On May 21, the National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA) and the Independent Insurance Agents & Brokers of America (Big “I") released their proposal to address future pandemics: the Business Continuity Protection Program (BCPP).

The attached document summarizes this proposal and identifies several key risks to consider as this proposal is debated and compared with other concepts.

The Proposal

In a nutshell, insurance agents and brokers may elect to sell a FEMA-administered protection agreement to businesses and nonprofits. If a business purchased this protection and its industry was later ordered closed due to a pandemic, the business would receive an immediate payout of a previously determined amount. 

See also: PRIA: A Tale of 2 Policyholders  

The payout amount is a percentage (e.g., 80%) of three months of the business’s payroll and operating expenses as reported in its last tax returns filed prior to purchasing the protection agreement. At the time it buys the protection agreement, the business would promise to spend any payouts on retaining its employees and covering other business expenses.

Key Risks

The BCPP concept raises several risks to consider in this and any other proposal intended to compensate businesses during pandemic lockdowns.

• Risk to State Role in Pandemic Response –The BCPP would require lockdown orders to either come from the federal government or follow an approach dictated by the federal government. In contrast, the states have taken responsibility to shape their own COVID-19 lockdown orders based on local needs and metrics subject to high-level guidance from the federal government.
• Basis Risk – Because payouts under the BCPP are based on out-of-date financial metrics, businesses face a significant risk that payouts would not match their actual needs. Failing businesses would tend to get more than their current expenses while successful businesses would get less.
• Moral Risk – The BCPP would pay out based on a business’s self-assigned NAICS industry classification code. Businesses could improve their chances of receiving a payout by selecting a higher-risk code before a pandemic or lobbying for the inclusion of their NAICS code in a lockdown order during a pandemic.
• Regulatory Risk – Although state licensed insurance agents and brokers would sell the BCPP product, it is not an insurance contract. Accordingly, insurance agents and brokers would face the risk of having to obtain an appropriate license and implement additional training, processes and controls.

Coronavirus is changing how people work and interact every day. Many companies have needed to expand their remote working capacity as a result of the outbreak – and usually at very short notice. To provide as many employees as possible with easy access to operating software and systems quickly, in some cases IT security standards have had to be lowered or suspended, resulting in potential cyber security exposures for companies.

One consequence of potentially laxer security may be that cybercriminals and hackers may find it easier to penetrate previously protected corporate systems, causing data breaches, cyber blackmail intrusions and IT system failures.

According to the Allianz Risk Barometer, an annual survey of more than 2,700 risk management experts around the globe, cyber risk already ranked as the number one threat for businesses in 2020 before the coronavirus outbreak, driven by concerns about data breaches becoming larger and more expensive; ransomware incidents bringing increasing losses and business email compromise (BEC) or spoofing attacks, which typically involve social engineering and phishing emails to dupe employees into revealing confidential or valuable information. BEC attacks have resulted in fraudulent losses in excess of $20 billion since 2016.

Unfortunately, the significant increase in home workers accessing the corporate network with a virtual private network (VPN) connection because of the coronavirus pandemic only exacerbates these risks, providing a perfect opportunity for cyber criminals, as recent events demonstrate only too well.

It is estimated that anywhere between 50% and 90% of data breaches are caused or abetted by employees, be it by simple error or by falling victim of phishing or social engineering. Recent events demonstrate the vulnerability only too well. In April, Google detected and blocked more than 18 million malware and phishing emails and 240 million daily spam messages related to the coronavirus pandemic in a single week. In total, Google blocks more than 100 million phishing emails each day.

See also: Coronavirus Boosts Cyber Risk  

If remote workers fall victim to a cyberattack, it puts their work network at risk. There are several effective security measures businesses can apply to help remote employees combat internet attacks.

Keep Software Up to Date

Check whether you can use current versions of operating systems and installed programs. If possible, use the automatic update feature, which is often the default setting. Otherwise, immediately install security updates for your software, especially for your web browser and operating system.

Use Virus Protection and Firewalls

Check activation of virus protection and firewalls, but keep in mind that this measure can only be effective as an accompanying measure with other security procedures. Its application does not reduce the importance of the other tips in this article.

Create Different User Accounts

Malicious programs have the same rights on the PC as the user account through which they entered the computer. You should, therefore, only work with administrator rights if absolutely necessary.

Be Cautious About Sharing Personal Data

Online fraudsters increase their success rates by addressing their victims individually: Previously spied-on data, such as surfing habits or personal names, are used to inspire confidence. Today, personal data is considered a currency on the internet and is traded in this way. If possible, use a VPN connected to your home network in public wireless local area network (WLAN) hotspots.

Otherwise, unencrypted transmitted data can be read by third parties. At the same time, a VPN also protects against a number of other attacks on the PC and the data stored on it.

Use Up-to-Date Web Browsers

Check whether to disable components and plug-ins in your browser settings. First, enter the addresses for security-critical websites, such as for online banking, manually in the address line of the browser and save the address entered in this way as a bookmark, which you can then use for secure access.

Two-Factor Authentication

Where two-factor authentication is offered, use it to secure access to your account. A password manager can facilitate the handling of different passwords. Do not share your passwords with third parties.

Protect Your Data Through Encryption

Protect your confidential emails with encryption. If a WLAN is used, subject to the information security guidance of your entity, pay attention to the encryption of the wireless network. Subject to higher standards as per individual guidance of the respective individual security officer (ISO), in your router, select the WPA3 encryption standard or, if this is not yet supported, WPA2, until further notice. Choose a complex password of at least 20 characters.

Identify All Participants in Online Sessions

It is particularly easy for unauthorized persons who have obtained the dial-in data to join large online meetings with many participants. That’s why everyone who appears in the meeting needs to briefly identify themselves, especially when discussing sensitive topics and sharing presentations on screen.

