For many small to medium-sized insurance carriers, government risk pools and captives, providing personalized customer service continues to be a priority. If your organization or your partners leverage digital technologies, you may have customers who expect that personal touch across channels. For these carriers, having a solid client relationship management (CRM) strategy is a priority. And while in theory a strategy is a great start, execution on that strategy often hits a couple of roadblocks, especially when it comes to finding the right technology to organize and standardize records related to better management of customer service, marketing and sales. After all, customer data is a lifeline to success for any business, but not having all of your customer data in one easily accessible place is usually a challenge faced by insurers that are on a growth path. See also: Yes, Personalize — but Get it Right!   This is complicated when insurers’ functional business units operate in silo fashion. For example, consider this workflow scenario: If underwriting can’t access a policyholder’s payment history or other financial records held in accounting, underwriting must email the accounting department to obtain it. Meanwhile, the customer, impatient for his quote, calls the carrier and is connected to a customer service representative who should be able to view all customer transactions, interactions, renewals, cancellations and other changes being made to the policyholder record, yet is unable to view data that reflects any issues that would affect the underwriter’s delays. Another roadblock relates to a common complaint among small to medium-sized insurers with limited or frozen budgets—the feeling by employees (users) of having to “do more with less.” Here we have a difficult and potentially negative cycle: If the insurer is operating with outdated technologies and processes and its spreadsheets and email platforms are overwhelmed by a growing customer database, the employee is unable to meet the customer’s needs and, over time, experiences burnout. The customer, meanwhile, is already shopping for another insurance carrier. For companies responding to these challenges by moving beyond a customer service excellence strategy and on to actual execution of a solution, an integrated CRM system is the next logical step. This type of technology puts the company in control—and requires rethinking of existing processes and creating process efficiencies. The inclusion of collaboration tools in the CRM help make this task possible, and creates a “team” effect even with the smallest of customer service departments. By their nature, CRM systems are rules-based, so customer data and records can be made available to the employee who needs it, when they need it. For example, consider the importance of receiving an automated alert of policyholder suspension, which triggers an audit trail, or the ability to build out custom fields to include additional categories, contact types based on demographics, channel partner status and more. The CRM should automate contacts, quotes, sales, tasks, calendar scheduling and more. But remember, this data automation doesn’t take place in a vacuum; it needs to be insurer-driven and should map to the policyholder’s unique requirements. It also should map to the distribution channel’s requirements, yet another source of critical customer data and the key to a better understanding of the policyholder’s existing status and changing needs. See also: Distribution: About To Get Personal   Let’s face it, digital technologies are with us to stay and can provide a powerful means to interact with a growing customer base. For small to mid-sized insurers on a budget, an integrated CRM system—once only an expensive pipe dream—today can be a reality. As your company grows and you have more policyholders than you can relate to personally, a CRM system makes it possible to “keep it personal” while providing superior customer service.

No physician wants to create an addicted patient. In almost all cases, they simply want to mitigate patients' pain. Good intentions with a bad strategy. The breakdown in the system stems from a poor understanding of pain and how to diagnose and classify it correctly. In effect, you have to match the treatment to the patient's condition, which means you need to possess a reliable method of diagnosing pain. Human beings experience three types of pain: 1) thermal pain -- quite rare and only produced in the very ill and systemically sick patients; 2) chemical or inflammatory pain -- pain that is mediated through a release of chemicals at a site of injury (this pain lasts five to seven days, occurs when trauma happens and is only present in 2% to 5% of all patients in pain); and 3) mechanical pain -- pain that is mediated through/by distortion or pressure on tissue (90%-plus of all pain that humans experience). Bend your finger back as far as you can until pain is produced, and you have just experienced mechanical pain in its purest form. A bulging or herniated disc in 95% of all patients produces pain because the wall of the disc is being distorted or strained just like your finger was when it was hurting. See also: Opioids: Invading the Workplace   You can't treat mechanical pain with a chemical intervention ( pills and injections). You can't treat chemical pain with a mechanical intervention. Makes sense, right? The problem is that we have a system built around using chemicals to manage pain and providers who receive less than two weeks of education in medical school around how to adequately assess and diagnose patients in this space. The evidence is overwhelming. There are dozens of studies that show little influence on back or joint-related pain (less than one point on a 10-point pain scale, and that's in only 30 % of the cohort) when using opioids, analgesics, muscle relaxants and steroids, yet every PCP and specialist in the land has them as the first stop off for MSK (musculoskeletal) patients. When the simple analgesics and muscle relaxants don't work, then escalate to opioids. Numerous studies show that less than 5% of patients experience any change in back pain when epidural steroids or transformational injections are used to put the medicine at the supposed source of symptom. Why are these studies struggling to find treatment effect on patients in pain with some of the best-trained examiner/physicians in the world conducting the study? It's simple. We don't train them to assess patients in a reliable way and to match chemical patients with chemical interventions and match mechanical patients with mechanical interventions (surgery and movement-based strategies). See also: 6 Shocking Facts on Opioid Abuse  90% of opioids are prescribed for back or chronic joint pain. The solution to the crisis is to teach providers to reliably sub-group patients into their appropriate pain group. Mechanical patients only get mechanical solutions, and chemically dominant or inflammatory patients get chemical treatment. Our failure to do this has allowed us to continue to use treatment methods long ago determined to be ineffective in this population and also forces providers to become inventive. We blame the patient; we claim they are gaming the system; we think the problem is psychosomatic or a construct in their mind -- when in reality we are not applying the right treatment to the right patient to the right body part at the right time.

