Hurricanes Harvey, Irma and Maria laid bare fundamental inadequacies of the current flood insurance program in the U.S. Too few homeowners had flood insurance in place. Federal Emergency Management Agency (FEMA) flood maps were inadequate to encompass actual flood risks and, even more importantly, outreach programs by FEMA and the National Flood Insurance Program (NFIP) were inadequate to properly communicate risks to the market. See also: Time to Mandate Flood Insurance?   The current hurricane season revealed an astounding lack of resiliency in the U.S. on many levels: (1) lack of insurance coverages; (2) inadequate mapping of flood risks; (3) failure to properly educate homeowners about their actual flood risks; and, (4) gross under-investment in resilient infrastructure by all levels of U.S. governments. As Congress prepares to slash budgets and cut taxes, the fact that Hurricane Irma easily topped City of Miami’s sea walls with only Category 1 strength winds and brought a four-foot river of water down Brickell Avenue, the center of Miami’s Financial District, shows how much work needs to be done to achieve resiliency in just one U.S. city. In its rush to reduce taxes, Congress is ignoring the U.S. infrastructure deficit, which is estimated to be in the multiple trillions of dollars by the American Society of Civil Engineers. The slide deck that I prepared for the Future of Flood Summit discusses new, cost-effective tools for flood risk modeling, flood risk report production and flood risk communication. A central theme is: "Can the insurance industry do a better job of helping insureds and societies cope with the increasing risks they are facing, as our climate changes and sea levels rise?” You can find the presentation here.

What a difference two words make. Last week, President Trump declared the opioid epidemic a “national public health emergency.” The declaration will speed up how quickly specialized personnel can be hired, expand access to treatment for some addicts and make some HIV/AIDS programs more flexible. But many people wish he’d left out the words “public health.” That’s because a “national emergency” would have freed up money, and lots of it. The Public Health Emergency Fund at Health and Human Services currently contains only $57,000. And the president did not ask Congress to refill it. But we shouldn’t entertain the idea that the federal government, or any other entity, is going to “fix” the opioid epidemic, just as you can’t pin blame for the crisis on a single entity. The epidemic is all-encompassing, far-flung and complex, and it unfolded over two decades and millions of bad decisions. See also: 6 Shocking Facts on Opioid Abuse   Pharmaceutical manufacturers are partly to blame because they marketed opioids as safe when taken as prescribed. Doctors and medical institutions compounded the problem because they didn’t adequately question and research these false claims. Drug distributors shipped massive amounts of drugs to places that obviously didn’t need them, and pharmacists looked the other way when filling prescriptions that were clearly too large. The Drug Enforcement Administration allowed manufacturers to make more and more opioids, even as overdose death rates skyrocketed. And many patients and drug users didn’t take responsibility for their own health. There’s no one person or organization responsible for the crisis, and there’s no easy fix, no magic bullet. I was disturbed by the recent reports that the Trump administration was “scrambling” to formulate an opioid plan. This epidemic didn’t have simple causes, and the response to it should not be rushed out. Meaningful change will require a response that recognizes millions of addictions have been created that aren’t going anywhere. Each of the parties that took part in creating of this epidemic must be a part of the solution. For instance, doctors and medical schools need to develop drastically different prescribing protocols to avoid creating addictions. Their far-more-challenging task will be to develop ways to deal with all of the patients who have been prescribed high doses of opioids for many years and are understandably terrified that they will be taken off their meds, even though the drugs are probably sapping their lives of vitality. How do you treat those patients so they don’t turn to street drugs? The federal government does have one big stick in its arsenal that hasn’t been used, which is the fact that the DEA is in charge of setting manufacturing quotas for all controlled substances. The DEA could use this power to force drugmakers to better track where their opioids are ending up. This hasn’t happened, and in fact, the DEA permitted hike after hike in manufacturing quotas, finally cutting the rates only in the last two years. See also: Opioids: Invading the Workplace   In the end, I think the gathering tsunami of lawsuits against the drug companies may prove to be more effective than the federal government’s response. The eventual settlements could dwarf the $206 billion in Big Tobacco settlements from 1998. We need to make sure that any settlement provides lots of money for research and treatment. But neither the federal government nor plaintiffs' lawyers are going to “solve” this epidemic. Addictions, once created, don’t die easily. The opioid crisis is going to be a part of life in the U.S. for a long time.

