I kicked off this series by detailing my argument for why physician quality is the single most important aspect of a claim — efficient and effective care is far more impactful than discounted care. Now, I want to expand on this idea by delving further into the relationship between the preferred provider network (PPO) and the exclusive provider network (EPO). First, let’s understand what is meant by EPO. The narrow definition of the term is a network that is the exclusive option for providers. In workers’ compensation, it most accurately describes programs like the MPN in California, the HCN in Texas or the PPP in Illinois. These are all examples of models where the insurer or employer can define an exclusive list of providers from which an injured worker must choose their doctors. In a broader sense, I think of the EPO as the listing of doctors and ancillary providers that are going to be included in elite programs. This includes the list of doctors you would want to use every time you create a workplace poster or the list of doctors used in any channeling program like initial triage. Think of it as the doctors you want to use any time you have the opportunity to either direct, contain or influence selection of a provider. Ideally, the goal of an EPO should be selecting the best available providers to drive improvements in outcomes. And improved outcomes should be at the heart of the relationship between PPO and EPO. Over the past decade, outcomes-based networks have become a well-adopted and proven model for dramatically improving a claim population’s overall costs, lost time and litigation, but many organizations struggle with the roll of PPOs in this model. They are also curious as to how to leverage the best of both worlds — PPO and EPO — to drive better outcomes and better pricing moving forward. Separating “Who” and “How” The idea of using both PPOs and EPOs to improve outcomes has been somewhat confounding to date. As discussed in Part One of this series, the primary goal of the PPO is to contract with as many providers as possible to drive the best purchase prices for medical and ancillary services. In the absence of any controls over care, the PPO serves its customers best by including poor-performing doctors, courtesy of more available discounts. With controls (and strategies to leverage those controls) for outcomes in place, however, the game changes, and the roll of the PPO needs to be reconsidered. See also: Why So Soft on Workers Comp Fraud?   In this environment, PPOs and EPOs coexist in an important balance. The EPO needs to determine “who” to work with, and the PPO provides the mechanism for “how” you work with them. Consider the following table: Hopefully, it quickly becomes clear that the “best of both worlds” model is not only achievable but also makes things like vendor selection and program management easier. Under this framework, the value proposition and role of the PPO is clarified: The PPO is the source of doctors who have been properly vetted through credentialing practices and contracted to provide care, typically at a favorable price. This function could be offloaded to your bill review vendor if it is positioned to resell networks, or you can take on the task of deciding which combination of PPOs gives you the best bench to select doctors from in each jurisdiction. On a case-by-case basis, you may find barriers with a certain jurisdiction or PPO vendor, so some research may be necessary to determine how to manage selecting a subset of providers from a list of preferred providers. Once you’ve built your bench of “available” doctors, the next step is to select the doctors that are going to be invited into the elite program, or EPO. The most effective method for selecting doctors for an EPO is outcomes-based. Depending on the program, it may be necessary to have processes and documentation for decisions related to the inclusion or removal of doctors from your elite programs. This is more important in situations where the decision to exclude a provider will prevent them from being able to treat your injured workers. Think MPN exclusion. It’s not really an issue when you are just selecting three doctors to be on a workplace poster. The core message is: Think differently about the purpose of your PPOs; they have a specific value proposition when you are working with an EPO strategy. Use the PPO to build your bench of available doctors, and use your EPO to decide which doctors are the ones you want your injured workers to use. See also: Healthcare’s Lessons for Workers’ Comp   The age of accountable care is upon us — in both comp and group health. Data science and access to big data has enabled a level of accountability that did not exist a decade ago. If you do not have a strategy for using quality as a primary factor in determining who should be seeing your injured workers, you are missing the boat. Having a framework for how to separate who you work with (EPO) from how you work with them (PPO) helps get you started on the path to an outcomes program or provides an easier perspective for how you manage and improve an existing program over time. Next Steps Once you have your framework in place, you need to determine the right balance of quality and quantity. To do this, quantify the difference between good and bad doctors. There are a lot of tools available to help you do this. Then, determine how many doctors you need of each type in a given geography to fully service workers. Next, eliminate those doctors whose outcomes don’t make the cut from your network. As long as you have enough good doctors available who can also provide a discount, there is zero benefit to having a deep bench. Once you make smart cuts, emphasizing quality over quantity, watch your savings and worker satisfaction with their care dramatically improve. Next up: outcomes strategies for each type of jurisdiction. In Part Three of this series, I will dive into three types of jurisdictional models and look at the differences between states. Stay tuned! This article was first published in Claims Journal.