In both traditional healthcare and pharmaceuticals, the phrase “value-based purchasing” is all the rage. Rightfully so, we want to spend our precious healthcare dollars on the care that is most valuable. In other words, we want to pay for care and drugs that are effective and not pay for those that aren’t. Like everything else, the shortest path to value is a truly competitive market. The gorilla in the room is that healthcare, and especially pharmaceuticals, severely lack this fundamental capitalist feature that we have benefited greatly from. American healthcare dwells in never-never land. We have neither explicit price controls through regulation nor implicit controls through a functional market, resulting in the worst of all possible worlds: a system that’s entrenched, opaque and dysfunctional. It gets worse when we narrow our focus on the drug market. We don’t even understand what it is that we are purchasing because buyers neither spend much time understanding drug effectiveness in the real world nor tie effectiveness to payment. Instead, in an attempt to save dollars, employers, health plans and the government have turned to intermediaries, pharmacy benefit managers, to manage the problem on their behalf. PBMs’ efforts to manage pharmacy costs rely on typical buzzwords like “formulary management,” “prior authorization” and “step therapy.” And PBMs are, as Bloomberg News explains, “the middlemen with murky incentives behind their decisions about which drugs to cover, where they’re sold and for how much.” See also: 9 Key Factors for Drug Formularies   This leads us down an unintelligible labyrinth of perverse financial incentives, with zero transparency for the payer or patient on the actual costs, alternatives for therapy and individual outcomes. That’s a problem especially in specialty pharmacy, the fastest-growing sector of pharmacy spending. Only a few years ago, specialty drugs composed a reasonable-sounding 10% of our overall drug spending. Last year, it bloated to 38%, and by 2018 it will be an astounding 50%, which is an increase of $70 million a day! Contrary to what we often think, there are better options even for many specialty drug therapies. Mavyret, manufactured by AbbVie, is the first example of a new brand name Hepatitis C drug that is actually better for patients and costs far less since Sovaldi hit the market at a price point of $1,000 a pill (never mind that you can purchase it for $4 per pill in India). Eighty percent of patients with Hep C can do an eight-week course versus alternatives manufactured by companies like Gilead and Merck, which generally require 12 weeks. Mavyret is the only drug that works for genotype’s 1-6 and has a list price that is less than half of what competitors charge, even after factoring in middleman shenanigans such as rebates. The final cost to cure a patient of Hep C is approximately $26,000. If that sounds high, consider that specialty medications for chronic conditions such as psoriasis are now $60,000 to $120,000 or more per year. If you’re like most payers, our current system locks you into paying more for drugs for your members that are less effective than proven, cheaper alternatives like Mavyret. For starters, your PBM may only provide more expensive drugs on its formulary because of large manufacturer rebates, the majority of which they retain. Formulary decisions, of course, are not based on what is most effective for the patient or cheaper for you, the payer. We feel the financial pain of this broken system every day, but it doesn’t have to be this way. Two decades ago, the internet revolution made the travel agency obsolete for most Americans. Uber and Lyft have done the same to parts of the transportation industry, and Amazon continues to do this to many others. What have these disruptive innovations taught us? That we might, in fact, be able to make better decisions ourselves, without non-value-added middlemen. It is time for this type of disruptive innovation to hit the pharmacy world. Today’s system focuses on controlling suppliers through PBMs, which in reality just limit our choices and prevent the functioning of a real market. Instead, if we were to focus on value, we could use patient data to give us an objective understanding of whether the patient was getting the right outcome at the right price. This scenario represents an opportunity for better health outcomes and savings compared with the status quo. Here’s the catch: To enter this world, we have to start saying “no” to the current "travel agents" and their obsolete model. See also: Opioids: Invading the Workplace   In many ways, Mavyret is like the canary in the coal mine. If this drug isn’t successful – we know it is better for the patient, more effective and costs less – what signal does this send pharmaceutical companies? Don’t bother discovering better drugs that cost less because they won’t sell! We salute AbbVie for doing what is right for patients and payers. America is the leader in driving innovation and investment in new drug discovery, and our inability to make the right choice not only reduces therapy choices for millions of Americans and their physicians but also for billions of others around the world who depend on us for leadership. Now is the time for payers to demand a functional market and stop overpaying for less effective therapeutic options.

The opioid crisis in the U.S. burst into full view over the weekend based on an investigation by the Washington Post and "60 Minutes" that showed drug distributors co-opting a few in Congress to pass a law that, beginning a year and a half ago, neutered any attempts by the Drug Enforcement Agency to halt even wildly suspicious shipments of the narcotics. This, even though the opioid crisis has already claimed more than 200,000 lives and created addictions that wrecked far more, in what the Post calls "the deadliest drug epidemic in U.S. history. (Here is the main Washington Post article and a transcript of the "60 Minutes" piece, including an interview with a whistleblower.)

Already, Rep. Tom Marino (R-PA), one of the three members of Congress singled out for pushing the legislation, has withdrawn as the nominee to be the drug czar in the Trump administration, and this story feels like it has legs. The president, who said in early August that he would declare opioids a national crisis, now says he will do so next week, adding official impetus to what will surely be a major effort among journalists.

When I was an editor at the Wall Street Journal, someone once described the ultimate story by an investigative journalist. It would begin: "There are a lot of bad people in the world. Here are their names...."

Well, journalists are going to be naming names on the opioid crisis and telling stories of those killed or crippled. McKesson, Cardinal Health and Amerisource Bergen are already being singled out, as the three biggest drug distributors, but there will be many more.

That coverage will create a platform for the many in the insurance world, especially workers' comp and healthcare, who have been sounding the alarm on opioids. We at ITL have been supportive, most notably in a manifesto back in February by Joe Paduda. Warning: "Pill-pushers" is the nicest term he uses to describe the drug distributors, which he says should have to pay to solve the crisis that he believes they created. If you're interested, search on "opioids" at the website, and you'll find many more articles, on various aspects of the problem.

We will now move into high gear, to try to take the opportunity to make headway on this huge problem. We welcome any thoughts you'd like to publish with us and will do all we can to help spread the word on ways to attack the crisis.

More generally, you'll also see us focus more on healthcare. I never believed that Washington, as dysfunctional as it is, would come up with some wonderful, clean solution to health insurance, but the drama needed to play out. Now that it has, we'll be publishing more pieces on ways that the private sector can both improve care and tame costs. The problem is daunting, but I assure you, just based on conversations I'm having, that an awful lot of smart people have a huge number of creative ideas. We'll bring as many as we can to the fore.

