Rapidly growing technology in risk management and loss reduction solutions is creating tremendous opportunities for commercial insurance agents and their customers.

As carriers attempt to identify valuable loss-reducing technology, pilot programs, also known as proof of concept programs, offer opportunities to gain operational knowledge in areas such as augmented and virtual reality, building information management, drones, machine learning, sensor technology, telematics, and visual learning.

These small-scale experimental programs are designed to manage risk, validate benefits and introduce change associated with emerging risk management technologies. Carriers either share the cost of the program with participants or support it in full. The experimental programs strive to:

• Evaluate feasibility in real-world applications.
• Determine administration and management requirements.
• Identify cost of use.
• Contrast actual performance and stated performance.
• Validate loss reduction potential.
• Establish scalability potential.

Feedback from agencies and policyholders who participate in pilot programs is vital in determining the feasibility of a large-scale project, which is only implemented if it can be designed and developed to ensure the desired benefits are realized by everyone in the commercial insurance chain.

Pilot programs provide numerous benefits to agencies and their commercial clients for little to no cost. Many of these benefits can be shared by both constituents, while others are unique to the policyholder or agency.

A pilot program may provide an insured with knowledge that enables them to utilize leading indicators, which identify the conditions of an accident before it occurs—a more successful metric than lagging indicators, which identify the causes of an accident after it occurs. The pilot program experience can therefore enhance a commercial insured’s understanding of proactive risk management solutions.

Insureds that participate in pilot programs also gain a deeper understanding of current and future technology. Their skills using an existing technology may improve, or they may acquire new skills using a technology they were previously unaware of. Implementing new technology also gives an insured firsthand knowledge of the technology’s capabilities, operational experiences, operations expenses, worker acceptance rate and potential loss reduction.         

Agencies have an unmatched competitive advantage when they are able to offer technology to their key customers at little to no cost. Implementing and monitoring processes creates additional customer interactions throughout the policy period. Additionally, the partnership between the agency and carrier highlights the support of the policyholder’s risk management improvement efforts. These synergies may lead to smoother renewals and improved retention.

As a trusted adviser, the agent is crucial in guiding the client through the decision of whether to participate in a pilot program by discussing several critical factors—the most important of which are management commitment and the desire to support it. With proper support, the inherent obstacles of emerging technologies can be overcome; without it, the project is destined to fail.

In addition, the insured should have a specific problem for the program to solve. A solution without a problem tends to lose support quickly.

Finally, management must be willing to recognize that the technology may fail to perform as advertised. Advise clients that a pilot program can be successful despite the failure of technology by providing business operation insights, improving worker adaptability to technology, or shifting workplace culture for the better.

Dave Galbraith is assistant vice president of risk management and risk management technical lead at Amerisure.