In North Carolina, a storm is brewing that highlights the healthcare industry’s influence and stranglehold over public dollars. An experienced civic-minded reformer with clout has emerged. Dale Folwell is a certified public accountant who served four terms as a Republican in the NC House of Representatives and was elected speaker pro tempore. Now state treasurer, he has responsibility for the State Employees’ Health Plan and its 727,000 employees, dependents and retirees (including my wife, a sign language interpreter in the Charlotte-Mecklenburg  school system). The plan spends $3.3 billion annually, making it the largest healthcare purchaser in the state. “Right now, the state health plan and members spend more on healthcare to employees and retirees than is appropriated for the entire university system or for public safety,” Folwell says. He has made it his mission to bring reason and stability to that program. Beginning Jan. 1, 2020, Folwell proposes to switch the health plan’s reimbursement method to reference-based pricing. The approach, around a decade and now gaining momentum with employers around the country, would in this case pay 177% of (or nearly double) Medicare reimbursement. The health plan’s program, called the Provider Reimbursement Initiative, would allow providers a reasonable margin but would cut an estimated $300 million annually from the plan costs and another $60 million from enrollees’ costs in the program’s first year. The health plan’s board of trustees unanimously supported the proposal. See also: 5 Health Insurance Tips for Small Business   In promoting his plan, Folwell has described some of the issues he’s faced. The most important is that, under longstanding arrangements with the state’s providers and the plan’s administrator, Blue Cross of North Carolina, the health plan can’t access pricing information on the services it's purchasing. “I know what I’m being charged, but I don’t know what I’m paying,” Folwell explained. “For years, the plan has paid medical claims after the fact without knowing the contracted fee. It is unacceptable, unsustainable and indefensible. We aim to change that.” “I said [to Blue Cross], I know what you are charging, but what am I supposed to pay? There is no transparency,” Folwell said. “Blue Cross would not tell me, and there are laws on the books that say they need to tell us. The healthcare system has worked long and hard to develop this broken system, and they’ve been completely successful.” Not surprisingly, the state’s healthcare lobby is gearing up to protect its turf.  State Rep. Josh Dobson, a McDowell county Republican, is expected to file a bill that would block Folwell from instituting the plan. Steve Lawler, president of the North Carolina Healthcare Association, one of a half dozen health industry associations with powerful lobbies, has claimed that Folwell has resisted discussion. But Lawler does not appear to have publicly addressed the transparency or excessive cost issues that are central to Folwell’s complaint. While the battle is shaping up to be a high-stakes, all-out fight, the healthcare lobby may not simply get its way this time. Robert Broome, executive director of the formidable State Employees Association of North Carolina, favors Folwell’s plan and said, “The state health plan board made a very sound financial and public policy decision that will save money for taxpayers and will save money for plan members, while bringing some common sense to how we pay for healthcare. It boggles my mind that folks could actually line up and be opposed to this.” The beauty of Folwell’s strategy is that it is grounded in doing the right thing, and he has made it very visible to the Carolina rank-and-file. When challenged, politicians and business leaders will likely have to openly support the public interest over the healthcare industry’s interest, especially an industry that has become wealthy by taking advantage whenever possible for decades. Folwell’s bold initiative takes its cue from a groundbreaking reference-based pricing initiative by the  Montana State Employees Health Plan, with about 30,000 enrollees. That program’s success has since led the Montana Association of Counties to implement a similar program. Here’s an introductory video on how that program works, and another one here explaining how the payment is calculated. As healthcare costs have relentlessly risen, much of it due to opaquely excessive care and unjustifiable unit pricing, federal, state and local government workers around the country have seen their benefits slashed and their contributions drastically increase. The initiatives in North Carolina and Montana may be the leading edge of a drive by purchasers exercising their newfound market leverage. There’s every reason to believe they can be replicated throughout the country by governmental and non-governmental purchasers, fundamentally moving our broken healthcare system in the right direction. See also: Avoiding Data Breaches in Healthcare   It’s also important to remember that reference-based pricing is just one of several dozen powerful quality- and cost-management arrows in a larger healthcare performance management quiver. Smart employers and unions around the country are finally beginning to go around their health plans and deploy high-performance solutions in drug management, musculoskeletal care, cardiometabolic care, imaging, allergies, claims review and many other opportunity areas for quality improvement and cost containment. Folwell may well be the champion we need at the moment, and it’s possible he could achieve something meaningful. If governmental and business leaders follow his lead in North Carolina and around the country, it would be a key first step to drastically changing our health system for the better.

