The global pandemic has brought forward an unprecedented rise in remote working worldwide. What was once considered a luxury offered to only a handful of employees has become an obligation for hundreds of millions of people. 

Yet, with this abrupt shift to working from home, are companies leaving themselves more exposed to online cybercrime threats? It seems so, as a massive 71% of business owners are expecting the increase in remote working to result in some sort of a cyber breach. To say the data privacy lawyers have got their hands full would be somewhat of an understatement!

With that said, here are some quick tips you can implement into your business so you can better protect both your company and employee data. 

Provide employees with basic security knowledge

Employee negligence remains the most significant threat of company data breaches, with 20% of all registered attacks occurring due to an employee mishap. Here are some of the main ways employees expose company data:

• Phishing attacks — one in every eight employees shares information on a phishing site.
• Unprotected personal devices — 45% of business owners are concerned about a potential data breach occurring due to a security issue on an employee’s personal device. 
• Poor password management — 73% of businesses are now running additional training for employees on how to remain safe when working remotely, with training focused on implementing better password management.
• Using public Wi-Fi — 63% of employees admitted to using public Wi-Fi to access company emails and files, and a staggering 21% admitted to leaving a work device unattended in public while working remotely.

So what can you do to better protect your company data?

• Amp up training on cybersecurity 
• Make cybersecurity a priority for employees
• Restrict the use of personal devices when accessing company data 
• Encourage the use of proper password management
• Forbid employees from accessing company data while using public Wi-Fi

See also: Navigating Security in the Remote Paradigm

Provide your people with VPN access

In the wake of the current global situation, 79% of business owners have decided to increase their cybersecurity procedures to manage high volumes of remote access. One of the leading ways of doing this was by giving employees access to a highly encrypted VPN.

If you aren’t already with what a VPN is, it’s basically a service that allows you to create a secure and encrypted connection between any of your devices and the internet server. It creates an encrypted tunnel for all of the data transmissions to be sent and received through, and thus it makes it extremely difficult for hackers to intercept. These days, running a VPN is becoming a necessity as cybercrime rates continue to increase, especially as they are relatively cheap and easy to use. Companies that use a VPN provider will likely continue to do so even after the pandemic is over. 

Run a password audit

A password security audit is an excellent way for you to test the strength of your employees' passwords and how they would fare against an attack. A thorough audit should help uncover weak passwords and also provides an excellent opportunity to further educate staff on “password hygiene,” especially when working remotely.

You should also consider investing in a password manager for your employees, which will massively reduce the risk of a successful password attack. 

Password managers work by creating a unique password for each site that your employee visits. The passwords they generate are highly secure and typically consist of an extremely long alphanumeric sequence that is next to impossible to guess. 

Use an MDM/EMM solution

Mobile device management (MDM) or enterprise mobility management (EMM) is a set of technology, processes and policies that help to bolster the security of corporate and employee-owned devices within your organization. 

In short, an MDM solution manages the features on the mobile device, whereas an EMM solution manages the entire device. Both are great ways to fortify company data security when employees are working remotely, regardless of whether they are company devices or employee-owned. These solutions allow you to do things such as:

• Enforce the use of security policies on devices
• Remotely control devices
• Track the device location in real time
• Wipe the device when reported lost or stolen

Foster community and care for employees

It’s important to remember that company data is not the only data at risk during a breach. Most companies are required to hold sensitive information about their employees, such as their date of birth, address and Social Security number. This information is a prime target for hackers looking to commit identity fraud, and you must protect your employees' data to the best of your ability. 

After all, employees are putting their faith in you the same way you put your faith and trust in them. This is why it’s a great idea to foster a sense of community and care for employees to create an atmosphere where everyone is committed to taking care of each other’s online security. 

As always, the best way to do this is through education, so make sure you take the time to set up training sessions and encourage participation where possible.

Provide clear guidance and encourage communication

Last but not least, you must make cybersecurity a part of your company policy. Given that employee negligence is still one of the biggest causes of breaches, you must put steps in place to limit the likelihood of such an event.

If possible, lay out clear company guidelines on what is expected of your employees, including best practices such as:

• Avoid opening pop-ups and unknown emails
• Use a strong password (preferably a unique one for each site)
• Only connect to secure Wi-Fi 
• Use a VPN where possible
• Enable firewall protection at home and at work
• Keep antivirus and system software up to date
• Back up data regularly

See also: Time to Focus on Cyber Resilience

Finally, it’s important to encourage communication around cybersecurity incidents. If an employee suspects there has been a breach or has located a potential threat/weakness, make sure the employee has a clear channel to communicate concerns.

The latest Out Front Ideas With Kimberly and Mark webinar brought together a panel of industry experts to explore current trends being seen in COVID-19 claims, as well as long-term medical complications and what risk managers should be monitoring in the future. 

Our guests were:

• Teresa Bartlett, MD – senior medical officer, Sedgwick
• Max Koonce – chief claims officer, Sedgwick
• Tim Stanger – vice president – partner relations, Safety National
• Alex Swedlow – president, California Workers’ Compensation Institute

One of the most significant challenges in analyzing workers’ compensation data is that a single data source that collects and analyzes all the data does not exist. Data is currently provided through multiple sources such as the National Council on Compensation Insurance (NCCI), independent bureaus, monopolistic jurisdictions and self-insured employers. The California Workers’ Compensation Institute (CWCI) and the Workers’ Compensation Research Institute (WCRI) also provide analyses around workers’ compensation data.

To fill in some of the major gaps in data, panelists from CWCI, Sedgwick and Safety National break down their individual data sources to provide a clearer picture of COVID-19’s impact on workers’ compensation.

