The percentage of organizations with relatively mature risk management processes increased over recent years, although the majority of organizations still do not believe their processes reflect a “complete” or robust ERM process. While progress is being made, there is still room for significant improvement in risk oversight for many organizations, according to a recently released study, 2017 The State of Risk Oversight: An Overview of Enterprise Risk Management Practices NC State’s ERM Initiative, in partnership with the American Institute of CPAs, has just released its 2017 The State of Risk Oversight: An Overview of Enterprise Risk Management Practices. Based on survey responses from 432 business executives spanning a number of industries, types and sizes of organizations, the report provides detailed insights about the state of maturity of their organization’s current enterprise risk management (ERM) practices. This is the eighth year that we have conducted similar research in partnership with the AICPA. See also: The Current State of Risk Management   This report provides extensive data about the state of maturity about various aspects of an organization’s ERM process. Not only do we provide data about the full sample, but we also separately report findings for the largest sized organizations (revenues > $1B), publicly traded companies, financial services organizations, and not-for-profit organizations. Here is a brief overview of some of the key findings. Risk Environment is Complex Most respondents believe the risks they face are complex and numerous

• About 70% of large organizations, public companies, and financial services entities perceive the volume and complexities of risks have increased "mostly" or "extensively" in the past 5 years
• That trend has been consistent over the past several years, suggesting the overall risk environment continues to be challenging to manage for all types of organizations
• Most organizations have dealt with significant operational surprises in past 5 years

Risk Management Processes Less Advanced Less than half of the respondents describe risk management processes as "mature" or "robust"

• 25% of full sample describes their risk management processes as "mature" or "robust", with large organizations, public companies, and financial services entities having more mature processes (but less than 50% of those are "mature" or "robust")
• The majority of organizations do not believe their processes reflect "complete" or formal enterprise-wide risk management

Opportunities Exist to Integrate Risk Management and Strategic Planning Most organizations are struggling to integrate risk management with strategic planning

• Only about one-quarter of the respondents describe their ERM processes as an important strategic tool with no real differences in that assessment across types of organizations
• 34% of the full sample do no formal assessments of emerging strategic, market, or industry risks
• If an entity considers strategic risks, that mostly involves qualitative assessments of risk exposures

Organizations are Strengthening Risk Leadership More organizations are establishing management-level risk committees

• 58% of the full sample has a management-level risk committee, up from 45% last year
• Management-level risk committees are more likely for larger organizations, public companies and financial services organizations (around 80%) - an increase of about 10 percentage points over last year
• We also saw an increase in the designation of individuals who serve as chief risk officer or equivalent

Calls for Increased Senior Management Involvement Strong majority of boards are asking for increased senior executive involvement in risk oversight ("somewhat", "mostly", or "extensively")

• 67% of the boards for the full sample are calling for more involvement, with even higher percentages of boards asking for greater management involvement in risk oversight at large organizations, public companies, and financial services entities
• This trend is consistent with prior years, suggesting boards continue to be interested in strengthening risk oversight

See also: 4 Steps to Integrate Risk Management   Future of ERM As organizations peer into the future, the challenge question for the board of directors, senior executives, and other key stakeholders is “how confident are we in our organization’s ability to effectively identify and navigate the unfolding uncertainties surrounding our current business model and new strategic initiatives?” Based on key findings in this report, what opportunities exist to enhance the organization’s risk management thinking so that both sides of the risk and return relationship are sufficiently and effectively managed? This year’s report highlights many other specific findings about various aspects of an effective enterprise-wide risk management process. In addition to providing findings for the overall sample, the report separately highlights key findings for public companies, the largest organizations, financial services organizations, and not-for-profit entities. You can download the full 8th edition here.