Be Extremely Careful With Suspicious E-mails or Attachments, Especially if the Sender Is Unknown

Especially in the familiar environment of your home office, you must be wary of suspicious e-mails. Take your time and check each email thoroughly before you open it.

Please see  CORONAVIRUS: STAYING CYBER-SECURE THROUGH THE PANDEMIC for a complete list of IT security measures.

See also: New Enhancements for Cyber Coverage  

COVID-19 is one of the many crises that hackers and scammers leveraged to exploit vulnerable businesses, and they will find more innovative ways in the future. More than ever, it is vital for organizations to protect themselves from malicious cyberattacks by educating employees about how to identify and prevent cyberattacks and implementing home security policies for remote workers.

SUMMARY

In the U.K., separate regulatory bodies are accountable to supervise prudential matters (solvency) and consumer protection (conduct). The Financial Conduct Authority (FCA) recently took several actions with respect to consumer protection in the context of COVID-19 using different tools than those available to U.S. insurance regulators.

Resolution of Business Income Coverage Disputes

The FCA has retained a law firm to represent the interests of policyholders in a proposed “test case” to be filed in court by the FCA against representative insurers. The FCA has requested insurers, intermediaries and policyholders to submit examples of disputed policy wordings and the respective positions of the parties.

It appears the action will be commenced before the end of July and is expected to result in binding outcomes as to the interpretation of selected wordings and guidance as to the interpretation of other wordings.

At least initially, the FCA’s statements suggested this litigation would be limited to a few rarely purchased coverage options not requiring “property damage.” It is now unclear whether the scope will expand to include coverages that are only triggered in the event of property damage.

Assessment of Product Value

In the U.K., insurance companies do not typically files forms or rates with the insurance supervisor. Instead, the insurance law imposes a duty to “act honestly, fairly and professionally in accordance with the best interests of its customer” on the insurer and its key executives. That duty includes an obligation to provide products that offer a reasonable value to customers.

The FCA plans to require insurers to assess whether and how the value of their products have been affected by the COVID-19 crisis. To the extent a product is no longer delivering the expected value (e.g., the insured risk no longer exists), the insurer must take appropriate action.

Insurers have six months to complete the assessment and take appropriate action. Insurers must be able to demonstrate to the FCA how they have discharged their obligations to customers.

Assistance to Customers in Financial Difficulty

The U.K. insurance law also imposes a duty to “pay due regard to the interests” of customers and “treat them fairly.” The FCA has issued guidance applying this duty in the context of the potential of temporary financial distress resulting from COVID-19 of individual and small business customers.

The FCA obligates firms to discuss options with policyholders that reach out to the insurer for that reason or who have missed a payment, inquired about making a COVID-19 business interruption claim or have asked for a reduction in coverage.

Options may include a reduction or waiver of premium, deferral of premium payments, replacing the policy with a less expensive product or reducing coverages.

Insurers must take steps to make policyholders aware of these possible options including in their websites.

DETAILS

Business Income Coverage Disputes

The FCA announced on May 1, 2020, its intention to commence a court action with respect to coverage for business income loss under policies issued to small and medium-sized businesses. Specifically, the FCA plans to seek a declaration on “key contractual uncertainties.” The insurance industry supports the FCA’s initiative and is working with the FCA to define the disputed issues.

FCA’s View of Business Income Coverage

In a “Dear CEO” letter of April 15, the FCA expressed its understanding that “most policies have basic cover [that does] not cover pandemics and therefore would have no obligation to pay out in relation to the COVID-19 pandemic.”

However, the FCA expects “where it is clear that the firm has an obligation to pay out on a policy . . . it is important that claims are assessed and settled quickly.”

See also: Business Continuity During COVID-19  

Two weeks later, the FCA acknowledged coverage decisions may be more complicated:

• “[A]t least in the majority of cases, insurers are unlikely to be obliged to pay out in relation to the coronavirus pandemic.”
• “[F]irms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.”

FCA’s Intention to Seek Resolution

The FCA has reached out to a small number of insurers (reportedly including QBE, Axa, Zurich and Hiscox). FCA has requested from each typical policy wordings and positions on coverage under several available but typically not purchased optional coverage extensions for:

• Non-damage denial of access
• Public authority closures/restrictions
• Infectious/notifiable diseases

The FCA will “put forward policyholders’ arguments to their best advantage” and has hired an external law firm to do so. On May 15, the FCA asked policyholders to submit examples of disputed wordings and their arguments for coverage.

For its part, the Association of British Insurers called the FCA’s action a “welcome step” and indicated insurers are expected to pay some £900 million in undisputed business income claims.

The FCA has expressed the view that most policies do not cover COVID-19 because they only have “basic cover for BI as a consequence of property damage.” The coverage extensions FCA initially selected for litigation cover “BI losses arising other than from property damage.”

With COVID-19 disrupting business, most employees in the insurance and insurtech industries have been forced to work from home. We are on week 12 of having most of our employees working remotely. 

Working from home has its challenges on the best of days. Now throw in your partner working beside you and perhaps add some children into the mix. Or maybe you’re living alone and talking to your house plants.

Longtime physical distance can lead to emotional isolation and stress, especially during a pandemic, with all the health worries about children, parents and grandparents. It behooves employers to make a human connection to their people when they most need it.

We emphasize team-building and connection as a key component of our corporate culture. Implementing tools and activities that keep employees connected, interested and feeling heard is critical to long-term success, now more than ever. Teams large and small worldwide have had to dramatically shift operations and quickly adapt to how they work. 

