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.

Does the name Ned Ryerson sound familiar? Perhaps just vaguely familiar, but you can’t quite remember where you’ve seen or heard the name? I’ll give you a hint: BING! How about now? Still don’t remember? Did you see the Harold Ramis film, "Groundhog Day"? BING!! Remember the annoying insurance salesman who torments Bill Murray’s character, Phil Connors, every morning, claiming to have attended the same high school when they were kids? BING!!! Remember how he shouted his cheesy, personalized catch-word as he badgered Phil to buy nearly every type of insurance known to man? BING!!!! “Needlenose Ned"? "Ned the Head"? BING!!!!! That was Ned Ryerson. (I’ll spare you the catch-word this last time.) For the five people on the planet who have not yet seen this comedy classic, a supernatural event forces a self-absorbed TV weatherman covering the annual Groundhog Day event in Punxsutawney, PA, to repeat the same day over and over again. Each morning, weatherman Phil Connors awakes on Feb. 2 and re-lives the same set of events, interacting with the same people, including the cringe-worthy Ned Ryerson. The first three or four times Phil encounters Ned, he does his best to avoid him. By their fourth encounter in the movie, Phil flattens Ned with a vicious punch before he can once again launch into his déjà vu sales pitch. After repeating the same day for the hundredth, thousandth or possibly millionth time, Phil Connors undergoes a personal transformation from egotistical jerk to a kind, caring person, thus allowing the calendar to finally turn to Feb. 3. And, yes, part of that penance included a purchase of insurance coverage from Ned Ryerson. After all, what greater demonstration of humanity is there than to be nice to an insurance salesman? Houston, We Have an Image Problem Ned Ryerson is the fictional embodiment of nearly every insurance stereotype in a single person. Unable to turn his “whistling belly button trick” from the high school talent show into a professional career, he did the next best thing; insurance. He’s creepy. He’s annoying. He tells bad jokes that only he finds funny. He never takes a hint. He’s relentless. He displays many of the worst traits perceived in our industry, and, sadly, he is one of the more positive depictions of the insurance industry that has appeared on the big screen. Consider the alternatives. In the Denzel Washington movie "John Q," a desperate father holds a hospital wing hostage and forces doctors to perform a potentially life-saving surgery on his dying child because his insurance company will not authorize the procedure. "The Rainmaker," a screen adaptation of the John Grisham novel, follows a lawyer suing an insurance company for denying a bone marrow transplant to a young man who later dies as a result of the company’s “deny all claims” directive. "Sicko" offers a scathing (albeit slanted) view of the American health insurance system that takes billions of dollars from individuals and then refuses to provide them coverage. If we are to believe Hollywood, the insurance industry steals hard-earned money from people who can least afford to lose it, seizes every opportunity to deny benefits to those in need and condemns children to death to protect profits. By contrast, Ned Ryerson is practically the patron saint of the industry. See also: Future of Insurance Looks Very Different   So what does Ned Ryerson have to do with the future of insurance? The Bureau of Labor Statistics projects the insurance industry will need to add nearly 200,000 jobs in the next five to six years to match projected demand. Brokerage firm Guy Carpenter projects that as much as 25% of the insurance industry will have reached retirement age by 2018. With so many stable, well-paying insurance careers available, it would seem the insurance industry should have no issues filling its employment coffers. And yet we do. In fact, we may be approaching a crisis-level talent gap. Why? Perhaps it’s because so few young people have had a positive introduction to the insurance industry. Maybe it’s because there are only a handful of universities offering insurance programs. Or just maybe, college students simply don’t want to envision their future selves as Ned Ryerson. No Degrees of Separation Insurance is one of the only major industries in the world that does not require or even encourage prospective employees to have an educational background in the field. There are insurance professionals who hold diplomas in English, finance, economics, liberal arts and a myriad of other disciplines but virtually no insurance degrees. When people learn that some universities offer insurance as a degree program, their reactions usually fall into one of two categories:

1. Sasquatch sighting: I’ve heard rumors such things exist, but I’ve never actually seen one in person.
2. Unstable personality concern: You mean people actually WANT to do this for a living? Perhaps these lost souls should consider seeking professional treatment for this condition….

