On May 18, 2016, the Department of Health and Human Services ("HHS") issued a final rule implementing Section 1557 of the Patient Protection and Affordable Care Act (ACA), which prohibits discrimination on the grounds of race, color, national origin, sex, age or disability in certain health programs and activities. Effective July 18, 2016, the final rule, "Nondiscrimination in Health Programs and Activities," required entities covered by the rule to comply with certain accessibility requirements applicable to their use of technology in the provision of services. See also: AI: The Next Stage in Healthcare   The rule applies to: (i) to every health program or activity, any part of which receives federal financial assistance provided or made available by HHS; (ii) health insurance plans and marketplaces; and (iii) HHS itself. The rule defines "HHS financial assistance" broadly, to include almost all types of financial benefit transfers, among them grants, loans, credits, subsidies or transfers of real or personal property (but excludes Medicare Part B payments). Key points of the rule include the following: First, the rule requires entities covered by it to make all programs and activities provided through electronic and information technology (e.g., a website) accessible for individuals with disabilities, unless doing so would impose undue financial or administrative burden. In addition, such entities must provide appropriate auxiliary aids and services when necessary to ensure an equal opportunity for persons with disabilities to participate in and benefit from the entity's health programs or activities. Auxiliary aids and services include qualified sign language interpreters, captioning, large print materials, screen reader software, text telephones and video remote interpreting services. In short, entities covered by the rule must take appropriate steps to ensure that communications with individual with disabilities are as effective as communications with others, in accordance with Title II of the Americans with Disabilities Act of 1990 and related regulations. Second, entities covered by the rule must take reasonable steps to provide meaningful access to individuals with limited English proficiency eligible to be served or likely to be encountered in their health programs and activities. This includes providing language assistance services, such as oral language assistance or written translation, free of charge and in a timely manner. Third, entities covered by the rule must comply with certain procedural requirements. Specifically, the rule requires applicable entities with 15 or more employees to have a grievance procedure, to identify at least one individual accountable for coordinating the regulated entity's compliance and to have a written process in place for handling grievances. In addition, entities covered by the rule that operate websites must post on the website notices of nondiscrimination and taglines that alert individuals with limited English proficiency to the availability of language assistance services. Such taglines must be posted in at least the top 15 non-English languages spoken in the state in which the entity is located or does business. See also: Digital Insurance, Anyone?   For healthcare providers operating in the digital health industry as well as for software and other technology vendors working with health care providers, the rule may create a number of challenges. Website accessibility has likewise been the focus of increasing litigation, and a number of high-profile settlements have emphasized the potential risks entities may face by failing to address technology-based accessibility issues. Providers would be well advised to review their websites and other customer-facing technology with counsel to determine the applicability of the rule to their activities, as well as any broader accessibility considerations and exposure. This article is from Jones Day Digital Health Law Update.  For more like this see: http://www.jonesday.com/digital-health-law-update-vol-ii-issue-4-08-08-2016/.

