So much is said these days about enhancing the customer experience, “delighting” customers and delivering customer service that goes “above and beyond.” For large enterprises, particularly in the insurance industry, this focus on customer experience is fast becoming a key competitive differentiator. Disruptors in the e-commerce, retail and hospitality industries have set the standard for new-age customer service. Amazon, Zappos and AirBnB are notable examples. This standard is spilling into other industries. In fact, 89% of companies expect to compete on the basis of customer experience vs. only 36% only four years ago, according to Gartner. But the question remains: Should every company try to be an Amazon or Zappos with their “whatever it takes” approach to customer service? I argue they shouldn’t. And, quite frankly, they can’t. Know what your customer REALLY wants Insurance, for example, is a low-interest, low-involvement category in that people rarely get excited about paying a policy premium or filing a claim. Can insurance carriers and providers delight policy-holders? Do policy-holders want to be delighted? I think about it like a visit to my dentist. My dentist is a great guy, very professional and takes great care of my teeth, but I always dread going and am glad when it’s over. The reality is, no matter how personable he his, how comfortable the chair is or how new the magazines are, I simply can’t be delighted. It is the dentist, after all. See also: How to Get Broader View of Customers   In the context of insurance, customers focus more on utility than on the extraneous features. It’s just like going to the dentist. Customers want to get in, get it done and get out as quickly and as painlessly as possible. The same is true for customer service. Customers just need the basics to run smoothly. They want processing their claim to be easy, and they want to move on. Everything else — any extraneous features — comes second. Despite this attitude, the insurance industry is in desperate need of innovation. In fact, it’s a $1.2 trillion dollar behemoth that’s begging for disruption. The proliferation of technology and innovation across other industries, such as retail and banking, means consumers are expecting the same level of innovation elsewhere — and insurance is in their sights. How can insurance companies approach innovation without overhauling the customer experience and over-complicating things in the process? The answer is simple: focus on utility over features. Utility over features Insurance companies need to determine what their customers' most basic demands are and must seek to fulfill them before exploring any transformative technology, additional features or new processes. When exploring new ways technology can improve business, it’s easy to get swept up in the sexiness and promise of innovation — the dreaded technology-for-technology’s-sake initiative! But to be effective, executives should approach innovation and new technology with a clear strategic and connected directive. Often, we crawl into our own heads and, with the best intentions, solve for a business problem without understanding the effect on customers. A thorough understanding from the customer’s perspective is essential, as is an understanding of how to align customer needs with the company’s overall direction. So the key is starting off small. Implement a simple process change to introduce customers to a new way of doing things and expand from there. Because while innovation is desperately needed, we mustn’t forget that change is hard. People, and especially large enterprises, are naturally resistant to change. Inertia, complacency and “that’s the way we’ve always done it” attitudes are easy and-all-too common in the insurance sector. Insurance customers aren’t ready for a revolution, either. Nor do they necessarily want one. Changes in technology mean a new learning curve, and if that curve is too steep or not thoughtfully executed with the customer in mind, the satisfaction plummets. Customer satisfaction is simple Your goal is to save customers time, save them money or simplify their experience (bonus points if you can do all three!). And at the core of any great experience is getting to the root of the customer’s problem. Customers aren’t always looking to be “delighted,” but they are looking for an answer. See also: How to Bottle Great Customer Experience   So I’m not suggesting an “Amazon-ification” of the insurance industry, but I do believe all companies should be aware of companies that are raising the bar and setting customer experience expectations. Think of it as another way to manage risk in the marketplace. There is a price tag associated with increased levels of customer service. Not all customer segments are created equal, but a more granular understanding of cost to serve, customer expectations and profitability are foundational to building the best customer strategy.

After a Sunday church service, fellow parishioners approached me with empathy about the prospect of dealing with healthcare after Tuesday’s election. I know this is just the beginning of what state insurance regulators will face as consumers bring us an array of questions regarding the future of the Affordable Care Act (ACA).

• Will it be repealed?
• Will it be replaced?
• Will it be amended?

