In Part 2 of this series, I explored how the innovations that Amazon popularized in retail would be transformative if applied to healthcare at scale.

The potential value of such innovations is not lost on those inside the healthcare sector. Many startups and large healthcare organizations are already working hard to adapt and adopt them. (See, for example, my articles on diabetes prevention, Boomers and how to shape the future of connected health). Here are some of the advantages that Amazon brings to this challenge: 

Amazon can start with a clean sheet of paper. Unlike those inside the current healthcare system, Amazon doesn’t have existing customers to placate, legacy systems to update or business models to protect. A fundamental disconnect in healthcare is that the patient is not the customer, so helping customers doesn’t necessarily benefit patients (or vice versa). In this case, Amazon and its partners are the customers. And, because the potential patients are employees, Amazon can leverage strong existing connections, relationships and overlapping interests.

See also: 10 Mistakes Amazon Must Avoid in Health 

Amazon brings differentiated capabilities and experience. While many talented people in healthcare are working on the same capabilities, few can match Amazon’s technical expertise and practical experience. Amazon’s expertise in social networking, mobile devices, user experience, the Internet of Things and artificial intelligence are extremely relevant to healthcare. Its existing platforms, like its Alexa-enabled devices and AWS cloud platform, will, no doubt, also come into play.

Amazon doesn’t have to make money. Innovators in healthcare have to worry about revenues and reimbursement, usually from insurance. With deep pockets and the potential to recoup cost through savings, Amazon has great flexibility to experiment without such concerns. Indeed, the alliance declared itself to be “free from profit-making incentives and constraints.” While its initial focus is on reducing cost and improving satisfaction for its 1.2 million employees, the alliance is not shy about wanting to create solutions relevant to all Americans. Doing so would serve two other incentives for Amazon to think big about its healthcare innovation.

Healthcare could enable synergies with Amazon’s other businesses. As I’ve previously observed, Amazon approaches competition as a no-holds-barred battle for tighter customer relationships and ever-larger share of customer wallets. It is hard to find a bigger untapped market category than healthcare through which to grow Prime membership. In addition, because mobile devices, AI and cloud-based platforms and services have become synonymous with the future of healthcare, it is likely that Amazon can find business synergies in those areas, as well.

There is a massive $3.2 trillion healthcare market to enter. Industry valuations tremble at the whisper of Amazon’s interest in healthcare for a good reason, as has happened to pharmacies, benefit managers and health insurers. That’s because investors know that there are deep pockets of inefficiencies and unnecessary complexity in healthcare that, in turn, offer real market opportunities for Amazon. For example, one analyst estimates that just pharmacy benefits management (PBM) business is a $25 billion to $50 billion market opportunity. Amazon had already been rumored to be building an internal PBM capability for its employees. Adding Berkshire Hathaway and JPMorgan employees into that mix would be another step closer to launching a market-facing business.

See also: Media Coverage on Amazon Misses Point  

Forbes.com contributor Dan Munro is pessimistic. He describes the overall effort as an exercise in “Fantasy Health Care.” At the heart of the problem, he writes, are big systemic flaws that the alliance cannot address. What’s more, Munro argues that the alliance “is not remotely novel or innovative, and the historical evidence is clear that it certainly won’t disrupt health care.”

Rather than partaking in a fantasy, I think Jeff Bezos offered a cleared-eye view of the challenge in the alliance announcement:

The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty. Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind and a long-term orientation.

For my part, I’ll take an optimistic point of view. The problem is big and hairy, and I applaud the audacious effort to take it on.  Let’s remember: Innovation is always hard and more often than not fails—and that’s why the rewards are great for those with the audacity to try and the chops to succeed.

