If there was ever a moment for risk managers to shine, this is it. In many companies, risk managers have won kudos because backup plans have made the transition to telework smoother than it easily could have been (though I feel awful for those working in restaurants, hotels and other businesses who have been furloughed or fired because their jobs simply can't be done at a distance.) Even when there have been unanticipated problems--and so very many companies face problems that go well beyond any telework issues--no one can play down the importance of risk management in a world turned upside-side so suddenly by the COVID-19 health crisis and the economic chaos that has followed.

Last week's "Future of Risk" conference, held by The Institutes, hit some risk-management themes that I think will be key as we all prepare for the new normal, and I'll highlight the boldest one I heard. It came during the opening session, a panel moderated by The Institutes' CEO Peter Miller.

Markham McKnight, CEO of BXS Insurance, said the U.S. needs a national risk strategy, rather than the current piecemeal approach--one bit of legislation providing flood insurance, one addressing terrorism, etc., with much of the work being done through emergency legislation crafted in the middle of the crisis that a virus, a hurricane or a wave of wildfires produces. A robust national strategy would provide an overarching framework for assessing all the risks and for funding ways to reduce those risks, as well as to pay for redress when the inevitable occurs.

"The absence of a national program leaves us just kicking the can down the road," McKnight said. "Legislation gets renewed, but only so we can keep doing business."

He said there should be a national risk pool in the U.S. that would take a comprehensive look at exposures and suggested the insurance industry could provide leadership on how to quantify and mitigate the risks.

Tony Kuczinski, CEO of Munich Re America, agreed with the need for industry involvement, saying he had signed a letter encouraging such a plan. "It’s four or five times as expensive to fix a problem after the fact than it is to be proactive," Kuczinski said. "You just have to have the stomach to tackle the problem up front."

Joan Lamm-Tennant, CEO of Blue Marble Microinsurance, which operates in the developing world, said she'd "globalize those thoughts." She said she's "experiencing a real call to action on behalf of governments and quasi-governments and a willingness to work more with the private sector."

She recommended a model along the lines of the Terrorism Risk Insurance Act (TRIA), enacted in the U.S. in 2002, following the 9/11 attacks. Under TRIA, insurance is provided via the private sector, but government acts as a backstop. That backstop "gradually recedes as the private markets get more data and get stronger," Lamm-Tennant said. Such a public-private approach, she said, would let us avoid setting up "some new government agency"--a goal that I'm sure we all applaud.

Perhaps I'm jaded from decades of watching inaction in Washington, but I doubt Congress will get as far as a national risk plan. I imagine most risks will still be treated piecemeal. I do think that, as long as people are throwing trillions of dollars around, considerable resources could be brought to bear. Legislators, like generals, tend to fight the last war, so the focus will surely start with public health, but other risks could win attention if a compelling enough argument is made.

I like this one: The U.S. spends north of $700 billion a year on the military as a sort of insurance policy against the chance that Russia will lob a bunch of missiles on New York City; maybe it's time to mitigate some other risks, too.

And I hope the insurance industry can lend its expertise in identifying, quantifying and managing those risks.

In the meantime, I dearly hope you all stay safe.

Cheers,

Paul Carroll

Editor-in-Chief

P.S. I was delighted to see that more insurance companies are staking a claim to the moral high ground in the pandemic. Following reports two weeks ago that some health insurers were waiving out-of-pocket costs for coronavirus patients, two auto insurers said Monday that they are rebating premiums to customers, as long as driving has dropped so much. Allstate said it is rebating $600 million, and American Family Insurance, $200 million. As I wrote a week ago, I hope the entire industry will do whatever it can for customers during what will surely be a defining stretch. So far, so good.

 

There is little doubt the world has changed, forever, as a result of COVID-19. In the aftermath of any upheaval that affects society so broadly, there will be a shift in behavior as people begin to react and behave based on their perceived new reality. What compounds the effect of this particular event is a fear of the unknown made more concerning by a general lack of confidence that anyone actually knows what will happen.

After COVID-19 runs its course, will we return to what was? Will people’s behavior have undergone a permanent change?

Habits are supposedly formed over about 28 days of consistent behavior. If that is true, then lots of new habits are being formed over this period of physical distancing, isolation, scarcity (at least of toilet paper and adequate bandwidth for Zoom meetings and conference calls) and fear.

This uncertainty over the future has brought entire industries and markets to their knees. Markets hate uncertainty (see the stock market). Business is driven by the ability to make decisions, ideally based on information, not just intuition. Yet when data is no longer relevant to the reality of the moment, it’s hard to make reliable business decisions. The result is usually either paralysis or adherence to what you “know” to be true.

However, this moment affords a better course; it is an opportunity to renew your business. When forecasting the future, much is unknown, and, while it’s possible we return to what we recognize as normal, the absolute least likely version of the future is “no change.” Those companies that emerge from these uncertain times stronger will be those that use these times to successfully prepare their business to meet a “new normal,” whatever that may be, and create as much clarity from uncertainty as possible. 

We do not know what the future holds; none of us do. But we do have an approach. There are three steps to begin the process of preparing your business for what’s next.

See also: COVID-10 Moral Imperative for the Insurance Industry  

First, transformation is achieved through a renewed mindset. No one ever does anything they cannot first imagine. Your executive team must adopt a new mentality, a new understanding, a new commitment to thinking differently. 

More than about how COVID-19 has changed the world and your place in it, a renewed mindset projects a much greater opportunity. Are your executives willing to face the possibility that the business model you operated under six months ago and the business model you may have six months from now do not align? Are they willing to do what it takes not to avoid compounding the current crisis with another crisis?