As 21st-century consumers, we are fully aware of the trends that shape and change the way we interact with the world. Although there are stark differences in the way, say, a millennial interacts with the world from that of a baby boomer, the themes are the same. Digitalization, business model disruption, mobile technology and process automation are some of the trends we have all become conditioned to. Advances in artificial intelligence, sensor technology, robotics and genomics are some of the forces that are likely to shape our future environment. Perhaps due to regulatory hurdles, perhaps due to complexity in the sales and new business processing transaction or perhaps due to the long-term nature of the policyholder-insurer relationship, the life insurance industry has remained somewhat insulated from these forces of change. Whereas other industries have been disrupted head-on by startups, much of the insurtech traction has been gained by new entrants modernizing aspects of the value chain, rather than overhauling the product or business model, as a whole. Recently, venture funding has begun to find its way to the types of companies that can now threaten life insurance as we know it. Lemonade, Policy Genius, Fabric and Ladder are a few examples of companies attempting to reshape the entire industry. Common among these startups is the fact that none are anchored down by legacy systems or held to strict ROI hurdles on new investments. They have the freedom and flexibility to redesign the policyholder-insurer relationship to fit the needs of the policyholder, rather than the needs of a distribution channel or administrative system. Even if large insurers want to be the change catalysts, internal efforts to disrupt, or cannibalize, entrenched business models are not likely to pass through the risk management controls that these insurers have in place. So, what is the large, entrenched incumbent to do? The controls that traditionally inhibit radical innovation from occurring in an organization are strong, but they can be circumvented. The cheapest and quickest way to reimagine life insurance from within the walls of a behemoth, is to do just that: reimagine. There is no risk, nor hard cost, to imagination, and the simple exercise of “Design Thinking applied to Life Insurance Risk” can uncover the likely traits that the inevitable disruptor is likely to possess. Here, we’ll take you through a simplified example of how to conduct such an exercise by examining the framework (Design Thinking) and the customer need (Life Insurance Risk), then layering in relevant Consumer Trends to make a prediction of what The Future of life insurance might be. Design Thinking Innovation has grown to become a highly technical discipline, which has spawned rigorous post-graduate programs. The underlying mechanisms of innovation, however, are simple and unchanging, despite countless volumes published on the “proper” or “best” way to innovate. The emergent discipline of Design Thinking does an excellent job of keeping tried-and-tested innovation mechanisms at its core, without over-emphasis on process or creativity. Design Thinking maintains the principles that smart solution design is human-centric and ambiguous. Restated, it says that by understanding changes in the consumer’s point of view, we can employ limitless creativity to reimagine any product. Innovation should begin with empathy for the consumer (and in the case of life insurance, the distributor), then seek to match expertly-designed solutions to the problems or needs that the consumers are facing. See also: This Is Not Your Father’s Life Insurance   A great starting point for our thought experiment is to empathize with the end consumer. Market research companies will charge tens of thousands of dollars to help you do this, but it may be just as effective to simply remove oneself from the paradigm that an insurance professional lives in, and to imagine oneself as the 21st-century consumer that you are. Then, answer a set of hypothetical questions to uncover their paradigm. How do they see the world? What are their expectations when purchasing products or interacting with companies? How are these expectations changing? How do they view life insurance? How do they manage the risks associated with death? Life Insurance Risk In the empathy exercise described above, the line of questioning you would follow to get a rich understanding of the consumer’s point of view is likely to lead you to an exploration of how consumers think about, plan for, and deal with death. It’s somewhat obvious that the average consumer’s relationship to risks associated with death has changed substantially over the past few generations. It wasn’t long ago that there was a very real risk of a factory worker, as primary wage earner, not coming home at the end of the day, having suffered a fatal accident at the workplace. Additionally, many chronic and critical illnesses that were once almost certainly fatal have become manageable with modern advances in medicine. This has led to a substantial improvement in life expectancy, which, for the consumer, means that the incidence of death risk has become very low in their lives. Further, with the reduction in the incidence of death in early life, the impact of death on families has changed. Consumers do not live as much with the acute fear of the death of a wage earner as they do with the fear of accumulating insurmountable medical expenses associated with accidents or chronic conditions. Coinciding with that is a notable shift in the complexity associated with dealing with accidents or chronic conditions. Family members caring for loved ones are often left to negotiate through treatment options, financial obligations, and legal matters all on their own. The empathy exercise shows that the risks associated with death, despite how an insurance professional may be conditioned to behave, are not wholly financial. While we all know this to be true, it is easy to for the insurer to lose this perspective, and thus lack empathy for its policyholders. What’s particularly interesting, especially in the case of term life insurance providers, is that the insurers have a vested interest in helping these families extend the lives of their policyholders, but their products and processes do not reflect this. Traditional controls such as reducing liability risk exposure have probably prevented insurers from becoming the consumer advocate. Shouldn’t the life insurer play the role of the advocate for the consumer in negotiating these complex processes associated with life insurance risk? It is these types of insights that deep consumer empathy can yield. Consumer Trends Having explored the consumers point of view, it’s important next to understand the context that dictates consumer behavior, or the way they interact with the world. In relation to life insurance risk, consumers have experienced many, many years of continuous reinforcement that an insurance contract is a paper one, brokered by an employer or agent. This may have served to maintain the insurance industry status quo, but insurers must be aware that the gravestones are plentiful of companies who believed that their consumers would continue to behave the same way, despite changes in their environment. Let’s define Consumer Trends as the patterns which impact the way that consumers interact with the world. These can be technologies, lifestyles, popular influences, scientific advances, and marketplace dynamics, among other things, which all define the environment in which consumers live, and those they are moving to. For each we identify, we should ask critical questions about the implications of such a trend to the life insurance business model. While it would be exhausting to list all the trends impacting life insurance consumer context, it’s worth considering some notable ones:

• Longevity - As explored above, advances in medicine and genomics are improving longevity to levels previously thought impossible. Can improvements in longevity be factored into product design?
• Crowdsourcing - Social media and associated technologies now allow consumers to use “the crowd” to appeal for support such as funding for medical procedures or funerals. To what extent is this emerging trend offsetting the need for a fixed financial benefit from life insurance?
• Sensor Technology - mobile apps, wearables, and the “Internet of Things” (IOT) are allowing consumers to gain immediate feedback on their health and wellbeing. This may lead to situations where consumers know more about their health than their doctors, and subsequently, life insurance underwriters. What is the implication of sensor technology on product design?

It may be worthwhile to bring in experts with varying perspectives into this step, such as experts in new technology, or to simply observe consumers in their natural environment and note how their habits might be affected by trends. The Future Once the above steps are complete, the final step is to assemble the consumer insights and trend analyses into a hypothesis, or set of hypotheses, for how the solution of life insurance risk management might change. We will leave it up to the reader’s creativity to imagine the ways in which particular traits of the business model are likely to change. Given the pace of change in the world today, conducting this type of design exercise regularly, or with a varying mix of perspectives, will yield new and different insights each time. What we can learn from this exercise is that there certainly is opportunity for insurers to rethink the value proposition of a life insurance contract. The data assembled above points to a need for insurers to reimagine the fundamental relationship between the policyholder and the company. See also: What’s Next for Life Insurance Industry?   What we can’t know is the exact nature of the eventual disruptor, or if the disruptor gains any sort of first-mover advantage. Large insurance companies, however, can make a reasonable prediction as to what the disruptor might look like, and can begin to prepare themselves for the eventualities. The boldest insurance companies may attempt to become the disruptor, while the slightly less bold may seek to acquire companies that align with their predictions. More cautious companies can still participate in the change, maybe by investing in startups through venture funds, or partnering with accelerators or universities. Of course, many will decide to keep their heads in the sand and ignore all the signs. They may cite risk aversion as a reason to not invest in innovation or disruption, but will ignore the question “What is the risk of not innovating?”

“Blockchain will transform the world.... Distributed ledger technology represents the biggest change to the business world since the adoption of double-entry accounting centuries ago.... Every industry will experience upheaval as blockchain becomes the foundation of the new business environment.”

This type of hyperbole is common today when discussing blockchain technology. The key questions for business leaders are about how much is hype and how much is reality. Insurance executives are asking, “What’s the real story?”

SMA recently asked insurance executives for their views on blockchain to determine the level of awareness in the industry and their expectations about business use and value. The title of a new SMA Research Brief provides the main storyline, Blockchain in Insurance: Awareness Grows, Activity Still Limited. Compared with just one year ago, awareness has increased significantly. This is not surprising because blockchain articles, videos and speeches are a dime a dozen these days. Many insurers have been to workshops, singled out individuals to become subject matter experts and even joined consortiums related to blockchain. Education and understanding are growing steadily across the industry.

See also: Blockchain: Basis for Tomorrow  

A handful of well-publicized projects leveraging blockchain have been undertaken, and some insurers have experimented with the technology, but the vast majority of insurers are in the watch-and-wait mode. Even so, insurers are beginning to see the potential. In addition to the digital currencies such as Bitcoin that first raised the visibility of blockchain, insurers expect the tech to be an important enabler for microinsurance, peer-to-peer insurance, asset tracking and authentication, smart contracts and the exchange of sensitive information and documents. P&C commercial lines insurers see the most potential, given the more complex nature of their products and their ecosystem of partners.

Blockchain may well become foundational to the business world and pervasive in insurance, but it is likely to evolve gradually over the next decade. Ultimately, the technology may become invisible, just a natural part of the digital infrastructure that runs the world, much like key emerging technologies of a prior age. Once-highly-touted technologies such as TCP/IP and HTTP are rarely discussed in business circles today – they are just there behind the scenes as pervasive enablers of the internet and the digital world. A similar trajectory may await blockchain.

