Insurers come in all shapes and sizes, from Tier 1 monolithic operations to the smallest captives and self-insured groups. One thing has been made clear to me in the 30-plus years I’ve served this industry: Regardless of size, many insurers do not fully understand their technology requirements. I’m not saying this because I want to sell them something they don’t need; I’m saying it because I’ve sat with hundreds of carriers over the years who suffer at the hands of less direct experience or the vision required to recognize the need for improved processes and the technology solutions to support them. This is especially true of small to mid-sized carriers, where budgets are fixed and IT staff is often stretched, leaving little room for ad hoc solutions, much less vision. Here “shadow IT” is often the norm (due to labor restraints, employees wear many hats, prompting those in positions outside of IT to work on catching and solving IT problems). Shadow IT can represent a real and present challenge to insurers of all sizes, because it often fosters a band-aid approach: Well-meaning but inexperienced employees make minor temporary improvements to address major long-term problems. Once the band-aid falls off, the damage is done, the technology solution provider (vendor) is called in and the fix that’s required is often immediate and expensive. See also: How Technology Drives a ‘New Normal’   This dilemma sometimes makes the vendor look like the bad guy, especially if the vendor is opportunistic and leverages the insurer’s misfortune to “fix” the problem with solutions the carrier might not really need. Further, it’s difficult to help remedy problems that the insurer is in denial about. Sometimes, a simple technology needs-assessment helps uncover where the problems originate. But remember that determining technical requirements begins with evaluating business requirements, which require a look at existing processes that are supported by technical support that is lacking in the first place. You can see why firefighting becomes the preferred mode—let’s just fix it so we can keep working. If we back up the discussion a bit, we see that the insurer’s real, primary need is for education. The vendor that is interested in becoming a trusted partner has an obligation to sit with the insurer and work together on confirming the business goals, then applying usage analysis and system requirements. In this way, the vendor becomes something akin to the “Dog Whisperer,” the seasoned canine expert on cable TV who tames otherwise unruly pets by noting that “it’s not the dog’s fault—it’s his owners who need to better understand his requirements.” When the technology solution provider connects with the insurer in a way that exposes the essence of the problem and provides the information and steps necessary to help solve it for the long term, it removes the need for crisis-mode operations. In most cases, this means a big change to the insurer’s existing processes, but the trusted partner doesn’t walk away from this challenge, either, because in almost every case those new processes free up the employee’s time to focus on providing more value downstream. See also: How Technology Breaks Down Silos   Taking the “Dog Whisperer” approach, we have learned from our customers’ use cases and implementation histories and bring the experience to each implementation analysis. We sit down with carriers to help them better understand their objectives and requirements, where the technology and process roadblocks are and what the potential is for that important long-term fix.

You are reading the headline correctly. If you follow these tips, your insurtech will either fail or will be heading toward failure. #5 - Get too much feedback. I truly believe that feedback is the breakfast of champions, but, if you are focused too much on customer validation and discovery, you will fail, as you haven't executed. To avoid analysis paralysis, I recommend doing enough exploration to test your use case. If you are getting five people telling you directionally the same information, then you are good, and it is time to act. Go Execute! If you are getting five people who are telling you totally different things, then revisit or take your hypothesis and break it down. Also, keep a watch on who is your feedback base. Are you talking to decision makers or industry experts? Remember: Insurance is a very old and broad industry, and change is difficult. Ensure your feedback base is made up of industry personnel who face the pain that you are going to solve or have knowledge of it. As a serial entrepreneur, I meet folks every day who are an expert in everything. Really? Getting false confirmations from someone you won't be serving or, on the flip side, someone who doesn't believe you are addressing a real problem can be dangerous for startups. BEWARE. Learn to let the feedback go in one ear and out the other. Here comes the best tip ever: RUN from such advice. (j/k. Be respectful of everyone and develop a filter.) #4 - Form an imbalanced team. If you are a technology company with no tech, you have a problem. If you have a product but lack industry expertise in your team, you have a problem. If you are the type who wants to be in every conversation, not only will I say you have a problem, but your team will have problems. The list can go on and on. Having the right team can make or break an insurtech and requires much TRUST. See also: The Failures and Successes of Insurtech   As an insurtech, having the idea and perhaps the technology is fantastic. Having a team that can implement the product in a frictionless way is the key to more clients and more money. Don’t take shortcuts for implementation. Hire the right people: project managers (ensure they have startup experience or come from a Lean/Agile background), DevOps, QA, etc. Also, ensure you either have a team member or a mentor who specializes in change management to ensure smooth implementation. If you aren’t from the industry (like me), get completely immersed and surround yourself with mentors, go to events such as Insurtech FastTrack from Startupbootcamp, Global Insurance Accelerator, Insurtech Week and NAIC events (especially if you are doing work that affects regulators). #3 - Bootstrap. Most startups fail because they run out of cash. Developing a product is one piece of the puzzle, but how to market and sell takes capital: $$$s and resources. There is a lot of testing and strategy within marketing and sales to get the leads that may convert to customers -- and I haven't even touched on customer retention or operations. It is a great time to be a startup in the insurance industry. There are so many companies that have created a VC arm to their company or are partnering with accelerators to boost startup activity. Some don’t even take equity in your company, like Hartland. But don’t take fundraising lightly. If you want to sustain, you need to start the process of understanding the investment landscape during the idea stage. Even if you have someone who is interested in funding, you are not going to get a check the next day miraculously. Due diligence takes a long time - anywhere from three to nine months, sometimes longer. Also, finding the right lead investor or VC company is critical. Don't get desperaten and sign with whomever; be strategic, as you are forming a marriage. Find the partner that aligns with your goals and can open doors with future customers and investors. #2 - Attend a lot of networking events. For insurtechs, go to the conferences that will get you exposure. We have been very thrilled with NAIC events as we do have a module that needs regulators' feedback. Also, Insurtech Rising was the very first conference we attended back in May, and we were grateful for the outcomes. We can’t wait to attend InsureTech Connect in Las Vegas in October. But have you calculated the time you have spent on your business vs. about your business? (Thanks, Action Coach!) Don't get me wrong, networking is AWESOME, but if it doesn't help your company, your clients or you on a personal level (thanks, Brent Williams), you are wasting time. Might as well take a nap or, even better, go work out! See also: Touching Customers in the Insurtech Era   #1 - Solving all the world's problems. If your product serves everyone, then you will most likely fail if you don't pivot, focus on a segment or market it correctly. Even Facebook started with a focused audience initially before it took over the world. It is incredible to solve problems for various industries, but go deep into one industry first. Having focus and clarity is critical for startups. As an example, Benekiva as a platform solves problems for any organization that maintains beneficiaries. But, rather than being generic and solving everyone's issues, we decided to focus on the life insurance industry so we can have pinpoint focus and go deep in the organization.

