We are stuck in a self-destructive cycle because an industry-wide culture that rejects true innovation leads to a huge talent deficit that prevents innovation.

With few exceptions, there is little in the way of innovation, effective marketing, risk-taking, creativity and substantive investment in systems and technology in the insurance industry. That absence will be the death of many insurers and health plans.

We can’t get enough brilliant people to work in our business because our culture is anathema to most of them.

The most important part of any organization is its people. Yet our industry’s talent deficit is as wide and deep as the Marianas Trench.

Sure, there are some very smart folks doing great work – in health plans, state funds, private insurers, third party administrators (TPAs) and service companies.

They are the exception, not the rule.

Don’t agree?

How many of your brilliant college classmates chose a career in insurance? In your career, you were blown away by someone’s acumen, insight, brilliance, thinking how many times? How many execs in this business came out of top business or other schools?

Why is this?

I’d suggest it is the very nature of our industry; it isn’t dynamic, doesn’t reward innovation, hates self-reflection, abhors risk-taking and doesn’t invest near enough in people or technology.

Proof statements, courtesy of The Economist:

• No insurer ranks among the world’s top 1,000 public companies for R&D investment – yet dozens of insurers are in that top 1,000.
• On average, insurers allocate 3.6% of revenue to IT —about half as much as banks.
• In a study of 500 innovation topics across 250 firms, many insurers are working on the same narrow set of ideas.
• Many property insurers, whose fortunes rely on forecasting climate-induced losses, are still learning how to use weather information.

Tough to recruit talent to an industry that – for Pete’s sake – invests half what banks do in IT.... Or where a property insurer hasn't figured out weather.... Or where all your competitors define “innovation” as doing the same stuff you do... That probably spends more on janitorial services than R&D? (Ok, that may be a bit of an exaggeration.)

Many of the big primary insurers in today’s market will be overtaken by the Apples, Amazons, Googles, Beazleys, Trupos and Slices tomorrow. The names you know are brilliant innovators and have billions upon billions of cash to invest. The names you don’t know have figured out and are diving into markets that the traditional, stodgy, glacially fast insurers can’t even conceive of – reputational risk, very short-term insurance for specific items, disability coverage for gig workers and a host of other opportunities.

Oh, and the innovators avoid all the paperwork, hassle and nonsense that keeps insurance admin expenses at 20% of premiums while frustrating the bejezus out of potential customers. (Having just spent hours on the phone fixing a problem with flood insurance, I count myself as one of the frustrated.)

See also: Realistic Expectations for Insurance in 2020  

And, no, with rare exceptions health insurers aren’t any better. With structural inflation that guarantees annual growth of 5% to 8% and an employer customer that has to provide workers with health insurance, plus governmental contracts that pay on a percentage of paid medical, and record profits across the entire industry, there’s every reason to NOT control costs.

The record profits may well continue till a Cat 5 storm hits the Jersey shore or a deep recession hits or investment portfolios are crunched by macro factors.

In the meantime, Jeff Bezos will be looking for places to plow some of his hundreds of billions.

What does this mean for you?

Critical self-reflection is really hard, and really necessary. This industry is ripe for disruption, and it will happen. The question is, what will you – and your company – do?

2020 kicks off our sixth year of Out Front Ideas with Kimberly and Mark, and we begin the year with our 20 Issues to Watch. You will notice that many of these issues reach beyond our usual focus on workers’ comp and healthcare. We also included issues relating to risk management, workforce management and employee benefits as each affects employers. 

1. 2020 Election Impact

The coming election will undoubtedly have an impact on our industry. With 11 state governors, 35 Senate seats, the entire House of Representatives and the president of the U.S. up for grabs, there could be significant change. The impact on businesses could include changes in healthcare, tax law, leave of absence regulations, independent contractor classifications and more. 

Democratic control could lead to an increased federal focus on state workers’ compensation laws, including federally mandated workers’ compensation coverage for farm workers. 

Virginia will likely have significant workers’ compensation reforms, with 17 bills already introduced. California also has many workers’ compensation-related bills, although recently few have become law. 

2. Healthcare Watch

As healthcare continues to be the hot button issue of the 2020 elections, with it comes uncertainty about what our future coverage model may look like. Regardless of uncertainties, we know coverage is complicated, and any system-wide changes will require years of effort before implementation. Healthcare.gov saw its first rise in new enrollment since 2016, up 1.8%, while renewing enrollees were down 2.9%.

Expect to see the continued rise of employer-led solutions in 2020, with healthcare programs like Walmart’s reducing cost, decreasing disability duration and promoting the best of care for common conditions. Community and local care is also emerging, with the continuation of new entrants into the market. New benefit solutions are also expanding, including apps and platforms, such as:

• Calm, an Apple award-winning meditation app.
• SleepScore, the leading firm monitoring sleep and offering actionable advice.
• Grand Rounds, a personal health assistant firm driving quality, timely care.
• Livongo, a digital health management firm for chronic conditions.
• One Medical, a membership-based primary care platform.

3. Government Affairs and Compliance

Workers’ compensation is one of the most regulated lines of insurance, and this bureaucracy adds to the system costs. Industry engagement with regulators and legislators is increasingly important to ensure we have a voice at the table when change is contemplated. To make the system more efficient and effective, it is critical that third party administrators (TPAs), carriers and employers engage with regulators and legislators at industry events, like those held by the International Association of Industrial Accident Boards and Commissions (IAIABC), and the Southern Association of Workers’ Compensation Administrators (SAWCA).

