In a highly competitive market, every insurance document needs to engage the customer in a consistent way to ensure a positive customer experience. However, with the plethora of business correspondence that an insurance enterprise produces, many insurers have lost track of their document inventory — all of those policies, statements, invoices, proposals, letters and even marketing materials — that have been created over time and what those pieces actually say. Making sense and maintaining these large inventories of communications can be an overwhelming task. It’s a huge challenge to ensure you’re reflecting and reinforcing your company’s brand while also ensuring compliance with regulatory requirements. See also: Payoff From Great Customer Experience? Additionally, companies often go through ideation phases where they attempt to refresh a piece of correspondence and label it a “redesign.” That can be a misnomer, as a true redesign of a document needs to get beyond applying a new coat of paint (the look and feel). Your “redesigned” communications still need to ensure they are meaningful, comprehensible, targeted and personalized, and that’s exponentially more difficult to achieve the larger your inventory. Find the patterns So, if it isn’t a traditional redesign that will create more compelling, relevant communications, what will? The answer starts with identifying what content you need that you can share and re-use in a consistent way. Set a course streamlining and reducing your correspondence content down to core chunks — for example, minimal sets of paragraphs that might make up a letter or a set of letters in such a way that they become your kernels in the system. These kernels are your foundation, your building blocks that you define once with a common voice and tone and deploy consistently to elicit the expected response you hope to get from the recipient. The name for this process is “rationalization.” Rationalization also means taking a hard look at what we call “outlier bits of content,” things that might appear just once in 1,000 letters, and asking why that paragraph only appeared once; was it really a situation where this company needed to say this at all? Sometimes the answer is “yes,” sometimes “no.” See also: Tips on Improving the Customer Experience   As an engineer by training, I am intrigued by the concept of rationalizing content because it is really about applying the principles of pattern recognition. By finding meaningful patterns in content, you can reduce your communications inventory to the minimum set of content “chunks” required to efficiently produce the correspondence in a way that meets the vision you have for a better customer experience. It’s about more than replication; think about it as revitalization. It’s understanding your content puzzle pieces and having an intelligent way to assemble them to complete the communications picture. With rationalization in place, you can make communicating with customers easier — for them and for you.

In part one of this blog, we looked at the transformational changes insurers are facing and the need to build bridges between today’s world and the future. Now it’s time to look at “the hows” – How do you respond? … How do you set a call to build those bridges? … And how do you stay competitive in this new world? SMA recommends that insurers plan to bridge to the future, building in capabilities that will achieve near-term goals for improvement, while moving toward a Next-Gen Insurer model. The following seven suggestions should be part of your bridging strategy: Operationalize customer-centric strategies: Improving the customer experience has been the top strategic initiative for insurers in 2015 and 2016 and is sure to remain critical in the years to come. Emerging technologies and the increasingly connected world have a large impact on customer needs, behaviors and expectations. More than ever in this fast-moving age, listening to the customer and creating a customer-centric business will be key. Modernize core platforms: Technology systems for rating, policy administration, billing and claims are the hub of every insurance company. Many a company has discovered that legacy systems in these areas stand in the way of implementing new business strategies and seizing market opportunities. Modernizing those core platforms is a great place to start in the quest to become a Next-Gen Insurer and position for a changing world. See also: 4 Technology Trends to Watch for Build a flexible organization and workforce: Technology and process don’t improve by themselves. New business models, new ideas and ways to capitalize on emerging trends and technologies come from an organization and the people who are able to change. Culture, organizational structure, new roles and agile technology infrastructures are required as part of a comprehensive strategy to build an organization that can quickly and willingly respond to changes in the environment. Major in data and analytics: Every insurer needs to create an enterprise strategy to leverage their internal data assets and capitalize on more external data in the marketplace. At a minimum, the strategy should start with master data management and include a strong business intelligence foundation. Building skills and capabilities for more advanced analytics and big data should be on the road map, as well. Institutionalize innovation: Innovation is not a passing fad. The creative rethinking of the business is a requirement for success in a world that is transforming. But institutionalizing innovation means going beyond thinking or imagining new ways to do business and extends into operationalizing those ideas. Go digital: Most insurers have been on a digital journey for a long time, but in many cases it has been on a department-by-department, project-by-project basis. Now is the time to create a more comprehensive strategy to improve digital operations across all aspects of the business. There may still be a long way to go on this journey, but it is important to have an overarching strategy and framework. Keep your finger on the pulse of the emerging trends and technologies: Not all emerging technologies will require the attention of every insurer. But each insurer should identify those with the most potential impact for their own company; develop a plan to monitor them; and invest, experiment and incorporate elements into the strategy over time. SMA has created a Next-Gen Insurer framework that brings together all of these elements into a common vision to aid insurers as they prepare for future success. This framework has innovation at its core and includes four related elements:

1. Creating a strategic plan that starts with customers
2. Establishing capabilities to develop innovative products and services
3. Adapting and capitalizing on technologies and data
4. Implementing new and revised business models.

As insurers consider the impact of emerging technologies for their companies, the SMA Next-Gen Insurer Model helps in planning how to bridge from today’s business to the insurance business of tomorrow. See also: Next-Gen Analytics Drive Efficiency Bridging is so important to insurers today that is a major theme of the SMA Summit this September. Insurers recognize that timing is critical, and the exponential changes taking place now in technology will only increase. Finding ways to build those bridges between today and tomorrow is paramount. Change is here, and it’s not going away. Now is the time for insurers to prepare and execute plans to ensure their company’s future.