A change requires companies to examine their purpose, their strategy and their customer in light of these continuing changes. Guesswork and speculation are easy and entertaining. Converting to clarity requires shift in mindset. 

This renewed mindset is an irreplaceable cornerstone of planning for the future. Every company today should approach these times like a STARTUP, or at least a RESTARTUP.

Second, you need to identify every assumption and thesis that underpins your existing business model. From the resources and relationships you require to operate, to the customers you serve and their behavior and how you engage your customers, many assumptions may no longer be valid (if they ever were). 

Is your supply chain still valid and sustainable? Has your target customer changed? Have customers changed the way they feel about your products or services? Do people view your value proposition differently?

This self-examination may be uncomfortable, but it is necessary. Identifying assumptions and theses requires executives to actively participate and be open to suspend long-held beliefs. We are not saying these beliefs and assumptions must be surrendered, but they must be examined. The assumptions and theses that kill businesses are those that are so embedded they go unrecognized. 

The ability to facilitate this self-examination by a protagonist, who is not bound by the unrecognizable constraints inherent in the business and is willing to approach the exercise with no preconceived answers or bias, is critical. If you fake your way through this, you will fail.

Third, you must test every assumption. Discernment only comes with examination, with testing. Testing assumptions and theses requires executives be completely open to a future that is highly undesirable but still plausible. 

Identify what data points you will need to ascertain whether each assumption or hypothesis is true. Assembling the right data on which to test assumptions and theses may hinge on accessing new technologies to gather data and finding new ways of analyzing the data. 

An effective facilitator in this process guides executives to identify which assumptions are actually relevant, those that have the most uncertainty, those that have the most potential impact. The ability to ask the not-so-obvious question is important, as is the discipline to examine motivation, why people behave or react the way they do. 

Executive teams must be able to ask “why do we do that?” “what if?” and “what’s possible?” at every turn. You have to face the unthinkable. No assumption goes unexamined, and nothing about the past is sacred.

Those companies that successfully prepare their business to meet a “new normal” will be those that undertake this renewal process and gain a new understanding of their supply chain, of the resources they need to execute and of their customers’ problems, attitudes and needs. Every executive will face shifts in the market that could not have been anticipated.

Our renewal process is an approach to emerge stronger. Our renewal process will cause executives to examine every aspect of their value chain, including resources, supply, engagement and the ultimate transaction. 

The strong will renew their businesses, then, based on the strategies and constraints developed from this process, they will undertake an intentional scenario planning process and innovate in the context of what the “new normal” might be.

See also: How Agents Are Adapting to COVID-19  

This call for renewal is applicable to all businesses. But, because of our historic emphasis on insurance and risk, I want to be clear. I’m not talking about renewing insurance policies, nor renewing any aspect of what was; rather the process requires a renewal of the mind. It results in a reimagining of what should be.

We all thought insurtech was going to produce a seismic shift in the insurance industry, and to an extent it has. By contrast, the global reaction to this virus will create a tectonic shift. People and businesses will reconsider what they truly need and don’t need and why they feel they need it, from whom they want it and how they want it delivered. This will create a broader world of opportunity.

So, I am officially planting the flag of the future on the hill of RENEWAL. Renewal will lead to transformation fueled by constrained innovation, resulting in accelerated growth. 

Our renewal process will accelerate your restart. You want to be on the right side of the starting line.

Technology is continuously changing the healthcare landscape. From reshaping ease of access to quality care to improving system efficiencies and interoperability, all aspects are reimagined. Telemedicine and digital health are disrupters that will continue to evolve on-demand solutions and care management significantly.

Three industry leaders from the Alliance of Women in Workers’ Compensation joined us on our most recent Out Front Ideas With Kimberly and Mark webinar to discuss the evolution of healthcare and its impact on workers’ compensation: 

• Artemis Emslie – CEO of Cadence Rx
• Dr. Melissa Burke – vice president and head of managed care and clinical at Amtrust Financial Services
• Ann Schnure – vice president of telemedicine operations at Concentra

Healthcare Reimagined

Access to care has become increasingly on-demand with advances in telemedicine and telehealth. Consumers want to engage with their health more than ever, and these tools put access in the palm of their hands. But from a claims perspective, are workers’ compensation professionals encouraging this kind of engagement from injured workers? Are employers encouraging use throughout their staff? It is essential to consider how useful these tools can be in communicating with an injured worker and in creating healthy trends in the workforce.

Applying consumer data is integral to creating the best healthcare solutions because new healthcare models are personalized, predictive and preventive. Healthcare has historically been viewed as sick care, but, with healthcare becoming more holistic, it covers a range that also includes well care. The range of care has moved to a decentralized model that connects everyone, including, payers, service providers and healthcare providers. While this model provides an easier connection to meet the needs of users, it also makes systems more vulnerable. Because private health data is often the target of cyberattacks, security must be at the forefront of technology advances. 

Throughout all evolutions of health, it is essential to remember that health is human-centric. Technology applications should always be used for improving efficiency and accuracy, shifting how engaged consumers are with their health data.

See also: The Graveyard of Digital Health  

Skills Competition

When developing solutions to advance the needs within the workers’ compensation industry, are you considering what skill gives your company a competitive edge? There is a considerable lack of engagement with digital health in workers’ compensation. Its real-time data could provide critical insights into medication adherence and post-surgery recoveries, and opportunities for an injured worker to speak to a case manager or nurse. Using these digital health advances could alter the engagement for all parties involved in a claim and should be considered when developing a path for a return to work. 

