For some, winter is a time of celebration – the holidays, winter sports, beautiful snowy landscapes and a reason to drink hot chocolate. For others, the shortened days bring on something called Seasonal Affective Disorder (SAD). For people who experience SAD, otherwise known as the “Winter Blues,” they find their symptoms of mild depression start in the fall and end as the sun shines for more hours in the spring. People who live farther from the equator are more likely to feel the effects of shorter days. According to the American Family Physician, about 6% experience severe SAD and as many as 20% may experience a milder form of the disorder. Common symptoms include:

• Lack of energy that is not fixed by increased sleep
• Upset mood: irritability, sadness, mood swings, anxiety
• Less interest in your usual activities
• Weight gain from increased carbohydrate craving
• Distraction and decreased ability to cope with stress.

What causes SAD? How can it be treated? Sunlight affects our biological rhythms and our sleeping and hunger schedules. When we lose our ability to access sunlight, our “biological clock” is disrupted. Furthermore, sunlight affects one of our main mood chemicals, serotonin, the brain chemical that affects sexual desire, feelings of well-being, sleep, memory and even the way we interact with one another. Thus, treatment for SAD can involve light therapy, counseling and medications. Dealing with SAD also means making a conscious effort to get outdoors when there is sunlight. Here the Mayo Clinic offers more information on treatment and home remedies. What is the relationship between SAD and suicide? See also: Blueprint for Suicide Prevention   There is a myth that the winter holidays and “winter blues” increase the risk for suicide. Many inadvertently may increase risk by perpetuating this myth and interfering with prevention efforts through this misinformation. According to the CDC, the suicide rate is, in fact, the lowest in December and the winter months around the world; the rate peaks in the spring and the fall. Several theories exist as to why this might be so. One is that during the holidays, more family tend to be around, which might increase a sense of connection or decrease opportunity for suicide. Another reason might be that people hold on for hope of positive changes in the new year, and when these changes don’t happen, their hopelessness increases. One final reason related to SAD is that, when the sun returns and the weather warms, some may find an “energized despair,” when before their energy was too low to act on their suicidal thoughts. See also: What Is the Business of Workers’ Comp?   In summary, Seasonal Affective Disorder is real and can be very disruptive to health, productivity and relationships. Like all other health conditions, early detection and treatment can significantly improve quality of life.