Cheers,

Paul Carroll,
Editor-in-Chief

A few weeks ago, in part one of this two part series, we discussed three trends that are disrupting the insurance claims cycle: the use of sensors, catastrophe support, and decreasing claims volumes. Indeed, these trends are drastically affecting the insurance industry, but there’s more. Investment in insurance technology has reached $3.4 billion since 2010. Most insurers, however, are falling behind in this trend toward digital innovation. In a survey by Willis Towers Watson, 74% of insurance professionals believe that the industry has failed to show leadership in digital innovation. Let’s take a closer look at a few more of the trends insurance professionals should consider. Trend #4 - Digital Disruption Insurance customers now want omnichannel access to products and services. This means the ability to file claims in person, on the phone, or, most importantly, through an app or website. The trend toward digital also means more personalized accounts and experiences for policyholders. As many as 76 percent of insurance policyholders report that they would change insurance providers to get personalized service and product offerings that are more tailored to their needs. See also: Disruptive Trends in Claims Cycle (Part 1)   Trend #5 - Improving Risk Management Increased access to data enables insurers to better manage and mitigate risk. With advanced data gathering and innovative technology, insurers can better know the risks involved in any number of situations. For example, wearable technologies such as Fitbits and Apple Watches are revolutionizing health and life insurance by providing data that was never accessible in the past. According to Accenture, 33 percent of insurers now offer services that depend on wearable technology. This trend toward improved risk management through technology can help insurers become more efficient in the risks they choose to take on. Insurers are now using “predictive modeling” to assess risk. According to Exastax, predictive modeling is allowing insurers to “identify whether drivers are likely to be involved in an accident, or have their car stolen, by combining their behavioral data with the exogenous factors such as road conditions or safe neighborhoods.” Trend #6 - Innovative Technology Technologies such as drones and artificial intelligence (AI) are also rapidly changing the insurance claims cycle. Both are being used to assist in claims processing. For example, drones can be used conduct insurance inspections on property damage claims, particularly following catastrophic events where conditions are too dangerous for physical adjustors. It is projected that 7 million drones will be owned by Americans in the year 2020. As a result, it is likely that the number of freelance drone operators working in the insurance industry will go up, radically changing the insurance claims cycle. AI makes it possible for many insurance-related processes to be completed without any human interaction. Consider that a chatbot called Jim, from insurer Lemonade, can settle a claim in less than 3 seconds. Insurance professionals know that this type of speed is critical and game-changing, particularly in times of increased demand. See also: How to Be Disruptive in Emerging Markets Final Thoughts Like many other industries, the insurance sector is undergoing unprecedented changes as a result of technological advancements. We know that the use of drones, AI, wearables and app-based products will continue to disrupt the insurance industry. It is becoming increasingly important for the insurance industry to respond to such inevitable disruptions and decide how to harness these powerful trends.

An entire industry is caught by the digitization fever. There is a wild spread of seminars and conferences about digitization, hundreds of new digitization experts, lots of startups. The term "insurtech" is en vogue, and to talk about digitization is hip and mainstream. Nevertheless, up to now, this is all pretty much about talking and less about doing. The industry needs a little less conversation and a little more action. Please! Insurance business is changing, and this transformation is no ordinary evolution because it already becomes apparent that the magnitude of change is bigger and the speed at which the change will move through the industry will be significantly higher than ever before. It will be a fundamental change – a revolution – through which insurance business will reach the next level at last. The basic idea of and the need for insurance will last, but this may not hold true for each and every insurance company and the current best practice. The following lines focus on the state of the union of life insurers and discusses some options for action to find the right way through this all-or-none transformation. What’s the state of the union? Safety and peace of mind are some of the essential needs of almost every human being. Life insurance companies have delivered that for decades. Especially private retirement provisions are getting more and more important – not least because of increasing lifespan and state pensions that tend to decrease. In fact, today best agers treasure up their wealth on savings accounts and earning almost zero interest. Potential tax incentives and unique selling propositions add pros to the account of the life insurance industry. All in all a perfect environment, isn’t it? Well, the status quo offers some “issues” that make life a little bit hard and that may sound the bell for an end of paradise. Just think about increasing competition, more critical customers, stricter regulations, potential competitors from outside the industry and the capital market environment that reveals that business in force is less profitable as calculated earlier. Indeed, life insurance industry is in an upheaval and in a life crisis. The industry has to deal with several challenges on several levels. On macro level, the advancing individualism of customers and the low interest rate environment in combination with higher regulations fuel the need for innovation and for processes, products and services that are more flexible. Customers are accustomed to a digital experience offered by companies like Apple and others, and they expect the same level of customer experience from an insurer. On company level, topics such as capital efficiency, a powerful step-in of risk management, de-risking of products, complex processes and expensive administration represent a huge obstacle for innovation. Given administration systems, processes and organization of most of the existing insurance companies make digitization and individualization difficult to achieve. On micro level, the complexity of modern products and their extensive and incomprehensible documentation complicate sales process. This is a further circumstance that does not accelerate new business at all. See also: Digitization: Bots Take the Reins   Insurer are searching for the global masterplan An entire industry is caught by the digitization fever. There is a wild spread of seminars and conferences about digitization, hundred new digitization experts, lots of new startups, at least the term insurtech is “en vogue” and to talk about digitization is hip and mainstream. Nevertheless, up to now, this is all pretty much about “talking” and less of “doing”. The industry needs a little less conversation and a little more action. Please! The history of life insurance business is characterized by different, replacing cultural epochs: sales, product and risk culture. For each era it is typical that it has a one-dimensional perspective. Unfortunately, one-dimensionality does not create satisfactory solutions nowadays. Single measures in different areas, such as a new product feature or a fancy app, simply fall short – especially, when these measures are not matched. The present situation requires a holistic approach and the method of trial and error. This balancing act is totally new to insurers. There is no global masterplan that can be imposed as a blue print on all companies. The starting point for a company should always be a holistic and individually derived new business strategy. A tiny, cute plant called insurtech Let’s face it, the insurtech movement is nothing more than a little plant yet. Insurtech is still in its infancy and this tiny, cute plant will grow large. In fact, the first half-year of 2017 is shaped by accelerated activities in the insurance technology area. There is no “jack of all trades device”. However, technology will help to solve most of the present issues if it is used now and in the right way. Dear insurers, the tech movement is your friend! Let’s have a look at some examples. Forget about paper: 100% digital policies The interface to the customer is a weak and challenging spot all at once. Online platforms and portals demonstrate it to us: it all works without paper. Banks offer a convenient and foolproof access to saving accounts and the portfolio of financial assets. It is not a business secret that customers are used to it now and that they require it from insurers as well. The idea of a paperless overview on all insurance policies at hand is so good and charming. To have real time information on my insurance account is great and to change contract or personal details whenever I like to is priceless. The customer wants to be enabled through his own and individual portal. Via this gateway, an insurer may pool the entire communication with the customer and he allows the customer to choose the mode: communication by written messages, a chat bot or a video chat. No paper and no idle time. Upgrade your underwriting: from static to dynamic statistics and alternative data Usually, the health status of a retail client for risk products is checked during the offer process as part of the underwriting (e.g. via health questionnaire). On the basis of this snapshot the price for the risk coverage is derived and fixed for the whole term. A healthy life style of a client afterwards is not rewarded, like a bad life style is not penalized. In an economy of an advanced individualism this is for many customers a little bit dissatisfying. Thanks to fitness trackers this may change. By the help of these little electronic devices the health status can be monitored during the duration of the policy (e.g. via daily activity level). Based on behavioral economics, the client takes an active role in managing his wellness and health. He is encouraged to develop healthy long-term habits. A client that is supporting his health is rewarded, e.g. via reduced premiums or other rewards. These so called life style or wellness programs are already present in life and health insurance. A popular example is the Vitality program introduced by Discovery in South Africa several years ago. Individualization of life insurance coverage is not totally new. Just think about the differentiation between smoker and non-smoker, the usage of the body mass index or information about the current job in case of disability insurance. Once a life insurance company offers in a market a new differentiation successfully, it will put pressure on the rest to follow, if they want to prevent adverse selection. Furthermore, alternative and additional data, like for example geospatial information provided by consumer credit providers, may enhance and innovate underwriting as well. Accelerate your product development: faster time to market and modular, individual products Insurtech may also originate when a life insurer and a FinTech work together in the area of saving products. An investment-linked life insurance product offers to its retail clients usually a broad universe of investments funds or other financial assets. This means on insurer side some administration issues (e.g. ordering and depositing of fund units, etc.). In addition, some older administration systems may not be able to manage several funds in parallel or do not allow any algorithmic based investment scheme. An upgrade of the system may take some time. Furthermore, classic funds are said to be costly and in the end, who cares about the individual portfolio of each retail client? For the latter reasons, the so-called Robo-Advisor emerged in the area of financial services and wealth management. A Robo-Advisor is a FinTech that simplifies and optimizes wealth management. Thanks to maximum efficiency and automation it offers for retail clients an individual and digital wealth management for a low minimum investment. Based on the risk appetite of the retail client, the Robo-Advisor manages the portfolio on a daily bases. So, why don’t we combine an investment-linked life insurance product and the service of such a Robo-Advisor? This is just one example of an automation and flexibilization of product development that allows a much shorter time to market. Such a cooperation and automation allows for totally new, flexible and individual products and related services. It brings in modular product concepts, which are already common in other, more technologized, sectors like the automobile industry. Modular product concepts enable an efficient development and administration as well as an individualization of a product offer. Product development will be more interactive and more customer centric than ever before. And this is good news! Put the puzzle pieces together: the financial cockpit The core question is about what customers really would ask for if they would know what they need. Or, to put it different, what would be most useful and helpful for a customer? The average customer is lacking of two important things: (a) he has no deep knowledge in financial products (incl. insurance products) and (b) he has no (real-time) overview on his financial assets. However, this is essential! How could a customer develop his financial strategy without knowing about his present situation? How could he execute his strategy without knowing what product are available and how these products work? If we give to these customers a foolproof self-service portal with an individual and modular product offer, he is in the position to manage his personal finances – on his own or by the help of any financial advisor (human or robot). This is the birth of the “financial cockpit”. See also: The Customer Service Dichotomy   The value chain is transforming. In the past and still up to now, the sales forces (partially controlled by the insurance companies) have the valuable contact to the retail clients. This will change. The power moves back to the retail clients and probably directly to such independent platforms. Existing sales forces and insurance companies have to connect to these platforms in order to remain part of the business chain or they develop such a portal on their own. In the end, it is all about cooperation Life insurance business is in a transition process and this transformation is no ordinary evolution. It will be a fundamental change, a revolution. It is time for companies to reconsider the existing business model and the way in which they do business today. Important elements of a new business strategy are the enhancement of the business model and to enter into cooperation. Insurtech is a big opportunity. Technology can help a life insurer to a break-through in the seemingly hopeless world of regulation, low interest rates and stagnating new business. Technology is capable of creating a “win-win-win”-situation because retail clients will benefit, too. Clients will be served quicker, more flexibly and more transparent – or to put it briefly: simply better than today! An insurtech startup is not afraid of leaving beaten paths. Revolution is part of its DNA. The need for change and continuous improvement is the impulse for its acting. Insurtech startups proof that it is neither necessary nor sufficient to be a large company in order to innovate or to be disruptive. This attitude will help a life insurance company to reach the next level. It is hard to believe that an entire insurance industry or the idea behind will be disrupted but some companies and current best practice will be. For sure! The revolution has already started. Insurtech will change life insurance business more than regulation can ever do and finally, this time, Godot will arrive.