Drug manufacturers can’t catch a break, but are they the real culprit? Sure, we could wave our finger at Heather Bresch, CEO of Mylan, but didn’t we just do this to Martin Shkreli from Turing Pharmaceuticals and Michael Pearson from Valeant? The key question isn’t, who’s the offender du jour? Instead, it’s why do these pricing "scandals" keep happening, and is our best offensive strategy public shaming? Complaining about Mylan is pointless because, as a publicly traded company, it is doing exactly what we would expect it to do to meet the profit and growth expectations of investors. Why is it Mylan's responsibility to compete against itself? If this were the financial services industry, Bresch would be hailed as a genius. The real issue here is market failure because of the lack of effective competition. Until we solve this underlying market dysfunction, we’ll just experience the same event again and again, much like Bill Murray in Groundhog Day, just with different names and companies. Maybe the best way to explain the real problem is, “It’s the system, stupid.” So, what’s the hubbub about? The EpiPen is a decades-old technology first developed for the U.S. military and paid for by the American people. An EpiPen is a branded auto-injector that delivers a metered dose of epinephrine, a cheap and generic lifesaving drug that has been in use for more than a century. A single dose vial can be purchased for less than $2. Assume another couple of dollars for the auto-injector, add some enormous margins and, voilà, the selling price is $635. This is profitable capitalism — effectively a monopoly. See also: A Radical Shift in Pricing Cancer Drugs?   A monopoly for an inexpensive generic drug encased in plastic? Really? A fair and competitive market requires three things: 1) real supply options, 2) the freedom to choose any of these options and 3) regulations that prevent monopolies and promote the public good. Let’s analyze how the EpiPen fares on each. First, supply options. Are there alternatives to Mylan’s version of an epinephrine auto-injector? Yes. Two pharmaceutical companies, Amedra and Lineage, manufacture less expensive, directly competitive products. Next, how easy is it for us to choose these EpiPen alternatives? This is where the friction starts. Unfortunately, most physicians aren’t aware of the available options because most pharmacy benefit managers (PBM) and health plan formularies exclude them, making choice virtually impossible. To understand why, let’s consider who really makes drug-purchasing decisions. A drug purchase starts with a prescription written by a physician. So are physicians responsible for the EpiPen monopoly? Partially. Rather than prescribing EpiPens, physicians should prescribe epinephrine auto-injectors, of which there are multiple options in the market. What’s the consumer’s and taxpayer’s next line of defense? Wasn’t this why an intermediary, such as a plan or a PBM, was hired in the first place? Yes. Then, why does our advocate, the intermediary, steer us in the direction of the highest-cost option? Unfortunately, the financial incentives don’t work the way we think they do. Intermediaries don’t make decisions based on what is best for the actual payer. Rather, they participate with manufacturers in complex rebate schemes (really kickbacks, even if they don’t meet the legal definition), allowing them to collect steep profits on brand drugs. Bresch states that Mylan pays rebates in excess of $300 to intermediaries who aren’t passing them back to the payer. This isn’t altruism; instead, all drug manufacturers know the intermediaries keep large portions of their rebates. This profit incentive is the mechanism that kicks competing drugs out of PBM and plan formularies, locks out competitors, drives market share and creates monopoly (or near-monopoly) conditions. Let’s review how drug purchases are made in today’s dysfunctional system:

• Consumer: Follows the physician's choice as long as someone else is paying for it.
• Physician: Prescribes what she is familiar with. She’s not paying for it, so what does she care?
• Manufacturer: Designs incentives to maximize market share and profitability—and gets a monopoly if all works as planned.
• Intermediary: Steers consumers to drugs that maximize their profit.
• Payer: Stuck without data about what works, out-of-control drug spending and no real options.

As John Quelch from Harvard Business School & T.H. Chan School of Public Health, puts it, “Monopolistic pricing is a political issue, especially in healthcare. If the industry cannot self-regulate, increasingly empowered consumers will have their elected officials do the job for them.” I believe breaking significant healthcare monopolies is not only legal, it’s a regulatory obligation. While policymakers have responded, their strategy unfortunately seems to rely heavily on public shaming. A more useful role for them would be to break existing significant monopolies and create legislation to prevent the formation of new ones. The healthcare industry isn’t going to fix itself. Long-lasting, effective change will only occur when external economic and regulatory pressure mandates it. Are we dreaming an impossible dream? Not at all. See also: New, Troubling Healthcare Model   After we get past the completely understandable anger of millions of Americans, healthcare is no different than many other industries once driven by dysfunctional systems that resulted in similar monopolistic behavior. In fact, our path forward could be easier because of successful precedents in our recent past. Not too long ago, the travel and financial services industries were also plagued by a dearth of information available to the consumer, a lack of choice to real buying options and lax regulatory oversight. Not only was the fix possible; it happened a lot faster than anyone expected! Together, we can do the same for healthcare. See also: Keep the Humanity in Healthcare   Imagine a world where: we have a functional market because we reward companies that have innovative solutions; the people who actually pay for these products and services have true control; and the ugly veil on pricing and business model opacity is finally lifted. We need to ensure the dollars we spend directly (and through taxes) are used to solve these problems rather exacerbate them. As Quelch points out, we are either going to have to solve this problem or the government will step in. I believe it’s better we fight to fix it instead of relying on the government to make our healthcare decisions for us. The government needs to ensure a level playing field exists for all, and we need to innovate and offer better solutions for less. As much fun as it is to shame Mylan, a much better way to punish the company would be to buy the lower-cost alternatives from Lineage and Amedra. That is how a real market system works.