The insurance industry has been historically slow to embrace technology, lagging behind even the banking sector. This attitude is understandable -- the industry relies heavily on historical data, which is generally not available for new technology, and the industry is immensely risk-averse, as even one failure to live up to their commitments could be devastating to an insurer. Technology is putting pressure on the insurance industry from three sides. New customer demand The first is customers, who have grown accustomed to an easy, Facebook-like experience in interacting with large service providers. Current insurance products are far too generalized and one-size-fits-all to appeal to a customer base that is expecting easily individualized products. Technology like usage-based insurance can make a provider significantly more appealing in this respect by making it possible to only pay the premium for risk actually taken; wearables can revolutionize the healthcare insurance market by allowing for truly personalized pricing. Competitors The second source of pressure comes from competitors. Not only will consumers be more likely to give their business to a digital-native insurer, but entire new kinds of exposure are opening that will give a challenger an opportunity to strike. The cybersecurity market is growing everywhere, along with the pressure to contain and manage the risk better, yet traditional insurers are slow to make convincing offers to threatened customers. In addition, the blockchain is making a more decentralized market possible: While insurers could so far count on the immense need for capital as a barrier to entry, the blockchain could finally bring the transparency and reliability needed to make dynamic, small-scale insurance underwriting possible. Internal Processes Lastly, technology provides new avenues to cut costs in internal processes and pricing products by making available huge sources of data and enabling its more efficient analysis. Insurers currently spend a lot of money on services that aren’t in their core specialty- processing claims, detecting fraud or manually assessing new risk. New algorithms for predicting risk, for example using machine learning, will allow for vast automation of the underwriting process, and managing contracts and identities with the blockchain will reduce the resources needed for fraud detection. New diagnostic technology, like wearables for healthcare or GPS trackers for cars, is bringing a new wealth of data that may balance the lack of historical data that is currently keeping insurers in as-is mode. See also: Which Rules Should Insurtech Break?   With those pressures, however, come a number of important opportunities in three areas: underwriting automation, connected devices and cybersecurity Underwriting Automation Data Automation in the insurance industry can make underwriting both more efficient and more precise, with different lines offering different opportunities for automation. Current Automation Insurers are currently using automation primarily to support underwriters and aid in triage, with only a fifth saying their primary objective is to fully automate the process. What kind of automation is possible varies between business lines, but even in the most advanced segment, personal lines, only 42% of insurers say they have “mastered or almost mastered” automation. At the bottom end, life insurance, 80% of insurers say they are struggling or just getting started with automation. Insurer ambitions Insurers are focusing on personal lines and small and mid-market commercial to expand their automated underwriting capacities, with more than 40% saying they will increase their spending in each field. However, in line with being late adopters, it is estimated that only 10% of insurers will have an algorithmic business strategy in 2019 that makes use of more advanced techniques like machine learning, which could make automation viable for more involved lines like health. New Data For most policies in motor, home and life, an underwriter reviews between eight and 15 factors. Current automation systems for life insurance have similarly small data requirements, with around half the systems drilling down into no more than 10 questions, and a third of them asking as many as 60 follow-up questions. Most systems incorporate lab data and prescriptions databases. These amounts of data are small compared with what a sophisticated automated system could use to assess risk. Trends As a naturally data- and analysis-heavy industry, insurance stands to profit from advances both in the sophistication of automation and in its affordability. As an industry that is also conservative and late to adopt technology, it faces the risk of being outflanked by a less risk-averse challenger that’s willing to bet on automation skills. Insurers have for more than 25 years used primitive systems to fully automate small-scale risk in simple lines (for example, travel insurance), or to aid their underwriters by more effectively triaging requests and directing them to the underwriter that’s best suited for them, or to do some preliminary analysis. These systems generally rely on simple rules and are seen as supporting underwriters. As automation products become easier and cheaper to implement, and new decentralized technologies like blockchain make small-scale underwriting more transparent and available, we can expect their share to increase incrementally. More importantly, insurers are also facing a new wealth of data both for historical risk research and for better assessment of new risk that could fundamentally change the way risk is priced. However, traditional systems are not equipped to deal with these amounts of data, and few insurers are ready to implement the machine learning technology that would be. The problem is that modern machine-learning can produce results but cannot generally explain them. Policy underwriters are naturally skeptical of underwriting risk based on a technology that provides no justification for a pricing beyond the rigor of its setup and the vastness of the data it has been trained on. However, insurers already use fundamentally similar systems for assessing their underwriters’ competence---if a junior underwriter repeatedly prices a risk outside of the usual range the same way a more senior underwriter would, the junior underwriter will be allowed to price those risks without supervision. If insurers can learn to trust this approach with technology, too, they will embrace machine learning. Insights Underwriting automation will become a significant field of innovation around both reducing staffing and coping with the new amounts of data, with each business line requiring its proper automation technology. As risk assessment algorithms become more reliable and executives more confident in them, they will be able to make low-level underwriting both cheaper and more consistent. As new sources of data for risk analysis become available, insurers will have to use machine learning algorithms to be able to make sense of the vast amounts of data. Connected Devices Data Connected devices in insurance describes the network of smartphones, wearables, home diagnostics and other internet-connected devices that form one of the fastest growing spaces within insurtech. This stands to make available a new wealth of data for insurers to handle better pricing and encouragement of risk-decreasing customer behavior. Wearables and Diagnostics 87.7 million U.S. adults, or about 38%, are expected to be using a wearable device in 2019, a growth mainly fueled by smartwatches and wristbands. VCs invested around $3 billion in IoT startups worldwide in 2015, and 38 million European and North American households are expected to have a smart thermostat in 2018, with two-thirds of those lying in North America. Nearly two-thirds of consumers already own or plan to purchase an in-home IoT device in the next five years. Only 3% of insurers are already making use of wearable devices, and less than a fourth are developing a strategy for them, even though 60% of insurance executives believe that wearable technologies will be adopted broadly by the industry. Telematics Telematics in cars allow insurers to track driving patterns of their customers. The advent of cheap GPS devices has made this technology ready for widespread adoption with usage-based insurance (UBI) and dynamically adjusted premiums. More than 15% of the U.K. car insurance market is usage-based, and Progressive alone has more than 4 million UBI customers in the U.K. In the U.S., there are around 5 million UBI policies in effect, and approximately 70% of all auto insurance carriers in the U.S. are expected to use UBI by 2020, with more than 26% of all motor policies being usage-based. Usage-based programs on average lead to a 57% decrease in total claims cost. Health Insurance Health insurance tech startups raised more than $1.2 billion in venture funding in 2015, more than twice as much as in 2014, and making up almost half of the $2.6 billion in venture funding that was raised by insurance tech startups overall. Insurers themselves have committed more than $1 billion to investments in startups, and many of them have established their own in-house venture capital funds to exploit IoT and ready themselves for new markets. 58% percent of smartphone users in the U.S. have downloaded a health-related app, and around 41% have more than five health-related apps, generating data that insurance providers could use to fine-tune their individual premium pricing and encourage low-risk customer behavior. The first insurance company to offer discounts to customers using technology aids for better living was John Hancock in 2015. Other companies in the U.S. and elsewhere have since followed suit, offering as much as a 15% premium discount. Trends The number of connected devices is projected to grow by 35% each year over the coming years. This creates a new wealth of data, which insurers see as important but do not know how to tackle. To understand how insurers can approach the issue, we must look at the health insurance industry, which is at the forefront of integrating wearable tech and makes up for about half of all insurance tech investment. Most of the efforts to integrate technology by insurers are simple and mainly designed as promotions, like awarding credits for a number of steps taken: this is a far cry from what big data could do for adaptive premium pricing based on comprehensive health data for each customer. The problem is likely a skepticism toward new technology for which no historical experience is available. See also: Top 10 Insurtech Trends for 2017   The other major industry using connected devices is car insurance. Here discounts are given to customers who drive less and more safely than others, and the benefits so far have been clear: a 57% reduction in claims. It remains to be seen how much of this reduction will turn out be a temporary Hawthorne effect, but it is sizable enough to pique interest everywhere. The major problem is that so far insurers do not penalize worse-than-average drivers, and it is unclear to what extent customer will accept self-tracking as mandatory or de facto mandatory by pricing. The same issues will also have to be faced by other insurance industries moving to integrate IoT. Insights Insurers agree that the Internet of Things and wearables will play a major role for the industry but have so far only used them in often-gimmicky promotional efforts, hindered by the fact that they cannot penalize customers for risk-increasing behavior. The health insurance market is the main point of investment for insurance tech, but the rise of smart devices everywhere makes innovation possible in all parts of life. The first insurer to overcome the regulatory hurdles and offer truly adaptive and responsive insurance that is not limited to one or two factors but embraces big data will have a strong first-mover advantage. Cybersecurity Data The cyber insurance market grows each year both in size and import but is insufficiently understood and served by insurance providers, who so far have few technological options to contain, predict and address cyber risk. Risk levels and market size Estimates for the yearly cost of cybercrime vary from €330 billion to €506 billion. The cost will increase as businesses and their supply chains become more digitally integrated. In the past three years, the average economic impact of cybercrime per organization in the U.S. has risen from $11.6 million to $15.4 million. The biggest share of this impact comes from the cost of business disruption. The global market for cyber insurance is estimated to rise to $20 billion in premiums by 2025. Customer awareness and adoption Businesses are insufficiently insured and informed around cyber risk. Around 40% of Fortune 500 businesses currently have insurance against cyber incidents, but generally not enough to cover their full exposure. In the U.S., 24% of all business have some form of cyber insurance. 48% of enterprise customers say they lack the necessary understanding of the complexity of cyber risks to better prepare against them. Available products and expertise Of the 10 largest insurers, only five offer standalone cyber coverage. While 90% of all insurance underwriters offer cyber insurance as an add-on to other products, more than 50% do not have any dedicated underwriters for cyber risk and rely on underwriters for other lines. Consequently, 70% of insurance brokers claim there is little to no clarity about what is covered in cyber products. Trends Cyber insurance is a major challenge for insurers as there is little historical data to inform the correct insurance pricing, and there is great variation from year to year in the kind of cyber attacks and damages that businesses face most. Technological solutions to better protect against cyber threats or at least contain the risk are unsatisfying. As a consequence, the traditionally conservative, risk-averse and technologically skeptical insurers are failing to live up to their role as protectors of businesses against new, existentially threatening cyber risks. While adapting rapidly, the strength of protection against cyber crime is unlikely to proportionally increase with the strength of the attacks, so defenses against cyber attacks are usually about one generation behind, with new types of attacks emerging each year. Businesses and their supply chain are digitally integrating to an ever larger extent, so both the target size and sophistication of cyber attacks will lead to rising risk and damage from cyber incidents, creating more exposure for businesses everywhere. These businesses are by and large aware of this threat but find themselves insufficiently informed about how to protect themselves because insurers fail to provide the much-needed expertise. The damage to different developed countries’ GDP from cyber crime ranges from 0.5% to 1.5%. As this share increases, we can expect regulatory pressure, which already represents a big liability risk for cyber incidents, to lead to an even higher demand for comprehensive cyber insurance. At the moment, insurers are still unsure about how to best underwrite cyber risk and often go the safe route of not offering dedicated cyber products at all, or only offering very limited products. As cyber insurance becomes more of a business necessity, insurers that cannot provide expertise on it will seem unreliable and unfit to support a business and see their market share suffer in other lines as well, and hence this area becomes an important space for further investment. See also: How to Measure ‘Vital Signs’ for Cyber Risk   Insights Cyber risk is a major, growing risk to insurance providers, including banks, and businesses looking for insurance, both because of liability exposure and the threat of business interruption that could run into substantial unplanned-for costs. Even though awareness is increasing among business leaders, insurers are struggling with offering the right products with relevant features and pricing because of their lack of experience. An insurer that knows how and is willing to underwrite this new type of risk will quickly capture a sizable market share. There is a level playing field for insurers and new players as there is no historical data available for both -- agility and willingness to use new sources of data could be a competitive edge for new insurtech players. You can find the full report from which this article is excerpted here.

