The wellbeing of our workforces is vitally important because it affects both the top- and bottom-line performance of an organization. Programs that focus equally on the personal health of employees and their professional productivity needs are becoming essential to help companies attract and retain talent. This was the subject of a recent “Out Front Ideas with Kimberly and Mark” webinar. Our guests were:

• Fikry Isaac, MD, MPH, the CEO of WellWorld Consulting and the retired chief medical officer, VP global health at Johnson & Johnson.
• Andrew R. Gold, Pitney Bowes, VP, total rewards and HR technology
• Alanna Fincke, SVP, director of content, meQuilibrium
• Brad Smith PhD, VP, analytics and reporting, meQuilibrium

Why It Is Important Wellbeing benefits individual workers as well as entire organizations and communities. It is a holistic approach that includes the mental, emotional, physical and financial health of the person. First, wellbeing is a way to engage employees with one another and management within the company. Activities such as walking and fitness programs allow groups to come together in a fun way that helps build trust and camaraderie. Wellbeing programs also can help employees become healthier by teaching them new habits and helping them get treatment for chronic conditions that they may not be aware they have. A screening, for example, can uncover risk factors for certain illnesses and help workers get the right medical care they need. The employee gets healthier and can continue working and earning a living. From the company’s standpoint, this helps improve productivity and controls the cost of medical care, so it is a win-win for everyone. From a broader perspective, the environmental factors within and outside of the workplace also affect the overall wellbeing of the individual and should be addressed. The boundaries between work and home life have become blurred, putting added stress on workers. Wellbeing programs need to take into consideration many aspects of the person’s work and home life. They need to help the worker become resilient to be able to handle the demands and pressures of both. Creating a culture of health within the workforce is paramount to the success of a wellbeing program. Any program or service within a company has to be ingrained in the culture for it to be successful. A wellbeing program needs to be part of the fabric of the business mindset so all employees – especially leaders – embrace the idea of a culture of health. Resiliency Resiliency is a newer concept that is gaining attention in workers’ compensation and on the benefit side. It is an important component in workplace wellbeing. Today’s business climate is more stressful than ever. The pace of work makes it difficult to keep up. The work-life merger adds to it. All of this takes a toll on employees. The latest trends show:

• 60% of employees report high stress.
• The annual cost of stress is $300 billion.
• One million workers are absent from work every day.
• 30% of the population has undiagnosed mental health issues.

Resilience teaches employees how to adapt to the changes and stresses of today’s work. While we cannot change the things that happen at work or in our lives, we can learn to change how we react and manage the stress. It is not something we are born with. There are scientifically based teachable skills to help us be more resilient. We can learn to control our thinking and how we react to pressures. Evaluating the Need for a Wellbeing Program Every company is different, and it is important when considering a wellbeing program to assess the organization’s needs against the value and impact of any given program. Some companies develop their own internal systems while others use commercial measures. Johnson & Johnson for example, surveys workers annually to determine where each person is on the health spectrum and how satisfied they are with the programs and services offered. The company also has a value system of management to assess the performance and engagement levels of leaders in the various business units. See also: Wellness Programs Lack Health Literacy   There are also a variety of tools available on the market to assess the need for wellbeing programs.

• The Gallup-Sharecare WellBeing Index looks at the key factors that drive greater wellbeing for individuals and populations. It is the world’s largest data set on wellbeing.
• Employee engagement surveys assess the level of employee engagement in their organizations and their perceptions of management’s involvement.
• The Centers for Disease Control and Prevention Worksite Health Scorecard designed to assess whether companies have implemented science-based health promotion and protection interventions.
• The Health Enhancement Research Organization (HERO) Scorecard is designed to focus on best practices for promoting workplace health and wellbeing. It shows what may be missing, the need and what employers can do to build a solid wellbeing program.

Pitney Bowes assesses the needs of its employees by talking to them directly and looking at various data. Feedback sessions, surveys and discussions with various department heads can reveal trends in a company that can be addressed through wellbeing programs. An important point in evaluating the workforce is to look at it holistically, not just a specific injury. Solutions for Employers Providing access for employees and their families to well-defined services can be effective in improving the wellbeing of a workforce. For larger corporations, onsite health clinics are ideal for quick issue resolution. They can also provide opportunities for preventive services and access to educational programs. Access to services for mental and emotional support is another very important service, whether it is through an Employee Assistance Program or an online tool. Energy management is an up-and-coming area to help with resilience. Companies that utilize it assess the energy level of their employees and provide training to increase their energy. The number and types of programs that are available can seem overwhelming, but not all programs work for all companies. Employers need to identify those that fit the needs and culture of their own workforce. One solution that companies are using is called meQuilibrium. Two of our panelists were from the firm, which uses behavioral psychology and neuroscience to help people manage stress. We typically do not include specific vendors in our webinars, but this is one instance where we thought it would be worthwhile. meQuliibirum is a digital tool powered by data-driven insights that measure and benchmark. It is a skills-based learning product that begins with an assessment to determine how the worker reacts in certain situations, connects with his community, his level of sleep and a host of other issues. The user is then given tools to help him become more resilient. Measuring Outcomes Measuring the success of a wellbeing program should take into consideration both the effects on workers and the return on investment for the company. One technique is to look at the four Es: enrollment, engagement, efficacy and experience.

• Enrollment is first and foremost because a program can’t have a significant impact on the bottom line if only a few employees are involved. Companies that have successful wellbeing enrollment use grassroots methods to spread the word, starting with senior management.
• Engagement. Once you get workers in the door, keeping them involved is equally important. The percentage of people enrolled in any given month will tell you the level of engagement, as will how long they stay involved. It’s also important to know what elements of the program they are using.
• Efficacy speaks to the effectiveness of the wellbeing program. Does it deliver what is promised? The best way to measure that is with an employer’s own data. For example, lower use of employee leaves suggests there is an improvement in employees’ resilience.
• Experience refers to whether and how the program is helping employees. Is it changing their lives? Would they recommend it to their families or friends? Do they have stories about life-changing events due to the program? Those can show the success of the program.