So, the real story? Yes, blockchain is vitally important, and it is a technology with the potential to transform the way the world conducts business. But, as its usage evolves and expands across insurance and other industries over the next couple of decades, it will become less hyped and more of a standard building block.

It may surprise you to learn that nearly 10,000 baby boomers (born between 1946 and 1964) are retiring every day. For industries such as insurance, this means a number of jobs will suddenly become vacant, and with those vacancies come the associated challenges of attracting the coveted millennial workforce. Though targeting industry newcomers in the now-largest working generation may require meeting particular criteria to match their unique preferences, our latest survey results reveal there’s a bright light at the end of the tunnel when it comes to attracting millennials. Our fourth annual “Millennials in Insurance” survey asked 3,500 insurance professionals, including 1,556 millennials, about their career preferences and priorities. This article explores those results and how the insurance industry can use this data to attract the next wave of professionals. Millennials Listen to Their Friends When it comes to recruiting millennials, the insurance industry may not face as many challenges as many may think when it comes to replacing the "Silver Tsunami" of boomers exiting the industry. Especially when 82% of millennials would recommend a career in insurance to others, and 39% of those already working in insurance were recruited by friends. See also: 3 Reasons Millennials Should Join Industry   Insurance business’ biggest asset is their current millennial employees, and tapping into their networks offers valuable word-of-mouth exposure for recruiting efforts. Offering incentives to current employees is a great way to increase motivation to bring in new talent and capitalize on referrals. They Want to Grow Within Their Company Contrary to popular belief, millennials tend to be sticking with their roles in the insurance industry rather than jumping from job to job. In fact, 67% of millennials currently working in insurance have been in the industry for at least three years and say they have no plans to leave. So how can the industry use this information to ensure their younger employees stick around? Offering them clear opportunities for growth is key. When asked about choosing a career, 63% of millennial respondents said they are most concerned with their ability to grow internally within their organization and “climb the ladder.” However, growth opportunities can’t come at the cost of sacrificing work-life balance, with 50% of millennials reporting they prioritize work-life balance over everything else. Offering less traditional schedules outside the typical nine to five or opportunities to work remotely or having a pet-friendly office may help attract millennials looking for perks and benefits that offset some of the costs they may incur outside of work. Arm Them With Tech, and You’ll See Results The insurance industry is adopting technology more aggressively to remain competitive. Over the past year, usage of social media and communications technologies has increased significantly as a strategy for improving customer service, and millennial employees agree, with 78% sharing that they’re adequately armed with the tools they need to compete and succeed. Continuing to arm employees with new and updated technology that allows work to be done more efficiently will attract and retain millennial talent that look for these kinds of resources when evaluating career opportunities. See also: 10 Commandments for Young Professionals  What’s Next? While the insurance industry has made leaps and bounds toward attracting and fostering the millennial workforce, there is still work to be done to ensure the employment gap is filled. Companies that adapt to meet the priorities of the millennial generation, like offering positive work-life balance, clear career growth opportunities and a diverse suite of technology tools, will undoubtedly reap the rewards of a loyal and high-achieving workforce. By catering to these individuals, the industry will be able to capitalize on fresh talent and new perspectives to transform the future of insurance.

Telemedicine can deliver faster, more accessible and more affordable medical care for patients across the world. However, when integrating a telehealth program into your business, there are some details that you should not overlook. Let’s start with state regulations. Because they vary across the country, it's important that employers be aware of the specific compliance regulations issued by their state. See also: Navigating Telehealth for HR and Employers   Telehealth and Workers' Compensation Another important factor to take into account is workers’ compensation. While telehealth and workers’ compensation have existed for years singularly, thanks to the rapid evolution of technology they have recently come together under the same vertical. To ensure that you’re getting the specific advantages that the business needs, employers should educate themselves on the available options for integrating telehealth into workers' compensation. One option is to make it available to treat acute conditions. It could be particularly useful for employees with minor injuries or those who would rather seek self-care over in-person treatment. Making telehealth available in cases where a clinic might not be immediately available is another option. In these cases, an employee might be at a remote location and may not have prompt access to healthcare.  Telemedicine solves this dilemma by bringing the doctor to the patient. And should the injured employee require further care, telemedicine providers will refer the employee to specialists or ancillary services within their network for continuity of care. Telehealth is the ideal platform to deliver healthcare to the injured employee if they meet the screening process. While all serious cases, emergency or otherwise, should be addressed in person by a physician or at an emergency room, there are far more minor cases that can be safely treated via telemedicine. The Big Telehealth Picture Many telehealth programs offer several direct benefits to the injured employee and the employer alike, including 24/7/365 availability, increased productivity, reduced absenteeism, greater employee satisfaction and reduced unnecessary visits to urgent care facilities, which allows for further cost savings. See also: Consumer-Friendly Healthcare Model   Whichever telehealth program an employer chooses, it's a good idea to make sure the program has a strong communications plan to stay educated on benefits, onboarding and more. This often comes in the form of onsite education seminars, where employers and employees have direct access to the extended boutique health and wellness services. And, of course, just like all healthcare benefits programs, it’s equally important to research the benefits, platform features and plan options available in any potential telemedicine services you subscribe to, as no two telehealth programs are exactly the same.