CWCI Claims’ Data Trends

In tracking the various components of COVID-19, CWCI has developed studies and on-demand webinars that cover the history of presumption laws, early adjudication decisions and how the industry leveraged telemedicine as a response to shelter-in-place initiatives. In addition, webinars are now available regarding legislation. When developing early COVID-19 models, essential elements were considered, including:

• Infection rate
• Symptomatic/asymptomatic rates
• Hospital admissions
• Intensive care admissions
• Mortality rate
• Cost per claim

Early projections related to COVID-19 claims were skewed based on a lack of stability in data modeling. The earliest data contained areas like China, Iceland and Greenland, with infection rates that were much different than other parts of the world. Once data became available regarding COVID-19 in the U.S., it was clear that the U.S. held a disproportionately large percentage of worldwide infection rates and deaths. 

California alone currently accounts for 13% of U.S. infections and 9.6% of U.S. deaths. When studying workers ages 18 to 65 in California, they account for 78% of the state’s infections and 26% of the deaths. However, when looking at the number of workers’ compensation claims in the state, only 4.7% of infections and 5.6% of deaths have an accompanying claim.

As of January 2021, there have been 123,674 COVID-19 workers’ compensation claims reported. Projections show about 143,432 claims expected through the end of January 2021. Reported claims from March 2020 to January 2021 show a 12% drop in all non-COVID-19-related claims. However, projections show that by the end of January the overall decrease in claims frequency will be around 4%, with almost 20% of all claims being COVID-19-related.

See also: 9 Months on: COVID and Workers’ Comp

The occupational characteristics of COVID-19 claims have changed with the fall wave of the virus. From October 2020 to January 2021, the healthcare industry share of claims dropped around 10%, accounting for around 29% of all COVID-19 claims. First responders have seen minimal change over the year in terms of their percentage of the total claims. Claims for the transportation sector doubled in the fall, now accounting for 8% of COVID-19 claims. Skilled nursing facilities still share a significantly higher percentage of COVID-19 claims in health care. 

Safety National Claims’ Data Trends

As a leading provider of excess workers’ compensation for self-insured entities, Safety National has seen that around 50% of its accounts consist of three industries: public entities, health care networks and education. Self-insured data is missing from bureau analysis, making Safety National’s data unique.

Consistent with CWCI’s data, overall workers compensation claims for Safety National clients dropped around 26% in 2020 compared with 2019, excluding COVID-19 claims. When including COVID-19 claims, the drop is around 10%. There were roughly three peaks throughout the waves of COVID-19, including early April, early July and early December, with the December peak being the highest number of claims seen all year. 

By age, the 20-55 bracket accounted for 84% of Safety National claims, with the average claim cost being $4,300. When looking at workers over age 55, the average claim cost was more than three times higher at just under $15,000. 

63% of death claims were age 56 or older, 43% were between the ages of 56 and 66. 61% of deaths were male. 51% of death claims were in healthcare, and 22% were from municipalities (mostly first responders).

Among the COVID-19 claims with an incurred cost of over $100,000, 15% have incurred more than $1 million. Some claims have over $2 million incurred, including organ transplants, long intensive care stays and even paraplegia caused by renal failure. 

Sedgwick Claims’ Data Trends 

Sedgwick also carries many self-insured accounts, with 24% of its business being in the retail sector. Like the rest of the industry, Sedgwick’s claims also saw high volume during the three peaks of infection rates. Although healthcare only represents 11% of all of the company's accounts, most COVID-19 claims were reported from that sector, accounting for just over 50% of all reported COVID-19 claims. The retail industry and the public sector round out the top three industries reporting COVID-19 claims. The top five states reporting COVID-19 claims are California, Texas, Michigan, Florida and Illinois. 

When it comes to the severity of the claims, Sedgwick created a model to project where claims would fall, grouping claims into buckets, including:

• Cases that only required quarantine 
• Cases that required nominal medical treatment
• Complex moderate cases 
• Complex severe cases, requiring ICU
• Fatalities

These severity groupings have closely trended with original predictions, with fatalities, for example, accounting for just over .5% of all claims. Approximately 1.5% are severe cases involving ICU stays, 8% are moderate cases involving several medical treatment visits and 90% are mild cases involving very little medical treatment. When reviewing these claims’ value, 73% are valued under $5,000, and 85% are valued under $10,000. 

See also: 20 Issues to Watch in 2021

There has been a fairly even distribution of claims among the age groups due to various industries’ claims. However, the more severe claims that include ICU stays are trending in the over-60 age group. The healthcare industry is accounting for a higher rate of hospitalizations than the other industries, trending 3% to 4% higher than the rest.

Overall, Sedgwick saw a decrease in workers’ compensation and liability claims across the country due to economic shutdowns and various employers not operating at full capacity. Even retail clients deemed essential saw a decrease in overall claims, which could be due to a lower customer count within the stores and an overall increase in safety measures. There has been a slight increase in work-from-home claims due to ergonomic-related issues.

To listen to the archive of our complete COVID Claims Development: Workers’ Compensation & Beyond webinar and view a full list of FAQs from this session, please visit https://www.outfrontideas.com/.Follow @outfrontideas on Twitter and Out Front Ideas With Kimberly and Mark on LinkedIn for more information about coming events and webinars.

President Kennedy is quoted as having said, "The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger, the other for opportunity. In a crisis, be aware of the danger -- but recognize the opportunity."

As I write this, the news coming out of Texas regarding the week's extreme weather is today's reminder that we face continued crises. (Hoping that everyone there reaches the end of this ordeal soon.)

Innovators can contribute to harnessing crises as opportunities, ensuring that collectively we focus beyond directing efforts to reverting to the way things were.

Now is the time to ask the basic question — "what is our purpose?" — because the answer will provide the means to align strategy, people, capital and other resources to innovate under remarkably different circumstances than most of us imagined a year ago.

Why should innovators focus on purpose?

