As we continue to face a national opioid crisis, insurance adjusters need to keep their safety top of mind during the inspection of a drug-related claim. It is essential to be aware of the potential health risks you could be facing, especially if the property or vehicle you are dealing with may be contaminated with an illicit drug. When you first step on the scene, remember to think whether the property could have been contaminated by the insured, a third party involved in the claim or an unknown party. Take a situation where an adjuster is inspecting a property damaged by the renter, and a mysterious white powder is discovered. This powder could be a number of substances --flour, drywall compound, cocaine or even fentanyl. It is important to treat it with caution while identifying the substance, as this will affect the claim and your safety. Another example is water damage that has occurred to a home where recreational drug use or pill pressing occurs. Adjusters must ask themselves and their teams what the contents or mixture of those pills were. Moreover, what if a car is stolen and damaged by individuals high on drugs? What is the risk is to the repair facility? It’s important to mitigate and manage these types of losses. How do we protect ourselves and our sub trades and rehabilitate the risk? Start by asking yourself, do I really know what the risks are and who can help assess and clean it up? Next, think about the risks by asking yourself, how can we best manage the salvage? As the fentanyl crisis continues, these questions are all crucial. Fentanyl and carfentanil are both now being cut into to illicit drugs like cocaine, heroin and counterfeit pills, which are made to look like prescription opioids. For this reason, there is no easy way to know if carfentanil was used in the making of a drug – especially because you can’t see, smell or taste it. This causes additional problems, as it is essential to know if there is even a very small amount of fentanyl when handling a substance because of its danger due to the high level of toxicity. See also: Better Treatments for Opioid Addiction   What level of exposure from opioids increases health risks? The answer isn’t clear-cut, as it depends on the types of drug that are present – scenes are highly variable if inspections are uncontrolled and unregulated. With fentanyl being 50 to 100 times more potent than morphine, and carfentanil approximately 100 times more potent than fentanyl, the risk is apparent. As little as a grain of salt of carfentanil could be lethal. If faced with a situation possibly involving illicit drugs, it is important to do your homework and make sure that qualified and experienced firms are used for the testing and decontaminating of fentanyl or carfentanil. Cleaning can create hazardous wastes or other issues if not done properly. Documenting the work and results by designated professionals is another way to limit a potential liability. In any case, next time you’re walking through a property and notice a strange powder on your clothes, think twice before simply brushing it off. The results could be fatal, not only to you but to whomever you may come in contact with.

Two bills currently being considered in the U.S. Congress may expand the insurance options available to marijuana-related businesses (MRBs) that operate in states that have legalized marijuana for medical or recreational use. As discussed in the recent Insurance Thought Leadership article, “Marijuana Policy Gap: Insurers’ Uncertainty,” 33 states have legalized marijuana for medical use, with 10 of those states legalizing for recreational use. As a result, cannabis has become a multibillion-dollar industry in the U.S. and is expected to continue growing rapidly. Nevertheless, pursuant to the Federal Controlled Substances Act (CSA), the cultivation, sale, distribution and possession of marijuana remains illegal under federal law. The conflict between the CSA and the laws of states that have legalized marijuana in some capacity has resulted in uncertainty for those interested in entering the “legal” cannabis market. The confusion created by conflicting approaches to marijuana legalization has implications for businesses in the cannabis industry and those that service the “legal” cannabis industry. So, the insurance options available to MRBs are fairly limited, as large, admitted insurers have taken a cautious approach and largely avoided entering this market. Many of the insurance options available to MRBs are limited to smaller, specialized insurers and the excess and surplus lines market. Excess and surplus insurers tend to be more specialized and are “non-admitted,” meaning they are not licensed by the insurance department of the state in which they underwrite risk. This is significant because excess and surplus policyholders are not protected by state insurance guarantee funds, which offer protection to insureds in the event that their insurers become insolvent. In addition, because excess and surplus insurers are not licensed by the states in which they issue policies, they are not necessarily subject to the same regulations as admitted insurers, such as regulations governing policy forms or finances. Accordingly, MRBs may face higher premiums and less comprehensive coverage. See also: Marijuana Policy Gap: Insurers’ Uncertainty   As a result of the limited and, in some cases, cost-prohibitive coverage options available for MRBs, many remain underinsured or even completely uninsured. This can have disastrous consequences, as MRBs can face significant liability, just as any other business does. Moreover, the lack of coverage available to MRBs can leave consumers or other injured parties unprotected in the event of a claim, as it can be difficult or even impossible to collect against an uninsured or under-insured business. To address the uncertainty and foster a more robust insurance market place for MRBs, on July 22, 2019, Sen. Robert Menendez (D-NJ) introduced a bill in the Senate titled the “Clarifying Law Around Insurance of Marijuana Act” or the “CLAIM Act” (S.2201). A similar bill was introduced in the House of Representatives just a few days later by Rep. Nydia Velazquez (D- NY), with the same name (H.R. 4074). The stated purpose is to create a “safe harbor” from liability for insurers that underwrite policies for MRBs in states where medical or recreational use of marijuana is permitted, to encourage more insurers to enter the market. Both bills enjoy bipartisan support, being co-sponsored by both Democrats and Republicans, although their prospects for passage into law remain unclear. The Senate version of the CLAIM Act would protect insurers that engage in the “business of insurance” with a “cannabis-related business” or service provider within a state that allows the cultivation, production, manufacture or sale of cannabis from being held liable under “any federal law” including regulations. The bill defines a “cannabis-related business” as a manufacturer or producer or any person or company that engages in “any business or organized activity that involves handling cannabis or cannabis products,” including cultivating, producing, manufacturing or selling cannabis or cannabis products. The bill would also prohibit any federal agency from penalizing or prohibiting an insurer from providing insurance to a “cannabis-related business.” The text of the House bill is substantially the same as the Senate bill. See also: Legal Marijuana: An Insurance Perspective   While these bills, if passed, could encourage more insurers to enter the cannabis market, potentially resulting in broader insurance options for MRBs, they may also clarify issues surrounding the enforceability of existing insurance policies that cover marijuana-related risks. After all, while some have argued that policies of insurance that cover marijuana-related risk are void as against public policy or otherwise invalid, even in states in which marijuana is legal, those arguments will become much harder to support if the federal government has carved out a “safe harbor” for insurers to underwrite cannabis risk in states in which cannabis is legal. As such, both S. 2201 and H.R. 4074 have significant implications not just for the future of the cannabis insurance market, but also for policies of insurance that have already been issued to MRBs for cannabis-related risk. Therefore, it is important that anyone working in the cannabis industry, or servicing those who do, continue to follow these critical pieces of proposed legislation.