One of the areas of focus on Out Front Ideas with Kimberly and Mark has been addressing chronic pain without opioids. The workers’ compensation industry’s approach to chronic pain has historically been trying drugs and other medical procedures first. Then, if the pain has not subsided or has worsened, we look for psychological factors. If we truly want to help injured workers in pain and prevent opioid abuse and other unnecessary measures, we need to reverse that protocol. To learn more, we spoke with two of the nation’s most highly respected pain management experts, who gave us great insights into the experience of pain, how it can be best treated and non-pharmaceutical ways to treat pain. Beth Darnell is a clinical associate professor in the division of pain management at Stanford; a clinical pain psychologist at the Stanford Pain Management Center; an NIH-funded scientist doing research on psychological treatment for chronic pain; one of the co-chairs of the Pain Psychology Task Force at the American Academy of Pain Medicine; one of the co-authors of the 2017 Chronic Pain Guideline updates from the American College of Occupational and Environmental Medicine; and author of multiple books on the subject: "Less Pain, Fewer Pills" and "The Opioid-Free Pain Relief Kit" — both written for patients. Dr. Darnell also recently co-published a research paper on The JAMA Network titled “Patient-Centered Prescription Opioid Tapering in Community Outpatients with Chronic Pain” Dr. Steve Stanos is the medical director of pain management services for the Swedish Medical System in Seattle and runs the pain services for five hospitals in the system; the director of Occupational Medicine Services at Swedish; the president of the American Academy of Pain Medicine; and the medical director for myMatrixx. He was also a reviewer for the CDC’s Guidelines for Opioid Management and was involved in the National Pain Strategy. Myths and Facts Many of us have preconceived ideas about pain — what it is and how it should be treated. Unfortunately, many of these ideas are misconceptions and have led us to where we are today. We think of pain as solely a physical experience. But our experts explained that pain is really a negative sensory and emotional experience. Psychology is an integral part of the pain experience, and, if we ignore that, we are not adequately addressing an injured worker’s pain. Pain is very helpful in alerting us to situations where our bodies are at risk. If you put your hand on a hot stove, for example, the pain signals your brain to remove your hand. However, that does not work well for chronic pain when the continuing pain alert does not help us. Instead, it causes us fear and stress, which can actually exacerbate the pain. Those fears and stress are what we need to address in injured workers with chronic pain. Another misconception is that people in pain are powerless to do anything about it and are at the mercy of drugs or other medical procedures. That simply is not true. There are teachable skills patients can use to assuage their own pain. These are learned skills. See also: Is There an Answer to Opioid Crisis?   We need to help injured workers understand and deal with the psychology of their pain experience up front, instead of waiting until the claim deteriorates. Medical providers, payers and others involved in a claim need to be aware of that and work with the injured worker to empower him or her to reduce their fears and stress and, in doing so, reduce their pain. That leads us to another misconception — that dealing with the psychology of pain requires a specialist for extended sessions. Actually, non-behavioral health individuals can teach valuable skills to help cope with pain. Again, this should be done early in the claim process for the best outcomes. The best predictor of outcomes in a pain program is early intervention with psychosocial factors. We need to have an early emphasis on behavioral health. Yet another falsehood is that using drugs and medical procedures first is better for the patient because it does not assume he or she has any psychological issues. Instead, we are missing the elephant in the room, and, when the injured worker is finally sent for psychological intervention, it can be demoralizing. It sends a message to the injured worker that he or she is a failure and that the pain is all in his or her head. It does a terrible disservice to the injured worker. We asked our experts whether all patients in chronic pain need psychological intervention. The answer was, yes, anyone in chronic pain can benefit from some level of behavioral intervention. That does not mean long-term, expensive, one-on-one treatments with a trained psychologist. Again, there are teachable skills to deal with chronic pain. The focus is on changing behavior. Non-Pharma Pain Treatments There are a variety of programs to help people deal with pain, many of which are based on cognitive behavioral therapy (CBT). This short-term treatment is goal-oriented and takes a practical approach to problem solving by changing patterns of thinking and behavior. Doing so helps change the way patients feel. CBT is considered the gold standard of psychological treatment for chronic pain. It teaches concrete information and skills with action plans to move forward. It helps in creating care pathways that promote organized and efficient patient care based on evidence-based medicine. It helps patients become engaged and active in their own treatment so they rely on themselves more than the medical system. Patients can learn the skills of behavioral health principles through classes and videos as well as by talking with therapists and others. Again, it is something anyone in pain can and should learn — not just those who are profoundly depressed or have other, more serious psychosocial issues. It is active management of pain. Some newer treatments include mindfulness training, acceptance and commitment therapy and chronic pain self-management. These are all based somewhat on CBT, although not necessarily on pain management. Acceptance and commitment therapy trains you to stay focused in the moment so you do not react to pain. Negatively reacting to pain can be more distressing than the pain itself. These programs teach people how to self-soothe. They also help establish meaningful goals and the steps to achieve them so people are not stuck in a passive mindset about their pain. Functional restoration programs incorporate many of these aspects and can also be great, not only for at-risk patients already struggling with chronic pain, but also for early intervention. These programs have been around for years and typically involve physical and occupational therapy, psychology, relaxation training, exercise and vocational rehabilitation. The cost is fairly inexpensive when you compare them to unnecessary surgeries, so they can be helpful. There are also certain medical procedures and services that have been overused in the past but can actually have a role as part of an overall pain management plan. Spinal cord stimulators and injections are among them, along with chiropractic care and spinal manipulation. These can help with function for certain patients, such as those with acute pain. But they must be integrated into an overall plan, and they are only appropriate for certain individuals. Passive treatments, such as acupuncture and massage therapy, might be helpful for some pain patients, at least in the short term. But again, it needs to be used in conjunction with an active therapy program in which the patient is helping to manage his own pain through skills learned from CBT and other techniques. One treatment on which both experts are hesitant to recommend at this point is medical marijuana, mostly because of its classification as a Schedule I drug under federal law. The science on it is just too sparse; there is no safety regimen around it and no protocols for when to use it, what type to use and how much could help. "Prehab" is a relatively new term that might hold some promise. Think of rehab before the fact. It focuses on things like wellness, how to relax during the day and stress reduction techniques. The idea is to intervene with patients prior to surgery or other treatments and prevent poor outcomes. Patients who have fear avoidance or catastrophic thinking can be taught skills so they are better able to deal with their pain and stress later on. Education programs are key in helping pain patients to avoid overuse of medications and services. Because so many do not understand pain or how to control it, they may seek multiple treatments to eliminate the pain. Opioid Guidelines The 2017 revisions to the ACOEM Chronic Pain Guidelines, released in May 2017, included an extensive section on behavioral health, the role of psychology and recommendations to integrate psychological principles in chronic pain. The CDC’s guidelines for managing opioids have been invaluable in the attention they have brought to the opioid issue since they were released last year. However there has been some confusion and pushback, especially on the recommendations that deal with the morphine equivalent dose. The CDC recommends providers avoid or carefully justify prescriptions of more than 90 MED. Some payers have incorrectly interpreted that to mean physicians cannot prescribe above the 90 MED. Another controversial recommendation says providers should only prescribe opioids for the duration of expected pain, typically between three and seven days. But some providers have been mistakenly told they can only prescribe the drugs for a specific number of days. See also: Misconception That Leads to Opioids   The Future Both experts say a shift from fee-for-service to outcomes-based care could be a huge benefit because it would allow for a more holistic approach, including the integration of behavioral health. Putting behavioral health efforts on the front end of the claim is one of the biggest changes that they believe would help chronic pain patients. This would be a game changer in the workers’ compensation system and would cost more up front, but the speakers believe it would pay off in dividends. Precision medicine is an emerging field that the speakers say could provide great promise for treating injured workers with chronic pain. It involves deep phenotyping patients on the front end and at each point of care. It includes an array of psychosocial variables and assessments to determine the specific needs of each patient for targeted interventions. It moves beyond the one-size-fits-all approach. Technological advancements will allow for more and better treatment, such as apps and videos that reinforce behavioral health techniques. Telemedicine is a way to help keep patients engaged. Telehealth can allow for virtual face-to-face meetings between patients and psychologists. Virtual reality also holds promise as a way to help decrease pain levels during treatments. Clearly there is much that the industry can do to reap better outcomes for our injured workers and, in turn, their employers. However, we need new ways of thinking; a change in the way we have been doing things. All stakeholders need to truly understand pain and what we can do to address it better and faster.

Let me summarize where we are today in design thinking. Design thinking has raised a lot of expectations as well as its fair share of controversy. Why are organizations so caught up by DT? Often, it became the promise of having creative ways to solve solutions and work in harmony with all the rational thinking that dominates much of business thinking today. DT sounded so appealing, it quickly became, “oh, we need some of that.” So, the marketing of DT kicks in, looking to capitalize and add momentum. DT got heavily promoted. It quickly became sold as a process, just like Six Sigma; it became limited by those jumping on the latest concept not being true design thinkers, apart from attending a short course or two. Then this new process became a little uncomfortable; living alongside more established, rational ones, it was difficult to integrate. So as this new kid on the block struggled, questions were raised on how it complements all the efficiency and effectiveness that is expected around an organization’s dominating mindset? Most people lost the plot that design thinking was different. It was so different, it was human-centered. The extra fuzziness of design thinking can sit uncomfortably in highly organized and rational structures. Design thinking was looking for those leaps of faith and lots of creativity, but it needed to be separated and contained. See also: Key Considerations for Managing Innovation   Organizations are recognition that design thinking is not “plug and play” When you are asked to be flexible, agile, willing to experiment and often fail, sometimes publicly, this can take you into some very uncomfortable territory. You might like the idea, but will the boss? When you do not have a clear definition of design thinking, of where and how it can actually fit, it continuously suffers from a lack of clear assignment and makes it feel a little bit of an odd-ball. You can be left wondering who executes this and how it might be applied and implemented at scale. Yet it feels useful and needs to be more embraced for its creative value. So, the short answer is: Give everyone a short exposure and let everyone embrace design thinking as the creative avenue for all to explore. It suddenly gets broken down, so it can be repeatable, a step-by-step process. Then, easily enough, we all become design thinkers... or do we? [caption id="attachment_29077" align="alignnone" width="570"] Image: https://www.interaction-design.org/literature/article/design-thinking-a-quick-overview[/caption] See also: Case Study on Risk and Innovation   Organizations suddenly turned design thinking into a linear, often-gated, by-the-book methodology, and suddenly it is not true design thinking anymore; it becomes just another too linear, too slow and not as bright way to be creative. The dominating thinking about process starts to screw up the freedom within true design thinking. It quickly became boiled down to aiding and supporting the incremental innovation. It loses its real powerful edge of harnessing creativity to solve problems in highly imaginative and insightful ways; it becomes just the encouragement to help thinking along. Leaders start to ask questions about all this design thinking "hype" and begin demanding far more from a design thinking process to tackle their complex problems. Then it is suddenly, “Houston, we have a problem.” Continue reading and learn more here.

