Small changes can sometimes have a big impact. This is particularly true in the realm of behavioral economics. At its core, behavioral economics (BE) challenge the traditional economic theory that individuals are sound and rational (“slow”) thinkers, by asserting that we instead rely more on heuristics -- or mental shortcuts -- to make quick judgments. Using comprehensive experiments, BE allows us to test ways to encourage individuals to “slow down” this fast processing through simple redesign and rewording. When BE techniques are applied to insurance applications, small changes in the way that questions are designed and worded can lead to more thoughtful completion by the individual. This, in turn, encourages an increased disclosure of medical conditions, resulting in a more comprehensive view of the individual’s health. Ultimately, this additional information and clarity can help the underwriting process, mortality and morbidity results and company profitability. Gen Re was at the forefront of this research for the insurance industry, conducting a BE study related to individual life insurance applications in 2016. This study successfully determined several BE approaches to enhance an application and increase disclosure rates simply through changes in question design and layout. Traditionally, the insurance industry has relied on a more tried-and-true approach to application design. For individual life, companies widely use standardized application questions relating to medical conditions. See also: Making Life Insurance Personal   In 2018, Gen Re set up a new BE experiment to take another look at designs from the 2016 study and to assess the effectiveness of a standardized question design in encouraging medical condition disclosure. This study used standard questions as a control group, testing them against various “treatments,” or different ways of designing the application questions. A sampling of U.S. residents, ages 30-60, was asked to complete online life insurance application questions. Close to 2,500 online applications were completed. Overall, six different question designs (treatments) were tested across 12 medical conditions. The objectives of the study were:

• • Primary: Understand how we can apply insights from behavioral science to increase an applicant’s disclosure level for insurance
  • Secondary: Determine how long it takes an applicant to complete the various treatments, so we can better assess answers to the question, “What is the best combination of time and experience of completing, versus understanding and overload?”

The results strongly supported what was found to be most effective in Gen Re’s 2016 BE study: a five-point scale question design (see Exhibit A). The multiple-choice options on the five-point scale prompt respondents to think about each medical condition, increasing their chance of remembering whether they have ever been diagnosed. Moreover, the clear definitions for each option eliminate the uncertainty respondents may have about whether they qualify as “having” the medical condition.

Exhibit A: 5-Point Scale

Have you ever been diagnosed, treated, tested positive for or been given medical advice by a member of the medical profession for a disease or disorder such as: In comparison, the standardized questions used as the control group were open-ended and asked individuals whether they had ever been diagnosed, treated, tested positive for or been given advice by a member of the medical profession for a particular medical condition (for example, “Any cancer, tumor, cyst or nodule” for cancer-related conditions). This may require a level of medical knowledge beyond what can reasonably be expected of someone who is not a medical professional and can create some uncertainty or difficulty in recollection for individuals completing the application. In addition, although the five-point-scale questions were one of the longest in terms of respondent time to complete -- averaging almost eight minutes - condition disclosure increased by four to eight times over the standardized (control) questions. The standardized question format was the shortest for respondents to complete, averaging just 2.34 minutes, yet it was found to be the least effective question design in terms of increasing medical condition disclosure. See also: Digital Distribution in Life Insurance   By implementing a new design framework, insurance carriers can improve not only the clarity of the application questions but also the level of information that is disclosed by applicants. While companies have much to consider when making changes to their applications, the results of Gen Re’s BE experiments show that small changes can have a big impact. In addition to our leading behavioral economics research, Gen Re also conducts numerous studies that benefit the U.S. Group and Individual Life/Health insurance industry. Our wide variety of industry studies, and our MarketChecks on key topics of interest, keep us at the forefront of insurance research. If you are interested in learning more about our research capabilities, contact me. You can find the article originally published here. Reprinted with permission from Gen Re. ©2019 General Re Life Corporation

The insurance industry is often depicted as resistant to innovation, skeptical of the cost, and unsure of the benefits from embracing innovation and new technologies. So, it was gratifying to hear from a number of insurance leaders who are optimistic about insurtechs and innovation, confident about the opportunities they can create for incumbents, and actively taking steps to change their product offerings and business models.

This was the view from Canada, which ITL’s Chief Innovation Officer Guy Fraker and Chief Operating Officer Paul Winston both experienced as participants and observers at the InsurTech North conference, held last week in Toronto. The conference featured a number of incumbent insurers, advisers and investors, accelerators and insurtechs—all active within the innovation ecosystem of Canada and North America.

Some of the biggest takeaways are:

• A growing number of Canadian insurers—from both the life and P/C sides of the business—are embracing innovation systems and practices and are willing to candidly share challenges and successes with peers.
• Two consistent themes emerged from innovation success stories: The C-Suite is convinced of the need to be successful with innovation, and leveraging carefully crafted constraints propels innovation.
• A key "break-through moment" shared by incumbent carriers actively pursuing new concepts came when they took a candid introspective look at their company and recognized they needed new partners with specific capabilities to successfully innovate.
• Innovation success comes from also understanding the human side of innovation, and that clarity of purpose can help minimize incumbent cultural resistance.
• The insurance industry, now feeling more experienced with various innovation models, seems be expressing not only a sense of arrival but also a mistaken perception that it is not facing disruption, just an acceleration of incremental change.

The conference also presented many valuable lessons, tactics, and strategies for the benefit of attendees that we felt worth sharing with the broader innovation community. Highlights from selected sessions follow:

Meeting the expectations of VCs

Two venture capital investors shared their perspective on insurtechs and what makes a startup an attractive investment.

Commenting on the growth of the insurtech "ecosystem," Maor Amar, Managing Director of Toronto-based Impression Ventures, estimated that he has looked at more than 1,300 startups since June 2017, and in that time has invested in only nine companies.

Among the reasons for VC selectivity, he said, is that within the universe of insurtech startup CEOs, the number of experienced, second-generation leaders—those who have already had one successful exit under their belt—is extremely low. 

Being attractive to VCs also requires that insurtechs have more than "selling to insurers" as a plan, added Jonathan Kalman, General Partner of EOS Venture Partners in Philadelphia. Most insurers have a long buying cycle—typically three years—and their innovation budgets are relatively small, he said. In addition, insurer IT budgets are predominantly devoted to maintenance of systems, with almost none allocated to new technologies and solutions, he said.

Does innovation success require commitment from and communications with "The Top"?

To be successful at innovation requires a leadership team that is convinced it’s a strategic priority and allocates resources for these efforts, said Rowan Saunders, president and CEO of Economical Insurance, based on Waterloo, Ontario. Companies may use an incubator to get an idea off the ground, but for the company to get the full benefit of the innovation it must be moved inside the organization, he said.

