For years, the preparation and management of data have exposed themselves as two costly and critical challenges for commercial property insurers. These challenges are hampering production and efficiency and inhibiting growth and profitability. The flow of submissions and the preparation of statement of values are laborious and time-consuming to agents, brokers, insurers and anyone else in between. Without a solution to meet the changing market needs to manage these complex data sets, commercial property insurers' ability to quickly respond to markets and aggressively price business is hindered.

The inability to address these issues has obstructed the process, making it prone to error and hard to scale, especially in today’s market. In turn, this obstruction limits the speed and accuracy of commercial insurers' decision making and debilitates businesses’ potential to grow. The gap between data preparation, screening, prioritization, analysis and pricing steepens, and companies find themselves stagnant and looking for answers. There is yet to be a commercially viable solution focused exclusively on automating the operational preparation and processing component of commercial property insurance data so companies can better meet the growing need of customers and markets and handle the substantial work that is required.

A company’s inability to respond quickly can affect the relationship with the producer, leading to a higher chance of being selected against. These types of companies are more likely to take on more complex characteristics, along with riskier business as the expectation of long processing times is already set.

But we’re starting to implement machine learning into problem-solving tools to address these challenges. These tools enable commercial re-insurers to take their raw data sources and harmonize them with next-gen technology that analyzes, reviews and writes business submissions to provide companies with the competitive edge that’s been sought after for years.

Making the most of your data 

On average, commercial property insurers can only process a portion of the submissions they receive. Typically, managing and preparing results in inconsistencies surrounding labeling, coding and more, which create downstream issues with pricing, modeling and aggregation. Critical amounts of data are lost through the process, and information is not consistently accessible, hindering the ability to make crucial decisions. The only way to solve this and manage business expectations is by hiring additional skilled labor, but this increases the acquisition costs, hurts profits and isolates information among the skilled experts.

Using machine learning, data integration and analysis offer the ability to make data mapping suggestions based on learning algorithms. Manual adjustments are then fed back into the decision-making model, transforming complex, big data into actionable insights that are accessible, in real time, to the entire organization. This allows teams to spend their time on business-generating activities and acting on insights from data, instead of the constant back and forth editing spreadsheets.

See also: How Machine Learning and AI Reduce Risk  

Potential opportunities to grow the business are lost today because of the acquisition costs for new business, but machine learning allows insurers to get from point A to point B by enabling them to screen and prioritize submissions. Today, submissions can be prepared one at a time, but, with machine learning, employees are able to triage multiple submissions at once, including new submissions, enabling the underwriter to focus on the key deals and negotiating terms.

A solution for the enterprise

Giving users the ability to gain access to all commercial property data gives them a wider, more detailed view of the market as well as an understanding of the risk profiles that producers are sending. By providing an automated process to ingest and prepare data, insurers are afforded a more efficient and flexible way of consolidation that essentially helps eliminate errors, cuts costs and promotes growth as companies can now allocate resources to address other areas of the business. Ultimately, automation and machine learning provide insurers with the ability to process submissions at a much higher rate of around 80%.

While giving data access to individuals within the company is beneficial, expanding that access in the form of outsourcing can create a number of different security concerns. Many insurers are operating and sharing data globally, making security and compliance with regulations like GDPR an absolute necessity. Outsourcing is nearly impossible under GDPR due to the heightened risks in sending and having external sources manage large amounts of customer data. Insurers need to show due diligence in not only securing their own data but their customers', as well. In place of outsourcing, we are now seeing data management and storage platforms incorporating heightened security and data integrity into the design, ensuring these tools meet security standards such as ISAE 3402, SSAE 16, AES at rest and SSL/TLS in transit and ISO 27001. Meeting the standards not only helps to prove compliance with regulatory requirements, it also shows customers that insurers are taking their data privacy demands seriously.

Looking ahead

For the commercial property insurer, it is of the utmost importance to have the ability to prepare and manage complex data sets with an easy, quantifiable solution. Emerging solutions across the industry will enable insurers to make fast, appropriate decisions required to address the always-changing market and expand the business.