The answer to each question is the same: No one today knows what will occur with the ACA. However, it’s important for people to understand that it will not be possible to make any changes quickly — and any changes that do occur will happen over time. This means that, because the law is still in effect today, people should take steps to obtain or maintain health coverage that meets their family's needs. There are mounting challenges in America’s healthcare system. It’s clear to me that we need a modern-day Manhattan Project to address healthcare — a focused initiative where the brightest minds come together to address the many deficiencies of the ACA and recommend changes to healthcare financing and delivery systems. This type of project would lead to a more affordable and ultimately sustainable healthcare system, something that the ACA was never going to provide. See also: What Trump Means for Health System   The ACA did not address what is driving healthcare spending. To “fix” healthcare, we must transform the entire healthcare economy with a focus on what is driving spending. Rising healthcare costs have an impact on all Americans, not just the small percentage that purchase their own coverage through the ACA. Without structural changes to our healthcare system and a focus on costs, healthcare may squeeze out all other government programs and cause employers footing a large percentage of healthcare premiums for employees to drag down wages, which stunts America’s GDP growth. President-elect Trump needs to take a holistic look at healthcare. The ACA should be his starting point as it is currently on life support and needs changes as soon as possible. If the new Congress passes a bill to repeal all of the ACA, I hope that a replacement for the ACA is stapled to that bill. An immediate repeal would lead to devastating consequences in the disruption of people’s care and would create even more uncertainty for millions of Americans. To ease the uncertainty, a transition time is required for any whole or partial suggested change. To offer immediate predictability, President-elect Trump could consider keeping transitional (grandmothered) plans in place for another 24 months. At least one state has requested CMS to allow for an extension of the transitional plans because of a severe lack of choice in the market in that state. The request was rejected. Millions of Americans are in grandmothered and grandfathered plans that they like and that are working for them. President Obama allowed the transitional plans to continue, and the new administration should consider keeping the individual and small group transitional plans. In Iowa, we have nearly 117,000 people in these plans today. To be clear, there are no easy fixes. The existence and reach of the ACA are contentious issues. Issues related to the ACA have been litigated in court and evaluated by public opinion for years now. Some parts of the ACA have merit and should be kept, in my opinion, but, on a whole, with skyrocketing premiums and insurers leaving markets, it is clear the ACA needs a lot of work. To make the individual insurance market work, it is imperative to build sustainable risk pools for individuals. Rates for 2017 are rising 25%, on average. Affordability is a major issue for Iowans purchasing their own coverage. Premium tax credits may offset and assist with affordability for those who qualify. However, for the nearly 125,000 Iowans who are above 400% of the federal poverty level that did not have access to employer coverage prior to the ACA, affordability is a major issue. The ACA exempts certain people from the requirements of the individual mandate. One of the exemptions is an affordability hardship exemption. If a person cannot secure health insurance for less than 8.16% of their modified adjusted gross income for 2017, they may qualify for the hardship exemption. This would be net of any premium tax credits. Therefore, a significant number of people will be able to “opt out” of the ACA’s insurance mandate today; as the rates continue to rise, however, those individuals will not have health insurance coverage. Many have stated that the ACA took a sledgehammer to healthcare when it was more appropriate to use a scalpel. Healthcare issues differ by state, but no matter what tool is needed to improve access to healthcare, it is clear that a number of changes should be considered immediately to help ensure that consumers have choices as they seek out coverage. Ten Points to help improve the ACA:

1. Create a mechanism for covering catastrophic claims, separate from individual insurance pools. As a parent of a child with Type 1 diabetes, I am grateful that the ACA eliminates pre-existing conditions. I know that if I ever need to buy my own insurance, I can find coverage that will still be meaningful for my family. However, it is clear that the most chronic and catastrophic conditions are the drivers for an extraordinary amount of the rate increases. In testimony I provided before Congress, I stated that looking at high-risk pools for catastrophic claims (defined as claims that cost over a certain amount) has merit. These high-risk pools could be state-funded pools like many states had before the ACA, or it could be a large federal pool. If we can keep the most expensive claims out of the individual risk pool — while still providing coverage to those families — it will lead to predictability in pricing. In Iowa, one claimant is driving nearly 10% of the 2017 rate increase for one of the companies offering coverage to Iowans. That family needs coverage but, if the coverage was provided through a mechanism where the costs are spread to society in general and not to the small pool of individuals using a single insurance company, costs for individual health insurance could be kept more manageable and predictable.
2. Eliminate the mandate. Instead, allow people to enroll in health insurance only once every two or three years, unless they have a proven special enrollment event. Let companies validate the special enrollment with an appeal available to a third party or the state department of insurance.
3. Shorten the grace periods to 30 days. There are stories all over the country with people gaming the lengthy grace periods.
4. Abandon metal tiers. There are no platinum plans in Iowa and few gold plans. Look at better ways to judge and compare plans.
5. Review the need for prescriptive essential health benefits. Require carriers to have two or three standard plans, similar to how Medicare Supplement plans are standardized. Then carriers could also design and offer non-standard plans.
6. Move the age band back to 5:1. At 3:1, the younger, healthy people feel penalized and are priced out of the market. Getting younger people into the pool will stabilize the rates for everyone.
7. Encourage innovation in the market. Encouraging innovation with limited underwriting rewards healthy people, similarly to how lower-income folks are given incentives through tax credits. Allow consumers to be rewarded with healthy behaviors, and allow companies to innovate on product design.
8. Look at health savings accounts as a means to increase consumers’ pricing awareness. If this is adopted widely, look at ways to fund health savings accounts for certain lower-income Americans.
9. Publish healthcare prices and create objective quality benchmarks and metrics for consumers to review. This will help inform consumers about price and quality. In the current market, individuals have no clue what healthcare-related procedures and items will cost us. We are more price-aware buying a refrigerator than we are when having a heart procedure. That needs to change.
10. Fix the 3 Rs. Abandon risk adjustment and risk corridor and continue a public reinsurance option.

