Heart disease, lung cancer and other non-contagious health issues, many of which are at least partially avoidable through changes in lifestyle, are costing the economy hundreds of billions of dollars every year. Today, non–communicable diseases (NCDs) are already responsible for half of all deaths worldwide – and this figure is projected to increase by 17% over the next decade. Of particular concern for businesses: More than half of those affected by NCDs are of working age. This is why this isn’t just a human tragedy, it’s an economic one — which is why combating the rise of NCDs should not only concern public health authorities. It could even be a sensible investment for encouraging future economic growth: The World Economic Forum estimates that costs related to NCDs will account for as much as 4% of annual global GDP by 2030. That is a staggering $47 trillion. Perhaps surprisingly, these silent illnesses are affecting more people in the developing world than in the developed. The greatest increase, 27%, is projected in Africa, with sub-Saharan countries stuck with the worst predictions. In lower-income countries, it is primarily respiratory diseases that are the biggest killer, often linked to smoking and poor air quality, while heart disease and stroke, associated with sedentary lifestyles, are the biggest killers in richer countries, according to WHO data. The rise of NCDs is increasingly undermining the productivity of workers all over the world and has devastating effects on the economic potential of the poorest of nations. Boosting the health levels of employees and participating in public-private partnerships to reduce the impact of NCDs in wider society should be seen as a profitable strategy, not a burden. In Depth Two myths surround non-communicable diseases: that they primarily affect people in wealthy countries and that they are a disease of the old. Historically, that was the case. Cancer, diabetes, respiratory or heart diseases were an illness of the developed world, largely caused by risk behaviors such as smoking, drinking, living a sedentary lifestyle and having a bad diet. Today, of the 38 million people who die each year from NCDs, 28 million live in developing countries. That is a 40% increase since 1990. “While it may seem easy for businesses to ignore this trend, especially in markets with government-centric health systems,” says Jim Winkler, chief innovation officer of Aon Health, “organizations need to focus on the adverse impact poor health has in the ability for working people to do their jobs effectively.” Business leaders are beginning to take notice. The World Economic Forum’s Global Competitiveness Report shows that about half of all business leaders worry that at least one of the four biggest NCDs (heart disease, cancer, diabetes and lung disease) will hit their company’s bottom line, especially where the quality of local healthcare is poor. A disproportionate 80% of deaths from NCDs are premature, taking the lives of people during their most economically productive years. The WHO says that 23% of Indonesian people between the ages of 30 and 70 are expected to die from NCDs. In the U.S., this figure is 14%. “Chronic and complex diseases such as heart disease, diabetes and other obesity-related conditions lead to declines in physical output, mental acuity and emotional resiliency,” Winkler warns. All of these will affect productivity — which is why this is a growing crisis not just for people’s health but also for the global economy. The Economic Burden of NCDs Hundreds of studies have linked individual NCDs with economic losses. The World Economic Forum and the Harvard School of Public Health estimate that people dying of heart disease in India (26% of all deaths) will cost the economy $2.7 trillion from 2012 to 2030. Along with other NCDs and mental illnesses, the total economic loss — measured by taking into account money spent by health providers on treatment and the reduction in the number of working people due to deaths — will be two and a half times the country’s GDP in that period. Productivity losses for businesses due to NCDs can be measured by calculating the cost of Disability Adjusted Life Years (DALYs), sick leave, unemployment and days lost by caregivers. In Nigeria, more than half of stroke survivors take a year and a half to return to work. A comprehensive study by the European Journal of Epidemiology found that the workplace productivity of stroke victims’ caregivers also continues to fall one to two years after they become carers. The same study found that, in the U.S., absenteeism one year after a cancer diagnosis costs the economy $20.9 billion annually. Aon’s European Sick Leave Index report, meanwhile, found the average direct cost per individual sick leave day was at least €160. How Can Business Help? The WHO has put combatting NCDs at the forefront of its agenda, with businesses playing an important role in helping stop the spread of the epidemic. The 2013–20 Global Action Plan for the prevention and control of NCDs calls for a collaboration between states, NGOs and the private sector to develop affordable strategies that would help prevent the continued rise of these diseases. The cost of inaction far outweighs the potential economic benefit of taking action on NCDs. The WHO calculates that implementing its Global Action Plan proposals would come in at just $1.20 per person per year. Business leaders are increasingly aware of the benefits that health programs bring to the organization. Aon’s 2015 Health Care Survey found that the top change U.S. employers want to implement in their rewards system to appeal to the 2020 workforce is “more opportunities and support to connect health and wealth.” The spread of NCDs is a trend that businesses should not ignore. They are increasingly taking the lives of people during their most productive years and have a huge impact on productivity before, during and after their development. The question is not whether businesses should act upon this global epidemic, but how. These initiatives not only save lives but help businesses reduce healthcare costs and productivity losses. For instance, Johnson & Johnson’s health and wellness program saved the company $250 million on health care costs over 10 years. The return on investment was $2.71 per dollar spent on tackling smoking and physical inactivity. To tackle this growing global crisis, targeting the risk behaviors that increase the chances of dying from NCDs is key. This is where businesses can have a significant impact — by improving availability of healthy food, promoting physical activity, setting up programs to help employees quit smoking and giving better access to preventative healthcare. Talking Points “The challenge… goes beyond health ministries… Non-communicable diseases undermine productivity and result in the loss of capital and labor. These costs are unbearable and clearly call for innovative solutions and an all-of-society approach, with strong partnerships between government, the private sector and civil society.” – David Bloom, member of the World Economic Forum Global Health Advisory Board and professor at the Harvard School of Public Health “Creating an effective, collaborative response against NCDs requires cross-sector and cross-industry action – it can’t be achieved by any one business, nor one sector alone.” – Dr. Fiona Adshead, chief wellbeing and public health officer at Bupa “We should encourage individuals to make the smart choices that will protect their health.  Exercise, eat well, limit alcohol consumption and stop smoking. We can do more than heal individuals — we can safeguard our very future.” – Ban Ki-moon, secretary-general of the United Nations “This article originally appeared on TheOneBrief.com, Aon’s weekly guide to the most important issues affecting business, the economy and people’s lives in the world today.” Further Reading

