Because of the economic crash in 2007, many people were left scrambling for work, any work. Those who were determined, but still came up short, looked inward to their skill sets and assets to find relief. The answer quickly became obvious; what is now referred to as the flexible workforce or sharing economy, is made up entirely of freelancers and independent contractors. This new group of freelance workers now makes up more than 35% of U.S. workers and earned more than $1 trillion last year. This information is found in a recent survey, "Freelancing in America: 2016,” which was published by Upwork, one of America’s largest freelance workplace platforms. The Gig Economy: A Brief Introduction The gig economy is a term that describes a portion of the U.S. economy that is made up of freelancers. It is often used, interchangeably, with "sharing economy," "collaborative consumption" or "access economy." This growing army of gig workers has become an integral part of the workforce, available on an on-demand basis. This has allowed innovative businesses to pivot and remain nimble. Indeed, in an era where consumers are increasingly more interested in access over ownership, flexible workforces have become powerful tools for businesses. Although many believe this segment of the workforce may be a fad that will soon to be diminished when unemployment numbers eventually plummet, a closer look at available data indicates otherwise. Reportedly, the gig economy has grown every year over the past five, and there are solid indications that this trend will continue. See also: 9 Impressive Facts on Sharing Economy   What the Feds Report Well, they haven't quite caught up yet - although they're getting there. The labor experts in D.C. minimize the gig economy by referring to gig workers as "contingent workers" (any position not expected to last longer than one year). The feds report that that this segment makes up about 4% of the total workforce. Looking more closely, however, one can easily determine that the most recent survey numbers used by the Bureau of Labor Statistics refers to data accumulated more than 10 years ago. I don't feel like we need to delve into why that's an issue, correct? How the Gig Economy Is Growing The gig economy continues to increase as traditional companies look for solutions to workforce issues. Although “outsource” is a term that consumers and traditional employees detest, no one has a problem with a temp in the workplace. But when you use the word “outsource” (which is what a temp employee is), many Americans think of good American jobs being sent overseas where workers will work for pennies on the dollar. The gig economy is growing because entrepreneurial gig workers now have the means to share with others how they can become freelancers and realize their dreams of being self-employed. Platforms such as Upwork, Airbnb, Uber, TaskRabbit, WeGoLook and many others seamlessly connect this new freelancer class with those who have paid work available. This entire process is all facilitated by innovative mobile technology and apps. What's not to love about that? It’s certainly not for everyone, but for those who even feel a mild burn of the entrepreneurial spirit, they can use their skills or assets to become part of the gig economy. Why The Gig Economy Is Growing The gig economy (flexible workforce) continues to grow because America needs it to grow. Companies can access skilled on-demand workers for one-off or continuing tasks. Thanks to on-demand worker platform, businesses can now access expert freelancers to perform critical functions that are temporarily needed. According to Jobshop, nearly one-third of B2B companies plan to hire gig workers over the next five years. Further, a report by Fieldglass indicates that 95% of B2B companies not only understand, but recognize, the need to incorporate the gig economy into their business models. The American workers are changing. Many regard employment as a job totally unrelated to what their life goals may be. Goals that were formed in their minds at a young age and continue to burn deep in their hearts. Even highly skilled workers earning terrific incomes imagine what it would be like to do what they love to do rather than what they have to do. Although born out of necessity, gig work has become a compromise for millions of hard-working Americans. Freelancing allows them to choose to do what they love and what they are best at. It provides the flexibility to work the hours of their choice, spend more time with family and become highly skilled experts in a field they love. Embracing the Flexible Workforce The insurance industry can embrace this growing flexible workforce made up of skilled freelancers in a number of ways. For starters, insurance carriers can use skilled gig workers to create efficiencies across many channels in their organization. Although major insurers have embraced technology, they continue to fumble the ball streamlining their processes and supply chain. Similar to the federal government, large insurers have many layers of bureaucracy that at times put the breaks on workflow, innovation and even communication. The result typically frustrates the consumers they have committed to serve. In the digital age where consumers crave access, convenience and timely services, cumbersome policies and bureaucracies will fade. Quickly! Areas that need rethinking and refocus are those where consumer interaction is critical. Communication There are many critical areas of communication that need not be assigned to full-time workers. These tasks are generally performed on-demand and for specific reasons and following certain events. Using a skilled freelancer who can be available on an as-needed basis for a short period makes more sense than using a highly paid (when you consider compensation plus benefits) full-time employee. See also: Benefits: One Size No Longer Fits All   Claims Streamlining the claims process is a priority for every insurer because it's not only a profit-earning department, it has many functions considered menial to an experienced licensed adjuster. Tasks such as consumer visits, picture taking, damage verification and more could easily be assigned to a local gig worker. Why maintain a network of thousands of field employees nationwide when you can access hundreds of thousands of on-the-ground gig workers when you need them? Although claims activity can be forecast to a certain degree, many insurers are caught off guard with the arrival of events such as a natural disaster. This often leaves carriers scrambling to recruit independent contractors, who sometimes are unwilling to perform many of the tasks that a freelancer can provide. Marketing Because marketing is about communicating with various market segments, it makes sense to contract with gig workers who specialize in that particular demographic. For example, millennials communicate differently than Generation Xers, who talk differently than Baby Boomers. Although each category can have similar insurance product needs, they prefer to learn about it, and make the purchase, in different manners. Whether you are an agency or an insurer, outsourcing your marketing needs to a gig workers can make more sense than loading your payroll with different personality types so that you can accommodate the preferences of the various market segments. Or, many companies are electing to leverage gig workers to augment their current full-time staff. Gig work isn't a full-time or part-time discussion - they can be complimentary. Whether you designate this growing on-demand labor force as the flexible workforce, gig economy, freelancers or outsourcing, there is no doubt that this workforce can provide skilled on-demand workers to the insurance industry. These are workers who are doing what they know best and are passionate about. Principals in the insurance industry should look to this flexible workforce to streamline processes that affect consumer satisfaction and save payroll dollars in the process. As the gig economy continues to grow as a viable employment alternative for many, traditional insurers can get ahead of the curve by leveraging them and embracing flexibility.

The insurance sector is one of the most old-fashioned and resistant to change, and this is why AI will have a greater impact on that with respect to more receptive industries. The collection of data of new types (i.e., unstructured data such as reports, images, contracts, etc.) and the use of new algorithms are disrupting the sector in several ways. Traditionally, an insurance company followed this type of process:

• Identifying pool of customers whom might be risk-assessed;
• Targeting those customers and assessing the risk for each class;
• Selling differently priced policies spreading the risks over the pool of customers;
• Try to retain those customers as long as possible offering lower price for longer contracts.

This is a really simplistic representation of the insurance business in the last fifty years, and I am aware that insurance experts might disagree with me in many different ways. There are a couple of further features to be pointed out: first of all, insurance has historically been sold not bought, which means that brokers and agents were essential to tracking new customers and to even retain old ones. In addition, it is an industry which is by definition rich of data because they collected anything they could, but is also one of the less advanced because either many of those data are unstructured or semi-structured, or the model used are quite old and simple. Most of those data were easy to obtain because they were required to correctly price the coverage, while additional complimentary data were provided only by good customers who had incentives in providing as much data as possible to get a cheaper policy. Of course, this works the other way for bad customers, and this is a perspective on the phenomenon of “adverse selection” (i.e., bad customers are going to ask an insurance because they feel they will need it). The adverse selection issue is though only one of the intrinsic challenges of the sector: strong regulation, high level of fraud attempts, and complexity are other features any incumbents should take care of. It is interesting to notice though that some of those are also specific barriers to entry for startups: they might attract indeed people who normally can get affordable insurance with a bigger competitor (adverse selection) and they usually have the capabilities for breaking down the risk complexity but not to support the funding need for risk coverages (so they need to work with incumbents rather than trying to replace them). In spite of those problems, in the last decade, we noticed a new trend emerging. Insurances, in the effort of trying to reduce moral hazard problems, they started offering premium discounts to their final customers in order to get extra information. This occurred either through a questionnaire (asking directly the customer for further data in exchange for a lower price) or indirectly through devices (healthy devices, black boxes, etc.). The real issue though has been the engagement side of this proposal, because of the opposite nature of information, rewards, and human nature. The rewards offered were indeed either temporary or provided only once and people got lazy very quickly, while the information stream needed to be constant. The following step has been the introduction of apps to let customers monitor by themselves their own data and behavior, sometimes even given away for free the device itself. Leaving the customer with full power on his data had though an inverse effect, because people did not have the motivation in tracking down their improvements, and they got upset at the same time because they felt they were not getting the most out of that opportunity. Regardless of the specific innovative way in which insurers engaged customers, the process used in the insurance business did not change much in the past century. Expert systems and knowledge engineering dominated the sector setting the rules to be followed in internal workflows, but this is slowly changing with intelligent automation systems. We are actually migrating from rule-based decision systems to statistical learning and eventually machine learning. [caption id="attachment_23603" align="alignnone" width="570"] Image Credit: http://www.creativityatwork.com/2014/06/10/busy-innovate/[/caption]  II. So how can AI help the insurance industry? AI is helping (or disrupting, depending on how you see the matter) the sector in different ways. First of all, it can help increasing the customer engagement and retention problem which has been just mentioned. The abundance of data can be used indeed to refine the customers’ segmentation and provide personalized offers based on personal features. It also helps in reducing the costs through smart automatization or RPA (robotic process automation). Second, AI is making people more aware of the risks as well as habits, and it is driving them toward better behaviors. Furthermore, the better pricing and risk assessment that AI is introducing analyzing more granular data will make some people uninsurable (i.e., too risky to be fairly priced and covered) as well as to turn back some previously uninsurable people into insurable customers again. The governments or central regulatory agencies should then start thinking about a “pricing/risk threshold” in which they intervene subsidizing the cost of relevant insurances (e.g., basic health coverage) in order to “guarantee the uninsurables”. Finally, it might be useful to think in terms of what an insurable risk is in order to see how AI can help with that. According to Jin Park (Assistant Professor at IWU), an insurable risk is identifiable through the following five conditions:

• Large number of similar exposure units (mutuality);
• Accidental and unintentional loss (not predictable and independent from the insured customers);
• Determinable and measurable loss;
• Calculable chance of (not catastrophic/systemic) loss;
• Economically feasible premium.

AI is going to affect all those features: with a better and more detailed customer profiling, we won’t need indeed to have such a large base of insured units. It will turn some frequent events into accidental (e.g., affecting drivers’ behavior it will reduce the basic accidents into rare events) and it will improve our ability to forecast and compute both the probability and magnitude potential losses even in those cases too hard to be managed before. All the previous improvements will make many more premium under budgets, and therefore the conclusion is that AI will “lower” the threshold of what we consider nowadays an insurable risk, and it will make then more risks insurable. [caption id="attachment_23604" align="alignnone" width="570"] Image Credit: iStock[/caption] III. Who are the sector innovators? There are plenty of startups out there working at the intersection of AI and insurance, and it essential to look at least at some of them to understand the future direction of the industry, as well as the kind of improvements AI is having in the insurtech space. An interesting thing to notice is that most of the innovation is happening in the UK rather than other countries, in all the segments proposed below. Claim processing: Shift Technology skims the valid claims from the ones that deserve further validations; Tractable instead is trying to automatize experts task for insurances; ControlExpert has a specific focus on car claims; Cognotekt optimizes internal business processes, as well as Snapsheet does; Motionscloud offers instead mobile claim management solutions; and finally RightIndem aims to help insurers to deliver on-premise smoothing the claiming flow. Virtual Agents & Chatbots: Spixii is an automated insurance agent who helps you buying any insurance coverage you might want; Cognicor is a virtual assistant that offers customer care services; Conversica identifies which leads intend to purchase, while Your.MD is a personal health assistant that analyzes symptoms and produces pieces of advice. MedWhat instead uses EMR (medical records) to assist the patient as it was a virtual doctor, and Babylon gives medical advice taking care of tight budget constraints. Insurify is another personal insurance agent who works as a comparator for car insurances. What today is called simply chatbot is going to be renamed in a few years robo-insurer. There are already few examples of companies toward that goal: Risk Genius is indeed an intelligent comparator which identifies gaps in coverage for the customer and PolicyGenius looks for the best solution that fits customer’s needs and characteristics, while Drive Spotterimplements real-time video analytics to keep drivers safe(r). More generally, robo-insurers will be a quite wide class of agents who will end up providing different services, all of them with the final goal of helping the clients to undertake risk-mitigating actions and only cover the real (residual) risks. Customers engagement: Oscar is probably the most successful insurtech company out there, with the final goal of making insurance simple and accessible to everyone through a great UX. Similar to Oscar is somehow Stride Health, while Brolly is a tool that helps customers in understanding their own needs and facilitates in one place all the insurance coverages in place, in a similar fashion to Knip. Adtelligence instead creates personalized offers and relevant products based on customer’s characteristics. Captricityuses machine learning to convert handwritten files into structured data, and this can be used to better understand the final customer. Finally, ValChoiceranks the service of insurers to the benefit of the client. Telematics: connected cars and telematics is a pretty big area itself (see CBinsights article to know more about it), but it would be worthy to point out the work that Greenroad, Vnomics, and Telogis are doing in capturing driving behaviors and habits as well as computing fuel efficiency. Cambridge Mobile Telematics works similarly, although it uses smartphone data and mobile devices habits. Navdy is trying to revolutionizing the UI/UX within vehicles, displaying information in such a way that the driver does not get distracted. Lytx uses vision technology to provide real-time feedbacks to the driver. Underwriting: AI can be (and actually is) used to spot out hidden correlations to granularly segment customers and risks in a more efficient way. Even though it might in theory possible to identify some algos that could perform better than others (see the work Wipro did for fraud detection), data always come first, at least for the next close future. Many companies operate in the space, as for instance Carpe Data that provides predictive algorithms and data products for property and casualty and life insurances through the analysis of public data (e.g., social media data). Atidot created a machine learning risk management platform, while Tyche uses unstructured data to optimize the underwriting and claims process. Big Cloud Analytics collects data from wearables and formulates health scores for a better risk assessment, while Cape Analytics uses computer vision techniques on geospatial data to improve the level of detail on current houses conditions. Dreamquark creates a more accurate representation of the medical datasets to be used for underwriting purposes by insurances, similarly to FitSense that offers also apps products. Melody Health Insurance provides also low-cost insurances, while Uvamo uses AI to assess the risk of policy applications. A more accurate underwriting can even translate into covering events that are today quite risky (e.g., as MeteoProtect and Praedicat, and are doing for weather risk management). Finally, on a side, it is worthy to point out to pure technological enablers as Instanda, which offers a management tool to the insurance providers to manage effectively and timely new products launched; Insly, a cloud-based platform for insurance brokers; and finally, SimpleInsurance is instead an e-commerce provider for product insurances. P2P insurance: Lemonade, Friendsurance, and Guevara are peer-to-peer insurance startups focusing respectively on property and casualty insurance the first two, and car insurance the latter one. Insurchain & Smart Contracts: these are companies in the insurance sector that are driven by blockchain technology. Elliptic offers real-time AML for bitcoin specifically, while Everledger is a permanent immutable ledger for diamond certification. Luther Systems is instead a stealth-mode company working on the standardization of smart contracts. Dynamis provides a P2P supplementary unemployment insurance product, while Saldo.mx provides micro-insurance policies on the blockchain. SafeShare covers multiple parties with insurance cover at short notice and for varying periods, and finally, Teambrella is another P2P insurance platform run on the blockchain. Insurance on-demand: this class of startups put in customers’ hand the entire insurance buying process. Trov is probably the best example of this new class of players and it allows to ensure things by simply taking a picture of them. Cuvva is quite similar but with a focus on car insurance, Sure and Airsurety on travel policies, and Back me up is another example of on-demand insurance. But this class does not include only the proper on-demand business model, but also insurance startups which provide products that vary by location, time, use, or customer. In other words, pay-per-mile business model (Metromile), micro-insurance policies (Neosurance), or eventually Insurance-as-a-service models (Digital Risks).

See also: 2017 Priorities for Innovation, Automation  

IV. Concluding Thoughts

Yan identifies four elements which constitute the insurance profit structure: premium earned and the investment income from one hand, and underwriting cost and claim expenses from the other. AI is and will be able to improve the cost structure, increasing at the same time the competitiveness and enlarging the customer base accessible to insurers, while optimizing internal processes and enhancing the transparency and robustness of the compliance flow.

The greatest challenge I still see in insurance is the cultural mindset which might prevent insurance to adopt early AI solutions, although this won’t probably have a long life given the incredible pressure to innovate the insurance providers are undergoing through. This article was originally published on Medium.com.

