In response to COVID-19, the hospitality industry has stepped up its tech investment to facilitate safer guest interactions and cut costs. For example, some hotels have swapped out front desks for check-in kiosks as smart phones increasingly drive contactless guest interactions.
But keeping hotel guests and restaurant and bar patrons safe is just one part of how the hospitality industry can move toward full recovery. There remains a huge shortage of workers, and employers must keep their existing employees safe from the remaining threat of COVID-19.
And perhaps the most troubling risks have been linked to technology — cybercrime in particular.
Cyber risk skyrockets
Two of the worst data breaches of 2020 were at hotel chains: Marriott (the personal information of 5.2 million guests) and MGM Resorts (compromising the records of 10.6 million guests).
Cyber insurance premiums are rising as much as 30%, so hotels having strong cyber security can benefit with reduced premiums.
To start, hotels need basic protections like firewalls, antivirus software and regular system backups, with dual authentication and virtual private networks providing additional layers of protection. For these measures to be effective, employers must train staff on cyber security.
Regular outside system audits will spot holes in a security plan. And because vendor lapses may cause breaches, checking and auditing vendors’ cyber security practices should be part of a cybersecurity plan.
Cybercrime is not the only risk hospitality operations must confront, and training and educating staff on how to recognize reemerging risks is critical to keep any hospitality operation functioning.
Keeping workers and patrons safe from COVID-19 remains paramount. Vaccinations cannot fully protect individuals, as evidenced by breakthrough cases of the virus infecting those who are vaccinated. One well-documented outbreak occurred in a vacation spot with high vaccination rates. Keeping workers masked is important to protect employees and patrons.
There are other risks, as well. For instance, any establishment serving alcohol must remember that, in many states, they are held responsible for the actions of those who become intoxicated at their establishment. In some states, general liability policies do not cover this liability, but it is covered under separate liquor liability insurance.
As patrons may overindulge at times — especially as many haven’t been to bars and restaurants or taken vacations for more than a year — it’s important to update policies about serving alcohol and help servers learn how to minimize the risks. Part of this includes coaching staff on common signs of inebriation and on their right to refuse service.
Another risk in hospitality: the labor shortage. However, offering benefits, especially health insurance, can be an enormous advantage to attract and retain employees in hospitality.
As the hospitality industry continues to come back from a long, hard pandemic year, it’s important to keep in mind that the work is far from done. "Prevention" and "training" are the operative words to offset risks.
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In this webinar, ITL Editor-in-Chief Paul Carroll sits down with Jim McKenney, chief strategy officer and products business head at Intellect SEEC, and Sandeep Tandon, CTO of Intellect SEEC.
In this webinar, ITL Editor-in-Chief Paul Carroll sits down with Jim McKenney, chief strategy officer and products business head at Intellect SEEC, and Sandeep Tandon, CTO of Intellect SEEC. They discuss how companies can lay the groundwork for modernization and innovation by reconfiguring their approach to core systems.
You will learn:
--Why changes in the business environment require a modernized approach to underwriting
--How you can vastly increase the speed at which you deliver capabilities and new systems - cutting deployment times to hours or days, from weeks or months, while delivering a clear ROI
--Why you should think in terms of microservices and application programming interfaces (APIs), decoupling capabilities from core systems so they can be deployed flexibly across the whole enterprise
Sandeep is passionate about technology with strong capabilities in architecting solutions for banking and insurance. He has been recognized for delivering top-level technology experiences across business segments and consistently delivering customer focused solutions. He is experienced in visualizing and capturing the transformational potential of emerging technologies.
In his 30+ years of experience working with global banks and insurance companies, Sandeep has demonstrated success in delivery of large-scale projects through the initial specification, design, development and implementation phases. His understanding and knowledge of the industry and technology has allowed him to successfully provide thought leadership to customers through innovative solutioning/consulting. Sandeep brings an extensive ability to connect business and technology to create solutions that result in value creation.
Jim McKenney
Intellect SEEC, Chief Strategy Officer and Products Business Head
Jim McKenney is Chief Strategy Officer and Products Business Head at Intellect SEEC. Jim is an experienced insurance executive, spending 18 plus years in various roles for Liberty Mutual Insurance. Most recently, Jim led Liberty's Product and Underwriting organization for the mid and large commercial segment. Prior roles include experience in small commercial underwriting segments and in various finance roles. Jim is a certified public accountant and graduated from the University of MA Amherst.
Paul Carroll
Editor-in-Chief, Insurance Thought Leadership
Paul is the co-author of “The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups” and “Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years” and the author of “Big Blues: The Unmaking of IBM”, a major best-seller published in 1993. Paul spent 17 years at the Wall Street Journal as an editor and reporter. The paper nominated him twice for Pulitzer Prizes. In 1996, he founded Context, a thought-leadership magazine on the strategic importance of information technology that was a finalist for the National Magazine Award for General Excellence. He is a co-founder of the Devil’s Advocate Group consulting firm.
Insurance Thought Leadership (ITL) delivers engaging, informative articles from our global network of thought leaders and decision makers. Their insights are transforming the insurance and risk management marketplace through knowledge sharing, big ideas on a wide variety of topics, and lessons learned through real-life applications of innovative technology.
We also connect our network of authors and readers in ways that help them uncover opportunities and that lead to innovation and strategic advantage.
Coming soon... A three-digit hotline for mental health emergencies
Crisis services use has increased year after year as accessibility improves and people are more aware of their benefits. Established in 2005, the National Suicide Prevention Lifeline has answered over 12 million calls. The Crisis Text Line, founded in 2013, has responded to over 5 million conversations. Given the ever-emerging technology and science surrounding crisis intervention, these services are continually evolving. Training and accreditation processes improve standards, professionalism and quality assurance.
What is the New Movement to 988 Crisis Hotline?