Wellness is back in the news these days. The National Bureau of Economic Research’s controlled trial invalidating a Harvard study that has been used to claim major benefits from wellness programs and the surprise decision in the AARP v. EEOC case disallowing large financial inducements for “voluntary” programs both received national attention. Further, WillisTowersWatson’s quiet revelation that most employees really dislike wellness programs marks the first time anyone in the industry has ever acknowledged that, absent bribes and fines, few employees would submit to their HR people playing doctor. By way of background, all these recent “findings” – the lack of savings from wellness programs, need for inducements, and the employee resentment – were quite clear to me in my roles at British Petroleum, Burger King and Walmart over three decades. Along with Al Lewis, I brought this experience (and many others, such as the much more positive and increasingly popular domestic medical travel program) to public view in our book "Cracking Health Costs," which continues to sell – and, more importantly, continues to resonate — five years after publication. Largely because of the news hooks above, there have lately been a flurry of references to a comprehensive, scholarly article by that very same Al Lewis. Al, of course, is well-known for poking the wellness beast with humor, screenshots and eloquence on www.theysaidwhat.com. This article is different. Not as much fun perhaps, but “The Outcomes, Economics and Ethics of the Workplace Wellness Industry” captures all my doubts and criticisms, and much more besides. See also: The Value of Workplace Wellness  Al often says that the wellness industry’s worst nightmare is being quoted verbatim. In this article, he has collected a mountain of self-incriminating verbatim quotes and claims, sourced with roughly 400 linked footnotes, all leading to the inexorable conclusion that, to be blunt, the wellness empire has no clothes. Al presents convincing evidence that what he calls “pry, poke and prod” programs really can actually harm employees. Further, the way wellness vendors typically calculate costs and benefits results in false ROI numbers. This exposé, though generally dry and straight, is not without flashes of Al’s understated humor, albeit delivered in the context of the leading law-medicine journal. In one passage, Ron Goetzel is forced to spin the gaffe that his wellness advocacy group, HERO, accidentally published a chapter in their Outcomes Guide showing that wellness loses money. Ron is sourced as saying: HERO’s board claims that, in creating the guide, they “fabricated” these numbers for the purpose of providing an example. Publicly, Goetzel, a member of HERO’s board, stated that “[t]hose numbers are wildly off . . . every number in that chapter has nothing to do with reality.” Al’s next paragraph: The chapter’s author, however, disputes the HERO board’s and Goetzel’s claim that the numbers were fabricated. He argues that, quite the contrary, his data is real and several board members, including Goetzel, reviewed it prior to publication. Reconciling the example’s data with the HCUP database, which shows almost total consistency between the HERO sample and the population, provides further evidence for the author’s claim that the data is not “wildly off” but rather real, and a representative sample of the privately insured American workforce. Al challenges the credibility of HERO’s board simply by quoting both a board member and the chapter author. After all, when your go-to defense is pretending to have fabricated your own numbers, you lose. And when Al Lewis is on the other end, you lose big. This article, though not a quick read, is a necessary one for all policymakers, pundits and especially employers as they decide how to react both to the new findings by NBER and Willis – which turn out not to be new at all –and how to prepare for 2019. See also: ‘Surviving Workplace Wellness’: an Excerpt   Perhaps the best preparation is to do something completely different – as my book says, perhaps try doing wellness for employees instead of to them. “Pry, poke and prod” programs, especially the coercive ones, may finally meet the demise that I’ve been predicting for about 15 years now. Published in the Case Western Reserve Health Matrix: Journal Law Medicine

For 10 years, I was an instructor of risk and insurance at LSU in Baton Rouge. I’d occasionally be invited to testify before legislative committees as an insurance expert. Often, some of the pending legislation was designed to solve real problems that were not fixable with insurance. In these cases, my testimony was simple. I’d explain: “Ladies and gentlemen, today, this legislative body has the ability to outlaw the effects of gravity on all state-owned lands. If this legislation is approved, a citizen can jump off the observation deck on the 27th floor and will die EVEN THOUGH IT IS AGAINST THE LAW. Gravity is unforgiving like that.” The first three examples below are real and, unfortunately, not sustainable in a long-term insurance model because we can't ignore adverse selection any more than we can ignore gravity. The fourth item is a “scientist” moving from the facts – and becoming (in my opinion) a social engineer acting on feelings. Consider the brief notes below as an introduction to each issue, not a complete discussion. 1. The Affordable Care Act – I’ll remove the emotion of illness and fairness from this discussion and just look at the numbers. From a Jan. 13, 2017, Wall Street Journal article, see the following statistics:

• The most expensive 5% of patients use 49% of health spending.
• The most expensive 20% of patients use 82% of health spending.
• The healthiest 50% of patients use only 3% of health spending.

Ours is a house divided. 50% of the market is perfect for an insurance model -- the other 50% is not, because insurance works when there is a “chance of loss,” not when losses are certain. In a loss-certain model, the No. 1 need is funding -- more and more money. See also: U.S. Healthcare: No Simple Insurtech Fix 2. NFIP (National Flood Insurance Program) – From the Acadiana Advocate (Jan. 26, 2018) see the following headlines: “Hopes for flood insurance deal dim – Another short-term extension expected” The future of NFIP is threatened by adverse selection. A disproportional number of high-risk buyers populate the pool, and an insufficient number of safe buyers (low-risk properties) exist to assure affordability and thus sustainability. 3. Auto insurance (issues of tort) – In the late 1970s in Louisiana, mandatory auto liability insurance became the law of the land. We can debate the wisdom or appropriateness of this, but it is the law. Today, ours is a house divided – those looking to sue and those fearful of being sued. Often, our industry invites (and sometimes deserves) lawsuits by being inefficient or ineffective or unreasonable in claims handling. In other cases, lawyers are searching for incidents and accidents that can do more than indemnify a claimant for a loss by creating wealth or at least “over-indemnification” through the courtroom. Our industry is becoming a tort roulette wheel. On a 140-mile trip from New Iberia to Baton Rouge, I counted 33 billboards for a specific attorney. There were many more for many others. Is this a cost the market is willing and able to pay? How many millions (billions) of dollars are taken out of the risk pool annually for over-litigation? Are we, the premium payers, willing to pay that cost? 4. Fairness in lieu of actuarial science – At its simplest, the insurance process includes four elements. Do these effectively, and you have a green and sustainable business model:

• Identify the risk to be insured
• Define the coverages
• Establish a price (premium)
• Pay the claims

On Saturday, Jan. 29, 2018, I was driving down a flooded Center Street in New Iberia concerned about the aforementioned flood article and the viability of the NFIP, when I heard a brief portion of a TED talk with Cathy O’Neil titled, “The Era of Blind Faith in Big Data Must End.” O'Neil, a data scientist with a PhD., talked about data being accurate but not being fair. Actuarial science demands objective data, but our society is starting to demand “fair.” Can these co-exist? Should bad drivers pay more than good drivers? Should health conditions be considered in underwriting life and health policies? See also: How Advisers Can Save Healthcare   I believe insurance is a risk-sharing process requiring underwriting, but it is rapidly moving to a “social welfare” platform. The market will get what it wants or tolerates, but as shown above our traditional insurance model may be sacrificed in the process. What does this mean in your world? Is it sustainable? What are we as an industry and a society going to do? Address the problems now or wait until these systems collapse or go bankrupt? “A government that robs Peter to pay Paul can always count on the support of Paul.” — George Bernard Shaw “We have met the enemy, and he is us” — Pogo comic strip