Remote work culture is here to stay, with many technology organizations expressing long-term interest in work-from-home options for their staff. Some of the team-building activities recommended in our first blog may not be feasible with social distancing. But there are several ways companies can leverage digital tools to check in on employees and promote active participation and keep them engaged and still feeling part of the team.

Fortunately, we’ve always had staff working remotely using web-based tools. We had tested all of our teams remotely before the outbreak. So we were ready, and the process was almost seamless. 

Here are a few activities and tools that you too can use to maintain a sense of team connection while we work apart. 

Check in with your employees 

With everyone at home, you aren’t organically interacting with your team throughout the day. Infrequent email correspondence removes a layer of connection and can also increase miscommunication. 

Instead, make sure employees are kept up to date with consistent communication that works for your business, such as daily video touchpoints and weekly emails. This is a turbulent time for many, affecting everyone in different ways. Make a point to check in with individual team members to see how they are doing and ensure they are properly supported. 

Make virtual meetings fun

Virtual teams don’t get to enjoy coffee-break talk, foosball or quick chatter between meetings. Maintaining fun social interactions between team members is crucial. 

Use video calls, meetings and touchpoints with teams to have a little fun and foster connection among your team. 

See also: Building a Virtual Insurer Post-COVID  

As well as continuing video meetings with our clients, we hold internal companywide video calls on Tuesdays and Fridays to touch base with everyone and provide internal updates. On Fridays, we set aside about 15 to 20 minutes to have a little fun. Some of the activities we’ve built into our meetings that any team could easily incorporate include:

• Costume contests, dress-up formal Fridays, holiday themes, ‘80s, etc.
• Games such as trivia, truth or lie, sharing bucket lists, etc. 
• Group stretching
• Contests to see who can come up with the best Zoom background
• Fundraising for the local hospital and food bank

Encourage your team to take breaks

Not having a designated office to separate work from one’s personal life and responsibilities is a significant adjustment. Encourage your team to take breaks and give them the flexibility they need to manage their schedule and make their days productive. Clearly communicate expectations to demonstrate trust in your team’s ability to be accountable for their work and deadlines without having to prove they’re online all the time. 

Take bonding activities online

Creative team-building games and events are key elements of fostering a startup culture. Fun activities help employees feel challenged and valued. While we may not be playing golf or having an office party for a while, let your team bond over a virtual activity on Zoom or Skype. 

There are a slew of options popping up, from virtual escape rooms to livestream classes. So far, we’ve held a few optional virtual events to bring our team closer together, including a fundraiser, an Easter contest, a recipe exchange (recipe book coming soon) and a jam session put on by our resident musicians. 

These activities can be short and simple--just something genuine that makes your team feel valued and gives them a little break. 

We may be physically isolated, but, thanks to technology, we need not be alone.

Across the country, healthcare providers are shifting their prescribing practices in response to the opioid epidemic. According to IQVIA Institute’s Medicine Use and Spending in the U.S. — A Review of 2018 and Outlook for 2023, prescription opioid volume declined 43%, from 246 billion morphine milligram equivalents in 2011 to 141 billion in 2018. Many factors have driven the decline, including news media coverage, state and federal initiatives (e.g., prevention, intervention, treatment and recovery support), the Center for Disease Control and Prevention’s 2016 guidelines for prescribing opioids for chronic pain, healthcare provider education, lawsuits against companies that manufacture and distribute opioids, the arrest and prosecution of healthcare providers and efforts taken by insurers to reduce opioid prescribing.

Although there has been significant progress in some ways, unintended consequences periodically emerge in the fight to reduce opioid dependency and addiction. For example, in early efforts to address the emerging opioid epidemic, law enforcement officials aggressively targeted and shut down opioid pill mills overnight. This abruptly left many opioid-dependent patients without access to opioids, resulting in a spike in heroin use. As another example, several states and private companies have successfully implemented policies to limit opioid prescriptions on initial fills to seven days or less under specific circumstances. In response, some healthcare providers have avoided these limitations by prescribing 30 days (or more) of pills in the shortened time frame. Lastly, as prescribers look for alternatives to opioids, the healthcare industry has seen a dramatic increase in the use of topical and compounded pain relievers. This has increased the cost of providing care in a healthcare system already struggling to contain medical costs. Despite the increased spending, these options often fail to demonstrate a corresponding desired therapeutic outcome.

This article will share some strategies being used by insurance companies to help injured workers receive cost-effective and therapeutically effective pain management drugs, with the ultimate goal of returning them to work and more productive lives.

Topical vs. Compounded Pain Reliever

By definition, a topical medication is a medication administered externally. Commercially available topical pain relievers usually contain one or more of the following ingredients: lidocaine, menthol, methyl salicylate, capsaicin and camphor.

The Food and Drug Administration (FDA) defines drug compounding as “combining, mixing or altering ingredients to create a medication tailored to the needs of an individual patient.” It notes: “[c]ompounded drugs are not FDA-approved.” Compounded medications can be made into a variety of dosage forms (e.g., oral, injectable, topical, etc.), but the majority of compounded medications we have seen in workers’ compensation are topical (i.e., applied to your skin).

Coventry and First Scripts 2018 Drug Trend Series Report noted that topicals represent 5.1% of high-impact drug classes by volume but 14% of costs. 68 of every 1,000 workers were using topical prescription analgesics, and nearly eight of every 1,000 workers were using private label topical analgesics. As Coventry’s Director of Pharmacy Product Development Nikki Wilson noted, retail, mail-order and out-of-network prescriptions for compounds costs and use decreased while topical costs and use increased in 2018. Topical costs increased due to the use of private label topical analgesics (PLTA), some of “[w]hich add little to no value clinically but increase costs exponentially” according to Wilson.