Much has been written about selling insurance across state lines. I do not see that as a major factor to help drive down costs. Those insurers that would sell across state lines would have to comply with applicable state mandates and would still have to build a network of doctors for competitive pricing. New companies can enter states today with ease, and many companies sell in multiple states. The issue is the cost to contract with doctors in those states. More competition in insurance sounds good, but if those carriers cannot get enough scale to get competitive pricing arrangements with providers, they will be priced out of the market. See also: What Trump Means for Best Practices   This is hardly an exhaustive list, but we need to start somewhere. Many more things must be reviewed in the healthcare economy, such as the cost of prescription drugs, emerging technologies and end-of-life care. However, looking at the financing of healthcare and insurance is the logical place to start — money always is front and center. My hope is that reasonable people come together to address this challenge.

Insurtech has finally come of age in 2016. The segment has seen a year-on-year doubling of global investment for the past two years, with 2016 appearing to continue the trend. While it’s still a fraction of the broader fintech wave that has swept the globe since 2013, insurtetch is rapidly catching up. Insurtech is officially the next hot thing. Asia, with the exception of China’s outliers (Zhong Ang, Huise, Joyowo and Xishan), has lagged in terms of investment and the volume of startups. That said, the region has seen a surge of interest since mid-2015. Much has been said about the need for the insurance industry to innovate to remove various frictions that exist throughout the insurance product experience – from buying, owning, to claiming. Innovation is critical to help regain consumer trust and ultimately help the industry remain relevant in the digital age of on-demand everything. Furthermore, little doubt remains that with a tidal wave of bright and unbiased people enabled by financial and tech resources injected in the industry, all the frictions will eventually be eliminated. We live in a world in which traditional models of investment in captive innovation have largely been proven ineffective and inflexible in an environment of rapid, technologically driven change. R&D departments with large budgets and armies of researchers couldn’t stand up to the agility of startups, which tap into customer proximity, high tolerance of failure and technological sophistication to nail solutions to relevant problems and scale fast. See also: Unified Communications and Collaboration are Increasingly Important for Insurers The value that has been created through entrepreneurship during the past decade has been disproportionate versus corporate innovation. Where do startups and corporate entities meet? Against that backdrop, major corporations around the world are increasingly waking up to the fact that startups are becoming the key source of innovation for them. There’s even a new acronym for it: CSE (Corporate Startup Engagement). Call it what you may: it’s delivering rapid iterative customer-centric R&D to quite a few of the largest global players. According to an INSEAD report, “262 of the world’s 500 largest corporations are actively partnering with startup companies.”  There’s clearly a set of complementary strengths that exists between corporate and startup entities. Rather than trying to fit the square peg of startup innovation into the round hole of corporate structure, corporate leaders are choosing to actively collaborate with startups to explore ways of combining the best of both worlds. This trend, not to be underestimated, creates an opportunity for the peg to round off, and for the hole to become sharper-edged, thus learning from each others’ strengths and each thus increasing their competitiveness. Corporate innovation in Asia: from attempts at ownership to collaboration Contrary to the co-innovation trend, in 2015 we saw a number of insurers rushing to create in-house innovation centers, labs and garages in an all-out arms race to become digital innovation leaders. Driven by a legacy mindset that dictated that money can solve any problem, we saw the rise of fancy innovation centers full of PhDs, entrepreneurs, data scientists and so on. The trend reinforced the fear of missing out and of being left behind: More and more insurers piled in, justifying the act to their boards by saying that everyone else is doing it, and so must we. After two years since the innovation arms race began in Asia, I’m happy to report that it has largely proven itself ineffective in generating any meaningful value beyond PR. It’s not unsurprising, considering the innovation evolution in other industries: from aiming to own innovation to collaborative cultivation