The four Es are also applicable to the workers’ compensation program. Enrollment, for example, could pertain to whether and to what extent an injured worker is engaged with case management. Efficacy is also important because we often do not look at the return on investment (ROI) holistically in workers’ compensation across expense, medical and indemnity buckets. A Net Promoter Score (NPS) in workers’ compensation could be extremely valuable. There is an opportunity to use measurements from the benefits side of an organization to help an employer incorporate them into workers’ compensation so vendors and suppliers have a more consistent way of reporting metrics on the company. HERO is another excellent way to measure success. This national non-profit organization is focused solely on identifying best practices of workplace and wellbeing to improve the lives of employees and their families. The HERO Scorecard can provide an instant assessment of a company’s wellbeing program compared to others in its database. From an employer perspective, measuring the ROI of a wellbeing program can be difficult. All the various elements work together to drive improvement for workers, so it is hard to see the overall ROI, but you can look at various metrics. Some numbers may not look significant, but are important. An Employee Assistance Program may only have 3% to 6% of employees involved at any given time, but it is important to those workers using it, so it is important to understand benchmarks. Other metrics that can be considered are things such as weight loss or other changes that measure benefits of the program. Additional metrics may also help, such as the data for care utilization, claims analysis, participation in wellness programs and lifestyle modification outcomes. There really is no one-size-fits-all way to measure the ROI of these programs, but the more details you can get, the better. Another way to measure the success of a wellbeing program is to look at its return on value; how much workers are engaged in their work based on their perceptions of the company’s support in helping them be healthy and take care of their families. The financial success of companies that have invested in health and wellbeing can be measured and is sometimes available in various publications. The American College of Occupational and Environmental Medicine, for example, has published studies showing the stock market performance of companies over time to see if there are differences after wellbeing programs have been implemented. See also: Employee Wellness Plans’ Code of Conduct   Challenges to Implementation Putting a wellbeing program in place can be challenging, but taking a few extra steps will help.

• Due diligence up front. Especially if you are using a third party, you need to really know what you are implementing. For example, if data is to be exchanged, what data and in what format?
• Communication. One of the biggest challenges is getting the word out to the people who can benefit from the program. Some companies use various marketing tools such as behavioral economics to spread the word. There should also be some way to motivate people to participate. Monetary incentives are one method.
• Effectiveness. It is important to monitor and see what is or is not working within the program and be willing to find a different approach, if needed.

Lessons Learned Despite a company’s best efforts, not every piece of a wellbeing program will meet expectations. You want to make sure you carefully assess whatever you put in place. Something might be perfect for one organization but not work well for another. Johnson & Johnson had to abandon a nurse line for employees because it just did not work. Pitney Bowes brought biometrics to company sites to make it more convenient for employees to get their blood drawn and get immediate results. But it turned out that method did not lead workers to take action. Instead, the company now pays employees to see a physician to get the same information. The physician can then persuade them to take action. You have to look at the data and utilization to see if a particular program is valuable or not and be prepared to make adjustments, or even pull the plug entirely on a service, based on those results.

I have been following and interested in space and rockets since I was a child. In April, I was honored to give the distinguished lectureship at the University of Mississippi Medical School, School of Population Health, titled SpaceX, Moonshots and Diabetes in Mississippi. The announcement that the U.S. Air Force has contracted with SpaceX for a launch of its Falcon Heavy brought that point home again. The gist of my presentation compared the current efforts to launch rockets into space with our healthcare system. In the space race, there are two major players at this time, United Launch Alliance, composed of Boeing and Lockheed Martin, with decades of experience and strong government relationships, and SpaceX, the Elon Musk company. ULA is like our current healthcare system -- big names, big contracts, major impact on and strong relationships with our federal government -- and the rockets cost a lot of money. In fact, ULA could also be compared to the Cancer Moonshot, which also has big names with strong government relationships and has big bucks. The Cancer Moonshot approach of using big data analytics, biologics and CRISPR to edit out the genetic defect are all needed and are all great ideas. They are also shiny objects, and they will most likely cost a lot of money. See also: 10 Reasons Healthcare Won’t Be Disrupted   As Buckminster Fuller said, "You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete." SpaceX is the upstart that is doing just that. It is based on Elon Musk's original vision to re-energize the public to space exploration by putting a greenhouse on Mars. This initial vision has become the goal of "enabling people to live on other planets." He quickly discovered that he could not do it with the rockets developed because they cost too much. So what did he do? He devised a new system/rocket and removed the waste, the waste of throwing away the rocket, resulting in lower costs and making his dream reasonable. Well, he did that and much more. His launches are considerably cheaper than those of the big guys of ULA. His Falcon Heavy is only the latest example: "The launch contract will cost the U.S. Air Force $130 million, far less than the $350 million average cost of United Launch Alliance’s Delta IV, previously the heaviest lifter in the U.S. arsenal." So what does that have to do with healthcare and diabetes in Mississippi?

• In 2015, Mississippi ranked first in the nation for overall diabetes prevalence, with more than 333,000 adult Mississippians living with the disease; that’s more than 14.7% of the adult population
• Diabetes accounted for more than 1,000 deaths in Mississippi in 2015
• In 2013, direct medical costs (e.g., hospitalizations, medical care, treatment supplies) accounted for about $2.4 billion, of which Medicaid spent almost $1 billion.
• MS has an estimated 30% of adults with pre-diabetes, creating the potential that more than 600,000 Mississippians are on the path to develop type 2 diabetes