Studies Making News

In November 2016, CVSHealth published The Rise and Fall of Compound Spend – Ongoing Monitoring Enables Early Identification of Lidocaine Spend, which noted that gross costs per compounded claim “increased nearly 1,700 percent for employer clients” from January 2011 to March 2014, while the “[a]verage gross cost per 30-day script increased more than 10-fold over a three-year period.” Leveraging a multidisciplinary team that included pharmacists and physicians, CVSHealth developed criteria to provide “coverage consistent with labeling, FDA guidance, standards of medical practice and evidence-based drug information to help ensure patient safety and appropriate utilization.” Their strategies drove the use of lidocaine products down on average by more than 80%.

In the August 2018 Office of Inspector General (OIG) report, Questionable Billing for Compounded Topical Drugs in Medicare Part D, OIG found that about 550 pharmacies and 124 prescribers had questionable Part D billing for compounded topical drugs in 2016 based on five measures that OIG has developed as indicators of possible fraud, waste and abuse. The study was driven by the 625% increase in compounded drugs from 2006 through 2015. OIG made several recommendations, including clarifying Part D coverage policies, conducting training for Part D sponsors on fraud schemes and safety concerns related to compounded topical drugs, clarifying that sponsors may apply utilization management tools, and following up with the pharmacies and prescribers identified in the report.

Workers Compensation Efforts

Several insurance companies have been monitoring and addressing compound spending across the country. The Connecticut Interlocal Risk Management Agency (CIRMA) has achieved success curtailing prescription costs and opioid use by adopting a comprehensive managed care program that combines communication, education, collaboration and data. Through nurse collaboration, prior authorizations, managing the use of compound drugs, excluding long-acting opioids, discussing best practices with prescribers, addressing claims with high morphine equivalent doses and using generic drugs over brand drugs, CIRMA significantly lowered utilization of opioids and compounds. For compound drugs, CIRMA and Coventry created a dedicated drug evaluation team that managed compound drugs and prevented processing of such medications without adjuster approval and clinical input. The effort included providing adjusters with recommendations for appropriate management of compound prescriptions, which “led to a decrease in both compound spending and utilization,” where “the percentage of compound costs dropped 42% from 4.0% in 2015 to 2.3% in 2017.” 

According to CompPharma’s 15th Annual Survey Prescription Drug Management in Workers’ Compensation, the survey of 29 state funds, insurers, TPAs and self-insureds showed that there has been a 49% reduction in compound usage among survey respondents with data for 2016 and 2017. Of the respondents who provided figures, only one had an increase in total compounds reimbursed. A number of reasons were cited for the decline in total drug costs, including a continued focus on improving clinical management programs, expanding utilization review and prior authorization, dramatic reductions in compounds, changes in prescribing patterns driven by physician awareness of opioid risk, state formularies and more structured drug alerts and alert management processes.

Effective July 1, 2018, the Texas Division of Workers Compensation revised Title 28 Texas Administrative Code, amending the definition of the closed formulary to exclude “any prescription drug created through compounding” and “required pre-authorization for all prescription drugs created through compounding.” The background section stated that reimbursements per compounded drug increased 141% from calendar year 2010 to 2015, with ingredient costs for a selected group of 10 commonly compounded drugs increasing between 82% and 1,474% from 2010 to 2014.

Chesapeake Employers’ History with Opioids

For more than a decade, Chesapeake Employers has been trying to turn the tide against the opioid epidemic. In 2009, a dedicated pain management review nursing position was established within the Health Services department to identify and monitor concerning claims. Since that time, the scope of the internal pain management program has evolved and expanded greatly. Now, in addition to a dedicated pain management nurse, Chesapeake Employers’ leverages the data analytics from its Pharmacy Benefit Manager (PBM) Express Scripts and the expertise of an in-house pharmacist, physicians and nurses to stay cutting edge in the approach to care. While there are many indicators of success, the above efforts have helped reduce the dollars spent on dispensing opioids by almost 76% over a five-year period and seen the number of injured workers receiving opioids decrease by 66%. 

Some of the most notable initiatives provide necessary resources to raise awareness for providers, the public and our employees. In 2016, Chesapeake Employers gave $750,000 to the Department of Health to be used for the state’s prescription drug monitoring program (PDMP), which allows prescribers and pharmacists to review opioid fills from all sources within the state. In 2017, Chesapeake Employers launched the STOPIOID addiction campaign via radio ads, safety kits and online safety posters to help educate Maryland about the dangers of opioid abuse and addiction. The Chesapeake Employers’ Communication Department won four awards from the Public Relations of America – Maryland Chapter, including “Best in Show” for our Let’s Work to Stop Opioid Addiction Now campaign in 2018.

See also: Access to Care, Return to Work in a Pandemic  

A final highlight was the 2019 rollout of the Opioid Overdose Response Naloxone (Narcan) training authorized by the Maryland Department of Health, which teaches employees and the public about opioids and overdose and provides materials and training to save lives. 

Chesapeake Employer’s Compound and Topical Strategy

As stated earlier, a costly effect of reduced opioid prescribing seen throughout the industry has been a proliferation of prescribing for topical and compounded pain medications. A recent analysis of Chesapeake data reveals hundreds of thousands of dollars, a larger share of annual drug expenditures, is spent on compounded or topical medications. Similar to trends seen in the industry, Chesapeake Employers’ has observed an increase in cost and use of these medications. Since 2016, pharmacy-dispensed topicals have increased from 2.8% of scripts to 4.4% and from 6.1% to 9.3% of total costs in 2019. This does not include costs for compounded medications and physician-office dispensed topical medications, which further inflate costs. 

