At American Family Ventures, we believe “Insurance 2.0.” will be, in part, shaped by structural innovation. The traditional insurance structure of centralized risk-pooling has been around for a long time. Unsurprisingly, it is also subject to heavy regulation. As a result, many entrepreneurs are using new approaches to lower regulatory burdens or unlock value through decentralization.

Two of the approaches we’re excited to watch develop are peer-to-peer (P2P) and private-investor-backed insurance.

Peer-to-Peer Insurance

P2P insurance isn’t a new concept. Mutual insurance companies effectively use a peer-to-peer model today. However, there appear to be a number of emerging approaches altering the dynamics of the risk/insured pool and creating new benefits for policyholders, carriers and investors.

For context, we see P2P as a set of techniques allowing insureds to self-organize, self-administer and pool their capital in a way that protects all the pool members from loss, all while ensuring any capital in the pool not reserved to pay claims (less any fees owed to a facilitator or administrator) is returned directly to the pool members. Of course, there is a great deal of nuance to making that work.

See Also: P2P Start-Ups From Around the World

Here’s a simplified diagram of a P2P insurance model:

We’ve identified a few reasons to think that, by redefining the traditional insurance structure, P2P models can offer unique benefits.

For one, the P2P system could mitigate elements of conflict in traditional, centralized insurance models. Because insurers (for the most part) get to keep the premiums they don’t pay out in claims, occasionally the incentives of policyholders and carriers fall out of alignment. Conversely, in a pure P2P model, because the premiums not needed for claims are refunded to the policyholders, in theory, any conflict with a carrier is diminished.

While that logic is clear, it likely oversimplifies the issue. The insurance system, while not without its flaws, has functioned for some time and has regulations and processes in place to mitigate adversarial circumstances. In addition, if conflict exists in the insurer/insured relationship, it likely remains present in the P2P model but shifts from customer/carrier to peer/peer. In essence, because any pool member’s payout is a function of the claims paid out to others in the pool, members now have personal disincentives to pay claims, similar to carriers in the traditional model. That said, the carrier/customer relationship isn’t perfect, and new variations of P2P could help advance it.

Secondly, P2P organizing models might leverage large networks like Facebook and LinkedIn more effectively than traditional insurance. The nature of self-selection logically fits the use of a social or professional network — it’s easier to imagine a group of Facebook friends deciding to form an “insurance group” than it is to imagine that same group recommending all of their friends purchase individual policies from a large provider. In effect, large networks power the formation of smaller networks.

In addition to organizing benefits, integration with large, network-based platforms can create efficiencies in administration and retention. Increased frequency of engagement as well as preexisting communication and payment infrastructure could power usability advantages, stronger net promoter scores and better retention rates.

Finally, P2P models, by enabling modifications to the size and composition of risk pools, could create differentiated pricing strategies. P2P models are often associated with self-organization, but they don’t necessarily require it. So, if P2P facilitators become involved in pool selection and can use existing or new underwriting criteria to influence or control pool composition, they could construct pools that offer each member the highest possible returns after claims (or, effectively, the lowest possible cost of insurance). In other words, P2P facilitators might algorithmically generate smaller baskets of varying risk profiles, shifting members, when necessary, to intentionally spread expected claims across numerous pools, thereby creating consistently lower average claims volumes per pool (and, consequently, better payouts for members).

Private-Investor-Backed Insurance

Private-investor-backed insurance allows third-party investment capital to pay or backstop claims expenses in exchange for investment return. For example, a private investor, in theory, could agree to receive premium payments from a basket of insureds in exchange for the obligation to pay claims when they arise. In this model, the private investor (or group of private investors) essentially steps into the financial shoes of the insurer, accepting a stream of certain cash flows in exchange for an uncertain future liability (which could exceed those cash flows). The facilitator of such a marketplace would likely take some fees in exchange for customer acquisition, administration, securing reinsurance and performing the functions of an insurer other than providing risk capital.

See Also: Insurance 2.0: How Distribution Evolves

There are a handful of benefits we think the private-investor-backed model offers participants in the insurance relationship.

First, if certain types of insurance risk can be effectively securitized, those securities would (theoretically) offer professional or retail investors diversification through an instrument that is not highly correlated with the general market (low beta). Some investors already have exposure to insurance through reinsurance contracts and catastrophe bonds, but securitized insurance could offer broader access to more familiar risks with different payoff profiles.

Secondly, similar to what Lending Club and Prosper were able to accomplish in personal and small business lending, a private-investor-backed insurance model might offer price-competitive options to customers who have difficulty securing traditional insurance. For example, today, customers who are unable to secure insurance from conventional insurers (standard market) use excess and surplus (E&S) markets to address their insurance needs. If private investors are willing to take on these E&S risks—whether due to the presence of unique underwriting criteria or higher risk appetites—they could create new competitive dynamics in the E&S market and ultimately improve options for buyers.

As a side note, we often hear people combining the notions of P2P and private-investor-backed insurance. In our minds, they are related and can work together but are separate concepts. Private investor backing is not a prerequisite to building a P2P model — a pure P2P model could employ a variety of strategies to guarantee liquidity and solvency. For example, P2P insurers could leverage reinsurance to cover large or aggregate claims beyond the pool balance, eliminating the need for private investment capital. The P2P insurers might also use traditional fronting arrangements to ensure solvency. By comparison, a pure private-investor-backed model doesn’t need P2P features to function. Instead, it might offer investors financial products that look similar to reinsurance contracts without making any changes to risk pooling or centralization of control.

Additional Considerations and Questions

There are various other structural approaches that might be used to create acquisition cost and pricing advantages or lower barriers to entry for start-ups. Often, these are not necessarily new structural ideas but are rather applications of existing legal strategies employed in surplus or specialty lines insurance to broader, bigger lines.

The successful execution of the P2P model relies on a number of assumptions we’re sure someone will figure out, but we don’t fully understand them just yet. For example, will pools self-select, or will they need to be automatically or algorithmically selected? If self-selected, will most pools (financially) perform as expected, or will there be a small subset of high-performance pools (created by information asymmetry) that generate an inverse adverse selection issue for the P2P business, thereby creating disincentives for participation by the majority of potential buyers? Will pools self-administer and self-police to influence lower losses and guarantee payment of claims, or will some centralized entity still need to exist to ensure member compliance? Will there be regulatory hurdles to overcome if small pools are constructed to reduce claims costs? Finally, how will pool facilitators/administrators/members handle float management — will the capital in the pools sit in cash, or will those assets be actively managed until need for claims? If actively managed, by whom?

The issues we’re interested to see addressed in private-investor-backed insurance are also numerous. Can insurance be a desirable or profitable asset class for private investors? Apart from catastrophe bonds, we haven’t seen much securitization of insurance. Which insurance products or coverages might one securitize best? In other words, which magnitudes and patterns of risk exposures will private investors accept, which existing or new data will they demand as third-party underwriters and what terms will be up for negotiation? Can facilitators find a way to make long-tail risk compatible with liquidity expectations for the asset class?

At the end of the day, we’re looking forward to finding out how companies are able to use structural innovation to create unique and differentiated value for customers.

