Back in mid-March, I wrote a piece titled COVID-19: Implications for Insurers. Two of the questions with longer-term implications that I suggested senior executives should consider were:

• Do we need to reduce our reliance on people being co-located, by re-considering office infrastructure strategies and the degree of remote working as standard?
• Do we need to reduce our reliance on people altogether, by increasing automation?

In the weeks since, I’ve realized that these questions are merely a subset of a much broader set of questions that senior executives should be considering – all of which focus on the longer-term business model implications that could arise from COVID-19.

Here’s my current list of key questions to consider, grouped under five headings:

1. Products and Services
2. Channels
3. Workforce
4. Supply Chains
5. Internal Priorities

Products and Services

• In the early weeks of the COVID-19 economic downturn, companies with pre-paid revenues, recurring income streams or subscription revenue models (such as insurers and Netflix) proved more resilient than others. What can we do to move more of our revenue to pre-paid, recurring or subscription models?
• Does COVID-19 create an opening for new, or updated, products and services we should be offering to the market?

Channels

• With huge numbers of people in lockdown, traditional distribution channels (particularly those involving bricks and mortar) often became useless. Do we need to change our existing distribution channel mix or even add channels (such as new digital channels)?
• The same issues applied to post-sale servicing. For example, many contact centers were quickly overwhelmed by their customers. Do we need to change, or add to, our mix of servicing channels? What can we do to make them more responsive to demand or migrate demand to other channels? And if we currently need to service customers on-site (for example insurers’ claim inspections) what can we do to add remote options?

See also: Business Continuity During COVID-19  

Workforce

• As my earlier article suggested, the COVID-19 lockdowns have proved that remote/mobile working is far more feasible than many senior executives had previously imagined. What is our opportunity to reduce our real estate footprint by making remote/mobile working the norm for certain employees? Conversely, how are we going to respond to any employees who, having started remote/mobile working, now demand to continue working that way?
• As the downturn hit, many companies struggled to deal with unneeded labor that they still had to pay. Meantime, companies such as Amazon and Instacart suddenly found themselves with far fewer workers than they now needed. What can our business do to make our own workforce more flexible in the future?
• Teamwork and collaboration usually drive significant benefits. And we’ve now discovered collaboration tools that can work successfully across vast geographies. So do we have more scope for beneficial internal collaboration than we previously realized?
• COVID-19 has shown the susceptibility of carbon-based workers (humans!) to disease. What’s the scope for replacing more of them with less vulnerable, silicon-based workers such as robots, process automation bots and artificial intelligence?

Supply Chains

• Given the disruptions we’ve seen to supply chains, do we need to carry higher levels of inventory?
• Given that many countries imposed blanket bans on certain exports, in some cases even from a subsidiary to a parent company, do we need to replace some of our overseas suppliers and overseas subsidiaries with in-country alternatives?
• Do we need to remove reliance on certain supply partners altogether, by manufacturing that component in-house (where possible)?

Internal Priorities

In addition to business structures, a company also has a tacit understanding of its relative priorities. Do some of these also need to change?

• Do we need to invest (even) more into IT, especially in hygiene factors such as resilience (use of cloud, for example) and cyber-security?
• Should we be allocating an increased share of our budgets to risk management and business continuity planning?
• In common with individuals, many businesses found that their rainy day funds just weren’t big enough when faced with COVID-19. Even once things return to "normal," should we be reducing the levels of cash we pay out in bonuses and dividends so that we’re better-placed when the next black swan event comes along?

* * *

So that's my current list of potential business model implications that senior executives should now be thinking about.

Have I missed any? Do any other business model questions or implications spring to mind?

Read this, and you'll be on your way to knowing more than 99% of what anyone else in insurance knows about a topic that's attracting a lot of interest. That makes you an expert, in my opinion.

The debate is heating up just now about who should pick up the cost for messy losses -- the kind that are hard to model and frequently excluded or defined rather vaguely in insurance contracts. Right now, of course, all the focus is on who should (and how to) cover the various costs arising from pandemics. Covid-19 today, and whatever hits us next time. The problem is being kicked around between insurers, governments and the capital markets.

One way or the other, we’re all going to end up paying, but life will carry on, and there will be even more need for creative solutions to the world's tricky problems.

So it’s worth looking beyond this current bun fight to consider one innovative funding mechanism that has, in some cases, radically changed the most basic nature of insurance. It's already providing at least one solution for covering pandemic losses and has been applied to many other complex or large events.

Parametric insurance offers financial protection against losses that are often hard, or even impossible, to get insurance for. Parametric structures are attractive to capital providers from outside of insurance (hedge funds, banks, pension funds and dedicated investment vehicles). When designed properly, parametric-based insurance products ensure that claims are paid fast, and without dispute.

In the second part of this article, I'm back to review 10 companies I recommend to watch that have been leading the way in designing or using parametric insurance and structures. But first, a quick primer on how parametrics work to get you in the mood for reviewing the recording of our InsTech London live chat event on BrightTALK from April 30.

Traditional indemnity insurance, the kind we are all familiar with, pays out based on the cost of the loss incurred, as decided by your insurer and its loss adjuster. Parametric insurance pays out when a pre-defined event occurs and breaches a pre-agreed figure or index. Examples of perils covered and typical triggers include hurricane (wind speed), flood (height), earthquake (shake intensity), pandemic (number of infections) or cyber (reported data breach).

The not-so-new new thing

Like a lot of great new ideas, parametric insurance isn’t actually that new. Catastrophe bonds, or insurance-linked securities (ILS), have been around for 25 years. It's worth taking a moment to understand how that market has developed when considering what might come next.

Today, the ILS market provides $100 billion of protection, most commonly used as a replacement for conventional reinsurance or retrocession covers. The majority of that capital now comes from outside of insurance. Most ILS bonds still use traditional indemnity losses to define payout, but parametric triggers have been used for 15% of these bonds. Investors like parametric structures because there is less risk asymmetry between the investor and the issuer (the original insurer). This means that investors know as much about the risk being covered as the original insured does (not the case for indemnity insurance).

