Over the past year, flood insurance has become more apparent in the media and trade publications. Normally, only catastrophic events (i.e. hurricanes) capture so much attention, but the combination of some massive floods and the continued progress of private flood legislation has started conversations that are overdue. Both the nature of these storms and floods, and their impact on property owners are getting close attention, and that is welcome because it is changing the way people think about underwriting flood insurance. Recently,  Jeri Xu of Swiss Re published an article that illustrates such a change of perception. She offers a very useful way to think of the rain events (what NOAA calls 1-in-a-thousand-year rain storms) that have caused some of the most serious recent floods (i.e. 2016 Texas, West Virginia, Maryland and Louisiana). Because these types of flood-causing storms are localized at the county-level (roughly speaking), and there are about 3,000 counties in the country, it is not unreasonable to expect three flood-causing thousand-year rain storms every year. With this insight, Xu has transformed the extremely rare to the commonplace and reconciled the headlines with the stats. See also: How to Make Flood Insurance Affordable   A bit of caution is needed when comparing rain events with flood events – for the sake of this argument, let’s assume a millennial downpour does result in flooding (it is not a stretch to say so). Xu and the headlines are teaching us to stop wondering when a serious flood is going to happen – it is way more important to understand where the damage will be when the serious flood does happen. The accepted and common way to guess where the flooding will occur is the 100-year floodplain on FEMA’s FIRMs. However, according to this article from David Bull, 85% of the losses in Baton Rouge and Lafayette were outside the 100-year flood plain and uninsured. Clearly, the FIRMs do not help underwriters (or homeowners) understand flood risk (neither where, nor when). Indeed, the FIRMs were never intended for that, as they are rate maps, not risk maps. Instead, underwriters need information that will help them understand the likelihood of a specific property flooding when there is flooding, because the flood is coming, somewhere. This approach is comparable to how wind (and, lately, storm surge) is underwritten. Karen Clark & Co. has taken such an approach for hurricane: The software assumes an event (the firm calls them characteristic events, or CEs) and then calculates the expected loss results based on that CE happening. There is good reason for this: Underwriters should assume a handful of hurricanes will land on the coast in a given year, just as they should assume a handful of significant inland flood events should happen annually. Working with that logic makes it less important to wonder when something will happen. See also: Is Flood Map Due for a Big Data Make-Over?   It has long been written about how flood losses occur beyond flood zones. Looking at flood risk by where, not when, is an effective way for underwriters to manage their business while considering this fact. More importantly, it is a view of risk that supports the creation of insurance products that can help narrow the protection gap in the U.S., because it is unacceptable to have 85% of damaged homes (in Louisiana of all places) without flood coverage.

Regarding the Dillard’s v. Vasquez ruling, I point everyone to the dissenting opinion, which is so insightful and succinct that all concerned parties should read it. The majority’s opinions ruling the Oklahoma Option unconstitutional were predictable in light of a number of cases on which the justices have opined over the past several months. For the fully developed rationale behind my own rejection of their poor decisions, I refer you to an essay I wrote four months ago: “Why Oklahoma’s Title 85A Has Been Right for the Sooner State Since 1917.” Leaning heavily on that essay and the aforementioned dissenting opinion from Justice Winchester, I offer a few thoughts below. See also: An Open Letter on the Oklahoma Option   Grand v. Petit Bargain In my aforementioned essay, I introduce the concept that the petit bargain replaced the Grand Bargain over the past half century. This evolution can be summarized as follows: Genesis of the Grand Bargain circa 1910

• Before the Grand Bargain, employers could use extremely powerful (and unfair) common law defenses when sued by employees who were injured on the job.
• Importantly, the only legal exposures by employers prior to the Grand Bargain were limited to: a) defense costs and b) damages when found negligent.
• The Grand Bargain was meant to adjust this arrangement by: a) minimizing legal costs while b) dumping the medical and lost wage expense of workplace injuries on the employer.
• The employee, therefore, would have a mitigated but universal solution via a no-fault system.

Incremental Incorporation of the Petit Bargain circa 1960

• The legal community was excluded from the Grand Bargain except in rare cases of dispute.
• Since disputes led to involvement, attorneys found ways to expand the grounds for disputes.
• Attorneys (both plaintiff and defense) have steadily increased their standing, sophistication of arguments and expenses in workers’ compensation (WC).
• For all WC cases (win or lose, plaintiff and defense) medical AND legal expenses are billed to employers.
• Dispute resolution became the norm in many states’ WC systems—with Oklahoma being near the top of that unfortunate list prior to the overhaul of 2013.