with startups. See also: 4 Benefits From Data Centralization What started off as the insurance industry’s attempts at protecting itself by replicating rapid innovation internally is evolving into something more powerful: collaboration magnets and cultural transformation catalysts. Startup innovation enablers What smart insurance corporates have discovered is that some startups have magic in them that makes them fly. That magic is a combination of awesome teams, purpose-driven cultures, completely different constraints, tech savviness and customer proximity, among other things. It’s also pretty apparent that while you can try replicating all these factors in-house as a corporate, it doesn’t make any more sense than keeping your grown-up kids housebound. If you can’t own them (… yet), embrace them! Understand what’s driving them: The mission of creating an efficient risk transfer, which is as easy as grabbing an Uber, is a big and hairy ambition. Nonetheless, it’s an exciting one. And it’s drawing droves of bright entrepreneurs, developers and data and behavioral scientists. Undeniably, for some, “get rich fast” is the primary driver. But for a lot of entrepreneurs, the ambition of making a dent in the universe is a powerful motivator, and money is an outcome rather than the objective. Be open: As much as innovation is about nailing the brilliant idea, it’s also about many other controllable (team, execution, supportive ecosystem) and uncontrollable (timing, network, partners) factors. Taken together, these factors translate to a meagerly low probability of a startup making it big. Openness to failure and the ability to quickly bounce back are important entrepreneurial traits. As insurance leaders, we should keep an open mind to different ideas, entrepreneurs who have failed and even our best employees who are itching to join a startup. Be nimble: Startups are very different; that’s what also makes them powerful. They sprint around the clock; a week might as well be a lifetime in the startup world. It’s all about developing and refining tech solutions based on customer feedback. Bootstrapping with limited resources and finding creative ways of overcoming obstacles are important. “Just do it” and “fail fast” are persistent mottos that drive progress. If you come across a startup solving a relevant problem, please don’t drag it through endless rounds of meetings with legal, compliance, distribution, senior management, then regional management and so on. Figure out a way to do a limited pilot within a month to test how the startup concept resonates, and secure the next, bigger step. Most legal and compliance folks are not prepared to assess startup risk; To stay on the safe side, they’ll advocate the status quo – which, as we know, is not an option. Senior management will need to figure out how to insulate the pilots from the status quo folks, at least in the early stages. Cultivating a startup ecosystem It will take a large number of startups trying various idea/team/location combinations to help us find the next revolutionary model for insurance. That said, chances of success can be improved through two factors: improving the controllable and increasing the number of attempts to overcome the uncontrollable. The idea of InsurTechAsia was born to act as that very catalyst for insurance innovation and collaboration. The aim was to:

• Connect startups with the best resources and partners for them to succeed, do that transparently and without friction, rather than trying to skim the value;
• Work with various stakeholders to remove any roadblocks, regulatory and otherwise;
• Bring together a community that will actively collaborate, share and help its members to make it much bigger than a collection of its individual members; and
• Encourage more startups to join the mission by building visibility around the opportunity while focusing the energy on the highest-potential areas to maximize the impact.

Our community has grown rapidly across Singapore, Hong Kong and most recently Ho Chi Minh and Bangkok. Right from the start, we’ve encouraged insurance leaders to be part of the community to experience and learn from the startup world first-hand. Being part of the community also means paying it forward by helping to mentor startup founders and connect them to potential opportunities in the market. See also: FinTech: Epicenter of Disruption (Part 4)   It’s been really encouraging to have a growing number of corporate leaders actively participate in our meetups and use those as opportunities to mingle with startups, entrepreneurs, regulators and investors and looking at ways to help the community grow. It is truly a beginning of a new era in the insurance industry, that of collaborative innovation and building an awesome future of insurance together. This article originally appeared in the October 2016 issue of the Asia Insurance Review.