See also: Growing Case for Parametric Coverage  

Coverage for ILS bonds is usually in the hundreds of millions of dollars, and payment structures have become increasingly sophisticated. At the time of writing. the $500 million pandemic catastrophe bond issued by the WHO is considered to have a high probability of being triggered. (Steve Evan’s Artemis is the best source of information on catastrophe bonds. His (free) deal directory provides fascinating insights into the variety of bonds issued since 1996. Of these, 104 are parametric. Definitely worth a read when you've exhausted the Netflix movie catalog.)

Going back upstream and down in size

Ever since the earliest catastrophe bonds in 1997, there has been interest in making parametric coverage available to large corporations as well as insurers. Oriental Land, the owner of Tokyo Disneyland, took out a $200 million bond for earthquake cover in 1999 that was based on earthquake shake severity. It’s proved tough, though, for brokers to convince risk managers at large corporations to switch from conventional insurance structures to this new type of cover. Few have been willing to bet the company, and their careers, against mostly untested structures with significant costs and an element of basis risk. (Basis risk is the potential for the payout from parametric insurance to be insufficient to cover the true cost of the loss in the way expected).

The first wildfire catastrophe bond, for $200 million, was placed in 2018 and issued by another corporation, Pacific Gas & Electric (PG&E) the California utility company. Wildfire lends itself to parametric cover, but the bond was structured as a traditional indemnity cover. The bond was subsequently triggered and presumably paid out when PG&E picked up $13.5 billion in liability from wildfires in 2018.

The innovator's tool kit

But you don't need a $100 million problem to use parametrics. Parametric insurance is particularly interesting for people or companies looking at ways to introduce innovation into insurance. As you'll see in part two, parametric insurance can actually work very well at a highly localized level, to provide cover for an individual building or field. Parametrics open up opportunities to those that can build, or tap into, a source of reliable data, preferably with years of historical records, that can be used to create indices that correlate with financial losses. These can be particularly valuable if the data source is exclusive. 

We're seeing lots of interest in IoT, but to date there have been few public and credible uses cases for insurance applications. Parametrics and IoT are a natural pairing. Providers of distributed ledger technology (DLT), which can be used to power smart contracts, have been sitting on the sidelines for years now, patiently waiting for a problem to apply their solution to. DLT could be a vital part of parametric insurance, although hang on to your investment dollars for now. DLT is not always essential for parametric triggers. Other choices are available.

The established ILS market will continue to grow, but companies have, until recently, not had many opportunities to use parametrics -- unless they had the appetite and chutzpah to issue a cat bond.

That is starting to change. Technology-enabled MGAs and brokers with clients that are struggling to get the insurance they need are starting to turn to parametric insurance. The concept has also been used for a number of years in microinsurance, as I discussed back in 2015. 

At InsTech London, we’ve been delighted to bring you many of the founders and leaders of teams running and building parametric products onto our stage, through our interviews and on our podcasts. Now we are also bringing you our favorites through our digital live chats on our BrightTALK channel.

I’ve seen the ILS market evolve over the last 20 years. Not every catastrophe bond has performed as expected when the wind blew or the earth shook (or indeed when the world’s banks hit the buffers in 2008). Parametric insurance is still some way from having complete solutions to many of the hardest problems. The world is full of surprises. Odd stuff happens at the edges of our experience. Some parametric solutions will fail to deliver. But innovation flourishes in adversity, and we are starting to see some very intriguing solutions emerging.

If you are looking to learn more about what has happened in this space, and how the future will evolve, then follow the link to the 10 companies I recommend looking at.

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

If you've found this interesting, then you'll definitely enjoy our live chat discussion on “The Role of Parametric Insurance in Post-COVID world” recorded on April 30 and brought to you and co-hosted with our friends at Qomplx.

Does all this make sense? Do you agree? Who's on your top 10 of parametric companies to watch? Feel free to add comments, share and all the other fun stuff you can do with Linkedin these days. 

I co-lead InsTech London, bringing together the most interesting people with intriguing ideas face to face, online or however you prefer. Now up to episode 80 of the weekly InsTech Podcast, CII-certified (the podcast, not me). We're delighted to be supported (i.e. get money from) almost 100 corporate members (with room for more) as well as a community of over 5,000. If you need a bit more in-depth analyses or help, head over to Abernite website to see what I am up to there.

It already seems like ages ago that we were able to go out at night. In most countries, the bars, restaurants and clubs are closed. In the basements of those places, there are tanks that preserve up to 1,000 liters of beer. But when time passes, the quality of that beer declines. So, what do you do with all that beer? It’s probably too much for the proprietors to drink it all themselves during this period of social distancing. 

Royal Swinkels, the brewery of Bavaria beer, has come up with an excellent and sustainable plan to give the beer another purpose. The brewery recalls the beer, removes the alcohol and recycles that into disinfecting hand soap. Next, ten thousand liters of hand-sanitizing products are distributed among hundreds of hospitals, doctors offices and nursing homes -- for free.

Even though there is a lot of despair in this time, it’s beautiful to see emerging, creative and especially heart-warming initiatives. There are numerous examples -- more and more insurance carriers, startups and other tech companies that are part of the DIA Community are lending their talent and technology to help the world fight the pandemic. 

Our analysis shows that each solves very specific problems. The opportunities seem endless. 

We defined eight categories in which they provide new value, each tapping into real needs, proving the relevancy and social impact of the insurtech and insurance community.

1.  Educating what coronavirus is exactly and how to know if you have it
There are a low number of quick assessments for people with COVID-19 symptoms that provide reliable recommendations and next steps. Consequently, medical professionals and health systems are overburdened by too many cases. 

Infermedica (Poland) provided a solution that cuts both ways. The company developed a screening protocol based on the official guidelines by WHO. It’s free, has been translated into 20 languages and can be used within minutes. This way, Infermedica hopes to help as many people as it can. 

2.  Knowing what to do if you’re abroad

Expats and travelers who are in countries abroad have difficulties finding general and country-specific COVID-19 information. It can also be quite a challenge to get tested or to find medical help, if necessary. Every country has specific requirements and is not always able to offer assistance in English. 

Air Doctor (Israel) created a comprehensive country-by-country guide that includes general information as well as details on where to find help. By using this guide, expats and travelers can comply with specific country requirements, limit exposure to others and help to flatten the curve. 

See also: How to Lead During the Pandemic  

3.  Preventing infection and spread of the virus

We all know we should avoid touching our face to prevent the coronavirus from getting us sick. But this is easier said than done. 