A 74-page study released on March 18, 2016, covers 15 large, multi-state employers that provided their Texas employees with customized occupational injury benefits in lieu of workers’ compensation coverage between 1998 and 2010. This is Professor Morantz’s second research study on Texas “nonsubscription” (also known as the Texas “option” to workers’ compensation). The new report is found here. Major findings: 1. Option programs paid better wage replacement benefits than workers' comp programs did. 2. The frequency of severe, traumatic employee injury claims was cut in half. 3. The percentage of employees disabled dropped by a third. 4. Employer costs were cut in half. 5. Coverage exclusions had minimal impact on cost savings. 6. Negligence liability exposure gave incentives to option employers to invest in safety. 7. As large Texas employers elected the option, workers' compensation costs dropped. In the study, Morantz stated all the study participants “offered employees private plans whose benefits roughly resembled (yet also differed from) those available through workers' compensation.” She said, “Some ubiquitous features of private plans—such as first-day coverage of lost earnings  and wage replacement rates that are not capped by the state’s average weekly wage—are more favorable to injured workers than workers’ compensation.” See Also: Texas Work Comp: Rising Above Critics Morantz expressed concern in her study because past studies have confirmed the existence of two moral hazard effects:

1. “Risk-bearing” moral hazard predicts employees will take more risks on the job as benefit levels increase; and
2. “Claims-reporting” moral hazard refers to the expectation that a worker will be more likely to file an injury claim (including for a feigned or off-the-job injury) as benefit levels increase.

The study says: “Consistent with the existence of both moral hazard, nearly all studies have found that increasing benefits or shortening waiting periods increases the frequency, cost and duration of claims.” Fewer Traumatic Claims and Lower Costs In spite of this historic research on injury benefit improvements, Morantz found:

• Frequency of severe, traumatic injury claims declines by about 47% under the Texas option;
• Serious claims involving replacement of lost wages are about 33% less common in the option environment;
• Employer costs per claim fell by 49% under the option;
• Employer costs per worker hour fell by about 44%; and
• Although the fall in wage-replacement costs is larger in percentage terms, the decline in medical costs was equally consequential.

Coverage Exclusions Have Minimal Impact. The option injury benefit plans studied all contain:

1. Exclusions (non-coverage) for permanent partial disabilities;
2. Exclusions for certain diseases (such as any caused by mold, fungi, pollen or asbestos) and some non-traumatic injuries (such as non-inguinal hernias, cumulative trauma if the employee has worked less than 180 days, carpal tunnel syndrome, chronic fatigue syndrome and fibromyalgia),
3. Caps on total benefits; and
4. An exclusion for chiropractic care.

Morantz found these exclusions from benefit coverage account for little of the estimated cost savings, writing, “Even when all four factors are accounted for, [the Texas option] is still predicted to lower total cost per worker hour by more than 35%.” Benefit Enhancements and Liability Exposure Lead to Safety Improvements Morantz mentioned a prior research finding that a rise in benefits can spur employers to invest more heavily in safety. Also, the study says the significantly lower frequency of severe, traumatic accident claims “provides strong evidence for a real safety effect, which is precisely what economic theory would lead one to expect. [Texas option employers] are, at least in theory, internalizing all of the costs associated with workplace accidents (including tort liability), which should induce them to invest more in safety-enhancing technologies.” The negligence liability exposure for employers that elect the Texas option “may prove costly in exceptional cases” and “may strengthen their incentives to implement costly safety improvements” which, in turn, offsets the above moral hazard effects. Grounds for Denying or Terminating Benefits Morantz found the majority of private plans include more grounds for denying claims or terminating benefits in particular cases than are commonly found in workers’ compensation. These provisions focus on employee accountability just before or after the injury takes place and on the nature of the injury. (Those provisions are commonly subject to a “good cause” exception that must be administered by a fiduciary under ERISA in the best interests of the injured worker.) Impact of Employment Status Contrary to option critics' claims that all injury benefits cease upon any termination of employment, Morantz found that medical benefits continue unless the employee is fired for gross misconduct. She also found that option plans commonly do not terminate wage-replacement benefits if an employee is laid off, but such benefits do cease if the employee voluntarily quits or is fired for other reasons. Only one study participant’s plan reserved the right to terminate wage-replacement benefits if the employee was fired for any reason at all. See Also: What Schrodinger Says on Opt-Out Retaliatory Discharge Claims  Morantz noted that the Texas’ Workers’ Compensation Act protects employees who file workers’ compensation claims from retaliatory discharge but that employees covered by option programs enjoy no similar protection under state law. However, she also noted the anti-discrimination/anti-retaliation claim available to workers under Section 510 of ERISA. Drop in Texas Workers’ Compensation Rates as Large Employers Moved to the Option Although very small firms (those with one to four employees) have always been disproportionately likely to forgo participation in Texas workers’ compensation, Morantz noted that substantial numbers of very large employers (those employing at least 500 workers) began doing so around the turn of the millennium. In 2001, Texas had among the highest reported cost-per-claim among the 14 states included in the annual Workers’ Compensation Research Institute (WCRI) cost benchmarking study. Since then, both medical costs and indemnity payments per claim under Texas workers’ compensation have plummeted. Need for More Study Morantz concluded there is an urgent need for further analysis of the economic and distributional effects of workers’ compensation systems co-existing with privately provided forms of occupational injury insurance. This includes the need to further (1) identify which specific characteristics of private plans are producing the majority of cost savings, (2) study potential cost-shifting to government programs or group health plans and (3) consider differences between option programs sponsored by small-, medium- and large-sized employers.

In our emerging on-demand economy, Blue Ocean strategy will abound for P&C and life and annuity (L&A) In this post, I will focus on the Blue Ocean strategies that are needed in the P&C insurance industry. The essence of Blue Ocean strategy, as discussed in W. Chan Kim's and Renee Mauborgne's 2005 book Blue Ocean Strategy, is "that companies succeed not by battling competitors but rather by creating 'blue oceans' of uncontested market space." Society's expanding on-demand economy is generating newly uncontested P&C insurance markets. These new insurance markets are being formed from the blurring of consumer and corporate exposures that have historically been considered separate exposures by insurance companies, intermediaries, regulators and customers. My objective in this post is to discuss the emergence of a new insurance player, a licensed insurance intermediary, that offers insurance that the Transportation Network Company (TNC) drivers—specifically Uber and Lyft drivers—should purchase to protect themselves, their ride-share vehicles and their passengers. TNC drivers have insurance requirements for all three time periods From the moment they "tap the app on" to the moment they “tap the app off,” Uber and Lyft drivers generate a fusion of personal and commercial automobile insurable exposures. The fused automobile insurable exposures are in play throughout three three time periods during which drivers need to protect themselves; their personal vehicles being used as ride-share vehicles to pick up, transport and drop-off their passengers; and, of course, their passengers. The three time periods are:

1. Time Period 1: This period begins when an app is turned on or someone logs in to the app but when there is no ride request from a prospective passenger. The driver can be logged into Uber, Lyft or both, but the driver is waiting for a request for a ride.
2. Time Period 2: This period begins when the driver is online and has accepted a request for a ride but has yet to pick up a passenger.
3. Time Period 3: This period begins when the driver is online and a passenger is in the car but has yet to be dropped off at the destination.