There are times when a blockchain is the right solution for a problem, and there are times when it is not. It is important to understand the differences because it is tempting to hypothesize about silver bullets. We also need to understand where risk can be transferred to a machine, when a simpler cryptographic method may be applied or when human authority must be retained. The following discussion was adapted from Avoiding a Pointless Blockchain Project by Gideon Greenspan and should be applied to the insurance industry adoption of blockchain. Current database technologies have decades of development and have been thoroughly tested. By contrast, blockchain technology is in its infancy. It is very important to be absolutely clear on when using blockchain is an advantage. If the project does not fulfill the majority of the following conditions, it is likely that another technology should be considered:

1. Shared databases
2. Multiple writers
3. Absence of trust
4. Disintermediation
5. Transaction interaction
6. Rules
7. Validators
8. Guarantor of assets

In the absence of any of the first five, one should consider: (a) regular file storage, (b) a centralized database, (c) master–slave database replication or (d) multiple databases to which users can subscribe. 1. The database Blockchains are a technology for shared databases, i.e., a structured repository of information such as a relational database, containing spreadsheet-like tables or file system. Every transaction on a blockchain represents a set of changes to the database. 2. Multiple writers Blockchains are a technology for shared databases with multiple writers. Blockchains are efficient where there will be multiple people modifying the database at the same time. The scalability may be enormous where people, mobile devices or even sensors (Internet of Things) may write to a blockchain. It is important to identify the writers when specifying the application. See also: How Blockchain Will Reorganize Society   3. Absence of trust Blockchains are a technology for databases with multiple non-trusting writers. This means that one user is not willing to let another modify database entries that it “owns.” Similarly, one user will not accept as gospel the “truth” as reported by another user, because each has different economic or political incentives. 4. Disintermediation Blockchains are a technology for databases with multiple non-trusting writers to be modified directly. There is already an effective solution to the problem of non-trusting parties – it is called the trusted third party intermediary – someone whom all the writers trust. A blockchain application requires no central gatekeeper or broker to verify transactions and authenticate their source. (However, the placement of specialized oracles, such as an engineering inspection to an insurance contract, is a special case where the placement of adjudicators is also decentralized) 5. Transaction interaction Blockchains truly shine where transactions created by different writers depend on one other. Let’s say Alice sends some funds to Bob, and Bob sends some on to Charlie. In this case, Bob’s transaction depends on Alice’s, and there’s no way to verify Bob’s transaction without checking Alice’s first. 6. Rules Blockchains can support a set of embedded rules restricting transactions performed. Every transaction can be checked against these rules, and those that fail are rejected. For example, a rule may state that the total quantity of each asset in the ledger must be the same before and after every transaction. This rule prevents money from being printed out of thin air. 7. Validators A blockchain’s job is to be the authoritative final transaction log, on whose contents all nodes provably agree. There are several reasons why this is important. 1. It allows a new user to start from scratch with the most updated version. 2. It does not allow two versions of the database to be in conflict. 3. Blockchains provide that a precise chronology of events can be proved by comparing two blocks (versions) in a chain of blocks. Users need to have a clear idea of who your validators are and why you trust them. See also: Can Blockchains Be Insured?   8. Guarantor of Assets What is the nature of the assets being moved around? The question is rather: Who stands behind the assets represented on the blockchain? If the database says that I own 10 units of something, who will allow me to claim those 10 units in the real world? Who do I sue if I can’t convert what’s written in the blockchain into traditional physical assets?

The progress of mankind has relied heavily on technology advancement in two key areas: transportation and communications. Communications technologies, for moving information from one place to another and presenting that information to people in new and different ways, have been instrumental to the progress of civilization. Transportation technologies, for moving people and things from one place to another in faster, safer, and more comfortable ways, have been advancing since the invention of the wheel. This blog will reflect on the latter, looking into the next decade and exploring some big implications for the insurance industry.

Driverless vehicles have been grabbing the headlines now for a few years. That’s understandable since most of us can relate to driving a car and are forming opinions on what we think about the move to autonomous vehicles. However, the effort by the major tech companies and auto manufacturers to develop and test these capabilities in cars is only one part of a much larger story – one that will greatly affect every person, business, and industry. And just as significant is the progress being made with many other types of vehicles that operate on land, sea, or in the air. Add in the evolution toward a smart transportation infrastructure, and the ingredients for massive transformation are ready and waiting. Much of what is happening in this realm seems like science fiction, but is likely to be common in ten years. Consider how much can happen in that time frame. Just ten years ago (in 2006), the iPhone had not even been introduced. There were no mobile apps. Now, we can’t imagine what life would be like without our mobile devices.

See also: Connected Vehicles Can Improve Claims  

Some of the other developments that are worth following include live trials of autonomous buses and taxis; the platooning of autonomous trucks; autonomous cargo ships, submarines, and drones; and autonomous commercial vehicles used in mining and agriculture. And don’t forget flying cars. This technology is actually gaining attention and funding. Add in the Hyperloop concept (the testing of which is now underway), supersonic air travel, and other means of high-tech transportation, and it is not difficult to imagine the kind of world we see in Star Trek, Star Wars, or other popular science fiction.