See also: How Machine Learning Transforms Insurance  

With the introduction of technology such as artificial intelligence and blockchain, combined with machine learning, the realm for new directions provides the insurance industry an unprecedented opportunity to collaborate. While these changes will continue to bring us new and improved methods to get things done faster and more efficiently, one thing is certain, ambitious commercial property insurers are already discovering collaborative initiatives to establish concept cases.

Three Key Takeaways

• The current processes are putting insurers behind their competitors in the commercial property market because they typically process 20% to 30% of the submissions received.
• Machine learning is allowing insurers to triage, screen, prioritize and score submissions much faster and with a higher output rate.
• The result is more completed submissions, which leads to the ability to be first to market.

Credit the coronavirus with one thing. In an era when individuals and organizations strive to establish themselves as “thought leaders,” COVID-19 has vividly--or, should we say, morbidly--demonstrated the importance of people becoming sensible “thought followers.”

Whatever one’s assessment of the public sector’s response to the pandemic, many believe there has been too much comment from too many quarters on the crisis, exposing people to an incessant barrage of information and misinformation. If there was ever a time to refrain from talking unless you have something truly new and valuable to say, this is it.

So, it is certainly gracious for an organization devoted to thought leadership to give room to someone promoting the idea of “thought followership.” It’s also presumptuous for me to think that what I have to say is “truly new and valuable” at a time when “stay home and shut up” is a civic calling. But, here goes.

A sacrilege?

The premise of thought leadership is that there is value in being able to come up with new ideas, either to solve problems or shape how others see them. Being perceived as a thought leader is considered to have value in itself, beyond any immediate impact that one’s ideas might have.

With regard to insurance, an abiding message of commentary over the past 10 to 15 years has been that insurers face transformational changes that threaten to “disrupt” the industry. “Insurtech” upstarts threatened to replace incumbents in a manner similar to how Amazon displaced traditional retailers. In the view of many “thought leaders,” the insurance industry had to shed its hidebound legacy methods and get into the 21^st century, or, or—what?

What, indeed, would happen if the insurance business as a whole remained operationally behind the times in the eyes of people not on the front lines of accepting and compensating risk?

It may seem sacrilegious to say so, but it is more important for insurers to follow than to lead. Innovation and disruption are givens in the modern economy; insurance is used to limit their potentially damaging effects. Insurance is there to preserve things as they were, to the extent possible.

Whose job is it?

To that end, it is not the job of the insurance business as a whole to figure out how to manage new and different ways of risk transfer. On the contrary, it’s up to those creating the risks to convince insurers that the risks can be adequately identified, managed, allocated and priced. 

There’s no right to be insured for property and liability losses. We lose sight of this basic fact because we’ve come to expect a competitive market for coverage to emerge almost automatically whenever a new form of enterprise emerges, almost as if it were a matter of right. 

The typical progression is for E&S markets to experiment with coverage of emerging risks until enough experience is acquired to write them in admitted markets. If professional insurers cannot come up with a way to sustainably insure certain risks, whoever has those risks will either retain them or create their own insurance entity to share the exposure (a mutual company, captive or risk retention group).

Of course, given the robust competition in U.S. insurance, no sensible person would deny that individual insurers must innovate in some way to remain competitive in the long run.

Still, prospective vendors and market entrants are often surprised to see how many insurance organizations remain viable despite having what the newcomers regard as outdated products, services and operations. “Incumbents” with “legacy” processes are likened to prehistoric fauna headed for extinction, yet they still manage to lumber along.

First, be dependable

How is it possible that an entire industry could appear to lag behind others and continue growing? There are a lot of reasons, and, yes, regulation is one of them, but it’s not the only one, nor even the most important. 

If insurance seems to be mired in inertia, it’s because stakeholders in commerce—consumers, organizations, lenders and public authorities—want insurance to be dependable more than they want it to be innovative. 

When it comes to core insurance products, these stakeholders value what’s old, established and expected. Sure, products have to address current exposures, but there’s been little desire and some resistance to having policies that are new and different for their own sake.

