valuable benefits for our clients:
Eliminate email back-and-forth Answer questions immediately by letting HR managers or licensing analysts view the current status of all submissions, 24/7, from any web-enabled device
Reduce the risk of accidental expiration – Ensure all agents are operating with current licenses
Become aware of upcoming renewals – Monitor upcoming renewals
Ensure correct jurisdictional licensing  – Confirm agents are properly licensed in all areas before expanding business into new territories
Access proof of current license –  LicenseReporter.com enables us to attach relevant documents, including a copy of the agent’s current license, or web verification from the state, saving space in the file cabinet and the time required to access a copy of the license, if necessary

Who should use Perr&Knight’s producer licensing and appointment services?

We manage licensing services for agencies of all sizes and scope. However, for certain agencies, our licensing services (including LicenseReporter.com) can be especially beneficial. These agencies include:

  • Insurance start-ups
  • Insurtech companies
  • Agencies with limited in-house support
  • Agencies operating in 5 or more states

Peace of mind managing license renewals

We developed LicenseReporter.com to solve an important issue that drains valuable time and resources from insurance agencies. By offloading the licensing process onto Perr&Knight’s experienced producer licensing services team then monitoring progress via online portal, insurance agencies can make sure all agent licenses are up to date while freeing their internal teams from managing minutiae.

Is your agency staff getting buried by license renewals? Let our licensing department lighten your burden.

Why Stat Reporting Shouldn’t Be an Afterthought

Authors: Jason Hudson, Principal Director, Statistical Reporting Services, and Mark Nawrath, Principal Director, Account Management
When insurance companies prepare to implement new software for policy and claims administration, regulatory reporting of the data captured is an afterthought. What appear to be turnkey systems often turn out to require more retrofitting and configuration than initially expected to meet statistical reporting requirements, resulting in an increase in investment and a longer timeline to launch.
Here’s why it’s necessary to consider statistical reporting needs throughout the entire development and implementation process.

Powerful and flexible modern systems…they require more configuration

Legacy technology (early mainframe systems) demanded a ton of programming to account for every possible scenario required for policy and claims administration. Building the complex logic required to encode, transform and format data into compliant statistical plan formats was an assumed part of the implementation process.
However, when client server technology started to take off in the 1990s and 2000s, new client-server-based technology vendors decided not to invest in complex logic to comply with statistical reporting mandates. These new products were like warm Jell-O waiting to be molded: they had the ingredients to  perform policy and claims administration processing, but required heavy configuration and customization, not just to write insurance business (that is, all the transaction sets in a business life cycle—endorsement transactions, change renewals, cancellations, etc.), but to conform to the regulatory  mandates for statistical reporting. It was up to insurance companies to make sure they were covered.
In plain terms: many of today’s systems are set up for collecting information, but how they store data on the back end is not designed to meet statistical reporting requirements.

Set yourself up for stat reporting success

In the rush to get new products to market, insurance companies often get caught up in launching their new system (or product or policy) as quickly as possible. Today’s client-server-based systems are not less capable than previous systems, they’re just more malleable. In providing insurance companies with more flexibility, the vendors put the onus on the insurance companies to configure their systems to perform and ensure compliance. Unfortunately, companies tend to focus on business functions (product rating, forms, coverages, claims handling, etc.) and overlook the importance of collecting and formatting specific transaction sets and data points needed to meet regulatory standards. This is why it’s so crucial to consider statistical reporting requirements from the very outset of your new technology implementation. Here are some strategies that work:

  • Involve the right people from the start

Bringing statistical reporting compliance stakeholders to the table late in the game increases the odds of revealing functionality and data needs previously unaccounted in defining implementation specifications. Therefore, it’s important to have statistical reporting subject matter experts work together with experts in rating, underwriting and claims, early in the process to understand what products, coverages and claim events are contemplated and to define the transaction sets and data elements required. 

  • Account for configuration in your budget

Because of the heavy amount of programming required for legacy systems, it was very difficult to ascertain exactly how much was invested in programming for statistical reporting. These days, it’s easier to identify and quantify. Avoid sticker shock on the final project by earmarking a section of the budget for statistical reporting requirements definition, configuration and testing.