In many ways, I am encouraged by moving our mental health crisis support to the 988 call system. First, 988 is much easier to remember than 800-273-8255, so access to qualified mental health crisis supports should increase significantly. Second, with the appropriate infrastructure and funding support required to make this successful, the shift to 988 symbolizes the importance of mental health crisis support. 911 responses to community safety will be on equal footing in importance to the 988 mental health crisis responses. Third, I hope that this shift to 988 also means a shift in the way crisis services are delivered:
Less reliance on a law enforcement response and increased engagement with peer support
Less fear and more compassion
Finally, the development of 988 will bring a much-needed coordination of services similar to air traffic control. So, people will have a better chance of getting matched to the right level of service.
In late 2019, a law to create a three-digit number for mental health emergencies came into effect. It will pave the way for more support, implementation and adoption of the 988 number many call centers already use, and make it easier for people in distress to get the support they need.
More Accessible
A simple three-digit number is easier to remember and dial during mental health emergencies. In addition, the branding of the new crisis response will go beyond just support for people experiencing suicidal despair and will include all psychological emergencies and even emerging mental health hardships. The design of the new system is intended to help facilitate a warm-handoff connection to qualified supports and to follow up to make sure those referrals are a good fit.
To work, funding and infrastructure support need to be commensurate with the scope of the shift to 988. This will resolve the funding issues that make it hard for local crisis centers to respond to callers through the current line.
Taking the National Suicide Prevention Lifeline as an example, there is a general misperception in the community about how the Lifeline works. While the leaders of the Lifeline call center system are under one umbrella, each call center is responsible for its own funding and operation. As the calls to the Lifeline have swelled each year, the call centers have been left to manage the load with minimal margins. The increased support required by the shift to 988 will give the call centers a fighting chance to be sustainable.
Less Fear, More Care
The 988 line will significantly reduce the numerous problems arising from calling 911 during mental health crises and help people get the assistance they need.
911 usually activates a law enforcement response. Law enforcement is best-suited to take control of chaotic and life-threatening situations. The skills and mental abilities of law enforcement under these circumstances are NOT best when responding to someone having a mental health crisis. Many police officers can feel out of their element when responding to people who are despondent, grieving, traumatized or highly anxious.
Additionally, for communities of color or for transgender people, a 911 call can often escalate to violence, regardless of the nature of the call. People of color living with mental health conditions are much more likely to be detained than white people. Thus, they are highly reluctant to call 911.
988 will link people to crisis responders trained to help them cope with and feel supported and understood during suicidal intensity and other mental health challenges. They’ll get the assistance and care they need instead of becoming embroiled in aggressive altercations with the law or ending up in institutions ill-equipped to help them recover. So, calling for help will connect them to people trained to listen empathically and provide accurate information and referrals instead of worsening their situations.
Help During the Transition
The line won't be available for another year. Given the mental health crisis caused by the pandemic, that's disheartening and distressing. Policy and funding changes that could help significantly during this transition include:
Establishing LOSS teams in every community for suicide “post-vention” support
Establishing peer respite centers in more regions for people experiencing mental health challenges who do not need urgent care
Encourage the continued development and evaluation of technology (e.g., virtual peer support, apps for peer support)
Looking Forward: Additional Advancements
988 call centers need to not only be prepared to support people experiencing suicidal intensity but also people affected by suicide death. Many crisis call centers would benefit from specialized services addressing the complicated trauma and grief suicide brings.
Integrating more people with lived experience with suicide and mental health crises will be essential in 988's effectiveness. The voices of people who have been there give us tremendous insight into what works and what doesn’t – when the focus is on helping people. What the wisdom of people with “lived expertise” tell us is that we will all be better off moving away from a fear-based approach and toward one built on upholding dignity, collaboration and compassion.
The new law is a significant and positive development. It promises an opportunity to reduce the bias of mental health issues and people fighting through them. Three simple numbers—988—send an unspoken message that these emergencies are legitimate and require a different kind of care and vigilance.
Sally Spencer-Thomas is a clinical psychologist, inspirational international speaker and impact entrepreneur. Dr. Spencer-Thomas was moved to work in suicide prevention after her younger brother, a Denver entrepreneur, died of suicide after a battle with bipolar condition.
It is difficult to imagine where digital business operations would be today if it wasn’t for the catalyst that is the pandemic. For nearly two years, businesses across industries, and especially within insurance, accelerated digital transformation plans to adapt to remote access for customers and employees. Insurers prioritized many self-service capabilities, such as virtual inspections, digital payments and automated workflows, while also focusing on investing in artificial intelligence (AI), the Internet of Things (IoT), new user interaction tech and other advanced technologies. However, as the effects of the pandemic continue to play out, market activity indicates commercial lines insurers are reprioritizing their tech-oriented projects, with some plans continuing to move forward while others have slowed down.
Today, there are 13 “transformational” technologies working with foundational technologies, such as core systems, portals and CRM systems, to move the insurance industry into the new digital-connected era. A new SMA research report, “Transformational Technologies in P&C Commercial Lines: Insurer Progress, Plans and Predictions,” examines these technologies and how they will affect commercial lines insurers now and in the future.
Commercial lines insurers are approaching both AI-related and non-AI-related transformational technologies at varying levels of investment and rates of adoption. Over the years, SMA has monitored these technologies, organizing them into three strategic planning horizons: short-term, mid-term and long-term.
In 2022, computer vision, IoT, machine learning (ML), natural language processing, robotic process automation, user interaction tech and virtual payments will continue to garner significant activity and yield a high impact on commercial lines. However, some insurers indicate they are decelerating their plans for certain short-term technologies. Last year, 51% of commercial insurers said they were in the midst of new implementations of ML solutions, but the plans through 2022 show only 45% implementing, primarily among Tier 3 and 4 companies. This pullback in building ML capabilities for smaller insurers is mainly due to the events surrounding the COVID health crisis.