Since its passage, the Affordable Care Act (i.e., ACA) has been a controversial law. From the time of its passage in March 2010 until U.S. House and Senate Republicans began their efforts to repeal and replace the ACA in the spring of 2017, support for the law has never exceeded 50%. The ACA’s lack of popularity is a function of the disruption it has caused in the Individual insurance markets and the premium increases passed on to policyholders. However, some provisions of the ACA are very popular. One aspect of the law that has significant public support is the protections it provides for persons with pre-existing conditions (i.e., guaranteed issue and modified community rating), with polls showing public support for these provisions at 78% or greater. Protections for persons with pre-existing conditions and the lack of a strong Individual mandate are the main reasons for the high premium increases observed to date in the Individual ACA market. Simply put, high premium rates have caused younger and healthier consumers to forgo ACA coverage. This problem is exacerbated by the current 3:1 age rating restrictions, which result in younger consumers paying higher premiums compared with their relative risk. As premium rates continue to rise, this trend will escalate, which could lead to one or more the states finding their Individual ACA markets in an adverse selection spiral. It is the opinion of the authors that persons with pre-existing conditions are not insurable risks, and that attempts to accommodate them in insurance market risk pools are bound to fail. Furthermore, we think that providing healthcare insurance coverage to persons with pre-existing conditions amounts to a necessary form of charity, and is therefore a public good. We believe that forcing responsibility for the funding and management of public services onto participants in private markets is neither fair nor prudent. Instead, we believe the cost of such mandates should be the responsibility of those who enact them, i.e., the general public through its elected officials and government agencies. The authors agree that persons with pre-existing conditions should not be denied affordable health insurance coverage. However, we think the appropriate vehicle for covering these people is a high-risk pool attached to the Individual ACA market and funded by general tax revenues. We believe that a properly structured high-risk pool would greatly lower premiums in the Individual ACA markets, significantly reduce the number of uninsured, provide for better returns on investment for care management programs, would be relatively inexpensive to operate, and would provide for a strong and sustainable lasting Individual health insurance market in the U.S. Policy Proposal This section provides the details for our proposal for the establishment of a permanent high-risk pool to pay for the cost of members with pre-existing conditions in the Individual ACA market. To make our proposal as easily understandable as possible, please note that all rules, subsidies, and structures that currently apply to the Individual ACA markets would continue to do so unless stated otherwise. Here is our proposal:

1. The federal government, through the Centers for Medicare & Medicaid, would administer a high-risk pool to cover people with pre-existing conditions who are seeking health insurance coverage in the Individual ACA market.
2. The cost of the program would be funded by a combination of the insurance premiums paid by the members identified with pre-existing conditions and general tax revenue generated through an additional payroll tax.
3. All member premiums in the Individual ACA marketplace would be priced assuming that no one in the risk pool has a pre-existing condition.
4. The allowable age rates for adults would increase from the current ratio of 3:1 to 5:1.
5. Members identified as having one or more pre-existing conditions would have their premiums and claim costs ceded to CMS. Members would continue to use their “insurer’s” networks and benefit plans as long as those members continued to pay their premiums to the insurance company. Insurers would forward providers’ bills for members with pre-existing conditions to CMS as they are received, and CMS would directly pay the providers within a set period of time (e.g., three to six months).
6. To be defined as having a pre-existing condition, an applicant would be required to have a current diagnosis at the time of enrollment for one or more conditions from a pre-defined list of conditions. This means that a member who develops a condition that is on the pre-existing conditions list during a coverage period would be the financial responsibility of his insurance company not CMS until the beginning the of the next coverage period. Please note that the policy would allow insurers to underwrite new members entering the Individual ACA for the purpose of determining whether or not they have a pre-existing condition at the time of enrollment.
7. CMS would establish care management programs (administered internally or externally through vendors) for members identified as having pre-existing conditions, and would work directly with providers to efficiently and successfully manage the care of those members.

