Workers’ compensation was designed to reduce litigation by trading out the employee’s right to sue his or her employer for negligence in exchange for limited guarantee of care and compensation. This exclusive remedy “bargain” was the justification for why the system was created a little more than 100 years ago. If we look at intent and where we are today, it’s a failure (albeit a fixable one).

Currently, the workers’ comp system is thought of as one of the more litigious marketplaces for insurance and healthcare. It doesn’t reduce litigation; it simply changes (and in some cases streamlines) the fight. We need to wake up and say ENOUGH! It’s time to dedicate resources on several fronts to get back to the original intent of this system.

Impact Analysis

In 2014, California Workers’ Compensation Institute released a study that provided a strong scientific approach to quantifying impact. The study showed that, if an injured party hired a lawyer, the associated costs went up on average by $40,000 for permanent disability payments and $25,000 in terms of temporary total disability benefits — even if the case never went to court. That is staggering!

Prior to this study, there was a general understanding that the system was not functioning as intended, but, when the hard numbers were presented in a very defensible analysis, it was truly shocking. More importantly, the study demonstrated that the injured worker doesn’t benefit from a litigious fight, either. It isn’t good for anyone (except maybe the lawyers) when things devolve to the point where attorneys become involved with a claim.

See also: 2018 Workers’ Comp Issues to Watch  

To determine whether things have improved since the release of the CWCI study, and if so by how much, I am involved with a new study. If the initial findings hold up, I can assure you that the situation has not gotten better. It’s far more likely that it’s only gotten worse. Doing a bit more digging on the impact of litigation on claims costs, we examined data culled from multiple claims companies. Several points stood out from the early informal analysis, most notably that, across all claims, on average:

• The overall time to resolve claims increased by nearly 10x when an attorney was involved.
• The amount spent in temporary disability payments was approximately 4.5x greater when an injured worker was represented by an attorney.
• The number of workdays employees missed more than doubled when lawyers were engaged.

These numbers are considerable and don’t even focus on the out-of-pocket costs of the attorney’s fees, direct litigation costs or the impact the additional friction causes in claims overhead costs. One of the more provocative initial findings shows that, when carriers distinguish between claims that are litigated and claims that are just represented and haven’t escalated to litigation, there is little difference in outcomes. If anything, initial figures suggest the worst outcomes are more likely in the claims that are represented but not litigated (carriers have different criteria for these categories, so it’s not a conclusive finding).

It is clear that, once the injured worker decides he or she needs to get an attorney, the horse is already out of the barn. We have to get IN FRONT of this event — and not just react to it. The future health of the workers’ comp industry depends on this.

See also: States of Confusion: Workers Comp Extraterritorial Issues 

There are lots of opinions on where to go from here. But real solutions are on the table. Before we examine all of this, however, it’s important to understand why injured workers hire attorneys to begin with. (Hint: It’s rarely because they are looking to score a massive payout). In my next article, I will dive into these reasons and how to remedy them so that we can return the workers’ comp system to its original intent.

As first published in WorkCompWire.

When you combine the ability to collect workplace data with evolving data analytics and machine learning, you can improve productivity, worker safety and fraudulent and exaggerated claim rates. During a session at the RIMS 2018 annual conference, Eric Martinez, founder and CEO of Modjoul, and Lance Ewing, EVP of global risk management and client services at Cotton Holdings, led a dynamic discussion around wearables and how they can and will create change for your organization. Why should companies start using wearables? For an individual, it can point to issues for correction. Groups of employees can compare with known thresholds, or set thresholds for improvement in areas of concern. For an organization, wearables change the way an organization is managed. The benefits of wearables are working with individual outliers, validation of application and new data for further understanding. Working with individual outliers, for example, in automotive telematics, the worst 5% of drivers represent 15% to 20% of losses. Validation of application can verify applications and information provided with new data for further understanding activity (bends, steps, twists, driving), training (aggressive driving events, near misses, bad bends), fatigue (duration of physical activity), fitness (height-to-waist ratio) and even environment (temperature, heat index, humidity). See also: Where Are the New Wearables Heading?   Workplace wearables create data and insights for companies and employees to achieve their highest performance. The wearable device captures payloads, then sends payloads to the cloud for computing and finally displays data on a dashboard. The criteria for a wearable are sensors (detect location, motion, environment and biometric data), processor (determines how fast data is sent to the radio and runs firmware code), data storage (provides short-term firmware and allows for inconsistent radio signal), radio (three basic types of radio: WIFI, Bluetooth and GSM) and data storage (allows ease of use for charging). These wearables are for finding the locations of injuries or potential injuries. Why are wearables the new hot topic for workers’ compensation?