The Simon Sinek video on managing millennials has gone viral. How do I know? I’ve received tons of emails from clients, trainers and members of my online community asking for a response. As a millennial who studies millennials for a living— I found Simon’s video disturbing. I started an international training and consulting company to help leaders understand and engage my generation. I’ve sat through one too many conferences featuring Xers or Boomers talking about millennials—as if we were on display at the local zoo. I've developed hundreds of tools like this free social media policy template to help leaders better relate to millennials. At age 43, Simon Sinek’s recent rant elevates him as another non-millennial guiding his peers on what millennials want. When men talk over or on behalf of women, it’s dubbed “mansplaining.” So what is it called when someone—other than a millennial—feels the need to explain who millennials are—Boomersplaining? What Sinek says isn’t all wrong—but it is in no way complete. His vantage point gives him an incomplete picture of who we are and yet again places a stereotype on this young generation. See also: Why Millennials Are the Best Workers   Here’s why Simon Sinek is flat wrong on Millennials: 1. Millennials don’t have low self-esteem. We were handed trophies for absolutely no reason—by well meaning parents and coaches sensitive to our feelings. Understanding how we were raised is the #1 strategy to marketing, recruiting or retaining Millennials. However, the accolade culture of the 90s and 00’s has actually had an opposite affect on my generation than what Mr. Sinek argues. Millennials have extremely high levels of confidence according to Pew Research. Millennials are ambitious—in our travel plans, relationships and careers. Sometimes too ambitious. It is this over-confidence that is misinterpreted as entitlement. From asking for a raise to expecting access to the C Suite—Millennials exude a solid confidence in who we are and what we can contribute. The challenge comes in how leaders can capture this confidence and use it for good. 2. Millennials aren’t the only ones addicted to social media. Try separating a college student from her smartphone and you will quickly learn just how addicted Millennials are to technology. It’s not just Millennials who treat their devices like phantom limbs. Nearly 80 percent of Millennials admit to look at their smartphones first thing in the morning. Smartphone usage isn’t much different for Xers or Baby Boomers. However, Millennials are the first generation that uses social media to see the world—and simultaneously letting the world see them. We are using technology to innovate, to dream, to collaborate and challenge ourselves to become our best selves. The answer lies in each of us becoming self-aware to use our devices responsibly and respectfully. Technological etiquette (what I call “textiquette”) is just as necessary in the classroom as the corner office. Most companies have outdated or non-existent social media policies-- even though studies show it is signficant in retaining Millennials. I have developed a template for leaders to use-- 100% free. Download your free social media policy template here. 3. Millennials don’t expect instant gratification. Sinek points out nearly everything worth having— job satisfaction, meaningful relationships and purpose— takes patience. However, I have discovered this truth interviewing hundreds of Millennials: if you want to appease Millennials keep things moving. If you want to retain Millennials make them a part of the movement. It’s not just a need for speed that distracts Millennials; it’s an addiction to involvement. Millennials have a fear of missing out, better known as FOMO. Leaders can capitalize on Millennial FOMO and motivate my generation with short term and long term goals we help create. According to Sinek, the future is bleak for my generation: “The best case scenario is that you’ll have an entire population growing up never finding joy…. Just waft through life… fine.” Simon Sinek throws a fair punch that feels more like a low blow. He paints my generation as reactionary and out of control. He patronizes our passion and need for meaning. Sinek sees a shade of us, but he doesn’t truly know us. And I don’t blame him. Simon is a brilliant thinker and skilled writer. But he cannot advocate for a generation that has been talked over, lumped together and mislabeled our entire lives. No, Simon. Millennials are not the victims. We were dealt a bad hand. But we aren’t blaming our parents. They sacrificed their health and happiness to give us a better chance. We’re not satisfied with our careers and we resent the lie that degrees guarantees employment. But we’ve also learned that whining isn’t attractive. The recession was the best thing that happened to us. We learned about ourselves while traveling the world, starting from scratch and paying off loans. We discovered simple but powerful truths: we could do it on our own but we don’t have to and the life we create is ours to enjoy. See also: No, Millennials Do Not Rule the World   The future is ours—and we will build a better America because we’ll do it together. We are confident because we will change the world, even if we don’t know our next move. We don’t need bubble wrap, beanbags or free beer. We aren’t defined by safe spaces. And although we appreciate the perspective, we’ll stick to representing ourselves and smashing the boxes you keep putting us in.

I don’t like bridges – particularly, those high bridges with long expanses. Crossing a bridge makes my stomach do flip flops, I hear the blood rushing in my ears, and, from time to time, I see little dots dancing before my eyes. I suspect that many an insurance executive gets the same set of symptoms when they think about all that must be accomplished to transform their organization into a Next-Gen Insurer. Fortunately, (and ironically) for insurance executives, there is an antidote (seven, in fact) for the symptoms mentioned … seven bridges to be specific. See also: 5 Cs of Transformation in Insurance   During 2016, SMA introduced the Seven Bridges, which illustrate initiatives that provide defined pathways upon which insurers can build transformation strategies to set themselves on a course to becoming a Next-Gen Insurer. SMA’s Seven Bridges are:

• Institutionalize innovation
• Keep a pulse on emerging trends and technology
• Operationalize customer-centric strategies
• Go digital
• Modernize core platforms
• Build a flexible organization and workforce
• Major in data and analytics

The burning question is – Where do insurers stand in their bridge-building efforts? The 2017 SMA IT Spending and Priorities Survey results reveal a number of interesting insights. Arguably, the most important insight revealed by the survey data is that it takes effort across all seven of the bridges to transform an insurer. Along each one of the bridges, there is a significant activity variance between insurers that are transforming/growing versus those that indicate they are in surviving/sustaining mode. For example: 47% of insurers in the surviving/sustaining mode believe that customer initiatives are secondary in importance versus only 23% of transforming insurers. And 71% of survey respondents in the transforming category indicate that customer-centric strategies are either critical, or they have already built those capabilities. Another area where important insights came to light is the difference in execution activity for insurers under $1 billion in premium versus those over $1 billion in premium. The big reveal is that while there is more active execution around the seven bridges in organizations over $1 billion in premium, insurers under $1 billion are working on the seven bridges – but at different execution levels than larger insurers. The transformation message is being institutionalized by all insurers regardless of size! An important point of analysis is around priorities. Not all bridges have the same meaning for every insurer. There are numerous variables that go into how the bridges should be built – industry segment, product mix, distribution channels, to name a few. However, when a priority analysis was done, “major in data and analytics” was at the very top, with 95% of survey respondents indicating some level of positive activity. The interesting nuance is that L&A insurers prioritize customer-centric initiatives slightly higher than data and analytics initiatives, which is good for L&A customers! See also: When Workplace Safety Is Core…   For me – I love these seven bridges! I don’t have to drive across them, and successful execution means significantly improved sales and service outcomes for distributors and customers and a rewarding work environment for employees. And best of all – no stomach flip flops, blood rushing in my ears, or spots dancing before my eyes. For more survey results and insights, see our recent research Insurance in Transformation: Building 7 Bridges to the Future.