Please note that the above list is a general policy outline. We imagine that there could be ways to “game” this, and we reasonably expect that legislators and regulators will anticipate and react to attempts to circumvent the purpose and goals of the policy. See also: What Trump Wants to Do on ACA   Modeling Methodology for Claims Projections The relative costs of Individual ACA members in 2015, with and without pre-existing conditions, were modeled using the 2014 and 2015 Individual ACA membership and claims experience Axene Health Partner’s proprietary experience database. The 2015 Individual ACA experience in AHP’s experience database included more than 2.5 million member months. Chronic conditions for these members were assigned using the University of California, San Diego’s Chronic Illness and Disability Payment System (CDPS) risk adjustment model. The CDPS model assigns one or more of 58 possible conditions based on ICD9 and ICD10 diagnosis codes. To simulate the underwriting of pre-existing conditions, we defined two classes of members with pre-existing conditions: members with known conditions, and members with undisclosed conditions. Members with known conditions were identified by comparing the CDPS results for Individual ACA members in 2015 with the CDPS results for members with any eligibility in 2014 with this health insurer. Conditions for these members that existed in both 2014 and 2015 were considered to be pre-existing in 2015. Members with undisclosed conditions were, by definition, more difficult to identify. For members that had Individual ACA eligibility in 2015, but no prior eligibility with a health insurer in AHP’s experience data, we assumed that the member had an undisclosed pre-existing condition if claims incurred within the first month of a member’s eligibility, as well as the claims over the remainder of 2015, were for one or more of the listed CDPS conditions. Because the CDPS model is intended to calculate the total relative risk of a given member based on all of a member’s conditions, the model can flag a member for multiple conditions. For our modeling purposes, we wanted to assign at most one pre-existing condition per member, because it was not necessary for us to split a member’s total claims cost across multiple conditions. In cases where the CDPS model assigned more than one pre-existing condition to a given member, only the most severe condition was recorded. Condition severity was based on the CDPS model’s risk weights, and all costs were assigned to the condition with the highest risk weight. We did not consider all of the 58 conditions used in the CDPS risk adjustment model to be appropriate for the pre-existing conditions high risk pool. Approximately two-thirds of the CDPS condition categories were excluded due to their relatively low CDPS model risk weights. We tended to keep conditions with qualifiers of “High” or “Very High”, more often than qualifiers of “Medium” or “Low”. We also used some judgement to include certain conditions when other categories within a certain condition class were already included. In the end, 21 conditions for adults and 19 conditions for children were chosen as appropriate for the pre-existing conditions high risk pool. Members who did not have a pre-existing condition on the list of chosen conditions, or members with no conditions at all, were assigned a condition of “none” for our modeling purposes. Table 1 below provides a summary of the pre-existing condition categories chosen. Member months, member counts, allowed claims, and paid claims from AHP’s experience database for 2015 were aggregated for each condition into seven age bands. From these summary statistics, the probability of a member having a given condition by age band was calculated. Average allowed and paid claims PMPMs were also calculated for each condition and age band. Using the summary statistics developed from AHP’s experience database for 2015 Individual ACA experience data, we modeled the expected cost of each state’s 2015 Individual ACA market. The total Individual ACA population that would be simulated for each state, as well as the distribution of ages within a given state, were collected from CMS public use data. The total Individual ACA population of each state was modeled based on the total State Billable Members Months listed in Appendix A to the Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2015 Benefit Year. Billable member months were grossed up by approximately 0.40% to calculate total member months. This gross-up factor is based on the ratio of total member months to billable member months that we have seen in our clients’ recent data. Where possible, the distribution of ages within a state were based on the 2015 Marketplace Open Enrollment Public Use File. This report only contains information for the 37 states that used a federally facilitated exchange in 2015. For the states not captured in that report, the distribution of ages in the 2017 Marketplace Open Enrollment Public Use File were used instead. A Monte Carlo simulation was performed in order to create a simulated Individual ACA market for each state. A set of random numbers was generated for each member in each state. These random numbers were used to assign the member’s age band by comparing the random number to the age distribution of members for a given state. A second set of random numbers was generated for each member and used to assign a condition by comparing the random number to the distribution of conditions for each age band. PMPM costs for each condition within each age band were scaled so that the expected total paid PMPM for each state tied to the state’s Average PMPM Claims reported in the 2015 Paid Claims Cost by State Report, produced based on data submitted to the EDGE server for purposes of the reinsurance program. Please note, we believe the actual population of people with pre-existing conditions that would obtain coverage through the above defined high-risk pool would be essentially unchanged from the 2015 Individual ACA members who we have identified as having a pre-existing condition from our list. This is because the ACA premiums and subsidies are very attractive to those with pre-existing conditions, and we do not expect that our proposal would make the Individual ACA market more attractive to people with pre-existing conditions in any meaningful way. Using the above methodology and data sources, we were only able to model the costs of the Individual ACA markets in 48 states. Excluded from our analysis were Massachusetts, Vermont, Washington D.C., and other U.S. territories such as Puerto Rico and Guam, due to a lack of publicly-available information necessary to model the costs of their Individual ACA market participants in 2015. The results of our modeling provided us with average paid claims and “sustainable market premium” PMPMs for each of the 48 states. These metrics were calculated both including and excluding members with pre-existing conditions. We defined the average sustainable market premium as the premium that would result in an average loss ratio of 82% in each state’s Individual ACA market. Our last step was to develop aggregate results for each of the four metrics across all 48 states. Modeling Results Table 2 below provides a summary of the results of the 2015 Individual ACA markets in the 48 states we modeled. Ceding members with pre-existing condition to CMS would have decreased the size of the 2015 Individual ACA markets in the 48 states in our analysis by approximately 3.1%, lowered total paid claims by approximately 23%, and decreased sustainable market premiums by almost 21%. In total, health insurers in the 48 states in 2015 would have ceded $14.3 billion in claims and $1.84 billion in premium to CMS (leaving a net unfunded program cost of $12.5 billion) under our proposed high-risk pool program. Assuming that program expenses are 5% of total costs results in net program costs of $13.1 billion a year in 2015 dollars for the 48 states. Scaling this result to account for all 50 states, Washington D.C., and U.S. Territories would increase net program costs to $13.6 billion a year in 2015 dollars, which we rounded to $14 billion to provide some conservatism in our estimate. By ceding members with pre-existing conditions to CMS’ Individual ACA high-risk pool, we have shown that insurers could lower sustainable market premium rates by more than 20%. A reduction in Individual ACA sustainable market premiums of 20% would make future premiums rates much more attractive to younger and healthier people who would otherwise forgo health insurance coverage. Similar to the manner in which members with pre-existing conditions can cause premiums rate increases to compound due to adverse selection, removing those members from the Individual ACA pool could have a favorable compounding effect on rates as a healthier average risk pool causes premiums to drop, thereby attracting additional healthy members who have an additional favorable impact on premiums. See also: 10 Ideas That Could Fix Healthcare   Additionally, by resetting the age curve from 3:1 to 5:1 (i.e., the maximum ratio of premiums paid by members age 65 to premiums paid by members age 21), allows for a further decrease in required premiums for younger and healthier members. Table 3 shows that removing members with pre-existing conditions from Individual ACA risk pool and resetting the premium age curve from 3:1 to 5:1 allows for decreases in required premium rates for all ages of at least 5%, while decreasing rates for the youngest members over 40%. These premium decreases are before the impact of the positive selection spiral. With the lower rates attracting more younger individuals into the risk pool, the premiums for older individuals will decrease accordingly. Additional Considerations Done correctly, we believe the creation of a high-risk pool of Individual ACA members with pre-existing conditions would result in a better return of investment for care management programs for these members. Given that members are allowed to change insurance carriers, persons with pre-existing conditions are as likely as any other market participants to shop for better plans and rates for the coverage they require. Care and disease management programs often require long time horizons to bear results. This means that insurers are less likely to implement cost-saving programs when members who benefited from the programs could change insurers before the full impact of the members’ claims cost savings are realized. By moving a large percentage of those with high-cost conditions to care management programs administered by a single entity (i.e., CMS), the return on investment of these programs is likely to be higher and results of the programs are likely to be more impactful for all insurers participating in the market. Due to the large volume of claims for members with pre-existing conditions, CMS would have the ability to review clinical practices, related costs, and outcomes for the services provided to these members. This information could be used to develop approaches to improve the effectiveness and efficiency, while lowering the cost of the care provided to these high cost claimants. Using evidence-based targets, CMS could then enter into gain and/or risk-sharing arrangements to help improve the quality and lower the cost of care provided. Conclusion In this paper, we have introduced a straight-forward and workable policy proposal that would continue to provide health insurance coverage to people with pre-existing conditions, significantly lower premiums in the Individual ACA insurance markets, reduce the number of uninsured, and allow for the creation of care management and risk-sharing arrangements with providers that would could greatly improve the quality and lower the cost of care. The annual price of this proposal would be approximately $14 billion in 2015 dollars, and represent an approximately 0.38% increase in the federal budget. Considering the importance that voters place of health care cost, quality, and access, we believe that our policy proposal would provide a popular and effective change to this critical component of the U.S. health care system at relatively small price.