Using our most crucial skills also means leveraging partnerships to develop the best solutions possible. One speaker noted that partnerships occur across all stakeholders, including our patients, and how we are engaging them. Start with the patient journey and then move outward to other stakeholders to keep your solution consumer-focused. Then proceed to use external resources, even engaging with your competitors, because not all solutions can be developed from within one resource.

The Investment Thesis

Investments in new health technologies should always focus on the ability to drive smart, connected devices, personalized healthcare and digitalized guidance and provide 24/7 accessibility to experts. Investors lean toward these ideas because they typically make consumers more engaged with their health. Understanding patterns in consumer behaviors, investors are also aware that technology that links to increased employer-sponsored benefits drives funding and more substantial deals. In 2019, one in three healthcare deals were within the digital space. Notably, women’s health and behavioral health technology earned significant investments last year. 

One of our guests spoke to the critical changes being driven by employers in healthcare, noting that venture capitals and angel funds are explicitly looking to invest in this field of evolution. Investors want to see a real impact on employees. Because blockchain technology protects user data, allowing the sharing of information in a trusted and safe environment, investors are also highly interested in this ever-expanding technology. Blockchain could be used to improve the patient/pharmacy experience and securely share data across a supply chain. 

Payer Perspectives

In creating healthcare solutions, it is imperative to understand the perspective of a workers’ compensation payer and how payers are incorporating healthcare technology into their business practices. One guest noted that the workers’ compensation industry should be incorporating technology and innovation into the foundation of our builds. We should be asking how we can do things differently from the beginning and bring a personalized approach to each injured employee. It is essential to balance these new technologies with human nature and match our resources with the right claim, using them to improve our processes.

Wearables, for example, can be used as a preventative measure and as a motivator. They can be used to stay connected and engaged with an injured employee and track progress. They can provide valuable data regarding who is most at risk in the workforce, or who is taking the necessary steps to prevent injury. Providing experts access to this data maintains relevancy to our goals, allowing a more personalized and aggressive approach to the care of an injured worker.

Mental health has also changed with telehealth and telemedicine, providing us with information on how it impacts a claim. Access to the most updated information on new drugs can provide critical data on drug interactions and reactions, allowing us to make the best decision for an injured employee and improve the outcome of a claim. 

Telemedicine Disruptor

Before the pandemic, telemedicine was viewed as an additional benefit of employer-provided healthcare. Now, there is an urgency to work through all the regulatory issues and make it widely available. There is now a paradigm shift from patients not feeling comfortable with telemedicine, to asking if it is an option, so they do not have to go into a doctor’s office and put themselves at risk. This increased demand is leading to the most dramatic shift in healthcare delivery history.

There are still many regulations on the delivery of care for an injured worker. Everyone in the industry should understand what is permissible in their jurisdictions in the workers’ compensation system to deliver appropriate care. For example, Washington DC regulations have shifted to allow telehealth care within a patient’s home instead of within a medical facility. These changes are part of a group of emergency responses that will expire on July 2, so industry professionals need to keep an eye on how these regulations will shift.

There have also been significant interests in providing telerehab and behavioral health services. With federal-, state- and workers’ compensation-level emergency regulations changing daily, we need to work with regulators to make sure these types of services are reimbursable. Additionally, some companies are offering examinations for quarantined employees so they can be screened before returning to work, ensuring the safety of all other employees, especially those in the essential sector. 

See also: Can We Thread the Needle on the Coronavirus?  

Will You Be the Disruptor or Disrupted?

As health and healthcare continue to be more consumer-centric, evaluate if your company is doing what it needs to create solutions consistently, or if it is becoming stagnant in a data-driven world. Is your model engaging injured workers to custom-fit their needs? Consider retooling your solution to enhance the consumer experience if it does not have customers' interests in mind. 

As workflow barriers continue to decrease, especially amid the pandemic crisis, it provides more room for growth in technology. Advances in virtual tools and assistance will increase as the need for a telehealth model only increases for at-risk individuals. Most significantly, post-pandemic, expect to see increased requests for telemedicine technology, and requested changes in workers’ compensation regulations.

To listen to the full Out Front Ideas with Kimberly and Mark webinar on this topic, click here. Stay tuned for our special edition Out Front Ideas COVID-19 Briefing webinar series, every Tuesday in April. View the full list of coming topics here.

Each year on the Wednesday before Thanksgiving, where could you find Southwest Airlines’ legendary co-founder and CEO Herb Kelleher? On the tarmac, of course, helping the ground crew load and unload baggage onto planes, during what was the busiest travel day of the year.

Kelleher appreciated the importance of leaders showing solidarity with their employees, particularly during challenging times. That spirit was echoed recently, when current Southwest CEO Gary Kelly announced he was taking a 10% pay cut in light of the business challenges created by the spread of COVID-19. Other airline executives followed Kelly’s lead, but he was the first to step forward with such a gesture.

Chipping in to help staff during difficult times is a hallmark of effective leadership. It helps to humanize executives in the eyes of employees but also sends an important message that, however bad a crisis is, however big a challenge we face — we’ll overcome it by working as a team.

At Vanguard Investments, that executive “roll up your sleeves” approach is actually institutionalized via the company’s Swiss Army – a customer service “reserve team” that’s called into duty to help maintain service levels during periods of high investor call volume. The people staffing the Swiss Army aren’t regular call center representatives; they’re specially trained Vanguard executives and managers.

In September 2008, for example, as investment bank Lehman Brothers collapsed and the U.S. financial industry began to implode, Vanguard CEO Bill McNabb was in the company’s Valley Forge, PA service center, fielding calls from anxious investors. Just imagine how that must have made his front-line call center representatives feel.