No, your personal automobile insurer probably does not cover the ride-share It would be foolhardy (at best) and extremely costly (to the ride-share drivers) to assume the insurance policy that covers the driver's personal automobile would also cover the exposures the driver generates as a TNC driver throughout the three time periods. However, there is an expanding list of personal automobile insurers that:

• cover time period 1 for ride-share drivers—TNC companies do not provide coverage during this period; and
• will not cancel a driver’s personal automobile insurance policy if the driver tells the insurance company she is using the vehicle as a ride-share vehicle while driving for Uber or Lyft.

But the fact remains that there is a paucity of insurers that cover the personal and commercial automobile risks for people using a vehicle as a ride-share vehicle during all three time periods. Further, drivers could very well find themselves with insufficient coverage even if the TNC provides coverage during time periods 1 and 2. The paucity represents Blue Ocean uncontested market opportunities The opportunities are the drivers' need for insurance coverage to:

• the fullest amount possible given the requirements of each state and each driver’s situation (i.e. the cost to repair the vehicle will differ by vehicle and state where the driver operates)
• fill the insurance gaps between 1) the driver’s personal automobile coverage; 2) what Uber or Lyft provide during time periods 2 and 3; and 3) what each state requires.

Simply put, depending on the type of vehicle the driver is using as the ride-share vehicle and the state where the driver is operating, it is entirely possible that whatever insurance the TNC provides—even if it meets the minimum requirements of the state—is inadequate to financially help the driver (Note: this is not meant to be an exhaustive list of financial requirements):

• remediate/restore the ride-share vehicle to its pre-damaged condition;
• pay for physical rehabilitation for the driver, passengers or pedestrians who are injured in an accident caused by a ride-share driver or a third-party;
• pay for property remediation caused by the ride-share driver
• pay the lawsuit of ride-share vehicle passengers who claim the driver attacked them;
• pay for the lawsuit of ride-share drivers who claim a passenger attacked them; and
• make payments in lawsuits brought by passengers or pedestrians injured or killed, or owners of property destroyed or damaged by the ride-share driver.

Slice emerges to provide hybrid personal and commercial P&C insurance Slice Labs, a new player in the insurance marketplace based in New York City, is emerging to target this specific uncontested market space by providing Uber and Lyft drivers with access to hybrid personal and commercial automobile insurance for all three time periods. In a March 29, 2016, press release, the company announced it secured $3.9 million in seed funding led by Horizons Ventures and XL Innovate. I truly appreciate and personally respect Slice for taking the time to enter this Blue Ocean market space in the “right way” by first becoming licensed in the states where the company wants to operate. Currently, Slice is licensed to conduct business for Uber and Lyft drivers in seven states: California, Connecticut, Iowa, Illinois, Pennsylvania, Texas and Washington. Getting licensed Moreover, Slice’s business model is to operate as a licensed insurance intermediary with underwriting and binding authority. The intermediary has become licensed as insurance agents for personal and commercial P&C, excess and surplus (E&S), and accident and health (A&H) insurance. Slice also has managing general agency licenses in the states where that license is required to sell the hybrid insurance coverage. Slice is taking this path of licensure because it is using a direct model and doesn’t plan to distribute through agents (intending instead to distribute through the TNC platforms and directly to the drivers). Further, because this is a hybrid personal and commercial automobile insurance opportunity, Slice is designing and filing the requisite policy forms in each state where it wants to operate. Slice is underwriting the risk, but it is not financially carrying the risk. For that, Slice will be working with primary insurers and reinsurers. Slice has not yet reached the point where it can identify which (re)insurers are providing the capability. Obviously, without having the insurance financial capacity, Slice can’t operate in the marketplace (unless Slice plans to use its seed financing and future investment rounds for that purpose—assuming that is allowed by each state where Slice wants to operate). It is also important to know which (re)insurers are providing the capacity. I hope Slice releases that information very soon. Conducting business with Slice A driver purchases the hybrid policy by registering on the Slice app (registering is the process of the driver receiving and accepting the offer to apply for insurance), which triggers Slice’s underwriting process. At the completion of the underwriting process, Slice generates and sends the driver a price for the policy that will cover the driver’s fused personal and commercial automobile insurance requirements for each cycle of turning on and off the Uber or Lyft app. Once the driver purchases the policy, Slice sends the driver the declaration page and policy in a form required by each state. Slice will send the DEC page and policy digitally if that is allowed by the state. Moreover, the Slice app will show the proof of insurance, the time periods the insurance policy is in effect and the amount of premium being charged during the time period from “app on to app off.” If there is a claim, the driver will file the first notice of loss through the Slice app. Although Slice plans to work with third-party adjusters to manage the claim process, the driver will only interact with Slice until the claim reaches a final resolution. What do you think? Will this uncontested market space remain uncontested for very long? I sincerely doubt it. The addressable market is huge: every Uber and Lyft ride-share driver who does not have the requisite insurance or doesn’t have sufficient insurance (the two are not necessarily the same animal). What do you think of Slice, of this market opportunity and of other on-demand economy opportunities that reflect a fusion of personal and commercial insurance exposures?

People often use "innovation" and "transformation" synonymously. Both words evoke thoughts of change and modernization. Both words are important outcomes of the change management life cycle. We know innovation is occurring all around us, as people find ways to improve things. Alternately, transformation is the result of moving from one state to another. So, should we innovate, or should we transform? Should we do both? What’s the difference? See Also: Does Your Culture Embrace Innovation? I think the best way to answer is to explore the differences between innovation and transformation in insurance and break each down into definitions and examples. Then, you can determine where your company is in the change management life cycle and decide what will work best for your organization. What SMA has found, as we work with insurers, is that innovation and transformation are not only distinct, but are decidedly different, and their impact on organizations is different, too. Innovation Innovation is defined by SMA as rethinking, reimagining and reinventing the business of insurance. We have seen the results of innovation in business models, customer relationships, new products and new services and in how investments in technology are made. A perfect example of innovation is the focused improvements of customer experience. Once, customers had to push paper and make phones calls back and forth with agents, but innovation has made these types of interactions a distant memory. Today, chat, apps, portals, mobile, etc. have started to create an innovated customer experience. It is different and (arguably) better. Similarly, in the data analytics arena, innovation in the ways we use and apply data has changed the way insurers operate, price policies, handle claims and compete in the market. Innovation makes something that once seemed impossible possible. It is rethinking the way of doing things, questioning the possibilities and turning them into action. Transformation Transformation is the evolution or journey from a current level to a different and better state. SMA describes it as modernizing and optimizing. Like innovation, transformations produce an improved state, but we can also measure the journey as an outcome of the process. The journey of transformation is the tangible process, structure or building block for future success, even if a project fails or takes a different shape. Transformation can be seen in core system replacements, during which existing and necessary underwriting, billing and claims capabilities are shifted and moved into a better state through improved technology and processes. Transformations are evolutionary and occur over time. Our recent research reveals that approximately 13% of insurers self-identify as innovating, while 45% identify as transforming. That’s a pretty sizable difference. The data suggests that transforming existing systems and processes is a necessary effort in today’s world. SMA predicts the percentages of both innovating and transforming insurers will continue to grow. Most insurers need both!

