It’s no surprise that insurance companies excel at understanding the panoply of risks faced by their customers. After all, accounting for what can, has or might happen is a core part of the business. Yet when it comes to mergers and acquisitions (M&A), many insurance companies only excel at half the job: assessing the risk of a potential takeover and expertly crunching the data. The other half — identifying cultural clashes that could scuttle integration — is often neglected. After a deal closes, and even during negotiations, insurance companies must move beyond the numbers and decide how, or even whether, to bring the two cultures together. Our experience and research shows that many deals in cross-border M&A in the insurance sector founder because of cultural issues. Too often, the industry views cultural differences as operational matters that can be hammered out, rather than behavioral differences that require a more considered approach. Boards of directors, which scrutinize the rationale and costs of a merger, often fail to consider cultural issues or monitor post-merger integration. As the global insurance sector consolidates and the number of deals increases, a keener understanding of how merging cultures can (and do) clash will become more important for success. To look deeper into the challenge of cultural integration following M&A, Heidrick & Struggles talked with senior insurance executives experienced in acquisitions in Asia, Europe and North America. Most agree that clearer communications and an active approach to identifying and addressing cultural issues can improve the value captured from M&A. Yet many admit they overlook it — one executive said that at his organization several transactions were led by people who never visited the target company or its market, and had little local knowledge. “Having bought assets, we expected local market leaders who were new to the group to adopt our culture off the back of a series of written protocols and the occasional visit to London,” he said. “We seldom asked them about the nuances of their marketplace.” Increase M&A Activity Ensuring that culture is top-of-mind will become increasingly important as the industry continues to rebound from the 2008 economic crisis. A study by Swiss Re reported 489 M&A deals were completed globally in 2014.¹ Although the volume remains well below the pre-crisis peak — 674 deals in 2007 — the insurer concluded that indications “suggest that momentum behind M&A is building.” In a separate study, Deloitte found the number of deals involving brokers grew 40% from 2013 to 2014.² Although in Deloitte’s counting, deals involving underwriters edged lower from 2013 to 2014, the average value per deal almost tripled, from $124 million in 2013 to $359 million in 2014. Indeed, 2014 saw the announcement of eight insurance M&A deals with values of more than $1 billion, dwarfing the volume of big-money deals in previous years. The largest transaction was the $8.8 billion takeover of Friends Life by British insurer Aviva, creating the largest insurer in the U.K. Sidebar: Let's Make a Deal Several factors are contributing to increased M&A activity in the global insurance sector, but most consider the main impetus to be overall lower policy rates. Lower rates are seen as a byproduct of overcapacity, and the industry is consolidating to retain profitability and increase differentiation. Other factors include growing interest in insurance M&A from a broad range of backers, including hedge funds, private equity and international investors. Companies are looking for ways to use vast cash reserves. A strong U.S. dollar has made some cross-border deals less expensive for U.S. companies. And insurers are recognizing the need for economies of scale, particularly as the costs of IT and system changes mount. In addition, many companies in Asia are moving into global markets and looking for strategic acquisitions to drive their expansion plans. For example, in 2013, Sompo Japan Insurance bought U.K.-based Canopius Group, and in 2015 Mitsui Sumitomo Insurance (MSIG) bought Amlin, also of the U.K. And among the recent deals originating from China, Peak Re, a unit of Fosun Investment, bought Bermuda-based Ironshore in 2015, and in 2016, Mingshen was finalizing its acquisition of U.K.-based Sirius from White Mountains. Against this background, insurance companies are pushed toward M&A for a variety of reasons. The most common, still, is to bring together two companies with complementary businesses and strategies and capture greater value through scale efficiencies. In Asia ,in particular, such mergers are trending as a way to support regional growth aspirations. For example, in 2014 Swiss Re paid $122 million for RSA’s China unit, Sun Alliance. RSA’s strategy to divest out of Asia thereby provided Swiss Re with an established platform for its continued growth of direct insurance in China. This deal, and others like it, focused on serving an aging Asian population with products centered on retirement planning and financial safeguards. Other strategic goals are also driving deals — for example, attempts to harness digital technology and reinvigorate tired corporate business models. In one case, U.S. insurer Aetna in 2014 bought technology provider bswift, which offers cloud-based insurance exchanges and other digital products, for $400 million. These types of deals focus on integrating the newest technologies, such as mobile applications and big data analytics, as a core component of a company’s business model, either to reach customers, provide market insights or improve internal efficiencies. Such mergers are especially prone to cultural clashes as staid insurers butt against dynamic, high-tech entrepreneurs, often extinguishing the very spark that created value in the acquired company. And finally, in a reflection of the industry’s positive outlook, outside investors are also turning to the sector as a channel for steady yields. In one example, in 2014, the Canadian Pension Plan Investment Board acquired the U.S.-based Wilton Re for $1.8 billion. See also: Insurance M&A: Just Beginning The Power of Culture While M&A is driven by a range of underlying strategic objectives, those with the greatest potential look beyond pure cost efficiencies. Success is drawn not just from spreadsheets but also from cultural integration that produces better collaboration and new ideas. Such cultural integration can take several forms. The parent company can absorb and dominate the culture of the acquired company (perhaps the most common form); the two cultures can coexist, with the acquired company retaining a certain level of autonomy; or the two cultures can mix, creating a more ideal corporate culture. Regardless of the form that cultural integration takes, the evidence suggests insurers everywhere find it challenging: For example, 39% of respondents in a 2016 Towers Watson survey of 750 global insurance executives cited “overcoming cultural and organizational differences” as a post-integration challenge.³ Yet when companies get culture right, the benefits are significant. The 2004 merger of U.S. insurers Anthem and WellPoint Health Networks is a clear example. Soon after the $16.5 billion merger was approved, Larry Glasscock, CEO of the new company (now called Anthem), made it clear the merger signaled the birth of a new company and a new culture, rooted in internal trust and innovation. Glasscock first delivered the message to a newly formed executive-leadership team, composed of 15 leaders from both companies, then to 300 top managers in the new company and finally to its more than 40,000 employees. Eventually, the new culture would permeate every aspect of the new company, from hiring and orientation to performance management. By 2007, the company was named by Forbes magazine as one of the most admired companies in the U.S., had cut administration expenses in terms of share of overall revenue and was on track to reach its growth targets. In 2016, Anthem itself is in the process of merging with Cigna and could profit from remembering these lessons. The "best" integration model depends on a variety of factors, such as the relative size of the two companies, the optimal organizational structure after the merger and the value created by various cultural characteristics. But identifying the right model is a crucial element of any M&A process. By planning strategies for assimilation with the same fervor as those for operational efficiencies, insurance companies can lower the risk of failure in M&A. Before the Deal Is Done Spotting and addressing cultural challenges should start well before the papers are signed. Parallel to due diligence, acquiring companies should critically compare attitudes, work habits, customs and other less overt characteristics of the two companies involved. The effort should be a routine part of the standard M&A process, rather than an ad hoc response if friction develops. Gather data on culture. One useful tool for comparison is the corporate-culture profile, a diagnostic instrument based on survey data from both companies. Such surveys explore a range of corporate characteristics, such as attitudes toward personal accountability and collaboration, trust levels and integrity. They also gauge strategic alignment and commitment and assess the strengths and weaknesses of each culture. A corporate-culture profile can quickly identify areas in which two cultures diverge, pinpoint areas that may require immediate attention and highlight areas of common ground that should be recognized and celebrated. Often, acquiring insurance executives wrongly (and perhaps unconsciously) assume that two companies in the same business will have relatively compatible cultures. In cross-cultural M&A, such notions are wishful thinking at best and can lead to challenges. Staff with different training, work environments and market experiences will naturally view work differently.