Saunders also shared his thoughts about the future of insurance with a statement both equally profound and clear: "In the next 10 years, insurance leaders will move from rating and repair to prediction and prevention."  (We at ITL certainly support this forecast.)

Can incumbents overcome technological and cultural logjams?

The so-called logjams that delay and complicate the adoption of new technology and integration of insurtech solutions with incumbents are not unique to insurance, said Ryan Spinner, head of innovation and disruptive partnerships for Aviva Canada. These obstacles can be endemic in any large organization that is trying to innovation, he said.

Spinner also gave the participants an important piece of advice by sharing from his own experience: "It takes humility and honesty for an incumbent to admit that it might be better to buy than build," he said. 

Wolfpack Competition

The Wolfpack competition among five startups illustrated an important concept: Success in systematic innovation, while minimizing the frequency and severity of "fail fast and learn" experiences, requires clarity and understanding the human side of innovation. At this year's competition, Finaeo won both the "People’s Choice" award from the audience and the Conference Award from the Wolfpack judges.

Founding CEO Aly Dhalla announced he was not there to make a pitch, but to tell a story. He then proceeded to tell a compelling story with a casual and engaging style. This is not to suggest the business model, as well as the technological solution, embedded in his story is not equally compelling. However, the best innovations are often shared, described, and arise from a well-told compelling story that rarely focuses on the technological details. The lesson from this 90- minute competition is how not to fall in love with the cool, new and shiny, but instead understand how the cool, new and shiny will be relevant to people’s lives.  

Build, buy or partner – is this time-tested decision framework still the best approach?

Innovation should be viewed as a process, not a goal in and of itself, according to Peter Primdahl, VP of Emerging Business Models for Guelph, Ontario-based Co-Operator’s Insurance. "It’s an enabler of a company’s priorities and business objectives," he said, adding that innovation should start with a well-articulated problem statement. 

In partnership with Slice Labs, Co-Operator’s launched an on-demand insurance product for home-sharing hosts as a standalone company called Duuo. "We wanted to create something new, not use this launch as a lever to transform the overall company," Primdahl said, noting that it would be hard to take advantage of such opportunities if the overall organization had to change first before it could implement new policies and procedures.

Alice Keung, Chief Transformation Officer of Waterloo-based Economical Insurance, said that her company took the view that the entire company must become more agile and flexible, and adopt a culture that is open to innovation. Economical launched a direct to consumer digital business, called Sonnet, that represented a big change from its traditional distribution partners, agents.

"We don’t want to be disrupted; we want to disrupt ourselves," Keung said.

Sun Life Financial faced some internal doubters and skeptics when it started on its innovation journey, noted Anna Foat, Director of Global Digital Transformation Office in London, Ontario. But as soon as the company showed its initiatives were generating revenue, that made them into converts, she said.

For lasting success, innovation needs to be repeatable, Foat said. "It’s like building an innovation muscle, which helps to overcome inertia" on additional projects, she said.

Another key to innovation success, Co-Operator’s Primdahl said, is greater recognition by senior leadership of the value of learning from innovation experiments, even if they don’t pan out. He said he's optimistic that more companies today "are likely to accept innovation stumbles as a learning process, not failures."

Another driver of innovation is competition. "Every company wants to be seen as innovative. There’s a fear of missing out," said Primdahl, who added that he believes companies should approach innovation as an informed choice, not simply fear of falling behind.

Is achieving scale possible without the wheels coming off?

As a startup, "it’s easy for us to innovate—we have no customers," said Tim Attia, CEO and founder of Slice Labs, in a conversation about how scaling for growth with Guy Fraker. "Scaling is much more challenging, especially if you have something that no one wants to buy."

As many insurance incumbents are evaluating startups and whether their solution is a fit, "insurtechs look at incumbents and evaluate if they can help them to scale," Attia said.

Citing transportation network giants Lyft and Uber, as well as Airbnb, Tesla, and automakers with subscription models, Attia and ITL’s Fraker engaged in a lively exchange about models of embedded and on-demand insurance.  Both agreed that the emergence of new business models and industry entrants will continue to apply pressure on the core incumbent business model.

A.I. will continue impacting insurance, so now what?

Three firms who are leaders in the application of artificial intelligence openly shared how they are leveraging A.I. technological capabilities in the context of insurance. Conference attendees had the opportunity to learn a simple, yet game changing, lesson from the world of technologies from Pypestream President Donna Peeples, Abhay Raman, who is VP at Sun Life Financial, and Cameron Schuler, VP of Industry Innovation at the Vector Institute. Many insurtechs and specific technologies are a "what," whereas artificial Intelligence stands out as a "how." A.I. is now as ubiquitous as connectivity, requiring the selection of carefully designed applications.

Barbarians at the Gate

Some of the big tech giants have shown signs of interest in insurance, "but it’s not clear they’ll be successful, that they’ll be the barbarians to take down the Roman empire of insurance," said Eric Weisburg, Vice President, Research and Consulting for Novarica in Boston.

Insurers have done a great job with regulation and capital requirements, and also have a very different risk tolerance compared with non-insurance companies, so it’s unlikely that tech giants will take away significant market share from incumbents, said David Wechsler, Executive Director of Channels and Partnerships for Philadelphia-based Comcast Infinity. "That’s not to say they might not take an interest in insurance if it means serving their customers," he added, noting that currently he views it as more advantageous for companies like Comcast to partner with insurers than compete with them.

Aly Dhalla of Finaeo, the startup that won the Wolfpack pitch competition at Insurtech North, said "don’t underestimate a VC fund’s ability to transform an industry, such as if Softbank decides to put $50 billion into the market to disrupt an industry."

Sridhar Manyem, Director, Industry Research and Analytics for A.M. Best Co., said that for tech companies to enter the insurance market requires more than a risk appetite. They also have a return perspective and it has to be attractive, he said.

A transformation journey is required for every company within our industry’s ecosystem that wants to remain relevant beyond 2030. So, how do you get past all the hype around disruption, digital and innovation and really set a course to transform? How do you start the journey – with clarity, focus and informed decisions – that will thrust your company forward on the route to staying relevant, competitive and positioned for future success?

A new approach is required. It’s actually not as hard you might think – but it requires a shift in mindset, a change in how we approach strategic initiatives.

See also: Accelerating the Transformation  

Insurers have made clear, but isolated, progress. Most of the transformation that has taken place within the industry so far has come from the traditional approach: replacing core systems, creating portals, adding CRM, improving customer communications, optimizing operations, enhancing products, expanding channels and entering new market segments. Despite the progress resulting from these efforts, the change has been no more than incremental.