When looking further into the future, 5G/edge computing, blockchain, AR/VR and autonomous vehicles are expected to have a transformational impact on the industry. Compared with a year ago, more commercial lines executives recognize their potential in certain business segments. For example, the potential for 5G/edge computing increases as the major wireless networks expand coverage and more devices accommodate the technologies. In a 2021 SMA survey, 24% of commercial lines insurers reported that they are monitoring and developing initial strategies around 5G/edge computing, up from just 18% in 2020. A range of areas within commercial insurance can be transformed by 5G, including IoT, autonomous vehicles and new UI technologies. So as the technology becomes more widely adopted, it will likely become a short-term technology for insurers’ planning purposes.
The transformational technologies underway in the industry today will only become more critical as virtual and digital interactions become the norm. Regardless of where commercial insurers are on their digital transformation journey, their strategies must be continually reviewed and revised in today’s ever-evolving technology landscape.
Heather Turner is the lead research analyst at Strategy Meets Action.
Turner supports SMA's advisory and consulting engagements through rich written content, quantitative and qualitative primary research, market and technology trend analysis and the management of SMA IP materials.
Prior to SMA, Turner was managing editor of the NU Property & Casualty Group at ALM, which includes the insurance industry publications PropertyCasualty360.com and NU P&C and claims magazines. She started her career as a journalist reporting on the property and casualty insurance industry at Insurance Business America and its sister publications in Canada and the U.K.
The Future of Work. Plus, 2022 resolutions to foster innovation; building a digital field of dreams; 3 keys to enhancing the customer experience; and more.
Some 20 years ago, I collaborated on a white paper with Bill Gates and other senior leaders at Microsoft on the future of work, to be the centerpiece of the annual gathering he held in those days for Fortune 500 CEOs at his home.
He framed a problem in a way that has stuck with me. It has yet to be solved — but that’s where you and your companies come in, as you take advantage of what we’ve all learned during the pandemic and map out new ways of working as we scope out a new normal.
The problem concerns focus — and how to get a lot more of it in our work lives.
Register now for a "crystal ball" view into 2022 to understand where your customers, martkets, technology and competitors are heading so that you can adapt to capture these opportunities.
With conversational AI, insurance companies can deliver easier and more convenient digital support to customers, improve agent experience and productivity, and reduce contact center traffic.
Paul Carroll Editor-in-Chief and Dr. Michel Leonard, CBE, head of the Triple-I’s Economics and Analytics Department, discuss the Triple-I’s latest Insurance Economics Outlook for Q4 2021 focusing on this year’s unusually wide range of growth and inflation forecasts and key performance indicators for the P&C industry in 2021
"Even before a commercial version of the internet browser was invented in the early 1990s, the rich, geeky types I dealt with in my travels at the Wall Street Journal were figuring out ways to wire their homes to ward off possible intruders."
Insurance Thought Leadership (ITL) delivers engaging, informative articles from our global network of thought leaders and decision makers. Their insights are transforming the insurance and risk management marketplace through knowledge sharing, big ideas on a wide variety of topics, and lessons learned through real-life applications of innovative technology.
We also connect our network of authors and readers in ways that help them uncover opportunities and that lead to innovation and strategic advantage.
An agency partner in Ohio recently submitted a California-based residential plumbing contractor for underwriting consideration, needing expedited review to avoid project delays. Using virtual tools, a Nationwide loss control services expert in Texas quickly contacted the contractor in California for a virtual survey and jobsite assessment, helping us accurately price the account while also providing valuable risk management expertise from his extensive experience working with residential plumbing contractors.
Just two years ago, this scenario might have posed a challenge for many carriers as they tried to accurately understand and price the risks, but in today’s age of historic digital adoption, it was an opportunity to showcase Nationwide’s tech-driven, customer-focused protection, which allowed us to put the right associate on the right risk.
Today’s business owners are working hard to continue serving customers while navigating extended supply chain disruptions and labor shortages. When it comes to insurance, they need their carrier and agent to work just as hard for them to prepare and protect their business for risks that lie ahead.
Nationwide’s latest Agency Forward survey found many business owners are missing openings to use risk management planning to help defend their business from costly disruptions and accidents – presenting an opportunity for agents and carriers to advise commercial clients about the importance of understanding and mitigating their business’s risks and the considerable impacts these efforts can have on their company’s bottom line.
The business owner survey revealed three key themes for agents to consider as they prepare for annual check-ins with clients:
Business owners want easy claims processes and industry expertise from their agents and carriers.
Risk management planning can help prevent costly disruptions or claims.
Agents can help clients mitigate risk and navigate claims.
Speed, ease and industry expertise top business owner needs when filing a claim
Eighty-five percent of the anonymous business owners surveyed who filed a claim in the past 12 months report being satisfied with their experience, yet some owners still struggle with navigating the claims process with their carriers. In fact, a quarter were dissatisfied with their claims experience, saying it was difficult (25%) or slow (24%), while another one in five say it was challenging to track the progress of their claim (22%) or that their insurance agent wasn’t helpful (21%).
Carriers who lean into quick claims handling when possible, clear communication and strong industry-specific expertise in claims can deliver a smoother experience for business owners, giving them confidence they’ll be back up and running quickly.
Nationwide has reduced average claim cycle times for business owners with easy filing online or by phone, digital payments and dedicated claims experts with deep knowledge in clients’ industries and the challenges they face. Customers also have access to solutions like the Nurse Triage Hotline to get qualified medical professional advice after an accident to help determine an effective course of action.
Risk management planning can help prevent costly disruptions or claims
Across the board, business owners believe risk management plays a significant role in protecting their business, employees and customers. However, owners’ risk management actions greatly differ based on their business’ size.
More than a quarter (27%) of small business owners say they have no risk management practices in place at all for their company, compared with just 4% of middle market business owners who don’t have practices in place to mitigate risk.
Further, middle market business owners are much more likely than their small business owner counterparts to be using carrier-offered risk management services. Business owners report using in-person/on-site services, safety program development and review and online resources most often. Just four in 10 middle market business owners, and about a quarter or less of small business owners, say they leverage digital risk management tools or virtual/teleconference services.