Evidence suggests that purpose-led brands:

• Always know where they are heading
• Use their defined purpose to guide them through uncertainties
• Sustain a workforce that brings their best selves to the organization
• Increase their ability to overcome challenges and achieve results.

What more useful and practical tool could there be to drive innovation?

What is the path to create a purpose-driven organization?

1. Believe it is possible to inspire a purpose-led workforce.
2. Sponsor and empower a diverse team to lead a collaborative, iterative and disciplined process to define the business' purpose.
3. Commit to constant communication.
4. Know that the organization must, to paraphrase the late author, futurist and businessman Alvin Toffler, "Learn, Unlearn and Relearn." This is transformative.
5. Avoid a top-down approach.
6. Connect the organization's purpose to execution -- to individual actions and decisions.
7. Identify and enlist change makers and influencers on the team and from outside who can be role models, helping peers build the confidence to embrace the change.

Two examples

Patagonia was well ahead of the times on being purpose-driven. The brand's purpose: "To build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis."

On Black Friday 2011, Patagonia ran this now famous ad in the New York Times.

This ad is one example of what being authentic to a purpose means. Business priorities are supported by Patagonia's purpose: reinforcing brand values and product durability, justifying premium pricing and differentiating in a busy category.

Consider CVS' commitment to purpose, beginning with its name change in 2014, from CVS Caremark to CVS Health. The change aligns with the company's purpose: "Helping people on their path to better health. Whether in our pharmacies or through our health services and plans, we are pioneering a bold new approach to total health. Making quality care more affordable, accessible, simple and seamless."

CVS decided to halt selling any tobacco products as part of a deliberate realignment, including establishing new health partnerships and in-store services and merging with Aetna. CVS gave up a reported $2 billion in annual tobacco sales and then saw overall growth. A further stakeholder impact has been that the move out of tobacco created public health benefits as studies have linked overall declines in tobacco purchasing with CVS' decision -- and the decline also includes other tobacco sellers.

Ways to test the strength of purpose

Look to these execution indicators as a starting point:

• Is the purpose evident in the organization's daily behaviors, or is it stuck inside presentation decks?
• Is the purpose equally relevant to internal and external stakeholders?
• Does the purpose inspire employees, vendors and partners and guide their daily actions with respect to the brand?

See also: Pressure to Innovate Shifts Priorities

Three Ways to Learn More and Take Action

1. In The Change Maker’s Playbook: How to Seek, Seed and Scale Innovation In Any Company, the Seek phase of the methodology is packed with practical stories and advice on how to embed purpose in the innovation effort, and why it matters to create business results from these investments.
2. I’ve also launched a prototype of a workshop engaging leadership teams to experience the Playbook in a compact, action-oriented session.  Reach out if you would like to learn more; you can shape the content and make it your own. 
3. In the current issue of Carrier Management ,you can find an expanded version of this letter, specific to the insurance sector. 

 

In business, change is constant. After spending years (or even decades) building your company, common sense tells you that future success relies on change as new organizations enter the market. For an industry to grow, expand and move forward, companies that have already achieved success should look for ways to give back to the industry that helped them flourish.

When leaders view their industry counterparts as collaborators, this attitude has a way of infiltrating the entire organization. Employees within a company can begin to take on a mentality where success and opportunities are unlimited, affecting everything from teamwork to innovation. Over time, employees feel even more confident about sharing ideas, making mistakes and taking chances.

Not investing in your counterparts only squelches the potential of innovation in your industry. Besides, industry dedication can inspire others in your company to do the same — creating a work environment of collaboration, self-development and creative thought. It’s like reinvesting in your business.

Take Doug Conant. The former CEO of Campbell Soup did many things to improve the business, but one of his most significant moves was weaving “abundance” into its DNA. While this abundance took the form of corporate social responsibility by focusing on sustainability in the agricultural supply chain, the notion that people want to work for aspirational organizations is universal.

Giving back to the business community provides a similar effect. People become more engaged, creating a better workplace and positioning their businesses to succeed in the marketplace. Even in the more competitive “niches” of the insurance industry, there is room for more than a handful of players.

Investing in the Community Is an Investment in Yourself

Engaging with industry colleagues builds connections that create more promising opportunities for success for everyone involved. This is certainly true in insurance and financial services.

“The rising tide of a strong marketplace with continuing growth lifts all boats,” said Scott Berlin, senior vice president at New York Life and a member of the board at PIMA, a trade association that brings companies throughout the insurance and financial services ecosystem together to learn from each other and improve the industry.

Instead of competing for a larger share of the same pie, Berlin said companies are better off working together to grow the size of that pie. These partnerships also provide insights into shared industry challenges, offering an opportunity to develop new approaches. These actions don’t just ensure a healthier marketplace — they also deliver new perspectives to all participants.

“Working together within one’s business community provides the opportunity to grow personally as a leader,” Berlin said. “Sometimes, the best lessons are learned when not doing your day job.”

See also: Navigating Confusing Insurance Regulations

Aside from obtaining growth or insights, sharing expertise can differentiate an individual as an industry thought leader while also inspiring others — cementing your reputation as a leader. This does more than give you added clout. It provides an opportunity to enact real change, helping your industry raise awareness and better serve consumers.

All it takes is for you to raise your hand and share the wins, challenges and insights you’ve gained through years of experience. This level of collaboration can help the entire industry grow.

“In the insurance industry, we have an opportunity to better position ourselves with consumers,” Berlin explains. “We sell valuable products and services, yet we’re hindered by a general lack of awareness. Working together, we can better educate consumers on potential solutions to their needs and highlight the benefits and guarantees we provide.”

One way to start is with “co-opetition.” Partnering with a competitor ends up benefiting both parties and providing stronger value to consumers. For example, Australian-based financial services company Suncorp often partners with innovative, tech-focused startups to offer on-demand services to its customers.