The advancement of autonomous vehicles of all sorts will be accompanied by progress in vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) technologies that allow moving vehicles to communicate with each other and their surroundings to ensure the smooth and safe flow of traffic, wherever it may be. So what does this all mean for insurance? Well, it does not take a rocket scientist to understand that virtually every type of property/casualty insurance will be affected in fundamental ways. Some of these scenarios have already been touted in the press and considered by industry strategists, but the implications may be even more far reaching than most realize. Consider implications in just three areas:

• Workforce Mobility: Information and communications technologies have already created an accelerating trend away from the central office model. New transportation technologies will result in a reduced need for workers to be clustered in major centers. Rapid transportation options will allow those farther away to travel where they need to be, and the tech for working remotely will continue to foster the work-anywhere trend.
• Manufacturing and Distribution: Opposing factors will likely disrupt the manufacturing and distribution models of the last century. The ability to transport goods much more rapidly and safely at low cost via autonomous transportation networks may lead to giant, centralized factories. On the other hand, 3D printing and the desire for custom items without waiting may favor local manufacturing with a different kind of short distance transport dominating.
• Agriculture: Automated machinery is already common in agricultural production today. The move to more fully-autonomous tractors, combines, and other vehicles will further change the industry. When sensors, biotechnology, vertical farming techniques, and other tech are considered, the very nature of the farm is likely to be substantially different ten years from now.

The list goes on, and it’s pretty heady stuff. The implications for population distribution, energy, travel, education, and virtually every aspect of the economy are huge. In all of these areas, the patterns change, the companies change, individual’s behaviors change, and the risks change. Existing risks may be dramatically reduced, resulting in large decreases in premiums. On the other hand, new risks are emerging, and the opportunities to serve customers in new ways are there for insurers bold enough and agile enough to rethink their business for this new era.

See also: Are You Ready for the Next Disaster?  

For more on the implications of emerging tech for insurance, see SMA’s research report, The Top 10 Ways Emerging Tech Will Transform Insurance.

Everyone is talking about the dangers of “opioid addiction.” It’s been a topic of conversation among pain management specialists, chiropractors and other healthcare providers for years, but constant news coverage of “opioids” has made it water-cooler talk. Thanks to the media, we’re all experts on the issue. But here’s the thing: the media – and the public – are missing the point entirely. Even the expression “opioid addiction” is completely off the mark. Because we’re not talking about “opioids” – we’re talking about addiction to heroin derivatives. “Opioid” is a much safer word than heroin – not nearly as hair-raising or dangerous. But using the word “opioid” is like putting icing on a mud pie – it’s a cover-up at best. And when you make the connection that opioids are actually heroin derivatives, you understand why the addiction has become an epidemic in this country. The problem, though, is much more sinister than we realize. For one, patients now expect their doctors to prescribe morphine or oxycodone for pain management. Second, there’s money to be made in “opioid addiction.” See also: Opioids Are the Opiates of the Masses   As reported in Risk & Insurance, a new study finds that a majority of patients still believe opioids are the most effective remedy for pain. In fact, a full two-thirds of physicians surveyed said their patients expect them to prescribe drugs. And in spite of the highly addictive nature of these drugs, doctors are still influenced by their patients’ expectations. It gets worse. Despite evidence that oxycodone and morphine are not the most effective medications for pain relief, almost all of the physicians who were surveyed - 98 percent of them – prescribe some form of opioids for pain control. What’s more, the National Safety Council reports that 99 percent of the providers prescribe opioids for longer than the three-day course of treatment the Centers for Disease Control recommends. Here’s the icing on this mud pie: nearly 90 percent of physicians say they find it difficult to refer patients to treatment for drug abuse or addiction, even when it’s clear their patients need help. It’s a vicious cycle with no easy solution. Like almost everything in healthcare, we’re overlooking the most important part of the story. The same doctor who prescribes opioids that lead to addiction can make his best money on the mandatory drug/toxicology testing he performs every month. Many good doctors recognize this as a conflict of interest – they also see that their patients are requiring higher and higher doses to feed their additions – and they intervene in the best interests of their patients. Unfortunately, there are plenty of other physicians who aren’t concerned about scruples. They are perfectly willing to pick up where others leave off. It has become a lucrative, albeit perverse, business model today. I wish that were the end of it, but we’ve only scratched the surface. The story gets much worse from here. When patients no longer can afford opioids and drug testing (which can cost them $4,000-$10,000 each year), many have resorted to selling a couple of pills on the street in order to cover their costs. In essence, decent, respectable people become law-breaking drug dealers. Some people don’t want to sell their prescription drugs, but still must feed their addiction. Broke and desperate, they buy a cheap, street version of their opioid. This is called heroin. It’s a trap, and it’s snaring people who never realized they were abusing heroin derivatives. They believed they were treating their pain with safe, physician-recommended oxycodone or morphine. They believe it was their best option for managing their symptoms. Heroin derivatives are ruining the lives of good, hardworking people across the country. In recent months, I saw the horror firsthand when heroin overdoses stole the lives of two young men in my community – men with their whole lives in front of them. They weren’t your stereotypical druggies – they were addicted to pain meds. See also: How to Help Reverse the Opioid Epidemic   I believe addiction to heroin derivatives is far worse than anyone realizes. Someone must throw a wrench in a problem that’s wreaking havoc on families and entire communities. Here’s how Redirect Health is addressing the issue: 1. Strike “opioids” from the discourse: Never call these highly addictive prescriptions “opioids” or “pain killers.” Instead, call them “heroin derivatives,” because if it walks like a duck and it talks like a duck… Far fewer people will want to start taking these drugs if they understand they’re a form of heroin. Simply changing the semantics will also give providers pause; they won’t be so quick to prescribe heroin derivatives. 2. Provide alternative forms of pain relief: We make it easy and affordable ($0 copays) for people to access other, safer and more effective pain management services. Our chiropractors and primary care physicians work together to help members with practical and customized virtual rehabilitation programs that don’t cost a penny out-of-pocket, don’t require them to miss work, and will provide a long-term, tenable solution to managing their pain. It’s common sense, but not commonly done.

