When an athlete gets hurt on the field, there’s often a lot of finger pointing.  The athlete might point the finger at the opposing player who hit her. The opposing player might point back. Then coaches get involved. After all the finger-pointing, though, who’s ultimately responsible for the medical care that might be needed for the injury? Is it the athletic program? Certainly, insurance has been factored into that program’s budget, but it might not be the kind of insurance that helps its athletes. And what about youth sports injuries or those sustained by professional athletes? When it comes to sports injuries, insurance liabilities aren’t as black and white as you might think. While insurance policies are mandatory for nearly every athlete, it may surprise you who pays for what, especially for medical care after the end of an athlete's career. Youth Sports With more than 30 million children participating in sports, it’s no wonder about 10% of them, aged 14 and under, end up in emergency rooms for injuries related to those sports. The most telling aspect of these injuries is that the majority of them occur during practices rather than games (nearly 62 %). In the game of who pays for what, it’s difficult to determine when an injury occurs during practice rather than competition. One Seattle-area high school’s student athlete handbook simply states that participants may be covered by the school district’s insurance or by a plan that is its equivalent or better. There is no mention of coverage based on practice versus competition, and the stipulation that students can be covered by a better plan puts the onus on parents to pay for the insurance, even though the students are representing the high school. Parents and guardians, of course, should be responsible in general for health insurance for their kids, but is it going too far to ask them to provide sports health insurance? Most regular health insurance plans will cover the basics of a child’s sports participation, but once a child becomes highly competitive, separate coverage for sports may be necessary.  It can also be argued that more specialized coverage is becoming necessary as youth sports are attracting bigger, more powerful players. College Athletics Once an athlete graduates to the college level, insurance liabilities don’t change much. While the NCAA requires all athletes be covered by insurance, it doesn’t require that all colleges pay for that insurance. In some cases, as sports medicine specialist Dr. David Geier points out, colleges and universities have limited budgets and cannot afford to fully cover athletes. While many institutions provide basic on-field care for their student athletes, the buck stops when those athletes get injured. Geier writes about the difference between the University of Alabama and Auburn, a large- and small-market team in the same state. While Alabama covers everything from basic medical and dental for its athletes to their rehabilitation for injuries sustained during an official team activity, Auburn only pays for expenses not covered by a family’s insurance. If an athlete’s family doesn’t have insurance, the school with then cover that athlete. Covering college athletes’ insurance expenses doesn’t come cheap for any school; Alabama paid nearly $2 million five years ago, Auburn nearly $900,000. Yet with so many college athletes suffering catastrophic injuries, does it behoove the NCAA and its member colleges to provide more comprehensive care? Professional Leagues If an athlete can make it to the big leagues, insurance coverage becomes a different game, literally. Professional athletes who play individual sports such as golf or tennis must pay for their own insurance. Team athletes, however, are covered by multiple policies. Leagues such as the NBA and the NHL have plans that blanket many of their players. For a league like the NHL, where injuries are prolific, this tactic is smart. These types of policies are based on a modest percentage of the players’ salaries. The NBA’s policy is only obligatory for a team’s top five players, essentially the starting line-up. Insurance for professional athletes has to do as much with financial losses for a club as it does with physical pain endured for an injury. Policies typically won’t kick in until an athlete has been unavailable for at least a few months.  Athletes sidelined for an entire season (think: Peyton Manning) cost their teams and insurers millions of dollars. However, because athletes of the highest caliber carry private insurance, they themselves are covering their medical expenses and covering potential income losses. After Manning’s neck surgery, the Denver Broncos guaranteed the first two years of his contract; after that, his salary could have been voided if he hurt his neck again. Now that Manning is retired, he is likely paying a disability policy.  He famously stated that he expects to have debilitating medical problems as he ages, simply because of his playing days. Should the NFL or the Broncos pay for his treatment? As with any other employer-employee relationship, it can be argued that Manning is now responsible for his own medical care. With the continued research into post-career injuries, the responsibility for covering them will likely evolve.

The idea of a fully connected world has become quite popular in the press, and it is driving much of the innovation and start-up activity these days. At SMA, we continue to articulate that there will be many different ecosystems in the connected world, such as smart homes, connected cars, smart cities, intelligent farming and so forth. Each will have many participants and contributors to its particular ecosystem, including device manufacturers, systems integrators, data/analytics companies, service providers and, yes, even insurers. It is interesting to consider how connected the connected world might really become. I am thinking of the potential related to big cities and rural areas. See also: 'Smart' is Everywhere, but...

The digital divide has been a concern for quite some time. The digital haves and have-nots are usually described in terms of socio-economic terms, with the less economically advantaged missing out on the benefits of the digital world — and now the connected world. But the divide may also occur between cities and rural areas. What are some reasons to think this gap may widen?

• Innovation test beds: Let’s face it, it seems like half the stories you see about innovative new companies and ideas emanate from San Francisco. While innovation originates in many places, the test beds for new ideas are most often the big cities.
• Communications infrastructure: The explosive growth of the mobile world has already created significant challenges for telecommunications capacity. As connected-world devices and sensors come online, new communications platforms and dramatic increases in capacity will be required. The dense structures and populations of big cities make it easier to test and deploy new wireless and wired solutions.
• Concentration of business and government: More of the institutions that, and people who, run the world are located in big cities. For political and other reasons, it is often easiest to begin technology experiments in their backyard, so to speak. Also, the concentration of businesses, healthcare facilities, utilities and transportation systems makes big cities a better target for initial implementations of new connected-world applications.
• Smart cities: Cities have the scale that is often required for broader testing and for cost-effective implementations. The smart city movement recognizes this while also working to address many of the unique problems of the world’s largest cities (such as traffic congestion, pollution and energy consumption).