Why is it so surprising that an insurance professional would have an insurance degree when it’s commonplace for others to hold degrees in their chosen fields? Attorneys attend law schools. Mechanics go to technical training schools. Doctors go to medical school. Why wouldn’t an underwriter or broker study insurance? Think about it. How would a patient react if he learned his neurosurgeon attended culinary school? Would an accounting firm hire someone who studied ballet? What if the electrician re-wiring your home offered his undergraduate degree in physical therapy as proof of qualification? Wouldn’t that be strange and possibly a little unsettling? Yet this is how most of the insurance industry operates. Professionals with educational backgrounds outside of insurance aren’t necessarily less qualified than those with insurance degrees. There are many exceptional people in our industry who did not pursue insurance as a course of study but still found their way to an insurance career. Yet how many talented young people do we miss every year simply because insurance is not offered as a career choice at the schools they attend? If we are to solve the long-term issue of youth and talent acquisition facing our industry, we will need to make insurance a more desirable and available option for college students. To do so, we need to help more colleges and universities across the country develop meaningful insurance programs. Unless the insurance industry supports college degree programs, students aren’t likely to consider insurance as a career path worthy of their time and talents A Bridge Under Troubled Waters According to a 2015 study published by Business Insurance, Temple University hosted the largest insurance program in the country with 475 undergraduate students in 2014. On the surface, this number may seem impressive but when compared with the enrollment in other courses of study and the projected needs of the insurance industry over the next few years, a very different picture emerges. Of the nearly 28,000 undergraduate students attending this university in 2014, less than 2% chose insurance as a potential career; fewer than those pursuing music and dance. If we assume half of the undergraduates studying insurance would be graduating in any given year, this particular program would fill fewer than 1,200 positions over the next five years. Gamma Iota Sigma, the insurance industry’s lone national professional fraternity, has active local chapters in just 50 of the 3,000 or so higher education institutions in the U.S. offering four-year degree programs. This means insurance is available as a course of study in just one out of every 60 colleges and universities across the country. In 2014, the top 20 schools offering insurance as a major had roughly 3,400 undergraduate students enrolled in those programs collectively. If the Bureau of Labor Statistics’ projections are correct and our industry will have about 200,000 jobs to fill within five years, there won’t be enough insurance graduates to fill the job vacancies left by those who are retiring, let alone the new positions. To bridge this impending employment gap, our industry will need to look to other non-insurance graduates to fill the void. For some of these individuals, insurance will provide a challenging and rewarding career, but for others it will be an option of last resort. The best and brightest of those pursuing other fields of study will likely have found homes in their chosen career paths. Insurance will get the leftovers. If the insurance industry is to continue to evolve and improve at the same rate as those we insure, something will need to change. The Lesser of Two Evils In recent years, a great number of studies have been published on the attitudes, values and work ethics of millennials. A 2011 report issued by PricewaterhouseCoopers (PwC), Millennials at Work; Reshaping the Workplace, indicates personal development opportunities, organization reputation, work/life balance and opportunity to make a difference are some of the key factors millennials consider when choosing a job. Compensation was also a factor but was not among the top three criteria millennials used to make career choices. The insurance industry would seem to meet most, if not all, of the essential criteria millennials use to judge prospective employers. There is an enormous opportunity for personal development and advancement for young people entering the insurance industry over the next few years. Likewise, many employers in the insurance industry have moved toward flexible working hours and work-from-home arrangements to accommodate a better work/life balance for their employees. Lastly, the insurance industry undoubtedly makes a difference for many people. Insurance allows people to buy homes, operate businesses and recover from life-threatening injuries without fear of possible financial ruin. It even helps people care for their families after they die. If not for one glaring exception noted in the PwC study, the insurance industry would appear to be a nearly perfect fit for millennials seeking professional employment opportunities. But to quote the great sage Ned Ryerson, that one exception is a DOOOZY. When asked if there were any specific industries millennials would not consider based on reputation alone, insurance ranked second behind only the oil & natural gas industry. Even Ned would have a tough time spinning that one to a prospective millennial. You may hate us, but our carbon footprint is really small... How’s that for a rebuttal and recruiting pitch? School is Back in Session The reality for most insurance industry recruiters is that the battle for millennial talent historically was lost before it even began. Not only do we not have an extensive network of colleges and universities providing insurance as a course of study for incoming students but most prospective millennial candidates decided against insurance as a potential career option long before they even chose a college to attend. If the insurance industry is to reverse this trend and attract talented youth, we will need to develop a strategy to engage young people before they begin pursuing a profession. Traditional career days and fairs at most high schools and colleges generate a relatively high attendance but typically offer little in the way of meaningful interaction with individual students. The likelihood of convincing someone to consider an insurance career in a two or three minute conversation is minimal. A guest lecture lasting 30 minutes (or more) provides much better odds. Many high schools now offer business classes as electives to their students. Some of these schools will occasionally invite guest lecturers from local businesses to speak in their classrooms. A guest lecture that presents an insurance career as a positive and challenging opportunity could be the first introduction to a rewarding career path for some students. See also: Future of Insurance: Risk Pools of One   Not sure if your local high school offers business classes as part of the curriculum or if they allow guest lecturers into their classrooms? Why not pick up the phone and ask? We call on prospective clients nearly every day asking them to place their business with us. Shouldn’t we put forth the same effort to secure the future of our industry? Supporting existing college insurance programs will also be a critical component to securing top notch talent in the future. For companies that want to participate in scholarship and grant programs without the administrative responsibilities of operating those programs, there are options available. Organizations like the Spencer Educational Foundation provide scholarships from donor companies and individuals to students pursuing careers in risk management and insurance. These scholarships provide real incentives for talented students to choose insurance as a career. Individuals can likewise help aspiring college graduates by participating in mentorship programs that pair graduating students with experienced professionals. Having a mentor available may make the transition from college to professional life easier and possibly improve the chances of those students remaining in the industry for the long term. Lastly, while there are only about 50 colleges and universities with established insurance programs nationwide, that leaves about 3,000 opportunities to develop new insurance degree programs. It is likely that at least a handful of the multitude of retiring insurance professionals may simply be looking for a change of scenery rather than a complete departure from the working world. A new career as a college professor could be an option for some. If just one college in every state were to create a small staff of adjunct professors from the pool of retiring insurance professionals, the number of colleges in the United States offering insurance as a degree program would nearly double. This wouldn’t eliminate the talent gap on its own, but as Ned Ryerson would likely agree, it sure as heckfire would be a step in the right direction. Am I right or am I right?