As business owners reconsider the locations of their offices and how they will be doing business in the future, in-person or virtual safety resources such as Nationwide’s virtual risk management consultations offer industry experts to review client programs, identify potential risks and provide solutions to keep their businesses running smoothly – no matter where they’re located or how they’re doing business.
Agents can help business owners mitigate risk and navigate claims
The survey found agents have opportunities to help clients better understand how adequate business planning and risk management programs can bolster their company’s performance, workforce retention and preparation for coming challenges.
Timely claims reporting is critical to getting your company back to work quickly. On average, commercial lines claims are reported 20 days after the event of loss, adding as much as 15% to the life cycle of a claim.
Many business disruptions are preventable. Taking time to ensure proper housekeeping, maintenance and business continuity planning is in place can reduce costly disturbances and decrease recovery time.
With the average cost of a fleet accident at approximately $70,000 and auto accidents being the leading cause of work-related fatalities in the U.S., for many organizations their fleet operations pose their greatest liability and workers’ compensation risk. It is important that organizations establish a formal fleet safety program to protect employees and reduce accident risk.
Agents who are able to deliver this counsel in the moment, while understanding the carrier-supplied solutions to benefit their clients, can open doors to deeper relationships and smoother experiences for clients leading into the year ahead.
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The biggest myth in healthcare is that better care costs more. The city of Fort Worth, Texas busted that myth. Using advanced analytics to establish and monitor a provider network, the city got its injured employees better care while driving its workers’ compensation costs down, not up.
In 2015, Fort Worth had 6,250 employees, and its total workers’ compensation costs ‒ claims plus indemnity payments ‒ were $9.7 million. After implementing the provider network, the city’s costs in 2016 fell to $9.1 million, and they’ve fallen every year since. In 2019, the costs were only $8.2 million, despite the city’s number of employees increasing to 6,900.
How?
How did Fort Worth do it? The city created a physician panel under Chapter 504 of the Texas Labor Code that would be available to its employees only. To identify the providers to include, the city applied the outcome algorithms described below to two juxtaposed data sets and found the providers achieving the best outcomes for each injury type ‒ who cost the city less, not more.
Healthcare is not a commodity. We all think that our doctor is the best ‒ or at least above average ‒ but we don’t live in Lake Wobegon, where all the children are above average. Exactly half of all children are above average, and exactly half are below. It’s the same with doctors ‒ and the specialists and surgeons that they refer us to, and the hospitals that they put us in.
Although counter-intuitive, going to a good doctor costs less overall than going to a bad one. 30% of healthcare costs are unnecessary, the result of poor or ineffective care. Good doctors don’t incur those excess costs because they:
Make fewer errors;
Perform fewer unnecessary procedures;
Experience fewer patient complications; and
Get their patients better faster.
So how can you do what Fort Worth did? First, you need access to the two data sets on which to run the analytics ‒ your medical and pharmacy claims and your employee absence records. If you’ve self-insured your workers’ compensation program, like Fort Worth does, then you own the medical and pharmacy claims. You still engage a third party administrator (TPA) to process those claims for you, but you are at actuarial risk for them, and therefore you own the claims. If, on the other hand, you’re fully insured ‒ you pay the insurance company a premium, and the insurance company bears the risk ‒ then you won’t own the claims and won’t be able to perform these analytics, although your insurance company could.
If you have the claims, then you match them against the absence records to identify the time that the employee missed from work because of the injury. You can do so in two ways. First, juxtapose the claim dates against your Human Resources (HR) Department’s time and attendance records to find the days missed because of the injury and value that time off at the employee’s pay rate or a normalized rate. Alternatively, you can use the indemnity payments to the employee as a proxy for the absence costs. When a TPA or insurance company uses these analytics, this is the route that they take because they don’t have access to the employer’s HR records.
Next, you must be able to direct care ‒ tell the employee which provider to go to. Every state has its own rules. In Texas, an employer can do so. This can include establishing referral protocols and criteria for medical procedures that don’t require pre-authorization ‒ decreasing the wait times to obtain care and thereby driving down lost days and indemnity payments.
If you meet these three criteria ‒ you own the claims, can direct care and have absence data ‒ read on and learn how you, too, can drive down your workers’ compensation costs while improving the care for your injured employees.
Quantifying Outcomes
We begin with the premise that a “good outcome” is getting an employee back to work and keeping them there. We therefore accumulate all the costs to do so and then rank the providers based on the outcomes that they achieve.
First, let’s look at the claims. The chart below shows the average claims costs for 14 specialists treating back injuries. Specialist #1 on the far left is the best, with average claims costs of $1,000, while Specialist #14 on the far right is the worst, at $8,600.
The claims, however, are only half of it ‒ sometimes less than half. You have to add the absence costs, the amounts that the employer paid the employee while out with their injury. Not only are these absence costs a real cost to the employer, but they double as an indication of the effectiveness of the care. The quicker the doctor got the employee better and back to work, the more effective the doctor was. This chart adds each specialist’s average absence costs on top of their claims.
Now Specialist #2 goes from being second best to second worst; and Specialist #9 is doing a better job than we originally thought because that doctor is getting their patients better and back to work faster.
There’s one more step. If you ask any doctor why their costs are more than another doctor’s, they’ll always give the same answer: “Because my patients are sicker.” And sometimes they’re right.
Sicker patients cost more and take longer to get better. If you have two employees with the same back injury, one of them young and otherwise healthy, while the other is older, overweight and diabetic, the older employee is going to cost more. So we adjust for comorbidities by assigning each employee a risk score. That way our rankings are based solely on the provider performances, not the patients that they treated.
There are a number of risk-scoring systems. One that is open-source is the Chronic Illness and Disability Payment System (CDPS). CDPS was designed by the University of California, San Diego and is employed by many Medicaid programs around the country. Accordingly, it is demographically appropriate for a working age population.
The CDPS system looks at various demographic and clinical data, including age, gender, diagnoses and the prescription drugs that a patient is taking and assigns the patient a score: 1.00 being an individual of average health, below 1.00 healthier than normal (the lower the score, the healthier) and above 1.00 sicker (the higher the score, the sicker).
