A phrase about fire should read more like an expression about fiery rhetoric, because where there’s smoke inhalation, there’s a cloud of confusion. The smoke comes from vapors of misinformation about an industry in which the good deserve recognition and the compliant warrant respect, in which those who comply with the law uphold the letter of the law, in which those on the right side of the law are true to the spirit of the law. The insurance industry should separate the good, whose ranks include manufacturers of approved vaping products and devices, from the bad. 

Approved products are not an endorsement of vaping, or approval from the government for people to vape for no reason. Rather, approval corresponds to federal standards of safety and disclosure. 

In honoring these standards, consumers have the knowledge to make informed decisions: to choose the right vaping devices for the right reasons. In turn, insurers should distinguish between those who vape in accord with the rules—on account of the rules—versus those who put themselves at risk of injury or hospitalization.

According to Mike Khalil, founder and CEO of JJ Compliance Consulting Group (J&JCC Group):

“Compliance is a necessity for the tobacco and vape industry. And yet those who ignore this fact, or believe they can change the facts, face an unpleasant reality via fines or lawsuits, both. The cost of noncompliance is a cost insurers will not absorb and consumers will not accept. Also, those who do not obey the law forfeit their moral right to object to the enforcement of the law—period.”

Notice the point about the morality of compliance, as this point alone speaks to what insurers should do. The point is to encourage good behavior, not punish it; charging consumers who vape with specific devices, specifically approved devices, less than those who vape with a sense of careless disregard.

If insurers care about this issue, if they care about compliance in general and improving the safety of vaping in particular, they should insist on the wholesale adoption of existing rules by the vaping industry. The effect would cause other industries to follow suit, lowering costs not only for insurers but for everyone.

See also: Pressure to Innovate Shifts Priorities

Compliance is a testament to matters of legal and moral importance. That is to say, compliance is not a DIY (do it yourself) project; it is instead proof of a company’s commitment to what the government demands, regulators require, courts expect, and consumers want.

Compliance is a goal insurers should promote, since the alternative is too dangerous to deny and too wrong to dismiss. 

That this goal is attainable, that it is affordable too, underscores the fact that it is the right thing to do. 

Prioritizing this goal is how insurers can increase safety without raising costs, or losing money. Prioritizing this goal is how the insurance industry can strengthen its reputation, and develop a reputation for oversight, care, and compliance.

With consultation from experts, compliance can be the standard all industries embody.

The rapid rise to fame of special purpose acquisition companies (SPACs) brings with it a host of uncertainty and risks along with the promise of fortune. In the U.S., 274 SPACs were launched in 2020, and so far in 2021 about $100 billion has been raised, according to the Wall Street Journal. Such is the growing appeal of SPACs that the Securities and Exchange Commission took the unusual step in March of warning that it is “never a good idea to invest in a SPAC just because someone famous sponsors or invests in it or says it is a good investment.”

In addition to warning against basing investments solely on celebrity endorsements, the SEC recently issued further guidance on the booming SPAC market, and many believe that increased scrutiny will continue, with further regulation coming. From an insurance perspective, much of the focus has been on the risk exposures of executives and directors involved in the deals, resulting in an explosion of D&O insurance demand. Although many of the risk exposures remain the same as those in traditional M&A deals, lack of historical data has fueled uncertainty over future litigation possibilities. Perhaps the biggest difference in SPAC risk exposure is the speed with which deals must be completed. As with other areas of the mergers and acquisitions market, the use of representations and warranties (R&W) insurance can offer real benefits to both buyers and sellers to help manage these risks.

Managing the risks

The use of R&W insurance has become a standard feature and a valued tool to facilitate deals in the private equity (PE) space over the last several years, with myriad benefits for both sides of the transaction. Participants in SPAC transactions should also consider R&W insurance once a target has been identified and work is underway to complete the de-SPAC merger. 

The risks to be insured on a SPAC transaction are not radically different from a PE deal – for the buyers, the exposures are largely the same.  However, there is one significant difference in SPAC transactions that may drive risky behaviors: deals are being done against the clock. 

One of the key attributes of SPACs is that deals must be completed within a two-year time frame, which imposes considerable pressure on the founders to find the target and close the merger. In a typical PE deal, despite months – sometimes years – of due diligence and the seemingly good intentions of both parties, it’s not uncommon for M&A issues to arise under sales contracts—often after the ink has dried. The aggressive timeline of a SPAC transaction only heightens these risks. Some parties may be tempted to cut corners in the due diligence process and SPAC sponsors are well aware that discovering bad news might derail the deal. 