Have you ever seen footage from old auto shows that showcase the "car of the future"? It always seems to be some sleek looking vehicle slowly spinning on a turntable, and everyone at the show can't wait to get one. Examples from past eras include the Cadillac Cyclone, Ferrari Modulo and Ford Nucleon. Only problem is, those concept cars never get built. Some features may get incorporated into production vehicles, but, in reality, that shining vision of the future never materializes. Some people see underwriting technology the same way. “Sure,” they say, “the features and functionality of a modern underwriting system sound really cool, but the promise of underwriting technology that truly transforms business results is just a fantasy.” See Also: The 5 I's of Underwriting  In reality, the next generation of underwriting technology is already here. It’s in production, it inspires real business value and a good number of forward-looking insurers are enjoying the ride! Property/casualty insurers are more engaged than ever in innovation initiatives, and strategy meets action (SMA) research ranks underwriting as one of the most highly targeted areas for investment. That’s because today's underwriting technology—especially in the form of dedicated underwriting workstations—is actually delivering on the promises of data-driven, workflow-optimized risk evaluation processes. Underwriting workstations are streamlining the underwriting process, making underwriters more efficient and helping to increase collaboration with producers. And, most importantly, underwriting workstations are giving underwriters access to a host of data and tools for better risk decision making, all while lowering loss ratios and driving profitability. Underwriting is often referred to as the engine of property/casualty insurance. The more underwriting operations are consistent, optimized and streamlined, the better the outcome. As insurers look to innovation strategies to advance their businesses, SMA’s outlook on industry trends indicates that underwriting workstation technology is playing a vital role in reshaping the underwriting process. Underwriting workstations stand out as a winning innovation investment because the real-world experiences of insurers that have already embraced the technology are a solid indicator of the benefits. Today, insurers continue to face challenges with legacy underwriting processes. From long processing and turnaround times to agent and underwriter communication delays and manual or paper-driven workflows, operational pain is often a standard fixture in conventional underwriting. Such restrictions actually discourage an environment for innovation, keeping underwriters from what they are meant to be doing: making the best possible risk evaluation decisions, as quickly as possible. The business and technology justifications for investing in advanced underwriting technology are plentiful. In fact, insurers are investing in modern underwriting technology and data environments as a foundational layer for business transformation. It is increasingly possible to make smarter, more informed risk evaluation decisions by using responsive, dedicated underwriting workstations that are connected to new sources of data and predictive models. The ability to access, assemble, manipulate and interpret risk information from a centralized, connected system is creating new opportunities for better and more consistent underwriting. More than ever, insurers are able to leverage modern underwriting workstations to offer the best coverages or exclusions at the right price. Those insurers with underwriting workstations in place have seen high returns on their investment. They experience growth in direct written premium, improved quote efficiencies, accelerated submission appraisal and see a boost in risk assessment productivity. Underwriting workstations sharpen the focus on actual risk evaluation, eliminating low-value tasks and the need to hunt for information. The solution increases the level of consistency, discipline and knowledge-sharing across the enterprise, through built-in rules, check lists and required supporting documentation before an application is allowed to move forward. Insurers may have aging technologies that perform key functions satisfactorily but, at a minimum, mandate underwriters access multiple systems (CRM, policy, billing, claims, loss control, etc.). The deployment of underwriting workstations insulates underwriting teams from having to maneuver in multiple systems to fulfill their tasks. Instead, data from diverse platforms can be made available to underwriters in the single, stable user interface of the underwriting workstation. It is a popular notion that policy systems alone can efficiently support the underwriting workflow. But the need for increasingly complex and data-driven risk evaluation precision—particularly by commercial and specialty lines insurers—indicates that a more sophisticated underwriting technology platform is required. Indeed, underwriting workstations can have the highest value when integrated with modern policy systems. The combination establishes a strategic and scalable enterprise platform, adding previously unattainable capabilities such as multi-line proposal workflows, full insured/account views and team-based underwriting. See Also: AI's Huge Potential for Underwriting Workstations also give agents and brokers access to the full underwriting process, making for easy collaboration and faster turnaround times. Producers and underwriters can share documents, notes and e-mail, providing real time visibility into the submission process for new business, renewals and endorsements. With underwriting workstations, managers gain support for regulatory and compliance requirements with systematic audit trails, and executive management gains deep insight around entire books of business. The organization also gains new strategic capabilities such as multi-line, account-based underwriting and becomes positioned to rapidly scale and expand products or lines of business. As data sources predictably grow and become more available, underwriting workstations allow insurers to leverage new sources of risk information. SMA research shows that more than 50% of property/casualty insurers are currently using data and analytics for underwriting and risk management, with more than 10% piloting data and analytics solutions and 25% planning to use those solutions in the next three years. The research indicates an increased reliance on varied and external data—such as geospatial models, catastrophe models, telematics and other sources—to support underwriting decision making, and it is helping increase profitability by eliminating risks that may currently be indiscernible in the underwriting process. While the ability to fully incorporate new data into business workflows continues to evolve, one key imperative for insurers is to improve their technologies and tools in a manner that informs and improves the underwriting process but does not further overburden underwriters with having to locate and integrate risk data. Insurers that capitalize on analytics in risk decision-making are able to accelerate growth and improve profitability. Therefore, data and analytics capabilities must be integrated within the underwriting workflows, and they must provide contextual analytics based on the risk being evaluated by the insurer. Underwriting workstations facilitate integration of multiple data sources and analytics, and they provide context based analytics at the point of the underwriting decision. So when insurers are looking for next generation technology to improve underwriting efficiency and boost the precision of risk evaluation, they don't have to wait or compromise. Unlike those concept cars of the future that never see the road, underwriting workstation solutions are already here and are tearing up the tracks.