The above summary demonstrates deft, self-serving maneuvers by the legal community until 2013. Recent court decisions are less deft and more blatant in their promotion of antagonism between employers and employees. The above summary should also help explain statements such as the one below from Mark Schell, co-chair of the Oklahoma Injury Benefit Coalition (the lobbying force behind the statutory overhaul): The OIBC will continue to work with the [l]egislature to preserve and improve the progress that this historic legislation has provided Oklahoma despite the opposition of those who cling to the old, more litigious system from which they benefited. What concerned parties need to understand about Oklahoma politics is that the state bar association has a lot of control over who sits on the state’s Supreme Court. Justices are therefore subservient to the collective agenda of attorneys throughout the state. The petit bargain is a financial windfall for attorneys and judges. Eliminating the costs of these disputes is not a prospect they want to consider, because very few attorneys fare well when everyone is happy. To avoid that conversation, lawyers and judges pretend to be united in their commitment to traditional and patriotic notions of due process—notions that are misplaced in the world of Grand Bargain legislation, which is all about special adjudication (a distinction explained in more detail in my above-linked essay). Gurich Opinion The Gurich opinion bears some clarification, as her argument included multiple logical flaws that inattentive readers may have missed. See also: The Pretzel Logic on Oklahoma Option After offering a false dichotomy in her first sentence, Gurich spends several pages discussing the red herring of Texas nonsubscription. She follows that up with a straw man argument against the false narrative of ERISA before concluding with a classic equivocation in her misuse of “exclusive.” Logicians and rhetoricians throughout the nation should be impressed with her argument’s brazenness (if not its efficacy). More important than detailing Gurich’s sophistries are Winchester’s comments in his concise dissent. Next Several months ago, we at WorkersCompensationOptions.com could see the writing of this decision on the wall, so we helped draft House Bill 2205, which addresses virtually all the concerns put forth by the Supremes yesterday. That bill had more than enough support last session to pass. We suspect the same will hold true this next session. It is now up to the legislature—as spokesmen of the citizens of Oklahoma—to determine what the next step is.

More employers than ever are allowing dogs into the workplace. Big companies like Google and Amazon allow employees to bring their dogs to work – as do 8% of American workplaces, according to a 2015 Society for Human Resource Management survey. Because this decision brings risk into the workplace, it’s a good time to revisit the issues employers face when making this choice. Every year, National Dog Bite Prevention Week is “celebrated” to educate and remind us about how our furry friends conduct themselves around humans. The Insurance Information Institute also published recent dog-bite statistics. Any employer making a decision on pets in the workplace should consult both of these resources. My Experience With Dogs in the Workplace The publication of this data reminds me of an event that is permanently etched in my memory. A while ago, I was introduced to business owners by their CPA. The owners were dissatisfied with their current insurance broker relationship and were considering a change. We set an appointment so I could learn more about their business and their needs. When I walked through their office door, I was immediately met by two medium-sized pit bulls. Both were showing their teeth, growling and barking at me in a very aggressive manner. See also: A Proposed Code of Conduct on Wellness   I have always been a dog lover. I’ve had two pet dogs who became loving members of our family. When meeting dogs for the first time, I’m usually successful in establishing a rapport with them, but this meeting required the owner’s immediate intervention. The employees in the office reacted with smiles and remained seated at their desks. My guess is that this type of greeting was common. Why Employers Allow Dogs in the Workplace In my discussions with employers, they cite the following as reasons why they or their staff bring pets to the workplace:

• The pet experiences anxiety by being left at home alone
• Dogs provide additional protection for the employer and employees
• The pet is a "service animal" to assist the employee with mental or physical disabilities
• They just like having the dog around them

The dog-bite statistics tracked by the Insurance Information Institute show the total number and cost of dog bites, but they don’t include dog-bite incidents or injuries in the workplace. This lack of business-specific data certainly doesn’t detract from the potential legal and financial issues employers can create for their businesses if they allow dogs on their premises. What Can Go Wrong? A look at the statistics shows how dog bites continue to be an expensive problem. At least 4.7 million people are bitten by dogs annually, resulting in an estimated 800,000 injuries that require medical attention. Those numbers increase each year. The problem also affects employers who send their employees out into neighborhoods or homes with unrestrained dogs. For example, the employees of the U.S. Postal Service who deliver mail continue to have problems with dog bites, and they are usually armed with a spray to protect them from aggressive dogs. Commercial insurance carriers typically don’t ask whether dogs will be present at a business, unlike the personal insurance companies that provide homeowners insurance. However, if you’re an employer considering allowing dogs in your workplace, it’s a good idea to consult a list of some "unacceptable" dogs that personal insurance companies frequently refuse to insure. You’ll notice some familiar breeds here, including pit bulls, Rottweilers, German shepherds, huskies and malamutes. Considerations for Employers Before you allow dogs into your workplace, take the following into consideration:

• If it isn’t necessary, why create more potential liabilities for your business? There are many workplace hazards that can cause injury to your employees. Why bring in another opportunity for injury if that can be avoided?
• Be aware of those dog breeds that have a history of aggressive behavior.
• If an employee requires a "service animal," and you have confirmed the animal is truly a "certified service animal," you will most likely need to accommodate your employee. To confirm certification, have the employee provide a letter from a doctor. Work with your HR professional so the process of consideration and accommodation is performed in accord with employment laws.
• Dogs can be a distraction and slow efficiencies in your company's workflow.
• Some people have a fear of dogs. How are you going to deal with this issue?
• Some people have allergies that can be aggravated by the presence of animals in the workplace before, during or after the employee’s work hours.
• When the dog bites an employee, in addition to reporting this to your workers’ compensation company and getting medical treatment for the employee, you must decide what to do with the dog and how to manage employees' perceptions of this event and possible future incidents?
• Do you want customers and other guests to potentially experience what I did when they come to your business?