Overview Shifting demographics are starting to reshape the workforce. As baby boomers retire, in most developed markets there will simply be fewer people of working age to fill positions. Not only is the pool of locally available replacement talent shrinking, but competition for their talent is on the rise. The people shortage is exacerbated by the lack of growth in graduates with science, technology, engineering and math (STEM) degrees. This is happening at a time when, because of rapid advances in technology, the demand for these skills in the workplace is on the rise. At the same time, businesses are also finding that the leadership and experience of the baby boomers are being sorely missed. As they leave the workforce, baby boomers are taking decades of knowledge with them, while younger generations often have yet to build up the experience and leadership skills needed to maintain successful businesses. So how can businesses respond to this confluence of demographic and training challenges to avoid being hit hard by a skills shortage that could be even more pressing than the one the world is already facing? With an emerging challenge this great, this is not just an HR issue – it’s core to future business strategy. In-Depth How are business leaders coping with the rising demographic, technological and human resource challenges they face as experienced staff retire and new technologies disrupt industries and require new skillsets? The first step in addressing these challenges is to understand staffing as part of a holistic business strategy. Organizations need to identify the critical skills and roles needed to support overall goals and objectives and build a sustainable talent pipeline. Aligning talent strategy to business strategy in this time of rapid change requires taking a long-term view. It’s not just about hiring for the positions you need today but about identifying the critical skills needed to help your business adapt over the long term. How to Tackle an Emerging Talent Shortage At a time of increasing competition for qualified people, what many of the firms are focused on now is creating a culture that is attractive for people to join and stay with. With as many as a third of employees thinking about leaving their current job within a year, according to Aon’s latest Workforce Mindset Study, this isn’t just about attracting new staff — it could be about preventing existing employees from being lured away by a competitor. Both mature and fast-growing industries are focusing on developing a culture to help them compete for scarce talent and become more attractive to their current and future workforce. When it comes to culture, here are a few things organizations can do:

1. Develop leaders who are engaging and serve as role models — With corporate leaders increasingly high-profile (and with leaders as a top driver of employee engagement), select and develop people who can act as internal and external role models and create an environment in which people are appreciated and motivated.
2. Establish a clear employee value proposition — To stand out from the employer crowd, think about how to make your corporate culture feel more distinctive and attractive by offering support in career development and continual training, as well as competitive compensation and benefits.
3. Develop and articulate a sense of purpose — With workers increasingly wanting employment that means something beyond just making money, explaining what your business stands for can be a powerful tool to attract like-minded talent and drive long-term employee engagement.

In addition to culture-building, planning for tomorrow’s workforce is key. Talent shortages are likely to remain a feature for years to come. Ensure your business has the qualified staff and skill sets needed by adopting a long-term program for attracting, training and developing the people who will drive its success over the long term — not just for this year’s needs, but for five to 10 years. There are a few things organizations should consider doing to help with their long-term talent needs:

1. Establish apprenticeships — Not only does on-the-job training help you cultivate the skills your business will need, it can help promote loyalty and long-term engagement. With training and career development opportunities as strong pull factors for modern workers — especially from younger generations. Making training a continuing part of your business from the early stages of employees’ careers can be a powerful proof point in your commitment to employee development.
2. Work with schools — Encourage changes in the educational system that support the development of needed skill sets in the long term. Ensure students are made aware of career opportunities in your industry and of the true value and potential a career with your organization can bring.
3. Commit to workforce diversity — Women and minorities still have significant under-representation within the managerial ranks of many industries. Organizations should be reaching out to qualified minorities, not just because practicing equality in the workplace reaffirms your business’ commitment to fairness, but because diverse workforces are a proven driver of innovation. Not only have organizations with greater gender equality proven to perform better, but being seen as promoting gender equality in the workplace can be a powerful attractor for talent.
4. Globalize your hiring — Developing countries around the world are producing well-qualified staffing for accounting, data analysis and other financial services, while in healthcare a majority of newly qualified healthcare professionals (including nurses and general practitioners) are graduating from schools in these countries. In a globalized world, the competition for talent is also increasingly global, so you increasingly need to look where the talent is, not just where you would like it to be.

Talking Points “Rather than focusing on salaries alone as the cure-all for attracting employees, corporations would be wise to look closely at the wider expectations and demands of their candidates, if they are to draw in the best talent. … While increasing the flexibility of the job offer can provide an effective short-term solution to draw in the best candidates, ultimately even these measures won’t resolve systemic talent gaps that have a significant impact on the long-term health of the business.” – Tara Sinclair, chief economist, Indeed “The struggle to fill vacancies is holding back growth and opportunities for business, and it is essential that both government and industry work together quickly to identify ways to plug this gap.” – Mike Hawes, chief executive, Society of Motor Manufacturers & Traders “Companies looking for sophisticated skillsets are starting to look to foster skills and relationships with future employees among high school age students.… If you’re not already thinking five to ten years ahead for your talent needs, you need to.” – Usha Mirchandani, partner, talent analytics, Aon Hewitt Further Reading

• Companies Struggle to Fill Quarter of Skilled Job Vacancies – Financial Times, Jan. 28, 2016
• How to Find the Right People in a Skills Shortage Sector – Talk Business, March 11, 2016
• The War for Tech Talent Escalates – Boston Globe, Feb. 19, 2016
• Talent Challenges in Times of Disruption – FinTech Innovation, March 28, 2016
• Workforce Mindset Study – Aon report