Insurance is risk transfer. A consumer has a risk. The consumer wants to eliminate or minimize the financial impact if that risk is, unfortunately, realized. Therefore, the consumer purchases an insurance policy. The insurance company takes the vast majority of the financial risk in return for a relatively small payment. The consumer eliminates the larger risk, however minimal the chances of realizing a loss, for a cost. For example, the consumer possesses the risk that his or her house will burn down. The homeowner wants (or just as likely, the mortgage company wants) to transfer to a third party the financial burden he would have if the house burned down. Let's assume the financial risk is $300,000. An insurance company accepts the risk of losing $300,000 in return for a $1,000 premium. If the insurance company has priced the risk correctly, then on average the company will make about $2 based on the last 10 years of results for homeowners insurance. That is quite a transfer of risk! (It may also qualify as a psychological study in madness because is it really worth $2 to go to all this effort and risk?) Some, maybe even most, people might argue that insurance companies have absolutely lost track that they are in the business of risk transfer. Some companies clearly have taken the attitude they are not in the business of incurring claims. Everyone, of course, claims to understand this, but actions speak louder than words, especially when internally their words echo their actions. They only want to write risks that have an incredibly tiny probability of a claim. As a reminder to all insurance company people, the world does not need you if there are no claims. This is your purpose, your reason for existing. Insurance company people are saying, upon reading this, "What does this author think claims people do all day? Of course, we have claims!" But what do claims people do all day is a valid question. On a broad scale, people do not have claims at nearly the frequency they had prior to 2001, according to A.M. Best data adjusted for more population, more cars, more homes, more businesses, and more drivers. All else being equal then, some claims employees may be twiddling their thumbs. One reason I suspect claims frequency has decreased so much is because agents are continually telling clients to not turn in claims. They do this because companies have conniption fits if they even think an insured has had a claim. Some underwriting is so tight, I am not going to be surprised to see a nonrenewal for an insured who even utters "claim" in a conversation. Again, no one needs companies if no reasonable chance of a claim exists. I understand the underwriting philosophy that once a person has incurred a claim the person is more likely to have another claim. That philosophy is as old as Lloyd's. I am not doubting a high-quality statistical study has been completed that uses an entire universe to prove this point. (I'm sure someone has actually completed this study and it just is not public because I have not seen one in 30 years.) See also: Underwriting, Marketing: Sync Up!   I doubt correlations are universal across lines. I doubt, too, that opportunity does not exist differentiating between types of first claims and types of insureds. Insurance companies, though, seem to throw the baby out with the bathwater. Underwriters and underwriting managers are too scared of a large, second claim occurring. More precisely, they are scared their boss will tear into them for not nonrenewing the account after the first claim, no matter how unrelated the first claim was to the second. So they go scorched earth and nonrenew everyone. Agents know this, so they tell insureds to not turn in claims. Underwriting behavior like this is highly problematic: 1. Agencies are damaged. Companies want their agents to survive and thrive, but they damage those agencies with their underwriting and claims actions.

• When agencies tell clients to not turn in claims, the agents are creating huge E&O exposures for themselves.
• Reputations are dulled and even damaged, especially relative to the new disrupters, because they have clean and better branding with no history.

2. The data used is questionable.

• How good is a particular company's one-loss regression analysis leading to a second loss? What is the true correlation, and is it really a simple regression? I doubt that. I imagine a quality statistical study would discover the correlation is a multi-factor relationship, and, therefore, simple underwriting rules should not be applied.
• If a large percentage of claims, even small claims, are not being turned in, then the database used to draw the correlation is inherently and materially biased.

3. I am not doubting a relationship does not exist between some small claims and future larger claims. One of my first underwriting lessons is that an old man backing out of the driveway and hitting a bike only had a small claim due to luck. The bike could have been a kid. The nature of the claim, though, dictates the probability of the future claim; the issue is not that a claim may have occurred. The industry's reputation is damaged when companies are so tight. If the reader does not see this, I am not going to explain. 4. Premium growth is impaired. One of the reasons premium growth has been so sluggish is that in the last 15 years tort reform, among other reforms, has arguably been too successful. I am not arguing such reforms should be relaxed, because, in my opinion, such reforms have been good for society. However, if fewer claims are filed or claims are settled for less, premiums decline. The fewer claims dollars paid, the lower premiums will be. The price for the risk transfer decreases because the risk decreases. When claims are not turned in, rates do not increase. When claims (not even claims, I’ll call them "incidents") result in automatic nonrenewals or large rate increases that force insureds to find more reasonable companies, rates do not increase. What is the definition of a claim anyway? When does a client's inquiry become a claim? Reputation damage, lower premium growth and increased litigation potential against agents should be enough to open eyes, if not at least slightly modify underwriting behaviors. Some companies wonder why agents do not sell more of their product. The policies are good, the rates are good and yet sales are minimal. What the agents do not say is they do not trust the company to be fair. The last thing agents want is having to deal with a client who has had a claim and is not being dealt with by the carrier fairly. The best solution is to not sell policies of those companies that have this reputation. Please believe me, most companies that have this reputation do not know they do. But look at growth rates office by office. See also: Shifting Balance in Risk Markets (Part 4)   Another bad situation for agents is to rewrite policies unnecessarily. Rewriting policies is a lot of work, and the agents do not get paid extra. So when companies take unnecessarily harsh underwriting positions, agents have to rewrite more policies. It is easier to just not write new business with those companies. For example: A young driver is backing out of a packed parking lot during the holidays. A careless driver is screaming through the rows trying to find a parking space. The two cars touch, but the young driver stops quickly enough to avoid any damage. The dust on both cars is wiped off, but the paint is not even scratched. At first, the simple and novice conclusion is the young driver should be more careful. But I suggest no one is going to see the speeding driver driving any more expediently than the young driver did. Yet, the insurance company canceled the young driver's policy simply for reporting the possibility the other driver might file a claim. The young driver did the responsible thing. The insurance company did the irresponsible thing. This is a true story. An insurance company should at least think these "claims" through or build better algorithms. Otherwise, no one really needs insurance companies, or at least ones that do not think. At the very least, just get rid of the underwriters by 5:00 pm because human underwriting without thinking is pointless and useless. Nothing good comes of increasing rates or nonrenewing accounts for incidents. Nothing good comes from agents telling clients to not turn in claims because insurance companies are taking ridiculous positions regarding incidents. Insurance companies are in the business of risk transfer, not writing risks that are absolutely perfect. If you run an insurance company or underwrite for one and cannot stand the pressure, sell the company or find a different job because absolutely no one needs an insurance company afraid of claims.