One easy way to practice coopetition is through peer groups. PIMA members, for instance, can join peer advisory forums, interest groups and a private online community. We’ve also formed an agency CEO forum that enables CEOs to meet with competitors throughout the year, to learn from one another and share insights on ways to improve the industry. It can be difficult to start conversations with people we perceive as competitors, but peer groups make it simple. And don’t be afraid to include new entrants or people outside the industry in your peer groups — inspiration can come from anywhere.

New York Life, for example, has its own venture capital arm that has tapped into startups that address the challenges experienced by many life insurance companies. The startups receive the invaluable backing of an established organization, and New York Life gains important insight into the future of life insurance.

To elevate the industry as a whole, be open to collaborating with industry peers while creating opportunities for mutually beneficial connections. You have the power, the capacity and the resources to support collective industry success.

Are you interested in sharing your perspectives with industry peers? Learn more about the PIMA community at www.pimainsights.org.

Prior to COVID-19, the U.S. boasted historically low unemployment and a roaring economy. Nearly every industry was expected to face a severe talent shortage within the next 10 to 20 years. But then March hit, and the world turned upside-down.

Since then, the pendulum has swung in the other direction. The current unemployment figures are reporting as many as 10.7 million people are out of work, and, despite this sudden abundance of available workers, staffing issues remain — they’ve just become more complex.

To navigate this wildly fluctuating environment, companies will rely on data for decision-making about hiring, training and countless other matters that affect the bottom line. This will require tools, like artificial intelligence (AI), to make sense of data and to adjust quickly amid uncertainty.

The best way to examine AI’s value in today’s uncertain world is to look at how it can work within a specific industry. Doing so makes it possible to show practical applications from which lessons can then be applied to other industries.

Commercial Insurance: A Case Study

Like other industries, commercial insurance faced a significant hiring crisis pre-COVID-19. The average claims adjuster remained in the industry for just four years — about the time it takes to gain full expertise — and those workers who stuck with claims have inched closer to retirement. So, this multibillion-dollar market is at risk of losing much of the human brain trust that enables current systems to run, as new workers cannot be hired, trained and retained fast enough to balance the scales.

Fast forward to today. Commercial insurance looks markedly different. The types and volumes of claims are changing. For example, claims related to COVID-19 contact or work-from-home circumstances are rising quickly, as are post-termination claims, while traditional claims have dropped.

At the same time, access to traditional healthcare has been in flux. To combat the limitations on available providers, telehealth solutions have exploded, opening up a whole new set of providers that claims reps need to become somewhat familiar with to facilitate claims accordingly — claims that bear a greater potential for fraud and litigation, which cost companies millions of dollars each year.

In short, almost everything about claims operations has changed — and, like many other industries that have been traditionally slow to adapt to new challenges, commercial insurance faces real hurdles.

The Importance of Data and Intelligence

Data is the key to overcoming dramatic changes within a relatively static industry. Maintaining a pulse on what’s happening across a business, or with a specific claim, and how it relates to things experienced previously is important; spotting trends early is vital. Organizations require data to determine if their plans and practices are working — and, if they are not, data should be used to drive intervention and adaptation.

But thousands to millions of data points alone won’t save the day if an organization doesn’t have the capability to understand what the data is telling them. What is the context? How are points connected? If a trend continues, what will be the effects six months or two years from now?

AI systems unlock the meaning of data to make it useful, pinpointing where organizations need to make adjustments. In commercial insurance, AI could allow for expanding provider networks to offer better, faster access to care. To actually expand networks using quality providers, systems need to tap into more data to learn which providers have achieved the best outcomes on which types of cases.

What is particularly exciting about implementing AI in this rapidly changing environment is that interpretations of data are not fixed. Machine learning capabilities are constantly refining and updating insights so that organizations — and their people — can respond accordingly.

See also: How AI Transforms Risk Engineering

Designing the Future Workforce

So, if data analytics and AI become staples in modern business, how do they solve the human resource problem? What do they mean for the future workforce? The answer is threefold.

Data determines what your hiring needs actually are: In a world that is changing so quickly, your business might not need as many people specialized in a certain area, whereas new opportunities or divisions may emerge. Your business may be forced to alter its offerings to match customer needs. Data is the guide; it lets you home in on exactly what skills are required.

AI guides training: Because AI is able to analyze so much data so quickly, new hires are able to access the information and prompts they need to do their jobs well as soon as they need it. There is not as much feeling around or dependency on senior colleagues. This is not to discount the value of experience, but it means that workers can reach a competent level much faster; what they lack in experience and intuition is replaced by data-driven insights and standardized practices.

AI augments jobs: AI solutions take care of many of the rote tasks workers are routinely bogged down with today. As a result, employees can focus on making more efficient, informed decisions; they can actually use their brains more. AI flags potential errors or problems so that they can be addressed before they escalate. Reps can focus on delivering compassion at a time when people need it most.

While COVID-19 has fundamentally altered the future workforce, tools like AI help get it back on track. In leveraging it effectively, organizations will become nimbler and more responsive to conditions while employees are more knowledgeable and effective.