Insurers have for decades nurtured brands that reflect stability and caring: Prudential's rock, the Travelers umbrella. More recently, insurers have spent billions of dollars developing hip brands: Geico's gecko, Allstate's Mayhem, Farmers' "we've seen a thing or two." But we're now in an age where brands can take a hit overnight, at the hands of an angry mob, so it's important to think ahead about where the dangers may lie. Otherwise, your reputation may find itself caught up in Mayhem.

To see how quickly a reputation can change, look at the Equinox and SoulCycle fitness companies. They were growing fast, with progressive, healthful reputations. Then it was announced that Stephen Ross, who owns Equinox and has a significant stake in SoulCycle, was holding a fund raiser for the Trump 2020 campaign. Protests erupted all over, and many canceled memberships. It remains to be seen how deep the damage is, but damage has clearly been done. 

In a fascinating podcast with our Wayne Allen, Ryan Cassin, a digital and political strategist who is the CEO of Asset, cited a 2018 study that found that 64% of customers buy on belief, which he described as a company's values and politics. He said that figure was up 13 percentage points in just one year.  

So, he argues, it's crucial to make sure your beliefs as a company line up with those of your customers.  

That's not always easy. The Business Roundtable's recent statement encouraging companies to focus on all stakeholders, and not just on generating short-term profits, sounds great in theory, but how does a CEO tell a major investor with a seat on the board that the management team isn't interested in maximizing profit? How much should a CEO take on politically contentious issues, such as climate change or gun control? Some customers will feel one way, others the opposite—and, especially these days, many will be passionate about their beliefs. 

Sometimes, the tradeoffs can be explicit. Chick-fil-A wins many fans because of the religious beliefs of the owners of the fast-food chain but those same beliefs alienate many others. Nike took a huge hit to its market value when it launched an ad campaign supporting football quarterback Colin Kaepernick but actually saw sales surge because its target audience was more likely than not to support his kneeling during the national anthem of NFL games to protest racism. The companies can sort through those sorts of tradeoffs.

