At hospitals and clinics across New Jersey, thousands of new doctors could soon be on call — literally. In Trenton, lawmakers are considering two bills that would enable doctors and patients to skip the office visit and conduct appointments using video-conferencing tools like Skype.

They’re right to embrace this kind of technology. The increasing use of “telemedicine” promises to improve patients’ access to doctors and slash healthcare costs.

Virtual medicine makes it a lot easier — and cheaper — to see the doctor. By first consulting with a patient by video, doctors and nurses can determine whether a costly in-person trip to the emergency room or to the doctor’s office is necessary — or whether two aspirin and plenty of rest will do.

See Also: 5 Questions on Telemedicine Coverage

For patients who end up in the hospital, telemedicine can facilitate faster and cheaper convalescence.

Consider a patient recovering from heart surgery. His doctor may want to continuously monitor his blood pressure and pulse. Telemedicine can accomplish that remotely and automatically. That saves the patient the trip and the doctor the time measuring those vital signs.

Telemedicine can also save money. Take a program called Health Buddy, which asks patients daily, tailored questions about their health through a handheld device at home. After reviewing the answers, doctors know when and how to offer care. A study published in Health Affairs found that Health Buddy reduced Medicare spending by as much as 13% per patient.

Other programs offer patients hospital-level care inside their own homes. Doctors and nurses visit one to two times a day while other providers monitor vital signs remotely. Participating patients often require fewer tests and less time under observation, so these “hospital at home” programs can cut costs by 19% compared with conventional inpatient care.

Telemedicine can also alleviate the mental stress of being sick. Someone diagnosed with heart disease, for instance, may understandably worry about his prognosis. That can take a toll on his physical health and jeopardize his chances of recovery.

Healthcare providers can ease these concerns with remote counseling. One such telecounseling program helped cardiovascular disease patients deal with anxiety and depression through video sessions. Over six months, the program reduced hospital admissions by 38% compared with a control group, according to a report published by the American Journal of Managed Care.

Telemedicine can improve healthcare providers’ ability to communicate with one another, too. By connecting doctors with health workers in emergency rooms, for example, telemedicine can prevent 850,000 unnecessary transfers between ERs each year. The savings? More than $530 million.

There’s even evidence that telemedicine can offer care that’s superior to inpatient care. Take Teladoc, a videoconferencing technology that allows patients to consult with a doctor around the clock. According to one study, those who used Teladoc were less likely to need to see the doctor again for the same illness than patients who actually went to the doctor’s office.

Finally, telemedicine may also decrease wait times. American Well, for example, offers a mobile app that allows patients to send out a request for a doctor — much like one does for an Uber — and the first to respond does the consultation via videoconferencing. Over the last three years, the average wait time has been three minutes.

See Also: Questions to Ask on Telemedicine Risk

New Jersey’s lawmakers seem to be paying attention to all this research, particularly Sens. Joe Vitale, D-Middlesex, and Shirley Turner, D-Mercer, and Assembly representatives Pamela Lampitt, D-Burlington-Camden, and Daniel Benson, D-Mercer-Middlesex. One of Lampitt’s bills (A-2668) would establish parity for insurance coverage of telemedicine with conventional in-patient care. A bill sponsored by Vitale (S-291) would allow patients to seek telemedicine services from out-of-state doctors. This latter measure would also permit New Jersey’s Medicaid program to reimburse for telemedicine.

Thus far, the Garden State has been slow to adopt telemedicine. Insurers in many other states already cover it. The American Telemedicine Association recently gave New Jersey six Fs on crucial telemedicine issues, including allowing for the reimbursement of remote patient monitoring and videoconferencing.

State leaders now have the chance to raise those grades. Telemedicine controls costs and improves patients’ health. It’s time for New Jersey to take advantage.

Healthcare Matters sits down with Dr. Richard Anderson, chairman and CEO of the Doctors Company. In Part 1 of the series, he helps us define what “defensive medicine” is, the economic costs associated with it and why he believes it’s a clear violation of the doctor/patient relationship.