You don’t have to scroll very far in your social media timeline to see the posts of outrage and calls for transparency aimed at the players in today’s healthcare insurance game. And, rightfully so. The waste, fraud and, at times, seemingly criminal behavior of the BUCAHs, pharma and healthcare providers is a travesty. It has to change. All these guilty players need to be called out, held to a higher standard and forced to account for their contributions to this mess we struggle with every day. Oh, it’s happening, sweetheart The Bezos-Buffett-Dimon (B-B-D) healthcare venture is heating up. While I have my serious doubts about their ability to solve the crisis (I believe that, as with most movements, change will happen on a much smaller, much more local scale), there is one thing that this trio will certainly bring, and that is visibility and outrage to the mess, and they will do so at a level we can’t even begin to fathom. With all due respect and reverence to the #MeToo movement, and others like it, I predict B-B-D will similarly open the floodgates of horror stories from victims of the travesty that has befallen our healthcare system at the hands of providers of care, insurance carriers and big pharma. We will see and hear, at the most publicly visible level, the telling of stories we are already sharing within our relatively small inner circle on a daily basis.

• Stories of lost lives due to inaccessibility of care.
• Stories of couples who choose to divorce so their child can get the care he or she needs.
• Stories of medications and medical treatment that cost multiples of what they should.
• Stories of the artificially inflated health insurance premiums that have kept businesses from growing and achieving their profit potential, at the expense of the profit of the insurance carriers.

I can feel you getting excited. I can hear you saying, “bring it on, B-B-D!!” See also: Bridging Health and Productivity at Work   Be careful what you wish for The spotlight from the B-B-D venture will be shone in every perceived dark corner of the system, with a particular intensity on anyone seen as a middleman. If you aren’t concerned yet, you should be. Make no mistake, benefits advisers, you will be next. In addition to the stories above, there will also be stories of brokers being paid $50,000/$100,000/$250,000 on a single account for “simply selling a policy.” Get out in front of this tidal wave I know most of you who read our posts work your behinds off every single day with the best interests of your clients clearly in mind. I know the decisions you help your clients make are some of the most complex made in their business. I get it. But perception is reality. And you need to brace yourself for the picture B-B-D is about to paint of you. Be prepared to deal with the perception of being nothing more than the distribution channel of the carriers, a middleman. You know that the carriers, which many of you attack on a daily basis, are going to be a very big, very sexy target of the B-B-D media machine. What you may not know is that you are going to be seen as part of that same target. When your compensation ties you directly to the carriers, when you are contractually tied to the carriers more closely than you are to your clients, it is going to be very difficult to separate yourself from the carriers. Sorry, but it’s true. You don’t even need tea leaves to predict this one A recent article about the venture is titled, in part, “Eliminate the Middlemen” and specifically addresses both pharma and, hold on, brokers. You are already being painted as an overpaid, taking-money-on-the-side, not-making-the-recommendations-in-the-best-interests-of-employers, middleman (go read the article). That sound you may be trying to not hear is one of the gauntlet being thrown down, hard. See also: Association Health Plans: What to Know   No time to spare Now is the time to be re-engineering your business to separate yourself from the carriers and to formally serve the clients you have always served altruistically. I get that there are significant changes you will have to make, many of which are not going to be easy. But there are a couple of things that are relatively easy that will take you in the right direction.

1. Sit down with each of your clients and have a stewardship meeting where you explain very clearly the various ways in which you bring them value.
2. During that meeting, have a transparent conversation about how much you are being paid by them (via commissions built into the premium) for delivering that value. If possible, let them know you will be asking the carriers to remove your commissions and ask them to pay you directly in a fee-based arrangement.
3. Finally, educate them about what is broken about the system and the solutions we are starting to see in the industry. Let them know you will be there to help them take advantage of every innovative solution that makes sense for them.