Moving Forward by Looking Back Paul Carroll, Editor-in-Chief of ITL How old do you think Martin Luther King Jr. was when he was assassinated? That question has been used to help gauge how good people are at making predictions and to help them get better. I’m going to try to build on it here to make a point about the need to look rigorously at past forecasts and decisions to calibrate how good we are (or, often, aren’t), so we can continually improve. The question about MLK is deliberately unfair. How can we be expected to know his exact age? So, pick an age, then give yourself a range, expanding in both directions until you figure you have a 90% chance of having his actual age fall within that range. (Go ahead and write it down. I’ll wait.) ... continue reading > How AI Can Transform Insurance Correspondence sponsored by Messagepoint Focusing on customer experience is a winning strategy as digital transformation efforts accelerate into 2021. Learn how AI-based tools are helping industries modernize their systems, optimize their content, and manage customer communications intelligently. Watch Now SIX THINGS 11 Keys to Predictive Analytics in 2021 by Andy Yohn Using the plethora of data now available, here are 11 ways predictive analytics in P&C insurance will change the game in 2021. Read More New Tool: Cognitive Process Automation by Chaz Perera With low interest rates putting pressure on expenses, CPA goes beyond robotic process automation, cutting costs while maintaining service. Read More Beware the Dark Side of AI by Nick Frank and Wei Ke Apple Card's algorithm sparked an investigation soon after it launched when it appeared to offer wives lower credit lines than their husbands. Read More Trusted Adviser? No, Be a Go-To Adviser by Kevin Trokey Is earning trust brag-worthy? Isn't trust the minimum for an adviser-client relationship? The real goal should be achieving "go-to" status. Read More Does Remote Work Halt Innovation? by Megan Bock Zarnoch We must make up for the gap in organic connection through a tried-and-true method of driving innovation – Networked Improvement Communities. Read More Making Inroads With Open APIs by Maarten Bakker Insurers must allow third parties to access their data and products and be present – and relevant – in customers’ digital ecosystems. Read More MORE FROM ITL The Future of Blockchain Series Episode 3 Usage in Life & Annuities Having explored the possibilities for blockchain in personal lines and commercial lines in P&C, we conclude our webinar series on the technology by taking a look at two use cases in life and annuities that are close to moving into production.  Watch Now February's Topic: Blockchain While the pandemic has greatly accelerated the digitization of the insurance industry — turning years into months — it has also shown us how very far we still have to go. As a rule of thumb, I’ve heard consultants say that 50% of the operating costs need to be driven out of the industry in the next five years. Blockchain has held out this promise for some time now. It’s lost a bit of its shine because it’s been identified as a hot technology of the year for so many years in a row. But it may be coming into its own, with some uses starting to move into production. Take Me There GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started Partner with Us We’d love to talk to you about how we can improve your marketing ROI. Learn More SPREAD THE WORD Share Share Tweet

I guess you could say growing up in Minnesota and spending most of my life in a climate that is exposed to winter weather almost half of the year has made me an expert in how winter weather can affect the insurance industry.

There is no denying that the recent Arctic outbreak was severe and historic meteorologically. The list of records and stats is very impressive and too long to list here, so I’ll just reference a good tweet thread by Alex Lamers, who is a meteorologist at NOAA weather prediction center.

The main point the insurance industry needs to understand with this extreme cold is that it occurred in the middle of February, which makes it climatologically that much more impressive, because the cold was topping records and stats that usually occur in late December or early January. The other impressive nature of this Arctic outbreak is the duration, which when combined with the time of year makes it that much more important an event.

We know the Deep South can get severe cold, but the prolonged nature of the cold this late into the winter season is a tail event meteorologically.

You might have seen several different sources of winter storm loss trends shared across different insurance publications, but one needs to use caution in truly understanding winter storm losses. The best example I like to use is the superstorm of 1993, which lasted from March 11 to 14 and which is often used as a benchmark winter storm loss event for the insurance industry.

It is classified as a winter storm due to its large impacts on the Northeast states with winter weather as the storm developed into a powerful nor’easter. However, over 40% of the loss came from severe weather that occurred in Southern states from a very strong cold front. The largest event loss (35%) impacts occurred across the state of Florida from numerous tornadoes. Although many in the insurance industry reference the inflation-adjusted loss of over $3 billion for the 1993 superstorm, social economics mean the loss was much larger.

BMS has taken steps to truly understand trends in winter weather events that only look at flooding, freezing temperatures, ice, snow and wind as possible causes of loss, as shown above.

Only two recent periods meteorologically would be comparable cold weather-related loss events, Dec. 17-31, 1983 and Dec. 21- 26, 1989. Today, these events would have resulted in $2 billion and $1 billion in insured losses, respectively, after adjusting for inflation, with no way really to understand how social-economic factors might have played a role if that type of cold occurred today. The current loss development with the 2021 Arctic blast seems to be several times the magnitude of any cold-weather loss the insurance industry has ever experienced.

See also: Increasing Regulation on Climate Change

This is largely a result of the insurance industry taking the brunt of a compounding event, which will be one of the topics at this year's Virtual Reinsurance Association Cat Risk Management Conference. This winter storm is the latest example of a compounding event to affect the insurance industry, resulting in much higher losses than what should likely be expected from an event.

The cold was historic. It was also the trigger for power outages that resulted in the inability to heat and move water, which resulted in water outage. This compounded into many other impacts, like internet outages and even trash collection delays, making the already miserable situation even worse, and likely a worse insurance industry loss.

If the power had stayed on and the demand could have been met, the losses would not be nearly this bad. Time and time again, we see the long-term lack of electricity compounds the overall insured loss. Hurricane Maria’s impact on Puerto Rico or the compounding impacts of the Tohoku Earthquake in 2011 come to mind as recent examples where the lack of power for a prolonged period had very large compounding impacts on insurance industry loss.

Therefore, is it time for the insurance industry to take a much larger role in the vested interest in helping ensure power grids around the world are reliable during times of disasters? Some might say the opposite is happening due to environmental, social governance impacts. The American Society of Civil Engineers rated U.S. infrastructure a D+.

Maybe in the future, the insurance industry can be at the table during discussions around critical infrastructure, which seems to have a clear impact on insured losses.

For me, one of the best songs by the rock band Queen was "Under Pressure," co-written by David Bowie. The story is that the collaboration was creatively different as the vocal was constructed in a very novel way in one night, where they all contributed different pieces of the song musically and vocally and then put it together to create what is considered one of the greatest hits!

