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.

Maturity in innovation means the innovative approaches taken by companies throughout the ecosystem are becoming more comprehensive and systematic. SMA has acquired a unique historical view of innovation in insurance through our annual SMA Innovation in Action Awards – and we have seen how it has changed over the six years of the program. Small-scale experimentation with a single emerging technology like drones has been replaced by building an entire product or division around advanced technologies like machine learning. Insurers are also taking concrete and proactive steps to establish an innovative culture within their organizations. This year’s award winners provide great examples of these shifts and show how innovation is becoming firmly established in insurance. An excellent example is Liberty Mutual Insurance, the winner of a SMA Innovation in Action Award for company-wide innovation. They created a sustainable innovation model across the enterprise to successfully deliver transformational value to their operations and customers. Their innovative initiatives include developing a digital, direct-to-consumer insurance product aimed at skiers and snowboarders, multiple skills for Amazon Alexa that break new ground in how consumers interact with their insurance company, and a number of next-generation telematics programs. See also: Innovation: ‘Where Do We Start?’   Liberty also implemented cutting-edge analytics and emerging technologies in support of their Liberty Mutual Benefits carrier, winning an award for innovation in a single initiative. Building the data structure from the ground up gave Liberty Mutual Benefits the opportunity to create a data-driven organization with a focus on speed to market and innovative thinking – in effect, an InsurTech within the larger Liberty Mutual structure. Liberty Mutual Benefits leverages the open-source analytics platform Hadoop, artificial intelligence, visual analytics, and machine learning to extract the greatest value from big data and store it in a data lake rather than a traditional data warehouse. Innovation at Liberty is not only happening within their innovation division, Solaria Labs, but throughout their business, with various external partnerships as well as investments through their strategic venture arm (Liberty Mutual Strategic Investments). Liberty Mutual is demonstrating how innovation as an organizational value can both drive competitive advantage and create new solutions for customers in the digital age. TAL, Australia’s largest life insurer, took their own approach with an innovation initiative. The first achievement of that program is a new breed of customizable life insurance, CoverBuilder, which won one of this year’s awards. TAL CoverBuilder allows consumers to build their own personalized life insurance policy by adding or removing blocks of coverage. Designed by consumers through interactive online processing and education, new policies can be written without the help of a financial advisor. They can see how each choice they make affects their premium and benefits, and educate themselves about their life insurance options at the same time. As a result, they both understand and value the coverage that they put in place. TAL’s new product approach is tailored to the self-directed digital consumer. They found that these new customers valued customization rather than simplicity and were willing to learn about many coverage options in order to personalize their coverage. TAL’s nimble pivot allowed them to better serve these customers. They furthered their offering by partnering with Qantas for early rollout, marrying their life insurance expertise to next-generation business models such as wellness programs. Grange Insurance created an internal practice to institutionalize innovation through cultural change, regular events, and multiple channels. Their formal innovation practice elicits active participation across the enterprise, using an ideation platform for crowdsourcing innovative ideas, regularly scheduled hackathons, gamification, and communal discussion boards. All business and IT associates are incented to participate, backed by strong support from the senior leadership team. Some of the new ideas, like their skill for Amazon Alexa and an associate mobile app, are already in production. Many others are in the development pipeline following hackathons focused on increasing customer retention and potential uses for chatbots. Grange has also benefited from adapting their cultural mindset to structured, scientific experimentation and accepting failure as a key learning step toward successful innovation and creativity. Grange’s direct, inclusive approach to innovation complemented their established business practices. The first hackathon dealt with policyholder retention, taking a new look at an old problem. Together with advanced technologies like natural language processing and chatbots is simple, low-tech collaboration: communal whiteboards for brainstorming and communication across siloes, with enthusiastic participation by top executives. See also: Insurance Coverage Porn   This year’s insurer award winners are well-established companies with long histories, not greenfield insurers. Together, they have been writing insurance for 335 years. As exciting as the InsurTech world is, it is not the only home of innovation. In fact, the shifts that the winners have taken show how they can take advantage of the best of the new world without giving up their existing expertise. The convergence of these two ways of thinking positions them as Next-Gen Insurers. What is clear from these examples is that these shifts are possible, valuable, and indeed central to the future success of these organizations. So, we urge insurers of all sizes and lines of business to look closely at these examples of convergence, where innovation complements an insurer’s established strengths. The opportunities are out there in every aspect of your business – and are paying dividends to the business of insurance.

