The insurance industry has been abuzz with the announcement by Allstate CEO Tom Wilson that he has created a stand-alone business unit with the express purpose of monetizing telematics data that the firm has been collecting for at least the last six years. The new company, called Arity, will provide data and analytics products to the insurer’s brands, as well as to third parties. This is not a surprising move for Allstate. I have been watching Allstate for the last couple of years. They have had an active research and development department. You can be assured other insurance companies are exploring similar options that will help them increase revenue in arenas beyond insurance policies.. Allstate has provided hints of its intentions for the last couple of years. In the 2015 SEC 10-K filing, the insurance company -- for the first time -- identified how changing technology is increasing the risk of its ability to continue to generate revenue from insurance products. Specifically, the company said:

“We are also investing in telematics and broadening the value proposition for the connected consumer. If we are not effective in anticipating the impact on our business of changing technology, including automotive technology, our ability to successfully operate may be impaired. Also, telematics devices used have been identified as a potential means for an unauthorized person to connect with a vehicle’s computer system resulting in theft or damage, which could affect our ability to successfully use these technologies. Other potential technological changes, such as driverless cars or technologies that facilitate ride or home sharing, could disrupt the demand for our products from current customers, create coverage issues or [affect] the frequency or severity of losses, and we may not be able to respond effectively.”

Allstate identified the new risk it faced. In response, the company has been aggressively researching, developing and testing new ideas for how to use the data collected to create new types of insurance policy coverages and rating models. See also: 6 Key Ways to Drive Innovation   Innovation Encouraged The company was granted 28 patents in 2015. So far in 2016, it has been awarded 15 patents. The company has also submitted 16 patent applications. Following is a small sampling of the patents: Insurance System Related to a Vehicle to Vehicle Communication System(#9,390,451) - System and methods are disclosed for determining, through vehicle-to-vehicle communication, whether vehicles are involved in autonomous droning. Vehicle driving data and other information may be used to calculate a autonomous droning reward amount. In addition, vehicle involved in a drafting relationship in addition to, or apart from, an autonomous droning relationship may be financially rewarded. Moreover, aspects of the disclosure related to determining ruminative rewards and/or aspects of vehicle insurance procurement/underwriting. Motor Vehicle Operating Data Collection and Analysis (#9,189,895) -- A method and apparatus for collecting and evaluating powered vehicle operation utilizing on-board diagnostic components and location determining components or systems. The invention creates one or more databases whereby identifiable behavior or evaluative characteristics can be analyzed or categorized. The evaluation can include predicting likely future events. The database can be correlated or evaluated with other databases for a wide variety of uses. Route Risk Mitigation (Utility Patent Application (A1)) - A method is disclosed for mitigating the risks associated with driving by assigning risk values to road segments and using those risk values to select less risky travel routes. Various approaches to helping users mitigate risk are presented. A computing device is configured to generate a database of risk values. That device may receive accident information, geographic information, vehicle information, and other information from one or more data sources and calculate a risk value for the associated road segment. Subsequently, the computing device may provide the associated risk value to other devices. Furthermore, a personal navigation device may receive travel route information and use that information to retrieve risk values for the road segments in the travel route. An insurance company may use this information to determine whether to adjust a quote or premium of an insurance policy. This and other aspects relating to using geographically encoded information to promote and reward risk mitigation are disclosed. Data is king Allstate has been granted about 43 patents in the last 18 months. A high percentage are related to data, telematics and how to use the data collected to more effectively understand driving behavior. Data and more specifically data analytics is rapidly becoming the key to unlocking new revenue sources. Data is king. Allstate CEO Wilson was quoted in the Chicago Daily Herald saying that Arity can “incorporate new data sources and enhance analytical capabilities in ways that we weren’t able to do when it was embedded in the insurance company. It’s a big enough platform today with the Allstate customers in it, and that will continue to grow, but we’d like it to grow even faster with a broader set of customers.” See also: Data Science: Methods Matter (Part 4)   One option for bringing innovation to a conservative company is to spin off the innovations into a separate company. It appears that the telematics business unit just simply couldn’t operate effectively within the confines of a highly regulated and conservative company.

“The biggest risk is not taking any risk... In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” ― Mark Zuckerberg

Lessons to be Learned? So what are the lessons to be learned?

• Invest in research and development - finding new ways to enhance the customer experience and at the same time generate additional revenue will be key to being prepared for the uncertainty ahead.
• Define “successful failures” -- you can be assured that not everything the Allstate staff tried worked. The key to innovation is being able to learn from your failures. This is particularly challenging in a larger company where risk-taking is punished.
• Embrace the changing nature of risk – Risk management departments are told to reduce a company’s exposure to all types of risk. To be able to respond to the rapidly changing nature of risk, you will need to increase your exposure to risk.
• Embrace the risk dilemma -  How do you encourage innovation (taking risks) without putting the company in jeopardy? Every type of organization faces this dilemma.

What do you think? What other lessons can be learned? Is this a smart move by Allstate, or risky adventure? Leave a comment below. This article was originally published on LinkedIn. It is reprinted with permission of Steve Anderson.

