If you’re raking ashes in California or ripping out sheetrock and carpets in Louisiana (where I live), you are disaster-wise. We grow through adversity. If you have never lived through a disaster, you are probably – with all due respect – dumb, fat and happy. This article is written with one intent – to make you think about the unthinkable. The more willing you are to consider a worst case, the more likely you’ll be able to deal with it when it occurs. Sam Walton, the founder of Walmart, was once asked the secret to his success. He replied, “Good decisions.” He was then asked how he made good decisions. His answer was, “Experience.” When asked for the source of his experience, he said, “Bad decisions.” There is “wisdom in scar tissue,” learning that “souls don’t grow in the sunshine.” We rarely learn anything when we think we know it all! “Talking about bulls is not the same thing as being in the bull ring.” (Spanish Proverb) Reality is the facts. Perception is how we see the facts. These can be worlds apart or very much aligned. Your challenge is to recognize the difference. To change perception, you merely need to look at the facts differently. To change the facts, we must intervene with physical force, money, time, energy, etc. As you consider the scenarios that follow, try to be honest. State the facts (circumstances) and how you would address these right now. Ten questions/scenarios are offered. Answer honestly. If 6 out of 10 answers suggest you're ready, I’d suggest your preparedness is above average. You pass the quiz. Once you complete the process, you will not be better prepared for a disaster but you may be motivated to prepare better. The final exam is completed as you arrive at a safe place following evacuation of your home or your business is restored and operational following a loss. See also: A Real Checklist for Real Disasters   In the movie Patton, the general said, “In the face of war, all other forms of human endeavor shrink to insignificance.” I believe that true disasters are the same. Your readiness: 1. People – Who are you responsible for and responsible to? If the local nuclear power plant melts down and all must evacuate immediately, who in your circle of responsibility (children, spouse, parents, employees, etc.) must you help? How can you coordinate their escape? Remember that Friday p.m. traffic is a pleasure compared with evacuation of communities that might move at 0 to 10 mph, if at all? 2. Necessities (food, drink, medication, toiletries, etc.) – Do you have a week or more of food at home or your office if you are forced to shelter in place? If the evacuation process takes days, do you have what you need packed in your vehicle? 3. Emotional readiness – Evacuations are never easy. Have you and your spouse or your staff thought through the challenge of dealing with and living through a crisis? If not, should you be thinking through the process and challenges while hoping your plan is never needed. In disasters, proactive is better than reactive. Reason has more benefit than emotion. Both will be part of the process – the ideal is balance. 4. Destination – If you are leaving here, you must get to there. If you are in a herd of evacuees heading west, “west” can be hundreds of miles away. Place and money matter. Knowing these are available makes the process run smoother. If you have a predetermined place where you can establish a safe haven, let everyone know, so you can meet. If you have the resources and can find living and work space for yourself and your family and your team, rent what you can. Place will be at a premium or not available at all in disasters. 5. Transportation – Who needs a ride? Who has a ride? Assume “mass transit” will be “mass chaos.” Understand that gas stations may not be open, so filling up may not be possible. Keep your cars near full – fill up tonight. Don’t plan to do it in the a.m. 6. Communication – Effective communication is most important in disasters whether it is at the evacuation end or the recovery end or somewhere in between. Communication is the negotiation of meaning. iPhones, the internet, the telephone, social media, e-mail, the spoken word, etc. are tools for communication. Often in crisis, many tools for communication do not work are or are not available for days or weeks.  Do you and your family or you and your organizational team have a communications plan to ensure that you can ultimately connect with each other after the worst has occurred? Perhaps have each individual have a list of all needed cell numbers and e-mail addresses and passwords. In the short term, your “e” and “i” tools may not work. Paper still has value.   See also: Realities of Post-Disaster Data Recovery   Identify a person/place miles away that can be the central contact or gathering point for all being forced out because of the disaster. This might be a family member of friend, willing to be called once by each member of your group and capture and share the information necessary to facilitate connection and reunion. 7. Evacuation – Look before you leap: Know your alternatives. What may be the most comfortable route west (or east, north or south) may not be workable in chaos. Bring a map. You may not able to access GPS. Gas, food, rest rooms and a place to sleep make the trip more bearable. Think through your options. Your marketplace and organization: 8. Marketplace and team awareness and readiness – Once the levees break, the neighborhood is on fire or the 24th inch of rain falls, it is too late to prepare your organization, your distributors, suppliers and clients for trouble. Trouble is here. Deal with it. Clients deal with you, and you solicit prospects, based on a value proposition to help them when they need it. Your problems are not their problems. Your needs are not their needs. When the world is working according to plan, doing what you promised or meeting and exceeding expectations is easy. When fires are burning, flood waters rising and the community is evacuating (think New Orleans immediately post-Katrina), it is too late to get prepared or to prepare your clients for troubles ahead. Readiness is differentiation! Tomorrow, plan what is necessary to give your clients and staff access to information needed, even if the world is broken. In the industry's equivalent of the Dark Ages, we would post the names and numbers of carrier claims offices and locations on the agency windows as we evacuated for higher ground. After Katrina and Rita and the collapse of the electrical and e-structure of our world, that approach was still an effective tool. Remember that your website may go down. Electricity may be off for a month. If your cell phones fail, they are only as good as a paper weight. One friend found his sister-in-law’s cellphone (with a different area code) worked after Katrina had shut down his own phones. Whoever communicates best – before, during and after a disaster – wins! 