Is your life insurance policy risk-free? At its core, a cash-value life insurance policy consists of three components: interest rates/dividend rates, mortality costs (cost of insurance) and expense charges. And, over the last 10 years, interest rates have been at historic lows. They are often lower than the guaranteed interest rates on universal life insurance policies. Something has to give. Insurance companies traditionally have invested their funds in debt-related investments (mostly bonds). As insurance companies are not earning enough interest to meet the projected interest rates on universal life and other cash value life insurance policies, they have had to lower the interest rates they credit to their policy owners. On some of these older policies, the guaranteed interest rate is higher than what the companies are earning, so the insurance companies are losing money on interest rates. See Also: How to Reach Millions With life Insurance What happens when insurance companies lose money? Well, they're not charities, so they look for the money in other places. Some companies have been able to make up some of the difference by changing their investment portfolio; however, by regulation, they are restricted in what they can invest in to some degree.  Why Am I Reading About Universal Life Policies Terminating?  Keeping in mind that almost every universal life insurance policy is crediting the guaranteed minimum interest rate, the insurance companies really only have one other component they can change to continue to maintain profitability. And that's the mortality costs, also known as the cost of insurance. A number of companies have recently announced increases in their mortality costs, though they do not typically disclose what the actual change is (dollar amount or  percentages). These companies include AXA Equitable, Banner Life, Security Life of Denver, Transamerica Life, Voya Life and William Penn Life. It is important to note that the companies are only raising mortality costs on some universal life policies, not all of them.  It is highly likely that other life insurance companies will follow, especially if there are no repercussions (regulatory, media, consumer, etc.).   If you have a whole life policy, you may be thinking, "Well, I'm safe, I'm getting my dividends." Dividends are tricky. Companies with whole life policies have reduced dividend scales, but this is usually not disclosed anywhere—you just receive lower dividends. On a whole life policy where your original projection was to pay premiums for X number of years, you'll find yourself paying premiums for much longer periods without ever being told. Most people don't realize their premium payment periods have been significantly extended.  Also, you won't be building up the cash value that was on the original projection, so if you bought a policy using the "Missing Money concept," "Be Your Own Banker concept" or a similar concept, you are almost certainly not going to end up where you expected. (This is setting aside the issue of whether these concepts really make sense, but that's a topic for another newsletter/article.) What's This Mean for You?  If you have a cash value life insurance policy, especially one purchased more than 10 years ago, your policy has a very high chance of terminating without value. To avoid this unwanted outcome, higher premiums are needed on almost every older universal life policy (traditional universal life, variable universal life or indexed life), basically on any life insurance policy where the premiums are not fixed. And if your premium is guaranteed, such as on a whole life policy, you may be paying premiums for significantly longer than expected or will be receiving a lower cash value. "So," you ask, "why hasn't my insurance company or insurance agent told me about this?" Good question. The answer could be any or all of the following: The insurance companies are not facing facts; the insurance companies would prefer to not face the issue; the insurance company does not realize the issue exists; the agent doesn't understand the problem; or the regulatory system is not addressing it yet.  This is definitely a matter of concern because life insurance companies are not detailing the impact on premiums and the life of the policy. And companies are not required to do so; nor are they even required to notify policyholders of increases in their costs of insurance (mortality costs).  How Do I Find Out About My Policy?  Recently, Bottom Line Personal interviewed me for a story on this topic: "Your Life Insurance Policy May Be Terminated." As mentioned in the interview, the only way to determine the impact of this increase in mortality costs is through an in-force illustration. An in-force illustration is a projection of future values based on current assumptions. The Insurance Literacy Institute has free "Insurance Annual Review" guides that include a form letter to request in-force illustrations in the Resources Section.  Your in-force illustration request should include a projection based on current premiums and assumptions, along with a request for the required premium to continue your policy to maturity (maximum length). The difference in premium may be significant. What Should I do?  A couple of things to consider are your health and life expectancy as well as your current need for life insurance. Most people find they don't have a need for permanent life insurance because they have other assets they accumulate and that replace the need for life insurance. Remember, life insurance is for protecting those who are financially dependent upon you. If you do need your life insurance policy, consider if you can pay the higher premium that would be required to keep your policy in force to maturity, or consider if a reduced death benefit would meet your needs. You should also take a look at the ratio of premiums to death benefit. If you're paying in 10% of the death benefit each year in premiums, then the policy doesn't provide you good leverage. Surrendering the policy is an option to consider, especially if there is a sizable surrender value. See Also: Bringing Clarity to Life Insurance Another option is selling a policy in the secondary marketplace (life settlement), though this needs to be approached carefully. Big Question:  How many other companies have increased their mortality costs, and how many other policies are affected?

What do you do when a group of precocious students decide to build a satellite and launch it into space? Or, when they decide to build an unmanned aviation vehicle (UAV)—more commonly known as a drone—and fly it over a busy urban market? Or, when they design and launch a few rockets October Sky-style from a training field on campus before heading to a NASA competition for a chance at $50,000 in prize money? As a risk manager, considering the answer to these questions may cause a heart palpitation or two as you think about the potential effects of these educational opportunities on the educational institution. Not only does the institution face increased liability and property damage risks, but there is also the potential for increased risk to reputation and even regulatory compliance considerations. Insurance was likely the last thing the students at St. Thomas More Catholic School in Arlington, VA, were thinking about when they began construction on a shoebox-sized satellite called Cubesat. According to a Washington Post article, the purpose of Cubesat, which was released from the International Space Station on Feb. 15, 2016, is to beam photos from 200 miles above the Earth back to computers in their school library. You can view pictures from the satellite here. See Also: Should We Take This Risk? Insurance was also, probably, the last thing students from the University of Wisconsin-Whitewater were thinking about in October 2015 when they launched their drone to capture aerial images of the new Whitewater City Market. According to the University of Wisconsin News, the purpose of the project was to respond to the market organizer’s request to geographically depict the organic growth of the Whitewater City Market. A video of the aerial images has been posted to YouTube and can be viewed here. To the 54 college teams selected by NASA for 2015-2016 NASA Launch Challenge, insurance was likely pretty low on the list of considerations as the teams worked to design, construct, test, launch and successfully recover a high-powered reusable rocket and its payloads. The purpose of the challenge is to encourage participation in STEM fields and to examine innovative solutions to potential issues that may arise during space travel. There is also $50,000 in prize money for the top three teams that complete the challenge. For 2015-16, the competing rockets will be launched on April 16, 2016. So, what are the risks associated with these types of activities, and how can insurance assist the college in transferring some of these risks? According to a white paper recently published by Allianz, a large commercial insurer, these types of aviation/space risks can be bifurcated into two areas: (1) ground or pre-launch risks and (2) in-orbit or post launch risks. Ground risks include:

• Hazard or catastrophic risk to facilities because of fire. This type of risk can be significantly increased if someone is using flammable chemicals, such as nitrogen or any of the components present in rocket fuel. Keeping these materials on campus can create additional risk for the institution, which may not be contemplated in current insurance programs.
• Transportation risk increases the risk of property and liability losses. Moving rocket components, including flammable materials, increases the potential for losses to (1) the components themselves and (2) a third party that may be injured as a result of an incident on the road.
• Liability loss because of launch failure may result in damage to property near the launch site or even injury to a third party, faculty member or student. Failure to take adequate safety precautions during design/construction—working with chemicals, power tools and other materials—may result in increased potential for injury to students and faculty participating in the project.

Post-launch risks:

• Loss of the object because of malfunction, damage or equipment failure, items that represent a significant investment of time, resources, and materials. Such a loss may result in the inability to participate in a competition, a loss of grant money or additional time spent rebuilding or reworking the project.
• Liability loss due to in-air collision, falling objects or interference with another aerial object (such as a satellite signal or an airplane’s operating equipment)—these types of incidents may result in significant bodily injury or property damage of a third-party property.

Typical insurance policies maintained by most institutions may not provide adequate coverage for space/aviation risks: Property policy—Provides coverage for loss or damage to property, equipment and materials of the university. Coverage is generally broad but may exclude: (1) hazardous materials, (2) property in transit or off premise, (3) property not owned by the university and (4) pollution because of the release of a hazardous substance or chemical. General liability policy—Provides coverage for the injury or property damage of a third party because of the negligence of the institution or those operating on behalf of the institution. Coverage responds to a wide range of standard risks, but there may be exclusions for: (1) aviation risks, (2) loss caused by the acts of a third party, such as a student or contractor, (3) third-party liability related to a discharge of pollutants/chemicals, (4) loss of institutional reputation or cost of a crisis management team, (5) coverage for regulatory fines and penalties for failure to obtain proper permits, etc. and (6) the liability to a third party because of the failure of a vessel to perform as expected or because of a design flaw. Automobile liability policy—Provides coverage for liability and property damage associated with the operation of a motor vehicle. Coverage responds to a wide range of standard risks, but there may be exclusions for: (1) pollution because of the discharge of a chemical substance transported on or in the vehicle, (2) liability for use of third-party transportation, such as a rental vehicle or bus charter or the use of a personal vehicle by a faculty member or student and (3) property damage to institutional property being transported on or in the vehicle. There are additional types of coverage that may be needed, including: Pollution coverage—Including premises pollution (to provide coverage for the institution’s own facilities) and pollution liability coverage (to provide coverage for third-party exposure to pollutants) Aviation/space coverage—Specialized policies can provide coverage for losses to an aerial vessel or its equipment and, also, for the most common types of liability loss (collision, crash or interference). Note: Special endorsements may be required for drones. Inland marine rider/policy—Provides coverage for scheduled equipment and property that may not otherwise be covered by the institution’s standard property coverage. This can include coverage for property that is being transported in a vehicle Crisis management coverage—Provides coverage for loss or damage to the institution’s reputation; this may include coverage for the costs to engage a crisis mitigation team and public relations experts or the cost to take other steps to preserve and restore the reputation of the institution. See Also: What Is the Future for Drones? Professional liability—Provides coverage to professionals because of the failure of the design/construction or for the failure of the devise to perform as intended. This coverage may include coverage for damages not related to injury or to property damage— including the financial loss and the costs for rework and redesign. Not all insurance policies are created equal—individual coverage and policies may respond differently. Please consult with an expert if you if you have questions about coverage for these types of institutional activities.