Virtual reality seems like one of those emerging technologies with limited applicability in insurance. But as I’ve tested a few VR headsets over the past few months I have come to realize there is opportunity for insurance — though you wouldn’t know it from the typical demos. I’ve now driven a Le Mans race car (until I crashed), flown over Manhattan (until I crashed) and fired a gun in a first-person shooter game (until I was killed). In all these situations, I found that the speed and movement made me dizzy — I am not really cut out for this type of VR. I also recently tested Google Cardboard with a series of apps. Admittedly, Cardboard apps are entry-level VR, designed to give a person an idea of the capabilities of VR. Mercifully (for me), many of the apps I tried were much slower, allowing me to absorb, learn and be entertained. This more “normal speed” approach is what I think is likely to be the basis of business-use cases for the insurance industry. A few of the potential VR uses in the insurance industry include:

• Adjuster Training: Today, large P&C insurers build houses and other structures solely for adjuster training. Imagine being able to create a wider variety of situations and enable adjusters to learn and experience them through VR.
• Underwriter Education: P&C underwriters must learn a great deal about the vehicles or property they will be evaluating, and life underwriters must be educated on medical and health conditions. VR environments that show different types of roofing techniques or vehicle construction would be very useful, as would interactive 3D illustrations of the human body.
• Injury Rehab: Treatment programs for injured workers or individuals hurt in car crashes are often complex. VR might be used to demonstrate physical therapy exercises and show how to use medical devices and assist in managing stress or depression.
• Loss Control: Training for loss control engineers or even providing safety training for commercial clients would be possible with VR.

I understand the fast-moving, visually stunning VR environments are where the action is today (pun intended). And there will certainly be a big market for gaming and entertainment VR apps. But, in the long run, there may be many more apps for individuals and businesses (including insurance) that allow users to experience a virtual environment by moving slowly and making conscious choices about how to navigate. VR will have to take some advice from Simon and Garfunkel’s “The 59^th Street Bridge Song”: “Slow down, you move too fast.” If so, insurers that implement VR really could be “feelin’ groovy.” See also: Is Insurance Ready for Virtual Reality?   What is your opinion about virtual reality and insurance? Take the new SMA survey on emerging technologies in insurance, where VR is addressed — along with blockchain, AI, drones, driverless vehicles, etc.

In June, the Property Casualty Insurers Association of America (PCI) published a report titled “Cost Shifting from Workers' Comp Opt-Out Systems: Lessons from Texas and Oklahoma.” It claims to show how employers in those states are avoiding costs that should be covered by workers' comp and that are instead paid by workers, their families, private payers and taxpayers. The report is part of a year-long, anti-competitive campaign that has been orchestrated with claimant attorneys who profit under workers' comp and resist any move away from the traditional approach. The report shows little regard for the facts, applicable law or actual data on performance of alternatives to traditional workers' compensation. Here are five of the most significant bits of misinformation and misrepresentation: 1. No relevant data. The PCI cost shifting report boasts of using “verifiable and relevant data” and speaks to “the behavior of opt-out employers.” But the report fails to actually include any Texas or Oklahoma Option claims data, and the truth is that there is no evidence that PCI has even attempted to obtain such claims data. 2. No apples-to-apples comparison. PCI fails to consider the benefit plan payments, supplemental plan payments and negligence liability settlements and awards under Texas Option programs that are not available under workers' compensation. See also: 2016 Outlook for Property-Casualty 3. No mention that the majority of Texas workers are covered. PCI fails to acknowledge that the Texas Department of Insurance has determined that more than 95% of Texas’ workers are covered by either workers' compensation or an injury benefit plan. Instead of criticizing responsible Texas and Oklahoma employers who provide injury benefit coverage for their workers, PCI should instead focus on the approximately 14 million — and growing — American workers across all states who have no work injury protection whatsoever. 4. No mention that proposed programs in other states have mandated benefits. PCI extrapolates from Texas to posit a false model for Tennessee and South Carolina. Option programs proposed in those states — unlike Texas — have mandated benefits. No bill has been introduced in either of those states to allow employers to “go bare.” 5. No acknowledgement of option program compliance with Medicare reporting and MSA requirements. Option programs normally pay full benefits before Medicare pays anything. The programs comply with Medicare quarterly, electronic reporting rules on open medical claims and liability settlements. The programs protect Medicare's primary interest before settling claims with Medicare beneficiaries by setting aside a portion of the settlement funds to pay for future treatment. Instead of using option programs as a scapegoat and pursuing the fatalistic view that savings by employers equate to cost shifting, perhaps the PCI should expend more energy on how to achieve better medical outcomes for injured workers through communication, employee advocacy, accountability and competition. Option Program Success in Delivering Better Outcomes Is the Real Story We will continue to advocate for a more positive discussion on how to achieve better medical outcomes. That should include a sincere discussion of the PCI board's criteria for an acceptable alternative to workers’ compensation, which was approved in July 2015 and publicly introduced eight months later at the 2016 annual conference of the Workers’ Compensation Research Institute. See also: Healthcare Reform’s Effects on Workers’ Compensation   Workers’ comp options in Texas and Oklahoma have disrupted the industry with much-needed innovation and positive change. This has understandably created some dissonance and has rightly generated calls for proof. We welcome a review of real option program data, which amply demonstrates how highly respected industry players and employers are improving the lives of injured workers and reducing costs. Who could be against that?