The marriage of “insurance” and “technology” — “insurtech” — continues to attract investment among P&C insurers, and startups specializing in insurance technology products are popping up all over. In fact, investment in insurtech reached $853 million in the first quarter of 2017 — a 50% increase over the same period in 2016. While, to date, most insurtech products have focused on the distribution and sale of insurance, there is great opportunity for new insurtech innovations to offer superior customer service, which translates to loyal customers — the brass ring in a highly commoditized market. Insurtech enables fast and personalized experience, any time and anywhere Customers want to know that they will be looked after if any issues arise — even after a policy purchase. This means succeeding at a full range of customer interactions and touchpoints, from addressing customer questions about their bills, to working with a customer during the claims process. Customers expect these interactions to be personalized, fast, efficient and on their own terms. At the same time, insurers are looking to automate some processes, thereby increasing time savings and freeing employees to focus on more complex activities. Altogether, this is why technologies like artificial intelligence and chatbots have found a following in insurance. See also: Insurtech: An Adventure or a Quest?   Artificial intelligence, for example, enables personalized customer service from the initial interaction to processing a claim — often without any human interference at all. Artificial intelligence can analyze a customer’s profile and recommend insurance products best-suited for the customer. And, by removing human intervention, the potential for error decreases. Chatbots, too, are gaining favor for their ability to do things like schedule an appointment or process a payment, any time and anywhere. Whatever a chatbot can’t help with can be elevated to a human, but just eliminating these types of simple tasks from employees’ to-do lists can be a boon to their productivity. Industry is evolving To be sure, traditional insurers are embracing insurtech to augment and improve their customer service. Insurtech distributors, too, are realizing the need to evolve and offer more than just great purchase experiences. In personal lines insurance, for example, distributors understand they must provide more than a great buying experience, so they are becoming insurers as a way to better control the customer experience. Metromile, for example, which became an insurer in 2016, recently launched a new automated claims service, which enables a more seamless claims experience. Now, Metromile more easily assesses whether a claim can be quickly processed and paid. Improving customer service can be daunting, especially for traditional insurers that sell multiple products in various customer segments through a variety of channels. In a highly commoditized market, however, the customer experience is the all-important differentiator. By investing in insurtech innovations, insurers will find they have a leg up on the competition and will reap the rewards of satisfied, loyal customers.

So why don’t most Enterprise Risk Management system work?  Simply, they don’t “manage” risk, they just record it.  Manage is a verb not a noun. It is activity not an item.  Making a list might be adequate for those who want to check off regulatory compliance, but it’s does not produce a ROI. They don’t manage threats To manage threats you need to actively monitor risk drivers and influences thru lead and lag KRIs in real time.  Reporting systems aren’t much use if they’re telling you after the event. By the time it shows up on a heat map it’s not a risk, it’s an incident.  Simply moving your risk management from spreadsheets to a cloud risk register does nothing to pursue an active defence against threats. To create a workable system, you need to take your risk registers, work out what causes those risks to worsen (drivers and influences), and what lead/lag KRI to use to monitor the movement of those drivers and influences.  You then need to set up a real-time system for collecting those KRIs and alerting the appropriate people who can act on the threats immediately. They don’t tell you HOW it will affect Objectives The common practice of recording what objectives might be affected by a risk does nothing to assist in achieving or optimizing those objectives.  The real purpose of risk management is to navigate the myriad of influences on the objective’s outcome as they occur, i.e. it is an interactive real-time activity. Risk Management’s primary purpose in the strategic and tactical planning phase is to identify the best course to market and thereby optimize resources (time and capital).  This requires specifying HOW risks and actions interrelate and compound effect on one another.  This highlights two things.  For ERM to work it must integrate both risk and actions, and it must know HOW variations in either compound effect. Once these are in place they can easily be used to monitor progress in achieving objectives. Workflows and Issue reporting become inputs to risk drivers and influences which in turn automatically update risks. With a real-time aggregation of risks (roll-up), alerts can be sent to interested parties when the risk threshold of any objective is threatened. See also: The Current State of Risk Management   They don’t improve the quality of decision making By definition complex systems (the business world) are chaotic (see Chaos Theory), where small variations alter outcomes, like the weather and the winner of the Melbourne Cup.  But risk management was never about predicting the future. It’s about providing advice on the effects of possible decision outcomes and being prepare for any adverse effects. But here’s the real rub.  For ERM to be useful it has to employ Predictive Analytics and machine intelligence.  In my defence, Predictive Analytics doesn’t actually predict the future, it just highlights obscure facts. It provides true decision making collateral on possible opportunities and threats in any scenario, from which “informed decisions” can be made, instead of “gut feel” guesses.  It helps mitigate decision bias and raise ramifications sometimes overlooked in the heat of a problem. Obviously many ERM systems have numerous other failing, such as a single hierarchy for aggregating or “rolling-up” risks (wouldn’t it be nice if the world was that simple), and not including Incident Management in ERM to create a closed feedback loop, which drives evolution and effectiveness.  But the single most important thing is to use your risk collateral as part of the day-to-day operational decision making and not to just let it stagnate in risk registers being reviewed annually.