The new approach is all about thinking big – thinking beyond our current state, beyond our comfort zones; letting go of the anchors and the siloed transactional thinking; and expanding our vision to encompass possibilities that define a future state with both a customer and operational focus. Or, to put it more imaginatively, looking through a new lens.

Picture a new future state of insurance – just close your eyes and begin to imagine what that could look like! A digitally connected enterprise with fully orchestrated and optimized operations. An organization that delivers state-of-the-art services and products for exponential improvements in ease-of-doing-business for customers as well as internal and external stakeholders.

We just released our latest research brief, “Bringing New Focus to the Transformation Journey: Accelerating Transformation with a New Lens.” It’s a must-read that lays out the blueprint for the transformation journey. It also showcases a transformation use-case from a large insurer that truly demonstrates this approach in action – all starting with a simple vision for Creating an Amazing Digital Experience for the Agent – a multi-year, multi-initiative approach that will reap amazing results. See also: Culture Side of Digital Transformation   Showing transformation in action and real success stories reminds us that, for insurers, thinking big is possible, thinking big is happening, and thinking big is achievable. Everyone is innovating, but not everyone is transforming. To transform, you have to think big and remember to think beyond the traditional.

Hurricane season begins June 1. Experts are calling for a more active season this year, with the Weather Company forecasting 14 named storms, seven hurricanes and three major hurricanes, above the 30-year average. Certainly the population growth and expansion of industries, particularly in the developing world, will ensure that losses from hurricanes will continue to increase. While hurricanes cannot be prevented, losses can be greatly minimized by adequate preparation before the hurricane arrives, including the development and implementation of a comprehensive written hurricane emergency plan. Here are some tips to help businesses minimize damage and get back to work quickly after a hurricane or significant windstorm: Pre-Hurricane Planning The key to minimizing damage is adequate preparation before the hurricane arrives.

• Assign emergency organization roles and responsibilities
• Provide annual training
• Assemble emergency supplies and equipment in a safe location such as plastic tarps, mops, squeegees, emergency lighting, battery-operated radio, tape for windows, lumber and nails, etc.
• Plan for salvage and recovery, including maintaining a list of key vendors, contractors and salvage services
• Anchor large equipment, such as cranes and draglines, in accordance with manufacturers' guidelines
• Fill fuel tanks of generators, fire pumps, company-owned vehicles, etc.
• Be prepared to shut down operations if necessary

See also: How to Predict Atlantic Hurricanes   During Hurricane

• Keep emergency response team personnel at the facility, if safe to do so, and have them prepared to respond
• Continue to monitor weather reports for information on potential storm damage, access to property, utility outage, etc.
• Update management and maintenance accordingly
• Patrol the property continuously and watch for roof leaks, pipe breakage, fire or structural damage
• Constantly monitor any processes, equipment, boilers, furnaces, etc., that must remain online during hurricane
• During power failure, turn off electrical switches to prevent reactivation before necessary checks are completed

After Hurricane

• Secure the site to prevent unauthorized entry
• Organize and prepare emergency crews for salvage and cleaning operations
• If safe to so, conduct an immediate damage assessment, paying particular attention to structural damage, utilities, roof coverings, production and process equipment, fire protection equipment and areas subject to flooding
• Notify utility companies of any outages or damages
• Call key personnel and notify contractors to begin major repairs
• Initiate salvage operations
• Review the effectiveness of the hurricane emergency plane and revise as needed.

See also: Hurricane Harvey’s Lesson for Insurtechs   Damage can be prevented or greatly reduced with proper planning in all stages of hurricane preparation. As we enter the 2019 hurricane season, these steps can help minimize overall damage because there is great preparation before and after; the steps also efficiently help rebuild businesses after the damage.

Microinsurance is an industry that keeps building momentum. Changes in the global economy have created an emerging middle class that has been underserved by traditional insurance models — and microinsurance offers a needed solution. For people in developing countries, who in many cases live on just a few dollars a day, traditional insurance is too costly. Constrained finances and limited awareness act as a significant deterrent for purchasing traditional, risk-mitigating insurance products. However, when loss events like those stemming from Hurricane Maria or workplace injury occur, insurance is necessary to rebuild communities and individual lives. Considering that nearly 6.5 billion residents live in emerging and developing countries like Ghana, the Philippines and Vietnam, the scale of this opportunity exceeds virtually any other single opportunity in mature insurance markets. Much of the (re)insurance market’s recent attention has centered on global natural-catastrophe losses, which have exceeded $500 billion since 2017. Many communities around the world were dramatically affected by these losses, forcing prominent insurers to understand the best way to serve those communities. Why Micro Makes Sense The increased buying power within these developing communities confirms there’s an opportunity for microinsurance to grow. A World Bank study found that, from 1985 to 2017, Vietnam’s per-capita GDP jumped by nearly 10 times from $230 to $2,343. Such gains encourage significant interest and investment specifically focused on microinsurance product development. Allianz, for example, has doubled down on its commitment to the field by joining forces with FPT Group to build insurance products for Vietnam and purchasing micro insurer BIMA for $290 million. In addition, LeapFrog raised $400 million for microinsurance product development and distribution, proof that sophisticated parties believe in the value of microinsurance products. For new markets where skepticism toward high-premium private products exists, microinsurance offers a low-cost option to mitigate risk and grow trust with corporate insurance brands. However, when viewed in the aggregate, there remains a mismatch between high-growth areas in terms of population and income — Latin America and the Caribbean, Asia and Oceania and Africa — and insurance penetration in these areas, which currently sits at only 7%. See also: Microinsurance: A Huge Opportunity   The challenge for investors and the insurers they support is simple: educating communities, developing relevant products and establishing trust in these products; all of which is typically expended before the first premium dollar is collected. The challenge is exaggerated by the high-volume, low-margin nature of individual products, which, in some communities, carry average microinsurance product annual premium of $14. While the economics of microinsurance will continue to challenge penetration and premium capture, insurers can overcome significant hurdles related to education and distribution by presenting simplified and relevant products to prospective insurance customers, and developing and executing a distribution strategy through a multidisciplinary team. How Insurers Can Solve the Microinsurance Quandary Insurers can position themselves for success in the microinsurance market through a couple of different approaches. Chief among those is to streamline their services. Microinsurance is a product of its time. Technology allows all kinds of consumer services to provide hyperpersonalized care, which means insurers need to offer products that are as simple and relevant as possible. To accomplish this goal, insurers must keep the end user in mind during all phases of product creation. Companies need to understand what customers need, how they prioritize those needs, and where their gaps in coverage lie. By identifying these factors, insurers can offer products that clearly spell out the relevant advantages to customers. This clarity can help engage customers and increase the odds that consumers will purchase the coverage. Customers don’t want to pay for coverages they don’t need. Insurers, therefore, must seize any opportunity to create granular products that are simple and affordable. Not only does this approach provide more useful products to buyers, but it also helps insurers limit how much information they must collect during underwriting. Additionally, insurers should build cross-functional teams internally to assist with distribution. Getting the right insurance product to the right customer at the right moment takes a coordinated team of experts. Those who distribute these products need to understand the environments in which they sell and have a stake in the profitability of the product. See also: Microinsurance and Insurtech   These distribution partners must also learn to describe to consumers the differences among products. It is not enough to sell: Distributors must be educators who teach customers that insurance can be as trusted as the local brands they know and rely on. To do that, the distributors and the people they serve must be supported through association with charitable and regulatory organizations. Finally, technology must be leveraged to effectively monitor and mobilize the distribution force and insureds alike. To that end, software developers must build and test features on the basis of real customer feedback and adapt quickly to optimize the products. When the back-end team gives distributors a product that people want, distributors can sell a product that brings clear and tangible benefit to the developing world. Microinsurance will continue to grow as the needs of the global population continue to evolve. Everyone in the insurance industry, from distributors to developers, is responsible for overseeing the growth of this new niche. Only by collaborating to offer a relevant product will insurers successfully earn their share of this new and burgeoning market.