Yet we know that perhaps 80% of type 2 diabetes is preventable. We also know that an estimated 30% of healthcare is waste, fraud and abuse. So that's roughly $800 million in waste, etc. that if freed up from the system could be applied to the social determinants of health that are driving this disease. Imagine that, the money to solve the problem is locked up in the system itself. Why not create a grand mission just like Elon Musk's mission to Mars. A mission that people can work toward, as they do the incremental changes needed to create the new system to make it happen. Lifting a quote from President Kennedy, I said: We chose to eradicate every case of lifestyle-related type 2 diabetes and pre-diabetes in the state of Mississippi, for no more than we are spending today on healthcare. We chose to eradicate every case of lifestyle-related diabetes and pre-diabetes, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win.  So how do we do this? By creating an Accountable Health Organization, implementing a broad-based population health program, changing the reimbursement to the healthcare system to a value-based approach, perhaps to capitation, and using the savings to fund the social services. It's a heavy lift, no pun intended, and it will take decade(s), but it can be done. It will require new systems, a long-term approach and a lot of small changes to get there. If we created the system to do this with diabetes, we could then apply it to the rest of the preventable issues, for we will have developed solutions for diet, exercise, patient engagement, adherence, appropriate medical care, rural care, urban approaches, personalization and on and on. See also: How to Optimize Healthcare Benefits   In fact, the UMMC School of Population Health and the Jackson Hinds-Comprehensive Health Center FQHCs have begun just such an effort by starting with pre-diabetes. Can you imagine the look on all our faces when we succeed...? You can find the article originally published here on LinkedIn.

How much will the distribution of P&C insurance change in the next five years? This is anything but an academic question. Insurers, agents/brokers and tech companies are all trying to read the tea leaves to position for success in a changing environment. Insurtechs focused on distribution are numerous; new entrants are surfacing every day. And the inexorable and rapid move to digital is the overarching theme that is affecting all of insurance, including the distribution area. SMA’s recently released research report, The Future of Distribution in P&C Insurance: Transformation in the Digital Age, takes a look at how insurance executives believe distribution is likely to evolve. The ways that personal lines and commercial lines distribution go forward are expected to be quite different. In general, insurers expect significant consolidation among commercial lines agents and brokers and see the trusted adviser role rising in importance. Major disruption by insurtech and entry by the global tech giants (Google, Amazon, etc.) is not anticipated to be as much of a factor, although still an important one. On the personal lines side, 59% expect major disruption by insurtech, and almost half assume that the global tech companies will play a significant role in the distribution of auto and homeowners insurance. See also: Future of P&C Tech Comes Into Focus   Other factors that will change the distribution channel environment include the continuing rise of direct (especially for personal lines) and an increase in comparative rating, which both personal and commercial lines executives foresee. There are two aspects of change that are especially noteworthy. First, almost no one predicts that insurance distribution will be largely unchanged five years out. In fact, none of the personal lines execs and only 8% of commercial lines execs responding said that distribution will be about the same in five years. The second interesting finding is that only 10% of personal lines insurers believe that agents will assume more of a trusted advisory role. In our view, it will be critical for personal lines agents to up their game. This includes becoming more of an adviser in a world that is increasingly connected and digital and has a changing set of risks. In addition, agencies must embrace the digital world to meet customer expectations, improve operational efficiencies and gain more insights into prospects, customers and their insurer partners. Insurers also expect emerging technologies to have a huge impact on distribution. Artificial intelligence, chatbots and mobile/digital payments are the top three technologies that insurers plan to invest in over the next three years to enhance their capabilities in the distribution space. See also: Key Strategic Initiatives in P&C   Pundits have been predicting the demise of the agent channel for decades, yet the channel is still dominant. The word "disruption" has been used in relation to distribution more than any other area of insurance. And to be sure, P&C insurance distribution is poised to change significantly. But ultimately, SMA expects agents and brokers to still be playing a major role in five years, although the agencies of the future might look quite different than those of today.