I live in the future. I drive a Tesla electric vehicle, which controls the steering wheel on highways. My house in Menlo Park, CA, is a “passive” home that expends minimal energy on heating or cooling. With the solar panels on my roof, my energy bills are close to zero — and that includes charging the car. My iPhone is encased in a cradle laced with electronic sensors that I can place against my chest to generate a detailed electrocardiogram. Because I have a history of heart trouble, including a life-threatening heart attack, knowing I can communicate with my doctors in seconds is a comfort. I spend much of my time talking to entrepreneurs and researchers about breakthrough technologies, such as artificial intelligence and robotics. These entrepreneurs are building a better future, often at a breakneck pace. One team built in three weeks a surgical-glove prototype that delivers tactile guidance to doctors during examinations. Another built visualization software that tells farmers about the health of their crops using images taken by off-the-shelf video cameras flown on drones. That technology took four weeks to develop. You get the idea. I do, in fact, live in the future as it is forming. It is forming far faster than most people realize, and far faster than the human mind can comfortably perceive. See also: AI’s Promise Is Finally Upon Us   In short, the distant future is no longer distant.  The pace of technological change is rapidly accelerating, and those changes are coming to you very soon, whether you like it or not. Of course, such rapid, ubiquitous change has a dark side. Many jobs as we know them will disappear. Our privacy will be further compromised. Future generations may never drive a car or ride in one driven by a human being. We have to worry about biological terrorism and killer drones. Someone you know — maybe you — will have his or her DNA sequence and fingerprints stolen. Man and machine will begin to merge into a single entity. You will have as much food as you can possibly eat, for better or for worse. The ugly state of politics in the U.S. and the U.K. illustrates the impact of income inequality and the widening technological divide. More and more people are being left behind by innovation, and they are protesting in every way they can. Technologies such as social media are being used to fan the flames and to exploit ignorance and bias. The situation will get only worse — unless we find ways to share the prosperity we are creating. We have a choice: build an amazing future, such as we saw on the TV series “Star Trek” or head into the dystopia of “Mad Max.” It really is up to us; we must tell our policymakers what choices we want them to make. The key is to ensure the technologies we are building have the potential to benefit everyone equally; balance the risks and the rewards; and minimize the dependence that technologies create. But first, we must learn about these advances ourselves and be part of the future they are creating. That future cannot be ignored. You could say that I live in a “technobubble,” a world that is not representative of the lives of the majority of the people in the U.S. or in the world. That’s true. I live a comfortable life in Silicon Valley, and I am fortunate to sit near the top of the technology and innovation food chain. As a result, I see the future sooner than most people. The noted science fiction writer William Gibson, a favorite of hackers and techies, once wrote: “The future is here. It’s just not evenly distributed yet.” But from my vantage point at its apex, I am watching that distribution curve flatten — and quickly. Simply put, the future is happening faster and faster, and it is happening everywhere. Technology is the great leveler, the great unifier, the great creator of new and destroyer of old. See also: Technology and the Economic Divide   We are only just commencing the greatest shift society has seen since the dawn of humankind. And as in all other manifest shifts — from the use of fire for shelter and for cooking to the rise of agriculture and the development of sailing vessels, internal-combustion engines and computing — this one will arise from breathtaking advances in technology. This shift, however, is both broader and deeper, and it is happening far more quickly than the previous tectonic shift. This column is based on Wadhwa’s coming book, “Driver in the Driverless Car: How Our Technology Choices Will Create the Future,” which will be released this winter.

Personal auto insurers have traditionally been more reactive than proactive in a slowly changing industry. However, that approach may no longer be adequate as vehicle technology accelerates at a pace the insurance industry is unaccustomed to embracing. To date, the focus of personal auto insurers has been on the underwriting impact of driver-assisted technologies that can self-park, maintain their lane and even force the vehicle to stop to avoid collisions. Insurers are continually fine-tuning their underwriting algorithms to align with such decreasing risks. However, insurers need to broaden their scope and move beyond tweaking rates. Let’s face the truth: Automobile claim processing relies on antiquated theories and techniques that are costly and inefficient and can produce faulty outcomes. See also: Telematics: Because Accidents Happen   Up until the 1980s, adjusters actually went out to the accident location to canvass the scene, interview witnesses, measure skid marks and look for obstructions to vision — all for the purpose of making a sound and well-researched liability decision. To cut costs, insurers eliminated scene investigations and relied almost solely on driver statements and physical damage to determine liability. The process works fine in a clear liability situation like when a stopped vehicle is rear-ended. But it doesn’t work so well in a multiple-car pile-up or an accident at an intersection. How often do we hear from the driver statements like, “He came out of nowhere,” or, “I thought I had the green light,” or, simply, “I don’t remember”? These same individuals have a vested interest in being found free of fault, in fear of adding points to their driving record and seeing increased rates. How do we expect desk-bound adjusters to make the right decision with facts and circumstances such as these? Liability adjusters futilely spend an inordinate amount of time searching for clues, hoping to uncover the truth when faced with conflicting stories or facts. Today, there are cameras everywhere and telematics available on almost every vehicle. The University of Michigan’s MCity is testing vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) communications that will soon be prevalent in our environment. Just as autonomous vehicles are using these cameras and sensors to alter the vehicle’s behavior, the V2V/V2I images and data can record the facts associated with the accident. This data can be consolidated to confirm and recreate the scene leading up to an accident. Information that adjusters rely upon will suddenly become objective, rather than subjective or tainted by guesstimates. For example, in an accident where a pedestrian darts out from between parked cars and is hit by a moving vehicle, the data will answer many questions. (How fast were you traveling? At what point did you apply the brakes? Did you try to swerve to avoid him? Were any vehicles or vegetation blocking your vision?) Without a witness, this type of accident is difficult to assess today, and the task is even harder to assess when the pedestrian is a child. Utilizing V2V and V2I data to validate the accident facts can make the process much less painful and much more equitable for all involved, especially for anguished parents who may not have seen their child dart into the street. See also: Predictive Analytics, Text Mining, And Drug-Impaired Driving In Automobile Accidents   While not everyone wants to share their day-to-day driving data with their insurers, insurers could offer customer discounts or deductible waivers for sharing the last several minutes of data leading up to the impact. This may be more palatable to many conscientious consumers, who see this option as effectively protecting them from the potential of being falsely accused of liability. Data is ubiquitous, waiting to be harvested and used to improve liability decision making. It’s time for insurers to initiate interactions with auto manufacturers and transportation infrastructure suppliers to create industry standards for sharing V2V, V2I and telematics data that can result in dramatic, positive changes in how claims are handled and negligence is determined. Insurers all want to make accurate liability decisions and consumers deserve a fair outcome. We finally have the tools available to ensure just that.