Sometimes, though, problems can sneak up on companies. Wayfair found employees and customers suddenly up in arms when it became public that the company sold furniture for use in detention centers for migrants along the U.S.-Mexico border. Google faced an uprising among many employees over some work it was doing to use artificial intelligence to interpret video for the Department of Defense. Both companies could defend themselves. Migrants deserve good furniture, right? And the U.S. needs the best defensive capabilities possible. But some actions create problems even if reasonable rationales exist.

To me, the best way for our industry to head off reputational hits is to stay focused on our True North. We're about removing risks from people's lives and making them feel more secure. That's a pretty great mission. 

Nobody gets a pass in a day and age when an angry mob can appear on your doorstep in a nanosecond, so we have to defend our reputations every day, but if we keep the main thing the main thing I think we'll be okay. 

Cheers,

Paul Carroll
Editor-in-Chief

Recent corrective pricing aimed at combating deteriorating loss costs across the commercial auto insurance industry has put increasing pressure on fleet managers and employees insured. Driving the point, commercial auto insurance renewal rates increased 4.5% in Q1 2019, inching toward the 6% to 12% increase predicted in 2018.

Luckily, the use of telematics – specifically vision-based AI solutions – has presented an opportunity for business fleets to identify unsafe driving, analyze the conditions in which they occurred and implement measures to reduce it, thereby lowering premiums and increasing safety measures. Currently, the automotive usage-based insurance market, which gives insurance companies the ability to quote coverage costs specific to driver behavior, has 65.1 million policyholders and is expected to grow in coming years. UBI separates itself from traditional formulaic premium quoting and serves as a voluntary policy in which drivers may pay less if they provide the insurer with access to all driving behavior up front. The tighter, streamlined insurance supply chain formed through the adoption of telematics and usage-based models ultimately benefits both the insurer and the insured.

Here are four ways telematics is evolving commercial auto insurance:

1. Improving overall safety Safety is the top line item in both insurers' and insureds’ objectives. By collecting data on driver speed, harsh braking, rapid acceleration, driver drowsiness, etc., vision-based AI solutions allow employers to record incidents, intervene in unsafe driver conditions and train employees to practice safer habits.

By agreeing to submit behavior, actions and conditions to the insurer, drivers are generally more conscious of their surroundings and position – increasing awareness and promoting a culture of safety. While in-cab cameras and vision-based technologies may not be able to prevent an accident in real time, they do ensure measures are taken to prevent future incidents. Captured video gives employers a passenger-seat view of employee driving behaviors and enables them to correct bad driving habits and instill better ones. From the employee, to the employer, to the insurer, having access to driver behavior data creates a safety ecosystem where all parties can manage and build on driver improvement.

See also: A Vision for 2028, Powered by Telematics  

2. Providing hard metrics Unsafe drivers can put employers at risk for a 10% to 15% increase in insurance rates. Ultimately, the goal is to hire only safe drivers. However, mistakes do happen, which is why fleet managers turn to telematics software to help improve existing driver performance. Not only does real-time telematics enhance driver safety, but it also gives weight to the claim that a company’s drivers are safe, making premium cuts and discounts from commercial auto insurers more likely.

Companies using telematics to monitor driver behavior receive a 5% to 15% insurance discount on average. The concrete evidence provided when harnessing this data gives fleet managers peace of mind that each driver is maintaining a safe speed and obeying state driving laws. In the event of an accident, the data provided can help determine liability in a claims settlement, potentially protecting businesses from false claims and subsequent rate increases.

3. Adding a next-generation visual component Telematics technology has been around for decades – not solely for automotive purposes, either. As it became more commonplace in fleet monitoring, traditional uses involved the collection and distribution of data to support claims and flag dangerous behavior. Now, the convergence of telematics data with video and AI, vision-based technology is giving fleet managers and insurers more in-depth, real-time insight for decision making.

The industry is starting to see the virtual and real world blend together with vision-based solutions that provide context about what is going on inside a vehicle at the time of an alert. Telematics technology previously existed to inform companies when a driver was being erratic or braking too hard, and before now little to no context was provided as to the condition surrounding the event. New vision-based video solutions are incorporating artificial intelligence and machine learning, which in some cases leads to drivers being rewarded for defensive driving when they would have previously been penalized for seemingly dangerous behavior.

4. Developing a mutually beneficial partnership The annual accident rate for commercial fleets is around 20%, and each accident can cost an average of $70,000. Not only is this detrimental to the driver and the company employing the driver, but it also makes insuring a great risk.