Slightly Robot (U.S.) redesigned a wearable that stops another type of harmful touching -- trichotillomania, a disorder that compels people to pull out their hair -- to one that prevents you from touching your face. The Immutouch wristband senses your hand movement 10 times per second and will vibrate once you touch your face. This way, Slightly Robot will support you in the fight against getting yourself infected with COVID-19.

4.  Offering relief to the overloaded doctors offices

A lot of people with symptoms are in doubt if they have corona. Doctors appointments cause unnecessary movement and physical contact that increases the risk of further spread. Physical appointments are also extremely time-consuming and cause the first line of medical aid to be overloaded.

To help people as well as the medical system, AXA Belgium developed a digital medical consult. Patients dial in, answer a few questions and receive an appointment with the doctor. A doctor calms, advises or refers a patient. With teleconsultation, the risk of spreading the virus is reduced, while the first aid line is still available for those who need it. 

5.  Lightening the workload in hospitals 

Every day, we read about the patient flows resulting from the COVID-19 outbreak, leading to increased scarcity of critical care capacity. 

Philips provides healthcare institutions with telehealth solution to process healthcare requests via online screening. Patients infected with the virus can be remotely monitored through automated questionnaires about their home situation and state of health. The telehealth solution aims to prevent unnecessary visits to hospitals and enables the remote monitoring of the vast majority of COVID-19 patients who are in quarantine at home as an alternative point of care. 

6.  Securing sufficient resources for medical aid  

In many countries, there is a genuine fear that the number of emergency ventilators and other equipment to treat COVID-19 patients is not enough, even leading to a run on equipment. But there are also new initiatives to produce more, quickly and efficiently. 

To be able to save as many lives as possible, Munich Re and Frauenhofer Research Institute set up the Give A Breath Challenge to find the best 3D-printable designs to enable immediate, decentralized production. A jury will decide on the best design, and this design will eventually be produced. The challenge has funding (for prize purses and a realization fund) of at least €1 million.

7.  Understanding COVID-19 better to predict and contain the virus

The current pandemic asks for a speedup in processing test results for COVID-19. But how can you speed things up when test results need to be put into spreadsheets manually, taking several hours or longer to complete? 

UiPath (Romania/U.S.) launched a pilot project with software robots that can sort and distribute test results from the hospital’s on-site lab in minutes, enabling staff to quickly put infection prevention and control measures in place where necessary. By automating the process, nurses and other specialists in the hospital’s infection control department are freed up to spend more time with patients.

See also: Chaos in a Post-Yesterday World!  

8.  Maintaining personal well-being in pandemic times

Maintaining healthy habits and personal well-being during a pandemic can be difficult. Virgin Pulse (U.K.) offers members a specific toolkit and integrated programs to track Covid-19 healthy habits, to ensure people stay mentally, physically and financially fit. This self-service hub, available in 100-plus languages, serves as a COVID-19 Homebase. Virgin Pulse teamed up with Aaptiv, Enrich, meQuilibrium, Monj, Whil and Zipongo to provide free access to health and wellbeing programs and resources for people to navigate this pandemic in a positive, healthy way. Examples include cardio classes, chef-led cooking demos and mindfulness audios put into a gamified app that offers challenges and rewards to track your healthy habits.

Currently, there is a movement by some industry personnel and legislators to expand the Terrorism Risk Insurance Act (TRIA) to include pandemics. There is a discussion draft of a bill, and a summary of that bill here.

So, is a federal backstop program that is part of, or similar to, TRIA feasible or advisable? It’s too early to tell, but below are some initial caveat emptor thoughts.

FIRST, TRIA has not been tested, so we don’t know if this backstop program actually works, how well it might work and how it might affect the insurance industry’s ability to assume risk in the future, much less be able to effectively respond to terrorist acts. In addition, for a claim to fall under TRIA, it must be caused by a traditional covered peril found in most property insurance policies. In the case of PRIA, the pandemic itself is the peril, and it can affect the entire population.

SECOND, following that thought, the industry has significant financial assets but not manpower. We’ve already seen how difficult it is for government and all of its resources to respond to regionally localized claims involving hurricanes, tornados, flooding and wildfires. The ability of the insurance industry to adjust claims on a nationwide basis would likely be extremely limited, raising the question of whether “insurance” is the proper mechanism for responding to truly catastrophic national or global exposures like pandemics.

THIRD, just as the manpower issue cannot be understated, neither can the required expertise of adjusters. PRIA would likely present a far greater indirect loss exposure than TRIA due to both the scope of losses and the impact of government-mandated business shutdowns, curtailments or operational modifications. The most significantly affected traditional insurance coverage is business income. This insurance product is one of the more complex in the industry, and, as a result, claims are FAR more difficult to adjust and require FAR greater expertise from adjusters than direct property claims.

Specifically with regard to TRIA, so far, most terrorist attacks have been localized. While it’s possible that a terrorism attack could have a much more widespread impact, absent a war-like action of a nation the risk is probably substantially smaller than the potential economic impact of a nationwide pandemic. As a result, the maximum possible (or perhaps probable) loss in a pandemic is likely to be measured in the trillions, not billions, of dollars.

See also: 3 Challenges for Pandemic Coverage  

FOURTH, TRIA is optional. Businesses do not have to buy TRIA coverage. Not long after TRIA was passed, a study conducted by the Council of Insurance Agents & Brokers (CIAB) found that fewer than 10% of small businesses and 20% of larger businesses purchased terrorism coverage where the cost was an additional 10% to 20% of their existing P&C premium. By 2013, the Congressional Research Bureau estimated that 60% of businesses had terrorism insurance, though that number was likely much smaller in higher-risk areas, where the coverage could cost thousands of dollars. According to a more recent report, this number has remained fairly constant, most likely due to the affordability of the coverage given the lack of terrorism incidents.

Can PRIA truly be an optional coverage, or must it be mandatory? Because the risk of a pandemic, in both frequency and severity, is presumed to be far greater than anticipated terrorist attacks, insuring it will likely be far more expensive than TRIA coverage. If so, it’s quite likely that few businesses would purchase it if they want to remain competitive with those businesses that don’t buy in. Given that huge numbers of businesses can be affected by a pandemic, what would become of the perhaps sizable majority of businesses that don’t purchase the coverage? Would the government simply allow them to go out of business? Highly unlikely. And, if interest-free loans or grants continued to be available, it’s even more likely that greater numbers of businesses would rely on that fail-safe mechanism than paying large amounts for insurance coverage they may not need in the short term.