I get that these may be difficult discussions to have, but, I promise you, they are nowhere near as difficult as the defensive discussion you will have to have if you wait for B-B-D to tell a story on your behalf. Don’t believe me, just ask the carriers that have been on the receiving end of your daily attacks. This article was originally published on Q4intel.com. 

According to the Occupational Safety and Health Administration (OSHA), workplace injuries have a major impact on an organization’s bottom line, causing the employer to bear expenses related to workers’ compensation, medical treatment, legal services, repairing damaged property and so on. Personal injury lawsuits are convoluted, putting your business at a risk of fines and expensive lawsuits. Moreover, personal injury laws differ in every state in terms of the type of injuries they cover and the reimbursements offered. For instance, the law enables personal injury lawyers in Chicago to cover everything, from the carpal tunnel syndrome in offices to spinal cord injuries on manufacturing and construction sites. Thus, victims of a workplace accident have everything to gain. Consequently, it is important for business owners to promote an environment of safety and security in the workplace, thereby reducing the total number of personal injury claims. Here are five effective tips that will help you protect your business from personal injury claims. 1. Pre-empt Workplace Accidents Accidents in a workplace are erratic and unpredictable. Therefore, it is wise to pre-empt the potential safety risks and implement measures to avoid dealing with the aftermath of an injury episode. Every business has a unique set of safety concerns that need to be addressed in time. Identify and tackle the safety vulnerabilities for your business and develop strategies to avoid such setbacks. A business owner is responsible for the maintenance of the office premises and equipment. Hire a building inspector to identify and fix structural issues like loose railings and broken staircases that may lead to accidents. Schedule regular repairs and maintenance to keep your commercial property safe for employees, visitors and customers and protect your business from personal injury claims. Clutter is a potential safety hazard. Keep high-traffic areas like aisles and stairways free of boxes and waste paper to minimize the possibilities of accidents and falls. Workplace driving accidents cost employers an average of $60 billion per year. Make sure all vehicles used for business purposes are thoroughly inspected, repaired and maintained on a regular basis to avoid any accidents in transit. Do not encourage overtime working. More often than not, overworked employees suffer from mental and physical exhaustion, increasing the chances of workplace accidents and injuries. Make sure you have adequate staff to improve the productivity and maintain a safe work environment for all. See also: When Workplace Safety Is Core…   2. Create a Successful Employee Safety Program According to OSHA, educating employees about accident and emergency response and other safety measures can reduce workplace injuries and disabilities by as much as 60%. Conduct pre-employment tests to screen the most efficient, skilled and qualified individuals for the job. Train your workforce to follow safety practices and identify, report and effectively manage site-specific hazards, thereby empowering them to make safe choices. Analyze your workplace for safety hazards and take effective steps to eliminate or control them. If you operate in the heavy machinery, construction or hazardous chemicals domain, make sure your workforce is using the proper safety equipment and protective gear. In an office environment, make sure the housekeeping staff keeps the aisle free of debris and spills, reducing the risk of falls. Moreover, follow the ergonomic workplace standards that promote employee productivity, safety and well-being. Routine safety and evacuation drills prepare employees for dealing with natural calamities like tornadoes, earthquakes and fire. It is critical to reinforce the safety measures at all employee meetings and training sessions. Encourage a culture of safety by stressing the importance of complying with safety standards, thereby reducing the risk of workplace accidents and protecting your business from personal injury claims. 3. Invest in General Liability and Property Insurance When accidents occur at the workplace, the injured employees, customers or visitors can easily file a personal injury lawsuit, imposing heavy fines on the business and damaging its reputation. Investing in liability insurance, however, can alleviate the financial burden of these lawsuits and maximize security for your business. Thus, when faced with personal injury claims of negligence, property damage, libel, slander and advertising injury, you can rely on general liability insurance to protect your business against such claims and cover your legal fees and the medical and miscellaneous expenses. To protect your company’s building and physical assets against fire, theft and accidental damage, it is advisable to invest in a liability insurance policy that includes property insurance. 4. Hire an Expert Business and Commercial Litigation Attorney Personal injury claims not only cost the business money but also put its reputation at stake. Whether you own a small or a medium-sized enterprise or a large organization, it is critical to hire a business and commercial litigation expert who can offer you valuable insights when signing contracts and settling claims. Personal injury lawyers know the personal injury claim process like the back of their hands and are updated on the latest health and safety laws. Thus, they can effectively represent you in court and advise you on the next steps, thereby ensuring that your business is adequately protected against such claims. 5. Know What to Do Once an Accident Has Occurred Despite safety precautions, workplace accidents do occur, resulting in personal injury claims against the employer. When an accident occurs in your business premise, injuring one or more employees, you should know how to handle the situation. First things first, seek emergency help for the people involved in the accident. Secondly, get in touch with your attorney, who can help you manage this situation in a professional manner. Investigate the sequence of events that led to the mishap and record it in the form of pictures and videos. Ask the employees who witnessed the incident to give you a recorded statement about the accident and remember to note their names and contact details. See also: Workplace Wearables: New Use of Big Data   Take Home Message As a business owner, you should always be prepared for dealing with all unexpected events, including workplace injuries. Because personal injury claims severely damage the company’s reputation and eat into its bottom line, the best defense is to take pre-emptive, preventative steps toward minimizing the incidence of workplace accidents, thereby securing the business from such risks. The information shared in this post will help you create a safe work environment for your employees and protect your business from pricey personal injury claims.