The disruption and changes that are reshaping economies, industries and the businesses within them are providing unprecedented growth opportunities for employee and voluntary benefit insurers in terms of new markets, new customers and the demand for new products and services … creating Digital Insurance 2.0. The gig economy, evolving healthcare markets, shifting industry boundaries due to mergers and acquisitions (M&A), cost shifting from employer to employee, new behaviors driven by digital companies as well as new technologies and the growth of small and medium-sized businesses (SMBs) are at the forefront of these changes and opportunities. Familiar Market, Brand New Look While the outlook for employee and voluntary benefits is promising, the market no longer looks like it once did. In our new thought leadership report developed jointly between Majesco and Milliman, A New Age of Insurance:  Growth Opportunity for Employee and Voluntary Benefits Insurance in a Time of Market Disruption, several factors are converging to create change and opportunities in the employee and voluntary benefits landscape, as illustrated in Figure 1. Figure 1: Forces creating opportunities in the employee and voluntary benefits market The two largest generations, Baby Boomers and millennials, are in the midst of rapid transition. Their shifting positions within the general population, the workforce and business leadership are rapidly reshaping the market landscape. The behaviors and attitudes of both generations are substantially influenced by economic conditions, and digital technology is rapidly becoming an integral part in their lives. Gen Z is further intensifying this shift. These factors have helped fuel the rise of the gig and sharing economy, which is estimated to encompass 35% of the U.S. workforce today and is continuing to grow and expand.[i] Together, these and other forces are creating employee and voluntary benefit needs and expectations that present unprecedented opportunities for growth. The growth in new affinity groups; increased demand for benefit portability; and the growing demand for new, non-traditional benefits and services that offer a simplified, satisfying customer experience are just a few of the dramatic shifts in needs and expectations. See also: 4 Good Ways to Welcome Employees   The market landscape will continue to rapidly transform as workers’ and employers’ needs and expectations shift, healthcare reform continues to change, industry boundaries shift with M&A, marketplaces evolve, new products are introduced and new competitors emerge from within and outside the industry. The surge in employee demand for innovative voluntary benefits are an increasingly critical element to attract and retain top talent for companies, particularly as we continue to see unemployment rates decline, as boomers retire and as the fight for technology talent intensifies. Adding fuel to the market shift is the rapid emergence of new technologies like wearables and advanced medical devices and exploding data (among others) that are redefining the insurance market into one focused on well-being, lifestyle and longevity, rather than illness and death. Innovative benefits are increasingly focused on digital health and well-being, elderly care, pet insurance, college loan repayment and the demand for digitally enabled customer engagement. Making the Marketplace and Workforce Changes Work for You Greenfields and startups saw these opportunities early, but existing insurers are now quickly developing strategies and plans to capture this once-in-a-generation opportunity.  Insurtech has fueled significant investment by venture capitalists, spawning companies like Zenefits, Maxwell Health, ZhongAn, Discovery, Allan, Bright Health and Clover Health.  We now see existing insurers begin to focus on the opportunities, such as MetLife focusing on the SMB market. At the same time, the increased demand for portability of voluntary benefits due to the generational acceptance of frequent job change offers insurers a unique opportunity to cost-effectively capture employees as individual customers and to keep and grow individual relationships (and premiums), rather than losing relationships through attrition. The robust, once-in-a-generation opportunity is seeing insurers of all types developing strategies and plans to capture business, including: --Traditional worksite carriers specializing in supplemental products such as accident, cancer, critical illness, hospital indemnity, voluntary STD, term life, universal life and heart/stroke insurance are expanding their portfolios to include voluntary LTD, gap, dental, whole life or vision products. --True group carriers that historically specialized in group products, including term life, basic AD&D, group STD and LTD, dental and vision are expanding their product portfolios to include accident, critical illness, hospital indemnity and gap insurance. --Medical carriers specializing in major medical coverage have been acquiring supplemental benefit carriers or administrators to expand their portfolio with supplemental products. They may have a competitive advantage because of their ability to harness and analyze extensive medical data. --Finally, we are seeing a range of other carriers including multi-nationals, P&C carriers, retiree market specialists, and others that are entering the market with unique voluntary benefits like pet insurance and legal insurance as well as expanded affinity market programs to capture the opportunity. Underlying each of these is the need to respond with innovative products, plan designs, underwriting and pricing as well as new services, distribution channels and customer engagement approaches enabled by modern digital platforms. Thinking about the best strategic approaches to pursue to maximize the potential of these new products, services and processes will be critical for success.  Several approaches that are gaining traction include: --Product differentiation: Insurers can differentiate themselves in a crowded market by offering a complementary portfolio of unique products, services and benefits. Differentiation may be achieved through value-added services (if exclusivity is achieved), creating an integration model across products, aligning products and benefits with a carrier’s identity, etc. --Adjacent markets: Traditional group carriers are developing individual products to compete in digital, direct-to-consumer markets, and traditional individual carriers are developing group products to compete in the gig economy or growing affinity markets. Carriers operating in the consumer market are expanding into retiree markets, and carriers in the retiree market are moving into consumer markets. --Product bundling: The demand for product bundling, or “combo” products, has recently increased. Sample combo products may include a group hospital indemnity product with accident, critical illness and term life riders or a universal life product with a long-term care rider. While these are just two examples, a large number of product combinations may be considered. In all market segments, and in particular the SMB market, combo products can broaden coverage, increase affordability and reduce or eliminate the need for underwriting by limiting anti-selection. --Rapid product development: We are seeing an increasingly quick pace of product development, which is in stark contrast to the long shelf life of products before the ACA. In addition, carriers in the large market are frequently required to customize benefits and rates for distribution partners as well as employers. Keeping up with this pace requires a nimble technology solution for administration, billing, claims and operations. Carriers that are using newer technologies will have a distinct competitive advantage, especially in the large account and broker markets, as these technologies provide increased flexibility and speed to market. This competitive advantage also applies to the bottom line, as more efficient technologies can eliminate manual processes and reduce expense margins. See also: Value in Informal Employee Networks   --Partnering with emerging technology/insurtech: Insurance markets are being flooded with new insurtech startups. Some of these startups provide products or services that complement employee and voluntary benefit carriers’ value propositions. Existing carriers would be wise to identify the key startup companies in their markets and establish strategic, beneficial partnerships. Reap the Benefits of This Unique Market Opportunity There are a multitude of exciting opportunities for employee and voluntary benefits insurers in this rapidly evolving market. The unprecedented pace of change will drive out old business models and allow new ones to flourish with the introduction of products and the offering of new services, plus interesting mergers and acquisitions such as Aetna and CVS, and the emergence of new business models via insurtech and established insurers. There is no longer a doubt or debate regarding the need to digitalize insurance, but this still continues to be an unpaved path for insurers. Not many understand the best way to achieve it. Insurers are still in the midst of legacy modernization of their core systems for strengthening their back-end processing capabilities, but most realize that these initiatives will fall short without digital transformations that will bring meaningful benefits to customers and ultimately to win them. In this new market, insurers will need a single platform to support individual, group, voluntary benefits and worksite across all lines of business and with a design flexible to adapt to new products, workflows, distribution channels and even devices. The platform will need to enable portability of voluntary benefits to individual policies as well as innovation of products where the same product can be offered as an employer-paid, voluntary or worksite product. Platforms must increasingly make it easy to customize plan options for groups. There are a multitude of potential futures for group, employee and voluntary benefits insurers in an increasingly volatile world. The rapid and unprecedented pace of change will drive out old business models and allow new ones to flourish with the introduction of products and the offering of new services, and much more, from both new insurtech startups and established insurers. At the heart of the disruption is a shift from Insurance 1.0 of the past to Digital Insurance 2.0 of the future. The gap is where innovative insurers are taking advantage of a new generation of buyers, capturing the opportunity to be the next market leaders in the digital age. It is a once-in-a-lifetime opportunity for insurers to redefine the market and competitive landscape in employee and voluntary benefits. Be one of them!

While current market opportunities for insurers – and for insurtechs – require a good product to sell, a large part of the story is about accessing customers via their preferred channels. So the topic of distribution is a natural follow-up to our last post on marketing and customer-centricity. The pre-digital era was characterized by more of a captive, sellers’ market, in which customers had little choice but to seek insurance via their agent of choice, who in turn would funnel work to a small number of large incumbents, generally ignoring new entrants. Over the past years, though, we have seen either the outright emergence or the rapid expansion of a number of non-traditional channels, encompassing direct-to-customer channels offered by insurers, new insurtech propositions, aggregator sites and affinity partnerships with major brands and retailers. So how exactly has this sea change in distribution changed the game for incumbents? Since the start of the internet, the insurance industry has invested in and expanded its digital channels from company websites to comparison sites, aggregators, social media and more – all in an effort to capture new business. At the same time, insurance remains a complex product that is hard to research, buy and use. This is an enormous problem for the insurance industry because every gap and point of complexity is a giant bull’s-eye for alternative channels, insurtechs and new managing general agencies (MGAs).