The one connected-world ecosystem where rural areas will certainly forge ahead is in intelligent farming. Smart agriculture solutions are already being broadly tested and implemented. From highly automated and connected farming machinery to sensors in the soil to robotic milking operations at dairies, there is great potential to improve the yield and quality of agricultural output.

What does all this mean for insurance? First, this is not to say there will not be smart homes, buildings, health care facilities, etc. in rural settings. Of course there will be, but it may happen that we evolve to a world of highly connected cities and loosely or marginally connected rural areas. Suburbs will fall somewhere in between in terms of connectivity. Insurers should conduct scenario planning to assess the implications of this potential new divide in the connected world. This may be especially important for those with a focus on urban areas because the risk landscape is likely to change the most over the next decade due to the growth of the connected world.

There has been a new virus spotted in some insurance operations. digital myopia. It is often found in the presence of another related issue — transformation shock. Together, they often bring about framework chaos. Fortunately, there is a straightforward vaccine in use —systematic analysis. The ever-rising digital bar for the insurance industry creates challenges and opportunities and a bit of chaos. The opportunities can help insurers build customer loyalty, compete, transform customer engagement and improve retention, which can lead to improved profitability. But how can insurers overcome the challenges of the digital transformation journey, and at the same time rid themselves of the feeling that they may be approaching digital transformation in the wrong way? See also: Why 'Digital' Is So Important To gain a new perspective, insurers can look at their key issues from a systematic approach. They can start with a few simple, but pertinent, questions.

1. Where does our organization sit on the spectrum of digital need?

In working with a broad array of insurers, from the largest to the smallest, from the traditional to the new start-ups, Majesco sees and helps many customers battle a variety of challenges on their paths to digital leadership. Often, they are confronted with pressure to “go digital.” We hear statements like this: “My board is pushing me to go digital, but I don’t know where to start, what to prioritize and what the ultimate goal is.” If this is you, welcome to the club. So many organizations try to think about their digital efforts before they ever consult their core business strategy. This throws off the ability to make wise digital decisions. It’s important to remember that digital strategy begins with the most basic, non-digital question — “Who are we?” So you start with your business strategy. Do you have one? If so, do you then focus on the gaps between your current digital capabilities and your target operational model — the one that fits your business strategy? Does your organization want to be a quick follower to current market leaders? Or, alternatively, does it want to be a market leader and disruptor? Finding the right model and approach that aligns with your business strategy instantly empowers your business priorities and aligns your organization’s DNA to the digital strategy it will adopt. Once this happens, a sense of relief will often flow throughout the organization —even before the digital work has commenced. Organizations need to know where they fit before they can grasp where they sit on the spectrum of digital need. 2: Do we need to create a coherent, comprehensive digital strategy? If your organization has its core business strategy defined, then you are ready for the next level of systematic analysis. Your organization (and often a technology partner) will assess the current environment and the array of digital initiatives underway. It is at this phase that we often hear, “We seem to have too many digital projects and initiatives going with no real plan or strategy behind them.” Many organizations started their digital initiatives before the digital strategy came into play. They are now realizing that the sum of the initiatives (parts) is less than it should be, sub-optimizing the business strategy and customer experience. This is often where most companies find themselves requiring urgent action to avoid a scattering of digital islands that do not connect to each other. Evaluating and consolidating these initiatives against your business strategy is crucial to digital transformation. Decide which initiatives are critical to your business success and kill those that do not align, creating clarity and focus for resources. There is nothing like the feeling that comes at this stage of the digital strategy. The organization and projects are aligned, the moon and the stars have moved into place and order is emerging from the chaos. The vaccine (systematic analysis) is working! See also: Waves of Change in Digital Expectations 3: Is our digital road map clear, but legacy issues stand in our way? If you find yourself in the position where you have a clear digital strategy and road map, but you can’t do as much as you wish because of legacy core insurance systems, then there are innovative approaches to address this obstacle. We advise insurers to adopt a digital platform that can provide a multi-speed digital transformation approach. This digital platform provides two critical components: First, it holds an enterprise service bus platform that can easily orchestrate transactions and data flows between multiple systems (including legacy) easily and efficiently. When the organization replaces the legacy systems, the new systems can be easily plugged into to this platform. This provides a quick win, using an underlying business and technology architecture that provides the foundation for your digital road map. And the best part is … it requires no change to your legacy systems, and it can be completed quickly. Second, the organization should look at key functional areas, like service areas, that need a digital mobile or portal to meet customer engagement expectations. Identify the few processes that are discrete and can be revamped, digitized, automated and integrated into the digital platform without major changes to your legacy systems. Digitize them and expose them to a federated or a self-serviced model. This digital transformation approach helps you meet the most immediate needs of your customers by turning obstacles into opportunities. It also gives you time to address the most pressing strategic obstacle, your legacy core system transformation. These two steps, once completed, will help build confidence and momentum in your organization’s business strategy. They will accomplish most of your digital transformation goals with your customers and staff and help make your total business transformation more viable, and more agile. A cohesive IT strategy and a successful business strategy nearly always go hand in hand. Your reward in pursuing a systematic digital transformation will be a clearer road map, a sense of direction and a group of people unified behind a common path.