If you say that everyone is in your target market, you imply that your service or product applies to no one in particular. Defining a target market is important because everyone is in a unique life stage that will affect their buying process. Generational marketing is when you market to a specific generation of people based on the preferences, attitudes and upbringings that distinguish them from other groups. This approach means tailoring customized messages for specific age groups instead of sending mass marketing messages. The Silent Generation refers to people born between 1925 and 1945. The Baby Boomer generation refers to people born between 1946 and 1964. More babies were born in 1946, the year after World War II ended, than ever before: 3.4 million. That is 20% more babies than in 1945. The Silent Generation as Clients Characteristics of the Silent Generation include being technologically challenged, staying loyal to employers, using traditional methods and respecting authority and patriotism. More than half of the Silent Generation was married, and fewer women worked outside the home than do so today. Many of them did not have a bachelor's degree. This generation witnessed the creation of Social Security and Medicare. Members of this generation were brought up on the value of hard work and diligent saving. Marketing to the Silent Generation means earning their trust and providing them with value. The Silent Generation lean toward face-to-face communication. It is important to clearly communicate information and explain services or products you provide. With this generation, agents should be prepared to answer questions in person and provide hard copies of forms or reports. When discussing financial history, it is important to approach questions without judgment. As time passes, it is imperative that you notice any cognitive changes in your clients. See also: The Unique Skills in Each Generation   When you are meeting with clients from the Silent Generation, it is respectful to meet them in the lobby or reception area and walk with them to your office or meeting room. You should prepare the meeting room to be handicap-accessible, such as with adjustable chairs and wheelchair-accessible tables. Many in this generation have physical disabilities. Some clients will have hearing disabilities, and reducing extraneous noise will make the meeting easier for them and for you. If you will be discussing end-of-life planning, having family members present is usually a good idea. Many from this generation are worried about the economic challenges their children and grandchildren are facing and wonder why success has become much more difficult for them. Some members of this generation set up college trust funds for their grandkids, and some even assumed formal custody of them. The Baby Boomer Generation as Clients Baby Boomers are in the over-50 age group. They have been considered the "me" generation, characterized as having individualist attitudes. This group of men and women were the first TV generation. Baby Boomers were also the first generation where divorce was socially tolerated. This generation has grown up through the phases of getting married, forming families, raising kids and settling in careers. Some are  now grandparents. This generation is viewing the world around them in an experienced way. To reach this generation effectively through marketing, you will need to try to show you understand their upbringing and values. If you are looking to form a stronger relationship with your Baby Boomer clients, you will want to be as respectful as possible. Never refer to a Baby Boomer as old; it disregards the way the generation is redefining what growing old means. When marketing to these people, do not assume their age will hold them back. Many Baby Boomers are looking forward to retirement adventures like cruises, dinner parties, sky diving and other means of experiencing the world around them. This is not the generation to retire so they can sit at home at watch TV all day. When working with Baby Boomer clients, it is important that you keep your promises. This should go without saying; keeping your promises should be a priority with all of your clients. This is how you build and maintain trust between your business and your clients. Providing exceptional customer service is vital if you want to win over the Baby Boomer clients. This generation loves one-on-one interactions in person, over the phone or through online live chats. User-friendly websites can add to the customer service experience. Many Baby Boomers want to find the answers to their questions easily on their own. Baby Boomers are tech-savvy individuals, this age group is actually the fastest-growing demographic online. Baby Boomers spend more time per week online than they spend watching TV. Creating and posting informative sources about your products or services online is just as important as explaining the benefits of the offerings your company provides. The internet is one of the most important information sources for Baby Boomers when they make purchasing decisions. A website needs to be easy for Baby Boomers to use to purchase products, and marketing materials must include calls to action directing them to buy now. Baby Boomers can purchase Christmas gifts online from the comfort of their home; they couldn't do this before, and, now that they can, they love it. Incorporate social media into your digital marketing. Now that moms and dads are on Facebook, the younger generation is not as interested in being on these social sites. This is, however, a great place to reach Baby Boomers. Statistics show that Baby Boomers are the fastest-growing age on Facebook, with an 80% surge in users between 2010 and 2014. The Importance of Generational Marketing Don't assume that all Baby Boomers or all of the members of the Silent Generation are the same. No group of people can or should be stereotyped. Marital status, income, net worth, life experience, health and age are things that affect how people respond to marketing messages. It is your job to understand this, act accordingly and reach clients in the moments that matter with a message that will create a connection. See also: How to Attract the Next Generation   Whether you are working with a Baby Boomer or a member of the Silent Generation, every message should be tailored to connect with each individual consumers. You will find connecting with clients easier when you know what they consider to be respectful. Respecting your clients, listening to their needs and giving them the best solution for their situation will lead you into the ideal client-agent relationship you desire.