Before any “lessons learned” speechifying, we should first pray for those who lost their lives and family members and homes and livelihoods to the nearly “biblical storms” Harvey and Irma. For those still in shelters and still being rescued, we wish them Godspeed. There are so many lessons from these two storms. Where to begin? Let’s begin with a word: “resilient.” The Merriam-Webster dictionary defines “resilient” as: (a) “capable of withstanding shock without permanent deformation or rupture; and, (b) tending to recover from or adjust easily to misfortune or change.” Clearly, as we look at our flooded and battered communities in Texas, Florida and South Carolina, we see that they are not meeting this definition. See also: Harvey: First Big Test for Insurtech   As individuals and societies, we strive, as we should, to be as resilient as we can be. Why? Because if we are not resilient in ourselves, our properties, our neighborhoods and our societies, we simply put our misfortunes on our neighbors, involuntarily, whether they can handle those burdens or not. Recall the story of the “Three Little Pigs” that we all learned as children. The two silly pig brothers who danced and sang and built their houses of straw and sticks ended up depending on the brother who built his house of bricks to save them from the huffing and puffing of the big, bad wolf. The wind-blowing wolf is certainly an apt analog for Hurricanes Harvey and Irma. What makes us and our societies resilient? There are several important aspects of lack of resiliency that Harvey and Irma have starkly revealed. The majority of homeowners with flood damages in Texas and Florida in the recent storms did not have flood insurance. Most all of these people owned cars, and, because of state laws, they all had automobile casualty insurance. Driving without insurance would be unlawful, yet their homes, where the majority of their net worth was invested, were without coverage. Whatever their homes were actually made of, they were financial “sticks and straw,” without flood insurance. Flood insurance is a critical component of resilience for the individual and for society at large, which will now direct billions of its tax dollars for FEMA relief. In the case of most homeowners who were wiped out by these storms, they could have afforded flood insurance but opted not to have it. Insurance is one component of resilience, but it is not the only factor. Let’s talk about personal responsibility. There are many relatively minor and cost-effective measures that homeowners in floody areas can take, short of raising their homes on stilts. Flood prevention investments can include: backflow preventers, storm shutters, removable flood barriers, raising electrical outlets, raising HVAC equipment off the ground, minor regrading and installing salt-tolerant vegetation. The list could go on and on. Why don’t most homeowners in the vulnerable coastal areas make these investments? One reason is that they lack comprehensive, flood-risk-vulnerability information about their own properties. The FEMA flood maps’ “binary” approach – in or out of the 100-year flood zone – has not been effective in communicating all of the various flood risks to which homeowners are subject. For example, FEMA flood maps do not include tidal flooding risks, NOAA maximum-storm-surge risks (which may be much greater in flood height) and heavy rainfall/high groundwater risks. This is why my company, Coastal Risk Consulting, developed its online, comprehensive flood risk assessments at www.floodscores.com – to help coastal residents get climate-ready and storm-safe. Once homeowners and their neighbors truly understand their flood risks from the “bottom up,” then, and only then, will they be able to effectively mitigate their personal risks and advocate with their town, county, state and federal representatives regarding the “top down” resiliency efforts -- and appropriation of funds needed to make public infrastructure climate-ready and storm-safe. Both individual and government investments in resilience are required to make us and our communities “resilient,” especially in light of increasingly intense storms. The next resiliency challenge for the owners of properties damaged by Hurricanes Harvey and Irma is whether and how to rebuild to become more flood-resistant in the face of severe weather to come. Many motivational speakers have orated: “In the Chinese language, the word 'crisis' is composed of two characters, one representing danger and the other opportunity.” Whether this is linguistically correct or not, it makes a good point. The multiple billions of dollars of property damages wrought by Hurricanes Harvey and Irma provides society with, perhaps, a generational opportunity: How should the hundreds of damaged communities rebuild themselves? Will they rebuild in the same locations and at the same elevations and with the same “lack of flood preventions”? In “Three Little Pigs” parlance, will they rebuild houses of sticks and straw or will they build “brick” houses that can withstand the floods and winds brought on by the next set of storms? Will local, state and federal governments say “enough is enough?” Will our elected representatives work with our visionary architects and engineers to rapidly change building codes and land use and zoning laws, to begin to make our communities more resilient? See also: Time to Mandate Flood Insurance?   As much as I hope for such a result, I would not, however, bet the house and the dog that our politicians will say what everyone knows they should say, namely, “Enough is enough.”

The recently completed EY Digital Underwriting Survey reveals the important and rapid evolution that is proceeding within commercial and specialty insurance. Further, it clarifies the digital technologies and capabilities that are the impetus behind some of the biggest changes to underwriting, the essential function within insurance. The “big idea” behind the results confirms that more insurers recognize that the future is now when it comes to digital. Insurers are planning to accelerate and expand their investments and activities to embrace digital insurance in its many forms. Both in response to the survey questions and in parallel interviews, the underwriting community expressed a belief that individual technologies are making a difference in advancing key capabilities, even if the initial use cases are narrowly defined. See also: Go Digital… but Don’t Change Who You Are   Looking at 12 specific technologies and capabilities, the survey findings reveal that most insurers are investing now and plan to continue to increase investing. Further, they expect to broaden how they use these technologies. The bottom line is that survey respondents see clear and ample opportunities to expand adoption and increase the value to their business. Key themes emerging from the survey

1. Predictive analytics, big data, underwriting trading platforms and geographic information systems (GIS) are the most mature technologies currently being adopted. More than half of respondents indicate these technologies are in the rollout or refinement stage. However, these technologies have been narrowly focused on just a few specific areas (such as pricing models and demographic and location data).
2. Blockchain, robotic process automation (RPA) and sensor-based technologies are all high priorities for the future, with organizations planning to commit significant resources. Currently, most insurers engaged with these technologies report activity in the context of research programs, proof of concept or pilots.
3. There is a strong need for longer and closer monitoring time of early-stage investments and the potential need for more rigor in business case development. Insurers currently measuring investment performance report strong, even compelling, returns, with most meeting or exceeding expectations.
4. Insurers and brokers agree that underwriting and pricing capabilities are the most important and potentially valuable in terms of future technology investments. These functions and processes have been augmented by the more mature technologies (predictive analytics, big data, automated portfolio management, underwriting trading platforms and GIS), as well as machine learning and sensor-based technologies.
5. Actuarial has benefited the most from predictive analytics and machine learning, while policy processing has been the focus of RPA initiatives. Product management capabilities have benefited from big data and automated portfolio management.