• How to Shrink Employees’ Waistlines to Help Your Bottom Line – The One Brief, Sept. 8, 2015
• People Are Living Longer — But There’s a Catch – Business Insider, Sept. 10, 2015
• Blueprint to Combat Non-Communicable Diseases Released – BusinessWorld, Oct. 29, 2015
• WHO Decision Is Critical to the Fight Against Obesity and Non-Communicable Diseases – The Lancet Global Health Blog, Oct. 21, 2015
• Wanted: A Road Map to Tackle Non-Communicable Diseases – The Hindu Business Line, Oct. 16, 2015
• European Sick Leave Index – Aon report
• 2015 Health Care Survey – Aon report

Data science has grown in inevitability as it has grown in value. Many organizations are finding that the time they spend in carefully extracting the “truth” from their data is time that pays real dividends. Part of the credit goes to those data scientists who conceived of a data science methodology that would unify processes and standardize the science. Methods matter.  In Part 1 and Part 2 of our series on data science methods, we set the stage. Data science is not very different from other applied sciences in that it uses the best building blocks and information it can to form a viable solution to an issue, whatever that issue may be. So, great care is taken to make sure that those building blocks are clean and free from debris. It would be wonderful if the next step were to simply plug the data into the solution and let it run. Unfortunately, there is no one solution. Most often, the solution must be iteratively built. This can be surprising to those who are unfamiliar with data analytics. “Doesn’t a plug-and-play solution just exist?” The answer is both yes and no. For example, repeat analytics, and those with fairly simple parameters and simple data streams, reusable tools and models, do exist. However, when an organization is looking for unique answers to unique issues, a unique solution is the best and only safe approach. Let’s consider an example. See also: Forget Big Data -- Focus on Small Data In insurance marketing, customer retention is a vital metric of success. Insurance marketers are continually keeping tabs on aspects of customer behavior that may lead to increasing retention. They may be searching for specific behaviors that will allow them to lower rates for certain groups, or they may look for triggers that will help the undesired kind of customer to leave. Data will answer many of their questions, but knowing how to employ that data will vary with every insurer. For example, each insurer’s data contains the secrets to its customer persistency (or lack thereof), and no two insurers are alike. Applying one set of analytically derived business rules may work well for one insurer — while it would be big mistake to use the same criteria for another insurer. To arrive at the correct business conclusions, insurers need to build a custom-created solution that accounts for their uniqueness. Building the Solution In data science, building the solution is also a matter of testing a variety of different techniques. Multiple models will very likely be produced in the course of finding the solution that produces the best results. Once the data set is prepared and extensive exploratory analysis has been performed, it is time to begin to build the models. The data set will be broken into at least two parts. The first part will be used for “training” the solution. The second portion of the data will be saved for testing the solution’s validity. If the solution can be used to “predict” historical trends correctly, it will likely be viable for predicting the near future as well. What is involved in training the solution?   A multitude of statistical and machine-learning techniques can be applied to the training set to see which method generates the most accurate predictions on the test data. The methods chosen are largely determined by the distribution of the target variable. The target variable is what you are trying to predict. A host of techniques and criteria are used to determine which technique will work best on the test data. There is a bucketful of acronyms from which a data scientist will choose (e.g. AUC, MAPE and MSE). Sometimes business metrics are more important than statistical metrics for determining the best model. Simplicity and understandability are two other factors the data scientist takes into consideration when choosing a technique. Modeling is more complex than simply picking a technique. It is an iterative process where successive rounds of testing may cause the data scientist to add or drop features based upon their predictive strengths. Not unlike underwriting and actuarial science, the final result of data modeling is often a combination of art and science. See also: Competing in an Age of Data Symmetry What are data scientists looking for when they are testing the solution? Accuracy is just one of the traits desired in an effective method. If the predictive strength of the model holds up on the test data, then it is a viable solution. If the predictive strength is drastically reduced on the test data set, then the model may be overfitted. In that case, it is time to reexamine the solution and finalize an approach that generates consistently accurate results between the training data and the test data. It is at this stage that a data scientist will often open up their findings to evaluation and scrutiny. To validate the solution, the data scientist will show multiple models and their results to business analysts and other data scientists, explaining the different techniques that were used to come to the data’s “conclusions.”  The greater team will take many things into consideration and often has great value in making sure that some unintentional issues haven’t crept into the analysis. Are there factors that may have tainted the model? Are the results that the model seems to be generating still relevant to the business objectives they were designed to achieve? After a thorough review, the solution is approved for real testing and future use. In our final installment, we’ll look at what it means to test and “go live” with a data project, letting the real data flow through the solution to provide real conclusions. We will also discuss how the solution can maintain its value to the organization through monitoring and updating as needed based on changing business dynamics. As a part of our last thoughts, we will also give some examples of how data projects can have a deep impact on the insurers that use them — choosing to operate from a position of analysis and understanding instead of thoughtful conjecture. The image used with this article first appeared here.

