The insurance industry is expected to converge soon. It is an inevitable reality. The question is how quickly such convergence likely to happen? The answer is soon. Definitely within a decade. And needless to say, customers are going to drive the next wave of convergence for the insurance industry. The insurance industry must examine the convergence journey of banking industry closely. Today, banks offer varied converged portfolio of products for customers. It ranges from various account types, deposit and savings products, range of loans, various cards, investments, portfolio services to numerous products as per need of customers. The question is: if today, insurance buyers shop for P&C, life and health insurance products for their needs at different places, why such insurance is not readily available in a converged manner? This is definitely a big opportunity for the insurance industry. Insurers that already possess licenses for different insurance segments, must leapfrog in offering converged insurance products for competitive advantage. Market and Product alignment: P&C, Life and Healthcare industry Insurance industry traditionally has been operating differently for property and casualty (P&C), Life and Healthcare segments. It followed such industry alignment as per needs of various buyers since its formation time and historically such alignment continued over decades with minor tweaks as per market demand. The regulatory frameworks were built around an industry structure to protect the interest of buyers and encourage healthy competitions in the marketplace. Today, the insurance industry has reached the multi trillion dollar in size globally and it is one of the key contributors for every economy serving billions of people in the world. Although there a few handful insurance companies that offer personal, life, annuities, disability, health and other range of insurance products for its customers, such products are typically sold either as separate policies or different business lines under a different legal entity or divisions in a fragmented manner. The overall market is fragmented today in terms of serving the customer holistically. And this is a great opportunity for the insurance industry in offering converged insurance to its buyers. See also: Model for Collaboration and Convergence   Why worry about it now? It is an opportunity that cannot be ignored! Today, every individual or corporate buyer cares for the insurance. It is different thing that many lack understanding of insurance products, few find them too complex to understand and many think companies are not selling or offering the right products for their needs. However, this issue is more related to customer education or awareness and can be addressed. It is very likely that within a family or household, you may find a minimum of 3 or more different policies for personal, life insurance and healthcare needs that are purchased from different insurance companies. This is definitely a missed opportunity for many insurance companies and shows the poor state of the industry in not serving the customer holistically for their basic insurance needs. The question is not about whether the buyer understand insurance or not, but more about whether insurance companies offer adequate products catering to common/generic needs of buyers. Few people may cite regulatory hurdle, licensing challenges, underwriting/actuarial complexities and operating models as potential bottlenecks in adoption of converged insurance, however such doubts may become irrelevant in case the market start maturing or your competitor’s starts moving in that direction or customers start demanding such converged insurance. It is the time to assess the demand holistically, assess market future demand and measure customer feedback and inputs. Product bundling as a strategy is certainly good for competitive advantage Within a household, if we assess the personal lines insurance products that are purchased, one may mostly find that auto insurance is being bought from one insurance company, homeowners from another and travel insurance from different insurance company. The product bundling is a good opportunity not just within a segment (e.g. Personal insurance within P&C) but it makes more sense to bundle products across various insurance segments (e.g. P&C, Life, Healthcare) to serve the customer needs. And there are many successful companies today, who have been doing it with very positive results consistently. State Farm, Progressive, Liberty Mutual are a few good examples who have attained market leadership position in personal insurance in the United States by offering bundled Auto and home products for its customers for quite some time. Nationwide Insurance has been helping customers with bundling Auto, Life and Home products. Similarly, there many other leading brands globally who have been benefitting from product bundling. For example, in the UK, the market leader Aviva is the first mover this year (2017) in offering the converged insurance and made a formal commitment by merging its General, Life and Health insurance business units across the organization to offer simple, convenient and improved value service to its customers. The shift towards converged insurance is just starting in the marketplace and not very far to hit the industry in a big way. Convergence of products is becoming more critical in today’s digital age In today’s digital age, customers are inclined towards digital products that can be purchased seamlessly with ease with some initial research. If the brand is strong and insurance product(s) offer adequate value at affordable price, customers mostly would prefer to buy it from the same insurance company. The days are not very far when many insurers will adopt “one-stop-shop” strategy for serving customer in the new digital age by offering converged insurance products. It is the right time for insurance companies to start preparing for the new converged world, develop cross functional capabilities, identify changes required in processes, operating model and develop platforms that caters to the needs of the new digital world. Emerging Technologies definitely play a critical role in shaping the new converged digital ecosystem. It also offers an opportunity for IT players, software vendors and insurtech companies develop fit for purpose solutions that can address the need of the new digital and converged insurance economy. See also: Convergence: Insurance in 2017   Avoid market distractions: Focus on core capabilities and customer Centricity Many insurance companies today are concerned about the disruptions in the industry. The influence of emerging technologies, insurtech and sluggish growth are adding to the anxiety of insurers globally. While many insurers are focusing on digital themes today trying to keep pace with digital technologies, few are unknowingly tilting themselves away from their focus for core capabilities. Underwriting, risk management, claims management and customer Service are the core capabilities of any insurance company and they must continually refine, invest and improve these areas irrespective of the state or direction of technologies for its competitive advantage and market leadership. The technology investments and core capabilities, investment must be detached. Any trade off here is harmful in the long term for insurance companies. In today’s digital age, convergence of insurance is an opportunity for insurers to address the fragmented products and services landscape. Convergence of insurance is inevitable. The market shifts had just started and customer will drive the next wave of convergence for the insurance industry. Are you ready to be part of the industrial transformation? It is right time to think about it as a long term business strategy and distinctive tool for competitive advantage.