4. Evolving Health Technology Models

Technology’s place in the evolution of health continues to expand, as seen at this year’s Digital Health Summit at the Consumer Electronics Show (CES). With tools that track health metrics and protect personal health information and with artificial intelligence, machine learning and blockchain all being major topics, the future seems to hold limitless possibilities. A few remarkable devices introduced at CES were:

• Sana Health designed a headset that uses neurowave stimulation from light and sound to reduce pain.
• Valencell launched a blood pressure sensor system that can be integrated into hearables or wearables.
• Mateo’s Smart Bathroom Mat helps individuals monitor their weight and posture using “medical-grade pressure-sensing technology.”

5. Social Inflation

You hear much about this term in the risk management marketplace, referring to the phenomena of significantly increased liability costs due to societal changes. The impact has be associated with:

• Jury behavior prediction becoming more difficult.
• Litigation financing becoming big business.
• Statutes of limitations being extended for a variety of claims, including workers’ compensation presumptions, malicious prosecutions and sexual assault.
• Courts allowing the pursuit of separate “bad faith” litigation for actions taken during the handling of a claim.
• Increased risk management exposures. 

A continuing trend of social pressures could make it very difficult and expensive for companies to secure liability coverage, as carriers continue to increase rates and reduce capacity in the marketplace.

See also: Realistic Expectations for Insurance in 2020  

6. The Power of Influence

Influence can be affected by cultural competencies, personal beliefs and how we feel about ourselves. Personal beliefs play a key role in influencing the level of participation and compliance, trust and communication and outcome of a workers’ compensation case. While technology advancements, wellness programs and regulatory requirements are important, an unsupportive environment, where employees feel dismissed, will affect their engagement. Companies are evolving their advocacy models and improving how they engage with injured workers and patients to accommodate the impact that personal beliefs can have on these cases.

7. Marijuana Workplace Considerations

With 11 states and D.C. having legalized recreational marijuana, it seems only a matter of time before it becomes federally legal. The Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, which would federally legalize marijuana, has passed the House Judiciary Committee but will need to pass through the House and Senate for any further advancement.

State legalizations have created challenges for law enforcement and employers because there are no easy tests for impairment with the drug, and no agreed-upon standards of what level of tetrahydrocannabinol (THC) would constitute impairment. The Occupational Safety and Health Administration (OSHA) also restricts blanket post-injury drug testing policies. New THC breathalyzer tests are set to hit the market this year that could assist employers and law enforcement with setting an actionable standard.

8. Rethinking Industry Engagement

Industry engagement affects your marketing efforts, sales and client relations, customer service operations and governmental affairs. One critical area to take advantage of is educational conferences. They bring incredible value to stakeholders, but keep in mind that attendees want to see new sessions and topics presented without presenters selling their services. Additionally, using social media to not only promote your brand recognition and thought leadership but as a platform for real-time engagement with consumers advances your customer service model.

The easiest way to engage the industry and ensure relevancy is getting involved with organizations like the Risk and Insurance Management Society (RIMS), Public Agency Risk Management Association (PARMA), the Public Risk Management Association (PRIMA), the American Society for Health Care Risk Management (ASHRM), Disability Management Employer Coalition (DMEC) and the University Risk Management and Insurance Association (URMIA). 

9. Safety and Loss Prevention

Emerging technologies are assisting in safety and risk management. We are seeing advancements in tech such as wearables that promote safer behaviors and drones that can view dangerous working conditions. 

For all the advances we’ve made with technology, there is little that has been done to decrease injuries related to workplace violence. This challenge has been especially prevalent in the healthcare, retail, hospitality and K-12 industries. 

10. Informed Pain Management

There is no ignoring the opioid epidemic in our country, but the fact remains: The pain is still very real with patients. In 2020, pay close attention to the evolution of pain management as the pressure increases greatly to limit the prescribing of opioids. Focusing on patient-centered care and taking an interdisciplinary and individualized approach to pain care are valuable options to advance patient needs.

11. Defining Value of Risk Management for C-Suite

Risk managers are facing rising insurance costs across multiple lines of coverage for the first time in a decade. This means they have to show their value to the C-Suite without the associated benefit of decreasing insurance costs. Additionally, there are many discussions taking place on the structure of risk management programs, including what duties they should perform and where they should reside within the corporate structure. 

12. Talent 'Reskilling'

Often referred to as "upskilling," talent "reskilling" could help with talent gaps as well as provide further internship opportunities and assist with the training of newer employees and older workers. Moreover, training in empathy and communication furthers engagement. Organizations that are taking advantage of these particular training areas, in addition to using new technology and on-demand environments, will have a decisive advantage.

13. Data Privacy and Cybersecurity

It is estimated that, by 2021, there will be $6 trillion worth of damages due to cyber security attacks. While it has become increasingly difficult for company IT departments to stay ahead of hackers, timely corrections like updating systems to install patches and correcting known flaws can help prevent major shutdowns. 

With the introduction of the California Consumer Privacy Act (CCPA), the most extensive and restrictive data policy regulation in the U.S., the insurance community will need to make adjustments. Elements of this law contradict industry records retention regulations. 

14. Caregiving

An estimated one in six Americans is assisting with the care of a disabled family member, with more than half of these employees working full time. Although paid caregiver leave of absence programs are not widely adopted with employers, they are gaining traction with those that are more forward-thinking. 

When the responsibility of care for someone disrupts the life of an employee, the impact can weigh heavily on productivity and increase absence in the workplace. Companies like Wellthy, a digital communication hub focused on family care coordination, links families with a virtual care coordinator. Often a social worker, this individual advocates and schedules to take over many caregiving responsibilities, which can alleviate the strain on a caregiver, leading to less absenteeism.

15. Public Sector Pension and Workers’ Compensation Debt

The average public entity pension is less than 73%-funded, leaving over $1.6 trillion in unfunded pension liabilities nationwide. Many public entities also have millions in workers’ compensation liabilities without funds set aside for payment of the claims. While there are no easy solutions to these challenges, increasing taxes and reforming pensions may be necessary. Public entity insolvencies is also a threat, which has happened in the past. 