Most entrepreneurs don’t just want to be entrepreneurs—they have to be entrepreneurs.   As a driven entrepreneur in the insurance industry, you will encounter both challenges and rewards far beyond that of the average employee. Navigating these ups and downs can be as challenging as steering a ship through a storm on the high seas, but I’ve done both—and lived to tell the tale. The lessons I learned sailing the seas have served me just as well on land. Here are five tips about entrepreneurship that sailing has taught me:

1. Know the terminology

In sailing, understanding boating terms like aft, starboard and leeward is vital to working with your crew and operating your vessel. The same is true in business. If you can`t speak the language of your clients and your competition, your next deal may get lost in translation.   Attending conferences and taking courses are both great ways to learn new terms and highlight that there`s a reason why you’re the expert.

2. Use trends like the wind

When sailing, jibing and tacking help you manipulate the winds to steer your vessel in the right direction. In business, trends are your winds, and you need to understand which direction they`re heading. Take a few minutes every day and bring yourself up to speed on the latest global and local trends. Aggregators like Feedly or SmartNews, along with social media feeds, keep you on the cutting edge and aware of which way the wind is blowing.

3. Learn when to tighten or ease the sheet

The sheet is a line or rope used to adjust a sail against a force of wind.   In business, you need to think about when to tighten or loosen your budget and your business’s growth in line with your sales cycle and market forces. Markets ebb and flow, and your business will, too. Tracking these fluctuations over time will help determine the ideal time to launch marketing campaigns and hire employees, or to tighten the purse strings.

4. Adjust quickly and wisely to a changing climate

The weather can change in an instant when you’re sailing, and you need to know how to use the sails to compensate, navigate under tough conditions and capitalize on whatever’s thrown at you. It`s not much different when you`re a leader in business. Like the weather, business is always moving and changing. Whether you`re steering your ship at sea or driving your business on land, it takes experience and at times raw courage to weather a storm. See each storm as a chance to gain experience for the next one and know that sometimes you simply need to batten down the hatches – and wait it out.

5. Be a decisive captain

It can take an entire crew to run a sailboat, but they won’t work effectively without a captain calling the shots. The crew rely on your vision, tenacity and experience to guide their actions. Without this direction, no one will know which way to travel. As the captain of a ship or a business, you spend your days adjusting your sails, guiding the crew and at times navigating dangerous waters. If you’re on the verge of starting a business or taking it in a new direction, remember one thing above the rest – always keep your hand on the helm and keep in mind: The pessimist complains about the wind. The optimist expects it to change. The leader trims the sails and sets a new course.