In addition, if the impact of a pandemic is likely to be far more significant in densely populated areas, much like flood insurance, adverse selection may play a role whereby even fewer businesses in sparsely populated areas will purchase the coverage even if priced lower than densely populated areas. And how might the uninsured otherwise affect the insured? Contingent business income coverage is critical to some businesses. For example, a business that has one or only a few suppliers or customers could be out of business if they suffered a loss. That likelihood is dramatically increased if they elect not to participate in a PRIA program such that the subject business would have an even greater need for contingent coverage.

Given these possibilities, would a mandated program be more feasible? For example, in response to civil unrest in the late 1960s, the insurance industry implemented a system of civil disorder charges that applied to ALL commercial property rates. The charge varied geographically based on presumptive risks. In the case of a pandemic, where the exposure is far more widespread, to generate the insurance proceeds needed, it’s quite possible that a mandatory funding mechanism could be indicated. Otherwise, an optional program is likely to fare far worse than the current federal flood insurance program, which still does not use actuarially sound rates, suffers from adverse selection and operates in the red year after year.

FIFTH, is traditional business income insurance even a feasible risk management approach to a catastrophic pandemic? As mentioned earlier, business income coverage is a complex product that requires significant financial skill and analysis. Determining loss amounts is far from an exact science and, in fact, often involves a great deal of conjecture and supposition that usually leads to negotiated settlements. In the case of a pandemic that can affect hundreds of thousands (or more) businesses over a very short time, what private sector industry has the manpower and expertise to adjust claims rapidly to the satisfaction of business owners?

IF a PRIA program is remotely feasible, it would probably have to be based on a nontraditional and simplified insurance product. Perhaps, rather than base the amount of coverage on a complex “business income” calculation that requires speculation about all forms of revenue, expenses and profit, the coverage should be limited to only “continuing expenses,” including payroll, to remain in operation for a specified period. The approach would be more analogous to the Maximum Period of Indemnity option currently available in ISO’s business income program.

See also: How to Lead During the Pandemic  

A simplified product covering only continuing expenses for a limited period, such as four months, MIGHT be workable in a mandated basis, but great care must be exercised in constructing and administering such a program. And, keep in mind that, in risk management circles, primary coverage should be provided by the entity with the greatest control over the exposure. In the case of pandemics, that would be the government.

Two forces have emerged that will reshape the workers’ comp system for years to come. The first is the COVID-19 pandemic, which has created sudden and deep shifts to personal health practices and healthcare delivery. To reduce COVID-19’s impact, much of the U.S. population is avoiding public spaces and travel, causing enormous disruption across a range of industries, from airlines to hospitality. This change has ignited a global recession.

Together, COVID-19 and the accompanying recession are driving changes across property and casualty insurance lines, including workers’ compensation, causing carriers, reinsurers and third-party administrators to rethink long-held assumptions. Companies hoping to navigate all of this need to anticipate and prepare.

To help, we held a Q&A session with some of the smartest people in the business who sit on our advisory panel. Special thanks go to Dan Rufenacht, QBE North America; Will LaChapelle, QBE North America; David Bacon, QBE Insurance; Kevin Bingham, Chesapeake Employers’ Insurance; and Jim Kinzie, QBE Insurance. Below is a summary of responses outlining the most fundamental changes to plan for. Let us know what you think — and what your team and company are doing to adjust to this new and dynamic environment.

What are the major changes we should anticipate in workers’ compensation claims due to COVID-19?

The experts on our panel highlighted several ways that workers’ comp claims will change, many of which are related to shifts in volume and type of claim. For example, the total number of claims is likely to go down as unemployment increases. There are fewer people in the workforce, which will lead to fewer claims overall, particularly as work involving manual labor slows.

Although the volume of typical workers’ comp claims will decrease, claims for different types of injuries could escalate. There will almost certainly be an increase in occupational disease claims from workers on the front line of fighting COVID-19 (e.g., police, fire, healthcare workers.). There is emerging pressure in some states and regions/provinces to extend coverage for workers being asked by employers to extend services or responsibilities for essential businesses. There is also the potential for new ergonomic claims and other types of accidents as people adjust from working in an office to working from their bed or couch and sitting for prolonged periods. Additionally, there is a risk for the select businesses hiring new workers — there could be an increase in frequency and severity of claims if workers are inexperienced or can’t be properly trained based on conditions. On top of this, there may be some spikes in preventable accidents, resulting in new claims, if safety service visits have been canceled due to COVID-19, leaving potentially dangerous areas exposed.

Organizations should also expect to see several changes in treatment patterns emerge, as care delivery will undoubtedly be affected under the strain that COVID-19 places on healthcare systems. Most non-essential surgeries, physical therapy sessions and scheduled doctor visits are tabled for the foreseeable future. This will delay the path to health for injured workers and delay the resolution of many claims. However, telemedicine and tele-rehab solutions are being implemented in an attempt to mitigate the effects of delayed treatment. The key here with telehealth options will be ensuring that access to and the effectiveness of care delivered to injured workers remains similar to, if not greater than, the same care provided in-person with the treating doctor or therapist.

See also: Business Continuity During COVID-19  

The shift to telemedicine and tele-rehab is an example of how present stresses are opening the doors for innovations. Telehealth options and digital resistance that insurers and the larger healthcare community have been fighting over for years have suddenly become possible within the course of only a week because they are necessity-driven. At least one panelist welcomed the opportunity, adding that “the old rules of ‘we can’t direct treatment’ are ripe for breaking just now.”

How are claims teams gearing up to handle these changes? Are there parallels that come to mind?

To prepare, claims teams are keeping a close eye on the new claims coming in — the type and volume — to ensure proper resourcing and reporting. New organization structures are also being considered. For example, some organizations are considering bringing some of the claims processing that previously had been outsourced to places like India and the Philippines back in-house — and possibly permanently. The benefit of this move is to open new jobs at home, which can offer good flexibility as employees work remotely.

Also, based on behavior in past crises, the panel noted that claimants are under a lot of additional stress; therefore, it is imperative that claims teams show empathy and compassion. We are all trying to navigate an unprecedented situation, and people are doing the best that they can.