Q: Some American pharmaceutical companies are well-known for pricing drugs at whatever the market will bear. In oncology, some specialty drugs seem to have price tags completely unrelated to the proven effectiveness of the drug. Your company has been taking a lead in confronting this problem. What do you envision as possible solutions? A: New oncology therapies carry astronomical price tags—most people know this. Receiving far less attention is the question of actual therapeutic value. Drug manufacturers spend billions on advertisements and PR, but unfortunately, real-world patient results are frequently unimpressive. Two recent articles in BMJ make this point, 1) No evidence of benefits for popular oncology therapies and 2) Do cancer drugs improve survival or quality of life? Why do high-cost oncology therapies with questionable results continue to be prescribed? Let’s examine a situation my company is dealing with right now. VIVIO Health received a request for neratinib, an FDA-approved extended adjuvant therapy for early-stage HER2 positive breast cancer. Our system analyzed all available performance data from sources such as the FDA, ICER and NICE. The drug approval was based on a newly created surrogate endpoint called invasive Disease-Free Survival (iDFS), which only scored 94.2% vs. 91.9% in the placebo arm. Even worse, 29% of the patients dropped out of the trial due to adverse side effects, 16.8% for diarrhea alone. Not surprisingly, the FDA committee patient representatives voted against approval. See also: 'High-Performance’ Health Innovators   Neratinib’s manufacturer PUMA Biotechnologies provided data on the current standard of care, trastuzumab, showing a disease-free survival (DFS) rate of 89%. Interestingly, the use of iDFS as an endpoint led to an increase in the placebo arm of ~3%, which is larger than the neratinib-to-placebo arm difference of ~2%. Ultimately the creation of a new endpoint made a larger impact than the therapy itself. The trial design itself had been altered so many times; the FDA suspected the trial had been "unblinded" and attempted to determine statistically whether unblinding had occurred. Even with these highly questionable results, the FDA approved neratinib in July. After being shown the questionable data and asked, “Why neratinib?” the requesting oncologist explained that it’s an FDA-approved drug and that “MD Anderson is giving it to everyone.” Granted it’s hard, but physicians should have the courage to do the right thing. In the context of high-dollar, high-tech therapies and billion-dollar windfalls for pharma execs like Puma CEO Alan Auerbach, physicians must be America’s frontline ensuring that only the right therapies get to the right patients. Using neratinib as an example, here are seven steps every physician should consider before prescribing oncology therapies:

1. Police endpoint games. Don’t allow drug companies to define arbitrary and meaningless endpoints for your patients. Prescribe medications with objective data on meaningful endpoints such as life expectancy. Anything less should be considered experimental at best, and pharma should pay for that.
2. Do the math. In the case of neratinib, a 2% probability of potential benefit means that for every two patients who might be helped, 98 are subjected to real side effects or other harm. In the neratinib trial, this equates to the "lucky" 33 out of 1,420 total patients, which is quite a needle in the haystack.
3. Consider the actual cost. Spending $5 million per patient "helped" with such uncertain outcomes makes no sense.
4. Consider societal opportunity cost. Spending money on therapies that don’t work diverts dollars away from developing therapies that do.
5. Stop listening to key opinion leaders (KOL). Dig deeper and make your own decision. A KOL’s opinion isn’t data and is too often wrought with conflict.
6. Require companion tests. Don’t prescribe low-probability therapies without some form of a companion diagnostic and insist that the drug company provide it for you.
7. Prescribe therapies as if you’re the patient and you’re spending your own money.