This is Part 3 of a four-part series. Part 1 can be found here. Part 2 can be found here. What if Leonardo Da Vinci had been alive to witness the digital revolution? Perhaps he would have been a sought-after consultant and speaker (after his start-up had gone public and his paintings were selling for millions)! Da Vinci was, according to historian Will Durant: “The most fascinating figure of the Renaissance… [He] took fondly to mathematics, music and drawing. In order to draw well, he studied all things in nature with curiosity. Science and art, so remarkably united in his mind, had one origin — detailed observation.” According to Da Vinci, a scientist should look at experience and observation before applying reason to any experiment. He uniquely had both a right brain and left brain perspective, the art and the science view, that looked at facts but then creatively used them to innovate — highlighting the power of observation. And Da Vinci’s observations are still with us today. For insurers, the power of observation is no less important than it was during the Renaissance. In fact, observation’s power for change and growth, using nearly any measurement (e.g. dollars, longevity, capacity for change, lowered risk) would certainly far exceed its Renaissance power. Insurance’s pervasiveness and necessity (it underpins economies to enable them to grow) make it globally and individually life-altering. If insurers wish to tap into the power of observation, in which direction should they look? The simple answer is that they should look at trends. But to fully explore trends, it will help us to split them into subcategories, such as purchase trends, lifestyle trends, customer preferences and commercial/industrial trends. Observing Purchase Trends This is the most obvious of the trends, yet it may be one of the most overlooked trends. How do people buy? What differences are there between segments such as millennials, baby boomers and small business owners? This goes beyond, “Well, they seem to be using the internet and mobile phones.” Observing purchase trends takes everything into consideration — Where are people when they are using their mobile phone or other mobile device? Where are people when they realize they have the time, need and inclination to purchase insurance? Is there a cosmic moment when the right offer at the right time with the right channel yields a magical response? See also: Data Science: Methods Matter (Part 2) This kind of observation can certainly be informed by trends and disruption within other industries. For a quick example, consider how iTunes created a profitable shortcut in the music purchase process (as well as dispensing with a physical product, all of its delivery methods and costs). Then think about how Spotify, Amazon Music, YouTube, Pandora and SoundCloud have all dented iTunes demand and caused its prices to look exorbitant. The lesson for insurers is twofold: 1. Capitalize on opportunities to be in the right place at the right time with market targets, and 2. Be vigilant in price response, service response and capitalizing on the next idea. Now that insurance is changing, it won’t stop. Perpetual observation, along with incubation and concept testing, will provide a foundation of market safety — if the organization is committed to acting on what it learns. This means continuous incubation and market testing of innovative products and services, likely outside of the normal insurance operations and systems structure — being creative and acting like a start-up. Observing Lifestyle Trends Insurance is so tightly bound to lives and lifestyles that it is imperative that insurers keep tabs on how lifestyles are changing. For example, in 2014, single adults in the U.S. began to outnumber married adults. How does that affect insurers with products that may seem to reward families with discounts and lower rates (i.e for multiple vehicles)? The sharing economy is also becoming mainstream, not only with services like Uber and Lyft, but also with shared office spaces, shared living arrangements and shared vacation residences growing in popularity. The sharing economy is all about the sharing of assets rather than ownership of them. Is it time for insurers to start thinking less in terms of insuring property owned or mortality and instead begin thinking in terms of insuring life experiences that may occur over short spaces of time, rather than for years? The rider in the Uber and the vacationer in the Airbnb may feel far more comfortable if they have the insurance for that specific time and need  — knowing that no matter where they are, and no matter what happens, they have access to insurance. Once again, this requires direct observation and then using the observations to creatively rethink insurance. Demographic studies that account for the next three, five and 10 years can even help insurers predict lifestyle patterns before they become mainstream, capturing the opportunity early and gaining market share. Observing Customer Preferences Many newspapers are losing money or are fading away. Bookstores are closing. Large department stores are somewhat outmoded. Bricks and mortar retail outlets are struggling to stay relevant. Purchases of used goods have never been higher. Online purchases have never been higher. What does this tell us about consumer buying preferences? What does it mean to insurers? The digital transformation of buying that is playing out is unprecedented. But does it mean agent sales aren’t the future or that un-tailored, high-volume products are no longer needed? The answer is no. In many cases, the answer is to increase an understanding of preferences at both a high level (market trending) and an individual level (preference trending). Preferences change frequently, so market analysis and segmentation underpinned by data and analytics play an important role in understanding where reality is at any one point in time. For observant insurers that care about growing their business, building an excellent customer experience and acting on a real knowledge of market trends and individual preferences will strengthen customer satisfaction and retention. It will also build loyalty among market segments that are changing or traditionally hard to keep. See also: 3 Skills Needed for Customer Insight Observing Commercial/Industrial Trends   What do Samsung clothes dryers, FitBits and connected cars have in common? All of them have IoT sensors, all of them have digital connectivity to mobile devices and … they are all relevant to insurers. When skateboarders started using GoPros (and posting videos to YouTube) and iPhones started locking themselves in cases of theft, insurers should have started paying attention. Drone technology, camera technology, GPS tracking, step measurement — all of these advances will play a role in insurer offerings, capabilities and services. But technological advancements are only the beginning of commercial trends that insurers can use. As commerce changes and as processes and products adapt, informed insurers will be able to support the changing needs of organizations. Start-up businesses and small businesses will be looking for ways to insure venture capital and other investments against loss. Drone and unmanned aircraft insurance needs will grow. Data protection and cyber security insurance needs will continue to grow. The insurance Renaissance will change the needs of companies and individuals as they embrace new market trends, technologies and as they reshape their preferences. This will likely mean a decrease in demand for some traditional products such as auto insurance or individual life insurance. But, at the same time, it opens the door for new products that embrace the changes. Just look at companies like John Hancock with its Vitality product, as well as insurers providing risk avoidance services using IoT in their homes or those offering shared transportation insurance. For observant insurers that grasp the way financial and business models are changing, there will be excellent opportunities to supply innovative products and risk preventive services. The key will be in the observation. Insurance is the economic foundation for economies, businesses, families and individuals, enabling them to operate or live life fully and with confidence. Our responsibility as an industry is to continually observe the changes that are happening inside and outside of the industries we serve, adapt to those changes with innovative products and services that meet changing customer needs, and do it with speed, capturing the opportunities unfolding before our eyes. In my next post on the insurance Renaissance, we’ll see how re-envisioning financial and business models may be one of the ways that insurers can prepare for a new era of progress and success.