This time pressure can also mean that SPAC sponsors may make concessions during the negotiation of the purchase agreement, because they have an incentive to close the business combination and don’t have a fiduciary duty to the investors. In most cases, sponsors are able to sell their shares soon after the deal is done, so they are less interested than other investors in the target’s long-term performance. This last issue can, and in some cases has, been resolved by making sponsors hold shares in the SPAC longer so that their interests are more aligned with other investors.  The more interest the sponsor has post-deal, the deeper they may dig to understand the target, and the more invested they may be in the due diligence process.

How R&W can make it happen

In simple terms, R&W insurance hedges risk for both buyer and seller. When evaluating coverage options, working with a team of underwriters experienced in executing deals under tight time constraints can give SPAC acquirers certainty that they will have insurance in place when they sign a deal. 

Equally important is choosing an insurer  that has a deep bench of underwriters with depth and breadth of experience across sectors, as they will be able to highlight any soft spots in the diligence that need to be addressed to ensure meaningful coverage.

See also: Startups Must Look at Compensation Plans

There is also competitive pressure for targets. Having R&W insurance can be an advantage to the targets in an auction process, making them attractive to investors. Should there be any misrepresentations or breaches post-closing, the seller is liable for losses for the period of time set out in the agreement. To cover any legacy liabilities, a portion of the proceeds from the sale are typically held up in escrow, handcuffing sellers from using those funds. When a target has R&W insurance, it removes the requirement to have an escrow and the sellers can realize the entire proceeds of the deal on closing. For a purchase in the hundreds of millions of dollars, the ability to liberate a 10% escrow with an insurance policy is very attractive. 

While the risk profile for a SPAC target is not critically different from that of any other business requiring R&W insurance, the abbreviated timelines involved on SPAC deals and their shorter track record makes it harder to predict outcomes. Just as a celebrity relies on their reputation to secure endorsements, so too must an SPAC sponsor seeking investor and target company trust. R&W insurance serves as an important tool to facilitate these fast acquisitions, transferring risk to the insurance company and keeping reputations intact.

One of the most important business lessons we’re learning throughout this pandemic is that nearly every job carries risk. Medical workers and first responders put their lives on the line. Essential workers report to duty even with high infection rates. Even corporate employees working from home endure increased mental and emotional stress. The result of this tenuous working environment is millions of employees ready to jump ship, and employers at risk of disrupting operational flow, revenue and employee retention.

Remote employees are said to be working three more hours per day and increasing productivity levels. This is happening in addition to other home life responsibilities they are managing. Some employees are experiencing burnout and depression but trying to stick it out, while others are seeking to jump ship. A recent survey shows 52% of employees plan to job hunt this year, up from 35% in 2020. Other Management reveals 46% of employees now feel less connected to their current employer, and 42% say company culture has dwindled during the pandemic.

Ensuring employee safety, which in turn mitigates corporate risk, is quickly becoming a priority for businesses if they want to thrive throughout this turnover tsunami. The Centers for Disease Control and Prevention Foundation reported in 2015 that the average cost of influenza for businesses averaged $87 billion annually. Now add a potentially annual seasonal outbreak of COVID-19 to that number, and you are looking at a very real, very large and very expensive problem.

However, much of what we’re learning about pandemic risk mitigation can be applied indefinitely to ensure healthier, more cost-effective operations, and better overall employee experience and retention. Considering that 50% of respondents to the 2020 HR Sentiment Survey by Future Workplace ranked employee experience as their top initiative, this shows a direct link between emerging workplace technologies, the employee experience, and operational success. If organizations can better shape the employee experience by capitalizing on emerging tech, they will create a pipeline to attract and retain motivated talent, bolster culture, decrease budgetary spending and improve business operations. 

Here are some of the workplace technologies that can help organizations reduce risk during the turnover tsunami:

1. Safety Solutions: Investing in an end-to-end health and safety solution that accounts for virus protection now and provides tools to keep employees safe in the future demonstrates the value your organization places on employee wellness. It’s a way to rebuild connections with existing employees, retain your corporate culture and recruit new talent.