The days of trusting your legislators to have your best interests at heart are in the rearview mirror. Apparently, their main interest is parroting the buzzwords of the moment to get elected and then being too busy banking lobbying money to listen to the voters. Our legislators have become spectators who wait for the perfect moment to pounce on their political enemy and then go on cable news shows to boast about it. The “us against them” attitude, punctuated by hyperbolic, apocalyptic rhetoric, closes the door to finding solutions. Our interests would be better served by having town hall meetings where voters could state their concerns, air their differences and learn what legislators are doing about their issues. Caution: Meetings at 9 a.m. on Wednesday ,when paid activists are guaranteed to outflank the working general public, are prohibited. There are strong differences of opinion on how to attain a healthy citizenry. Educating potential patients about what drives up medical care expenditures can start the conversation. Well-informed patients would demand solutions based not on corporate interests or government or political agendas but on a fair, competitive market that maximizes choices and achieves lower costs. Eight years of the Affordable Care Act have borne out Congressional Budget Office predictions that abandoning basic principles of insurance—which compensates only for events beyond the insured’s control and is priced according to the degree of risk—would lead to higher and higher premiums, fewer participating insurers and unsustainable government expenditures to subsidize insurance premiums. The data in three recent Centers for Medicare and Medicaid reports on ACA exchanges show “individual market erosion and increasing taxpayer liability.” The average monthly premium for coverage purchased through the exchanges rose 27% in 2018, and federal premium subsidies increased 39% from 2017 to 2018. See also: 10 Reasons Healthcare Won’t Be Disrupted   A less frequently discussed cost driver is the disturbing trend of private doctors’ offices being scooped up by hospitals, health insurance companies and venture capital groups. Prices tend to rise when health systems merge, because of decreased competition. And not only do hospitals and health systems generally charge more than private physicians’ offices, the government compounds this problem by paying more to hospitals than independent offices for the same service. A review of 2015 Medicare payments showed that Medicare paid $1.6 billion more for basic visits at hospital outpatient clinics than for visits to private offices. Patients are the biggest losers: They paid $400 million more out of pocket and had their tax dollars wasted. The study also found hospital-employed physicians’ practice patterns in cardiology, orthopedic and gastroenterology services led to a 27% increase in Medicare costs. This translated to a 21% increase in out-of-pocket costs for patients. Similarly, a U.C. Berkeley School of Public Health study of consolidation of California's hospital, physician and insurance markets from 2010 to 2016 concluded: “Highly concentrated markets are associated with higher prices for a number of hospital and physician services and Affordable Care Act (ACA) premiums.” In consolidated markets (defined by the Federal Trade Commission’s Horizontal Merger Guidelines), prices for inpatient procedures were 79% higher, and outpatient physician prices ranged from 35% to 63% higher (depending on the physician specialty) than less concentrated markets. Big medicine and third-party financing are taking the cost curve in the wrong direction. This speaks to the urgency of encouraging cash-friendly practices that bypass insurance and supporting direct primary care (DPC) practices. With DPC, all primary care services and access to low-priced commonly used medications are included in an affordable upfront price. Importantly, DPC’s time-intensive and individualized management of chronic diseases decrease hospital admissions, paring Medicare’s $17 billion spent on avoidable readmissions. See also: How to Optimize Healthcare Benefits   Why corporations want to marginalize private practice seems clear; the government’s motive is open to debate. Surveys consistently find that patients overwhelmingly want “personalized provider interactions.” Thus, herding patients into government-directed programs is not the solution. One core problem with government systems is their reliance on the goodwill of politicians. As President Ford said, “A government big enough to give you everything you want is a government big enough to take everything you have.” It’s time for Congress to scrutinize anti-competitive health system mergers. It’s time to bring to the floor more than a dozen bills to expand and improve Health Savings Accounts (HSAs) to give patients more control over all facets of their medical care. Congress, the clock is ticking on this legislative session. Stand up for patients. Or did the dog eat your courage?