See also: U.S. Healthcare: No Simple Insurtech Fix   Physicians, you hold the key to changing the cost curve for ineffective therapies. Drug companies will get the message when you refuse to prescribe treatments that don’t work and cost too much.

Many insurers — especially regional players with deep ties to their local community — stress that customer service is a key differentiator for their business. Novarica’s position has always been that customer service and technology are not tangential, but rather they are one and the same: having quick access to agent and policyholder data, quoting and binding in real-time, and generating recommended contact opportunities are examples of the kinds of technology-enabled capabilities that take customer service to the next level. But key to providing great customer service is recognizing how customer expectations have changed in the last decade. Insurers must be ready to engage with consumers when and how they want across multiple channels for engagement. This has put considerable pressure on the insurance industry to figure out how to model themselves after other tech-driven industries in an affordable and scalable way. In the last year, chatbots have emerged as a viable option due to their ability to enable rapid customer service across a variety of low-touch applications 24/7. Moreover, chatbots are able to provide an added layer of support and consumer engagement without the need for additional staffing, freeing up human resources for higher-level tasks. See also: Chatbots and the Future of Interaction   Insurance use cases for chatbots include first notice of loss (FNOL), claims self-service, customer policy applications, policy endorsements and support, and agent interaction. These are great opportunities, not to replace other modes of interaction, but to supplement them for off-hours or for consumers who prefer a chat over a phone call. But chatbots are only as useful as the existing back-end functionality that supports them, and insurers can’t slap a chatbot interaction into their website or mobile app if they don’t also enable their core systems to provide real-time status updates or quotes via a web service. Just because a chatbot understands a user’s question doesn’t mean it can respond if the information isn’t available via machine, and an unsatisfying chatbot interaction is worse than none at all. The quick evolution of chatbot technology is a great option for a new channel, but it doesn’t let insurers off the hook to modernize and service-enable their entire infrastructure. Moreover, as discussed in a recent blog post on Progressive’s new chatbot, Flo, insurers need to understand appropriate use cases for chatbots: while some self-service functions are ripe for chatbot usage, others may require empathy that an algorithm can’t provide. The submission of a claim is often triggered by a traumatic life event for the consumer, such as a car crash or illness, instances calling for a human touch. For this reason, it is unlikely chatbots can completely replace human agents capable of offering empathy and reassurance to their customers during heightened emotional crises. As with any emerging technology, insurers should have specific, targeted use cases in mind for their initial implementations. Even if the end goal is to have chatbots available across all modes of support and service, such strategic projects start best with tactical investments. For more on this, see my recent brief, Chatbots in Insurance: Overview and Prominent Providers.

I'm going to borrow the approach taken by Chuck Schramm, a Chicago-area insurance agent with more than 50 years of industry experience and one of the premier insurance educators in the country. He has done a series of seminars that examine a single policy (commercial property, business auto, CGL, etc.) by providing several case study-based claim scenarios. Participants must determine for each claim whether the policy covers the damages and why or why not. It’s a wonderful way to learn HOW to read, understand and APPLY policy language to coverage and claim situations. Many insurtech startups and online comparative quoting systems take the position that auto insurance is little more than a commodity distinguished almost solely by price, that insurance buyers do not need professional representation by insurance agents nor advocacy at claim time because the product and process are so simple and there’s so much information available on the internet. Let’s dispel that ludicrous assertion with the following scenario…. Bubba owns a car insured in his name with the State Insurance Company. His wife, Bubbles, owns a car insured in her name with the National Insurance Company. Their adult daughter, Bubbette, and her six children live with Bubba and Bubbles, and Bubbette owns a car insured in her name with the ARP Insurance Company. All three insurers use the 2005 ISO PAP. See also: Geospatial Data: New Key on Auto   Using the ISO policy, determine who is covered for liability by what policy in the following claim scenarios AND why or why not are they covered. In other words, in each scenario, are the parties insureds under the policy, and, if so, does a liability exclusion apply? Claim #1:  One afternoon, Bubba drove Bubble’s car to the liquor store, ran a stop sign and had an at-fault accident. Bubble’s PAP   __ does   __ does not   cover Bubbles. Bubble’s PAP  __ does   __ does not   cover Bubba. Bubba’s PAP  __ does   __ does not   cover Bubba. Bubba’s PAP  __ does   __ does not   cover Bubbles. Claim #2:  That evening, Bubba drove Bubbette’s car to a local tavern and had another at-fault accident while returning home at dawn the next morning. Bubbette’s PAP  __ does   __ does not   cover Bubbette. Bubbettes’s PAP  __ does   __ does not   cover Bubba. Bubba’s PAP  __ does   __ does not   cover Bubba. Bubba’s PAP  __ does   __ does not   cover Bubbette. Claim #3:  Upon his arrival at home, Bubba and Bubbles separate, and Bubbles moves in with her mother that afternoon. That evening, Bubba asked Bubbles if he could borrow her now-repaired car again to take his new girlfriend to visit her mother and had yet another at-fault accident. Bubble’s PAP  __ does   __ does not   cover Bubbles. Bubble’s PAP  __ does   __ does not   cover Bubba. Bubba’s PAP  __ does   __ does not   cover Bubba. Bubba’s PAP  __ does   __ does not   cover Bubbles. I’ll post the answers within the next week, so make a note to check back later. If you simply can’t wait because you’re just too darned excited that you know the answers, feel free to email them to me, and I’ll respond. See also: Auto Claims: Future May Belong to Bots   If you find this kind of exercise valuable, let me know, and I’ll do others. Another one I have in mind for the PAP involves three people – Moe, Larry and Curly – two of them with PAPs and all involved in the rental of a car.