2. Pre-Employment Screenings: Hiring and onboarding quickly and safely during a turnover tsunami is critical to an organization’s success. Partnering with an internationally accredited screening firm ensures new hires are vetted completely before joining the staff. A screening firm will run checks on criminal records and social media use and verify references and credentials. Many businesses are adding COVID-19 testing to their pre-employment screening packages to help reduce health risks. 

See also: 3 Silver Linings From COVID-19

3. Drug Testing: Studies show substance abuse increases dramatically during a national crisis and remains elevated for months afterward. Since the pandemic began, more employers have started using oral fluid (saliva) drug testing. These tests are accurate and easy to use and can be taken from the comfort of an employees’ own home while under constant supervision. Oral fluid drug testing can be collected virtually, using remote video observation, ensuring the validity and integrity of the sample and protecting the safety of the donor and collector from any COVID-19 exposure.

4. Learning Management Systems: Part of a successful employee experience is providing opportunities for growth. An internal learning academy, like one you could build out with an LMS, meets employees where they are. Classes can address employee needs like wellness, upskilling and remote team management. The result is a strong workforce and a subtle way to rebuild your culture. 

5. Artificial Intelligence: AI is imperative in your recruiting process as it facilitates work and transforms behaviors using real data. Screening capabilities allow you to customize questions to attract the right talent. Automated tools can aggregate and score applicants. Chatbots can schedule interviews, answer questions and even deliver videos. 

Employees and job hunters alike are expecting and searching for employers who work to protect their workforce and improve workflow. Technologies to improve the employee experience and protect new hires are more than just incentives to boost confidence and safety. They help organizations position themselves to attract skilled talent and futureproof operational excellence.

From a downpour of tears to a deluge of debt, the loss of a loved one can drown a family in a sea of emotions and a storm of expenses. The loss can flood the last refuge of sanctity and shelter, leaving a house underwater and a family homeless; leaving a widow without a lifeline, a widower without a line—a path—to safety and children without the means to pursue any number of life opportunities. Given these dangers, given the specific danger of losing a house to foreclosure, life insurance has the power to protect spouses and families from further suffering. 

Life insurance with mortgage protection allows families to shelter at home—to stay in their homes—rather than sheltering in place. Rather than leaving families seeking temporary shelter, or evacuating to emergency shelters, life insurance with mortgage protection not only diverts the course of a storm but dissipates it altogether. But families must first buy this protection, which means insurers must explain why families—particularly young families—need life insurance with mortgage protection. 

The explanation is a matter of basic math, where loss of life equals loss of income. This loss expands as bills accumulate and interest accrues, turning survivors of the hardest loss into nomads in a permanent state of hardship, turning the worst hard time into hard times without end, turning all time into the horrors of the end time.

This scenario is no exaggeration, as too many live to survive while too few have the protection to live well. For families to avoid this scenario requires the insurance industry to speak to the urgency of the issue. 

Emphasizing this issue, repeating the emphasis on having life insurance with mortgage protection, is a duty the insurance industry must honor. Anything less is a disservice to those who need to know the truth, that this protection is indispensable to honoring the terms of a mortgage without mortgaging the strength or savings of the good.

The good include families in pain, whose sorrow insurers can assuage through policies—life insurance policies—that are palliatives of a financial sort. That these palliatives may be curatives, that these treatments may have restorative properties, that among these properties are the protection of property and a source of monthly income—these goods are just and righteous.

Insurers must, however, promote this message.

See also: Simplicity, Magic in Life Insurance Sales

If insurers think people think of themselves as prospects, and consumers treat themselves as contacts, if insurers think lack of contact corresponds to lack of interest, that consumers have no interest in life insurance with mortgage protection, insurers need to rethink everything.

The insurance industry has a chance to broadcast a digital PSA, a public service announcement for online media, about the benefits of life insurance with mortgage protection.

Every post that highlights this message, every email that encapsulates this message, every message about this message advances a cause for the good. 

Every advancement due to this message is an act of goodness.

In writing this message, insurers have the potential to underwrite more life insurance policies with mortgage protection.

It’s not so much that the questions scare salespeople; it's the lack of answers they find terrifying.

As someone who coaches salespeople and makes selling a part of my everyday activities, I can appreciate the job's difficulty. What I can't respect is not doing everything possible to make the job simpler. I swear, at times, it seems like salespeople are intentionally making their job harder.

Here’s what I mean

Open your customer relationship management (CRM) system and answer the following questions for each active prospect…

But wait. Hold on a minute. Before we get to the questions, let’s address the two key elements in my request.