Why did we call David an underdog? He was young and smaller, whereas Goliath was older and a giant of a man, “whose height was six cubits and a span”. Goliath was an experienced warrior, a veteran soldier, whereas David was a mere shepherd. Goliath was outfitted with modern weaponry and all David had were his shepherd’s tools. This contrast and disparity is because there were three types of warriors in ancient times:  First, there were warriors who fought with slings and bows as lightly armored troops, forming bands of skirmishers. Second, there were the more heavily armored soldiers who formed the bulk of the infantry as foot soldiers, who fought in close-quarters combat with swords, axes, pikes and spears, such as Goliath. Lastly, there were warriors who fought on horseback as the cavalry. Goliath was a foot soldier with sword and spear, David a skirmisher with a stave and sling.  As the story goes, Goliath and David started their duel with some distance between them, Goliath expecting David to draw near and engage in combat. He wanted to engage David in a hand-to-hand fight where his reach and strength would make him unbeatable. David, however, decided on a different strategy, which played to his strengths as a shepherd, using a sling to defend his flock against lions and wolves.  He rejected the heavy armour and focused on what he knew best — excelling at attacking from afar with great accuracy. So here was David, the shepherd, experienced in the use of a devastating, precise weapon, up against a giant weighed down by a hundred pounds of armour and incredibly heavy weapons that are useful only in short-range combat. Goliath was a sitting duck. He didn’t realise it, but he had been outsmarted before the combat had even begun. So how does this story relate to the insurance industry? If you are a “large” and “established” insurance company (Goliath), the headlines regarding the disruption in insurance are provoking concern at the C-level.  Much of the material equates “large” to “lethargic and slow to react”, while “established” equates to “old and legacy”. In contrast, the material positions small, new and agile companies (David) as extremely innovative and disruptive.  The message is that these “disruptors,” with their new business models and digital capabilities, will make large, established companies irrelevant very soon. Are larger, established insurers destined to be lethargic, slow off the mark, or can they become agile and innovative? It is definitely possible, if the larger, established insurers leverage their strengths and act like a new disruptor. In fact, Chunka Mui’s book, “The New Killer Apps:  How Large Companies Can Out-Innovate Start-ups”, co-authored with Paul Carroll, suggests such a scenario. See also: InsurTech Start-Ups: Friends or Foes?   So, how can established insurers disrupt these “disruptors”? Certainly not by fighting them on their chosen ground and with their weapons of choice. Insurers need to aggressively experiment and learn and accept that failures are part of the process of innovating. They need to leverage the strength of being big, with deep experience and expertise, and combine that with greater agility and innovation. It may even involve cooperative endeavours that could look more like Goliath and David working together than working as dire competitors. For now, however, we’re concerned about refashioning Goliath’s capabilities. So what are the strengths that established insurers can use to forge ahead and disrupt them? Your key strengths are precisely what are mentioned as your weaknesses – “legacy” – the legacy of reputation, the legacy of large customer bases and the legacy of experience and expertise. Those legacies are still highly valuable. It is the legacy mind-set, legacy business models and legacy technology that needs to be reconsidered. Let us peel off a layer from your strengths. The legacy of reputation Whilst this should be a positive for most established insurers, sadly many reputations have been impacted with perceptions of not paying claims. No amount of statistics published by the industry will change the perception, because trust has been impacted. And increasingly, consumers are placing their trust in the voices of other consumers using an array of social media options. Insurers can create a new business model with an underlying digital platform where consumers can easily rate your services openly, and anonymously, if they choose, with the assurance that they will be responded to and engaged with. They can also engage with other customers. This will go hand-in-hand with the creation of communities or interest groups. It will increase trust levels, bridge any trust deficits and help insurers build reputation. Even a slip in service is seen as acceptable if it is transparently acknowledged and acted upon. Doing that builds more trust and reputation. Do more of it and openly.  The legacy of the customer base The customers of today are fickle and loyal to nobody. They will change service providers for the slightest of reasons. How can you get them to be loyal to you? Engaged with you? The customers of today do not engage with “brands” as much as they engage with each other, often through social media. Can you create communities from such customers? Certainly. Communities can revolve around any commonality or interest. Insurers can build communities revolving around areas of interest or even around the insurance type. For example, you could foster a community of insured musicians, passionate about their instruments. They could be part of such communities on the popular social media platforms. Insurers could take advantage of these social media platforms or create a simple one of their own focused on the special tasks involved in caring for these expensive musical treasures. The insurer’s proactive, preventive approach will also help them to keep a low claims ratio. Community-based groups are also less likely to make fraudulent claims because they are “known” within the community. The legacy of experience and expertise. There is a wealth of knowledge and experience in your company, knowledge about customers, about risk, about financial modelling of events, and about the business as a whole. This is likely not being leveraged to the extent it could be. By taking that knowledge and expertise from people’s minds into a system that can leverage it opens up possibilities for the business.  Insurers can automate and configure the business to rapidly adapt to change, using it to grow the business rather than hinder the business. A good example of this is the Majesco Transformation Framework, a path to modernizing without losing the essential aspects of an insurer’s foundation. See also: Getting to 2020 — Defining the Unknown (Part 2)   So, the end goal is to embrace your “Goliath” position while integrating and employing your “David” tools for better competitive strength. To accomplish this you need a robust platform that can support the core of the business with a digital front-end that engages the customer. Robust platforms with back office and front office components, rich in insurance content for products, processes and channels allow the traditional insurers to be big and agile. And as noted in The New Killer Apps, “Yes, small and agile beats big and slow, but big and agile beats anyone — and that combination is now possible.”