In a recent New York Times story, New Gene Test Poses Threat to Insurers, reporter Gina Kolata describes how data transparency and availability are disrupting underwriting for long-term-care insurance. Kolata discusses how this product, challenged for years by inaccurate claims forecasting and sky-high pricing, faces further threat of adverse selection -- as a consequence of innovation. The article highlights challenges that have potential to affect other insurance lines, as well. Carriers should take note. Companies like 23andme create data asymmetry between a policy buyer and the carrier, with the advantage flipped from the historical norm, where the carrier had the upper hand. With a $199 investment, all of us can now make more informed decisions about which risk pools we may fall into based on the odds, at some point in our lives, of being afflicted by one of 10 diseases covered so far (the company has regulatory support to expand its offering). The availability of predictive insights into future medical conditions at an affordable retail price signals that we are entering a world where we will be able to prioritize, with more knowledge than ever before available, where to put our insurance premium dollars. We will have more data to assess which risk pools are worth joining. See also: 3 Key Steps for Predictive Analytics   This is one more development overturning the business model for life, health and other products. $199 is a good deal when deciding whether to purchase a policy that might cost thousands of dollars in annual premium. The two million people who have already purchased a test kit would likely agree. Usage-based insurance (UBI) products, such as those offered by Metromile, Progressive and Allstate surface knowledge about an individual that helps the carrier with more precise underwriting, allowing the tailoring of a policy to an individual’s driving behavior. UBI also disrupts traditional risk pool principles. And, it is hard to imagine that UBI won’t hurt those with less favorable profiles. The full consequences to society may not be examined or understood until out into the future, but they are brewing. The 23andme model exploits personalized data, but from the opposite direction. It puts personalized data in the hands of the individual, off limits from the carrier. The power shifts to the individual, and, because he is under no obligation to share what he knows, now the carrier faces a greater disadvantage. Carriers can withdraw from markets, skim the beset customers or advocate for the creation of high-risk pools. Let's hope the insurance sector will also look itself in the mirror and recommit to its purpose as it relates to making it possible for a community to pool resources to protect individuals in an hour of need. The question is: Will insurers find a path to sustain their purpose under rewritten assumptions? The floodgates demanding reinvention are open. Any insurance player who thinks "this too will pass" or regulations will provide protection may be able to buy time for a while. But chances are his business is already being affected by what data is available to whom and when, by what will be growing data asymmetry working against the traditional insurance model and necessitate a redefinition of how to create and manage risk pools. Back in the 1990s, businesses began to recognize that the World Wide Web would change the way companies across all sectors engaged with everyone -- customers, employees, vendors and all of their other constituents. The notion of individuals, not companies, having greater control over what products and services they chose to buy and use was new. For those of us who were at least young adults at the time, the impact of anyone with connectivity gaining access to information via an act as simple as typing a query into the Google search bar took a while to digest. The insurance sector is a self-confessed laggard when it comes to internalizing and getting out in front of the implications of the Internet. The underlying business model has been relatively stable for a long time. There is evidence of risk pools going back 5,000 years, when shippers devised pools to protect against loss of cargo and crew at sea. The sheer complexity of managing an insurance business made it of lower interest to startups, at least until the last couple of years. See also: Let’s Get Rid of Risk Altogether!   Certainly while insurance companies have introduced countless products, brands have come and gone, and distribution, sales, regulation, automation and every other aspect of the business has evolved, the basics have not changed – the creation and management of a risk pool that is sufficiently durable to pay claims over time, and engagement of a broad community of individuals to feel that their interests are served by participating. Typically, over the summer, companies on a fiscal calendar year engage in strategic planning processes where leaders take a look out into the future and project the implications of big trends on their long-term financial outlook. It’s a good time to take out a white piece of paper and consider:

• Recommitting to their purpose as players in the insurance ecosystem
• Acknowledging what is different, and how to see threat as opportunity
• Prototyping alternative business models, including product, client interaction, distribution, servicing, underwriting and claims management – in other words, the major operating levers of the business
• Engaging in serious experimentation to chart paths that are feasible given the changes that are no longer theoretical – they are here.

May is Mental Health Month! Across the world, many companies are highlighting mental wellness, mental health condition awareness and recovery. Over the past 25 years, I have been helping organizations create effective mental health campaigns, and here are 10 tips I’ve learned and resources I’ve discovered to help your mental health awareness campaigns be most successful. 1. Normalize struggle safely One goal for many mental health campaigns is to let people know they are not alone. When mental illnesses and suicidal crises strike, people often suffer in silence. By letting people know that others have lived through similar challenges, campaigns can offer hope and community. Pain shared is pain lessened. The trap that some mental health campaigns fall into, however, is overemphasizing the prevalence of extreme behaviors as an “epidemic.” This type of messaging can make people feel hopeless about change. Worse, when it comes to suicide, this type of exaggeration might even create a cultural script that inadvertently influences people to engage in suicidal behavior, because it is the "norm" of what people do to cope with pain. Following the safe messaging guidelines helps ensure that the messages they are sending are promoting health and not creating additional risk.

• Positive example: “Each Mind Matters”
• National Action Alliance Safe Messaging Framework

2. Offer screening tools that lead to action Screening is a great example of a low-cost, high-impact tool to highlight during mental health campaigns. As with other health issues, screening for mental health conditions increases the likelihood that we can identify emerging symptoms and alter their course with early intervention. Screening offers people a way to anonymously self-assess, which is often an attractive first step for those who are ambivalent about seeking help. A screening that just gives participant a label, however, will fall short. Effective screening tools give participants a call to action and link them to additional local and on-line resources. Many on-line and paper screening options exist (e.g., Screening for Mental Health), and nationally recognized days can make screening a part of a community’s regular health programming:

• Special screening day initiatives

See also: New Approach to Mental Health   3. Know your resources on a first-person basis Effective mental health campaign leaders do their homework. If you want to be a trusted referral source, you need to walk your talk. Get to know your local mental health providers. Visit your local psychiatric hospital. Invite local counselors to a “meet and greet” event. Call your local crisis line, text the Crisis Text Line or contact your EAP (employee assistance program) to get a better sense of how it works. Ask the questions you need to have answered so you can refer people confidently. Your referral will be so much stronger if you can say, “Oh, I know Dr. So-n-so, she’s really approachable and competent. I’ll take you there to meet her if you’d like.”