The insurance industry has been talking about technological evolution for a long time. From the rise of insurtechs to implementing tools like client portals and e-signature, the need for digital transformation has been top-of-mind for all insurance professionals. But in 2018, the barriers have been removed, and this talk will finally evolve into significant action. The combination of competitive conditions, availability of cost-effective technology and numbers of independent agents striving for growth and better service creates the perfect storm to drive agent digital transformation. While embracing digital is integral to competing in the market, consumers still heavily rely on the human, one-on-one service that only agents are able to provide. Great customer service is foundational for all agents. Providing the ideal mix of technology solutions and personal interaction should be at the center of an agency’s planning process as it prepares to meet customer demands and increase growth and retention. See also: Insurtechs: 10 Super Agents, Power Brokers   As the year comes to a close, we analyzed current trends and patterns in the insurance industry and developed five predictions for independent agents in 2018: 1. All about the infrastructure: Insureds expect on-demand service. They want their agencies to be always-on and to be able to conduct insurance business whenever and wherever they like. Agencies need systems and processes that can efficiently handle their workload. They have to have strong and flexible digital infrastructure to grow and expand. This includes interactive websites with online chat and quoting capabilities, client portals and mobile apps, next-generation agency management systems and integrated call centers for 24/7 service. In the new year, agents will be evaluating their infrastructures and expanding capabilities and services for clients. 2. Move from closed loop to open access: Agents operate in many environments. They regularly visit multiple carrier websites, manage their workload in their agency management system and pursue prospects who are gathered in their customer relationship management system. Most of these applications are closed, meaning that information put into one system won’t automatically populate into another system. This forces agents to spend time on manual workarounds and double data entry. Agents will seek to partner with companies and implement tools that can bridge the gap between various systems and choose applications that are built on open structures, meaning they “talk” to one another. 3. Pursuit of the paperless agency: E-signature is nothing new, it has been around the industry for 20 years. However, many agents still don’t use it. But in 2018, a large number of agencies will take the plunge and finally implement e-signature and other e-document tools. With a desire to not only be more efficient but also to improve the sustainability of their operation, more agencies will shift to an all-digital mentality when it comes to sending, receiving and signing documents. But this can’t be done in a vacuum. Agencies will also collaborate with carriers and be informed by regulators to help make the shift to all-digital documentation. 4. Synergistic partnerships increasing access to sales analytics: The carrier/agent partnership is about to go beyond a provider/seller framework. Agents and carriers both have access to unique information that, when shared, can help both organizations grow. Agents gather sales data such as target market behaviors, web preferences and specific product interest that can help carriers improve sales and marketing efforts. Meanwhile, carriers have the technological infrastructure and expertise enabling them to provide education, training and best-practice programs that can help agencies improve their digital capabilities. These two entities will develop stronger partnerships that will enable both of them to improve sales. 5. Agents embrace artificial intelligence (AI): For agents who are still trying to find ways to implement interactive websites, e-signature, or client portals, technologies such as machine learning, robotics and artificial intelligence seem way outside of their current capabilities. But these tools are beginning to become more commonplace, and agents will appreciate their ease and benefits and might even realize they have already been using some sort of AI. From automatic fill on certain forms to using machine learning to move key prospects to the top of the workflow to installing chatbots on websites that can resolve claims and answer clients’ simple questions, agencies will convert from trepidation to the implementation of AI that will drive key processes. See also: Chatbots and Agents: The Dynamic Duo   2018 will be a transformative year for independent agents with many taking significant steps toward digital adoption. But even as agents embrace technology they cannot forget the human element. As more agents adopt these digital solutions, they will have to find the balance between technological evolution and one-on-one personal customer service.