9. Chaos/combat – Remember the chaos in the post-Katrina world in New Orleans. Those agencies and teams that evacuated didn’t leave the chaos behind when they left New Orleans. They had to relocate and build a temporary operation for their own safety and sanity and to serve their clients (who were in yet-to-be-determined places) and deal with their own losses/problems. Many of these folks had lost family members, homes, cars and most of their worldly possessions. They were wanderers – hurting. Nonetheless they had to be there for their clients and their fellow team members. Who they were before the storm may not be who they are after their crisis (loss). The storm changed everything. Some of your best workers may not be able to do what they did in the good times. Others who may have been suspect before become star storm troopers in the chaos. All are human and need support from and to offer support to each other. Bob (a friend and New Orleans agency owner who evacuated to Baton Rouge for many weeks) told me one thing he had never considered before Katrina was the need for a group hug/cry. He said, “Several times a day – we’d stop working and hug each other and have a good cry and then get back to work.” Your systems are robotic; your team is made up of living, breathing, feeling and hurting individuals who can do so much but all have a breaking point. Don’t cross it. 10. Contingencies - Many agencies work like a Swiss watch – a very effective process. Unfortunately, you must build, maintain and sustain a living system. Every day, you’ll discover something new, something different, something you didn’t plan for – you must adapt. As you process and progress, ask yourself and each other: What now? What else? What next? See also: New Regulation After a Disaster: More Harm Than Good? In closing, I’ll flash back to one of the most memorable days in my life. It was October 1962. I was a high school sophomore. The U. S. and Russian navies were facing off over nuclear weapons in Cuba. Coach Blanco was sitting on top his desk. He told us, “Boys, if I get off this desk and crawl under it, you do the same. That means I’ve seen a mushroom cloud.” We had regularly prepared for such disasters with “Atomic Bond Drills” (crawling under our desks). Obviously, such a plan would not work. What is offered here is not a plan that will work, but it is a plan that I hope will get you thinking and acting. Find a better way. Do more than crawl under your desk. Remember, some day soon the “merchant of misery” may visit your town. BE PREPARED!

What is it with InsurTech startups and insurance companies? To any outsider, it’s very clear that InsurTechs and insurers make for very odd bedfellows. InsurTechs are quite ephemeral. They sprout up with the sweet rains of venture capital funding and die as their funding dries up. They are nimble and innovative. They aspire to be the next Google — ready to disrupt the establishment in the best “moon shot” tradition. Insurers, on the other hand, tend to be corporate immortals, often measuring their tenure in centuries. Their processes appear fixed and hidebound, handed down from ages gone by. Their speed of innovation is positively glacial, and their customer proposition has “rock of Gibraltar” stability. Insurers are the very establishment that InsurTechs are seeking to disrupt. Opposites attract — or so they say. The fear of disruption The insurance industry has seen an ever-growing demand for “creativity,” “disruption” and new digital technology since 2013. AXA was one of the first to declare its intent to become a digital insurer. In April 2014, the company established a lab in Silicon Valley and announced its tie-up with Facebook. At the time, everyone in the industry was waiting in trepidation for the market entry of the tech giants such as Amazon, Google, Facebook, Samsung and Apple. The fear was that those companies would sweep away the traditional insurers in an Uber-like tech tsunami. Well, the tide came in, but it was no tsunami. Google breathlessly launched into the motor insurance compare market in March 2015. Just a year later, it unceremoniously departed. The industry heaved a collective sigh of relief because there was little or no impact. Yet the tech giants linger and remain the insurance industry’s boogie man. See also: An Eruption in Disruptive InsurTech?   Follow the money The presence of the tech giants has created a created a rush to fund new InsurTech startups. Many of the leading insurance firms have set up VC funds focused on InsurTech. AXA is, again, one of the more notable in this area, providing funding to the tune of €230 million over the last 18 months. VC funding for InsurTech startups has increased 250% year-on-year, from $750 million in 2014 to $2.65 billion in 2015. For insurers, they get financial rewards and get to be at the forefront of any industry disruption if the technology takes off. But many insurers see the need not only to fund innovation but also to “do” innovation. Hence, we’ve seen a steady stream of insurers around the world establishing innovation labs, collaborative spaces, digital garages and centers for digital disruption. Time will tell if these are fundamental drivers of strategic change or are unmasked as simply “window dressing” for the market. Widening the net The InsurTech “boot camp” is another recent phenomenon that has opened up a wider range of innovative startups to the insurance industry. These camps are a cross between an accelerator program, a beauty pageant and a reality TV talent show. For the small price of some equity and the added incentive of some up-front “pocket money,” the InsurTechs get to rub shoulders and gain insights from industry mentors and leading insurers. These boot camps are quite grueling, as they extend over several months. Competition can be fierce, with the best of the best InsurTech teams pitted against each other. The participants get to hone their solution pitches, demos and financial plans for the gathered insurance brotherhood and their fellow InsurTechs. Yet some InsurTech teams are frustrated by the insurers' lack of urgency and their naïve view of how much effort is really required to make an innovation alliance work. See also: InsurTech Start-Ups: Friends or Foes?  A new hope All of this activity has not been lost on governments wanting to push a “clever economy” strategy, creating sovereign incubators for the development of new or exotic financial services products and business models. The Singapore and U.K. governments are leading exponents of this new way of thinking and have spawned a wave of innovation emulators from Australia to Germany. These innovation-friendly government policies generally encompass a mix of:

• Seed funding for startups;
• Provision of “collaborative” spaces;
• Incentives for the establishment of innovation labs; and
• Regulations fostering the flexibility/tolerance to try new things in public that may fail.