See also: The Dawn of Digital Reinsurance   The value proposition for digital enablement is strong across and throughout the underwriting function. Digital is as much about culture as it is about tool sets, and underwriting organizations may have a way to go on the cultural front. For example, one reason for the limited applications and narrow use cases is that digital may lack a single unifying vision or leadership sponsor within underwriting. For the business value to be realized in a full and sustainable fashion, with broad adoption, underwriting needs to work more closely with IT and other partners to define and prioritize the use cases for these digital technologies. To see the full report follow this link to EY.com.

While talking about data has become trendy -- with terms like big data, small data, dirty data all good candidates for buzzword bingo -- the reality is that, big or small, even if it is clean, data is useless unless it drives actionable insights. Data is the foundational layer that underpins almost every industry, and it is a survival requirement for business today. Industries like retail, travel and finance have all tapped into the power of data to drive consumerization. And, while the health insurance sector may have fallen behind these industries, it is catching up, as today’s health insurance consumers are demanding actionable information in the form of choice, transparency and simple user experiences. The good news is that innovators in the space are responding to these consumer demands by creating ground-breaking tools -- tools that leverage modern technology, powerful software design and quality data. Today’s health insurance innovators are making waves in the insurtech industry by building products and features that truly solve consumer pain points. So, who are these innovators? What are they creating? And why is the underlying data so crucial? Who are the innovators? According to CB Insights, $1.7 billion was invested in insurtech in 2016. Essentially, the insurtech category encompasses all new technologies, companies, apps and business models that are pushing to revolutionize the insurance industry itself. And, thanks to advances in technology and funding, this category is seeing rapid growth. See also: Why to Refocus on Data and Analytics  Jump Capital recently pulled together its view of the movers and shakers that are disrupting the insurance industry. With so many new vendors in the market, it is safe to say that there is definitely a lot of moving and shaking going on in insurtech. These companies are finding different ways to meet consumer demands and remove the complexity associated with the insurance industry. The companies included in the healthcare segment of this infographic are, for the most part, delivering new ways to help consumers find, buy and receive health insurance. Collectively, health insurtech platforms answer a consumer cry for help. But none of these platforms are functional, let alone useful, without a foundational layer of quality data on which to build. What are the innovators creating? Health insurtech innovators are working to answer a variety of consumer demands. They’re creating tools that simplify the health insurance shopping experience. Tools that help doctors find prescription drugs that are covered by a patient’s insurance plan. Tools that help consumers find doctors that are in-network. The problems that these platforms solve are many. Here are just a few examples of innovative tools and features being created to deliver value to health insurance consumers: 1. Decision Support Tools for the Individual Market A variety of web-based entities (WBEs) have popped up to help individual consumers find and purchase a health insurance plan that is right for them. PolicyGenius is a good example of an innovative platform doing just that. The company prides itself on delivering simple benefits that are personally designed for the individual. A consumer enters a few bits of information, and PolicyGenius recommends health insurance plans for that individual -- all delivered through a seamless digital experience. 2. Analysis Tools for the Small Group Market Certain broker-facing platforms are starting to build analytical tools that help strengthen group health plan recommendations. These tools allow platforms to compare and contrast different health plans, including each plan’s network, aiding in disruption analysis and delivering value to their employer customers. 3. In-Network Provider Search and Notification Features Many health insurtech platforms offer customers provider-network search and notification features. Stroll Health, for example, delivers personal recommendations for imaging centers based on a patient’s insurance plan. And some HR and benefits administration platforms now have the ability to notify employees if an employee’s preferred doctor drops out of network. Thoughtful features like these save consumers time and money. See also: Next Step: Merging Big Data and AI   Why is the data so crucial? While data may not be the sexiest element of a tech platform, the data layer enables all features. For example, for those broker-facing analysis tools to be useful, the broker platform must have access to accurate and timely data on the benefits and rates of every health plan they’ll compare. For an HR and benefits administration platform to alert an employee when a doctor drops out of network, the platform must first know when that doctor drops out of network. This means the platform must have access to an accurate and extremely granular database of providers in the specific network being tracked. Quality data is what informs today’s innovators, pushing them to take action and build exciting applications that solve real problems. Health is a complex space, but there are many brilliant minds working to improve the health insurance industry. Putting the right data into the hands of these innovators allows them to do what they do best -- solve problems with creative technology solutions. Continuing to do this will allow today’s innovators to respond to consumer pain points and transform the health insurance industry.