Blockchain technology is being hyped as ‘internet's superlative’. Some even think that blockchain promises to be a new infrastructure for financial services by 2020. The essence is that it facilitates peer-to-peer exchange of value, that is without the intervention of a third party, and that indeed renders the possibilities endless. Applications include identity validation, risk reduction, dramatic process improvement (on speed, accuracy, transparency and cost efficiency), fraud prevention, effective and efficient compliance and a lot more we can't possibly know about at this point. In this blogpost we listed our favorite blockchain showcases. All five have been selected for DIA editions in Barcelona or Amsterdam. All five match our key criteria; they significantly contribute to operational excellence and customer engagement innovation.
1. Tradle: KYC on blockchain New York-based Tradle is using the blockchain to build a 'know your customer' (KYC) requirements network to secure both intrabank and external transfers. Current technology has moved little beyond pen and paper but the blockchain provides a secure digital infrastructure. Tradle's system, ensures the transfer of data is verifiable. It's about transferring trust, not assets. With KYC on blockchain, Tradle is building a global trust provisioning network to give retail, wealth, SME and institutional customers of financial institutions faster access to capital and risk allocation. Tradle helps financial institutions to turn the pain of compliance into commercial opportunity. Read more … Check demo … See also: Blockchain: Basis for Tomorrow   2. Everledger: blockchain-based diamond fraud detection Everledger is a digital, permanent, global ledger that tracks and protects items of value by using the Bitcoin blockchain as a platform for provenance and combating insurance fraud. The London start-up is starting with diamonds, with a view to expanding into other luxury goods - high value items - whose provenance relies on paper certificates and receipts that can easily be lost or tampered with. With Everledger, the record is tamper-free; it’s immutable and can therefore be trusted. It also provides a Smart Contracts platform to facilitate the transfer of ownership of diamonds to assist insurers in the recovery of items reported as lost and/or stolen. Smart Contracts will also enable a fundamental change in the diamond marketplace and the way they’re financed. Diamonds are a global problem in terms of document tampering and fraud. In London it’s a 2 billion USD problem, meaning it is realistic to generate revenue with a blockchain-based diamond fraud detection system. Read more … Check the keynote of Everledger CEO Leanne Kemp … 3. Eris Industries: The smart contract application platform to solve big problems The London start-up Eris Industries has built a universal platform for smart contracts and legal applications of blockchain technology. This platform is the first that allows the full potential of blockchain-based technologies to be realized in business. By combining blockchains and systems of smart contracts, businesses can take any data-driven human relationship and reduce it to code – guaranteeing accurate and consistent execution of functions that hitherto required human discretion to manage. The free software allows anyone to build secure, low-cost data infrastructure with run-anywhere applications. By using permissionable, smart contracts’ capable blockchains developers can easily solve commercial data driven problems. Read more … Check demo … 4. Guardtime: the world's largest blockchain company Guardtime is a cyber-security provider that uses blockchain systems to ensure the integrity of data. The company has its roots in US defense systems and expertise in state-level digital security (Estonia). Guardtime uses Keyless Signature Infrastructure (KSI), a blockchain technology that provides massive-scale data authentication without reliance on centralized trust authorities. Unlike traditional approaches that depend on asymmetric key cryptography, KSI uses only hash-function cryptography, allowing verification to rely only on the security of hash functions and the availability of a public ledger. In this way, Guardtime guarantees data integrity without the need to keep secrets. In short, instead of putting all of the data up in the blockchain, they only take fingerprints of the data. Read more … Check demo … See also: 5 Main Areas for Blockchain Impact   5. Kevinsured: blockchain powered chatbot insurance for sharing economy Kevin, Traity’s new chatbot, provides micro-insurance for online P2P transactions. Created in collaboration with Australia’s financial services conglomerate, Suncorp, Kevin protects buyers on online marketplaces such as Gumtree, Facebook and Craigslist. From buying football tickets to renting a bicycle, Kevin insures any P2P transactions against theft, fraud, scams, etc. Anything. Millions of transactions happen between strangers every day. Most of them work out really well, but the small percentage of scams make people fear strangers. Kevin brings trust to people buying, selling and renting from one another, Kevin ‘insures the use of internet’. To help stop scammers, startup chatbot Kevinsured is here to support online buyers. For any transaction under $100, Kevin validates the integrity of parties to insure the transaction between the buyer and seller. Once a purchase is made and Kevinsured is notified of it, the chatbot reaches out to both the buyer and seller to verify everything is legitimate. $100 may not sound like much, but it covers most of the transactions online. Furthermore, at Kevinsured they think that this is not just about insurance but about prevention. Users who buy and sell through Kevin will be subject to a reputation check, and scammers will simply try to avoid it, so they are likely to see a low level of scams, because scammers prefer to be anonymous.