The chart below shows the relationship between an employee’s risk score and the number of days that they miss from work. As you would expect, the higher the risk score ‒ the less healthy the employee ‒ the more time that they miss.
Going back to our back specialists, when we risk-adjust their patients and level the playing field the results change again.
Now the doctors’ total costs and rankings are based on their performances, not the patients that they treated. Doing this, we see that Specialist #13 was doing a better job than we initially thought. This doctor would now be ranked 10th, not 13th.
When we re-order the doctors based on their average risk-adjusted total costs, Specialist #1 is still the best, and Specialist #14 is still the worst. But other than Specialist #12, the order has completely changed. The green arrows show the doctors who moved up, and the red arrows show the ones who moved down.
We can also show this on a quadrant graph. Along the horizontal axis, we graph each provider based on their average claims costs relative to the group average, and along the vertical axis we do the same for the absence costs. The best providers are in the upper right quadrant ‒ low claims costs and low time off ‒ and the worst providers are in the lower left quadrant, with high claims costs and high time off.
Fort Worth’s Provider Network
Fort Worth used these analytics to identify the best providers by injury type and then placed them in its own workers’ compensation provider network. An injured employee must stay within this panel when seeking treatment.
But Fort Worth didn’t just look at its workers’ compensation claims and rank the doctors handing its current cases. Instead, it threw in its health plan claims, too. That way, it identified great doctors not currently handling workers’ compensation cases, but whom the city wanted to in the future.
By sending injured employees to the best doctors, Fort Worth achieved fantastic results ‒ a decrease of 23% in its costs while getting its employees better care!
Benchmarking and Predictive Analytics
Fort Worth didn’t stop there, but incorporated the Official Disability Guidelines (ODG) for benchmarking and predictive analytics, too. ODG is a nationwide database of workers’ compensation and occupational health injuries owned by the Hearst Health Network.
Using these guidelines, Fort Worth not only compares the providers in its network against one another but benchmarks them against national and regional best practices and averages for claims, time off work and other metrics. These other metrics include whether the doctor is seeing the employee more often than usual for a particular type of injury, or whether the doctor is billing unusual procedure codes (which could be either good or bad but bears investigating). In addition, comparing claims against the database allows Fort Worth to categorize them as being within the normal range for that injury type ‒ which the city can pay without further scrutiny ‒ or outside those norms, in which case the city flags the claims for investigation.
Fort Worth also uses the guidelines to perform predictive analytics. When an injury occurs, the city predicts the claims and lost time based on specific factors and then monitors the case and intervenes early when the actual results begin to stray from the predicted ones. For example, using ODG, the table on the left predicts 47 days off and $7,925 in total expenses for an employee suffering a lower back sprain with the following particulars:
40 years old
Living in Texas
Job involves “medium” physical demands (not sedentary, like an office worker, or heavy, like a construction worker)
No risk factors or comorbidities
Case involves some time off work, so it is more severe (80% of all workers’ compensation cases involve only medical expenses, no lost time)
The table in the middle shows that keeping everything the same, except adding that the employee has diabetes, increases the prediction to 62 days off and $11,204 in total expenses. And the table on the right shows that, if the employee hires a lawyer ‒ not a comorbidity for an employee, but definitely a risk factor for an employer ‒ everything more than doubles!
Health Plans
You can use these analytics for your health plan, too. When doing so, there are two differences.
As discussed above, in workers’ compensation, many states permit the employer to direct care. In most health plan settings, however, you can’t do that. You can only encourage someone to go to the best doctor. They can go to whomever they want.
So how do you get your employees and their dependents ‒ your health plan members ‒ to the best doctors for what they need? You could ask your TPA to include only the best doctors in the provider network, or at least eliminate the worst ones, but your TPA usually won’t do that. In fact, many of the contracts that TPAs sign with health systems preclude the TPAs from excluding any of the health system’s providers from the network or steering patients away from them.
Although you won’t be able to set the network, you can stratify it. Tier the network and decrease or eliminate co-pays and out-of-pocket costs when members go to the best doctors. If you have an HDHP (High Deductible Health Plan) married with HSAs (Health Savings Accounts), you can even pay employees to go to the top-ranked doctors by contributing to their HSAs when they do so.
You can also give a list of the best providers for each root diagnosis to:
The case managers handling your high-cost and chronically ill members so that those case managers can suggest the best providers to them;
The primary care physicians (PCPs) in your network to use when referring your members to specialists and surgeons; and
The employees themselves so that they and their dependents can look up the best providers for what they need.
The second difference is that your health plan will have not only employees in it but their dependents, too. You won’t be able to use the algorithms above on the dependents because you won’t have any absence data to match against their claims.
Instead, you can use a different algorithm on the dependents that uses only the claims data. For the employees, we combine the claims and absence data and ask how much it cost and how long it took to get the employee back to work and keep them there. For the dependents, we flip the question and ask how much it cost in claims to keep them well.
We define being well in terms of healthy days, which we can see in the claims. Healthy days are days that the person does not spend in the healthcare system (e.g., hospital stays, doctor’s visits, etc.) or at home in a non-functional state (e.g., recuperating or otherwise unable to carry out their normal activities).
We put this information in a fraction. The numerator is the patient’s risk-adjusted claims for a particular root diagnosis during the year, and the denominator is the patient’s healthy days during that year. We then rank each provider by root diagnosis, from the best with the lowest average risk-adjusted claims per healthy day when treating patients with that condition, to the worst with the highest.
Not only can you rank providers based on their claims per health day, but you can rank wellness programs and just about anything else, too. The chart below compares the risk-adjusted claims per healthy day to keep employees with behavioral health issues at work (instead of out sick) against the claims per healthy day to keep employees without those issues at work (almost everyone has some claims and absences during a year). The risk-adjusted claims per healthy day for a person without any issues is $10, while the claims per day for a person with headaches is double that at $21 per day, and the claims per day for a person with drug and alcohol problems is double that again at $44.