If the workers’ comp industry is serious about leveraging analytics and technology, then we need to create an innovation-friendly legislative framework. A consortium of major corporate players and industry groups should design, promote and lobby for high-level legislative clarifications suitable for all jurisdictions. This will open fertile ground for better and faster innovation. I hereby name this endeavor the “Workers’ Compensation Legislative Imperative to Foster Technology,” or simply “WC-Lift.” Why do we need WC-Lift? State legislatures do not seem to anticipate their role in redefining workers’ compensation as we know it given the promise of technology, analytics and artificial intelligence. Without legislative anticipation, great applications may be DOA in the marketplace if implementation doesn’t fit the letter of law. To insurtech pioneers and their investors, I ask: Would you rather launch a product blindly amid potential claim-by-claim legal objections and hope new case law eventually favors your application? Or would you rather have the path cleared by legislative adaptations that change the statutory paradigm and embrace technology? The WC-Lift mission is to recognize potential reaches of technology as they apply to WC, to know what innovation is incubating and to provide guidance for lawmakers in setting the stage for accepting breakthroughs. A universal framework of immediate statutory changes should be prescribed. These changes anticipate statutory grey areas or roadblocks for new applications and simply clarify an ability to do something new. See also: States of Confusion: Workers Comp Extraterritorial Issues  Just a few examples of law-adaptations in the WC-Lift can include: Open Payment Methodology: Refine the legal definition of “payment” to include “all viable methods of funds transfer and receipt as acceptable to parties of any given case.” For money transaction innovators, this wording removes the risk that WC law might strictly require payment as paper checks drawn from traditional banks. Enhanced Medical Evidence: Confirm acceptability of medical evidence beyond that of written reports from a physician to include “credible statistical and analytical data that enhances contemplation of causation, permanent disability, reasonable and necessary treatment, functional capacity, diagnosis, treatment plan, future cost or life-care estimates; and also refines the selection of providers and independent examiners for specific claimants.” This adaptation says nothing of the weight such evidence carries, but at minimum it opens the playing field for innovators to begin a proving process in shaping adjusting decisions and convincing courts to limit human bias in critical medical decisions. Dynamic Employability Factors: Consider “employability” measurement on an open platform, specifically allowing enhanced evidence to measure permanency or future earning capacity. Statutory clarification can call for “combinations of data from aggregated job postings, analytics depicting most suitable work, predictive value of vocational training, evidence from functional capacity evaluations,” etc. This open field will spark innovation in aligning individual claimants with an outlook for their future employability and earnings. As machine learning proves out, this evidence should carry more weight in case decisions. Like and Kind Awards Comparison: Allowance of “historical data for like cases to be considered in valuation of settlements and awards” as an enhancement to case valuation and the mediation/settlement process. Dollar-value based on analytical historical precedent and informed by individual case nuances can be a precursor to any statutory process by which settlements are evaluated and approved. Open Filings Methodology: Recognizing the burden of state filings allows a “compliance appeal process whereby adjusting companies can propose technological means to satisfy filing requirements or alter requirements that are obsolete based on technological means to automate the transfer of information, confirm and update critical status.” Any legislature adopting this premise is in a position to benefit from technological advancement aimed at efficiency and accuracy for the greater good. See also: Predicting the Future of Insurtech   The possibilities are vast. Consider that the early mission of WC-Lift is not to change low-level statutory process nor to adopt controversial legislative positions but simply to create safe openings that deliberately engage any and all jurisdictions in embracing technology. WC-Lift is not upsetting the apple cart but rather creating a bigger cart with more apples to choose. The drawback, if any, is that adoption by states will require a span of time where technology and new evidence must be tested with perhaps greater diligence but minimal harm. The payoff is ensuring a future that identifies and nurtures emerging strains of innovation that truly improve WC outcomes and claimant experience. I invite any interested parties with the wherewithal to charter this notion of WC-Lift to contact me and get started. Legislatures need us!

“Define the vision, own the strategy, ship great products” — these are perhaps some of the most commonly uttered phrases in any product management (PM) job description. While they capture much of the essence of what PM entails, those of us who are less familiar with PM as a discipline may find words such as “vision” or “strategy” a bit abstract. So what is a product vision? When one Googles around for “product vision,” definitions pop up in various sizes and flavors. To thoroughly understand the idea of a vision, it is important to also understand two other concepts: strategy and tactics. Here is how I would explain these concepts to a product newcomer:

• Vision: the goal you’re trying to achieve
• Strategy: doing the right things toward achieving this goal
• Tactics: doing these things right