In the 1988 film “Bull Durham,” Nuke LaLoosh, a young pitcher with great talent but no professional experience (or maturity), embarks on his professional career with the minor league Durham Bulls. Crash Davis, an experienced though aging catcher near the end of his playing days, is responsible for grooming LaLoosh into a more polished player. Davis and the team’s coaches and managers spend an entire summer trying to teach LaLoosh the finer points of baseball, and – as importantly – how to think and comport himself like a professional. LaLoosh, Davis, and the Bulls have many ups and downs as the season progresses, but eventually Davis’ mentoring of LaLoosh is effective, and the young pitcher is poised to go onto to bigger and better things, just as Davis prepares to retire from the game. There are many similarities between the insurance industry and “America’s Pastime,” not the least of which is how to manage and solve the challenges of maintaining a pipeline of young talent. The insurance industry can learn a great deal from baseball’s tried and true strategy of developing talent organically through the minor leagues. Moreover, professional teams – which, like insurers, are in a data-driven business – have invested significantly in data analytics to operate more economically and efficiently with the resources they already have. Using similar strategies, the insurance industry can build an effective strategy for recruitment, training and development, as well as for sustainable operations, thereby establishing a platform for long-term success. Too many Crash Davises and not enough Nuke LaLooshes The insurance industry is facing a crisis – a rapidly aging workforce. According to the U.S. Bureau of Labor Statistics, the number of insurance professionals aged 55 years and older has increased 74% in the last 10 years; by 2018, a quarter of insurance industry employees will be within five to 10 years of retirement. Moreover, by 2017, one in every three U.S. employees will be a Millennial, and Millennials will make up 75% of the global workforce by 2025. These workforce changes mirror the demographic shifts in the U.S. population. The U.S. Census Bureau estimates that, in the U.S. alone, 10,000 baby boomers (those born between 1946 and 1964) will turn age 65 each and every day until 2030. While the expected number of Americans age 65 and older who leave the workforce will grow 75% by 2050, the expected number of American workers age 25 to 54 will grow by only 2%. Most U.S. employers are woefully unprepared for the business realities of an aging workforce and face a potentially massive loss of skilled, knowledgeable workers. Companies that effectively recruit, train and develop dedicated future staff and leaders will differentiate themselves and set themselves up for success. Like professional baseball teams, they are trying to find ways to maximize existing talent and replenish it. Also like baseball teams, they are attempting to more effectively use analytics to improve functional efficiencies (e.g., scouting in baseball and claims/underwriting in insurance), as well as continue to automate routine/recurring processes (e.g., data collection in both industries). Recruit Traditionally, baseball teams have employed scouts who are responsible for finding and evaluating amateur baseball talent. The scouts talk with each other and college and high school coaches to develop a network of contacts and resources. Human resources recruiters are the scouting departments of the insurance industry. Similar to baseball, where major league teams can either hire qualified free agents or grow talent organically through the minor league system, insurance recruiters have two options – to hire experienced candidates or recruit and develop raw talent through effective training programs. (For the purposes of this report, we focus below on acquiring and retaining young talent.) Effective college campus and entry level hiring programs are just the first step in growing talent organically. Organic growth can only occur with the development of robust recruiting programs that focus on two key things:

• Improving the insurance industry brand. Show Millennials that insurance isn’t boring. Insurance isn’t just about adjusting claims or underwriting risks, and it’s not necessarily an office-bound industry. It offers technical, sales, account management, data analytics and product development jobs similar to those in other industries that have more of a ”hip” image.
• Educating talent about the variety of roles available in the industry. Letting young people know there are rewarding career paths available in insurance (and working with them to make the promise a reality) is more likely to result in long-term employment.

To recruit Millennials, companies must adapt their recruiting strategies. Companies must think like this generation, supplementing recruiting on college campuses and at career fairs with outreach via social media and online talent communities. See Also: Why Millennials Are the Best Workers In “Bull Durham,” Annie Savoy says, “Well, actually, nobody on this planet ever really chooses each other. I mean, it’s all a question of quantum physics, molecular attraction and timing.” However, as an employer, you DO choose employees and need to be in the best possible position to make them want to choose you. Train Training new employees, much like training baseball rookies, is critical to retaining talent. Companies that find ways to deliver cost-effective, interesting and meaningful training in fundamentals, coupled with mentorship programs that pair young employees with experienced ones, will create sustainable leadership pipelines. Of note, companies that use e-learning, which appeals to Millennials much more than conference room meetings and presentations, will especially benefit:

• Company perceived as cutting-edge. A newly hired Millennial trained via an easy-to-follow e-learning system that is technologically up to date, with quality graphics and sound, will perceive that the company is on the cutting edge of technology.
• Millennials feel respected. Companies that develop a high-quality, customized e-learning program, catering to the way Millennials learn, will demonstrate value and respect for the time and talents of their employees and build loyal, hard-working and fulfilled employees.
• Cost-effective and agile. E-learning is well-suited to today’s work environment, which is fast-paced and characterized by constant change. Easily customizable and cost-effective, e-learning easily keeps pace with the rate at which technology, work procedures and workers develop.