⁴ Investigate the intangibles. Our conversations with insurance executives who are experienced in M&A highlighted specific themes that arise during negotiations. The following concerns should be included in the process to lower the risk of cultural clash in an acquisition. Geographic location One executive who was involved in XL Capital’s 2001 $405 million takeover of Winterthur International, a unit of the Swiss insurer, said that cultural clashes delayed integrating the acquisition by years. “U.S. and Swiss cultures couldn’t be more different, and the conversations never even touched on the subject, only the data,” he recalled. “U.S. firms measure success on a quarterly basis, and Europeans have a long-term view on the business.” Foreign executives with marginal connections to local culture or sensitivities commonly lead the due-diligence process. As a result, it is generally superficial and ineffective in regard to these intangibles. Deals are rarely scuttled over cultural concerns, even though these tensions can delay extracting full value from a merger and potentially affect expected returns. Management level One deal that was, in fact, scuttled was an aborted attempt by a global insurer interested in acquiring a niche firm in India. The acquirer found a sharp contrast between attitudes held by executives and staff at the target company. Senior executives were focused on growth, and mid-level managers worked in fear of disappointing them. Even though the financials were promising, the deal fell through over integration concerns. “You almost always only get exposure to top management during the due-diligence phase, and it’s a dress-up show,” an executive close to the deal said. Potential problems can be avoided — or at least identified — by asking questions that go beyond a company’s books and by meeting all levels of staff. For example, ask senior managers about long-term strategies, business operations, styles of working and relations with mid- and low-level managers. Along with their answers, their approach — for instance: consultative or aggressive — should also be noted. See also: Is M&A in Data and Analytics Setting a Path for Innovation? Mindset Acquiring companies should also spend time with staff at all levels, assessing work habits and attitudes. Along with meetings at the workplace, off-site events can also be beneficial. “Buyers with a high EQ [emotional quotient] tend to have the ability to truly get the heartbeat of a business,” said the former regional leader for a global insurer, himself an M&A veteran. “Spend time getting to know the top and middle team outside of the work environment to understand their values and drive.” Encourage clear, honest communication In general, workers at an acquired company understand — and sometimes fear — that job cuts are possible. Painting too rosy a picture ahead of a deal could create tensions later when reality hits. “Be honest from the outset,” a senior manager at a European insurer suggested. “You’re buying a business for their book, and you need to cut costs.” Honest communication during negotiations and due diligence can help expose attitudes toward potential job cuts and identify any measures that are seen as off limits. When a global company negotiated a takeover of a Malaysian life insurer, the acquirer presented a clear plan for adjusting leadership roles, pointing out gaps and explaining how they would be filled, said an executive close to the deal. The plan was presented at meetings to ensure alignment. “The acquirer needs to understand and respect non-negotiables relating to culture and not just look at the numbers,” this executive said. Open communications at this stage can also create a clear picture of how integration will be handled if the takeover is completed. For example, acquiring companies often promise a short period with no major changes immediately following an acquisition. This interval allows senior executives and staff at both companies to become better acquainted and can help produce a more appropriate integration plan for capturing the full value of the merger. In the case of the Malaysian insurer, for example, the acquirer agreed that there would be no major changes during the first six months. Once the grace period was over, changes were to be gradual and subtle, rather than abrupt and disruptive, said a top executive who worked on the integration. The executive noted that continuity between the due-diligence and integration teams was also important to ensure that the basis for such agreements was understood and that the agreements held. The approach was likely helped by lessons learned during an earlier acquisition in which the global parent and acquired company struggled for several years under two separate management teams. Collaborate, don’t dominate Creating a collaborative atmosphere — one that doesn’t alienate staff at the company being acquired — begins with first impressions. Companies that tout their superiority or power can find cultural integration more difficult. In one case, the due-diligence team from a U.S. acquirer flew into Asia on private jets, stayed at the best hotels and boasted of their lifestyle to staff at the target company, creating emotional distance between them. “Historically, the insurance buyers have an absorb-and-impose approach to culture,” a top executive at a Japanese insurer said. “U.S. companies are known to be the worst acquirers. They generally look at immediate financial results and key performance indicators rather than the long-term picture. Buyers will tend to focus on protecting their core headquarters’ market first and other regions are at the bottom of the list.” Throughout the acquisition process, staff at the targeted company should be treated as any other corporate colleague. Corporate hierarchies and chains of command exist, of course, but when they are the defining aspect of personal relationships, staff at acquired companies can become more anxious and less collaborative, posing an obstacle to integration. One executive observed, “Nothing raises hackles more than feeling you have been absorbed into a large and seemingly uncaring behemoth when, up until a few weeks earlier, you were top of the tree in your local market.” See also: Cyber Threats and the Impact to M&A After the Papers are Signed If efforts before the deal can be seen as cultural intelligence-gathering, those after the deal focus on execution. After all, each integration effort is unique in its cultural aspects. A company may have a standard approach for combining product service lines, for example, but bringing staff members with diverse backgrounds together effectively requires a tailored approach. For years, French insurer AXA followed a generally successful pattern that it rigorously applied to its M&A activities. Conversion in some areas, such as branding, corporate values, shared services and IT infrastructure, were not up for negotiation, but acquired companies were allowed greater flexibility in others, according to a former country leader for AXA. But even AXA’s template is being tested by today’s volatile and highly competitive market. Our experience and discussions with insurance executives demonstrate several points that are helpful to keep in mind during this phase of a takeover. Don’t rush big changes... In many takeovers, cutting costs (and jobs) at the acquired company is one of the first priorities. But moving too fast can cause unnecessary friction and inadvertently force valuable talent out the door. By taking a long-term view of the value potential of an acquisition, companies can take the time needed to understand cultural differences, and then focus only on those that may directly prevent the company from reaching its goals. As two businesses merge, it’s natural for workers to become protective of their positions — and even paranoid about their future. The acquiring company must take pains to demonstrate that any cuts to duplicated roles will be decided based on merit, rather than internal connections. Some insurers can be very deliberate with any changes they make to an acquired company. “Japanese companies, when acquiring outside their home market and when they do it right, take a long-term view,” said an executive at a Japanese insurer. “They don’t impose their culture (because) it’s so different. Instead, they spend a lot of time learning what works and what doesn’t before implementing changes.” Some companies spend the first three or four months after an acquisition getting to know how the new company works. They might stage a night out with junior management away from their superiors to get a better idea of how they see the business. Such measures could help pinpoint where a company’s legacy culture might interfere with business objections. For example, if lower-level managers say they simply follow their boss’ orders, there could be a misalignment on staff empowerment that could reduce innovation and block flows of information. Once the integration is fully under way, continuing informal staff meetings at all levels can help define new cultural norms (such as greater entrepreneurship and accountability or the value of clients), reinforce key messages and gauge progress. In one example, an insurance executive recalled that when a North American holding company recently moved to acquire an Asian arm of another global insurer, it tried a new integration approach. Instead of forcing job cuts, the acquirer left the organizational chart for the acquisition open and slowly introduced the company to the new leadership approach and cultural norms. Managers who weren’t comfortable with the new thinking left relatively quickly of their own accord. The executive said there were no conflicts around the departures, and in the end the company lost about 20 from a staff of 400. With the money saved by avoiding remunerations to retain the highest-performing managers, it offered each employee a 40% interim bonus after six months, which helped boost morale. ...but when the time comes, act Once a decision is made to cut staff or to take another significant step, the acquiring company should act quickly and completely. Drawing out painful measures only accentuates lingering staff anxieties and delays the return to normalcy. For example, when a British insurer recently took over a national business in Asia, it agreed to retain all staff for two years, partly to appease local unions. As a result, the local workers who were upset with the merger (about 10% of the staff) didn’t cooperate with the new leadership, and their attitude lowered morale and productivity across the organization. After about a year, the acquirer paid out the intransigent workers to leave early. Create a strong team Just as an acquiring company should be aware of its first impressions during due diligence, its leaders should work to build a team of peers with the acquired company’s staff during integration. Too often, buyers approach acquisitions like a conquering army, imposing its rules without much consideration of the implications. Many of the executives we spoke with noted that U.S. insurers are especially notorious for this approach. When a global insurer bought the Asian unit of a European company, a number of unnecessary dictates upset the Asia staff, partly because they were perceived as ignoring cultural differences, an executive involved with the integration recalled. For example, the parent company banned sending text messages on company phones, even though text messaging was the primary channel the Asian staff used to reach its 5,000 independent agents. The Asian workers had to buy and use personal phones to do their jobs, the executive continued, adding that the acquirer also reneged on a promise to upgrade local offices after deciding it was too costly. Along with exerting dominance over an acquisition, singling out staff for special treatment can also lead to discord. A common error is offering retention pay to only a few executives, rather than across the board. Be candid about the downside The importance of clear and honest communication continues into the integration phase — and indeed beyond it, as a matter of course. New structures or other big changes should be broadcast quickly and widely to prevent destabilizing rumors from taking hold. Any messages about upcoming changes should be non-ambiguous and professional, especially for measures that could be perceived as negative. There is no good time for bad news, yet uncertainty is often more corrosive than the reality. When QBE bought Zurich Insurance’s Singapore unit in 2004, the Australian insurer was clear on the implications, an executive close to the merger said. Among these were that costs would be reduced at the top, and anyone in a position with more than one claimant would have to reapply for the position, undergo interviews, demonstrate their capabilities and show that they fit the new culture — all within three months. Everyone adhered to the schedule, and there were no surprises or unnecessary conflict, the executive said.