• Wearables can be put in place to improve productivity and safety.
• 70 million-plus blue collar/labor workers in America.
• Typically don’t have access to their cell phones while on the job, making it harder to inform supervisors in real time when injuries occur.
• Employee turnover is high, requiring a solution that can easily transfer between users.
• Hazardous environments, increasing the probability for injuries.
• Due to the spread-out nature of work, employee reporting is hard to track.
• Occupational injuries and illnesses cost $250 billion a year.
• Injured workers require an average of eight days away from work to recuperate.
• Lost productivity ($183 billion) far outweighs the cost of medical expense ($67 billion).
• Worker productivity has continued to be abysmal.
• Productivity growth is the weakest it has been since the early 1980s — only 0.8% a year over the last half a decade, compared with 2.3% on average from 1947 to 2007.

These wearables can keep workers safe and productive. Wearables modify work procedures and can improve work activities based on data conveying a certain activity is potentially hazardous or inefficient. Telematics can provide near-real-time feedback of employees' motion, location and environment, and real-time clock timestamps all activities, including start, break and end of day. Fraud detection can record employee incidents to verify when accidents occur, and the potential severity and time reporting verification ensures employees are working in reported time. Wearables can identify near-miss events and identify locations/processes/poor technique that result in near misses to implement solutions before an accident can occur. Wearables also track employee performance and drill into data to provide work insights that empower employees to achieve their highest performance. See also: Wearable Technology: Benefits for Insurers   Lastly, some privacy concerns to consider are that there no biometric screening data is captured. Only captured data has a business purpose. WiFi credentials are encrypted inside device and when transmitting to the cloud and device can be logically turned off based on shift times. The time of wearables is now!

In a videoconference hosted by Indian start-up website Inc42, I gave Indian entrepreneurs some advice that startled them. I said that instead of trying to invent things, they should copy and steal all the ideas they can from China, Silicon Valley and the rest of the world. A billion Indians coming online through inexpensive smartphones offer Indian entrepreneurs an opportunity to build a digital infrastructure that will transform the country. The best way of getting started on that is not to reinvent the wheel but to learn from the successes and failures of others. Before Japan, Korea and China began to innovate, they were called copycat nations; their electronics and consumer products were knockoffs from the West. Silicon Valley succeeds because it excels in sharing ideas and building on the work of others. As Steve Jobs said in 1994, “Picasso had a saying, ‘Good artists copy, great artists steal,’ and we have you know always been shameless about stealing great ideas.” Almost every Apple product has features that were first developed by others; rarely do its technologies wholly originate within the company. Mark Zuckerberg also built Facebook by taking pages from MySpace and Friendster, and he continues to copy products. Facebook Places is a replica of Foursquare; Messenger video imitates Skype; Facebook Stories is a clone of Snapchat; and Facebook Live combines the best features of Meerkat and Periscope. This is another one of Silicon Valley’s other secrets: If stealing doesn’t work, then buy the company. See also: Time to Rethink Silicon Valley? By the way, they don’t call this copying or stealing; it is “knowledge sharing.” Silicon Valley has very high rates of job-hopping, and top engineers rarely work at any one company for more than three years; they routinely join their competitors or start their own companies. As long as engineers don’t steal computer code or designs, they can build on the work they did before. Valley firms understand that collaborating and competing at the same time leads to success. This is even reflected in California’s unusual laws, which bar noncompetition agreements. In most places, entrepreneurs hesitate to tell others what they are doing. Yet in Silicon Valley, entrepreneurs know that when they share an idea, they get important feedback. Both sides learn by exchanging ideas and developing new ones. So when you walk into a coffee shop in Palo Alto, those you ask will not hesitate to tell you their product-development plans. Neither companies nor countries can succeed, however, merely by copying. They must move very fast and keep improving themselves and adapting to changing markets and technologies. See also: 3 Technology Trends Worth Watching   Apple became the most valuable company in the world because it didn’t hesitate to cannibalize its own technologies. Steve Jobs didn’t worry that the iPad would hurt the sales of its laptops or that the music player in the iPhone would eliminate the need to buy an iPod. The company moved forward quickly as competitors copied its designs. Technology is now moving faster than ever and becoming affordable to all. Advances in artificial intelligence, computing, networks and sensors are making it possible to build new trillion-dollar industries and destroy old ones. The new technologies that once only the West had access to are now available everywhere. As the world’s entrepreneurs learn from one another, they will find opportunities to solve the problems of not only their own countries but the world. And we will all benefit in a big way from this.