Better Care at Lower Costs
,Fort Worth busted the myth that better care costs more. By sending injured employees to the best doctors the city drove down its costs, while getting its employees better care.
This article originally appeared in the March/April 2021 issue of Public Risk, the member magazine of the Public Risk Management Association (PRIMA).
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Some 20 years ago, I collaborated on a white paper with Bill Gates and other senior leaders at Microsoft on the future of work, to be the centerpiece of the annual gathering he held in those days for Fortune 500 CEOs at his home.
He framed a problem in a way that has stuck with me. It has yet to be solved -- but that's where you and your companies come in, as you take advantage of what we've all learned during the pandemic and map out new ways of working as we scope out a new normal.
The problem concerns focus -- and how to get a lot more of it in our work lives.
Now, Gates is famous for his ability to focus and drive deeply into a problem. When I knew him, if he got curious about a topic he'd take a tall stack of thick books along with him on vacation and sit on the beach under an umbrella while working through them for a week. I once was at Gates' table at a conference when the after-dinner speaker came by. The speaker had just published a technical book on nanotechnology that was a hit in Silicon Valley -- and learned that nanotechnology had been the subject of one of Gates' beach excursions. The two got into a heated debate about how quickly nanotechnology would develop, and it was clear to all of us listening that Gates carried the day as he acknowledged massive potential but said nanotechnology wouldn't develop nearly as fast as the speaker predicted. The arc of nanotechnology in the 30 years since that debate confirmed the ability of Gates to focus on, absorb and process massive amounts of material.
The rest of us aren't so fortunate. But Gates had an idea. He framed it around research that, he said, showed that someone takes 15 minutes to regain focus once interrupted.
He wanted software to protect us from interruptions except those that were truly urgent -- from a key client, a boss, a spouse or child -- and funnel routine interactions into certain stretches of the day, where they can all be dealt with at once.
Some of those capabilities are now possible in Microsoft Teams and other sorts of software, where you can specify how available you want to be. But the world has mostly moved in the other direction. We get notifications on our phones on the very latest in the saga of Antonio Brown running out on the Tampa Bay Buccaneers and on all sorts of other trivia, and we check our email and our texts constantly to see what just arrived. (Someone once aptly described email as a way for others to put things on your to-do list.)
I want what Gates laid out, and I don't see why I can't get it. I don't want to just set my status in Microsoft Teams. I want a software agent to help me structure my day and keep me focused by filtering out what's not essential.
Being on the West Coast in an East Coast world, I always need to deal with some pressing emails when I start my day -- but I don't need to see all 150 that have accumulated overnight. I could train an intelligent agent pretty quickly about which I needed to see and which could wait -- reducing my first pass through email to maybe 15 minutes or half an hour, rather than some stretch of wildly varying length. I'd then give myself a bit of time to catch up on the general news of the day -- in various jobs at the Wall Street Journal, I sometimes had to be up to the moment on events, and old habits die hard; I get twitchy when I'm out of touch. But I could then train an agent to shut off all but the urgent, so I could tackle the main work of the day for two or three hours without interruption before getting to the less important tasks that have piled up. Afterward, the agent could protect me for another uninterrupted stretch.
Cal Newport, who wrote a book called "A World Without Email," tells a fascinating story about the difference between George Lucas and Francis Ford Coppola following their breakout successes -- Lucas with "American Graffiti" and Coppola with the "Godfather" films. Coppola bought a huge home and, eventually, a winery. Lucas bought a modest home and built a tower where he could sequester himself and work uninterrupted several hours a day. It was in that tower that he figured out how to pull together a project he'd been noodling over for years. You've heard of it as the "Star Wars" franchise. (Along the way, for good measure, Lucas' efforts spun off Pixar.)
I suggest that we all need some version of Lucas' tower. I realize that many jobs require far more interaction than my work as a writer and editor in a remote locations does, but I still believe that we can create large pockets of focus for just about everyone that will make individuals and businesses much more productive. And now is the time to address the issue, as long as we have license to rethink so many things about what work should look like post-pandemic.
I think the vision laid out by Gates two decades ago is the right approach -- a software agent that I train in the same sort of way that we all train our spam filters -- even though even Microsoft has only produced an anemic version of its founder's vision.
The way I see it, if you've read this far in the email, I've now put the problem on your to-do list. Good luck. Let me know how things work out.
Cheers,
Paul
Get Involved
Our authors are what set Insurance Thought Leadership apart.
Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.
It’s that time once again when predictions about the insurance industry’s outlook for 2022 come rolling in like waves. They are interesting to those of us in the industry and may provoke discussion and healthy debate or even serve as a call to action for others, even though most predictions turn out to be incorrect or poorly timed. As Bill Gates famously said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction.”
Just take an objective look at the early 2020 predictions, which said little to nothing about the prospects of a multi-year global pandemic, not to mention the acceleration of certain technologies and derailing of others. Granted, this is an extreme example, but it illustrates the point. Predictions about the rate of M&A activity and adoption of technology seem to be generally accurate about “if” they might happen but mostly inaccurate as to the “when” they will happen.
Rather than add a prediction to the fray of what might happen, let’s concentrate on something that many in the insurance and insurtech space would like to see happen, framed as New Year’s resolutions for 2022. Let's focus on removing barriers to innovation.
The insurtech movement is somewhere between seven and nine years in play and certainly gaining no matter the standard of measurement: Global investment sums, sheer numbers of startup launches and the level of M&A and SPAC activity are all at record levels. During this period, there has been a loud and growing chorus of discord between the cadence of new ideas, concepts and technology and the contrast of that with protracted insurer adoption cycles. To make matters worse, the number of startups focused on identical or similar solutions is far greater than the number of insurers with sufficient bandwidth to evaluate or pilot all of them. As one industry pundit recently shared with us, “There are just too many dogs chasing the same bone.”
This is not a statement of blame, instead a commonly shared observation from all participants: insurers, startups, investors, established solution providers, analysts and thought leaders.