There are five factors why successful implementation of most enterprise programs is almost impossible. Factor 1 – Lost in Translation We all know the major steps in a software development life cycle (SDLC): Step 1 – Identifying Strategic Direction and Imperatives Step 2 – Creating Business Requirements Step 3 – Developing Technical Architectures Step 4 – Developing Technical Designs Step 5 – Code Construction Each step in an SDLC represents an interpretation of a prior step's deliverables into this step's deliverables. But it’s almost like translating from English into Mandarin Chinese. There will be gaps in this translation. Every step is, we hope, conducted by people who know their own step very well, yet they have a limited knowledge of the prior or the next step. Subject-matter experts (SMEs) writing requirements more often than not have a very limited understanding of all the current market needs, and even less of an understanding of future market trends. They for sure have no idea about underlying architecture. By the way, making strategists write requirements produces the same result. So let’s not even ask BCG or Bain to create requirements. Unfortunately, there is no magic button we can use to verify the created requirements’ compliance with the strategic direction, or how well architecture satisfies strategy or even business requirements. And the issue applies to every SDLC step. Let’s assume we are very good at what we do. Let's say we improperly translate only 10% of what was created by a prior step. This means that the probability of delivering something useful to a target market and to our internal business just dropped to below 60%! And this even before we take into consideration the budget and time overruns. So, at least 40% of objective market needs are not satisfied because they are lost in translation. And this is the best possible case. Factor 2 – Implementation Time Is Our Enemy These steps represent our subjective interpretation of what’s required by the target market players and by our internal business. So, the only objective entity here is our target market. And this market changes much faster than we suspect. While CIOs can ask or even demand during long-running programs to freeze changes to business requirements, we can’t ask the same from our markets and customers. Our target markets do not wait for us to complete software development. See also: Expanded Role for Alternative Capital   It is not uncommon for an enterprise program in insurance to last around 36 months. Let’s assume that one of the success factors is defined as not having a need for significant changes to the production code for the first 24 months after deployment. I even quantify a significant change as a change requiring 15% of the cost of initial implementation. That means that our strategy team must identify market needs with almost absolute accuracy for the next 60 months. Futuristic analysis like that is impossible for one simple reason – there are too many factors influencing consumer behaviors in a market, especially for such a long period. The longer we take to implement, the more likely it is that our understanding of objective market needs will change, and therefore the less accurate the initial assessment was. That means that by the time we deliver, we are already too late. What we deliver will be functionally outdated and must be immediately changed. We can certainly refresh our strategy every year. But what to do with the requirements that have already been implemented? And how to deal with new upstream and downstream process dependencies? DevOps approach, gaining popularity now, due to internal architectural dependencies of most legacy and even more modern off-the-shelf products, produces very limited success. Factor 3 – Measuring Success at the Wrong Spot When we measure success of the core systems implementations (and this kind of projects represents the majority of enterprise-sized programs), we count numbers, but the best way to measure success is to measure our internal users’ satisfaction. Right? No, not right. Remember the only objective entity? The only true measure of success is our target markets. If our work does not increase market penetration and does not result in revenue and cost improvements, then it doesn’t matter how good our organization feels about new, modern applications. It is that simple. So why do we so seldom measure the effects of our work on the markets? Because so often our business case is not really based on market needs and does not measure the effects of new systems and processes on our consumer. Factor 4 - The Wrong Reasons for the Program In my experience, as much as 70% of all programs represent a replacement of legacy systems by more modern applications. That’s the only business case. In some cases, my clients were losing vendor support, and in some cases teams that developed their legacy systems left the company. A true story: I was on an engagement for a client who wanted to have new tech so that she could move it to the cloud and save about $25 million in annual support cost. To do that, she was willing to spend around $200 million on core system replacement. There was no return on investment (ROI). She was not an exception. It’s amazing how often insurance companies get into long-term projects to replace one technology with another technology – without targeting or achieving any revenue increase, and without opening any new markets. Maybe it’s less expensive to train your people on older technology and keep supporting this old technology on your own while developing a real business case for replacement? Just saying. Factor 5 – Hero Worshiping One of the first questions I’m asked by my clients is what other insurance firms are doing. This question makes me very uncomfortable for many reasons. For one thing, I can’t disclose confidential information. But another reason is even more important. As a matter of fact, it is fundamental. Just because a perceived industry leader does something does not mean you should follow in his steps. Doing so relegates you to the position of a follower. Do you really want to be No. 2 or number ”anything except 1?“ Second, even leaders make mistakes. The difference is – big companies can mask their losses, but, if you work for a mid-size insurance firm, you can’t afford to fail. You have no billion- dollar budget to mask a $20 million loss. Finally, just because a leading insurance firm does something, that doesn’t mean that it does it right. Besides, a market leader’s customer profile can be vastly different from yours. So please do not jump from this roof because someone your worship jumps. It is bad idea for them, and it is an even worse idea for you. See also: Pulse Check: How Do You Approach Risk?   Conclusion There are only two events in the life of a modern Information technology organization that result in mass firings of executives. One of them is a security breach. Another one is the almost hopeless journey to implementing core system replacement and any large enterprise program. Before you embark on this journey, think about the real chances of your success, and think long and hard about what success really means to you. Are there simpler and less expensive ways to deliver value to your customers? Is doing nothing better than doing something? Are there better places to spend money? Try answering these questions before starting an enterprise program.