This is the first part of a three-part series on the innovation needed in flood insurance. If you are an insurance agent trying to survive in today’s competitive marketplace, you may have dipped your toes in the flood insurance waters, so to speak. If you have not, get ready to jump in, because there’s a “perfect storm” of opportunity ahead. Flood insurance is a vastly under-penetrated market. According to a recent report from the Federal Emergency Management Agency (FEMA), approximately 10% of U.S. residential property is located in areas where flood insurance is required for federally backed mortgages, yet fewer than half of these homes carry the coverage. Total penetration in the U.S. is less than 7% for the roughly 95 million residential structures. That 7% penetration is compelling when you think about the prospective flood universe. Every single state in the country has suffered flood losses. So the question becomes: How do we leverage the opportunity to expand flood insurance beyond those 7%? When you consider the current state of the industry and of the National Flood Insurance Program (NFIP), the climate is ripe for change. The federal program is upside-down by $23 billion, resulting in additional fees and charges, and the Biggert-Waters Flood Insurance Reform Act of 2012, followed by the Homeowners Flood Insurance Affordability Act, injected new complexities into the NFIP. These — and related — conditions have created a “perfect storm” of opportunity to grow the number of homes that buy flood insurance. See also: Why Flood Is the New Fire (Insurance) Taking Advantage of Emerging Private Flood Options Legislation has paved the way for private flood insurance, which has come in response to different markets having different views and different appetites for risk, and additional measures pending in Congress further clarify the critical role of private flood insurance. Those diverse interests or private markets call for the independent development of product and service solutions to address various flood insurance needs and to differentiate their programs from others. The resulting innovation and product specificity directly benefits consumers. Accordingly, the conversation around flood has really evolved from "What is private flood?" to "Why now private flood?" One significant challenge for agents will be helping consumers understand that flooding (unlike earthquakes or hurricanes) is the only natural disaster where people actually influence the event itself. Whether through urbanization, the clearing of land for agriculture or artificial levee systems, we influence where floods happen and the severity of floods when they happen. Areas that were not in danger yesterday are exposed today. Private industry has an opportunity to help educate Americans on how these changes drive future flood risk through modeling techniques and data analytics. We need to help homeowners understand that yesterday’s safety does not necessarily equate to safety today. I see this playing a pivotal role in helping educate homeowners on their true risk of flood. Getting an Edge in a Competitive Marketplace Education remains a critical charge for insurance agents who want to obtain an advantage in this evolving market. Agents want loyal customers, and a flood insurance solution represents one more policy that agents can deliver to deepen existing relationships. From my perspective, there are fundamental strategies to employ to your advantage:

• Understand the impact of flood in your area

Every state has been touched by flood, so the risk is widespread. By familiarizing yourself with the history of floods in the areas where your agency is operating, you will better understand the potential impact to your customers.

• Get to know your customer

Does your customer have a man cave in the basement? Is your customer living in a high-value home? Is your customer in a home that is not elevated or that is exposed to flood more than other homes? Is your customer at risk of being displaced for weeks or months at a time if flood happens? That knowledge will help an agent determine what is appropriate for a client and then to match those specific needs with product options in the private market.

• Leverage flood tools available

Take advantage of tools that enable independent assessment of flood risk outside of FEMA flood maps. For example, through www.floodtools.com, agents and homeowners can learn about their potential exposure to flood. By entering an address, they receive an easy-to-understand visual representation of where they are positioned with respect to floodwaters and flood plains.

• Stay current in the evolving product environment

New, more relevant private products are becoming available every day. Staying informed in the changing product environment will help improve your ability to meet the diverse needs of customers with contemporary offerings such as: —Additional living expenses —Enhanced basement coverage —Increased limits for various risk classes

• Be clear on who is backing the product and the capital structure behind it

There is an abundance of capital looking for new business to write. Know who is backing the product and the capital structure supporting the private program. Consider the financial strength and financial rating of the insurer and inquire about flood underwriting experience. See also: Modeling Flood — the Peril of Inches Setting Course for the Challenges Ahead We are seeing a lot of interest in the flood space and the emergence of a host of new products. Many employ a so-called “coupon” approach by offering a percentage discount on the NFIP premium, but they haven’t changed the experience at all. Agents still need to manage extensive applications, an elevation certificate and property photographs. The experience needs to be improved, for the agent and for the customer. Are there opportunities for agents to sell flood insurance on a larger scale? Certainly, but more work is necessary to make that happen. When it comes to flood insurance, we need to find solutions attractive to both agents and homeowners for the purpose of increasing overall participation. We need to address the existing challenges. Constituents entering this space cannot solely focus on a price-to-coverage configuration angle. Ultimately, without product and service innovation, we can’t expand the market.