Any impact on other types of claims due to the stresses on the healthcare environment?

Panelists instantly noted how much pressure first responders are under. These workers are covered in many states under presumption laws, which can include PTSD. If so, according to our experts, there will likely be an increase in claims from first responders soon.

Any advice for claims professionals?

Panelists offered several thoughts, including:

• Remember to stick to the basics: Conduct quality and complete investigations and thoughtful compensability evaluations. Use common sense and empathy and talk to peers and managers to manage stress and determine the best ways to help claimants.
• Look for opportunities and new or different treatments and delivery channels that can provide relief in lieu of surgery, as almost all non-emergency surgeries have been postponed or canceled.
• Watch how other lines indirectly and directly affect workers’ comp. For example, health insurers will be inundated with all kinds of pre-hospital, hospital and post-hospital expenses. If they can get workers’ comp to pay for these costs, it may become more important to them.

See also: Chaos in a Post-Yesterday World!  

With things evolving on a daily basis, how do we keep abreast of all the changes going on? Are there any specific resources you use?

Our experts rely on several proven and reliable industry blogs, association websites, attorney newsletters, state bulletins and other alerts to stay on top of the industry — in addition to daily news broadcasts and updates. Some listen to podcasts, as well. Sources include general business and technology, in addition to verticals.

To help, we compiled a list of some of the most useful industry-specific content mentioned:

• AON: Impact of Coronavirus (COVID-19) in U.S. Casualty Claims
• Insurance Thought Leadership: Impact of COVID-19 on Workers’ Comp
• Risk & Insurance: 7 Ways COVID-19 Is Impacting Workers’ Comp, According to One Call CEO Thomas Warsop
• NCCI: COVID-19 and Workers Compensation: What You Need to Know
• WCI: Ensuring Employees Are Safe During a Pandemic – Tips and Best Practices
• Risk & Insurance: When Is Coronavirus Covered by Workers’ Comp? How to Tell When You’ve Got a Claim on Your Hands

I would like to extend my great thanks to all of our advisory panel members for sharing their insights in this turbulent time.

Artificial intelligence has become a hot topic in the insurance industry as the push to modernize the agency with digital solutions reaches a fevered pitch. Especially now, as our society and business operations adapt to a global pandemic, agencies are scrambling to leverage technology and analytics to make smarter decisions for their clients and their own business.

For many independent agencies, however, AI still feels like a theoretical concept — a capability reserved for and only accessible to big companies with deep pockets. But the reality is, AI has tangible benefits for even the smallest independent agencies when it comes to improving client services and strategic business growth. And, it’s more accessible than many might think. 

Leveraging AI can enable better business strategy for agencies of all sizes, today and in a post-pandemic environment. With AI, agencies can:

1. Better advise clients. Now more than ever, insureds are looking to their insurance agents for risk management, stability and reassurance. With AI, agents can draw on industry insights to better understand the risks their clients face, provide more relevant, data-driven advice and do so with confidence. With the right tools, agents can look at data about similar individuals, businesses or industries and spot trends early to offer coverage suggestions. For example, the demand for business interruption insurance has risen sharply since the pandemic began. By leveraging AI, agents can see these potential risks coming down the pike and can make sure their clients are protected.
2. Accurately predict risk. For years, actuarial services have attempted to quantify the economic value of risk to help carriers and agencies arrive at appropriate levels of coverage and premium costs. But today, AI provides a much more insightful and accurate risk assessment. By delving into industry-wide historical data, AI tools can arrive at a more accurate risk value based on real, documented data rather than conjecture. This allows the industry to set premium rates accordingly so that insureds get the coverage they need at a price that’s competitive and makes sense. 
3. Find business opportunities. Without AI, agencies must rely on hunch, experience and clients to find and address new opportunities. AI technologies let agencies quantitatively analyze client needs, market dynamics and carrier appetite. Based on this insight, agencies can make smarter, faster and more confident business decisions to spur growth. For example, with industry intelligence, agencies can identify valuable opportunities to upsell coverage, identify new clients and expand into new markets based on carrier appetite for certain types of policies in specific geographies. 
4. Improve agency efficiency. Digitizing processes to eliminate rote, manual tasks not only improves agency productivity and performance, but also client relations. When agents can spend less time pushing paper and more time talking with clients to better understand their needs and provide expert advice, everyone wins. AI can help drive this efficiency with predictive and automated workflows that can make many common insurance processes move faster. 
5. Enhance client relations. While many agencies fear that AI and other technologies might take away from the personal relationships they’ve built with clients, AI can actually do the opposite. By automating processes and surfacing data-driven insights, AI can give agents more time to spend in meaningful conversations with their clients, providing informed counsel on how best to protect their assets. AI can also improve one of the most frustrating processes for clients — claims processing — to deliver a better experience. For example, we can now automate the submission process by using AI to analyze damage photos and natural language processing of the description of the claim submitted to rapidly assess the probability of fraud. Below a certain threshold, the claim may be automatically and instantaneously paid. This accelerates the process, delivering a more positive experience for the individual or business submitting the claim.

See also: How AI Can Stop Workers’ Comp Fraud  

As digital modernization becomes imperative for agencies, AI is proving to be a crucial ingredient for delivering the level of service that clients expect and for driving agency growth. By scaling AI implementation, agencies can not only keep pace with their peers but also offer innovative solutions that give them a competitive advantage, positioning agents as confident and dependable risk advisers in an increasingly uncertain environment.

“Existential” is a word used far more often than it should be these days. Its importance has been diluted with its too easy and too frequent use as an adjective to assign far greater weight to events, people or things than are deserved. And yet, this is the adjective most often used when considering the COVID-19 pandemic and the response of governments in the U.S. to the many problems associated with it.

As stated by Joshua Raymond Muhumuza in his blog post, COVID-19 nudges us to rethink our approach to the existential threats of our time (April 28, 2020), Cornell University Alliance for Science:

“The world as we knew it ended a few months ago. What we have now is a seemingly alien muddle that we are all trying to make sense of. Aside from occasioning an unprecedented global public health crisis, COVID-19 is a not-so gentle nudge for humanity to rethink—and maybe reset— several things pertinent for our very existence.”