  • Clarify your specifications

Identify the statistical file generation processes you’re currently using to inform your needs for your new system. From there, generate a comprehensive list of specifications and make sure they are reviewed by the teams who will be responsible for statistical reporting. Statistical reporting subject matter experts and third-party reporting consultants can come in handy here, as they can make you aware of current industry best practices and other information “you don’t know that you don’t know.”

  • Produce usable test policy data

One part of the transition that is often overlooked is the availability of “production like test data”, essential to ensure completeness in the encoding/transformation process and often required in bureau electronic testing certifications. A number of statistical agents and rating bureaus require you to compare the captured and encoded statistical data (for risks, coverages, policy and claims transactions) to what is being produced on front-end for the insured. That means classifications of business, coverages being offered, rates and premium amounts must be a direct replica on the back end for statistical reporting process. Account for this in your roll-out plan and dedicate appropriate resources for it.

  • Don’t rely on your data warehouse for stat reporting

Data warehouse solutions are typically not architected to satisfy statistical reporting mandates (including rating, premium and claims detail at the line/subline/coverage/transaction level, policy and endorsement form data and onset/offset entries for regular and out of sequence endorsements). Rather than making your data warehouse too complex and robust, let your statistical reporting experts and programmers work with native data that comes from policy and claims administration systems.

Create a comprehensive game plan

Develop a proactive strategy to test how your system will issue policies and transactions once policies become enforced. Don’t make the mistake of testing front-end functionality without an end-to-end review of how those policies and claims get formulated in comparison to the statistical data that you will also be collecting on the back end.
Involving an outside insurance reporting and development consultant to guide you through the process can be especially valuable here. At Perr&Knight, we offer workshops as a part of our Statistical Reporting Solution service offering. These workshops involve all relevant stakeholders and cover key topics that will inform the game plan that guides you forward.
In these multi-day workshops, we discuss with your teams the interlacing of statistical reporting file creation and testing processes into your information technology objectives, the risks associated with delivering an improved statistical reporting capability, and the coordination of your team and third-party participants to schedule projects related to the implementation of an enhanced statistical reporting solution. The final deliverable to you is an evaluation of strengths, potential vulnerabilities, and a plan for moving ahead that includes clear roles and responsibilities, cost projections and duration estimates. Whether you decide to partner with us or not, you end up with impartial strategy for implementation that you can use as a roadmap.
Because statistical reporting is not seen as revenue-generating aspect of the business, it’s often overlooked during technology development. However, doing so only short-changes you on the back end of your project implementation, as teams scramble to retrofit new systems to meet statistical reporting mandates. Instead, keep statistical reporting requirements in mind straight from the start and save yourself the headache of having to go back and make costly corrections – or being fined for non-compliance.

Want to discuss how to make statistical reporting more manageable for your in-house staff? Our insurance technology experts can help.

How to Make the Most of Your Software Evaluation Period

Determining whether a new software system will meet your company’s needs may seem like a gamble.

  • How can you tell if this new product will really streamline your workflow?
  • Will it actually increase process efficiency?
  • Can you guarantee that it will add value to your organization?

Vendors understand that you’ll need to get your hands on the product before you can make an informed decision. Luckily, some offer a time-boxed “trial” period where you and your team have a chance to apply the software to your workflow and obtain a much sharper perspective. By taking full advantage of this evaluation period, you’ll be able to determine whether or not the solution will work for you.
Here’s how to make the most of your evaluation period before investing in full.

Take time to prepare. Don’t just dive in.