While I love the music, the title reflects what companies are increasingly facing … pressure. How they respond and what they do will define their future.  

There are all kinds of “pressure cookers” driving innovation, and they are proving how organizations with foresight are solving issues with rapid planning and prioritization.

Take Instant Pot -- a literal pressure cooker. When Robert Wang developed it, his background in software gave him a model for quick development and for rapid iterations that would perfect the technology quickly. According to an interview with Wang, Instant Pot adopted “continual innovation and highly disciplined product launch cycle (12-18 months), more typical of software development than consumer goods.” Wang had the foresight to integrate the fixed timelines with an aggressive customer feedback loop. This would place pressure on the company to innovate and stay ahead of the competition.

Then consider GM. In September 2020, California’s governor, Gavin Newsom, issued an executive order “requiring sales of all new passenger vehicles (in the state) to be zero-emission by 2035.” Whether it was a coincidence or not, GM announced on Jan. 28, 2021, that “GM would phase out petroleum-powered cars and trucks and sell only vehicles that have zero tailpipe emissions by 2035.” So…a timeline has been set. The race is on. These two announcements will rapidly disrupt an industry, reinventing supply chains and even affecting insurance.

Finally, COVID-19. It has accelerated the need for digital transformation at the same time that it has sent a warning signal to insurers to be ready to adapt to anything. In the Dec. 26 Wall Street Journal article, “Covid-19 Propelled Businesses Into the Future. Ready or Not,” Loren Padelford, vice president at Shopify, summed up the pressure with this comparison:

“Covid has acted like a time machine: It brought 2030 to 2020. All those trends, where organizations thought they had more time, got rapidly accelerated.”

Changes that normally might have taken years unfolded in months, and shifts that began as temporary fixes are likely to become permanent. The disruption of 2020 creates significant opportunities for those in the insurance industry to accelerate their digital transformation, from new customer experiences to new products and services, channels and business models … if we embrace the disruption. 

COVID-19 has all of the elements of the pressure-cooker environment that requires foresight, innovation and prioritization. In the case of the insurance industry, transformation to a digital insurance business model is an imperative.

Are Insurer Responses a Mismatch with Industry Pressures?

As we explore in our latest thought-leadership report, Strategic Priorities 2021, some insurers have responded to COVID by delaying or stopping strategic initiatives that will drive the future of their business. Fear and uncertainty have resulted in less action and more waiting. Insurers pulled back from previous years with regard to key strategic initiatives crucial for digital transformation. Among 11 initiatives tracked over time, seven show declines (six with double-digit percentage drops) from their peak ratings in 2018-19. 

While Improving customer experience remains the top-rated priority, it dropped by 9% (Figure 1). Data and analytics and Digital strategy ranked third and fourth in priority this year but showed even larger declines. This is concerning, given that most insurers are only beginning a digital transformation. They still retain old “portals” to engage customers rather than next-gen customer experience solutions and do not have data foundations to leverage new sources of data that will be required for new products and services, enhanced underwriting and customer experiences. If 2020 taught us anything, it is that digital priorities like these must be accelerated rather than stalled or slowed. 

Figure 1: Declining trends in priority of strategic initiatives

Surprisingly, the largest decline in priority was Scaling the business on a cloud platform, particularly given that cloud became the mantra and requirement for businesses to successfully operate virtually --- from Zoom and Teams to Salesforce, Workday and other crucial systems. The decline is consistent with the historically low legacy replacement activity in the past year and expectations for the next three years. Our research on core systems last year showed that legacy transformations over the last five to 10 years have been to non-platform modern core systems implemented on-premise, rather than cloud and API-enabled platforms. Non-platform solutions do not have the breadth of capabilities needed to digitally transform the business and respond rapidly to market opportunities or changes. Because of this, insurers are recognizing that they must replace these again to optimize the existing business or in some cases stand up a new cloud-enabled core platform to launch products, enter new markets and create a new business model.

These initiatives are four of five (Cost containment, covered below, is the fifth) that define Modernize and Optimize in the two-speed strategy for business transformation. While the overall decline is a discouraging development, particularly in light of the rapid market shifts that COVID has accelerated, when you separate out Leaders from Followers and Laggards, it becomes apparent that Leaders are adapting and accelerating modernization and optimization of the business while the others continue to fall behind. Followers and Laggards must place a higher priority on these initiatives than ever before to remain relevant.    

See also: COVID-19 Highlights Gaps, Opportunities

Figure 2: Declining trends in priority of strategic initiatives

Cost containment has been a top-five priority in all six years of our research, growing 17% since the first survey in 2015-16 and holding relatively steady over the past three years. On the other end of the spectrum, Merger and/or acquisition has consistently maintained the lowest priority spot among the list of initiatives, which is interesting given the continued M&A activity in the industry.

Entering/developing new market segments (+8%) and Accessing new capital markets (+9%) saw slight increases or remained flat as compared with the last two years. Two new innovation-themed initiatives added this year showed strong rankings:

• Innovation: 7.14, fourth-highest-rated initiative this year
• Product innovation for new/changing risks: 6.74, sixth-highest-rated

The strong showing by innovation highlights its continued use as a lever of change within organizations. 

Together, these four initiatives define Create a New Business in the two-speed strategy and reflect a positive, growing focus by insurers. Though not shown here, companies that are focused on bringing new products to market rated nearly all the strategic initiatives as higher priority compared with those focused on traditional lines of business for P&C and L&A. This highlights their head start in capturing new markets and customers with new products needed in the future of insurance. The increased priority on developing new products and business models align to customer and market shifts we uncovered in our life and auto customer research last year.

Internal and External Pressures That May Reprioritize Initiatives

Resources from outside the industry, such as Google’s SaaS data and analytics platforms may hasten insurers' adoption of AI and machine learning — effectively re-prioritizing Data and analytics enablement by making it easier to adopt. This is a hallmark of the pressure cooker environment. Which pressures will require insurers to yield, no matter what, and which technologies will simply assert themselves into future planning because they provide simplicity and a ready-made solution?