Chesapeake Employers leverages a multi-disciplinary team approach when managing pharmacy cost and utilization. This includes the in-house pharmacist, physicians, nurses, claims and legal professionals. The goal is to facilitate rapid injured worker recovery by using cost-effective and therapeutically effective drugs and appropriate means. 

In 2011, Chesapeake Employers’ began researching and educating our claims and health services professionals on compounded medications. The research included documenting the available medical literature and outlining the circumstances under which the use and payment for a compounded medication may be considered reasonable. The research is updated periodically and peer-reviewed by an external independent medical expert.

Closed formulary states, such as Texas, Arizona and Tennessee, only cover drugs on the adopted Official Disability Guidelines (ODG) Workers’ Compensation Drug Formulary list. According to the NCCI’s June 2019 Research Brief Formulary Implementations and Initial Impacts on Workers Compensation, use of topical and compound drugs in Tennessee decreased 35% following the requirement of pre-authorization for all topicals and compound drugs, regardless of the ODG Formulary status. By contrast, Maryland is an open formulary state, which allows physicians to prescribe any medication available on the market. In an effort to address the use of costly topicals and compounds, Chesapeake Employers leverages established medical policy supported by evidence-based medicine and guidelines to help educate healthcare providers. Assessment of the topical’s therapeutic value becomes necessary in continuing its use with our injured workers. Research shared from the American Medical Association (AMA) Opioid Task Force, medical journals and the Federal Drug Administration’s Opioid Analgesic REMS Educational Blueprint shows healthcare providers are less likely to prescribe medication when educated about the risk, especially when guidance is supported by medical guidelines and continuing medical educational training focused on opioid prescribing, non-opioid alternatives and pain management. An educated prescriber provides another layer of protection to the process, because providers are asked to provide the rationale that supports medical necessity and appropriateness. 

In addition to discussions with providers, Chesapeake Employers has implemented other successful initiatives. The company partners with a local compounding pharmacy to meet the prescription needs of injured workers at a lower cost. The company also provides educational letters to prescribers for high-cost topicals for which there are therapeutically equivalent alternatives at a much lower cost. Some individual claim recommendations generate cost savings of greater than 85% without compromise of the desired clinical outcomes.

Conclusion

Educating patients, educating prescribers, using a multi-disciplinary team, enhancing data analysis and reporting, in addition to using peer reviews and independent medical evaluations (IMEs), offer a cohesive approach to evaluating the medical necessity and therapeutic effectiveness of compounds and topicals.

In the face of rising use and cost, insurance companies must help injured workers receive cost-effective and therapeutically effective drugs so they can receive the care they deserve and ultimately return to work and more productive lives. 

See also: Can AI Solve Health Insurance Fraud?  

However, there is still a lot of work to be done when it comes to taking care of our injured workers. It is strongly believed that healthcare professionals are conscious of prescription costs when they are educated about the cost ramifications of their prescribing habits. Greater awareness and transparency about topical pain medications results in better, informed patient care decisions. As Larry Winget said in his book "It’s Called Work for A Reason," “Knowledge is not power. The implementation of that knowledge is power.”

When all parties involved in the workers’ compensation system understand the therapeutic equivalence, effectiveness and cost savings from using alternatives; and the importance of only prescribing drugs when it is medically necessary for the injured worker, everyone wins.

In the real estate market, it is often said that the three most important factors are location, location and location. For underwriting, it is essential to also have data on many specific characteristics of the property such as square footage, exterior and interior building materials, roof shape, foundation type and size, the presence of pools or fences -- and there is a lot of buzz in the industry about creating comprehensive property attributes. However, these data points must be associated with the correct address before any adequate analysis can be conducted. This is where geocoding comes into play.

Geocoding provides a set of coordinates for each address, with the goal of allowing the insurer to understand the location of each building that is being insured and its proximity to various peril zones. Geocoding solutions have long been used by insurers for underwriting and risk assessment. Over time, new approaches and technologies have enabled increasing precision as solutions evolved from postal code centroids to street level centroids to land parcel centroids. These geocoding solutions have each endeavored to estimate where the building on each property is located by using crude estimates such as the center of a ZIP code, center of the parcel or side of the street – all of which may be far away from the building’s actual physical location.

Now, enter the most precise geolocation of all: building-based geocoding. With the advent of AI technology and high-resolution geospatial imagery, it has recently become possible to achieve high-precision nationwide building-based geocoding – correctly providing geocodes on top of buildings across the country. The foundation of this solution is a complete and recent set of building footprints (a polygonal representation of the base of each building derived from satellite or aerial imagery), to which a comprehensive set of address points is then attributed. This ensures that each geocode is placed on top of the correct building – not an estimation. 

Unfortunately, many insurers still use the older geocoding methods, which result in non-trivial portfolio risk. Recent research conducted by Ecopia.AI revealed an estimated $43 billion of value at-risk across the U.S. resulting from inaccurate geocoding based on earlier, less precise methods. Without accurate location information, underwriters could quote and write property risk based on a completely different set of factors versus what exists in reality. On a given property, the exposure that a building has to various perils might vary significantly based on where it resides.

Two examples illustrate the potential problems with traditional geocoding and the power of building-based geocoding.

In the first example, there may be two homes on adjacent properties on a river. One home may be near the river within the flood zone, while the next home may be farther away from the riverbank and out of the flood zone. In this scenario, the home nearer the river would have a much higher risk of flooding. If underwriters are using the street-level geocoding solutions that were popular in earlier times, or even parcel centroids, the two homes may both be identified as having the same risk profile.

Another example would be two homes that are near a forest subject to wildfire risk. One home may be positioned farther away from the forest on the lot and have a natural firebreak between the structure and the forest edge. The next home may be close by but positioned closer to the forest, diminishing the firebreak. These two homes would have very different fire risk profiles.