When it comes to driverless cars, I argue in a recent article, the appropriate first-mover unit of innovation is not the car, or even the car company. It is the nation. That’s because further development and deployment of this technology is now very much dependent on a tangled web of competitive, policy, regulatory, licensing and other hurdles that span local, regional and national regulatory bodies and entrenched interests. Thus, in the U.S., sorting out how to test and deploy driverless cars is a muddled mess. See also: 7 Wonders of the Driverless Future Singapore, on the other hand, is fertile ground for this innovation. As an island nation, its urban density and finite space make it particularly sensitive to traffic congestion and land use. Roads consume more than 12% of the island’s area. Its aging population and limited workforce of potential professional drivers makes mobility for non-drivers an urgent policy imperative. Today, Singapore imports half of its bus drivers from other countries. Its environmental conditions — modern infrastructure, flat terrain, warm weather (no snow or ice) and well-marked roads — simplify the introduction of driverless cars. Finally, the nation’s strategic focus on fostering a high-tech, knowledge-based economy makes it unusually open to driverless-car innovation, and its tight-knit, efficiency-oriented government makes it easier to manage regulatory constraints. Singapore also has a long history of public and private support for driverless-car research, development and testing. An area of the island center is currently open to real-world testing, and plans are in place for eventually opening up the entire island to driverless cars. A small company called nuTonomy is partnering with Singapore to turn those plans into reality. nuTonomy is based in Cambridge, Mass., near its academic roots. But its cofounders, CEO Karl Iagnemma and Chief Technology Officer Emilio Frazzoli, are MIT roboticists with a rich history of research in Singapore. nuTonomy, therefore, has its commercial sights  focused squarely on Singapore. See also: Is Driverless Moving Too Fast?   Iagnemma told me of his ambitious plans, including a major demonstration in 2016. He envisions building a fleet of fewer than 100 cars for the first operational pilots, then launching expanded and more sophisticated pilots and ultimately creating a “radical expansion” to launch the world’s first commercial driverless taxi service. He has set his sights on Singapore. Read the full story about nuTonomy’s ambitious approach and the potential rewards for Singapore for being a first-mover nation in driverless cars.