Working in the trenches with employees is a smart move for organizational leaders at any time, but even more so during challenging times.

Indeed, whether it’s working alongside stressed employees, or volunteering to take an executive pay cut during a financially challenging period – these types of actions send an unmistakable signal to the workforce: We’re all in this together.

In this sense, how a particular business crisis originates is almost immaterial. It could be an isolated, company-specific event, such as a product recall, or it could be a worldwide disruption caused by a global pandemic. The important thing is how leaders respond in those situations, and the signals they send to their organizations via their own personal behaviors.

See also: Coronavirus: What Should Insurers Do?  

Most businesspeople are problem solvers at heart. During crises, our natural inclination is to fix the problem, to stop the hemorrhaging, to focus on the mechanics and logistics of business recovery. While those are all very important activities, it’s critical to complement them with smaller, tone-setting tactics that, on their face, might seem less strategic and “unworthy” of an executive’s time.

Depending on what industry you’re in, that could mean helping customer service reps field incoming inquiries, or assisting warehouse personnel in boxing up orders, or chipping in to help a staff member complete an urgent task. These are all small gestures that can leave an indelible impression, especially on employees who are stressed and anxious about what the future holds.

All too often in the business world, there is a chasm between the corner office and the cubicle, between the top brass and the front line. Particularly during difficult times, it’s essential for organizational leaders to bridge that chasm, and to show the workforce what it really means to be a team player.

A version of this article originally appeared on Forbes.com and can also be found here.

Despite the headline, this blog is not about auto insurance or distracted driving. It’s about lessons learned in the COVID-19 pandemic. One is very likely to be that a fundamental change is needed in how we, as an industry, view product and services development.

Insurance product creation is based on historical data – the rearview mirror view. It always has been, and there is value in the approach. Past trends are likely to be repeated, and coverages and rating need to reflect that. Insurance departments require years of historical data to approve changes.

However, there is a fundamental change afoot that cannot be ignored. The once-in-100-years event is rapidly headed toward becoming a once-in-10-years event. As COVID-19 has shown, “we’ve never seen this before” is a veritable constant. As a society, and thus as insurers, never before have we experienced 9/11, the Fukishima nuclear disaster, Hurricane Sandy’s impact, the SARS and MERS global reach and on and on.

A stark reality is that the past is no longer the only predictor of future outcomes. But there are tools available to help.

Non-Traditional External Data. There is clear value in using internal and traditional external data in product development. However, as current and not-too-distant past events show, “we’ve never seen this before” is not reflected in that data. As an industry, we have new friends in the amount of scientific data that is now available and the technology providers that can make that data consumable.

A good example is the recent SMA Transformation in Action Award winner Sompo International, in partnership with Praedicat. Sompo was interested in emerging risk. It wanted to know what the next possible asbestos-like event might be so it could react now. Praedicat was able to bring machine learning, natural language processing, artificial intelligence and scientific data sources to this discovery process.

This is the windshield view! And what we, as an industry, need to include as a standard part of product development (and business decision-making) activities.

Clarity of Coverage. An early mentor told me that most people don’t care about their insurance coverage until they need it. One can debate the accuracy of that statement, but it does lead to the issue of clarity of coverage. People need to understand their coverage to care.

Unfortunately, there are already a number of lawsuits about what is and isn’t covered under certain policies related to COVID-19 outcomes. This happened after 9/11 and Hurricane Sandy, etc., too. This will never go away entirely, but it certainly can be mitigated. For example, for many insurers, due to mergers and acquisitions, it is not clear what is or is not covered within their total book of business. This is an area where technology can assist via AI to review and compare coverages between old and new products so that coverage issues can be addressed and clarified. Again, a little more windshield and less rearview mirror.

See also: Will COVID-19 Disrupt Insurtech?  

Creative New Services. Not too long ago, there were some insurance departments that would not approve services within insurance products. Fortunately, that problem has largely disappeared. Insurers are attaching mitigation services to cyber policies and IoT device implementations. Insurers can play an important part in extending services.

Product development initiatives should include services analysis as a routine part of activities. Services development can take advantage of the learnings coming out of external data analysis – are there gaps a service can address? Some insurtechs have homed in on this possibility.

For example, Jumpstart Recovery provides financial relief for whatever a person needs in the event of an earthquake outside of a traditional earthquake policy. The website identifies examples of pet care, camping supplies and document restoration. And Jumpstart Recovery is parametric-based, so there is creativity on several fronts. Maybe there’s a place for a similar attachment to a standard worker's comp or business interruption policy to cover gaps in the event of a pandemic. More windshield thinking!  

Right now, there is so much going on, it’s really hard to think about the creative and technology-based products and services that insurers can deliver to individuals and businesses. Things will settle down, and COVID-19 will get under control. However, on some fronts, there’s reason not to return to the same old way of doing things because the risks we insure are changing rapidly.

“We’ve never seen this before” isn’t going away. As insurers, we need to step up and be prepared, not just to preserve internal financial results, but because we can continue to improve society with the right tools, data and insights. Products and services need to be based on the forward-thinking, windshield view as much as it has been based on the historical, rearview mirror process of the past.

We are in a time when technology can be the facilitator. Out of adversity comes progress.

Life insurance sales are sluggish, and the struggle to capture the elusive mid-market and millennial demographic persists. Insurers are searching for a way to turn things around.

As tech start-ups have entered the insurance market, shaking up age-old policy servicing and sales models, insurers have been forced to rethink their offerings. Not adapting is not an option anymore.