We have been telling everyone who would listen for a long time that the future of the insurance industry will be dictated, not by the insurers, but by the clients. We have also been telling you that this reorientation will manifest itself first on the commercial side of things, if for no other reason than the greater bargaining power of the customer. Sure enough, Willis Towers Watson announced last week an innovative risk advisory service that very much looks at the world through corporate clients' eyes.

Of course, Willis is not the only organization moving in this strategic direction. We know of at least one large broker that is actually ahead in its thinking. But it's still worth looking at the implications of the Willis program, which helps risk decision-makers (usually risk managers or CFOs) manage risk more effectively, balancing retained and transferred risks to reduce companies' total cost of risk. 

I have heard from a lot of risk managers that they would like their role within their organizations to be elevated. They would like to be part of strategic decision-making, forging the organization's risk profile. Well, as the Willis program shows, here's your chance. 

The key to the future of risk management is that risk has always been viewed as an expense or a liability but, because of technology, will start to feed into opportunities on the top line of a company's financial statement. Basically: Yes, there will be a risk if we attempt X, but we can be smart and mitigate risk by doing Y. The numbers for X now look a lot better, so let's go ahead with it—and watch sales climb.

Risk management can become strategic if managers find ways to enable projects that can drive revenue. We have seen more than a few examples of this. The benefits are not fractional; they are measured in multiples, as in P/E multiples that make the stock market amplify the gains.

From the standpoint of brokers like Willis, the needs are pretty straightforward: They need to become better at identifying technology advances that are important for clients, to stay ahead of their broker competitors, and will need to consult more with clients while selling products less. There will, of course, be some transition required in the business models, because consultants don't get paid a commission on premium. New pay arrangements will need to be figured out.

From the internal risk manager standpoint, the situation will be more complicated. Even though many risk managers say they want to take a more strategic role in their organization, they may be reluctant to stick their necks out. (No jokes needed about being risk-averse.) Just look at all the RMs that have sprung up over the years—ERM (enterprise risk management), SRM (strategic risk management), IRM (integrated risk management) and maybe more—without causing the sort of major shift in role that many have predicted.

There isn't always an appetite among senior management for more input by risk managers, either. Our friend Chris Mandel, an SVP at Sedgwick who is one of the world's ranking authorities on risk management, says input is requested on the most destructive exposures, so requests for strategic advice are scattershot. But the needs are there among senior management, and aggressive risk managers can spot and fill those needs. (Chris offers more thoughts on risk management opportunities in a podcast I did with him earlier this year.)