See also: Are You Ready to Fail in 2020?  

16. Does Our System Do Harm?

While we often debate varying state regulations and the resultant inadequacies, we do not ask ourselves enough whether our system does harm. Misaligned incentives, complex claims processes and procedures and a daunting system can all affect recovery for the injured worker. Emergent technologies and an abundance of data offer solutions to systemically improve our industry. These solutions need to be implemented to fulfill the industry’s obligations. 

17. Markets and Rates

For several years, there has been a downward trend in the rates for workers’ compensation guaranteed cost insurance. Claims costs have been steadily increasing, but a decline in accident frequency has offset these increasing costs. However, the focus of retention marketplace (self-insured and high-deductible) is on accident severity. The combination of increased accident survivability, longer life expectancies and new medical technologies mean that the industry is seeing more expensive individual workers’ compensation claims than ever before. 

Additionally, lower returns on investments in bonds, especially municipal and government bonds, could affect premium rates as the insurance industry invests heavily in these instruments. 

18. Mental Health

Access to proper care and a lack of providers continue to be major roadblocks for the mental health crisis in our country. As we continue to break down the stigma, promote wellbeing and assist in improving access to care, many workers’ compensation companies and health providers are offering unique and meaningful crisis management and behavioral health case management and will work to create a wellbeing program for your firm.

Organizations like the National Alliance on Mental Illness (NAMI) are collaborating with businesses and public entities to shed light on issues like suicide awareness and prevention to push a stronger culture of wellbeing. It is also imperative that our own workforces focus on their own mental health. We cannot be good advocates for others if we are not taking good care of ourselves. 

19. Data Validation

The reliance of data in our industry is more important than ever, but is our data accurate? There is no single source for accurate information on the entire workers’ compensation industry, as the National Council on Compensation Insurance (NCCI) and the independent bureau states all have only a piece of the puzzle. Data from self-insured employers is also missing from most analysis. 

The accuracy of data is very important for risk management decision making. Risk managers should be asking what stories their data is telling, including:

• Is my data complete and accurate?
• When my data conflicts with my expectations, what do I do?
• Do I trust my data, follow my instincts or dig deeper?

20. The Americans With Disabilities Act (ADA) and Leaves

Continuing changes to regulations, litigation and risks make this an ever-present challenge for employers. Conditions such as obesity, diabetes, pregnancy-related impairments, depression and stress-related mental health impairments continue to be addressed

Leave programs continue to evolve across the country, with California, Connecticut, Colorado, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Washington and San Francisco and D.C. enacting paid leave. D.C. goes live in July, Connecticut in 2022 and Oregon in 2023. This makes it increasingly critical to understand how these policies run concurrent with a workers’ compensation claim. Alignment between leave programs must be outlined so claims teams are aware and properly engaging the necessary resources.

To listen to the archive of our complete Issues to Watch webinar, please visit https://www.outfrontideas.com/

Follow @outfrontideas on Twitter and “Out Front Ideas with Kimberly and Mark” on LinkedIn for more information about coming events and webinars.

Over the past decade, U.S. tech firms have made significant advancements in artificial intelligence and robotics, making it far easier and more efficient to automate tasks and functions across industries. Artificial intelligence (AI) affects all types of risks and lines of insurance, and the workers’ compensation market has a particularly large stake in the developments.

Although the U.S. has experienced technological change and disruption during prior periods of industrial revolution, the pace and scope of the fourth industrial Revolution positions it to have a far greater impact on the U.S. and global economies. The recent advancements in AI and robotics are some of the most significant computer science advancements of our generation. Google CEO Sundar Pichai has compared the advances to the discovery of electricity and fire, while Bain predicts that the U.S. will invest $8 trillion in automated technologies by 2030.

The U.S. is currently the global leader in developing and investing in AI technologies and robotics; however, our global competitors are rushing to catch up. In 2017, AlphaGo, an artificial intelligence program developed by Google, defeated Ke Jie, the world’s champion Go player. (Go is a popular and complex ancient board game made digital). Since then, global investment dollars in AI continue their upward trend.

See also: Untapped Potential of Artificial Intelligence  

Back in 2015, China’s government launched the "Made in China 2025" campaign to become a market leader in developing these new technologies by 2025. As China and other global leaders invest in smart factories (which are driven by AI and robotics), the rise of these factories will affect not only production worldwide but also potentially eliminate jobs and keep wages down worldwide. This intense focus and investment from our largest global competitors will likely accelerate the pace and scale of change and limit our ability to manage the disruptive effects across many sectors of our economy.

Significantly, the new technologies are poised to challenge traditional assumptions that AI and robotics will be used to perform only low-level and highly repetitive tasks. MIT’s latest research shows that machines are better at pattern recognition and judgment calls. New AI technologies and robotics are also helping doctors detect early signs of cancer by analyzing a condition and comparing it with data points of other patients. (We’ll explore this notion further in our next blog in this series.)

It remains unclear whether the benefits of AI and robotics will outweigh the disruption to many traditional industries and their employees. In fact, a number of influential CEOs, venture capitalists and academics have already raised concerns about how these advances in AI and robotics could fundamentally change our society and the future of work for blue- and white-collar workers.

See also: 3 Steps to Demystify Artificial Intelligence  

Blackstone’s CEO, Stephen Schwarzman, who provided $250 million to launch MIT’s new college for AI and robotics, remarked, “We face fundamental questions about how to ensure that technological advancements benefit all - especially those most vulnerable to the radical changes AI will inevitably bring to the nature of the workforce.”