Another great example of simplification that begs for reprioritization would be the adoption of no code/low code insurance platforms. The internal pressures of IT cost reduction, speed of delivery and talent acquisition make it easy to justify a new model and, hence, should make it easier to make a case for reprioritization.

Business and IT Alignment

Accelerating business transformation requires alignment between business and IT more than ever on all of these strategic initiatives. Unfortunately, there is a gap between them by 22% (Figure 3). This gap places insurers at a disadvantage and can affect their ability to innovate and be ready for the future. The gap will drive the business to seek options outside the traditional IT organization, which can create momentum but may also create challenges.  

Figure 3: Business-IT gaps in priority of key business transformation initiatives

While these overall planning results are mixed for the industry, the differences between Leaders, Followers and Laggards stand out – highlighting the significant advantages that Leaders have. While many Followers may be keeping relative pace to Leaders with their modernizing and optimizing the existing business, often reflected in strong financials, this is deceiving when considering the future business needed – where Followers and Laggards are falling further behind.  

See also: A Burning Platform for Transformation 

Strategic planning needs to be bold enough to match the velocity and magnitude of the changes the industry faces. 

It will no longer be sufficient to allocate most of the resources to maintaining the status quo of the current business. Rather, companies must look to reallocate resources to accelerate in areas they are behind for both speed of operations and speed of innovation. It is not one or the other – it must be both.

If you feel the pressure, we encourage you to download and read Majesco’s report, Strategic Priorities 2021, to see how your organizational priorities stack up against others in the industry. and to see if you are a Leader, Follower or Laggard in preparing for the future of insurance.

How old do you think Martin Luther King Jr. was when he was assassinated?

That question has been used to help gauge how good people are at making predictions and to help them get better. I'm going to try to build on it here to make a point about the need to look rigorously at past forecasts and decisions to calibrate how good we are (or, often, aren't), so we can continually improve.

The question about MLK is deliberately unfair. How can we be expected to know his exact age? So, pick an age, then give yourself a range, expanding in both directions until you figure you have a 90% chance of having his actual age fall within that range. (Go ahead and write it down. I'll wait.)

The answer: He was 39 years old when he was assassinated on April 4, 1968, in Memphis, Tenn.

Don't feel bad if you didn't realize he was so young: When a group called the Good Judgment Project asked a series of such questions to a broad array of research subjects, it found that people were typically right less than half the time even though they thought they'd given themselves a 90% chance of being correct.

A recent New York Times article described how professionals are not only consistently wrong, like the rest of us, but can be biased. The article looked at the last 15 years of forecasts by top economists about GDP growth in the U.S., made two years in advance. Twelve of the 15 consensus views were too enthusiastic, and the eight biggest errors were all on the side of optimism.

We typically don't recognize our fallibility, either. Research for a book I collaborated on a few years ago found that only 2% of high school seniors ranked themselves as below average on leadership skills, while 25% put themselves in the top percentile. Maybe you could just have a chuckle at high school seniors' poor understanding of averages and percentiles, but 94% of college professors rated themselves above average. Among engineers, who really ought to know better, 32% at one company said they were in the top 5% of performers, and 42% at another company put themselves in that top category.

The idea of revisiting predictions has been a pet project of mine ever since I saw that many of the companies extolled in Tom Peters' book "In Search of Excellence" ran into trouble by the mid-1980s, just a few years after the 1981 publication. "Blue Ocean Strategy," published in 2004, caught my eye because the premise was simplistic -- look for opportunity in the blue ocean, where no one else is, rather than the red ocean, where competition is bloody. While the book became a fad, in the many years since I have seen no example of any company using the book's frameworks to score a major success, beyond the case study about a Nintendo game system cited in the book.

As much as I respected the thoroughness of Jim Collins' research for his books, including "From Good to Great," the 11 companies he cited in 2001 weren't all looking so great -- or even good -- a decade later. Circuit City had gone out of business; the Great Recession had crushed Fannie Mae and hurt Wells Fargo badly; and several others had seen their stock prices decline or rise only slightly. Shouldn't that performance raise some questions about the predictive power of the principles laid out in the book?

Readers don't seem to think so -- the book ranked #362 on Amazon's best-seller list this week, nearly 20 years after publication. But I'd bet that Collins hasn't stopped learning and would welcome some do-overs. For instance, while his "Level 5 leadership" is a laudable concept, the idea that a Level 5 leader can pick a Level 5 successor was never very helpful, because it takes too long to see how the successor does. The concept has now taken a real hit because of the collapse at General Electric. Longtime GE CEO Jack Welch was the exemplar of Level 5 leadership, including for his selection of Jeff Immelt as his successor -- but you practically have to stand in line these days to pillory Immelt, now that GE forced him out in 2017.

Our culture certainly doesn't seem to value accountability much. Political experts confidently tell us things day after day even though they're right about as often as a coin flip. Sports experts on TV tell us some team is a sure bet, only to be wrong and then come back with some equally ironclad guarantee the next week.

But we need to make better decisions in business. There's real money on the line, not just some aspiration for our favorite sports team. And we're not all in the 99th percentile as forecasters, or even above average.

Fortunately, there are ways for you to improve, by calibrating successes and failures and learning from them.

One way might be to take up bridge or poker -- which the Good Judgment Project found correlated with better estimating. One reason seems to be that you keep score and have to see over time whether you're winning or losing. Another is that the games encourage you to be analytical about decisions you've made -- my older brother, a Life Master at bridge, could spend hours considering what he might have done better on a single hand. Even if you don't want to take up a new pastime, you can imagine the sort of mental discipline that a good bridge player or poker player applies to problems.