If you do decide to allow dogs in the workplace, your HR professional will need to update your employee manual. Set guidelines as to how and where the pet may be located. Set guidelines for acceptable animal behavior. Create clear guidelines about the owner's productivity and responsibilities. Establish how other employees may interact with the pet. These are just a few of the questions you’ll need to answer before implementing any new policies. See also: States of Confusion: Workers Comp Extraterritorial Issues With the potential risks involved in workers’ compensation, HR and general liability, should dogs really be in the workplace?

It’s no surprise that in the last few years how consumers shop for car insurance has changed drastically. Third-party comparison sites that provide car insurance quotes have taken the industry by storm, giving consumers the ability to shop, review and switch insurers faster than ever. But what does the rise of these sites mean to customers, and to insurance agencies as a whole? And where does car insurance shopping go from here? Consumer Must-Knows Getting a car insurance quote online through a comparison site may seem hassle-free, more efficient and more relevant, but as the industry evolves there are two main points consumers must be aware of: 1. Hassle-Free Doesn’t Mean Quicker or Accurate: One of the main customer value propositions of car insurance comparison sites is their ability to quickly provide insurance quotes for a variety of companies that sell in a consumer's geographical location. The problem is that to truly get an accurate car insurance quote, consumers must be willing to provide more details than sites that generate quotes request. For example, most comparison sites provide quotes after a consumer has put in first name, last name, Zip code, age and car details. Using public rate filings from sample data, these sites then provide an estimate of what your average annual rate may be. What this fails to take into consideration is all of the unique variables that companies use to determine your risk profile, which ultimately determines your premium. In addition, no comparison site currently covers the whole car insurance market. Consumers that go to three different comparison sites will typically not only be shown different providers in their area, but also different prices for the same company. This is because comparison sites often have deals that prioritize partner companies over cheaper and better options. See also: The New Age of Insurance Aggregators   Consumers are only being shown select companies, and those companies’ quotes are most likely inaccurate. So consumers are going to multiple car insurance companies, filling out numerous driver profiles and then comparing the rates they are being shown. This can be more time-consuming than simply calling one, two or even three companies to get a direct quote. 2. Cheapest Doesn’t Mean Best With third-party comparison and review sites putting the strongest focus on which companies provide the cheapest insurance, getting the right insurance coverage has taken a backseat. While using comparison sites may result in paying less, it can also result in being underinsured. Having the proper car insurance coverage ultimately is a step toward financial protection. Take a driver who opts for the cheapest coverage, which only includes the state’s minimum car insurance limits of 25/50/25. Let’s say that driver is found to be at fault in an accident that causes $35,000 of injury to the other party. It is up to the driver to then pay $10,000 out of pocket to cover the difference between what the insurance company has insured them for and the cost of the damages done. One problem with comparison sites is that prices for higher coverage limits are not shown because they aren’t the cheapest option. Consumers must not be tricked into thinking the cheapest companies are the ones best-suited for them. Instead, consumers should find a policy with enough coverage to fully insure them and their financial assets, and then turn toward the tools available to them for saving money for that policy. How Comparison Shopping Affects Car Insurance Companies Not only are customers being affected by comparison sites, but so are car insurance companies themselves, with there now being a fierce need for competitive prices. Never before has it been so easy for consumers to find rates at just a click of a button. And while there is a concern over the accuracy of these rates that are being shown, it doesn’t take away the fact that customers are seeing these prices, and insurance companies are having to take that into consideration. How do companies combat getting a call from a customer who has seen a quote for $200 less than what that company can actually offer? Some have become exclusive partners with insurance shopping engines, possibly under the assumption that, if you can’t beat them, join them. Others are working to make sure their logo, their rates and their brand aren’t being displayed. But at the end of the day, neither of these are benefiting the customer. What Insurance Shopping Looks Like 5 Years Down the Road There is no doubt that consumers have preferred the ability to compare, review and get quotes from a number of companies in a matter of minutes. But it’s only a matter of time before the perceived ease of use wears off. For comparison sites to truly succeed, one of two things will need to happen.