As customers increasingly demand a better experience when they interact with companies, including insurers, help is coming from a counterintuitive source. It turns out that one of the best ways to be more personal is through… robots. More precisely, the answer is turning out to be chat robots, or “chatbots.” People don’t like having to phone call centers and wade through that phone tree — “Para continuar en espanol, oprima uno… For billing, press 2; for….” Many, especially younger people, just want to be able to text a question and get it answered. That’s how they handle everything else. So, many companies are realizing they need to have customer service reps that respond to texts, and they’re seeing an opening to use chatbots. Using so-called natural language processing to understand a text message and then drawing on artificial intelligence to both find the answer and generate a reply, chatbots can handle perhaps 70% to 80% of queries. They can hand a conversation off to a human when necessary and can take the conversation over again, without the customer’s ever realizing that a bot has been involved or that a handoff occurred. In fact, the bots can wind up sounding a lot less robotic than the standard call center rep who is only allowed to read off a script. The bots are so efficient about finding answers that they actually have to be slowed down, so the customer doesn’t think, “No one could type that fast,” and wonder if a computer is involved. (A certain percentage of typos can also be programmed to appear, as can emojis or lots of exclamation points, to make the bots seem more human. You can actually program the bots to have different personalities.) See also: Want to Enhance Your Customer Experience? With so many mundane tasks handled by bots, the call-center reps get to deal with more interesting issues and can spend more time with customers, giving everyone a better experience. Although they haven’t shown up widely in insurance yet, they are in use in numerous other industries, with great success. Why now? Chatbots have been around for more than 20 years. Why should companies pay attention to chatbots now? For starters, these days just about everyone is carrying a super-computer around in her pocket. In 1991, 1GB of flash memory would have cost around $45,000. Now, most phones have at least 32GB of memory. Processors are more than 1,000 times as fast as they were in 1991. So, the technology for chatbots is lightyears ahead of where it was. Companies have also placed an increased focus on messaging, including with bots. Facebook Messenger uses more than 11,000 chatbots to respond to messages. The chat app Kik recently said that more than 20,000 bots have been made specifically for its platform. Perhaps even more importantly, the pendulum in the customer-business relationship has swung heavily in favor of the customer. Companies no longer control the message/brand; it’s all out there in the ether, and companies need to guard their reputations by caring for customers. Some companies, such as Zappos, have pretty much built their businesses on the customer experience, while others, including cable companies (Comcast, most notoriously), are vilified. Insurance companies can see what’s happening in other industries and see what they need to do. Net Promoter Scores (NPS) are the insurance industry’s most consistent measurement of customer loyalty, and, despite some pockets of brilliance by individuals, most of the time the insurance industry stinks. Chatbots can help. Chatbots create a conversational web and conversational commerce. They can even be programmed to wish the customer a happy birthday or happy anniversary or make some comment about how long the customer had been with the company. Chatbots make a company’s behavior more consistent across the board, especially in terms of elegance and simplicity. On top of that, it’s easy to keep the bots on-message, and they only need to be trained once. See also: ‘Age of the Customer’ Demands Change In 2013, it was estimated that it takes five screens to get a user to where he wants to go. In 2015, that number has increased to seven. Bots get the information almost instantly, even if that means going to a deep link in an app or on a site or in a corporate data center. Bots aren’t “one size fits all.” They’re “one size fits one.” So work has to go into customizing them for a company. But simple bots such as for frequently asked questions can go live in a day, and an ecosystem of bots can be developed over time. Once a bot exceeds its ability to answer a question, it might initially pass the question to a human, but, in time, the handoff could go to another bot that has been developed. Bots will also be able to take on more tasks, including outreach to customers. Bots could automatically alert customers of an impending hurricane and begin a dialogue with them about what steps to take to prepare, who to call if they need immediate assistance, how to file claims, etc. In insurance, there’s nothing like the Domino’s pizza tracker, which allows a customer to follow along with an order every step of the way, from the order to the oven to the front door. But there will be, and imagine how helpful that will be with claims. Many customer calls are about where their claims are in the process, so streamlining it and providing a bot with the capabilities to respond to the customer would make the process easier, eliminate a lot of calls — and make the customer much happier. Of course, an insurance bot isn’t going to answer “what is the meaning of life?” or “how much wood could a woodchuck chuck if a woodchuck could chuck wood?” like Apple’s Siri can. But a bot can be tailored and trained to answer many questions, filling a gaping hole in the insurance world.