Some innovative insurers are starting to gamify elements of the customer experience as well as the value chain, like we’ve seen in other industries, from airlines to credit cards, which already have well-received loyalty programs in place that rely largely on game mechanics. Innnovative insurance companies are rewarding users with points and gift cards for completing courses or taking quizzes related to financial wellness and mindfulness, for example. This is their way of incorporating fun, engaging elements into policies as a means of meeting the insured where they are.

But are these new types of policies and customer engagement models taking hold?

Research conducted recently by the Harris Poll on behalf of SE2 and Life.io investigates if factors like rewards and engagement make life insurance more appealing both to those who already have policies and those who don’t. The findings found that the vast majority of the 2,000 respondents would share real-time wellness data with insurance companies through wearable devices in exchange for financial benefits like a lower insurance premium or wellness rewards.

The data also found that U.S. adults want their policies to be more interactive. Roughly two-thirds (68%) say that, if a provider offered a policy that included elements of gamification to reward healthy lifestyle and wellness habits (think: badges for hitting certain milestones, a leaderboard, financial rewards), they would be likely to engage in those elements. Additionally, 43% of U.S. adults say they’d be “much” or “somewhat” more likely to purchase a life insurance policy if the insurer offered an interactive program with wellness benefits (such as coaching and education) rather than just policy payout.

See also: Customer Experience Gets a Major Facelift

In terms of generation, over half (53%) of millennials (ages 23-38) say they’d be “much” or “somewhat” more likely to purchase a life insurance policy if the insurer offered an interactive program with wellness benefits. This is noteworthy given that life insurance sales have historically lagged among this group, according to previous research from SE2. Even baby boomers want in. More than one-third (36%) of boomers (ages 55-73) say an interactive program with wellness benefits would make them “much more” or “somewhat more” likely to purchase a policy.

Will Sweat for Discounts

The survey also found that a majority of U.S. adults seem to like the idea of exchanging wellness and lifestyle data with life insurers for rewards and improved lifestyle. They would share wellness data, such as steps walked daily (79%), blood pressure daily (76%), heart rates daily (74%), calories burned daily (73%) and sleep patterns each night (71%) for financial or health rewards.

In fact, those rewards could lead to lasting lifestyle and health changes. Eighty-six percent of U.S. adults say they’d be “much” or “somewhat” more likely to live a healthier lifestyle if a life insurance company offered cash back as an incentive in exchange for their real-time wellness information. Almost all (94%) of millennials say this would be the case for them.

Other incentives that would urge the insured to improve their lifestyle habits? There are plenty:

• 86% of U.S. adults say cash back would encourage them to live a healthier lifestyle
• 85% say a lower life insurance premium would encourage them to live a healthier lifestyle 
• 82% say additional coverage or benefits would encourage them to live a healthier lifestyle
• 77% say wellness rewards would encourage them to live a healthier lifestyle 
• 70% say wellness education/coaching would encourage them to live a healthier lifestyle
• 66% say financial education/coaching would encourage them to live a healthier lifestyle

See also: 3 Ways to Improve Customer Experience  

More Frequent, Meaningful Touchpoints Matter

The importance of customer engagement cannot be overstated. The research found that policyholders want to hear from insurers more often, not just upon sign-up and for billing purposes. More frequent, personalized touchpoints are crucial for retaining and growing the insurer’s book of business. Higher-quality interactions can help build relationships, which leads to higher sales conversion, reduced lapse rates and referrals.

What to take from all of this?

Policyholders and prospective policyholders will no longer settle for the status quo. They want higher-touch customer service with more frequent touchpoints, policies that are more personalized and engaging and rewards that continue. These approaches can help turn around sluggish sales and lead to lifestyle and health improvements of the insured.

For insurers who aren’t willing to evolve their policies and engagement models to better meet consumers where they are, survey respondents stated that they would be willing to switch insurers. That’s not to be taken lightly.

Global financial markets are fluctuating, daily operations for businesses across industries have been disrupted and masses of the workforce are being grounded from travel and urged to work from home because of the coronavirus. This is an unprecedented situation, and the quick changes can overwhelm businesses.

Insurance agents likewise face challenges, including dealing with any staff and workplace issues and sharing guidance and advice with clients. The key to enduring the coronavirus or any other crisis is developing and activating a crisis management plan. Plans should focus on transparency; factual communication; aggressive planning; operations; and people management. 

Aggressively creating a plan

Failing to prepare can harm a business’s reputation and financial wellbeing. Crises, as evidenced by the coronavirus, unfold quickly. This is why being aggressive is key for businesses—always expect the unexpected. 

When creating crisis plans, business leaders need to imagine the worst possible scenarios and work backward. What’s the worst thing that could happen? How would we respond? What steps would be necessary to rebuild? Asking these questions leads to a well-rounded plan. 

Business leaders must know whom to contact, whether it’s their clients, partners or employees in the event of a crisis. All contact information should be up to date and on-hand for quick communication to avoid last-minute scrambling during a stressful time. 

Crisis plans can’t be created in a bubble. They become meaningless if people aren’t aware of them. All employees need to know how their company plans to respond and regularly perform drills to boost confidence that the plan can be executed without a hitch. Performing due diligence can lead to better results and consistency when the time comes.

See also: COVID-19: Moral Imperative for the Insurance Industry  

Considering impacts on business and people

When developing crisis plans, consider all scenarios—related to health, weather or personnel crises--and their potential impact on business operations. Running through scenarios, no matter how realistic, is a great exercise.