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The global insurance sector appears ripe for a new wave of consolidation as companies investigate entry into new markets and access to new technologies. As they pore over the numbers and explore the strategic rationale behind various moves, would-be dealmakers should also take stock of culture. Industry leaders have long been excellent at weighing the financial risks and rewards of an acquisition, but they often fall short when considering the cultural aspects — if they consider culture at all. Cultural differences, however, can often ruin an otherwise well-planned acquisition. By purposely including culture in the negotiation process and after the deal is signed, companies can improve their odds of success. Related thinking Larry Senn, chairman of Senn Delaney, discusses avoiding culture clash in mergers and acquisitions in this video. References ¹See  M&A in insurance: Start of a new wave?, Swiss Re Sigma, Number 3, 2015, swissre.com. ²See 2015 Insurance M&A Outlook: Continuing acceleration, Deloitte, 2015. ³For more, see “Defying gravity: Insurance M&A on the rise,” Towers Watson, January 2016, towerswatson.com. ⁴In acquiring assets outside the sector, such as technology companies, the danger is even more acute. The fast-moving culture of digital innovation often clashes with the more reserved pace of big insurance. To overcome this tension, some companies, including MetLife and Aviva, have set up innovation centers that operate separately from their parent companies.

Over the past few months, many of us have heard of the abuses surrounding Martin Shkreli (who is in the news again after a judge set a 2017 trial date for his securities fraud case) and separately, Valeant Pharmaceuticals, which was recently under fire for drug price increases. What we haven’t heard is that these sensationalized cases are truly insignificant when compared with the enormity of the problem facing America.  Only a few years ago, specialty drugs composed a reasonable-sounding 10% of our overall drug spending.  Last year, it bloated to 38%, and by 2018 it will be an astounding 50%, which is an increase of $70 million … a day. See also: Cutting Prices of Drugs Dispensed by Doctors   The reason we pay many multiples more than other countries for the same drug is because we have a rigged system in which America is the only globally unregulated market. Worse, we have actually created laws to protect large healthcare monopolies. So, we as Americans have the worst of all worlds: neither a single payer system with explicit price controls nor a free and fair market. Consider the hepatitis C drug Harvoni, which sells for about $95,000 in the U.S. for the required 12-week course. The same therapy costs less than $1,000 in India, for products that are officially licensed by Gilead, the manufacturer of Harvoni. The argument that this is a result of us having to subsidize drug R&D costs for developing countries is a farce. In developed countries such as France, Harvoni is available for about half the price we pay in the U.S. Unfortunately, the same dynamic extends beyond specialty products into other commonly used drugs. The price for a 30-day supply of Crestor is about $200 at most U.S. drugstores, but the price in India is only $6 for a product that in both cases was manufactured in Puerto Rico by AstraZeneca. I'm excited that VIVIO Health, which I've joined as CEO, is tackling this large and complex problem. We represent the vast majority of Americans, who pay far more than they should for healthcare. I dream of a better country for my three children, and I know you do the same for yours. I have been asked whether I feel like Don Quixote. No question, reforming how healthcare is purchased in America is a daunting task, but our team has clarity on enough of the puzzle pieces to make a difference. Reform is an achievable goal, with many precedents in other industries, such as travel, stock brokerage and retail. See also: AI: The Next Stage in Healthcare   The VIVIO Health solution reimagines the way we buy, use and measure specialty drug therapies. Our solution starts with the outcome and works backward, collecting data at every step. We’ve reversed the current purchasing model that starts with profitability for intermediaries and suppliers and instead prioritize the best alternatives for both patients and employers who foot the bills. The data we collect coupled with external data allows us to answer perplexing questions surrounding cost, efficacy and choice. We foresee a day, with everyone’s participation, when America saves billions on healthcare costs.  We need your support and are asking you to join us in saying NO to legacy and YES to a better system.  Sources:

• GoodRx US drug prices July 2016
• France pegs Gilead hepatitis C drug at "lowest price in Europe"
• Express Scripts 2015 Drug Trend Report, March 2016
• Barclays U.S. Health Care Distribution & Technology, Specialty Market Model 2016 Update, Jan. 6, 2016
• Natco gets DCGI approval to launch generic hepatitis-C drug Harvoni in India

There’s been a scary increase in successful ransomware attacks against large organizations this year. Specifically, hospitals have found themselves at the mercy of hackers who demand ransom payments to unlock critical system files. Recently, there have been signs that these criminals have moved on to universities, too. The University of Calgary admitted to Canadian media last month that it paid a $20,000 ransom “to address system issues.” But individuals have something new to worry about. A new report from Kaspersky Lab says its detection rate for mobile ransomware—malicious software targeting smartphones and demanding ransoms—quadrupled in one year. It’s easy to see why phone ransomware would work. Consumers fly into a panic when their phone battery dies; imagine what it’s like to see a message saying your phone is locked, and a $100 payment is required to unlock it. See also: Ransomware: Your Money or Your Data!   Kaspersky says some ransomware criminals simply require that mobile victims type in an iTunes gift card number to free the device. I’ve written recently about the increasing use of Apple card payments for fraud. A combination of easy, anonymous payments and off-the-shelf copycat software tools makes mobile ransomware a new and potentially dangerous threat, both to consumers and to the companies that employ them. The numbers tell the story: From April 2014 to March 2015, Kaspersky Lab security solutions for Android protected 35,413 users from mobile ransomware. A year later the number had increased almost fourfold to 136,532 users. It’s unclear from the report how users encounter mobile ransomware in the first place, though at least some get it when visiting porn sites and are tricked into downloading and installing malicious software. “The extortion model is here to stay,” Kaspersky says in its report. “Mobile ransomware emerged as a follow-up to PC ransomware, and it is likely that it will be followed up with malware targeting devices that are very different from a PC or a smartphone. These could be connected devices: like smart watches, smart TVs, and other smart products including home and in-car entertainment systems. There are a few proof-of-concepts for some of these devices, and the appearance of actual malware targeting smart devices is only a question of time.” See also: Ransomware: Growing Threat for SMBs   Kaspersky offers these tips to consumers:

• Back-up is a must. If you ever thought that one day you finally would download and install that strange boring back-up software, today is the day. The sooner back-up becomes yet another rule in your day-to-day PC activity, the sooner you will become invulnerable to any kind of ransomware.

• Use a reliable security solution. And when using it, do not turn off the advanced security features, which it most certainly has. Usually these are features that enable the detection of new ransomware based on its behavior.

• Keep the software on your PC up-to-date. Most widely used programs (Flash, Java, Chrome, Firefox, Internet Explorer, Microsoft Windows and Office) have an automatic update feature. Keep it turned on, and don’t ignore requests from these applications for the installation of updates.

• Keep an eye on files you download from the internet, especially from untrusted sources. In other words, if what is supposed to be an mp3 file has an .exe extension, it is definitely not a musical track but malware. The best way to be sure that everything is fine with the downloaded content is to make sure it has the right extension and has successfully passed the checks run by the protection solution on your PC.

• Keep yourself informed of the new approaches cyber crooks use to lure their victims into installing malware.

More stories related to ransomware: Understanding ransomware helps organizations devise solutions Cyber criminals use ransomware to hook big fish With rise of ransomware, keeping intruders out of network is crucial This article originally appeared on ThirdCertainty. It was written by Bob Sullivan.