Clients will, of course, continue to work on reducing their traditional, internal risks, and technology will help there, too. For instance, many companies have learned the hard way that they had more cyber exposures than they realized—the sort of thing that technology can track. Reducing the number and severity of claims will, at least eventually, lead to lower premiums. But the days where the risk management game was based on ratings and recovery are numbered, and the days of prediction and prevention are fast coming. The new game will be won by those in the industry that can help clients switch from a focus on reducing losses to enabling growth.

Those companies that embrace the notion of risk as a value driver will see exponential gains in enterprise value, and those of us in the insurance industry need to enable those gains. It's all about the clients, not the insurance.

Wayne Allen
CEO

This summer, we celebrated the 50th anniversary of the Apollo 11 spaceflight that first landed men on the moon. Just eight years before, President Kennedy gave his famous speech calling for America to land a man on the moon and return him safely to earth by the end of the decade. At the time, the goal seemed both impossible and within reach. It would require a level of collaboration, innovation and commitment never before accomplished in the world, and an unwavering focus on a light in the sky previously accessible only in our imaginations. In July 1969, Neil Armstrong took his famous “giant leap for mankind.” Today, we are dedicated to creating the workplace of the future, in which the leadership strengths of men and women are deployed equally, in combination more powerful than either can be on their own. The goal seems both impossible and within reach at the same time. There is endless conversation about why women need to be included in organizational leadership and reams of data establishing that, when women lead organizations, result across all measures improve. Nonetheless, the same data also shows that, despite a tremendous investment of resources, we are making no meaningful progress and may even be sliding backward. Our focus on the future world previously accessible only in our imaginations seems to be fading out of sight. The commonly accepted (and overly generalized) problem statement is that society views men as better than women, and women in many instances behave as though they are less than men. The solution everyone comes up with, as we did originally, as well, is to separate men and women and work on elevating women. See also: 3 Keys for Building Women Leaders   Women generally acknowledge we have some work to do to clear through barriers we put in front of ourselves and to overcome the inner voices telling us we are less than. Companies and media outlets are raising awareness of hidden gender bias. The market is overcrowded with women’s networking organizations, training programs, conferences attended by thousands of women, a plethora of books written by women with star power and movies about strong women, all aimed at “inspiring and supporting” women. Women are inspired and supported, but the work isn't making any meaningful difference. A few years ago, a study projected that it would be 140 years before we achieved gender parity in the C-suite. A few weeks ago, that number was updated to 204 years. At the same time, a survey of male executives revealed that about 60% of them refuse to work on projects with or be alone in a room with a female colleague. We believe the problem is that incremental change can’t accomplish transformational goals. Women need to jump the abyss, rise up above the quagmire of little things that keep us stuck in place and stay focused on the possibilities from a new world view. We call it jumping the abyss because it requires a willingness to leave behind the comfort of our belief system and jump toward the unknown of what can be but isn’t yet. However imperfect, the status quo is at least familiar and is scary to leave it behind. This type of leap is necessary if we want to make progress, because incremental change keeps us stuck in the quagmire. The mistake we are making is the assumption that women need to jump the abyss on their own power and for themselves. We believe women need to be self-propelled. However, women can’t execute the leap on our own. This is the crux of why a tremendous investment of resources is not producing meaningful progress. To accomplish something that has previously existed only in our imaginations, we need a level of collaboration, innovation and commitment never before accomplished in the design of organizational leadership. For women to successfully jump the abyss, men and women must make the leap together. See also: Why Women Are Smarter Than Men   What’s available on the other side is the opportunity for women and men to work together as partners in leadership, designing and building the workplace of the future. All are welcome, and there is no longer any doubt that all will benefit from a new approach. We don’t have a leader today who can put out a call we will all be inspired to answer, as President Kennedy did. We have to decide on our own that we are ready to take “one giant leap for mankind” and then do it. Every person can play a role. Are you willing? If you want to engage in conversation, if you want to explore how women can move forward, breaking through the tangles and making transformational changes for themselves and those around them, we would like to talk with you. Please reach out to us or check our website at www.hightidesgroup.com.

The health reimbursement arrangement (HRA) is having quite a moment. After being seriously reduced by IRS guidance following the Affordable Care Act, they’ve reentered the scene as a serious option—particularly for small businesses. With the creation of an HRA in 2016 and two new HRAs on the horizon, it’s a good time to look forward to what’s in store next year.

In this post, we’ll cover everything you need to know about HRAs in 2020. That includes whether your business should consider one, which HRA options will be available, how any HRA rules might change and what’s happening with federal proposals to create two brand-new HRAs in 2020. Let’s dive in.

Will HRAs be a good option in 2020?