The Internal Revenue Service is acting to help individuals who are eligible for Patient Protection and Affordable Care Act (Obamacare) health subsidies and who live in regions where exchange insurers do not offer bronze (lowest-cost) coverage, even as it moves ahead to nail employers failing to comply with Obamacare's employer shared responsibility rules (commonly referred to as the "employer mandate"). IRS New Individual Obamacare Relief Notice 2017-74  will provide that individuals who are not eligible for coverage under an eligible employer-sponsored plan and who lack access to affordable coverage should not be denied the use of the affordability exemption under § 5000A(e)(1) of the code and § 1.5000A-3(e) of the regulations merely because they reside in an area served by a marketplace that does not offer a bronze-level plan. Consequently, for purposes of the affordability exemption under § 5000A(e)(1) and § 1.5000A-3(e), if an individual resides in a rating area served by a marketplace that does not offer a bronze plan, the individual generally should use the lowest-cost metal-level plan available in the marketplace serving the rating area in which the individual resides. Notice 2017-74 will be in IRB 2017-51, dated Dec. 18, 2017. See also: Optimizing Financing in Healthcare   Employers Still Face Obamacare Penalties While the IRS has issued limited relief for individuals from the ACA's individual mandate penalties, so far it has remained steadfast in its refusal to grant employers corresponding relief from the ACA employer-shared responsibility penalties or other ACA penalties. Instead, IRS officials continue to make clear that the IRS intends to enforce the ACA employer-shared responsibility rules against employers with 50 or more full-time employees (including full-time equivalent employees). Under the Obamacare employer mandate rules, covered employers face significant federal tax penalties for (1) failing to offer minimal essential coverage to substantially all full-time employees and their dependents (the “A Penalty”), or (2) offering coverage that is either “unaffordable” or does not provide “minimum value” (the “B Penalty”) if a full-time employee enrolls in the health insurance marketplace and receives a premium tax credit. While many employers assumed President Trump's Jan. 20, 2017, executive order "Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal" would insulate them against enforcement of the employer mandate and other Obamacare penalties, the IRS doesn't see the executive order as barring its enforcement of Obamacare against sponsoring employers or their group health plans. In an April 14, 2017, IRS Chief Counsel letter, for instance, the IRS announced it does not interpret its discretionary authority under Obamacare to allow waiver of the employer mandate tax imposed under Internal Revenue Code Section 4980H against covered employers that fail to provide the affordable minimum essential coverage required by the employer mandate. In keeping with this interpretation, the IRS has announced that it will begin enforcement of the employer mandate tax liability for plan years after 2015 against covered employers that failed to meet the employer mandate. Of course, the employer mandate is not the only Obamacare provision that employers and their health plans need to worry about. In addition to the employer mandate, Obamacare imposed a host of patient protection and other federal mandates upon employer-sponsored plans, most of which apply to plans covering two or more employees. In addition to any benefit and other administrative penalties that otherwise arise under the Employee Retirement Income Security Act or the Social Security Act for violating these mandates, employers sponsoring plans that violate any of 40 listed mandates imposed by Obamacare or certain other federal laws also become liable under Internal Revenue Code Section 6039D to self-identify, self-assess, report on Form 8928 and pay an excise tax equal to $100 per person per uncorrected violation. The IRS, Department Of Labor and Department Of Health and Human Services have taken the position that the Jan. 20 executive order also does not bar enforcement of those Obamacare penalties. Accordingly, employers and their group health plans continue to face potentially substantial liability if their group health plan does not comply with Obamacare. See also: U.S. Healthcare: No Simple Insurtech Fix   In the face of these exposures, employers and their group health plan should carefully review their plans and their administration for compliance before the end of the plan year so as to be able to take appropriate and timely corrective action before penalties attach and while stop loss or other insurance is available to help mitigate the cost of these corrections. Employers preparing for health plan renewals also should review their group contracts and conduct due diligence to verify their group health plans terms and operations meet the mandates as they initiate new plan years. Employers also generally will want to review their compliance and take action to address any deficiencies against any vendors or advisers who may have culpability in the defective health plan design or administration. Prompt action against vendors who may be culpable for the design or administration defects is necessary to preserve potential claims for deceptive trade practices or other causes of action that an employer might have under state contract, tort or other law. Employers and health plan fiduciaries should consider engaging experienced legal counsel to conduct this review on behalf of the employer or other plan sponsor within the scope of attorney-client privilege so as to assess and address these potential risks on a timely basis.