In a deep dark recess of the Federal Register this week, large corporations quietly received permission to “play doctor” with their employees. Corporations can now impose even more draconian and counterproductive wellness schemes on their workers. The hope of the corporations is to claw back a big chunk of the insurance premiums paid on the behalf of employees who refuse to submit to these programs or who can’t lose weight. A Bit of Background on Wellness The Affordable Care Act (ACA) allowed employers to force employees to submit to wellness programs under threat of fines. Specifically, the ACA’s “Safeway Amendment” — named after the supermarket chain whose wellness program was highlighted as a shining example of how corporations could help employees become healthier — encouraged corporations to tie 30% to 50% of the total health insurance premium to employee health behaviors and outcomes. (As was revealed while ACA was being debated, Safeway didn’t have a wellness program. The fictional Safeway success was a smokescreen for corporate lobbyists to shoehorn this withholding of money into the ACA.) Once this 30% to 50% windfall became apparent, many corporations figured out what this vendor (Bravo Wellness) advertised: There is much more money to be made in clawing back large sums of money from employees who refuse to submit to these programs than in improving the health of employees enough to allegedly reduce spending many years from now. “Allegedly” because — unlike simply collecting fines or withholding incentive payments — improving employee health turns out to be remarkably hard and ridiculously expensive to do. It is so hard and expensive that:

• The entire wellness industry has not avoided even a single heart attack or case of diabetes, statistically speaking, according to data compiled by a wellness consulting firm for the federal government;
• The only wellness company willing to release results of its own wellness program on its employees admits the program failed;
• Even the employers whose wellness programs have won awards as the best in the field have made only trivial improvements in employee health.

Most importantly, the complete lack of regulation has allowed the wellness industry and health plans to expose employees to significant potential harms to maximize revenue. See also: Wellness Promoters Agree: It Doesn't Work The Federal Government Green Lights “Wellness-or-Else” Programs There are no regulations, licensure requirements or oversight boards constraining the conduct of wellness vendors, and there is only one agency — the Equal Employment Opportunity Commission (EEOC) — providing any recourse for employees. The Business Roundtable has taken on the latter at every opportunity. First, the Business Roundtable threatened President Obama with withdrawing its support for the ACA unless he declawed the EEOC. Then, the Business Roundtable arranged for sham Senate hearings titled “Employer Wellness Programs: Better Health Outcomes and Lower Costs.” Finally, it threatened to push the “Preserving Employee Wellness Programs Act” to legislatively eviscerate the EEOC’s protections. But it turns out the legislation was not necessary; the EEOC has now caved in. These programs are defined as “voluntary,” yet, as of now, employees can be forced to hand over genetic and family history information or pay penalties. So, as in 1984, where “war” means “peace,” employees can now be required to voluntarily hand over this information. Let’s be clear. Genetic information isn’t about employee wellness programs, which do not work. It is all about the penalties. Genetic information is worthless in the prevention of heart disease and diabetes, as Aetna just showed in a failed experiment on its own employees. Knowing family history does have some predictive value, but it is unclear how employees are going to benefit from employers collecting it. Self-insured employers could either fire the employee or do nothing. Neither is useful for the employee. If the employer is fully insured, this information is akin to a “pre-existing condition” in the old days. The employer’s premiums will increase as long as employees with bad family histories remain on their payroll. See also: The Yuuuuge Hidden Costs of Wellness The Good News, Part 1: Corporations Wising Up The Business Roundtable — and its friends at the U.S. Chamber of Commerce — might want to connect their computers to the Internet. It turns out that many companies are finally realizing that compelling employees to submit to medical screens just to claw back some insurance money isn’t worth the morale hit. Increasingly, employers are learning that what the national data shows is also true for themselves: These programs simply do not work. For example:

• The prestigious journal Health Affairs confirmed previous analysis that fining or bribing employees to lose weight is a waste of time and money;
• The state of Connecticut (also in Health Affairs) admitted that its program has caused costs to increase;
• The Health Enhancement Research Organization (HERO), the wellness industry’s trade association, admitted wellness causes such massive cost increases that it loses money — even when HERO acknowledges fabricating data to try to show savings.

And the morale hit? A formerly obscure faculty member who led the successful employee revolt against the Penn State wellness program was just elected president of the Penn State Faculty Senate — largely because employees were so grateful for his leadership in that revolt. The Good News, Part 2: Wellness for Employees As a result, many companies are deciding that clawing back some insurance money is not worth the damage done to their workforces. They are replacing “wellness done to employees” with “wellness done for employees.” These companies are improving the work environment, upgrading their food service, encouraging fitness or simply adding features like paternal leave or financial counseling. They might still hold a “health fair” every now and then, but their medical tests are conducted infrequently (based on actual clinical guidelines) instead of allowing vendors to screen the stuffing out of employees to find diseases that do not exist. Or, companies are actually focusing efforts where they can make a difference, such as steering employees to safer hospitals or educating employees on how to purchase healthcare services wisely. (Disclosure: My own company, Quizzify, is in the business of teaching employees how to do the latter.) Notwithstanding this disruption and regardless of the harm it has caused, the $7 billion wellness industry has excelled in perpetuating its own existence. Industry thought leaders recently proposed a scheme to encourage companies to disclose how fat their employees are and have even managed to get a few large employers to sign on to it. The sheer audacity of that scheme and the complete disregard for its consequences on overweight employees means the war on “voluntary” wellness-or-else programs is by no means over. Like every other industry threatened by reality but supported by deep-pocketed allies such as the Business Roundtable, the wellness industry can rely on the government to delay the inevitable. Consequently, it might be quite some time before the inevitable course of reality overcomes the wellness-or-else pox on the healthcare system.