Does anyone working in the P&C insurance ecosystem really believe the speed of insurtech adoption is acceptable? In fact, you could go so far to say the current rate of adoption is actually a threat to the insurtech movement itself. Either way, the speed of insurtech solution adoption will be a critical factor in industry progress in 2022 and beyond.
What startups say
Startups are often surprised about the number and complexity of barriers in the insurance space. While it is well understood that the industry is mature, highly regulated and dominated by many very large companies, most startups are dismayed by the number of decision makers and the time it takes to do just about everything: scheduling meetings, signing non-disclosure agreements, reaching terms to start a pilot, etc. Long sales cycles are a familiar and widely accepted obstacle when trying to partner or simply demo one’s solution.
Upwards of a year or longer from introduction to pilot phase is common and, in some circles, considered fast. Ironically, startups may find an insurer’s information security protocols, no matter how onerous, a welcome step because the prior steps were truly difficult. The infosec stage is also a step closer to pilot or implementation, so no doubt a relief once reached.
To avoid barriers, some startups have opted for a managing general agency (MGA) model to deploy their technology somewhat more directly, but this approach leaves out the majority of insurtechs, which work within existing insurance models. Partnering with other solution providers can help accelerate things, but here again there are complications. Finally, while startups often begin prospecting with the largest carriers, they find that the larger a company is the harder it is to do business with. (On a positive note, startups that do overcome these barriers tend to realize long-lasting, successful relationships with insurers.)
Insurance carriers believe they are misunderstood in some areas while generally agreeing about the criticism directed toward them. They’ve also bought into the realization that disruption is part of the future of insurance and have thus made their own insurtech investments, stood up innovation teams, sponsored accelerators and competitions and much more.
Insurers are quick to point out a bevy of legal, regulatory and privacy exposures that may be overlooked by startups. But there is a realization of the need for innovation and true admiration for the unobstructed thinking that allows startups to be nimble.
Carriers also cite real world factors such as the need to upgrade or even transform legacy systems, while moving many operations to the cloud. Insurers also say they are moving at an unprecedented tempo and are trying all sorts of new concepts, with lots of evidence of newly announced partnerships, investments and deployments. Money and resource constraints are real and restrict the number of new endeavors.
What they both say
When you carefully consider the startup and incumbent vantage points, there is a high degree of empathy and understanding for each. They want to help each other and realize their success depends on working together early and often.
COVID-19 derailed many plans, accelerated others through necessity and channeled focus toward business continuity and later to hybrid workforces. This is a major issue for large companies no matter how much of a game face companies project.
Overcoming barriers in 2022: platforms and ecosystems
The insurance business process is highly complex and involves hundreds of potential interactions internally and externally, including connections with thousands of ecosystem participants. Until now, this has been a major barrier to process efficiency,
The emergence of insurance industry platforms, also called marketplaces, represents an important cure for this complexity that can facilitate commerce among insurers, insurtechs, supply chain participants and policyholders. For both insurers and insurtechs, integrations are reduced from many to few or even to one. For policyholders, customer experience is improved. For all participants, costs and time to market are reduced, and access to more and different trading partners is significantly expanded. The ability for insurers to test and engage with innovative startup solutions is considerably simpler, faster and less risky.
In the spirit of making New Year’s resolutions we would like to see for 2022 that will alleviate innovation and adoption barriers, here are our top wishes – a mix of practical, incremental and bigger breakthroughs:
once an insurer and startup begin discussing the NDA process, it will be completed in one week or less
startups will know and anticipate their prospective insurance carrier’s audience much better and will dial into problems, pain points and priorities
insurers will identify and share their problems, pain points and priorities more clearly and will also distinguish among what’s desirable today, tomorrow and in the future
insurers will find ways to take more risk and create more sandbox areas to pilot, sort of an innovation lab 2.0 with real funding and authority
startup offerings will become more categorized by type to make awareness, comparison and contrasting possible
startup vaporware will be eliminated or reduced to more immediate, tangible solutions vs. future road map ideas
when insurers are not interested, they will say so as soon as they know it and offer any constructive feedback
intermediaries and those well-positioned to help move the needle will be more involved, from scouting to solution alignment
This last wish for 2022 is extremely relevant to us, because we are one such intermediary and leverage our deep subject matter expertise and extensive relationships across the ecosystem to assist market participants, including insurers, insurtechs, supply chain partners and investors, to execute on their strategic objectives.
We want to wish you all a very successful 2022.
Get Involved
Our authors are what set Insurance Thought Leadership apart.
Stephen Applebaum, managing partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem.
Alan Demers is founder of InsurTech Consulting, with 30 years of P&C insurance claims experience, providing consultative services focused on innovating claims.
You have decided it is time to move out of your apartment or house and into another one. You are packing up your closet, and you realize there are some decisions to make. Half of the closet is filled with items you like but just don’t use. Do you take the time and energy to move those things to your new place?
Let’s take this one step further. Let’s say your new home has a “smart closet” that won’t allow you to bring along the clutter. It is designed to help you maximize your use of space by only allowing you to store items that are regularly used.
One of the benefits of the smart closet is ease and speed of access. You never have to look through shirts that never get worn to arrive at ones that do. The racks and shelves in the closet fit what you need. If you don’t wear hats, there’s no hat rack. If you mostly wear sandals and flip flops, the shelves are made shorter than a standard shoe rack. The smart closet automatically customizes itself to you and your “operational needs.” Life is a little easier with a smart closet.
It’s this same logic that goes into the development and use of cloud technologies. Insurance administration within SaaS 3.0 is all about precision in what is used, what is stored and how it is managed. As we move into the future of SaaS (software as a service), this precision will give insurers real competitive advantage. But what is SaaS 3.0? How does it differ from what we have been calling SaaS all along?
The true definition of SaaS 3.0 is everything that comes under the heading of “differentiated experiences.”