In business, as in politics and war, we too often yearn for heroic leaders. A smart book argues, instead, that leaders need to act more like humble gardeners. Stanley McChrystal and his coauthors write in Team of Teams: New Rules of Engagement For A Complex World that “we unrealistically demand the apogee of heroic leadership—omniscient, fearless, virile and reassuring.” We expect leaders to be like Napoleon, crafting brilliant strategies, deftly maneuvering troops and distributing precise commands—all while looking regal on horseback. We demand high-level strategic vision and an unerring ability to anticipate broad market trends. We celebrate leaders for encyclopedic mastery of every aspect of their business and ridicule them when they do not have it. We expect all this even though we know that it is entirely unrealistic. See also: Better Way to Think About Leadership   What’s more, the authors observe, too many leaders compound the problem by trying to live up to this expectation. They strive to stay informed, to always have the right answers and deliver them with force. They construct rigid, hierarchical organizations, which they then try to control like a thousand marionettes on many stages. They fear that failure to do so reflects weakness and irrelevance. McChrystal, a retired four-star general, tells of his own temptation to view war, the ultimate real-life competition, as if it were like chess—“the ultimate strategic contest.”

Empowered with an extraordinary ability to view the board, and possessing a set of units with unique capabilities, I was tempted to maneuver my forces like chess pieces. I could be Bobby Fischer or Garry Kasparov, driving my relentlessly aggressive campaign toward checkmate… I felt intense pressure to fulfill the role of chess master for which I had spent a lifetime training.

The problem is that the chess metaphor quickly breaks down. Chess is an orderly game, with clear rules and alternating moves between players. In real life, the competition is free to move multiple pieces and pummel you on multiple fronts, without waiting respectfully for your next move. Events unfold faster and with more complexity than one person can master, or for hierarchical decision processes to monitor, assess, decide and act. The speed and connected nature of the competitive battlefields render both heroic leaders and hierarchical organizations too slow to survive. Instead of heroic leaders, McChrystal argues, we need leaders who act more like humble gardeners. Master gardeners know they do not actually “grow” tomatoes, squash or beans—they can only foster environments in which the plants do so. Similarly, leaders need to understand that competitive success cannot depend on move-by-move control. It requires consistent nurturing of the structure, process and culture of one’s organization to enable subordinate components to function with “smart autonomy.” Smart autonomy is the ability, responsibility and authority of every part of the team to take action as best it sees fit in pursuit of the overall strategy. That doesn’t mean total autonomy, however. Every part of the team must be tightly linked to common strategies and mission. They must be enabled with “shared consciousness” and have ready access to information from across the organization. See also: Best Insurance? A Leadership Pipeline Becoming a gardener, rather than a chess master, changes the role of the leader but does not diminish the need for one. McChrystal argues that leadership is more critical than ever. Here are key elements of “leading like a gardener” that he and his coauthors lay out:

1. Shift focus from moving pieces to shaping the ecosystem
2. Create and maintain the teamwork conditions
3. Keep the team of teams focused on clearly articulated priorities
4. Demand free-flowing conversation
5. Reinforce empowered execution
6. Lead by demonstration
7. Keep eyes on, hands off

Whether you lead grand armies, a multi-national conglomerate or a small team, Team of Teamsis well worth putting on your summer reading list.

Plaintiffs' attorneys have discovered a new, rich litigation vein to exploit, potentially yielding a treasure of targets to sue. Using Title III of the Americans with Disabilities Act (ADA) and applying it to a modern societal institution (the internet) that was not in existence or contemplated when that law was enacted, lawyers may have hit pay dirt again by claiming that websites are not accessible to the disabled. Title III of the ADA requires places that are open to the public to not discriminate against individuals due to their disability or otherwise deny them “the full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of any place of public accommodation.” These rules apply to any company that permits “entry” by the public. Although traditionally Title III of the ADA has been applied to physical structures, recent cases have raised issues as to whether these rules may apply to websites, as well. To date, the case law addressing these issues is very limited and has been mixed. Case law from the Seventh Circuit has applied the ADA to websites, and the First, Second and Eleventh Circuits have applied the ADA beyond physical structures, providing ground for plaintiffs to argue that the ADA can extend to a virtual space such as websites. Meanwhile, the Third, Fifth and Ninth Circuits have applied the ADA provisions to physical locations only. See also: Broad Array of Roles for Disability Coverage   The Department of Justice, which is responsible for interpreting and enforcing Title III of the ADA, says that Title III does apply to websites. However, in typical government fashion, the DOJ has delayed releasing its “accessibility” guidelines for webpages, with an anticipated release date in 2018. While the regulations and laws on website accessibility may be unclear, a few law firms are nonetheless sending out demand letters targeting specific industry sectors nationwide (for example, private universities and real estate brokerage firms) and demanding compliance with onerous website standards. The letters ask the recipient to hire the plaintiff's law firm (or their preferred vendor) to help reach an “acceptable level” of compliance. In addition, several national retailers, including Patagonia, Ace Hardware, Aeropostale and Bed Bath & Beyond have been named in lawsuits regarding accessibility to their sites. According to Bloomberg’s BNA reports, 45 of these type of lawsuits were launched in 2015. That number is expected to increase substantially in 2016. With the law so unclear on this topic, how should businesses navigate these murky waters? First, if you receive one of these demand letters, you should consider contacting an attorney and should avoid engaging in discussions with the plaintiff or their law firm without representation. Then, along with your attorney and an IT representative (in-house or a vendor), develop a strategy to bring your webpage into accessibility compliance. Although there is no “one-size fits all” approach to move toward compliance, depending on what is on your website, businesses can consider providing audible text on each webpage and providing audible captions for pictures. Ultimately, to play it safe you may want to take all reasonable steps to improve navigation and access on your website. See also: New Products and Combined Approaches Takeaway Lawsuits related to website accessibility could likely be next cash cow for plaintiffs' attorneys. As the early case law on this issue is so mixed, there is little guidance as to who has to be compliant and what exactly compliance would look like. Until the DOJ gets around to issuing guidelines (assuming they provide much guidance), businesses should consider reviewing their websites and documenting reasonable efforts to make the sites accessible to the disabled. Further, companies should consider purchasing a robust employment practices liability (EPL) policy with broad third-party coverage that can potentially pick up the defense of claims related to website access claims. This article was co-written by Marty Heller.