This is not an unreasonable characterization. The loss of life is tragic. The harm caused to families, whether directly through illness or loss of life, or due to the staggering effects on the American economy, deserves sympathy, compassion and remediation. The harm goes well beyond the physical effects of COVID-19.

But this commentary – repeated in one form or another in publications and broadcasts and across the Internet – is also lacking in context. This is not the first pandemic the world has ever faced. In fact, it is not even the first pandemic of this century, which began only 20 years ago. Under the microscope that exists today, the lack of preparation of both the public and private sectors is appalling, but also not unprecedented. In 2009, the California Nurses Association/National Nurses Organizing Committee (CNA/NNOC) and its 16,000 members were preparing for a one-day strike at 34 hospitals in California and Nevada in part due to lack of preparation, including access to adequate personal protective equipment (including N95 masks), for the H1N1 pandemic. The strike was averted. (See: here) 

Nurses figure prominently in the current pandemic crisis and the public policy debate regarding how the workers’ compensation system is to respond. This debate is the focus of legislative and regulatory action nationwide. In California, Assembly Bill 664 (Cooper), was amended on April 17 to define the term “injury,” for workers’ compensation purposes, to include being exposed to or contracting, on or after Jan. 1, 2020, a communicable disease, including COVID-19, for certain peace officers, firefighters and healthcare employees. The communicable disease must be the subject of a state or local declaration of a state of emergency issued on or after Jan. 1, 2020. The bill also creates a conclusive presumption that the injury arose out of and in the course of the employment and also exempts permanent disability resulting from such communicable diseases  from the apportionment provisions in Labor Code § 4663.

See also: COVID-19: Stark Choices Amid Structural Change  

Gov. Gavin Newsom declared a state of emergency due to COVID-19 on March 4. He subsequently issued a statewide stay-at-home order on March 19. London Breed, the mayor of San Francisco, declared the existence of a local emergency due to COVID-19 on Feb. 25. 

AB 664 also states, “It is the intent of the legislature in enacting this section to fully compensate the peace officers, firefighters and healthcare employees whose lives are placed at risk when they are exposed to or contract COVID-19 or other communicable diseases in the course of performing their duties.”

That last part, “…in the course of performing their duties,” would seem inconsistent with creating a conclusive presumption that would mean, in all cases, that being exposed to or contracting COVID-19 is a compensable injury regardless of whether the injury, as defined in the legislation, occurred arising out of and in the course of employment.

AB 664 is pending in the Senate Labor, Public Employment and Retirement Committee. No hearing has been set.

Also pending in this committee is Senate Bill 1159, written by Sen. Jerry Hill (D-San Mateo), chair of the Senate Labor, Public Employment and Retirement Committee, and Assemblymember Tom Daly (D-Anaheim), chair of the Assembly Insurance Committee. In the California legislature, the Insurance Committee has jurisdiction over workers’ compensation issues in the Assembly.  

SB 1159 is a work in progress. It seeks to create a “disputable” presumption of compensability for certain critical workers whose illness or death results from exposure to COVID-19 during a period in which the critical worker is in the service of an essential critical infrastructure employer. These and other terms will be made more specific during May. Unlike AB 664, SB 1159 has a sunset date, is specifically limited to injuries resulting from COVID-19 and is not retroactive.

The California debate, including whether Gov. Newsom will issue an executive order encompassing many of the issues framed in these two bills, focuses on five issues: (1) whether a presumption of compensability is conclusive, (2) which workers could claim the presumption, (3) whether the presumption is retroactive (and to when), (4) whether the presumption is limited to COVID-19 exposure and illness and (5) whether exposure alone, without contracting COVID-19, is a compensable injury.

How these issues are resolved will, dare I say, have an existential impact on the workers’ compensation system. A conclusive presumption inevitably means that workers’ compensation will provide healthcare and wage replacement benefits for illnesses not arising from an occupational injury. For the public and private sector classifications most often named to benefit from such a presumption, these benefits would be in place of benefits paid through ERISA plans, various state-mandated leave programs and other employee programs such as sick leave or personal or administrative time off. 

By allowing these changes retrospectively, California would also allow healthcare plans to recoup money paid out in benefits, and prospectively to deny any coverage for COVID-19 from an employee. In essence, workers’ compensation becomes the primary healthcare insurance for any worker subject to the conclusive presumption. It would also allow California’s Employment Development Department (EDD) to recoup money paid under that state’s disability insurance program (SDI) to disabled workers who contracted COVID-19 from community or travel sources. 

The proper role for workers’ compensation in this crisis is to ensure it does what it is intended to do and has done for over a century. Now is not the time to try to lessen the burden on other benefit systems by creating a legal fiction that all exposure to COVID-19 occurs at work for certain employees – even in those occupations that have a high risk for occupational exposure. 

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

With this observation, however, comes a solemn obligation. This potential existential  risk is more likely to become a reality each time an employer or an employer’s insurer or claims administrator denies a claim without proper investigation or justification. The national debate over presumptions over the past several years strongly suggests that not all actions taken by employers on claims are consistent with the underlying grand bargain of workers’ compensation.

As observed by the Colorado legislature when addressing the question of rebuttable cancer presumptions in 2017, “Nine years of experience has shown that the rebuttable presumption established by House Bill 07-1008 has produced no demonstrable benefit to firefighters but has led to significantly greater costs to employers of firefighters.”

During this critical time in our nation, it's important for policymakers to understand that the various programs that make up America’s social welfare system should be providing for those who are ill with the benefits both law and contract oblige these programs to provide. The focus should be on the unacceptable gaps in this system and how to close them, not how to shift responsibility from one program to another with all the unintended problems that will cause. 

The COVID-19 pandemic has put an enormous strain on the healthcare system, delaying non-emergency medical care, potentially creating a higher risk for pain patients. However, the behavioral health community is adjusting with transitions to telemedicine and other alternatives that allow their patients to receive the care they need. With clinicians feeling additional stress during this time, telehealth options are readily available for the healthcare community, too. We cannot expect those working in healthcare to properly care for others unless we are prioritizing their mental health needs.