To explain, I’ll provide an anecdote from when I worked for an advisory organization that developed policy forms and manuals for standardized lines of P&C insurance. 

See also: Digital Darwinism: Time to Move Faster

As new employees went through orientation, I used to explain how we competed with the market leader to produce forms that had content almost entirely equivalent to that of the market leader. In other words, we competed to standardize, if you can grasp that. We had to be different enough to add value while adhering to long-established parameters and practices of coverage.

To describe the implications of this, I would ask new employees to consider what would happen if they showed up at a mortgage closing with a “new model,” “cutting edge,” “outside-the-box” homeowners policy. Even in the unlikely event the policy was approved by regulators, the transaction would come to a halt. The parties could not stop to read and interpret a new policy. To proceed, they would need coverage in place in a format they immediately recognize.

Challenges

Now, my premise above is being challenged by Berkshire-Hathaway, whose three-page small business policy, called “THREE,” provides broad commercial property and liability coverage in a short policy designed to be read and comprehended by the policyholder. If THREE takes off and starts a trend, that would truly upend decades of insurance marketing practices—and probably lead to a new standard approach.

At this point, some readers will object that my analysis has overlooked insurance distribution and claims management, two transactional elements of insurance where buyers’ expectations are established by the experiences they have with banks, retailers, service providers and other organizations outside of insurance.

In that case, it is indeed wise to be a thought follower, or practice follower, in the wake of industries that specialize in transactions. There’s no need to be a leader here, because insurance is not a transaction-rich business, compared with others.

Think about it. How many transactions a month do you have with your financial institution, supermarket, gas station, utility companies and other providers? Compare that with how many transactions a year—or even in your life—you’ve had with your P&C insurer(s). There’s no comparison.

One of the biggest misconceptions about insurance is that the business has “fallen behind” other financial services in embracing and using technology. The fact is, insurers were among the first major adopters of computer technology as record keeping and manual calculations were moved onto electronic media, and insurers eagerly embraced online data and analytics as they emerged at the turn of the 21^st century.

If insurers “fell behind,” in the eyes of some, it was principally in the 1980s and 1990s, when other industries implemented technology for massive volumes of user-generated transactions that insurers did not have or need.

Insurance transactions are better compared to one’s relationship with a lawyer than with other financial services. People buy insurance the way they buy legal services, with the hope they will never have to make contact, but with the expectation they will be fully and competently supported if they do.

Like legal advice, insurance is really a consultative service. Online portals will sell standardized coverage commodities, like low-cost auto coverage. “Insurance,” properly understood, will consult with households and business to help them select the right types and amounts of protection against a growing range of risks. That will certainly entail a good deal of innovation and thought leadership, but it will also entail a return to the founding principles and practices of modern insurance.

Fail fast? Not here

On their own, constraints on policy form development shouldn’t suppress innovation in insurance, but they do place boundaries on it, boundaries that extend to the corresponding loss information used to help price coverage. 

More than that, however, enduring expectations and practices regarding coverage shape the culture of insurance companies and the industry in general. Given the inherent limitations on insurance product innovation when compared with other industries, insurance is going to attract and retain individuals who value dependability over disruptive change.

Those who prefer the breakneck pace of disruptive change would be frustrated to learn that the current mantra of “fail fast” has little application in insurance. 

“Fail fast” refers to an organization’s toleration for experimental change whose results, good or bad, can be quickly demonstrated, acknowledged and, if necessary, abandoned. Fail-fast is a path to innovative breakthroughs in many industries and can be safely applied to internal agency and carrier operations with limited exposure to product performance or market conduct.

There is almost no room for failing fast in core insurance operations, however.

An underpriced exposure in a portfolio of property accounts can devastate the combined ratio of that book. An overlooked or unintended exposure in liability accounts can do the same. Errors like these can linger in a book of business for months or years before being detected, at which time it may be too late to compensate for the damage.

Again, beyond the immediate impact of the operating results, this limitation on insurance innovation shapes the culture of companies and the industry by self-selecting for people most comfortable operating under such constraints.