Breaking new ground, the Monetary Authority of Singapore (MAS) has launched its own innovative boot camp: the Singapore FinTech Festival. It’s a coordinated way to accelerate innovation for the whole financial services industry, drawing on FinTech and InsurTech talent from around the world. Singapore is putting its money where its mouth is, funding a “Hackcelerator” competition as part of the festival. This competition will run 10 weeks, starting in September 2016, and it has more than $500,000 of funding and prizes to be shared — no equity required! All the teams need to do is be in the top-20 at solving at least one of 100 problem statements set by the organizers. In a similar vein, Singapore insurer NTUC Income has announced its own InsurTech accelerator program. It’s offering funding of S$28,000 apiece for 12 top InsurTech startups. Again, no equity required. The program runs from January to March 2017. If this trend continues, boot camps will be out of business — at least in their current, equity-gobbling format. But where are the traditional insurance tech vendors? In all this activity, where are the insurance legacy tech suppliers (LegTechs)? Many of the traditional consulting firms are doing quite well, tying up with some of the boot camps. But those vendors that were selling mainframe systems, software development services and the like, where are they? The answer for the most part is nowhere — the land of digital transformation. Perhaps it’s indicative of the level of mistrust between insurers and their LegTechs that insurers “go direct” to the innovation source. Perhaps it’s the fear that the innovation will too quickly be commoditized by these vendors and spread to insurers’ competitors. Whatever the case, LegTechs are being cut out of the conversation. This is a big mistake. LegTechs are better at partnering. They typically understand the innovation process and have a product mentality, which would really help package what InsurTechs have to offer. There is also an alignment on maximizing profit on technology with a common view of pervasively selling into the market. As a consequence, the LegTechs have a large, well-established, tech-savvy salesforce ready to carry the InsurTechs' message to the market. This is one of the most decisive reasons why InsurTechs should partner with LegTechs. The final reason is that LegTechs are a goldmine of useful resources. They have an army of developers, lab space, sandpit environments, technology centers of excellence and distinguished engineers/architects with decades of experience — all of which would rapidly bring robust InsurTech products to market. See also: InsurTech Boom Is Reshaping Market   For LegTechs, there are also many attractions. Systematic partnering in this way would inject innovation and an entrepreneurial spirit they badly need. InsurTechs would provide an outlet for some of the LegTechs’ brilliant engineers, giving them an opportunity to dabble with the heady challenges of a startup while maintaining their security. This would definitely boost retention and attraction of this scarce talent pool. Finally, the LegTechs could get into new growth areas rather than stagnate on a declining commodity technology business. The bottom line Change is the only constant in an industry fiercely trying to catch lightning in a bottle. The lyrics from the Pokémon song are really quite apt for this current stage: “You teach me, and I teach you,” as I doubt we can “catch ‘em all.” We have a vision but have yet to stumble on the magic formula for repeatable innovative disruption. We hope we’ll find it in InsurTech’s perfect match. Or, perhaps, it has already happened but we just don’t know it. In any case, with boot camps, hackcelerators, insurers, VCs, governments and LegTechs all at hand, our visionary InsurTechs will soon deliver further breakthroughs. Let’s hope their beauty and passion rub off on an old industry. This article originally appeared in InsurTech News.