Medicare Set-Asides (MSAs) continue to frustrate parties resolving workers’ compensation (WC) claims. For many, the MSA is the last major hurdle to a closed file. Sometimes, the hurdle involves an MSA report from a non-legal third-party vendor that does not seem to make sense based on the facts of the case. Other times, it is the federal government’s response to a request from the settling parties that it review an MSA report which causes the frustration. The fact that the WC claim in question may be a denied WC claim only serves to intensify that frustration. The purpose of this article is to separate fact from fiction when it comes to MSAs in denied WC claims. In short, MSAs are not needed when an employer/insurance carrier (E/C) has not accepted and does not accept responsibility for a claimant’s future medical expenses as a part of resolving the claim. Asking the Centers for Medicare & Medicaid Services (CMS) to review and approve your $0 MSA though is problematic as we all know. 2017 is the right time to find an alternate risk transfer solution that creates efficiencies in your claims handling process. After reading this article, your goal should be to review your current process and think about the time and money being spent on denied WC claims. Instead of the problems associated with CMS reviewing $0 MSA proposals, you could instead close the file faster by relying on a legal opinion from a lawyer experienced in MSA issues. All parties in the WC system would capitalize on a more streamlined system if they believe this one basic fact: FACT: Medicare’s recovery rights under the Medicare Secondary Payer (MSP) Act are not automatic. The MSP Act does not grant Medicare unlimited recovery rights. It does not even grant Medicare automatic recovery rights. Instead, two things must happen for Medicare’s recovery rights to ripen: 1) a primary plan or payer must accept responsibility for a claimant’s medical expenses; and 2) that responsibility must be evidenced by a judgment, a compromise for release or other means. Unless both occur, Medicare does not have recovery rights under the MSP, period. That also means that it does not have a right to have an MSA funded to pay for a claimant’s future medical care. In the event of a WC claim denied from the outset and the E/C never accepts responsibility for future medicals, the MSP Act is not triggered. FICTION:  The MSP Act requires MSAs. Nowhere in the MSP Act does it mention MSAs, Medicare Set-Asides or even future medical expenses. What it does say is that Medicare won’t pay for a beneficiary’s medical expenses where payment has been made under a workers’ compensation plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). An MSA gets funded to pay for those future medical expenses a claimant anticipates incurring down the road which the E/C already paid for in the settlement. While the law does prohibit Medicare from making payment for those expenses with one exception, it does not obligate anyone to use an MSA to ensure Medicare does not pay those same items, services or expenses previously paid for by the E/C in the WC award. FACT: An MSA might be appropriate for anyone, not just current Medicare beneficiaries. While the MSP Act contemplates that Medicare will not pay for a Medicare beneficiary’s medical expenses when payment has already been made under a WC plan, other scenarios are conceivable. First, a claimant may not yet be Medicare enrolled but could be close. Those in the MSP industry refer to these individuals as having a “reasonable expectation” of Medicare enrollment. Typically, the time frame in play here is 30 months from settlement. So, you will see MSA issues arise if the claimant falls within this period of “reasonable expectation.” But an MSA could also be an issue for other claimants. Since the MSP Act prohibits Medicare from making payment where payment has been made, an argument exists that the issue would need to be examined for a much larger pool of claimants. In any WC settlement, it’s possible that the E/C is paying for future medical expenses. The MSP Act prohibits Medicare from paying when payment has been made under a WC plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). The claimant could take the proceeds and get on Medicare at some point post-settlement. See also: 25 Axioms Of Medical Care In The Workers Compensation System   Let’s assume that happens five (5) years after settlement. If the claimant still has money remaining for future medicals from the WC award, the statute would prohibit Medicare from paying for his future medicals that were paid for in the WC award. Now that the claimant is a Medicare beneficiary and has money remaining for that specific purpose, the law would kick in. To comply with the law, the claimant should spend down his remaining future medical proceeds on injury-related care otherwise covered by Medicare before billing Medicare. Of course, all that presumes that the claim was accepted and the E/C paid future medical dollars to the claimant as part of the WC award. When a WC claim is denied and ultimately “clinchered” on a doubtful and disputed basis, no future medical dollars change hands since the E/C does not accept responsibility for future medicals. Thus, no MSA would be needed, and you would simply want to document the file appropriately. FICTION: When future medical expenses are expected to be incurred, an MSA must be funded. Future medical expenses ≠ MSA funding in every case. Only when Medicare’s right of recovery is triggered would an MSA need to be funded. So, those future medicals must be related to the compensable claim for the MSA to need to be funded. Even then, there are options available other than funding an MSA (such as obtaining a legal opinion) to comply with the law stating that Medicare will not pay where payment has been made under a WC plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). FACT: A denied WC claim represents a compromise situation as opposed to a commutation under the federal regulations. Medicare explains the distinction in its regulations. A commutation occurs when the amount of the WC award is intended to compensate the claimant for all future medicals required because of the work-related injury or disease. 42 C.F.R. § 411.46(a). According to Medicare, “a lump-sum compromise settlement is deemed to be a workers’ compensation payment for Medicare purposes, even if the settlement agreement stipulates that there is no liability under the workers’ compensation law or plan.” 42 C.F.R. § 411.46(b)(1). This regulation is titled "Lump-Sum Compromise Settlement." So, denied WC claims must be compromise situations, not commutations, under Medicare’s own regulations. FICTION: The CMS WCMSA Reference Guide is the only place to look for how CMS handles future medical expenses. While most will point to the WCMSA Reference Guide as the definitive statement about future medical expenses, it represents unofficial guidance from CMS on the issue. Official guidance can be found in the code of federal regulations. 42 C.F.R. §411.46. There, CMS discusses the differences between future medicals in commutation cases versus compromise cases. Since a denied WC claim would be considered a compromise case, the regulations should be the first place to start when examining the MSA issue in a denied WC claim. FACT: The regulations, like the statute itself, do not address MSAs. Hard to believe, but this is true. Both the statute and all regulations promulgated by CMS in support of the statute fail to mention MSAs or Medicare Set-Asides even once. Since the regulations are what provide us with any federal administrative agency’s official statutory interpretation, it is accurate to say that no substantive legal standard exists today when it comes to MSAs, even in WC. 42 U.S.C. §§ 1395hh(a)(1), (2). FICTION: The regulations address future medicals for commutation cases exactly how they address future medicals for compromise cases. CMS’s own regulations treat compromise cases much differently than commutations. With respect to commutations, CMS advises “If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.” 42 C.F.R. § 411.46(a). Commutations are paid out (presumably) at 100 cents on the dollar. Thus, this regulation highlights the law which says that Medicare will not pay where payment has been made under a WC plan. 42 U.S.C. § 1395y(b)(2)(A)(ii). Again, if the E/C is paying dollars for future medicals, then Medicare won’t pay for those same items, services or expenses. See also: How Politics Drives Up Your MSA Costs   CMS treats compromise cases differently. With respect to future medical expenses in compromise cases, CMS advises, “(1) Basic rule. Except as specified in paragraph (d)(2) of this section, if a lump-sum compromise settlement forecloses the possibility of future payment of workers' compensation benefits, medical expenses incurred after the date of the settlement are payable under Medicare. (2) Exception. If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.” 42 C.F.R. § 411.46(d). Very different result in a compromise claim as compared to a commuted claim. Denied WC claims would be considered compromise claims, no matter who you ask. In those cases, CMS tells us that its basic rule is that CMS pays future medicals, except where an allocation for future medicals exists. When an allocation exists, then the claimant should spend down and exhaust before Medicare will pay. The rules for denied WC claims are different from the rules for accepted WC claims, whether CMS and its contractor admit it or not when it is reviewing the $0 MSA proposal for your denied WC claim. FACT: Submitting MSAs is a voluntary process. Remembering that the statute and regulations are both silent about MSAs, we can look to the CMS WCMSA Reference Guide. There, CMS tells us, “There are no statutory or regulatory provisions requiring that you submit a WCMSA amount proposal to CMS for review.” CMS WCMSA Reference Guide v2.5, Section 1.0 (April 4, 2016). FICTION: CMS workload review thresholds provide safe harbors for those cases failing to meet threshold. This is perhaps the biggest fiction about MSAs in the WC industry. While CMS is willing to review certain MSA proposals, it does not have the resources to review everything. Thus, it imposes certain workload review thresholds based on a claimant’s Medicare enrollment status and the gross WC award which help its contractor to determine which cases to review and which to not review. If the case fails to meet the threshold, it does not mean that the parties can ignore the MSA issue. Medicare specifically counsels otherwise. CMS says, “These thresholds are created based on CMS’ workload, and are not intended to indicate that claimants may settle below the threshold with impunity. Claimants must still consider Medicare’s interests in all WC cases and ensure that Medicare pays secondary to WC in such cases.” CMS WCMSA Reference Guide v2.5, Section 8.1 (April 4, 2016). CMS goes on to say, “Regardless of the low dollar threshold, Medicare beneficiaries should always consider Medicare’s interest in all WC cases and ensure that Medicare is secondary to WC.” CMS WCMSA Reference Guide v2.5, Section 14.0 (April 4, 2016). The same holds true in the event of a denied WC claim. While Medicare would not be willing to review a $0 MSA proposal in a denied WC claim when the matter fails to meet threshold, the parties should still ensure the files are documented appropriately with evidence that Medicare’s recovery rights under the MSP Act were never triggered in that case. FACT: CMS is willing to review a $0 MSA proposal. Not only will CMS review it, CMS provides an example of the letter you will get in return if it approves your $0 MSA proposal. See CMS WCMSA Reference Guide v2.5, Appendix 5 – Sample Letters April 4, 2016). You might be interested to know that this conclusion, just like the conclusion in any other approval letter, is not considered final by Medicare unless or until you provide Medicare with a copy of your final executed WC settlement agreement. FICTION: It takes CMS the same amount of time to review a $0 MSA proposal as it does any other MSA proposal. You might have experienced this. You submit a $0 MSA proposal to Medicare, but instead of an approval letter, you receive a development request seeking additional documentation related to medicals or evidence that the E/C never accepted responsibility for medical expenses. Despite your best efforts, it seems that you’re destined to either receive a development request or a close out letter, forcing you to start the process over again. While CMS has a stated goal of reviewing a matter within 45 to 60 days, it seems $0 MSA proposals take longer, sometimes much longer, to review and approve. FACT: Once you’ve voluntarily asked CMS to review your $0 MSA, you’ve agreed to play by CMS’ own rules. Medicare is clear with its expectation here. “If you choose to use CMS’ WCMSA review process, the Agency requests that you comply with CMS’ established policies and procedures.” CMS WCMSA Reference Guide v2.5, Section 1.0 (April 4, 2016). So, if you believe a claim is denied properly under your state law, temper your expectations if you ask CMS to review and approve a $0 MSA proposal in the case. By agreeing to bring CMS into the process and ask for its approval, you have relinquished control of the matter, and are subject to the policies and procedures CMS establishes and changes from time to time. Remember also that no WCMSA appeals process exists. “When CMS does not believe that a proposed set-aside adequately protects Medicare’s interests, and thus makes a determination of a different amount than originally proposed, there is no formal appeals process.” CMS WCMSA Reference Guide v2.5, Section 16.0 (April 4, 2016). While CMS does have a limited re-review process, it only applies when: 1) you believe CMS’ determination contains obvious mistakes; or 2) you have additional evidence, not previously considered by CMS, which was dated prior to the submission date of the original proposal. CMS WCMSA Reference Guide v2.5, Section 16.0 (April 4, 2016). Make absolutely sure you are willing to open that door. Once you’ve asked CMS to review, it’s a door that is quite difficult to close. FICTION: The MSP Act always preempts state law with respect to future medical expenses. This one might be surprising, but it’s false. There are at least three examples of cases where the court concludes that state law dictates Medicare’s recovery rights in an MSP situation, not vice versa. In Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010), the Court concluded that Medicare’s recovery right was limited to that portion of the award which had been allocated to medical expenses. The allocation was based on a Florida state probate court’s allocation of a wrongful death settlement between claims of the survivors and the claims of the estate. In Caldera v. The Insurance Company of the State of Pennsylvania, 716 F.3d 861 (5th Cir. 2013), the Court concluded that the MSP does not go as far as to eviscerate all state law limitations on workers’ compensation payments. Recently, the Court in CIGA v. Burwell, 2017 U.S. Dist. LEXIS 1681 (decided January 5, 2017) concluded that state law creates Medicare’s recovery rights based on concepts of what is compensable versus what is not compensable. The law does not allow Medicare to recover conditional payments for items deemed unrelated to the compensable WC claim, even when bundled together with at least one code that was accepted by the E/C as compensable. This case calls into serious question CMS’ recovery practices under the MSP Act. More examples exist. The moral here is that Medicare’s recovery rights and the need to take certain actions with respect to MSAs originate from your state law granting property rights to parties in the first place based on issues of compensibility. FACT: Medicare is not a party to the WC claim; instead, it’s the most important potential “lienholder” to consider when resolving the WC claim. Some think that Medicare must approve the MSA to validate the settlement. Medicare is not a party to the settlement. The parties to the settlement are the injured worker, the employer and (perhaps) its insurance carrier or TPA. Medicare does not have the power to accept an offer on behalf of the claimant. Medicare does not have the power to extend an offer to settle on behalf of the E/C. Medicare is not a party to your WC settlement. Likewise, Medicare does not have the authority to approve a settlement once struck. That is the job of the workers’ compensation industrial commission or board in your state. Asking Medicare to review your MSA proposal is a voluntary step in Medicare’s eyes, and you should also consider it to be voluntary. If your state industrial board or commission mistakenly believes it is required to submit MSAs to CMS for review and approval or makes that a condition of its approval, it falls on you to educate members why that is not the case. 2017 is the right time to consider alternate forms of “considering and protecting” Medicare’s interests, including legal opinions. The MSP Act is in place to help ensure that the Medicare program will be around long term. MSAs are created as a way to comply with the law enacted to ensure the longevity of the Medicare program. That being said, it does not mean that Medicare has a right on every settlement to an MSA. And on denied WC claims, it really means that Medicare never has a right to an MSA. See also: The Looming $20 Billion MSA Train Wreck: Welcome Aboard   FICTION: MSA vendors who only review medical records when calculating MSAs provide accurate conclusions that align with the legal requirements of the MSP Act. You’ve likely had a report like this. Claim has been denied in full. No medicals or indemnity has been paid. The E/C hires one of its approval MSA panel members to calculate an MSA. In its report, the non-legal vendor concludes that an MSA of $X is needed since the claimant is expected to incur future medical expenses. What these non-legal vendors might not realize is that future medicals under the MSP Act are both a medical obligation as well as a legal obligation to address. This is where most non-legal MSA vendors fall short. Their team of nurses are charged with reviewing medicals and calculating an MSA. The report that results is less that of an MSA and more along the lines of a medical cost projection. This report, when it involves a denied WC claim, bears no relation to the actual legal position taken by the E/C. As discussed above, MSAs for those cases should always be $0 since Medicare’s right of recovery never ripens under the law. But, understand that those same non-legal MSA vendors may not be able to arrive at that conclusion. Citing and relying on the law in its MSA report comes dangerously close to the line when it comes to the issue of the unauthorized practice of law. Non-legal MSA vendors cannot issue legal opinions on MSA issues. They can issue reports based on their experience and knowledge of MSA issues involving CMS, but cannot provide those as a legal opinion unless the vendor is also a law firm that practices law. This might explain why those MSA reports say the proper MSA figure is $X when everyone on the file knows it should be $0 since the WC claim was denied. FACT: Instead of asking CMS to review and approve a $0 MSA allocation (when thresholds are met), consider obtaining a legal opinion from a lawyer experienced in the MSP Act. Wouldn’t it be great if we knew with certainty that CMS would agree with our $0 MSA proposal at first glance? That would alleviate a lot (but not all) of the frustration with the current system. Unfortunately, we never know that up front. In fact, as soon as you voluntarily ask CMS to review the MSA, you have lost all control of the claim. Chances are good you will receive in return either a development letter asking for more information supporting your assertion that a $0 MSA is appropriate, or you will receive a counter-higher letter. Neither result is good for the file. Now, how many times has that happened to you over the past 12-24 months? Instead of playing CMS’ WCMSA review game, you can choose to not play by obtaining a legal opinion instead from a lawyer who has experience addressing MSA issues. You gain all the same benefits you get from CMS approving the WCMSA (i.e., ability to close the file with confidence, complete risk transfer on the future medical issue, etc.) without involving the federal government. If you had the choice, would you voluntarily ask the federal government to audit your tax return for accuracy? I didn’t think so. WCMSAs are the same. Why ask it to audit your WCMSA conclusion for accuracy when perfectly valid alternates exist and you can avoid federal scrutiny? It just doesn’t make sense in 2017. Do you know how Albert Einstein defined ‘insanity’? He said, “Insanity is doing the same thing over and over again expecting different results.” Parties who continue to ask CMS to review and approve its $0 MSAs, in this author’s opinion, engage in just that type of activity. You can’t expect CMS to approve your $0 MSA simply because you want it to or even because it is legally appropriate for them to do so. CMS’ track record proves that. Instead, you should hire a lawyer to provide you with a legal opinion that protects you in the future in the unlikely event that CMS comes calling with its hand out. Cattie, P.L.L.C. is a law firm that has experience with MSA issues, including how to protect parties from the federal government when a WC claim has been denied. I’d be happy to consult with you at your convenience about your claim and how a legal opinion from my law firm can be used in lieu of CMS approval of your MSA. The firm is actively accepting new cases now. For more information, please email cattielawpllc@gmail.com.