At the 2018 RIMS annual conference, Christopher Loebler from the firm McCarter & English discussed business interruption claims. Business interruption usually falls within your property policy. The coverage is triggered by a property loss from a covered peril under the policy that shuts down your business for a time. One in five U.S. companies sustain a loss in this area with an average claim of more than $2 million. Oftentimes, losses are less obvious, more complicated and larger than the property claim. Unfortunately, the focus on the front end tends to be on the property loss when any incident occurs. See also: How to Assess Costs of Business Interruption   Five Pitfalls on Business Interruption Claims:

1. Failure to include an insurance coverage lawyer on your crisis response claim. Policies tend to be long and complex, so you need someone who has read the policy in advance of the incident to now how to best respond.
2. Issuing a press release can directly undercut the insurance claim. After an incident, the typical reaction of a company is to issue a press release letting people know that the business can still operate. Later, when you try to file a business interruption claim, the carrier pulls out that press release and questions coverage.
3. Failure to understand what is privileged communication. Questions should be asked through your lawyer under privilege, not through you broker. Communication with your broker is not protected by privilege.
4. Failure to communicate. You have an obligation to communicate with the carrier, including putting iut on prompt notice. However, you need to make sure you are not giving it information that can be used against you without going through your attorney.
5. Failure to retain a forensic accountant. A forensic accountant is an expert in both the policy and making claims. The accountant knows exactly what information is needed to maximize recovery.

NOTE: Claim preparation expenses are usually covered under the policy. This includes the forensic accountant but not attorneys. Also, you can add contingent business interruption coverage to your policy. This coverage would apply if one of your key suppliers suffered a loss that would be covered under the policy and that particular loss disrupted your business.

Blockchain is gaining popularity across industries. While the technology holds long-term promise of transformation and business model changes, there are few people in business and IT communities who understand it in detail, and there is little evidence on real adoption and successful  implementations of blockchain projects. While you may have come across numerous use cases of blockchain covering asset transfer, asset management, supply chain management, payments, reconciliation, digitization of information, digital identities and smart contracts, giving the illusion of automating and simplifying everything under the universe, the reality is that blockchain technology is still evolving, very complex, unproven and lacking in the basic enterprise technology adoption hygiene that is needed to build real use cases. Technology hype or a game-changer: Where do you stand in blockchain adoption? The unfortunate state of many industries is that someone doing something “cool” on any new technology is seen as an innovator. So, many CXOs believe that their company must do something innovative to stay on the radar and in the limelight to attract investors and analysts’ attention. Biased by media news and growing articles on blockchain, they don’t want to be left behind. Innovation often demands business values that are tangible, measurable and sustainable. The unfortunate state of blockchain is that it still lacks basic tenets of innovation, i.e. desirability, feasibility and viability. The “desirability” aspects of blockchain lack the “real problem” that companies are trying to solve for customers. The “feasibility” aspects confront the immaturity and still evolving nature of blockchain technology to make it business- or enterprise- ready. The “viability” aspects fail to relate to or justify returns on investment (ROI) leveraging blockchain technologies. In the current state, blockchain technology is not ready to deliver meaningful value to enterprises! Blockchain: What is there in it for insurance companies? Blockchain technology often relates to trust, transparency and security/immutability aspects in the mind of insurance stakeholders. These aspects are key for insurance CXOs! And that is the reason why insurers are keen to learn, adopt and explore blockchain. See also: Blockchain: the Next Big Wave?   Few insurers are reimagining insurance as an “intermediaries-free” ecosystem where blockchain would connect an insurer with customers and other ecosystem partners seamlessly in a trusted, decentralized manner, helping sell the right product to the right buyer with ease while improving compliance, minimizing operational cost and nullifying frauds. This is an ideal-world scenario that is perhaps decades away from reality. One may promise to automate the entire insurance value chain using any emerging technology, but the reality is that insurance is not that easy for a paradigm shift. Blockchain is still a new technology and is still a few years away from being accepted at enterprise levels. Opportunities, challenges and realities of blockchain: A pragmatic view While blockchain's potential cannot be underestimated, it is still in pilot and proof-of-concepts stages in many industries. The key enterprise technology vendors in this space (IBM, Microsoft, Oracle, Amazon, etc.) are just gearing up. The most popular platform players in this space are Ethereum, Hyperledger Fabric, R3 Corda and Ripple, offering permissioned and permission-less blockchain. The continuing changes in these core platforms are another reason that this technology is a bit unstable. But blockchain technology has received backing from top executives across industries and backing of more than $2 billion in the last two years. Where do you start with blockchain? Don’t expect miracles. Treat blockchain like any other emerging technology that is an enabler for your business and watch the market carefully until it takes off. Let me assure that you have not missed much if you did not start experimenting with blockchain in the last 18 months. You may start with proof of concepts (POC) in any area of your business (underwriting and claims are best suited to begin with). Think strategic, act tactical: It is not the use case but the ecosystem that matters Once the blockchain POCs can address a few business scenarios with transactional capabilities, try integrating blockchain with one or more of your core system or applications to prove the end-to-end capabilities. You may also explore the consortium model in case you want to experiment it with other re/insurance companies and partners with whom you collaborate regularly and pick adequate use cases accordingly. The other option is to ask your preferred technology vendor or a startup company to demonstrate use case scenarios that resonate with your business. The key challenge is not the use case(s) you pick for building a blockchain POC but more about the right platform and technology partner you select for your blockchain initiatives. The commitment of technology partners and technology platform is crucial. See also: How Insurance Can Exploit Blockchain   Conclusion Blockchain technology is still evolving but holds long-term promise to transform business across industries. The technology is not enterprise-ready at the moment, and there is little evidence of real adoption within the insurance industry. But insurers must watch for progress and start their homework in choosing the right platform, partner and blockchain initiatives.