First, let's make sure we agree about what constitutes a prospect. A prospect is not a name on a wish list or on the list you just purchased. Those are suspects, someone you think you may want to have as a client.

You don't have an actual prospect until the person is aware of your interest in potentially doing business and agree to participate in that exploration.

Now your CRM. To be clear, I’m talking about the technology you use to track prospects. This is the system that you bitch about to your sales manager because "entering stuff in the system gets in the way of my valuable sales time.”

Do you know why salespeople avoid using a CRM? It allows them to avoid owning up to the reality of not having a healthy pipeline.

Tracking prospects in a consistent, centralized manner is a prudent practice. Enough with the bitching and moaning about data entry.

Back to the questions

Yes, selling is difficult. Nobody likes to be sold to, right? So, look at the opposite side of this coin. Instead of thinking about how you can sell to the opportunities in your pipeline, focus on how you can help them make better buying decisions.

The path to them making better decisions comes with clues that lead to an engagement with you. If you can answer the following questions, there is an excellent chance you will help the prospect make a better buying decision. There is also a good chance that a better buying decision will include you.

1. What does this opportunity value most?

This question is both the most obvious and the most ignored. It is obvious because, of course, you have to show prospects more value. The problem is that most salespeople assume the answer to this question on behalf of the prospect. Salespeople assume the prospect wants a lower price, more free stuff or better service.

Maybe they do. But the path to lost opportunities is littered with wrong assumptions made by salespeople.

See also: Trusted Adviser? No, Be a Go-To Adviser

Don’t make this difficult. Just take the time at the beginning of the sales process to ask the buyer what they value. But ask it in a way that expands their expectations beyond price, product and service.

Ask, "If we were getting together for dinner to celebrate what we have accomplished by working together, what are a couple of non-cost-related things we would be celebrating?”

2. What have I done to deliver on that value?

Once you have identified what a prospect values, start delivering it. I mean, like NOW, while they're still a prospect.

I laugh at one of the cornerstones of way too any producers’ value propositions. They will say, "What sets us apart is the level of service we provide."

WTH?! 😳

Here’s my problem. A prospect can’t experience your service until they become a client. You have ZERO chance to demonstrate that value during the sales process.

If you want to make the buying decision easier for a prospect, nothing will move the needle faster than delivering ideas and advice on what they value. This completely removes the concern they have over whether they would get any meaningful value from working with you.

A prospect in motion

The following two questions are yet more examples of why following a sales process is so important. If you have a consistent sales process in place, the steps of moving a prospect through the pipeline become apparent. To ensure productive movement, you must be able to answer these questions for each opportunity.

3. When will our next meeting take place?

The one thing worse than an empty pipeline? One that is filled but stagnant. Prospects must keep moving forward (and I don’t mean on the two- to three-year timeline so many producers believe it takes to earn a new client).

If you have identified what a prospect values and are already providing proof of your ability to deliver, you have their attention. And, if you have shown them a path that leads to even greater value, they will be eager to schedule the next conversation and move forward with you.

Interested prospects are almost as excited for the next meeting as you are.

4. What is the purpose of the next meeting?

Every meeting must have a purpose, a defined goal. When you and the prospect agree on what you will discuss next and why it is meaningful to the buyer, meetings stop feeling like a burden and start to look like the growth opportunity they need to be.

When you have defined the purpose of a meeting, they become productive, meaningful and valuable to the buyer.

Purposeful meetings build momentum, trust and confidence.

The questions move your KPIs

The average time it takes a typical producer to acquire a new client is way too long in our industry, and the close ratios are woefully low.

Answering these four questions with confidence will lead to more new clients in dramatically less time.

Closing more deals isn't rocket science, guys. You have to be able to answer the right questions.

See also: What COVID and 43 Years Taught Me

Back to your CRM

Look back at each prospect in your pipeline. If you can positively and definitively answer each of these questions for a prospect, you are likely looking at a future client.

If you can't, well, your gut has already been telling you that answer.

Much has been written, and much has been done in the past decade regarding the customer experience in P&C. Progress has been made in understanding customer needs and journeys, implementing digital solutions for mobile and self-service capabilities and improving interactions with agents and policyholders. However, anyone involved in strategies and improving the CX in P&C is likely to admit that the industry is still in the earlier stages of the journey. It is clearly a marathon, not a short term, once-and-done project. But now, as a result of the pandemic and the momentous events of the last year, the race has changed.