A.M. Best weighs in

This discussion might be academic if not for the fact that A.M. Best has just begun formally incorporating an insurance company’s ability to innovate into Best’s assessment of the overall strength of an insurer.

Innovation and thought leadership are not the same thing, as the former can be carried out quietly, and often is in the world of insurance, where even small and subtle adjustments can create competitive advantages that carriers are reluctant to share publicly.

Nonetheless, innovation and thought leadership share the same basic premise: The ability to generate and implement new ideas is seen to have value in itself, apart from their actual impact. The implicit presumption is that an innovative company culture will generate enough good ideas to more than compensate for any bad ideas that are tried and rejected.

Early on, some observers questioned the need for Best to assess innovation separately. If the ability to innovate makes a company stronger, won’t the existing measures of company strength reflect that?

For its part, Best argues that, to the extent insurers can innovate, they can “better respond to external challenges such as evolving consumer preferences, growing business complexity, shifting market dynamics and ever-expanding technological advancements.”

Best adds that “insurers that successfully incorporate innovation will likely strengthen their organizations, increase their customer base and improve their efficiency, supporting their financial strength.”

It’s hard to argue with that, but the issue becomes a little murky when one considers the actual criteria for rating innovation. In one key section, the new methodology scores a company’s “level of transformation” due to innovation according to four statements, labeled 1-4, with one being the lowest and four the highest (best) score.

1. The company’s innovation output is primarily the result of replication of well-used or mature processes or technology.
   Why is this a weakness? If you can do something with existing tools and methods, why change?
2. The company’s innovation output is not industry-leading. The company has adopted some emerging technologies.
   Shouldn’t insurers be selective in their technology investments?
3. The company’s output indicates that it is an industry leader in innovation. Peers often replicate the output results. The company is viewed as a leader in the industry.
   “Peers often replicate the output results.” Where do you want to be in the chain of innovation investment?
4. The company effectively uses cutting-edge processes and technology throughout the enterprise. The company’s innovation is at levels comparable to leaders even outside the insurance industry.
   If your company really needs and can use “cutting-edge processes and technologies,” go for it. If you want to be “comparable to leaders outside the insurance industry,” knock yourself out. But if you want to insure risks on a sustainably profitable basis, why not do so with the minimum investment on your end, and with the greatest possible commitment and contribution by those whose risks you are assuming?

Now, no one should let off-the-cuff comments of an industry observer diminish the importance of what A.M. Best is trying to accomplish. Following extensive review by and input from the industry, the new criteria are thorough and carefully explained, and compose only a fraction of a company assessment.

See also: Will COVID-19 Disrupt Insurtech?  

But insurance professionals should not be distracted by this important initiative from recognizing and embracing the historic role of this business in preserving value so that innovators can create value. One might say that insurance is the protective yin to the dynamic yang of a modern economy, an essential complement that responds to different imperatives.

Thought-following essentials

What, then, is “thought followership?” I would describe it as a series of commitments and understandings to guide decisions within an insurance organization and in its dealings with customers:

• A commitment to minimize disruption until it can add real value;
• A commitment to use established business practices and methods of communication until others are shown to better add or preserve value; and
• An understanding that, all else being equal, an established idea or practice is actually better than a new one, simply because of its track record and common understanding.

For the most part, insurance professionals already demonstrate these commitments and understandings, even as they improve the way coverage is delivered. That approach simply hasn’t been fashionable of late, and the industry and the people who work in it are continually told they have to change the way they think. Well, they don’t, fundamentally. What they have to do is follow where other sectors are leading, and provide old-fashioned assurances to leading-edge enterprises.

Wondering how AI can help detect medical provider scams? Wonder no more.

Artificial intelligence (AI) is redefining work in nearly every industry thanks to the increase in accuracy, efficiency and cost-effectiveness that AI-based applications offer. One of the latest industries to benefit is insurance, where applications are now being deployed to help detect and reduce provider fraud through advanced predictive tools. Claims payers identify fraudulent providers early in the life of a claim and root out bad actors while saving organizations millions of dollars.