"Those who can make insurance easier for customers to understand and buy stand a good chance of capturing business from companies whose processes remain complex. In today’s new digital world, it is not about any single channel but rather about a multichannel approach that is based on consumer choice." – Denise Garth, SVP of strategic marketing, industry relations and innovation at Majesco

The emergence of new channels has raised the stakes for incumbent insurers, nimble newcomers and players outside of insurance alike, all of whom have an opportunity to capitalize or, otherwise, get left behind. In this installment, on distribution, we examine:

1. The rise of the digital direct channel
2. The expanding role of affiliate partnerships
3. The importance of cross-channel consistency for insurers
4. Carriers' omnichannel strategies
5. The impact of aggregators
6. How distribution is driving disruption

Our stats and outside perspectives are drawn from our Global Trend Map; a breakdown of all survey respondents, and details of our methodology, are included in the full Trend Map, which you can download for free at any time. 1. Going Direct to Customer 72% of insurers sell to customers directly… We can see that the direct channel has become a totally mainstream concern for insurers. Interestingly – and based on our segmented stats – North America appears to trail on this measure compared with our other regions, in conformity with our prediction from the our last installment, on marketing and customer-centricity: namely that channel disruption is potentially less in North America. The strong showing for direct channels in Asia-Pacific is interesting as, from our broader research with contacts in the region, we know the market there to be heavily intermediated, with a strong reliance on agencies and, in particular, bancassurance. For example, recent research from Swiss Re and LIMRA indicated that the direct channel does not exceed 10% of total share in any APAC national market apart from China. We should bear in mind that our stat indicates the existence of the direct channel rather than its volume. Nevertheless, for a healthy number of APAC insurers to have established a direct channel, despite what remain for now relatively low volumes of business, indicates how strategic this channel is perceived to be. We may remember, as well, from our priority tables, that Asia-Pacific led our other regions on distribution diversification, which adds weight to this trend (see Global Trend Map  No. 3: Priorities).

"The reach of this digital transformation goes way beyond the elimination of 'the middle man' from a distribution point of view. The direct digital channel dominates very few markets and deals only with compulsory insurance. In the vast majority of markets, a multichannel-oriented customer continues — with variations from country to country — to choose at least at some point of the customer journey to interact with an intermediary." – Matteo Carbone, founder and director at Connected Insurance Observatory

While many customers in many circumstances may prefer the direct channel to the agency path, insurers should not necessarily place all their strategic eggs in this one basket. Insurance has always been sold, as they say, and never bought, so any portal for buying insurance, however slick, is at a disadvantage by its very nature. See also: Distribution: About To Get Personal   The way to get insurance products into customers’ hands may, in fact, be to integrate them into other products that are bought, whereby the insurance becomes part of a bundle or an add-on. This philosophy has boosted the popularity of affiliate channels, which, in addition to taking even more friction out of the process, also bypass any issues that may exist with consumer trust, by tying the insurance to a trusted brand that consumers know, respect and perhaps already interact with daily or weekly. 2. Expanding Affiliate Channels 89% of insurer respondents are increasing their distribution through affiliate partners … Current examples of affiliate channels are major retailers, such as Tesco in the U.K. and Falabella in South America, but theoretically the affiliate channel could include just about anything, with the insurer effectively becoming an API that other consumer applications can plug into, like for instance ride-sharing and taxi apps for travel insurance. The scale that incumbent insurers can offer in this channel may put them in good stead against their insurtech competitors; large affiliates can benefit from the brand equity of household-name insurers, and the resultant selling partnership will likely prove more successful for all involved.

"We're looking into partnerships with companies from different sectors: how we can plug in, bringing the insurance dimension and being the insurance carrier, while the partner does all the front-end, customer-facing stuff. And as I like to call it, we're just a third-party API." – João Neiva, head of innovation, IT and business change at Zurich Topas Life

Another important indirect channel – but one on which we have not gathered stats – is bancassurance. While the concept is making headway in emerging markets, it has been out of fashion in Western markets over the past decade. The interest expressed this January by Italian bank Intesa Sanpaolo in a tie-up with Assicurazioni Generali shows the concept is not dead – but this deal was nonetheless scrapped the following month. 3. The Omni-Channel Grail: Consistent Multi-Channel Experiences As of today, many insurers operate both direct-to-customer and affiliate channels alongside their traditional agency channels. Whatever the blend of channels that customers ultimately come through, it is important for insurers to offer a consistent experience across all of them (a consistent experience need not necessarily be an identical one). It’s bad enough if one channel offers a comparatively poor or irregular service, this is then compounded because consumers are increasingly – as in retail and e-commerce – using multiple channels as part of their research and decision-making process, and an inconsistent (or in any way confusing) experience will lead valuable customers to bounce or churn. In certain segments, a majority of customers may well come through a broker/agency channel for the foreseeable future, but it would be unwise to ignore the role of the direct channel in prepping them and to neglect obvious re-engagement points during the process that can recall, reinforce and build on the online experience.

"We believe that this is an opportunity for brokers and intermediaries to innovate and continue to create new sources of value for their B2C and B2B segments. For instance, identifying and carving out new and emerging B2C (micro-insurance, flood, non-standard risks, risk pools/schemes, older generation/retirees) and B2B (IP-based startups, cyber, supply chain, cross-border liability, terrorism) needs and creating innovative channels to access them." – Sam Evans, managing director at Eos Venture Partners

While much of insurers’ backroom tech can be aligned across channels, the face-to-face element in indirect channels can prove more challenging to coordinate, especially as we are here dealing with a multitude of different selling organizations with a multitude of different working cultures. This is not to say that the face-to-face element is a tale of lost opportunities and inefficiencies – if it’s put to work effectively, there’s seldom a better way to create lasting customer engagement and up-selling opportunities. So, Is Your Customer Experience Consistent Across Channels?  Customer experience (CX) professionals in insurance are chasing the same omni-channel grail as their analogues in other digitally disrupted industries, like retail/e-commerce, that is: to ensure that customers enjoy the same product and service experience regardless of which channel they come through. Let’s start by seeing how well Insurers currently perform in this regard: Only 23% of insurers believe their customer experience is consistent across channels … There is clearly still a long way to go before omni-channel is the norm in insurance, and the steady addition of new channels will further complicate matters for insurers chasing channel consistency.

"Insurers’ infrastructure, which has been built over literally hundreds of years, never anticipated having multiple channels of communication to support, so insurers are scrambling to learn how to do that." – Stephen Applebaum, managing partner at Insurance Solutions Group

From our regional segmentation, we can reveal that Asia-Pacific trails our other regions on this measure. This is likely a consequence of the pursuit of new channels in the region (as we noted with the prevalence of the direct-to-customer channel): It is more difficult to maintain consistency across a multitude of emerging channels than across a core of traditional ones. 4. Do You Have an Omni-Channel Strategy? The creation of an explicit omni-channel strategy is the first step of many toward being able to offer a consistent customer experience (CX) across channels. 62% of insurers have an omni-channel strategy… It is encouraging to see that the majority of insurers do have formal omni-channel strategies, and this should go a long way toward raising the low percentage of insurers currently able to offer a consistent customer experience across channels. It will likely be a number of years before today's omni-channel strategies yield concrete results, and, as we pointed out, the continuing complication of the distribution landscape through the addition of new channels will mean insurers must run just to stay where they are.

"Most insurers are still focused on e-commerce, but the leaders are developing longer-lasting relationships by using their digital capabilities to gain enhanced customer knowledge and harnessing that information to profile customers more effectively, fine-tune underwriting and deliver customized solutions." – Michael Quindazzi, business development leader and management consultant at PwC

5. Attack of the Aggregators! Our final question on distribution relates to the role of aggregators like U.K.-based comparethemarket.com, U.S.-based comparenow.com and Singapore-based GoBear. These have burgeoned since the millennium, inserting an extra distributional step between insurers and their prospective clients, and have had a major impact on the market (just like comparison sites in other industries) both in terms of the overall business model and from a branding and customer-relationship perspective. By allowing, and encouraging, customers to pit insurers against each other on a price-by-price basis, these sites have further commoditized insurance lines and driven down premium prices and margins.