In Aldous Huxley's 1931 novel Brave New World, many original ideas were posited about a futuristic society. Two of those ideas, appearing in our present, involve eugenics and an ever-increasing reliance on technology. Techniques like CRISPR (clustered regularly interspaced short palindromic repeats) to genetically engineer a human embryo, and technological advances like self-driving vehicles, could be said to represent some of Huxley's notions. However, professional liability underwriters, especially those underwriting cyber liability and tech E&O, are out of phase with this "brave new world,” and this fact creates a dangerous situation for both those underwriters and an economic world dependent on them. To be responsible and successful in the present and into the future, the professional liability insurance sector must look backward to look forward and, in so doing, create a breed of underwriters who are every bit as creative as the future will be. Being out of sync with present-day reality is clearly represented in questions not asked on cyber liability and tech E&O applications. For instance, one current cyber liability application does not ask what type of firewall an applicant is using. A company can use a simple device with a firewall feature and claim to have a firewall in place, but that device will not come close to equaling the protection offered by a hardware-based NGFW, or Next Generation Firewall. The same application also does not ask if multiple hardware and software ecosystems are used, even though the answer to that question, especially for a medium-sized and large business, offers significant insight into the company’s cyber security approach. Additionally, this particular application does not ask whether an applicant is using the services of a cyber security firm. Those kinds of questions, and the answers to them, convey an enormous amount of information about the cyber security posture of an applicant and, in turn, provide significant insight into whether a risk is worth underwriting and at what cost. For such questions to be missing from an application is dangerous for insurance companies and the clients of those companies. See Also: Space, Aviation Risks and Higher Education The current situation with technology E&O applications is equally worrisome. For example, in the exclusions list on one recently updated technology E&O policy there is no exclusion for computer languages known to be highly prone to cyber breaches. Theoretically, an insured software company could be writing code in Adobe Flash or Java Script, languages that should be avoided. By not excluding those languages, the insurer is exposed to adverse results of claims and lawsuits caused by an insured using hazardous script. Perhaps even worse, this insurer does not exclude wireless products that do not include proper encryption. Thus, if a company that produces baby monitors creates a product that broadcasts the signal in an unencrypted format, claims could arise from a concerned consumer of that product. After all, what reasonable parent would allow anyone to spy on her child? This issue is likely even worse because, time and again, successful lawsuits have already been brought against manufacturers of products that lack proper wireless encryption. The absence of such exclusions to protect itself and to encourage better behavior from its insureds calls into question whether a technology E&O insurer is in sync both with technology and the current legal environment. With underwriters being out of step in the present, one must wonder how they will be able to help drive the world forward in the future. There are other parts of the professional insurance sphere that are not poised well to be in harmony with the future. In the near future, robots will be introduced into social environments like nursing homes. If a robot injects medication into a patient, prescribes a medication or lifts a patient from a wheelchair to a bed, then that takes an already risky situation into an unexplored legal realm. If a patient suffers an adverse reaction to a drug that was injected by a robot, then how will the nursing home be protected by any of its insurance policies? Or, what if a robot is provided by the nursing home to a patient who needs companionship? If the robot malfunctioned and could not be replaced and the patient drew into a depressed state and died, then how would insurance cover a wrongful death suit by the patient’s family? A general liability policy certainly would not cover such an event, and an allied health policy is not currently worded to handle such a risk. What about the manufacturer of that robot? Would a technology E&O policy step forward and indemnify the manufacturer of the robot? Most countries, especially those like China, Japan and the U.S., have populations that possess far more elderly people than younger ones, and there are simply not enough people entering the field of senior care to handle the influx of those who need care in their golden years. This means that robotic companies are going to be filling that void and, in so doing, will create an unprecedented situation that will require the professional insurance sector to provide guidance and protection to the rapidly aging world. To provide that guidance and protection, however, will require professional underwriters to understand the intersection of technology, human care and the law, an intersection with which underwriters are currently less than conversant. So how do insurance companies offering cyber liability, technology E&O and other professional insurance get into sync with the evolving world they are underwriting? There was once an international competition that encouraged students in the seventh through twelfth grades to form groups of two or three people and build educational websites. The competition was known as ThinkQuest. It was supported by both governmental and private organizations, had strong support from educators in more than thirty countries and rewarded the most successful competitors with scholarships of as much as $25,000. A similar approach must now be embraced and championed by the insurance industry. The brilliance of ThinkQuest was that it brought together young people who could appreciate and understand a multitude of ideas, numerous bodies of knowledge and people who were willing to learn and teach at the same time and who could convey their ideas both by the written word and binary. The spectrum of ideas that the groups put forth ranged from examining a social phenomenon like Harry Potter to examining how music affects people’s mental and physical health. To be able to fully appreciate and understand nearly every cyber liability and technology E&O risk requires people who have an uncommon breadth and depth of knowledge that extends from simple areas like grammar to complex areas like quantum mechanics. When an underwriter tries to underwrite a risk like SSA (space situational awareness), to underwrite a risk in which a company produces electronic-photopic chips or to understand memory-resistant malware, that requires a degree of understanding that is clearly not being demonstrated by the majority of the current breed of underwriters. However, the degree of wide-ranging creativity needed here was what the ThinkQuest competitions were created to foster in young people. The insurance industry needs people who can draw from a wide range of knowledge, and it also needs people who can write binary code with exactitude. Insurance companies must employ cyber forensic engineers who can pinpoint where a security breach happened, how an intruder gained access to additional computers and how to remedy the situation. Being able to work individually or in a team, being able to backtrack to the point of intrusion and being able to view the world in tangible and non-tangible ways requires more than someone who can simply write one line of code after another. Currently, insurance companies depend on other companies to investigate data breaches, but this will not work out in the long run. In the 20th century, numerous insurance companies owned law firms to litigate claims economically. The 21st century will require cyber liability insurers to employ cyber forensic engineers to investigate claims based on network breaches. Moreover, in the very near future insurers will need to create an organization that tests routers, switches, servers, smart phones, robots and other technology devices to determine how secure or how capable those devices are. As has already been argued on the PLUS Blog in November 2015, not all technology devices are created with the same expertise, and figuring out which devices are least and most secure will greatly facilitate insurers’ ability to price policies correctly. However, to find young people who can view the computer realm in multiple dimensions, and to find those who can function in a cross-disciplinary environment and approach a risk from a multitude of angles can only be successfully accomplished on a large scale through an instructional competition. People who have a broad and deep appreciation for multiple disciplines and cyber forensic engineers are uncommon, and insurance companies are not the only ones who need such thinkers. cyber security companies, law firms, private and public educational organizations, research organizations, think tanks and governments are just a few sectors that need those type of people. This means that, as difficult as it is already to find thoughtful insurance people knowledgeable about the cyber world, the future is only going to be exponentially more troublesome. When the 20-year-old who is going into her senior year at college thinks about the past and future, what will she strongly consider for a career? Will she remember the competitions that the insurance industry hosted that allowed her to cultivate friends from all over the world, and allowed her to gain the needed assurance in her skills as a programmer or a writer to pursue a major in computer science or history? Will she remember the competitions that helped fund her time at college, and in doing all of that proved that being a cyber liability underwriter is a fulfilling career opportunity? Or will that 20-year-old have nothing to remember where the insurance sector is concerned? The Cyber Security Challenge is one competition that currently aims to increase the pool of cyber forensic engineers; however, it is not an international competition and focuses only on people who are capable of becoming cyber forensic engineers. Professional liability insurers need thinkers and tinkerers, and locating both on a large scale can only be accomplished through a competition like ThinkQuest. Nano-technology, advanced robotics, augmented reality and memory-resident malware are elements of a brave new world that cyber liability and tech E&O insurers are going to come face-to-face with in the short term. In three to five years, insurers are going to encounter robots where none have been before. If insurers do not create and enthusiastically support a competition like ThinkQuest, then insurers will not be acknowledged or remembered by those in college. Consequently, insurers will find themselves without a breed of underwriters who can thrive and understand the brave future. This must not be so!