Personalization is a significant opportunity for life insurance carriers looking to revolutionize their relationships with customers. In this article, Montoux takes a closer look at some key themes, with examples carriers can aspire to. Customer relationship Customers have long been thought to begrudgingly purchase life insurance protection, either as a rite of passage or something an agent or other perceived authority has advised them to do. The nurturing of a customer relationship is not something that has been required of the carrier, as it has traditionally sat with agents working to earn their commission. This lack of an engaged relationship has led to a culture of disconnect, distrust and even resentment toward the carrier companies, and without an agent’s care can lead to lapses in premium payments and ultimately lack of coverage. It is in customer relationship building that personalization is not merely an aspiration, but becoming a necessity. As younger generations are delaying or completely bypassing more traditional milestones of marriage, home ownership and starting families, the opportunities for agents’ messaging to resonate with them is lessening. The average age of a life insurance agent in the U.S. is 59 years old, and, as these aging agents focus their efforts on high-value policies among their peers, traditional carriers are at risk of losing touch with the new needs and perspectives of young generations if they don’t make significant changes now. Modern consumers -- and even more so, those of future generations -- are moving away from traditional sales models and purchasing behavior in every other industry, with insurance following in this inevitable shift. Consumers are going online to not only research and attempt to understand policies but complete applications and make payments. Even more significantly, the internet plays a key role in educating the modern consumer on the need for life insurance in the first place, as even the traditional triggers of life insurance purchase such as home ownership and financial advisers move to the digital space. It is essential to ensure younger generations realize the value of purchasing a life insurance policy in the first place, as Denise Garth outlines in this article. Consumers of today are bombarded with constant opportunities to part with their money, with a 2015 study estimating the average attention span has dropped from 12 to eight seconds since 2000, to less than that of a goldfish. Agents will continue to have a significant role to play for the foreseeable future as the Boomer generation enjoys long lifespans, and value the human connection. Tech-savvy agents will take advantage of digital distribution channels for acquiring new customers, and continue their roles indefinitely. But the ultimate transformation for life insurance could be turning it from a grudge purchase customers don’t perceive any immediate benefit from, to something that can improve their own lives and wellbeing in addition to ensuring their loved ones are financially secure in the event of their own death, or they receive a substantial payout from permanent policy in later life. And this potential shift lies in the carriers’ hands. See also: Thought Experiment on Life Insurance   Personalizing power An example of a grudge purchase becoming one of enjoyment in a different industry is shown by Flick Electric. Flick is an electricity company based in New Zealand that was established in 2014. It has built a steady following of loyal customers who are so enthusiastic about their relationship with the company that they often become ambassadors, referring friends and family to join. Flick has achieved this relationship by not only bringing a different payment model, which reflects the market rate of electricity and passes these ebbs and flows onto the end customer’s bill, but has also very tactically framed their marketing and social media presence to attract the key millennial and Gen-Z markets as they become new bill payers of households - and also well-prepared for Generation Alpha and beyond. While the purchase of electricity is obviously a more essential expense for people than life insurance, the customer relationship Flick has managed to build is a great example of what insurers can strive for in making customers perceive value in each and every premium payment they make. Life and death should feel personal Insurers can look to optimize their digital spending with highly targeted social media campaigns, as part of their wider marketing strategy. With social media now an integral part of 81% of U.S. Americans’ lives, insurers that work to very specifically target campaigns in response to personal milestones shared online could reap the rewards of more conversions by ensuring their marketing efforts are in exactly the right place, at the right time. Envisage the way in which a millennial couple sharing their excitement over their new firstborn child’s birth on Twitter could be automatically approached with a very specific offer of life insurance, which outlines the benefits of such a policy