Best-selling Author Og Mandino once said:  "Always seek out the seed of triumph in every adversity." It appears that a small, yet growing number of America's front line health providers are doing just that. Instead taking on increased risk, greater healthcare bureaucracy and more administration headaches, these medical mavericks have drawn a philosophical line in the sand. I'm speaking of direct primary care (DPC). For the uninitiated, DPC is an emerging model where general practitioners elect to disassociate from, and no longer bill services to, health payers, including Medicare. DPC practices average between 600 and 800 total patients (vs. the national 2,300-patient average for traditional primary care provider (PCP) patient panels). This return to front-line doctoring -- "sans insurance" -- translates into a cost-reduction of as much as 40% in staffing and reduced administrative complexity. Electronic health records (EHR) software finds itself replaced with lighter applications to track, schedule and bill patients. Practices may also choose to use mhealth/telehealth technology to monitor/connect with patients. Patients in these practices are often those with low to middle incomes, with high-deductible health plans (HDHPs). For this reason, DPC doctors develop network relationships with other local medical specialists and services. The result is patients gaining access to discounted medications, imaging and labs, plus lower service fees from local specialists -- all on a cash basis. And presto! We have a true two-party care relationship, where doctors focus purely on patients, instead of blending in payers as their second healthcare customer. The median monthly DPC fee for an adult is about $70; and fees for kids are priced between $10 and $20 per child. Many DPC practices also cap monthly family fees. Pricing is independent of pre-existing conditions and current health status and allows for more face-to-face time, as often as needed. These practices report reducing urgent care and ER visits, plus hospital admits and re-admits. Quality and outcome data has apparently started reaching malpractice insurers, now quoting lower rates for direct vs. traditional primary care practices. Here is where it gets sticky. DPC is rightly considered a "health service," both by the Affordable Care Act (ACA) and by 16 states. However, under section 223(c) of the U.S. tax code, the I.R.S. wrongly considers DPC a "gap," or secondary, health plan. Therefore, DPC is not a qualified medical expense -- and fees paid by patients are not reimbursable by health savings accounts (HSAs). Changes are in the works, per the introduction of Senate Bill 1989 - The Primary Care Enhancement Act of 2015, which would make DPC fees a part of HSAs. The bill, with strong support from the American Academy of Family Physicians, also seeks to require the Center for Medicare and Medicaid Innovation (CMMI) to create a new payment pathway for DPC as an alternative payment model (APM) in Medicare and with dual eligibles. The plan is for DPC to show Medicare its mettle -- and eventually receive a modest flat fee payment for primary care services offered by a DPC medical home. The legislation includes allowing qualified physicians who have opted out of Medicare to participate in the program. It also serves as a partnering catalyst with Medicare Advantage, in an affordable care organization (ACO)-like structure. DPC is a disruptive "hot knife" model, whose entry is well-timed to cut through the cold stick of butter called high health costs. Today, PCP co-pays have gone up to $45, and deductibles are sky high. Many consumers have no idea that at or around the same per-visit patient fee, DPC exists as an option. Employers are just beginning, on a larger scale, to integrate DPC with other options such as HDHPs and self-insured health coverage. Using this new model with self-insured companies makes sense, to hedge risk, lower health costs, improve outcomes and improve quality of care. One county in North Carolina, which employed a DPC option, saved nearly $1.5 million on yearly medical expenses -- on just 800 covered lives! It may surprise you that, apart from HSA standing, there are already early employer adopters who have chosen to pay the monthly DPC fees for employees themselves. A British Medical Journal study showed patients of Washington state DPC provider Qliance coming in with 35% fewer hospitalizations, 65% fewer emergency department visits, 66% fewer specialist visits and 82% fewer surgeries. DPC benefits appear to not only reduce primary care costs, but lessen the healthcare costs and utilization outside of their practices. Payer transparency is a significantly important strategy to the future growth and integration of DPC. We talk about the importance of transparency in hospital pricing to patients, and for drug companies to reveal their true R&D costs. But have you ever stopped to consider the importance of transparency in how payers calculate and price plan premiums for each covered member? Just how much of the premium payment can be carved out as estimated primary care services to be received? More than ever, healthcare consumer groups and fully insured employers should push health payers for transparency. Because I'll bet what payers have estimated for per-person primary care usage and costs, adding in the associated patient responsibility portions (co-pays, and any applicable deductible or co-insurance fees) will be much more than an $840 yearly DPC payment. But wait...there's more. Don't forget to have payers deduct an additional...let's be conservative...1/3 of the Qliance savings percentages for the estimated care cost savings relating to carved-out estimated care outside of primary services. Next, look at Medicare and do the same thing. But…instead of the wallets of health plan members, think federal budgets, taxpayers, subsidies, growing liabilities and the potential to hold off future tax increases. Then look at Medicaid for the same reasons, remembering that DPC would certainly create a greater improvement of care quality than Medicaid care providers and facilities. Remember the "triple aim" -- cost, outcomes and quality -- and that doctors are happier. DPC injects disruption and greater consumerism into healthcare. Something interesting happened along the way to transforming our healthcare system. The ACA fell far short of its goals, and America's care delivery and coverage became even less affordable for millions of employers and individual consumers. We should know by now that improving quality and pricing for all will not come from laws -- specifically, from those who force people into lower-quality Medicaid coverage, and insurance plan exchange options with punishing deductibles; in essence, giving people a broken Christmas toy with a pretty bow on it and pretending they will enjoy it.   No matter how you dress it up, and much money you throw at it: Healthcare coverage is not the same as affordable healthcare. In the heart of even the toughest situations, there are innately driven people who make bold, fresh choices and take stands -- efforts that emphasize principles we know to be just and right, rather than gaining financially on the backs of others' misery. My hope resides in what Lincoln called "the better angels of our nature." DPC offers a free-market "injection" into healthcare's regulated pricing model. If Senate Bill 1989 or a similar law passes, it will provide individuals and companies a better chance to gain better quality, more affordable care. Unlike some DPC purists, I see a future inflow of Medicare dollars to non-enrolled DPC qualified providers as stimulating a transformation where coordinated care begins from outside of the umbrella of big medicine ownership. Like the plunging penguins who emulate the courageous actions of others, I believe many primary care physicians are looking for the right time to enter a DPC model. Whether that happens individually, through groups, or by strategic partnerships, is up to industry forces. It's the beauty of filling consumer demand. Making healthcare services, drugs and coverage affordable to consumers appears completely disconnected from the industry's mission to improve care quality and outcomes, and lowering health "costs." Free market forces are what bring down consumer prices in most every market. Their introduction into U.S. healthcare will likely cause short-term fallout and financial pain within healthcare industries, but it would leave us, and future generations, with a more sustainable, stronger system. We’ve gotten to the point where healthcare bloat and unaffordability will require sacrifice from all involved. By allowing consumer-friendly models like DPC to enter the regulated world of healthcare, perhaps slowly through the back door, we will see transformation come from within. History has repeatedly shown us that better models fueled by consumer desire rise to the top.