The best athlete you've likely never heard of is Mikaela Shiffrin, who is close to breaking all the career records in international Alpine ski racing—and is just 24 years old. When Lindsey Vonn was considering one more heroic comeback from injury last season so she could build on her 82 wins on the World Cup circuit and pass Ingemar Stenmark's all-time mark of 86, she not only decided her body couldn't handle any more abuse but also basically said, "Ah, what's the use? Give Mikaela a year or two, and she's going to hold all the records anyway."

Shiffrin, who already has 64 career wins, posted a 2018-2019 season so good that it would qualify as a top-20 or even top-15 CAREER—17 World Cup wins, the overall World Cup title, season titles in an unprecedented set of three disciplines (slalom, giant slalom and super-G) and two gold medals and a bronze at the world championships.

And Shiffrin doesn't just win, she dominates. Ski racing tends to be a hit-or-miss affair, because there are so many variables outside the skier's control—for instance, snow conditions and lighting can change decisively during a race, and start position and course setup can greatly favor certain skiers. Yet Shiffrin won 21 out of 25 races in the slalom, her specialty, over three seasons. (Take the other side of that record, winning four out of 25, and you're a bona fide star.) Races typically are won by tenths of a second or even hundredths, but Shiffrin routinely wins slaloms by more than a second, sometimes more than two seconds. She once won a race by more than three seconds, the greatest margin ever recorded on the World Cup circuit.

How do you compete with someone like Shiffrin? And where might there be lessons for competition in the business world?

In the case of Shiffrin, other ski teams have started sending crews to film her practice sessions. They set up shop up and down the course she's going to ski to capture all the fine points of her technique, to see what drills she's doing, even to watch the interactions of the coaches and technicians who make up her team.

Historically, skiers have been left to train in private, and Shiffrin has bristled at the crowds, but there's no prohibition on cameras in skiing (unlike in football *cough* Bill Belichick and in baseball *cough* Houston Astros). In skiing, if you buy a lift ticket, you have your place on the mountain.

It's too early to tell what the competitors have learned, but Shiffrin has "only" four wins halfway through this World Cup season, has finished second and third in the last two slaloms and looks like she'll win the overall title this year by mere miles and not by a lightyear or two, as she has the last three years.

In the case of insurers, they certainly benchmark against competitors, and they benefit from one of the oddities of the industry—that everyone pretty much has to make their business plans public, given all the filings required by state regulators. But comparisons seem to focus on products or programs. I don't hear the intensity I'd expect when it comes to other comparisons, especially on matters of operational efficiency.

The most startling insight I came away with after helping with a McKinsey book project a few years ago is that, while strategy and operations are often treated separately, a sustained edge on operational improvements can confer a major strategic advantage. The authors of "Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds" found that improving operations 25% faster than the rest of the industry for a decade was one of the five most important strategic moves a company could take. And if you believe, as I do, that insurers can—and must—cut 50% of their operating costs over the next few years, then the issue takes on even more urgency. Get there faster than the other guy, and you can win big. You free up funds to invest in growth, attract more capital at better rates, draw talent and so on, creating a virtuous circle that can drive you to dominance.

But I mostly hear insurers comparing themselves to…themselves. There's a lot of talk about improvement in operational efficiency, but not about how that rates versus the competition—and the competition is the true measure.  

Insurers also brag about shortening the underwriting cycle, the handling of claims, etc., but, again, the frame of reference is almost always the company's prior results and not about competitors—which are also shortening the underwriting cycle, the handling of claims, etc. The same with improvements in customer experience: Sure, you're getting better—but are competitors getting better faster or slower?

In the late 1990s and early 2000s, I used to talk to a friend who was a senior executive at GM, complaining about how slow the company was to adapt to new customer demands in the digital age, and he'd tell me, "We're changing as fast as we can." I told him that the market didn't care how fast GM could change, that customer behavior was going to change as fast as it changed, and GM's only choice was to keep up or not. When the financial crisis came along in 2007-8, GM lost its ability to hide its problems, and it filed for bankruptcy.

I got to sit in on a couple of product review sessions that Bill Gates held in the early 1990s and was struck by how little he focused on his products and how much he focused on the competition. For the first half of each hour-long session, he quizzed the product team about what it thought competitors were doing or could be doing. Only then did he turn to his own product.

While the insurance industry has been making real progress on internal operations, on interactions with customers and on many other fronts, I think it's time to change the basis of comparison. Stop looking at what you did last year, and start looking at what the competition is doing this year. Be more like Gates and like Shiffrin's competitors and less like the GM of 20 years ago.

I'd say to imitate Shiffrin, but I'm not sure a once-in-a-generation genius can be copied. If Lindsey Vonn couldn't do it, I sure can't.  

Cheers,

Paul Carroll
Editor-in-Chief

The chart below compares the government's Bureau of Labor Statistics' inflation calculations for Medical Care versus the Kaiser Family Foundation's research into how much insurance premiums have been increasing. The differences between the two calculations are huge. From 1998 - 2018, the government estimates that health costs have increased by 107%, but for some reason insurance premiums have increased 288%. In fact, 288% is a material understatement because that figure does not include the huge increases in deductibles. One might say, "Well, this means the insurance companies are overcharging!" That is a possibility, but if the insurance commissioners of America are that bad at reviewing rate filings, which I doubt, then all the insurance commissioners and their staffs should be replaced ASAP. Another reason I don't think the difference can be accounted for by declaring insurance companies are grossly overcharging is that between the combination of the ACA, which to some degree limits their profit margin, and a review of their financials, their profit margins do not suggest this level of overcharging. Another perspective is that government-sponsored healthcare expenses do not increase nearly as much as the costs covered by insurance companies. Medical care is medical care, unless if under government programs patients get materially less care or the insurance companies subsidize government programs by overcharging everyone who buys their own insurance. A third alternative is that the Bureau of Labor Statistics' numbers are just plain wrong. I trust the Kaiser numbers because they are associated with Kaiser Permanente Insurance, so they know what premiums are being charged. Premiums are easier to verify, too. See also: The Science That Is Reinventing Healthcare   In your day-to-day world, what difference does all this make? Maybe none except by adding to your humor or frustrations. Or, perhaps it adds to your conspiracy theories. In selling benefits, though, I think it helps the intelligent and educated producer sell and advise the educated and intelligent buyer. Understanding the true inflation of medical care will help people make better decisions.

