Before the advent of underwriting in London’s coffee houses in the 1600s, civilizations used various mechanisms to provide financial protection within their communities. For example, in the Middle Ages, tradesmen learned their skills through apprenticeships in the guild system. These guilds collected fees, and the wealthier guilds used these fees as a kind of insurance safety net. If a member of the guild was robbed, if his house burned down or if he died, the guild used money from the safety net to rebuild the house, support the family or settle any financial obligations. The world of insurance has changed a lot since those times, but the fundamental definition of insurance as “the mutuality in the sharing of losses” hasn’t. Which brings us to emergence of the new generation of peer-to-peer (P2P) insurance firms. These InsurTech start-ups want to address the conflict between the insured and insurer, because the insurer is betting that the insured won't make a claim, while the insured is betting he will. The P2P InsurTechs also want to address human behavior and moral hazard. P2P insurance protagonists around the world Friendsurance – Germany The pioneer of P2P insurance in 2010, Friendsurance pools its users into small groups and gives its customers a cash-back bonus at the end of each year if they remain claim-less. Friendsurance operates as an independent broker in Germany. See here for an interview with CEO and founder Tim Kunde. Lemonade – U.S. Claiming to be the “world’s first P2P insurance carrier,” little is known about Lemonade other than that it is coming soon. The company hit the press when it was reported it had raised a massive $13 million in seed funding (a strong indication where the puck is heading). Inspeer – France Here, customers form friend-and-family groups to share the deductible (aka excess) element of a claim. This enables high deductibles, thereby reducing premiums from the insurance carrier. The group shares the benefit of lower premiums and provides each other with financial cover for the higher deductible if there is a claim. PeerCover – New Zealand This is a friend-and-family savings scheme to provide financial cover for deductibles in the event of a claim. Like Inspeer, the higher deductibles result in lower premiums for everyone in the group. However, unlike Inspeer, in the event of a claim, members get as much as three times their initial contribution back to cover their excess. Guevara – UK, TongJuBao – China For Guevara and TongJuBao, I spoke with the founders to find out more about how P2P insurance works and why it is different from traditional insurance. The two companies have two very contrasting stories. I'll start in China—or Shanghai and Hong Kong, to be precise. Recently, I skyped with Tang Loaec, founder of the Community Risk Sharing platform, TongJuBao (aka P2Pprotect). Tang is on his third financial business launch after a career in banking and risk management. In his spare time, he writes fiction books! Like most involved with InsurTech start-ups, Tang wants to disrupt insurance. Tang explained, “We all want protection, but nobody loves insurance. And our insurance providers have not done a good job. In China, customer satisfaction is low at around 19%. Something needs to be done. “People think the process is unfair. Consumers pay premiums regularly and on time, but, when it comes to the claim, insurers often delay and deny the amount to be paid out. This just leads to a breakdown of trust.” Often, an InsurTech startup builds a business model that relies on a traditional underlying insurance business model. Tang aims to build a P2P insurance model that is more than a social group sharing each other’s exposure to deductibles. TongJuBao, like Guevara and the recently announced Lemonade, plans to go further and completely redefine the end-to-end insurance model. This is not just a distribution play built on some social novelty factor. This is the start of a new wave of insurance business! With TongJuBao, there is no underlying insurance carrier. Its model separates the underwriting process from the claims process, thereby removing any conflict of interest. First, TongJuBao creates social communities or groups that customers join. The company then creates a deposit account for every member. All members pay two sums of money into their deposit accounts. One is the fee for administration. The other is, effectively, a guarantee deposit to cover the risk being insured. All members pay the same amount into the deposit account to buy units of protection -- in other words, if one unit provides £10,000 of cover, and I want £50,000 of cover, I buy five units. Tang explained that his first-year focus is on launching a range of social risk products into the Chinese market: – Marriage cover is typically not insurable because divorce is a human-based, not event-based, decision. TongJuBao’s product will launch with a flat-rate premium and a short-term, no-claims period (to guard against early payout on someone buying, marrying, divorcing and claiming in a very short period). Effectively, this is selling an insurance product as an alternative to a pre-nup. There is a similar product in the U.S. market from Safeguard Guaranty, which claims to offer the “world’s first divorce probability calculator.” – In China, child abduction is a massive social problem (see this report from the Guardian). Nobody knows the true scale of the issue, but it has been a problem since the 1980s and is possibly an unintended consequence of the “one child” policy. TongJuBao’s policy will provide immediate support to the family through an agency that will offer emotional support as well as initiate search-and-rescue activity in the critical early hours after abduction. How does TongJuBao work? Tang explained, “The members of each community pay premiums into a large pot, and then members draw on the pot when they claim. Essentially, everyone in the community signs a contract with everyone else. The members all share the risk and reward.“ This is a mutualization model, but there is a capital limitation with this model, so all payouts are restricted to a capped amount. In many ways, you could look at the TongJuBao model as a marketplace more than as an insurance carrier. However, unlike the Uvamo model, members are not speculative investors looking to get a return on an investment. As for regulation, TongJuBao operates under a civil law contract and not as a regulated insurance business. This is the model that has been working for P2P lending over the past eight years, and Tang expects it to work just as well for P2P insurance. Can this business model scale? Tang believes he can get the same rates of growth in protection as the ones China has seen in lending. He told me, “The model will scale. Just look at P2P lending in China, which has scaled to over 2,000 platforms and [where] total volume of lending is four times more than [the] rest of the world put together! And how did this happen? Because, in China, banks were not meeting customer needs. It’s the same story for insurance; they are not serving customer needs.” In many ways, TongJuBao’s business model takes us back to the roots of insurance. Way back in 1696, Hand in Hand Fire & Life Insurance,  the predecessor to Aviva, the UK’s largest insurer, was created to provide everyone in the community with protection in the event of a fire. Members paid a subscription, and Hand in Hand owned its own fire brigade. Everyone in the community enjoyed the collective support of all the other members in the event