According to McKinsey, the goal in establishing a sound digital strategy is to simply meet customers’ expectations. What sounds straightforward and easy to a digitally advanced industry, such as retail, is a major undertaking for property and casualty insurers, particularly those that sell exclusively through independent or captive agent forces. As insurers prepare to go direct-to-consumer, they face a unique set of challenges, including the question of where to start. First, You Have to Know What the Customer Wants Creating a direct-to-consumer strategy that meets customers’ expectations requires P&C insurers to first understand who the customer is. For them, it’s a task similar to putting together a jigsaw puzzle. Each piece is part of an array of distributed and disparate systems, and there is no easy way to gain a single view of the customer without painstakingly assembling the picture piece by piece. Samantha Chow, senior analyst at market research firm Aite Group, in an interview with Informationweek said that insurers have data they can’t make heads or tails of because of data integration problems and lack of data governance. Many of the processes that incumbent insurers use to run their business still operate on legacy technology. Chow says that some top-tier carriers are running as many as 27 aging policy administration systems to support their products. To make matters worse, data across these informational silos is often inconsistent. See also: 9 Elements for Customer Portals   It seems that insurers have the wrong type of data, as well. According to Mark Breading, partner at Strategy Meets Action, insurers are limited by a customer view that delivers only “an awareness of the current and former products owned by the customer, the performance of those products, information related to product needs of the customer and perhaps some relationship information like the agent involved.” In direct-to-consumer distribution, insurers need to expand their data sets, tracking consumer activity across products and channels as well as gathering information from third-party sources to gain a broader understanding of the customer, their lifestyles, purchasing preferences and buying behavior. A single view of the customer is essential to respond to their complete coverage needs in real time and is a primary component of D2C engagement. Setting up the Online Storefront Amazon set up shop in 1994 as an online book and music seller, but rapidly evolved into an international retailer of just about everything. The fact that Amazon’s sales last year topped $135 billion underscores the effectiveness of the strategy: Make it easy for customers to find and buy the things they want, when they want them. As customers enter Amazon’s site, searching for products is fast and simple. They can easily compare pricing and then select the items that meet their needs. In many cases, purchasing is accomplished in a single click. When insurers try to recreate this type of environment in insurance, they run up against some impressive obstacles. For one thing, rapidly quoting, binding and issuing products that our housed in separate silos requires a central point of access. Only a handful of insurers have this today. Then there is product diversity. Consumers expect insurers to meet their coverage needs, but what happens when they can’t? The Amazon experience would dictate that the insurer offer products from other carriers to augment their own selection, similar to Amazon’s army of third-party sellers. “It’s an idea whose time has come,” said Eric Gewirtzman, CEO, BOLT. “Insurers who position themselves to meet more of the needs of their customers, even if it means offering products from other carriers, will be recognized as customer-first organizations.” Customers Still Need Agent Support Our research of top carriers indicates that 77% are seeing demand for D2C engagement, but providing online access to products and services also means setting up agent support for digital channels. A customer with a leading D2C insurer recently needed to obtain insurance for one of her vehicles in another state. Her daughter was registering the vehicle where she was attending college, but, given the significant cost advantages, the customer wanted to keep the teen-aged driver’s coverage bundled with the original policy. Unique situations like these often require support from an agent licensed in the specific state. In this example, much of the transaction was started online. Because all information was available to the agent, digital paved the way for a faster and more efficient response to the customer. Committing to a D2C strategy means providing agent support to field questions and issues from direct channels. For insurers that work exclusively through independent or captive agents, that means setting up or gaining access to licensed resources to support D2C channels and ensuring they have streamlined access to information customers enter online. Despite Challenges, Now Is the Time to Move Looking into insurer’s thoughts on the future, John Cusano of Accenture remarked on the company’s research with 563 insurance executives. “In our survey, we found that 87% of insurance respondents agree that we have entered an era of technology advancement that is no longer marked by linear progression, but by an exponential rate of change,” Cusano says. “What’s more, 86% say that their organization must innovate at an increasingly rapid pace just to keep a competitive edge.” See also: Why Customer Experience Is Key   Part of that innovation is advancing toward an omni-channel strategy that includes direct-to-consumer capabilities. Eric Gewirtzman of BOLT, in an interview with McKinsey, said, “Insurance customers are already moving between various channels.” Now insurers need a strategy that fulfills the customer’s demands for direct-to-consumer purchasing. Disruption from outside forces and continuously evolving consumer expectations is forcing the industry out of its protective shell and onto the cusp of change. Despite the challenges, the insurers who realize the greatest wins in the changing environment will be the ones who begin now to evolve into highly competitive digital institutions of the future.