A new SMA research report, Customer Experience in P&C: Transformation in the Pandemic Era, assesses the journey of P&C insurers. Companies covering the personal lines, small commercial and mid/large commercial market segments are profiled based on a survey of executives and SMA’s analysis of customer experience projects with insurers.

About one-quarter to one-third of insurers are in broader rollouts of customer experience strategies, with the personal lines segment being the most mature. There is a correlation between the status and maturity of CX officers and the level of overall segment maturity. There are two categories of CX-related projects that are vital to track: those that are strategy/organizational in nature and those that are oriented around technology capabilities. For example, flipping the lens from a customer service to a customer experience orientation and establishing a customer-centric culture are the top two project areas, signaling a recognition that these are foundational elements of a good CX strategy.

See also: Lessons on Reaching Customers Remotely

The project plans recognize the change that is underway. While it may be hyperbole to say the pandemic changed everything, the pandemic and all that it has entailed altered customer expectations and caused insurers to rethink and reprioritize plans. The short-term focus has been on enabling and improving self-service, digital payments and digital intake for both sales and service. Improvements will continue, but, in the meantime, P&C insurers have been taking stock of their customer experience journey – and this is where they are running a marathon. What once was movement at a steady pace has now taken on steadily increasing momentum. Virtually every insurer is accelerating digital transformation, and customer experience is an important element.

However, now that the expectations of agents and policyholders have risen, the finish line for the marathon has been pushed out. It is not as if there was ever a firm finish line where a company could claim it was “done” with customer experience. But the race is now taking some new turns, will require adaptability and may require a longer sustained effort to remain competitive.

A Price Tag on Climate Change Paul Carroll, Editor-in-Chief of ITL While agreement has grown in recent years that climate change is real, that humans are a major contributor and that it presents a grave danger, the consensus still leaves a lot of wiggle room. How fast is the world warming? How much influence do we humans have? How stark are the coming dangers, and when will they hit us? Many have rallied to the climate change cause based on a perceived moral imperative – we owe it to our kids and grandkids to leave the planet in the best shape possible – but the realist in me knows that the effort will go to the next level once the cause turns into a clear economic argument. The argument would project costs related to climate change, writ large – the growing damage from wildfires and hurricanes, the damage to crops from increased heat, the costs of people having to relocate from the coasts as sea levels rise, etc. (Yes, the models are imprecise, but they’ve been getting better for a long time and will continue to do so.) The argument would then project the costs both of slowing the warming of the planet in the long run and of mitigating the short-term risks from those storms, fires and more. Once it becomes clear that the price of likely damage exceeds the cost of mitigation, then climate change expands from being a cause to being a calculation. That may be starting to happen... continue reading > KPMG and Majesco Webinar Hallmarks of a great digital customer experience include choice, speed, and convenience. Insurers must build on these attributes to create value-added features that increase customer engagement.    Register Now SIX THINGS State of Mental Health in the Workplace by Mark Walls and Kimberly George As work from home continued, employers became even more aware of the impact of mental health and well-being. Read More Does Cyber Insurance Add to Ransomware? by Joshua Motta There is literally no industry better positioned to fight cybercrime than the insurance industry. Read More Elevating the Capability of Employees with AI based Fraud Detection Delivers Significant Financial Results sponsored by Daisy Intelligence AI done right will deliver significant cost savings in claims operations, satisfy customers and make the difficult job of fraud detection and claims processing easier.  Read More Could COVID Help Life Insurance? by Mike Reeves While the pandemic may have put the world on pause, it has put the modernization of the life insurance industry on fast-forward. Read More Simplicity, Magic in Life Insurance Sales by Sébastien Malherbe Everything we’ve learned about e-commerce design can be applied to the life insurance consumer--no matter where or how a policy is purchased. Read More COVID-19’s Impact on Replacement Costs by Andrew Slevin To make sure there are no surprises, asset owners across sectors need to ensure that their valuations are up to date. Read More Top Risk Concerns for 2021 by Paul Schiavone Financial institutions face emerging risks driven by cyber exposures, a growing burden of compliance and the turbulence of COVID-19. Read More MORE FROM ITL May's Topic: Cyber In high school, a friend of mine had a poster on his wall that read, “Just because you’re paranoid doesn’t mean they aren’t out to get you.” That pretty well summarizes how the world of cybersecurity and insurance works. Companies may feel paranoid for looking over their shoulder all the time, expecting something bad to happen, but we all know that there are plenty of bad guys out to find all the victims they can. Take Me There The Alarming Surge in Ransomware Attacks Ransomware and business email compromise (BEC) attacks are soaring, and ransom demands have gone from an average of $10,000 to well north of $100,000 – demands sometimes reach the tens of millions of dollars. In this interview, we discuss what is causing the surge – and what businesses can do to protect themselves.  Watch Now Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2021 Media Kit GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started SPREAD THE WORD Share Share Tweet Forward Copyright © *|CURRENT_YEAR|* INSURANCE THOUGHT LEADERSHIP, All rights reserved. *|IFNOT:ARCHIVE_PAGE|* *|LIST:DESCRIPTION|* Our mailing address is: *|HTML:LIST_ADDRESS_HTML|* *|END:IF|* Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