The politics of guns in America are volatile, divisive and passionate, yet the risks that firearms present to organizations every day do not depend on the politics of the moment. Employers must deal with the reality of gun violence in America. A RIMS 2016 session discussed the legal aspects of what organizations can do and the practical implications of creating a firearms risk management program. Speakers were:

• Michael Lowry, attorney, Thorndal Armstrong Delk Balkenbush & Eisinger
• Danielle Goodgion, director of human resources, Texas de Brazil

What Risks Do Firearms Pose? OSHA states that an employer must provide “employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” See Also: Active Shooter Scenarios There are several risks to your organization, including:

• Operations can halt in the case of a shooting. You have issues like police investigations and possibly injured employees.
• Workers’ compensation will kick in if employees become injured.
• General liability will be activated to cover injuries of non-employees.
• Reputational risks are possibly the largest risks. You do not want your business associated with a violent act.

Most think that the Second Amendment bars private businesses from banning guns, but this is incorrect. The amendment applies to governments, not private homes and businesses. Some employers react by posting signs banning all guns. This simple sign can be a recipe for disaster for several reasons:

• Have you created a duty? If you post a sign, you have officially created a duty.
• Why did you create this policy?
• What are you doing to enforce this policy? Did you have a manual? Did you put up X-ray detectors? Probably not. You have to be able to prove you are enforcing the policy if you post a sign.
• Did you train your employees to enforce this policy? If this policy is not enforced, a person might be injured by a firearm on your property.

"Bring Your Gun to Work" Laws This is not a good idea. According to the law, business may not bar a person who is legally entitled to possess a firearm from possessing a firearm, part of a firearm, ammunition or ammunition component in a vehicle on the property. In Kentucky, an employee may retrieve the firearm in the case of self-defense, defense of another, defense of property or as authorized by the owner, lessee or occupant of the property. In Florida, the employer has been held liable for civil damages if it takes action against an employee exercising this right. Reputational risks also can apply. You could either get special interest groups protesting against your business or people who refuse to do business with you. The Middle Ground It is best to create a policy. Even if you support the right to bear arms, you can do it subtly. There are several provisions on what type of carry you allow and what signs are required. Business owners also do have the ability to allow no guns on the premises. See Also: Broader Approach to Workplace Violence Your policy should describe exactly how to approach a customer if an employee sees a weapon, including who should approach the customer, what to say and the steps to take to address the issue. Training is important. Why Train?

• Researchers from the Harvard School of Public Health and Northeastern University found the rate of mass shootings has tripled since 2011.
• In 2014, an FBI study considered 160 events between 2000 and 2013. 70% occurred in business or educational setting.
• In 2000-2006, the annual average rate was 6.4 shootings. That jumped to 16.4 in 2007-2014.

This is clearly a problem that is getting worse, so why is training rarely provided? Places of business are a target – especially retail, restaurants and businesses in the hospitality industry. The active shooter wants soft, easy targets in large, open, public and crowded areas, and the goal is to kill indiscriminately. If your business is doing well with large crowds, you are a soft target. Active Shooter Resources To learn how to manage this risk, you can find resources from:

• Law enforcement
• Insurance partners
• Government
• Outside experts
• Legal
• Human Resources

Online resources include:

• City of Houston: Run. Hide. Fight. Surviving an Active Shooter Event
• Los Angeles County Sheriff’s Department: Surviving an Active Shooter