Benefits managers who rely on their health plans to keep costs down are bound to be disappointed. Despite health plans’ protests to the contrary, paying them a percentage of total expenditures is an incentive to make healthcare cost more, not less. The largest insurance companies have been among the market’s most profitable performers, with almost 500% average health plan stock price growth since 2009. Until health plans are at financial risk for better health outcomes at lower cost, reducing total spending will continue to translate to reductions in net earnings, a result clearly at odds with their business interests. So for now, benefits managers interested in driving greater efficiencies are on their own. Their most promising opportunities are programs that deliver strong returns in health outcomes, productivity and savings. They can use their core plan for the basics. But then they can go around many of its programs, directly engaging instead with proven high-performance solutions compared with conventional health plan management. The challenge is determining which risk management approaches will yield the greatest value. Should you invest in targeted, high-impact solutions (like drug management, musculoskeletal management, imaging management or reference-based reimbursement), or should you pursue the broader management inherent in a worksite primary care clinic? See also: Healthcare: Need for Transparency   Generally, the answer depends on whether you have a short- or long-term horizon. For quick wins, many modular solutions have low-cost entry requirements and provide an immediate, powerful return on investment. For example, using an independent drug management firm in addition to your pharmacy benefit management arrangement can drop total healthcare spending by 7%. Musculoskeletal disorder management can save 5% to 10% off total costs with better health outcomes than conventional orthopedic care. Imaging management can reduce total spending by 5% to 8%. Reference-based reimbursement for hospital care can drop costs by 13% or more. Other services — claims audits, surgical management, cancer care management, large case management, large claims resolution, dialysis management, cardiometabolic care management — can deliver similarly strong savings and health outcomes improvements right away. Often, the vendors are willing to financially guarantee results. Of course, prioritizing the solutions to pursue is a delicate process and should be informed by your population’s experience, health characteristics and the sponsor’s tolerance for plan disruption. Plan sponsors with a longer view may want to consider a worksite clinic. Typically you’ll need to fund startup fees, the costs of establishing the physical plant and operational costs that are about 8% to 12% of current health plan costs. If you’ve chosen a capable vendor, the clinic may begin to save more money than it costs in the first 18 to 24 months. That said, be aware that Mercer survey data suggest that fewer than half (41%) of clinic sponsors can demonstrate savings, and the actual number may be lower than that. Identifying an effective vendor is critical, and the evidence is clear that most clinic sponsors and their consultants fail at that. But let’s say that you have chosen your vendor wisely and that your clinic performs as hoped. (Some do!) This puts a comprehensive primary care practice in place at the front end of the system, conveying more control of patients and the care they receive throughout the continuum. A clinic then becomes a platform that you can build on with a robust array of clinical and financial risk management tactics. These can include how co-pays are structured, managing referrals with high-performance narrow networks, or dispensing generic and therapeutic equivalent drugs directly into patients’ hands. It can mean handling many important, costly tasks more efficiently onsite, from imaging to managing diabetes or pain management. Seemingly small, thoughtful clinic design elements can have tremendous impacts on patient health and total cost. High-performance modular solutions, like those we’ve described above, can also be integrated into a clinic to get much greater traction over high-value problems. Healthcare’s problems are tremendously complex, and many highly tailored solutions are necessary to hold excess in check. What’s more, just as it’s challenging to identify them and bring them together, it is equally difficult to coordinate and manage their implementation. Having a dedicated platform that begins with healthcare’s front end is a logical and powerful way to bring these solutions together and deploy them effectively. See also: Optimizing Financing in Healthcare   The real goal of a fully capable clinic with a full array of management tactics, is to change conventional care and cost patterns, driving appropriate care and, just as importantly, disrupting inappropriate care. Within two years post-implementation, we have seen good clinics dramatically improve the health of both individual patients and the patient population and reduce total health spending by more than 20%. Combining a good clinic with high-value niche solutions can produce even higher impacts. Healthcare has become defined by rampant excess, so effective benefit managers will, of necessity, seek unconventional solutions. Established approaches are available now that will improve care and save considerable cost through clinics or high-value niches. As is always the case, success depends on being as knowledgeable as possible about the dynamics, choosing carefully and then holding all the participants accountable. This article was written by Brian Klepper and Richard Sutton. The article was originally published on Worksite  Health Advisors.