The digital transformation of the insurance industry is first and foremost motivated by the demands of clients, who are always looking for the easiest way to solve claims. New technologies also can improve processes, eliminate fraud risks and collect data that can be used to personalize services.

Together with banking and finance, insurance is one of the most highly regulated industries, and any change must go through lengthy and rigorous probation. This explains the lag in using state-of-the-art technology compared with other industries.

However, things are changing, and the insurance industry can see gains of $1.1 trillion just from AI.

Here are five ways technology can make the insurance industry better for clients and more efficient for providers.

Process Automation and AI-Based Decisions

Digitization has affected most business sectors by cutting processing times, simplifying procedures and offering more power to clients. The insurance industry can benefit from all this, too.

Claim processing can be stepped up, with clients performing some part of the registration process, then letting AI do the rest. Technology can also increase renewal rates and cut down churn by sending automatic reminders or scheduling automated payments.

Underwriting is no longer delegated exclusively to people. Now it is a mix of automatically computed risks and human decision-making.

Since this industry relies heavily on extensive paperwork, any help regarding recording, sorting and retrieving information is a notable improvement. OCR and computer vision make insurance brokers’ works easier and save time.

Self-Service Portals and Chatbots

Clients are becoming more tech-savvy with their ever-more=powerful mobile devices. They are no longer ready to wait in lines at an office to be served by an insurance officer. The trend is to create a website or an app where clients can buy a policy, submit claims and evidence, create support tickets and request payments as quickly and conveniently as possible.

This should be part of an integrated omnichannel strategy, where the client has a choice of communication channels with the insurance provider.

See also: In Age of Disruption, What Is Insurance?

While some clients still prefer talking to a human agent, and this service is not going anywhere any time soon, chatbots are gaining ground. These solutions are helping insurance companies reply on the spot, thus eliminating waiting times, which are frustrating for customers.

IoT-Based Prevention

Better prevention methods could help avoid a great deal of the hazards for which insurance companies have to pay. Pipe leaks, fire outbreaks, gas leaks and more can become things of the past with the help of smart IoT sensors, which are becoming the norm in modern homes.

This is something AXA is already testing within smart homes. When home appliances are connected to a central system and give constant feedback, it becomes easier to avoid accidents by simply shutting off those posing a high risk. In a disaster, it will also be easier to process the claim because there is a clear record of the underlying cause.

Fewer Accidents With Self-Driving Cars

Self-driving cars will eventually be able to avoid collision with each other and other objects, reducing the number of accidents and saving insurance companies millions of dollars.

Until then, installing smart safety systems in vehicles can also diminish the number of accidents or at least minimize adverse outcomes.

Healthier With Wearables

Most chronic health problems are preventable if people adopt a healthy lifestyle. Some insurance companies are already implementing gamification schemes to motivate their clients, with the prize being a discount in the insurance premium paid. The motivation of the insurer here is that the cost of the bonuses or discounts is far less than the doctors' fees.

Technology can also help medical providers keep track of the entire care delivery cycle, from the admission to long-term remote monitoring. This can smooth out the friction between hospitals and medical insurance providers, as this insurance portal development project explains in detail.

Ethical Issues of IT in Insurance

Although the consumer’s benefits in the form of personalization and less friction are apparent, there is also a darker side of using IT in insurance. Ethical issues include:

• Data governance. Because these systems are very recent, there are few legislation points covering data accessibility and management, except for GDPR and some others.
• Security and privacy. As with any other information systems, the problems of authentication and encryption remain relevant.
• Transparency. Most smart systems act as black boxes; therefore, clients and staff have no way to explain why the system returns a particular answer. This contradicts the fundamental right of the client to be fully informed about the service.
• Bias and discrimination. The primary concerns here are related to the ability of AI to qualify a specific client as high-risk and deny the client the service or put the client at a disadvantage.
• Job losses. Reports show that as many as 18% of current insurance jobs could be automated by 2025.

See also: IT Security: A Major Threat for Insurers  

Despite the risks, using IT in the insurance sector means that there are fewer intermediaries between the client and the provider, faster service, less friction and overall more accessible policies. As the insurance tech is maturing, it’s time for providers to weigh the advantages versus risks and consider a digital pivot while it can still provide a competitive advantage.

More and more companies are seeking to differentiate themselves with an effective customer experience strategy. To advance those efforts, some firms hire highly skilled “chief customer officers” or engage expert consultants for assistance.