• Need more information about EAPs? Here is a buyer’s guide:

4. Share stories of hope and recovery A main goal of many mental health campaigns is to reduce the stigma of mental illness; however, paradoxically, the more we talk about stigma, the more we actually reinforce it. Instead, we can fight stigma by sharing stories of hope and recovery. When we can demonstrate how others transform their wounds into sources of power, we create hope. When respected people come forward and say, “I suffered, and I got better,” others feel they can get better, too, and the issues become less marginalized. When campaigns highlight the experience of living with a mental health condition, focus on the turning points, the coping and resilience and the interventions that worked. One powerful storytelling resource that models best practices in safe and effective testimonies is the photojournalism of Dese’Rae Stage. Her project “Live through This” is an anthology of portraits and interviews of people who have lived through their own suicide attempt. Dese’Rae’s story and project are highlighted in a new documentary just released in April 2017 called “The S Word.”

• Live through This
• The S Word

5. Make messaging attractive, compelling -- and even fun What attracts us to advertising? Messages that make us laugh, catch us off guard or inspire us. It’s human nature to turn away from things that are scary, confusing and depressing. The challenge for mental health campaigns is to make messaging uplifting, engaging and compelling without becoming so superficial they miss the point. Here are some examples of messages on the mark and one example of what not to do:

• Stop using “head-in-hands” despair imagery
• Michael Irvin “To My Brothers” video for the NFL Lifeline
• Man Therapy – a mental health campaign for men that uses humor to get results: www.ManTherapy.org

6. Tell people what you want them to remember Sometimes, in our attempt to get attention to our cause, we play up tragic outcomes and overlook important calls to action and messages of hope. We need to tell people what we want them to remember: Treatment works, prevention is possible and people recover. Let people know what to do if they are struggling or if they are worried about a friend or loved one. Tell people exactly how to get involved in suicide prevention in their communities.

• More tips on creating an action-oriented, positive narrative

7. Engage leadership Often, mental health campaigns gain momentum at the grassroots level – passionate families, students or faith community members come together and apply their collective energy to make changes. “Grass-top” approaches should also be considered to augment this strategy. People in positions of influence can often move things along more quickly and usually just need to know that people care about an issue. So, engage your leaders to start the conversation. Ask them to speak publicly on why mental health matters to them, why it’s an important health and safety topic for your workplace and how mental health challenges have shown up in their own lives. If they have experienced a mental health condition including depression, addiction or overwhelming stress themselves and have received any form of support that was helpful, their “lived experience” is often the most important driving force in changing culture within a company. By sharing their vulnerability and positioning their story as overcoming hardship by reaching out, they model for the rest that “we are all touched by this, and we can get through it together. I’ve got your back and will persist with you to get you the help you deserve.”

• Leadership messaging examples and tips from the National Action Alliance for Suicide Prevention’s Workplace Task Force

See also: Language and Mental Health (Part 3)   8. Provide opportunities for deep learning Many mental health promotion efforts seek to promote awareness, but education alone will not move the needle. We call it the “State Trooper Effect.” We pay attention to educational or awareness raising efforts when they are done well and right in front of us, but once they are in our rear view mirror we tend to go back to what we were doing before. Deep learning goes beyond passive input of knowledge. Deep learning engages people in a knowing-being-doing process. Yes, education is part of that equation – a necessary, but not sufficient piece. We also need to get people “doing” – physically, emotionally and even spiritually involved in the work, and, to really make it stick, personal reflection on the experience is key. One example of “learning, being, doing” is Project Helping – a corporate, positive psychology engagement program that gets people engaged in actions that create a caring culture at work. 9. Create a symbol of solidarity We’ve seen how the color pink has symbolized breast cancer awareness. Symbols of solidarity work, but they need to be unique. When these symbols work well, people can see at a glance the community that is being built. Symbols used to promote suicide prevention can let people who are struggling know who might be a safe person to approach with questions. When the symbol of solidarity starts to spread to large groups of people it is a powerful testament to a person secretly in despair. Some examples of symbols of solidarity include: [caption id="attachment_25940" align="alignnone" width="318"] Photo by Joits[/caption]

• “Honor bead” necklaces worn at the American Foundation for Suicide Prevention’s Out of Darkness Walk. Participants choose to wear different colors to symbolize their experience – one color represents “I have lost a loved one to suicide,” another color might mean “I have struggled myself,” while another says that “I support the cause of suicide prevention.”

10. Promote belonging and purpose Thomas Joiner’s model of suicide risk tells us that a thwarted feeling of belonging and a perception of being a burden are two critical factors that increase a desire for suicide; the opposites of these states are belonging and purpose. When we create meaningful communities and let people know they are needed, we are doing suicide prevention. How can your mental health campaign help people connect to one another and find a new or renewed sense of purpose? How can people “pay kindness forward” and develop trusting relationships with one another? Conclusion Mental health awareness campaigns need to go beyond “awareness raising.” They need to do more than just share statistics and the local resources’ contact information. Promising campaigns model hope, inspire creatively, practice safe messaging and call us to action. The campaigns that are most effective go well beyond any awareness day, week or month and are “baked in” to a company’s health and safety culture. The ones that are truly culture-changing are “by, about and for” the people within the company; real employees telling real stories of hope and recovery. When we realize we have a secret we all share, the walls come down and we heal together.