Other scenarios may have to do with how close a building is to buildings on adjoining lots, how close they are to a street or highway, how the location on the lot relates to the nearest fire hydrant or many other factors.

See also: 3 Key Enablers for Better Underwriting

Geocoding may seem like a standard capability that every insurer uses, providing no competitive differentiation, but nothing could be further from the truth. The precision offered by building-based geocoding that leverages transformational technologies can produce variations in results that are dramatic.  

For a deeper dive into building-based geocoding and its power for insurers, join me on a webinar with Ecopia Tech. Register at this link for Geocoding: The often overlooked foundation of underwriting & risk assessment.

Frontline healthcare workers are relieved when critical PPE arrives on site, and families are grateful to find store shelves restocked with toilet paper and disinfectant. With essential supplies in-hand, what these folks often don't recognize, however, are the heroic efforts taking place behind the scenes to deliver these products to market.

In the face of the COVID-19 pandemic, brokers, shippers and carriers are laboring under considerable stress and strain. While their work has never been more critical, it has also never been quite so risky. They must contend with the health and safety of their work forces, the economic downturn and the skyrocketing demand for capacity. In the rush to rapidly transform business operations, their increased risk exposure can easily go unnoticed.

As the freight industry seeks to better manage its risk, streamline processes, cut costs, preserve cash flow and, ultimately, protect business sustainability, insurance innovation is emerging as a critical piece of the puzzle.

Facing fresh challenges in the new COVID reality

Today, carriers are facing extraordinary pressure to rapidly move essential goods to market. Between FMCSA hours of service suspensions and pandemic-related panic, drivers are strained and exhausted—making them more likely to be involved in an accident.

What's more, private fleets may be entirely unaware that they're operating with additional risk exposure. With for-hire authority fast-tracked by the FMCSA, many are moving into the spot market—and they're likely self-insured. Meaning, they aren't carrying the same comprehensive insurance coverage as for-hire carriers right out of the gate.

Meanwhile, the economic downturn has rendered shippers incredibly vulnerable. There's no room for error. With business already interrupted by the outbreak, however, their cargo is moving more slowly than before—putting them at risk of contractual penalties.

Should goods be damaged or spoiled en route, without their own coverage shippers are forced to engage in time-consuming claims settlement processes that demand they prove carrier negligence—something they may be unable to do. If so, they absorb the losses at a time when losses are particularly painful. Even if their claims are successful, settlements must move through a human-driven process—straining cash flows as carriers wait for potentially 100 days or more.

Finally, as COVID-driven demand exceeds the ability of contractual logistics to cope, overflow freight is moving to the spot market. And, recognizing the urgency needed to move essential supplies, brokers are increasingly contracting with new carriers. In the rush, they're less likely to do proper due diligence.

See also: Will COVID-19 Disrupt Insurtech?  

Tech innovation delivers real-time risk rating for the on-demand age

Traditional insurance has served the freight industry well for decades, but its fragmented processes can't deliver against the time-sensitive needs of today's market. There simply isn't time for a policyholder-to-insurance-broker-to-underwriter-and-back-again game of phone tag. 

Likewise, while the freight industry has been awash in data, there hasn't been a way to harness that data to underwrite cargo insurance on a pay-as-you-go basis.

Loadsure technological innovation, however, has ushered greater efficiency and effectiveness into the cargo insurance marketplace. Leveraging APIs, Loadsure pulls in massive amounts of data to build predictive models powered by machine learning. These models, in turn, deliver the real-time risk rating necessary to introduce per-load insurance to the client's daily workflow.

A proprietary decision-making engine also automates the claims process, accelerating settlements from days, or even weeks, to just minutes.

Today, as freight businesses are challenged to remain profitable, and often with fewer resources, innovation offers a self-serve, pay-as-you-go approach that enables businesses to eliminate expensive annual covers and purchase insurance only when they're exposed to risk, cutting costs and preserving cash flow.

In the retail industry, O2O "online-to-offline" signifies an online trigger, such as an ad, that prompts consumers to go to a physical location to complete their purchases, but it can also occur in the opposite order.

In the insurance sector, over 100,000 independent agents in the U.S. depend on high-value networking, customer references and direct carrier relationships. For insurance professionals, interacting with customers face-to-face has been vital.  But in the wake of the coronavirus, it is critical to move insurance agencies from an offline to an online model, O2O, where almost all tasks that agents were accustomed to on a day-to-day basis need to be done completely remotely.

This change can offer considerable benefits if executed correctly: higher productivity, greater scale and a high degree of accuracy that allows agents to continue to build trusted relationships. As risk management advisers, agents are responsible now more than ever for equipping policyholders with unbeatable risk transfer strategies. As cyberattacks on small to mid-size businesses (SMBs) continue to escalate, cyber insurance presents an opportunity to rebuild an agency book of business when done right. 

Here are 10 tips on jumpstarting your O2O transformation:

1. Focus your efforts on insurance lines with growth opportunity

Cyber insurance is relatively new, with substantial opportunities for adoption in the SMBs market as cybercriminals exploit people’s vulnerabilities using sophisticated social engineering attacks during COVID-19. In fact, phishing has increased by over 600% since the end of February, according to security provider Barracuda Networks.

2. Prioritize industries for which cyber insurance is vital

Organizations have begun using SaaS applications and operations in an effort to digitize online but will likely be left vulnerable to cyber incidents. Recognize which industries are either required to obtain cyber insurance or are paving the way for digital transformation.

See also: Will COVID-19 Be Digital Tipping Point?