Insurers that earn jeers from their customers are falling further behind the ones that earn cheers. That’s the key takeaway from Watermark Consulting’s 2018 Insurance Customer Experience ROI Study. The study, which was last conducted two years ago, seeks to provide insurance executives with a macro understanding of the impact that customer experience has on a company’s fortunes. This is important information for an industry that publicly affirms the importance of customer experience, but privately struggles to quantify the benefits of such investments. About the Study Watermark’s analysis is based on data from what is arguably the best-regarded source of insurance carrier customer experience rankings—J.D. Power & Associates’ annual Insurance Satisfaction Studies. The study’s approach was simple: We calculated the cumulative total stock returns for two model portfolios, composed of the Top 5 (“Leaders”) and Bottom 5 (“Laggards”) publicly traded companies in J.D. Power’s annual study. (A white paper about the study, referenced at the end of this article, includes a more detailed description of how the analysis was conducted.) We went through the exercise twice—once for auto insurers (where J.D. Power rankings were available from 2010-2017), and once for home insurers (where rankings were available from 2009-2017). In both cases, our model portfolios tracked the stock performance of the carriers for the year-earlier period of their designation as a Leader or Laggard (so, for example, J.D. Power’s 2017 Leaders were used, retroactively, to build our 2016 stock portfolio). See also: Profiles in the Customer Experience   This approach was consistent with our thesis that the market would already be rewarding/penalizing the Leaders/Laggards in the full-year period preceding the release of J.D. Power’s consumer survey (given the customer experience the carriers were already delivering). It also helped ensure that the model portfolios’ performance was not at all influenced by the publication of the J.D. Power study itself. The Results Yet again, the Insurance Customer Experience Leader portfolios far outperformed the Laggard portfolios—and the margin of victory widened considerably as compared to the 2016 study. [caption id="attachment_32200" align="alignnone" width="570"] Watermark defines Auto Insurance Customer Experience Leaders and Laggards as publicly traded insurers falling in the Top 5 and Bottom 5 national ranking of J.D. Power’s 2010-2017 U.S. Auto Insurance Satisfaction Studies. Comparison is based on performance of equally weighted, annually readjusted stock portfolios of Customer Experience Leaders and Laggards.[/caption] As the accompanying graphic shows, over the eight-year period studied, the portfolio of Auto Insurance Customer Experience Leaders far outperformed the industry, generating a total return that was nearly double—171 points higher—that of the Dow Jones Property & Casualty Market Index. While a few carriers made repeated appearances in the Leader category over the eight years examined, only one, Erie Insurance, earned that distinction for every year of the study. What’s most striking is the growing chasm between the Auto Insurance Customer Experience Leaders and Laggards. The Laggard portfolio now trails the Leader portfolio by an astounding 242 points. As with the Leaders, there was some year-to-year consistency in the Laggards list, with two firms— MAPFRE-Commerce Insurance and the Hanover—showing up in that category every year of the study. The graph below, which shows the analysis for home insurers, exhibits a similar pecking order as seen with the auto insurers. The Home Insurance Customer Experience Leader portfolio outperformed the industry, generating a total return that was nearly double (87 points higher) than that of the Dow Jones Property & Casualty Market Index. While several home insurance carriers made it into the Leader category multiple times, Erie Insurance was again the only one that achieved that distinction for each of the years covered by the study. The Home Insurance Laggards in this latest study fell even further behind the Leaders, with the cumulative performance gap between the two portfolios reaching 119 points. (In the prior study, the gap was 57 points.) Interpreting the Results This study should give pause to anyone who is skeptical of the value that customer experience differentiation accords to an insurer. The Auto and Home Insurance Customer Experience Leader portfolios generated average annual returns that were more than double that of their Laggard counterparts. The results suggest that carriers that consistently excel in customer experience tend to be viewed by the market as more valuable entities than those that do not. That enhanced value is a function of the Leaders seeing a rise in revenue, thanks to happy, loyal customers who spend more with them, stick around longer and refer others. It’s also a function of a more competitive cost structure, as the Leaders can spend less on new business acquisition because of all the referrals they receive. In addition, because these firms’ happy customers complain less, there’s not as much stress on their operating infrastructure, which also helps keep expenses in check. The Laggards, of course, are weighed down by just the opposite factors—depressed revenues, high customer churn and profit-sapping, strained infrastructures. What was notable in this year’s study was that the disparity in performance between the Leaders and the Laggards wasn’t just striking—it was also growing by double digits. This suggests that the competitive edge enjoyed by Insurance Customer Experience Leaders is both real and strengthening. That should certainly concern any carrier that frequently finds itself in the Laggard category, because these results do not bode well for firms that struggle to endear themselves to customers. See also: Why Customer Experience Is Key  Those angling to break into the Leader category should be forewarned: There is no “silver bullet” for achieving customer experience excellence. Latching on to some buzzword– big data, insurtech, AI, etc.—won’t get you there. Neither will advertising how great your customer experience is. The reality will always overshadow the marketing. Companies that do customer experience well—inside and outside the insurance industry—recognize that there are no shortcuts. Customer experience isn’t some “initiative du jour” for them. It’s not just part of their business. It is their business. Those leading firms often rely on a handful of time-tested experience design principles. (See the white paper referenced below for examples). However, at their core, what makes the Leaders different is their unwavering commitment to always start with the customer—understanding their needs and wants, their frustrations and aspirations—and then working backward to craft a distinctive, impressive, end-to-end experience. Fundamentally, it is this outside-in philosophy that gives these companies their competitive edge. And, as this study so clearly illustrates, the strength of that advantage should not be underestimated. Note: A white paper describing Watermark Consulting’s 2018 Customer Experience ROI Study (Insurance Industry Edition) is available for complimentary download at http://bit.ly/CX-ROI-INSURE. You can find the original published here on Carrier Management.

From what I’ve seen in recent insurance technology news updates, it appears that the insurance industry is finally ripe for change, ready to make the leap to digital technologies that will lead us into tomorrow. Or is it? Consider these core drivers of change: digital innovations such as cloud, telematics, IoT, analytics and AI, mobile, real-time 24/7 access to data, the growing need for on-demand products and, in general, using these transformative technologies to create operational efficiencies, adopt new business models and anticipate and exceed customer expectations. Even though we know these technologies are enabling new insurance products, methods, processes, services and business models, there is still an omnipresent culture that hangs on to the troubling “it’s the way we’ve always done it” battle cry. This is often voiced by insurers that share their frustrations with being challenged to change existing culture from inside out to address these digital drivers. My view is that, while many of the larger insurers are making the hard move to adopt digital technologies, it’s still not a priority for many small- to medium-sized insurance companies. And now, more than ever, there is a certain urgency to having that discussion. Tanguy Catlin, senior partner with McKinsey & Co., when addressing the issue, referred to it as the “tipping point” that is “where those that have not adapted their [digital] strategies fade away.” See also: Darwinian Shift to Digital Insurance 2.0   In research results published by MIT Sloan Management Review (SMR) and Deloitte’s Digital practice, 87% of executives queried believe that digital technologies will disrupt their industries, yet only 44% felt they were adequately preparing for it. Gerald Kane, professor of information systems at the Carroll School of Management at Boston College and MIT Sloan Management Review guest editor for the Digital Business Initiative, compares insurers' thinking about digital disruption to homeowners in disaster-prone areas who often seem caught off guard when an actual hurricane or cyclone strikes. [caption id="attachment_32193" align="alignnone" width="570"] Source: MIT Sloan Management Review[/caption] So, why isn’t adoption of digital technologies a priority for more small- to medium-sized insurers? While many see the opportunities presented by digital technologies, perhaps they don’t believe the likelihood is high that digital will actually disrupt their own organization. But the authors of the research note that, if digital technologies represent an opportunity for your organization, they also represent a threat for your competitors — and vice versa. I get it, change is hard… but, the argument, “we are not in a financial position to prioritize” is irrelevant to the discussion of digital technology investments. Competitors aren’t waiting for your company to be in a better “financial position” before they act. Moreover, because at some point in the coming years insurers will need to replace their growing faction of retirement-age employees with a younger, more tech-savvy labor force. And in a war for the best talent, the A and B players have absolutely no desire to work on outdated systems. So, what does that mean for the future of your company? See also: Digital Insurance, Anyone?   Just remember, technology is an accelerator for your company and your staff. In other words, the more digital technologies that are put into play, the greater and faster the return. Those insurers that ignore its call will fall further and further behind until they reach the tipping point and slowly fade away. Remember what happened to Blockbuster Video when it failed to adapt in a time of digital change. Don’t be a Blockbuster in a Netflix world.