Are blockchains insurable? This question was posed as a topic for presentation by the Center of Insurance Policy and Research, a research arm of the National Association of Insurance Commissioners (CIPR/NAIC). The trigger appears to be that some insurance companies are being asked to insure the business operations of blockchain enterprises. This same question would apply to legacy businesses that may choose to use or participate in a blockchain, which is basically a shared database managed by software. If one listens to blockchain activists, this issue could apply to everyone in the near future. The Ingenesist Project volunteered the following opinion to the question: “Are blockchains insurable?” The article is long and comprehensive, but the implications are staggering. The article begins by describing the landscape of finance and entrepreneurship in terms of insurability. It follows with, in essence, a mathematical proof that blockchains are indeed insurable but that business processes using blockchains may not be. Luckily, the technology offers sufficient mathematical underpinning to adequately calculate risk and thereby pool risk exposures of its components. However, trouble arises when digital assets can neither be treated as money nor as property. As such, an extralegal condition may exist that would be categorically non-insurable in mainstream finance. See also: Why Insurers Caught the Blockchain Bug   “Extralegal” refers to a condition where something is neither legal nor illegal. Economist Hernando De Soto writes about how the extralegal sector in many parts of the world grossly inhibits economic growth because people are unable to secure “title” to property and businesses they create. They are unable to bridge the capitalization gap — that is, the ability to borrow against tangible assets or future returns. Blockchain technology appears to be languishing in the extralegal domain as courts and governments have few uniform ideas about how and where this tech fits in society -- that is, until something goes wrong, such as a major hack where important people lose a lot of money. Only then will some patchwork of blanket legislation likely emerge that favors those of one sector over another. The running joke in crypto-space is that any effort to control blockchain technology would negate any benefits of having it one in the first place. A Third Option The CIPR/NAIC article raises the possibility that the pairing of blockchain technology with professional engineers (as the decentralized adjudicators of smart contracts) would achieve a state of insurability and thus bridge the capitalization gap required for mainstream financing of blockchain enterprise. This arrangement applies primarily to basic infrastructure and derivatives of basic infrastructure, which may not actually be a bad thing at all. See also: What Is and What Isn’t a Blockchain?   The Critical Path The Earth is currently an epic case study in deferred maintenance. There are very real and serious global problems that affect every living creature that we need to attend to immediately. Critical path methodology is a technique familiar to all builders as a set of instructions specifying where one action must precede the next for subsequent actions to occur. Millions of business plans that provide basic human needs and protect our natural resources and that are currently unprofitable will suddenly become hugely profitable. These outcomes could be accomplished with the recommendations provided within the CIPR/NAIC article. Please read this article and forward it to others who are interested in this technology. There is very real value to be released and money to be made in the next economic paradigm that is currently at our fingertips. All we need to do is align insurance with engineering on a shared database.

