In February 2015, Anthem, the nation’s second-largest health care insurer, disclosed losing records for 80 million employees, customers and partners. That was followed a few weeks later by Premera Blue Cross admitting it lost records for 11 million people. Then in July 2015, the U.S. Office of Personnel Management began a series of mea culpas. OPM ultimately conceded that hackers swiped sensitive personnel records for 21.5 million federal employees, contractors and their family members. Anthem, Premera Blue Cross and OPM were among the high-profile breaches in a year when the Identity Theft Resource Center counted more than 750 publicly disclosed data leaks. ThirdCertainty asked three IDT911 experts -- Brian Huntley, Eduard Goodman and Victor Searcy -- for their 2016 prognostications. (Full disclosure: IDT911 underwrites ThirdCertainty.) Wire fraud and politics 

  Huntley: In the coming year, fraud and theft will plague the merchant payments and ACH wire transfer systems. Small and medium-size businesses are especially vulnerable. If enough SMBs get victimized, it could result in a public outcry about the inherent vulnerabilities in these systems, especially as consumers and small business owners come to realize there is minimal regulatory protections in these types of cases. This being an election year, U.S. presidential candidates will focus on cyber war strategy and armament. Armchair quarterbacking of the 2015 U.S.-China cybersecurity agreement will arise as the centerpiece of this debate. We could see the U.S.-China cyber accord ascend as the basis for peer agreements between other nation states. Meanwhile, the search will continue in different industries for an information security control framework that is akin to what the financial services sector has in the Federal Financial Institutions Examination Council’s (FFIEC) Information Security Guidelines and the health care sector has in the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Data tranfers and children’s privacy

  Goodman: U.S. companies with a European presence will encounter a tremendous amount of uncertainty in 2016 with respect to Europe’s stricter Safe Harbor data privacy rules, relating to the sensitive data transfers to businesses in the U.S. European regulators can be expected to harass the likes of Facebook and Google. And the threat of sanctions for noncompliance with Europe’s tougher Safe Harbor standards could easily filter down to many smaller companies, as well. In another area, the recent hacking of toy maker VTech and Hello Kitty parent company SanrioTown.com signals that the theft of children’s information could become a worrisome new trend. As children obtain earlier access to social media, smartphones and Web-enabled toys, details of their personal information and preferences are rapidly becoming part of the greater data ecosystem. As a result, we will see more breaches that involve the theft of information for individuals under the age of 18. Hopefully, we also will see more public dialogue about the concept of preserving children’s privacy, whether it be school record data, health information or data files containing images, video and audio recordings. Taxpayers targeted—once again

  Searcy: One of the most pervasive identity theft scams involves the filing of a faked federal tax return using an ill-gotten Social Security number. Sadly, this will continue to be true again in 2016. In the 2010 and 2011 tax seasons, the Internal Revenue Service paid out $8.8 billion of taxpayer money to identity thieves. And statistics pulled from a sampling of customers assisted through IDT911’s Resolution Center in 2014 show a 120% increase in tax fraud victims in 2014 and another 134% increase in 2015. We expect this number to grow again in 2016. It can take months for a victim to sort out the mess with the IRS. Worse, there is little stopping criminals from using a victim’s Social Security number and other personal information in other scams. IDT911 stats show that 16% of tax fraud victims also were victims of financial identity theft; 12% of customers experienced multiyear tax fraud; and 16% were victims of both federal and state tax fraud.

Some workers' compensation claims seem to have a life of their own. Before you know it, years have passed since the date of injury. Here are three signals telling you to take a hard look at settling now.