Customer service is rapidly shifting to self-service, digital, and mobile, with the next wave including chatbots, natural language processing, and AI/machine learning. This new era of customer service promises to be more efficient, more effective, and even fun in some cases. And from a customer perspective, the opportunity to save time and ensure accuracy is a big benefit. For insurers, the potential to optimize resources and reduce expenses is a major driver of activity in this area. However, before we rush headlong into these new customer service options, it might be beneficial to take a look at the reality of technology-based customer interactions today. Most of us have already benefited from digital, mobile self-service, but have also been victims of tech gone wrong. At a recent panel discussion at the SMA Summit, Helen Thompson from ESRI noted the frustration we have all experienced in dealing with interactive voice response systems (IVR), as we struggle to work through the options tree and ultimately end up shouting at the phone “REPRESENTATIVE” in a vain attempt to connect to a Live Human. See also: Much Higher Bar for Customer Service  Another recent encounter I had with self-service is painfully demonstrative. My plan to cancel a subscription for an online magazine that cost about $8 per month took 3 phone calls, the filling out of two web forms, and waiting for a chat session that never happened. In the end, my only recourse (suggested by the one real person I talked to) was to block the transaction through my credit card company. What should have been a simple cancellation turned into a 45-minute ordeal. I could go on citing examples, like my car’s Bluetooth that continuously fails to recognize simple, familiar names when I request it to dial and, instead, launches calls to random individuals. I’m certain that you can think of your own experiences and interactions via chat sessions, IVR, or online web forms that were less than satisfactory. What does this mean for insurance customer service? I believe there are two primary implications for our industry. First, there will be a role for humans for a long time, whether it is for agents, contact center representatives, field adjusters, or other professionals. This is not to suggest that insurers and insurance professionals should be complacent. On the contrary, it is vital that new technology options are understood and adopted to augment human capabilities. The agent, adjuster, and contact center rep of the future will look very different than they do today. Second, insurers must move toward a true omni-channel environment. There will be multiple ways to communicate with agents, prospects, and policyholders, including many digital and human interaction options. The challenge (and opportunity) is to enable the smooth transfer of those interactions and the related information between the different channels in real time, so that the customer is provided with choice, and the use of digital and human capabilities can be optimized. See also: Life Is a Bowl of… Customer Analytics   Right now, there appears to be a dichotomy with a wide gulf between the potential and the reality of automated customer service. But the shortcomings of the technology today should not result in insurers ignoring the potential. The best way to create an omni-channel environment that offers and delivers customer service that suits every customer is to move forward now. One final note – great customer service will always be a function of culture. Whether an insurer is delivering customer service through bots or people, through digital means or a variety of human interactions, the secret sauce behind superior customer service will be the commitment to customers and a passion for excellence.