Every day, our colleagues take care of people facing uncertain situations. Whether they have a workplace injury, need time away for the birth of a child, experience a medical situation that will lead to time off, are in an auto accident or suffer product or property damage, we are here to let them know that it’s going to be okay. Part of our job in caring for these people is to simplify and clarify the process and to explain what consumers can expect. An evolving system, shifting regulations, rapidly advancing technology and economic uncertainties add to the complexities they face. Key areas in the spotlight for the coming year include good health empowerments, regulation transformations, consumer-centric progressions, risk circumventions and tech modernisms. We will continue to offer our insights as we monitor the following business advancements and challenges throughout 2017: Good health empowerments Accessing care via technology Technology advancements will continue to influence healthcare delivery. Connecting a specific injury or condition with a quality provider in a virtual setting for more immediate treatment will make these advancements more readily acceptable and increase demand. Balancing the scale of pain management Increasing opioid addiction and the legalization of medical marijuana will ensure pain management remains at the forefront of industry discussions. Increased education about the dangers of opioid abuse, the availability of marijuana as a medical alternative and the introduction of alternative pain management techniques will continue to dominate the conversation. Supporting mental health initiatives The pressures to reduce stigma and strengthen initiatives aimed at psychosocial issues and behavioral health will continue to mount. The linkage between absence at the workplace and mental health will continue to be highlighted. See also: 10 Insurance Questions for 2017   Regulation transformations Compliance enforcement Employers will continue to manage compliance-related issues as they respond to changes in the ADA/ADAAA, FMLA and other federal and state laws affecting our industry. Political reorganization and shifting administrative priorities may also create regulatory shifts for OSHA and the EEOC. Navigating regulatory changes Assessing the impact of provisions introduced by newly elected officials from the federal and state level in the areas of healthcare, workers’ compensation and parental leave will be at the forefront. It will be necessary to monitor newly introduced legislation in key states such as California, New York and Florida to determine how best to respond and comply with new regulations. Workers’ compensation strategies Primary steps among industry leaders include finding common ground and developing strategies focused on benefiting all key stakeholders. Those who favor a federal workers’ compensation option point to inconsistent benefits, rules and regulations among the states. Others believe the state systems have proven to be effective and simply need to be updated. By understanding what should be changed or replicated, legislators can work to revitalize workers’ compensation and help ensure that it continues to fulfill its original purpose. Consumer-centric progressions Enhancing the claims experience The current claims paradigm will continue to shift and be characterized by an increasing focus on the consumer. The needs of injured or ill employees and other consumers will assume center stage. Claims expectations will be established early on; information and resources to support the consumers’ needs will become more readily available; and care and concern will drive and transform the claims experience. Bridging benefit models Integrated benefit plans have long been discussed, but not widely implemented. Pushing the boundary between various benefit providers, administrators, payers and employers through advanced online platforms could be at the forefront of many discussions. In addition to technology advancements, there is a renewed health, wellness and compliance mindset that is fostering increased interest in integration. On-demand consumerism Consumer and customer expectations are on the rise, and providing an immediate response has become expected in many industries. Increased connectivity and immediate communication are now the standard. In the past, it was enough to provide claim and case details through push technology, seamless payment processing and direct bank deposits. Now, the gold standard is to provide a consumer-focused experience where access to resources and data are a click away. With enhanced consumer engagement comes faster resolution, reduced litigation and reallocation of resources to focus on more complex matters. Risk circumventions Crisis plans Building resiliency through new predictive models in pre-catastrophic events and using new technologies in post-disaster recoveries is on the mind of many employers. Whether the emergency is natural or man-made, cyber- or product-related or a supply chain interruption, having the right pre-catastrophe plan in place continues to be a discussion among employers, brokers, carriers and payers. Geo risks More organizations are likely to consider an enterprise-wide response to growing political, economic and global risks as customer markets expand. There is also an increasing need to address travel risks for employees servicing global customers on a short-term or interim basis, and ensure preparedness plans are in place. Talent strategies There continues to be a need to attract, train and retain new talent as baby boomers enter retirement years. Employers must learn how to accommodate multiple generations with varied preferences – from telecommuting to technology – and ensure successful integration with the existing workforce. Creating strategies and using new tools for knowledge sharing will help enhance communication and understanding. See also: 2017 Priorities for Innovation, Automation   Tech modernisms Artificial and emotional intelligence The rapid advancement of technology has led to conversations and interest in artificial and emotional intelligence. Developments in these areas and others such as new connected health technologies, Internet of Things, drones, driverless cars and services using virtual technology are contributing to privacy law and ethical guideline debates. Explosion in actionable data With today’s technology advancements and increasing number of connected devices come an explosion in actionable data, creating a need for more data miners. There is a growing demand for data scientists and engineers who can interpret actionable information. The use and expectation of having more refined predictive analytics to drive decisions will continue to increase and underscore the need for this specialized talent. Deciphering actionable insights as more data pours in from various connected devices will continue to be an important topic of discussion. Self-service innovations Having been introduced in the banking and airlines industries early on, consumer self-service options are becoming increasingly popular in the risk and benefits industry. Consumers of claims services are seeking the same user experiences that they have become accustomed to in the B2C world, including instant information access, connectivity to tech support and two-way communication when and how they want it. You can find the original report here.

As 2017 gets rolling, state legislatures are convening all over the country. Several of them are about to make mistakes in the area of medication management in workers' compensation. My colleague, Mark Pew, and I have written and spoken extensively on the topic of drug formularies. And we're currently working, formally and informally, with regulators and other stakeholders in jurisdictions across the country on approaches that make sense for employers, doctors, pharmacists and, most importantly, injured workers. While there's not a lot to be gained for any of us in calling out individual states, there's a great deal at stake for all of us in the successes and failures of drug formulary implementations. A failure (perceived or real) in one jurisdiction can lead another jurisdiction to delay its own attempt at a formulary — or to scrap it altogether. So how can we tell if a law or rule set is headed in the right direction? Or, alternatively, if a state's efforts are more likely to lead to sub-optimal results? Here's a quick litmus test that you can apply to make your own determination: 1. Will the formulary rely on independent, third-party medical treatment guidelines? There's a great deal of industry discussion surrounding this topic, mostly focused on the definition of "evidence-based medicine." While that conversation is interesting, it's not the critical factor in overall formulary success. The crucial questions are twofold: First, will there be room for political influence in the formation of the guidelines? Second, will the guidelines be updated with sufficient frequency? See also: How Should Workers’ Compensation Evolve?   2. Does the formulary process build off of existing dispute resolution processes? States that have successfully implemented drug formularies thus far have done so by relying on existing rules regarding resolution of medical treatment disputes. States that try to simultaneously create a formulary and new dispute resolution processes to support it are, in reality, trying to do two things at once. Not impossible, but certainly creates execution risk. 3. Does the formulary allow for a remediation period for legacy claims?  On the one hand, a single effective date creates chaos as employers and physicians try to figure out how to address legacy claims, which tend to be more complicated. On the other hand, applying new rules to new injuries creates two standards of care within a workers’ compensation system, where an injured worker’s treatment plan is driven entirely by the date on which he was injured (which makes no clinical sense). I look for regulatory language that takes a balanced approach — an initial implementation date for new injuries, followed by a remediation period for legacy claims, followed by a fully effective date for new rules and all claims. 4. Is the formulary process scalable?   I always look to see if the dispute resolution process can stand up to a significant volume of cases. While the goal of any formulary adoption should be to streamline access to medically necessary medications for injured workers, states should take a "hope for the best, plan for the worst" approach. Dispute resolution processes that rely on one individual or one office for ultimate resolution may lead to bottlenecks and, in a worst-case scenario, undue influence. I always ask myself, what will this look like if there are more disputes than the state expects? See also: Five Workers’ Compensation Myths One bad apple can spoil the bunch. Let's get this right. The article was originally published here.

A conclusion concerning insurance aggregators (aka comparison portals) in the Accenture Distribution and Agency Management Survey is: “Irrespective of insurers’ views on the role of aggregators, it seems they are here to stay." This conclusion is supported by many others, but I venture to doubt it . The aggregator business may be nearing a tipping point. There are (normal business) threats like:

• heavy competition (usual in a successful and booming market)
• takeover by the insurers (ending neutrality, a key issue for a serious comparison offer)
• high cost of acquiring customers (apportioned to the customers)
• pressure on product development (requiring cheaper derivatives of existing products, producing less transparency for the customer and making the process of buying insurance even more complex)

Maybe those can be overcome but I see a more fundamental threat for aggregators.  Comparability Comparison of coverages and premiums is possible because of the standard insurance products we have in all markets. Products were already quite standard, but the aggregation business has forced them to become even more comparable. See also: The New Age of Insurance Aggregators   Insurance, which generates little interest among buyers and which has price as the main buying parameter, might have lived happily ever after as a mature, not innovative market, but.... The New Insurance Is No Insurance Forced by extreme pressure and pushed by new technology, a new type of service is being deployed: The insurance industry will move from claims handler to claims preventer. Creating a safer environment for the customer and his/her beloved and belongings; optimizing prevention via smart vehicles, homes and people; analyzing the residual exposure and insuring only the part that is worthwhile to transfer -- this is where insurance is headed. There are huge opportunities for the insurance provider that is willing and able to shift to:

• Real customer-centricity
• Customer engagement with continuing advice and loyalty programs
• Long policy life-cycles, away from aggregator dominance and costs
• New products and services
• New earning models
• A safer and greener environment

All will result in customized and optimized interactive protection and insurance services for the complete household. There will be one-to-one services, on the road to living services (see also Fjord Report). Non-Comparability So what’s to compare in one-to-one services and products? In living services? Of course, customers will need some guidance in this new world, as well. But it’s going to be a completely different ball game than the relatively easy “matching and ranking.” The Peak There is so much going on, to develop and to learn that this new world will take some time and the mass market has to follow, adopt and adapt. Therefore, I believe the aggregator business has not reached the peak YET. But, in my opinion, for aggregators the sky is not the limit, and they are not here to stay. At least not in their current modus operandi. See also: Understanding Insurtech: the ABCs   Ultimately The U.K. seems ahead with close to 70% aggregator-involvement in car. So there's a fair chance that the U.K. will be leading in reaching the peak, as well. Technology is developing very quickly, and prices are falling rapidly. Tech companies, OEMs, consumer electronics giants, telcos, media and utilities are already rolling out worldwide their connected devices and ecosystems. Millennials and other digital natives do expect continuous connected value added services in return for their effort and data. Revolution will come suddenly and from unexpected sources.