Communicating factual information

The World Health Organization has referred to the coronavirus as not only a pandemic but an “infodemic,” because of the rapid spread of misinformation and speculation online. It’s the responsibility of business leaders to maintain clear, factual communication with employees and clients during a crisis.

Before sharing information or guidance with clients or staff, leaders must ensure that it’s coming from an official, credible source like the Centers for Disease Control and Prevention or the World Health Organization. Business leaders should also:

• Know the best way to reach employees, clients or other interested parties in the event of an emergency. Think about the most common methods and channels of communication at your business and develop a mix of communication and content that will be most effective and efficient--internal or external email, social media, press releases, newsletters, etc.
• Not rush communications. Business leaders should maintain regular communication throughout a crisis, but it needs to be factual. Employees and clients alike shouldn’t be kept waiting, but rushing to get statements out can lead to unclear messaging, increased uncertainty and the spread of false information. Take enough time to make sure that all statements are clear, factual and approved by legal advisers before release. Leaders may be tempted to respond immediately, but quickly sharing false information can be dangerous.  

See also: Will COVID-19 Disrupt Insurtech?  

Ultimately, business leaders need to avoid feeding into fear, despite the uncertainty inherent in a crisis. Laying the groundwork for crisis responses can be incredibly beneficial for companies, their people and their clients in the long term.

When I saw this article in the Wall Street Journal this week, on how states are pressuring insurers to pay business interruption claims related to COVID-19 even though policies specifically exclude pandemics, I was reminded of my first encounter with the “deep pockets” theory that is driving the pressure.

A college friend who was a new associate at one of Chicago’s biggest law firms had managed to get me invited onto its softball team, and a bad hop on a wicked single had shattered the nose of our rightfielder. Once we bundled the poor fellow into a car, so someone could drive him to an emergency room, the young associates started talking about who was liable. Natch. But whom?

Someone suggested that the rightfielder bore liability because he played rarely and perhaps should have known better than to take the risk. But you don't sue your teammate. So, an eager associate joked that the batter bore the liability for blistering the ball. “What about the pitcher, who served up such a juicy ball?” another asked. Then came the definitive ruling, from still another: “Who has the deepest pockets? The municipality. We sue the municipality for not maintaining the field properly and allowing for that bad bounce.”

We all had a laugh, and nobody sued anybody, but I’ve seen over the past few decades just how appealing the “deep pockets” approach is, and now the insurance industry is a target of those looking to finance relief from the pandemic.

Do we have a responsibility to provide business interruption insurance even though it’s not covered in the contracts? More broadly, what is the industry’s responsibility to help with this crisis?

No, I don’t think the industry should have to cover business interruption due to the pandemic. I think small businesses and individuals, who did nothing wrong, should be bailed out by government as part of a collective effort by us taxpayers and citizens. But I don't see why the insurance industry bears any special responsibility. Two years ago, Marsh actually offered a policy that would cover pandemics, and no one bought it, so why should insurers have to cover them, essentially for free? A contract is a contract.

But….

But, but, but….

I think there is a moral imperative for the industry to do everything it can, even if means bending some rules and forgoing some revenue in the short term. There should even be long-term payoffs for generosity now—though that needs to be a secondary consideration.

When I was a kid, and one of my seven siblings or I (yes, Irish Catholic) would head out the door, my Dad would typically call one of two things after us, “Remember your name is Carroll,” or, “Do the right thing.” While the first admonition applied just to us Carroll kids, I’ve found the second to be a remarkably good guide to behavior, whether individual or corporate, ever since.

In the current moment, doing the right thing looks to me like finding ways to defer premium payments when possible. After all, the insurance industry is in strong financial position, while many clients, especially individuals and small businesses, are not. Why not let them rest on the broad shoulders of the insurance industry and borrow our balance sheet for a while? It’s not like the cost to insurers would be material, in a period when interest rates are nearly zero.

Is there some way to quickly diminish workers’ comp payments at small businesses where, after all, so many people aren’t working? Maybe recalculate slip-and-fall liability as long as there aren’t customers or workers who will slip and fall? Reduce premiums for commercial auto fleets if they've been idled? For buildings that aren't being used? Temporarily lower premiums for individuals whose cars are just sitting in their driveways or on the street?

I realize that regulators will need to weigh in on premium adjustments and that some bad debts will arise if people get into the habit of not paying their premiums, but I think my broad point stands. There are probably lots more ways to support clients in their time of need, too. Perhaps a blanket deferral of premiums for businesses with dire cash flow?

If a claim is the proverbial moment of truth, then this pandemic is the moment of truth among moments of truth. This is the moment to shine.

There are loads of people out there who are convinced that insurers are unfeeling and nothing more than greedy. Look at this article in the Daily Beast. The haters can control the narrative, or we can.

Look at the great publicity that Cigna and Humana have received for waiving copays on coronavirus treatment. Or, look at the coverage of the humanitarian gesture by Zion Williamson, a rookie with the New Orleans Pelicans, who said he'd cover 30 days of expenses for the team's stadium staff after the NBA put its season on hold. This is a 19-year-old kid (albeit, one earning some $20 million a year). Surely, with all the resources in the insurance industry, we can make many such grand gestures.

Whatever we do or don't do, it'll be remembered for months and years to come. So, let’s do the right thing. Let’s help in every way we can, even if it means going outside the normal rules and procedures. It shouldn’t cost much, if anything, in the short run and will return long-term dividends both for the industry and for grateful clients.  

Stay safe.