There is a monster lurking beneath the insurance companies. For now, it lies dormant, having already been satiated by enormous feasts of industry. But soon it will soon grow hungry again and may turn its voracious appetite and overwhelming power on the insurance industry. I am speaking, of course, about Apple. The tech giant is one of the biggest potential competitors of insurers, having the capital, ingenuity and distribution to become a major player in the industry. And this monster moves frighteningly quickly. Within a matter of months, Apple could release a top-notch life insurance product coupled with an enticing marketing campaign, effecting disaster for major insurance companies. Picture the following scenario: Apple execs, eyeing their unholy pool of liquid capital, begin brainstorming, “How to use it?” Stagnation must be prevented, growth is the mantra, the motive. “The phone and computer markets are nigh entirely tapped! Not much growth to be had there. We must look… elsewhere.” And then, an idea! Insurance! And the more they turn this idea over, the more practicable it appears, until they have a detailed plan, a proof of concept, laying out exactly the methods and means and growth timeline, and everything else required to break into insurance. See also: This Is Not Your Father’s Life Insurance   The plan, fitting very neatly within Apple’s modus operandi, is to galvanize some of their best and brightest into creating a sophisticated machine learning program for underwriting. Even the execs can see that machine learning software has potential for revolutionizing underwriting, it being a chancy, complex business. Not only would the software handle variables with an incredible efficiency, it would be able to identify new markers of mortality with relative ease. The program would also be able to draw from the huge amount of existing user data. Apple Health Kit alone could be a treasure trove of data plundered for mortality tables. And how much more does Apple have than that?! Location tracking, financial information… our whole lives are stored on our phones! One reels at the sheer amount of underwriting power this machine learning program would have. While the underwriting software is being developed, the marketing team goes to work setting up all the pieces they will need to successfully move into insurance. They set their developers to work building the app on which the insurance products will be purveyed and managed, directly embedded in iOS, just like Health Kit and other apps. Then, the team produces a slick commercial, as Apple is known to do, introducing their newest product, "Apple Life." Apple Life is "life insurance as it should be," i.e. hassle-free, cheaper, personalized and guaranteed by more cash reserves than any insurance company has. Now, there’s just one more step before going public: getting the paper, as they say in the industry, meaning making legally compliant products. While Apple would have no problem doing this itself, the quickest route would be to engage insurers and reinsurers that have already paved the way in all 50 states; they would be amenable to such a partnership, to say the least. Once the deal’s done, and the app is developed, and all teams are prepared to take this thing live, the execs pause, and they smile the kind of smile that comes when one knows he’s won for sure and that no one else does. Smugly satisfied, they release the app, queue the oh-so seductive marketing campaign, and voila! the public is smitten. Life insurance for all! Yet, perhaps after pondering a little more, the execs may realize there is an even quicker, deadlier way to realize Apple Life. They propose, "Why spend months on end developing proprietary underwriting software, when we could simply assemble the most effective underwriting practices of existing MGUs and put our distribution power behind it, the one thing they have always lacked?" And then, "Why not, instead of building our own life insurance app, engage an insurtech?" Knowing Apple, they would probably buy one to keep everything in-house, only making sure that the insurtech acquired has a viable product for them to release. The execs gloat, “Ah this plan is so much easier, so much quicker than the first. All we’re really doing now is draping our brand over products others develop for us. And, with our distribution power, not to mention our vast, unholy pool of liquid capital, these products will be a smashing success, without the time and hassle of us building them from scratch.” See also: What’s Next for Life Insurance Industry?   A clever plan, isn’t it? Apple would be able to execute this likely within the matter of a few months, which should put the fear of… something into life insurers. Maybe extinction. All Apple really needs to do is leverage its $260 billion in cash to hire the right people, then throw their brand and distribution power behind what those people provide. It’s that simple. And it’s clearly not just Apple that could do this— Amazon, Google, Microsoft, etc. are equally scary monsters looming far too near to the insurance industry. So what can life insurers do to prevent against this kind of scenario? Simple. Tap the talent before Apple does. Contract or buy a good insurtech, so you, life insurer, can release the hip, new life insurance product first.