As life insurance and annuity carriers pursue greater market share and growth, a potential solution sits before them: M&A activity. This transactional path, leading to deep consolidation in the life insurance and annuity (L&A) sector in the U.S., is stoking much debate and discussion in company boardrooms. The hunt for elusive growth and profitability for carriers in the U.S. has many players, creating a crowded marketplace for possible consolidation. The multi-headed acquirers come in three dominant forms: large insurance companies, private equity (PE) investors and foreign acquirers, driven largely by the Chinese and Japanese. Insurance carriers intimately know about their competition and what companies in the sector would mesh well within their operations. Executives have the greatest amount of specific industry expertise and therefore can understand the pros and cons in a specific combination. See also: How Life Insurance Agents Can Be Ready Private equity investors have been turning to the life insurance and annuity field for several years to provide consistent returns, as these companies have predictable cash flows. Through these investments, investors can strengthen their returns for assets under management with steady growth. One caveat to this investment approach is the concern of the increasing regulatory state and federal pressures, as navigating through 50 individual state regulatory guidelines can be burdensome and difficult if a company moves out of a state and into a new one. Foreign countries like China and Japan continue exploring opportunities to increase their presence in the U.S., the world’s largest insurance market. Reasons abound: Japanese insurance companies have found U.S. acquisition targets appealing to offset the aging of Japan’s population and to provide a more attractive interest rate environment. Chinese companies have been snapping up foreign companies, including in the U.S., searching for yield on their capital and economic growth. Several reasons exist for this trend of M&A activity.

1. Buyers are motivated by the current low-interest-rate environment and the opportunity to expand their assets and book of business. This has always been an essential piece of the M&A discussion as market conditions must be favorable to make any transaction worth its while.
2. Sellers are suffering from the low return on their capital. By exiting less profitable lines of business, they can reallocate their capital for use in other capacities. As contemplation of one’s business clarifies, many carriers may conclude that selling, rather than buying, assets is the chosen path. Selling could stabilize or enhance a company’s bottom line as the capital obtained in a sale can be reinvested in its existing operations or be put to use for another potential acquisition.
3. Increasing regulations are restricting the ability of companies to productively run their businesses; thus, they are looking for exits. Companies are often stymied by the sheer weight of complying with and managing regulations. Exiting businesses can become appealing.

Regardless of which direction is undertaken, one aspect paramount to success is the importance of ensuring that business continues to operate smoothly. In today’s environment, the role of technology, specifically at a time when companies are implementing and managing digital transformations, can be a beacon of light. And as acquirers delve deeper into possible transactions, increasingly they are employing an outsourcing model to extract more value. See also: This Is Not Your Father’s Life Insurance   Safeguarding a company’s operations and maintaining its continuity through powerful technology and servicing solutions, or what we call “future proofing,” has additional benefits besides the desired functionality. Companies must first build their vision and plans and then bolster them with end-to-end operational services. This step will then enable rapid expansion into new market segments, faster product launches and seamless servicing of open and closed blocks of business. By future-proofing through technology, carriers can drive greater efficiencies, lower costs and produce higher levels of customer satisfaction.

The natural disasters of the last week-plus bring to mind the old chestnut: "Other than that, how'd you like the play, Mrs. Lincoln?"

The other-than-the-"assassination" reports have been good, thus far, in the wake of Hurricane Harvey and Hurricane Irma. Irma took an ever-so-slightly unexpected path, so, while electricity is out for millions and will likely be a problem for weeks, the storm visited much less destruction on Florida than expected. Local, state and federal authorities have seemed to react well. Insurance companies are on the scene, trying to pay claims and get people back to their regular lives as soon as possible. Citizens have risen up to to help themselves and others—the drive that I mentioned last week that was led by Houston Texans defensive lineman J.J. Watt has now passed $31 million in donations, not counting the enormous gifts of supplies and transportation he's received.

But we're still left with the "assassination" parts of the hurricanes, and those are dreadful. For instance, our chief innovation officer, Guy Fraker, knows that the eye of Irma passed directly over his key in Florida and that the bridges on both sides of the key have been wiped out. It's not clear when he'll even be able to get back to check on his home. People in Florida and the affected parts of Texas and Louisiana will need months or years to recover. 

As it happens, in the midst of the storms, Fortune put out a list of 50 "Change the World" companies that are turning "doing good into good business." The 50 were chosen based on their social impact, financial results and degree of innovation. I looked eagerly to see how many insurance companies made the list and found...two. Insurance Australia Group was ranked #29, and Allstate was #39. Having two isn't bad representation, given all the other industries competing for just 50 spots, but, with everything the industry is doing to pull Florida, Texas and Louisiana back together, I had certainly hoped for more.