For a while, I have been saying that one of the reasons for the disconnect between senior executives and risk practitioners is the latter’s language. Leaders of the organization speak in plain English about the achievement of corporate objectives such as earnings, profits and projects. Leaders of the risk management function talk about risks, impact or consequences and sometimes talk in technobabble about terms that only risk practitioners and statisticians understand, such as “risk capacity,” “alpha” and “residual risk.” See also: How to Remove Fear in Risk Management The traditional way of explaining the risk management process is (per ISO 31000):

• Establish the context
• Identify risks
• Analyze risks
• Evaluate risks
• Treat risks
• Communicate and consult (throughout the above)
• Monitor and review (continuously)

Can this be translated into plain English? How about this:

• Anticipate what might happen
• Analyze the possibilities
• Ask: Is there a problem? Can we do better?
• What are the options? Can we improve them?
• Which is best?
• Decide
• Act
• Review/monitor/learn

I especially like the work anticipate. It’s better than talking about “uncertainty,” another word that risk practitioners understand (I hope) but that executives find difficult. See also: How Risk Management Drives Up Profits Isn’t risk management all about anticipating what might happen between where we are and where we want to be? I welcome your thoughts. Can we practice risk management in plain English and help leaders make intelligent and informed decisions without even knowing that this is “risk management”?

The world of work is facing a perfect storm when it comes to retaining talent and knowledge. As the baby boomer generation – those born between 1946 and 1964 – reaches retirement age, younger workers are changing jobs more frequently than ever before. Youth unemployment is at record levels in many countries, meaning the next generation is failing to pick up suitable work experience. Aon’s 2015 Global Risk Management Survey, which surveyed senior decision-makers across 60 countries, found the failure to attract or retain top talent was the fifth-most significant risk facing businesses worldwide. This has been confirmed by other studies — more than 38% of hiring managers are struggling to find or retain the talent they need, according to a recent survey of 41,700 managers in 42 countries, with 22% citing lack of experience as a key challenge. Aon’s 2015 Trends in Global Employee Engagement report confirmed this — the average employee’s work experience has dropped by 28% since 2013. Skills, knowledge and experience are vital to a successful business, but also necessary to innovate and evolve with the needs of the marketplace. So retaining existing institutional knowledge is an increasing priority. If finding people with the knowledge you need is getting harder, a good starting point is focusing on keeping and developing the knowledge and people you’ve already got. In Depth Although the loss of data is an increasing concern in the age of cyber threats, the primary way organizations lose institutional knowledge is by losing valued employees with that knowledge. Every year, four million baby boomers leave the workforce in the U.S. alone, with 10,000 people a day hitting retirement age. In the U.K. and many other developed countries, more than 30% of the workforce is older than 50. Many baby boomer workers are in leadership positions, and when they leave the workforce almost all are taking with them decades of accumulated skills, experience, networks and personal business relationships, as well as first-hand knowledge of the reasons why their businesses have evolved the way they have. To make sure this valuable experience isn’t lost, organizations need to take a strategic approach, starting with a thorough analysis of their workforce, including:

• How many employees are coming up to retirement in the next five years?
• How many have key skills, knowledge or experience?
• How many have a succession plan in place?