Automating risk management, rating, quoting and renewals, integrating massive disparate legacy systems and redefining age-old business models – essentially all at once – is no small task. But it offers progressive insurers great opportunities to vault past the competition It seems as if almost overnight emerging insurance technologies have flooded the market under the rubric of insurtech. Of course, this isn’t quite how it happened. This shift in insurance, evolving over decades, has seen a rush largely due to the emergence of agile disruptors recognizing the need for digitization and automation in a market previously slow to change. The innovations have been fast and furious, but according to a recent Celent report, Life Insurance CIO: Pressures and Priorities 2017, insurance IT departments are still relatively slow to make innovation a top priority. Only 14% of carriers pursuing innovation say it will have a significant impact on IT spending. Some 71% report a moderate impact, and 14% say none at all. Nevertheless, as disruptive forces increase, traditional insurers will have to respond. See also: Preparing for Future Disruption… Take peer-to-peer insurance. This new model first appeared in 2010 when a German company, Friendsurance, decided to offer products that promote transparency. Its pricing reflects the number of claims recently submitted. Consider Lemonade—the insurance outfit, not the drink. It offers personal insurance to New Yorkers, boasting, “Maya, our charming artificial intelligence bot will craft the perfect insurance for you. It couldn’t be easier, or faster.” There’s even a charitable angle: “We take a flat fee, pay claims super-fast and give back what’s left to causes you care about.” New approaches such as Friendsurance and Lemonade are creating customer-centric models that could garner attention from consumers and may have the potential to change insurance dramatically. Driverless cars, enabled by Internet of Things technology such as sensors, will affect the way cars are insured. Google and Uber are already investing in fleets of self-driving vehicles, but, with few on the road as of yet, the extent to which safety has improved hasn’t been determined. But it is clear is that claims previously resulting from human error would likely no longer apply. The car manufacturer, not the driver, would be liable. If this happens, drivers can expect lower insurance premiums but may see higher prices or built-in fees for autonomous cars to reflect the transfer of risk from the driver to the manufacturer. Digital business tools such as electronic signatures are already having a big impact. The technology allows for the creation and transfer of secure signatures over networks via computers, tablets and smartphones. It can support completing an application or policy in one transaction. E-signatures improve workflow for the broker as well as the customer’s experience. Now brokers and customers can finalize transactions from anywhere at their convenience and eliminate the manual tasks of printing, scanning, faxing and emailing documents. Electronic signatures also help reduce risk by providing audit trails and ensuring all documents that necessitate a signature are in order. Benefits include lower costs, fewer errors and more streamlined processes. Regulations in some states limit the use of e-signatures, however. See also: Which to Choose: Innovation, Disruption?   These innovations are creating entirely new ways for insurance providers to reach and retain customers, and it’s only just beginning. Today, continuous innovation is just as important for insurers as the traditional disciplines of underwriting, financial management, marketing and customer service.

At first glance, innovation and risk management may seem diametrically opposed—the limitless possibilities of “what could be” being dragged down by worries about “what could go wrong.” This construct is far out of date, as leading risk managers have increasingly become vital partners in shaping their organization’s business strategy and enabling innovation. As director of business risk and insurance for one of the world’s most innovative companies, Loren Nickel of Google is charged with managing both the company’s everyday risks as well as an ever-evolving array of emerging ones. So how does he protect the company from risks in a fashion that still champions the innovation so vital to its long-term success? Aon sat down with Nickel, the recipient of the Risk & Insurance Management Society’s 2017 Risk Manager of the Year, for a wide-ranging conversation on how he strikes the right balance between innovation and risk. He shared his insights on integrating data and analytics in risk management, enabling innovation and effectively engaging with the C-suite. What is your philosophy of risk management? Loren Nickel: Our approach is rooted in analytics and quantitative analysis. It helps that Google is a company full of engineers. My team likes to quantify things that people may sometimes assume can’t be quantified. This process involves many different elements of analytics, including quantitative and actuarial analysis. So we use those frameworks to set priorities and strategic direction and to make sure that our current approach supports where the company is going to be in the next few years. Analytics helps us make the best possible decisions. I don’t think anyone could do the amount of risk management work that we’ve done without analytics. However, you do have to start from the ground up and build an analytics platform to make the changes that we’ve made to our organization. It’s about capturing information in new and different ways. With more accurate and timely information, products can evolve and improve over time. See also: The Current State of Risk Management   How do you position risk management to promote innovation? Loren Nickel: We’re not the “no” team—we’re not here to tell our colleagues how not to do things. We’re trying to guide them in the best way possible to create their products. That’s really how I would want to be perceived—that we’re trying to enable innovation. Google is working on several different kinds of emerging risks, and our team is involved. Our job is to promote good behavior so that innovation can continue. To make things better, you have to change, and that’s a constant process. If you’re just putting up barriers, you only see the result if someone tries to break through them. The problem is that you may be aware of just one out of 10 people who bumps up against these barriers; the other nine people might have given up because you’ve created too much process for them. They see the barriers and decide to focus on another area where there is less friction. It’s kind of the economics theory in the sense that all of these barriers to entry have a real influence on the company itself. Something I always push back on with my team is prioritization. If programs aren’t extremely material to the organization, we shouldn’t set up processes that limit or restrict innovation, ability or speed. When the risk and potential damage aren’t material, these processes just serve to slow down the organization quite significantly. Our efforts are focused on making sure that we’re really adding value and not just creating process for process’ sake. We often have to test those boundaries, meaning that, if you just remove the process, what happens? If the sky doesn’t fall, then that process is probably not something you need. How can you advise the C-suite more effectively? Loren Nickel: With my [risk management] team, we focus on translating technical information in a way that makes it very palatable to the C-suite. Packaging analysis for senior leaders is a very different challenge, and it’s critical to do so in a way that’s theoretically correct and gives the right answer. Building credibility and working to help senior leaders understand what is really critical to the business is a constant process. To establish credibility, you need to have knowledge and experience and be able to communicate that expertise in a nontechnical way. This task certainly sounds easy, but it is difficult. You often have to work internally on projects that maybe aren’t really risk-related, but someone needs your help. You do that to build credibility. Over time, as people gain a greater understanding of the value we deliver, they will seek out our opinions on different issues. It’s also important for our team to take a longer-term view of risk. When a team seeks our guidance, we’re typically closer to laws and regulations so we can direct them in the best way possible. Often, regulations are unclear or evolving. Take self-driving cars: Clearly, regulations will change over time, and it’s important for us to work with our internal teams around those issues. See also: 4 Steps to Integrate Risk Management   What fuels your passion for risk management? Loren Nickel: I believe that we are enabling changes in technology and in the world. For us the passion is basically enabling all of those technologies to happen more quickly and in a safer way. And the impact from a company like Google is just earth-shattering in terms of its magnitude. I think our team makes a disproportionate contribution compared with some other companies or places, just based on the size and scale of the organization and the amount of innovative work that’s coming out of the company.