The Fortune list comes at a time when a backlash has developed against the idea that the sole purpose of a corporation is to serve the shareholders by increasing profits and stock price as much as possible. The idea, formulated in 1970 by Milton Friedman, a Nobel-prize-winning economist who was the leader of what's known as the Chicago school, stoked the fever that led to accounting fraud and scandals such as WorldCom and Enron. More generally, a sense is developing that companies have responsibility to all sorts of stakeholders, including employees, customers, communities, the environment and, in the case of our favorite industry, insureds. 

A company to watch is Unilever. It has explicitly taken a "change the world" approach, to the point that it recently faced a takeover attempt by Kraft Heinz, which promised to stoke shareholder returns. Unilever fended off the attempt, the board committed to its more-balanced approach to long-term gains for all stakeholders, and Unilever is certainly reaping PR rewards.

Given the business we're in, I have to believe that there are opportunities for insurers to take the lead in this "change the world" movement. Insurers seem to be off to a good start in the aftermath of Harvey and Irma. Let's hope that continues. Publications like Fortune will notice.

Cheers,

Paul Carroll,
Editor-in-Chief

Cliff Treese of Association Data brought some statistics to my attention involving earthquake (EQ) insurance in California. Going back as far as 2001, the percentage of properties without EQ insurance were: Homeowners       84-88% Dwelling               95-97% Commercial         89-93% So, only about 15% of homeowners, 10% of business owners and 5% of dwelling owners buy EQ insurance. Why? Lots of studies and surveys have been done. It’s too expensive. It doesn't pay much, especially for partial losses, because of percentage deductibles. “It’ll never happen to me.” The government will take care of me. “I thought my regular insurance covered this.” And on and on. One of my favorite quotations is from Gen. Jimmy Doolittle, who said, “The problem with Americans is that we’re fixers rather than preventers.” This is so true in so many ways. Following Hurricane Harvey, it was widely reported that only about 15% of flooded properties had flood insurance. We’ll see what happens, if anything. See also: Harvey: First Big Test for Insurtech  While we can’t prevent earthquakes and hurricanes, we can prevent, to a large extent, their financial impact by buying catastrophic insurance. Private insurers sell EQ coverage and, underwritten by the NFIP, flood insurance. Yes, in many cases, it’s expensive, but what are the alternatives when the exposure is so real? As I posted last week, is it time that such coverage was mandated and included, with a federal terrorism-like backstop, in standard policies covering property damage? Such a solution would be complex and difficult, but what are the alternatives? And, while Gen. Doolittle’s quotation is so often true, it may be even more true that, increasingly, the problem with Americans is that we’re not preventers OR fixers. In the meme I used for last week’s post, I used another quotation from the German philosopher Hegel, who said, “History teaches us that man learns nothing from history.” This may be illustrated in a recent USA Today story about repetitive flood properties with this excerpt: "Instead, NFIP embraced a “flood-rebuild-repeat” model that has spawned an almost $25 billion debt. The National Wildlife Foundation estimated in 1998 that 2% of properties covered by federal flood insurance had multiple damage claims accounting for 40% of total flood insurance outlays, and that more than 5,000 homes had repeat claims exceeding their property value. A recent Pew Charitable Trust study revealed that 1% of the 5 million properties insured have produced almost a third of the damage claims and half the debt." NFIP paid to rebuild one Houston home 16 times in 18 years, spending almost a million dollars to perpetually restore a house worth less than $120,000. Harris County, Texas (which includes Houston), has almost 10,000 properties that have filed repetitive flood insurance damage claims. The Washington Post recently reported that a house “outside Baton Rouge, valued at $55,921, has flooded 40 times over the years, amassing $428,379 in claims. A $90,000 property near the Mississippi River north of St. Louis has flooded 34 times, racking up claims of more than $608,000.” See also: Time to Mandate Flood Insurance?   Wow. Fully 2% of properties insured for flood account for 40% of all flood insurance payments. A $120,000 home was rebuilt 16 times in 18 years at a cost of almost a million dollars. Another home has allegedly flooded 40 times and still another property 34 times, racking up combined payments in excess of a million dollars. WHY? Apparently because we’re not fixers OR preventers AND we learn nothing from history.