The insurance sector has entered a phase of profound transformation. Numerous insurtech startups—around 1,000, according to Venture Scanner map—have popped up to challenge the traditional model. I believe that we will see a completely changed insurance sector in the medium term. But I’m convinced that insurance companies will still be relevant in the future, or will become even more relevant than they are now, but these companies will have to be insurtechs, or players who use technology as the main enablers for reaching their own strategic objectives. The reach of this digital transformation goes way beyond the elimination of “the middle man” from a distribution point of view. The direct digital channel dominates very few markets and deals only with compulsory insurance. In the vast majority of markets, a multichannel-oriented customer continues—with variations from country to country—to choose at least at some point of the customer journey to interact with an intermediary. But the digital transformation happening in the insurance industry is widespread and encompasses all of the phases of the insurance value chain, from underwriting to claims. See also: Insurtech Has Found Right Question to Ask Every insurance sector player—whether it’s a reinsurer, a carrier or an intermediary—ought to pose this question: How should the insurance value chain be reshaped by using the new technologies at hand? There are numerous relevant technologies that come to mind, including: the cloud, the Internet of Things (IoT), big data and advanced analytics, quantum computing, artificial intelligence, autonomous agents, drones, blockchain, virtual reality and self-driving cars. To take full advantage of these technologies, there has to be a structured approach that begins with identifying use cases that can have an actual contribution to reaching strategic business goals, then maximizes their effects inside the insurance value chain of each player. Finally, the approach should look at the software/hardware selection or the “make vs. buy” choices. The essential idea is that “one size does not fit all. Each player needs to create customized use cases based on their individual strategy and characteristics. To date, there are several types of approaches to mapping insurtech initiatives. I have developed my own classification framework based on six macro areas (awareness, choice, purchase, usage, IoT and peer-to-peer (P2P)). Insurance IoT, also known as connected insurance, represents one of the most relevant and mature insurtech trends. Connected Insurance represents a new paradigm for the insurance business, an approach that fits with the mainstream Gen C, where “C” means connectivity. This novel insurance approach is based on the use of sensors that collect and send data related to the status of an insured risk and on data usage along the insurance value chain. Auto telematics represents the most mature insurtech use case, as it has already passed the test and experimentation phase within the innovation unit. It is currently being used in daily work within motor insurance business units. In this domain, Italy is an international best practice example: According to the SSI’s survey for the Connected Insurance Observatory, more than 70% of Italians show a positive attitude toward motor telematics insurance solutions. According to the Istituto per la Vigilanza sulle Assicurazioni (IVASS), about 26 different insurance companies present in Italy are selling the product, with a 16% penetration rate out of all privately owned insured automobiles in the second quarter of 2016. Based on information presented by the Connected Insurance Observatory—a think tank I created in partnership with Ania that brings together more than 30 European insurer and re-insurer groups—the Italian market will surpass 6 million telematics policies by the end of the year. See also: Insurtech: One More Sign of Renaissance   Based on this data, we can identified three main benefits connected insurance provides to the insurance sector:

1. Frequency of interaction, enhancing proximity and interaction frequency with the customer while creating new customer experiences and offering additional services
2. Bolstering the bottom line, improving insurance profit and loss through specialization,
3. Knowledge creation and consolidating knowledge about the risks and the customer base

The insurance companies that are part of the Observatory are adopting this new connected insurance paradigm for other insurance personal lines. The sum of insurance approaches based on IoT represents an extraordinary opportunity for getting the insurance sector to connect with its clients and their risks. The insurers can gradually assume a new and active role when dealing with their clients—from liquidation to prevention. It’s possible to envision an adoption track of this innovation by the other business lines that are very similar to that of auto telematics, which would include:

• An initial incubation phase when the first pilots are being put into action to identify use cases that fit with business goals;
• A second exploratory phase that will see the first rollout by the pioneering insurance companies alongside a progressive expansion of the testing, to include other players with a “me, too” approach;
• A learning phase in which the approach is adopted by many insurers (with low volumes) but some players start to fully achieve the potential by using a customized approach and pushing the product commercially (increasing volumes);
• Finally, the growth phase, where the solution is already diffused and all players give it a major commercial push.