1. A site will need to build personal relationships with all of the top brands. Until then, we can expect that rates will be inaccurate and that insurance companies will be listed by comparison site’s bias toward their exclusive partners and not by what’s best for the customer.
2. A comparison site will need to be just that but for other comparison sites in the insurance industry. Yes, you heard right. For the comparison business model to work in the insurance vertical, a comparison site will need to compare quotes, offerings, discounts and top companies being listed on other comparison sites. And while prices still may not be 100% accurate due to the nature of how insurance rates are determined, this could potentially solve the solution of company bias.

See also: Waves of Change in Digital Expectations   Because we don’t see companies such as State Farm, which only allows its appointed agents to to sell their product, ever agreeing to option number one, we have to suspect option number two is the next best solution. Is it a perfect solution? No. Comparison site shopping as we know it will have to change in the next five years. How? We will have to wait and see.

Imagine a time when oil lamps dimly lit streets. They were difficult to service -- someone had to light them and put them out every day, and they required regular maintenance. Moreover, oil had a nasty tendency to catch fire during transport. As it became possible to improve the lamps, it was difficult for oil lamp manufacturers to comprehend that what society needed was light, not a better lamp. Light with all the fundamentally wonderful things that it enabled: joy, safety and productivity. It wasn’t lamp manufactures that brought about the revolution in electricity and electrical lighting that most of us take for granted now. Insurech as a Catalyst for Change What if I told you that the story of insurance resembles that of oil lamps? We are now in the age of oil lamps of insurance while electricity is being invented in our backyards. Investment into insurtech has grown exponentially since 2012, and 2016 is the year it entered the mainstream. Entrepreneurial talent powered by investment is rapidly experimenting across the whole insurance value stack and is starting to chip away at the first set of key insurance industry problems. Power of a Utility Over the years, insurance has evolved into the equivalent of a super complex oil lamp contraption that resorts to all kinds of complexities and tricks to address inherent structural limitations of the current insurance model. The more time I spend with insurtech startups, customers and insurers across Asia, the more I become convinced that the only way forward for insurance is for it to become a utility, akin to electricity. In fact, as a consumer you want insurance for precisely the same reasons you want electricity, as an enabler for joy, safety and productivity. See also: InsurTech Need Not Be a Zero-Sum Game   Furthermore, just as electricity expanded from the original purpose of lighting to power everything from our homes to internet and transportation, once basic insurance becomes a utility there’s a world of opportunities for it to improve society on a much broader scale. Think of these opportunities as apps that plug into the insurance platform, just as fridges, air-conditioning, computers, Teslas, etc. are all ultimately powered by electricity. Electricity is a super enabler, and insurance should be, too! Insurance Journey Toward Becoming a Utility If we take an analogy of insurance = oil lamps, we can extrapolate it to help us start imagining what the world of insurance would be if it became the equivalent of electrical lighting. It's a journey that will take us less time than you might imagine because of the non-linear nature of progress. Furthermore, I’ll venture to say that we’ll experience a tremendous consolidation across the insurance industry and will end up with three major utility providers per market instead of the current, fragmented landscape. First Wave of Insurtech The first wave of insurtech startups is already out there in the market experimenting with new tech/propositions and testing insurers’ appetite for collaboration. Broadly, there are three camps of startups:

1. Partner with insurers to accelerate their journey toward becoming a utility (eliminating frictions and building insurance grid infrastructure);
2. Develop applications that plug into the insurance utility grid to provide custom products both in insurance and risk prevention;
3. Aim to outrace insurers and become utilities themselves.

I'm a big believer in the power of collaboration between startups and incumbents. Hence, I feel that the first two insurtech camps have a better shot at creating a broader impact. At this point, most of the startups are focused on one particular technology or proposition. For insurance to become a utility and a true enabler of joy, safety and productivity it will take a few of these enablers to join up in clusters and connect to the right insurers. The heat map from Munich Re is a useful reference. "Insurance as a utility" is the mental model that nicely summarizes all the various things happening in the nsurtech ecosystem and at a same time can act as a beacon for ecosystem players.