Because of the economic crash in 2007, many people were left scrambling for work, any work. Those who were determined, but still came up short, looked inward to their skill sets and assets to find relief. The answer quickly became obvious; what is now referred to as the flexible workforce or sharing economy, is made up entirely of freelancers and independent contractors. This new group of freelance workers now makes up more than 35% of U.S. workers and earned more than $1 trillion last year. This information is found in a recent survey, "Freelancing in America: 2016,” which was published by Upwork, one of America’s largest freelance workplace platforms. The Gig Economy: A Brief Introduction The gig economy is a term that describes a portion of the U.S. economy that is made up of freelancers. It is often used, interchangeably, with "sharing economy," "collaborative consumption" or "access economy." This growing army of gig workers has become an integral part of the workforce, available on an on-demand basis. This has allowed innovative businesses to pivot and remain nimble. Indeed, in an era where consumers are increasingly more interested in access over ownership, flexible workforces have become powerful tools for businesses. Although many believe this segment of the workforce may be a fad that will soon to be diminished when unemployment numbers eventually plummet, a closer look at available data indicates otherwise. Reportedly, the gig economy has grown every year over the past five, and there are solid indications that this trend will continue. See also: 9 Impressive Facts on Sharing Economy   What the Feds Report Well, they haven't quite caught up yet - although they're getting there. The labor experts in D.C. minimize the gig economy by referring to gig workers as "contingent workers" (any position not expected to last longer than one year). The feds report that that this segment makes up about 4% of the total workforce. Looking more closely, however, one can easily determine that the most recent survey numbers used by the Bureau of Labor Statistics refers to data accumulated more than 10 years ago. I don't feel like we need to delve into why that's an issue, correct? How the Gig Economy Is Growing The gig economy continues to increase as traditional companies look for solutions to workforce issues. Although “outsource” is a term that consumers and traditional employees detest, no one has a problem with a temp in the workplace. But when you use the word “outsource” (which is what a temp employee is), many Americans think of good American jobs being sent overseas where workers will work for pennies on the dollar. The gig economy is growing because entrepreneurial gig workers now have the means to share with others how they can become freelancers and realize their dreams of being self-employed. Platforms such as Upwork, Airbnb, Uber, TaskRabbit, WeGoLook and many others seamlessly connect this new freelancer class with those who have paid work available. This entire process is all facilitated by innovative mobile technology and apps. What's not to love about that? It’s certainly not for everyone, but for those who even feel a mild burn of the entrepreneurial spirit, they can use their skills or assets to become part of the gig economy. Why The Gig Economy Is Growing The gig economy (flexible workforce) continues to grow because America needs it to grow. Companies can access skilled on-demand workers for one-off or continuing tasks. Thanks to on-demand worker platform, businesses can now access expert freelancers to perform critical functions that are temporarily needed. According to Jobshop, nearly one-third of B2B companies plan to hire gig workers over the next five years. Further, a report by Fieldglass indicates that 95% of B2B companies not only understand, but recognize, the need to incorporate the gig economy into their business models. The American workers are changing. Many regard employment as a job totally unrelated to what their life goals may be. Goals that were formed in their minds at a young age and continue to burn deep in their hearts. Even highly skilled workers earning terrific incomes imagine what it would be like to do what they love to do rather than what they have to do. Although born out of necessity, gig work has become a compromise for millions of hard-working Americans. Freelancing allows them to choose to do what they love and what they are best at. It provides the flexibility to work the hours of their choice, spend more time with family and become highly skilled experts in a field they love. Embracing the Flexible Workforce The insurance industry can embrace this growing flexible workforce made up of skilled freelancers in a number of ways. For starters, insurance carriers can use skilled gig workers to create efficiencies across many channels in their organization. Although major insurers have embraced technology, they continue to fumble the ball streamlining their processes and supply chain. Similar to the federal government, large insurers have many layers of bureaucracy that at times put the breaks on workflow, innovation and even communication. The result typically frustrates the consumers they have committed to serve. In the digital age where consumers crave access, convenience and timely services, cumbersome policies and bureaucracies will fade. Quickly! Areas that need rethinking and refocus are those where consumer interaction is critical. Communication There are many critical areas of communication that need not be assigned to full-time workers. These tasks are generally performed on-demand and for specific reasons and following certain events. Using a skilled freelancer who can be available on an as-needed basis for a short period makes more sense than using a highly paid (when you consider compensation plus benefits) full-time employee. See also: Benefits: One Size No Longer Fits All   Claims Streamlining the claims process is a priority for every insurer because it's not only a profit-earning department, it has many functions considered menial to an experienced licensed adjuster. Tasks such as consumer visits, picture taking, damage verification and more could easily be assigned to a local gig worker. Why maintain a network of thousands of field employees nationwide when you can access hundreds of thousands of on-the-ground gig workers when you need them? Although claims activity can be forecast to a certain degree, many insurers are caught off guard with the arrival of events such as a natural disaster. This often leaves carriers scrambling to recruit independent contractors, who sometimes are unwilling to perform many of the tasks that a freelancer can provide. Marketing Because marketing is about communicating with various market segments, it makes sense to contract with gig workers who specialize in that particular demographic. For example, millennials communicate differently than Generation Xers, who talk differently than Baby Boomers. Although each category can have similar insurance product needs, they prefer to learn about it, and make the purchase, in different manners. Whether you are an agency or an insurer, outsourcing your marketing needs to a gig workers can make more sense than loading your payroll with different personality types so that you can accommodate the preferences of the various market segments. Or, many companies are electing to leverage gig workers to augment their current full-time staff. Gig work isn't a full-time or part-time discussion - they can be complimentary. Whether you designate this growing on-demand labor force as the flexible workforce, gig economy, freelancers or outsourcing, there is no doubt that this workforce can provide skilled on-demand workers to the insurance industry. These are workers who are doing what they know best and are passionate about. Principals in the insurance industry should look to this flexible workforce to streamline processes that affect consumer satisfaction and save payroll dollars in the process. As the gig economy continues to grow as a viable employment alternative for many, traditional insurers can get ahead of the curve by leveraging them and embracing flexibility.

The insurance sector is one of the most old-fashioned and resistant to change, and this is why AI will have a greater impact on that with respect to more receptive industries. The collection of data of new types (i.e., unstructured data such as reports, images, contracts, etc.) and the use of new algorithms are disrupting the sector in several ways. Traditionally, an insurance company followed this type of process:

• Identifying pool of customers whom might be risk-assessed;
• Targeting those customers and assessing the risk for each class;
• Selling differently priced policies spreading the risks over the pool of customers;
• Try to retain those customers as long as possible offering lower price for longer contracts.