Paul Carroll

Editor-in-Chief

It’s safe to say that 2020 will be nothing like the year we were expecting. Our actuarial projections from last year, based on looking at historical data and adjusting it to fit future conditions, are woefully inadequate for the task of projecting what life will be like in an age of “social distancing,” pandemic-level illnesses and deaths, widespread closures and cancellations, stock market panic and massive unemployment.

Amid the hourly developments coming from the news, we are beginning to understand how we should adjust our actuarial assumptions to match this new reality. The magnitude of many of the outcomes discussed here depend on the evolving response to the crisis and, most significantly, how long it takes to get back to “normal.” The speed of change is dizzying, but here are some early thoughts:

Commercial Lines

Auto — In prior periods of economic downturn, commercial auto has experienced significant decreases in accident frequency. Historical data from the 2001 and 2008-2009 recessions show frequency dropping for both minor and severe accidents. The combination of people staying indoors (both as employees and consumers), disrupted supply chains, juggling “work from home” with caregiving responsibilities and increased “belt-tightening” from the stock market downturn should result in similar frequency reductions for most auto policies.

It is unclear how delivery vehicles will be affected. Will the increase in delivery services from “social distancing” outweigh consumers’ tightening budgets? The shift of many restaurants toward “delivery-only” could increase the hired and non-owned auto exposures for those risks. One concern is that new delivery drivers may be less experienced, which could give rise to increased accident potential.

In general, trucking activity will likely decrease, which would lower the number of claims. However, there may be factors offsetting this, such as drivers under more pressure to drive longer hours now that the U.S. has suspended the 11-hour-per-day limit on driving.

See also: COVID-19 and Need for Decision Intelligence  

Another consideration is that fewer personal autos will be on the roads, resulting in fewer car-on-car accidents. On the other hand, people are finding that walking and biking are good ways to get outside while keeping a safe distance from others, so there may be an increase in pedestrian strikes.

General Liability — Premises/operations claim counts are most likely going to plummet as the prospect of patrons visiting premises has all but evaporated in the era of “social distancing” and large-scale business closures. In contrast, we anticipate an increase in frequency from habitational risks as people spend more time in their rented homes. Small children cooped up inside could lead to more accidents and injuries resulting from dangerous conditions on the property.

Product claims may increase as companies shift their focus away from established products and move into new endeavors that are more relevant to the current epidemic. Examples of this are perfume manufacturers making hand sanitizer and restaurants shifting to delivery and take-out operations. In addition, consumers may start using products in ways that manufacturers never intended, such as making their own sanitizing products at home.

Pharmaceutical and healthcare companies will need to be careful about how they represent the efficacy of their products, lest they tread into “false advertising” territory.

Workers’ Comp — Businesses are temporarily closing, employees are working from home and the economy is grinding to a halt. All of this points to a big reduction in the frequency of WC claims in the aggregate, although certain classes may face pressures that cause an uptick in claims. There will likely be a large increase in the number of claims arising from healthcare workers as these brave men and women put in extra shifts to help others during this crisis. A similar situation might arise for workers under pressure to meet heightened shipping demands (e.g., truckers, distribution center workers, manufacturers and delivery services), as well as public safety officials, such as law enforcement and first responders.

There may also be fewer catastrophic injury claims as we expect a reduction in many occupations that are associated with high rates of fatalities (e.g., pilots, roofers, construction). One benefit of telecommuting is a reduction in employee concentration in one location, making a multi-person loss less likely.

Payroll, which is often used as the exposure base for premium, will probably decrease significantly, resulting in lower premiums collected.

Property — Many businesses will be closing or operating with reduced staff, making it less likely for a fire to occur there in the first place and lowering frequency. However, in these vacant and under-occupied buildings, it is more likely that a fire or water damage could go unnoticed and result in more severe building damage. And, as companies face financial pressures in a slumping economy, arson may become more prevalent.

Habitational exposures will likely see a greater frequency of fire losses, with people spending much more time at home cooking meals and using fireplaces. Some people are leaving their quarantined urban apartments to rent or property-share (e.g., AirBnB or VRBO) larger homes in less-infected nearby suburbs.

Repairs and maintenance may be slower than usual due to financial or safety reasons, and there may be less supervision of rental properties due to supervisors isolating themselves.

Directors & Officers — Some challenges facing corporate executives include enacting existing business continuity plans in a rapidly changing environment (without misrepresenting the efficacy of those plans), and the need to pay close attention to the impact that their decisions will have on their stock prices in this volatile market.

Employment Practices Liability — Employers need to navigate a diverse array of potential hurdles, including Family Medical Leave Act issues related to caring for loved ones, complications arising from unusual remote working arrangements and mass as well as individual worker layoffs under existing and new emergency employment laws. Unemployment rates are projected to rise from 3.5% up to double-digit levels, with the hardest-hit industries being retail, transportation, leisure and hospitality.

Cyber — We have already seen a marked increase in the number of phishing email scams targeting workers that are new to telecommuting, as well as fake CDC warnings that take advantage of the public’s fear.

Medical Malpractice — If the U.S. healthcare system becomes overwhelmed by a surge in patients, we might see different outcomes for patients resulting from the triaging of limited resources, for both coronavirus victims and all other types of patients. The danger posed to nursing home and long-term care patients is especially acute and will need to be monitored closely.

Surety/Credit — Surety frequency could increase if contractors are unable to continue work, raw materials supply chains are delayed or public officials stop inspecting worksites.

Public Entities — The widespread closure of public facilities could result in lower revenue for jurisdictions in the form of tuition refunds, refunds for canceled programs and a decreased tax base from reduced business and tourism. It is still unknown how effective online learning will be for students, especially those with special needs. A surge in emergency response spending will necessarily mean a decrease in less-essential maintenance and services going forward.