Whether for individuals or businesses, the #claims handling process is often the most confusing and frustrating part of having insurance. According to J.D. Power, 2015 was one of the worst years for customer satisfaction in claims handling as overall satisfaction decreased five points during the year. Even our community members acknowledged that claims handling can be frustrating, with 37% of respondents to a recent survey listing "more efficient claims resolution" as an enhancement that customers would like to see in 2016. While the claims process may be the aspect of insurance that non-industry folks know the least about, it's actually one of the most important for customer retention. That same J.D. Power study found that only 14% of displeased claimants say they "definitely will" renew their policy and only 7% say they "definitely will" recommend their current insurer. Conversely, 81% of highly satisfied claimants plan to renew their policy, and 81% will recommend their insurer. Clearly, a positive experience with the claims process goes a long way toward keeping customers despite what is becoming a more competitive environment, seemingly by the day. See also: Bad-Faith Claims: 4 Ways to Avoid Them   For most claims pros, getting an entire company to revamp its claims process by implementing new technology may be difficult. However, there are improvements that individuals can make for customers. Here are three tips: 1. Openly communicate with claimants early and often When customers call an insurance company about a claim, chances are that they are doing so during a time of distress either for themselves or their business. It's critical for claims professionals to be open and honest with the claimant from the first point of contact. Letting them know up-front the steps of the insurance claims process, what is needed from them and the timeframe for receiving their insurance settlement can help ease fears before they arise. Additionally, claims professionals should update claimants on the status of their claim and provide a timeline of what they should expect along the way. This way, misunderstandings about expectations and confusion about why the whole process is taking so long can be reduced or eliminated altogether. 2. Get to know the claimant on a personal level A large part of the practice of opening up communication avenues with claimants is not only providing information but also being empathetic to what they may be going through. Today, the difference among insurers and the amount and types of coverage they provide is smaller than it's ever been. The biggest differentiator among insurers is often the lengths they go to understand the individual's unique situation and to provide a personalized experience. Do you know what claimant Sarah needs and the amount of care she's looking for versus claimant John, who may have submitted a similar claim but wants a totally different result and interaction with his claims pro? Even the smallest things, like knowing whether someone has a pet or knowing they have children, go a long way toward reinforcing the notion that you are aware of their needs and doing everything you can to take care of them. Doing this not only differentiates you as a claims professional, but also the insurance company you work for as one willing to go that extra mile. 3. Organize and prioritize Few people outside the industry are aware of the vast amount of critical checks and balances and documentation necessary to get a claim processed. Unlike other jobs, in which having "your own organized chaos" works to an extent, claims handling requires diligent organization and prioritization to ensure a claim is processed accurately and on time. Developing guidelines and checklists for processing each claim, including having a status document or claims system to know where in the process each claim is at any given time, will make the entire process much smoother and more efficient for both the insurance company and the claimant. In addition, being familiar with policy coverages and provisions, staying current on new technologies to help you organize your tasks better and completing work on a designated timetable will streamline the process and help you provide professional and specialized service to your customers. See also: Power of ‘Claims Advocacy’   Finding efficiencies in the claims handling process is less about improving life for the insurer than about showing the claimant that the insurer truly does care about making sure the process is smooth, as efficient as possible and fair to all parties. Interested in other claims handling tips? Find out about our Associate in Claims and Associate in Claims Management designation programs.