The diabetes industry is far more sophisticated than the wellness industry when it comes to dramatically overstating outcomes and savings. Excluding vendors by the Validation Institute like It Starts with Me and US Preventive Medicine, wellness industry claims can easily be shown to be fraudulent. It’s equally easy to back that assertion with a $3 million reward, knowing that no wellness vendor or consultant or “guru” will ever try to claim it, even though I’ve made it ridiculously easy, accepting the burden of proof and only allowing myself to pick one of the five judges. By contrast, unlike the more transparently dishonest wellness industry, the diabetes industry’s “outcomes” can only be challenged, rather than simply invalidated on their face. And no way I’m offering a reward. (I’ll make an even-money bet, though – same rules.) There could be actual savings from these programs, but these five examples of biostatistical sleight-of-hand suggest that those actual savings, if any, are far more modest than claimed savings. 1. Conflating verb tenses Here is a claim by a diabetes prevention vendor showing ROI on its program. One would be excused for thinking that these results had actually been achieved and validated, given the choice of verb tense in the graphic: Looking harder at the language, note that the phrase is “recoup their investment,” not “were validated by the Validation Institute as having recouped their investment.” Yet the verb “saved” is in the past tense. And the heading says: “How quickly employers recoup,” whereas the only article cited in the footnote analyzed Medicare patients, whose chronic disease are far more advanced. Further, digging into the actual article (financed by the vendor) yields the following sentence [emphasis mine]: We used a Markov-based microsimulation model in which a person’s characteristics are used to predict health outcomes in the upcoming year. Elsewhere the article says: We applied 26-week weight loss results to simulate potential health and economic outcomes  Therefore, this entire claim is based on a predictive simulation model that somehow morphs into a clear statement showing precisely $1,338 “saved." Speeding up time As can be seen from that graphic, this particular vendor is claiming a huge ROI in two years for employees with pre-diabetes. However, the Centers for Disease Control and Prevention says: One in 3 adults in the United States has pre-diabetes (fasting blood glucose, 100–125 mg/dL); 15% to 30% of those adults will develop type 2 diabetes mellitus within 5 years. See also: Diabetes: Defining Moment of a Crisis   So only a small minority of pre-diabetics will develop diabetes in five years. And then, of course, it would take years for avoidable complications to develop even if no one “manages” the newly diabetic employees to avoid them. How, then can $1,338 of expenses per participant be claimed to be avoided by keeping these employees from getting sick in a measly two years when most of these employees aren’t going to be sick five years from now even without an intervention? Comparing participants to non-participants Speaking of “participants”… Let’s be very clear: Whenever you see the word “participants” in a study report, the claimed outcome is vastly overstated.  Participants will always outperform non-participants, regardless of the intervention. The National Bureau of Economic Research proved this using a randomized control trial. Further, on three other occasions, biased researchers trying hard to prove the opposite accidentally showed that 100% of their apparent “savings” were attributable to participation bias, meaning 0% to the program. (The bias won’t always account for 100% of the claimed savings, of course.) The best example of this bias? A Koop Award-winning wellness program accidentally revealed that participants hugely outperformed non-participants even when there was not a program to participate in. In this slide, note the X-axis. The groups were separated in 2004. The program was implemented in 2006. During the two years between separation and implementation, the participants “saved” almost 20% vs. the non-participants by doing nothing. This isn’t a secret. Participation bias is well-known to insiders in the diabetes industry. Yet every single diabetes vendor ignores this bias (or “matches” participants to some medical charts), while most also fail to disclose the dropout rate – and the fact that most employees who drop out of programs do so because they aren’t getting results. Projecting participants’(!) short-term weight loss into the future Essentially all of them do this, too. Very large-scale studies have shown that only the smallest percentage of people who lose weight keep it off. There is no reason to think that somehow a few diabetes vendors have unlocked the key to long-term weight loss that has eluded the rest of the world and all academic researchers, especially when the vendors don’t follow employees for the long term or count dropouts. Rhetorical and arithmetical sleight-of-hand This single set of claims from a diabetes vendor looks quite impressive at first glance: Now look at it again, paying special attention to the underlined words: Once again, there is that word “participants.” That is just the tip of the invalidity iceberg. Six variables were tracked…and yet 27% of active, motivated participants weren’t able to reduce any. Randomly, three should decline. And many of the other 73% of participants could reduce only one…and this is considered successful? Further, these statistics look like averages on first glance –but they are not. They are examples (“improvements such as”) of reductions that maybe a few participants achieved. I can guarantee that, absent statins, virtually nobody reduces triglycerides by 29%. Regression to the mean Diabetes vendors often split the population into high and low utilizers and claim credit for reductions in high utilizers (whom they manage) while counting the utilization increase in low utilizers toward their “savings” — as though last year’s high utilizers also would have increased had it not been for the program. In this case, there are two giveaways that the 59% decrease in admissions is totally or mostly regression to the mean. The first giveaway is observing which diagnostic categories account for the bulk of an employer’s admissions. This is the top 10 list, in descending order. (“Del” means “delivery.”) To begin with, the majority of admissions on this Top Ten list – and about a third of all employer-paid admissions — are birth events, not affected by a diabetes program. You don’t see diabetes on this Top Ten list. That’s because diabetes itself  in the last year for which complete data is available accounted for less than 1 admission per 1,000 commercially insured people (126,710 admissions in about 150 million privately insured people). Diabetes admissions don’t even crack the top 25. Because total employer-paid admission rates are about 50-60 per 1,000, eliminating every single diabetes event would decrease admissions by – get ready — about 2%. See also: Putting Digital Health to Work   Reducing admissions by 59% would require wiping out not just every diabetes admission but also almost every admission not related to childbirth. The vendors might argue that temporary weight loss and eating better reduce other admissions, too. However, the only non-childbirth events in the top 10 are septicemia, joint replacements and pneumonia. Good luck crash-dieting your way out of those. The other giveaway that this seemingly impressive “decrease” is regression to the mean is that the non-program-members (the vast majority of the population here) regressed upward to the mean. There is no reason to think that admissions in the average employee population are going to increase 4%. Over time, inpatient admissions in the commercially insured population are falling. Using a selection methodology that is partly dependent on having high claims in the baseline assures both this apocryphal 55% “decrease”– and the equally apocryphal 4% increase in non-member admissions. For instance, about a third of all heart attacks occur in people who did not have a pre-existing CAD diagnosis. Therefore, if you “manage” patients with diagnosed CAD, you will show a one-third reduction in heart attacks in that population, simply because you didn’t tally the heart attacks in the cohort you didn’t manage. Then you’ll separately tally the employees without a pre-existing document CAD diagnosis, note the increase and say: “See how fast heart attacks increased in the population we didn’t manage.” The right answer, of course, is to add the heart attacks in both cohorts back together. Naturally, you’ll find no reduction at all. Coming soon: What is the Solution? The next installment will cover how you should measure outcomes to avoid being taken advantage of and to see what really does happen in your population when you implement a diabetes prevention program.

In a more virtual world, socially efficient ecosystems will generate more customer loyalty than do bricks and mortar, big advertising budgets or legacy insurance brands.

The relentless conversion of analog to digital communications and information over the past 15 years, bolstered by the voracious appetites of consumers and an impressive array of AI technologies, has already fueled real industry transformation, spawning the connected insurance ecosystem. This connected network partnership of complementary services will begin to deliver levels of insurance customer experience excellence approaching those provided by established ecosystems such as Amazon's.

McKinsey predicts 12 distinctive and massive ecosystems will emerge around fundamental human and organizational needs, which will account for $60 trillion in revenues by 2025, or roughly a stunning 30% of all global revenues. These insurance ecosystems, powered by AI technologies across the entire enterprise, are quickly transforming the industry across the value chain.

Chatbots are taking policy servicing inquiries and triaging them expertly. First notices of loss are being self-reported by policyholders using smartphone cameras and in real time from connected vehicles, homes and businesses, investigated and documented by drones, evaluated and settled in days instead of weeks and subrogated electronically in a frictionless process.

Almost every one of these functions is supported by seamlessly connected third-party technology, software and databases. Insurance applications are automatically pre-filled after requiring little more than a few items of personal information. Life insurance policies are being bound simply and digitally and without the need for a medical exam. New hyper-personalized insurance products are being developed and brought to market with lightning speed.

Next Inflection Point: Real Loss Prevention

But the next major insurance industry inflection point will be its most impressive and game-changing. The power of networks has already become apparent, but in 2019 it will come of age in insurance. Driven by the torrents of information that will be transmitted by billons of connected things and turned into actionable insights and decisions through the application of artificial intelligence, claims will actually be prevented, turning carriers into risk managers in the truest sense.