Illustrating via an Analogy Let’s use an analogy. Suppose I would like to plan an exciting Christmas getaway with my girlfriend this year. I’ve often heard from friends about how Strasbourg turns into a magical place with its elaborate Christmas market. So I begin planning a trip from Heidelberg to Strasbourg by pulling up Google Maps. After a quick dance with the loading spinner, Google Maps presents many options for how to get from Heidelberg to Strasbourg, including going via car, transit or even bicycle. Each transportation mode comes with several routes that I could take. This user interface captures the essence of “vision” and “strategy” very well. In this case, I have the vision of “an exciting Christmas getaway in Strasbourg,” and Google Maps helps me understand the various strategies I could employ to get there (i.e., mode of transport and route). Just like in the realm of products, there are often several different routes that one could take to arrive at a single destination. We can continue expanding on this analogy by choosing a transportation mode, then selecting one of the routes. At this point, the user interface outlines detailed turn-by-turn directions for the route that I have selected. These steps represent the tactical features or milestones that I must achieve to stay on course with the selected strategy: to follow a route that Google Maps recommends for driving from Heidelberg to Strasbourg, I need to carefully follow each turn that it prescribes. Another way tactics play into this analogy could be ways to prepare for the trip so as to minimize the need to stop along the way, such as filling up the gas tank before leaving or bringing lunch. The message here is simple: to properly execute against a product strategy, we need to use the right tactics and make sure they add up to something bigger. Six Reasons for Having a Product Vision Now that we have discussed what product visions are at a high level, I hope you understand why they are so important. For those who are still skeptical, there are many practical reasons why you should have a product vision. I will highlight six of my favorite reasons below: 1. Visions Are a Prerequisite for Change In 1997, the late Steve Jobs narrated a famous TV commercial for Apple called “The Crazy Ones.” The spot ends with him saying: “...the people who are crazy enough to think they can change the world... are the ones who do.” This quote has always stuck with me because it captures the idea that innovation always starts with someone who believes he or she can create something and change the world. For me to have an amazing Christmas getaway in Strasbourg, I need to first have the idea of going on such a trip, and then believe enough in it to act on it. Similarly, to create a product that moves humanity forward, someone must first come up with an idea of how to do so and then act on it with conviction. See also: How to Speed Up Product Development   2. Visions Simplify Ideas One of the school games that left the deepest impression on me was “Telephone,” where the teacher lined up all of the students in a single row and then whispered something into the ear of the first student. The teacher instructed this student to pass on the message by whispering into the ear of the next student. This process repeated until the last student in line received the message. It was always surprising how different the initial message was from what the last student reported. This game taught me a simple yet important lesson at a young age: Communication is hard. It is especially difficult at scale, where complex ideas must be conveyed across many different teams and organizations. Within the context of a tech startup, how can we make sure that the vision our founders have in their heads is clearly understood by the entire company so that we can collectively execute toward this common end goal? This is where the product vision comes in — as a team, it is crucial for us to develop a clear and concise vision that conveys the essence of our shared end goal. We should then regularly use this vision in our communication to maximize the chances of everyone understanding the same version of the vision. Each word in the vision statement should serve a specific function toward guiding the team, rather than needlessly adding complexity or further diluting the message. If we do this well, any single team member should be able to articulate an understanding of the vision that matches what the founders had in mind when they founded the company. 3. Visions Align Groups As companies grow, the responsibilities of team members tend to become increasingly specialized. On a day-to-day basis, this means that people will spend most of their time working on a specific part of the vision and become an expert in that area. While this phenomenon is an important part of organizational evolution, it is important that all team members retain an understanding of how their part fits into the overall collective goal. A well-crafted and clearly communicated product vision can serve as an important tool for aligning groups and empowering team members to make better decisions independently. 4. Visions Unlock Collective Imagination Different people can have varying perspectives of the same reality. Because of this, a product vision is often the single most empowering tool you can give your team. Given the same goal, team members may have a slightly different view on it, enabling them to use their own imagination to work toward it in a slightly different way. Thus, a well-articulated product vision can be the key that unlocks the maximum potential of your team. When this is done effectively, the collective intelligence of the group will always outperform any individual person regardless of how smart that person may be. 5. Visions Help Distinguish “Motion” From “Progress” The product vision is the goal of our journey, so it is naturally the single most valuable reference point for differentiating motion from progress. If we ride a horse with our eyes closed, it would be difficult to tell whether we are getting closer to our final destination or not. Conversely, if we know where we want to go and do a pretty good job of keeping our eyes on the prize throughout the trip, we will have a much better idea of whether we’re getting closer with each milestone that we achieve. 6. Visions Support Effective Prioritization Similar to #5 above, a product vision provides a quick and simple way to articulate tradeoffs between ideas and make sure we are focusing on the things with the most impact for our customers. The vision helps articulate the amount of “user value” that any given project delivers because everything we do should slightly improve the status quo and move the world closer to the new reality that we’re trying to create. I hope you’re now convinced and eager to start creating a product vision of your own. The next section discusses some tips for how to go about doing so. How do I create a product vision? Vision is about telling a story. When I lived in Seattle, I used to attend this wonderful meetup called “Fresh Ground Stories” hosted by a man named Paul Currington. It occurs monthly and operates like an open mic specifically for storytelling. Thirty minutes before the event begins, anyone can put his or her name into a box and sign up to tell a story as long as the stories are real and about the individual themselves. I once signed up to tell a story; I was very nervous, so I asked Paul for some advice. He smiled, then calmly said: “Always know your last line before you begin.” As I continued working in product over the years, I’ve found this advice very helpful for articulating product visions. Within the context of storytelling, your last line is your goal. It is how you want to leave the world when you are done. For product, your vision is what you ultimately want to achieve. It is the summary of how you envision the world looking when you have finished what you’re creating. At this point, we get into some territory that can be tricky to explain because there isn’t really a “right answer” for how to go about coming up with great product visions. There isn’t a checklist of specific tasks to complete that will ensure you have a 100% success rate. Similar to telling a story or writing a novel, product visions can require lots of imagination and creativity, and inspiration for doing so can come from anywhere. See also: A Vision for 2028, Powered by Telematics   Sources of Inspiration There are two primary buckets: intrinsic and extrinsic. Intrinsic Intrinsic inspiration comes from within:  ideas and feelings that I notice within myself, which I then try to tie into the product that I am working on. Here are some examples:

• “Imagine a world where...”: A vision can be as simple as seeing what comes out when you try to finish the sentence.
• Dissatisfaction with the current world: When was the last time you felt like something about the world just could be better? What didn’t feel right about it? How would you make it better if you had a magic wand?
• Intuition and gut feeling: Sometimes we just have a feeling that something is off and could be improved. Explore these feelings, and try to get to the bottom of them.