of a fire. Moral hazard A common theme when talking to InsurTech firms is “the moral hazard." The long form definition of moral hazard can be found here, on Wikipedia. In the modern context, the term is used to define the actions and choices of the protected party when it doesn't carry the financial consequences of those actions. If an insured party knows it is protected financially should it crash a car or drop an iPhone in the street, does it act with the same level of precaution as it would without any financial cover? And why should it? That's what the insured party has bought insurance cover for, isn’t it? (Source: http://www.lifetonic.co.uk/articles/moral-hazard) Leaving personal responsibility and the moral dimension of this debate to one side, the fact is that a riskier attitude ultimately leads to higher premiums for everyone. This is why P2P insurance offers the potential for lower-cost insurance. By having you join groups or communities you have an affinity with—whether family, friends or people with common interests—the business model relies on a socially responsible attitude to risk-taking, as well as a financial one. If the insured knows the deductible is going to be funded by family members, is she less likely to make an exaggerated claim, especially when she is also taking the deductible from her own pocket? Hanging out with Guevara  One sign of success appears when your name is regularly dropped as a pioneer in your field, which was the case when Guevara and Friendsurance were prominently named when the story about Lemonade hit the press.  So, it was my absolute pleasure to spend time with three of the four founders of Guevara at their London headquarters—Paul Anderson, Rich Philip and Mike Greer. (The fourth founder is Kim Miller.) Anyone who spends time in the investor community, especially during early-stage investing, will tell you it's all about the team. And there’s no better example than the team at Guevara, with a wide range of backgrounds, skill sets and experiences. Everything about Guevara is incredibly professional, from the cool branding and young Turks’ positioning to the grey-haired underwriting and pricing experience in the back office. Formed in 2013, Guevara started offering motor insurance in late 2014. As the founders explained the origins of this digital insurance business, they relayed their personal experiences in buying insurance, from paying high premiums to having no idea with whom they were insured. The best story came from Anderson, who is from Australia. When he first came to the UK, he bought car insurance based on having an Australian driver’s license. It cost him £1,000. Close to renewal time, his insurance provider reminded him that his Australian driver’s license was only valid for a year and that he needed to switch to a UK one. However, there was an unintended consequence of swapping. He was recategorized as a new/inexperienced driver of less than a year! His premium shot up to £4,000. Same driver, same car, same location. Sadly, this is an all-too-real illustration of how motor insurance works today and why there is real market opportunity for a new approach. 'Old insurance is rubbish' Guevara offers a standard motor insurance policy that is underwritten using traditional rating factors (ABI rating, driver history, location). The premiums are competitive, although drivers are unlikely to find Guevara on the aggregator sites. This is because Guevara is different. Here’s why. New customers are offered a choice of groups to join. Their base price (which is what Guevara calls the premium) is split in two, with one portion going into the individual group (called the protection pool) and the rest going into a single pot that supports all of the groups (called the insurance fees). The amount of the split is anything up to 50% and depends on the number of members in the group. For groups of fewer than 10, the pool contribution is 20%, with 80% going into insurance fees. But when groups get to be larger than 100 members, the base price is split 50-50 between the two pots. Claims are first paid from the money collected in the protection pool associated with each group until it runs out (or doesn’t, in which case there is a surplus). In the event that the protection pool runs out, claims are covered out of the collective pot (insurance fees). And in the event that the collective pot runs out—i.e. the combined ratio exceeds 100%—Guevara is reinsured by a traditional carrier. The key here is that any surplus is redistributed back to the members. At renewal time, all money in the protection pool stays where it is, and the renewal premium is discounted accordingly. The model works so that members can achieve 100% discount on their protection pot contribution and only pay the insurance fees element if everyone in their group does not make a claim. For larger groups, this is 50% of the originally quoted motor premium. To affinity and beyond! What makes Guevara work is affinity. Having an association with the group is really important, because this model relies on keeping claims expenses down. Even if there has been an accident and a claim needs to be made, the member has direct incentives to minimize the claims expense. For example, following an incident, how frequently does the insured go and arrange a hire car instead of letting the insurer do it at a much lower expense? If the Guevara customer knows that a claim will directly affect friends or family or will hurt its affinity group, the customer is more likely to only claim what is necessary. What you see is what you get Guevara also wants to tackle the continued complaint of customers is that there is no transparency with motor premiums -- How are they calculated? Why do they vary so much from one insurer to another? Why do they go up from one year to the next? Guevara not only lets customers make their own choices about the group they join but always lets them see who is in the group, how much money is in the protection pot, who is making a claim and, most importantly, how much is left in the pot at renewal time. Philip, one of Guevara's founders, said the company's aim is to “encourage customers to engage and understand our insurance product. ... Insurance is such a large proportion of household discretionary spending. By giving our customers accountability within their groups and making that transparent for everyone, we can reduce the cost of motor insurance for everyone.” What next for Guevara? For now, the team is totally focused on the UK motor market, but I can sense they won’t stop there. And this is more than a distribution play. Guevara is building a full-stack insurance model, and building an insurance business is no small feat. It takes time and a lot of capital to do that. Plus, there is the whole subject of regulation, which has to be embraced and fully adopted into the business model. Guevara's product is ultra-sticky because the upsides come at renewal time, just when buying decisions are being made. For Guevara to succeed, it has to show, over time, that it can deliver a better trust engagement, a change in driving behavior and, ultimately, lower, fairer premiums for group members (which is the goal for all the P2P InsurTechs I've listed). Insurance evolution Jeff Bezos is credited with saying, “What is dangerous is not to evolve.” The traditional insurance model is not in good health, and this is creating the dynamic for change. The emergence of P2P insurance is evolution in action, even if it is taking us back to the roots of the industry!