If you hear employees talking about spending their stardust and candies, chances are they’re caught up in the latest pop culture fixation: Pokémon Go. The mobile phone game sensation has fans roaming the country with their handhelds out to capture the “Pocket Monsters” scattered virtually throughout the real world. The kid in me chuckles at this innovative use of augmented reality (AR) technology. But my cyber risk side looks at AR and sees potential issues involving malware, privacy, data disclosure and employee safety. Real-World Risks Computer and online games become instant targets for malware, through such things as fake and cracked versions in app stores. Hackers could gain control over a phone and thus a wealth of data about its user. For companies with bring your own device (BYOD) programs, enterprise email accounts and other data could be exposed. See also: Better Way to Assess Cyber Risks? Of course, BYOD risks are not limited to Pokémon Go. For example, sensitive information can be exposed through employees’ social media postings and other activities.  But apps that are addictive and seemingly innocent can blind users to the risks of downloading. AR technology combines elements of the digital and physical worlds into a single view, allowing data, text or images to be superimposed on a live video feed. In Pokémon Go, AR allows for the game map to align with a real-world map and players to find and even photograph their monsters in physical locations. What if a Pokémon is located inside your company’s office? If a user shares a photo or screenshot of such a location, it poses a risk of inadvertent loss of sensitive company or customer information. And there are issues around invasion of privacy for people/places that don’t want to be involved in the game. Managing Risk As surely as Pikachu evolve into Raichu, technology like AR will morph and bring new risks. Businesses may try to block or limit employees’ access to AR and similar technology, but that may only provide temporary relief before the next threat emerges. See also: Cyber Risk: The Expanding Threat   So as with all cyber risks, when it comes to Pokémon Go, organizations should make sure they don’t focus only on prevention. Among the steps to bolster response and recovery, businesses can:

• Educate employees about the risks.
• Conduct regular cyber risk assessments and audits to identify threats and assets at risk.
• Develop and test disaster recovery, business continuity and incident response plans in conjunction with law enforcement, regulators and others.
• Purchase cyber insurance to deal with the inevitable risks that slip through the cracks.

AR and other disruptive technologies are here to stay, and promise to benefit companies and consumers. Risk professionals will need to be nimble as they manage the accompanying risks.

Certainly some forms of insurance like health, home, auto, life or long-term disability coverage are probably necessary components to your wellbeing and security. But many people fall victim to fear or slick salesmanship to be convinced of the need to purchase some kind of special insurance coverage that is redundant, unnecessary, impractical or downright wasteful. It sounds good at the time, but in reality many insurance policies cost too much, have an unrealistic deductible or are simply frivolous coverage. You have to ask yourself in each case what the loss ratio is based upon each dollar of premium versus dollars paid for claims. For example, various kinds of credit insurance typically pay out 10 to 15 cents on the dollar versus auto insurance that typically pays out 80% to 85% of premium dollars. See also: The Most Effective Insurance Policy Here are my picks for the top 10 most useless insurance policies in alphabetic order:

• Accidental Death Insurance

If you need life insurance, buy an amount that you deem necessary to cover you for all the ways you could die accidentally whether it’s by accident, disease, assault or old age. Accidental death insurance is often referred to as Las Vegas coverage – like a bonus to your heirs if you die in car crashes. Your heirs may have a civil negligence lawsuit to pursue in such cases anyway.

• Cancer Insurance

Dreaded disease insurance policies like this cover you only if you die from one or more specific diseases. This is like playing specific numbers on the roulette wheel. Buy a term life insurance policy that covers you for the widest range in causes of death.

• Cell Phone Coverage

New cell phones come with a manufacturer’s warranty covering defects or malfunctions. Consumer groups don’t recommend buying this monthly supplemental coverage due to consumer complaints including “fine print” exclusions, hidden deductible fees and refurbished replacement phones.

• Credit Card Insurance

By law, most credit card fraud losses are capped at $50 per card with prompt notification, and most banks or credit unions have a zero-liability limit of stolen credit cards. Review your monthly statements regularly. Furthermore, the insurance schemes that offer to pay off of your credit card “balance owed” due to disability or death is better avoided, in favor of a traditional long term disability or life insurance policy.

• Extended Warranties

These “policies” are often sold as a scare tactic that typically provides additional commissions or spiffs to retail sales people. Who can remember which items you bought such coverage for and until when? Why buy an extended warranty from a reputable retailer or manufacturer that should provide a reasonable warranty to begin with? Moreover, with the pace of technological changes, most consumer products, whether appliances or electronics, are greatly improved or less expensive after two to three years.

• Homeowner’s Scheduled Property Insurance

Review your homeowner’s insurance policy carefully as most policies include overall personal property losses in an amount shown as a percentage of the value of the insured home. Singling out valuables as scheduled items, such as jewelry or fine art, typically requires appraisal and documentation, to be worthwhile. Furthermore, such items are often underinsured over time due to the fact you have to periodically purchase higher specific coverage limits for each scheduled item that may appreciate in value.

• Identity Theft Insurance

Federal protections can leave you paying little to nothing if your identity is stolen. Regulators have slapped the ID protection industry several times for deceptive marketing practices. Furthermore, most stolen name, birth dates or Social Security numbers are used to open new credit card accounts or to file a bogus tax return in your name to get a refund. 80% of stolen identities involve credit card fraud or check forgery. See also: Insurance at a Tipping Point (Part 1)

• Mortgage Insurance

Private mortgage insurance uses the same sales approach as credit card or dreaded disease life insurance policies. Unless PMI is required by the lender (when you put less than 20% down on purchase), buy adequate term life insurance to cover these kinds of financial obligations. The only exceptions may occur if you are unable to obtain life insurance due to age or illness and want to ensure that your property’s mortgage is paid off at your death.

• Pet Insurance

This often cost more overall than it will pay out due to various terms and conditions as well as exclusions, including inconveniently located designated veterinarians or clinics. Explore any nearby veterinarian universities as well for excellent low-cost medical treatment options.

• Rental Car Insurance

In most cases, this coverage is provided by other sources such as your own auto insurance carrier, your credit card company or your employer, if you are on business.