Blockchain technology is like a three-trick pony. It essentially combines three slightly clumsy computer tricks to mimic decisions that a human administrator routinely makes. The difference is that, if done correctly, the computer can perform some of these decisions with great speed, accuracy and scalability. The peril is that, if done incorrectly, the computer can propagate an incorrect outcome with the same stunning efficiency. 1: The Byzantine General’s Dilemma A scenario first described in 1982 at SRI International models the first trick. This problem simulation refers to a hypothetical group of military generals, each commanding a portion of the Byzantine Army, who have encircled a city that they intend to conquer. They have determined that: 1. They all must attack together, or 2. They all must retreat together. Any other combination would result in annihilation. The problem is complicated by two conditions: 1. There may be one or more traitors among the leadership, 2. The messengers carrying the votes about whether to attack or retreat are subject to being intercepted. So, for instance, a traitorous general could send a tie-breaking vote in favor of attack to those who support the attack, and a no vote to those who support a retreat, intentionally causing disunity and a rout. See also: Can Blockchains Be Insured?   A Byzantine Fault Tolerant system may be achieved with a simple test for unanimity. After the vote is called, each general then “votes on the vote,” verifying that their own vote was registered correctly. The second vote must be unanimous. Any other outcome would trigger a default order to retreat. Modern examples of Byzantine Fault Tolerant Systems: The analogy for networks is that computers are the generals and the instruction “packet” is the messenger. To secure the general is to secure the system. Similar strategies are commonplace in engineering applications from aircraft to robotics to any autonomous vehicle where computers vote, and then “vote on the vote.” The Boeing 777 and 787 use byzantine proof algorithms that convert environmental data to movements of, say, a flight control surface. Each is clearly insurable in a highly regulated industry of commercial aviation. So this is good news for blockchains. 2: Multi-Key Cryptography While the Byzantine Fault Tolerant strategy is useful for securing the nodes in a network (the generals), multi-key cryptography is for securing the packets of information that they exchange. On a decentralized ledger, it is important that the people who are authorized to access information and the people who are authorized to send the information are secured. It is also important that the information cannot be tampered with in transit. Society now expends a great deal of energy in bureaucratic systems that perform these essential functions to prevent theft, fraud, spoofing and malicious attacks. Trick #2 allows this to be done with software. Assume for a moment that a cryptographic key is like any typical key for opening locks. The computer can fabricate sets of keys that recognize each other. Each party to the transaction has a public key and a private key. The public key may be widely distributed because it is indiscernible by anyone without the related private key. Suppose that Alice has a secret to share with Bob. She can put the secret in a little digital vault and seal it using her private key + Bob’s public key. She then sends the package to Bob over email. Bob can open the packet with his private key + Alice’s public key. This ensures that the sender and receiver are both authorized and that the package is secured during transit. 3: The Time Keeper Einstein once said, the only reason for time is so that everything doesn’t happen at once. There are several ways to establish order in a set of data. The first is for everyone to synchronize their clocks relative to Greenwich, England, and embed each and every package with dates of creation, access records, revisions, dates of exchange, etc. Then we must try to manage these individual positions, revisions and copies moving through digital space and time. The other way is to create a moving background (like in the old TV cartoons) and indelibly attach the contracts as the background passes by. To corrupt one package, you would need to hijack the whole train. The theory is that it would be prohibitively expensive, far in excess of the value of the single package, to do so. Computer software of the blockchain performs the following routine to accomplish the effective equivalent process: Consider for a moment a long line of bank vaults. Inside each vault is the key or combination to the vault immediately to the right. There are only two rules: 1. Each key can only be used once, and 2. No two vaults can be open at the same time. Acting this out physically is a bit of a chore, but security is assured, and there is no way to go backwards to corrupt the earlier frames. The only question now is: Who is going to perform this chore for the benefit of everyone else, and why? Finally, here is why the coin is valuable There are several ways to push this train along. Bitcoin uses something called a proof-of-work algorithm. Rather than hiding the combinations inside each vault, a bunch of computers in a worldwide network all compete to guess the combination to the lock by solving a puzzle that is difficult to crack but easy to verify. It’s like solving a Rubik Cube; the task is hard to do, but everyone can easily see a solution – that is sufficient proof that work has been done and therefore the solved block is unique and valid, thereby establishing consensus. See also: Blockchain: No More Double-Entry Books? Whoever solves the puzzle is awarded electronic tokens called bitcoin (with a lower case b). This is sort of like those little blue ticket that kids get at the arcade and can be exchanged for fun prizes on the way out. These bitcoins simply act as an incentive for people to run computers that solve puzzles that keep the train rolling. Bitcoins (all crypto currencies) MUST have value, because, if they did not, their respective blockchain would stop cold. A stalled blockchain would be the crypto-currency equivalent of bankruptcy. This may account for some amount of hype-fueled speculation surrounding the value of such digital tokens. Not surprisingly, the higher the price, the better the blockchain operates. While all of this seems a bit confusing, keep in mind that we are describing the thought patterns of a computer, not necessarily a human. The important thing is that we can analyze the mathematics. From an insurability standpoint, most of the essential ingredients needed to offer blockchain-related insurance products exist as follows. 1. The insurer can identify the risk exposures associated with generals, traitors, locks, vaults, trains and puzzles. 2. The insurer can calculate probability of failure by observing:

• The degree of Byzantine fault tolerance.
• The strength of the cryptography
• The relative value of the coins (digital tokens)

3. The consequences of failure are readily foreseeable by traditional accounting where the physical nature of the value can be assessed, such as a legal contract. We can therefore conclude that each of the tricks performed by this fine little pony are individually insurable. Therefore, the whole rodeo is also insurable if, and only if, full transparency is provided to all stakeholders and the contract has physical implications. Markets are most efficient when everyone has equal access to information – the same is essential for blockchains. So much so that any effort to control decentralized networks may, in fact, render the whole blockchain uninsurable. It is fundamentally important that the insurer is vigilant toward the mechanics of the blockchain enterprise that they seek to insure, especially where attempting to apply blockchain to its own internal processes. Adapted from: Insurance: The Highest and Best Use of Blockchain Technology, July 2016 National Center for Insurance Policy and Research/National Association of Insurance Commissioners Newsletter: http://www.naic.org/cipr_newsletter_archive/vol19_blockchain.pdf