The digital banking conversation is alive and kicking within the FinTech world, focused on discussing the merits, definitions and initiatives around what it means for a bank to become digital across its entire technology and business stacks. I have yet to find the same level of discourse and vibrancy within the insurance world. Spurred by Yan Ranchere’s latest blog post, I am adding my own thoughts to the insurance narrative or, dare I coin it, the “digital insurance” narrative. First, let’s frame the discussion by attempting to define the evolution of the insurance model from old to current and future or digital: Old Insurance Model:  This model is mostly paper-based with an application collected from the customer by the agent and sent to the carrier. The agent quote is not binding and may indeed change once the carrier has reviewed the application. I would qualify this model as carrier-centric. The carrier does all the heavy lifting with data verification and underwriting, with little stimuli from external data feeds in real time; the agent merely serves as a conduit.  As result, underwriting and closing a policy may take several days or even several weeks. Claims management and customer service are cumbersome. Arguably, this delivers poor service in today’s age of instantaneous expectations. Not only can the old model be considered carrier-centric, I would also venture it is product-centric (in the same way that the old banking model is product-centric). The implications from a technology point of view are the same as in the banking world: a thin front end, shaky middleware and a back end that is silo-driven and that makes it difficult to optimize underwriting or claims. Current Insurance Model:  The current model optimized the old model and made the transition from carrier-centric to agent-centric, which means that things are less paper-based and more electronic and that there is more process pushed onto the agent to be closer to the customer. In this model, the agent is empowered to issue policies under certain limits and risk frameworks—the carrier is not the gating factor and central node anymore. Instead of batch-processing policies at the carrier level, the system has moved to exception processing at the carrier level (when concerned with nonstandard data and policies), thereby leveraging the agent. The result is faster quotes and policies signed more quickly, with the time going from days and weeks to hours or just a day. Customer service will go the same route. Claims management will still remain the central concern of the carrier, though. Digital Insurance Model:  This is the way of the future. It is neither carrier- nor agent-centric, and it certainly is not product-centric any more. This model is truly customer- and data-centric—very similar to what we witness in digital banking. The carrier reaches out to the customer in an omni-channel way. Third-party data sources are readily available, and the technology to process and digest the data is extremely effective and delivers fast and furiously. Machine learning allows for near-instantaneous underwriting at a carrier or agent level, any time, anywhere. The customer can now get a policy in minutes. Processes after policy-signing follow a similar transformative route. The technology implications are material: new core systems of record, less silo effect, more integration, massive investments in data warehouses and in products and services that act as layers of connection between data repository centers, core systems, claims management platforms, underwriting platforms and omni-channel platforms. Picture the carrier effectively plugged in to the external world via data sources, plugged in to the customer in myriad ways that were not possible in the past and plugged in to third-party providers, all of this in real (or near-real) time. That means no more of the old linear prosecution of the main insurance processes: customer acquisition, underwriting, claims management. Furthermore, with a fast-changing world and more complex customer needs, delivering a product is not the winning formula any more. Understanding the customer via data in a contextual manner is. To be fair, insurance carriers have nearly completed massive upgrades to their database architecture and can claim the latest in data warehouse technology. Some carriers have gone the path of renovating their channels and going all-out digital. Others are refining the ways they engage new customers. Most are thinking of going mobile. Still, much remains to be done. These are exciting times. Boiling down what a digital insurance model means, we can easily see the similarities with digital banking; digital insurance must be transparent, fast, ubiquitous and data-focused, and there must be an understanding that the customer is key and is not a product. Once you digest this new model, it is easier to sift through the key trends that are reshaping and will reshape the industry. I am listing a few that we followed at R66.  By no means is this an exhaustive list, nor is it ordered by priority, impact or size of opportunity: 1) Distribution channel disruption: There are three sub trends here—a) the consolidation of brokers and agents, b) channels going all-out-digital and disrupting the brick and mortar and c) carriers continuing to go direct and competing with brokers. 2) Insuring the sharing/renting economy: Think about Uber, Airbnb and the many other start-ups that are building the sharing economy. All of them need to or already are creating different types of coverage through their ecosystems. Carriers that focus on the specific risks, navigate the use cases, gather the right data and are forward-thinking will win big. James River is an insurance carrier that comes to mind in this space. 3) Connected data analysis: I do not use the term "big data" any more. Real-time connected data analysis is the right focus. Think of the integration of a series of hardware devices, or think of n+1 data sources. These are powerful, mind-blowing and will affect the trifecta of insurance profits: underwriting, claims management and customer acquisition. 4) Technology stack upgrades:  This means middleware to complement data warehouse investments, new systems of record, software platforms for underwriting (or claims management) and API galore. It's the same story with banking; there is just a different insurance flavor. 5) Technology externalities: GPS, telematics, AI, machine learning, drones, IoT, wearables, smart sensors, visualization and next-generation risk analysis tools—you name it, these will help insurance companies get better at what they do, if they adopt and understand. 6) Mobile delivery:  How could I not list mobile delivery? Whether it is to improve customer acquisition; policies or claims management; or customer service, we are going mobile, baby. 7) A la carte coverage: Younger generations are approaching ownership in different ways. As a result, a one-size-fits-all insurance policy will not work any more. We are already witnessing a la carte insurance based on car usage, homes or commercial real estate connected via sensors or IoT. 8) Speciality insurance products:  We live in a digital world, baby, which means cyber security, fraud and identity theft. It should be noted that the above describes changes in the P&C industry and that the terms "carriers" and "reinsurers" can be used interchangeably. Furthermore, I have not focused on health insurance—I know next to nothing in that field. Any insurance expert is welcome to reach out and educate me. Anyone as clueless as I am is welcome to add their thoughts, too! This article first appeared on Pascal Bouvier's blog, here.