What’s a great, differentiated customer experience really worth to an insurance carrier? It’s a vexing question for the insurance industry, where the idea of investing in a better customer experience is often met with skepticism. Carriers may publicly affirm the importance of customer-centricity, but many in the C-suite privately question the value of customer experience differentiation, unsure of the financial return it really delivers. In an industry where actuaries are kings and numbers rule the day, the seemingly “soft” benefits of a great customer experience don’t carry much weight. As a result, carriers continue to subject their customers to complex purchase processes, unintelligible policy documents, cluttered websites, dizzying 800-line menus, disempowered service representatives, confusing claims communications and archaic business practices. The irony is that the benefits of a better customer experience are far from soft—it’s just that companies aren’t well-versed in the cross-silo economic calculus needed to measure them. For example, the benefits of a plain-language policy summary from an underwriter may only manifest themselves downstream, by reducing customer confusion and preempting phone calls to a service center. What many numbers-oriented insurance executives seem to crave is quantifiable evidence that, at least at a macro level, a great customer experience really does pay dividends. And now they have that evidence. Quantifying the Impact of Customer Experience To help industry leaders understand the overarching influence of a great customer experience (as well as a poor one), my firm aimed to elevate the dialogue and avoid getting mired, at least for a moment, in the cost/benefit calculations of specific types of improvement projects. We sought to illustrate the macro impact of an effective customer experience strategy by describing it in a language that every insurance executive should understand: shareholder value. So we sharpened our pencils and compiled years of data from what’s arguably the most well-regarded source of insurance carrier customer experience rankings: J.D. Power and Associates’ annual Insurance Satisfaction Studies. See also: How to Redesign Customer Experience Our approach was simple: We calculated the cumulative total stock returns for two model portfolios, comprised of the Top 5 (“Leaders”) and Bottom 5 (“Laggards”) publicly traded companies in J.D. Power’s annual study. (A white paper about the study, referenced at the end of this article, includes a more detailed description of how the analysis was conducted.) We went through the exercise twice—once for auto insurers, where J.D. Power rankings were available from 2010-2016, and once for home insurers, where rankings were available from 2009-2015. In both cases, our model portfolios tracked the stock performance of the carriers for the year-earlier period of their designation as a Leader or Laggard (for example, J.D. Power’s 2016 Leaders were used, retroactively, to build our 2015 stock portfolio). This approach was consistent with our thesis that the market would already be rewarding/penalizing the Leaders/Laggards in the full-year period preceding the release of J.D. Power’s consumer survey (given the customer experience the carriers were already delivering). It also helped ensure that the model portfolios’ performance was not at all influenced by the publication of the J.D. Power study itself. The results of our analysis were quite compelling. As Figure 1 shows, over the seven-year period studied, the portfolio of Auto Insurance Customer Experience Leaders far outperformed the industry, generating a total return that was 129 points higher than the Dow Jones Property & Casualty Market Index. Three carriers had the distinction of making it into the Leaders category for each of the seven years examined (in alphabetical order): Ameriprise, Erie Insurance and GEICO. (Editor’s Note: For insurers that are not publicly traded but are owned by a publicly traded holding company, such as GEICO and Berkshire, the performance of the holding company is used in the Watermark Consulting analysis.) The Customer Experience Laggard portfolio lived up to its name, posting a total return that was 75 points lower than that of the broader P/C market. As with the Leaders, there was some year-to-year consistency in the Laggards list, with three firms showing up in that category every year of the study: MAPFRE-Commerce Insurance, The Hanover and 21st Century (in alphabetical order). To underscore the disparity in performance between the Leader and Laggard portfolios, consider this: The Auto Insurance Customer Experience Leaders generated an average annual return that was nearly triple that of the Laggards. The Home Insurance Customer Experience Leader portfolio outperformed the industry, generating a total return that was 42 points higher than the Dow Jones Property & Casualty Market Index. See also: Keen Insights on Customer Experience   While several home insurance carriers made it into the Leader category multiple times, only one achieved that distinction for every year of the study: Erie Insurance. The industry’s Customer Experience Laggards again trailed behind, posting a total return that was 15 points lower than that of the broader P/C market. The Laggard category, too, was generally consistent year-to-year, though only one company placed in those ranks every year of the study, and that was Travelers. To again illustrate the wide gap in Leader/Laggard performance, consider this: The Home Insurance Customer Experience Leaders generated an average annual return that was double that of the Laggards. Interpreting the Results Let’s start with what the results don’t mean. A great customer experience does not guarantee carrier success. There are a whole host of factors that influence insurer performance, such as underwriting discipline and regulatory compliance. Customer experience is a necessary but not sufficient ingredient for carrier success. Despite that caveat, there’s no denying that this study’s results—reflecting over half a decade of carrier performance—are intriguing, to say the least. The findings imply that the much theorized connection between customer experience and financial performance isn’t a purely academic concept and can actually be observed within the insurance industry. The results point to the benefits enjoyed by carriers that invest in, and effectively execute on, a customer experience strategy: higher revenues (due to better retention, less price sensitivity, greater wallet share and positive word-of-mouth) and lower expenses (due to reduced acquisition costs, fewer complaints and the less intense service requirements of happy, loyal customers). Conversely, the study also provides a sober reminder of how customer dissatisfaction saps business value by depressing revenues and inflating expenses. See also: Best Way to Track Customer Experience   The bottom-line implication is that the marketplace believes carriers that deliver a great customer experience over the long term are simply more valuable than those that do not—and that’s a finding that should be of interest to public and private insurers alike. Takeaways for Insurance Carriers Perhaps the most important takeaway from this study is that insurance firms shouldn’t resign themselves to delivering just a mediocre customer experience (at best). The results suggest there is competitive advantage to be gained by differentiating along this axis, but it requires that carriers embrace some key realizations before setting a path forward:

• Retention is not a good proxy for loyalty.

Insurance providers often rely on retention to gauge the quality of their customer experience. While retention is a valuable metric, it can be a misleading indicator of customer perception (after all, a retained policyowner may not necessarily be a loyal one). As a result, many firms tend to overrate the quality of their customer experience.

• Insurance can be more than a “grudge” purchase.