Earlier, I discussed the implications of the gig economy on the insurance industry. We concluded that the existence of "crowdworkers" in the gig economy creates four main opportunities for insurers: a faster flow of information, claim process efficiencies, information customization and cost efficiencies. We at WeGoLook believe all industries must take notice of the disruptive gig economy to remain smart and streamlined, adapting to consumer needs. What I want to do today is focus on the traditional finance industry, which includes insurance, and the new disruptive trend in fintech. When you combine two major disruptive shifts (fintech and the gig economy) the results are game-changing. The Fintech Disruption: The picture we can already see Fintech is an umbrella term for an array of new financial sector services that were once monopolized by large financial institutions. This is a good thing. The change is forcing traditional banks to adapt and may even keep those pesky banking fees to a minimum! Goldman Sachs predicts these fintech startups will capture as much as $4.7 trillion in annual revenue from traditional financial companies and $470 billion in profit. These fintech companies include budgeting platforms such as Mint and Acorns, automated investing services such as Betterment or lending services such as Lending Club, OnDeck and Kabbage. What these companies are accomplishing is the decentralization and democratization of financial services like loans, banking and investing. These fintech companies are making traditional services more accessible to consumers. Remember, the gig economy — or what some people term the “sharing economy” — is all about access. See also: ‘Gig Economy’ Comes to Claims Handling   In 2015, the Economist declared fintech to be a “revolution” of the finance industry, and Time Magazine stated banks should be “afraid” of fintech. The Role of the Gig Economy in Fintech: Flexible workforces In the gig economy, intermediaries disappear. But don't ask me — ask your local taxi owner, hotelier or car rental agency if Uber, Airbnb or Turo have affected their way of doing business. This is a rhetorical question; of course there's been an effect. This is a good thing, but how we react will define our businesses in the years to come. When discussing what fintech means for the traditional finance industry, Barry Ritholtz, a Bloomberg columnist, aptly said: “What is much more interesting to me is how the traditional money-management industry will respond to and adopt the latest technologies for helping it operate more efficiently and with greater client satisfaction.” This flexibility is something most industries, including the financial sector, have yet to fully embrace. There are a number of gig economy companies out there that have access to thousands of on-demand workers who can perform a number of tasks that were traditionally in the wheelhouse of full-time employees. Why would an insurance company or other large financial institution have tens of thousands of employees across the country to verify assets when they can leverage a stable of trained, vetted and professional gig workers? This is the gig economy, where people with spare time are self-identified as willing to complete on-the-ground tasks in their location. See also: The Gig Economy Is Alive and Growing   Gig economy companies aren't just a vendor service — they can be part of the process. Need we get into the amount of money this can save a company? Let's dive into a specific sector of fintech — online lending — as a case study of how the gig economy can enable and complement the lending process. Gig Economy Case Study: A flexible workforce and online lending Online lending, including peer-to-peer lending, is an old concept reinvented for a digital age. Entrepreneurs, business people and citizens have always borrowed and lent money, but only in recent history has that become much more sophisticated and accessible through online marketplaces and fintech services. Foundation Capital predicts that more than $1 trillion in loans is expected to have originated through these new lending marketplaces by 2025. Let that number sink in for a second. Indeed, fintech has enabled a safe lending environment between people and businesses through innovative screening and credit checking. Investors and businesses of all stripes can now lend and borrow through internet platforms without traditional bank applications or even the need to physically exchange documents. In most of these cases, however, asset or document verification are still requirements. Take, for instance, common financial loan transactions, such as vehicle financing or refinancing, property financing and business loans. All these transactions require some form of physical verification that an asset exists and is “as described.” Whether that is a car, property, business or some other assets, someone needs to fulfill lending requirements. Gig economy companies such as mine, WeGoLook, have access to thousands of workers across the U.S. who are ready and trained to travel to a specific destination to complete asset verification tasks. The Gig Worker Landscape: What that means for fintech Technology allows us to direct our "lookers" to capture the correct on-site data and perform tasks in a consistent manner across the U.S. (and now in Canada, the U.K. and Australia). The benefits of this gig model are numerous, and a looker, or gig economy worker, can now:

• Replace multiple vendors;
• Augment or supplement employees in the field;
• Augment, supplement or replace employees dispatched from a bank to verify assets or perform a task;
• Provide faster task completion at a lower cost; and
• Capture and store all data in the same place and format.

For an example of a real estate report we provide to many of our banking clients, click here. Because of the flexibility inherent in gig work, there is a significant increase in flow of information to clients. For instance, companies like mine can provide an electronic “live” report, which allows clients to review photos and information prior to receiving a traditional report. There is also the ability to support video, enabling a walk-through of a property, a demonstration of a piece of equipment in operation — and much more. This walk-through can also be done live with the client, if needed. In the past, a customer would need to bring documents to a bank and work face-to-face with a branch employee for notarization and paperwork completion. This is no longer the case. Gig employees can now immediately travel to the customer's home or place of business. The gig worker can take photos of the asset, deliver documents, notarize originals, deliver them to a shipper and submit all relevant information via an electronic report. This allows the bank to view all information and verify all documents are properly signed. The bank can then fund a customer before the FedEx or UPS package of original documents arrives. See also: On-Demand Economy Is Just Starting All this flexibility allows for faster turnaround times, the elimination of multiple vendors and a reduction in lag time waiting on a customer to try to get to the bank during business hours. In the end, what we have is a smarter and faster process, which is important, particularly when a loan rate guarantee is in place. Changing entire industries takes time, but the gig economy and fintech are rapidly altering the landscape of the traditional finance industry. As discussed, all three of these industries aren't mutually exclusive. Traditional financial services can embrace the better use of technology through fintech and greater efficiency through the gig economy.