Over the past 20 years, many large, sleepy industries have heard a familiar story line – “you will be disrupted due to emerging technology.” Some of those who embraced technology change found massive opportunities to improve product offerings, drive higher margins and streamline customer experiences. Others, resistant to technology or unable to move fast enough, found themselves quickly replaced by upstarts.

Looking retrospectively, I would argue that no industry to date is more on the cusp of opportunity/exposed to disruption than the property and casualty (P&C) insurance sector is today. And, of the many technology breakthroughs (insurtech) available to the P&C insurance sector as a whole, ranging from internet-based distribution to “bots” for automated customer claims, the one technology that is both the most opportunistic and the most misunderstood, is the Internet of Things (IoT) for smart home and its potential to change homeowners insurance.

Put simply, IoT reflects a growing technology movement to connect any device with electronics to the internet. By doing so, these devices and their data can be interacted with anywhere in the world. On a fundamental level, this connectivity allows for remote control of devices, changing how consumers interact with their homes. But on a deeper level this technological evolution allows for new third-party services, especially as diagnostics and performance data is made available by manufacturers.

Many sectors will benefit from this technological evolution, and as more and more home systems and appliances (everything from dishwashers and refrigerators to heating/cooling and hot water tanks) are connected the homeowners insurance space has an incredible amount to gain.

Most consumers today have a limited understanding of the smart home road map, and many assume it starts and stops with home automation – examples such as controlling your thermostat from your phone and your lights automatically turning on when you pull the car into the driveway. However, as I have discussed in an earlier online post, even the near future of smart home is much, much more.

Soon, the smart home will optimize its performance around your behaviors and recognize when something is not right, notifying the appropriate people of problems and steps for remediation. As futuristic as this sounds, you have grown to expect your car dashboard to notify you of an engine problem or your computer to let you know of a hard drive issue – these indications are nothing short of what we expect from products today and are similarly available for your home. Likewise, home systems and appliance can be carefully watched by computers capable of instantaneously notifying you, or third parties, of problems.

As huge benefactors of this technology, P&C insurers should be rushing to enable their customers to embrace this technology.

See also: How Smart Is a ‘Smart’ Home, Really? 

Here, at a high level, are some of the ways how home insurers stand to benefit:

1) Early Peril Detection Leading to Loss Avoidance – already in-market today. There are many IoT devices capable of sensing almost all of the perils associated with homeowner loss: theft, water, fire, even destructive weather such as hail and wind. Of course, minimizing loss from these perils requires action, but earlier detection helps homeowners, emergency responders and authorized third parties to respond faster, minimizing loss.

How many times have we heard stories about coming home from a vacation finding a pipe had burst and mold had grown for days, or a fire burned for hours in an unoccupied home? With devices such as remote locks and wireless cameras, you could even imagine a world where a service technician, like a plumber, could enter your home in an emergency even in your absence and could be monitored while there.

Beyond notification, devices themselves will also soon have the intelligence to respond. For instance, a hot water tank on the verge of rupture will not only notify the owner, it will also shut off its water intake and self-drain.

2) Claims Processing – Precision data from sensors is at the core of IoT innovation. In the home, practically all sensors have continual readings and time/date stamp on data points such as temperature, moisture and motion. As events happen, data is essentially cataloged for consumption by other systems like claims.

Automatically validating or measuring loss is not an unreasonable expectation of this sensor data soon. And first notice of loss (FNOL) moves from the responsibility of the claimant to an automated and sophisticated process where all parties are better-served and better-protected.

3) Fraud Analysis – The very data used to facilitate FNOL will also serve as a record-of-truth in claims analysis. Machine learning algorithms will take data from these sensors and dramatically improve models for predictive loss behavior. Just as consumers have credit scores or driving records, it’s not hard to see how home data will one day drive home safety assessments.

Probability of loss based on behavior will be a front-line indicator for likelihood of fraud. Additionally, data from these sensors, uploaded to the cloud typically at the time of capture, serves as the immutable record of truth when loss occurs. Be it rapid increases in temperature or moisture detection, re-creating how, when and where a loss started and ended will no longer be an exercise in on-site investigation but rather a review of clear data points, making the process easier and more honest for everyone.

I am willing to bet that the mere knowledge that sensor data is collected will, in itself, begin to reduce fraudulent claims.

Of course, with all of this progress, there are considerations. We are on the frontier of a new world, and, as with many technology advancements, the true impact is hard for many to truly understand.

The industry needs to think through key implications:

Consumer Privacy – As with all things in life, there needs to be balance between what you give up and what you get. Privacy is a hot topic right now, but the reality is that every day people choose to opt into programs that consume their data in return for benefit.

Transparency and parity are critical in these transactions – e.g., “You are letting us know about something about you in return for something else of this value.” When clearly presented with the facts, many consumers will willingly give data to get better service and lower premiums.

Security – Of course there are security risks with devices being connected to the internet, and they need to be thoroughly protected. But the risks are manageable. Professional organizations focused on IoT have massive security staffs trained to ensure that consumers and business using IoT data are protected.

Data Consumption – Even in an industry as sophisticated at using data as the P&C space is, the capabilities to ingest this level of data likely do not yet exist. Organizations will need to assess which data is the low-hanging fruit for their businesses and build from there. Ultimately, new partnerships in technology need to be built to ensure that data is provided in a manageable form to the insurer.

See also: What Smart Speakers Mean for Insurtech 

For those of you feeling these concepts are futuristic – they are not. From a technology perspective, everything discussed is in-market today -- at least in its early form. And while arguably many IoT products have a ways to go before being truly ready for important insurance applications, the process is aligned with a fairly typical technology life cycle.