Billions of dollars of investment are flowing into startups focusing on insurtech. From the viewpoint of investors, anything that has to do with using technology in the insurance industry can be labeled insurtech. For incumbent insurers, however, this broad term is unfortunately not very useful for coming to an understanding of the many start-ups focused on the sector. Novarica has proposed a framework called the “ABCs of InsurTech” to help insurers differentiate between Analytics Arms Dealers, Beneficial Bots, Creative Carriers and Digital Distributors. The first two categories, which are focused on helping insurers transform and compete, are likely to have a greater impact on incumbent insurers in the short term than the direct competitors to existing carriers and distributors. But the latter two categories will offer useful examples of how to operate a digital insurer that will be copied by successful incumbents as they transform themselves. See also: Top 10 Insurtech Trends for 2017   Analytics Arms Dealers include start-ups like Carpe Data, Praedicat, and Tyche, focused on selling data and analytical capabilities to insurers to help them compete more effectively. These companies are not participating in the marketplace directly, but selling tools to those who do. The dramatic growth in the accessibility and sheer volume of third-party data, combined with the increased power of analytical tools and big data technologies, is changing the way insurers operate. The combination of predictive modeling combined with straight-through processing is making the business of insurance more effective and efficient in areas ranging from pricing, to underwriting, to claims. Analytics Arms Dealers represent an opportunity and a threat to incumbent insurers: an opportunity if an insurer is able to leverage new capabilities effectively before their peers, and a threat if they are not able to. “Beneficial Bots” is a generic term that covers emerging technologies like drones, the Internet of Things, and blockchain, which have the potential to disrupt many industries, or at least transform operations within them. The term encompasses not only the technologies themselves, but the companies bringing them to the insurance industry, like Human Condition Safety, Meshify, and PrecisionHawk. Like Analytics Arms Dealers, Beneficial Bot providers are primarily selling tools to incumbent insurers, as opposed to competing with them directly. These emerging technologies have the potential to bring about dramatic changes in costs and capabilities, in the process forcing re-evaluation of business models and opening new potentials. Also like with Analytics Arms Dealers, insurers need to understand the potential value of these new capabilities better and leverage them faster and more effectively than their competitors. Creative Carriers are start-ups that believe that by leveraging massive amounts of third-party data, powerful analytics, and digital communications, they can create a new way to create and sell insurance. In many cases, they are taking an “Outside In” approach by starting with the desired customer experience and building their operation backwards from there. Some Creative Carriers, like Trov and Slice Lab, are focused on offering innovative products. Others, like Lemonade or Oscar, are selling a traditional product through a more customer-centric sales and service experience. These companies, while unlikely to pose a direct threat to most incumbent insurers (due to a lack of resources and what will likely be an eventual realization that the business of insurance is more complicated than they imagine), can serve as useful examples for incumbents to follow in how they approach the customer experience. Some may be acquired by incumbent insurers, but even the ones that ultimately are unsuccessful may still provide the industry with valuable lessons on how to serve customers more effectively with new capabilities. Digital Distributors are agencies, brokerages, or aggregators, with a good user interface and a digital-focused customer experience model. From the incumbent insurer point of view, Digital Distributors are hardly disruptive at all. They get the most press and a disproportionate amount of investment because they are the easiest to understand. Digital Distributors like CoverHound, PolicyGenius, and Zenefits may compete with existing channels, and may require insurers to streamline operations in order to access the markets they’ve aggregated. But they, like any other intermediary, are selling insurance underwritten by carriers. Working with a Digital Distributor is not really all that different from working with a traditional distributor. Over time, expect distributors to learn lessosn from Digital Distributors about customer convenience, digital marketing, and service, and those lessons will reshape the way most distributors operate. In that sense, Digital Distributors are similar to Creative Carriers. And while some may reach critical mass or thrive as independent concerns, most will either be acquired by traditional players or fail. Insurers need to sift through the hype over InsureTech in order to make an informed decision about how, or whether, to engage with start-ups. Digital Distributors and Creative Carriers mostly offer distractions and confuse the market. Analytics Arms Dealers, on the other hand, can advance pricing, underwriting, and claims, while Beneficial Bots bring entirely new possibilities to the insurance business. Insurers looking to thrive in the future should consider what engaging with the right kind of InsureTech startups can do for them. See also: Which Rules Should Insurtech Break?   Of course, there will always be some risk involved when engaging with start-ups, most of which eventually fail. But if insurers apply an underwriting mindset to engaging with this world—in other words, realize that a small number of hits may pay for the losses—it may become a more attractive proposition. In any case, there are great opportunities to learn, and potentially even greater risks to remaining ignorant of new approaches and capabilities.