The Fraud Problem

Fraud involves deliberately presenting false information to extract a benefit. The most common examples of provider fraud include “phantom billing” (billing for services not rendered), submitting bills for more services than are possible in a provider’s day, providing services unrelated to the injury, using unlicensed or non-credentialed individuals to provide medical services, getting paid kickbacks in exchange for sending patients to third parties and referring patients to entities (such as laboratories or testing facilities) in which the provider has an ownership interest.

While most providers do not engage in fraud, those that do are extremely costly. According to the National Insurance Crime Bureau (NICB), workers’ compensation medical fraud costs approximately $30 billion per year in the U.S. alone.

Fraudulent provider behavior is hard to detect and prove, particularly in workers’ compensation data systems. Advanced data analytics based on AI, however, offers opportunities to overcome the inherent weaknesses in these systems while developing methods to identify and curb provider fraud. Let’s take a look.

Fragmentation of Payers

One of the biggest issues in provider fraud is that no one organization has more than 5% of workers’ compensation market share, so none can see the entire picture of a provider’s claims. This can cause a whole host of issues. For example, if one company has identified a fraudulent provider, other companies may not have this information and continue payments. In states where fraud information is publicly available, providers simply begin practicing in other states, avoiding the state that sanctioned them.

Using AI tools, however, organizations can tap into multipayer pools of aggregate information to spot fraudulent patterns quickly and reliably without compromising payer, employer and employee information. It also makes it easier to flag and curb behavior across a multipayer database.

See also: Untapped Potential of Artificial Intelligence

Inaccurate Provider Identification

The constantly changing complexity of provider identification is another major challenge. Data is often tied to names. Fraudulent providers know this system weakness and frequently change their organization names and addresses as well as other identifiers.

Using AI, data scientists can now reliably link multiple bills from the same provider using a National Provider Identifier (NPI) developed by the Centers for Medicare and Medicaid Services (CMS). Almost all providers have an NPI, and some have more than one. When supplemented with taxpayer identification (FEIN) numbers and license numbers, NPIs can reliably identify 95% of medical providers. As a result, machines can overcome the name game, detecting the long-term, multiyear activities of almost all providers and provider organizations.

Long Lag Times

The interval between when an instance of fraud occurs and when it is detected is often several years. For example, a provider may submit a bill on day one for services unrelated to the injury; the bill will be submitted for review 30 days later and will likely be paid in another 30 days. This practice will be repeated dozens of times by the same provider on the same patient over the course of months. If fraud is detected, the provider will have already been paid, and financial recovery is difficult.

To combat this problem, AI can detect the entire course of treatment on the same claim from the first through subsequent billings over multiple years. Software tracks the diagnoses and the number of procedure codes billed by the same provider on the same claim — per day, per month and per year. As a result, claims staff receive real- time alerts and can intervene when a fraudulent provider initiates treatment on a claim.

Complex Provider Supply Chains

The entire fraud supply chain often includes attorneys, medical providers, outpatient and inpatient facilities, interpreters, testing facilities, medical device suppliers, pharmacies, copy services and transportation services. Unless data sets capture all or most of these moving parts, the chance of detecting fraudulent patterns is very difficult.

With AI, it’s getting a lot easier. Data scientists can use aggregated data to track sequences of out-referral and in-referral, exposing links between fraudulent individuals and entities. Sophisticated techniques isolate consistent and repeatable patterns of relationships between multiple providers and third parties. Data scientists then can graphically display suspicious network clustering patterns inherent in fraud networks.

And these are just a few examples of how AI tools can greatly increase the detection of fraud.

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

Defining the Future of Claims

AI differs from more traditional research approaches because it can generate its own rules to detect fraud and look across large data sets nearly instantly. Via machine learning, databases are continually refreshed, becoming smarter and more effective all the time. By incorporating AI-based solutions, insurance payers can defeat fraud at a systemic level and realize significant financial benefits in return.

As first published in The CLM.