Personal Lines

Auto — As with commercial auto, with fewer people commuting to school or work, we expect a material decrease in miles driven (which translates into lower claim frequency) and a potential rise in pedestrian strike claims. Physical damage claims frequency will likely also decrease as a result of reduced miles driven.

Property — Families are “hunkering down” in their homes, increasing the amount of cooking, heating and other activities that could cause fires. Unoccupied second homes (rentals and additional dwellings) are more likely to go unchecked and thus face risks associated with vacant properties (water damage, unnoticed fires, vandalism). However, there may be some cases of homeowners leaving their primary dwellings in a quarantined city and spending more time at their secluded secondary dwelling.

All that social distancing should lead to a reduction in homeowner liability claims, as social visitors are less likely in this new environment.

See also: Impact of COVID-19 on Workers’ Comp  

Other Consideration – Insurer Operations

There are also common business issues that have a unique impact on insurance operations to consider. For example, claims departments might be beholden to slower-than-usual mail delivery, reduced staff, headaches associated with alternative work arrangements, lags in claim reporting, difficulties in adjusting claims and slower than normal claim payments.

On the top-line side, there could be a reduction in new insurance submissions in the short term. And, since insurance premiums are linked with GDP growth, employment levels, payrolls and revenues, we anticipate a decrease in future premium as these macroeconomic benchmarks deteriorate. Unfortunately, insurance companies have many fixed costs, so decreased premium combined with constant fixed costs could result in lower profitability margins. Longer-term projects and updates are likely to be put on hold until companies are back at full operational capacity and have the financial stability to re-invest in themselves.

Even insurance experts can’t foresee every eventuality. The speed and widespread prevalence of the coronavirus are upending almost every projection we made for 2020. And, given the pace at which the health situation is evolving and the world is reacting, much of our current thinking may soon be obsolete! As always, please reach out with any questions as we navigate through these challenging times together.

Republished with permission from Gen Re. You can find this article originally published here.

Lockdowns, mandatory work from home, social distancing – the coronavirus pandemic has upended lives across the US. With no definitive end in sight and officials closing restaurants, bars and non-essential businesses in cities and towns across the country, most small businesses are feeling the economic impact and wondering, does my insurance cover this?

It’s long been known that insurance agents demonstrate their value to customers during crises, whether that’s a personal crisis, such as a car accident, or a community crisis, such as a major storm. During these times, agents are advisers providing much needed guidance to worried clients. Now, with the unprecedented uncertainty surrounding the coronavirus, businesses are wondering if they have enough protection to help them weather this storm. Agents are advocates helping customers with the information they need, and are friends, providing comfort and support and a receptive ear to those who need a sounding board. 

Even if their physical locations close, agents need to be accessible to their clients. Agents have to have instant access to policy files. They need to maintain constant communication. And they need to implement solutions that handle routine matters, so they have more time to focus on their clients’ unique needs.

Here are three ways agents have adapted to continue to provide the service their clients require. 

1. Taking their agencies to the cloud. 

Most agency management systems are set up to work in the cloud – giving agents access to their customer files. Many agencies have been using these capabilities easily, with no disruption to their normal course of business. Agencies that are not set up should contact their vendor representatives to ensure they have all of the functions needed to continue business outside of the office.

Agencies are also using other cloud-based solutions that make it easier to process new business, claims and endorsements outside of the normal office setup. Automated quoting solutions that obtain multiple carrier quotes from a single-form submission eliminate the need to go to and resubmit the same information on multiple carriers’ websites. Online portals give customers instant access to their policies so they have the information at their fingertips and can file claims online. 

See also: Coronavirus: What Should Insurers Do?  

2. Extending communications beyond email and phone.

Every minute there seems to be a new coronavirus development. With things constantly in flux, customers will continue to have questions and want answers as quickly as possible. Agencies are making sure clients know how to reach them, especially since clients have gone mobile.  Some agents are using social platforms such as Twitter, LinkedIn and Facebook to share updates that are helpful for all customers. One good idea: If many of the questions are repetitive, consider adding a Frequently Asked Questions page to your agency website that can be promoted on social media. Other agencies are using text for simple questions that can be answered quickly. 

In a crisis, it’s also important to implement face-to-face communication tools to maintain relationships with clients. Social distancing doesn’t have to prevent you from meeting with customers. Take your conversations to the virtual world, using solutions like Skype or Zoom to maintain personal interactions.

3. Business doesn’t stop, and innovation can’t stop. 

With the world in chaos, the temptation may be to focus on stabilizing business, maintaining the status quo. But as agencies adapt and implement different processes to keep operations going, agencies should be using all tools at their disposal. Technological solutions, like automated quoting, that help with routine, time-consuming tasks can have a long-term effect in not only helping agencies through a crisis but better serving clients in the future. For example, some agencies are taking advantage of on-demand webinar platforms to host Q&A sessions where a variety of business owners can get advice on their most pressing queries. This can be a powerful tool in building long-term client relationships.

See also: How Coronavirus Is Cutting Connections 

It’s important for agencies to think about the changes they are making now as advancements that go beyond the crisis. Many of the improvements that agencies are currently making in real time can have significant benefits to efficiency and growth when things return to normal leading to an overall stronger agency dynamic.

These are uncertain times, and we don’t know how long the coronavirus pandemic will last. Taking the necessary steps now ensures that agencies continue providing their clients with critical customer service. When the pandemic subsides, many of these learnings and changes can be continued as the marketplace returns to normal.