"The process of buying insurance can be simple – go online, compare the relevant information, select an insurer and pay. But three days later you get a 22-page printed policy at home, written by a lawyer. As a layman, you’re totally lost. What customers really want are simpler and easy-to-understand products so that they regain trust in this industry. Get that trust, and it will drive revenues." – Andre Hesselink, CEO at GoBear

Due to a variety of factors, including marketing budgets and regulation, the effects of aggregators are neither uniform across lines nor across geographies. For example, according to a recent survey of consumers by consultancy Finaccord, more than 40% of respondents in the U.K. had taken out car insurance via an aggregator, compared with only 5% in the U.S. and Canada. The impact of aggregators can be felt across the whole ecosystem, so we asked all our respondents to specify how big an impact they are having on their organizations. Overall, 14% indicated a large impact, 29% a medium one, 37% a small one and 20% none at all. As we can see from the infographic above, a relatively small proportion of the ecosystem is heavily affected, although the impact is being widely felt (more than three quarters of respondents citing some impact). See also: Taking the ‘I’ Out of Insurance Distribution   From our regional segmentation, we can reveal that Asia-Pacific trails on this measure. As we have pointed out, while many insurers there do have digital channels, the overall volume of business being done this way is still quite low – and this potentially explains the lower regional score. However, as insurers in the region actively build and promote their direct capabilities, we expect aggregator impact there to quickly catch up. 6. Distribution: The Fulcrum of Market Disruption? We suggested in our previous post on marketing and customer-centricity that changes to distribution are what fundamentally lies behind today's changing customer expectations and behaviors (specifically the internet and the rise of digital for everything from research to commerce).

"The most important driver of success for insurtech start-ups has been distribution. Distribution in insurance (more specifically in personal lines, but increasingly so in commercial lines) is getting disintermediated as data becomes increasingly transparent between the buyer and seller." – Sam Evans, managing director at Eos Venture Partners

As a result, we predicted that traditional channels might be marginally more intact in North America than elsewhere – as an explanation for this region's marginally lesser prioritization of the customer (as we saw from our priority tables in Global Trend Map No. 3: Priorities). Our reasoning: If new channels are the fundamental enablers of disruption, the more stable the traditional channels are, the less disruption insurers will face and therefore the less forcefully they will have to prioritize the customer. So, what do our regional stats on distribution reveal? ... We noted that the direct-to-customer channel is less prevalent in North America than elsewhere, so it would indeed appear that traditional distribution is – marginally – more intact here. This strength of traditional channels translates into lower levels of lost business for North American carriers. Indeed, in our earlier post on insurtech – Global Trend Map No. 2: Insurtech  – where we introduced the "disruption score," only a quarter of insurers and reinsurers in North America reported losing market share to new entrants (versus 47% in Asia-Pacific). The model we are applying is one in which distribution disruption leads to customer disruption and thereby to a complete re-evaluation of the customer relationship. So, what can this tell us about Europe and Asia-Pacific? Let us start with Asia-Pacific: On the distribution level, we encounter a high incidence of direct channels, low channel consistency and a high priority allocated to distribution diversification (as we saw from our priority tables in Global Trend Map  No. 3: Priorities). And following this through, we find a corresponding degree of disruption on the customer level, with APAC respondents scoring high on measures of customer priority (as we saw in the previous section on marketing and customer-centricity). It is clear, therefore, that APAC insurers know they are in trouble and that they are trying to meet the 21st-century consumer head-on. This is very much in line with our disruption score for the region, whereby 47% of in Asia-Pacific stated that they were losing market share to new entrants, a high score in which fear may well play a considerable role. Europe is an interesting case. In terms of distribution, we note solid adoption of direct-to-customer channels, and the continent has in many ways been a pioneer in its use of affiliate channels and aggregators (we explore these themes in more depth in our regional profile on Europe – read ahead here). The customer relationship here (along with Asia-Pacific) is marginally more problematic than in North America, based on the forceful prioritization of the customer we found here. Does this mean that Europe finds itself in the relatively more disrupted camp, along with Asia-Pacific? Not necessarily. We cannot help but notice Europe’s low disruption score of 23% (much lower than Asia-Pacific's, in line with North America), meaning that, at least in carriers' perceptions, relatively little market share is currently being lost. One way to square this with our foregoing observations on the distribution and customer situation in Europe would be if European insurers were rising better to the challenge of serving customers across a complex distribution landscape than their counterparts in Asia-Pacific are. This would imply that Europe is perhaps slightly ahead of the curve and has had some time to adjust. In line with this hypothesis is the low prominence of the chief customer officer role among recent or forthcoming appointments at European insurers (contrasting with its importance in Asia-Pacific). Our inference from this is not that customer-related roles do not exist in Europe (after all, Europe allocated the highest overall priority to customer-centricity out of all our regions) but rather that they are not of such recent creation. So, we can tentatively conclude that, while Europe and Asia-Pacific are both undergoing distribution- and customer-driven disruption, Europe has entered deeper into this. There is, as such, no wholesale panic regarding lost market share through new entrants. In this sense, Europe would be not so much the most disrupted as the longest-disrupted of our key regions. It will be interesting to observe how the sense of disruption in Europe, North America and Asia-Pacific waxes and wanes as the market develops. The characterization we have attempted here is based on fine gradations, and, with the global market fluctuating as it is, there is no reason to believe development in any region will be linear. We return to these issues – and to the perennial question of disruption – in the regional profiles section with which we close the report (read ahead here).

"Technology is changing more rapidly today than ever, which is changing the nature of risk. The distribution of insurance products and services is poised for rapid change. Agents and brokers will have a role to play as the distribution model changes. Those agents and brokers that are willing to adapt will thrive, those that rely on the old methods will continue to be successful until they wake up one day and they are not." – Steve Anderson, president at the Anderson Network

As insurers around the world pursue customers, we are left with the question of the brokers and agents who hitherto have been the face of the insurance industry. Intermediaries still hold the cards in many customer segments and business lines – especially for complex, high-value products in life and commercial – and can play an important role more broadly as part of the omni-channel mix. And, before we write them off too hastily, we should remember one thing: Although intermediaries no longer own distribution in the strictest sense, it is debatable whether carriers will want to take all aspects of customer-servicing in house just because they can.

"Chatbots and guided conversations – in the not-too-distant future – will significantly change the role of agents and brokers when providing insurance knowledge and resources to policyholders. Expert advice will still be needed, but chatbots and guided conversations will provide much of the basic information to the digital-savvy consumer anytime and anywhere." – Steve Anderson

For insurance players big and small, distribution is the key to getting in front of today's customers, in the sense either of tapping totally new segments or of fighting off competitors' threats to the existing book. However, if you cannot follow up on your promises across the customer life-cycle, then all that top-of-funnel work will have been in vain.  