My day job at Ribbit.me keeps me insanely busy. Too busy, unfortunately, to spend enough time thinking about one of the more exciting and disruptive impacts of blockchain technology: the breakdown of double-entry bookkeeping. In a previous life, I was a CPA, and I’ve been wanting to put some thoughts out there for a while. I still see very few people talking about the effect on blockchain on bookkeeping despite its potentially bringing into doubt the effectiveness of the most fundamental foundation of commerce today.  Tried and True Double-Entry Bookkeeping Double-entry bookkeeping is the basic foundation of how we account for value today. For 2,000 years it has served as an unquestionable given in commerce. There are two columns, the debit column and the credit column. There are two entries — the first entry is to record what you have, and the second entry is to record how you got it (e.g. debit cash and credit sales). If these aren't equal, we know counterparty exposure has not been properly accounted for, prompting an audit and a correction. It mandates the accounting of counterparty exposure for every single movement of value. It is a beautiful system in its simplicity and effectiveness. See Also: What's In Store for Blockchain But, what happens if the counterparty exposure is not known? What if we don’t know who owns, or is liable for, the value of assets recorded on a ledger? In the old paradigm, this was simply an impossibility. Counterparty claims to assets were always known, because, to receive or send an asset of value, it must be received by or sent to a counterparty! It seems so basic and fundamental, someone would think this could never be questioned. Until now. Permissionless and Permissioned Blockchains Enter blockchain. A blockchain is a single-entry bookkeeping ecosystem. Well, technically a permissionless blockchain is a single-entry bookkeeping ecosystem. A permissionless blockchain is an ecosystem where, obviously, permission is not required to participate. On the other hand, there is the permissioned blockchain. My company Ribbit.me uses a permissioned ledger as its platform. In the permissioned blockchain ecosystem, permission is required for a user to participate. The degree of permission can vary from ecosystem to ecosystem. Permissioned blockchains have come about to facilitate enterprise adoption of blockchain technology. If you want to know why, it's all about counterparty risk. A pure permissionless blockchain ecosystem is a type of distributed autonomous organization (DAO). In a DAO, there is no central authority running the show. Control is decentralized across anonymous users in the distributed network, and anyone can participate as a user. The blockchain does not know or care who the users are. It introduces the real potential for true universal and global financial inclusion. This is great! But, wait, the road to utopia isn’t that simple. An ecosystem of anonymous users means transactions with counterparties of unknown identity. In other words, it means we no longer know the identity of who has ownership of or who has creditor claims to the assets on the ledger. Double-Entry Bookkeeping in Legacy Banking When we deposit money into a bank account, we are transferring value to the bank as custodian of our asset. We still own the asset in our account and, at some point, the bank is required to return the asset to us. On the bank’s ledger, this transaction will result in a debit to cash, an asset account on the left hand side of the ledger and a credit to demand deposits (a liability account on the right hand side of the ledger). Easy-peasy double-entry bookkeeping!  Single-Entry Bookkeeping in a Permissionless Blockchain When a user acquires access to (not ownership of — keep reading to know why) a permissionless blockchain native token, it is effectively doing the same thing as what was described above. It is transferring or depositing value into a ledger wallet. In this case, the bank is replaced with network nodes performing as custodians of a distributed ledger. The depositor and the custodians can also be anonymous. On the permissionless-blockchain-distributed ledger, this transaction is recorded as a debit to the user’s wallet, an asset account on the left side of the ledger and a credit to… what? To answer that question, we need to figure out who is actually liable for the distributed ledger. Well, the network nodes should be, as they are our custodians of the ledger and, therefore, of the value contained within it. Furthermore, since every network node is of equal importance and authority, in theory, every node should equally share the custodianship liability of the assets recorded in the left hand column of the ledger. Anonymous Counterparties We have two problems here. In this ecosystem, both the users and the network nodes are anonymous. And because it is a DAO, there is no centralized owner/operator of the ledger to approach for access to network node identities. The Introduction of Single-Entry Bookkeeping Because the user’s network node counterparty is anonymous, it is impossible to record it as the entity liable for the asset. A search for ledger ownership in the form of a capital account will not be any more fruitful. Remember, this ledger is a DAO. By definition, no single entity owns or operates it. And, just like that, with nobody to attribute liability to and nobody to attribute ownership to, the right hand-side of the credit column disappears. Double-entry bookkeeping collapses. What is left behind is a single-column ledger in a single-entry bookkeeping ecosystem. I omitted one part of the bank-deposit example out of this blockchain example: “We still own the asset in our account, and, at some point, the bank is required to return the asset to us.” This was omitted because there is a possibility that the user can never really own value embodied as a blockchain native token. First, the user’s identity may be anonymous. Second, even if the user chooses to reveal its identity, the value it claims ownership of always resides within the blockchain ledger. It is literally impossible to have physical possession of the value. To do so would require a counterparty to request the returning of the user’s value to it. Paradoxically, the deeper one’s understanding of double-entry bookkeeping, the more difficult it may be to understand all of this. More than once, I’ve spent more than an hour trying explain this to university accounting professors and professional-practicing CPAs. They are so close to double-entry bookkeeping that asking them to question it is something akin to asking a physicist to question gravity. It’s like they say: Don’t try this at home, kids! Entirely New Challenges and Risks Cognitive dissonance aside, blockchain has introduced a new age of single-entry bookkeeping. This has opened a Pandora’s box of entirely new challenges and risks that are brought about by undefinable asset ownership/liability and unquantifiable counterparty risk. These are not just new challenges and risks for the transaction counterparties but for the regulators mandated to oversee it all. See Also: What Is and What Isn't a Blockchain? Challenges for Enterprise Adoption If the user is an individual, as sole proprietor of its person, it can make decisions regarding risk exposure on its own behalf. But can a corporate director? Can a corporate director authorize the use of shareholder capital for an anonymous counterparty transaction in a single-entry ledger ecosystem without violating its fiduciary duty to those shareholders? Can a regulator determine (with confidence) that a regulated entity in the same transaction is not in violation of KYC/AML or anti-terrorism financing laws? These are very important questions that have yet to be answered and that risk managers must demand answers to. Entirely New Accounting Standards Are Needed Once considered the boring bedrock of commerce, accounting as a discipline is now entering an era of uncertainty at the most fundamental level. This will force us to redefine how value is accounted for. This brings new opportunities — as we will soon see, single-entry bookkeeping will emerge as a new discipline of study and research. There will be a real market need to innovate standards that allow us to account for value in the new paradigm. This probably terrifies the accountants out there. But in reality it is good, as it is human innovation itself that is true source of wealth creation. If I have sparked an interest, feel free to reach out! You may very well be a pencil-pushing geek just like me.