The annual EY Insurance Executive Forum in New York City last week crystallized some thoughts about the complexity of the innovation journey that insurance and risk management professionals face. So, as we head into the holiday season, while kidding ourselves about watching our eating, here is some calorie-free food for thought:

I often say that I've been watching the same movie on digital transformation for more than three decades, since I started covering IBM for the Wall Street Journal in 1986 and saw it implode, followed by disruption to the whole computer industry, followed by Internet-driven upheaval for retail, journalism, music, you-name-it. But I now think that the path for insurance and risk management will be more complicated and not just because of the complex regulatory environment. One would be remiss to overlook a fundamental reality: The convergence of technological capabilities, business acumen, and risk management resulting in the reinvention of an industry has become highly refined and remarkably well capitalized.

There are really four plot lines happening simultaneously within insurance and risk management.

First, as usually happens, every part of the value chain is being reexamined. Distribution has been a particular focus for innovators, but underwriting, claims, operations and everything else are also up for grabs. Given that nearly 40 cents of every premium dollar go to expenses, including loss adjustment expenses, there is an awful lot of room for innovation at a time when every industry faces extreme pressure for efficiency. But one person's efficiency is another person's revenue, so the push is never easy. Based on innovators tracked via the Innovators Edge platform, nearly 2,000 firms spanning 178 countries are "insurtechs" focused on transforming some aspect of insurance.

Second, the core of the product itself is changing, even more than typically happens when, say, music goes digital or when something like car rides or hotel rooms become based on sharing, coordinated through a digital overlay from an Uber or Airbnb. Increasingly, innovators are finding new ways to manage risk and prevent losses, rather than just compensating for losses after they've occurred. New business models have only peeked their heads out thus far, but some are surely coming and will drive great change while creating great angst. The number of early stage technology firms that focus on areas we refer to as reinventing the actual risks managed by insurers—areas such as artificial intelligence, genomics, robotics and more—tops 68,000 worldwide, per Innovator's Edge.

Third, the nature of work is changing. This is happening in every industry as robotic process automation (RPA) takes over routine tasks. For insurers, the complication is that the change is happening at the same time that they're wrestling with the sorts of fundamental issues that other industries have been adjusting to for 15 or 20 years now. In many ways, automation should be welcome in insurance both because it cuts expenses and because it could reduce the pain that is surely coming as so many in insurance professionals reach retirement age. But the change will require adjustment and create uncertainty.

Fourth, customer expectations are being reset in ways that are shocking insurers. They are finding themselves forced to conform to the sort of expectations that Apple's "there's an app for that" and Amazon's one-click have created in consumers. Again, every industry has had to confront these new expectations from customers who just "aren't going to take it" any more, but the change is happening unusually quickly in insurance, which intuitively makes sense given the sheer volume of customer experiences being reinvented every day. Having groceries and recipes delivered weekly was unknown globally 24 months ago and now boasts a market cap exceeding $2B. The industry pretty much remained in a cocoon until a couple of years ago but now must snap into line, not with the fledgling Amazon of 20 years ago, but with the overpowering Amazon of today. When customers begin asking Alexa for a quote on their car insurance, the train will have long since left the station on a stellar experience coming from within the industry.

Personal computer pioneer Alan Kay says that "everybody likes change – except for the change part." And change in insurance looks like it will follow an unusually convoluted series of plot lines. That said, the entire EY team is to be applauded for creating an EY Insurance Executive Forum experience that was rich with lessons learned and powerful advice.