A little while ago, my 92-year-old mom said that she was tired most of the time and was taking more and more naps. After several doctor visits and tests, the diagnosis was that her pulse was around 40 beats per minute, as opposed to a normal rate of 60. Her cardiologist recommended a pacemaker to improve her heart function and quality of life. When she checked into the hospital, it had all her records, history, blood work, EKG printouts, etc. Everything was correctly recorded on physical and digital paper. The staff still hooked her up to an EKG and blood pressure cuff to get moment-by-moment readings. You see, some things are just too important for paper. Before she went into surgery, her pulse was 42, and her blood pressure was very high. The staff gave her two courses of blood pressure meds, which brought it back into range so the surgery could take place. When they wheeled her back into her room after surgery, her pulse was 60. Her blood pressure was starting to creep back up, so they continued with some additional meds that brought it back into range. They kept her on the EKG and blood pressure cuff until she was discharged. I am so thankful that she went home and is back to her old self; out of the house at least five days a week, playing bingo three of those days. My 95-year-old dad still drives them to doctor appointments and worship on the weekends, followed by McDonald's. To celebrate special occasions, my dad drives them to Chick-fil-A or the Olive Garden. While having all documentation, forms and information available in paper or electronic image is helpful to a point, it’s just not good enough. The hospital staff needed something more. They needed to continually monitor my mom, checking her pulse, watching her blood pressure and other vital signs. See also: New, Troubling Healthcare Model   Some things are just too important for paper. Now that she’s back to living a full and active life, a technician has come to her home to set up a device that communicates with her pacemaker. It monitors information on her, the pacemaker and her vitals. On a daily basis, this information is collected and forwarded to her doctor via a secure website. D.O.A The insurance industry has invested untold billions in technology, and who knows where hand-held devices, wearables, wireless high-speed communications, etc. will eventually take us? But there is one boat anchor of a technology that is dragging down speed, accuracy and efficiency while adding cost and waste. That technology is the ubiquitous paper form. Like any form, certificates of insurance are D.O.A. (dead on arrival). Now this might sound harsh, but the reality is that forms are created with information as of a point of time. Because the form is cut off from any possible changes or updates, the cert is potentially out of date by the time it’s delivered. A host of possible changes and informational updates can invalidate the cert. Mid-term endorsement, renewal, changes in limits or forms, cancellation for non-payment and AM Best rating downgrades are but a few of the possible changes that can nullify the cert. It makes absolutely no difference how the form was created (agency, company or third-party software and service providers), everyone creates D.O.A. forms. The delivered method is also irrelevant: Paper, fax, web address link, mobile phone, table, PDF and other digital images all have exactly the same problem. The fact that forms are not plugged into and alive with information pronounces them D.O.A. There is no continuing re-verification of the policy status in conjunction with the needs of the insured and the third-party that needs verification of coverage. Islands of Misinformation There are four stakeholders involved in any proof of insurance, and they are isolated on individual information islands. The carrier, agent, insured and third party are involved with the certificate, yet no one can monitor or have control over the entire process. Each organization has its own needs and desires and its own email system. There are also no controls, follow-ups or monitoring of the process. Everyone hits the ubiquitous “reply all” email command, creating an unintelligible spaghetti string of text that is unmanageable and unintelligible. Business and insurance islands are not known or documented at the beginning of the process. Requirements normally leak out during the process, wasting precious time and money while raising frustration. I’m familiar with an agency that diligently and professionally worked to get a cert out for a client. Everyone was happy when the process was finished -- then the third party sent out yet one more notification, saying the use of “N/A” for "Not Applicable" was not acceptable and needed to be changed to “N.A.” Time and good manners do not permit me to retell the loud and colorful commentary that was heard throughout the agency for a good 15 minutes. Disruption It will take significantly more than a smart mobile device or cloud-based system to solve the systemic problems once-and-for-all. There needs to be a fundamental shift in the way the industry thinks about proof of insurance. See also: Customers’ Digital Expectations   We need to declare the certificate D.O.A. and move toward a data-driven digital solution of the sort we have developed at GAPro: a single source where insurance information is automatically housed, updated on a daily basis and integrated with data from all stakeholders in the insurance ecosystem. Carriers send electronic versions of policy transaction data and attached forms for new, renewal, mid-term change, cancellation, reinstatement and billing status to GAPro. GAPro stores and matches policy and form information with data from other insurance-related resources, including AM Best, agency licensing and other sources. Risk profile information describing the insurance business and content needs of agents, insureds and third parties is collected and integrated on a per-policy basis. See also: Can Risk Management Even Be Effective?   It's time for continual monitoring and notification leveraging 21st century technology and insurance-specific capability, wrapped in an easy-to-understand interface. Insurance conformation and compliance verification are too important for paper.

The Future Trends Framework The New Insurance Value Chain The greatest level of activity in insurtech is focused on the front end of the value chain, where new companies are leveraging expectations and capabilities to change traditional insurance distribution. They are focused on making it easier for customers to compare features and prices and get quotes and, for some of them, actually purchase a policy. This first group (in the graphic below) consists of insurance-specific online agencies and comparison sites. A second group exemplifies the blurring of channels across industries, where well-recognized non-insurance brands are getting into distribution arrangements with partnering companies and using their affinity and reach to extend insurance to broader marketing. The second area of focus is disrupting parts of the value chain with new capabilities and solutions. The first group in the graphic below allows customers to get quotes and manage all of their policies, from multiple companies, on digital devices such as a smartphone. The second group applies new platforms and data to specific parts of the value chain like pricing, claims and underwriting This next category includes both new and established companies that are integrating access to insurance within their offerings, rather than having insurance as a stand-alone product or brand. Finally, in this category are the new business models and companies that are looking at the entire value chain, creating completely new insurance business models operationally, financially and competitively. De Novo Options