This is a really simplistic representation of the insurance business in the last fifty years, and I am aware that insurance experts might disagree with me in many different ways. There are a couple of further features to be pointed out: first of all, insurance has historically been sold not bought, which means that brokers and agents were essential to tracking new customers and to even retain old ones. In addition, it is an industry which is by definition rich of data because they collected anything they could, but is also one of the less advanced because either many of those data are unstructured or semi-structured, or the model used are quite old and simple. Most of those data were easy to obtain because they were required to correctly price the coverage, while additional complimentary data were provided only by good customers who had incentives in providing as much data as possible to get a cheaper policy. Of course, this works the other way for bad customers, and this is a perspective on the phenomenon of “adverse selection” (i.e., bad customers are going to ask an insurance because they feel they will need it). The adverse selection issue is though only one of the intrinsic challenges of the sector: strong regulation, high level of fraud attempts, and complexity are other features any incumbents should take care of. It is interesting to notice though that some of those are also specific barriers to entry for startups: they might attract indeed people who normally can get affordable insurance with a bigger competitor (adverse selection) and they usually have the capabilities for breaking down the risk complexity but not to support the funding need for risk coverages (so they need to work with incumbents rather than trying to replace them). In spite of those problems, in the last decade, we noticed a new trend emerging. Insurances, in the effort of trying to reduce moral hazard problems, they started offering premium discounts to their final customers in order to get extra information. This occurred either through a questionnaire (asking directly the customer for further data in exchange for a lower price) or indirectly through devices (healthy devices, black boxes, etc.). The real issue though has been the engagement side of this proposal, because of the opposite nature of information, rewards, and human nature. The rewards offered were indeed either temporary or provided only once and people got lazy very quickly, while the information stream needed to be constant. The following step has been the introduction of apps to let customers monitor by themselves their own data and behavior, sometimes even given away for free the device itself. Leaving the customer with full power on his data had though an inverse effect, because people did not have the motivation in tracking down their improvements, and they got upset at the same time because they felt they were not getting the most out of that opportunity. Regardless of the specific innovative way in which insurers engaged customers, the process used in the insurance business did not change much in the past century. Expert systems and knowledge engineering dominated the sector setting the rules to be followed in internal workflows, but this is slowly changing with intelligent automation systems. We are actually migrating from rule-based decision systems to statistical learning and eventually machine learning. [caption id="attachment_23603" align="alignnone" width="570"] Image Credit: http://www.creativityatwork.com/2014/06/10/busy-innovate/[/caption]  II. So how can AI help the insurance industry? AI is helping (or disrupting, depending on how you see the matter) the sector in different ways. First of all, it can help increasing the customer engagement and retention problem which has been just mentioned. The abundance of data can be used indeed to refine the customers’ segmentation and provide personalized offers based on personal features. It also helps in reducing the costs through smart automatization or RPA (robotic process automation). Second, AI is making people more aware of the risks as well as habits, and it is driving them toward better behaviors. Furthermore, the better pricing and risk assessment that AI is introducing analyzing more granular data will make some people uninsurable (i.e., too risky to be fairly priced and covered) as well as to turn back some previously uninsurable people into insurable customers again. The governments or central regulatory agencies should then start thinking about a “pricing/risk threshold” in which they intervene subsidizing the cost of relevant insurances (e.g., basic health coverage) in order to “guarantee the uninsurables”. Finally, it might be useful to think in terms of what an insurable risk is in order to see how AI can help with that. According to Jin Park (Assistant Professor at IWU), an insurable risk is identifiable through the following five conditions:

• Large number of similar exposure units (mutuality);
• Accidental and unintentional loss (not predictable and independent from the insured customers);
• Determinable and measurable loss;
• Calculable chance of (not catastrophic/systemic) loss;
• Economically feasible premium.

AI is going to affect all those features: with a better and more detailed customer profiling, we won’t need indeed to have such a large base of insured units. It will turn some frequent events into accidental (e.g., affecting drivers’ behavior it will reduce the basic accidents into rare events) and it will improve our ability to forecast and compute both the probability and magnitude potential losses even in those cases too hard to be managed before. All the previous improvements will make many more premium under budgets, and therefore the conclusion is that AI will “lower” the threshold of what we consider nowadays an insurable risk, and it will make then more risks insurable. [caption id="attachment_23604" align="alignnone" width="570"] Image Credit: iStock[/caption] III. Who are the sector innovators? There are plenty of startups out there working at the intersection of AI and insurance, and it essential to look at least at some of them to understand the future direction of the industry, as well as the kind of improvements AI is having in the insurtech space. An interesting thing to notice is that most of the innovation is happening in the UK rather than other countries, in all the segments proposed below. Claim processing: Shift Technology skims the valid claims from the ones that deserve further validations; Tractable instead is trying to automatize experts task for insurances; ControlExpert has a specific focus on car claims; Cognotekt optimizes internal business processes, as well as Snapsheet does; Motionscloud offers instead mobile claim management solutions; and finally RightIndem aims to help insurers to deliver on-premise smoothing the claiming flow. Virtual Agents & Chatbots: Spixii is an automated insurance agent who helps you buying any insurance coverage you might want; Cognicor is a virtual assistant that offers customer care services; Conversica identifies which leads intend to purchase, while Your.MD is a personal health assistant that analyzes symptoms and produces pieces of advice. MedWhat instead uses EMR (medical records) to assist the patient as it was a virtual doctor, and Babylon gives medical advice taking care of tight budget constraints. Insurify is another personal insurance agent who works as a comparator for car insurances. What today is called simply chatbot is going to be renamed in a few years robo-insurer. There are already few examples of companies toward that goal: Risk Genius is indeed an intelligent comparator which identifies gaps in coverage for the customer and PolicyGenius looks for the best solution that fits customer’s needs and characteristics, while Drive Spotterimplements real-time video analytics to keep drivers safe(r). More generally, robo-insurers will be a quite wide class of agents who will end up providing different services, all of them with the final goal of helping the clients to undertake risk-mitigating actions and only cover the real (residual) risks. Customers engagement: Oscar is probably the most successful insurtech company out there, with the final goal of making insurance simple and accessible to everyone through a great UX. Similar to Oscar is somehow Stride Health, while Brolly is a tool that helps customers in understanding their own needs and facilitates in one place all the insurance coverages in place, in a similar fashion to Knip. Adtelligence instead creates personalized offers and relevant products based on customer’s characteristics. Captricityuses machine learning to convert handwritten files into structured data, and this can be used to better understand the final customer. Finally, ValChoiceranks the service of insurers to the benefit of the client. Telematics: connected cars and telematics is a pretty big area itself (see CBinsights article to know more about it), but it would be worthy to point out the work that Greenroad, Vnomics, and Telogis are doing in capturing driving behaviors and habits as well as computing fuel efficiency. Cambridge Mobile Telematics works similarly, although it uses smartphone data and mobile devices habits. Navdy is trying to revolutionizing the UI/UX within vehicles, displaying information in such a way that the driver does not get distracted. Lytx uses vision technology to provide real-time feedbacks to the driver. Underwriting: AI can be (and actually is) used to spot out hidden correlations to granularly segment customers and risks in a more efficient way. Even though it might in theory possible to identify some algos that could perform better than others (see the work Wipro did for fraud detection), data always come first, at least for the next close future. Many companies operate in the space, as for instance Carpe Data that provides predictive algorithms and data products for property and casualty and life insurances through the analysis of public data (e.g., social media data). Atidot created a machine learning risk management platform, while Tyche uses unstructured data to optimize the underwriting and claims process. Big Cloud Analytics collects data from wearables and formulates health scores for a better risk assessment, while Cape Analytics uses computer vision techniques on geospatial data to improve the level of detail on current houses conditions. Dreamquark creates a more accurate representation of the medical datasets to be used for underwriting purposes by insurances, similarly to FitSense that offers also apps products. Melody Health Insurance provides also low-cost insurances, while Uvamo uses AI to assess the risk of policy applications. A more accurate underwriting can even translate into covering events that are today quite risky (e.g., as MeteoProtect and Praedicat, and are doing for weather risk management). Finally, on a side, it is worthy to point out to pure technological enablers as Instanda, which offers a management tool to the insurance providers to manage effectively and timely new products launched; Insly, a cloud-based platform for insurance brokers; and finally, SimpleInsurance is instead an e-commerce provider for product insurances. P2P insurance: Lemonade, Friendsurance, and Guevara are peer-to-peer insurance startups focusing respectively on property and casualty insurance the first two, and car insurance the latter one. Insurchain & Smart Contracts: these are companies in the insurance sector that are driven by blockchain technology. Elliptic offers real-time AML for bitcoin specifically, while Everledger is a permanent immutable ledger for diamond certification. Luther Systems is instead a stealth-mode company working on the standardization of smart contracts. Dynamis provides a P2P supplementary unemployment insurance product, while Saldo.mx provides micro-insurance policies on the blockchain. SafeShare covers multiple parties with insurance cover at short notice and for varying periods, and finally, Teambrella is another P2P insurance platform run on the blockchain. Insurance on-demand: this class of startups put in customers’ hand the entire insurance buying process. Trov is probably the best example of this new class of players and it allows to ensure things by simply taking a picture of them. Cuvva is quite similar but with a focus on car insurance, Sure and Airsurety on travel policies, and Back me up is another example of on-demand insurance. But this class does not include only the proper on-demand business model, but also insurance startups which provide products that vary by location, time, use, or customer. In other words, pay-per-mile business model (Metromile), micro-insurance policies (Neosurance), or eventually Insurance-as-a-service models (Digital Risks).

See also: 2017 Priorities for Innovation, Automation  

IV. Concluding Thoughts

Yan identifies four elements which constitute the insurance profit structure: premium earned and the investment income from one hand, and underwriting cost and claim expenses from the other. AI is and will be able to improve the cost structure, increasing at the same time the competitiveness and enlarging the customer base accessible to insurers, while optimizing internal processes and enhancing the transparency and robustness of the compliance flow.