The proposed workers' compensation opt-out legislation in South Carolina and Tennessee, coupled with the recent challenge to the Oklahoma opt-out statute’s constitutionality, has spawned many recent articles, publications and commentaries regarding legislation allowing employers to “opt out” of state-governed workers’ compensation insurance programs and become “nonsubscribers.” Most of these articles have attacked the nonsubscriber option as pro-employer and anti-employee. Interestingly, however, when the Texas Department of Insurance (TDI) last investigated the satisfaction levels of injured workers employed by nonsubscribing companies, those studies showed that employees of nonsubscribers were generally satisfied with their treatment post injury, making nonsubscription a win/win for both employer and employee. Indeed, there are lots of reasons why employees like working for nonsubscribers: 1. Nonsubscribers Provide Enhanced Safety. Nonsubscribing employers tend to provide safer workplaces overall. Why? Because their claim costs directly correlate to claim frequency and severity. Consequently, improved safety, with the resultant decline in claims and severe injuries, is in nonsubscribers’ best interest. In her recent comprehensive study of nonsubscription, Stanford Professor Alison Morantz observed this phenomenon. Morantz studied 15 large multistate firms, analyzing and comparing data relating to their nonsubscriber claims in Texas and their workers’ compensation claims in other states. She found “strong evidence” that nonsubscription creates a “real safety effect,” because “[n]onsubscribers are, at least in theory, internalizing all of the costs associated with workplace accidents (including tort liability), which should induce them to invest more in safety-enhancing technologies.” She based this conclusion on the “sizable and statistically significant decline” in the claim frequency of severe, traumatic injuries. See also: Even More Tips for Building a Workers Compensation Medical Provider "A" Team   Steve Weatherford, vice president of finance and human resources at Daryl Flood Relocation (a Mayflower Transit agent), explained how safety is an integral part of Daryl Flood’s nonsubscription program: “The key ingredients to a successful non-subscriber program are an effective safety program (prevention); employee acceptance of the benefit of early reporting (early treatment); a quality medical network (effective treatment); and a proactive light duty program (restoration to employment).” He explained that “[t]he investment in these ingredients results in higher employee satisfaction; lower frequency of injuries; lower costs per injury; and a quicker return-to-work rate.” Because of its focus on these key ingredients, and notwithstanding the physically demanding nature of the employees’ work, Daryl Flood has gone more than four years without an employee missing a day of work due to a work-related injury. 2. Nonsubscribers Provide Enhanced Access to Quality Medical Care. The Texas workers’ compensation system can actually impede an employee’s access to quality medical care. Texas workers’ compensation laws cap the amounts that doctors can charge when treating injured workers receiving workers’ compensation benefits. As a result, many prominent doctors refuse to treat patients under the workers’ compensation system. Nonsubscribing employers, on the other hand, have the freedom to negotiate fees with medical providers, and they take advantage of this opportunity to enlist the most highly regarded specialists in many fields. “We search for and use credentialed doctors and strive to use only board-certified specialists,” says Jim Dickinson, Kroger’s claim manager, who helped roll out Kroger’s nonsubscription program in 1992. “And since we are not bound by workers’ compensation protocols, we are able to help associates who are in pain by expediting the treatment and testing they need.” 3. Nonsubscribers Provide Enhanced Benefits. The vast majority of the employees covered by occupational injury benefit plans receive benefits that are more generous than their workers’ compensation counterpart. For example, many nonsubscriber benefit plans provide wage-replacement benefits on the first day of missed work. Employees whose injuries are processed through the Texas workers’ compensation system, on the other hand, do not begin receiving wage-replacement benefits until the eighth day away from the job. Additionally, nonsubscriber benefit plans typically pay 85% to 100% of lost wages with no weekly caps, whereas an injured worker employed by a subscriber to the Texas workers’ compensation system is only reimbursed 70% to 75% of lost wages, with caps based on the state’s average weekly wage. United Supermarkets, for example, pays 90% of the injured employee’s wages beginning the first day of missed work, and it does not set a ceiling for the maximum amount of a weekly paycheck. In addition, most nonsubscribers allow their injured workers to make their usual deductions from their paychecks, such as deductions for group-health insurance premiums—an option not available under workers’ compensation. See also: How Should Workers’ Compensation Evolve?   Statistically, these differences are significant, because most claims involve minor injuries with little missed work. Workers who suffer minor injuries and are out of work between one day and one week under the state compensation system receive no lost wages, whereas workers employed by nonsubscribers with benefit plans typically start receiving lost-income benefits immediately. Professor Morantz wrote about this benefit to workers in her article: “Some ubiquitous features of private plans—such as first-day coverage of lost earnings and wage replacement rates that are not capped by the [state’s] average weekly wage—are more favorable to injured workers than workers’ compensation.” 4. Both Nonsubscribing Employers and Their Employees Are Satisfied With Their Treatment Following On-the-Job Injuries. For these and other reasons, “injured workers employed by nonsubscribers are generally satisfied with their post-injury treatment.” Indeed, in 1997, the last time that TDI studied the satisfaction rates of nonsubscribers’ employees, the study “revealed that worker satisfaction with employer treatment, medical coverage and income benefits paid during recovery was relatively high.” Nonsubscribing employers’ satisfaction levels are likewise high.  In TDI’s 2014 study on nosubscription, the department found higher satisfaction rates for nonsubscribers – 67% overall – than for subscribers – 61% overall.  Historically, researchers have found the gap to be logical: “Differences in satisfaction levels observed between subscribers and nonsubscribers are not surprising since employers who have made a conscious decision to opt out of the WC system may feel a stronger sense of ownership over their alternative occupational benefits program than subscribers do about the statutorily based WC system. Thus, higher overall satisfaction levels, as well as a greater degree of satisfaction with specific aspects of their programs, can be reasonably expected from firms that choose to opt out of the system.” And while there will always be employees who are dissatisfied or mistreated under any system—whether employed by a subscriber or nonsubscriber to workers’ compensation—many employees sing the praises of nonsubscription. Paul Philley, for example, describes his favorable experience following a workplace injury at Kroger: “They got right on it, and the treatment was excellent,” he said in a telephone interview. Philley, a 36-year-old produce employee with Kroger, suffered a severe cut to his finger when a baler door slammed closed on it. In previous years, he suffered several hernias, which he also treated through Kroger’s nonsubscription plan. “I give Kroger 100 percent A’s,” he said. “They went by the book and took care of me each time.” He confirmed that he never had to pay a penny for his medical care out of his own pocket. 5. The Most Criticized Features of Nonsubscribers’ Plans Have Little Impact in Real Life. Four of the features of nonsubscriber plans that are most criticized have very little impact on workers as a whole: non-coverage of permanent partial disabilities, capped benefits, lack of chiropractic care and categorical exclusion of some diseases and non-traumatic injuries. Professor Morantz’s study concluded “that even in combination, these four plan features account for relatively little of the cost savings.” As Morantz explained, “The impact of these plan features on total savings looks much smaller than I expected.” These headline-grabbing provisions affect only a very small percentage of injured workers. 6. Nonsubscription Is a Win/Win for Employers and Employees. While many organizations and lobby groups representing workers’ compensation insurers and plaintiffs’ attorneys spout unsupported criticisms of nonsubscription, the only objectively researched and published data shows that nonsubscription works, both for employers and employees. The ability to opt-out was a key component of the Texas workers’ compensation system as it was initially crafted in 1913, and nonsubscribers’ treatment of their injured workers has only improved since then. See also: Five Workers’ Compensation Myths   Most employers—whether subscribers or not—genuinely care about their employees and want to treat them right. Nonsubscription is an alternative way for employers to provide for their employees, and a way to get them better care, faster, so they can return to work sooner. The truth is, nonsubscription works, and it’s a win/win for both employees and responsible nonsubscribing employers.

Overview Your data might not be as safe as you think it is — and it could cost you dearly. Part of the threat comes, unwittingly, from your employees — and, possibly, even yourself. A significant proportion of cyber breaches (as many as 30%)­ are caused by “negligence or mistakes,” caused by individuals failing to act responsibly or follow procedure. Two decades after the launch of the web, digital has become so ingrained in our lives that it’s easy to assume you know the best security practices to keep you and your organization safe from a data breach. But as technology continues to drive changes in the way we live and work and as the Internet of Things becomes more omnipresent, the digital risks we all face are only going to increase as more and more devices share data around the world. Read on for some simple steps you can take to help keep your data more secure. In-Depth A growing threat, but an inadequate response The number and potential severity of cyber breaches is increasing. A recent PwC survey found that nearly 90% of large organizations suffered a cyber security breach in 2015, up from 81% in 2014; the average cost of these breaches more than doubled year-on-year. With more connected devices than ever before — and the total expected to reach 50 billion by 2020 — there are more potential targets for attackers, as well as more potential for accidental breaches. What’s more, as of late 2015, companies are, for the first time, listing their information assets as nearly as valuable as their physical assets, according to the2015 Ponemon Global Cyber Impact Report survey, sponsored by Aon. So how do you keep your organization’s data — and that of your clients and customers — safe? According to Aon cyber insurance expert Stephanie Snyder Tomlinson, it’s not just a matter of investing in better technology and more robust systems. “A lot of companies find that the weakest link is their employees,” Snyder Tomlinson says. “You need to train employees to make sure that if they get a phishing email, they’re not going to click on the link; that they don’t have a Post-it note right next to their monitor with all of their passwords on it. It’s the human error factor that companies really need to take a good hard look at.” From intern to CEO: Simple steps everyone can take It’s easy for individuals to become complacent about data security, says Brad Bryant, Aon’s global chief privacy officer. But with cyber threats increasing, it’s more important than ever to be aware of the seemingly innocent individual actions that can potentially lead to serious cost and reputational consequences for your organization. According to Bryant, there are four key things everyone can do to help protect themselves and their organizations from the rising cyber threat:

• Be alert to impersonators— Hackers are becoming increasingly sophisticated at tricking people into giving away sensitive information, from phishing to social engineering fraud. You need to be more vigilant than ever when transmitting information. Are you certain they are who they say they are?
• Don’t overshare— If you give out details about your personal life, hackers may be able to use the data to build a profile to access your or your company’s information. From birthdays to addresses, small details build up.
• Safely dispose of personal information— A surprising amount of information can be retained by devices even after wiping hard drives or performing factory resets. To be certain your information is destroyed, you may need to seek expert advice or device-specific instructions.
• Encrypt your data— Keeping your software up-to-date and password protecting your devices may not be enough to stop hackers should those devices fall into the wrong hands. The more security the better, and, with the growing threat, encryption should be regarded as essential.

Key approaches for organizations to better protect data To protect your and your customers’ and clients’ information, investing in better cyber security is only one element. But data breaches don’t just happen through hacks, or even employee errors. At least 35% of cyber breaches happen because of system or business process failures, so it’s vital to get the basics right. Prevention is key, says Tom Fitzgerald, CEO of Aon Risk Solutions’ U.S. retail operations. There are four key strategies he recommends all organizations should pursue to limit the risk and make sure they’re getting the basics right:

• Build awareness— Educate employees on what social engineering fraud is, especially in your financial department. Remind employees to be careful about what they post on social media and to be discreet at all times with respect to business-related information.
• Be cautious— Always verify the authenticity of requests for changes in money-related instructions and double-check with the client or customer. Do not click on random hyperlinks without confirming their origin or destination.
• Be organized— Develop a list of pre-approved vendors, and ensure employees are aware. Review and customize crime insurance. When it comes to coverage or denial, the devil is in the details.
• Develop a system— Institute a password procedure to verify the authenticity of any wire transfer requests and always verify the validity of an incoming email/phone call from a purported senior officer. Consider sending sample phishing emails to employees to test their awareness and measure improvements over time.

Much of this advice is not new — but the scale of the threat is increasing, making following it more important than ever. “Social engineering fraud is one of the greatest security threats companies can encounter today,” Fitzgerald warns. “This is when hackers trick an employee into breaking an organization’s normal digital and physical security procedures to access money or sensitive information. It can take many forms, from phishing for passwords with deceptive emails or websites to impersonating an IT engineer, to baiting with a USB drive.” How governments are driving data protection The potential consequences of inadequate data security are becoming more serious as courts and regulators are focusing on this issue globally. The EU is considering a data protection directive to replace previous regulations implemented in 1995. The expected result will be a measure that focuses on protection of customer data. Similarly, an October 2015 ruling by the European Court of Justice highlighted the transfer of customer data between the E.U. and the U.S. “Regardless of where a company is located, the provision of services to E.U. customers and the collection or mere receipt of personal data from European citizens may potentially subject companies to E.U. jurisdiction,” Bryant warns. “Failure to comply could present unprecedented risk for companies, including fines of up to 4% of a company’s total global income.” It’s not just changing E.U. rules that could affect your business. Internet jurisdictions and organizational operations are increasingly becoming cross-border. This global patchwork of internet rules and regulations is why only 24% of cyber and enterprise risk professionals are fully aware of the possible consequences of a data breach or security exploit in countries outside their home base of operations. Why getting the basics right is critical As the Internet of Things continues to grow, the number and range of potential targets for cyber attack is only going to increase. While eliminating all cyber risk may be impossible, getting the basics right is becoming more important than ever. “Given the large scope and impact of the various changes in data protection law, coupled with the drastic increase in fines, becoming educated on how to protect our data is more business-critical now than ever before,” Bryant says. Talking Points “The average cost per user of a data breach is now $240… The costs are costly, but the current model of privacy will not make sense going forward.… The Snowden revelations advanced hope that there would be this really excited response that would get government to impose really strict regulations. There was some posturing made, and it seemed like we were heading in that direction, but I don’t think we are going there.” – Lawrence Lessig, Roy L. Furman Professor of Law, Harvard Law School “A step change in sanctions will make privacy a board-level issue. Some businesses will need to start taking these issues a lot more seriously.” – Tanguy Van Overstraeten, Linklaters “The digital future of Europe can only be built on trust. With solid common standards for data protection, people can be sure they are in control of their personal information.” – Andrus Ansip, Vice President for the E.U. Digital Single Market Further Reading

• 2016 Privacy Forecast: Cloudy, With a Strong Chance of Regulation – Bloomberg BNA, Jan. 6, 2016
• Tech Privacy Policies Need an Overhaul, Regulators Say – CNET, Jan. 7, 2016
• How to Prepare Your Company for EU Data Protection Reform – TechWeek Europe, Jan. 2, 2016
• E.U. Data-Privacy Law Raises Daunting Prospects for U.S. Companies – Wall Street Journal, Dec. 16, 2015
• Privacy Can No Longer Be a Low-Level, Box-Checking Exercise – Irish Times, Dec. 31, 2015
• Social Media: The Challenges of Risk and Governance – Forbes, Jan. 5, 2016
• Essential Guide: E.U. Data Protection Regulation – ComputerWeekly
• Lessons Uncovered: The New Role of Data Privacy In Outsourcing – Aon.com
• 2015 Ponemon Global Cyber Impact Report – Aon.com