The Good Judgment Project also found that by providing as little as an hour of instruction they improved forecasting by an average of 14%. Training partly consists of some basic concepts -- no, having a coin come up heads five times in a row does not make it more likely to come up tails the next time -- but mostly consists of "confidence questions" like the one I posed about MLK. Once people learn to become more realistic about what they know and what they don't know, their forecasting improves.

At the C-suite level, learning from mistakes is even more important because the dollar amounts are so much higher -- but calibrating still isn't done nearly as much as it should be. Research for another recent book I helped write found that social dynamics within the senior team often prevented them from conducting a thorough analysis. Those hockey stick forecasts of massive growth from last year and the year before and the year before that just got buried in a drawer when the growth didn't materialize, and those making forecasts were allowed to pretty much start fresh in the new budgeting season. Even when companies tried to analyze past forecasts, success tended to be credited to management while underperformance was written off as due to unforeseeable circumstances beyond management's control.

There's no easy solution at the C-suite level, but it will help to maintain the discipline of making very specific predictions and then revisiting them at the appropriate time to see whether they panned out -- while trying to allow for the tendency to write off failure as bad luck.

When Chunka Mui and I conducted research that was the flip side of Jim Collins for a book we published in 2008 -- while he looked at successes, we spent two years with 20 researchers looking at 2,500 strategic failures -- we decided that our lessons learned had to have predictive power, or they were no good. So we started a blog and made predictions for a couple of years about major strategy announcements that we were sure would crater. We were right, too, on something like 49 of the 50 predictions we made. (We gave up on the site years ago, so I can no longer do an exact count.)

So, good for us, right? Well, we were also lucky. We were all set to make our boldest prediction around the time of the book launch but got some really smart pushback. We dropped an attempt to get a national newspaper to publish our thoughts and never even posted them on our blog. Good thing, too -- the deal has been a raging success.

I've still taken the near-fiasco to heart and think of it from time to time as I try to help myself understand where the weaknesses are in how I think. (I've started playing bridge again, too.)

Stay safe.

Paul

11 Keys to Predictive Analytics in 2021

Using the plethora of data now available, here are 11 ways predictive analytics in P&C insurance will change the game in 2021.

New Tool: Cognitive Process Automation

With low interest rates putting pressure on expenses, CPA goes beyond robotic process automation, cutting costs while maintaining service.

Beware the Dark Side of AI

Apple Card's algorithm sparked an investigation soon after it launched when it appeared to offer wives lower credit lines than their husbands.

Trusted Adviser? No, Be a Go-To Adviser

Is earning trust brag-worthy? Isn't trust the minimum for an adviser-client relationship? The real goal should be achieving "go-to" status.

Does Remote Work Halt Innovation?

We must make up for the gap in organic connection through a tried-and-true method of driving innovation – Networked Improvement Communities.

Making Inroads With Open APIs

Insurers must allow third parties to access their data and products and be present – and relevant – in customers’ digital ecosystems.

First, create a list of questions to ask your HR team.

Before you set up your new work-from-home space or even if you've already left the office to go remote, circle back with your HR team to understand how you’re covered if you experience a work-related issue at home. Start with these questions:

• May I take my work equipment with me? If so, what is covered in case of an accident?
• What happens if I get injured during my time working from home? 
• Am I covered through my work?
• If so, how do I file a claim?

Start to separate business equipment from your personal electronics.

Typically, headsets, desktops and screens that are owned by your company would not fall under your homeowners insurance -- even if you’re working remotely. However, if you’re doing work on a personal computer for business use and have a theft or loss, there may be limits on personal property coverage.

Enroll in a comprehensive homeowners insurance plan.

Most Americans are required to purchase home insurance with their mortgage, but the home office coverage limit may not cover the range of equipment you’re bringing home from your employer. If you’re going remote, understand what items your company owns and what is a personal item being used for business. Do an inventory of personal items like laptops, monitors, printers and voice headsets to make sure your coverage limit lines up with what your stuff is worth. We’ve found that video logs work great for this.

Or, do a thorough review of your existing homeowners policy.

When you go remote, the occupancy of your home may shift drastically from 30% of your time to 100%. And, during the day, you're up and moving around, while at night you’re usually asleep. The increase in activity could increase the probability of a claim in your home, especially if you’ve got kids home from school. 

See also: Does Remote Work Halt Innovation?

Request an increase in your personal home office limit (if you need it).

The average homeowners policy in the U.S. has a $2,000 limit for home office equipment. As more people have office setups at home, homeowners can request higher limits, if necessary.

• Storage of business inventory could increase your personal limits. If you’re unable to make it into the office and must begin storing your company’s products or materials at your home, then speak to your company first or call your homeowners insurance company to make sure you’re covered before you take on the responsibility of business inventory. 

• Increases in foot traffic could boost your personal limits. If you’re going to be remote for an extended period and are thinking about bringing clients to your home, then you’re assuming liability for those guests as they come onto your property. Check with your insurance company to make sure you’re covered appropriately.  

If remote working turns into a permanent thing.

Home-based businesses usually require more coverage than standard personal limits. If you decide to stay remote, check with your homeowners insurance company on what coverage limits it offers and ask for endorsements. 

Remember, adapting to a new work environment takes time.

If you’re already thinking about your insurance coverages, then you’re ahead of the game. But be sure you’ve set up your new working environment in a safe way. Think through the different scenarios that could lead to physical harm or injury, like loose electrical cords or leaving the stove on when you have the ability to cook lunch instead of buying it. New environments take some time to get used to.

See also: Navigating Security in the Remote Paradigm

Finally, know your home’s limits.

Energy costs may go up when your family members are home during a time of day when your home is usually at its lowest point of energy consumption. Try offsetting the drawing of power and energy throughout the entire day with some energy saving devices and LED lights.