Operator errors, driving under the influence, and product defects have long been blamed for catastrophic accidents in the transportation industry. However, recent headlines revealed how cyber risk has emerged as a new and disturbing threat to airlines, railways, auto manufacturers and ocean cargo carriers. Those in the transportation sector have embraced the “Internet of Things” and transformed what were once far-reaching concepts into some of the most common components of the cars they manufacture and the planes they fly. They often rely on a secure internet connection to function safely and efficiently. Recent headlines, however, raised concern and started a debate: Can the transportation sector be hacked? If so, what are the consequences? Automobiles In July 2015, Fiat Chrysler announced a recall of 1.4 million vehicles after white hat hackers demonstrated that they could take control of a Jeep Cherokee's braking systems, change vehicle speed and affect operation of the transmission, air conditioning and radio controls. Hackers gained remote access by exploiting a software vulnerability in the vehicle’s Uconnect entertainment system. The stakes have been raised even higher with recent advances made in the development of driverless cars, as more vehicles will become completely reliant on secure technology. Safety concerns were raised after a series of crashes allegedly caused by the failures of Tesla’s Autopilot technology, resulting in the death of a passenger. This prompted Tesla to announce efforts to improve its Autopilot software, including "advanced processing of radar signals." See also: How to Measure ‘Vital Signs’ for Cyber Risk   The Department of Transportation has also recognized the risks associated with technology. In January 2016, the department entered into an agreement with 17 major automakers to enhance driver safety, including information sharing to prevent cyberattacks on vehicles. According to the agreement, the National Highway Traffic Safety Administration will propose industry guidance for safe operation for fully autonomous vehicles. Planes Boeing recently became the subject of a hacker demonstration when a security researcher accessed the entertainment systems of one of the company's planes in mid-flight. Boeing was adamant that the hacker could not have gained access to the aircraft’s critical functions due to segregation of the two networks. However, the incident raised concerns throughout the airline industry, and an FBI investigation followed. Railway Systems German security researchers SCADA Strangelove demonstrated, without naming the rail systems in question, that they, too, are vulnerable. Their December 2015 report highlighted vulnerabilities related to outdated software, default passwords and lack of authentication. Moreover, entertainment and engineering systems were operating on the same network, leading to speculation that if one system is compromised hackers could gain access to the other. Because rail switches are automated and dependent on properly operating networks, the theory of a system compromise leading to a head-on collision with another train was explored in the report. Marine Shipping An investigation by Verizon Risk concluded that modern-day pirates are increasingly relying on network intrusions as a means to carry out crimes on the high seas. Verizon concluded that an unidentified shipping company’s networks were penetrated by hackers, giving them precise information on which ships were carrying the most valuable contents. Hackers then targeted their attacks on specific vessels, using bar codes to focus on individual shipping containers. As of this writing, we have not seen any incidents of bodily injury or loss of life in the transportation sector directly attributed to a deliberate network compromise. Yet the findings of various researchers across multiple transportation sectors lead to some alarming conclusions. Law enforcement and transportation safety regulators have taken these findings seriously and conducted investigations of their own. We can therefore expect with some degree of certainty that the transportation sector may be held to higher cybersecurity standards and will see increased regulatory scrutiny that has been witnessed in other industries, such as healthcare and financial services. When networks containing sensitive data may be compromised, regulators that oversee that industry often propose protection standards that ultimately become mandates. Failure to comply often leads to lawsuits, settlements, fines and significant reputational harm. See also: Protecting Institutions From Cyber Risks   Until then, the transportation sector can start by following the best practices as outlined in the National Highway Traffic Safety Administration’s "A Summary of Cybersecurity Best Practices," published in October 2014 . Key observations and recommendations include:

• Cybersecurity is a life-cycle process that includes elements of assessment, design, implementation and operations as well as an effective testing and certification program.
• The aviation industry has many parallels to the automotive industry in the area of cybersecurity.
• Strong leadership from the federal government could help the development of industry-specific cybersecurity standards, guidelines and best practices.
• Sharing learning with other federal agencies is beneficial.
• Use of the NIST cybersecurity standards as a baseline is a way to accelerate development of industry-specific cybersecurity guidelines.
• International cybersecurity efforts are a key source of information.
• Consider developing a cybersecurity simulator. It could facilitate identification of vulnerabilities and risk mitigation strategies and can be used for collaborative learning (government, academia, private sector, international).
• Cybersecurity standards for the entire supply chain are important.
• Foster industry cybersecurity groups for exchange of cybersecurity information.
• Use professional capacity building to address and develop cybersecurity skill sets, system designers and engineers.
• Connected vehicle security should be end-to-end; vehicles, infrastructure and V2X communication should all be secure.

The transportation sector is yet another industry that must learn to adapt to the systemic nature of cyber risk. Because of ever-increasing reliance on evolving technology, cyber risk will certainly begin to move toward the top of the list of transportation safety concerns. The captains of this industry can no longer claim ignorance to cybersecurity issues or completely delegate responsibility. They owe a duty to safeguard the flow of information that effectively keeps our planes airborne and our cars on the road. Failure to do so could be catastrophic.