Employers looking to dial up the correct mix of benefits to retain valued employees are increasingly including identity theft protection services as a perk. Research firm Willis Towers Watson predicts identity theft protection, offered by 35% of employers in 2015, could double to nearly 70% by 2018, making it the fastest-growing type of employee benefit over the next couple of years. See also: Identity Theft Can Be Double Whammy   ThirdCertainty recently sat down with Joel Ray, the CEO of New Benefits, a Dallas-based employee benefits solutions provider, to discuss the drivers — and the arc — of this trend. The following text has been edited for clarity and length: 3C: Identity theft has become part of the lexicon of the world we now live in. Ray: With all the hacking of corporations, health plans and government, there is a myriad of ways people can get their identities stolen and misused, whether it’s medical fraud, tax return fraud, stealing a Social Security number or a credit card information scam. To me, not protecting yourself with an identity theft protection service is commensurate with not locking your door and setting an alarm when leaving home or not buying life insurance to protect your family. It just makes all the sense in the world, when you have the ability and a product is available to address identity theft, to include this as an employee benefit. 3C: So how do employers view this? Ray: Employers were the first ones decades ago to offer health insurance to their employees, and early adopters have added other types of benefits over the years. The idea, of course, is to attract and retain good people . … Research shows an employee’s financial health is every bit as important as physical and mental health. If anything goes wrong (financially), they are not going to be a productive worker. Meanwhile, identity theft happens every two seconds in the U.S. to quite a large number of Americans. So, identity theft protection is something that, in today’s digital world, makes perfect sense to provide employees, either on an employer-paid or payroll deduction basis. 3C: How much of a challenge is public awareness? Ray: The hard part is the education. Yet the almost daily reports about breach events have gotten employers more interested. We’ve had many (benefits) brokers representing our products say that, for the first time, employers are asking for identity theft protection. It really is the brokers in today’s world who act as consultants regarding the latest and greatest new products. And, typically, identity theft is toward the top of the list — if not at the top of the list. See also: ID Theft: A Danger Even After Death   3C: How does improved productivity factor in? Ray: Identity theft protection is like any other benefit. Basically, anything you can do to provide financial security to your employee is a good thing. It’s a primary reason employers provide 401Ks. A lot of voluntary benefits, like cancer disability, critical illness and dental, charge a lot more for family coverage. This one charges a little bit more, but you get financial security and protection, not only for the employee but for the entire family, as well. It’s a very inexpensive benefit relative to the protection it offers, and I think it will become a staple of the industry in the very near future. The early adopters who provide this benefit to their clients now are going to have market advantage over those who wait. 3C: Sort of like supplying peace of mind as a benefit? Ray: Yes. For example, employees buy life insurance for peace of mind so the family is protected in case of an untimely death. With identity theft protection, employees and their families are protected from something that happens every day from thieves who always seem to be one step ahead and out of reach from the law. If you’re an employer, wouldn’t you rather offer your employees a benefit that will meaningfully protect them from financial harm versus other benefits that, based on the historical record, may not add any real value? More stories related to identity theft insurance: As threats multiply, cyber insurance and tech security industries start to merge Cyber insurance industry could face turf war, report warns NAIC sets model standard for consumer rights, cybersecurity This article originally appeared on ThirdCertainty.