This summer, I have attended a number of disruption/innovation insurance industry conferences in London that often, to varying degrees, come down to a debate regarding the extent to which InsurTech startups will be able to come and eat the lunch of industry incumbents. There is little argument that, should the insurance industry fail to better engage with its customers and continue to poorly communicate its social value in protecting people, communities and assets somewhere else will transform what today for many is a “grudge transaction” into a delightful relationship. However, I believe InsurTech does not have to be a zero sum game. I am a proud member of the International Insurance Society (www.internationalinsurance.org) led by Michael Morrissey. In Singapore at the IIS annual conference, a keynote presentation was delivered on the recently formed Insurance Development Forum (IDF). The IDF was formally launched in April and is a collaboration between the insurance industry, the World Bank, the UN and various other institutions. The IDF is chaired by Stephen Catlin, with Rowan Douglas leading the Implementation Committee that includes industry heavyweights such as Dan Glaser, Nikolaus von Bomhard, Greg Case and Inga Beale. Its mission is to incorporate the insurance industry's risk management expertise into governmental disaster risk reduction and to give insurance a larger role in providing resilience to communities all over the world. In a speech at the conference, IDF Chairman Stephen Catlin noted, “We talk about innovation and new products. The reality is we are not even selling well the product we know and love dearly.” I believe the less insular InsurTech community — with its diverse skills sets (often from outside of the insurance industry) — can help insurers start to address the obvious misunderstanding consumers, governments and regulators share of the social value of the insurance product. Sam Maimbo of the World Bank, who sits between deep technical insurance teams and the public sector, noted he spends 70% of his time explaining what the industry has to offer. Addressing this communication gap has parallels to what many InsurTech companies are trying to do in providing better engagement with consumers than is currently provided. There is real opportunity for InsurTech to work with the insurance industry in addressing blockages in the system that, if unlocked, would drive increased demand and grow the overall insurance pie. We are seeing a bit of this in microinsurance with companies like MicroEnsure and Bima providing low-cost insurance solutions to customers that, before recent technological advances, were just not possible. For instance, we need to see more examples of smart contracts founded on blockchain technology. In Africa, it is now possible to buy crop insurance through a mobile device that pays out based on a parametric weather-related trigger through a blockchain-validated third party source that almost eliminates the cost of handling a claim. I am confident we are at the start of this kind of innovation and look forward to seeing more InsurTech companies look to grow the overall industry pie for the benefit of themselves and society as a whole.