If you are involved with workers' comp claims in any way, you undoubtedly have a stable of great stories to tell. Maybe you've seen the guy who claims he can barely walk yet finds the strength to run in a marathon. Or maybe you’ve seen the claimant who says he has never had any prior workers' compensation claims yet knows the workers' comp procedures better than most attorneys.

Watch Out for Those Sprinklers

Sheyla White, an office worker from Florida, alleged a sprinkler hit her in the head in October 2015. Unfortunately for her, the entire “injury” was captured on video. The video shows White sitting at her desk as a sprinkler part falls from the ceiling onto her desk, missing her. She pauses for a moment, looks around the room and picks up the device, slamming herself in the head with it. You can watch the edited video yourself here.

See also: Why So Soft on Workers Comp Fraud?  

White was convicted of workers' compensation fraud in May 2017 after the employer turned the video over to the Florida Division of Investigative and Forensic Services. Legend has it that a young Isaac Newton was sitting under an apple tree when he was bonked on the head by a falling piece of fruit -- a 17th-century “aha moment” that prompted him to come up with his law of gravity. In retrospect, White would be a happier woman today if the revelation she received following her self-inflicted hit on the head was: “Don’t commit workers' comp fraud.” Hindsight is always 20/20; for White, foresight would have avoided three to five in the slammer.

Workers' Comp Fraud Is Serious

Despite the fun one can have while watching White’s viral video premier, workers' comp fraud is serious business. It drives up costs to employers, adds to the backlog of pending claims and creates an atmosphere where even legitimate claims are often scrutinized. According to a recent study by Business Wire Magazine:

• More than one in 10 small-business owners are concerned an employee will fake an injury or illness to steal workers' compensation benefits;
• Nearly one in four owners also installed surveillance cameras to monitor employees on the job;
• One in five owners feel unsure how to identify workers' compensation scams; and
• More than half of business owners agree these are fraud flags: Employee has a history of claims (58%); no witnesses to the incident (52%); employee didn’t report the injury or illness in a timely manner (52%); and the injury coincides with a change in employment status (51%).

Most states have agencies devoted to workers' compensation fraud. These agencies investigate both fraudulent claimants (trying to steal workers' compensation benefits) as well as employers who refuse to pay lawfully owed benefits to injured workers.

Why Is Workers Comp Fraud Rarely Prosecuted?

Sheyla White was caught and convicted, but this is truly the exception rather than the rule. I’ll admit that, from my jaded perspective as a workers' comp defense attorney, I see a lot of fraudulent claimants who go unpunished. If you have spent any amount of time in the trenches, you’ll probably agree with me.

Here's the problem: When claims are pending, what is the desire of almost every employer and insurance carrier? It's: How quickly can we close the file? While this perspective is usually effective in reducing the cost of an open claim, it is not effective in prosecuting fraud. Why? The easiest way to close a claim quickly is to present evidence of fraud to the claimant’s attorney for the purpose of reaching a quick and reasonably priced settlement. Claim over. Done. Time to move on to the next claim. And yet, doesn’t this process simply encourage more fraud and abuse? If my daughter wrecks my car and tries to hide it from me, do I “punish” her with bags of money? Claimants are often rewarded for their bad behavior, not punished, and once the bragging on social media begins others, too, are encouraged to start their own fraud journey.

See also: Workers Comp Ensnares the Undocumented  

The other problem is the level of proof that is often required by state agencies to prosecute workers' comp fraud. Sure, it was easy to go after Sheyla White because there was video that couldn’t have been better staged by Steven Spielberg himself. But what about the thousands of claims where sexy video is not available to guarantee a quick and easy prosecution? Un-prosecuted fraud, like rabbits in spring, simply creates more of its own kind. The benefits, though, of a significant reduction in workers' comp fraud would be like manna falling from heaven. Now that I think about it, a metaphor based on objects falling from the sky is probably not the best way to end this.

As he blazed/thrashed/insulted his way to the White House, Donald Trump constantly claimed Obamacare was not working. According to Trump, it was a “disaster” that only he could fix. His criticisms have certainly been creative, such as this tweet about one of the perpetrators of the Boston Marathon bombing. Whether Trump  can actually fix Obamacare remains to be seen, but he was right about one thing: Insurance premiums are on the rise. It’s estimated that in 2017 premiums will go up by approximately 24%. Insurance companies like Aetna and UnitedHealthcare are pulling out of some markets after reporting significant losses, and other companies are significantly reducing the plans they offer. But why exactly is this happening? What are the root causes? While the issue is certainly complex, we do know some of the reasons costs keep rising. Here are seven primary reasons why Obamacare isn’t quite what everyone hoped. Two Things You Need To Know Before we depress you and make you worry about the future, let us give you two semi-good pieces of news. It’s not all gloom and doom. The Increases Primarily Affect Those Who Purchase Their Own Insurance First, it’s important to note that the rise in premiums primarily affects those who are purchasing their own insurance, like those who are self-employed. If you live in cubicle land or work for the man, you probably won’t feel the brunt of the increase in premiums. Also, if you get your insurance through Medicaid, Veterans Affairs or Medicare, you probably won’t see much increase in your premiums. However, those who shop in the insurance marketplace will find themselves staring at steeply increasing premiums. For now, you may be able to work from a beach while sipping a mojito, but soon you may need to start drinking Bud Light. Let’s hope that doesn’t happen. You may not be working for the man, but you’ll giving more money to the man. Those Who Are Willing to Shop Around Will Probably Be Relatively Safe If you get a government subsidy to offset the cost of your insurance premiums and are willing to shop around for a new plan, you may not be hurt by the increase in premiums. There are various plans available in the insurance marketplace, some more expensive than others. If you’re willing to switch to a new plan, you can probably find one that doesn’t gouge you so deeply. But this is one of the problems with Obamacare. It usually covers a narrow selection of doctors and hospitals, and if you switch plans you may need to find a new doctor. If you’ve got challenging or complex health issues, this can be a big deal, especially if a particular doctor has been treating you for years. Unfortunately, this means that those who are in the worst health may get hit the hardest by the rate increases. If you don’t want to switch plans, you always have the option of becoming independently wealthy. Of course, this can be a bit more difficult than switching plans unless you happen to have a rich relative. See also: How to Push Back on Healthcare Premiums   Now let’s talk about why premiums are going up. Reason #1: Predictions Weren't Very Good Wait, you mean when the insurance companies and the government teamed up, they actually made some mistakes? But they both have such sterling reputations for efficiency! It turns out that the health insurance companies underestimated how much it would cost them to insure those who weren’t already covered. A 2015 report found that insurance companies lost $2.7 billion in the individual market, in part because they had to cover more claims than expected. Insurance companies aren’t really in the business of losing money, and now they’re scrambling to make up for what they lost. On top of this, those patients who are the sickest generate about 49% of the healthcare expenditures. This unequal distribution of costs complicates the estimates and means some companies are losing money. Now that insurance companies actually understand the pools of patients, they’re adjusting premiums to account for the actual costs, which are way higher than they estimated. Reason #2: Insurance Companies Are Bailing Out Leading the way in the “Things That Aren’t Surprising” category is that many insurance companies are discontinuing plans that lose money. Additionally, some companies such as United Healthcare and Aetna are completely exiting some markets, leaving very little competition. In some states, there is a single insurance provider, allowing it to raise rates without consequence. In 2017, it’s expected that the number of healthcare providers will drop by 3.9% in each state. As we all learned in introductory economics, less competition equals higher prices. Reason #3: Healthcare Costs a Lot Remember last year when the price of EpiPens started skyrocketing and people were saying, “We’ll die without them!” and the producer said, essentially, “Well, it stinks to be you!”? People got rightfully upset because that was a pretty low move to pull. Unfortunately, rising medical costs aren’t just happening to EpiPens. Generally speaking, medical costs have been rising at about 5% each year, but some think they’re going to go up even more. Unfortunately, Obamacare is at least partially to blame for this. Newer treatments tend to be very expensive, and now even the sickest people have access to health coverage. This, in turn, means that they have access to the pricey treatments they never had access to before. As their expenses are covered, overall costs for all people are increased. As Sean Williams wrote:

The reason insurers are coping with substantially higher costs for Obamacare enrollees is actually pretty easy to understand. Prior to Obamacare's implementation, insurers had the ability to handpick who they'd insure. This meant people with pre-existing conditions, who were potentially costly for insurers to treat, could be legally denied coverage. However, under Obamacare insurers aren't allowed to deny coverage based on pre-existing conditions.

Now could be the time to begin experimenting with those homeopathic cures we’ve been hearing about all these years, like rubbing cucumbers on our feet or bathing in olive oil. Purchasing hundreds of gallons of olive oil is probably cheaper than premiums will be. See also: More Transparency Needed on Premiums   Reason #4: Some Government Subsidies for Insurers Are Ending Since 2014, the government has provided some subsidies to marketplace insurers that cover higher-cost patients. These subsidies significantly reduced the cost to insurance companies and made them more inclined to work through the problems. But this program is ending in 2017, and it’s expected that premiums will go up 4% to 7% as a result. Reason #5: It’s Not Easy to Fix a Giant Market Unfortunately, fixing a giant market like health insurance isn’t simple. This should surprise absolutely no one. First, the government is involved. Fixing anything government is always a nightmare, taking years of meetings, proposals and backroom deals. Second, the healthcare industry is involved, which is only slightly less unwieldy than the government. Getting both of these entities to actually make progress is like trying to convince an elderly person that rock ‘n roll doesn’t sound like pots and pans banging together. Lots of solutions have been proposed, but a single, straightforward solution has not been adopted. Reason #6: The Market Is Smaller Than Expected Chalk this one up to yet another miscalculation by the government. It turns out that significantly fewer people are enrolled in the insurance marketplace than expected. Like, 50% less. Young adults in particular aren’t signing up, probably due to the fact that the penalty for not signing up has only been around $150. A smaller market means that insurance companies can't absorb the cost of particularly ill patients as easily. In larger cities, enough people may enroll to spread out the risks, but in smaller areas insurance companies are hit hard. This, of course, causes insurance companies to pull out, increasing the problem even more. Reason #7: The Rules Aren’t Helping Things One of Obama’s big selling points for his healthcare plan was that insurance companies wouldn’t be able to deny coverage to those with preexisting conditions. This sounds great in the public square but doesn’t always work well in reality. Currently, the government forces insurance companies to cover people but doesn’t offer the companies assistance when their costs exceed their revenues. If an insurance company doesn’t think it will make money, it will pull out faster than Donald Trump says something ill-advised. See also: A New Way To Pay Long Term Care Insurance Premiums – Tax Free!   Conclusion It’s easy to be critical of Obamacare, but we should also recognize the great things it has achieved. Many people who would never have received medical coverage have been able to get the treatments they desperately wanted. Will the problems be fixed? Let's hope. But as we’ve seen, creating a solution that works for both consumers and insurance companies isn’t easy. This article originally appeared at Life Insurance Post and has been republished with the permission of lifeinsurancepost.com.

This week will be fairly quick, because I'm touring Civil War battlefields with my daughters, the younger of whom will soon launch into a senior thesis on some aspect of the war, and I have a long drive to Vicksburg in my immediate future. But I wanted to pass on one observation that surprised me, despite my having read dozens of books on the war over the years: Seemingly small innovations can make all the difference.

We've all heard that the generals fight the last war, and that certainly showed in early tactics in the Civil War, when the lines of infantrymen firing and reloading in turn would have looked familiar to George Washington. But the generals gradually learned the value of entrenchments, and here's where small differences mattered.

When Union Gen. Ulysses S. Grant attacked the Confederates at Cold Harbor as he finally closed in on the Confederate capital of Richmond, VA, in mid-1864, he had success on the first day, when the Confederates had only had time to dig the sort of shallow trenches that were common early in the war. Emboldened, Grant ordered an overwhelming assault by his 108,000-man army the next day. His commanders couldn't bring their troops to bear in time, but Grant went ahead with the attack the morning of the day after that. By this point, though, the Confederates had time to build the better trenches that had evolved during the war, and going from two-feet deep to four-feet deep made all the difference. (Many of these trenches were so sturdy that they're readily visible more than 150 years later.) Grant's forces suffered 3,000 to 7,000 casualties in no time—the chaos made the number unusually hard to count—while throwing themselves against what turned out to be impenetrable barriers. One Confederate soldier who had been at the center of the attack wrote that it ended so fast that he barely knew anything had happened.