Overview Connected companies are organizations that move away from traditional hierarchies to embrace communities of employees that reach across departments and geographies. By implementing innovative technology solutions and designing workspaces that remove bottlenecks to collaboration, these companies are building smarter and more productive teams, increasing talent retention and creating a more satisfying work experience for their employees. Within an organization, such networks can lead to innovation and competitive advantage. Mapping these communities reveals that the amount of knowledge and information that flows through them far outweighs what is available through traditional organizational hierarchies and silos. The challenge for many large companies today — particularly at a time when consumers are more demanding in the services and support they seek — is to find ways to channel the power of such informal networks to fuel growth and revenue and to better serve their customers. In-Depth Businesses, both large and small, are typically organized by department. Within these formal structures, dozens of informal, shared-interest communities develop — either intentionally to enable collaboration across teams, or organically by employees through their shared interests. Increasingly, it is through these often-invisible networks that work actually gets done in today’s knowledge-intensive companies. As ideas are shared — whether through instant messaging, collaboration tools, intranets or digital social networking platforms — extracting the value within these networks has never been more important – or, if implemented effectively, easy. Perhaps the biggest barriers to harnessing the power of these peer groups are the formal hierarchies, matrices and organizational charts that overlay them. These formal structures tend to downplay the power of informal relationships and the ideas and innovation that are their byproducts. As executive leadership teams contemplate ways to boost the value of these networks, they should consider implementing both technological and structural changes. The idea is to encourage goal-oriented collaboration, create pathways to forging value-creating informal connections and remove bottlenecks to networking across business functions. Addressing the Needs of an Evolving Workforce Changing workforce demographics are forcing organizations to rethink talent management. For example, the impending retirement of baby boomers means companies could face a serious talent shortage and loss of important institutional knowledge. The new workplace imperative is to accommodate the needs of all employees, ensuring they can share information and knowledge effectively. With various skills in short supply, some businesses are increasingly hiring outside their traditional geographic regions to attract and retain top talent, creating a more distributed workforce. As a result, companies are retooling their knowledge-sharing technology to support remote employees. Flexible working programs are forcing executives to rethink corporate real estate and space planning. Should virtual workers be entitled to office space? What workspace designs and technology are necessary to support office workers collaborating with their virtual counterparts? Similarly, many employees want stronger and deeper connections with each other and their leadership, and they are looking for more instantaneous feedback on their work instead of the traditional employee review. Maximizing the Benefits of Instant Feedback “Today’s business environment is real-time,” says Teryluz Andreu, U.S. engagement leader at Aon Hewitt. “Customers act and interact with the swipe of a screen and a click of a button. Data is available immediately, and, increasingly, today’s customer expects instant results.” Employees are no different. “Millennials, in particular, are looking for continuous feedback loops to improve their daily work — not after long, sometimes rather complex, process and formal surveys,” Andreu says. This feedback from employees is essential for the organization to analyze and act upon. Research has shown that employees want organizations to encourage them to speak up, actively solicit their feedback and encourage conversations across the business. Making Informal Networks Formal To help address these emerging needs and maximize the opportunities they present, businesses with entrenched hierarchical structures could consider introducing flatter structures that encourage collaboration, similar to those popularized by startup culture. Rather than completely restructure, businesses can explore designing and supporting informal networks around ad hoc peer groups. These can be designed to focus on a specific work area of mutual self-interest, bringing more diverse perspectives to problems and unlocking enormous value at low cost. Before undertaking such an effort, leaders need to very clearly understand the objectives and the outcomes you are trying to drive in your company and (with) your colleagues,. Just as formal hierarchical structures have defined management roles, employee networks should have defined collaborative roles. These connected communities benefit from designated group owners and “knowledge managers.” In this way, networks can support the creation of small, focused communities of interest within larger communities — for example, sub-communities focused on the different industries within healthcare, such as pharmaceutical and medical devices. By participating in these smaller communities, talented workers gain access to knowledge across the company. A person in the medical devices community could also be a member of a marketing community, helping both groups better understand the needs of the other. Carrying out analysis of existing communities by working through influential employees who are already connected with them can help companies formalize networks. This can often make collaboration more efficient and secure buy-in from existing members. These individuals also tend to have a strong perspective on which people from disparate functions, locations or groups can add the most value. Learning How to Listen A critical factor in formalizing employee networks is ensuring employees are engaged and empowered to participate. “Agile listening” encourages continuous conversations between employees and company leadership, often through technological solutions. These new types of feedback loops are often less cumbersome, intrusive and costly than their annual or semiannual survey counterparts, helping companies and employees put new ideas into practice quickly. “Creating networks and connections is a basic human need,” Andreu says. “Having issues addressed and feedback acted upon is essential to an individual’s engagement and work output. Organizations that listen and respond to their worker’s concerns satisfy the need of employees to feel connected to their organization and part of a larger community.” According to Andreu, one of the primary benefits of agile listening is the ability to act on feedback in real-time and to also help balance the onus of “employee engagement.” Instead of staff feeling employee engagement is only a result of what the organization does, these new tools can now help the individual to proactively improve their own engagement. “These personalized engagement reports for employees help address what they need to change about their own behavior to improve their engagement and, more importantly, what things they can change in the workplace to feel more connected,” Andreu says. From Connections to Collaboration To enable these connections and boost internal networks, businesses need to identify and implement the right mix of technological tools. Just as LinkedIn, Facebook and Twitter have changed the way individuals communicate, there is now an array of powerful and secure communications tools that allow for easy collaboration across time zones and from virtually any location. Internal social networks like Microsoft’s Yammer or Facebook for Business can also support the development of communities of interest within larger networks. Rather than searching for an answer or expert within a large and often cumbersome database, these tools allow employees to search for employees outside their direct groups based on expertise or skills. Companies can also establish a robust intranet or private website that is accessible by employees only. These are useful not only for publishing news and sharing essential company policies and updates, but they can also serve as a secure place in which to communicate in real time, improve collaboration, outline strategy and provide essential training. Rethinking Workspaces to Break Down Silos Beyond the business case, companies should have some sort of cultural readiness assessment in place because it is a (big) cultural change. Technology alone is often not enough to help bring about such changes. This is why, in addition to technology powering collaboration, structural changes to physical workspaces can help promote a more networked work environment. A well-designed workplace can catalyze the collaborative behaviors businesses want to promote, energize and motivate among workers. It’s essential to understand “people want to interact, socialize and play with each other at work,” says Lyle Sandler, head of technology, design and human experience at Aon. “But they find themselves sequestered to cubicles and windowless offices. Instead of interacting with humans, they are glued to computer screens and sometimes overly tied to technology instead of what is more natural to us: human interaction. The ‘agile workspace’ provides us with the opportunity to explore these natural human behaviors — behaviors that produce ideas and drive innovation.” Sandler also notes that well-designed agile workspaces can encourage “successful collisions.” A smart and thoughtful workplace design can “get people to literally bump in to each other, speak with others that one wouldn’t normally interact with and ask for help and perspectives from people with different backgrounds.” The Business Benefits of Collaboration Networks can generate significant value by activating talented employees and encouraging them to work together across the enterprise. The benefits of a networked approach can be substantial: smarter teams, improvements in workforce productivity, better customer service, product innovation, efficiency gains and reduced overheads. The connected company also constitutes a win for employees and a strong reason to join — or stay with — a company in an age of increasing competition for top talent. They can look forward to greater workplace flexibility, more engaged and satisfying experiences on the job and a culture of collaboration. All this can lead to better financial performance and better long-term prospects for the entire business. Talking Points “We are at an interesting inflection point — a time when many of the scenarios we have been talking about for a long time are almost becoming reality.” – Jackie Fenn, fellow emeritus in business innovation and emerging trends, Gartner “In a nutshell, collaboration tools eliminate silos — one of the biggest inhibitors to digital transformation today.” – Andy Litherland, VP of European channels, Avaya “When it comes to breaking down silos, I don’t think you’re ever really done. It’s something you work on every day and every year, by emphasizing that we’re all in this together.” – Pat Cunningham, director of aviation, Pepsico Further Reading

• Team Spirit: Businesses Are Embracing the Idea of Working in Teams. Managing Them Is Hard – The Economist, March 19, 2016
• A Managed Services Model for the Connected Workplace – Computer Weekly, March 17, 2016
• Could a Workplace Redesign Lead to Better Collaboration – TechTarget, March 31, 2016
• Social Networking Comes (at Last) to the Workplace – The Wall Street Journal, March 14, 2016
• What’s Next for Collaboration in the Workplace? – InformationAge, March 17, 2016

Across the developed world, leading businesses are facing new workforce productivity challenges. Many recent graduates lack the skills necessary to succeed in today’s quickly changing workplace, while economic uncertainty has forced many experienced workers to delay their retirement. Companies need to consider the impact of these trends and the ways they can differentiate themselves as they wage the battle to find and retain top talent.  