Gallup has just released the Guide to Customer Centricity: Analytics and Advice for B2B Leaders. The study reports that 71% of B2B clients are ready and willing to take their business elsewhere – not even one-third are fully engaged in their relationships with suppliers. If you are operating in the B2B world – and you likely are, as either a supplier or client – do you find this statistic surprising? This finding should be a wake-up call for B2B brands to figure out what is going on with their clients. Do you know anyone in the business world who will say they are opposed to client-centricity? Putting clients at the center of a business remains an aspiration for many companies. Why is a strategy of such potential value so difficult to execute? What must happen to create mutually beneficial relationships between businesses and clients? Companies have to get out of their own way and provide the value that clients expect. B2B or B2C, people handing over their money to you because they believe you are meeting their needs demand personalized engagement. They will choose the right moment to go elsewhere if you fail to deliver. Here are some areas that can make a difference:

• Sales force compensation systems rewarding new client deals, with little incentive past contract signing and getting the client set up, can be updated to reward surfacing and delivering on continuing needs.
• A linear approach to winning, welcoming and engaging clients can be reinvented to treat clients like people and break old habits of putting them through a gauntlet of internal systems and silos.
• An outside/in understanding of client needs and wants can replace product pushing. Even traditional client needs assessments may not capture evolving needs – these methods tend to play back answers biased by the products driving today’s P&L.

There is no magic to this. Client-centricity requires change and a new mindset. It’s hard work. Where can you begin? Follow these four action steps to identify the priorities for your business:

• Go out and talk to clients. The value of conversations where clients do most of the talking and you do most of the listening can be far higher than quantitative research.
• Segment your client base. This is not just about bucketing clients by size, sector, potential value to you or historical purchase relationship. It’s about the clients’ journeys, including their attitudes and behavior, how they go about achieving their vision of success, and where you fit in.
• Reimagine your clients’ experience of doing business with you. How does your brand enhance the clients’ journey -- it’s not about making them fit in to your mechanisms for running your business. It’s about reflecting their preferences back to them in every interaction they have with you.
• Figure out what this means for your employee experience and expectations. Everything from sales incentives, to marketing communications, to servicing policies to channel capabilities – should contribute to the experience your brand will create so your clients see you as enabling their vision for their business. Hire people who are not only business-focused but people-focused.

The very term “B2B” fails to acknowledge the reality that every brand, irrespective of whether its audience includes individuals or enterprises, must prove itself to the people who will be its users, buyers or payers. Behind every B2B relationship are P2Ps – People-to-People. This post also appears in Amy’s regular column on Huffington Post.