Loic Le Meur, who many will know from Le Web Conference and his new startup, Leade.rs,, had a great interview with Alex Dayon, the president and chief product officer at salesforce.com, about how owning a car is almost obsolete. It got me thinking about our shift to utility-based living and what it means for insurance. In a land where an Englishman's home is his castle, the car is often seen as the next most expensive asset a person will purchase, so the move away from ownership is great.  And the car is just the start. Now, start to add bundles such as insurance, maintenance and fuel. These sorts of schemes give the best of both worlds because you get to choose what model you try. Do you want a weekend utility, something bigger for holidays away or something smaller for whizzing around town? These new levels of flexibility will absolutely become the norm. See also: Connected Vehicles Can Improve Claims   Many of us are used to utility today — prestige car hire, AirBnB, vacation rentals, handbags, pets and so much more! The sharing economy is continuously expanding. The key changes here for me are the added convenience because of technology (think about calling a taxi 10 years ago vs. calling one today with an app) and then business models that have changed to deliver micro experiences. Cuvva is doing the same in insurance with policies available by the hour. While that's a brilliant idea, I'd almost argue we can get too granular sometimes. We need to be clear on what the pivot point is — it's just different for different people in different circumstances. If you have ever been to IKEA or something like it, you often find vans in the parking lot that you can rent for an hour because you have bought more than your car can hold. See also: Beat Brain Drain: Boost Your Talent Pool   These sorts of schemes change the entire competitive landscape. The winners here will be those companies that provide frictionless experiences that are both relevant and convenient. Of course, frictionless won’t be for everyone. Your choice will depend greatly on where you live (inner city, suburbs or rural areas). Some look at moving away from ownership as another bastion of losing control. That said, think about how many more hours a day you'd get back to do enjoyable or more meaningful stuff. Time is the most precious entity — period. This is the new generation; experiences far outweigh things, which, coincidentally, makes us all happier, too! As the old saying from John Paul Getty goes, “If it appreciates, own it. If it depreciates, rent it!” As we move further and further in this newly accepted world, insurance will form part of the experience bundle, whether you knew it was there or not. The important thing is being reassured you have it and that you have it at the right level. As I picked up a rental car in Dublin Airport, I got a hard sell about reducing the €1,500 standard excess with better insurance for just €20 per day. While I understand why companies do this, it kind of makes me sad and gives insurance a bad name. How many take out this extra cover? Now is the time for carriers to focus on the partnership opportunities that come with renting and to come up with better approaches. No matter what, I’m looking forward to trying lots of different cars without the hassle of owning any through new apps and business models that allow me to try things I would never be able to own.

After several years of working with executives in large corporations to help them innovate, I have seen a distinction emerge that has really helped some teams get on the same page: innovative thinking vs. innovation. These might sound the same, but they are not. Both are very important for companies to remain relevant and successful for years into the future. However, one is pointed inward, and the other is pointed outward. See also: Insurance Innovation: No Longer Oxymoron   Innovative thinking means your teams are applying the principles of creativity, collaboration, problem-solving, risk-taking and customer focus to the business problems of today, including your current products, services and operating models. Some great applications of innovative thinking fall under the headers of improving customer experience; moving the needle on key business metrics such as sales, market share, retention or expense ratios; or even improving field satisfaction. These are important, daily challenges that deserve innovative thinking to come up with new ways to solve them, perhaps working within certain constraints. Constraints actually help drive innovative thinking vs. curtailing it. Many companies today have problems with innovative thinking because the organizations are not skilled in creative problem-solving; they don’t collaborate well; and they don’t know how to take calculated risks. These problems are solvable through the proper skill training and by providing the right data to help make decisions about what to focus on first and how much effort and money can be spent to solve it. Innovative thinking is an empowering competency for generating good business results. It also needs to be accompanied by innovation for long-term survival and relevance. Innovation, on the other hand, takes those same skills and points them toward unmet consumer needs. These could be consumers or needs you are not serving today. Additionally (and ideally), they could be needs that are not being served by anyone. When we discover large, unmet needs in the marketplace, these are significant opportunities for growth. However, it is difficult because a capability needs to be built that does not exist yet. We define innovation as the synchronized intersection between an unmet need, an idea that solves it and a great experience designed to bring it to market effectively. Innovation has all three of those elements correct. If one or more is incorrect, it is just an invention. Innovation is even more difficult than innovative thinking because teams are dealing with unknowns in the market as well as unknowns in the business. With innovative thinking, at least some things are familiar. This is why large corporations have such trouble launching game-changing ideas. See also: How to Turn ‘Inno-va-SHUN’ Into Innovation   The missing skillsets relative to innovation could be any of the same ones required for innovative thinking but also the skillsets of prototyping and effective piloting. These are skills the insurance industry generally does not have. But the good news is that these, too, can be trained in or brought in by outside partners. Startups are good for that, and some companies have taken that approach. However, it is not enough to just outsource. Your teams need to learn some of these skills so that innovations can eventually be integrated into the core business. When innovative thinking and innovation are confused, bad things happen. This is how “innovation” becomes a bad word. If various leaders or team members don’t see this distinction, innovation teams struggle to get traction. For example, the team is looking to create the next big thing, while the CEO just wants more sales. We’ve seen over and over again how companies establish innovation teams or centers and then shut them down because the organization did not make this distinction clear enough. If you are reading this and your team is struggling with gaining traction around innovation, this could be part of the problem. There are many ways to learn from mistakes of the past, and it takes a lot of wisdom and self-awareness not to repeat them.