HRAs have always been a good option for businesses that struggle with group health insurance costs. As access to these benefits expand, more and more businesses can consider them as a viable alternative. This will continue to be true in 2020. The underlying causes of rising health care costs haven’t been addressed, and group health insurance rates will continue to increase while small businesses struggle to meet them.

With the availability of the qualified small employer HRA (QSEHRA) firmly in place—and two new HRAs set to become available in 2020)—small businesses will have a way to control their budgets while offering a formal benefit to employees. What’s more, the individual market will continue to stabilize, with more insurance carriers returning to and entering public marketplaces. This makes for a fertile field of options for employees who will be shopping for their own policies during the 2020 open enrollment period.

What HRAs will definitely be available in 2020?

While federal proposals recommend creating two HRAs in 2020, the list of confirmed HRAs for the year remains the same as it was in 2019. They include:

1. The group coverage HRA. The group coverage HRA is an HRA that operates alongside a group health insurance policy. A business using the group coverage HRA purchases a high-deductible health insurance policy and offers a separate HRA to employees enrolled in the policy. Employees could use the HRA to reimburse themselves for out-of-pocket, non-premium medical costs, including amounts paid toward their deductible.
2. The one-person stand-alone HRA. As the name suggests, the one-person stand-alone HRA is a stand-alone HRA for businesses with one employee. The HRA reimburses the participant for all HRA-eligible expenses, including individual insurance premiums. To offer the HRA, businesses must have onyl one full-time W-2 employee.
3. The retiree HRA. The retiree HRA functions much like the one-person stand-alone HRA. All retired full-time employees can participate in the benefit. Typically, only larger businesses offer this HRA.
4. The qualified small employer HRA (QSEHRA). Created through bipartisan congressional legislation in 2016, the QSEHRA is available to all businesses with fewer than 50 full-time employees. With the QSEHRA, employees can be reimbursed for all out-of-pocket medical expenses, including individual insurance premiums. All full-time employees are automatically eligible for the benefit, and the business can choose to include part-time employees, as well.

If the proposed federal regulations are affirmed in a final rule, we also expect to see two additional HRAs become available to businesses of all sizes.

See also: North Carolina’s Battle for Healthcare Value  

Will any details about these HRAs change?

The group coverage HRA, one-person stand-alone HRA and retiree HRA will all function in the same way in 2020 as they did in 2019. Some details regarding the QSEHRA will change, though.

First, annual contribution amounts will change. Every year, the IRS reexamines the maximum amount businesses can contribute to employees through the QSEHRA based on cost-of-living adjustments. In 2019, these amounts are $5,050 per single employee and $10,450 per employee with a family. The 2020 allowance amounts, which we expect to be released in October or November, will be higher.

Second, if federal proposals on HRA changes go forward, we’ll see new enrollment opportunities for employees with a QSEHRA. Right now, becoming newly eligible for a QSEHRA is not a qualifying life event that entitles an employee to a special enrollment period. Instead, the employee must wait until open enrollment season to shop for and purchase an individual health insurance policy. With these new guidelines, that will change. If the proposals are enacted in 2020, employees who gain access to a QSEHRA will be able to claim a qualifying life event, which opens a 60-day special enrollment period.

Can we expect new HRAs in 2020?

In October, the departments of the Treasury, Labor and Health and Human Services released proposed regulations that would expand access to HRAs. The most exciting development in the proposals is the creation of two HRAs: the individual coverage HRA (ICHRA) and the excepted benefit HRA. With the ICHRA, businesses of any size could offer an HRA to employees as a stand-alone benefit. Unlike the QSEHRA, the ICHRA would have no annual contribution caps, and businesses could choose to define eligibility and allowance amount by nine different employee classes. The excepted benefit HRA would also be available to businesses of any size. Those offering the HRA could reimburse employees up to $1,800 per year for excepted benefits, including dental and vision expenses.

The regulations suggest an implementation date for both the ICHRA and the excepted benefit HRA of Jan. 1, 2020. However, the final rule that would solidify this start date has yet to arrive. In the meantime, insurance carriers and state insurance departments have been lobbying the departments to push the start date back to 2021 or later. They argue that, because HRAs would allow a significant number of new people onto the individual market, the HRAs could affect their risk pools and the way they structure pricing. Because rates for the 2020 individual market have already been filed, they argue, it would be unnecessarily risky to introduce the new HRAs next year.

See also: How to Optimize Healthcare Benefits  

While we expect the ICHRA and the excepted benefit HRA to become available eventually, we can’t say for certain that they’ll be available in 2020. Subscribe to our blog or check back here frequently to stay updated on all your HRA options for next year.