The difference from one year to the next can be astounding. Just compare surveys of independent agents from the end of 2015, with the same survey taken a year later at the end of 2016. Industry outlook improved significantly as 49% felt positive about the year 2017, compared with only 33% for 2016. But…before we start doing the happy dance, let’s take a more in-depth look at the state of independent agents. Not as Good as It Seems Despite the hoorays and hoopla, we’re not uncorking the champagne just yet. There are still disconnects between independent agents and carriers over workforce efficiency. In a recent survey conducted by National Underwriters (NU) in conjunction with PIA, Flaspohler, 66% of independent agents rated ease of doing business as the number one consideration when selecting carriers. EY sheds more light on this. Over a quarter of independent agents find the effort spent on administrative tasks to be a serious threat to growth, while 35% of agents told EY that they would stop, drop and roll for improved customer online tools, and 45% would stand on their heads for fewer forms and less paperwork. Furthermore, 60% of agents select carriers based on the quality of the tools they offer and 35% have left one carrier for another offering better options. See also: P&C Insurers: Come Out of the Dark Ages   Another major storm cloud on the horizon is product choice. Product choice significantly impacts the ability of agents to generate new business. In the NU study previously referenced, independent agents rated access to superior products and coverages 8 points in importance on a nine-point scale. As proof of changing consumer preferences, agents already report that demand for usage-based insurance and policies tailored to meet the needs of the sharing economy are escalating. Putting the Numbers Together Now that we’ve showered you with the rapid-fire numbers, let’s take a second to recap and focus on what it all means. Agents are seeing demands for a wider selection of products, including new coverage types related to the sharing economy. As a result, nearly half see the ability to customize products to the needs of their customers as integral to their future success. Greater product choice is also a concern with 40% of agents saying they need products to fit a wider range of consumer needs. Distribution is also a challenge. Digitally-enabled insurers are growing at 2.5 times the rate of their less- advanced peers. The difference between agents with strong digital capabilities and those still wading through complex forms and processes to quote, bind and issue products, is efficiency. Enabled with automation, digitally-empowered agents rapidly quote and issue products, meeting the needs of consumers expecting lightning fast distribution. As a result, more than half of agents select carriers based on the tools and capabilities they offer. For instance, Progressive, an insurer recognized for embarking up the digital tree when it comes to empowering agents, was ranked number one on independent agents’ list of approved carriers. While carriers fight aging legacy technology and costly, long new product development cycles, the world continues to spin and agents continue to award their business and loyalty to insurers capable of delivering the products they need in a seamless simplified transaction. Or, they take matters into their own hands, and find it themselves. Doing it Their Way Leading agencies are adopting a top-tier digital distribution platform with a tightly integrated market network of products. In doing so, they gain access to efficiency-enhancing digital tools and expanded product selection without taking on new carrier appointments. Agents use the digital distribution solution to bundle their current carrier appointments with products from the market network. It happens seamlessly, in a single transaction and all that customers see is an agent who can offer robust product choice and then quickly and efficiently quote, bind and issue the coverage they need. Benefits include:

• Tightly integrated market network: Waiting for carriers to develop new products and provide appointments can leave agents holding the bag with customer satisfaction. A market network gives agents access to the products they need now, without obtaining additional carrier appointments.
• Straight-through processing: PwC, in their recent report on the state of the P&C insurance market, proposed an interesting scenario: “…imagine a small business owner being able to enter just four pieces of information (e.g., business name, business address, and owner’s name and DOB) on a policy application and receiving a real-time business insurance quote with the option to immediately purchase and electronically receive policy documents.” Surprise, surprise, no imagination required with the right digital distribution platform, as automation prefills the application, quotes multiple product options and then binds and issues the coverage when the agent clicks the mouse. And it’s available for both personal and commercial lines.
• Improved efficiency: Stop working on those speed typing records. With digital distribution, you won’t need them. Data entry is minimized, giving agents a shorter, more productive path to policy quoting and issuance.

See also: P&C Core Systems: Beyond the First Wave   By selecting a digital distribution platform with a tightly integrated market network, insurers have improved agent efficiency, doubling quote volumes, converting 35% of those to sales and booking over 55,000 policies in a single year. Others who have started seamlessly bundling products from their own lineup with those from other carriers are selling 1.6 more of their own offerings, ultimately generating $70 million in premiums in under 10 months. Maybe it is time to start doing the happy dance after all. To learn more about the power of product choice and digital prowess, download our infographic, A New Year, A New Insurance Industry.