But there’s also a fair share of firms that choose to go it alone, proudly proclaiming that “we know what we’re doing.” Those five words, though, could undermine the effectiveness of those firms’ customer experience (CX) improvement strategies. Why? Because there’s more to customer experience strategy than meets the eye. It’s easy for most anyone to think they’re a customer experience expert. After all, each of us is a consumer ourselves. We know what it takes to make a customer happy – keep promises, abide by the golden rule, serve with a smile, etc.  It’s not rocket science, right? Well, maybe not rocket science, but definitely science. See also: Why Isn’t Customer Experience Better?   The fact is, there’s a whole science to shaping great customer experiences and, contrary to what many business people think, it’s not all common sense. To help illustrate that – to underscore how “we know what we’re doing” could be a dangerously overconfident viewpoint – below are a few examples of customer experience strategy considerations that may surprise you:

• What’s most important isn’t shaping customer experiences, it’s shaping customer memories. For a business to derive strategic advantage from its customer experience, people need to remember it positively. When a friend or colleague asks you – “what do you think of [Company/Product X]?” – your response is grounded in your recollection of the experience, which is actually different than the experience itself. It’s for this reason that the best CX strategies capitalize on cognitive science to shape customers’ memories more positively, thereby elevating people’s impression of the overall experience.
• Fixing customer pain points won’t get you where you want to be. Business leaders are, by and large, fixers. They are trained early on, and subsequently coached and encouraged, to find problems and fix them. Fixing problems is a good skill to have, and many a career has been built on such aptitude. It’s also a valuable skill when managing the customer experience – after all, a customer experience with fewer pain points is a better customer experience, right? Yes, but there is a catch. Merely fixing pain points may help achieve competitive parity, but it doesn’t necessarily deliver competitive differentiation. It doesn’t make your customer experience memorable. Achieving that often requires more than just fixing existing customer touchpoints; it requires introducing entirely new ones that enhance the experience in a meaningful way.
• What customers don’t see is as important as what they do see. Most companies focus their customer experience strategy on the live, digital and print touchpoints that people encounter when patronizing the business (call them “onstage” components). That’s entirely appropriate, but it’s also only a partial solution. Equally important are the “backstage” components – the behind-the-scenes workplace practices that help shape the mindset, behavior and engagement of company employees. From hiring profiles to training programs to compensation practices to cultural norms, these are all backstage elements that customers never see, yet they materially influence the quality of the experience delivered. The most successful customer experience strategies take this into account, balancing their attention across both the onstage and backstage parts of the equation.

If you found some or all of these operating principles eye-opening, you’re not alone. While engineering a great customer experience definitely requires a heavy dose of common sense, it also involves science and subject matter expertise that isn’t at all common. Former U.S. Secretary of Defense Donald Rumsfeld once famously declared that there are “known knowns” (things we know we know) and there are “known unknowns” (things we know we do not know). But, he cautioned, there are also “unknown unknowns” (things we don’t know we don’t know). See also: The Best Boost to Customer Experience   So, if you’re a business leader launching a customer experience transformation, be wary if you hear your team confidently declare that “We know what we’re doing.” Consider that moment a coaching opportunity, and engage in a little pushback. Challenge your team to honestly evaluate their expertise. Challenge them to augment their CX knowledge, through books, training and other resources. Challenge them to entertain the very real possibility that “unknown unknowns” – things they don’t realize they don’t know about CX – could sabotage their best efforts to create a winning customer experience strategy. [A version of this article originally appeared on Forbes.com.]

“Once you have tasted the taste of sky, you will forever look up.” -- Leonardo da Vinci Is it time to recast our vision for where Insurtech 2.0 should be headed? People say that the worst thing you can do is start off with an apology. I still must begin with one; not for the headline on this article, but for living in central Florida. While most of the country has been bombarded with freezing cold, we’re living with the windows open, wearing shorts and playing golf. My apologies. The apology is important because it is involved in how I came to ask the question as to whether it’s time to “flip the bird” on insurtech. As we were working on our flower garden, five Florida sandhill cranes walked by. These magnificent birds are almost four feet tall and have a six-foot wingspan. They have a most graceful gait as they strut by, bobbing their heads to and fro. Sandhill cranes are always looking for food. They do not have a meal plan with the Golden Corral or any other buffet restaurant. Because they eat insects, seeds and other small pieces of anything edible, being so tall means they are always looking down at the ground right in front of them. Sandhill cranes plod slowly, heads down as they wander back and forth without any discernible path or plan. As these five walked by, they passed right beside our cherry tomato plants. The plants were full of ripe fruit and located at the same height as their eyes, but the cranes walked by without giving them a second notice. With their focus down on the ground in front of them, they had no idea that luscious, delicious and nutritious cherry tomatoes were there for the taking. All they had to do was look up. But with their habitual downward gaze, they were oblivious to what was right there in front of them. See also: Insurtech 2020: Trends That Offer Growth   As I watched the sandhill cranes miss their golden opportunity, I wondered if the same might be said about insurance organizations and their use of technology. Are they forever missing insurtech opportunities for greater customer engagement/protection, enhancing distribution channel effectiveness, eliminating unneeded tasks/data and driving down costs? Are there significant openings to leverage technology all around the insurance industry that we are missing because we are only looking down right in front of us? I believe that the answer is a resounding “yes”—it’s time for insurance organizations to stop emulating sandhill cranes. Insurance organizations need to lift up their heads and stop looking just at their feet. There are many reasons that insurance organizations only gaze downward:

• We’ve been doing things this way for as long as we can remember.
• Once upon a time, one of our executives designed the way we’re doing things, and we don’t want to risk his/her wrath if we question one of the “children.”
• Even though revenue streams are in retreat, doing things the same way is predictable.
• Our core system only does things one way, and the road to replacing it is very long and expensive with no guarantees.
• We’re too busy to try anything different.