Two of the leading researchers and practitioners in pain medicine joined us for our special edition Out Front Ideas COVID-19 Briefing Webinar Series to discuss the challenges of treating pain patients during the pandemic and how the healthcare landscape is adapting:

• Beth Darnall, PhD – pain psychologist and associate professor, Department of Anesthesiology, Perioperative and Pain Management at Stanford Health Care
• Steven P. Stanos, DO – medical director of pain medicine and medical director of occupational medicine services at Seattle’s Swedish Health

Workplace Wellbeing

Due to the additional stress that the pandemic has created for healthcare workers, behavioral health psychology and counseling have become available in many primary care facilities. The behavioral health industry has a concierge of services that allow doctors to work with a therapist confidentially in a time of need. This “care for caregivers” model also includes Zoom-based videos and lectures covering helpful techniques like tai chi demonstrations, breathing exercises, guided meditations and chair yoga. These videos are then saved in an archive, making them readily available for later use when caregivers need them. While created to get through the stress of the pandemic, these videos will help to alleviate tension that healthcare workers face regularly.

Behavioral health, as well as many other clinical disciplines, had to rapidly adjust to telehealth visits, creating safer access for patients. Not only does this alleviate stress for the clinicians, it creates a safer workspace for clinicians and staff alike. In addition to the creation of video resources for the healthcare community, crisis management and wellness resources are available. Organizations like the American Psychological Association have created online resources that collate information for clinicians and administrative leaders, providing on-demand access when they need it most.

Patient Wellbeing

COVID-19 has created disruptions in all areas of our lives, but it has been especially challenging for those managing chronic pain. These patients are seeking stabilization in their lives, but continued disruptions have complicated their paths to wellness. These disruptions can compound mental and physical ailments for a pain patient, making it especially difficult for those with co-morbidities. The pandemic has exposed the vulnerability of opioid patients given the difficulty it has created for those who need access to medications. Some patients have requested options to taper off opioids or reduce their usage since the current environment may leave them feeling even less in control. 

Because patients are at the mercy of the elements currently, it is increasingly critical to use patient-centered communication. Many pain patients who were just beginning to develop regular schedules are now dealing with the stress from a lack of routine. Refreshing patients on skills learned through previous treatments may help create structure and give clinicians key insights into their at-home routines. Understanding a patient’s stress level can make medication refills easier because conditions like anxiety may be exacerbated currently, putting an opioid patient more at risk than usual. This continued communication will be key when there is a return to normalcy, to maintain consistency in the care of an injured worker.

Treating Pain During COVID-19

Accessibility is essential in treating pain patients throughout the pandemic. Nearly all visits have become telehealth visits, including psychological follow-ups and physical therapy. Behavioral medicine now offers options like individual or group sessions and on-demand treatments that can be used without a therapist. Immersive, experimental treatments, like virtual reality (VR), have created more engaging therapy for patients, putting control in their hands so they can get help when they need it. This portfolio of options, including internet-based treatments, creates readily accessible care for pain patients.

Patients who were involved in rehabilitative programs can now experience treatment virtually. The same content they would receive in-office, through physical therapy, pain education and relaxation training, can be delivered through courses a few days a week. A couple of options for these treatments include Zoom group visits or private YouTube videos, which comply with the Health Insurance Portability and Accountability Act (HIPAA). 

All of these virtual programs work to support the hospitals when they need it most. For those experiencing significant pain and those with co-morbidities, emergency procedure clinics are now open to avoid ER visits and waiting on an approval process through a hospital. These clinics help to reserve hospital capacity for patients who need it most during the pandemic. 

Current Research

The need for alternative treatments during the pandemic has created a wave of new research and guidelines for therapy. The National Institutes of Health (NIH) introduced the “Heal Initiative” to reduce opioid usage and awards grants for tools creating alternative pain management. One of those viable options includes VR, which has shown to be equivalent and sometimes even more effective than in-person pain therapy. These concepts retrain a patient’s brain and can optimize experiences based on biofeedback. This type of experimental treatment is especially helpful in areas where there are not enough trained clinicians to deal with those experiencing acute and chronic pain. As this technology gets increasingly cheaper, it will create better long-term tools for patients in need.

New guidelines created by the American Academy of Pain Medicine (AAPM) and the American Society of Regional Anesthesia (ASRA), in conjunction with Veterans Affairs (VA) and the Department of Defense, outline best practices for pain management during the pandemic. This document also addresses public health issues and the welfare of providers. It covers the potential issues surrounding telemedicine, explains how to treat opioid management, outlines mental health considerations for patients and healthcare providers and defines emergency procedures, like those associated with cancer patients. The document discusses emergency procedures for patients with poorly controlled pain that need opioids and how to help those experiencing withdrawals from use. The document also advises the use of acetaminophen to treat pain because the topic is still controversial in its interactions with the treatment of COVID-19. 

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

While this period is transcending longstanding barriers now that on-demand care has been proven necessary, it is also important to continue assessing pain from a multidimensional perspective. This includes evaluating the risk for each patient, so in-person psychological evaluations are being used to treat the more symptomatic patients. Using resources like patient records and history to discern patients' pain can provide insight into which patients may be more at risk. Though it may seem that telehealth visits could increase the risk of opioid abuse, there is no evidence on the extent of that risk when it is still the same patient reporting the same pain value, in-office or not. It is critical to take a patient’s reporting at face value and remember that pain will always be subjective.

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

When I founded and edited what became known as a "new economy" magazine in 1997, to explore all the strategic possibilities created by the internet, a friend told me a curious thing.

"You know," he said, "there were magazines with names like Popular Electricity back in the early 1900s, when it was this great new thing. Then electricity just became part of daily life, and the magazines went away."

Sure enough, after half a dozen fine years, my magazine, Context, faded away, as did all the similar publications, including Business 2.0 and the Industry Standard, which once were so thick with ads that they looked like phone books.

It may now be time to start retiring the term "insurtech," too.

It's not that technology is no longer a key driver for the insurance industry. Far from it. In fact, the pace of innovation has been picking up for years as companies have become more knowledgeable about the possibilities of various technologies, about how to incorporate them and about how to innovate, in general. Now, COVID-19 is making the industry step on the accelerator because so many interactions must happen virtually.

The issue is that technology is now so ubiquitous that it's time to stop treating it as this new, alien thing. Yes, the many technologies now at the industry's disposal — blockchain, the various flavors of artificial intelligence, etc. — are wildly complex. But so is the laptop or phone you're using to read this right now, yet you treat your device as a tool, a simple extension of your hand or your brain. It's time to start thinking of insurance technology — not insurtech — the same way.