Extrinsic Extrinsic inspiration comes from surroundings: observations about the world that could inform the next step in an ever-evolving society. Some examples are:

• People around you: When was the last time someone you know said something smart? How might you expand on those ideas and integrate them into your product?
• Gaps in existing products: What does the competition look like? Are there any customer segments that are underserved?
• Trends from other industries: Are there other industries that are going through similar changes? For instance, how might we compare and contrast insurtech with fintech and e-commerce?
• History of the world: Are there past events that vaguely resemble what’s happening in your product area? For example, what parallels can you draw between the rise of manufacturing and the rise of automation?
• Random person on the street: Basically, extrinsic inspiration can come from anywhere. Perhaps the most important thing is that we pay attention and take time to reflect a bit when we find something interesting.

Giving It a Shot Armed with the tips from above, perhaps you are ready to create your own product vision now. If you feel comfortable, please share your visions in the comments section; I would love to see what kind of great ideas you have, let’s have a discussion.

On March 14, insurance credit rating agency A.M. Best released its Scoring and Assessing Innovation (Draft). Per its press release, “AM Best defines innovation as a multistage process whereby an organization transforms ideas into new or significantly improved products, processes, services or business models that have a measurable positive impact over time and enable the organization to remain relevant and successful. These products, processes, services or business models can be created organically or adopted from external sources.” The rating agency further notes, “Innovation always has been important for the success of an insurance company, but, with the increased pace of change in society, climate and technology, it is becoming increasingly critical to the long-term success of all insurers.” Best begins with an assessment of the commitment of senior management to innovation. In the compliance world, this is also called the “tone at the top.” Best broadly labels this criterion “Leadership.” If there is a firm commitment, then a positive culture of innovation follows throughout the enterprise, the second component (“Culture”) of the Best scoring model. This requires sufficient resources devoted by the insurer to bring to market new products, processes, services or business models and, per Best, “…a demonstrable impact on its long-term financial strength.” This is the third component of the model (“Resources”). Finally, existing company governance structures, policies and procedures must facilitate an innovative environment and address enterprise-wide data management and compliance obligations. (“Process and Structure”) That all sounds logical. See also: Changing Nature of Definition of Risk In what could be said to be an understatement, Best next observes, “A challenge for insurers is aligning the use of customer data with varying regulatory restrictions related to consumer privacy. The rules for mining of personal data are expected to fall within the confines of governance and encompass regulatory guidance.” While this is axiomatic, it also demonstrates an inadequate treatment of the various risks posed by innovation as characterized in the draft. Consider A.M. Best’s 2013 document, Risk Management and the Rating Process for Insurance Companies, in which “Operational Risk” is defined as: “Financial exposures arising from damage to a company’s reputation or franchise value stemming from a wide variety of external and internal factors, such as: management change; business interruption; fraud; data capture; data security and integrity; claims handling; and employee retention.” Operational risk is one of the pillars of the A.M. Best Risk Management Framework. Consequently, a properly governed insurance company will take into account the full scope of regulatory compliance issues raised by innovative technology, which is more than today’s increasingly complex and fluid data security regulatory environment. Enterprise risk management (ERM) must also assess the risks associated with replacing a wide range of systems and, potentially, relationships, that may occur with innovation. While insurtech startups have captured the imagination – and capital – of insurers, these ubiquitous private firms are also third-party vendors that should be subject to the same due diligence as any other service provider. This isn’t to suggest the insurance industry and the consumers of its products should curb their enthusiasm about innovation, or to minimize the benefits that are being realized by both insurers and insureds from what insurtechs have enabled. It is to say, however, that unless we innovate all elements of insurance operations at roughly the same time, innovation will be marked with unnecessary failures, regulatory entanglements and costly litigation. It is not just consumers who are affected by innovation. The whole spectrum of service providers integral to the delivery of benefits to insureds must be on board if there is to be success in these technological initiatives or, as Best puts it, if the insurance company is to be, “relevant and successful.” This includes legal and regulatory compliance, but it also must include making certain that every entity that must adapt to innovative technology adopted by an insurance company is capable of doing so. Currently, predictive analytics driven by access to big data have already been adopted by many insurers to improve the underwriting and claims processes. New web-based distribution systems – which rely on big data, as well – make getting insurance easier in the increasingly competitive world of small business insurance. Platforms such as bi-BERK (from Berkshire Hathaway) and Pie Insurance are but two examples of how technology is making it easier for small firms to do business with large insurance companies. For personal lines of insurance, the Internet of Things (IoT) has provided new opportunities to enhance the customer experience. It is vitally important, however, for insurers to understand the relationship between innovation and their partnerships with a wide range of service providers. In other words, change management is important throughout the environment in which the insurer operates. If any one participant in that environment is told to “just do it” (with apologies to Nike), then there is a risk that innovation will fail. While third-party service provider (vendor) management should already be part of the insurer’s ERM program, onboarding these vendors when new technology solutions are implemented should be something specifically acknowledged by A.M. Best when scoring for innovation. In a recently released study, process mining company Celonis looked at how both leaders and business analysts in the U.S., U.K., Germany and the Netherlands view business transformation. The results were startling. Sixty-two percent of C-suite executives set key performance indicators (KPIs) for their transformation initiative without understanding what’s going wrong in their business first. That led the sponsors of the survey to observe, “This suggests that many businesses are undergoing disruptive transformation processes because they think they should, rather than knowing exactly why they must.” See: Celonis (2019), Why are Business Transformation Initiatives Being Launched in the Dark? See also: New Phase for Innovation in Insurance   Echoing that theme, in a report by Valen Analytics, 2019 Outlook: The Data Race Intensifies, it was noted: “Adding to the innovation challenge in insurance is a trend of long IT backlogs, with most insurers reporting a backlog of one to two years. For the 22% of respondents unable to identify how long their IT backlogs are, it may be one indicator that technology innovation is not at the center of business strategy.” Today, the risk run by the A.M. Best effort at innovation scoring is that insurers will not do the thorough risk analysis necessary before launching and implementing significant technology initiatives. Only then will the path to innovation be focused, aligned with well-defined company objectives and capable of delivering value to all who are part of the claims, distribution or underwriting environments. Without that assessment, “bright shiny objects” will continue to be embraced for no other reason than to say that they were.