It’s time to “flip the bird” from a sandhill crane and become more like a hawk. Hawks are always looking for movement and change. Spotting an opportunity from above, they swoop down for a quick strike and make off with the reward while others are still assigning a committee and study the opportunity. Hawks are discerning when they strike—not grabbing at anything or everything; they ignore that which will not help. They selectively pick only that which will benefit them and their family. And when they grab onto something, they never let go. Teddy Roosevelt said, “Complaining about a problem without posing a solution is called whining.” Because I don’t want to incur the wrath of TR, let me propose some solutions to consider: If any organization, or anyone, says they totally understand insurtech and have a perfect solution, grab your wallet, run and don’t walk to the nearest exit. Don’t wait for the perfect solution but try something now. Remember that the enemy of the good is the perfect. Look to your front-line employees for ideas and suggestions. After all, they bear the brunt of the self-inflicted pain associated with the current approach. Because you will not have all needed information before you start, be willing to adjust and learn as you try. See also: Is Insurtech a Game Changer? It Sure Is Some define insurtech as very complex and all-consuming with extremely expensive leaps. But why can’t we look at it more as a continuing evolution, small changes over time, that will eventually add up to significantly alter the way we sell and service insurance. So why don’t you “flip the bird” on insurtech, keep your head up, and get into the game! This article first appeared in the 2019 edition of “Last Agent Standing,” published by www.paradisopresents.com.

Have you heard of the marshmallow test? A marshmallow is placed in front of a kindergarten child, and an offer is made; you can eat this marshmallow right now, or, if can wait for 15 minutes, you will get a second one. This experiment, which sounds quite simple, provides invaluable insights about the self-control dynamics of humans. The experiment was conducted first in 1960, and the results have been evaluated over the years. It was found that kids who were able to hold off a long time without eating a marshmallow were more likely to have higher SAT scores. Similarly, in their adulthood, these people had a better body mass index, more self-confidence and less tendency to be addicted. Studies also show that delaying gratification gets harder under stress and keeps getting harder, the longer you delay. If you realize that you forgot your entrance card after driving in terrible traffic in the morning, you will be defenseless against dessert at lunch. Buying insurance is an act of delaying gratification, like retirement saving, dieting or avoiding sugar. It takes real self-control to spend your money on a product that you don’t enjoy when it is not mandatory. Delaying today’s pleasure for a possible future benefit, buying car insurance instead of a new phone…. So, if buying insurance is an act of delaying gratification, how can you help your customers on this issue? See also: Is Buying Insurance Like Ordering Food?   Develop Desired Products Perhaps be a supporter on good days rather than just compensate for the bad days? Why don't life insurance companies try to make their customers' life happier? At least they could send them a cake on customers' birthdays. Enriching an insurance product with benefits that can be used immediately can also help customers to delay gratification. Offering free car washing service once a month to your car insurance customers will definitely make them more satisfied with their purchase. Ease Purchasing Did you know that we suffer physical pain when making any payment? Neurofinance studies show that spending money activates the areas of the brain associated with physical pain and feelings of disgust. And the activation is much more when payment is in full view. Ask your customers to pay in cash, if you want to make your customer suffer. PayPal, mobile wallets and contactless payment are much kinder solutions. Know Your Best Customer The best insurance customers are those people who make regular savings, eat healthily and do volunteer jobs for the community. Why? Because those people have enough self-control to delay daily pleasures. As they are aware of their responsibilities, they will be more likely to purchase insurance. They will also do their best to avoid risks. Identify this customer segment and flag them as the best customers. Appreciate the Will Being appreciated strengthens our will, motivating us to be more responsible. Insurance companies should appreciate their customers both emotionally and financially. The health insurance company that appreciates customers with emails for being careful about pursuing a healthy life would increase customer satisfaction. The insurance company that gives small gifts to customers who have not any claim for years would likewise be rewarded with customer loyalty. Knock on the Door at the Right Time High stress leads people to instant gratification. Long-term plans are usually made in quiet moments. If you are not able to check the pulse of your customers by using a wearable device data for now, don’t worry. Just call your customer in the morning instead of evening after a busy work day. Speech emotion recognition systems are also powerful tool that should be used in call centers. See also: The Behavioral Science on Buying Insurance   Automate Decisions Delaying gratification is a real struggle when you do it the first time. We struggle mentally, but it becomes easier the next time, and finally it turns into a kind of habit. Our brain automates the action, so we don’t have to spend our self-control power. It is difficult to get consumers to adopt the insurance purchasing habit, so there is bloody competition for the customers who already have this habit. Customer acquisition is silver, but retention is golden. Insurers rely on insurtechs for the technological transformation of the industry. But first the industry needs a customer-oriented transformation. This may be possible by understanding the emotional and behavioral tendencies of consumers. Thanks to Walter Mischel, who inspired this article with research for more than 50 years on delay of gratification and self-control.