As physicians and hospitals compete for the “under 65” patient -- whose payments are generally 150%-plus higher than for a Medicare patient -- they have to determine their pricing model. The traditional choice is to offer a low price per service based on a higher volume, or a high price per service based on a lower volume. But some are charging a higher price with the goal of generating higher volume, and their number may increase. Healthcare spending is already 17.5% of U.S. GDP and is expected to hit 20% by 2025. This high-price/high-volume approach could exacerbate the problem. See also: Healthcare: Time for Independence   Part of the reason for concern is a recent landmark decision, in which Cigna was ordered to pay an out-of-network provider more than $13 million to cover certain alleged underpaid claims and ERISA penalties. ERISA is the federal law governing large employers that self-insure their medical plans (generally those with more than 250 employees). In the lawsuit, Cigna alleged that the supplier was failing to collect the patients’ deductibles and coinsurance. The carriers’ intent is for the supplier to collect the deductible and coinsurance to make patients aware of the supplier’s charges and of their shared responsibility for the bill. Cigna took the position that, if the healthcare supplier does not collect any payment from the patient, the provider is accepting as “payment in full” the amount processed by Cigna on behalf of the employer. Cigna argued that, if the patient's portion under the Summary Plan Documents (the carrier’s contract with the employer and the employee) is waived, then the plan’s portion is waived, as well. When suppliers “forgive the patient liability,” these healthcare providers often have a revenue model of very high prices with the goal of higher volumes. They’ll entice the patient to use their more expensive services because the patient does not have to pay anything -- and the higher payment to the healthcare provider under the plan will more than cover the liability that the provider forgave for the patient, even though the average employee deductible is high, at $1,300. Most patients have not grasped that healthcare suppliers are running a business and that prices vary by as much as 300% within a network. As a result, while employees (the patients) may save money when the provider waives their financial responsibility, they lose in the end. That's because their employers’ costs increase, resulting in higher health insurance costs, with larger deductibles and payroll contributions for all employees. The court's decision to reject Cigna’s claims creates further risk to the affordability of healthcare for employers, as employees will be financially motivated to access care from suppliers with higher prices because the patient’s liability is forgiven. Can we expect other healthcare suppliers to implement a revenue model tied to high prices with no patient liability? See also: AI: The Next Stage in Healthcare   Conversations with a number of healthcare suppliers shows that many do not realize that most large employers self-insure their medical plans; the suppliers perceive that the insurance carriers covers the costs. The purchasers (the employers) have the opportunity to engage the healthcare suppliers (hospitals/physicians) in a discussion around supply chain management, quality and patient safety, so the providers fully comprehend that the one ultimately paying the bill is monitoring their performance. We’ll look forward to sharing the results of this type of collaboration, now underway in a major market. It’s time for employer-driven healthcare.

“It was the best of times, it was the worst of times…”  Charles Dickens, “A Tale of Two Cities” On Aug. 12, 2016, it was the best of times in Denham Springs, (Livingston Parish) LA. By Monday, Aug. 15, 2015, it was the worst of times. Denham Springs was a community of 10,000-plus people in a parish of 132,000. Driving your car through Main Street, you’d see small-town America. Driving through the suburbs, you’d discover a booming town. On Aug. 12, Denham Springs was a bedroom community for Baton Rouge, LA. It had it all — great schools, young families, new homes and commercial developments everywhere. You’d agree — it was the best of times. After three days and 30 inches of rain, you could still drive through the town — by boat. It was the worst of times. From the Livingston Parish News website: “The 30-inch downpour that has devastated nearly 90% of Denham Springs and flooded more than 70% of Livingston Parish has led NOAA [National Oceanic and Atmospheric Administration] to classify the rain event as a once-in-every 500-year flood. For Livingston Parish, it may have exceeded the statistics of even the 500-year event. In a parish in which an estimated 40,000 homes were flooded — and 90% of them considered possibly a "total loss" in Denham Springs — observers from NOAA believe the damage, based on population and statistics, could surpass the devastation New Orleans and the Mississippi Gulf Coast suffered in Hurricane Katrina.” See also: Is Flood Map Due for a Big Data Make-Over? If you can’t wrap your head around such devastation, remember the difference between New York City on Sept. 10, 2001, and on Sept. 11. Think about New Orleans, which was not destroyed by wind but rather by water. Think Flint, MI, where failed decision making and neglect resulted in destruction of the “water” and severe damage to the health and the future of her citizens. Drive through your town and imagine 70% of it wiped out. I could go on, but I won’t — I assume you get the picture. Now let’s leave the flood waters of Louisiana and move back to your reality. You are a successful professional or a business owner. Things are going great or, at least, good enough. You are in your comfort zone. If you’re in the business of risk or insurance, you talk constantly about risk management. In my simple mind, risk is uncertainty. Uncertainty is the difference between good things and bad things happening. Management is control. Risk management is control of uncertainty. This is all about maximizing the good and minimizing the bad in our clients' lives. Be selfish. Exercise this risk management process and discipline on your own shop and your own future. I’d ask you to do one thing differently: Over the next few paragraphs, measure your reality not as the wild-eyed, optimistic, successful entrepreneur you are but measure it in the hard reality of “misery.” Consider what would happen if you and your agency failed to open today because (like in Denham Springs) water has risen to the ceiling of your office and to the ceiling of 70% of the homes and offices in your