Workplace violence can happen any time and anywhere. This session at the RIMS 2019 Annual Conference & Exhibition reviewed a spectrum of workplace violence risk management tactics, including red flags that can foreshadow an event and training on what to do if an event does occur. Speakers included:

• Dr. Teresa Bartlett, senior vice president, medical quality, Sedgwick
• David Rydeen, senior director, risk management, Raising Cane’s Chicken Fingers
• Officer Chris Perez, Brockton Police Department

Workplace violence can stem from a variety of issues. Domestic disputes, mental health issues, drug abuse issues, disgruntled employees and racism are all drivers. OSHA reports that 2 million incidents occur each year, many of which (non-fatal incidents like bullying or harassment) go unreported. Robbery-related homicides and assaults are the leading cause of losses in retail. In this setting, there are tactics to help. For instance, post clear signs that there is limited cash on hand/surveillance cameras in use, maintain an unobstructed view of and from the cash register and sales area and create and train on a clear policy as to what to do in case of an event. Approximately 70% of attacks occur within the healthcare industry. Train your staff so they know what to do. Frequently involve police and first responders in that training. It is important to have protocols in place when events escalate and train on de-escalation skills. See also: Workplace Violence: Assessment, Response   Whatever the industry, it is important to know the warning signs. A mishandled termination or other disciplinary actions are often triggers. Know that you are not required to call someone in to work to terminate the person. Also be aware of weapons on the work site. Listen for motivations. If someone is suicidal, the person probably will not have problems hurting others. Drug or alcohol use on the job is also a red flag. Try to be aware of employees’ personal circumstances. Your management really is the front-line defense and must be consistent and present. Family conflicts, financial or legal problems and emotional disturbance can all indicate problems. Gently address any noticed changes in a non-threatening way. Start with, “Your energy is different today. Is everything OK?” Other behaviors to look for are:

• Increasing belligerence
• Ominous, specific threats
• Hypersensitivity to criticism
• Recent acquisition or fascination with weapons
• Apparent obsession with a supervisor or coworker or employee grievance
• Preoccupation with violent themes or interest in recently publicized violent events
• Outbursts of anger

Know your resources. Meet with local city and country law enforcement in preparation of an emergency. Invite them to your building for a tour. Provide architectural diagrams of the site and make them aware of emergency routes and all entrances/exits. See also: Broader Approach to Workplace Violence   Risk managers must focus on designing a customized approach that matches the goals of their organization. Use clinical resources such as mental health professionals and nurses and look to umbrella policies for planning assistance. Plan for post-event strategies, including crisis management companies to meet with witnesses and a plan for HR to go to the homes of those affected and cannot return to work immediately. Dealing with the aftermath is extremely important, especially for survivors. A variety of PTSD-related conditions can lead to a variety of mental health implications for employees. Access to psychological help will be essential. There are also return-to-work strategies that will need to be applied, including gradual exposure therapy or possibly assigning an employee to a job in a different department. All of these strategies are geared at proving that it is safe to return.