Partnering in these early stages will help IoT vendors and insurers ensure that product features will satisfy the requirements of the larger market need. In other words, when the insurance market gets its arms around true requirements for IoT and helps create the business case for mass consumer adoption – the Internet of Things market will respond, and quickly.

Many baby boomers would be willing to give virtual healthcare a try, but they want to be sure that an e-visit or other type of remote care is just as good as the care they would get in person. They also want to be confident that their health information stays private. For seniors who live in rural areas with few doctors, telemedicine would improve their access to healthcare and be more convenient. For many people with chronic illnesses or mobility issues, making it to the doctor’s office can be an ordeal. With telehealth, they can have the doctor visit virtually. What Is Telehealth Telehealth is a collection of methods for enhancing healthcare, public health and health education delivery and support by using telecommunication technology. Today, telehealth covers four domains of applications. Each state and insurance company varies in its use and reimbursement of these applications. They are commonly known as:

• Live Video Conferencing (Synchronous): This is a live, two-way interaction between a person and a provider by using audiovisual telecommunications technology. The Center for Connected Health Policy made a micro-documentary video, "Telehealth Saves Lives," that shows how video telehealth can be a lifesaving technology.
• Store-and-Forward (Asynchronous): This will allow recorded health history to be transmitted through an electronic communication system to a practitioner, usually a specialist, who uses the data to evaluate the case or render a service outside of a real-time or live interaction. This technology will allow access to specialty care, even when there are limited board-certified specialists in the community.
• Remote Patient Monitoring (RPM): With RPM, patients will be able to transmit their personal health and medical data from one location to a provider in a different location via electronic communication technologies for use in care and related support. "Telehealth and Quality of Care" is another video from The Center for Connected Health Policy that demonstrates how remote patient monitoring can help individuals stay healthy in their home.
• Mobile Health (mHealth): This is the healthcare and public health practice and education supported by mobile communication devices like, tablets computers, cell phones and iPads. Applications can range from text messages that encourage healthy choices to large-scale alerts about disease outbreaks.

Telehealth encompasses a variety of technologies and tactics that deliver virtual medical, health, and education services. Telehealth is a collection of means to enhance care and health education, not a specific service. What Will Telehealth Do for Seniors? The older we get, the more health issues that arise. Therefore, seniors are more likely to experience chronic conditions, such as diabetes and heart disease. Both illnesses require routine monitoring from healthcare providers. With telehealth technology, doctors can now keep an eye on things such as blood pressure and sugar levels. Routine doctor's visits can be costly and difficult for seniors to attend, especially if the elderly person has mobility problems or limited access to transportation. The use of telehealth can improve communication between providers and patients, allowing physicians to monitor an older patient’s overall health. This level of monitoring can allow providers to discern when patients may be becoming sick or at risk of experiencing a medical emergency. While seniors are at a higher risk for developing chronic conditions that require care provided by specialists, specialists are not always located in every community, and travel is often warranted. This can be difficult for seniors. Telehealth removes the barriers of location and mobility, connecting more seniors with necessary care provided by specialists. Telehealth also makes it easier for family members who live far away to stay connected to their elders’ care program. This will relieve some of the stress associated with caring for seniors. See also: Navigating Telehealth for HR and Employers   When telemedicine is used, caregivers have greater access to providers. These providers can give them information that helps provide more effective care. Without a need for routine in-person visits to providers, caregivers can dedicate more time to care at home or in their own personal and professional lives. Not only is telehealth more practical for routine monitoring and time efficiency, it is a more cost-effective option for both patients and providers.

• Telehealth has the potential to make physicians more money, because telehealth allows for less time-consuming individual consultations, meaning the doctor has time to see more patients each day.
• Telehealth means big savings for patients, because consultations delivered virtually usually cost less, and money is saved when travel is eliminated.

When nursing homes adopt telehealth technologies, up to $327 million can be saved each year through a reduction in the need for emergency room visits. Telehealth is a life saver and a money saver. Medicare and Telehealth Medicare tightly restricts what it will pay for, so seniors have a harder time getting telehealth covered. Some private insurance companies are increasingly covering certain services like virtual visits. Luckily for Medicare recipients, Congress passed a law last winter that expands Medicare coverage for options such as video visits to diagnose stroke symptoms or check on home dialysis patients. Medicare Part B would cover the cost of telemedicine services, but the patient needs to fulfill certain conditions. Medicare Advantage programs are used by a third of beneficiaries and can start offering additional telehealth options. This is a step in the right direction, but it certainly doesn’t cover everything. Costs are already a major issue for people who need continuing assistance, and telehealth is still new. For telehealth to save the most money, it will need to replace in-person care, not add to it. More than half of adults of all ages would be comfortable with a video doctors visit via FaceTime or Skype to discuss medications, treatment for continuing care of a chronic illness or even for an urgent health concern. High-risk patients who use daily telehealth monitoring are less likely to be readmitted to the hospital. This isn’t about just having Skype in the home; it’s about having a team of healthcare professionals who are supporting the care of a patient. See also: Whiff of Market-Based Healthcare Change?   The Security of Telehealth The privacy and security of protected health information (PHI) is very important to insurance companies, doctors and patients. With new technology, usually, comes new challenges. With every problem comes a solution, and by making smart choices patient data can be protected. Telehealth services are legally required to abide by Health Insurance Portability and Accountability Act (HIPAA) mandates. HIPAA is concerned with the protection of patient medical records, always improving privacy and reducing fraud. To be sure the health data is safe, your telehealth system should comply with the HIPAA guidelines. To comply, you will need:

• Business Associate Agreement (BAA): This is a written contract between a covered entity and a business associate that establishes the permitted uses and disclosures.
• Transport Encryption: This must-have encryption for data security converts the sensitive information into a meaningless stream of seemingly random data.
• Storage Encryption for the Videos Stored in a Device: This will encode backed-up and archived data on storage media.
• Properly Stored Data: You have many options here like a flash drive or a cloud storage; in any case, make sure you choose a HIPAA-compliant product or service.