As insurers and regulators address uncertainties in connection with risk-adjustment, transparent health reinsurance emerges ever more forcefully as a marketplace solution for managing risk in connection with healthcare costs. The immediate instance animating fresh reconsideration of health reinsurance is the early July Trump administration decision to desist from administering risk adjustment. The decision followed a federal court decision in New Mexico that found that the Centers for Medicare and Medicaid Services was being arbitrary and capricious in its risk adjustment. There is nothing inherent in risk adjustment that makes rational and neutral implementation impossible. It is simply that CMS wasn’t doing that in New Mexico in the court’s determination, so the judge sided with Land of Enchantment insurers and rapped CMS’s knuckles. Risk adjustment is a permanent element of the Affordable Care Act, or Obamacare, to transfer risk among insurers. Transitional reinsurance and risk corridors, elements of Obamacare that expired at the end of 2016, worked well... and badly. Transitional reinsurance had pooled enough money, coupled with $5 billion of Treasury subsidies over three years, to pay claims. Risk corridors, by contrast, paid but 12.5% on claims and put a number of insurers in the lurch. They had entered Obamacare markets on the supposition that risk corridors would pay vastly more. Administration decision making on risk adjustment leads inescapably to uncertainty because of the potential for adverse selection, an escapable element of insurance. Nicholas Bagley, a scholar, says that, “in one sense, the furor over the risk adjustment program may be overdrawn. The 2019 rule has been fixed, so we’re really talking about accounts receivable at this point. They’re big accounts receivable, amounting to hundreds of millions of dollars, but most insurers can handle a short delay in getting paid. "In another sense, however, the needless suspension of the risk adjustment program is a signal that the Trump administration remains intent on sabotage. Already, insurers were stiffed on their risk corridor money. Then the cost-sharing payments evaporated. Now, even risk adjustment money may go up in smoke. What’s next? This is no way to run a health program, and no way to run a government.” One practical solution is to embrace transparent health reinsurance, a proposal that ITL published in anticipation of fade-outs for risk corridors and transitional reinsurance just over two years ago. If anything, conditions are more propitious now. See also: Reinsurance: Dying… or in a Golden Age?   This past fall, the president placed the foundation for association health plans. Last month, the Department of Labor issued implementation guidance, which will go into effect later in August, so associations of enterprises could jointly negotiate and purchase health care coverage. DOL says: “As it has for large company plans since 1974, the department's Employee Benefits Security Administration will monitor these new plans to ensure compliance with the law and protect consumers. Additionally, states will continue to share enforcement authority with the federal government.” Similarly, the Trump market liberalization for short-term, limited-duration insurance opens another market for reinsurers. As with association health plans, CMS says that, “in the final rule, we also strengthened the language required in the notice and included language deferring to state authority.” The market liberalization initiatives, coupled with Department of Labor, CMS and state regulatory oversight, present signal opportunities for reinsurers. For instance, in the emerging private flood insurance market, “market growth to date has largely been driven by the interest of global reinsurers in covering more U.S. flood risk,” the Wharton Risk Management and Decision Processes Center reported in July 2018. Issuers would mitigate adverse selection. Associations and issuers of short-term, limited-duration insurance would mitigate risk. State legislators and regulators could enact statutes and set standards, their domain competencies. Mandatory, state-based reinsurance is wholly feasible, particularly in densely populated states, for each marketplace offering. This approach could go a long way toward creating foundations for accountable health organizations. See also: The Dawn of Digital Reinsurance   Innovators like Amazon Web Services could bring one element of available technologies, cloud computing, to provide fresh applications boosting asset values and volumes and increasing probabilities for effective service. Associations, enterprises and individuals would experience greater healthcare security and quality.

The federal National Flood Insurance Program (NFIP) underwrites the overwhelming majority of residential flood insurance policies in the U.S. As of April 2018, more than 5 million NFIP policies were in force nationwide (4.8 million residential), representing slightly more than $1.28 trillion in coverage ($1.17 trillion residential). For decades, the NFIP has been homeowners’ only option for flood insurance, but over the past several years a small private market for residential flood insurance has emerged. Policymakers are increasingly interested in learning whether the expansion of this market could help meet the policy goals of increasing the number of homeowners with flood insurance or offering more affordable coverage. Stakeholders—in congressional testimony, op-eds, reports and other forums—have offered diverging opinions as to the appetite of the private sector in writing more flood insurance, on the existing barriers to private coverage and on the implications for the NFIP. The present state of the market is unclear, particularly because there is no nationwide database on the companies writing residential flood insurance, coverages offered, policy terms, pricing and any differences between private and NFIP flood insurance. This makes it difficult to evaluate the market’s future evolution and relationship to the NFIP. This report aims to fill these knowledge gaps and has two primary objectives:

1.  to document the current state of the private, residential flood insurance market across the U.S.; and
2. to identify the main factors influencing the number and form of flood insurance policies offered by the private market.

To meet these objectives, we conducted in-depth, semi-structured interviews with 63 insurers, reinsurers, state brokers and other market participants. We also gathered and analyzed current private market data from a range of sources, including public documents, congressional testimony, news articles, state regulators and private firms. See also: Future of Flood Insurance   Key Findings