Some question the viability of a customer-focused business strategy in insurance, given it’s an intangible product that people must buy, never knowing if they’ll get any benefit in return. Smart carriers overcome this perception by engaging customers with value-added services that transcend traditional insurance coverage.

• It’s essential to focus on more than just claims.

As the ultimate moment-of-truth in insurance, it’s critical that the customer claims experience be exceptional. However, the vast majority of insureds won’t experience a claim in any given year. For this reason, it’s essential that experience improvement programs go beyond claims—targeting other, more common customer touchpoints.

• The mundane things matter.

Insurance is a low-interaction business, which amplifies the impact of routine, recurring transactions on customer perceptions. Firms often treat these interactions (policy delivery, billing, renewal, etc.) as mundane administrative tasks—and it shows in the resulting experience. However, for many insureds, these mundane touchpoints are the entire experience, which is why these routine interactions deserve close attention from carriers. Insurance companies are struggling to set themselves apart in a marketplace that increasingly views their products as commodities. As the Insurance Leaders in this study demonstrate, the best way to break out of that “sea of sameness” is to deliver an end-to-end customer experience that turns everyday policyholders into true raving fans. Note: A white paper describing Watermark Consulting’s 2016 Customer Experience ROI Study (Insurance Industry Edition) is available for complimentary download at http://bit.ly/CX-ROI-INSURE. This article originally appeared on Carrier Management.

At SMA we have long been tracking the rise of smart things and their implications for the insurance industry. A variety of emerging technologies has been rapidly advancing to make everything imaginable smart. But participating in the ESRI User Conference in San Diego this year has driven home one key point: Geospatial solutions will have a critical role in making sense of all those smart things. The notion of a connected world is not an academic pursuit – possibilities to ponder about sometime in the future. It is a here-and-now issue affecting every industry, including insurance. See also: Insurance and the Internet of Things   The Internet of Things is already upon us. Sensors and embedded chips are present in buildings, infrastructure, agricultural settings, vehicles, devices in the home, medical facilities and government operations. Add to that billions of mobile phones and the capability to track location, movement and environmental conditions, and the result is many connections and massive amounts of data already measuring, monitoring and acting on the world around us. Predictions about the adoption of connected things vary widely, but, by any measure, the connection points and the data volumes will continue to increase exponentially. The problem, then, is not deploying smart things or collecting data from the smart things. The fundamental problem is the ability to combine and analyze data to gain some insights. In some cases, those insights might trigger decisions with global implications, solving some of humanities thorniest problems. In other cases, the insights might lead to a small action that improves the life of one individual. Enter geospatial solutions. Analytics and big data, in general, have essential roles to play in understanding the data generated in the connected world. But visualizing that data in a way that tells a story and reveals insights is the province of geospatial solutions, an area that has much to contribute to the connected world. Unfortunately, old impressions of geographic information systems (GIS) linger, especially in insurance. Most insurers have GIS solutions to do geospatial analysis, but they tend to be used by a small number of specialists for very specific applications. Today, the advances in 3D; animation; digital capture through drones, satellites, or LiDAR; and other technologies offer new opportunities. Tools for spatiotemporal analysis (understanding changes over time), crowdsourcing of real-time data and cloud-based collaboration platforms for maps and apps have elevated the discipline and provided government and industry with the potential to gain a deep understanding of the world to aid in addressing both new and old problems. See also: How Connected Will Connected World Be? Many insurers are considering the implications of the connected world and how it will affect their particular lines of business. Connected cars, smart homes, the quantified self, smart cities, autonomous commercial fleets and many other new areas create both threats and opportunities for insurers. Evaluating how geospatial capabilities can be harnessed to gain a better understanding of these emerging areas should be part of every insurer’s strategy and planning initiatives.

As new technologies like mobile are used and the need for agility and speed rises, so does the need for new testing techniques; otherwise, testing will hold implementations and organizations back. Just as today’s systems are modernizing, new testing methods and tools are rapidly advancing the quality and speed of development and implementation. To assess the current state of testing and reassess the need for insurance-specific testing, Majesco recently reviewed modern testing processes. What we found makes a case for modernizing enterprise-wide testing. Moving from static to dynamic Insurers need to have core systems that will be able to add capabilities, products, workflows and more through configuration. They will need an overall approach to system quality that will allow for continuous updates. Robustness and stability will need to be tested to bolster quality assurance (QA), and a whole new world of testing will arise to cover the various software areas that will be added to the enterprise. Not only will testing needs grow, but also a dynamic framework for understanding enterprise-wide testing will be mandatory. See also: Baseline Testing Provides a Win Minimizing risk Many organizations are worried about the risks involved in transformation and their inability to have clarity around operations, development, migration and the investments involved. Insurers are realizing that they need a well-designed QA process. Three key components are coming to light:

• Previously tried-and-true approaches are no longer best practices in testing. (For example, the waterfall approach to development and testing will no longer provide the results needed.)
• A single testing partner with a framework and methodology and domain expertise is vital.
• The end goal is to employ a single platform that works with a variety of approaches and tools in a way that enables agility and speed.

Reaping the benefits As digital enhancements grow and system touchpoints and channels are on the rise, test types are also becoming broader. Manual testing is still needed. Automated testing is more frequently employed. Performance testing and digital testing are more important than ever. To cover all types of testing, insurers need an automation framework that is structured, simplified and process-based. They need a system that “learns” and provides long-term efficiency by allowing for the repeatability of tests while increasing the speed with which tests can be executed. See also: Inventing Your Future: A 3 X 3 Approach A modern testing framework will give insurers prompt developer feedback and will support agile development. Testers will have the capability to build automation in parallel to application development. They will give users the ability to conduct continuous and recurring regression tests. Business analysts will be able to get more involved in testing. Scriptless automation techniques will provide business users with their own test automation capabilities. These are just a few of the ways that a modern testing platform will bring insurers into the future and give them a competitive edge. To dig more deeply into the benefits of expert testing in the transformation process and beyond, download Majesco’s recently released white paper, Putting Insurance Testing to the Test. In addition to Majesco’s testing overview, supplemented with industry perspectives from the research firm Novarica, readers will find a valuable example of an agile-friendly test automation approach as well as a helpful list of distinct service elements that should be taken into consideration when picking an IT testing partner. This article was written by Dan Mets.