Telehealth can be a secure way to receive medical care and reduce further stress for seniors and caregivers. Telemedicine care is the future of healthcare. Telehealth will save money, time and patients' lives.

In a 2017 report titled “Drones: Reporting for Work,” Goldman Sachs estimated the addressable market opportunity for drones globally between 2016 and 2020 to be $100 billion, of which the insurance claims drone market was estimated to be $1.4 billion. And the report did not address the wider opportunities in personal and commercial property insurance: underwriting, pricing, risk prevention, traditional and virtual claims management, fraud detection and product marketing. The report also didn't cover the use of images from satellites and fixed-wing aircraft, including streaming video. Whatever the actual size of the total insurance market opportunity, the impact of aerial and drone images in insurance will be enormous. Industry observers are just beginning to recognize the transformation in property insurance underwriting and claims that is emerging through advanced analytics, artificial intelligence and machine learning tied to neural networks and integrated with data from aerial and drone images. Property claims investigation costs the industry an average of about 11% of premiums – automated inspection can reduce that expense substantially. And automated property inspection cycle times can average two to three days, compared with 10 to 15 days using traditional methods – lowering costs and increasing customer satisfaction. Providers will transform the property insurance industry through the convergence of these sources of better images, expanding numbers and types of connected home technologies, customer self-service and aggregated property risk data (historic and real-time). Follow the money Venture and private equity investment activity in emerging technologies is a good indicator of potential growth opportunities – these professionals typically engage subject matter experts and conduct deep market research and diligence in a highly disciplined and proven evaluation process prior to investing. Since 2012, almost $2 billion has been invested in more than 370 drone company deals, and the current run rate is more than $500 million in announced deals annually, according to CB Insights research, which states that ”19 of the 24 smart money venture investors have backed at least one drone company since 2012.” See also: How Technology Drives a ‘New Normal’   Within just the past two months, four such insurance-related transactions were announced;

• Nationwide Ventures made an investment in Betterview, a machine learning insurtech startup focused on analyzing data from drones, satellite and other aerial imagery for commercial and residential property insurers and reinsurers. This follows a September 2017 seed round funding of $2 million.
• DroneDeploy, the world’s largest commercial drone platform, raised $25 million of Series C venture capital, bringing total funding to $56 million.
• Cape Analytics raised $17 million to grow its AI and aerial imagery platform for insurance companies, led by XL Innovate.
• Clearlake Capital Group acquired a significant interest in EagleView Technologies alongside Vista Equity Partners, which had purchased EagleView in 2015. (Vista also owns the majority of Solera, parent of property and auto insurance claims services and information providers Enservio and Audatex.)

In 2017, Genpact, a global professional services and insurance claims solutions provider, acquired OnSource, which provides 24/7/365 full service on-demand drone property inspection claims and settlement services across the U.S. Earlier that year, Genpact acquired BrightClaim and National Vendor, providers of integrated claims solutions to the U.S. property insurance market In 2016, Airware, a global enterprise drone analytics company, closed a Series C round of $30 million to bring its total funding to $110 million. Early in 2016, Verisk Analytics formed the Geomni business unit to specialize in image sourcing and analysis and has since acquired a number of U.S.-based aerial survey companies and their aircraft fleets. Verisk also owns Xactware, the dominant industry provider of property insurance claims solutions and third party products. The Geomni fleet is expected to include more than 125 fixed-wing aircraft and helicopters by the end of 2018, operating from 15 hubs located throughout the U.S. Verisk expects to invest approximately $100 million in Geomni through 2018. Competition and differentiation The space has attracted a large number of participants in the past two years, and there are no signs of slowing. Competitors are taking innovative paths to differentiation, including: drone manufacturing, drone operating software for use by field staff and contractors, ground-based roof and wall measurement technologies and full-service, virtual property inspection and property damage reports using drones. Insurance industry adoption and barriers The insurance industry’s use of images from satellite and fixed-wing aircraft is fairly well-established, particularly in catastrophe response planning and claims. The North American property/casualty insurance industry has been cautious and conservative in its testing and adoption of drone use for property claims and in using aerial images for underwriting. Until recently, FAA rules had made it onerous for carriers and industry vendors to obtain licenses and permission to use drones for property inspections. However, after extensive industry lobbying efforts, assisted by more pro-business policies, that obstacle has eased significantly, and several carriers have trained staff and hired contractors to use drones for property claims inspections. Obstacles remain, including restrictions on use near airfield perimeters and outside of operators’ line of sight. Carriers are split into two roughly equal camps (by market share) on more recently introduced third party services that provide virtual property inspections: those that do not believe that drone image and damage identification technology is sufficiently accurate as yet to manage claims leakage as effectively as their own staff field adjusters – and those that do. Both groups acknowledge that drones are not appropriate for all property claims. Furthermore, customer satisfaction and therefore retention is thought to be higher when insurance company staff visit the property and the homeowner in person. The future of property insurance For claims, virtual methods of inspection will include not only drones but claims reporting that involves customers. Claim self-service, including smartphone images and video, which has seen impressive adoption and results in auto claims, is beginning to penetrate property insurance claims, particularly for reporting home interior and exterior wall damage. New, accurate 3D smartphone image measurement technology combined with higher image resolution and the expected expanded availability of much faster 5G wireless broadband will drive adoption. See also: Secret to Finding Top Technology Talent   Other methods of property inspection, particularly following extreme wind or hail events and catastrophes, will most certainly incorporate the use of drones, whether operated by insurance staff, managed repair network contractors or third-party inspection services. Also, autonomous drones performing roof inspections not requiring an operator on site may be expected soon. Finally, on the property underwriting side, we expect high-resolution geospatial image data from multiple sources, artificial intelligence and machine learning to transform that process. Real-time feeds of comprehensive property attributes such as measurements and condition of roofs and other property on the target site will enable instant and more accurate pricing, quoting and binding/renewal of property insurance. Aerial imagery, mobile technologies, artificial intelligence and computer vision will continue to transform property insurance products and processes, leading to better pricing accuracy, more profitable operations and, above all, better customer experience for policyholders.