The greatest challenge I still see in insurance is the cultural mindset which might prevent insurance to adopt early AI solutions, although this won’t probably have a long life given the incredible pressure to innovate the insurance providers are undergoing through. This article was originally published on Medium.com.

The Simon Sinek video on managing millennials has gone viral. How do I know? I’ve received tons of emails from clients, trainers and members of my online community asking for a response. As a millennial who studies millennials for a living— I found Simon’s video disturbing. I started an international training and consulting company to help leaders understand and engage my generation. I’ve sat through one too many conferences featuring Xers or Boomers talking about millennials—as if we were on display at the local zoo. I've developed hundreds of tools like this free social media policy template to help leaders better relate to millennials. At age 43, Simon Sinek’s recent rant elevates him as another non-millennial guiding his peers on what millennials want. When men talk over or on behalf of women, it’s dubbed “mansplaining.” So what is it called when someone—other than a millennial—feels the need to explain who millennials are—Boomersplaining? What Sinek says isn’t all wrong—but it is in no way complete. His vantage point gives him an incomplete picture of who we are and yet again places a stereotype on this young generation. See also: Why Millennials Are the Best Workers   Here’s why Simon Sinek is flat wrong on Millennials: 1. Millennials don’t have low self-esteem. We were handed trophies for absolutely no reason—by well meaning parents and coaches sensitive to our feelings. Understanding how we were raised is the #1 strategy to marketing, recruiting or retaining Millennials. However, the accolade culture of the 90s and 00’s has actually had an opposite affect on my generation than what Mr. Sinek argues. Millennials have extremely high levels of confidence according to Pew Research. Millennials are ambitious—in our travel plans, relationships and careers. Sometimes too ambitious. It is this over-confidence that is misinterpreted as entitlement. From asking for a raise to expecting access to the C Suite—Millennials exude a solid confidence in who we are and what we can contribute. The challenge comes in how leaders can capture this confidence and use it for good. 2. Millennials aren’t the only ones addicted to social media. Try separating a college student from her smartphone and you will quickly learn just how addicted Millennials are to technology. It’s not just Millennials who treat their devices like phantom limbs. Nearly 80 percent of Millennials admit to look at their smartphones first thing in the morning. Smartphone usage isn’t much different for Xers or Baby Boomers. However, Millennials are the first generation that uses social media to see the world—and simultaneously letting the world see them. We are using technology to innovate, to dream, to collaborate and challenge ourselves to become our best selves. The answer lies in each of us becoming self-aware to use our devices responsibly and respectfully. Technological etiquette (what I call “textiquette”) is just as necessary in the classroom as the corner office. Most companies have outdated or non-existent social media policies-- even though studies show it is signficant in retaining Millennials. I have developed a template for leaders to use-- 100% free. Download your free social media policy template here. 3. Millennials don’t expect instant gratification. Sinek points out nearly everything worth having— job satisfaction, meaningful relationships and purpose— takes patience. However, I have discovered this truth interviewing hundreds of Millennials: if you want to appease Millennials keep things moving. If you want to retain Millennials make them a part of the movement. It’s not just a need for speed that distracts Millennials; it’s an addiction to involvement. Millennials have a fear of missing out, better known as FOMO. Leaders can capitalize on Millennial FOMO and motivate my generation with short term and long term goals we help create. According to Sinek, the future is bleak for my generation: “The best case scenario is that you’ll have an entire population growing up never finding joy…. Just waft through life… fine.” Simon Sinek throws a fair punch that feels more like a low blow. He paints my generation as reactionary and out of control. He patronizes our passion and need for meaning. Sinek sees a shade of us, but he doesn’t truly know us. And I don’t blame him. Simon is a brilliant thinker and skilled writer. But he cannot advocate for a generation that has been talked over, lumped together and mislabeled our entire lives. No, Simon. Millennials are not the victims. We were dealt a bad hand. But we aren’t blaming our parents. They sacrificed their health and happiness to give us a better chance. We’re not satisfied with our careers and we resent the lie that degrees guarantees employment. But we’ve also learned that whining isn’t attractive. The recession was the best thing that happened to us. We learned about ourselves while traveling the world, starting from scratch and paying off loans. We discovered simple but powerful truths: we could do it on our own but we don’t have to and the life we create is ours to enjoy. See also: No, Millennials Do Not Rule the World   The future is ours—and we will build a better America because we’ll do it together. We are confident because we will change the world, even if we don’t know our next move. We don’t need bubble wrap, beanbags or free beer. We aren’t defined by safe spaces. And although we appreciate the perspective, we’ll stick to representing ourselves and smashing the boxes you keep putting us in.

I don’t like bridges – particularly, those high bridges with long expanses. Crossing a bridge makes my stomach do flip flops, I hear the blood rushing in my ears, and, from time to time, I see little dots dancing before my eyes. I suspect that many an insurance executive gets the same set of symptoms when they think about all that must be accomplished to transform their organization into a Next-Gen Insurer. Fortunately, (and ironically) for insurance executives, there is an antidote (seven, in fact) for the symptoms mentioned … seven bridges to be specific. See also: 5 Cs of Transformation in Insurance   During 2016, SMA introduced the Seven Bridges, which illustrate initiatives that provide defined pathways upon which insurers can build transformation strategies to set themselves on a course to becoming a Next-Gen Insurer. SMA’s Seven Bridges are:

• Institutionalize innovation
• Keep a pulse on emerging trends and technology
• Operationalize customer-centric strategies
• Go digital
• Modernize core platforms
• Build a flexible organization and workforce
• Major in data and analytics

The burning question is – Where do insurers stand in their bridge-building efforts? The 2017 SMA IT Spending and Priorities Survey results reveal a number of interesting insights. Arguably, the most important insight revealed by the survey data is that it takes effort across all seven of the bridges to transform an insurer. Along each one of the bridges, there is a significant activity variance between insurers that are transforming/growing versus those that indicate they are in surviving/sustaining mode. For example: 47% of insurers in the surviving/sustaining mode believe that customer initiatives are secondary in importance versus only 23% of transforming insurers. And 71% of survey respondents in the transforming category indicate that customer-centric strategies are either critical, or they have already built those capabilities. Another area where important insights came to light is the difference in execution activity for insurers under $1 billion in premium versus those over $1 billion in premium. The big reveal is that while there is more active execution around the seven bridges in organizations over $1 billion in premium, insurers under $1 billion are working on the seven bridges – but at different execution levels than larger insurers. The transformation message is being institutionalized by all insurers regardless of size! An important point of analysis is around priorities. Not all bridges have the same meaning for every insurer. There are numerous variables that go into how the bridges should be built – industry segment, product mix, distribution channels, to name a few. However, when a priority analysis was done, “major in data and analytics” was at the very top, with 95% of survey respondents indicating some level of positive activity. The interesting nuance is that L&A insurers prioritize customer-centric initiatives slightly higher than data and analytics initiatives, which is good for L&A customers! See also: When Workplace Safety Is Core…   For me – I love these seven bridges! I don’t have to drive across them, and successful execution means significantly improved sales and service outcomes for distributors and customers and a rewarding work environment for employees. And best of all – no stomach flip flops, blood rushing in my ears, or spots dancing before my eyes. For more survey results and insights, see our recent research Insurance in Transformation: Building 7 Bridges to the Future.