See also: It’s Time to Act on Connected Insurance 

Extending this trend, advanced driver assistance systems and autonomous and connected vehicle safety programs will continue to reduce accident and claims frequency and transform personal auto insurance into manufacturer and software liability insurance.

Wearables will monitor the health and wellness of life and health insurance policyholders, broadcastings warnings of diabetes, high blood pressure and other conditions, likely avoiding medical claims and even more serious risks.

Connected home sensors will notify home owners and first responders of potential risks such as fires, water or gas leaks, thereby minimizing and even completely avoiding costly claims.

Consequences of Connected Insurance Ecosystems

However, the impressive benefits emanating from this new connected insurance ecosystem will come at a price – namely the erosion of personal privacy, the growing threat of cyber theft and the need for ethical oversight of the uses and applications of artificial intelligence. Related consumer protection regulations and standards will emerge and impose new requirements and limitations on the various custodians of this personal information.

Another consequence of the adoption of AI technology will be its impact on the nature of work. Automation will free knowledge workers from repetitive tasks, enabling them to focus on higher-value functions and augment human intelligence, enabling faster and better-informed decision making.

Significant change management, re-training and continuing education of workers will be critical for workers to operate and thrive in the new world of human/machine partnerships.

Strategic Partnerships Become Mandatory

The insurance ecosystem and the relevant data being generated is rapidly expanding and becoming connected. No single company, regardless of its size, has all the expertise, resources, relationships and necessary understandings of every co-dependent industry. Cross-industry partnerships and alliances will speed time-to-market, expand market reach for each participant and add more value to the products and solutions consumed by their common customers.

Insurance Evolves from Product to Services

As a result of these changes, the insurance business model will also change to reflect this new and different role of insurers as service providers whose “products,” delivered through ecosystem partners, will be priced on the basis of the economic value of their risk-avoidance potential. The products known today as “insurance” will evolve into the services known as “protection” as loss avoidance becomes the most valuable benefit and the need for loss reimbursement diminishes.

Insurers can also help protect customers from the increasing threat of cyber attacks, which are enabled by the exploding number of connected devices in their lives through which their information is exposed.

See also: Insurance: On the Cusp of Disruption 

In this more virtual, less physical world, trust will be gained digitally and socially efficient ecosystems (think Amazon) will generate more customer loyalty than do bricks and mortar, big advertising budgets or legacy insurance brands.

You can find the article originally published here.

I wrote a column nearly 10 years ago about people and organizations and their reluctance to change. The title was: "Innovation – Incubator or Graveyard?" The first two paragraphs of the article follow: "Dale Dauten in his Sunday column got me thinking with the closing statements: 'If you have an idea you want to nurture, don’t plant it with the forest of the status quo; place it in a fresh field, away from the old growth. Give it a new group or try it in an experimental store, surrounded by people who want it there, who want it to thrive,' and 'Which brings us to an IBP (important business principle) with a lovely Zen weightless heft: It’s easier to change people than to change people.' "Dale is right on both counts. My question is: 'Can you, your team and your company innovate?' Before you say yes, remember, Casual Friday is not innovation! Does your organizational culture embrace the new, innovation, or is the status quo your lover? To quote Davis Balestracci (Quality Digest Magazine), 'Quite simply, culture is created by what is tolerated.'" See also: Wisdom From Some Very Smart People   As I’ve aged (many of y’all know me too well for me to claim I’ve matured) I realize that transformational changes (giant steps) are very challenging. For this reason, I’m going to offer a simple process that might be worth considering as you want to facilitate incremental change (baby steps moving in a different direction than your status quo). Consider this an idea that is not too threatening nor too high risk as to invite pushback from your team but still worth pursuing as you try to move forward into tomorrow’s world. The greatest benefit from such simple initiatives is the opportunity for you and your team members to succeed in an easy challenge so you build confidence in the processes of innovation and planning. Think of this as basic training for bigger challenges. A few days ago, I opened up a magazine I was reading a month ago. I found six bullet points I had scribbled onto one page of the journal. I upgraded this list with four more ideas that I believe are workable on some strategy or innovation you may be considering for the future. I offer this “to do” list for your consideration:

1. Acknowledge that, “None of us are as smart as all of us (Ken Blanchard).” Get input from all members of your team.
2. Facilitate communication. Know that communication is the negotiation of meaning. When everyone understands and engages, your chance of success is much greater.
3. Create a pond or pool of new perspectives and ideas. Don’t assume what you’ve done in the past is the best way to do something in the future. Discuss, debate, innovate, etc. until the ideas shared start to build a constituency of believers. Listen for, “Hey, this really might work!”
4. “Fish” this pond of ideas for what’s right for the challenge and your culture as it exists today. Test the first idea that you hook or hooks you. If that doesn’t work, throw it back in and grab another.
5. Reality-check your plan and process. Tweak as needed. Go back to the drawing board – if necessary.
6. Now take action – JUST DO IT!
7. If it works, CELEBRATE.
8. If it bombs, PICK YOURSELF UP, DUST YOURSELF OFF AND START ALL OVER AGAIN.
9. Know that there is wisdom in scar tissue -- grow from the lessons learned. Count heads and fingers and toes. If no lives were lost and no serious damage was caused – commit to continued efforts at innovation and experimentation. Your future depends on this.
10. Believe there is GENIUS in creative efforts – successful or unsuccessful. Find it! Remember, “Curiosity killed the cat, but satisfaction brought it back.”

See also: A Contrarian Looks ‘Back to the Future’   In tomorrow’s world “the greatest risk is not taking one” (AIG annual report). Commit to change initiatives. Build your future on innovation, not bureaucracy. Understand the process of success is defined by some as, “Fall down seven times, stand up eight!” In tomorrow’s world of incremental change you must THINK NEW! Happy NEW Year!