for the future of that baby. Fabric demonstrates the kind of messaging that could resonate with this hypothetical pair of new parents. Fabric’s own social media content emphasizes "parenting made easy, starting with life insurance," conveying an easy, low-effort, high-reward investment, which appeals to new parents wanting to secure the financial future of their family. This kind of personal and emotional connection to a life insurance purchase is key for new generations of digital natives who are bombarded with constant offers online and limitless places to spend their money -- especially as, in this example, when starting a family. Breaking through the noise to demonstrate the immediate value of peace of mind is key for life insurers to earn that place in a young family’s budget. Products Life insurance products currently leave plenty of scope both for further personalization, and for wider improvements on messaging that will actually resonate with customers. Complex, wordy policies with grim mentions of “death benefits” that attempt to cover every eventuality can leave customers confused, frustrated and often either under- or over-insured. Sherpa is an example of using a different model to ensure the cover offered to customers is extremely personalized. While traditionally insurers create products, and brokers work to find the best customers to buy these products, Sherpa charges a value-based annual fee to customers, and in turn meets all their specific insurance needs. Distribution It’s important that insurers work to accommodate customers by allowing them to use the communication channel they are most comfortable with, rather than trying to funnel them into the carrier’s preference. A report published by McKinsey indicates that more than 80% of shoppers encounter a digital channel at least once during their purchasing journey. Especially on social media, replying to a customer’s inquiry through that channel with advice to call a phone number could lose an opportunity completely, whereas being able to answer questions directly and then move to another online channel such as the carrier’s website is more likely to retain interest. Behind the scenes, carriers need to ensure their staff are provided with the tools to communicate information and monitor customer engagement across channels to ensure every interaction a customer has with an insurance company as a whole is as seamless as possible, no matter which individual staff member at the insurance company might be behind the interaction. These digital communications with customers, along with the collection and analysis of data, allow insurers to build rich profiles of customer needs and preferences - and prevent the repeated ask for basic customer information, which should be acquired once only. Data and analytics Analyzing existing customer data is key to understanding patterns of premium lapses, and determining ways to help prevent them from happening with future customers. Using this data to ultimately identify the earliest signs and indicators of customer payment lapses means an insurer could preempt these, and ensure that reminders and offers of solutions keep the customer meeting premium payments, and are delivered effectively. Reminding a customer of the benefits and significance of the insurance policy at key points of doubt or uncertainty over the policies’ value relative to other payment requirements in their lives is a huge advantage for insurers. See also: This Is Not Your Father’s Life Insurance   Experience data and connected wellness Finding ways to gain access to and use customers’ experience data is key in achieving true personalization of life insurance, with IoT and device data greatly improving the company’s data set, and ultimately benefiting individual customers with personalized messaging and rewards. Improving the customer perception of carriers to build trust and good faith in insurance companies is crucial in obtaining this personal data, as customers will need to overcome fears of anti-selection in openly sharing, as well as their concerns around privacy. Being able to analyze this information provided by new customers can allow individual quotes to become even more accurate and eliminate the issues of non-disclosure or misinformation provided by customers -- which can ultimately lead to their policy not being paid out. This device data can also be used in a continuing basis to explore patterns of behavior, health and death to more accurately model risk. Insurers are already beginning to use data to help nudge customer behavior - the AIA Vitality app updates the insurer on activity levels by syncing from fitness wearables and rewards customers’ health improvements with lower premiums. According to Accenture, 77% of consumers would be willing to exchange behavior data for lower premiums, quicker claims settlements or coverage recommendations. Interestingly, this aspect of personalization may not be just for targeting the young, as Accenture also reports senior citizens are adopting wearable devices five times faster than the general population.