During the snowstorm that hit the East Coast in January, I took some time to clean up my office and read reasonably current newspapers and trade magazines. I quickly identified many opportunities for new insurance products, mostly around shared assets. For example, an article on Millennials and the sharing economy explained that (primarily young) people make money by sending selfies of what they are wearing every day to a website called CovetMe; they get paid based on the brands and looks they are sporting. They Uber their way to work, school or social events (when did Uber become a verb?) as a driver or passenger; they use their subscription to a shared car service such as Zipcar to take occasional trips; or they get paid for allowing advertising on their own car by subscribing to companies such as Carvertise. FlightCar gives you free parking at big airports if you let other travelers use your parked car when you are traveling. Similar sharing activities take place with homes, clothing and accessories, occasionally used tools and equipment and even medical equipment. All these shared assets need to be covered in different ways than the traditional, personal lines homeowner’s or car insurance policies. Occasionally renting out assets to third parties or shared ownership of one asset between non-family members creates a different risk profile than self-use only, both for property coverages and especially for liability. Think about deductible coverage between multiple owners in case of a claim, good driver discounts or multiple non-familial owners getting involved in the same accident, as liable parties and as claimants. The insurance market has been pondering insurance solutions for the shared economy for a while now and found ways to cover Uber drivers or Airbnb landlords or offer non-owner car insurance. As an industry, however, we defaulted to our classical model of insurance and put a commercial coverage, bought by the shared economy company for their members,  on top of individual personal insurances where needed. It works, but, as one can imagine, it is a bit clunky. Especially on larger claims, I expect delays and issues to occur concerning liability, wear and tear, acceptable use of assets and confusion around which policy should pay followed by subrogation. Now, most shared-economy companies have stated that they will reimburse their members for losses and will figure out later what is covered by which insurance. This is a good thing for their members, of course, but it doesn’t necessarily help insurers very much. We should be able to do better and create truly new insurance coverages for the shared economy. For example, why wouldn’t an insurer work with one of the new tech companies that provides people with a cloud solution to document all of their assets with pictures, videos, sales receipts or warranty documents? Why wouldn’t an insurer create a comprehensive coverage for property and liability for all these clients’ assets, under the assumption that they will be shared? Tag the key assets with a sensor and learn from usage data. Use telematics data on the car use. Limit home rentals to one or two partner companies and learn from usage analytics. Why wouldn’t a carrier try a pilot with a segment of young people with limited assets, in a single location? I know that this is not a simple proposition and that, in creating these kind of coverages, many hurdles will be encountered. I do think, however, that the market is ready, and that the sharing economy will become a force to be reckoned with soon. So, we might as well figure out how to insure and service that force. As my colleague Mark Breading stated in his recent research brief, Insurance in the Connected World: Observations on Opportunities and Threats, “Actively participating in the rapidly growing sharing economy will be critical for personal lines insurers. Asset ownership is shifting and requiring a different approach for managing and protecting the assets.” It is not going to be easy, but customers will count on our industry to develop solutions to protect their shared assets. We have successfully been supporting changing economies and technologies for centuries now – I am sure we’ll also find a solution for the new sharing economy in a connected world.

This is the first of a two-part series, by David Toomey and me, on why healthcare cost growth has historically been much higher that general inflation.  If you want to truly understand why corporate healthcare costs have risen faster than nearly anything else over the past 40 years, read this article. In 2001, David was managing large accounts for a major carrier/TPA (third-party administrator) when the largest hospital system in the market issued a notice to terminate its relationship with the carrier, to begin negotiating for higher unit prices. (When hospitals want a very high fee increase, they sometimes start the process by terminating participation in a carrier’s network.) This notice began a tumultuous series of negotiations that involved the local press. The fee increase demanded by the hospital system was high single digits, above market and highly inflationary for the area. This system was already paid a premium because of its large market presence. David moved quickly to engage major self-insured clients and educated them on the cost impact. They told him to hold firm, as they could not absorb the increases. When asked what they would do if this major hospital was not in the network of the carrier that employed David, many responded that they would turn to another carrier so as not to disrupt employees who used the hospital system! There were no questions by employers on the quality of the hospital’s care or on its commitment to process improvement. Although they realized that they could not really afford the higher prices, they felt that avoiding disrupting employees (even in a fairly minor way, by having them use a different hospital system) trumps company profits and affordable payroll deductions. That position meant David had no leverage at all in negotiating with the hospital system. As a result, employer and employee health costs ratcheted up in that market. That's too bad, but this story is the norm. We’ve seen this same scenario continuously in our careers. Even if a hospital or clinic is used by fewer than 5% to 10% of a company’s employees, getting complaints from employees—even just a few—trumps corporate profits, shareholder returns, rising payroll deductions, restraining rising deductibles and rising employee out-of-pocket health costs. Even though self-insured employers are the ultimate purchasers of healthcare, they usually just roll over when providers keep raising their charges year after year. In every market, by definition, half the providers are below average. While company benefit managers profess to want the best-quality care for their employees, they willingly accept larger fee increases from the worst providers. Why? Avoiding a few employee complaints has always been more important than deleting poor-quality providers, ones with a high rate of harming patients. (By “harming patients,” we mean providers with high rates of misdiagnoses, high rates of prescribing bad or suboptimal treatment plans and high rates of infections, some of which are deadly.) Sally Welborn, head of benefits for Walmart Stores, recently called for self-insured employers to take the lead in reforming how providers are paid and in making hard, value-based purchasing decisions. (The term “value” excludes providers that have a high rate of misdiagnosed patients and give them profitable but unnecessary treatments.) Soon, you can read Part Two on how employers can obtain value from the provider community.

Every time you breathe, you take a risk. But, usually, the potential for harm is greater if you don’t breathe. (There are exceptions, such as when your head is under water without a breathing mask.) Every time you make a decision, you take a risk; we take risk all the time, in pretty much every facet of our personal and professional lives. But, when faced with the same situation, people will act differently from one another. A person may assess the risk differently from someone else. He may make a different decision regarding whether the risk is acceptable and which fork in the road he should take to address it. In risk management, it’s fine to have defined risk criteria or appetite statements, but these rarely cover every decision a manager has to make. So, the manager has to make a decision based on what she thinks is best. A number of experts will point to risk culture as the answer to this variance in decision-making. The experts seem to believe that some organizations are more risk-averse than others. But organizations are composed of people—different people in leadership roles with different backgrounds, experiences and biases. Organizations are not homogeneous. In fact, sections of an organization are not staffed with people who are identical in their attitude toward risk. For example, on whether to select vendor A, B, C or a combination of the three, different people are likely to make different decisions. Manager X may have had a bad experience at another company with vendor A, while Manager Y used to work for that vendor. Manager Z may have lived through a disastrous experience where a sole-source vendor failed, so she will opt for a combination of two or more vendors. Manager Y may have just suffered a loss on the stock market that affects his desire to take risk, while Manager X has just heard he is a grandparent again. Even something such as a state of mind can influence a risk decision. It’s not only that different people make different decisions in the same situation but that each person may make different decisions at different times. This is important because, as risk professionals, we want decision-makers to only take the level of risk that top management and the board desires. To have consistent decisions on risk, we need to know the temperature and overall health of the organization and its decision-makers. We need to answer these questions:

• Who are we relying on to take the risks that matter most to the organization’s success?
• How can we obtain assurance that they understand the desired level of risk?
• How can we obtain assurance that they will act as we desire?
• How will we know when their risk attitude changes?

A survey will, perhaps, give you a moment-in-time view. However, people change. Managers and executives leave, new ones join and people’s perspective and desire to take risk changes, especially if they see their compensation or termination is likely to be affected by their decision. This is a complex issue that risk professionals need to understand and assess within, and across, their organization. Richard Anderson and I will be discussing this in our Risk Conversations coming up in April in London and Chicago. Details are at www.riskreimagined.com. In the meantime, how do you address this variability? How do you know that your decision-makers will take the desired level of risk?

I am fortunate to live amid incredibly smart, driven, hard-working people who care about making an impact. Sometimes, some of them trust me enough to come to me for business and career advice.

Before every such meeting, I try hard to set aside my beliefs and biases and just listen. For me, it takes genuine effort to actually listen and remember that listening to someone isn’t really the same thing as just waiting to talk. I do my best not to make someone clearly in pain feel good with the formulaic “10 steps to happiness” psychobabble.

The problem usually starts with a clear symptom : “I hate my boss,” “I don’t have faith in my CEO,” “I deserve more equity,” “I need a bigger title,” etc. Having been in their shoes as an employee, a manager, a CEO, I’ve dealt with many of these feelings myself, so I can often relate to where people are coming from. I suppose that’s the real value of talking to someone—it helps separate problems from symptoms, and knowing the problem is half the solution.

A lot of times, what I discover in these conversations—once we talk through what’s going on and dig deeper into the situation—is that these surface emotions are just really reflections of the real problem, which is larger, more corrosive and harder to admit.

Entitlement.

The problem is we all feel entitled to something. Entitlement is a subtle and implicit belief that we deserve things, that the world owes us something.

The truth, something we all know, is that the world owes us nothing. However, it is hard to remember that at the right time, when you are feeling entitled.

I am not suggesting that having expectations, desires and sometimes taking things for granted is unnatural or even bad. I am saying that if you stop for a minute and zoom out, you’ll start to realize that a lot of your pain goes away if you stop feeling entitled and that dealing with the reality of your situation becomes a heck of a lot easier.

So the next time you are feeling upset about something, try it . Zoom out and tell yourself, "The world owes me nothing," and see what happens.

When I do it mindfully, I can tell you I feel a sudden emptiness, followed by a delightful lightness. Sure, it may only last for a minute, but that little lull puts things in perspective, replacing the heaviness of “I deserve better” with “I am grateful for what I have. There will always be more I want. It will never be enough, but it will all be OK.”

Try this for a week: Every morning, tell yourself , "The world owes me nothing." See if it subconsciously affects your thoughts, alters your tone and orchestrates your actions throughout the day. Note how that sets you up for a simple but powerful call of duty, to be useful to people around you—your family, friends, co-workers, customers, investors, neighbors, strangers, everyone! Be grateful for the many, many things you have.

We begin life with a cry. In the end, the only thing that matters is how many people cry when we die. Or maybe that, too, is an entitlement.