At American Family Ventures, we think advances in product development will have a dramatic impact on the insurance industry. We’re also excited about new insurance experiences that combine “Insurance 2.0” distribution, structural and product innovation. We’ll discuss both subjects below. Product Before we dive in, let’s define a few things. We consider an “insurance product” to be the entire financial protection experience. From a whole product perspective, this definition includes processes inherent in the creation and the use of such products, including methods of underwriting and activities like claims and policy administration. We’re watching two product trends in particular:  behavioral disaggregation and the unbundling of policy time and coverages. Behavioral Disaggregation As the world becomes increasingly connected through mobile devices, sensors, networks and information sharing, new context becomes available for managing risk. Dynamic insurance products that react to comprehensive information on behavior will be a direct result of these increases in contextual information. See Also: Insurance 2.0: How Distribution Evolves The concept of contextual insurance is not new. In fact, the purpose of insurance underwriting is to segment and accurately price insurance using information about the applicant. Even behavior-based pricing is not a new concept. Since the 1950s, insurers have used access to DMV records to adjust rates in the event of speeding tickets or other traffic violations. However, the innovation we’re seeking goes a few steps further. An insurance provider that accurately understands the discrete behaviors influencing the safety of an asset and its users could also offer novel and effective ways to protect both. Behavioral data could be generated through connected devices, more robust asset histories and inventory tracking, collaboration with the owner on risk mitigating activities and the like. Using enhanced access to relevant behavioral information, new products would offer increased customization, accessibility, frictionless coverage acquisition and live reconfiguration. Perhaps someday we’ll see dynamic, multi-factor insurance policies that continuously and automatically adjust to choices the policyholder makes. Consider the following homeowners insurance example: A homeowner replaces an old fireplace with a new model that has important safety features. Of course, this fireplace is “connected.” As soon as the fireplace cloud tells the homeowner’s insurance carrier the new model is installed and active, the homeowner’s premium payment drops by 10%. Impressed with this outcome, the homeowner tells three of her neighbors about the product, and they promptly replace their own rickety fireplaces. As a result of the newly safe cul-de-sac , rates drop an incremental 3% for all residents in the neighborhood. Soon after, one of the neighbors is shocked to discover that his new model was incorrectly installed, creating a small gas leak that would become dangerous over time. Fortunately, his insurer, in coordination with the manufacturer, flags this issue and repairs the unit before it becomes a hazard. A week later, the three homeowners who originally purchased the product, dining out with their insurance savings, all decide to purchase water-leak-detection systems, for which they are promptly rewarded with an additional insurance discount. We’re still in the early innings of behavior-based insurance, but, as you can see, its impacts are meaningful. Contextual data doesn’t have all the answers, but it will drive new insights and, perhaps more importantly, prevent losses. Unbundling Policy Time and Coverages Existing insurance products bundle coverages. For example, consider that a standard homeowners policy consists of four types of coverages:

1. Coverage for the structure of your home
2. Coverage for your personal belongings
3. Liability protection
4. Additional living expenses if your home is temporarily unlivable

Each of these coverage areas then insures against loss from a number of specific perils (fire, lightning, wind, etc.). Each also has distinct exclusions. These coverages are put together, often in very standard ways, to create homeowner’s insurance. However, insurers might also unbundle coverages and fragment coverage time periods to create tailored coverage systems that react to the risks present (and absent) in various circumstances. These strategies subdivide coverage profile and duration into more relevant and accurate segments, offering more accurate pricing or supporting new forms of self-insurance. Fragmenting coverage time can be accomplished with on-demand or transactional insurance. As we all witness large portions of our lives becoming managed services — transportation, home ownership, fitness — paying to be protected against loss only when specific risks are present or a unique event occurs is an increasingly useful option. This could imply securing insurance only when circumstances or behavior indicate need, or using broad, umbrella-type coverage for losses in everyday activities and ratcheting up coverage for specific types of risk. For example, imagine an insurance service that uses access to a mobile calendar and other apps to offer timely insurance products based on daily activities. If your morning commute is in a Zipcar (that doesn’t drive itself… yet), you might be offered short-term, simplified personal auto insurance options before you leave. If you instead decide to walk to work that morning, you receive credit toward discounted health and life products. If you’re taking a long flight during inclement weather, you’re prompted with an offer to increase your term life insurance amount. If your job requires you to travel to an unsavory place, your employer is reminded to add kidnapping and ransom insurance to its existing commercial policy (yes, that exists). Unbundling coverage can be done with a la carte policies. In using a la carte features, insurers can offer insureds more control over the assumption or transfer of risk and, in turn, greater capacity to segment and self-insure (alone or in groups) specific parts of an asset, incidents or perils. This allows for the personal assumption of precise risks by excluding them from coverage. This is accomplished today, in part, through the selection of deductible levels, but we think there are ways to push the concept further. Of note, we believe the inverse of unbundling — “super-bundling”— is also quite powerful. This refers to insurance products that increase the scope of protection until the insured is no longer required to consider insurance at all. In essence, they abstract the idea of insurance from the buyer. Instead, as long as any obligations the customer owes the insurer (payments or data) are fulfilled, everything and anything is covered. Of course, this convenience is likely to carry additional costs. These contrasting approaches to providing insurance offer distinct benefits. Unbundling offers maximum economic efficiency in exchange for increased engagement and complexity, whereas super-bundling offers maximum simplicity in exchange for decreased control and higher costs. Additional Considerations and Questions Balancing the interests of the individual with the interests of society and public policy is a key question surrounding product innovation. For example, assuming unbundling scenarios are economically viable for the individual, how do we ensure the presence of coverage for liability-related incidents and the protection of third parties? Other questions that need answering as product innovation advances include:

• How will privacy and data sharing be addressed in mutually beneficial and safe ways? Customers will expect value in exchange for sharing information about behavior, so data recipients must create the right incentives and will have to protect personal data vigilantly.
• How does the unbundling of insurance consumption affect the way risk is aggregated and spread across large groups of people?
• Will frequent, accessible and granular self-insurance create adverse selection issues?
• Can unbundled customers effectively select risks to self-insure, or will people fall victim to the ludic fallacy, applying oversimplified statistical models to complex systems?
• And, as with any product, what is the appropriate balance between customization and ease of use?

Combinations Insurance distribution and structural/product innovation support one another in ways that are both reactive and complex. As a result, they can be used in coordination to create entirely new insurance experiences. One example we often discuss is the idea of “entire life” insurance. This is not the same as whole life insurance but rather describes a “super-bundled” risk management product offering the maximum amount of simplicity and flexibility to the insured. In short, entire life insurance would offer a single policy that captures information related to all of your daily needs (transportation, housing, health, travel, etc.) and wraps it into a dynamically priced instrument that indemnifies you against loss from anything bad that might happen. In contrast to the on-demand insurance, usage of entire life insurance is abstracted from the buyer. Instead, the policyholder has a single policy that represents the entire cost to insure that individual based on dynamically adjusted, minute-by-minute protection for all activities. Such a product, if at all feasible, would require a substantial amount of behavioral data and insight. The makers of this product, at least at first, might also need to discover new approaches to capital raising and risk pooling to offer the product within the bounds of state and federal law. Finally, it stands to reason that a product so deeply integrated with other services and data sources might be sold most effectively via some form of digitally enhanced adviser or life concierge service. Think Jarvis for financial security. See Also: P2P Start-Ups From Around the World

We also think that combinations like entire life create barriers to entry. If we revisit the simple Venn diagram from our first post, you can imagine a defensibility gradient, where increasingly challenging activities — from a technical, regulatory or human capital perspective — build on each other to create complex, difficult-to-replicate models and relationships.

Defensibility across three areas of Insurance 2.0 While the gradient diagram above portrays the center as the most difficult to replicate, it’s not hard to imagine the dark portion of the circle shifting based on the source of competition. In other words, it may be that, when comparing tech startups to insurance incumbents, barriers to entry are shifted toward the product, but when considering incumbent defensibility against market share erosion from incidental channels (competing directly with carriers), the gradient shifts towards distribution. ________________________________ In the past few posts, we’ve offered some guesses on what the future holds for insurance. However, given the speed of change and complexity of the systems in play, we've surely missed things and made mistakes. So, instead of making internal forecasts that are precisely wrong, we opted to share our observations with you, in the hopes you can incorporate or transform these ideas into your own. If you’re working on changing insurance in these or new ways, let us know!