Healthcare meets Network. That is the one-sentence summary of Dave Chase’s new book, A CEO’s Guide to Restoring the American Dream: How to Deliver World-Class Healthcare to Your Employees at Half the Cost. Dissecting the title, the “restoring the American Dream” reference is as follows: While wages have barely budged in the last 20 years, employee compensation has risen quite a bit — with most of the increase being the health benefit. Dave’s observation is that if the health benefit were managed much more tightly, wages could climb noticeably for the workforce without increasing the total employee compensation budget. As for “half the cost,” that number may be overstated…but not by much. For instance, I just saw a wellness vendor send 2/3 of a company’s employees to the doctor because they have “conditions” they didn’t know about, that this vendor “discovered” by — you guessed it — screening the stuffing out of them by flouting clinical guidelines. This employer could save about 3% simply by firing the vendor and not consigning all those employees to the treatment trap. (Of course, there has been no measurable improvement in outcomes from all these doctor visits.) This employer and others could save another 0.5% simply by not insisting that their employees and spouses get annual checkups (and “well-woman” visits) because as readers of this site know, they have no value. The good news is that checkups are not likely to harm employees, which is more than can be said for many wellness programs. See also: Wellness Vendors Keep Dreaming   So we are already saving 3.5%, and we haven’t even done anything hard yet, where “hard” is defined as “something that does not delight employees, like getting rid of ‘pry, poke and prod’ programs.” In other words, “hard” isn’t really hard. Slightly harder opportunities In addition to an expose on wellness, Dave Chase exposes some scams that make wellness look like child’s play. (Wellness is child’s play, in the sense that any fifth-grader knows more arithmetic than a wellness vendor. And a 14-year-old knows more about BMI.) In no particular order, we’ll start with PBMs. Their stock prices have exploded — literally, 300-fold — in the last 30 years.  You think they achieved that growth honestly? They make wellness vendors look like Boy Scouts. They obfuscate everything, with “rebates” and “formularies” and under-the-table payments from drug companies, and all sorts of other things that we probably don’t even know about. Here is a New York Times article that casts just a little light on the subject…but more than enough light to indict the entire industry. It isn’t easy to ditch a PBM, but increasing numbers of alternatives are popping up. A good rule of thumb is, the thicker the contract with your PBM, the more you are getting ripped off.  I invite folks who offer one of these new alternatives to add a comment at the bottom of this posting or on LinkedIn following this posting. Then there are the carriers, who typically make more money, the more money gets spent. The number of scams is mind-boggling. For example, consider Dave’s explanation of what happens when a claim is overbilled: Another fee opportunity is so-called “pay and chase” programs, in which the insurance carrier doing your claims administration gets paid 30-40 percent for recovering fraudulent or duplicative claims. Thus, there is a perverse incentive to tacitly allow fraudulent and duplicative claims to be paid, get paid as the plan administrator, then get paid a second time for recovering the originally paid claim. Good luck trying to ferret your own claims data out of carriers so that you can do your own analysis on them and change policy accordingly. I do quite a bit of work for top-flight carriers, measuring their wellness-sensitive medical events. They always seem to have the data at their fingertips. We can complete the analysis for the year within weeks after claims run-out ends, meaning sometime in April. Meanwhile, I’ve got a Fortune 50 client whose carrier, Optum, still hasn’t managed to provide them (at an extra fee!) with their own event rates for 2016, a delay which more than coincidentally will make it impossible to implement any cutbacks in Optum’s services for 2018 if the event rates show that — hang onto your hats — Optum didn’t achieve anything. Don’t get Dave started on providers, who find highly creative ways to snooker employers and employees.  Like staffing in-network facilities with out-of-network doctors, who then bill patients ridiculously high charges. You need to re-contract with your carrier and put that one on them.  Or, if you’re large enough, recontract with the hospital. And speaking of hospitals, why have Leapfrog D- and F-rated hospitals in your network at all? If a geographic necessity, then at a minimum educate your employees that it might be worth the extra drive to avoid some major complications. Providers also bill companies what they think they can get away with, rather than what a buyer would expect to pay given what others in the area are charging. Because the company is generally not the decision-maker (the employee or doctor generally decides where to go, not based on price), providers often get away with it. An entire chapter is devoted to provider pricing scams and the importance of transparency. See also: A Wellness Program Everyone Can Love   Or, my own personal favorite provider scam, disguising emergency rooms as urgent care centers. (A rather naively idealistic Colorado legislator tried to make freestanding ERs disclose that they are not urgent care centers, but the provider lobbyists prevailed.) A sidebar: Quizzify trains employees to be on the lookout for these scams, which is helpful for the 0.1% of the 150,000,000 commercially insured employees who actually have access to the quizzes. The other 99.9% are on their own. And yet it all comes back to wellness Employer obsession with wellness has caused them to take their eyes off these many other balls, because wellness was supposed to solve everything (including industrial waste, according to HERO stalwart Bruce Sherman). Truly, wellness has been the Maginot Line of healthcare cost containment strategies. While a vastly disproportionate share of resources has gone into wellness, PBMs, carriers, providers and various middlemen simply circumvented these efforts, to dig right into your pocketbooks. I can only scratch the surface here — just go out and buy the book, and then you’ll understand both why when it comes to scamming employers and employees, wellness vendors have a lot to learn, and also why you should be mad as hell and not take it any more.