The first Out Front Ideas with Kimberly and Mark webinar of 2017 provided our thoughts on the 20 Workers’ Compensation Issues to Watch in 2017. What follows is a summary of the issues discussed: 1. Election Impact The Department of Labor under President Obama had made it clear that they felt state workers’ compensation systems needed reform and they were prepared to recommend minimum benefit standards to the states. Trump’s recommendation for Secretary of Labor has been a vocal opponent of many federal labor regulations. For now, any talk of the Federal Government getting involved in state workers’ compensation issues seems to be on hold. However, one issue that could involve the federal government is related to potential costs being shifted from workers’ compensation to social security disability. Efforts to preserve the solvency of social security could result in action intended to limit this cost shifting. 2. Healthcare Reform Regardless of which side of the aisle we find ourselves, surveys have shown that most Americans believe the Affordable Care Act is not working as it was originally intended or as well as they would like. A few things are clear, access to health insurance does not dictate better health. If care remains unaffordable, people will not access care for themselves or their family. Healthcare is increasingly complex and accessing the right care at the right time remains a struggle for the general public. We are challenged to advance the approach of well care when, in fact, we remain largely a sick-care system. While we wait to see how the GOP evolves health reform, we are hopeful that efforts underway to shift from fee-for-service to value-based and outcomes-focused care will continue to advance. We hope healthcare suppliers will continue to advance population health wellness as much as they focus on chronic disease. Kimberly George views this as the single most important issue to watch in 2017. 3. OSHA Another potential impact of the election results is the direction OSHA may take in 2017 and beyond. In recent years, employers have complained that OSHA was more focused on enforcement than education and training. In fact, OSHA did shift resources out of education into enforcement. Recent OSHA policies such as the publicly-accessible online database and restrictions on post-injury drug testing were met with significant resistance from the employer community. OSHA falls under the Department of Labor and, as mentioned before, the expectation is that the Department of Labor will have a new direction under the Trump administration. 4. ADA/FMLA During the Obama administration, we saw an increase in enforcement actions and also broadening of regulations that placed more burdens on the employer. Leave-of-absence regulations have become increasingly more complex over the past eight years. ADA accommodation requests were initially related to ergonomics and transitional work accommodations following an illness or injury. Today, they have become more complex, including everything from bringing service animals into the workplace, allergies and noise accommodations to establishing work-from-home accommodations. The list goes on and on. What constitutes a “covered” disability has evolved and employers are tasked with ensuring compliance. Under the Trump administration, the Feds are less likely to pursue actions that would expand existing boundaries of the law. 5. Rates and Premiums One of the interesting things about workers’ compensation market cycles is that they are generally driven by changes in competition more than changes in exposures. If you look at claims costs over the last 20 years, they have steadily increased, yet premiums during this same period have gone up and down. During the January 1 renewal cycle, rates trended flat or slightly down compared to expiring premiums. There are some problem states that saw higher rates, including California, New York, Illinois and Florida. The declining rates compared to increasing claims costs have caused A.M. Best, Fitch and others to issue a negative outlook on workers’ compensation. It is expected that this hyper-competitive market cycle is going to end soon as the new entrants into the marketplace start to see the long-tail losses from their business hitting the books. See also: 25 Axioms Of Medical Care In The Workers Compensation System   6. Long-Tail Exposures One of the things that make workers’ compensation such a challenge for employers and carriers is the long-tail nature of the claims. “Long tail” means that premiums collected today must cover losses for years to come. The claims tail is an issue to watch because of the impact it has on both carriers and employers in terms of cost of insurance today and future reserves. The biggest driver of increasing claims-tail costs are advances in medical science. Better medicine means life expectancies are getting longer. This increases the exposures for lifetime indemnity and medical benefits. In addition, new drugs and treatments almost always cost more than what they are replacing, especially when you consider the cost difference between brand name drugs and generic medication. Prosthetics are so much more advanced today than they were 10 years ago, but they also cost significantly more. 7. State Legislative Agendas We expect to see new workers’ compensation legislation established in at least four states during 2017: Florida Last year, the Florida Supreme Court tossed out multiple elements of their workers’ compensation statutes as unconstitutional, which caused a significant increase in claims costs and premium rates. There will be bills introduced to address these issues. Illinois Last year, and again this year, Illinois Governor Rauner has made workers’ compensation reform a key element in his job-growth agenda. He is calling for medical fee schedule reductions, higher causation standards for conditions to be found compensable, and legislation to reverse court decisions that have expanded benefits. New York New York is another state where reform efforts stalled last year. Employers are pushing for limits on the time for an employee to reach maximum medical improvement, which triggers the 10-year cap on indemnity benefits. California Every year the legislature passes bills to reverse recent reforms, and with few exceptions the Governor has vetoed those bills. There will inevitably be more reform bills introduced in 2017, so we will see what those bills address and whether the Governor will approve any of them. Options to Workers’ Compensation In 2016, we saw efforts to push for options to workers’ compensation stall. Legislation in Tennessee and South Carolina did not move forward, and the Oklahoma Option was found unconstitutional by the State Supreme Court. There is talk of a Texas-style opt-out bill being introduced in Florida in 2017. This bill would make workers’ compensation optional. There are also rumors about an option bill being reintroduced in Tennessee. It remains to be seen if there is enough momentum in either state to move this legislation forward. 8. Treatment Guidelines Workers’ compensation stakeholders have become very familiar with medical treatment and return-to-work guidelines, along with evidence-based medicine. Payers and managed-care suppliers work diligently to embed guidelines in their systems for nurses and claims adjusters to improve efficiency with access to the guides and workflow for their colleagues. States have implemented a variety of guideline solutions, which include creating unique formularies and treatment guides, and also adopting industry-available workers’ compensation guidelines. The lack of guideline consensus across stakeholders including physicians, regulators, payers, and suppliers is an ongoing challenge to the system. 9. Constitutional Challenges In 2016, elements of the workers’ compensation statutes in five states were found to be unconstitutional by such states’ respective Supreme Court. Among the issues found unconstitutional in 2016 were:

• Caps on temporary total disability benefits
• Exclusion of coverage for certain farm workers
• Caps on attorney fees
• Time limits for filing cumulative trauma clams
• Use of current edition of AMA guidelines for impairment ratings

When an aspect of the law is found unconstitutional, that change goes back to when the law was enacted. In Florida, the rulings changed the laws governing years of existing claims, significantly increasing the exposure on such claims retroactively. This created unanticipated liabilities for carriers and self-insured employers. The success of attorneys in challenging these statutes provides a road map for attorneys in other states to pursue similar challenges. 10. Mental Health The notion that workers are not impacted by mental illness when a work injury occurs or that mental health is always separate from workers’ compensation is an increasing challenge for the industry. Mental health is among the top 3-5 reasons for short term disability absences across white and blue collar workers, mental health crosses industry verticals. More than ever employers understand that lack of mental health care impacts productivity, regardless of how an injury or illness occurred. Ways in which employers are addressing mental health and workers’ compensation include promoting EAP and behavioral health programs for employees regardless of how an injury or illness develops. One challenging aspect of this issue is the fact that many states significantly limit or completely prohibit workers’ compensation benefits for mental injuries without any physical cause. There will be more discussions in the future about the need to revisit laws around the country dealing with mental injuries. 11. Impaired Workforce After the November elections, eight states and DC allow for recreational use of marijuana. This means around one in five people live in a state where recreational marijuana is now legal. For employers, this means the reality that a percentage of your workforce is likely impaired. Years ago many employers stopped doing pre-employment drug testing because they could not get enough applicants to pass to fill their jobs. New OSHA regulations from 2016 seek to significantly limit the use of post-injury drug testing, which further inhibits employers looking to maintain a drug-free workplace policy. The answers to this issue is very challenging. Drug testing for marijuana always focused on whether the drug was present in the system because it was illegal. It can be detected in the system 30 days after use, but showing presence of the drug does not show impairment. This is an area where the science needs to catch up with social reality. We need an established standard for what constitutes impairment when it comes to marijuana. See also: How Should Workers’ Compensation Evolve?   12. Alternatives to Opioids for Chronic Pain For a number of years, there has been significant focus on reducing prescription opioid use in workers’ compensation. With President Obama supporting awareness of the opioid epidemic in 2016, the management of opioids and opioid-related deaths became a household topic across America. In 2017, we believe there will be greater emphasis on the options outside of opioids for both acute and chronic pain. Admitting patients into functional restoration programs and multi-disciplinary integrated pain management programs have proven successful ways to eliminate opioid use. Meditation, exercise, mindfulness, yoga, and cognitive behavioral therapy have also shown success. In the quest to offer non-opioid treatment options in workers’ compensation, one of the challenges is coverage. Insurers have been quick to pay for opioids and hesitant to pay for alternative treatments. One-size-fits-all approaches to care will not work for these patients. Treatment is outside of guidelines and requires coordination and care, rather than simply approving or denying treatment. 2017 should be our year to improve functionality for patients currently on opioids and alternative treatments must be considered. 13. Occupational Disease We know that exposure to certain substances in the workplace can lead to diseases such as cancer. It can take years after the exposure for these diseases to manifest themselves. Yet most statutes only cover certain defined diseases and, in many states, the statute of limitations for reporting a claim is less than the manifestation period for the disease. This creates a hole in the coverage for these diseases. This is an issue we are going to see in more courts around the nation, as these diseases continue to manifest themselves over time. Medical science is becoming more precise in identifying the sources of these diseases, and, as this happens, workers’ compensation statutes will need to be amended to provide better coverage for those workers who contract such diseases. The opposite end of the spectrum when it comes to occupational disease coverage are the presumption laws that impact police, firefighters and other first responders. There are currently 34 states with various presumption laws covering a variety of cancers, diseases of the heart and lungs, and certain blood-borne diseases. Opponents of these bills argue that the science does not support an increased risk for disease due to the occupation alone and that these claims should be subject to the same causation standards as other occupational disease claims. 14. Transparency with Workers How many times have you heard an injured worker say they didn’t understand the information that was provided to them? Often times injured workers retain attorneys simply because they are confused and do not feel like anyone is there to help them. Many of us in the industry believe the pendulum has swung too far towards the process of workers’ compensation instead of taking care of the injured worker. There was great industry momentum in 2016 with advocacy-based claims models. In 2017, look for ways in which the advocacy discussion evolves into transparency discussions. Transparency is helping the injured worker be a good consumer within the workers’ compensation arena, helping them understand the process, and providing them the best available information to make proper decisions. 15. Insurance Talent Gap We know that a significant percentage of the workforce in the insurance industry is expected to retire in the next 10 years. The pipeline of workers to replace these retiring employees is insufficient. To address this, we need a multi-faceted approach that includes working with colleges in developing risk management education and a focus on talent attraction and recruitment. Training programs need to continue to be refined so that the knowledge of retiring employees can be passed on. Finally, employee retention is also a concern. Employers need to be more flexible with working arrangements to compete with other occupations that allow for flexible hours and work-from-home options. 16. Workers’ Compensation’s Public Image There is growing effort underway to promote the good in our industry. Everyday our companies and our colleagues are making the right decisions and helping people in their time of need. Yet, we also have such a long way to go in the area of public relations. We need to talk more about the good we do in helping injured workers regain their quality of life. This will not only help with the stakeholders in the system, but will go a long way with recruiting the next generation into our field. Workers’ compensation is about taking care of people and it is very meaningful work. Let’s all focus on improving workers’ compensation’s reputation this year. 17. The Evolution of Workers’ Compensation In the last year, several industry groups have had discussions on how workers’ compensation should evolve to better meet the needs of today’s workforce. The threat of federal intervention was the driving force behind much of these discussions. With that threat on hold for now, it is important that the industry take this opportunity to continue these discussions while we can control the agenda. If change is needed, then we want to be the ones working with legislators and regulators to draft those changes. 18. Machine Learning and Artificial Intelligence Predictive analytics have been around for over 10 years. Claims professionals began using predictive analytics to identify the claims that had a propensity for adverse development. Other models evolved to address litigation, sports medicine care opportunities and return-to-work goals. It is safe to say that nearly all payers have predictive models today and probably just as likely that there is little published data on the outcomes associated with these models. In 2017, we believe the conversation will shift to machine learning. What payers have evolved or are building new claims systems to address artificial intelligence and machine learning? Should all claims be handled by a claims adjuster? Do interventions on every claims impact the ultimate exposure or are we at a point in the industry where processing a claim should be as easy as a warranty or auto claim? There is tremendous untapped potential in this area. See also: Healthcare Reform’s Effects on Workers’ Compensation   19. External Disruptors Looking to the future, there are many areas where external disruptors could have a significant impact on workers’ compensation. Mark Walls feels this is the biggest issue for the industry to watch in 2017. Many large employers have been looking at the merits of a 24-hour healthcare model. With medical making up close to 60% of workers’ compensation costs, what happens if that element is removed from the system? Changing retail buying habits are also having an impact on workers’ compensation. Retailers are closing stores and going out of business. With more Americans doing their shopping online, what is the future for the retail industry? Finally, automation is a reality that has potential to be a significant disruptor. The manufacturing and distribution industry has seen significant job loss due to automation. Think of all the jobs in the trucking, shipping and transportation industry that could be lost to self-driving vehicles. Automation could be the ultimate disruptor for the workers’ compensation industry. 20. Innovation in Action While the insurance industry is traditionally not known for innovation, we are certainly hearing more about innovative solutions. Digital health, insurtech, med tech, machine learning, and automation are all terms we are becoming familiar with and each brings its own value to workers’ compensation. As the innovations come to fruition in the marketplace, we will be focused on understanding the value of the innovation. Is the innovation going to improve the experience of the user or is it designed for internal processes and workflow? Will the solution drive efficiency and speed to decision or process improvements? How will quality, compliance and outcomes be impacted and measured? To listen to the complete webinar, click on this link.