It was in 14th century Florence that an epic awakening happened. It was all-pervasive. It wasn’t just art that began to thrive. Philosophy, economics, culture and science began rapid change, too. Education, technology and literature were thrown into a cauldron of modernization, and world-shaking disruption and advancements spread rapidly. Fast-forward to today, and the comparison is striking. As we enter a new era of disruption and change underpinned by new technologies, business models and more (see Future Trends: A Seismic Shift Underway), the past offers an opportunity to guide and inform our future. The insights may help us see opportunities from a new perspective. We’ve identified dozens of parallels and lessons from the Renaissance that can give insurers and technology experts food for thought as they prepare for this journey. Over the coming months, we will be taking a look at the renaissance unfolding in insurance and reflecting on when the world was shifting from the “dark ages” to a future of opportunities, possibilities and enlightenment. See Also: The Five Charts on Insurance Disruption As a preview, consider the original Renaissance and these modern parallels to today’s: Focus on People In the dark ages, individuals didn’t matter on the level they did during the Renaissance, when individual thought was cultivated and education encouraged. People gained freedoms to act and create in ways they hadn’t thought of before. Today, technology and connectivity have brought a new level of individualism to insurance. We are moving from mass standardization to hyper-personalization for everything from marketing to product pricing. The individual voice, rather than groups, matters more than ever. Universal Access The Renaissance changed communication. Moveable type and printing allowed communication to be more widely disseminated to the larger population. In today’s world, we can reach nearly everyone, any time, anywhere and in any way.  Transactions take place on mobile devices. Social media has made it so customer thoughts and decisions are not hampered by distance or hours of operation. The enlightened and prepared insurer has nothing standing between it and its customer. “Trade” has blossomed in the city of the internet. Reality and Empiricism Art and science in the Renaissance shared a trait — the drive for a “real view.” Artists approached painting and sculpture from the standpoint of realism, while science began to revisit the idea of research and empirical evidence. In our era, at least for the last several decades, insurers have also attempted to operate from a standpoint of mathematical certainty — pricing products based on historical data trends. Yet the digital era is bringing with it an entirely new set of real-time data streams and, with those, real-time, personalized analysis, pricing and decision-making. Our new perspectives will soon allow us to see into individual lives and habits with striking clarity. (For more on this, see John Johansen’s blog series on Data Symmetry.) We will enjoy enhanced levels of insight to engage and service customers as never before.  And all of this reality will be brought to us with dramatic speed. Insurers that are prepared with the agility to consume and analyze data in real time will have the advantage over their competitors to better serve their customers. Money-Driven Innovation The Renaissance didn’t happen overnight. It was spurred by a convergence of factors, the greatest of which was increased wealth. Trade in Florence had produced a new class of financier who was willing to fund artistic and scientific endeavors. Wealth created ease; ease allowed time for thought and innovation. Our modern businesses are also the beneficiaries of affluence. Population and economic growth have created a culture where even many of the economically disadvantaged have access to digital and mobile technologies. Those technologies provide online access to insurance to protect them against a growing array of risks. Likewise, investments in the 20th century helped insurers become more efficient and more accessible, fueling an improved product and service landscape within the traditional insurance business model. Today’s renaissance, however, is moving well beyond the traditional model. Significant capital investment in new insurance greenfield or start-up companies is fueling massive innovation in products, services and business models. For reference, simply consult the CB Insights Periodic Table of Insurance Tech. CB Insights has indicated that Q1 2016 has already topped the record for most early-stage insurance tech deal activity (Seed/Series A). This includes two start-ups: a peer-to-peer insurance company, Lemonade, and a small business insurance start-up, Next Insurance. Interest and investment is also expanding beyond venture investors to carriers and reinsurers such as Guardian Life’s GIS Strategic Ventures investment in health benefits startup, Maxwell Health and many more. For the 130-plus start-ups and private companies in the insurance tech space, CB Insights indicates that more than $3.5 billion in aggregate funding has been raised.  Money is the seed and the fuel for the massive innovation taking hold in insurance. In the coming weeks, we will dig deeper into the details of the insurance renaissance. We will uncover some of the philosophy behind modernization, while also thinking about the practical aspects of improved operations, digital capabilities and customer service. In each case, we’ll be keeping our focus on agility, innovation and speed so that we won’t just be learning about the renaissance, but we’ll be living out its lessons within our organizations.

The P2P insurance model promises to change the conflict dynamic between insured and the insurer. From Friendsurance to Guevara and the eagerly anticipated Lemonade, P2P insurance has already evolved two generations in six years. Now, we see the emergence of the next generation of P2P insurance; the self-governing model. People-to-People Insurance The jury may be out on the peer-to-peer insurance model, but that hasn’t stopped the steady stream of new entrants who believe in fundamentally changing the dynamic between insured and insurer. Back in December, I wrote this article on P2P insurance and featured two very different InsurTech start-ups. First, there was TongJuBao, a Chinese peer-to-peer insurer that provides social risk sharing insurance products. Recently, Tang Loaec, the founder/CEO sent me this announcement of a strategic partnership to distribute the company's products through Huaxia Finance across Greater China. See Also: Is P2P a Realistic Alternative? The second was Guevara, the U.K. motor insurer that was first to take the P2P model beyond a pure distribution play. I must give credit to Paul Andersen, Guevara’s co-founder and CEO, for the term “people-to-people insurance,” which is way more appropriate than peer-to-peer. Since that article, there has been a stream of announcements from the pseudo-stealth peer-to-peer insurer Lemonade. First, the company caught everyone’s attention with a $13 million seed round (which is significantly higher than usually associated with a pre-revenue, no-customer first raise.) Then, the company announced a list of high profile reinsurers lined up to back the business when it launches later this year. The latest news is the announcement that the company had hired a chief behavioral officer in guru Dan Ariely. There’s much speculation about what they’re going to do when they go live, but we’ll just have to wait and see on this one. In the meantime, I’ve been drawn to a new wave of P2P insurers. Some on the blockchain, some using Bitcoin and all based on a self-governing, peer-to-peer network model. The Next Wave of Peer-to-Peer Insurance is “Self-Governing” The first wave is based on a distribution model where "friends and family" risk pools self-insured each other's deductibles to lower premiums. Then we saw the carrier model, wave 2. Here, the pools are the primary bearers of risk, and they share in any retained premiums not paid out in claims. Wave 3 is the self-governing model, A back-to-the-future model that takes us further toward a mutual insurance than we’ve seen to-date. To find out more, I Skyped with Alex Paperno, the co-founder of Teambrella, the Russian InsurTech that uses Bitcoin to hold client money. This article appeared in The Digital Insurer.