Nearly every severe weather season, families in Oklahoma lose their homes — or even their loved ones — to a devastating tornado. Year in and year out, the insurance industry helps the victims rebuild their homes and their lives. When insured Oklahomans replace lost homes, their new homes will be constructed according to existing building codes. When the next devastating tornado hits, the cycle repeats itself. But what if we could stop the cycle? While we can’t stop tornadic activity, we can build homes that are more tornado-resistant. The city of Moore, Okla., a community all too familiar with rebuilding, is committed to doing just that. And I believe the entire state should follow its lead. A Tested Community Moore experienced three significant tornadoes in less than 15 years, including the May 3, 1999, tornado that killed 44 people and caused an estimated $1 billion in damage. The May 8, 2003, tornado caused $370 million in damage, but there was no loss of life. The May 20, 2013, tornado killed 24 people and injured at least 200 more. There, property damage from the 17-mile long swath included an estimated 1,150 destroyed homes; the economic loss was estimated at $2 billion. Breaking the Cycle  Less than a week after the 2013 Moore tornado, a team of professors, scientists, civil engineering students and professional engineers conducted a reconnaissance trip to the disaster zone. Their goal was to investigate the tornadic impact on buildings and homes. They discovered homes recently built to higher-quality construction standards sustained less damage than homes built to a lesser standard. Chris Ramseyer, OU associate professor of civil engineering, later presented the team’s findings to the Moore City Council. Ramseyer recommended the council modify the city’s residential building code to lessen the impact from tornadoes. The changes, Ramseyer said, would make homes significantly stronger while only raising the cost of construction 1-2%. The council voted unanimously to approve the new building code. Embracing Recommendations The new standards require building techniques that allow homes to withstand winds up to 135 miles per hour, rather than the old standard building requirements of 90 miles per hour. The new code requires roof sheathing, hurricane clips or framing anchors, continuous plywood bracing and wind-resistant garage doors. Engineers say a wind-resistant garage door is important because once it is breached, the rest of the home is extremely vulnerable. While EF-5 tornadoes inflict the most catastrophic damage with winds up to 200 mph, 95% of tornadoes are rated EF-2 (or 135 mph) and below. Even in Moore in 2013, 88% of the damage was caused by wind speeds rated EF-2 or lower. If those homes had been built according to Moore’s new building code, 1,012 of 1,150 damaged homes would have withstood the destructive forces experienced that day. It’s Time to Take Action Since 1989, Oklahoma has experienced 1,575 tornadoes that have resulted in almost $32 billion in insured losses. If we assume 88% of those losses fall within the EF-2 or lower wind speed, the loss then falls to $3.84 billion. As we move forward, I will advocate the adoption of the Moore fortified home construction standard as our state standard for new home construction. Insurance policies require that replacement construction meets existing code. If Oklahoma law requires fortified construction techniques, then insurance companies must cover those tougher requirements. More importantly, a stronger home would be a source of comfort to those who have been victimized by tornadoes. For our industry and for our neighbors, it’s a win-win.