“To be, or not to be, that is the question: Whether 'tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles And by opposing end them. To die—to sleep, No more; and by a sleep to say we end The heartache and the thousand natural shocks That flesh is heir to: 'tis a consummation Devoutly to be wish'd. To die, to sleep….” ~Hamlet I’m not going to paste the entire Hamlet speech here, but you can see that he was going through a very tough decision-making process about a form of death he wanted to pursue. Technology decisions being made in organizations should also be deemed as do-or-die if you want to continue to exist. I know: very drastic. But let’s face it, competition is fierce, startups are popping up ready to grab your market share and the organizations that survive look at expenditures from a strategic viewpoint. From an application development lens, questions include: Should we build, whether in-house or outsource, or should we buy and integrate? See also: How Insurtech Helps Build Trust   The ugly truth: Developers LOVE to build. The maker inside of us wants to create. Integration projects aren’t deemed as fun. I worked with an organization where the IT department predominantly built software solutions. Need a scheduling tool? “I can build this.” Need a workflow solution? “I got this.” Developers would make any excuse known to mankind to devalue other products in the marketplace. Another ugly truth. Build projects are EXPENSIVE and take forever even if you outsource them. Why would you build a scheduling tool? There are thousands of such tools. The same is true with workflow. You may be thinking: Such problems could never happen! Why would someone sign off on the project if such problems were ahead? If you don’t have the right leadership -- your technology reports to a non-technologist or you don’t have the right project oversight -- your organization might very well make this kind of mistake. Technology dollars are precious, so why spend your time, resources and capital on projects that don’t propel your organization forward. Why spend the money building a scheduling tool or workflow solution? Why not take the opportunity to integrate with someone who has already built the solution? Here is the challenge I would offer you if you sit in project prioritization or new initiatives sessions, regardless of your department and role: Has due diligence occurred to look at software solutions that may solve the need? If the answer is no, figure out a way to start the process, or you will be in the do-or-die situation. If the answer is yes, vet various solutions. This can’t be left to IT only. The vetting must be done by a mixture of IT and the business, with equal decision-making power. Vet the various solution providers and find out how you can integrate while building the other pieces. Ask yourself: As an organization, what is your mission? Are you in the business of developing software or using software to serve the mission? Why would a life insurance company want to develop its own workflow tool, its own policy admin systems or its own claims systems? There are vendors whose sole purpose is to make your organization run better. See also: When It’s Better to Build In-House   Use your brightest IT talent in innovation, not in building solutions that exist in the marketplace. Figure out how to transform your organization using best-in-class technology. Integrate with solution providers and startups. Build what others cannot do, and innovate on solutions to beat the competition. “To be, or not to be, that is the question….”

The rapid technological evolution of the insurance industry will require independent agents to turbocharge their adoption of digital tools in 2019. Consumers have become accustomed to the convenience afforded by artificial intelligence (AI) when it comes to completing day-to-day transactions. Voice assistants allow people to ditch the keyboard and conduct searches by talking to devices. Chatbots enable customers to have personalized interactions tailored to fit their needs. This is the world in which agents are operating, and, to grow, they will have to leap forward and implement more of these technologies into their current offerings. Here are five predictions that will have a big impact on agencies’ abilities to compete and grow in 2019: 1. Voice search will become more common for insurance. The rapid adoption of smart devices powered by manufacturers like Google and Amazon are compelling consumers to speak to robots about their needs from their homes and offices and on the go. Insurance is no exception. Predictions indicate half of all searches will be conducted through voice-assisted technology in the near future. As more carriers index their local agents to work with voice services like Alexa and Siri, agencies must ensure that their websites and digital assets respond to advances in voice search. Content strategies will expand beyond conventional keyword campaigns and target phrases to sentences that mimic natural language used between two humans in conversation. See also: Insurtech: Revolution, Evolution or Hype?   2. Insurance agent bots will be humanized to create authentic interactions. Insurance agencies must adopt technology solutions that move their client-focused insurance buying experiences to the online environment. With deep knowledge and expertise in developing personal connections with their customers, agents have the advantage over insurtechs that are limited to simple mono-line customer interactions. Through customizable communication enablers, including chatbots and smart forms driven by automation and artificial intelligence, agents will elevate the emotional intelligence of their websites, social media and emails to speak to the consumer authentically. 3. Google mobile first represents an important frontier for insurance products. Google mobile-first indexing was formally launched in March 2018 and reinforced in September, which means websites will be indexed and ranked based on the mobile version of their content. Although desktops historically led the way for consumers to research and find products and services that met their needs, it is more critical than ever that agents have mobile responsive sites to not only grow but also maintain the highly coveted search engine real estate that they have worked for years to establish. 4. Texting will increasingly be used to connect with customers. The rise of mobile users will have an effect on how agents communicate. Texting is a critical line of communication with millennials and will be the preferred method of contact for the next generation of insurance customers. For better effectiveness, texting tools are expected to be integrated with existing email and CRM systems, and innovations in rich communication services (RCS) promise to deliver better app integration, secure transactions and branding for businesses to text. 5. New micro-experiences will become the building blocks for digital expansion. Agencies are differentiated by the niche markets they sell to and service better than their competitors. Investments in digital content campaigns and user interfaces that cater to specialized prospect and customer segments will rise in 2019. These micro-experiences will enable agencies to have access to a market with carriers, as well as the ability to quote, bind and service insurance online. Micro-experiences will typically focus on commercial lines and specialty insurance for niche markets, such as programs for craft breweries, energy contractors, concrete pumping or marijuana dispensaries, to name a few, and they will offer new opportunities for agencies to expand quickly with digital building blocks that can be easily integrated into existing business and workflows. See also: Digital Survival Tools for Agents   2019 will be the year where agents take significant technological leaps – from responsive mobile websites and texting with customers to humanized chatbots and the ability to search for products using voice commands. Agents will look for solutions that allow for the sharing of customer data, requiring platforms to become more open and work together to better them. The New Year will be the start of the next era of independent agents characterized by openness to new digital tools and rapid adoption of the latest technologies

In today’s online insurance shopping environment, many lead sellers and buyers work well together toward the same goal of delivering a great customer experience. But, it hasn’t always been this way. For example, in the mid 1990s, when InsWeb sold the first data lead produced from an online insurance quote form, our industry was a lot less focused on customer experience and a lot more focused on selling as many leads as many times as possible to anyone that would buy them. As you might imagine, the self-interest of lead generators, lack of industry standards being adopted and increasingly complex privacy regulations meant the industry would struggle to survive. Many learned the hard way (consider the demise of Bankrate Insurance, outlined further in this article), while others developed technology and standards to drive a better customer experience and are thriving today. The Beginning of the Lead Seller-Lead Buyer Relationship The relationship between online lead sellers and lead buyers began as a very simple one, over 20 years ago. The lead seller was also the lead generator and dealt directly with the lead buyers. At the time, aggregators did not exist. In the early 2000s, small and medium-sized publishers realized they could make money by generating leads. They would sell these leads to the larger lead generators who had direct relationships with the lead buyers (the insurance brands). This was the start of lead aggregation. And it appeared to be a logical business decision that was good for all parties involved: the generator, aggregator and buyer. The problems began to emerge when buyers and sellers started to exchange leads without any central record of the activity. Without third-party certification, and no industry standards, some lead generators and aggregators were driven more by the incremental monetization opportunity than by win-win-win relationships where lead generators, lead buyers and consumers all benefited. What’s more, the ping-post process evolved to allow an unlimited number of sellers and buyers to come together. On the surface, this should have created an efficient market with a variety of options for the consumer. In reality, without any standards or third-party verification, consumer information began to travel to dozens of lead buyers, creating an overbearing, intrusive consumer experience rife with fraudulent transactions. This is when the wheels came off the bus. See also: Insurtech Ecosystem: Who Will Eat Whom?   The End of the Beginning By 2010, relationships between sellers and buyers became very strained. Rules were in place to protect all parties: the lead generator, aggregator, lead buyer and the consumer. Some examples included:

• no selling of leads beyond a certain number of buyers
• no manipulation of the consumer’s data (many times, manipulating data would lead to higher monetization)
• no recycling/remarketing of leads at a later date
• no fake leads
• no leads based on incentives
• no unauthorized sales to stated end buyers (i.e., no selling of the lead to a captive agent that already bought the lead)

Unfortunately, these rules were not always followed, and there was no way to effectively know who was compliant, let alone how to enforce them. As a result, many carriers and agents experienced a noticeable decline in lead quality. While some of the aggregators and generators played by the rules, a few meaningfully sized “bad actors” wreaked havoc, making it difficult for the honest providers to survive. The industry went through a period of contraction, with several acquisitions resulting in less transparency, less trust and more gaming of the rules to benefit bad actor sellers over the customer or the lead buyer. Insurance carriers (the lead buyers) lost control, and the situation became dire. The industry tried to self-regulate. Some lead sellers discussed sharing data about the origin and history of a lead, as well as proof of compliance. In other words, each lead seller was expected to follow a set of standards loosely agreed upon by multiple parties and documented by parties like the LeadsCouncil. There were a lot of good folks trying to create valuable customer experiences, but the bad behaviors by some were making it difficult for everyone. For example, bad actors were selling leads to multiple insurance providers or holding leads to sell again and again—in other words, recycling leads. Other sellers were aggregating leads and misrepresenting this fact, while others would acknowledge they were aggregating but would misrepresent the actual origin. Simply put, by 2010 our industry lacked transparency and accountability. Consequently, the inability to identify and eliminate old, recycled, dupe, fake and no-intent leads led to the deterioration of lead quality. We were witnessing the beginning of a downward spiral where carriers and agents were directly affected by the decline in quality. Many carriers reallocated budget to hedge on the lead generation channel, and thousands of agents discontinued buying leads altogether. Pushing the Reset Button By 2011, the industry realized that self-regulation would not work. A new solution was needed. With advances in technology coupled with the widespread belief that a third party was required to certify leads, the problem certainly seemed solvable. It was at this time that a concept called LeadiD (the company that is now Jornaya) led the effort to leverage technology and data to promote confidence, clarity and trust in the lead generation space. The concept was simple: Lead generators placed a simple script on each page of their lead funnel. Each time a consumer arrived on the website, a unique LeadiD token was created for the lead event, and key data about the lead event was captured in a privacy-friendly manner by an independent, third party. No consumer data and no proprietary lead generator data was at risk while independent third-party validation was provided to rebuild both the trust and transparency of lead generation across the industry. The LeadiD token served like a Vehicle Identification Number (VIN) for the lead event. When a lead was presented to a prospective buyer, the LeadiD token was also included. The buyer could thus query Jornaya, an independent, third party. Similar to using a VIN with CarFax, buyers were able to validate in real time the key attributes about the origin, history and proof of TCPA compliance associated with each lead. The factual data provided by an independent observer, Jornaya, allowed the buyer to validate the lead’s value and minimize TCPA risk. The process effectively cleansed the waters made toxic by bad actors, unenforceable standards and lack of third-party certification. Lead buyers began to buy more volume programmatically, with the trust baked into the transaction. Lead aggregators used the same LeadiD technology to ensure transparency with their affiliate lead sources. The good actors, such as All Web Leads jumped on board immediately, and many followed. For others, it took some convincing. While many eventually began creating and passing LeadiD tokens, there were a few large holdouts. Which raised the question from carriers, why hold out? Implementing LeadiD was free, and sharing LeadiD tokens was also free. With firms like All Web Leads, ReviMedia (now PX), Quinstreet, Apollo Interactive and Hometown Quotes working together to require and share LeadiDs, there was a clear movement underway. An industry course correction was beginning to happen. A Lead Generator “Verified” Solution Fails Spectacularly Not long after LeadiD tokens started flowing throughout the ecosystem, Bankrate Insurance, one of the largest sellers at the time, created its own “verified” solution—providing data elements such as lead age and consumer consent (for TCPA compliance purposes). For its larger lead buyer customers, the company would also provide “exclusive” access to other attributes of the lead event to make buying decisions. I’ll never forget a meeting with senior management at a large insurance carrier alongside Bankrate executives. The carrier was listening to Bankrate discuss why the carrier did not need a third party solution, because Bankrate’s approach would solve all the problems. The vice president at the carrier asked, “Why would we trust you instead of an independent third party?” What’s more, the executive stated unequivocally: “Even if you are trustworthy, it’s very clear it’s not working for each lead provider to be self-regulating. We support a single, industry solution, with independent certification, and we’re wondering why you wouldn’t support the same.” This executive understood that while the Bankrate Insurance “verified” solution may have been technically viable, a lead seller taking necessary steps internally to clean up and verify its own traffic was actually a terrible idea fraught with problems. This solution never gained traction and did not last very long. Here are five reasons why an in-house “verified” solution provided by a publicly traded lead generator did not work:

1. Buyers had no way to independently verify the accuracy of the origin and history data contributed by the seller. “Because I said so,” simply wasn’t good enough.
2. In considering a lead, buyers could not confirm consumer consent to their approved TCPA compliant language (and font size/contrast requirements) across hundreds of websites owned and operated by the seller and accessed by millions of consumers across multiple device types.
3. For TCPA complaints and lawsuits, no independent, objective verification of a consumer’s consent to be contacted existed. Simply put, defense amounted to relying on attorneys or the courts to believe the lead generators, once again, “because they said so.” In contrast, independent certification has proven successful in mitigating TCPA risk time and again.
4. Because they didn’t receive the “exclusive” access to certain data, smaller lead buyers were not playing on a level playing field. Exclusive data sounds good until others realize it’s not actually exclusive and that it's not possible to identify or stop this behavior. Already rejected leads often ended up back with the buyers because the leads are aggregated and sold to them by a different lead seller, without the buyer being able to know this is occurring.
5. The temptation to falsify the data was enormous in the face of revenue and profit margin guidance and expectations, and many cases of false data were identified with a third-party solution, but were very difficult to identify with self-regulation.