Last month, Uber Technologies took action to heal a rift with its drivers, but it may have inadvertently created a rift with its customers. The company announced a class action settlement with its California and Massachusetts drivers, who sued Uber for classifying them as independent contractors, rather than as employees. The settlement, if approved by a San Francisco judge, will leave the independent contractor classification intact, but it will also give Uber drivers some new rights. Among those new rights is allowing drivers to post signs in their cars soliciting tips from customers. And that’s where Uber’s ride might get a bit rocky. Uber and its ride-hailing app arrived on the scene in 2009, and the company has enjoyed spectacular growth ever since. Fueling that success has been Uber’s innovative customer experience — which isn’t just great, it’s magical. With the push of a button on a smartphone, a private car rolls up curbside ready to take you wherever you need to go.  You get in, you go, you get out. That’s it. There’s no fumbling for cash to pay the driver, no math problem at the end of the ride to calculate a tip from a fare meter. Uber just charges a flat fee for the trip to the credit card on file for the customer. It is, in a word, effortless for the passenger, both physically and mentally.  But that could change if drivers start soliciting tips. Uber’s app has no facility for adding a tip to the fare, and the company has indicated it has no intention of incorporating that capability. So, with the driver's ability to solicit tips, the cashless interaction, a hallmark of Uber’s customer experience, is replaced by one that looks and feels a lot more like a traditional taxi cab. Furthermore, a service that had been free of the emotional baggage of tipping (should I or shouldn’t I, and, if so, how much?) will suddenly become more mentally taxing. Instead of feeling liberated from the typical taxi fare ritual, Uber riders may feel "guilted" into tipping their driver (especially because Uber’s bidirectional scoring system lets drivers and passengers rate each other). In Uber’s defense, it’s possible that tip solicitation was the least of all evils at the settlement negotiating table. What’s troubling, however, is that tipping — as handled in Uber's ecosystem — undermines a key point of differentiation for the service. What was effortless suddenly becomes effortful. Down the road, that could present a problem for Uber and could perhaps be a give a lift to Lyft, Uber's primary competitor in this space (which, incidentally, offers cashless tipping via its app). See also: New Questions on Uber and Lyft To survive long-term, businesses have to adapt, be it to changing circumstances, marketplaces, regulations or environmental influences. What’s important, though, is to make sure those adaptations don’t undermine foundational elements of a company’s value proposition (in the case of Uber: rider convenience.) Southwest Airlines, for example, has long resisted charging fees for baggage, even as the rest of the industry has collected billions of dollars. Why? Because the company views the lack of fees as a central component of its passenger-friendly policies — policies that, to quote the stated brand purpose, give people the “freedom to fly.” Southwest has also avoided flying any aircraft other than the Boeing 737, viewing that operational simplicity as a critical ingredient to delivering a superior passenger experience. (Southwest’s acquisition of AirTran in 2011 was almost derailed over this point — until Southwest got Delta to take over every non-737 airplane in AirTran’s fleet.) So follow Southwest’s lead and ask yourself: What elements of my firm’s customer experience are truly sacrosanct? What are the characteristics or components that are so central to our brand experience they should never change? Put your finger on those elements now, when you’re not in the middle of a stressful business decision that might cloud your judgment. Then do your best to protect those pillars of the experience, limiting adaptations and accommodations to areas that are less likely to dilute the brand differentiation you’re trying to cultivate. See also: Will Workers' Comp Kill Uber, Lyft, Etc.? With Uber opening the door to gratuities for its drivers, we may be witnessing a “tipping” point in the evolution of the company’s customer experience (and not for the better). Avoid putting your business in a similar situation by clearly identifying – and preserving – that which sets you apart in the marketplace. This article first appeared at Watermark Consulting.

What do Steve Martin, Alice in Wonderland and Amazon founder Jeff Bezos (or any other successful entrepreneur) all have in common? They know how to “get small.” While the notion of getting small means something different to each, the ultimate meaning for all is that getting small is the key to something bigger. For Steve Martin, it is a hilarious way to describe the way to measure how much a recreational drug has impaired, or perhaps even expanded, one’s perception of the world. For Alice, it is a way to enter places she could have never gone before and thereby learn something new. For Jeff Bezos, it is about envisioning a big idea and recognizing that investors and consumers won’t accept it unless it is served up in bite-sized pieces, in the right order. Getting small is a critical, yet missing, skill set (and mindset) for the insurance industry. This wasn’t always the case. If you trace back the roots of any insurance company, you’ll find a founder who had a big vision but knew how to start small before asking anyone for money to help fund it. Perhaps it was just to help a small region of the country or a specific group of people who had a unique situation where impact could easily be measured. Dial the clock forward 100-plus years and you have companies that are so far from their entrepreneurial roots that they completely lost the ability to create and launch brand new products, services and business models. We’ll blame things like legacy systems, multistate regulations and entrenched cultures, which are real; however, we can still apply the skill set of getting small to work within those constraints. Having been through innovation journeys with a healthy number of insurance companies over six years, it is easier now to see how much this issue has impeded the ability to make progress with big ideas. Yes, there are game-changing ideas in their pipelines — ideas that disruptive start-ups would be proud of. But the lack of ability to get small stands in the way because of these three beliefs:

1. The product has to be maintained for the life of any one policy. So every possible future transaction must be accounted for because nobody wants customer complaints.
2. The product must conform to all the current rules and regulations, even if they don’t logically apply to the new idea, because nobody wants to disturb regulator relationships.
3. The product’s underwriting risk must be completely understood before launching anything because nobody wants to shut down a product on account of being wrong about its pricing.