When asked if he’s heard of Walt Whitman, Nuke says, “No. Who’s he play for?” We hope your personnel development and education is easier, but you should have the processes and systems in place to answer the questions of a younger generation that is learning on the job. Developing a succession management plan that prioritizes leadership development not only improves retention, building a solid pipeline of talent for years to come, but also reduces recruiting costs. Over the last 15 years, many baseball owners have realized that a high payroll does not necessarily result in on-field success. Expensive free agents are not a sure thing, and savvy clubs realized that they could be competitive (and have a lower payroll) by developing young players in-house. The World Series champion Kansas City Royals are a case in point: The team has developed much of its roster – and many of its best players – in its own system. Because top talent clearly is a competitive differentiator, companies will define future success by developing deep and enduring bench strength – a pipeline of players with the leadership skills to be successful in the “big leagues.” Good development results in beneficial, life-long lessons that benefit the employee and employer. Consider the following exchange after Nuke and Crash fight: Crash: Did you hit me with your right hand or did you hit me with your left? Nuke: My left. Crash: Good! That’s good! When you get in a fight with a drunk, you don’t hit him with your pitching hand. Remaining competitive even after the veterans leave Attracting and hiring Millennials is only one way to address the challenge of an aging workforce, and building a developmental system is not the only way companies can promote the transfer of knowledge from one generation to the next. Many organizations are now seeking operational efficiencies via outsourcing, predictive analytics and automation to help address the challenges of an aging workforce. Shifting back office operations (e.g., claims processing, call centers and mail rooms) to an outsourcing provider can help obviate the need to replace retiring workers. While companies historically have considered outsourcing from a cost and labor arbitrage perspective, they are now making it part of their overall growth strategy because the right outsourcing partners can help them create efficiencies, lower costs and enjoy bottom line savings. Moreover, by consolidating existing and incoming information into standardized management systems and using advanced analytics to interpret this data, companies can position themselves to make better business decisions – consider the Oakland A’s now famous and commonly used “Moneyball” approach – with a smaller workforce. Some companies have gone so far as to globally standardize key processes by using business process management or workflow software that promotes procedural consistency throughout the enterprise. As has been the case with forward-thinking baseball teams, these types of investments have enabled leading carriers to more effectively manage and use the vast amounts of structured and unstructured data they possess. Perhaps as importantly, these companies also have increased worker productivity because their employees are now able to focus much more of their time on value-added activities instead of routine, low- to no-value administrative and clerical tasks. Last but not least, the carriers that have made meaningful investments in outsourcing, business process improvement and advanced analytics have created a virtuous cycle in terms of recruiting. Companies that are on the cutting edge of business technology are also more attractive to Millennials. As a result, these employers not only need fewer employees, they attract higher-caliber newcomers. See Also: 22 Steps to Reduce the Impact of Retirement To meet the challenges of an aging workforce, prescient carriers, agencies and brokers are already changing how they recruit and assess their workplace. They are modifying policies to appeal to Millennials, making physical changes to create a more inviting workplace and facilitating knowledge transfer to improve the long-term viability of their organizations. With the impending profound demographic changes, the need to build a pipeline of new talent is mission-critical. In addition, to further minimize the effects a shortage of workers may have, many companies have recognized the need to modernize processes and systems to more effectively manage the business even with a smaller workforce. Implications

• The insurance industry is facing an impending talent crunch. If it does not take steps to attract young employees, the crunch will become a crisis.
• Millennials will soon predominate in the workforce, and insurers need to differentiate themselves from companies in other industries as being attractive places for Millennials to work. They can do this by:

– Effective recruiting that demonstrates rewarding career paths exist in the industry. – Training that pairs new hires with experienced employees and helps build mentoring relationships; e-learning is a cost-effective way to do this, and one that Millennials like. – Developing leaders internally – akin to a minor league system – which both encourages retention among younger employees and also eases internal succession planning because it ensures there is a healthy talent pipeline. – Strategic outsourcing that focuses on complementary capabilities and not just cost reduction; modernizing business processes and effectively employing advanced analytics can significantly improve efficiencies, reduce costs, foster a focus on the things that really add value to the business and attract the best and the brightest newcomers to the industry workforce.

I love health policy, healthcare technology and using "corkscrew" thinking to find solutions for big problems. Perhaps no problem looms larger today than our current healthcare crisis and its financial implications for our future.   The U.S. healthcare system needs more than a healthy shot in the arm—it needs a cure. Premiums continue their upward surge. More Americans are going into debt because of healthcare. Fewer workers are funding a growing Medicare base. There is a heavy shift of enrollees to Medicaid coverage, drug prices keep climbing and people are living longer. In the last decade, top healthcare analysts, industry leaders, medical school experts, bloggers, public policy wonks, foundations, think tanks and politicians have had plenty to say, but the American consumer continues to be hit hard. Current (and evolving) solutions we have to fix healthcare include: the Triple Aim, affordable care organizations (ACOs), private- and public-sponsored medical research, disease fundraising, population health management, electronic health records (EHRs), high-tech abuse/fraud solutions, new drugs, end-of-life talks, Obamacare and the future of pay-per-value. See Also: Why Employers Should Comply With Obamacare Mandate Everything about our healthcare crisis screams for utilization that is more selective, has a greater efficiency and can lower costs. But the red light on healthcare's dashboard says there is a bigger issue. It's something that, when fixed, will provide a greater benefit for generations to come. That red light alerts us to the fact that, out of the $3 trillion spent per year on healthcare, 86% is related to chronic disease—many of which can be prevented, delayed in their onset or better managed earlier. Per the Centers for Disease Control and Prevention (CDC), the costs and figures are simply staggering. If the world's largest company was going under, its underlying financials couldn't look any more crippled. Everyone has been looking at our national healthcare crisis in the wrong way. The solution is not to provide everyone with health coverage but to take strong, legal steps to teach, coerce and even mandate that the majority of American children and adults become healthy, through individual accountability. "Mandate" hits a nerve, especially to those like myself who value the strength of our individual freedoms. But, historically, a large number of American citizens have consistently shown they do not value their health. When value is lost, the effect is often poor choices and subsequent long-term management. This leads to the development of sustained drivers, culminating in the onset of chronic disease(s), the major cost driver of our healthcare crisis. For starters, nearly 50% of all American adults (117 million) have a chronic disease, and 25% have at least two. More than a third of our country (35%) is obese. Nearly half of U.S. adults (47%) at least have uncontrolled high blood pressure or uncontrolled high LDL cholesterol or are smokers. "Steve, that is the individual's choice, and that person has to live with the results," you say. Sure, personal responsibility is key. However, for the healthcare markets, one person's chronic disease affects everyone in the system. Subsidies and public coverage, such as Medicare and Medicaid, run off taxpayer money. Private insurance prices group and individual premiums from risk pools. Therefore, there is no misunderstanding—today's unhealthy people cost healthy people money both now and in future generations. Almost everyone agrees that eating a carrot is better than eating a donut, that running two miles a day beats chain-smoking a pack of cigarettes. If that's the case, why aren't people making the needed changes? Simple : Those people do not value their health. Therefore, they do not take actions to improve or maintain it. Having individuals value their health on a mass scale is the answer to lowering chronic disease rates. Lower disease rates lower cost for care, resulting in more affordable healthcare for everyone. ACOs, EHRs, increasing pay-per-value reimbursement helps lower costs and creates efficiency but does very little to drive individuals to value their health. When someone makes a decision on just about anything, there are only two reasons: to gain pleasure or to avoid stress or pain. You might eat a chocolate bar, craving the sweet taste. Or you might quit smoking, after the first heart attack, where the strong possibility of death has set in. Here’s the thing. For most people 25 and under, if they already "feel good" physically, neither trigger is in play. By the time they "feel bad," many chronic diseases may already have had an irreversible foothold for years or decades. Early detection for everyone is tremendously important and desperately needed. Many young Americans don't go to the doctor, because they "feel good." The initial motivator to get people to value their health is not public education, throwing large data points at them, getting them on high-deductible healthcare plans or using fear marketing. Rather, we must create an instance where people will get massive amounts of pain from not going to get a checkup or screening. The law must require every insured and uninsured American to have routine physicals and screenings. Basic Outline of Program:

• There must be repetitive and selective screenings, depending on gender and age.
• Those who do not get screened receive a financial penalty, paid directly by individuals from their taxes or through their paycheck, or deducted from their social program or subsidy benefits.
• Subsidies would cover the patient portion for screening, whether insured or not.
• Results would be tracked, individuals would be counseled and any further results on subsequent actions would be tracked.