After identifying software that seemingly checks all the boxes, it’s tempting to want to begin trying it immediately. However, preparation is a crucial step that lays the foundation for an accurate assessment. Here are some less obvious things to do in order to be thoroughly ready to analyze the new product:
Develop test cases: Include both standard transactions and anomalous outliers, as well as things that are on your team’s “wish list.” Identify and document an array of scenarios such as initiating records from scratch, conducting tests on reporting at the beginning/middle/end of the workflow, and interfacing/importing external records.
Use existing data: If your prospective software will replace an existing system, use your trial period to evaluate how your new solution works with your existing data. Your IT department can provide your vendor with a detailed list of the types of data objects you’ll need to manage which can be used to populate the new system with your current data set. Even if you must scrub some of your data before sharing with the vendor, the more you can provide, the more accurately they can assess your needs. If you were to license the software, using the data from the evaluation period may be used for your implementation of the product.
Gather requirements from your legacy system: Your current system was built on set of requirements and design documents. If you want your replacement system to mimic those assumptions, share these details with your vendor. This information will help them determine if the system will meet your needs as-is or if it will require customization.

Treat it seriously, like a project

Though your evaluation period might not cost anything upfront, there is a very real opportunity cost if the software ultimately doesn’t deliver or if you dismiss a quality product without sufficient review. Therefore, treat your software evaluation period like a mini-project. Dedicate the same level of attention as if your company had already invested capital.
Create a one-page “mini” charter that defines important specs such as: What is the purpose of this project? What is its perceived benefit? Who is assigned to work on it? Who ultimately “owns” it? What are the roles and responsibilities of each individual or team? What is the scope of the project? Developing an official “work order” enables you to obtain signoff for teams to dedicate their time to evaluating the software, thus increasing the chance that all parties will take the evaluation period seriously.
As part of defining the scope of this mini-project, don’t hesitate to bring in an outside subject matter expert who can springboard you into software usage to accomplish your goals straight away. Their detailed answers about your specific questions can save you plenty of time that may otherwise be wasted on back-and-forth between you and your vendor.
Finally, be sure to hit your dates. All projects have a timeline and this one should be no different. Work with your vendor to establish an achievable schedule that will keep your teams on track. During evaluation periods for our own state filings software, StateFilings.com, we create a week-by-week plan that outlines what we will accomplish, from training to full implementation. A timeline creates a necessary structure that keeps everyone on track and enables teams to identify any hiccups early on.

Ask plenty of questions

Don’t make assumptions about what the software may or may not be able to do. If it is important to your particular process and the answer is not apparent, ask! Be specific about what you need. By describing your workflow requirements in detail, the vendor can train you on how to perform your desired task, explain how the software handles the requirement in a more efficient manner, or determine that the software may need further customization to meet your needs. Don’t be afraid to ask questions that may seem obvious. It’s faster and easier to confirm that your needs will be met than to worry whether or not the software can perform the basics.
Additionally, feel free to ask the vendor to share the product road map with you, which will detail upcoming features. This might answer some of your questions about functionality and may reveal opportunities for you to improve your own workflow when new features are launched.

Determine how close you are to going live

If you present your vendor with a full set of current data, going live may be as easy as “flipping a switch” after signing the licensing agreement. If the data is only a partial set, or requires additional software customization, fully operational real-world use may take longer. Work with your internal teams and vendor to determine what functionality is mission-critical and what can be postponed until after launch. Strategic configuration during the evaluation period can minimize implementation delays. Perr&Knight’s StateFilings.com evaluation period has resulted in many near-immediate go-live implementations for customers.

Help your vendor help you

Your vendor wants to do more than just sell you a product. Ultimately, they want to solve your problem. Make sure that your teams are not impeding the process. When the vendor asks for information, keep turnaround time to a minimum. Establish a regular meeting schedule (once a week is preferable, but bi-weekly meetings can suffice) and keep communication clear and frequent. As mentioned above, if you have questions, ask them ASAP. Finally, if it becomes clear that the software solution is not what you expected and will not meet your needs, let your vendor know immediately. Instead of wasting everyone’s time, it’s better to move on.
The goal of your software evaluation period is to reduce surprises further down the line. Pressure-testing the system from all angles will provide a clear perspective on what the software can and cannot do. By taking the trial period as seriously as you would any other project, you stand the best chance of achieving your ultimate goal: implementing a smarter solution for your organization.

Want to know if your proposed insurance software will actually perform? Our insurance experts can help you better capitalize on your evaluation period.