The reality is innovation in any industry involves complaints, changing relationships and being wrong about pricing. The key is minimizing each of these so that the financial and reputational impact on the company is also small. How? By building the skills of prototyping and minimum viable product (MVP) design. Prototyping is a way to design an experience so that it feels real but isn’t. No promises are ever made, no rules broken and no risk transferred. The advantage of prototyping is the ability to accurately test consumer reactions to key features, and learning which ones are the most attractive. More important, prototypes paint the vision of the future for purposes of galvanizing a team and inspiring change for regulators who need to be on that team. Not everyone can be inspired, but if you find a few, that’s a start. The lessons from the prototype dictate the MVP, which is the smallest and lowest-risk starting point at which a product will attract. From this, you learn, adjust and ultimately scale up if appropriate. There is also an exit strategy. Choosing the right MVP is critical because it means you’ve taken the optimal amount of risk for the potential return. Zero risk is not an option because it means you’ve learned nothing, launched nothing and got no result. Steve, Alice and Jeff would never stand for that. Neither should you. This article previously appeared in National Underwriter Life and Health Magazine.

AARP's Project Catalyst recently released a study in collaboration with HITLAB, the healthcare innovation and technology lab based in New York, that shows a very high family caregiver interest in using new technologies to help care for loved ones (71%), but the actual usage today of technology by caregivers is very low (7%) due to the lack of awareness of viable options and the time challenges involved.

According to Laura Pugliese, deputy director of HITLAB and member of the research team, the study is "a call to action regarding the tremendous challenges facing our society and unpaid family caregivers, who are unsung heroes. We are helping to put together a road map for innovative companies to produce technology products and services in the caregiver marketplace to address unmet needs. We want to find out what works and what doesn't."

That is the basic goal of AARP and its partners in Project Catalyst, including the medical researchers at HITLAB. The staggering statistic in this study is that by the year 2020 there will be 117 million Americans (including the aging baby boomers) who will need assistance with daily living and healthcare issues. The problem is that, although 117 million people will be in need of a wide range of assistance, it is projected that only 45 million family members will be available to help care for their loved ones. These family members are not only unpaid, but lose $522 billion in income, according to the study ("Caregivers and Technology: What They Want and Need").

As a former caregiver for both my mother and father, who served in WWII and who were part of America's greatest generation, I can't even begin to share how stressful, time-consuming and emotionally draining the process is and the profound impact it played in both my personal and professional life.

As a caregiver over the span of several years, I became involved in finances, banking, wills, estates, taxes, power of attorney, selling a home, healthcare directives, Social Security, Medicare, Medicaid, senior housing, assisted living, nursing homes, DNR orders (Do Not Resuscitate), doctor appointments, surgery, emergency room visits, hospital stays and end-of-life decisions, in addition to just being a son and a brother. I wouldn't have it any other way, of course.

The only technology available to me was my cellphone and answering machine, but AARP Project Catalyst has identified nine frontiers for innovative technology companies to address:

• Medication Management
• Vital Signs Monitoring
• Diet and Nutrition
• Aging With Vitality
• Healthcare Navigation
• Social Engagement
• Physical Fitness
• Emergency Detection and Response
• Behavioral and Emotional Health

These nine frontiers certainly identify the key areas of concern of a caregiver. However, as I thought about all the time and effort involved from my own personal experience, what is lacking is overall caregiver support. I was often asked, How is your mom? How is your dad? Nobody ever asked how I was doing.

Nothing can prepare you for this caregiver role. In the middle of intense professional obligations as a vice president with responsibilities to major clients, I had to sell a house, find good doctors, get power of attorney, prepare financial statements, pay bills and find cleaning services while seeing that my parents were getting the best healthcare available at the right time and place and taking all the right medications.

Being a caregiver is at minimum like having a part-time job, unpaid. The AARP/HITLAB study found that on average a caregiver spends 20 hours a week on a wide variety of tasks. From my experience, that is about right on a good week.

I can envision existing and future technologies having the ability to better monitor medication regiments. My father, who suffered from congestive heart failure, a blocked carotid artery, diabetes, arthritis, sleep apnea and other ailments, was given so many medications that I had to work with the hospital pharmacy department to develop a check list of what medications he should be or not be taking, what for, why and how often. I developed a handmade chart on his refrigerator door and put numbers on his prescription drug bottles. My handwritten instructions were take # 1, 2, 6, 8, 10 and 12 in the morning, another set in the afternoon and another set at night. It worked, but I had to do this myself by hand with help of a pharmacist.

Initially, the doctors wanted to amputate my father's legs due to poor circulation from congestive heart failure, but by getting a second opinion we learned that his cardiologist was prescribing the wrong medications. I got him a new cardiologist and the right medications. A dad whose sons didn't have our healthcare background and connections would have needlessly lost his legs and his quality of life.

Although there are technologies in use today, the actual usage based on this real world study is only 7%. The ability to monitor vital signs, especially for people with sleep apnea, congestive heart failure and other chronic conditions along with glucose levels for a diabetic can bring both peace of mind to a caregiver and potential lifesaving capabilities for the patient.

This study should be a call to action, and I'm sure there are many potential technologies in the pipeline or on the drawing board. I am also glad that people like AARP and HITLAB and the sponsors of Project Catalyst, including Pfizer, UnitedHealthcare, Medstar Health and the Robert Wood Johnson Foundation, are working on this road map.