Yes, this plan will drive up costs on the front end. Look, it took us a lot of time to get to this healthcare crisis, and it will take time to undo it. If we believe we can find a short-term solution to reverse this, we are kidding ourselves. See Also: Endangered Individual Health Market The most important result is gaining proper management for the long term, allowing affordability for future generations There will be those who claim individual rights will be lost when such coercion takes place (just think about how the Affordable Care Act was positioned as a tax). In the end, if we didn't have such nasty, costly surprises on the middle and back-end portions of our lives, we wouldn't have to make these changes. Perhaps if doctors, insurers, drug companies, hospitals and other medical services reduced their revenues, affordability would be in hand. But here's a reality check: The U.S. healthcare sector is growing faster than any other sector in the country. Companies, employees and shareholders are not going to reduce their financial interests and current way of life for the average American consumer to afford care. We need something new. We do not need something to work against businesses but something to work for people.  People can, then, with better personal health data, be motivated to gain more than ever in their current and future health. Americans have always been strong enough to call upon resolve and forward thinking. Now, we live in the time of "what's in it for me?" Sometimes, mandates are necessary to get people to see the importance of helping their fellow man, instead of themselves. People are dying unnecessarily. This will continue if we don't stand for more than ourselves. Let's come together to give more people the chance to make better decisions and to live healthier lives.

The group insurance market shows real promise, but most carriers are still trying to determine the best path forward. Moving from being in a quiet sector to the front lines of new ways of doing business has shaken the industry and confronted it with challenges – and opportunities – that many could not have foreseen even a decade ago. For starters, let’s take a look at where the market is right now. Three recent trends, in particular, are having a profound impact:

• The Affordable Care Act, which has led health carriers to increase their focus on non-major medical aspects of the parts of their business that the legislation has not affected. In turn, this has led to intensifying competition.
• Consumerism, which has resulted largely from workers’ increasing responsibility for choosing their own benefits. This has created disruption as employees/consumers have become increasingly dissatisfied with the gap between group insurance service, information and advice and what they have come to expect from other industries.
• The aging distribution force, which means that experienced brokers/agents are leaving the work force and are being replaced by inexperienced producers at decreasing rates or are not being replaced at all.

Group players – which historically have been conservative in their market strategies – focus on aggressively driving profitable growth. To do this, they are concentrating on four key areas: 1) growing their voluntary business, 2) streamlining their operating models, 3) re-shaping their distribution strategies and 4) making significant investments in technology. See Also: Long-Term Care Insurance: Group Plans vs. Individual Group insurance is no longer a quiet sector of the industry but instead is in the front lines of developments in customer-centricity and technological innovation. Growing the voluntary business – The voluntary market has been of interest to traditional group insurance carriers for more than two decades, but the success of the core employer paid group insurance business has resulted in a lack of robust voluntary capabilities. However, with employers shifting more costs to employees, voluntary products have become a key way to manage group benefit costs while expanding the portfolio of employee products. Some carriers are expanding their voluntary businesses by offering a modified employer paid group product in which the employee “checks the box” to pay an incremental premium and receive additional group coverage (e.g., long term disability (LTD), life and dental). Other carriers are exploring models where employees can sign up for an individual policy at a special premium rate. The former example is a traditional voluntary product, while the latter example is a traditional worksite product. For most carriers, adding the traditional voluntary product is fairly straightforward because it is still a product that the group underwrites. However, more carriers are looking into the worksite product (which AFLAC and Colonial Life & Accident have executed particularly well) because, with the passage of the Affordable Care Act, some see a potential opportunity to reach small businesses that previously may not have been interested in group benefits. Streamlining operating models – Group carriers also are trying to develop streamlined, cost-effective, customer-centric operating models. The traditional group insurance operating model has been built around product groups such as group LTD, short-term LTD, dental, etc. However, the product-based model is inefficient because it increases service costs, slows speed to market and fails to support the holistic views of the customer that enables carriers to serve customers in the ways they prefer. Group insurers are now investing both time and capital to understand how to remove inefficient product-focused layers of their operations and streamline their processes to profitably grow. Many have focused on enrollment, which cuts across products and is a frequent source of frustration for everyone. Carriers are frustrated because they can spend days and weeks trying to ensure that everyone is properly enrolled in the right plan. Moreover, what should be a fairly straightforward, automated process often can require considerable manual intervention to ensure that employees are properly enrolled. In the meantime, employees are frustrated with recurring requests for information and the slowness of the enrollment process. Employers are frustrated by the additional time and effort that they have to expend and the poor enrollee experience. Producers become frustrated because the employer often holds them accountable for the recommended carriers’ performance. Reshaping distribution strategies – In terms of distribution, private exchanges initially promised to connect group carriers with the right customers using extremely efficient exchange platforms. As a result, many group carriers joined multiple exchanges expecting that this model would put them on the cusp of the next wave of growth. However, success has proven more elusive than they expected, largely because they’ve spread themselves too thin across too many, often unproven exchanges. And, while private exchanges still offer great potential, many carriers have now begun to rethink their private exchange strategies with the realization that the channel is not yet a fully mature group insurance platform. Investing in technology – Whether group carriers are focusing most on entering the voluntary market, streamlining operations or refining their private exchange strategies, successful in all these areas depends on technology. Group technology investments have lagged behind the rest of the industry. The reasons for this range from a lack of proven technology solutions that truly focus on the group market to downright stinginess and the resulting reliance on “heroic acts” and dedication of committed employees to drive growth, profits and customer satisfaction. However, viable technological solutions now exist – and they are probably the most critical element in the march toward effective data integration, efficient customer service and ultimately profitable growth. Every facet of the business –underwriting, marketing, claims, billing, policy administration, enrollment, renewal and more – is critically dependent upon technological solutions that have been designed to meet the unique needs of the group business and its customers. Prescient group carriers understand this and have been investing in developing their own solutions and partnering with on-shore and offshore solutions providers to fill gaps in non-core areas. Whatever their primary focus – growth, operations or distribution – a necessary element for success is up-to-date and effective technology. A market in flux In conclusion, group insurance is in a time of transition. Major mergers and acquisitions have already started to reshape the market landscape, and existing players are likely to use acquisitions and divestitures as a way to refine their market focus. Moreover, new entrants are looking to exploit openings in the group space by providing the kind of focus, cutting-edge product offerings and service capabilities that many incumbents have not. These developments show group’s promise. The winners will be the companies that wisely refine their business models and effectively employ technology to meet the unique needs of new, consumer-driven markets. Implications

• We will continue to see group carriers focus on the voluntary market, especially traditional group-underwritten products. They will look to not only round out their product bundle by providing solutions that meet consumer needs, but also integrate their offerings with other employee solutions like wealth and retirement products.
• Group insurers will continue to aggressively streamline processes to promote productive and profitable customer interactions.
• Private exchange participation strategy needs to align with target markets goals, including matching products with appropriate exchanges. Focusing on participation means that group carriers avoid spreading themselves too thin trying to support the various exchanges (often with manual back-end processes).
• Group carriers can no longer compete with antiquated and inadequate technology. Fortunately, there are now group-specific solutions that can make modernization a reality, not just an aspiration.