The American workplace has changed dramatically since Illinois created its workers’ compensation system in 1911. But the workers’ compensation system, especially in Illinois, has not kept pace. Not only does the current system do a poor job of serving the majority of workers, especially parents and other workers who need flexibility to work hours outside the traditional workday and in off-site locations such as their own homes, but it also prioritizes the financial interests of groups such as lawyers and workers’ compensation doctors over the needs of both workers and employers. The system needs to be reformed. Illinois policymakers should allow workers and employers to opt out of the state-run workers’ compensation system and to craft their own agreements around their particular circumstances – rather than forcing all workers and employers to adhere to rigid regulations that often no longer serve their purpose. The early 20^th century origins of workers’ compensation At the turn of the 20^th century, increasing numbers of Americans found themselves in new, hazardous working conditions in the jobs created by the Industrial Revolution. But few protections existed for workers who might be unable to support their families if they became injured at work. Workers’ compensation was designed to remedy that situation by providing medical care and income replacement to injured workers. The system, however, has not evolved to meet the needs of today’s workers and employers and is ill-suited to address the problems of the modern workplace. Changes in the modern workplace Far fewer people work in inherently risky jobs today. The industrial sector employed nearly a third of the workforce in 1900, but employed just 19% in 1999. And even today’s dangerous jobs have become less hazardous. Deaths per 100,000 workers fell more than 93% to just four by the end of the 20^th century, down from 61 deaths per 100,000 workers at the start. But workers also face new challenges. In the middle of the 20^th century, just 30% of women were part of the workforce. That number has risen to nearly 60%. Increasing numbers of Americans must now balance work responsibilities with caring for a child or elderly relative: 82% of parents are in families where both parents work. Many employers have met those challenges by offering more flexible work environments such as telecommuting and flexible schedules. But workers’ compensation – a system supposed to protect workers – increasingly stands in the way of new work arrangements to meet workers’ needs. See also: How Should Workers’ Compensation Evolve?   Workers’ compensation was designed for an industrial workplace. Yet, it applies equally to a telecommuter working from home. A professor who slips on papers in his home office or an interior designer who trips on her dog can claim workers’ compensation. That makes businesses less likely to give workers flexibility to work at home or, when employers do, to let workers set their own hours. A worker who answers email at night, after taking time to pick up children from school and prepare dinner, could still be considered in the workplace as though the distinction between work and home could be drawn as simply as when workers punched a time card. Employers have little control over possible costs if the employee is injured at home, and the broken workers’ compensation system gives employers an incentive to take away flexible working arrangements for fear of legal liability. These problems are not unique to Illinois, but the Prairie State is unusual both in having one of the most costly workers’ compensation systems in America and in not having exemptions for small businesses or domestic workers. The absence of an exemption for domestic employees hurts increasing numbers of workers who must balance work with child or elder care. As with telecommuting, this can affect all workers, but it disproportionately affects women, who tend to spend more time caring for children. And, while not everyone can afford a live-in nanny, reducing impediments to hiring domestic help makes it easier for women to hold more senior positions. Opting out of the state-run workers’ compensation system While Illinois has one of the most restrictive workers’ compensation systems, Texas has one of the least restrictive, even allowing employers to opt out entirely. Critics of the Texas system allege this has led employers to cut services, but the evidence suggests employers prefer to save money by cutting areas prone to fraud, while often increasing benefits that employees value. Employers often provide better benefits than required for the same reason they offer flextime: to recruit the best employees at the lowest cost. Special interests benefit from the current workers’ compensation system to the detriment of workers and employers The government-imposed workers’ compensation system has also been far more susceptible to co-option by special interests. While workers and employers use the workers’ compensation system only when there is an injury, lawyers interact with workers’ compensation every day. As a result, although the workers’ compensation system is supposed to provide quick resolution to workers’ claims, the powerful lawyers’ lobby helped create a system that can stretch claims out over years. This costs businesses money and denies injured workers rapid settlement of their medical bills. Medical providers, too, have benefited from a system that unnecessarily prolongs treatment and facilitates the overprescription of certain medications, including addictive opioids. See also: The Pretzel Logic on Oklahoma Option   Employers and workers both have an incentive to design a better system, but the false presumption that the government-run system is better prevents them from doing so. Interestingly, Texas employers who opted out of the state-run workers’ compensation system have all but eliminated opioid overprescription. Fixing Illinois’ workers’ compensation system means government must step back and allow workers and employers to reach agreements that make sense in their specific situations – arrangements that suit the needs of workers and employers, rather than line the pockets of special interest groups benefiting financially from the current system.

Overview In recent years, there has been a global shift toward more environmentally sustainable ways of working. The world’s biggest companies are also increasingly disclosing their greenhouse gas emissions and other energy metrics – and being judged on them by consumers – with 71% of the world’s top 500 companies opting to externally audit their environmental impact numbers. Although most countries don’t yet require companies to disclose such information, this is likely to change. China has recently issued a draft environmental tax law, and the U.S. has announced plans to cut carbon dioxide emissions;  both are aimed at encouraging businesses to become more green and proving that to the government. The E.U.'s Directive 2014/95/EU entered into force in December 2014, requiring companies with more than 500 employees operating in the E.U. to report on a range of non-financial (including environmental and sustainability) issues by the end of 2016. While there is some debate on the business benefits of shifting to a more sustainable model, evidence is mounting that companies with lower greenhouse gas emissions perform better on average. So is being environmentally friendly about good PR — or just good business? In-Depth Tracking your company’s environmental impact The challenge in assessing both your businesses’ environmental impact and the potential benefits of becoming more sustainable is in working out the true extent of your operations. While some aspects are relatively easy to identify — amount of recycling, office energy efficiency or the number of flights taken by employees, for example — the connections among our increasingly globalized supply chains and business operations can make monitoring broader ramifications incredibly complex. Though there are no universal standards for environmental business reporting and impact analysis, there are a number of initiatives under way to encourage more transparency and provide guidance: • The United Nations Global Compact devotes three of its 10 principles to environmental issues and boasts more than 10,000 corporate signatories. It promotes taking a precautionary approach to environmental challenges, encourages businesses to promote environmental responsibility and is pushing for the development and adoption of environmentally friendly technologies. • The Global Reporting Initiative has produced guidelines for sustainability reporting that have now been adopted by more than 7,500 companies. With 30 environmental indicators, the focus is around energy, biodiversity and emissions. • The Carbon Disclosure Project offers guidance on the kinds of data needed to identify ways to reduce negative environment impact, with more than 5,000 corporate signatories by the end of 2014. • The Leadership in Energy and Environmental Design program takes a more focused approach, offering guidance and certification for the development and running of more environmentally friendly buildings. Operating in more than 30 countries, and with 20,000 organizations signed up, LEED-certified buildings are not only better for the environment but also more cost-effective because of the reduction in energy use. The benefits to the bottom line Analyzing your environmental impact may not yet be universally mandated, but it can be worthwhile. The detailed analysis of the true costs that thorough environmental reporting necessitates can not only help you avoid being accused of a “greenwashing” PR exercise but can also help identify potential savings. The guidelines provided by these organizations can serve as a handy blueprint for identifying more sustainable ways of working. With energy price volatility “the new normal,” making your operations more energy-efficient and less wasteful can reduce the unpredictable impact of shifts in costs. At the same time, the cost of installing on-site sources of renewable energy is decreasing as technologies improve. Some governments offer subsidies and tax breaks to implement renewable energy, and others (like the U.K.) even pay for renewable energy generated. Even without subsidies, installing renewable energy sources can prove to be a good investment, depending on your location. In the U.S., solar panels may still be expensive to install, but they tend to pay for themselves within 10 to 20 years. Making your supply chain more sustainable is also a sensible long-term investment, albeit considerably harder to develop. When Puma became the first company to publish the cost of the carbon emitted and water used throughout its supply chain back in 2011, it helped identify ways to reduce water, energy and fuel consumption by 60%, resulting in potential savings of millions of dollars. You may not need to invest as much as Swedish furniture giant Ikea with its plan to invest €1 billion in projects to encourage sustainability, or Google with its $2 billion investment in solar and wind projects. With the climate challenge too big for any one company (or country) to tackle alone, every little bit helps — and, at a big enough scale, even the smallest changes can make a huge difference. The starting point of identifying ways to reduce your environmental impact and maximize your efforts’ business benefits is understanding what you’re currently doing through detailed analysis and reporting. Only then can you identify what you can do and what impact this can have on both your business and the planet. Talking Points “The fact is… big businesses assess risk and opportunity at a global level, which means that their actions can reverberate across the planet. They develop systems that not only scale up, but require stability and continuity to be good investments.… These days, it is Big Business – not governments or consumers – that is stepping up… because they know their own corporate futures are at stake.” – National Geographic “Understand that for markets to grow, and for your own future prospects to be successful, it makes sense to integrate, in your strategic thinking and operations, environmental, social and governance issues” – Georg Kell, executive director, UN Global Compact “Planners, presidents and prime ministers might sign sweeping ‘deals’ but the CEO is where the real power lies, and they will not move a muscle unless change makes sense financially – nor should they.” Robert Clarke, entrepreneur-in-residence, School of Business and Entrepreneurship, Bath Spa University “The challenge is to distinguish between the (environmental, social and governance) factors that have a material influence on company performance and those that do not. But the data that companies currently report are inadequate to enable investors to make this distinction.” – Laura Tyson, Haas School of Business Further Reading