It quickly became apparent to lead buyers that the primary purpose of those unwilling to pass LeadiD tokens was to handicap the transparency process and increase their own revenue and profit margins. Buyers equated the approach to “the fox guarding the hen house.” Consequently, lead quality of these sellers continued to decline. Some sellers exited the business altogether, while others were acquired by companies willing to create and pass LeadiD tokens. An efficient market was starting to grow built on trust, standards and transparency. Like a stock market, the lead generation marketplace can, and should, thrive when buyers and sellers offer transparency and both sides use independent, standard and trusted insights to make data-driven and consumer privacy-friendly decisions. As a result, everyone can win. Well, everyone willing to embrace true third-party transparency and industry standards. Here is a checklist to help understand in-house “verified” solutions versus an independent, industry-wide, third-party solution. Where We Are Now Today, Jornaya witnesses the vast majority of insurance lead events. We are in this privileged position because of the forward-thinking lead generators and aggregators who have embraced Jornaya as the third-party certification source for the industry. Thousands of lead buyers (aggregators, carriers and local agents) rely on the independent transparency of lead origin and history that a LeadiD token enables. With that transparency comes trust, better lead seller/buyer relationships, stronger performance, TCPA compliance and a smarter and safer consumer experience. See also: How to Build an Innovation Ecosystem   It’s been a fascinating journey, and we reinforce this story often with our customers. Many have experienced this journey alongside us and have witnessed the trials and tribulations of the evolution. Our partners and customers across insurance, mortgage, banking, real estate, home services, automotive and education appreciate that LeadiD tokens flow freely throughout the ecosystem and have programmed their lead bidding and buying technologies accordingly, expecting a LeadiD token just like any car evaluation system would expect a VIN. The collective voice of lead buyers and like-minded, collaborative lead sellers will assure we maintain an ecosystem with trust and transparency. I don’t say that just as GM of insurance at Jornaya, I say it as someone who has cared deeply about improving the insurance consumer experience and insurance provider productivity since we all started creating and exchanging leads over 20 years ago. Frans van Hulle, CEO and co-founder of PX (formerly ReviMedia), sums it up nicely in his recent article: “If you have something to hide, you’ll fear transparency. If you don’t, you won’t.” Most lead sellers have benefited by participating in this journey with us, and many insurance carriers have helped us get to this point. We all gain by being able to transact leads using a single, trusted currency (LeadiD tokens) that ultimately creates valuable consumer experiences. As such, we also enjoy playing the role of connecting like-minded lead sellers and buyers because we know how beneficial it is for all involved.

Customer experience experts are in typical year-end prediction mode. But our crystal ball came up with a bit of a different take on what’s in store for next year. It’s that time again, when all the management gurus come out with their customer experience predictions for the coming year. So what customer experience trends do the gurus foresee in 2019?  What do they predict organizations will focus on?  Here’s a sampling of their ideas, culled from some recently released prediction lists:

• Companies will create more customer-centric cultures, using new recognition systems and training programs.
• Companies will use technology to digitally transform the customer experience.
• Companies will go the extra mile by empowering their employees to surprise and delight.
• Companies will use robotic process automation to speed customer transactions.
• Companies will leverage AI to automate customer interactions without making them feel mechanical.
• Companies will break down silos and align customer experience strategies across functional domains.
• Companies will use predictive analytics to create more personalized customer experience.
• Companies will overhaul their voice-of-the-customer programs, relying more on text analytics of unstructured content, such as survey comments, call center recordings, social media conversations and online chat sessions.

It all sounds like wishful thinking to me – or perhaps just some firms trying to promote their products and services under the guise of supposed customer experience predictions. See also: 3 Ways to Optimize Customer Experience   Call me a cynic, but here’s my bold customer experience prediction for most companies in the coming year: Not much will change.

• Most organizations will lumber along, spinning their wheels on this topic, discussing it endlessly, executing on minor improvements that amount to window dressing, just so someone can “check the box” on the next performance review.
• Most organizations will continue their navel-gazing, focusing inward on organizational changes, role shifts, political infighting and silo strife.
• Most organizations will lose whatever little momentum they may have gained around customer experience improvement, as top executives with organizational attention deficit disorder spot some shiny new object that becomes the next initiative du jour.

Forgive my pessimism, folks, but most organizations are unremarkable and are destined to stay that way. That’s precisely why, when a company actually does break from the pack and deliver a differentiated experience, it turns heads. So, rather than obsess over what everyone else will be doing (or what the gurus say everyone else will be doing), focus instead on what your company can do to avoid the fate of mediocrity. Think about how to send a clear, unmistakable signal to the marketplace — and your workplace — that something fundamental is changing. A signal that you’re no longer going to do it “like we’ve always done it.” A signal that you’re disrupting the status quo in your industry. A signal that you’re liberating consumers from long-simmering frustrations. See also: How to Use AI in Customer Service   A signal that you’re dispensing with the typical customer experience platitudes, in favor of very tangible and compelling changes that make a difference in the lives of your customers and the employees who serve them. If, at the end of 2019, you don’t want to be among the many companies that validate my bold prediction, well then…  go do something bold! You can find the article originally published here.

The debate on insurance innovation has been dominated recently by comments generated as a result of the State Farm TV ad where this insurance giant celebrates the superiority of its thousands of human insurance agents compared with the AI-based chatbots. Lemonade -- a smart U.S. insurtech startup -- has credited itself as the target of this ad, because its marketing story is that a chatbot is just as good – if not better – than any human insurance agent. It does appear that Lemonade's platform does need to learn a bit more about how insurance works, as AIs have regularly paid out more in claims than they’ve collected in premiums. Many comments on various social platforms have called the commercial, “the worst commercial I’ve seen,” creepy, freaky and hilarious. Many blame the insurance giant for releasing this “attack ad.” Even our friend Chunka Mui has written a well-articulated censure to this ad. However, we love this ad. We hope this discussion will encourage two calls to action for insurance companies:

1. Be proud of the way you do business
2. Master the art of communication.

Be Proud of Your Business Model Let us start with the first aspect. In the past years, technology arrogance and a sort of politically correct tech-speak have forced the storytelling of the largest insurers around the world to, on one side, shyly hide that real people generate the vast majority of their business and, on the other hand, celebrate any insurtech proof of concept as evidence of their innovation, even when it has an immaterial impact on profit. It seems insurance companies have felt embarrassed by their agents, brokers and other distribution partners. Most of their innovation efforts have been on solutions that in some way challenge their greatest asset, the human agent and broker. “The last agent is already born” is a slide title we have seen at industry conferences for the last 10 years, but as of today, all around the globe, the sale of P&C insurance continues to be dominated by agents and brokers (excluding a few exceptions like the retail auto business in the U.K.). See also: Digital Survival Tools for Agents   For life insurance, digital distribution accounts for less than 1% of global sales. It is great news to finally see a large insurer that is very proud of its agents. We love this communication because it is not hypocritical and gives a clear message both to customers and to agents: This is the way (through agents) we do business, and this is the reason why we do it this way. We are not celebrating or encouraging “old school” thinking. We are firm believers in insurance innovation – and agree with Chunka that chatbot, machine learning and AI use cases are among the technologies that will have the greatest impact on the future of the insurance sector. However, we are also pragmatic. We want to provide a view about insurtech that is different from the superficial mainstream. We think it is a pity to let the innovation cheerleaders – people raising their pom-poms at any PR released news but are not able to distinguish a loss ratio from a combined ratio – guide the debate about the future of the insurance sector. The mantra of our activities in the insurance sector around the world is “all the players in the insurance arena will be insurtech,” meaning organizations where technology will prevail as the critical enabler for the achievement of their strategic goals. So, we believe insurtech is much more than digital distribution. Our view is that insurtech is a superpower for insurers, a terrific enabler for performing the job of insurance in a better way: to assess, to manage and to transfer risks. The world is full of opportunities for reinventing each step of the insurance value chain through technology and data usage. Moreover, an insurance company has a key opportunity to share these superpowers with its agents, brokers and distribution partners. Many insurers already understand that not involving their distribution system in corporate innovation is a wasted opportunity, so these carriers have introduced technologies that can enhance the capabilities of their human intermediaries. Instead, we have seen only a few players communicating effectively and consistently to support their agents and brokers. Because of this, carrier innovations are frequently perceived as threats by agents and brokers. Insurance companies don’t need to create this kind of barrier. Maintaining this conflict only pleases the innovation cheerleaders who not like and want to get rid of intermediaries. Master the Art of Communication Let’s move to the second call to action. The insurance sector has always experienced bad press and has never excelled at storytelling. The new generation of insurtech startups are demonstrating the power of a consistent and modern communication strategy. The startup that has started the discussion about this ad is the best example of this communication ability. From our perspective, Lemonade's two years of case history must be studied in marketing courses at any university. There is a lot for the current industry to learn. The company has pretended to be the good guys who will be the remedy for a broken business. This home insurance startup has positioned itself as champions of trust. Everyone remembers the company for the fixed percentage of premium it charges – the iconic slice of pizza – while all the rest is used to ensure they will always pay claims, and whatever is left goes to charities. In today’s age of post-truth, only a few people go deeper, study and try to understand fully. Therefore, that slice of pizza celebrated by insurtech cheerleaders has flown tweet to tweet, article to article, conference to conference. Moreover, consistent and well-orchestrated communication has fed this mechanism. https://www.slideshare.net/matteocarbone/iot-insurance   What does “all the rest is used to ensure they will always pay claims” mean? In the long and wordy FAQs, the startup mentions the necessity to cover “internal reinsurance,” reinsurance costs and other expenses. Therefore, at the end, the maximum amount available for the charity giveback is 40% of premiums. The terrific 40% giveback happens only in the theoretical scenario where there are zero claims within the peer group. In a scenario with claims at 40% of the premiums (40% loss ratio) or above, the giveback is zero. This means there is a giveback only if the loss ratio is lower than 40%. See also: Important Perspective for Insurance Agents   Insurance is a contract where someone promises to indemnify another against loss or damage from an uncertain event as long as a premium is paid to obtain the coverage. On average, the U.S. home insurance business line had a loss ratio of 74% in 2017 (an exceptionally high year; 46% has been the lowest loss ratio in the past five years). This means that 74 cents have been used to indemnify the policyholders for each dollar collected as premium. In the age of post-truth, the Insurtech startup we talked about pretends to be the good guy that will fix a broken business model because it guarantees to pay – as claims or giveback – at least 40 cents for each dollar collected as premium within each peer group. It seems clear to us that the insurance incumbents have more arguments for claiming they are the good guys, but they have only to develop consistent and modern communication storytelling. Following are some suggestions on next steps that insurance companies can take:

• Be proud of and support your agents, brokers and distribution partners
• Encourage them to be part of your innovation initiatives
• Develop a frictionless process to help the people who distribute your products better engage with policyholders
• Learn how to tell a better story – about your company and your agents and brokers and distribution partners.

What ideas do you have for helping the industry to help agents and broker better protect their clients?

The past several months have seen increased activity and focus on the promising technology of blockchain and its potential in the insurance industry. Blockchain has also reemerged as an important issue in the European Union (EU) following the go-live date of the General Data Protection Regulation (GDPR) on May 25 of this year. As a side note to U.S. policymakers, including the California legislature, the GDPR was adopted two years before its effective date. There was a reason for that.

There will be a considerable amount of scrambling in Sacramento this year as efforts are made to clarify the scope and limit the unintended consequences of the hastily enacted California Consumer Protection Act 0f 2018 (CCPA). Virtually everyone in the insurance environment – including startup and established insurtechs – need to keep a very close eye on what emerges during this effort in 2019.

Regardless, it is important for all those dealing with technology to understand how the E.U. is dealing with issues such as blockchain. Businesses in California should be paying particularly close attention to how the E.U. is attempting to reconcile GDPR and emerging technologies while the CCPA is moving inexorably to its effective date of Jan. 1, 2020. Multinational companies are already dealing with GDPR compliance given its long extraterritorial reach. Inevitably, how the E.U. is dealing with privacy will serve as at least a partial template for how privacy issues will be dealt with in the U.S. E.U. commissioners are currently attempting to sort out the interaction between GDPR and blockchain technology. It is not a nice fit.

To foster a dialogue on this issue, the E.U. Blockchain Observatory and Forum was created as a European Parliament pilot project. Per its website, the observatory’s mission is to monitor blockchain initiatives in Europe, produce a comprehensive source of blockchain knowledge, create an attractive and transparent forum for sharing information and opinion and make recommendations on the role the E.U. could play in blockchain.