Why is this taking so long?! The challenge I hear echoed throughout the insurance industry is, “How do we speed up the claims process for customers?” Insurance companies often face the brunt of the frustrations from stressed-out customers regarding delays with their claims. As we all know, processing those claims takes time and patience to gather information, details, photographs and a myriad of other documentation. Getting the right information and accurate documentation takes even longer. Based on the volume of claims, resources and personnel can become stretched thin quickly. Despite all the efforts within organizations, it’s not uncommon to see claims departments contorting themselves like Gumby to get it all done. Insurance claims are stressful, and relying on customers to reliably and quickly provide information is a challenge — even when it’s to their benefit. The problem becomes exacerbated following natural disasters or claims in geographic locations where companies have little to no footprint and limited resources to document and gather the information needed. In those situations, companies have to reallocate and sometimes relocate resources — which is expensive, time-consuming and a logistical nightmare. See also: What Gig Economy Means for Insurers   Saving time, improving data quality and accuracy are all key components to avoiding customer frustration and increasing customer satisfaction and loyalty. Traditional Challenges Meet Disruptive Solutions Recently, there’s been a lot of handwringing about the “sharing economy” or the “gig economy” and what it means for traditional lines of business, workers and whether it will completely transform the workplace as we know it. As Tony Canas shared in his Insurance Thought Leadership piece, “What Will Be the Uber of Insurance?”, the gig economy is hardly the end of the world — and the insurance industry is probably due for some disruption. What a number of traditional lines of business are beginning to discover is that the gig economy presents an opportunity to leverage crowdsourcing to solve challenges and inefficiencies and even spark innovation within their own organizations. Target and Instacart, Ford and Lyft, are both great examples of how large, traditional verticals are finding ways to integrate the gig economy into new products and services to attract and keep customers while increasing the bottom line. Now, let's go back to one of insurance’s greatest challenges: saving time and improving accuracy in the claims process, particularly when it comes to getting information such as photographs, records, police reports and inspections. These tasks sometimes feel like they can go on forever with a single claim, as companies try to coordinate logistics with policyholders. What if there was an Uber for insurers? A service that could dispatch an objective third party with a smartphone to quickly take pictures and gather exactly the information needed in the claims process almost immediately? There is. The gig economy and the crowdsourcing model provide a nimbleness and speed that are often sacrificed or buried alive in large enterprise organizations. See also: The Gig Economy Is Alive and Growing   Turning to the gig economy and its on-demand workforce is generating economic benefits and creating true efficiency. We’ve witnessed the process being replicated in companies both large and small and in a variety of categories. I’m continually inspired by the creativity of entrepreneurs and how they’ve found inspirational ways to apply crowdsourcing. From crowdfunding, ridesharing, coworking, delivery services (even pet Airbnb), the gig economy marketplace is homing in on specific consumer and business needs and is delivering. It can do the same for claims, so we can all stop being asked why they are taking so long.

When I was a kid growing up in Wisconsin, arm wrestling was a big deal. I'm not exactly certain why, but my guess is that it was because the winters in Wisconsin are really long and really cold. I think everyone ran out of things to do at the local tavern — so, arm wrestling it was! In my career in the insurance industry, I have seen a lot of arm wrestling matches. Perhaps not functional arm wrestling, but arm wrestling in spirit. One of the longest-standing reasons for an arm wrestling match has been over the topic of who owns the customer and the customer experience. In some instances, departments such as marketing and, more recently, e-commerce feel they own the customer experience — and they are going to protect that turf. I have witnessed situations where IT was vying for ownership of the customer experience because it could install software that would make the customer experience appealing and functional — in one way or another. I have also seen a good number of departments madly running away from a customer experience ownership arm wrestling match. Customer experience can be a really scary topic, and having it weigh into your performance appraisal might be daunting for many. See also: Payoff From Great Customer Experience?   Recently, a number of insurers have realized that ownership of customer experience isn’t a department issue; it’s a person issue. A person needs to be responsible. To make it a top priority — which it absolutely should be — the responsible person needs to be at the upper level of the organization, within the C-suite or at least directly reporting there. Responsibility is a good thing, but that’s not the whole success factor. To truly institutionalize customer experience, organizing around it is imperative. A recent press release involving Farmers Insurance organizational changes brought the theme of this blog into clear focus. The reporter understood the issue; The title of the article was “Farmers shuffles execs to improve customer experience.” Now, there isn’t a magical formula for customer experience organizational structures. Farmers elected to place the responsibility for customer experience ownership with two people: the newly appointed personal lines chief product officer and the person assuming the role of head of service operations for the company, who reported to the COO. The whole point is that an insurer needs to have a vision and a strategic goal for customer experience and then enforce it through its organizational structure with an accountable person or persons. See also: Want to Enhance Your Customer Experience?   While I don’t live in Wisconsin any more, I'm pretty sure arm wrestling is still a big deal. But when it comes to customer experience, insurers need absolute clarity on what the corporate direction is, not arm wrestling — and sound organizational structure around customer experience will make that happen.