Now, more than ever, insurance executives should be seeking out opportunities to have their assumptions challenged, to understand how technologies can be applied, to embrace the idea that even the most incomprehensibly advanced innovations are easily grasped through the lens of consumers. 

Conferences such as the recently concluded Global Insurance Symposium in Des Moines have managed to establish the ideal environment for both the distillation of actionable information and for fostering very candid discussions.  Such events are part of a larger ecosystem that, for the first time in modern industrial history, has formed in advance of massive technological change and that gives insurance an advantage that other industries haven’t had as they’ve faced major change over the past 20-plus years. 

We can examine cautionary examples like Blockbuster, which in 1994 had a valuation of $8.4 billion. Ten years later, Blockbuster still had 84,300 employees and nearly 10,000 stores, but it was a dead man walking. Its valuation had, in fact, fallen to $4.7 billion by year end 1997, and by 2004 it was too late for Blockbuster to reverse its fortunes.

What happened? Amazon was founded on July 5, 1995. Netflix launched Aug. 29, 1997. YouTube launched on Feb. 14, 2005. But the video store industry was focused on the video store industry and didn’t see that it was doomed almost the day that Blockbuster hit its 1994 peak. None of the global video rental brick and mortar chains invested in the launch of any of those new technologies because the chains didn’t see the massive effects the startups would have.

If Blockbuster had had a warning system in place, might the outcome have been different?

Consider the adoption curves represented in these two charts from the World Economic Forum.

The chart on the left renders the adoption curve of household technologies, pre-internet. The adoption curves on the right are primarily post the emergence of e-commerce, as well as depicting the advent of mobile technologies. Note the exponentially shorter adoption curves.

Those charts show that, while we can use Blockbuster and other cases to learn from the past, we also have to realize that the pace of change is increasing and that we need to accelerate with it. Although it’s generally accepted that the insurance industry is in the early stages of a sea change, the great irony is that the momentum is building based on business models and technologies that represent relatively incremental progress.

Insurtechs represent significant improvements in the practice of managing known risks. But that’s not enough for the insurance industry to keep up. There is a tsunami of risktechs coming that are dedicated to reinventing risk. These are the firms, funded with nearly $350 billion in 2017 alone, that believe the losses we have experienced for the past century, or two, need not continue. These companies, like those that devastated Blockbuster, rely on technological breakthroughs that have been in the works for over a decade already, by the way.  

Again, no industrial sector upended by technology had the opportunity to benefit from the ideal trifecta of capital on hand, advance notice and the emergence of an ecosystem totally dedicated to the success of the incumbents. Insurance has all the tools needed to identify and deal with the fast pace of change that the emerging risktech competitors represent. What remains to be seen is whether existing insurance industry firms will leverage vision, capital, technologies, time and a support ecosystem to create the next great growth cycle. 

This is a time for giant killers, historic circumstances that level playing fields, filled with opportunities that favor the focused. Time will tell if the unique circumstances favoring success through action will be leveraged by those who commit to clarity and growth and see past the hype and chaos.

Guy Fraker
Chief Innovation Officer
Insurance Thought Leadership

Extraordinary change is taking place throughout the insurance industry and everything that surrounds it. The whole world is going digital. It’s the new reality, and there is no getting around it. But just the word or even the idea of digital has many people, insurers included, pondering the basic and fundamental questions: Why do we need to be digital? How do we go digital? And what, exactly, is digital anyway? To get a visual of what digital means for insurance, look through the lens of digital transformation. Defining Digital Defining digital is important because it is a very broad topic with far-reaching implications. Simply put (and without getting into the science behind it), digital is a way of doing things. And becoming digital is a state that will be required for moving around in the digital world: communicating, shopping, traveling, doing business, keeping a competitive edge and much, much more. See also: Future of Digital Transformation   Going Digital Digital is such a broad concept that it is easy to get too narrowly focused on just one part of the everything that makes up digital. For example, digital is a format for storing assets of many kinds; it is a way of transmitting data and information from one place to another, and it is a way of interacting with data. But that’s not all. The digitization of assets is just the first phase or step on a pathway that will lead to the next phase of digital: creating the digital experience. The experiential phase of digital begins when digital assets come into use. Now digital becomes the method that undergirds the interaction. Digital assets are transmitted digitally to create digital experiences via portals, mobile apps, websites, sensors, wearables and many other digital things. In the third phase, digital transformation, digital presence and capabilities go beyond to an expanded and progressive digital experience that touches everything, connects the parts, resets the expectations, broadens the horizons and transforms the lives of everyone it touches. Being Digital For insurers, the journey of digital transformation will involve rethinking an insurer’s value proposition and internal business operations, embracing data and advanced analytics, creating and supporting all means of engagement and automation across all the company and delivering enriched customer solutions that are thoroughly integrated with internal operations as a seamless, personalized experience from start to finish and everywhere in between. Digital is the thread that will connect and unite all systems, processes and strategic initiatives and tie them together into an enterprise that is ready for the future. And digital transformation is the strategic initiative that will set the foundation, set the context and set the direction for the next-generation insurance company. See also: Digital Transformation: How the CEO Thinks   In our new report, Digital Transformation in Insurance: Discovering the Pathway to Digital Maturity, SMA introduces its Digital Maturity Model, a model for developing a digital strategy that will be fundamental to success in the digital world, both today and tomorrow.  Click here for a copy.