Next, identify key soon-to-be retirees whose knowledge you most want to retain and begin to develop or expand your retiree-specific knowledge retention strategies. Just be aware that one size does not fit all — to get the best results, you may need to tailor your approach to the individual. There are three primary methods businesses are using to pass older workers’ expertise on to the next generation: knowledge hubs, mentoring programs and staggered retirement. Knowledge hubs are familiar to most organizations — a form of corporate intranet that pull together important knowledge in an easy-to-access central digital repository. The challenge is twofold: getting the right information into the hub and making it useable. Older employees, in particular, may struggle with digital technology, meaning you will likely need to provide training or assistance to help them enter the information you require. Equally, identifying what that information is can be difficult, which is why the most successful knowledge hubs are backed up with dedicated teams to manage and maintain them, as well as to measure their effectiveness and use. Apple takes this to an extreme, with dedicated university-style courses organized via an employees-only site backed up with in-person training. Mentoring programs have become increasingly popular over the last couple decades and have been proven to have a positive impact when implemented effectively. However, not every experienced employee will make an effective mentor — clear desired outcomes need to be communicated, expectations need to be set, training may be necessary to maximize benefits and you may need to introduce an incentive program to encourage participation. Both mentors and mentees will also benefit from third-party support. While it’s worth noting that the most successful mentoring programs tend to run over an extended period, there are no immediate, overnight benefits. Staggered retirement is a relatively new concept and one with much to recommend it. There are multiple variations in execution, but the basic concept is simple: Rather than retiring completely, employees are retained by the company in some capacity, perhaps shifting to part-time, perhaps to a contingent or contract basis. There is often a renewed focus on training or advising colleagues over their previous work. This enables the organization to continue to have access to valuable expertise and the retiree to top-up their pension with some additional earnings. However, there are some potential pitfalls, as Bankrate explains; depending on the nature of your retirement and health care plans, the retiree extending their working period may end up losing out, so seeking expert advice is vital. The broader benefits of active knowledge retention An added advantage of encouraging older employees to share knowledge is a boost in engagement — and with that retention levels — of younger employees. Career opportunities were the number one employee engagement driver in every region in Aon’s 2015 Trends in Global Employee Engagement survey, and opportunities to learn and develop new skills are a vital part of career development. Mentoring programs can also act as successor training schemes, giving more junior employees a clearer sense of their career path. Strong training programs are in demand among today’s increasingly mobile workforce, and well-constructed knowledge hubs can be a valuable pull-factor for jobseekers when supported with the right mix of internal communication and encouragement. Finally, while the very act of trying to systematically collate the knowledge and experience of your staff can help to increase their sense of value, it can also increase your organization’s capacity to make the most of its employees’ skills. While conducting an initial workforce analysis to identify key employees whose knowledge you want to retain, it may also be possible to start developing an internal skills database to maximize the potential impact of staff who may not be utilizing all of their expertise in their current roles. With failure to innovate or meet customer needs the sixth biggest concern for businesses in Aon’s 2015 Global Risk Management Survey, knowing what your organization knows is a crucial first step in ensuring that you’re able to adapt. The best way to retain your knowledge is to be aware of what knowledge you have in the first place. Talking Points “Organizations need to get to grips with the aging workforce challenge today or face skills shortages that will affect their ability to grow or deliver key services in the very near future… Too many employers are sleep-walking toward a significant skills problem that risks derailing their business strategy if not addressed. Not enough organizations are thinking strategically about workforce planning or even know enough about the make-up of their workforce.” – Ben Willmott, head of public policy, CIPD “The retirement of the current generation of corporate leaders will lead to cultural changes that most organizations are unprepared for. In order to thrive in the post-baby boomer landscape, companies need to put serious thought and effort into smoothing the intergenerational transition for leaders from generations X and Y.” – Richard Boggis-Rolfe, chairman, Odgers Berndtson “Retirement is currently seen as ‘all or nothing,’ where you are falling off a cliff. This problem comes from the way our public and private pension policies are framed. People would like to be able to work, but not as much, or work part of the year only. Instead of retiring all at once, they could enter phased retirement — that is perfectly feasible from a workplace policy perspective, but goes against some national policies.” – Ruth Finkelstein, associate director, Robert N Butler Columbia Aging Center, Columbia University “This article originally appeared on TheOneBrief.com, Aon’s weekly guide to the most important issues affecting business, the economy and people’s lives in the world today.” Further Reading

• Baby Boomer Retirement: Avoid a ‘Senior Moment’ in Your Business – Business.com, 30 September, 2015
• Preparing for the ‘Silver Tsunami’ – Government Executive magazine, 25 September, 2015
• More Employers Want Workers to Put Off Retirement – Benefits Pro, 11 August, 2015
• Phased Retirement Programs: Will They Make a Comeback? – The Huffington Post, 24 September, 2015
• Why Planning to Work in Retirement is a Risky Business – Reuters, 3 September, 2015
• Flexible Working Key to Keeping Singapore Seniors at Work – Enterprise Innovation, 19 August, 2015
• 6 Ways to Turn Managers into Coaches Again – Harvard Business Review, 10 August, 2015
• Avoiding the Demographic Crunch: Labour Supply and the Ageing Workforce – Chartered Institute of Personnel and Development, June 2015
• 2015 Trends in Global Employee Engagement – Aon report
• 2015 Global Risk Management Survey – Aon report

Insurance Europe's International Insurance Conference touched on some critical friction points between government and industry. Capital standards, consumer protection and climate risk resilience have grabbed the headlines, but important new ground was trodden when industry leaders began adding a new policy challenge to the industry’s agenda: the intersection of insurance and technology.