Originally published on Medium

Things happen fast in the start-up world. Early yesterday, I wrote a post on how Zenefits’ compliance challenges in Washington state could cost the company millions of dollars in lost commissions. While noting that it was only a matter of time before someone at Zenefits lost his job over the situation, I had no idea that Zenefits CEO Parker Conrad would resign later in the day, citing the compliance problems. In a press release cited by VentureBeat.com announcing Conrad’s departure, Zenefits' new CEO, David Sacks, who had been COO, declared, ”I believe that Zenefits has a great future ahead, but only if we do the right things. We sell insurance in a highly regulated industry. In order to do that, we must be properly licensed. For us, compliance is like oxygen. Without it, we die. The fact is that many of our internal processes, controls and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.” (The entire press release is worth reading). The loss of a founder and CEO is another cost Zenefits will pay for the alleged failure to comply with states’ insurance laws. I don’t believe they’re done paying for their mistake, however. What follows is a slightly edited version of my earlier article: Washington regulators are investigating Zenefits’ alleged use of unlicensed agents selling insurance policies in the state. This is not only embarrassing for a company as brash and boastful as Zenefits, but the company’s finances could be substantially affected, too. Not just because, if found guilty of this felony, Zenefits could face a multimillion-dollar fine. The far greater risk to Zenefits is the prospect of losing commission income — a lot of it. William Alden at BuzzFeed News has done a great job pursuing the story of Zenefits’ unlicensed sales. Now Alden is reporting that, based on public records, it seems “83% of the insurance policies sold or serviced by the company through August 2015 were peddled by employees without necessary state licenses….” The potential fallout is quite substantial even though only a small number of sales are involved -- just 110 policies out of 132 sold or serviced by Zenefits in Washington between November 2013 and August 2015. “Soft dollar” costs include a damaged brand because of the bad press, distractions at all levels of the company and the need to address whether the company is ignoring other consumer protections. Then there are the hard costs. 110 policies times the maximum $25,000 per violation that Washington can impose means fines of as much as $2.8 million. Financial penalties imposed by other states could add to this figure. While paying a $2.8 million fine is no laughing matter for a company losing money every month, this represents less than 0.5% of what Zenefits has raised from investors. However, the legal fines are, potentially, just the tip of the proverbial iceberg. As Alden points out, the fallout from this investigation could result in carriers dumping Zenefits, and that could cost the company far more than any criminal fines. Carriers require agents to meet several requirements before contracting with them, and agents must continue to meet these requirements to keep the agreement in-force. Common provisions include being appropriately licensed, maintaining adequate errors and omissions coverage and not committing felonies or breaching fiduciary responsibilities. Fail to meet any of these requirements, and agents can find their contract terminated for cause. Terminations for cause usually allow insurance companies to withhold future commissions from the agent and, depending on the specific terms of the contract, from the agent’s agency, as well. If an agency or agent knows or should have known he was in violation of contract terms when executing the agreement, carriers may be able to rescind the contract and demand repayment of commissions. Being found guilty of a felony in Washington state could allow a carrier -- any carrier, anywhere in the country -- to terminate Zenefits’ agent contract for cause. Late last year, Zenefits CEO Conrad claimed the company was on track to earn $80 million in 2015. So, let’s see, millions times 50% … carry the one … yeah, this hurts. A lot. A nuclear outcome is highly unlikely. The Washington state investigation into Zenefits is continuing, and Zenefits, to date, has been found guilty of nothing. Even if Washington regulators find Zenefits committed a felony, for reasons described in a previous post, the outcome is highly unlikely to be a fatal blow to the company. Insurance regulators have considerable leeway in determining fines and penalties. Absent proof that Zenefits intentionally violated state law or that consumers experienced actual harm, the Washington State Department of Insurance is likely to conclude that this situation resulted from incompetence. The department might then impose a modest fine on Zenefits and subject the company to enhanced review of its licensing practices for a few years. Let’s put this in perspective. Richard Nixon resigned the presidency as a result of what started off as a two-bit break-in. That kind of cascading escalation is extremely rare. What we’re seeing unfold in Washington state is probably not Zenefits’ Watergate moment. Zenefits has already paid a small price for what it allegedly did. I’m guessing the whole mess has been a bit distracting to management. And the fact remains: Mishandling more than 80% of sales in a state is a sign of immense ineptitude, arrogance or both. Having this reality aired publicly is not good for Zenefits’ brand, and resources will need to be expended to make sure it doesn’t happen again. I’m not aware the company has fired anyone as a direct result of the lax licensing controls, but that could happen. As a result of this fiasco, Zenefits has already taken down its controversial broker comparison pages in which the company used carefully selected criteria to compare itself to community-based agents. (I guess the company was reluctant to add “being investigated for multiple felonies” as one of the comparison points). This is a small sacrifice as the comparison page was likely an attempt to enhance search engine optimization rather than an effort to take business from the competition. Zenefits has paid a small price. The open question is: How large a price will the company ultimately pay?

News flash! You are not an insurance agent. Yes, you sell insurance products and services for commissions, but that’s not why your clients buy from you. Every successful insurance agent today understands that they do much more than transfer risk for their clients. Today’s successful insurance agents understand that they are first and foremost marketers, publishers, creators, innovators, speakers and value providers. This may seem like a foreign concept, but it’s true. No insurance producer can help clients financially if she can’t first paint an emotional picture through words and ideas. Marketing is not about manipulation, tricks or tactics. Today’s insurance buyers are too educated and untrusting to fall for inauthenticity. Today’s marketing is about great content. Content is not limited to a website, emails or product and service descriptions. Everything a customer or prospective customer comes into contact with about you or your agency is content. Content is any medium through which you communicate with the people who may use your products or services. It could be the words on your webpage, the email sent to a client, a headline on your brochure or the words used during an appointment with a prospective client. There is no hiding from content. It will make or break you. However, most agents don’t seize this opportunity. In fact, most agents don’t even know the opportunity exists. Ann Handley, author of “Everybody Writes,” says it best: "Ours is a world where technology and social idea have given us access and power: Every one one of us has the awesome opportunity to own our own online publishing platforms—websites, blogs, email newsletters, Facebook pages, Twitter streams and so on. "I don’t use the phrase 'awesome opportunity' lightly. The opportunity to change how we communicate with people we are trying to reach—and what we communicate—is tremendous, yet we aren’t taking full advantage of it.” With this great opportunity, why are the vast majority of insurance agents still standing on the sidelines, simply watching and waiting? Some think they lack time, others say they lack of knowledge or skill, and others still believe that there is no need to change. I contend you don’t really have a choice.

• Your prospective clients have more options than ever before.
• Your prospective clients have more resources than ever before.
• Your prospective clients expect more from their agent than ever before.