Mark Twain once said, "The difference between the right word and the almost right word is the difference between lightning and a lightning bug." And, in my experience, the same is true of innovation. I know a guy who almost invented the iPad (his startup was 10 years early) and almost founded eBay (his auction site took delivery of goods and shipped them, rather than just facilitating transactions, as eBay did).  

The only way to increase your odds of finding lightning, not a lightning bug, is to experiment relentlessly, with as many possible combinations as you can. All sorts of small things—product features, user experience, etc.—can mean the difference between success and failure.

Until next week, here's wishing you a four-foot-deep trench, not a two-foot-deep one, as you innovate in this season of great change in the insurance world.

Cheers,

Paul Carroll,
Editor-in-Chief 

The states do not have a constitutional “right” to oversee insurance. Clearly, insurance and reinsurance is interstate commerce, which gives federal government the oversight. There are no states rights issues involved. The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, which was passed by Congress in 1945, does not regulate insurance, nor does it mandate the state regulation of insurance. Section 2(b) of the act does specify that the business of insurance is exempt from the antitrust laws only if it is regulated by the states. It provides that "Acts of Congress" that do not expressly regulate the "business of insurance" will not preempt state laws or regulations that regulate the "business of insurance." What else was going on in 1945? Oh, yeah, that World War II thing. Perhaps congress then did not want more responsibility. It is time that this war-generated act is revisited. "Perfunctory" would be a kind word for how some of the states actually oversee the insurance process. I have personally experienced insurance departments that are totally unaware of the laws by which they are supposed to be regulating insurance. Regulators either do not know the law or do not care about enforcing it. While I have not witnessed the federal government’s efficiency, to continue the regulatory status quo is to argue that the demonstrated 50-plus (states and territories) individual messes are better than one big mess, while having to accept as a foregone conclusion that a federal system would be a mess. The states have clearly proven to be lacking in both integrity and self-restraint. The 2015 State Integrity Investigation shows the reality of the situation. Only three states score higher than D-plus; 11 states flunked. The State Integrity Investigation is an in-depth collaboration designed to assess transparency, accountability, ethics and oversight in state government, spotlight the states that are doing things right and expose practices that undermine trust in state capitals. The project is not a measure of corruption, but of state governments’ overall accountability and transparency. The investigation looks at both the laws in place and the “in practice” implementation of those laws to assess the systems that are meant to prevent corruption and expose it when it does occur. State foxes are guarding the henhouse. While the state insurance regulatory heads are adamant about keeping their perfunctory regulation of insurance based on the misnomer of “states’ rights,” they are by design or defect giving away that power to the quasi-private nongovernmental National Association of Insurance Commissioners (NAIC) or the private rating agencies, which may be thought of as shadow regulators. In the name of commonality of law among the states, the NAIC produces model legislation, which the states are pressured to accept, lest they lose their cherished accreditation status by the NAIC. See also: How to Bulletproof Regulatory Risk   The tactic used by the NAIC is not unlike the federal speed limit of 55 MPH in the '70s and '80s. Where does the federal government have the right to tell any state what its speed limit should be? It doesn’t. But the Transportation Department said, Do this, or we won’t give you any highway funds. So how does this NAIC model legislation thing work? Here is an example. In the NAIC’s Deceptive Trade Practices Act (DTPA) or (Unfair Trade Practices Act), the NAIC said that if a company does something (bad) with regularity, that may be considered a “trade practice.” Originally, this was NOT anything but additional ammunition for the state insurance regulator, but when Texas passed this model, it did so with two big changes:

1. A one-time act of bad by the insurance company could be considered a trade practice.
2. There was a private right of action against the insurance company for violating the DTPA -- the right didn't just belong to the insurance regulator.

Oklahoma passed the act close to the way the NAIC wrote it, yet according to the NAIC both states have passed the model. But sameness in name does not mean sameness in fact. Fighting Back: Not everyone sees this drift toward private oversight as a good thing for the insurance consumer. The National Conference of Insurance Legislators (NCOIL) -- those elected guys who actually pass the insurance legislation -- are trying to do something about the drift. At its fall meeting in November 2015, NCOIL urged each state legislature, the departments of insurance and insurance commissioners to foster competition in insurer rating. No single insurer rating agency should be allowed to position itself to supersede state regulation. The message is clear; the state is in charge of insurance regulation, not some private rating agency setting up rules as to what an insurance company must do to get a certain grade. Major intermediaries appear to favor state oversight, which is logical because reinsurance intermediaries are basically unregulated by the various states, and they are not so likely to remain unregulated if the federal government assumes its rightful place in insurance regulation. Thomas B. Considine, now NCOIL’s chief executive but previously commissioner of the New Jersey Department of Banking and Insurance, used NCOIL’s spring meeting in New Orleans as the venue to raise public concerns about states becoming subject to the authority of the NAIC, a private trade association composed of the nation’s insurance regulators. The circumstance under which lawmaking authority may be delegated to private organizations is narrow. For that reason, delegation of states' authority to a private organization (such as the NAIC) needs to be stopped. The situation makes a good argument for the Treasury Department’s Federal Insurance Office, an agency whose existence has been questioned by the NAIC, as well as some other elements of the industry. State oversight is not a good argument against federal oversight, especially when the state regulator is doing what it can to cede its power to the private industry and away from itself. See also: Investment Oversight: Look Beyond Scores!   Bigger issue This is not just a turf war; it goes to the very core of the McCarran Ferguson Act itself. An analysis of the act will determine the scope of the antitrust exemptions. History paints a narrow picture. Issues are not centered on whether Congress has the power to regulate the business of insurance but rather whether the commerce clause precludes state regulation altogether. That changes the argument and the analysis. This is also not a case of which oversight is more appropriate, federal or state, but whether the state should be allowed to continue its oversight in order for various federal exemptions to apply to the entities in the business of insurance. That is, the Sherman, Clayton, and Federal Trade Commission (antitrust laws) apply to insurance only “to the extent that such business is not regulated by state law.” If states regulate, then exemptions apply; if the states do not regulate, the exemptions do not apply. This is a very clear indication that any dismissive perfunctory attitude of some state regulators invites the application of federal law against those in the business of insurance. Analysis