We're solving business problems, not technology problems, as we innovate within our organizations. We want to have the most efficient operations, the smartest underwriting, the fastest and smoothest claims processes for clients. Technology will play a role almost everywhere, often a key role, but the goal isn't simply to have the best AI or the coolest blockchain application.

The industry has been migrating toward a more balanced view of technology and innovation. You see that, for instance, as companies try to rethink the customer journey, where the focus is squarely on the customer and where technology facilitates much of what happens, but in the background.

Some technologies will still require great attention, in and of themselves. Something like blockchain, for instance, could provide a competitive advantage if you figure it out before your competitors, or it could be an expensive bust for you, so you need to develop a deep understanding of the technology. But even with something like blockchain, you're starting with that business problem you're trying to solve.

I suspect the term "insurtech" will play out rather as "digital strategy" did at the consulting firm that published my magazine.

When the late, great Mel Bergstein founded Diamond Management & Technology Consultants in 1994, he had the then-radical idea that digital technology could drive corporate strategy, rather than just be an afterthought. The firm did a lot to popularize that concept, especially when one of our partners, Chunka Mui, co-wrote a best-seller in 1998, "Unleashing the Killer App," whose subtitle was "Digital Strategies for Market Dominance."

The notion of digital strategy stayed popular through 2010 or so, I'd say, and plenty of consulting firms will still sell you one, but every strategy has a digital piece to it these days. Try to imagine a strategy that isn't digital. So, "digital strategy" has gradually become "strategy."

Likewise, while a few people still talk about "e-commerce," it mostly has a simpler name: "commerce." Amazon was treated as a technology company for the longest time even though it sold books. Now, it's treated as what it is: a retailer (that's extraordinarily sophisticated in its use of technology) and a provider of technology services through its AWS cloud business.

"Insurtech" hasn't been around nearly as long as "digital strategy" or "e-commerce," and the combination of insurance and technology in innovative ways will only pick up speed from here. But the innovation needs to happen as part of, well, the normal innovation process and not as a sort of excursion into foreign territory. So, I think "insurtech" will soon enough be referred to by a different name: "insurance."

It’s not clear what “normal” will look like when the throes of the COVID-19 pandemic are behind us. The world will probably not return to the way things were in February. But the world is learning to cope; so are insurance carriers. Recently, Novarica’s team facilitated a virtual town hall to learn how insurer CIOs and their teams are adjusting to working from home (WFH) as an entire organization. 

Most insurers appear to be navigating the same challenges and enjoying the same benefits from the transition. Despite varying reaction times of state governments in issuing shelter-in-place orders and encouraging non-essential workers to stay home, most insurers appear to have taken aggressive action to protect their employees and ensure continuous service for their customers by mid-March at the latest.

While some individuals and teams within insurance companies already had experience with WFH, insurance IT leaders noted apprehension about large-scale efforts to do so. A month later, here are some of the key considerations—and lessons—insurance IT executives have learned from the rapid-fire process brought on by COVID-19. 

This Isn’t a Snow Day

While most companies, including insurers, have been prepared for small-scale WFH events in the case of weather events like heavy snow or a hurricane, CIOs were bracing themselves for the strain that more widespread WFH would put on certain areas of their organization. VPN access and general internet bandwidth were a main concern for insurers across the board, but with additional licensing, close collaboration with key suppliers and careful management, carriers are staying online.

Paper processes are another area of focus for many insurers; some are partnering with lockbox vendors to close manual gaps by handling scanning and e-payment. Most insurers noted that they are sending limited numbers of key employees to the office to manage any processes that can’t be immediately made digital. At least one insurer at the town hall noted that the company shut down specific lines of business that would guarantee a floor on return for the time being, but all participants said they aren’t seeing a dynamic outflow of cash. 

One long-term adjustment an insurer noted was that employees were encouraged to take their entire office setup home to optimize their workspaces for the duration of this pandemic. This included signing out desks, chair and computers—anything that would help employees keep their productivity levels up while remaining safely at home. 

See also: COVID-19: Stark Choices Amid Structural Change  

Communication and Transparency Are Key

Insurers’ biggest concern right now is consistent across the board: people. This includes their employees, their agent/broker/vendor partners and their customers. No matter the action being taken, all insurer IT executives said their top concern was keeping everyone safe while they’re doing their jobs. The best way of ensuring this gets done is by communicating openly and often. Most organizations are holding company-wide town halls on a regular basis, offering virtual facetime with senior leadership as well as with their direct managers. 

When possible, video chat is being encouraged to keep everyone in touch and engaged. Team leaders and executives have sent out thank-you notes to the teams staying productive during a global crisis, and some CEOs are answering employee questions during their town halls to make sure every voice is heard. Engagement methods like voting on the questions to be asked during meetings, themed virtual happy hours, informal daily team huddles and mindfulness resources posted on company intranets have all seen positive results at insurers. 

While video conferencing has been an adjustment for some organizations, most participants in the town hall said it has been a valuable tool for helping teams stay close even though they have to be apart. In addition, most 2020 metrics for managers have been altered or paused to allow them to prioritize caring for their teams. As one CIO said, while business continuity plans have been a good guide for this situation, everyone is learning along the way. 

The Future Holds More WFH Flexibility

With insurers, vendors and agents all successfully shifting more than 95% of their operations online, the future of work might look vastly different from how things operated at the beginning of March. Many insurer IT executives are finding that digital projects that were on the road map are suddenly a priority. Digital applications and processes are all on the rise, and some vendor partners are even offering upsell opportunities at a discount that could help boost digital functionality. 

But will remote work become a permanent fixture for most American workers? It might for some of them; remote talent pools allow for a broader range of applicants to fill empty roles, and some employees feel more productive within their own walls. Most insurer CIOs think the answer lies somewhere in the middle. 

While it’s becoming clear that most roles can be completed from home, many employees find themselves missing their in-office neighbors and water cooler chats. Every office has its own culture, and some insurers may hire more remote workers and allow more flexibility with WFH options. Others might shift back more toward traditional ways of working.

The insurance industry, like much of the world, had to shift rapidly to WFH practices. While the transition wasn’t entirely seamless, insurer IT executives have found broad success by focusing on the people and processes that keep their organizations going. These short-term changes are likely to lead to permanent alterations once we have reached our new New Normal, whatever that looks like.