The past decade has been transformative for U.S. marijuana laws. Not since the era of Prohibition has the U.S. wrestled so broadly and intensely with the cultural, judicial and economic implications of legalizing a formerly illegal substance. And while the push to reform state marijuana laws continues sweeping the country with unambiguous fervor—a late-2018 Gallup poll showed 64% of Americans favor legalization—many questions and complications remain for those in the insurance industry. Whether it’s being used as medicine or for recreational leisure, marijuana's core problem for insurers is a policy landscape where myriad state laws now conflict with the fact that the federal government still considers marijuana illegal under the Controlled Substances Act (CSA) and classifies it as a Schedule I drug with "no currently accepted medical use in treatment in the U.S." What’s more, the particulars of individual state laws are anything but uniform, and what’s considered legal in one state may be unlawful in another—even if they both allow for some degree of marijuana possession or consumption. “This has all led to a real insurance quandary,” says Brenda Wells, director of the risk management and insurance program at East Carolina University in Greenville, NC. “Do they cover it? Do they not cover it? And if they do cover it, how is it valued? These are just some of the questions they’re wrestling with at this stage. And it can get confusing.” Marijuana and Homeowners Insurance The question is simple: If a policyholder has some marijuana—or is growing it within state-mandated limits—and it’s damaged in a fire or stolen from the property, will a homeowners insurance policy cover the loss? The answer is not so straightforward. Not only are insurers nervous about covering marijuana-related losses because of the legal disparities between state and federal policy, but most homeowner policies also contain explicit exclusionary language related to controlled substances, which means that a claim for lost, stolen or vandalized cannabis may be denied if the insurer believes the loss falls within the exclusion. This can wreak havoc on the enforcement of contracts between an insurer and its clients, says attorney Richard Blau, an insurance expert and shareholder at GrayRobinson and head of the firm’s medical marijuana team. To emphasize his point, Blau cites a now-infamous 2012 Hawaii federal court ruling that said a homeowners insurance policy did not cover the theft of one woman’s marijuana plants grown for medicinal use. The homeowner, Barbara Tracy, was allowed to grow and possess marijuana for her own medical use, and after 12 plants were stolen she submitted a claim to USAA for $45,600. USAA initially agreed to pay Tracy $8,801 for the claim, but Tracy sued, claiming the plants had a far greater value. USAA argued that, because marijuana is federally classified as an illegal Schedule I substance, it was under no obligation to cover the loss at all. The court ultimately agreed with USAA, stating that even though Hawaii law permits the use of marijuana for medicinal use it is illegal under the Controlled Substances Act and therefore not subject to homeowners insurance coverage. “So on the one hand, you have a lot of insurance companies that operate in many different states, which means they arguably fall under federal jurisdiction. They’re worried their charters could be challenged under federal law,” Blau says. “But you also have what I think is the larger issue of judicial precedence that says insurance contracts are not enforceable under federal law. The good news is that… we now have an alternative line of cases where judges have ruled that as long as the claimant stayed within the scope of state law the insurance contract is valid and enforceable. But the split of judicial opinion needs to be reconciled.” See also: In the Weeds on Marijuana and WC   According to Wells, a lot of insurance companies “are reluctant to even talk” about whether they will cover marijuana-related homeowner losses, adding that “the industry in general hasn’t been handling this very well, but they need to figure out if they’re going to cover this. And if they are, they need to be prepared to pay claims like they would for anything else.” Trying to find a catchall approach to the marijuana home insurance quandary produces a staggering variety of anecdotes, opinions and legal vagaries that fluctuate from state to state and from insurer to insurer. At the end of the day, whether a loss is covered will most likely be up to the individual insurer. “Legal marijuana is one of a few Wild West issues facing property insurance right now. It’s vast, uncharted territory,” says Janet Tulsette, a Connecticut-based property insurance consultant who has recently specialized in the intersection of insurance and marijuana law. “Not only is it complicated…but it’s also so unprecedented, which means insurers are reluctant to be the first to make any bold moves one way or the other. They’re playing it relatively safe, but that makes things more complicated, not less.” As of right now, some insurers are looking to individual state laws to establish a precedent for coverage. For instance, Allstate went on the record in 2014 saying it would cover the loss of marijuana in Colorado, where cannabis is legal for both medicinal and recreational use, adding that marijuana plants grown with a state license—and not exceeding the legal state limit—would be “limited to the perils and limits under additional protection for trees, shrubs, plants and lawns.” Marijuana and auto insurance On a consumer level, the intersection of legal marijuana and auto insurance has been fairly uncomplicated thus far, and that’s because the insurance ramifications for getting caught driving high are no different than those associated with driving under the influence of alcohol. However, cannabis-related businesses are finding it extremely difficult to obtain commercial auto insurance policies that can adequately cover various auto-based aspects of their businesses, including the transport and delivery of cannabis-related products. “A lot of the mainstream underwriters are pretty old school, and their vision of a driver in this industry is like a stoner pizza delivery guy,” says Jeff Kleid, owner of the California-based Elite Green Insurance Solutions, which provides a suite of insurance products to the cannabis and hemp industries. “They think that since these men and women are delivering marijuana they must also be smoking it while they’re driving. And that couldn’t be further from the truth. This is a problem of perception as much as it is a problem of legal disparities.” Kleid is quick to point out that insurers are also reluctant to write commercial auto policies because there’s a significant dearth of claims and risk data essential to underwriting. “Insurance is a data-driven industry, and because it’s been illegal for so long there’s not enough data out there to make insurers comfortable working in this space,” Kleid says. Marijuana and life insurance As more and more Americans legally smoke cannabis for recreational and medicinal use, life insurance providers have had to grapple with its impact on the application and underwriting process. According to insurance specialist Michael Quinn, life insurance providers are wrestling with whether smoking marijuana carries the same health risks as smoking cigarettes. “Regular smokers are charged tobacco rates, which are often four times higher than those for non-tobacco users,” Quinn says. “But some insurers are deciding to treat marijuana differently.” For instance, Prudential tends to offer some of the lowest life insurance rates for marijuana users because they do not place them in the same risk pool as cigarette smokers. According to Prudential, a preferred non-tobacco rate is granted to users who smoke marijuana no more than three times per week, and insurance applicants must admit to marijuana use during the application process. Meanwhile, providers like United of Omaha offer non-tobacco rates for those who smoke marijuana no more than three times per month, while John Hancock stipulates that it considers smoking marijuana “drug use” and will not offer applicants competitive rates. “Based on your marijuana use alone, there is no telling what kind of rates you will be offered. You could technically get rates anywhere from substandard to preferred plus,” Quinn says. “However, a company like Prudential looks at the reason behind your marijuana use, and if it’s for medicinal reasons your rates will be based on the severity of your health condition, not the marijuana use alone.” Many in the industry echo this distinction. “For underwriting consideration, the first thing we must determine is whether the use is recreational, or if the proposed insured had been issued a prescription for medical use,” Pinney Insurance underwriter Mike Woods says. “If it’s for medicinal purposes, underwriting is going to be looking to the specific issue that the marijuana is being used to treat." Marijuana and business insurance As anyone familiar with the legal cannabis industry will attest, there is a lot of money to be made from insuring cannabis-related businesses. According to Fortune, the U.S.’s legal marijuana industry grew to $10.4 billion in 2018 (it was $6.5 billion in 2016) and employed more than 250,000 people. What’s more, Fortune estimates that investors will “funnel more than $16 billion into the industry” in 2019. The need for a comprehensive approach to insuring various aspects of the legal marijuana industry is becoming increasingly critical for everyone from growers to dispensary owners, and there are signs that the insurance industry is starting to pay attention. To be sure, a handful of niche carriers and subsidiaries have begun filling the gap. For instance, Brown & Brown Insurance now offers marijuana business insurance through a new company division called Cannabis Insurance Professionals (CIP), which is based out of California and licensed in all 50 states. CIP garnered national headlines last year after the company paid out more than $1 million to one of its clients whose marijuana crop was destroyed in the 2018 Thomas wildfire. “There are small private insurers trying to fill the gap, but not many. And most of these companies are non-admitted, coverage is limited and the price is expensive,” says Dawna Capps Evans, executive director of the National Cannabis Risk Management Association (NCRMA), a membership-based trade organization that provides risk management and insurance solutions for CRB owners and investors. According to Evans, the current insurance landscape leaves business owners with tough choices. “They can either purchase very costly insurance, or they can go uninsured or under-insured—which leaves assets unprotected and exposes them from a personal liability perspective—or they have to piece a plan together from many different insurers, which can be extremely time consuming,” Evans says. See also: Marijuana and Workers’ Comp   According to attorney Meghana Shah—partner at Eversheds Sutherland LLP and co-founder of the firm’s cannabis industry team—the conflict between state and federal law once again rears its head, potentially exposing marijuana businesses and their ancillary service providers (such as insurers) to federal criminal liability. “Business owners and insurers alike remain concerned about the risks associated with doing business in the cannabis industry,” Shah says. “For cannabis-related businesses, the inability to secure insurance renders them unable to protect themselves against common business risks, some of which have the potential to irreversibly cripple their business.” Adjacent to this concern is the limited access that CRBs have to the banking system. Consider, for instance, that in 2014 Colorado’s Fourth Corner Credit Union was chartered to serve the “unique financial needs” of cannabis-related businesses. But despite operating within the boundaries of Colorado’s legalized marijuana framework, the application for a master account from the U.S. Federal Reserve System was denied because of marijuana’s continued illegality at the federal level. This is just one example of how the disparity between state and federal law has forced the legal cannabis industry to operate within a cash-intensive “gray market,” bringing with it all manner of concerns, including theft, the risks of currency transportation, money laundering and cash hoarding. “The lack of banking options is a unique and significant risk for the cannabis industry right now because so much of this economy is being fueled by large, cash-based operations, and that leads to significant exposure,” Evans says. “Banking and financial institutions play a critical role in our economy, and most businesses take for granted the way they use these institutions in a secure way. Without access to safe banking in the cannabis industry, insurers are going to be very reluctant to get on board.” In an effort to address this particular problem, the House Financial Services Committee voted 45-15 in March to advance the Secure and Fair Enforcement (SAFE) Banking Act, which aims to protect banks and other financial institutions from federal prosecution when working with cannabis-related businesses operating in compliance with state laws. What’s more, the act would prohibit federal banking regulators from sanctioning financial institutions that work with CRBs and would also protect ancillary businesses—like insurance companies—from being charged with money laundering or related financial crimes. And while the SAFE Banking Act still faces an uphill battle, many in the industry are extremely optimistic about what it foreshadows. “The industry is only going to grow, and the losses associated with legal marijuana are only going to increase,” Tulsette says. “The insurance industry really needs to come up with comprehensive and substantive solutions. They can only keep their heads in the sand for so long.”