I’ve written a fair amount over the years about what is wrong with the American Health Care System from ethics to pricing, structure, incentives etc.  So, what needs to be done to fix it? In the end, is there a better way? Listed below are some of the ideas that I think would have a profound impact on lowering costs and improving quality.  None are new, but taken together they could be very powerful: 1. Get rid of Fee For Service (FFS) medicine. Yes, its cliche but it needs to be gotten rid of and the best solutions are to move the risk to the providers, through global capitation or other bundled payments. Providers will need to put in the resources and expertise to manage this and work to drive the 30% of waste out of the system, thereby potentially making more profit than before.  This is one of the reasons why it is so important to continue the various bundled and capitated payment programs now being implemented by CMS and others.  Providers need to learn, and learn fast, no more sticking one’s toe in the water, take the dive. Another example of how bundled prices or capitation can save money.  If a hospital has a fixed bundled price for knee replacement, how hard is it to bill that?  You don’t need a bunch of billing clerks and others to be sure every item is on the bill the hospital submits, and on the payer side, they don’t need a bunch of people reviewing the hospital bill to re-price the $75 aspirin or remove the extra band aids that were not provided. Who cares whether the hospital used an additional band aid at that point if the service was appropriate and high quality. 2. Revise the 80/85% Medical Loss Ratio (MLR) requirement.Let’s say you manufacture cars and sell each one for $10,000. Per the MLR rule, you would have to spend $8,500 (85% of your sale price) per car on all the parts and labor, excluding marketing and management. Your cost for marketing and management would come out of the remaining 15% and then whatever is left over is your profit. In this example assume marketing and administration are $1,000 (10%) leaving your profit at $500 (5%) per car. You as the manufacturer now negotiate lower prices on your supplies and it now costs you $8,000 to make the same car. According to the MLR rule, you can no longer charge $10,000 for your car, but can only charge $9,411.76 because the costs of parts and labor must make up 85% of your total charge; and unless your marketing and management fees were reduced, you now would only legally make $411.76 per car. So why would you get more efficient?  In healthcare, the question is, why as a health plan would you want to improve the health of your members and seek to prevent illness, thereby reducing the 85% you paid for their medical care; ultimately reducing the 15% for other expenses and profit?  Current health plans want to get 15% of an ever-growing number, they want 15% of $10,500 the next year and on and on. This was a fundamental flaw in the ACA. I understand it was to ensure that health plans do not make money by denying services, but there is an upper and lower range to most quality measures not a fixed point and the same goes for healthcare services. Health Plans or those accepting the risk should have a range that their MLR must fall in and/or some way to benefit when they can show that their efforts improved the health of their members and thereby reduced costs. See also: So Here’s an Idea on Healthcare Reform   3. Target Medication Pricing and the Supply Chain.  We pay way too much and there are so many people in the middle of this that there are multiple opportunities. Here are two.  The first is to allow importation or other means to get access to cheaper medications.  Want to see prices drop fast, that’ll, do it.  We’ll reach a happy medium somewhere below what we pay now and what we allow developing countries to pay for the same medicines. At the same time, we need a new system of medication purchasing and distribution, an Amazon type system that gets rid of the many middlemen adding a piece of cost/profit at each touch point. Think also beyond the pharmacy:  Imagine a system where you go online and take the order direct from the manufacturer through Amazon with a drone delivering the medications to your door. In healthcare medications are one of the best “onion” examples, it just keeps adding layers to the service and each layer adds costs.  Just the fact that companies often hire consultants to review their PBMs who are supposedly getting them the best rate is all you need to know.  In fact, one major corporate chief medical officer told me verbatim “I’m sick of getting ripped off by my PBM.” 4. Watch out for Aggregation to increase prices versus lower costs. Hospitals are rapidly embracing this philosophy, driven by the ACA, as they are buying up practices, opening free-standing ERs and the like.  It’s amazing to watch as these efforts more often than not increase admissions and costs.  I was at an American College of Healthcare Executives meeting where the panel topic was how hospitals would survive the move from inpatient to outpatient services. In a stunning show of honesty, two of the three senior hospital executives said they were not going to move to a more outpatient based approach and were in fact doing everything they could to increase admissions. They both claimed to have been so successful at pushing people into their hospitals that their inpatient census continued to rise and were at record levels. Well at least they were honest (in front of a friendly audience). Going back to number one, if they have a fixed price (capitation) for the person or population, they’ll figure out once and for all that the hospital is a cost center and reducing beds, not building more, while allowing services to occur through the lowest cost point in their network is the key to profitability. And yes, maybe constructing less gorgeous and elaborate facilities might lower costs as well. Here’s another classic hospital aggregation approach to increase costs, acquire the oncology doctors and then stop providing infusion services in the clinic. Why?  Because hospitals can charge 2-4 times as much when the infusion is completed in a hospital outpatient or inpatient facility versus the doctor’s office. 5. Sell healthcare services on eBay or Amazon. I spoke with eBay years ago about this concept, but they were not interested.  Why they wouldn’t want a piece of the $3.2 trillion healthcare market is beyond me, but hey perhaps Amazon? My dream is to go online and schedule my MRI at 3 am for $150 or $200 because the radiologist has an open slot and I am paying out-of-pocket. Sure, I know, what about quality? Well vet the places, provide real outcomes and quality data and publish it. 6. Narrow the networks based on quality and price.  Most people say they hate narrow networks, and of course when done based solely on price, I hate them too.  But I experienced a narrow network in action long before they came into the lexicon.  As a child, I was a frequent visitor to the ER, I broke a lot of bones and had a few other stitches and scrapes. My father was a Professor of Medicine.  I can’t tell you how many times he narrowed my network and told the physician who was walking in to see me that they would not be treating me. He knew all the doctors, the good and the bad.  I healed up well, thanks to him.  I also experienced issues with poor quality during his later years with Lewy Body Dementia and other ailments. There were more than a few times I wish I could have thrown the doctors out who were suddenly assigned to treat him because he was now covered by a Hospitalist and some specialist he had never seen. They nearly killed him a few times.  As in any field quality varies. 7. Allow Medicare and Medicaid the flexibility to send patients outside of the United States.  As an add-on to number 2, why not save billions by flying surgical patients or those with Hepatitis C out of the country to get much cheaper services or drugs?  I’m sure after a few flights, the providers and manufacturers will come running back with lower rates. And while we’re at it, how about the prisons, there are a lot of Hepatitis C patients now incarcerated who should be getting treated. We need to look at issues like Hep C from the patient side. Because of the high costs of the drugs in the United States, there are hundreds of thousands of people who are not getting access to the treatment. Is that good? 8. Don’t let Congress be bought. Not sure how to do this except through an election, or changing the rules of lobbying while remaining within constitutional bounds, which is well out of my wheelhouse. The healthcare industry uses Congress to protect their interests at the expense of average Americans who are now burdened with excessive costs and poor outcomes compared to other developed countries. See also: Wellness Isn’t the Only Scam in Healthcare 9. Send Crooks to Jail. Healthcare has a fair amount of fraud, and you know what, its perpetrated by people, people who hide behind corporations.  Typically, the corporation settles, without admitting guilt of course, pays a fine and moves on.  But what about the people who directed the corporation to do this stuff? If we sent more people to jail, we’d reduce the fraud. Recently, there have been more announcements by the DOJ holding  individuals personally accountable; so it seems this is moving in the right direction. 10. Invest in our communities and social services. These phrases have become mantras now:

1. 1. healthcare only accounts for 20% of your health;
   2. your zip code is one of the best indicators of your health status;
   3. how you live determines how you die,

We must invest more in the areas that affect health like community, safety, schools, parks, access to housing and food, but, and it’s an important but, we have to hold the organizations that we fund accountable, too many of them exist to exist and offer limited value. Much of this funding could come from savings in healthcare costs. Together we can create healthy communities for all our community members. These ten ideas are but a start and I am certain that there are many other good and viable ideas for fixing our healthcare system. It’s time we got serious and began implementing more of them. What are your thoughts and ideas?