This an excerpt from an interview that HIStalk conducted with Al Lewis, JD, the author of several books on healthcare outcomes, the operator of the website, They Said What? Because the Wellness Industry’s Pants Are On Fire, and the founder and CEO of Quizzify. The full interview can be found here.  Tell me about yourself and what you do. I am CEO and quizmeister-in-chief of Quizzify, which is a an employee health literacy company. As we say, wiser employees make healthier decisions. However, I believe we are having this conversation because of my personal blog, which is called, “They Said What?” in which wellness vendors, diabetes vendors and related vendors are critically analyzed to in fact show that they usually don’t achieve what they claim to achieve. You’re offering $3 million to any company that can convince an impartial panel that its program can save employers money. Do you have concerns about having to pay up? None whatsoever. The entry fee is $300,000, and, believe me, it’s worth [the risk] with this impartial panel of five judges, of which I only get to appoint one and the burden of proof is on me. They don’t have a chance, which explains why nobody has tried to take me up on it. Is it lack of knowledge or intentional deception that motivates wellness companies to sell services to employers without having sound science behind them? Confucius put it very well. He said, and in those days it was all gender-specific, that, “When a man makes a mistake and it’s pointed out to him and he doesn’t correct it, he is telling a lie.” So at this point, these folks know they are lying. They have made the gamble, and it’s a good gamble, that vastly more people are going to read their ads than are going to read my website. So what they do, and they’ve gotten very good at this in the last couple of years, is simply ignore my postings instead of responding to them so as not to create a news cycle and a whole discussion. Is the available science good enough that they could do it right if they really wanted to? I would say that, for wellness generally, it is mathematically impossible to save money. There are not enough wellness-sensitive medical events. Even if you were to reduce 100% of them, you could not pay for most wellness programs. I’m not going to say it’s impossible, but it has clinically never even gotten close to that 100%. The typical reduction in risk is 0%, somewhere between minus 2% and plus 2%, while you would need a mathematically impossible 100% to 150% reduction to break even. Most vendors are counting on the fact that most employers have absolutely no idea how many of their employees go to the hospital every year for diabetes. I could tell you if you like, unless you want to take a guess. Out of 1,000 people under the age of 65, how many go to the hospital with a primary diagnosis of diabetes in the insured population? I’ll say two. Actually, that’s very close. It’s more like one. Occasionally, I run health and wellness trivia contests at conferences. How does the radiation in the CT scan compare with the radiation in an X-ray? But I also throw in that specific question. If you added all the diabetes events and all heart attacks together in a typical employer population, what would the rate be per thousand? In fact, it would be two, if you put both of those together. The guesses that I get are usually somewhere between 20 per thousand and 200 per thousand. What about the perception of the incidence of chronic disease in general? It’s not my take, it’s the world’s take. Because I do this show of hands thing, I do these trivia contests all the time. The employer benefits community thinks it is between about 20 and 200 of these events per 1,000 employees. Which of course makes no sense whatsoever. This is just what they say because they get bombarded with information talking about all the people who have diabetes and all the expensive chronic disease. Let’s take those two things one at a time. A lot of people do have diabetes. They may not even know it. It’s not going to become an issue for them for many years after they find out. If in fact an employer intervenes, they may possibly be able to control it. But what the [employer is] doing is saving Medicare money down the road because virtually nobody goes to the hospital with diabetes before the age of 65. Yet employers want to start paying for medication for these folks, so it’s a net increase in cost. And then your other point of chronic disease. I’ve written extensively on this fallacy that 86% of cost is chronic disease. If you read... carefully, you’ll find that they are saying that 50% of adults have chronic disease. Now if you’re defining chronic disease that broadly, you’re including a whole lot more things besides the things that a wellness vendor can get to. You’re including arthritis. You’re including hypertension. Who doesn’t have hypertension? If you put all that together and say, “Let’s count every dollar that someone with hypertension spends on healthcare....” So. someone with hypertension breaks [a] leg, you count that. You probably don’t even get to 86%, but most of that is also going to be in the over-65 population. In the under-65 population, the major drivers of costs are birth events and musculoskeletal. The wellness vendors have done a great job of moving the goalposts. It used to be they would say, “You’re going to get a three-to-one financial return.” Then they started saying, “You’ll get a one-to-one return.” Now they’re saying, “There is really no financial return, but the employees will be healthier.” If you actually look at the health of the employees … I’m not going to name names, except to say that there are a handful of vendors, generally the ones validated by the Validation Institute, that get more than a trivial improvement in health. There are other vendors — and I don’t mind naming names; Interactive Health and Wellsteps come to mind — where employees actually get worse as a result of these programs. If that’s the case, won’t those companies eventually get fired for failing to deliver? Some number of them are getting shown the door, but new employers are coming in. The problem is that the vendors have figured out how to measure outcomes fallaciously in such a way that most employers and most consultants aren’t going to catch them. They compare participants [with] non-participants, for example. It’s been proven up, down, sideways, backwards, forwards and eight ways to Sunday that every iota, every dollar of savings in a participant versus a non-participant comparison is due to the mindset of the participants versus the non-participants and not to the program. How do I know that? There are several data points. Studies have benchmarked those things and found exactly that. But the most dramatic one is a company called HealthFitness Corporation that did a wellness program for a company called Eastman Chemical. They separated the groups into participants and non-participants in Year Zero. But due to a whole bunch of incompetence and delays, they didn’t get the program started until Year Two. By the time they started the programs, the participants had already dramatically outperformed non-participants. The funny part about that is that my nemesis, the Snidely Whiplash to my Dudley Do-Right or the Lex Luthor to my Superman, was stuck with this, so he moved the goalposts. He said, “Oh, we overlooked that. That was our bad. We weren’t competent enough to realize that the program had actually started in Year Zero, not in Year Two. Therefore, you don’t know whether it’s due to the participants or non-participants.” That turned out to be a big enough lie. And I don’t mind saying, oh, I’ll say on the record, Ron Goetzel is a liar. He can go ahead and sue me. The difference between him and me is that, if he calls me a liar, I’ll have him in court the next day. [Editor's Note: We have emailed Goetzel to see if he wants to respond or offer a general defense of the economics of wellness, as he once did via an article we published. If he does so, we will update this article. To our knowledge, he has not yet responded to the original HIStalk article, published last week.] They put out a graph that shows suddenly that the program started in Year Zero, not Year Two. The people who actually did the program got upset enough with that. If you go back and look at the website now, they have in fact replaced the lie with the truth, which is that the program started in Year Two after dramatic savings had already been found. You’ve made the case that the simplest way to measure a workplace wellness program’s success is to ask the people who signed up if they participate regularly and see benefit from it. Do most programs fail even that basic test? There is a tool put out by the Validation Institute that is the most elegant tool for measuring the cost-effectiveness of programs that I’ve ever seen. We are big supporters of it. You ask employees two questions. How much did you use something? You may not even have to ask them that because you already know. Then, did you find it useful? Then you multiply the number of times somebody used something times the usefulness they found. That gives you an engagement score as your Y axis. On the X axis is the cost of the program. You plot the engagement score against the cost of the program and you can tell in a single graph how cost-effective your programs are as viewed by employee use, employee engagement. For the rest of the interview, click here to go to histalk2.com.