Conclusion

As in years past, interest in HRAs as a stand-alone health benefit is increasing. In 2020, the HRA will be a great choice for businesses committed to providing health benefits but concerned about cost. With four strong HRA choices definitely available in 2020 and two more potential candidates, HRAs are poised to help thousands of businesses offer strong health benefits to employees.

For more information about HRAs, check out PeopleKeep’s HRA education page.

Marketplaces have existed for as long as humans have had products and supplies to trade. Marketplaces transcend cultures and languages — from bazaars (Persian), souks (Arabic), to marchés (French) — and the definition remains consistent throughout: an open or public area where products are bought and sold. Over the centuries, marketplaces have continuously evolved from a traditional analog state to increasingly digital, which has opened a wealth of opportunities for businesses and entrepreneurs. As advancements in technology continue, the value of digital marketplaces to businesses is clear:

• Improve and elevate the client experience
• Condense sales cycles and increase revenue potential
• Extend visibility and market reach

The constant evolution of marketplaces has transformed business practices, and in some cases upended entire industries. To highlight how this happens, let’s start by taking a look at the various marketplace models that exist today: Marketplaces for Physical Products and Goods: Products and tangible items that can be bought, sold or exchanged through marketplaces can be distributed completely offline through brick-and-mortar stores, online through integrated e-commerce or through a hybrid of online-offline. Offline marketplaces have evolved the least and still closely resemble the way goods have been purchased for centuries. This is due to the nature of what is being sold. For example, people generally prefer to try on clothes in-person before purchasing (this may evolve with advancements in AR/VR technology), or assess the quality and freshness of food and fine ingredients themselves. In these cases, offline marketplaces meet those needs and serve as a centralized meeting point for people to gather to sell and purchase goods. Online marketplaces were introduced in the '90s during the dotcom boom to decentralize the exchange of goods and make the process more efficient. The increase in speed and efficiency led to an explosion of growth for businesses, and it hasn’t slowed. Some of the most notable companies in this space — Amazon, eBay, Alibaba — generated combined revenue of $296 billion in 2018. With the introduction of online marketplaces, consumers can shop in real time and are no longer restricted by location, hours of operation or access to specific vendors. The world now has access to limitless item categories, across any device, at any time. See also: 3 Reasons to Use Online Marketplaces   Hybrid models exist where the entire end-to-end purchasing experience cannot take place online. For example, a person could go through all of the steps of purchasing a nightstand on Amazon — from search to product comparison and payment — and have it delivered directly to the doorstep (integrated online). Whereas if the same person bought a nightstand on Craigslist, the person could go through most of the same steps online, but would still need to pick up the item in person from the seller (online-offline hybrid). On-Demand Marketplaces for Needs and Tasks In the 2000s, technology continued to advance at a rapid pace. Through the introduction of smartphones and wireless internet, we entered a “digital economy.” Technology became more accessible and standardized than ever before, which meant industry after industry underwent a digital transformation, creating a set of standards for the way businesses interact with clients. One way to highlight this is by looking at the speed at which it took different technologies to reach 100 million users. It took the landline (1896) 75 years, Instagram (2010) two years and Pokémon Go (2016) one month. During this time, online marketplaces evolved once again to include an on-demand needs category. This introduced fully integrated online spaces for consumers to fill a specific need instantaneously. Whether it’s transportation (Uber, Lyft), accommodation (Airbnb) or ordering lunch (Ritual, UberEats), options are available for consumers through the click of a button. During this time, we saw the birth of the “shared economy,” which allows individuals to share underused personal resources (cars, property, etc) in exchange for a fee. It’s here that marketplaces took on a slightly expanded definition: an open area or technology that’s accessible to the public where products and services are bought and sold. The Next Generation of Marketplaces: Regulated Services The next evolution of marketplaces is quickly approaching, and this time we will be moving into an era of fully integrated experiences for regulated services. Regulated services often require a certified or licensed intermediary to support the client and help move the transaction forward. Some industries that use this model are legal services, real estate, healthcare, financial services and insurance. Li Jin and Andrew Chen of Andreessen Horowitz have studied this space extensively and published this great essay on why they believe the next phase of the internet will be about reinventing the service economy. Services marketplaces are currently straddling the offline and hybrid models, however haven’t reached the tipping point of full integration. A fully integrated online experience would be completely powered by technology, involving no manual or analog parts of the process. The end-to-end experience for the client is managed on one integrated platform — and incorporates the built-in trust and credibility associated with licensed intermediaries. In their research, Li and Chen highlight that “while services make up 69% of national consumer spending, the Bureau of Economic Analysis estimated that just 7% of services were primarily digital.” This is partly a result of service industries having standards that are often grounded in manual processes. This makes it difficult to digitize parts of the process that are traditionally done offline. For example, a person can go through some of the steps of purchasing a home online — from exploring listings, interacting with a real estate agent, negotiating terms and completing mortgage application forms — but signing the required legal documents still needs to be done in person with a witness present. In life insurance, advisers intermediate between the carrier and client. It’s the adviser’s responsibility to assess the clients’ needs and financial goals and identify the best carrier products available for them. The adviser also oversees the approval process, which involves many layers, including underwriting, filling out application forms for individual carriers and sending the client a list of quotes and policies to compare. Reviewing these steps, the adviser’s role as intermediary serves the same purpose as a digital marketplace — advisers search, exchange information between vendors and clients, provide relevant product recommendations and facilitate the transaction. The process is the same, but the approach is currently manual. However, we are nearing what many would consider the fourth industrial revolution. Clients rely on technology more than ever, and businesses need to adapt. In this recent article, James Currier, managing partner of NFX, claims that, “Over time, nearly all independent professionals and their clients will conduct business through the market network of their industry. We’re just seeing the beginning of it now.” Service-based businesses need to start preparing for the process of digitization now to compete. See also: The Best Approach for Small Commercial? It’s clear that intermediated industries are on the verge of a massive shift, particularly regulated services. With this in mind, it will be important to understand the advantages that digital marketplaces provide and, more specifically, what companies and business leaders can do today to ensure they’re prepared for the future. In part two of this series, we’ll take a deeper dive into these topics:

• Four critical functions of service industries that will be transformed by digital marketplaces
• How business leaders can prepare for the future and stay competitive in an increasingly digital economy

Non-standard insurance is no longer exceptional. The nature of risk is ever-evolving as the way we live continues to change. Factors such as climate change are becoming a much bigger issue and have significant implications both for insurance providers and homeowners. The evidence of this shift is all around us. Just a couple of weeks ago, Lloyd’s of London announced that it had seen steep losses over the last two years due to natural catastrophes. This announcement followed the news that hundreds of Whaley Bridge residents were forced to evacuate their homes after extreme rainfall threatened to burst a nearby dam. Even MPs have come forward recently suggesting that companies are going to have to be more forthcoming about the risk their assets face as a result of climate change. The insurance market is going to have to adapt. Climate issues aren’t new; the U.K. heatwave of 2018 led to increased subsidence, while the growth of flood plains has had a similar effect, with more and more homes being pulled into the non-standard category. In fact, just looking at the shop-around market, the non-standard category saw year-on-year growth of 9.3% from 2018 to 2019, compared with the 2.7% growth in the standard market. But it’s not all down to climate change; the rise of non-standard is also largely due to the changing nature of housing stock. A 19th century family villa comes with very different risks to a new-build flat. Seemingly innocuous factors such as whether the house has multiple occupants, serves as a work-living space, houses a lodger or takes Airbnb guests, changes the profile once again. See also: Distribution: About To Get Personal   Additionally, the nation’s embrace of loft conversions and extensions – invariably flat-roofed – is altering the national risk profile at scale. The current economics of home-buying suggest that renovating will remain at least as popular as buying, and that the rate of second (and thus frequently empty) home ownership will grow. Unfortunately, many homeowners only discover their non-standard status when they apply for home insurance. These consumers naturally expect exactly the same services as their standard counterparts. They don’t want to be treated differently; they expect instant quotes, competitive prices, online transactions and easy self-serve options, and insurers who can’t deliver risk losing customers. It seems that insurance providers have found it too hard to meet the needs of this new category without risking their loss ratios. Consequently, most insurers only have an underwriting footprint of 60% to 70%. Now that non-standard is rapidly becoming the new normal, this is no longer sustainable. The good news is that the rise in non-standard can be supported by two major technology trends. The first, aggregator distribution, democratizes the process of getting a quote and gives consumers a more complete view of their options, leading to an increased underwriting appetite for non-standard markets. This results in a virtuous circle, in which the number of brands prepared to quote online for non-standard is growing, increasing the viability of aggregators as a distribution route for non-standard products, which has increased customer engagement, in turn. The second trend is set to have an even bigger impact: the technical ability to manage, process and analyze previously unthinkable volumes and varieties of data. Advanced analytics, machine-learning techniques and smart predictive algorithms give a much more detailed and accurate risk profile – leading to more precise and cost-effective quotes, which is positive for both insurers and the consumer. See also: Why 5G Will Rock the Insurance World   Climate change may be accelerating changes in the insurance market, but there are many reasons why non-standard is on the rise, bringing different risk dynamics with it. Standard price and risk modeling are struggling to respond, and a more complex set of underwriting rules is required. While not every underwriter will have the technological tools to cope, and not every organization will choose to be competitive in this market, for those that do, they will face both attractive margins and a growing consumer audience.