Anyone who even casually follows insurance industry business developments is no doubt aware of the recent spike in announcements by TSPs (Telematics Service Providers), auto makers, information providers, insurance carriers and the related articles from industry thought leaders about many new products, programs and partnerships all focused in one way or another on the connected car (and driver). To oversimplify it, this is all being driven by a wide range of opportunities perceived by each of these participants to represent significant monetization of the related data. Until very recently, telematics supported the interesting and novel little corner of the auto insurance industry known as Usage Based Insurance (UBI). UBI was seen by the industry as little more than a marketing channel and a few carriers – most notably Progressive who used it effectively in their Snapshot program to lure several million new customers (mostly low mileage, safe drivers seeking to be rewarded by discounts for doing little more than connecting a device to their vehicle for 6 months). However, hardware and administration costs plus the phenomenon of adverse selection made these programs marginally profitable, if at all. But now, as OEMs and others have begun to realize the commercial value of vehicle and driver data, now accessible through increasingly more powerful smartphones and the increasing amount of onboard connectivity appearing in newer cars, numerous new participants and new programs are emerging regualrly. Good examples are the Telematics Data Exchanges introduced by Verisk, LexisNexis Risk Solutions and otonomo, who have attracted large OEs and insurance companies as partners. Announcements this week alone include;

• telematics insurer Root is in talks with OEMs seeking alternative driver data from connected cars for claims and underwriting
• Milliman, Inc., a premier global consulting and actuarial firm, announced a driving "risk score" created with tech start-up Zendrive that is claimed to be up to six times more powerful than the leading predictive models.
• Octo Telematics to acquire UBI assets of Willis Towers Watson and partner with them on insurance-related products

See also: Ready for Telematics? 7 Considerations   And over just the past few months of 2017;

• IMS development kit speeds delivery of insurance telematics and connected car programs and enables insurers to simplify and unify app development by integrating telematics and connected car services directly into their existing or new mobile applications.
• Octo Telematics released Glimpse Plus, a digitally-enabled telematics service that provides a reliable way for insurers to gather accurate data on driving behavior, as well as more detailed crash detection and claims analysis. The solution also enables consumers to use their smartphone to monitor their driving habits and become safer drivers.
• Arity, the technology unit of Allstate that was established just last year, is now offering Shared Mobility Solutions to offer interested parties access to risk data and driving analytics.
• Arity also announced that it has entered into an agreement with National General Insurance to build and launch a new telematics program for the insurance company
• CCC Information Services, whose core platform already connects over 350 insurers and 24,000 repair shops, announces new CCC ONE for OEMs platform that links insurers to OEM connected car and vehicle data
• LexisNexis Risk Solutions and Verisk Risk Solutions introduce Telematics Data Exchanges making OEM driver and vehicle data available to insurers
• LexisNexis and TrueMotion join forces to provide smartphone app solutions, data services and advanced analytics, enabling insurers to deliver distracted driving models as well as traditional UBI programs
• LexisNexis Risk Solutions engaged with three auto manufacturers (including Mitsubishi) to provide unique solutions through LexisNexis Telematics Exchange to provide greater insights and ROI for insurers and auto manufacturers
• Verisk Insurance Solutions and Driveway Software introduce a smartphone telematics solution to automakers who participate in the Verisk Data Exchange to deliver greater flexibility to automakers and their millions of customers who own older vehicles and previously couldn't leverage all the benefits of data connectivity.

And this list is really only the tip of the iceberg. Many more strategies and emerging partnerships and alliances are under development and we can expect numerous announcements over the next few weeks. For car makers, telematics represents a major step forward in the long sought after upgrade of the customer engagement and lifetime relationship…and the related associated revenues. These include offering location based services in partnership with third party retailers, finally exerting real control over accident management and related triaged services from Towing to Temporary Rental to increased use of OEM parts in repairs and increased direction of accident repairs to OEM certified collision repair facilities. Indeed, it could well include the packaging and sale of auto insurance with the price of the automobile. Proving the point is Ford’s recent leadership change with Jim Hackett taking over CEO duties from Mark Fields who was notably failing to carry Ford into the future of vehicle technologies. Of particular interest, and now driving renewed carrier interest in telematics, are the various applications focused on Claims and automated FNOL (First Notice of Loss) – the holy grail of meaningful loss cost reduction. When accidents are reported in real-time, carriers can triage critical services such as towing, temporary rental cars, schedule collision repairs and reduce attorney penetration in the event of 3rd party injuries. In addition, automated claims reporting with all of the related accident documentation (including onboard video) will significantly reduce some aspects of fraud and help to determine fault, liability and comparative negligence where applicable. And, maybe most importantly, over time and as individual driving histories and behaviors become more generally available from third party databases (much like credit scores), insurance underwriting and pricing will become more accurate and precise, leading to greater profitability. Ultimately, we expect to see consolidation on the information provider/TSP side as supply exceeds demand and uptake and we expect to see partnerships of convenience between OEMS and carriers as each realizes their true core competencies (making cars and managing information and claims) and settles for their respective pieces of the large revenue prize. See also: Telematics Has 2 Key Lessons for Insurtechs And while it may seem counter-intuitive that so much energy and capital is being invested in drivers and vehicles even as the proliferation of self-driving vehicles are a virtually inevitable reality, meaningful penetration of fully autonomous cars is still decades away. Moreover, many of the same technologies being leveraged in today’s connected car and driver programs utilize the same basic components and designs upon which self-driving cars will depend. And today’s programs will serve to make consumers more comfortable with the concept of always being connected and sharing driving behavior and other personal information in exchange for some perceived value. But none of this will evolve much further without overcoming serious challenges from consumers and regulators, foremost among them the long overdue debate and resolution of data ownership, privacy and security concerns. In the end, only permission-based solutions requiring positive consumer confirmation will assuage those concerns (and even then not for 100% of the population), and that permission will require all participants to share potential rewards with consumers. One might look to the EU’s impending General Data Protection Regulation (GDPR) and its severe penalties coming into force May 2018 for guidance in this regard.