city. Consider what would happen if the city and the state is on lockdown because terrorists have set off a dirty bomb. You’re driving away but are hearing rumors of the community being uninhabitable for at least three years (think Chernobyl). What do you do? How do you do it? Where’s your staff? Your future? Your value? See also: How to Make Flood Insurance Affordable   Draining the swamp is difficult when you’re up to your butt in alligators. Consider: “Job” and “job” are spelled the same way. Most often, when we think of “job” we are thinking of what we do (“a piece of work, especially a specific task done as part of the routine of one's occupation or for an agreed price.”) When we are going through the worst of times, some think of the other “Job,” “the central figure in an Old Testament parable of the righteous sufferer.” About 20 years ago, Dave Hamilton spoke at the IIAL convention. He was excellent. His theme was “No bad days.” His message was that we all have bad moments where bad stuff happens — but there are no bad days. He closed with the following, “The merchant of misery is either at your door, has just left or is soon to arrive. Still there are no bad days.” Dave is wise! If you’re enjoying the “best of times,” thank God. If you’re suffering through the “worst of times,” pray to God. Remember: Life is a streaming video, not a snapshot. Even after a 1,000-year flood, the sun shines again. Be prepared.

The phone rings in a company’s human resources department. The caller explains he is from the IRS and is conducting an audit of the company’s use of consultants. The company may have wrongly classified employees as consultants. If the company did misclassify, huge fines will be coming. To clear up this misunderstanding, the caller from the IRS needs historical W-2 data from all employees. An HR employee knows the company did nothing wrong, so he exports digital copies of all W-2 documents and sends them to the specified email address. By this point, alert readers should be horrified at both this obvious scam and the poor HR employee who will shortly be unemployed. Most people are familiar with the concept of phishing, which is targeting a specific person and using social tactics to elicit private information. From the clinical perspective of this article, it is easy to dismiss this approach as useful only against the unsophisticated. It would be much harder to dismiss if your phone rang from a Washington, D.C., number and the caller already had your company’s tax identification information. See also: Payoff From Great Customer Experience?   In other scenarios, there is no ill intent, only poor oversight. A health insurance company is preparing explanations of benefits (EOB) mailings, which include sensitive and private information about healthcare services. This company generates millions of EOBs each month and saves a copy in each member’s account on the company’s website. A batch process reads the member account number from the EOB and places the document into the correct website location. Recent regulatory changes forced the IT department to perform a series of last-minute adjustments to these documents, and the process updated the format of the account numbers. No one told the batch team, and the process that posts these documents was not updated. Millions of EOBs are posted to the wrong account, revealing everything from drug test results to cancer treatments. In both nightmare situations, digital communications have exposed a company to huge fines as well as public embarrassment and customer attrition. These dangers are not new. Traditional paper communications could have had the same effect. What is different in a digital environment is the speed with which a small mistake can reach millions of customers. With digital communications, no one can rush down to the mailroom and stop a stack of envelopes from going out. Automated processes massively increase efficiency, but these same processes, by their very nature, lack human oversight. This transition from traditional forms of communication to digital communication is critical for customer experience, but companies must update processes and procedures along with technology to avoid these dangerous situations. What can a company do to modernize communications processes while also remaining compliant with regulations? There are two considerations: prevention and recovery. Prevention is the more important approach. Recovery requires recognizing that, eventually, someone will make a mistake — and a proactive company will have the technology in place to minimize the impact of that mistake. See also: The Human Resources View Of Health Care Benefits Needs To Change   Prevention is not an exciting topic. Communications and customer experience professionals generally do not enjoy working with compliance departments. Compliance reviews can slow projects and sometimes prevent exciting new communications from even being launched. Because of this aversion, what often happens is that, at the end of a project, someone will remember to call compliance for a last-minute review. Compliance is upset because its schedule is disrupted; those responsible for customer experience are anxious because their project is delayed; and IT is angry because its work might have been wasted. The key to avoiding this situation is internal communication. Compliance should be an integral part of any new communications project, especially one that involves new technology or new delivery channels. Reviewing compliance challenges early keeps projects on schedule, and integrating compliance knowledge into communication design reduces the chances of an expensive mistake. Recovery is also an important consideration. In the first scenario above, every employee, current and past, was affected. Contacting current employees is easy; contacting former employees is not. Even with addresses on file, does the company have the technology in place to generate the appropriate notifications and follow-ups? Manual processes are slow and labor-intensive. Proof of notification is also critical to show that the company did everything in its power to inform the affected people. Creating this automated notification and auditing system after a breach has taken place is generally not feasible. Digital communications bring huge benefits to organizations, but they also bring new data privacy challenges. Any company that is in the midst of a digital transformation cannot afford to ignore these concerns. By focusing on prevention and recovery before a breach occurs, organizations can minimize the financial and legal effects and reputational risk. Spending the time and money now can prevent a much larger problem later.