Winning the battle for talent is about more than compensation. To remain attractive to multiple generations of current and future employees, businesses are shifting their focus to a broader array of benefits. A healthy person at the beginning of a career, for example, is more likely to want flexible benefits that support an independent lifestyle. In contrast, a long-time employee who is nearing retirement is more likely to favor a more predictable structure weighted toward retirement savings.

The reality is that there will be five generations of employees sharing the workplace by 2020, and the best places to work will be defined by their ability to meet the increasingly diverse needs of their entire workforce. So what can employers do to ensure they are offering a competitive range of benefits that attract and retain the best talent?

In-Depth

Workplaces are evolving — and not always in ways that support business goals. Employee trust in employers is at an all-time low, according to the Aon Workforce Mindset Study, and one-third of employees are seeking to change jobs in the next year.

With populations aging and the pool of local, fresh talent stagnant, businesses can’t afford to ignore these realities. They need to develop innovative ways to attract and retain talent, including workplace flexibility, according to the Workforce Mindset Study. Benefits packages, in particular, stand out as one area that can be made more appealing.

Craig Dolezal, senior vice president of Aon, believes offering a wider range of benefit choices tailored to each generation’s needs can become an important differentiator for attracting and retaining this talent. One model that could become a powerful vehicle for achieving both of these aims is through what Dolezal calls “a total rewards exchange,” where an employee gets to create a benefits package, prioritizing compensation, bonuses, time off, medical, dental, wellness and child care (among other rewards).

Essentially, it’s like creating “a marketplace where people can make their own decisions about how they want to be compensated,” he says, “whether they want life insurance at this level or they’d rather have it in a sabbatical. It’s up to them to decide.”

Learning From Health Exchanges

Such an arrangement can appeal to prospective employees who desire greater individual control over their benefit options and care choices. But, according to the Workforce Mindset Study, employees also want to see more honesty and transparency from their leaders, which ranks as their top suggestion. Further, consistent with other aspects of their life, they expect to be able to access information on their benefits when and where they want.

Mike Christie, senior vice president, Exchange Market Strategy at Aon, says health exchanges, which are becoming popular in the U.S., represent a significant step in this direction. Private health exchanges are competitive marketplaces where consumers can shop across multiple products — often from multiple providers in an efficient manner. Their purpose is to combine cost-accountability with meaningful control over health benefits for individual employees. They also arm employees with information to make smart choices based on their health needs and tools to evaluate their options.

“What the health exchange does is in a very overt way show employees what the employer contribution allows you to purchase,” Christie says, so it brings more cost transparency about what the company’s contribution provides them.

New thinking about benefits

The high cost of health care in the U.S. is one of the key drivers of the private health care exchange market. But the U.S. experience with private health exchanges does have potential applications in other countries. Today’s workforce is more global and diverse than ever before. In almost every country in the world, there is a greater range of age groups, ethnicities and nationalities, as well as more women, more people working remotely and more hiring in other countries and time zones.

“Private exchanges give employees a wide range of options so they can decide which plan is best suited for them,” Christie says, and this has broad appeal in markets around the world.

In the competition for talent, businesses offering benefits that employees crave is only part of the challenge. Businesses should consider using a more consumer-driven benefits approach to create incentives for healthy behaviors and encourage people to make smarter choices about the health insurance, supplemental benefits and retirement products they need to prepare and protect themselves and their families for the future. For example, strong retirement packages might have greater appeal to people in their 60s than to people in their teens — and a working parent might prioritize child care, while someone just beginning a career could be interested in tuition reimbursement.

For many, a balance of reward options is a precondition for employment, and as the battle for talent becomes more competitive, perks such as travel vouchers and free lunches could become differentiators.

The Future of Employee Rewards?

At a time when skills shortages are on the increase globally and workforce demographics are changing, 70% of employers say they are going to be revising their total rewards strategy to accommodate the changing needs and demographics of their workforces in the next five years, according to the Aon 2015 Health Care Survey. Applying the health exchange approach to employee benefits could prove a valuable model for rethinking how to administer these benefits.

It can “take away a lot of the corporate decision making employers have to do when trying to choose the right plans,” Dolezal says, allowing organizations to focus their energies on value creation rather than administrative functions.

Employers can also find significant cost savings through this model because of the reduced in-house administrative burden. By giving employees more choice, an exchange-style approach answers the increasing demand for benefits flexibility from employees. By expanding this approach beyond healthcare to a fully flexible benefits offering, organizations can offer a rewards package that meets the needs of employees as individuals, rather than attempting a one-size-fits-all approach.

“We actually think that will be the next wave of innovation,” Dolezal says. “Moving beyond healthcare exchanges to total rewards marketplaces.”

Talking Points

“By shifting the role of the employer to that of financier/facilitator and empowering employers with a true consumerism model — one that brings together competition and consumerism, a private health exchange brings a host of incentives to bear to exert positive influence on the market, including reduced costs and higher consumer satisfaction.” – Private Health Exchanges and the Consumerism Movement, Aon Hewitt (White Paper)

“We’ve seen individuals move to plans that are close to what they’ve had in the year prior, however, there are individuals who increase coverage or try to secure lower premiums. The exchange model lets people decide which plans and which insurance companies are best suited for them and their situation.” – Mike Christie, senior vice president, Exchange Market Strategy, Aon

“We believe this new approach to medical coverage better meets the needs of our diverse workforce and provides our company with increased efficiencies in our health careofferings.” – Dean Carter, chief human resources officer of Sears Holdings

Further Reading

• XChanges Today: A Business Brief
• Aon 2015 Retiree Health Care Survey 
• Reshaping Retiree Health Care Through a Private Exchange Strategy