Medicare Set-Asides (MSAs) continue to frustrate parties resolving workers’ compensation (WC) claims. For many, the MSA is the last major hurdle to a closed file. Sometimes, the hurdle involves an MSA report from a non-legal third-party vendor that does not seem to make sense based on the facts of the case. Other times, it is the federal government’s response to a request from the settling parties that it review an MSA report which causes the frustration. The fact that the WC claim in question may be a denied WC claim only serves to intensify that frustration. The purpose of this article is to separate fact from fiction when it comes to MSAs in denied WC claims. In short, MSAs are not needed when an employer/insurance carrier (E/C) has not accepted and does not accept responsibility for a claimant’s future medical expenses as a part of resolving the claim. Asking the Centers for Medicare & Medicaid Services (CMS) to review and approve your $0 MSA though is problematic as we all know. 2017 is the right time to find an alternate risk transfer solution that creates efficiencies in your claims handling process. After reading this article, your goal should be to review your current process and think about the time and money being spent on denied WC claims. Instead of the problems associated with CMS reviewing $0 MSA proposals, you could instead close the file faster by relying on a legal opinion from a lawyer experienced in MSA issues. All parties in the WC system would capitalize on a more streamlined system if they believe this one basic fact: FACT: Medicare’s recovery rights under the Medicare Secondary Payer (MSP) Act are not automatic. The MSP Act does not grant Medicare unlimited recovery rights. It does not even grant Medicare automatic recovery rights. Instead, two things must happen for Medicare’s recovery rights to ripen: 1) a primary plan or payer must accept responsibility for a claimant’s medical expenses; and 2) that responsibility must be evidenced by a judgment, a compromise for release or other means. Unless both occur, Medicare does not have recovery rights under the MSP, period. That also means that it does not have a right to have an MSA funded to pay for a claimant’s future medical care. In the event of a WC claim denied from the outset and the E/C never accepts responsibility for future medicals, the MSP Act is not triggered. FICTION:  The MSP Act requires MSAs. Nowhere in the MSP Act does it mention MSAs, Medicare Set-Asides or even future medical expenses. What it does say is that Medicare won’t pay for a beneficiary’s medical expenses where payment has been made under a workers’ compensation plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). An MSA gets funded to pay for those future medical expenses a claimant anticipates incurring down the road which the E/C already paid for in the settlement. While the law does prohibit Medicare from making payment for those expenses with one exception, it does not obligate anyone to use an MSA to ensure Medicare does not pay those same items, services or expenses previously paid for by the E/C in the WC award. FACT: An MSA might be appropriate for anyone, not just current Medicare beneficiaries. While the MSP Act contemplates that Medicare will not pay for a Medicare beneficiary’s medical expenses when payment has already been made under a WC plan, other scenarios are conceivable. First, a claimant may not yet be Medicare enrolled but could be close. Those in the MSP industry refer to these individuals as having a “reasonable expectation” of Medicare enrollment. Typically, the time frame in play here is 30 months from settlement. So, you will see MSA issues arise if the claimant falls within this period of “reasonable expectation.” But an MSA could also be an issue for other claimants. Since the MSP Act prohibits Medicare from making payment where payment has been made, an argument exists that the issue would need to be examined for a much larger pool of claimants. In any WC settlement, it’s possible that the E/C is paying for future medical expenses. The MSP Act prohibits Medicare from paying when payment has been made under a WC plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). The claimant could take the proceeds and get on Medicare at some point post-settlement. See also: 25 Axioms Of Medical Care In The Workers Compensation System   Let’s assume that happens five (5) years after settlement. If the claimant still has money remaining for future medicals from the WC award, the statute would prohibit Medicare from paying for his future medicals that were paid for in the WC award. Now that the claimant is a Medicare beneficiary and has money remaining for that specific purpose, the law would kick in. To comply with the law, the claimant should spend down his remaining future medical proceeds on injury-related care otherwise covered by Medicare before billing Medicare. Of course, all that presumes that the claim was accepted and the E/C paid future medical dollars to the claimant as part of the WC award. When a WC claim is denied and ultimately “clinchered” on a doubtful and disputed basis, no future medical dollars change hands since the E/C does not accept responsibility for future medicals. Thus, no MSA would be needed, and you would simply want to document the file appropriately. FICTION: When future medical expenses are expected to be incurred, an MSA must be funded. Future medical expenses ≠ MSA funding in every case. Only when Medicare’s right of recovery is triggered would an MSA need to be funded. So, those future medicals must be related to the compensable claim for the MSA to need to be funded. Even then, there are options available other than funding an MSA (such as obtaining a legal opinion) to comply with the law stating that Medicare will not pay where payment has been made under a WC plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). FACT: A denied WC claim represents a compromise situation as opposed to a commutation under the federal regulations. Medicare explains the distinction in its regulations. A commutation occurs when the amount of the WC award is intended to compensate the claimant for all future medicals required because of the work-related injury or disease. 42 C.F.R. § 411.46(a). According to Medicare, “a lump-sum compromise settlement is deemed to be a workers’ compensation payment for Medicare purposes, even if the settlement agreement stipulates that there is no liability under the workers’ compensation law or plan.” 42 C.F.R. § 411.46(b)(1). This regulation is titled "Lump-Sum Compromise Settlement." So, denied WC claims must be compromise situations, not commutations, under Medicare’s own regulations. FICTION: The CMS WCMSA Reference Guide is the only place to look for how CMS handles future medical expenses. While most will point to the WCMSA Reference Guide as the definitive statement about future medical expenses, it represents unofficial guidance from CMS on the issue. Official guidance can be found in the code of federal regulations. 42 C.F.R. §411.46. There, CMS discusses the differences between future medicals in commutation cases versus compromise cases. Since a denied WC claim would be considered a compromise case, the regulations should be the first place to start when examining the MSA issue in a denied WC claim. FACT: The regulations, like the statute itself, do not address MSAs. Hard to believe, but this is true. Both the statute and all regulations promulgated by CMS in support of the statute fail to mention MSAs or Medicare Set-Asides even once. Since the regulations are what provide us with any federal administrative agency’s official statutory interpretation, it is accurate to say that no substantive legal standard exists today when it comes to MSAs, even in WC. 42 U.S.C. §§ 1395hh(a)(1), (2). FICTION: The regulations address future medicals for commutation cases exactly how they address future medicals for compromise cases. CMS’s own regulations treat compromise cases much differently than commutations. With respect to commutations, CMS advises “If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.” 42 C.F.R. § 411.46(a). Commutations are paid out (presumably) at 100 cents on the dollar. Thus, this regulation highlights the law which says that Medicare will not pay where payment has been made under a WC plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). Again, if the E/C is paying dollars for future medicals, then Medicare won’t pay for those same items, services or expenses. See also: How Politics Drives Up Your MSA Costs   CMS treats compromise cases differently. With respect to future medical expenses in compromise cases, CMS advises, “(1) Basic rule. Except as specified in paragraph (d)(2) of this section, if a lump-sum compromise settlement forecloses the possibility of future payment of workers' compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare. (2) Exception. If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.” 42 C.F.R. § 411.46(d). Very different result in a compromise claim as compared to a commuted claim. Denied WC claims would be considered compromise claims, no matter who you ask. In those cases, CMS tells us that its basic rule is that CMS pays future medicals, except where an allocation for future medicals exists. When an allocation exists, then the claimant should spend down and exhaust before Medicare will pay. The rules for denied WC claims are different from the rules for accepted WC claims, whether CMS and its contractor admit it or not when it is reviewing the $0 MSA proposal for your denied WC claim. FACT: Submitting MSAs is a voluntary process. Remembering that the statute and regulations are both silent about MSAs, we can look to the CMS WCMSA Reference Guide. There, CMS tells us, “There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.” CMS WCMSA Reference Guide v2.5, Section 1.0 (April 4, 2016). FICTION: CMS workload review thresholds provide safe harbors for those cases failing to meet threshold. This is perhaps the biggest fiction about MSAs in the WC industry. While CMS is willing to review certain MSA proposals, it does not have the resources to review everything. Thus, it imposes certain workload review thresholds based on a claimant’s Medicare enrollment status and the gross WC award which help its contractor to determine which cases to review and which to not review. If the case fails to meet the threshold, it does not mean that the parties can ignore the MSA issue. Medicare specifically counsels otherwise. CMS says, “These thresholds are created based on CMS’ workload, and are not intended to indicate that claimants may settle below the threshold with impunity. Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.” CMS WCMSA Reference Guide v2.5, Section 8.1 (April 4, 2016). CMS goes on to say, “Regardless of the low dollar threshold, Medicare beneficiaries should always consider Medicare’s interest in all WC cases and ensure that Medicare is secondary to WC.” CMS WCMSA Reference Guide v2.5, Section 14.0 (April 4, 2016). The same holds true in the event of a denied WC claim. While Medicare would not be willing to review a $0 MSA proposal in a denied WC claim when the matter fails to meet threshold, the parties should still ensure the files are documented appropriately with evidence that Medicare’s recovery rights under the MSP Act were never triggered in that case. FACT: CMS is willing to review a $0 MSA proposal. Not only will CMS review it, CMS provides an example of the letter you will get in return if it approves your $0 MSA proposal. See CMS WCMSA Reference Guide v2.5, Appendix 5 – Sample Letters April 4, 2016). You might be interested to know that this conclusion, just like the conclusion in any other approval letter, is not considered final by Medicare unless or until you provide Medicare with a copy of your final executed WC settlement agreement. FICTION: It takes CMS the same amount of time to review a $0 MSA proposal as it does any other MSA proposal. You might have experienced this. You submit a $0 MSA proposal to Medicare, but instead of an approval letter, you receive a development request seeking additional documentation related to medicals or evidence that the E/C never accepted responsibility for medical expenses. Despite your best efforts, it seems that you’re destined to either receive a development request or a close out letter, forcing you to start the process over again. While CMS has a stated goal of reviewing a matter within 45 to 60 days, it seems $0 MSA proposals take longer, sometimes much longer, to review and approve. FACT: Once you’ve voluntarily asked CMS to review your $0 MSA, you’ve agreed to play by CMS’ own rules. Medicare is clear with its expectation here. “If you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS’ established policies and procedures.” CMS WCMSA Reference Guide v2.5, Section 1.0 (April 4, 2016). So, if you believe a claim is denied properly under your state law, temper your expectations if you ask CMS to review and approve a $0 MSA proposal in the case. By agreeing to bring CMS into the process and ask for its approval, you have relinquished control of the matter, and are subject to the policies and procedures CMS establishes and changes from time to time. Remember also that no WCMSA appeals process exists. “When CMS does not believe that a proposed set-aside adequately protects Medicare’s interests, and thus makes a determination of a different amount than originally proposed, there is no formal appeals process.” CMS WCMSA Reference Guide v2.5, Section 16.0 (April 4, 2016). While CMS does have a limited re-review process, it only applies when: 1) you believe CMS’ determination contains obvious mistakes; or 2) you have additional evidence, not previously considered by CMS, which was dated prior to the submission date of the original proposal. CMS WCMSA Reference Guide v2.5, Section 16.0 (April 4, 2016). Make absolutely sure you are willing to open that door. Once you’ve asked CMS to review, it’s a door that is quite difficult to close. FICTION: The MSP Act always preempts state law with respect to future medical expenses. This one might be surprising, but it’s false. There are at least three examples of cases where the court concludes that state law dictates Medicare’s recovery rights in an MSP situation, not vice versa. In Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010), the Court concluded that Medicare’s recovery right was limited to that portion of the award which had been allocated to medical expenses. The allocation was based on a Florida state probate court’s allocation of a wrongful death settlement between claims of the survivors and the claims of the estate. In Caldera v. The Insurance Company of the State of Pennsylvania, 716 F.3d 861 (5th Cir. 2013), the Court concluded that the MSP does not go as far as to eviscerate all state law limitations on workers’ compensation payments. Recently, the Court in CIGA v. Burwell, 2017 U.S. Dist. LEXIS 1681 (decided January 5, 2017) concluded that state law creates Medicare’s recovery rights based on concepts of what is compensable versus what is not compensable. The law does not allow Medicare to recover conditional payments for items deemed unrelated to the compensable WC claim, even when bundled together with at least one code that was accepted by the E/C as compensable. This case calls into serious question CMS’ recovery practices under the MSP Act. More examples exist. The moral here is that Medicare’s recovery rights and the need to take certain actions with respect to MSAs originate from your state law granting property rights to parties in the first place based on issues of compensibility. FACT: Medicare is not a party to the WC claim; instead, it’s the most important potential “lienholder” to consider when resolving the WC claim. Some think that Medicare must approve the MSA to validate the settlement. Medicare is not a party to the settlement. The parties to the settlement are the injured worker, the employer and (perhaps) its insurance carrier or TPA. Medicare does not have the power to accept an offer on behalf of the claimant. Medicare does not have the power to extend an offer to settle on behalf of the E/C. Medicare is not a party to your WC settlement. Likewise, Medicare does not have the authority to approve a settlement once struck. That is the job of the workers’ compensation industrial commission or board in your state. Asking Medicare to review your MSA proposal is a voluntary step in Medicare’s eyes, and you should also consider it to be voluntary. If your state industrial board or commission mistakenly believes it is required to submit MSAs to CMS for review and approval or makes that a condition of its approval, it falls on you to educate members why that is not the case. 2017 is the right time to consider alternate forms of “considering and protecting” Medicare’s interests, including legal opinions. The MSP Act is in place to help ensure that the Medicare program will be around long term. MSAs are created as a way to comply with the law enacted to ensure the longevity of the Medicare program. That being said, it does not mean that Medicare has a right on every settlement to an MSA. And on denied WC claims, it really means that Medicare never has a right to an MSA. See also: The Looming $20 Billion MSA Train Wreck: Welcome Aboard   FICTION: MSA vendors who only review medical records when calculating MSAs provide accurate conclusions that align with the legal requirements of the MSP Act. You’ve likely had a report like this. Claim has been denied in full. No medicals or indemnity has been paid. The E/C hires one of its approval MSA panel members to calculate an MSA. In its report, the non-legal vendor concludes that an MSA of $X is needed since the claimant is expected to incur future medical expenses. What these non-legal vendors might not realize is that future medicals under the MSP Act are both a medical obligation as well as a legal obligation to address. This is where most non-legal MSA vendors fall short. Their team of nurses are charged with reviewing medicals and calculating an MSA. The report that results is less that of an MSA and more along the lines of a medical cost projection. This report, when it involves a denied WC claim, bears no relation to the actual legal position taken by the E/C. As discussed above, MSAs for those cases should always be $0 since Medicare’s right of recovery never ripens under the law. But, understand that those same non-legal MSA vendors may not be able to arrive at that conclusion. Citing and relying on the law in its MSA report comes dangerously close to the line when it comes to the issue of the unauthorized practice of law. Non-legal MSA vendors cannot issue legal opinions on MSA issues. They can issue reports based on their experience and knowledge of MSA issues involving CMS, but cannot provide those as a legal opinion unless the vendor is also a law firm that practices law. This might explain why those MSA reports say the proper MSA figure is $X when everyone on the file knows it should be $0 since the WC claim was denied. FACT: Instead of asking CMS to review and approve a $0 MSA allocation (when thresholds are met), consider obtaining a legal opinion from a lawyer experienced in the MSP Act. Wouldn’t it be great if we knew with certainty that CMS would agree with our $0 MSA proposal at first glance? That would alleviate a lot (but not all) of the frustration with the current system. Unfortunately, we never know that up front. In fact, as soon as you voluntarily ask CMS to review the MSA, you have lost all control of the claim. Chances are good you will receive in return either a development letter asking for more information supporting your assertion that a $0 MSA is appropriate, or you will receive a counter-higher letter. Neither result is good for the file. Now, how many times has that happened to you over the past 12-24 months? Instead of playing CMS’ WCMSA review game, you can choose to not play by obtaining a legal opinion instead from a lawyer who has experience addressing MSA issues. You gain all the same benefits you get from CMS approving the WCMSA (i.e., ability to close the file with confidence, complete risk transfer on the future medical issue, etc.) without involving the federal government. If you had the choice, would you voluntarily ask the federal government to audit your tax return for accuracy? I didn’t think so. WCMSAs are the same. Why ask it to audit your WCMSA conclusion for accuracy when perfectly valid alternates exist and you can avoid federal scrutiny? It just doesn’t make sense in 2017. Do you know how Albert Einstein defined ‘insanity’? He said, “Insanity is doing the same thing over and over again expecting different results.” Parties who continue to ask CMS to review and approve its $0 MSAs, in this author’s opinion, engage in just that type of activity. You can’t expect CMS to approve your $0 MSA simply because you want it to or even because it is legally appropriate for them to do so. CMS’ track record proves that. Instead, you should hire a lawyer to provide you with a legal opinion that protects you in the future in the unlikely event that CMS comes calling with its hand out. Cattie, P.L.L.C. is a law firm that has experience with MSA issues, including how to protect parties from the federal government when a WC claim has been denied. I’d be happy to consult with you at your convenience about your claim and how a legal opinion from my law firm can be used in lieu of CMS approval of your MSA. The firm is actively accepting new cases now. For more information, please email cattielawpllc@gmail.com.