Through the countless discussions that have occurred these past two weeks with many insurers, there have been winning strategies that have shone through as insurers have been executing their business continuity plans. And there have been certain challenges on the other side. Were you a company that needed the support of people to be in the office to “load the tapes,” making sure all those batch jobs on the mainframe computer kept running? Did you have challenges making applications available to your now-remote workforce? Were your call centers still able to fully support agents and policyholders?

One of the greatest successes in this market has been the performance of cloud computing. I remember, back in 2012, discussing the advantages of cloud computing. As an industry, there was just experimental acceptance of this capability – usually relegated to sandbox environments and testing. Jump forward to 2020 – and we see that 84% of all core system buying transactions were cloud-based. Not only have we leapt forward in our use of cloud, but we are now in mainstream acceptance that core systems – some of the most critical systems in the enterprise – are being commonly deployed in the cloud.

Let’s consider for a moment some of the advantages of systems that are deployed in the cloud – just to name a few that have been experienced over the past two weeks:

• Cloud provides a virtual computing environment that also enables virtualized managed services.
• New environments can be created to dynamically test changes.  
• Access is available – for all that need to use the applications regardless of physical location.
• Cloud decreases the need for “onsite” resources – elimination of tape loads, etc.

Investments that insurers continue to make to transform their organizations are bearing fruit today (even though we do not want to have to go through a pandemic to realize this truth). The digitally enabled experiences that insurers are providing to their customers and distribution partners are critical. Never before has it been more important to provide full transparency to the customer. For some, you are experiencing the world as it was before COVID-19 – a world of transformation that was moving forward, understanding the importance of the digital experience, and looking at ways to provide these capabilities. Today we are in a state where these digital experiences are a reality.

See also: Will COVID-19 Disrupt Insurtech?  

If the events of the past few weeks find you considering cloud deployment for your applications moving forward, refer to our recent research report, Cloud and Core Systems: Top 10 Strategic Considerations, for insights on buying cloud-deployed software solutions. Cloud will be one of the levers that insurers can use to meet the digital mandate that is no longer for the future – but is here today.

Insurance carriers and claim professionals deal with various catastrophes each year, so it was only fitting that when COVID-19 struck they were some of the first prepared to revert to "emergency work from home mode."

With many other industries trying to determine how (and if) their workers can take on remote duties, the insurance world led the way with flexibility and (for the most part) ordered adjusters to telecommute so they would not miss a beat of their daily workload. 

This trillion-dollar industry is fairly secure in most crises (the popular mantra being that "everyone needs insurance.") Understood are the IT capabilities needed in advance and the supervisor's faith in employees, as they've been doing this sort of thing for years. It was as easy as a keystroke from insurance upper management to keep workers from driving to their respective claim centers with their laptops and instead plugging in at home and being ready to go. 

Some insurance companies were first to respond in the U.S. by canceling all in-person (unnecessary) meetings and going virtual. They left some of their fellow businesses they share office space with in the dust as those other companies continued to mull over their options (or until the point of being bound by local government orders). Carriers have, for the most part, been eager to protect their workers from risk (isn't that what insurance is known for?) A possible hazard to staff meant a swift and immediate decision to work from home. 

Many carriers have realized the benefits of this arrangement, and even that many employees may put in more hours when working at home, saving themselves a tiresome commute (the average worker in the U.S. commutes over four hours a week, and some high-traffic areas require much more than that). 

See also: Moral Imperative for the Insurance Industry  

Most carriers also subscribe to the notion of in-office safety, encouraging those who are sick to work remotely, whereas some organizations may suggest workers come in or otherwise use a paid time off (PTO) day (few employees are pleased with that option as the average PTO days per year that Americans receive are quite low compared with other countries - another conversation, however!).