Employers across the country are looking to provide employees with the largest and widest PPO networks as a means of giving employees choice.  Somehow the health insurance industry has determined that networks should be "all-inclusive." The more medical professionals and facilities in your network, the better your network is. It is time to raise a red flag on this kind of thinking. Before your organization looks to increase employee access to doctors and hospitals, there are three things you must understand about PPO networks. Larger Networks Can Lead to Larger Plan Costs You hear it all the time. Insurance carriers battle over who has the largest network both locally and nationally. Now, having a network with a national presence can be appealing if you are an employer with facilities and a workforce scattered across the country. However, a larger network opens the door for greater access to poor-performing physicians and medical facilities. The bigger the network, the greater the odds your employees are accessing doctors and hospitals who are not on the right side of cost, quality and outcomes. As a result, your medical plan's costs continue to rise year after year. See Also: Untapped Opportunity in Healthcare A Network "Discount" Can Be Misleading In a typical medical plan, the majority of the member population will use the plan via day-to-day services such as preventive exams, sick children and the occasional medication. For these folks, a network discount does an adequate job reducing costs for both the member and the health plan. However, imaging, surgeries and hospital stays are driving plan costs today, and it is here where a network "discount" can be misleading. Yes, network discounts are still applied to these services and, yes, the discounts can be 50% or more. However, when facilities are allowed to charge 400%+ of the limit allowed by Medicare, you are not getting much of a deal at all. To put it into simple terms, if I told you my iPhone is worth $2,000 but agreed to sell it to you for a 50% discount, I would still be ripping you off. Networks Often Block Creativity Recently, I had an interesting conversation with a national insurance carrier about a mutual client. After a thorough review of the client’s claim activity, we uncovered several facilities that were providing imaging services (MRIs, CT scans, etc.) at a low cost, much lower than the same services provided at other facilities. Knowing this, the client wanted to give members incentives to choose the low-cost facilities when needing imaging services by agreeing to have the health plan pay 100% of the service, saving both the member and the health plan money. However, we were told “no” by the insurance carrier because it had a duty to “keep the rest of the network happy.” If we are going to create change in the health insurance market, employers need to implement creativity into health-plan design. Unfortunately, most PPO networks discourage this kind of thinking. Remember, there is a place for PPO networks within the healthcare industry. However, if you are an employer looking for creative ways to give your employees access to high-quality, low-cost doctors and hospitals, do not count on PPO networks to pave the way.  

Would you buy a house if you didn’t know its price or the continuing cost of your mortgage? It seems like a ridiculous question, but many claimants are asked to make decisions of the same magnitude on the non-Medicare covered portion of their settlements with little to no reliable information. Most of the time, claimants don’t know the current cost of their medical treatment nor the future expected increases. While a Medicare Set Aside may provide a vote of confidence to the claimant for the MSA portion of a settlement, given that Medicare approves the amount, the costs that would not be covered by Medicare (also known as “non-qualified costs”) can be particularly daunting. Many adjusters try to avoid addressing the issue of non-Medicare covered items altogether in a settlement, but oftentimes it is a necessary component of the offer and a very contentious one. Estimating the pricing on big-ticket items, such as facility costs, custodial care service and home healthcare can be extremely difficult and often result in many cases never reaching settlement.  Working with a hands-on professional administration company, you can gain transparency into real-world pricing for these items and reach a definitive number for the costs.       What are some of the most significant non-Medicare covered expenses?

• Long-term skilled nursing facilities
• Home health aides and custodial care services
• Home modifications
• Certain creams, gels & compounds (Lidocaine, Voltaren, )
• Transportation
• Medical supplies sold over the counter
• DME bathroom supplies
• Services like acupuncture, gym memberships, home IV therapy

See Also: Healthcare Costs: We've Had Enough There is no exact science for how to appropriately cost out these expenses for a settlement. Many adjusters are trained to look at the past two years’ cost and then project out the future costs based on the claimant’s life expectancy. The issue with this method, as many applicant attorneys will be quick to point out, is that the carrier has sophisticated cost-containment systems in place to reduce what it pays on its bills. The true expense can be dramatically higher after settlement when the claimant is no longer covered by the payer’s systems and instead faces these costs alone, paying retail prices with cash. Other adjusters rely on MSA vendors to put together a “non-qualified” projection for these costs. It is worthwhile to examine the basis of these projections, given that, unlike MSAs, there is no specific guideline across the industry that the vendor must follow, so the figures can vary significantly. In contrast, with a professional administration provider you can often discover the exact cost that the claimant will incur after settlement for these expenses. Professional administration companies can go out and secure pricing for some of the largest cost-drivers, and often minimize or at least lock in inflation risks. For example, at Careguard, we have locked-in rates for claimants at specific facilities for long periods: 10 to 15 years, or for the rest of their lives. In other instances, we have been able to secure rates for home health treatment, depending on the type of care and requirements of the claimant. In addition, many professional administration companies have pharmacy networks that drive discounts on the creams, gels and medications that are non-qualified. Case Study: California Facility Costs An attorney introduced a case to CareGuard that was not going to settle due to disagreements over non-Medicare covered costs. The claimant was in a long-term skilled nursing facility in California. He and his family were interested in settling, but hesitant about the continuing expense of the care and medical cost inflation.  CareGuard took the following steps to help move the case forward: In this case, CareGuard was able to negotiate a rate with the facility that was about $54 a day less than the carrier had been paying. This reduced rate over 17 years generated a significant savings that allowed the carrier and claimant to find a middle ground and to settle the case. Non-Medicare covered expenses will continue to become more significant components of settlements. Reports indicate that home health attendant costs have risen between 1% and 2% over the past five years, that nursing facility costs have risen approximately 4% per year and that, in the last year alone, rates for adult day care rose almost 6% nationwide. There is also enormous price inflation and variance in the cost of the prescriptions. These challenges are not going away any time soon. As the parties to a settlement try to come to a resolution, knowing and using real-world pricing through a platform such as CareGuard can help bridge the gap. Don’t let the discrepancy in estimates of non-Medicare costs become a huge sticking point in your negotiations. Instead, introduce visibility into the cost and let a professional administrator help get everyone on the same page so claimants can feel confident that they’ve made an informed choice when they settle their case.