• Why Sustainability Ratings Matter– MIT Sloan Management Review, Aug. 7, 2015
• Sustainability Reporting: Digging for Data – Ethical Corporation, Sept. 3, 2015
• The Power of Sustainability-First Design – The Atlantic, May 12, 2015
• Corporate Sustainability: First Evidence on Materiality – Harvard Business School working paper, 2015
• 7 Research-Backed Ways Your Business Will Benefit by Being More Socially Responsible – Huffington Post, June 25, 2015
• Rethinking Business: Sustainability and Finance – Financial Times, June 30, 2014
• The Legal Risks Associated With Corporate Sustainability Reporting – Latham & Watkins LLP, July 23, 2015
• Driving Corporate Sustainability Through Risk Management – Aon report
• Sustainability – Beyond Enterprise Risk Management – Aon report

Change is constant; we all know that. External forces are conjoining with emerging technologies and changing our whole world, including the business of insurance. And changes bring challenges. How insurers face these challenges and bridge their current world to the future is the key to success. Our perceptions of change vary. For some, it feels like the pace is accelerating beyond comprehension, and keeping up may feel like an insurmountable challenge. Sometimes, it may seem almost impossible to fathom. As you walk into work today or attend a meeting, the business itself may feel the same on the surface. They’re the same people and similar processes. It appears to be business as usual … but is it? What we at SMA know is that, just below the surface, insurers are working hard to respond to external changes in a variety of ways and to transform their businesses in response to these external stimuli. We have observed patterns of change adoption in insurance that, at times, may seem very scattered, unstructured and, depending on the size of the insurer, very erratic. Insurance is embracing innovation; it is really happening. It’s still difficult to apply absolutes and see consistent patterns. But the data is there to gather. See also: 100 Ideas That Changed Insurance No one has a crystal ball to predict the pace or time frame for these developments. But one thing is clear: Even now, the insurance industry is starting to see the implications of emerging technologies, and there is likely to be significant change over the next several years. Many insurers recognize this and are working to position their companies to be more agile and responsive. At the same time, insurers have complex operations, organizations and products that require intense focus every day. Managing operations and improving competitive position are challenging enough even before considering the ways that emerging technologies will transform insurance. So, how are insurers responding? SMA has been tracking six major ways that insurers are gearing up to prepare for the challenges and bridge to tomorrow:

• Establishing venture capital arms to actively invest in startups – focused on new technology solutions, new agent/broker firms and even insurance company startups. The focus is within the insurtech and fintech spaces.
• Creating new partnerships with global companies such as Facebook and LinkedIn, and global technology companies like Google, Microsoft and even IBM. These partnerships are also expanding into auto and other industries as the digitally connected world matures.
• Developing new roles to match the digitized world and capabilities – like digital officer, customer experience officer and chief data scientist. These new roles are attracting new talent and also motivating seasoned insurers to develop new skills.
• Embarking on on new strategic initiatives like digital transformation, customer experience and even big data analytics. These initiatives are a result of the outside pressure from the digitally connected world, the changing customer experience and the advancement of analytics and data sources.
• Creating innovation labs within their businesses and outside the operations, encouraging a culture of innovation. These innovation labs promote ideas from within and are transforming the way in which individuals work and are rewarded.
• Transforming their core operations – underwriting, billing and claims with core systems, initiatives that establish a platform for modernization, optimization and innovation.

At SMA, we focus on what all of this means for insurance, when the impacts are likely to be felt and how insurers can become Next-Gen Insurers positioned for success in the future. See also: The 4 Major Sources of Change for Insurance Bridging the traditions of insurance with new technological innovations and transformations is essential for success, as well as being a major focus of the SMA Summit this September. Insurers large and small are all facing this transformative time in different ways, and some of them will be sharing their experiences and insights at the Summit. Step one is identifying what insurers face and knowing that the time to act is now. Step two is determining “the hows.” How to build the bridge between today and the future. How to take action. How to ensure that you are competitive in today’s world. I’ll address those steps in the next blog: Bridging Today to Tomorrow, Part 2.