Each year, the cyber security industry faces new types of threats as cybercriminals evolve their approach toward accessing organizations’ data. For 2017, the security experts at Symantec have taken a close look at the trends we can expect to see this year and in the years ahead. Given the consistently changing security landscape, it’s important to take a moment and determine where the security industry needs to focus attention. We’ll continue to see a shift toward the modern workplace as businesses allow employees to introduce new technologies such as wearables, virtual reality and IoT-connected devices onto the network while supporting a rapidly dispersed workforce made possible by cloud applications and solutions. Enterprises will need to shift their focus from safeguarding endpoint devices toward protecting users and information across all applications and services. Here’s a list of cyber security threats in 2017 as predicted by the Symantec cyber security team. 1. Connected cars will be taken for ransom As cars start to have connected capabilities, it is only a matter of time until we see an automobile hack on a large scale. This could include cars being held for ransom, self-driving cars being hacked to obtain their location for hijacking, unauthorized surveillance and intelligence gathering, or other automobile-focused threats. This will also lead to a question of liability between the software vendor and automobile manufacturer, which will have long-term implications on the future of connected cars. See also: Best Practices in Cyber Security   2. IoT devices will increasingly penetrate the enterprise Beyond looking simply at computers and mobile devices for vulnerabilities, incident response teams will need to consider thermostats and other connected devices as jumping points into the network. Similar to how printer servers were used for attacks several years ago, nearly everything in an enterprise is now connected to the internet and will need to be protected. 3. Increased IoT DDoS attacks The Dyn attack in October demonstrated the vast number of IoT devices that don’t have security on them and are tremendously vulnerable to attacks. As more IoT devices are installed in the mass market, the risk of security breach will increase. Once insecure devices are in the market, it becomes almost impossible to fix the issue without recalling them or issuing security updates. Given that this lack of security will continue for the foreseeable future, the number of IoT attacks will only increase as well. 4. Ransomware will attack the cloud Given the significant shift towards cloud-based storage and services, the cloud is becoming a very lucrative target for attacks. The cloud is not protected by firewalls or more traditional security measures, so there will be a shift in where enterprises need to defend their data. Cloud attacks could result in multi-million dollar damages and loss of critical data, so the need to defend it will become even more crucial. 5. Threats from AI will only continue to grow In 2017, artificial intelligence or AI will only continue to grow - Forrester predicts investment in Artificial Intelligence will grow 300 percent next year alone. With this growth comes new, powerful insights for businesses to tap, and an increased collaboration between humans and machines. From a security standpoint, this expansion will impact organizations in more ways than one – including endpoints and mechanisms in the cloud. 6. Machine Learning to cause widespread threats As new forms of machine learning and AI continue to enter the market, enterprises will need to invest in solutions that have the capabilities to collect and analyze data from the countless endpoints and attack sensors across different organizations, industries and geographies. These solutions will prove to be instrumental in teaching machines how to operate on the front lines of a global battle that changes every day, minute by minute. 7. Rogue nation states will finance themselves by stealing money There is a dangerous possibility that rogue nation states could align with organized crime for their personal gain, such as what we saw in the SWIFT attacks. This could result in down time for countries’ political, military or financial systems. 8. Fileless malware will increase. Fileless infections – those written directly onto a computer’s RAM without using files of any kind – are difficult to detect and often elude intrusion prevention and antivirus programs. This type of attack increased throughout 2016 and will continue to gain prominence in 2017, most likely through PowerShell attacks. 9. SSL abuse will lead to increased phishing sites using HTTPS The rise in popularity of free Secure Sockets Layer or SSL certifications paired with Google’s recent initiative to label HTTP-only sites as unsafe will weaken security standards, driving potential spear-phishing or malware programs due to malicious search engine optimization practices. See also: Paradigm Shift on Cyber Security   10. Drones will be used for espionage and explosive attacks This could be seen in 2017, but is more likely to occur further down the road. By 2025, we can expect to see “dronejacking,” which will intercept drone signals and redirect drones for the attacker’s benefit. Given this possibility, we can also expect to see anti-drone hacking technology being developed to control these devices’ GPS and other important systems. You can find the original article here.

"When it comes to assets, a growing number of people are increasingly satisfied with having access to these assets, rather than owning them." -- Transpay.com

There is no doubt that the hot topic for 2017 and beyond will be the growth of the so-called sharing economy. The reason for this growth is simple: Instead of owning assets, people are increasingly electing to access them. But that's not the end of the story. Exacerbating this access over ownership mentality is the rapid growth in mobile technology. This allows online platforms, like WeGoLook, to use powerful mobile apps to facilitate the new emphasis on access. The idea of owning assets, popularized by the consumption habits of baby boomers, is now slowly losing its appeal. The assets you do own can now work for you, and ultimately earn you supplemental income. And people are comfortable with this. A recent PwC study found that 60 percent or people believe the statement that "access is the new ownership." What implications does this have for insurers? Great question. But first, let's discuss the idea behind the sharing economy. See also: Breakthroughs in Managing (and Insuring) Tangible Assets   Access to Assets? The concept of access over ownership, also known as collaborative consumption or the access economy, is simply the idea of sharing resources. Due to advances in mobile technology, sharing assets (homes, cars, labor, consumer items) is structured through the use of online platforms and mobile apps (Uber, Airbnb, WeGoLook, etc.). The sharing economy allows consumers, and businesses, the opportunity to use assets on an as-needed basis instead of purchasing and managing them. Is Sharing Better Than Owning? It's certainly becoming more popular. A recent survey found that 72 percent of adults are expected to participate in the sharing economy over the next two years. Further, PwC estimates that by 2025, the sharing economy will be a $300 billion dollar industry. So why are people choosing to access rather than own? The Downsides of Ownership While owning assets may portray some degree of success, prestige, and affluence, it also means depreciation, maintenance, and storage. Depending on the asset -- boat, fancy car, vacation property, etc. -- you have to use that asset frequently to make it worth its value. And so often, this isn't the case. Consider that both cars and boats sit unused 95 percent of the time. That's massive underused capacity and waste! Think of something expensive you bought years ago that you've used a fraction of the time? Yea, we are all guilty of this! But fortunately, people are changing their ways. A study by Frost & Sullivan estimates that the number of participants in car-sharing ventures in North America will rise to 9 million by 2020. Considering that almost any asset can be shared, the possibilities are endless. Can the Insurance Industry Jump On Board? Many have argued that the insurance industry needs to innovative its old business practices. Whether or not they're right, there is some truth to the idea that all industries need to adapt to the sharing economy phenomenon. Insurance carriers have already experienced the massive shift to mobile tech with the insurtech revolution. Now, the consumption emphasis on access is gaining momentum. Here's a statistic to blow your socks off: 90% of millennials don't have insurance. This should be a siren song to insurance industry insiders. There is a huge gap that needs to be filled! See also: What Millennials Demand as Customers   Many insurtech companies like Lemonade, Friendsurance, and MetroMile, are offering access to shared insurance pools or time-limited policies. These companies are embracing access, and are killing it! Insurtech as a whole has attracted more than $5 billion in investment since 2011. On the policy side of the equation, similar rethinking needs to occur. Since consumers are increasingly electing to share their assets instead of owning them, traditional insurance packages don't apply. Indeed, many insurers have developed niche specific policies for ride-sharing, car-sharing, and home-sharing. But, many have not. Rising to the Challenge The truth is, the sharing economy and its emphasis on access can no longer be an afterthought. The sharing economy demands a fresh look at the traditional way risk management and insurance packages are offered to consumers. As more consumers access goods and services online, an exciting challenge and opportunity are presented to insurance companies. How will you react?