After having passed through all the previous steps in a period spanning almost 15 years, the Italian auto telematics market is currently entering this growth phase. The telematics experience teaches us three key lessons regarding the insurance sector:

• Transformation does not happen overnight. Telematics—before becoming a relevant and pervasive phenomenon within the strategy of some of the big Italian companies—needed years of experimentation, followed by a “me, too” approach from competitors and several different use cases to reach the current status of adoption growth.
• The companies can be protagonists of this transformation. By adding services based on black box data, telematics has allowed for improvements in the insurance value chain. Recent international studies show how this trend of insurance policies integrated with service platforms is being requested by clients. It also shows that companies, thanks to their trustworthy images, are considered credible in the eyes of the clients and, thus, valid to players who can provide these services.
• If insurance companies do not take advantage of this opportunity, some other player will. For example, Metromile is an insurtech startup and a digital distributor that has created a telematics auto insurance policy with an insurance company that played the role of underwriter. After having gathered nearly $200 million in funding, Metromile is now buying Mosaic Insurance and is officially the first insurtech startup to buy a traditional insurance company. This supports the forecast about how “software is eating the world”— even in the insurance sector.

Insurance is regulated by states, and the states’ laws are implemented and administered by state insurance commissioners. This was affirmed in 1945 by the McCarran-Ferguson Act. Under that act, states regulate the business of insurance unless the U.S. Congress decides otherwise. In the past six years, the federal government has with regularity encroached on areas previously controlled solely by state insurance commissioners, such as through the following federal actions:

• The creation by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of the Federal Insurance Office (FIO)
• Dodd-Frank’s creation of the Financial Stability Oversight Council (FSOC)
• The Affordable Care Act (ACA)
• The Department of Labor (DOL) fiduciary rule issued April 8, 2016

These federal encroachments have led to regulatory confusion. Although state insurance commissioners are the predominant regulator of licensed insurance carriers and producers, insurance companies that are deemed systemically important non-bank financial institutions are supervised both by the Federal Reserve and by their domestic state insurance regulators. This creates significant duplication and regulatory burden; the cost of that burden – as well as some of the confusion -- is ultimately passed on to consumers. Under the ACA, for instance, state insurance regulators routinely must react to hundreds of pages of regulations that are published by the Centers for Medicare and Medicaid Services. Licensed insurance producers and carriers must overhaul their operations and distribution to comply with the 1,023-page DOL fiduciary rule. See also: What Trump Means for Business   As I see it, state legislatures have given state insurance regulators dual mandates: (1) to protect consumers from the moment of purchase through filing a claim and ultimately the payment or denial of that claim; and (2) to ensure companies are solvent and can meet their financial obligations to consumers. While insurance regulators at the state level can always improve, I do believe that collectively we do a commendable job. Insurance company failures are rare, and most states respond to consumer complaints in a very timely fashion. Under a President Trump, I believe the role of state insurance regulators will grow as some federal regulations are eliminated. If Dodd-Frank is reviewed, the role of the FIO and even the FSOC could change. State regulators have argued tirelessly that the FIO is not a regulator and needs to stay in its lane as authorized under Dodd-Frank. State regulators are debating with the FIO the need for a covered agreement on reinsurance collateral and are worried about state law being preempted. I think that, under a Trump administration, state regulators may be listened to much more in this debate. State commissioners and the FSOC representatives with insurance experience have also worked to ensure that the FSOC recognize that insurance is not banking and that traditional insurance is not systemic to the global financial system. A Trump administration may agree with state insurance regulators on these issues and many more. Only time will tell, of course. State insurance commissioners need to demonstrate through the execution of states’ dual mandates that we deserve the responsibility of supervising the insurance markets in our respective states and that we do it better than it could be done from the federal level. I believe the time for state insurance commissioners to shine is now, and I hope we all continue to deliver results as our roles as the regulators of insurance carriers and producers and as the protectors of consumers become increasingly important. See also: What Trump Means for Workplace Wellness  