1. Is the activity part of the business of insurance? (Unfortunately, the act does not define the business of insurance, and the legislative history here is not clear.)
2. If it is, then the analysis goes to the extent to which the activity is regulated by the state. § 2 (b) of the McCarran -Ferguson Act addresses the state regulation activity. (Case law shows that any uncertainty regarding the applicability of the exemption should be resolved against a grant of antitrust immunity.) Unfortunately, the U.S. Supreme Court has not defined what extent is necessary; however, lower courts hold that a statutory framework that is a mere pretense is insufficient. Perfunctory regulation won’t suffice. The legislative history indicates that Congress intended the exemption only when effective state law exists.
3. If the activity is not regulated effectively by the state, or if the activity constitutes a form of boycott, coercion or intimidation, the activity will be subject to the scrutiny of the antitrust laws.

The wholesale delegation of authority by the various states to the NAIC or deferring to select private rating agencies brings with it the very real possibility of a successful challenge to the state’s current insurance regulatory status quo.

Connected insurance is the next “big thing." It will be enabled by the IoT, big data and artificial intelligence. Health, home and motor insurance are three pillars of this connected, evolving landscape. Microinsurance comes as a transversal opportunity that can help close the protection gap while allowing carriers to propose customer-centric products and services. But connected insurance is mainly about people: how to reach and engage with them in an efficient way while connecting their risks with their insurance cover. I refer to connected insurance as: any insurance solution based on sensors for collecting data on the state of an insured risk and of telematics for remote transmission and management of the data collected. This definition can be applied in all the sectors from motor, house and health to life and industries. So you have this great capacity to register, deposit and analyze data that comes directly from the users, giving the insurer new insight into actual behaviors and lifestyles:

1. You have the impact on the insurance bottom line that comes as a result of specialization.
2. You’ve got frequency of interaction with the customer that puts the insurer much closer but is less invasive than before. In other words a new, customized and more efficient digital customer experience.
3. You create knowledge, a key issue for insurers, which have more data on risks and their customer base.
4. You get to improve lifestyles in the long run, with positive externalities for a sustainable society.

See also: 5 Innovations in Microinsurance   In this innovative landscape, microinsurance is a transversal opportunity for insurers to get closer to their clients, offering the right coverage at the right time. Above, you can see a good matrix that shows how some of the players are positioned on the market based on their sales approach and their distribution model. You’ve got the group in the lower left corner that has more of a standard pull approach regarding their customers and has stand-alone solutions, in most cases based on their own mobile app solutions. I am of the opinion that integration with partners in a plug-and-play approach is much more efficient in reaching potential customers out there. By looking at the lower right corner, you can see how there are many solutions of this type but still using a pull commercial approach. Now the interesting part is when you start to mix the two sales approaches (between pull and push) and you get the well-known Asian insurer Tokio Marine, which has been on the market with its microinsurance solutions since 2010. And finally we get to the upper right corner, where you can see the logo of Neosurance, the insurtech startup that I co-founded a little over a year ago. I personally believe that it’s really well-positioned based on the criteria that I find to be particularly relevant on the market today: selling microinsurance via push notifications that are sent to the user in an intelligent way thanks to an artificial intelligence machine learning system. Plus you’ve got great reach through the use of existing communities (they have their own mobile applications) with users that have homogenous interests. We must consider a statement regarding the industry that has proven true for the last decades: “Insurance purchase is not exciting; insurance is sold not bought!” The average attention human span has been dropping: from 12 seconds in 2000, to 8 seconds in 2013. We’re slowly transforming into pretty goldfish, happily living in our bowls. So the insurer has to address the current context, which has dramatically changed with the arrival of mobile and then smartphone technology. Get the customer’s attention by using the same channels that they use and talk to them in their language. Insurance should adapt to the customer’s habits and environment. The best way to do that in my opinion is by selling microinsurance that has a short duration with a push approach. Know what the customer needs before he or she does! Then you’ll be able to give the right insurance coverage, when the clients need it, directly on their smartphones. The trick here is being able to avoid annoying the customers with offers that do not interest them directly, in the wrong moments. To avoid that ,you would need to use a system that can give you insight into the lifestyle and preferences of the users. A good microinsurance solutions has to be able to create a seamless digital customer experience by reading and interpreting customer behaviors and emotions. The aim here is to create a win-win situation for customers and insurers alike. And push microinsurance has just what it takes. For customers: always close at hand when they need to be protected, with the possibility of buying personalized microinsurance on the spot directly from the smartphone. For the insurer, it’s still very much uncharted territory to be explored but can also raise profitability levels significantly while avoiding moral hazard. This comes as a consequence of having a digital salesforce that sells insurance in a smart way because of AI and machine-learning capabilities and can reach the connected generation right where they like to spend most of their time: on their smartphones. See also: Microinsurance Has Macro Future Recent studies reported that millennials are currently the most underinsured generation and are the least likely to have health, rental, life and disability insurance. So, what’s the magical combination for winning their attention? The key is to reach them with the right message, at the right time, on a device where they swipe, tap and pinch 2,617 times a day: their smartphone. Moreover, millennials are just the tip of the iceberg: The "connected generation" is the single most important customer segment. Empowered by technology, they search out authentic services that they use across platforms and screens, whenever and wherever they can. We believe in a new distribution paradigm for the insurance sector: to stimulate the emotional need of protection, when the insurance coverage is not compulsory. Our artificial intelligence engine delivers a push suggestion at the right time with the right offer to provide a simple solution to this protection need, a promise easy to understand and convenient to purchase. We work with insurers and reinsurers to create insurance propositions while developing a streamlined purchasing process.