• The private residential flood insurance market in the U.S. is currently small relative to the NFIP. We estimate that private flood insurance accounts for roughly 3.5% to 4.5% of all primary residential flood policies currently purchased.
• With the exception of Puerto Rico, more policies are written by surplus lines carriers than by admitted carriers subject to state rate and form regulations. This is unsurprising, because surplus lines firms tend to cover new or catastrophic risks for which consumers may have trouble finding coverage in the admitted market.
• Roughly 20% of private residential flood policies (and 40% of admitted carrier policies) are in Puerto Rico; another roughly 20% are in Florida. No data are available to evaluate the size of the total private market in other states or at a substate level nationwide.
• Private market growth to date has largely been driven by the interest of global reinsurers in covering more U.S. flood risk. In the admitted market, reinsurers are assuming most of the risk for primary insurers, often in excess of 90%. In the surplus lines market, Lloyd’s of London has played a major role, backing the majority of residential flood policies.
• Among the small number of policies written by the private sector, we identified three broad policy types. The most prevalent is what we refer to as an “NFIP+” policy within the FEMA-mapped 100-year floodplain, where flood insurance is required for federally backed mortgages. NFIP+ policies have higher limits or broader coverages than NFIP policies. Most are stand-alone policies, although some are sold as endorsements to homeowners policies. A second type is a lower-coverage-limit policy issued as an endorsement in lower-risk areas. The third type, used by only a couple of firms, mimics the NFIP policy.
• There does not exist data to ascertain how many homeowners previously uninsured against flood are purchasing private policies versus how many are switching from NFIP policies to private coverage. Insurers in the market believe their portfolios include both newly insureds and policyholders switching from the NFIP.
• Because the NFIP will provide a policy to anyone in a participating community, private firms can operate only where they can price lower than the NFIP or provide broader or different coverages for which there is consumer demand. In a sense, then, the NFIP is a default benchmark for comparison with private flood insurance policies.
• Companies have identified certain types of properties or risks where they believe they can profitably operate and compete with the NFIP. Those target areas of opportunity, however, vary across firms. For example, some are restricting themselves to areas that FEMA designates as having lower flood risk, and others are focusing on areas that FEMA designates as at higher flood risk.
• The largest U.S. homeowners insurance companies have generally been hesitant to enter the flood market, although a few have begun to enter through subsidiaries. Their caution, we learned, stems from concern about being unable to adjust rating or policy coverages as they gain experience in writing flood because of state regulatory practices; concentration of risk in their portfolio; correlation of flood with existing wind exposure; satisfaction with the current arrangement; and concern about reputational risk should they need to raise premiums or scale back coverage as they explore the potential flood market.
• More private capital is now willing to back private flood coverage in the U.S. Interviewees agreed that, as insurers’ familiarity with flood catastrophe models grows, as underwriting experience develops and as state regulatory structures evolve, the number of private flood policies in force could continue to grow, including among admitted carriers. As of this writing, there were multiple new rate filings in many states, suggesting a continued expansion of the market.
• Whereas the NFIP is required to take all risks, private insurers are selective in their underwriting. All interviewees agreed that the private sector will never be able to write policies for certain properties or locations (e.g., repetitive loss properties or high-tide flooding areas) at a price homeowners would be willing to pay. Substantial public investment in risk reduction, combined with aggressive land-use management, they said, was essential for limiting future exposure and encouraging the private sector to move into those areas.
• The private market participants we interviewed differed as to how much flood risk in the U.S., and storm surge risk in particular, they thought could be underwritten by the private sector. All agreed there would likely remain a large and important role for the NFIP to play, particularly in the near term.
• Acceptance of private flood insurance by banks and financial institutions does not appear to be a major constraint on the market at present. With very few exceptions, private insurers have told us banks ultimately accept their products, though they may have some initial questions or concerns.
• There is a need for expanded insurance agent education about flood risk and flood insurance products, both for the NFIP and private policies. Interviewees disagreed about whether the higher-than-market commissions paid by the NFIP were creating a disincentive for the private market.
• Most interviewees saw limited demand for flood coverage today, whether offered by the NFIP or by a private provider, and said that consumers were price sensitive.

See also: How to Make Flood Insurance Affordable   This report was written by Carolyn Kousky, Howard Kunreuther, Brett Lingle, and Leonard Shabman. You can find the full report here.

As data breaches increase in type, severity and number, more companies plan to purchase cyber insurance. While cyber insurance premiums in 2016 in the U.S. were $5 billion, projections indicate they will increase to $20 billion by 2020. Complex cyber crimes mean insurers find themselves facing contentiously complex relationships with their insureds. To create a resilient business model, both of these parties need to communicate effectively and understand the overt and hidden risks they face. The Underwriting Communication Gap Information forms the basis of strong underwriting. With traditional general liability policies, insurers can easily gather information on a company’s financial solvency by reviewing publicly available documents such as annual financial reports or credit ratings. With cybersecurity policies, attack vectors extend in a variety of directions, making information less tangible for underwriters. With a compounded annual growth rate of 41%, cyber insurers need insight into the full range of their insureds’ risks. The present model relies on questionnaires from applicants; however, when insureds misrepresent or misunderstand their risks, insurance companies suffer billions in losses. Often, the cost of a breach exceeds the limits of a policy’s liability, meaning that even those companies with insurance find themselves underinsured. Because courts generally agree that general liability policies do not cover cyber loss, business continuity plans require appropriate insurance aggregates to fully cover losses. Even the most sophisticated companies find themselves unaware of their biggest cyber risks. When insureds lack data, underwriters cannot effectively write policies. Thus, the communication gap poses a risk for both the insureds that remain underinsured and the insurance companies that may be overextending their books of business. Security ratings act as a tool that allow better communication between insurers and their insureds when establishing a cyber security policy relationship, similar to credit ratings in the general liability arena. See also: Roadblocks to Good Customer Relations   The Claims Communication Gap Insureds use insurance to protect their internal and external stakeholders. However, the communication gap creates a claims problem for insureds. Coverage litigation costs and a sense of betrayal ruin relationships between companies that share the economic ecosystem. The Equifax breach offers a contemporary example. Most recent estimates place Equifax's breach costs at $275 million, but the company retained only $75 million in cybersecurity insurance. A single employee’s failure to patch a known vulnerability in the Apache Struts Java application created an opportunity for hackers. Equifax’s failure to understand its own patching cadence led to its underinsured status and, ultimately, its severe losses. Information Enables Resilience The information security community focuses on resilience. When a distributed denial of service attack causes a company to shut down services for days or weeks, the company lacks cybersecurity resilience. An insurance company’s resilience requires setting aside financial reserves to cover claims costs. Because cyber policies often cover business interruption costs, businesses that lack cyber resiliency too often claim losses and file insurance claims. Security ratings provide insight into an insured’s resilience. Because data breaches are inevitable, even companies with strong security ratings may be hacked, but their continued attention to their environments means they will have strong disaster recovery protocols limiting business interruption. To remain financially stable and resilient, insurance companies need to adequately estimate potential losses so that premiums adequately align with their risk acceptance. Insurance companies and their customers need shared visibility into the protected cyber ecosystem. Otherwise, insurers continue to dissuade financial safety by overestimating premiums while companies risk their solvency by underinsuring their business. This business model promotes neither economic stability nor resiliency. Continuous Monitoring Builds Continuous Relationships Remedying the information and communication gap between insurers and insureds provides the only solution to the current resilience problem. Companies often prove, through audit reports, that they engage in information security, yet those documents show proof of only a single moment in time. Insurers need tools providing visibility into their insureds’ ecosystems on a continual basis, such as security ratings. Organizations face data security threats from both their IT environments and those of their vendors. One breached vendor creates a domino effect of cyber insurance claims as the damage travels through the supply chain. Insurers and insureds need to be able to communicate both visible and hidden cyber risks. Security ratings continuously monitor insureds’ endpoint security, IDS and antivirus, while also providing a shared language so they can effectively communicate with insurers. Insurers, conversely, can use the shared language of security ratings to communicate to insureds the impact that security vulnerabilities have on insurance premiums and coverage. See also: The New Agent-Customer Relationship   In the cyber insurance space, increased claim complexity degrades the symbiotic relationship. As insureds shop around for better premiums, insurers lose valuable business. To promote continued business relationships, the two parties can both benefit from automated tools that enable continuous communication about continuous monitoring. Tools to facilitate visibility help establish metrics for the appropriate pricing of risk to cover potential losses and set reasonable premiums. Insureds must communicate with their insurance companies; however, companies focusing on the daily tasks of conducting business lose track of communication and time. Therefore, insurance companies need to protect themselves by monitoring their insureds. Security ratings are poised to help promote resiliency between, as well as within, industries by offering publicly facing data. With the right continuous monitoring metrics, SaaS platforms can enable continuous relationships that reinvigorate the insurer-insured symbiotic relationship.