Project Catalyst is actually reaching out to caregivers themselves to determine what their needs are and what works and what doesn't. HITLAB medical researchers literally went to people's homes to interview them to determine their daily needs and their use of technologies as a caregiver. I believe a very comprehensive list of potential technologies should be developed and tested. I see that healthcare technologies and apps are being developed and tested now to address health monitoring such as vital signs and glucose levels. My fear is that this potential use of technologies will be fragmented and require multiple companies, each addressing one of the nine identified frontiers, and may be cumbersome or expensive.

A major issue will also be the ability of medical providers to monitor these vital health signs and other health issues in real time. In addition, will the health insurance industry, including Medicare and Medicaid, be in position to pay primary healthcare providers for this monitoring?

I would also like to see innovative companies provide a comprehensive list of capabilities to help with all the non-direct healthcare needs of a caregiver, such as selling a home, power of attorney, healthcare directives and finding professional caregivers such as visiting nurses, assisted living and nursing homes.

Stan Kachnowski, chairman at HITLAB, stated; "Our goal is to help bring the best technologies to the caregiver marketplace in order to make a positive impact where the patient (and their caregiver) comes first and profits last."

AARP and HITLAB plan to continue their research and will conduct a series of pilot programs to test new technologies.

This is something that will eventually affect almost everyone either as a patient, caregiver or both. When doctors say there is no known cure for congestive heart failure, diabetes or Alzheimer's or other chronic conditions, they mean it.

In today’s insurance environment, victory belongs to the bold. Margins are under pressure, and competition is heating up; insurers can no longer afford to sit on businesses that are under-performing or sub-scale. By taking a portfolio approach to their businesses, insurers can start to assess the value and performance of their assets to make bold decisions on whether to grow or go (build or leave the business). Time for bold decisions Facing continued low interest rates, growing rate pressures in the property and casualty (P&C) sector and high levels of competition in both the P&C and life sectors, insurers will see margins under pressure for the near future. Not surprisingly, most have already undertaken massive cost-reduction initiatives. Now, with little room left to cut, some are starting to take a more critical and strategic view of their business as a whole. Our experience suggests that insurers need to take bold action and make difficult decisions now if they hope to create shareholder value and grow their business. The reality is that too many insurers are carrying businesses that are sub-scale, underperforming or simply distracting for management. See Also: What is Your 2016 Playbook for Growth? To help organizations assess their businesses and local operations, we have developed a diagnostic tool that segments businesses in the following way: Taking a portfolio view We firmly believe that there are significant opportunities to help insurers enhance shareholder value by taking a portfolio view of their assets. And, in doing so, insurance organizations should be able to make clear decisions about whether to go (i.e., leave those markets and businesses that do not meet the strategic objectives of the organization) or grow (i.e., committing to targeted investment to drive transformational change and improvement initiatives that will allow the business to compete effectively). Indeed, by looking at non-core businesses as a portfolio of assets, insurance executives should be able to properly assess each businesses’ strategic fit, performance and synergies, which, in turn, will enable them to identify opportunities to improve the business through portfolio realignment. Taking a portfolio view will also provide insurance executives with the insight needed to prepare a fix, close or sell strategy that drives a clear approach for non-core assets and then move through to a robust execution plan with appropriate governance. GO: A bespoke approach to divestment In those cases where the assessment process leads to the decision to go, insurance executives will need to develop a smart divestment strategy for the business. Interestingly, our experience suggests that the divestment process has evolved considerably over the past decade. Whereas in the past, the normal approach to selling a business involved rigid auction processes based on standard checklists and documents such as information memoranda and vendor due diligence reports, most now recognize that this approach may not maximize value. Instead, insurers are now taking a more bespoke and focused approach to divestment that is largely influenced by four key factors: — economic conditions — sellers taking control — wider buyer populations — business model changes GROW: More than just scale Insurers need to have sufficient optionality and diversification to respond to a rapidly changing business environment. And while not all divisions and local operations need to be market-leading, they do need to demonstrate how they can make a contribution to the overall strategic ambitions of the organization. For some, the answer will come in the form of inorganic growth within their sub-scale businesses. For others, targeted investments to support product growth initiatives or new distribution arrangements offer a lower-risk solution. However, while many deals have been driven recently by organizations with a (fully understandable) strong focus on costs and efficiency, we often find that scale, in itself, is not a good enough reason to support a deal. Indeed, we believe that acquisitions must also bring complementary capabilities (such as new expertise in specific product lines, increased geographical reach or new distribution models) to create a sustainable platform for future growth. GROW: Responding to a changing environment New technologies, changing customer demands, new ways of doing business and the threat of innovators disrupting the traditional business model are all changing the way that insurers view their portfolio of assets and businesses. See Also: The Formula for Getting Growth Results Clearly, understanding and capturing the benefits of innovation is a critical imperative, and there are major opportunities available for companies willing to invest in new technologies. Recognizing this, many insurers are now starting to develop new models and ways of working with the financial technology (FinTech) community. Key takeaway: Be bold Regardless of whether the decision is to grow or go, insurers need to start facing up to the difficult decisions that must be made about their underperforming assets. Interestingly, our experience suggests that — in this rapidly evolving space — outright acquisition may not always be the right answer. As our recent report, The Power of Alliances, demonstrates, many insurers are now exploring the value that could be generated by investing in partnerships, alliances and innovation hubs to broaden their exposure to innovations and technology solutions. Simply put, insurers can no longer afford to sit on businesses that are not delivering value; they must make bold decisions and then execute on them to win in this environment. Reprinted from (Regulatory Challenges Facing the Insurance Industry in 2016,) Copyright: 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of a particular situation. For additional news and information, please access KPMG's global website.