“Reification” describes how people reorganize around new technologies. The Iron Age, Industrial Revolution, Information Revolution, etc., provide abundant evidence of the reification of society. Blockchain technology will likely have a similar impact. The insurance industry is currently optimized for the existing collection of risk pools, data inputs and price signals. If people reorganize, so, too, would their risk exposures — perhaps toward positive risk, or perhaps not. Understanding the implications of these emerging conditions requires a brief history lesson on database architecture. In the early days of computer networks, machines that performed computations were connected with wires to other machines that stored data on some physical medium such as magnetic tape. Humans interacted with these machines by using finger symbols on a keyboard and changing reels of magnetic tape. These activities had very little to do with the computation actually being performed, yet they caused the drive toward reification. While we may not realize it, those same functions are still often performed today in one form or another every time we interact with a computer database. Like the expression, “A fish has no word for water,” many activities that blockchain technology renders unnecessary remain difficult to identify. See also: Can Blockchains Be Insured?   Over time, databases became so incredibly useful that companies and institutions stored all of their data in proprietary silos where they could control access to financial records, product specs, trade secrets, personnel files, customer data, sales projections, etc. The database for an aircraft manufacturer was structured entirely differently than a coffee shop chain — or an insurance company. The specialized linkages that formed between the data and the operations became unique to the organization and, in many cases, proprietary. This was also convenient in sequestering people whose skills were adapted to a particular data structure. The purpose of management was to let nothing in or out of the database without appropriate permission. It has been widely written how institutions have become defined, or “reified,” by their data structures. The problems with legacy databases became apparent when the need arose for one database to communicate directly with another database. This was impossible without human administration. With the advent of the internet and social media, widespread networking capability between computer nodes became exponentially more valuable, while the ability for computers to communicate with each other remained linear. While electrons moved at the speed of light, many systems remained limited to the speed of bureaucracy. In the 1990s, organizations introduced legions of administrators, intermediaries and brokers to help databases communicate with each other. More recently, database engineers invented special interfaces (APIs) that allow, say, Amazon to provide access to parts of its database to wholesalers or partnered retailers. APIs allowed for a wave of innovation associated with the e-commerce movement and much more. However, even APIs had significant shortcomings with the more formal “titled” transactions. In 2016, with all the APIs in the world, a real estate broker must still wrestle with several databases to complete a transaction. The broker must lead the buyer and seller around the multiple listing service database (MLS), coordinate a financial lenders database, adjust for property inspection database, secure via a property insurance database,  use an escrow service and title insurance database — all under strict government database regulation and their own corporate management database oversight. The agents must deliver all of these databases in relative unison to a single point in time to receive archaic ink “signature” and a time stamp. A small mountain of paper “papers” is then registered in public archives. And, still, the deal can still be reversed by a legal challenge. The process can take weeks or months with unnerving risk, cost frictions and price volatility. “This is all very weird, only we’ve become accustomed to it” – Vinay Gupta Unfortunately, as the value of data increases, so, too, are the incentives, probability and consequences of cheating, especially where the ability to cheat has been equally enhanced by new technology. Reified society then reacts by adding additional laws and regulations that may thwart innovation to a greater degree than the protection that those laws may provide. Today, asymmetric information, blanket legislation and selective enforcement are considered among the scourges of modern-day commerce. Keep in mind, this complexity STILL has very little to do with the actual thing that people are trying to accomplish. See also: Why Insurers Caught the Blockchain Bug What if we can get rid of all the complexity? What if we can eliminate the brokers and intermediaries; the bureaucracy and the administration; the noise and the friction; and the risk? Actually, this is a popular idea that has been attempted throughout history in various forms of governance and marked by the willingness, ability and degree of control of information. Obviously, there are many methods for applying control (or not applying control); most lie on a spectrum between a fully centralized organizational system and a decentralized organizational system. Blockchain technology would allow data sources to communicate securely with each other directly with no central authority, administration or brokers. The insurance industry needs to take this technology seriously to enhance society’s ability to organize their own risk pools — or the insurance industry risks irrelevance. (Adapted from Insurance: The Highest and Best Use of Blockchain technology, July 2016 National Center for Insurance Policy and Research/National Association of Insurance Commissioners Newsletter)