OK, this time I’m not the one causing the kerfuffle in the wellness industry, though I will confess to being a force multiplier. Not since 2014, when the very unstable morons at the Incidental Economist made fun of the very stable geniuses who give out the Koop Award and also unequivocally concluded that wellness loses money — combined with continued fallout from the Penn State debacle and the Nebraska scandal — has the wellness industry had such a bad year. And it’s only February. Let’s review what’s happened so far in 2018. First, a federal judge ruled that voluntary wellness programs need to be — get ready — voluntary. The EEOC’s responded with the legalese equivalent of:  “Fine, be that way.” Next, Willis Towers Watson did something that might get them in hot water with the very stable wellness industry leaders: They were honest. They published a study revealing that employees hate wellness even more — way more — than they hate waiting for the cable guy to show up. Finally, the very unstable National Bureau of Economic Research conducted a controlled study finding basically no impact whatsoever from a wellness program. More importantly, they specifically invalidated the “pre-post” methodology. Even more importantly, they specifically invalidated 78% of the studies used in Kate Baicker’s “Harvard Study” meta-analysis. Here is an interesting piece of trivia: The lead researcher is an assistant professor at the Harris School of Public Policy. Why is this interesting? Because Katherine Baicker — the Typhoid Mary of wellness, whose THC-infused study claiming a 3.27-to-1 ROI for every dollar invested in wellness is the basis for essentially every subsequent genius wellness outcomes claim — is now the dean of that very same Harris School. I’m just guessing here, but I’d say it’s gotta be a trifle embarrassing when your own subordinate publicly disproves your own study. I mean, it’s one thing for me, RAND, Bloomberg and anyone else with five minutes, internet access and a calculator to do it, but…your very subordinate? See also: The Wellness Industry Pleads the Fifth   On the other hand, the researcher, Damon Jones, just demonstrated not just amazing competence but amazing integrity, as well. In other words, he has no future in wellness. The Wellness Empire Strikes Back How does the wellness industry respond to these smoking guns threatening their entire revenue stream? Apparently, there is little cause for concern on their planet. Let’s start with America’s Health Insurance Plans (AHIP), the health insurance industry lobbying group. Here is AHIP’s oxymoronic Wellness Smartbrief (Jan. 26) on the NBER research. Yes, it summarizes the same wellness-emasculating study as the one above, though you could never guess it from the headline: Healthier employees participate more in wellness programs but still save money Continuing, AHIP said: Offering incentives for completing wellness activities might be more cost-effective than offering incentives for wellness screening, a recent study of a comprehensive program found.  Perhaps AHIP has been infiltrated by Russian trolls, because here’s what the NBER article actually said about “completing wellness activities”: We…do not find any effect of treatment on the number of visits to campus gym facilities or on the probability of participating in a popular annual community running event, two health behaviors that are relatively simple for a motivated employee to change over the course of one year. AHIP continues: Wellness programs might attract mostly employees who are already fitness-conscious, but the potential to attract healthy employees whose medical spending is already low could nonetheless be a boon to employers, the researchers found. And on the subject of “the potential to attract healthy employees” as being a “boon to employers,” the authors actually said: We further find that selection into wellness programs is associated with both lower average spending and healthier behaviors prior to the beginning of the study. Thus, one motivation for a firm to adopt a wellness program is its potential to screen for workers with low medical spending. Considering only health care costs, reducing the share of non-participating (high-spending) employees by just 4.5 percentage points would suffice to cover the costs of our wellness program intervention. In other words, you can apply some workplace eugenics to your company by using wellness to weed out obese employees, employees with chronic or congenital diseases and so on. Good for you! Soon, if AHIP and others have their way, there will be no need for guesswork in eugenics: Employer wellness programs will be able to screen these employees out based on their actual DNA. AHIP’s take on AARP v. EEOC And now, AHIP’s take on this landmark case, their ace reporters scooping everyone with this Feb. 2 headline on the Dec. 20 court ruling: Employers may have to tweak wellness programs after court ruling Here are more typical headlines on that court ruling, headlines that came out the same month that the court ruling came out. Perhaps AHIP used the interim six weeks to use focus groups to test various verbs until they settled on…tweak??? AHIP:  It’s not just the headlines One prominent healthcare executive recently attended an AHIP conference and reports: I just returned from one of the dumbest meetings I’ve ever attended in Washington. Report of a new “study” by AHIP. Turns out people don’t mind health costs all that much, they just want more benefits. And everything is hunky-dory with their health plans, people like them so much. They love wellness benefits and crave more. Prescription drug prices have been nicely controlled thanks to the competitive marketplace (no, I am not making this up or exaggerating for drama). For every $1 employers spend on benefits workers get $4 in value. Priorities for SHRM rep: Fitbits for all employees, solving the outrage that only 20% of her employees got an annual physical. 85 cents of every dollar spent on healthcare goes to chronic disease. Over these same two hours, I’d estimate about a thousand employees were misinformed, harmed or harassed by wellness vendors, roughly equal numbers of  employees got useless annual checkups, employers spent about $200 million on healthcare and 40 people died in hospitals from preventable errors. But I’m being such a Debbie Downer! I’m going home to read Why Nobody Believes the Numbers to remove myself from this alternative universe. Enter the Health Enhancement Research Organization (HERO) HERO’s Prevaricator-in-Chief, Paul Terry, is demonstrating his usual leadership abilities in this crisis, of course. After all, HERO is the wellness industry trade association, and these three items — the NBER invalidating their product, employees hating their product and a federal judge forbidding them to force employees to use their product — represent existential threats to his “pry, poke and prod” members. Here is quite literally his only blog post on any of these three items: Teddy Roosevelt said, “complaining about a problem without posing a solution is called whining.” It’s a quote that also reminds me why I’ve not thought of angry bloggers who target health promotion [vendors] as bullies. Though they relish trolling for bad apples, their scolding is toothless, more the stuff of chronic whiners. I suspect he is talking about me here as the “chronic whiner” who is  “scolding” them. Or perhaps he is referring to the “angry bloggers” at  the Los Angeles Times, the New York Times, Slate or STATNews, because those “toothless” publications seem to be scolding wellness vendors more than I ever have. For instance, I’ve never called wellness vendors’ offering a “scam” or a “sham.” I simply quote these very stable wellness geniuses verbatim, as above or below, or last week. See also: Wellness: An Industry Conceived in Lies, Retractions and Hypocrisy   Being quoted verbatim, not angry bloggers, is their worst nightmare. (One thing I would concede, though, is that “Paul Terry and the Angry Bloggers” would be a great name for a rock band.) Yep, looks like the implosion of his industry is all my fault. Otherwise, I’m not quite sure who is the “angry blogger” he is referring to, other than to note that Mr. Terry himself seems to blog a tad angrily himself, both above, and here… Why I choose to ignore the blogger critics: We’re fortunate to work in a profession with a scant number of vociferous critics. My take is that there is one thing these few angry loners [Editor’s note: the complete “scant list” of the 220 “few angry loners” who have been “vociferous critics” can be found here] want more desperately than attention: that’s to be taken seriously. What they fail to comprehend is that as they’ve gotten ever more farfetched and vitriolic in search of the former, they’ve cinched their inability to attain the latter. Baiting people with misinformation and offensive insults (but just a tad under highly offensive) is a pesky ploy that trolls hope will eventually land a bite that confers credibility where there is none. Even reading such drivel is a form of taking the bait; responding is swallowing it whole. Some say dishonesty should not go unchallenged and I respect their view; nevertheless, I’m convinced responding to bloggers who show disdain for our field is an utter waste of time. I’ve rarely been persuaded to respond to bloggers, and each time I did it affirmed my worry that, more than a waste, it’s counter-productive. …and especially here, a seemingly incongruous decision to “act out” by someone who claims to be “choosing to ignore the blogger critics.” Having read years of my “drivel” alongside Mr. Terry’s posting explaining why you shouldn’t “swallow this bait,” perhaps readers might opine here: Which of us, exactly, is the “chronic whiner”? Coincidentally, when I run live health-and-wellness trivia contests, the first of our three rules is: No Whining. Seems to me that he would have just violated it. Indeed the only rule HERO hasn’t violated so far is #3 below. Not that I want to put ideas in their head.