3. Select partners that operate exclusively online

Now is the perfect time to reassess the insurance carriers and programs that you’re working with for capacity to shift online. Today’s technology allows businesses to deliver a vertically integrated insurance solution that ties together insurance requests, risk assessment, underwriting and policy and claims management in one system enabled by a common, relevant dataset. 

4. Search for admitted, standalone programs

This is directly related to your carrier of choice. The shift toward standalone cyber insurance programs is occurring because cyber insurance provided as an endorsement to other intricate coverages only creates more complexity. Standalone cyber programs outline what incidents are and are not covered, and the policy’s aggregate limit and sub-limits for each coverage, along with precise cyber criteria. 

5. Align risk to coverage, as your go-to sales pitch 

Cybersecurity aims to safeguard a business’ use of technology and the web. Each business uses different applications and operates in its own way. In turn, each business has drastically different risks that should be recognized by policies. Policyholders must be able to account for the coverages, aggregate limit, sub-limits and deductibles that best fit their risk assessment. 

6. Learn as much as the customer about the risk, if not more

Cyber risk exposures and attacks are constantly evolving. Evaluating an organization for cyber risk yearly is a risky and obsolete cyber strategy. Being able to regularly reevaluate risks and coverage on a continuing basis is necessary for cyber and shields all parties from coverage gaps.

7. Collaborate with carriers on prospecting

Transform your website to a producing site, not just a lead generation platform. API integration of your website into the carrier’s quoting and underwriting platform is instrumental in delivering a constant stream of potential cyber insurance consumers.

8. Educate policyholders on claims experience and loss control

Your customers should be equipped with security awareness training, generally administered by the carrier. Phishing simulation and basic InfoSec training are key education tools. Regular updates to policyholders on providing their risk insights and remediation guidance provide effective risk mitigation and loss control.

9. Educate yourself on what events activate which coverage

Outline for your policyholders what exactly is covered by the carrier’s insurance program by sharing your claim scenarios. Demand a list of cases for each incident that would activate specific coverage paired with concrete use cases.

See also: COVID-19: Implications for Business Models  

10. Don't spend more than a few minutes on a submission, application or binding

Moving to an online operation can feel unsettling at first but, if done correctly, will produce real results:

• Faster and more precise applications
• Quicker turnaround time on quote and bind when working with a program that is also deployed online
• Ability to offer additional services to policyholders as part of the online experience – risk assessment, training, notification of critical updates. Consistent communication online boosts customer satisfaction and opens the door to lasting relationships

In the early days of the internet, a professor at Northwestern's Kellogg School of Management said something to me that's been rattling around in my head ever since: "Once you can manage something by wire, it doesn't matter how long the wire is."

The professor, Mohan Sawhney, was referring in particular to the possibility of managing factories from a great distance, but his insight from the late 1990s describes so many other possibilities, too. Basically, once a process becomes digital, you can do it from anywhere — and COVID-19 is greatly accelerating the digitalization of insurance processes.

So, let's ponder for a moment what has historically been done face-to-face that will now be done remotely. Lots has been written about the surge in telemedicine, and that's certainly an important trend that seems likely to continue, but that's just the start. Remote handling of claims and sales will get a big boost from our experience during the pandemic and, perhaps, fear of future ones. So will an area I hadn't thought much about until recently: property inspections.

Telemedicine has dominated the "tele-" discussion for good reason. We've been social distancing for months now, but people still need medical care beyond COVID-19, and a lot have realized that a doctor doesn't have to say, "Stick out your tongue, and say 'aahhh,'" to diagnose and treat many issues. Telemedicine had already been proven as a concept. It was just being held back by regulatory issues such as how to license doctors communicating across state lines and by the sort of uncertainty that comes as any truly new approach is adopted. So, when COVID-19 demanded remote treatment, telemedicine was ready.

Telemedicine is so much more convenient for both doctors and patients that it will continue to grow, though I see it becoming an integrated part of healthcare rather than a separate form of care. A doctor can't fully evaluate me remotely, but if tele-visits become part of my relationship with my primary care physician, they could remove any worries I might have while helping the doctor spot problems sooner than he or she would if we waited for my annual seven minutes in front of the doc. Similarly, telemedicine capabilities could be added to what on-site clinics offer at many bigger companies. Telemedicine is already starting to be done to triage injured workers. I can imagine plenty of uses in caring for mental health, even beyond what's possible via phone hot lines; a sympathetic face can mean a lot. Elder care seems promising, too — just looking into a nonagenarian's eyes and talking to him or her for a minute can tell you a lot. (My mother, who just turned 90, still beats most of us at bridge online, so I'm excluding her from the possible beneficiaries of any acuity assessment.)

(If you're interested in reading more about the possibilities of telemedicine, this article from McKinsey is quite thorough.)

Claims have been getting attention, too, because they were already heading in a do-it-yourself direction before COVID-19, and the trend has picked up speed. I remember how radical it seemed when Robin Roberson founded WeGoLook and we helped her promote her network of thousands of "lookers," who were dispersed around the country and could go take photos of damage, saving an insurer the cost of dispatching an adjustor. But who needs lookers now? Everyone has a camera and, guided by a remote expert — on as long a "wire" as you like — can document the damage without the need for a visit by an adjustor. Claims will keep getting more "tele-," and probably quickly.

Sales have been slower to go remote. People do much of their research online but have still finalized an awful lot of contracts face-to-face. Not so much now. Avoiding handshakes and wearing masks has taken a lot of the magic out of in-person meetings, even when they're allowed. And, now that sales can be done remotely, we'll have to see just how remote they become. I have a feeling I won't see nearly so many "Insurance" signs in strip malls any more.