Those agents who deliver on these expectations will stand out and earn business from their ideal clients. Those who don’t will continue to fight and scrape for what’s left. So, I ask you a basic question: Are you a marketer or an insurance agent? Trick question. You have to be both. One is expected, the other will make you successful. You are expected to understand policy terms, definitions, exclusions, coverage gaps, underwriting, endorsements and what all those strange acronyms mean. You get paid for providing a positive experience through your content. Providing that is not easy, and that’s why most agents are struggling. It requires that you are much more than just smart, friendly and able to ask if you can provide a quote.

• You have to help your customers achieve something that’s important to them.
• You have to provide a unique viewpoint.
• You have to put 100% focus on your customer and view the world through his eyes.

All three listed above take hard work, hustle, training, continual personal development and a passion that burns deep inside you. This passion doesn’t come from outside sources. It starts and ends with you.

• How badly do you want to make an impact?
• How badly do you want to help others?
• How badly do you want to become the industry leader?

To succeed, you must decide you will not settle for being just another insurance agent. You are a professional who earns trust through consistent and valuable content, offline and online, to your clients and prospective clients. To be a successful insurance agent today, you must first be a marketer ... and a good one.

According to patent applications recently filed with the U.S. Patent and Trademark Office, Allstate is planning a driver safety scoring system that will take into account speed laws, road signs, traffic signals, weather and possibly even biometric data such as your heart rate. These driver safety ratings would then be used to determine what kind of car insurance you can buy and how much you’ll pay. Allstate’s plans are part of a wider effort in the industry to gather telematics data from today’s advanced vehicles, smartphones and other devices. Many insurers already offer “usage-based insurance” programs that set rates based on actual driving behavior, such as Allstate’s Drivewise, Progressive’s Snapshot and State Farm’s Drive Safe. If you tailgate, speed, drive through high-crime neighborhoods or even drive at night, insurance companies might be able to justify charging higher rates, regardless of whether you get a ticket or cause an accident. You’ll probably find yourself getting a driving score for each trip, even paying different insurance amounts each time you go out. Filing a patent application doesn’t guarantee that a plan will ever be used, but, within five years, it might be hard to find an auto insurance company that doesn’t have a plan to score your driving and use that score for setting your rate, says David Lukens, director of telematics at data analytics company LexisNexis. If insurers don’t want to develop their own scoring system, they can buy one. LexisNexis, which has tracked and analyzed more than a billion miles of driving behavior based on data from insurers that have telematics customers, has developed its own system for scoring driving behavior and offers it to insurers. Allstate declined to comment on details of its patent but said it “is committed to shaping the future of insurance to add more value and best serve customers’ changing needs.” The company's statement to NerdWallet added that “Allstate treats this information confidentially, enabling customer control over the distribution of their personal information.” Allstate’s system wouldn’t necessarily operate silently while you speed and blow through stop signs. The patent application describes incorporating real-time feedback such as warnings that you’re driving over the speed limit or approaching a stop sign—much like a spouse who yells “Watch out!” from the passenger seat. This is similar to a system being developed by State Farm (first described by NerdWallet) that would measure driver emotions and respond with in-vehicle stimuli such as music and even fragrances to improve driving. Allstate’s proposed system for rating drivers could incorporate more than just data from the car. For example, the insurer is considering monitoring and evaluating your heart rate, electrocardiograph signals and blood pressure through sensors embedded in the steering wheel. According to another patent filed in 2014, Allstate is also working on a game-like system where groups of drivers would encourage each another to drive better to improve the overall driving score of the group. Allstate calls it “geotribing.” Allstate imagines this as a kind of high school scenario where the baseball team is competing with the basketball team to see which group can capture the better score to earn rewards. Real-time driving scores could be monitored remotely by all members of the group. Allstate’s hope is that this “creates a self-policing atmosphere.” The sense of always being watched should make drivers “more conscious of practicing safe driving habits,” according to the patent. Lukens says such group encouragement can make a big impact on driving habits—if done the right way. “It gets iffy when it comes [down] to allowing people to comment on other people’s behavior,” he says. “You can’t control the way people talk to each other.” Encouragement could devolve into bullying. Many consumers seem interested in getting driver scores and improving their own driving. In March 2015, LexisNexis asked slightly more than 2,000 consumers whether they would be interested in a smartphone app that measures their driving score and offers ways to drive better, without any insurance discount. Fifty-nine percent said it would be nice to know their score, and 50% liked the idea of improving their score. But only 28% said they were interested in comparing their scores to others. Although you might not be forced into a scoring program, Lukens says you should expect to pay higher rates in the future if you opt out. Allstate says, in one of its patent applications, that drivers who decline to participate might be signaling concern “that the information would demonstrate less-than-ideal [driving] behavior.” Allstate is also considering how to leverage all this data for additional business opportunities. For example, it says a person who has a specific spending and credit profile—and who refuses to share her driving data—“may be particularly receptive to an ad campaign for luxury sports cars or certain vacation travel.” Similarly, NerdWallet has previously reported that State Farm has made plans to collect customer data for targeted advertising. Driving scores aren’t on the horizon; they’re already here. Insurance companies are, right now, internally testing them. In fact, Lukens says, if you are a customer of a usage-based insurance program, you already have a score, even if your insurer hasn’t told you about it.