Workers’ comp claims teams vary in their performance. Yet there has been no way to clearly identify what superior performance means and what superior performers do. Now we have the summary results of a five-year, 1,700-participant survey project to provide answers. The annual Workers’ Compensation Benchmarking Study, founded in 2013 and published by Rising Medical Solutions, pinpoints what separates the top quarter of claims organizations from the rest. To date, five Study reports have racked up more than 500 pages of text, tables and graphs. In a new white paper – How to Close the Claims Performance Gap – this multi-year data is whittled into the “top three” practices claims that organizations should adopt to join their more successful peers. Here we discuss one of them: Best performers focus more on what’s most important Workers’ compensation claims entail managing a wide array of competencies encompassing legal, medical, workplace, regulatory and psychosocial factors that affect recovery and claims closure rates. Therefore, a first step in comparing performance is to find out what and how claims teams focus on “core competencies.” See also: The State of Workers’ Compensation   Since the Study’s onset, claims executives have been asked to rank in order of importance the 10 core competencies most vital to successful claims outcomes. Survey participants – the majority of whom work for insurers, third-party administrators and self-administered employers – have consistently ranked medical management, disability/return-to-work (RTW) management and compensability investigations as the top three capabilities most critical to claim outcomes. Not that other items on the list, including litigation management and claims reserving, are not important competencies. But survey participants ranked them as having a less significant impact on achieving the best claims outcome – with survey participants defining an employee’s return to the same or better pre-injury functional capabilities as the #1 classification of a “good claims outcome.” This definition of an optimal outcome reflects a shift away from a reactive culture more focused on legal compliance, toward a more proactive, service-oriented approach. The 1,700-plus survey respondents clearly say that this is the business they are in, with upward of one million compensable, new lost-time claims occuring each year. However, there are striking stratifications in this “business” with higher-performing claims organizations outpacing lower performers by factors of five six, and 10 respectively when it comes to measuring their performance within core competencies, measuring claim outcomes based on evidence-based treatment guidelines and measuring claim outcomes based on evidence-based disability duration guidelines. The primary reasons that lower performers cite for not measuring performance within core competencies are: data/system limitations, unsure how to operationalize and, startlingly, it’s not a business priority. The study was able to separate high performers from lower performers by ranking respondents by their claims closure ratio. A closure ratio of 75% means that for every three claims closed, four are opened. Organizations with a closure ratio of 100% run a tight ship, closing claims at the same pace they are opening new ones. Claims experts agree that a claims ratio of 101% or higher is a reliable sign that the organization is managing claims outcomes effectively. For claims executives and system designers, the message is clear: Focus on and measure key core competencies more to succeed. See also: States of Confusion: Workers Comp Extraterritorial Issues  In addition to core competencies, we have identified two more critical practices that claims organizations should implement to join the elite ranks. With only 24% of industry payers achieving top-performer status, this means the remaining 76% need to take action or risk falling further behind. To learn about these two critical practices, as well as viable implementation strategies, read our entire white paper, freely available here.