Many articles have been recently published with "work from home" tips; below are some of the more applicable to insurance industry professionals:

IF Insurance has penned a column called "How to work from home safely and efficiently?" It discusses an important topic in claims as it suggests that "Remote work provides several benefits, such as the possibility to focus deeply on specific tasks that require uninterrupted concentration." For that large litigation claim file with extensive injuries, this makes much sense; fewer interruptions makes it easier to focus on complex claims. Some other useful tips of the article include letting family members know you need to work in peace and keeping an eye on ergonomics and the setup at home (is that monitor at the correct level?). Planning your breaks with a clear start and end time is also key. Remember to keep in touch with colleagues, and don't isolate yourself completely!

"Working From Home Can Mean You Never Stop Working" is a recent piece from Philadelphia Magazine that reminds us all to keep a better work-life balance while doing so and setting rituals for logging on and off while not falling victim to some of the various pitfalls. Remember to move around so as not sit in one spot all day. Have a list of your priorities for the day and use noise canceling headphones if needed to minimize distractions.

See also: Claims: Beyond the ‘Moment of Truth’  

Arch Daily's website discusses tips for architects adjusting to the new experience of working from home. Largely, these professionals are used to collaborating with others in an office setting and now need to learn how to use digital technology to replicate those interactions. The article offers very useful information for experts in this field (and all others) to adapt to the times we face.

Will other industries learn from insurance and be well-equipped in the future? 

Or will the world change and move drastically to remote working after realizing some of its benefits? And is it really any surprise that insurance carriers are setting the example? 

After all, insurance and risk management by definition set out to identify, evaluate and prioritize risks and apply the use of resources to minimize the impact of unfortunate events (like right now).

In the midst of all the chaos, insurers are being put to test in real time. For all, it becomes the moment of truth for our industry and every individual company.

The strength of our industry is shining through. Insurers have quickly adapted to the new norm. Insurance executives are mindful of how this pandemic could hurt revenues and the bottom line, all financial ratios, even investment returns and stock prices and possibly coverage/claims.

At the same time, we continue to serve as a safety net for society, mitigating risks for all types of disasters – man-made or natural. This is who we are and what we do – as an industry and as each company in the ecosystem. As always, we will assess our strengths and our gaps and adjust our strategies and plans accordingly.

As a vehicle for insurers to understand and monitor the pulse of our industry in the middle of this pandemic, SMA just published a research brief that outlines the “The 10 Moments of Truth and Watch Points for the Future: How Insurers are Responding to COVID-19” highlighting the “whats” and “hows” of insurer response to this new norm. Each Moment of Truth reflects our reality as of April 1; insurers will continue to adapt to our changing environment every day. This brief also highlights the watch points to track and monitor for each Moment of Truth, as insurance evolves over the next several months.   

Below is the list of SMA’s 10 Moments of Truth: 

1. Demonstrating Insurance Strong
2. Stressing Every Risk and Continuity Plan
3. Working Remotely Effectively and Efficiently
4. Sustaining Current Levels of Service
5. Keeping Momentum Going Across Initiatives and Plans
6. Changing the Rules of Engagement
7. Innovating in Real Time
8. Keeping Everyone in the Loop
9. Demonstrating the Value of Digital Investments
10. Identifying the Gaps in Digital Strategies

One thing that this pandemic has already taught us is that we have never needed a digitally connected world more than we do now. Couple this with the reality that a crisis often brings about needed change. The needs, possibilities and opportunities that become clear during this crisis will stand out even more in our environment of fear and uncertainty.

Just remember, we are all part of this amazing insurance industry, and we are all standing strong. We will continue to stay present in this Moment of Truth. 

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

In the meantime, stay healthy and safe.

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

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

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

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

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

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

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

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

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

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

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

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

Cheers,

Paul Carroll

Editor-in-Chief

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See also: How Agents Are Adapting to COVID-19  

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

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

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

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

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

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

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

Healthcare Reimagined

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

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

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

See also: The Graveyard of Digital Health  

Skills Competition

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

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

The Investment Thesis

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

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

Payer Perspectives

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

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

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

Telemedicine Disruptor

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

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

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

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

Will You Be the Disruptor or Disrupted?

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

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

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

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

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

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

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

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

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

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

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

See also: Coronavirus: What Should Insurers Do?  

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

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

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

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