The U.S. Department of Labor recently announced regulations that it will allow for the expansion of Association Health Plans (AHPs). But what exactly are AHPs, and what do they mean for small businesses? Essentially, AHPs allow small businesses to band together to purchase health insurance. The definition of a small business varies by state, with most states capping it at 50 employees, and California, Colorado, New York and Vermont at 100 employees. While we have seen efforts to promote AHPs since the 1980s, the new rules are different in that they also allow sole proprietors -- those who own unincorporated business by themselves -- to join the associations. Previously, sole proprietors could only buy individual coverage. The new rules allow carriers to introduce AHPs as early as September 2018, so we may see plans on the market as soon as this fall and early next year. How many small businesses and sole proprietors are affected? According to the U.S. Small Business Administration, there are more than 5 million small businesses in the U.S., which employ almost 40 million people. There are also about 23 million sole proprietorships, which will likely continue to increase along with the growth of the gig economy and number of freelancers in the workforce. The expansion of AHPs, therefore, has the potential to affect the lives of a huge number of people. Today, there are more than 35,000 associations in the U.S., organized by geography (state or greater metropolitan area) or industry. Some examples include your local Chamber of Commerce, the National Restaurant Association and the National Writers Union. Existing associations can be grandfathered in under the new AHP regulations, but new associations will have to meet the following criteria: 1) be in the same geographic area or the same industry and 2) have another business purpose other than offering health insurance. Existing options for these small businesses and sole proprietors aren’t going away. Small businesses can still participate in the small group market and Small Business Health Options Program (SHOP), while sole proprietors will still be able to purchase individual coverage. AHPs will just add another layer of choice to the market. See also: Why Start-Ups Win on Small Business   Lower premiums AHPs provide small businesses with the opportunity to offer health insurance at lower premiums, which is important because cost is one of their main concerns. Healthcare costs are an issue for almost everyone but are especially significant for small businesses, which are usually juggling between growing their business and paying for increasing costs of growing their team. AHPs are likely to provide lower premium options for two reasons: 1) They are exempt from requirements to cover the 10 essential benefits required by the Affordable Care Act, and 2) the law allows for more flexibility in the way AHP premiums are set. Thus, AHPs allow some small businesses to be able to offer health plans with lower premiums. In turn, these lower premiums may mean that businesses can offer insurance to their employees when previously they could not afford to do so. But with some caveats While AHPs offer lower costs for some, it’s also important to remember that you don’t get the same benefits as you would with a traditional health plan. The Affordable Care Act outlined certain essential benefits that have to be included in health insurance plans, including preventive care, ambulatory services, emergency services, hospitalization, mental health services, maternity care, prescription drugs, rehabilitation, laboratory services and pediatric care. AHPs are exempt from these regulations and may not cover some of these things. See also: Taking Care of Small-Medium Business   The new AHPs are better for relatively healthy individuals without high needs for medical services. If you need any of the services mentioned above, or just generally use care more frequently, be aware that AHPs may not cover all the benefits you frequently use. The expansion of AHPs makes it especially important to understand plan benefits before purchasing health insurance. Buyers should compare premiums, benefits and network coverage between AHPs and other existing options on the market (including fully insured or self-funded plans). By doing this research, you can make an informed decision and pick a plan that best meets your employees’ health needs. Conclusion Providing health insurance as a small business can be costly, and Association Health Plans are an attempt to lower premiums and increase choice. While AHPs will result in lower-cost options, it is important to remember the plan benefits may not be the same as those in more expensive health plans. Now more than ever, it is critical for consumers to do their research and make informed choices about health insurance. When in doubt, seek out the help of licensed experts who can guide you through your options and help you make the best decision for your business and your employees.

Although the general reaction to the selection of Atul Gawande as CEO of the Amazon/Berkshire Hathaway/JPMorgan Chase medical joint venture known as ABC was positive and although I continue to think he was an inspired choice, Dan Munro says in an article this week: "Not so fast!" 

The article, which I highly recommend, basically says the problem with U.S. healthcare is too entrenched to be solved even by an innovative venture with cachet and clout, run by someone Dan admires greatly. In particular, Dan argues, the U.S. won't be able to overcome the odd system that developed here during World War II, when companies were ordered to freeze wages but were allowed to offer health benefits tax-free. Because individuals pay for care with after-tax money, the U.S. relies more than any other country on employers to provide healthcare, introducing a series of mutually reinforcing distortions into the market that inflate prices and make a solution near-impossible.

I confess that, while I always try to find a solution, Dan's piece reinforces the pessimism I've been developing while reading "An American Sickness: How Healthcare Became Big Business and How You Can Take It Back," by Elisabeth Rosenthal, a Harvard-trained physician who left medicine and spent two decades as a reporter at the New York Times. She lays out in excruciating detail how all the players in healthcare—hospitals, doctors, Big Pharma, insurers, you name it—learned to game the system, and why they will just keep exploiting their edge. She offers a list of 10 rules of the "dysfunctional medical market," including:

• More treatment is always better. Default to the most expensive option.
• As technologies age, prices can rise rather than fall.
• More competitors vying for business ... can drive prices up, not down.
• There are no standards for billing. There's money to be made in billing for anything and everything.

Not a pretty sight.

She offers a series of ways to counter the dysfunctional forces, but they're mostly small ball, and I don't see any better options for now, given the constraints that she and Dan describe. She basically says to be demanding both about what treatments are prescribed and about prices—as ABC will surely be—but it seems we're stuck searching for incremental progress while we wait for the current system to finally become so onerous that something has to give. 

Have a great week anyway. 

Paul Carroll
Editor-in-Chief