One of the big areas of focus across the insurance industry, in general, has been to streamline the application/quoting process. Whether it’s agents who are submitting applications for their customers or individuals and business owners filling out their own applications, there is a recognition that faster and simpler is the way to increase customer acquisition. Many insurers have been improving the user interface, leveraging data prefill capabilities or even rethinking what data is really needed to underwrite a particular line and application. Examples abound for personal auto, small commercial, renters, workers’ comp and other lines. This brings us to the question of homeowners insurance. Are the same factors at work here? And is the industry making progress? This summer, SMA conducted a mini research study to gain some insights. Applications for quotes were placed for a small number of homes in three states with 20 prominent insurers and MGAs. We conducted a similar study in 2010. Due to the complexities and variations in homeowners insurance by state, and types/sizes of homes, the research is not comprehensive enough to be statistically significant. (Also, we did not consider comparative rater sites for this project.) Nevertheless, the survey does give us a good idea of the state of the user interface for quotes, how much data insurers require, the types of data underwriters are requesting and the level of prefill underway. See also: The Reinsurers Are Coming!   This project led to a few top-line conclusions and insights:

1. Estimating home value/replacement cost – a central element for quoting – is difficult but still reflects mostly the inside-out view by insurers (questions asked from the insurer’s viewpoint): What information do I need to make sure I understand all the exposures and costs before I price it? Few are thinking outside-in: How can I make this easy for the homeowner? (The insurtech Hippo is an exception.) For the homes we used, which ranged in value from $225,000 to $600,000, the number of data fields requested ranged from 15 to 60-plus. On average, there are over 30 data fields requested, only slightly better than 10 years ago. The time to get an initial quote ranged from two minutes to 20 minutes.
2. The UI has improved in the last 10 years – with more radio buttons, better visual appeal and responsive design elements. But there are still lots of data fields for the customer to fill in and limited prefill.
3. Even among the top insurers, many still do not offer online quotes. Many refer prospects to the agent immediately. Some ask a few questions first and then refer to an agent.
4. Unlike with many other insurance products, there are relatively few direct-quote-access insurtechs. There are a number of aggregators, but they follow the requirements of the insurers. The lack of insurtech focus may be the result of the complexity of the line of business.

We understand the difficulties related to this line, including the limited availability of property characteristic data for older homes, the variability in perils by geographic area and the uncertainties related to CATs. In fact, because of the region-specific catastrophe issues, there appears to be a hesitancy to do on-line quoting. The amount of data needed to quote/underwrite for things like sinkholes, coastal winds, floods, wave-wash, wildfires, earthquakes and hail make it difficult, but not impossible, to generate a seamless on-line experience. In addition, from an insurer perspective, insurance to value (replacement cost) at a book level is pivotal to profitability. Because of this, there appears to be a reluctance to let go of the building characteristics questions. In the limited instances where they are prefilled, there is a validation process. Where they are not prefilled, they must be answered by the insured. Frankly, most people cannot answer structure questions about homes they have lived in for a long time. And the number of questions asked about the structure varies significantly. See also: An Insurance Policy With Some ‘Magic’   So, yes, it is a challenge to create the five-question, two-minute online experience that many are striving for in other lines. But most customers don’t understand or care about the complexities. In the near term, the answer to this challenge lies in integrating external data from real estate databases, tax records and other sources of dwelling/structure data for prefill. Validating information is significantly easier than inputting data. The homeowners line cannot be the odd man out in the quest for ease of doing business in a digital world. The insurer/agents/MGAs that rethink this process from the outside-in customer perspective will be positioned for market growth.