There’s a popular word this year that I’m really tired of. It may not be bothering you so much, but I’ve read it so much that it’s become this year’s “it is what it is” for me. "Disruptive"; adjective; relating to or noting a new product, service or idea that radically changes an industry or business strategy, especially by creating a new market and disrupting an existing one: (dictionary.com, definition of "disruptive") Every insurance startup or insurtech company is telling us how it's planning to disrupt the insurance industry. They’re going to single-handedly turn the insurance world on its ear by the magic of big data, custom apps and chatbots. Here is what their story seems to be, “The insurance industry has been asking you crazy questions, ripping you off and enriching themselves at your expense. We’re here to stop all of that.” See also: Harvey: First Big Test for Insurtech   Over the next few weeks, I’ll give you a few statements, their implications and (I hope) a reasoned response to them. After a couple of hours of writing, I looked down and saw how long this had gotten. I decided that it would be serving you best by making this a short series, rather than a (very) long article. You’re welcome. Here we go. Statement #1: We do good! Lemonade wants you to “forget everything you know about insurance.” They are going to give you: instant everything, killer prices, big heart. They made a big splash recently announcing their 2017 giveback. Implication: The insurance industry does not do good. Insurance companies take your money, give you nothing in return and, to top it all off, don’t do any good for you, your community or your planet. We’re the good people. Buy insurance from us and be a good person, too. Response: I reviewed Lemonade's website, and I have determined that they’re not doing any more good than other insurance companies. You might argue that other insurance companies are doing even greater good than they are. A quick thought about their “forget everything” mantra before we move to the meat of my response: I reject their “forget everything” statement. I sat at my desk with a friend of mine who’s an underwriter, and we walked through the application process. It feels a lot like other personal homeowners’ applications. So let’s park that forget everything bit. The biggest difference is that I don’t have an agent to talk to; I have a chatbot and a website. On to my response on their statement: The rest of the insurance world does good, too. Let’s look at a few ways that insurance does good.

1. The insurance policy is a good thing. People may doubt that when they buy their insurance, especially if they never have a claim, but just about the time you think you won’t need your insurance and wish you could cancel it, that’s when you have a claim. My son had an accident about two months ago in his new (to him) car. The accident did about $8,000 of damage to Sheila (his car; his second love. Stop laughing.) Because he’s making payments on the car, do you think he could pay for the repairs and the two months he had the rental car? I don’t think so, either. When you can’t retain the loss, the insurance policy is a really good thing.
2. Insurance people are good people. Having been in the insurance industry this long, I’ve met a lot of insurance people. They are constantly doing good. Some volunteer on boards of universities, colleges and non-profits. Many volunteer with different non-profits, like churches, the Humane Society in their area, hospitals, etc. My prior company hosted monthly blood drives; gave to the USMC Toys for Tots program; and had a community program that gave employees time off to serve our community. Another company that I worked for participated in the adopt-a-highway program in central New York. Fun days, in the median of Interstate 81, cleaning up bag after bag of trash. My current company is a big supporter of IICF. What’s that? The Insurance Industry Charitable Foundation. Take a look.
3. Search “insurance company charitable giving.” That search makes this final point. I don’t need to elaborate any further. The industry makes it clear that we’re interested in helping the world around us.

See also: 10 Insurtechs for Superb Engagement   Can we stop with the rhetoric that insurance companies don’t do good? Next time, we’ll discuss statement #2: It’ll just take a few seconds! This article first appeared at www.insurancejournal.com.

A couple of conversations with data leaders have reminded me of the data wrangling challenges that a number of you are still facing. Despite the amount of media coverage for deep learning and other more advanced techniques, most data science teams are still struggling with more basic data problems. Even well-established analytics teams can still lack the single customer view, easily accessible data lake or analytical playpen that they need for their work. Insight leaders also regularly express frustration that they and their teams are still bogged down in data fire fighting’, rather than getting to analytical work that could be transformative. Part of the problem may be lack of focus. Data and data management are often still considered the least sexy part of customer insight or data science. All too often, leaders lack clear data plans, models or strategy to develop the data ecosystem (including infrastructure) that will enable all other work by the team. Back in 2015, we conducted a poll of leaders, asking about use of data models and metadata. Shockingly, none of those surveyed had conceptual data models in place, and half also lacked logical data models. Exacerbating this lack of a clear, technology-independent understanding of your data, all leaders surveyed cited a lack of effective metadata. Without these tools in place, data management is in danger of considerable rework and feeling like a DIY, best-endeavors frustration. See also: Next Step: Merging Big Data and AI   So, what are the common data problems I hear, when meeting data leaders across the country? Here is one that crops up most often: Too much time taken up on data prep I was reminded of this often-cited challenge by a post on LinkedIn from Martin Squires, experienced leader of Boot’s insight team. Sharing a post originally published in Forbes magazine, Martin reflected how little has changed in 20 years. This survey shows that, just as Martin and I found 20 years ago, more than 60% of data scientists' time is taken up with cleaning and organizing data The problem might now have new names, like data wrangling or data munging, but the problem remains the same. From my own experience of leading teams, this problem will not be resolved by just waiting for the next generation of tools. Instead, insight leaders need to face the problem and resolve such a waste of highly skilled analyst time. Here are some common reasons that the problem has proved intractable:

• Underinvestment in technology whose benefit is not seen outside of analytics teams (data lakes/ETL software)
• Lack of transparency to internal customers as to amount of time taken up in data prep (inadequate briefing process)
• Lack of consequences for IT or internal customers if situation is allowed to continue (share the pain)

On that last point, I want to reiterate advice given to coaching clients. Ask yourself honestly, are you your own worst enemy by keeping the show on the road despite these data barriers? Have you ever considered letting a piece of work or regular job fail, to highlight technology problems that your team are currently masking by manual workarounds? It’s worth considering as a tactic. Beyond that more radical approach, what can data leaders do to overcome these problems and achieve delivery of successful data projects to reduce the data wrangling workload? Here are three tips that I hope help set you on the right path. Create a playpen to enable play to prioritize data needed Here, once again, language can confuse or divide. Whether one talks about data lakes or, less impressively, playpens or sandpits within  a server or data warehouse — common benefits can be realized. More than a decade working across IT roles, followed by leading data projects from the business side, taught me that one of the biggest causes of delay and mistakes was data mapping work. The arduous task of accurately mapping all the data required by a business, from source systems  through any required ETL (extract transform and load) layers, on to the analytics database solution is fraught with problems. All too often this is the biggest cost and cause of delays or rework for data projects. Frustratingly, for those who do audit usage afterward, one can find that not all the data loaded is actually used. So, after frustration for both IT and insight teams, only a subset of the data really added value. This is where a free-format data lake or playpen can really add value. They should be used to enable IT to dump data there with minimal effort, or for insight teams to access potential data sources for one-off extracts to the playpen. Here, analysts or data scientists can have opportunity to play with the data. However, this capability is far more valuable than that sounds. Better language is perhaps "data lab’." Here, the business experts have the opportunity to try use of different potential data feeds and variables within them and to learn which are actually useful/predictive/used for analysis or modeling that will add value. The great benefit of this approach is to enable a lower cost and more flexible way of de-scoping the data variables and data feeds actually required in live systems. Reducing those can radically increase the speed of delivery for new data warehouses or releases of changes/upgrades. Recruit and develop data specialist roles outside of IT The approach proposed above, together with innumerable change projects across today’s businesses, need to be informed by someone who knows what each data item means. That may sound obvious, but too few businesses have clear knowledge management or career development strategies to meet that need. Decades ago, small IT teams contained long serving experts who had built all the systems used and were actively involved with fixing any data issues that arose. If they were also sufficiently knowledgeable about the business and how each data item was used by different teams, they could potentially provide the data expertise I propose. However, those days have long gone. Most corporate IT teams are now closer to the proverbial baked bean factory. They may have the experience and skills needed to deliver the data infrastructure. But they lack any depth of understanding of the data items (or blood) that flows through those arteries. If the data needs of analysts or data scientists are to be met, they need to be able to talk with experts in data models, data quality and metadata, to discuss what analysts are seeking to understand or model in the real world of a customer and translate that into the most accurate and accessible proxy within data variables available. So, I recommend insight leaders seriously consider the benefit of in-house data management teams, with real specialization in understanding data and curating it to meet team needs. We’ve previously posted some hints for getting the best out of these teams. Grow incrementally, delivering value each time, to justify investment I’m sure all change leaders and most insight leaders have heard the advice on how to eat an elephant or deliver major change. That rubric, to deliver one bite at a time, is as true as ever. Although it can help for an insight leader to take time out, step back and consider all the data needs/gaps – leaders also need to be pragmatic about the best approach to deliver on those needs. Using the data lake approach and data specialists mentioned above, time should be taken to prioritize data requirements. See also: Why to Refocus on Data and Analytics   Investigating data requirements to be able to score each against both potential business value and ease of implementation (classic Boston Consulting grid style), can help with scoping decisions. But I’d also counsel against just selecting randomly the most promising and easiest to access variables. Instead, think in terms of use cases. Most successful insight teams have grown incrementally, by proving the value they can add to a business one application at a time. So, dimensions like the different urgency + importance of business problems come into play, as well. For your first iteration of a project to invest in extra data, then prove value to business to secure budget for next wave – look for the following characteristics:

• Analysis using data lake/playpen has shown potential
• Relatively easy to access data and not too many variables (in the quick win category for IT team)
• Important business problem that is widely seen as a current priority to fix (with rapid impact able to be measured)
• Good stakeholder relationship with business leader in application area (current or potential advocate)

How is your data wrangling going? Do your analysts spend too much time hunting down the right data and then corralling it into the form needed for required analysis? Have you overcome the time burned by data prep? If so, what has worked for you and your team? We would love to hear of leadership approaches/decisions, software or processes that you have found helpful. Why not share them here, so other insight leaders can also improve practice in this area? Let’s not wait another 20 years to stop the data wrangling drain. There is too much potentially valuable insight or data science work to be done.