It’s been an interesting few days/weeks in U.S. politics, especially when viewed from London. In the words of James Bond, some of us have been “shaken, not stirred.” Bond was, of course, referring to his dry martini. Perhaps it has been the occasional martini that has carried us through rough times in London. Recently, the U.K. has had to come to terms with the vote to leave the European Union, and as Europe looks forward to 2017 there could be equivalent turmoil in both French and German politics as the global mood seems to lurch toward nationalism rather than globalization. Plenty of press fodder with lots of ammunition for column inches. But what does this have to do with insurance? The insurance market does not operate in isolation, and it’s essential that insurers understand their role in a volatile and perhaps uncertain world. See also: Thoughts on Insurance After Brexit   While government and policy makers are central to determining the world’s future, it has also become clear that public opinion still has a major part to play in determining their response to risk. The Chartered Insurance report series “Future Risk: Insuring for a Stronger World” carried out 2,678 interviews in five countries (Australia, the U.S., India, Great Britain and Brazil — roughly 500 citizens in each) to rank their perceptions of risk. At a global level, income inequality, overpopulation and global warming were viewed as high-risk, high-impact. Cyber attack, obesity and pandemics were viewed as low-risk, low-probability. If you split these out by country, income inequality remains consistently important as being high-risk, high-impact. Perhaps the recent U.S. elections have simply reflected the zeitgeist of our decade. (“Zeitgeist” is from the German word “zeit,” meaning “ghost,” and “geist” meaning “time.” In other words, the “spirit of the age.” ) So what does this mean for us as insurance professionals? At the very least, we need to understand what’s going on and think of all these political changes in the context of our industry. If income equality is one of the key issues, won’t it also be one of the key drivers of industry change? While the insurance industry cannot solve inequality, can’t it accelerate the creation and distribution of microinsurance products? What will be the impact on the connected financial marketplace? Despite the promise to look inward, isn’t the U.S. too big not to have an impact on global affairs, and won’t that also extend to the insurance industry? See also: What Trump Means for Business   If the new policy is to invest in the U.S., won’t this lead to some element of inflation and corresponding interest-rate rise that will affect non-U.S. markets? Financials have surged back to a level that existed before the collapse of Lehman, and the markets (including the insurance market) are hoping for lighter regulation. Perhaps all this is a perfect counterpoint to the onerous Solvency II requirements in Europe? What then will be the impact on wealth management and life and pension products?

OK, guys, London’s black cabs are officially an endangered species. Not just yet, but, considering that Uber is gaining ground every day, this is going to happen at some point. And it's not just Uber that's making traditional service industries nervous. Airbnb has surpassed the largest hotel chain in the world in terms of total rooms available. But, hey, why the sad face? This is hardly a bad thing. Much like traditional insurance carriers are embracing insurtech innovations, traditional industries should be doing the same with the sharing economy. I emphasize “should.” The sharing economy is already part and parcel of our lives, so much so that we’re not even questioning it anymore. It seems like a simple concept: leveraging underutilized assets for profit. But this is much more than a simple consumption shift. It's also a shift in how we are accountable — and how we regulate commerce. As you know, the sharing economy is mostly unregulated by governments. This lack of regulation fosters a massive debate that won't subside for years to come. See also: Sharing Economy: The Concept of Trust  The question is: How does this new industry create accountability? How on earth do you get random strangers to trust that you won’t drive your car straight into a tree when they’re riding shotgun? How can you, as a client, distinguish between a legit host on Airbnb and a scam? Haven’t You Heard of Reviews? When it comes to the sharing economy, you can’t rely on the government to test out every service provider for you and then give you the “all clear.” Two-way review systems are critical to many sharing economy platforms and provide the foundation of trust upon which this new industry is built. Sellers and buyers can rate each other following a transaction. This creates two-way accountability that has allowed the sharing economy, so far, to thrive. It all sounds pretty great in theory, but, in practice, things are not that easy because you can never really know for sure that the person behind a review — be it a stellar one or a nasty one — is telling the truth. We always try to paint the most positive picture of ourselves. It's human nature. Some people have internal biases, and Airbnb and Uber are witnessing firsthand how racial prejudices affect their platforms. This is terrible and is an existential threat that needs addressing. The challenge going forward for sharing-economy platforms is not after-the-fact, two-way ratings but how sellers react before engaging in an economic exchange with sharing-economy buyers. Stay tuned on this one. Smile, You're Being Rated! At first, this may seem like a crazy idea, but it works. Studies have shown that even the illusion of being watched makes people behave in more socially acceptable ways. Ready for a quick super-scientific experiment? Get out the beaker! Imagine you're traveling for business and one night you stay at a Hilton, the other with Airbnb. Now, think of all the times you've left a hotel room. Then consider how you'd leave someone's residence if you stayed in an Airbnb. You also know this host will leave a public review of you as a guest. You probably would not leave the home like this...: ...but more like this: Most of us undoubtedly would leave the Airbnb in better shape than we would a hotel room. And that's the point of accountability in the sharing economy: It makes people behave better! Accountability Through Reputation Capital Rachel Botsman, one of my favorite sharing economy thinkers, has paved the way for how we understand accountability in the sharing economy through her concept of “reputation capital.” In an age of mobile technology and sharing economy innovation, reputation is a tangible asset that can be managed and built. Although we are at the early stages of this, we will likely soon be able to carry our reputation with us across online platforms. Some have even argued that online reputation will be the new currency in the 21st century. The point is that every sharing economy platform has some sort of feedback process. As a seller, your earning potential depends entirely on the management of your reputation. See also: 9 Impressive Facts on Sharing Economy   As the sharing economy and its accountability foundation continue to grow and enter different aspects of our lives — I am thinking of healthcare and social causes — it's important to understand the complex concept of accountability, especially in a digital age where everything is recorded, stored in the cloud and then commented on a hundred times. That's all for now, folks. Next time, we will talk about the implications of another sharing innovation that affects the insurance industry: home-sharing.