Insurers and intermediaries know that innovation has the potential to disrupt their current business and operating models. And they know that they need to innovate faster than their competitors to defend and grow their business. Yet few have found a winning formula for embedding innovation into their people, products or processes. Feeling the disruption The fact that new technologies, innovations and business models are changing the dynamics of the insurance market is clear. More than eight in 10 insurance executives responding to our recent survey, Innovation in Insurance, said that they believe their organization’s future success to be tied closely to their ability to innovate ahead of their competitors. But with new entrants, new technologies and new business models emerging at an increasingly rapid pace, many insurers are also concerned that innovation will bring more disruption than value. Many are already feeling the heat. In fact, almost half of our survey respondents said that their business models were already being disrupted by new, more nimble competitors. For some, the risk of disruption and the opportunity for competitive advantage is driving a renewed focus on innovation. In a recent interview with John Geyer, senior vice president of MetLife’s innovation program, for the report, A New World of Opportunity: The innovation imperative, he said: “If somebody’s going to disrupt our industry, it might as well be us.” Indeed, new technologies are reducing losses and costs while saving lives and increasing customer satisfaction, reducing risks and driving new business models and consolidation within the industry. New advances such as driverless cars, machine learning, home sensors and "robo-agents" empowered with artificial intelligence and mobile payments offer a world of opportunity for insurers. The capacity and capability to innovate While many insurers recognize the vast possibilities that innovation brings, many seem reluctant to be first out of the gate. This is not entirely surprising; most organizations responding to our survey reported that they lack the hallmarks of an innovative organization, such as dedicated budgets, formal strategies, executive-level support and measurement processes. Even those that want to take first- mover advantage (as almost a third of our respondents’ claim they wanted) face significant challenges catalyzing innovation. In part, this comes down to capacity: 79% of respondents across the globe told us that they were already running at full tilt just keeping up with their core requirements. Capability is also a key concern. Lack of skills and capability was ranked by 74% of respondents as a top three barrier to innovation, particularly for smaller and mid-sized organizations and those based in Europe. Simply put, insurers know what they need to do to drive innovation but recognize they lack certain skills to achieve it. To be fair, most insurers have certainly been working hard to improve their innovation strategy and capabilities. Many have already implemented cultural change programs focused on fostering innovation and training programs to develop idea generation and innovation skills. Others have put their sights on widening their innovation ecosystem by engaging in partnerships with academics, FinTechs and other third parties to drive innovation. Some have even changed their business models or created innovation "hubs" or "labs." Lessons from leaders Our experience suggests that while all of these previous initiatives are valuable, few organizations have been bold enough in their objectives or their execution to truly drive change. Based on our research, our interviews and our experience, we have identified six key ways that leading insurers are becoming more innovative.

1. They are focusing on creating a customer-centric culture. While more than half of respondents say they have conducted a cultural change program in the past five years, our experience suggests that they may have focused their efforts in the wrong area. Rather than trying to become more innovative, insurers may instead want to become more customer-centric, which, in turn, will drive innovation.
2. They are willing to disrupt their existing business models. Doing more of the same, only faster, is not a recipe for long-term growth. Leading insurance players recognize the need to innovate not only product and service development, but also how they approach innovation itself. Insurers and intermediaries need to be willing to try new models and partner with new stakeholders to truly compete in an innovation-led competitive marketplace.

3. They apply agile and dedicated leadership. Innovation requires leadership, strong executive support and clear vision. There’s no secret engine behind a door that creates innovative energy for an organization. It’s not about having the best game plan; it’s about having a coach who knows which players to put in the field to execute on the game plan. That’s how goals are scored.
4. They mitigate risk by investing and experimenting. The best companies have discovered ways to link their investments to the expected frequency and severity of risks to ensure they are appropriately matching investment to risk. They have started to experiment with new business models. Looking at the viability of their current business model and the role of technology in their competitive strategy, they are also exploring new business models and businesses as the profile of risk changes.
5. They understand why they are investing. While most organizations report that they measure their return on their innovation investments in some way or another, the leading insurers are working to ensure that they have the right alignment with business objectives and are broadening their metrics beyond simple financial ROI calculations to include more subjective measures such as public reputation or customer engagement.
6. They learn from others. We believe partnerships will be key to future success, but we need the right structures, models and infrastructure to create value. Large organizations need to learn to partner, and all organizations need to learn to partner effectively. Consider alliances with partners outside of insurance to accelerate customer benefits and expand the value chain.

The road ahead Our research and discussions with established and start-up players suggest that — to make the most of this new world of opportunity — the insurance industry needs to pivot from a traditionally risk-averse culture to one that encourages experimentation while mitigating financial risk. To achieve this, insurers will need to tap into new sources of innovation, accessing fresh ideas from employees, customers, investors and partners, which, in turn, will require progressive leadership at the top of the organization. The innovation imperative is clear for insurers. Now it’s time to make the most of the world of opportunities that exists for those bold and innovative enough to seize these opportunities to create competitive advantage. Reprinted from (Regulatory Challenges Facing the Insurance Industry in 2016,) Copyright: 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of a particular situation. For additional news and information, please access KPMG's global web site.