Here’s a chilling stat: For every two producers you hire, only one will pan out. According to a well-referenced study by Reagan Consulting, just over half of new agents and brokers are successful. The other 44% wash out before they can be of value to the organization. The picture gets even more ominous when you consider that as many as 60% of firms aren’t hiring enough producers to meet their growth goals. That makes retaining producers and validating them quickly particularly important. Plenty of organizations have robust hiring departments and devote a lot of resources to attracting and landing top candidates. But far too many firms squander this top talent once a new employee is through the front door, and good producers end up leaving the organization. This isn’t only a drain on resources; with the average cost to replace an employee amounting to as much as two times his or her annual salary, it hurts your bottom line, too. While poor hires likely lead to some of the turnover, the more common cause is subpar onboarding and early employee training programs. See also: Why You Need Happy Producers (Part 2)   The benefits of a formal onboarding program Every organization has an onboarding program, whether they realize it or not. Keep a new hire waiting in the lobby until his direct supervisor shows up a half-hour later? Shuffling the new hire from introduction to introduction and forgetting to tell him where the bathroom is? That’s your onboarding program. Undoing those early negative impressions is a real uphill battle. Study after study has shown that formalizing your onboarding program is key to maximizing its success. Employees are 69% more likely to stay with an organization for up to three years if it has a formalized onboarding process, according to the Society for Human Resource Management (SHRM). Considering Reagan Consulting’s finding that it takes an average of 32 months to validate successful producers, keeping agents and brokers around beyond the three-year mark can have a huge impact on an agency’s bottom line. An effective, formal onboarding process doesn’t just keep employees around longer, it can also significantly expedite the time to validate and improve employee engagement. SHRM researchers identified additional advantages that ultimately benefit both employees and employers:

• Higher job satisfaction
• Organizational commitment
• Higher performance levels
• Career effectiveness
• Lowered stress

What’s more, a formal onboarding process can help managers more quickly identify producers who aren’t a good fit for the organization. Spotting red flags during the onboarding process can help you make adjustments (up to and including termination) before you’ve spent too much time and resources on the employee. This enables organizations to identify the financial impact—positive or negative—earlier in the validation process and adjust accordingly. Effectively onboarding all new producers Your formalized producer-onboarding process needs to be consistent across all new producer hires to ensure more useful benchmarks and metrics. But developing a program that works for the many different kinds of producers is challenging. Each hire brings his or her own set of experiences and gaps in skills. Broadly, new producers typically fall into one of four categories based on their experience with sales and the insurance industry:

• No experience — little to no familiarity with sales or the insurance industry
• Sales experience — familiarity with the sales process but little to no exposure to the insurance industry and agent/broker processes
• Insurance experience — knowledge of the industry but little to no sales experience
• Established producer — proven agent or broker who may have worked for a competitor

Onboarding processes need to add value for all of these groups. A robust, fully formed onboarding program should begin well before an employee’s first day and extend well past the six-month mark. But the entire program doesn’t have to be built at once. Start with something as simple as sending an email. When Google reminded hiring managers to plan an employee’s first day, the new hire got up to speed 25% faster and reached peak productivity a full month earlier, all thanks to that leg up on day one. See also: Happy Producers, Happy Customers   Focus on onboarding efforts that give producers a better idea of what your company’s all about, beginning with company culture and specific company processes and procedures. When done right, explaining HR policies and company handbook rules can reveal a lot about your organizational culture. As you work to formalize your onboarding process, make sure to regularly check in with managers and new hires to verify the effectiveness of your efforts and find areas for improvement.

From “I thought homeowners insurance covered that,” to “I’m in a low risk flood zone, so I don’t need flood insurance,” flood insurance agents have heard all the myths about why homeowners don’t need flood insurance. Unfortunately, these myths often undercut the true dangers of flooding and leave home and business owners across the country woefully underprepared if a flood event does occur. In 2017 alone, the National Oceanic and Atmospheric Administration reported 16 separate disasters in the U.S., each with damages exceeding $1 billion, which generated total record losses in excess of $306 billion. A large percentage of these damages were caused by flooding, including damages associated with Hurricane Harvey in Texas and Louisiana, and record high water levels in Missouri, Arkansas and Illinois. While this devastation has certainly brought the conversation about flooding and flood damage back to the forefront, it also may have relayed a subtle, worrisome message to others: Flooding events only affect certain regions at certain times of the year, and 2017 was an anomaly. The reality is quite the opposite. When it comes to flooding, these disasters can happen any time of the year, anywhere across the country. In fact, 25% of all flood damage in the U.S. occurs in what are classified as low- to moderate-risk flood zones by the National Flood Insurance Program (NFIP), and destructive flood events have occurred in 98% of counties across the country. This is especially troubling when, as the NFIP estimates, just one inch of water intrusion can cause more than $20,000 in damages, and the average NFIP claim is around $43,000. In addition, one-third of FEMA disaster assistance goes to properties in these low- to moderate-risk zones, but it’s rarely enough to cover the damages. The data from these costly flood events reveals a story of loss and hardship that needs to be more widely understood, and now—with the bevy of new private flood insurance options in place—is the perfect time for agents and organizations to research the facts and widely broadcast the message to the home and business owners they protect. What Agents Need to Know Flooding is not restricted to heavy tropical storms. It takes multiple forms that can affect other regions in the U.S., including rapid rainfall or structural failure leading to flash floods, spring snowmelt, changing weather patterns, clogged rainwater systems and new building development. Flooding can even be triggered by drought and wildfires. Why? Because wildfires and droughts alter soil conditions, leading to reduced absorption and increased runoff during any heavy rain that follows. See also: Future of Flood Insurance   Simply put, flooding is the costliest and most common natural disaster in the U.S., especially considering that it can strike any time of year. Ultimately, a single flood event can destroy a property and wreak irreparable damage on the finances of uninsured home and business owners. Yet, despite these dangers, only 12% of homeowners have flood insurance. For those in low-risk areas or those without mortgage loans not required by their lenders to purchase NFIP policies, this is a huge problem. Consider the following:

• A March 2017 survey by InsuranceQuotes found that 56% of respondents mistakenly believed that a standard homeowners policy covers flood damage.
• Most business insurance policies exclude flood damage.
• FEMA flood maps may be outdated, and flood risks are changing rapidly. Some research suggests that current maps vastly underestimate those in the high-risk, 1-in-100-year floodplain, with one study suggesting that 40 million Americans, instead of the current estimate of 13 million, are at high risk.
• Hurricane Harvey hit low-risk flood areas, and fewer than 20% of homes damaged in Hurricane Harvey were flood-insured. In total, just 15% of all the 1.8 million homes in Harris County (Houston) had flood insurance, including only 28% of the homes in high-risk areas.
• NFIP policies in low-risk, preferred risk areas are as low as $500 a year, while a flood claim averages $43,000.

Collectively, these statistics highlight the importance of flood insurance for all Americans, no matter where they live. As agents, it’s our job to understand the potential risks in our communities and educate clients—and potential clients—on their flood risk to advise them in the best possible way. What Are the Solutions? For agents and others in the insurance industry, spreading the flood risk message requires perseverance and a keen understanding of the different insurance products that are available. While it’s important that owners and tenants know their FEMA-assigned flood risk, it’s also key that they understand the shifting nature of flood risk: that the dangers are changing, and every property is at risk at any time of year. Additionally, while government-backed NFIP policies are a critical way for many Americans to secure coverage, they are not the only option. Some homes and businesses may need excess coverage to cover up to replacement cost, and still other eligible properties may benefit from the array of coverage options available with private insurance products instead of an NFIP plan. That’s why it’s critical for agents to analyze the true needs of our clients and regularly communicate any changes or updates that may be necessary. The NFIP provides coverage limits up to $250,000 for the structure of a home, and up to $100,000 for personal possessions. For business owners, coverage limits are up to $500,000 for a structure and $500,000 for contents. Depending on the value of their structure and belongings, some home and business owners may need excess coverage, provided by private insurers to supplement their NFIP policies and provide additional coverage options. For example, NFIP policies do not cover additional living expenses—like the rental of a hotel room if a family is displaced from their home—or coverage for basements and pools. Private flood insurance policies, however, may provide coverage for these things and more, to better serve consumers. Homeowners and renters aren’t the only ones who can be helped by private flood insurance options. Often, much of the focus during catastrophic flood events is on homes and families, but the effect on businesses is just as devastating. Buildings and inventories have been destroyed, computer equipment wiped out and workers left with nowhere to go—and no job left to do. Often, the cost of recovery from a flood is too much for a business to manage, with 40% of small businesses never re-opening their doors after a disaster. See also: Hurricane Harvey: A Moment of Truth   The fact is, whether a tenant or building owner, an uninsured company can lose everything in an instant when the water rises. The message agents deliver to business owners needs to mirror the one delivered to homeowners: The risks of flooding are high, and the cost of inaction could be financially unbearable. Agents need to make a special effort to educate business owners on the topic. After all, a company that is willing to invest in anti-theft measures, IT protection and liability insurance should recognize the real financial dangers that floods can deliver. At the end of the day, private flood insurance options will only be embraced if agents and their clients are fully educated about the risk of flood, the limits of NFIP and all the changing options available. The bottom line is: Flood insurance options are expanding, and we as agents need to understand the full array of flood coverage possibilities available to ensure that those we serve have the opportunity to choose the coverage that will best protect their homes, their families and their businesses.