On Oct. 16 of this year, the E.U. Blockchain Observatory and Forum published a thematic report, “Blockchain and the GDPR.” As noted in the report regarding blockchain and GDPR compliance: “The issue of compliance of blockchain with GDPR is an important one. By specifying how personal data is to be protected, the GDPR will play a fundamental role in shaping digital markets in the Union. Considering its strong support of this nascent technology, the European Union clearly believes that blockchain technology has an equally important role in these markets, too, offering new paradigms for the ways we transact and interact with each other.” (Report, p.8)

See also: Blockchain’s Future in Insurance

What is not clear at this point in time is how blockchain can flourish while remaining compliant with GDPR. There are those who think the fundamental structure of blockchain is irreconcilable with GDPR. That opinion is not prevailing at this time.

As noted repeatedly in the report, GDPR compliance is not about the technology, it is about how the technology is used. There are clearly issues, even with private consortium blockchains, that need to be fully understood. The issue isn’t just where the data are housed, the issues also include who controls the data and, as the report repeatedly emphasizes, how that data are used.

The E.U. is ahead of the U.S. in efforts to balance the rights of natural persons regarding their own personal information and the improvements that can come from technological innovation. While various sectors of the economy, including insurance, seem to be gushing about the possibilities of blockchain, there is a singular silence about how this environment will comply with the host of state and federal requirements placed on all the participants in this distributed ledger technology.

This isn’t just about privacy in general and the CCPA in particular, although the CCPA could disrupt blockchain even in the commercial context if there is no further clarification during the 2019 California legislative session. The observatory’s report, however, serves as a reminder that the GDPR deals with personally identifiable information belonging to natural persons and not information that is shared with other business forms provided to businesses.

That is an important distinction but not entirely dispositive. In the world of commercial insurance, there are sole proprietors who must have not only liability coverage but also workers’ compensation insurance. These are “natural persons” who under GDPR and currently under the CCPA could ask their personal data to be removed from a database. This is not consistent with the blockchain’s promise of immutable records. (See: Civil Code Sec. 1798.105)

Earlier this year, industry giants Marsh and IBM, working with Acord, teamed up to develop a commercial blockchain for proof of insurance. Acord is the Association for Cooperative Operations Research and Development, an industry-supported organization that, among many other functions, makes many of the forms used in the property and casualty insurance industry for the transaction of insurance (applications, certificates, etc.). The pilot participant for this is ISN, a global contractor and supplier information management business.

Per Marsh’s announcement earlier this year, “A distributed ledger technology, blockchain is ideally suited to large networks of partners. It establishes a shared, immutable record of all the transactions that take place within a network and then enables permissioned parties access to trusted data in real-time.” IBM and Marsh also recently announced that they are working on making the proof of coverage blockchain accessible to Marsh clients through Salesforce. Recently, The Institutes, best known for its professional designation programs in the insurance industry, has launched its RiskBlock Alliance. Per its Sept. 23, 2018 announcement, “…a blockchain consortium representing 31 risk management and insurance companies, has launched Canopy, the industry’s first end-to-end reusable blockchain framework, using the Corda blockchain platform.”

One of the use cases currently being developed for Canopy is proof of insurance. In remarks on the National Association of Insurance Commissioners (NAIC) Innovation and Technology (EX) Task Force Oct. 15, 2018, conference call, Christopher McDaniel, president of RiskBlock Alliance, said, in response to an inquiry from Oregon Division of Financial Regulation Deputy Administrator TK Keen: “…if regulators have their own node on the blockchain, they could push a button and create a report, as long as the appropriate agreements were in place to share the information.” [NAIC Innovation and Technology (EX) Task Force conference call Oct. 15, 2018, draft minutes dated Oct. 26, 2018]

In a July 12, 2018, blog titled “Ultimate Guide to Blockchain in Insurance” from management consulting firm Accenture, it was noted that blockchain would facilitate “using shared loss histories to obtain data-driven insights on prospective customers for more sophisticated pricing.” I suspect that state insurance regulators would have a keen interest in how that would be accomplished.

Workers’ compensation rating organizations such as the National Council on Compensation Insurance, Inc. (NCCI) or the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), operating under license from state insurance regulators and serving as a critical part of the active regulation of insurance required under the McCarran-Ferguson Act, would most likely have a few questions as well. In other words, while there has been much discussion about the promise of blockchain, that discussion needs to be fully integrated into the discussion of how all that data are going to be secured, shared, and stored within the context of existing and anticipated regulatory compliance requirements.

This goes beyond insurance regulation and, as is the case with the EU, directly implicates the emerging and complex privacy environment as evidenced by the CCPA. Take, for example, the issue of proof of coverage and the issuance of certificates of coverage within the workers’ compensation environment. These are two separate issues that require separate solutions. States maintain coverage verification portals for any person to verify workers’ compensation coverage. These are managed by rating organizations pursuant to statutory mandate and generally by self-insurance regulatory authorities. In some instances, such as with California’s Contractors State Licensing Board (CSLB), there are separate coverage disclosure requirements that are also accessible by the general public. This is not a testament to the accuracy of these systems, but rather only to their accessibility.

For blockchain to be effective in the workers’ compensation environment, therefore, it needs to have some degree of integration with public databases. That isn’t as easy as it may seem. For example, Labor Code Sec. 3715 states, “The nonexistence of a record of the employer’s insurance with the Workers’ Compensation Insurance Rating Bureau shall constitute in itself sufficient evidence for a prima facie case that the employer failed to secure the payment of compensation.”

Does this mean that rating organizations should have a node on the proof of coverage blockchain, as should the Division of Labor Standards Enforcement (DLSE) and the Department of Insurance (CDI)? If that is the case, then what does that mean for purposes of public records laws and whether the blocks in the blockchain are public records? In other words, if the blockchain is to serve a public purpose then it must take into account access issues that may not be present when the ledger is entirely for private transactions.

See also: How Insurance and Blockchain Fit

A certificate of insurance is issued, arguably, by either an agent or broker or an insurance company. For most transactions, this is currently done through a writable .pdf document or done manually. This process is an open invitation for fraud. The work Acord is doing with Marsh and The Institutes underscores a technology solution may help make the certification of insurance coverage – both as to existence and to limits (for liability lines of insurance) more reliable and transparent.

This is not an inconsequential matter, especially in California and considering the particular issue of whether some staffing companies are very much part of the problem. The latter issue regarding staffing firms is a critical one for California. Given the Golden State’s broad regulation of employment relationships, it is at best vexatiously ironic that when it comes to staffing agencies, with some very limited exceptions, there is virtually no regulatory framework to verify the legitimacy of staffing firms and the way they do business.

This is a problem – and a problem that needs to be resolved before applying a technology solution to the issue of bogus certificates of insurance. And that finally leads us back to what the observatory noted in its thematic report: “… start with the big picture: how is user value created, how is data used and do you really need blockchain?”