While agreement has grown in recent years that climate change is real, that humans are a major contributor and that it presents a grave danger, the consensus still leaves a lot of wiggle room. How fast is the world warming? How much influence do we humans have? How stark are the coming dangers, and when will they hit us?

Many have rallied to the climate change cause based on a perceived moral imperative – we owe it to our kids and grandkids to leave the planet in the best shape possible – but the realist in me knows that the effort will go to the next level once the cause turns into a clear economic argument. The argument would project costs related to climate change, writ large – the growing damage from wildfires and hurricanes, the damage to crops from increased heat, the costs of people having to relocate from the coasts as sea levels rise, etc. (Yes, the models are imprecise, but they’ve been getting better for a long time and will continue to do so.) The argument would then project the costs both of slowing the warming of the planet in the long run and of mitigating the short-term risks from those storms, fires and more. Once it becomes clear that the price of likely damage exceeds the cost of mitigation, then climate change expands from being a cause to being a calculation.

That may be starting to happen.

A group of universities and climate research organizations published a report recently that said that climate change contributed $8 billion of the $75 billion of damage that Superstorm Sandy wreaked on the Northeast in 2012. Based on extensive simulations, the group concluded that climate change had raised the water level by four inches in the Atlantic Basin. That doesn’t sound like much, but, once Sandy churned up a monumental storm surge at what turned out to be an extra high tide, the water level was 14 feet above normal in New York City – and the researchers concluded that the extra water from climate change meant that 71,000 homes were flooded that would otherwise not have been.

One data point does not a trend make (and some will challenge that data point), but I’m encouraged by this effort and hope that the real experts on risk – insurance companies – will increasingly weigh in on how to quantify what the costs of climate change will be and on how we might reduce those risks, so we can move from cause to calculation.

Investors are certainly encouraging interest. The Wall Street Journal reports that investments globally in funds focused on the environment hit $2 trillion in the first quarter and appear to have passed the tipping point. The WSJ says that investors are adding $3 billion a day to those funds and that $5 billion of bonds and loans are being issued daily to finance green initiatives – which would mean $3 trillion more for such initiatives just this year.

Since I helped with a book called “Resource Revolution” back in 2013, I’ve argued that a key approach to heading off climate change is to turn the market loose on it: Find ways to make it profitable to head off disaster.

Maybe we’re finally headed in that direction, if we can start to put a number on the costs of climate change while holding out really big numbers in front of those trying to innovate solutions.

Here’s hoping.

Cheers,

Paul

P.S. Here are the six articles I'd like to highlight from the past week:

State of Mental Health in the Workplace

As work from home continued, employers became even more aware of the impact of mental health and well-being.

Does Cyber Insurance Add to Ransomware?

There is literally no industry better positioned to fight cybercrime than the insurance industry.

Could COVID Help Life Insurance?

While the pandemic may have put the world on pause, it has put the modernization of the life insurance industry on fast-forward.

Simplicity, Magic in Life Insurance Sales

Everything we’ve learned about e-commerce design can be applied to the life insurance consumer--no matter where or how a policy is purchased.

COVID-19’s Impact on Replacement Costs

To make sure there are no surprises, asset owners across sectors need to ensure that their valuations are up to date.

Top Risk Concerns for 2021

Financial institutions face emerging risks driven by cyber exposures, a growing burden of compliance and the turbulence of COVID-19.

Many insurers are still uncertain as to how the pandemic has shifted the fraud landscape and its impact on their businesses.