This would include things like:
Internet of Things transformation
Embedded insurance
Predictive analytics
Simplification at an infrastructure level with purpose-built databases and server-less microservices
It may help to think in terms of functionalities. SaaS 3.0 will help insurers to do more in terms of predictive underwriting models and risk stratification. These are just a few of the opportunities. The deeper insurers dig, the more they will realize what is possible.
A smarter strategy for building purpose into the product
Insurers are finding that, when it comes to technology, what they don’t need bogging down their systems are the functions, capabilities and data that they will never use.
With cloud systems, you don’t bring all of the unused items that have been sitting in the closet. You clean, pitch, start from scratch, then move what needs to be moved after it has been organized and vetted for its usefulness. It’s a fresh start that stays fresh. How does this strategy work?
Five core principles are the future of SaaS. These answer the issues inherent in yesterday’s monolithic systems. When we look at the core principles properly, we see that they make sense because they allow for customization that fits an insurer’s purposes instead of making an insurer’s operations fit into a system box. Let’s look at these five principles.
1. "Componentized" — Create loosely joined cloud-native architectures that operate as microservices.
A large insurance organization may need many or most of the capabilities that come with an entire policy administration platform. A small insurer may need far less in the way of functionality. Perhaps they only need form-intake capabilities and don’t require the rest. In a SaaS 3.0 environment, each set of services or capabilities might be easily used as simple components. So, instead of monolithic products, such as a property & casualty system or a full underwriting platform, all capabilities become available as microservices. As a part of SaaS 3.0, we need to be able to segment monolithic, “old school” ERP systems. We need to "componentize" the microservices but keep them loosely connected with each other.
2. Specialized — Each service is designed for a set of capabilities.
As a natural byproduct, these microservices are developed for a specific function. It’s like walking into a restaurant where everything is a la carte instead of paying for a full buffet where you won’t eat every dish. Each capability has its purpose, and you only select the specialized purposes that fit your experience or need.
3. Communication-ready — APIs act as a gateway to an application or point of data.
How do these capabilities engage with the larger platform? How do they talk with each other? Insurers are currently using application programming interfaces (APIs), but most aren’t coming close to what is possible. APIs are shifting from simple data exchange tools to become the primary gateway for capabilities to talk with one another. The fundamental lever for SaaS 3.0 is to use APIs as the nerve center for ID stacks. Insurers will no longer need to create point-to-point connectivity between two systems. If every system contains open APIs that can connect to any other system, insurers will be gaining communication efficiency while they reduce resource needs and integration time. Open APIs remove layers of integration. They invite collaboration, which, in turn, fosters innovation. SaaS 3.0 is an environment built for easy innovation.
4. Data-ready — Applications are designed on purpose-built databases optimized for specific workloads.
Nearly every insurer is in the midst of analyzing their customer journeys and how to use cloud technology to improve them. Many have hit a hurdle that they don’t quite understand. As they begin to unravel the issue, they come to realize what they are missing can be solved in SaaS 3.0.
Here is the issue: If you look at an application or a piece of software, it is relatively easy to understand the user experience (UX) —the piece that the customer gets to touch and feel and use. Underneath that is something we typically refer to as business integration. Underneath that is the database or data warehouse — a huge bucket that holds all the data. Below that are infrastructure items like servers, networks and security. But when we talk about SaaS or Cloud 3.0, executives and business strategists are many times focused on that top layer.
“How do we make our applications cool and unique and downloadable on iPhones?” Discussions around microservices and APIs are often restricted to the top layer and the iOS App Store and Google Play, etc. Everything below that layer, however, is potentially-restrictive to the innovations insurers could be making at the top layer. The layers below the top can hold insurers back, but some insurers are reluctant to go there. Conversations on SaaS frequently stall at the point where architecture analysts ask insurers, “What is your existing database?” It might be a SQL database or perhaps data is sitting in an Oracle data store. When discussing how data will be used or moved, insurers may back off. “Oh, we can’t do that.” There is a refusal to move.
In those cases, data’s real value is stymied by what I call data inertia. It’s too “heavy” to move. Either insurers have made a huge investment in their databases that they don’t wish to deconstruct, or they have acquired and merged so many times that numerous databases are held together with very important and fragile Band-Aids.
Cloud conversations need to percolate down to the core of how data is stored and managed. For SaaS 3.0, applications need to be designed with purpose-built databases that are optimized for specific workloads.
Consider how we use databases: There are transactional purposes. (Data A + Data B = Output C). There are reporting purposes. (Data is used to generate reports, dashboards and financials.) There are machine learning/AI purposes. (Data can improve operations and teach us something.)
If we purpose-build and purpose-use databases, then we can partition out database requirements so we have a separate stream of databases that are used purely for that particular function. Reporting won’t infringe on the transactional layer, and it won’t affect performance and methods. This is the core of what needs to happen. This proper design and use of individual databases is arguably more important than anything being done in the transaction layer because it is an enabler. The face of the organization holds more promise when the core is doing what it needs to do to support it — and only what it needs.
5. Justified — Operational impact as a key imperative.
We need to think of operational impact in the SaaS world much more differently than in the traditional technology world. When cloud computing began to grow, there was the conceptual idea that cloud brings efficiency with it. Today, though, we have to consider and measure the full realm of operational impact. We need a solid and evolving set of metrics to measure how we are progressing along parameters of performance, efficiency, operational excellence, cost optimization and scalability.
Better SaaS starts with clear insights
By keeping operational impact at the forefront of SaaS conversations, the organization can clearly justify the shift to cloud technology. The evidence that you compile in analyzing the current stack against future deployment is performance-based and not anecdotal. For those who work with Majesco, we begin with an operational impact analysis so that we can jointly review and understand all of the operational impact levers that are benefits to cloud deployment. We call them pillars. Each pillar stands on its own as a reason cloud works so well, but it’s easy to see how they jointly support best practices in the enterprise. The pillars include:
The New Year traditionally brings with it a time for reflection and the need for fresh starts. As your organization contemplates how it will adapt and change to meet the years ahead, it may be time for you to compare your current state with the possibilities to be found in cloud technologies through the lens of SaaS 3.0.