Workers’ compensation is constantly evolving with new case law and legislation around the nation every year. Because of this, managing a workers’ compensation program is a huge challenge for risk managers. At the CWC and Risk conference Mark Walls lead a panel discussion around the state of workers’ compensation. The panel included:

• Janine Kral, Vice President of Risk Management, Nordstrom, Inc.
• Jennifer Saddy, Director of Workers’ Comp/Corporate Insurance & Risk Management, American Airlines, Inc.
• Miriam Levario, Director of Workers’ Compensation, Warner Bros. Entertainment Inc.
• Duane Hercules, President, Safety National
• Rick Taketa, President and Chief Executive Officer, York Risk Services Group, Inc.
• Tom Ryan, Managing Director, Workers’ Compensation Market Research Leader, Marsh LLC
• Mark Walls, Vice President Communications & Strategic Analysis, Safety National (Moderator)

Talent attraction and retention for the future: what can we do? Social mission is a key message to attracting new talent. Employees care about getting those workers back to work as soon as possible. Employees want to have meaning and value added to their job. We are here to help people, here to help, here to entertain. Bringing in employees that are like family. They are coming to work for the brand not necessarily the company. That is how to retain employees. Employees are looking for a mission or bigger picture to be part of a bigger and greater good. Continue to tell the greater good of how we help injured workers. Work with universities and internships to create and build those relationships. People want a job with a purpose. How important is total cost of risk? Total cost of risk includes all costs of an insurance program. Imagine a pie cut into slivers and each of those pieces are costs of variable and fixed costs involved in a workers’ compensation program. As small as 10% could be fixed and 90% could be variable including surveillance, lost wages, medical costs, etc. Look at benchmarking compared to peers to see where your company stands compared to others. Create specific goals to measure and chose key data elements and watch those costs. Do not want the claims of today to turn into the claims of tomorrow. Open communication between workers’ compensation and company. See also: 25 Axioms Of Medical Care In The Workers Compensation System   Thoughts around drug treatment guidelines and drug formularies? Should create similar procedures and protocols for similar injuries, positives far outway the negatives. Create better true treatments for injured workers now not using 17 year old data and treatments that are outdated. Create clinical treatments early on and create benchmarking to create results, be proactive and not reactive. Predictive analytics is an industry buzzword now. How are you using analytics? First thing to look at is prevention. Look at how we can use that data and create prevention in that area. Post loss – look at opportunities to mitigate those losses. Prevention. Once you have an open claim, you have an open claim. Meet with safety and other departments that are having multiple similar injures. The word predictive is important. This requires action after you receive that data. Look into those claims and see which one will benefit from this predictive analytics the most. Pattern recognition from huge groves of data. Its not just about identifying what has happened in the past but how can that be used for the future. Use that data and create a workflow path for similar injuries. Need to check and recheck data to make sure its accurate. Make sure the reports are credible. Machine learning and artificial intelligence. What are some other technology areas for potential impact of workers’ compensation? Assisting and changing the way we communicate with injured workers. Large area for improvement for communicating with injured workers. Claimants should be able to get any information regarding their claim whenever they would like such as a portal they could log in and see where their claim is standing. Understand and know your audience. Some technology will work for younger claimants but some older claimants appreciate the personal phone call and not the text message. Collision avoidance programs to decrease injuries. Wearable technology and wearable devices can provide real time data to proactive to reduce injuries. How does California compare with other states? Its a nation to itself. Just the size is huge. Geographic and demographic complexity. Over the past few years there has been a lot of positive change. The state is also highly regulatory complex. Clear litigation issue in California that needs to be addressed. Highly more expensive. Changes over the past years have been favorable but there are still issues with litigation. Issues around marijuana More research needs to be done, it is an evolving trend for sure. Safety is a big issue and some companies want to remain a drug free workplace. Minimal regulations on medicinal marijuana. Needs to be a more safe environment and regulated. Challenge for some companies is around drug testing and remaining a drug free environment but these injured workers are taking heavy doses of opioids. Dealing with issues in states where marijuana is legal but the company is a drug free workplace. This gets confusing for employees. See also: How Should Workers’ Compensation Evolve?   How do you think workers compensation needs to evolve? Crucial for claims examiner and their role with the claimants. They can make a huge impact with the way the claim plays out. Effective use data and technology to increase workplace safety. This leads to better outcomes. Evolve to meet on demands needs such as Uber, Lyft and even delivery services. Attract the best and brightest new talent. Nothing is better than getting injured workers back to health and back to work. Look at a more holistic approach to health management and better alignment with health and wellness.