Does wellness save money? I say no. The wellness industry — specifically its trade association, the Health Industry Research Organization (HERO) — says yes. We both can’t be right. The difference is that I am backing up my conclusion with a $2 million reward, up from last year’s paltry $1 million offer, for showing that wellness works. See also: What Trump Means for Workplace Wellness   Beyond that $2 million, I would also send a $1 million donation to the Boise School District to atone for the highly unfavorable coverage it has received about its program, coverage apparently so biased that the CEO of Boise’s vendor, Steve Aldana, called the award-winning STATNews journalist who wrote it a “lier.” To win the $2 million reward for yourself and the $1 million for the school district, you just need to prove (using the more-likely-than-not civil standard of proof), the following (to bend over backward to be fair, I will start out by offering to use only materials prepared by your side):

1. During this millennium, the wellness industry has reduced hospitalizations by enough to break even, using the government’s Healthcare Cost and Utilization Project database. For this one, I will concede in advance that the wellness-sensitive medical event methodology (“potentially preventable hospitalizations”) as described on pages 22-23 of the HERO Outcomes Guidebook is the one to use. (HERO and I agree that non-hospitalization expenses increase.)
2. The vendor anointed in 2016 as the “best” vendor, Wellsteps, indeed did reduce the costs of the Boise School District by about a third (as the company claimed), specifically by making the employees sufficiently healthier to support that savings (as the company claimed). For this one, I will concede in advance that the raw data collected by Wellsteps is accurate. In other words, we are both working off Wellsteps’ own published reports.

Here are the rules. This is a binding legal offer, as any attorney will tell you. Panel, Venue and Judges We each pick two panelists from Peter Grant’s “A-List” of the leading 260 health economists and policy experts (this is an invitation-only email group where health policy and health economics concerns are addressed and debated) that are unaffiliated with either the wellness industry or with my company, Quizzify, and together they pick a fifth. The parties will convene in Boston for a 2.5-hour finalist presentation, featuring:

• 10-minute opening statements, in which as many as 15 slides are allowed;
• 30-minute cross-examinations with follow-up questions and no limitations on subject matter;
• 60 minutes in which panelists control the agenda and may ask questions of either party based on either the oral or the written submissions;
• Five-minute closing statements.

Entry Fee and Award I give you a lien on $2 million as soon as you put $200,000 in escrow to cover the costs of the program, for panelist honoraria, venue, etc., as well as for wasting my time with your quixotry. If I win, I will make a $100,000 in-kind donation to the Boise School District to help compensate them for the fees the district wasted on its wellness program. Length and content of Submissions Each side submits up to 2,000 words and five graphs, supported by as many as 20 links; the material linked must pre-date the award application to discourage either side from creating linked material specifically for this contest. Publicly available materials from the lay media or blogs may be used, as well as from any of the 10 academic journals with the highest “impact factors,” such as Health Affairs, published within the last five years. Each party may separately cite previous invalidating mistakes made by the other party that might speak to the credibility of the other party. Either side may cite an unlimited number of “declarations against interest” made within the last five years — meaning comments made by the other party so prejudicial to their own position that the other party would have said them only if they believed these statements to be true. Example: If I said, “Wellness definitely saves money” (except when I said that as an April Fool’s gag a few years back), you could cite that. There is no word limit on these. See also: There May Be a Cure for Wellness   Each party can then rebut the other party in writing with up to 2,000 words and five graphs as well as 20 links. Additionally, we both take a lie detector test. Each side will present the polygraph operator with five questions, and all 10 questions will be asked of both parties. Results are then sent to the panelists. What if you want to claim the award? Send $1,000 via Paypal to alewis@dismgmt.com to hold your spot. I will set up an escrow account at Bank of America. Once we both sign the escrow papers, you send the $200,000 to that account, and I'll give you first lien on $2 million of asset