Incorporating team building as part of your corporate culture may seem like an obvious step in strengthening your business overall, but it is often neglected. In fast-paced, high-energy environments such as the insurance and insurtech industries, investing in your employees through professional development and team-building activities can go a long way in promoting success. In a competitive market, attracting the right people for your team can be a challenge, as can maintaining a motivated team. Startup tech businesses have become known for their ability to attract and maintain talented employees through a culture that prioritizes open communication, collaboration team building and individual growth. This “startup culture” focuses on nurturing a strong team through tools and activities that allow employees to bond, feel heard and continue learning within their role. When it comes to attracting talent, “startup culture” is the expectation these days. Prospective employees, especially recent graduates and millennials, place a great deal of importance on a fun, inclusive and social work environment. They seek companies with a “startup culture” - modern vibrant offices, open-plan workspaces, flexible schedules and, most importantly, a collaborative environment. Organizations of any size can borrow elements of “startup culture” to strengthen their own team. Here are some benefits of creative team building and a startup atmosphere: Boosting Employee Morale Creative team building breaks the monotony of spending the day at the office working on insurance claims or underwriting files. Regular team-building activities provide an opportunity to get out, have fun and relax, while encouraging collaboration and team bonding. The activities help eliminate employee burnout, improve productivity and increase retention. See also: How to Embrace Insurtech Culture   Team-building activities usually revolve around the completion of tasks and problem-solving. (Read on for some creative examples.) Completing these tasks boosts employees’ confidence and trust in their unique abilities. Confidence is a major source of motivation that is transferred to the workplace. Creative team building, therefore, contributes to a positive corporate culture that boosts employee morale. Improving Productivity Poor performance is often seen as being linked to employees’ incompetence or lack of care, but it could instead be a result of poor communication and lack of confidence. Creative team-building activities present the opportunity to overcome communication barriers and foster interaction and collaboration among staff. Improved communication enhances productivity as it encourages employees to seek second opinions and ask for help. Employee Retention and Happiness All employees want to feel valued and contribute to meaningful work. They also want enjoyable workspaces where they are heard, not spaces they can't wait to get away from. One-third of our lives are spent at work. Many people are surrounded by their colleagues more often than their friends and family. A strong corporate culture and positive team dynamic is key to creating a favorable working environment employees want to stay in. Creative team building can help in retaining top talent, reducing employee turnover and promoting employee happiness. Creative Team-Building Ideas There are a number of different team-building activities to choose from, depending on budget, team size and team dynamics. Here are a few activity ideas that my team loved:

• Escape rooms: Employees in teams collaborate on cracking codes and solving mysteries. This is an excellent way to boost communication, encourage problem-solving and create camaraderie.
• Seasonal office parties and personal celebrations: What better way to create a sense of family and bring employees and management together? Fun activities provide a lot of needed laughs. For example, we had a foosball tournament in the office. Bosses and workers alike can don goofy hats and have a good time.
• Recreational sports and tournaments: Friendly competition and teamwork are a great way to create friendships and lasting bonds among teams. For instance, we had a zip line adventure at a nearby camp.

See also: New Challenges as Startups Consolidate   At the end of the day, employees want to feel valued, challenged and respected. While catered meals and an open office are appealing, it’s open communication, growth potential and strong team dynamics that keep good employees. Fostering a team-oriented environment through regular team-building exercises and activities is one step any organization can take to improving company morale.

Many commercial lines insurers recognize that there are great opportunities for growth in the small commercial segment. There is no question that the segment is hot and that the potential is there for increased business. So, many are rushing into the space or redoubling their efforts and focusing on small commercial. Thus, it is hyper-competitive, and success is not guaranteed. This raises the question, “What does it take to win in the small commercial segment?” A new SMA research report, Ten Guidelines for Success in the Small Commercial Market, answers this question. Senior leaders intent on small commercial face many questions. Are our existing distribution channel partners adequate to support our growth? Should we establish a new digital brand? Do new insurtech distribution firms present good partnership options? Do we need to modernize our products by adding new coverages? How can we simplify the submission and underwriting processes? The list of questions could go on. To develop a winning strategy that can be effectively operationalized, insurers should consider the 10 guidelines in the SMA report. These guidelines can serve as a type of filter or way to organize and address the various questions that arise in the development of a new or enhanced strategy for small commercial. Five of the guidelines are aimed at framing the strategy, while the other five are meant to direct the execution elements. Excerpts from each type of guideline are: Strategic Approach: Take an outside-in approach. Internal insights and agent input are still important, but the outside-in approach considers customers first: their needs, their pain points and their preferences for interaction. The very first task in taking the outside-in approach is to be absolutely clear on who the customer is. Is it the agent? The policyholder? Or, are they both considered customers? Execution Elements: World-class data and analytics. The strategies and operations for small commercial must be data-driven. This demands a sophisticated platform for business intelligence and advanced analytics. One of the top areas of focus today for small commercial is improved data pre-fill and data augmentation. See also: Emerging Tech in Commercial Lines   Winning in this market is not easy. Big players are devoting huge dollars to capture more market share. New entrants such as insurtechs are bringing innovative, customer-focused approaches that are appealing to small business owners. Leaders are leveraging analytics to understand how to segment more effectively. And all are looking at the vital role of technology to create a competitive advantage. It is a big and growing market. And the right formula and focus can make a winner out of any insurer willing to innovate and stay the course.