It's a simple question -- can insurance innovate? Think about your answer; I will give you mine at the end of this post.  Here's a quick story from an insurance book that helps set the stage for how the industry got to where it is today: There once was a membership association called the American Insurance Underwriters (AIU). The AIU acted as an agent for member insurance companies in international markets. Each member insurance company held a percentage of the AIU pool by which payments and liabilities were assigned. In the 1960s, an AIU member bid on a contract to insure a large church in Boston. But the insurance company didn't bid the insurance like everyone else. Instead, the insurer created a tailored contract with its own rate calculations, "rather than the standard forms and prices other (AIU) insurers had agreed to use." The incumbent insurer was not pleased: "Executives at Continental Insurance, which held about 27% of the AIU pool, went ballistic.... [Continental Chairman Victor] Hurd objected that this radical maneuver of using competitive pricing and deductibles in fire insurance was somehow going to ruin the insurance industry." Executives at the heretic insurance company convened.  One "old-fashioned insurance man" (the book's description, not mine) argued that the relationship with the AIU must remain intact as it was an important revenue source to the company. The executive urged the group to stick to the AIU practices.   See also: Underwriters Need Some Power Tools Another executive who participated in the custom underwriting urged another path: "We should not be tethered to outmoded practices," he said, "whether the custom of rate-setting associations, the terms of our policies or anything else." Who was that executive? Maurice Greenburg, who later became the CEO of AIG, one of the largest commercial insurance carriers in the world. But before AIG, Greenberg had to fight to change the way things were working at American Home, the heretic insurance company. Greenberg had to argue that remaining a part of an organization that sets international practices and shares profits and liabilities across insurers was not the best approach. Today, this seems obvious; at the time, some viewed this as blasphemy. But Greenberg's innovation didn't stop there. According to Greenberg's book, he used the AIU discussion to point out another outmoded practice relating to insurance agents: "Insurance agents worked for themselves in the field writing policies, yet they possessed the authority to bind the insurance companies they represented.... American Home's agents seemed to care more about commissions than quality. Greenberg envisioned moving American Home away from its reliance on agents in favor of setting its own underwriting standards and moving away from the personal lines that agents tended to underwrite in favor of commercial risks that tended to be identified by brokers." Of course, every insurance company operates this way today. Reading The AIG Story has led me to a couple of ideas. There is absolutely no doubt that insurance companies can and do innovate. Insurance companies create new insurance products every day. For example, AIG launched kidnapping insurance in the 1970s in response to the emerging threat to wealthy individuals. You can see this kind of innovation today in the insurance products that were created to cover the Uber gap. But, as I take a step back and survey the insurance technology (insurtech) scene, I believe we are missing one important discussion: the connection between the technology and new insurance products. How will your mobile app help AIG identify a new product that should be underwritten? How will your health data help Zurich create variable rates for health insurance? How will your technology-enabled policy review software help an insurance company identify outlier language that may create additional liabilities? (I have an answer to this last question!) See also: 6 Key Ways to Drive Innovation The last mile is missing from insurtech discussions. The last mile is showing how your awesome new software can actually improve the underwriting or claims experience for insurance professionals. The last mile requires an inordinate level of expertise by the creators of the new technology. Most technologists won't finish the last mile. Pitch decks and 10-minute question and answer periods won't get you there. So yes, insurance can innovate. The question is, can insurtech truly support this innovation?

For years, the go-to approach with clients for discussing long-term care insurance (LTCi) solutions has been from an educational perspective. The idea was that if we could just get a prospective customer to lower his guard long enough to understand the strong statistical rationale or risk in favor of LTCi, the decision would become clear to him, and coverage would be purchased. As logical as all that sounds, maybe our logic is flawed? The reality we’re facing in the LTCi industry is that this approach is likely not the most effective way to lead Americans into action on LTCi. What we’ve experienced is that, despite our best efforts and compelling factual arguments in favor of LTCi, adoption rates have consistently hovered around 8%, which corresponds with the percentage of the population that is predisposed to long-term planning by nature. So why isn’t the traditional approach to planning for LTCi working for the other 92%? The answer, it turns out, might be found in some fascinating recent research into “behavioral economics,” which considers economic decision making from a psychological perspective. Best-selling books such as Nudge (Richard Thaler and Cass Sunstein) and Thinking Fast and Slow (Daniel Kahneman) have explored the ramifications of this fascinating topic. The idea is that people really don’t act rationally, as classical economics assumes. Instead, people are motivated to act based on their emotions and impulses. Moreover, the choices we make are very dependent on how options are presented to us. See also: Can Long-Term Care Insurance Survive? Companies and governments have recently used the findings of behavioral economics to try and "nudge" people to take actions. For example, more companies now auto-enroll employees in 401(k) plans and make them opt-out if they don’t want to join. The result has been a big increase in 401(k) participation. Another finding—that too many choices lead to inaction—has led to a narrowing of investment options. Similarly, “default” choices, such as target date funds, are now part of many 401(k) plans. Here are six ways in which the findings of behavioral economics can help improve your closing rate when doing LTCi planning with clients:

1. Keeping choices as simple as possible. As an adviser, you may think your job is to give a possible buyer multiple options for planning for care, such as spread sheeting several insurance carriers or comparing standalone and linked products. However, the reality is that consumers don’t want this—they want a recommendation with just a few choices. Share your due diligence, but limit the information to what you consider the best options for them to consider.
2. Focus on the possible gain LTC will provide instead of the possible loss. Research has shown that, just like gamblers, we all want to win, and we don’t like to think about losing. People who are considering LTCi don’t want to think about loss when planning for care, such as how their retirement savings may be depleted. Instead, focus on the fact that a small LTCi premium gives the policyholder the possibility of a big payoff in benefits. For example, a $2,000 annual premium could result in $300,000 to pay for high-quality care at home.
3. Use stories, not statistics! Statistics are important for discovering trends and insights, but they are awful when used for discussing LTC planning. People are way too optimistic about their future and think they will be on the winning side of a statistic. Focusing on stories and experience that motivate prospects is much better than using statistics that can destroy empathy when talking about planning for LTC.
4. Focus on “now” benefits, not the future.  It's incredibly difficult for people to imagine aging and needing help. Instead, focus on the “now” benefits of LTCi.  The now benefits are more difficult to quantify, but they can include peace of mind, good health underwriting and locking into a lower premium before a birthday.
5. Help guide heuristics (rules of thumb). For analytical advisers, it's tempting to use tools such as cost-of-care surveys that project the cost of care 40 years in the future when designing plans. A better approach is to “follow the crowd” and recommend benefits similar to what policyholders are actually buying. You may think people want customized solutions, but most would feel more comfortable picking options similar to other buyers. Recommend they do what most people are doing.
6. “Nudge” a choice.  When people have to make a decision, such as actively signing off on the fact they have been offered LTCi but declined, they will be more likely to buy. LTC planning is easy to delay, and people need motivations to keep them from delaying the decision forever.

See also: Long Term Care Insurance: Group plan vs Individual Behavioral economics is a controversial topic, but we think it offers an important critique of the way we have traditionally approached LTCi planning with prospective clients. Employing some of its findings might move us beyond the 8% threshold of highly motivated long-term planners to help the remaining 92% of the population engage in meaningful consideration of their long-term care needs.

The possibilities of a fully connected world are unfolding before us. Technological progress has always been about making our lives easier and providing us with more options to enjoy life – to travel, be entertained, buy stuff and communicate with others. But, the connected world promises to shift progress into overdrive. Many of the smart home, connected car and sharing economy capabilities already allow us to sit back and control the world with our mobile apps or via voice commands. Even today, a person can adjust a thermometer, launch a music playlist, check flight schedules and order a box of Twinkies – practically without lifting a finger or moving a muscle. Will this ultimately result in a populace that doesn’t think, exercise or know how to do anything except control the world through devices? Will we all end up as unthinking, lethargic, good-for-nothing sloths?

I suppose some would argue that we are already there. The YouTube-Netflix-Facebook culture spends enormous amounts of time entertaining themselves, and it conjures up images of people with eyes fixed on screens, ranging in size from tiny handheld devices to enormous, wall-mounted TVs to those giant screens on buildings in places like Times Square. Those at home are in danger of becoming couch potatoes. Others in more public places are just as mesmerized and are so attached to their devices that some fall into fountains in shopping malls or risk walking into traffic on busy streets.

See also: How to Think About the Rise of the Machines

But the developments in the emerging tech arena are made for more than just entertainment purposes, and the resulting changes in society demand a deeper exploration. The full truth is always a bit more complex. Consider the following connected world possibilities and the positive effects they can have on individuals and society:

• Fitness Wearables: Sales of wearables for fitness and health monitoring continue to climb rapidly. Athletes and non-athletes alike are tracking a variety of biometrics and being given incentives to improve their health.
• Smart Homes: In addition to entertainment and convenience capabilities, smart homes offer considerable opportunities to improve security and safety, reduce accidents and enable the elderly or disabled to have more options for independent living.
• Robotic Exoskeletons: Workers in warehouses, airports and other locations are being outfitted with exoskeletons that allow them to lift heavy weights while reducing injuries.
• Connected and Driverless Vehicles: Developments in advanced driver assistance systems (ADAS) and progress toward autonomous vehicles hold the promise of dramatically reducing vehicle accidents and the related injuries and deaths.

These are just a few of the hundreds of examples of the emerging, connected-world opportunities that may improve our health, promote wellness and enrich our quality of life. In addition, the entrepreneurial spirit and venture capital related to emerging tech and the connected world are engaging legions of individuals, both young and old. There may be one group of individuals that is looking forward to binge-watching Netflix while interacting with their world from the comforts of their living room couch. But there are many others that are actively engaging in the connected world to better themselves and the world around them.

See also: How Connected Will Connected World Be?

You may be wondering what this has to do with insurance. The answer is – a lot. Just as mobile and social media technologies have changed expectations, patterns of communication and the business environment, so will the connected world. Positive and negative implications of the connected world will affect human health, traffic patterns, accidents, population distribution, employment opportunities and many other areas of life and society. In short, virtually everything that the insurance industry covers will be affected in some way. There may be some who will sit on the couch as their health deteriorates and their societal contributions decrease, but there will also be many more who thrive on the opportunities of the connected world. Either way, the needs and risks of customers will change.