See also: Advanced Telematics and AI  

The information provided through today’s telematics technology solutions allows insurers to assess potential customers and associated risk, and fleet managers to lower insurance premiums. As next-gen telematics technology continues to evolve, fleet software companies are starting to partner directly with insurance providers to give discounts to businesses that adopt telematics software to track safety and monitor assets. If drivers are continuously being recorded and reported, auto insurers are more likely to be comfortable with providing affordable coverage, knowing they can easily spot potential liabilities.

The rise in premiums and increasing renewal rates designed to combat auto insurance market instability can only be deterred through the use of telematics technology that monitors, reports and supplies driver data directly to the insurer. Engaged companies are using this solution to drive growth, reduce risk and distance themselves from the competition. This insight, on average, encourages insurance discounts that not only benefit the company but encourage drivers and their fleet managers to improve safety practices, ultimately benefiting the insurer, as well.

To some, it is magic. To insurance, it is reality. The ability to accurately discern the past and predict the future based on nothing but data points and the long-lived experience of actuaries and adjusters has served the industry well, allowing insurance to become a multibillion-dollar industry.

The picture has changed dramatically in recent years, however, driven by the advent of the Internet of Things (IoT): technologies that collect, record and transmit live and granular data about their surroundings. The technologies may already seem ubiquitous, but estimates of how many IoT devices will connect our cars, homes, communities, medical services and work lives by the year 2020 range from 30 billion to 50 billion. Whatever the precise number, the IoT will generate a huge amount of data to be analyzed and monetized.

Already, writing policies can now be far better informed by what is known about the risk level of an individual or entity, as opposed to simply what is known about the claims generated by an entire class of risk. John Hancock, for example, announced in 2018 that all new life insurance policies must use digital fitness trackers to monitor policyholders. Using the high-quality, objective data derived from IoT, it is now possible to assess claims more accurately and efficiently, and in some cases, even prevent them from arising entirely.

“IoT is already enabling customers to avoid bad things happening to them," said Nick Ayrdon, head of strategy and development at Aviva. "Some people call it prevention. I see it as empowerment of customers.” Insurers are changing how they interact with customers, both before and after a claim. One executive predicted that that we are in fact “shifting from a claims-handling business to a claims-prevention one.”

As the value proposition of exchanging data for value becomes more concrete, it could drive uptake of connected insurance products. And yet, already operating in an environment of squeezed profits, high regulation and low consumer trust, the industry is witnessing something of a perfect storm. The tools for insurance carriers to stay relevant and appeal to today’s consumer do exist, but uncertainty over how best to implement such profound strategic transformation is holding many back.

See also: 3 Technologies That Transform Insurance  

To provide a comprehensive overview of the progress and prospects of connected insurance, Insurance Nexus has produced the Connected Insurance Report, an in-depth study of the progress of insurance technology globally, based partly on a survey of over 500 people working in insurance and related industries, as well as on the insights of 20 thought leaders, including Matteo Carbone (founder and director of the IoT Insurance Observatory), Cecilia Sevillano (head of smart homes solutions for Swiss Re) and Boris Collignon (vice president, strategy, innovation and strategic partnerships, Desjardins General Insurance Group). Access the Connected Insurance Report today for in-depth insights, analyses and case-studies on the technology-led transformation of insurance, including:

• How the Benefits of Technology Confer to Insurance: More data, fewer claims and lower costs. Discover how the application of technology to insurance is changing the relationship between insurers and insureds and where extra value can be created.
• The State of Play of Technology in Insurance Today: What progress has been made so far across the different lines of insurance? Which lines are most developed and where is ripe for transformation?
• The Practicalities of Embedding Technology in Insurance: From proving the business case to organizational restructuring and digital transformation, explore how carriers have succeeded in leveraging the benefits of insurance technology.
• Making Sense of the Insurance Tech Stack: Provide value to customers by maximizing the worth of all data throughout the value chain. While challenges to each entity and line of business are unique, discover and overcome the principal challenges to embedding technology as reported by the industry.
• The Long-Term Opportunities: From claims prevention to customer engagement, what will the technology-led future of insurance be like? Discover what is on the management “to-do list” to ensure readiness for the era of “insurance 2.0.”