Property inspections have already gone a bit "tele-." It's now possible to have a drone fly around a house and take photos of the exterior while providing exact measurements, without making a guy with a tape measure spend an hour crawling through the bushes and climbing onto the roof. But that seems to be just the beginning, partly thanks to COVID-19. Startups such as Flyreel are enabling DIY inspections: You walk around your home or apartment, documenting everything that's there while the expert on the other end of the video call asks questions. "Are those countertops granite?" "Could you go a little closer to the wall; I need to see if that's dry rot?" You not only save time by not having to dispatch an inspector but wind up with a precise, video record of the state of a property — "Sorry, but no, that couch wasn't brand new...."

Brett Jurgens, who is the CEO at an interesting "smart home" startup called Notion (and who introduced me to Flyreel), speculated that DIY could move beyond inspections in a way that blends insurance and maintenance. Why would you have to call a plumber, for instance, when you might be able to just call one, show him or her the problem and ask for advice? How many other visits could be handled remotely, perhaps as part of some sort of subscription service? (Free idea, independent of insurance, for someone: Having killed my share of plants over the years, I'm betting some "plant doctor" could sell inexpensive subscriptions for remote monitoring and advice.)

I think that Jurgens is on to something and that, if we let our minds roam, we can imagine all sorts of possibilities for remote handling of processes, well beyond healthcare, that now just have to happen in person. And that's without getting into the sort of internal realignment that companies in the insurance industry will go through as they decide how much work will be done in the office and how much can be done from home — another topic for another day.

Stay safe.

Paul

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

4 Key Changes to WC From COVID-19

How companies respond to these changes in workers' comp may determine their survival in a challenging economic environment.

How Startups Will Save Insurance

The evolution is unstoppable because innovation benefits both the insurance markets and the underlying consumer.

Is Insurance Office Going Away for Good?

Take this time to plan how to restructure your business. As things settle out, you need to have permanent adjustments ready to go.

PRIA: A Tale of Two Policyholders

An uncomfortable reality is that a TRIA-style “make available” requirement would separate policyholders into the haves and the have-nots.

Planning for the Unknown Unknowns

In the New Normal, you cannot do as you did in the old normal, just harder. You need a new approach to strategy.

Now Comes the Flood Season

We can’t expect collective, nationwide resilience to flood events without innovation from FEMA and decisive action from Congress.

We’re entering a flood season where one-third of Americans are expected to experience flood events, after which we’re forecast to see above-average hurricane activity. With people already experiencing financial shocks from COVID-19, it is all the more important that we take steps now to prepare for flooding. 

We need three things: rapid innovation from the Federal Emergency Management Agency (FEMA), long-term authorization of the National Flood Insurance Program (NFIP) and the removal of regulatory barriers around private flood insurance.

1: Rapid FEMA Innovation

FEMA’s response to COVID-19 was swift and decisive: It extended its flood insurance premium payment grace period to 120 days (from 30). This offers homeowners breathing room and will go a long way toward ensuring homeowners maintain the protection they need while juggling other financial commitments.

The agency has also provided guidance for remote claims adjusting, which makes it possible for policyholders to have a flood loss adjusted without an adjuster physically visiting the property. This guidance lets everyone comply with social distancing directives.

These actions illustrate the agility and innovation FEMA is capable of. To ready homeowners for 2020’s flood season, we need more of this, in areas that go beyond direct responses to COVID-19.

While there are some actions FEMA can take today, the most important changes would require action from Congress.

2: Long-Term NFIP Authorization

NFIP authorization is set to expire on Sept. 30, in the midst of the 2020 hurricane season. This is incredibly dangerous. 

We’ve been lurching from short-term authorization to short-term authorization since 2017. The lack of long-term authorization creates uncertainty that could cause further financial damage to a population already reeling from record unemployment. This would happen via two mechanisms.

First, an NFIP with lapsed authorization cannot write new policies or issue renewals. This has the first-order effect of leaving millions of Americans without flood protection. Just as crucially, the lapse could also cause real estate transactions in some areas to halt, as mortgage lenders will not issue loans in these areas without proof of coverage.

For an industry already strained by COVID-19, a lapse would be disastrous.

Second, without long-term authorization, the NFIP’s ability to borrow from the Treasury is severely reduced, which could jeopardize its ability to pay claims. After a flood, homeowners with insurance might be delayed in collecting benefits they depend on to rebuild their homes. It’s hard to overstate how devastating this could be, particularly in light of current economic conditions.

See also: Need for Context in Assessing Flood Risk  

3: More Common Sense Around Private Flood Insurance

Today, homeowners with private flood insurance who decide, for one reason or another, that they want to switch to an NFIP policy aren’t considered to have had continuous coverage, which can make them ineligible for subsidized NFIP rates.

In today’s flood insurance landscape, where private products are increasingly available and robust, this policy no longer makes sense. But FEMA seems unable to update it without authorization from Congress.

It is incumbent upon Congress, therefore, to update eligibility guidelines so that Americans who have maintained continuous insurance coverage are eligible for subsidized NFIP rates. Without those subsidies, cash-strapped homeowners might opt to forgo flood insurance altogether, meaning that, in the event of a storm, they become wholly dependent on emergency FEMA resources rather than benefits from a policy specifically designed to help them recover and rebuild.

To Prepare for 2020’s Flood Season, We Need Support From Lawmakers

Much flood preparation happens at the individual homeowner level.

But we can’t expect collective, nationwide resilience to flood events without innovation from FEMA, and we can’t achieve that without decisive action from Congress. We need long-term NFIP authorization to ensure that homeowners have coverage when waters rise and regulations that acknowledge the validity of private flood insurance to ensure NFIP subsidy access to homeowners returning to NFIP policies.

Without both, we risk augmenting financial distress for both individual homeowners and the larger economy, neither of which we can afford right now.