As a supporting partner on the 2017 event, here are our top 6 important things we choose to highlight from this year's conference: 

1. C-Suite insurance leadership need not worry about having the in-house talent to succeed executing a systematic approach to innovation. If sleep is to be lost over innovation and talent, then let the discomfort come with the issue of retaining that talent while the company contemplates a systematic approach to innovation. A strategy to identify and hire the talent that doesn't fit historic cultural norms is another priority requiring attention. This message came through loud and clear in remarks from Eric Steigerwalt of Brighthouse Financial, Andrew Robinson of Oak HC/FT, Donna Peeples of Pypestream and Progressive Insurance CEO Tricia Griffith.
2. A cornerstone of success for world class innovation-based growth strategies is having a C-suite who command truth, unfiltered honesty and constructive conflict. No better examples can be cited than the rapid fire, at times thundering, fact based presentation from ACORD's Bill Pieroni, the candid and humorous words of Wisconsin Commissioner Ted Nickel, and the quietly direct advice from Piyush Singh, founder of Terrene Labs.
3. The common thread that connected every speaker thriving amidst what many see as chaotic noise is the leveraging of constraints to drive innovation. The laser-like focus on a well-defined customer segment, a problem for that segment (also known as the Job To Be Done) and a well-developed solution yields growth. This convergence was embodied in the comments of Andrew Beal and Mike Consedine of the NAIC, Marcus Cooper of Zurich North America, and Gina Papush of QBE.
4. The core mission of insurance is to enable economies. Such is the role that insurers have played through history, from opening Europe to the shipping trade with the Far East, to the launch of a new nation in the 1750s, to transforming mobility in the 1920s. The opportunities to harvest exponential growth by enabling this innovation economy bring the equally compelling opportunity to literally make the world a better place. Lyft's Kate Sampson captivated the participants with her description of the culture of innovation at Lyft and the future of mobility. ITL's Chief Innovation Officer Guy Fraker shared this message with explicit optimism, as did EY's Global Insurance Lead, David Hollander, and Philip Edmundson of Corvus Insurance.
5. Innovation requires sponsorship of the CEO. However, what is often missed is the stark reality that consistent success of innovation lives and dies in the middle of established cultures. The conference offered more than a few speakers reinforcing this message including Barbara Turner of Ohio National, Terrance Williams of Nationwide and Charlie Mihaliak of EY. This notion of how best to harness and foster cultural diversity as part of an organization's strategy to grow through innovation, is a theme we at ITL believe is critically important.
6. Success in achieving growth by executing an innovation system is unique in the insurance industry. That said, best practices and valuable lessons learned can come from anywhere, which was echoed by innovation leaders Scott Sanchez of Nationwide and Dan Reed of American Family. Important, too, were the comments and experiences of industry innovator Barbara Humpton of Siemens, providing an outside-the-industry look at how organizations like Siemens approach and foster innovation.

We would love to hear any reactions/additions/corrections on the above. 

Cheers,

Paul Carroll and The ITL team

The dam has likely broken on sexual harassment claims. While the allegations currently focus on celebrities, politicians and other public figures, we can expect it to broaden to encompass virtually anyone in an organization. Victims now have a plethora of ways to address wrongdoings: social media with the #MeToo hashtag, traditional media and, of course, the legal system. The risks to organizations are reputation, loss of focus and reduced productivity levels in the face of the negative publicity, legal costs, and legal awards or settlements. The current climate may very well have set the stage for some very large jury awards as juries decide to punish those who they feel failed to take the steps that should have been taken. Make sure your company and clients don’t fall into this category. If your clients or company have not already implemented solid risk management practices in the employment practices arena, do so immediately! Make certain you have strong anti-harassment policies in place that are fully supported from the top down through the organization, train everyone in the company on the dos and don’ts of all forms of harassment, establish a clear line of communication for employees to report harassment and make certain that all complaints are promptly and competently investigated. Lastly, if you haven’t historically purchased employment practices liability insurance, revisit that decision, as well. What do you think? Will the current deluge of harassment claims become a flood? Has corporate America done what it should to mitigate and manage the risks? Are companies large and small buying adequate insurance to fund the claims they cannot avoid? Share your insights and recommendations with other readers in the IRMI Group on LinkedIn. You can find more at IRMI.com.