Although digital transformation and automation has been underway for the better part of a decade, insurers have been faced with unprecedented and changing demand requiring resilience under extremely testing circumstances. However, one thing is clear; the inability for insurance companies to automate claims processing and proactively identify and mitigate emerging fraud threats is no longer an acceptable business practice as consumers demand better service.

 

The first installment covered regression to the mean. This installment features the fallacy of using non-participants as a control for participants.  This “control” fallacy led the Food and Drug Administration to reject this methodology more than half a century ago. 

And, as we’ll see through examples below, correctly so.

The news of the fallacy and its rejection never reached the employee health services industry—or maybe it reached the industry altogether too well. Either way, vendors of wellness, diabetes, disease management and orthopedic programs routinely compare participants with non-participants, or measure just on participants alone.  Buyers don’t insist on controlling for participation bias, largely due to lack of understanding. Vendors not validated by the Validation Institute (VI) rarely offer to control for participation bias. Such a control would undercut their own performance claims, because participants always outperform nonparticipants. 

Indeed, one of the most dramatic savings figures was achieved simply by separating employees into participants and non-participants, without even giving "participants" a program to participate in.

Participation bias is even more invalidating in employee health services than in drug trials. The latter usually require only taking a pill and tracking results. The former require very active participation. Further, those who initially volunteer and then drop out are never counted as participants. Often, the dropout rate is never even reported. The result is what’s known in the industry as “last man standing” programs, because the only people whose outcomes are counted are the initial voluntary participants who stuck with the program the entire time. 

This study design is a recipe for massive invalidity. Not surprisingly, it has been proven four times that 100% of the alleged outcome of a program using this study design is attributable to the design, rather than to the intervention itself. 

This explains why VI-validated programs – programs that self-select to apply for VI validation because they actually accomplish something – make such modest claims, as compared with invalid vendors. It’s because modest claims are what they actually achieve…but modest valid claims trump massive invalid claims.

“Accidental” proofs of study design invalidity

The beauty of the first two proofs below is that they constitute what a litigator would call “declarations against interest,” meaning that the perpetrators’ own statements invalidate their own arguments. The wellness promoters who conducted these studies accidentally proved the opposite of what they intended to prove, without acknowledging it in the first case, or realizing it in the second.

 These two cases, discussed at length here, are summarized below:

1. Using the same employee subjects, a program measured outcomes both ways: through a high-quality randomization and also through participants-vs-non-participants; 
2. As mentioned, participants were separated from non-participants but not offered a program to participate in.

In the first case, a large group of employees without a diagnosis of/history of hospitalization for diabetes or heart disease was divided into:

1. Group A, to whom invitations to participate would be offered;
2. Group B, employees “matched” to the invited group using demographics and claims history, for whom nothing special was done.

See also: Are Your Healthcare Vendor’s Claims Valid?

The population was separated before any invitations were issued to Group A, making this a valid -- and extremely well-designed -- comparison. The “invited” Group A then included both participants (about 14% were willing to submit to the program, of which almost a quarter dropped out, leaving 11%) and non-participants.

The intervention was to use people’s DNA to tell them they were at risk for diabetes or heart disease, and then coach them. Because there were no hospitalizations or ER visits specific to those events beforehand as part of the study design, it would be arithmetically impossible to reduce the relevant hospitalization rate of 0. And yet "savings" of $1,464 per participant was claimed for the first year for the “last man standing” group of the 11% of Group A invitees who actually completed the program, vs. those Group A invitees who declined the invitation.

A cynic might say this massive savings figure was chosen because the program itself cost $500…and a program needs to show an ROI well north of 2-to-1 to be salable.

Using the valid randomized control methodology, the participants, dropouts and non-participants were then recombined into the full “invited” Group A…and compared with the control Group B. Though no cost comparisons were offered, there was essentially no difference-of-differences between these two groups in any relevant clinical indicators. While all changes in both groups were fairly trivial, the latter three trended in the “wrong” direction for the Group A vs. the Group B control.

Along with the fact that there were no relevant hospitalizations to reduce in the first place, the near-total absence of change in clinical indicators makes it impossible for any savings to be achieved, let alone $1,434 per participant, perhaps the highest first-year claimed savings in history. 

This excerpt courtesy of the Validation Institute. For the smashing (and needless to say, hilarious, this being the wellness industry) conclusion, click through here.