In late December, Congress put together a last-minute “tax extender” package that, among many other things, made some changes to section 831(b) of the Internal Revenue Code. That section allows “small” captive insurance companies to elect to exempt from income tax all of their insurance income. These small captives have been widely used in recent years by owners of large, privately held businesses to allegedly add to their existing insurance coverages while enjoying immediate income tax reductions. Further tax benefits could include conversion of ordinary income to capital gains and a potential estate transfer benefit, depending on the ownership of the captive. Congress has changed those benefits a bit, by eliminating any estate planning benefits, starting in 2017. But Congress failed to address the true levels of abuse that this code section has spawned and, indeed, may have made things worse. These “enterprise risk” or “micro” captives are primarily used as a form of tax shelter, notwithstanding the pious claims of captive managers that they are meeting legitimate insurance needs. While such needs certainly may exist in some clear cases, the vast majority of entrepreneurs forming these captives care much more about the tax benefits than any increased insurance coverage. The IRS knows this and has stepped up both audits of individual companies and larger, promoter audits of captive managers in an effort to crack down on captives that are being formed without the intent to form an insurance company. In addition, the IRS is well aware that unscrupulous captive managers create vastly inflated “premiums” payable by the operating company to the captive to maximize the tax benefits of owning such a small captive. These premiums often bear no relation to third-party market costs, nor can they be justified by a reasonable actuarial analysis of the actual risk being insured by the captive. Another abuse is found in captive managers’ offering the new captive owner what the IRS would call a sham “pooling” arrangement, to comply with certain “risk distribution” requirements of court cases and revenue rulings. There are many cases pending in the Tax Court that attempt to corral these abuses. Their outcome is, of course, uncertain. So the Treasury Department went to the Senate Finance Committee in early 2015, hoping to obtain legislation that would gut section 831(b) (and put a lot of captive managers out of business). Instead, the department got legislation that only stops these captives from being used as estate planning tools. The legislation also increased the annual allowable premium paid to such captives, from $1.2 million to $2.2 million, indexed for inflation. The reasons for this failure have a lot to do with Sen. Chuck Grassley of Iowa, who has long wanted an increase in premium to benefit certain farm bureau captives in his state. He needed some revenue offset to allow for the increase, and, by closing this “estate planning loophole,” he can claim that tax revenues will increase. That claim may be doubtful (only about 1% of taxpayers end up being subject to the estate tax), and captive managers now have a new, higher goal of $2.2 million for the “premiums” to be paid to these small captives. It is also clear that this new legislation will have no effect on the current robust enforcement actions underway by the IRS. The issues of inflated premiums, sham pooling arrangements and lack of substance in the alleged insurance transaction remain in force and subject to serious scrutiny. It is unlikely that Congress will bother to look at this code section again any time in the near future. As a result of this new legislation, section 831(b) captives can generally no longer be owned by the entrepreneur’s spouse, children, grandchildren or trusts benefiting them. (Details about how the legislation achieves this change can be found in other sources). Perhaps as many as half of all existing micro captives were formed with estate planning in mind. These captives will have to change their ownership or dissolve before the end of 2016. Tax professionals should review all captives owned by their clients to ensure that they remain complaint with the changes in the law. Relying on the captive managers may not be sufficient.

For every medical diagnosis, disease, injury, symptom, complaint and procedure, healthcare professionals use a specific code to maintain consistent outcomes, data assessment and billing. These codes, formerly called the ICD-9, are a set of characters and numbers that have experienced a series of revisions since they were first put into place. As of Oct. 1, 2015, the ICD-10 (International Classification of Diseases, Revision 10) is in effect. With such a wide range of known diseases, ailments, symptoms and more, ICD-10 codes can get a little wacky. The infographic below illustrates 14 of the most unusual codes that illustrate the totally bizarre ways in which people manage to injure themselves. From an ice skater’s initial collision with a stationary object to computer keyboarding injuries, the ICD-10 codes don’t miss a trick.

"Star Trek" fans love to point out that, over the last five decades, many of the show’s futuristic technologies have gone from science fiction to fact. Mobile communicators (cell phones), non-invasive surgery (focused ultrasound surgery), food replicators (3D printers) and phasers (now being tested by the U.S. military) are but a few examples. But in its own way, a show in the 1980s was just as prescient: "Knight Rider"– a show about the exploits of Michael Knight (David Hasselhoff) and his car KITT, a talking, thinking and feeling car is nearly spot on. In the show, this highly autonomous vehicle could map locations, conduct video calls and talk much like Apple’s Siri system. In reality that’s headed our way, automobiles that feel and virtually think will be made possible by technologies that include augmented reality, microscopic sensors and mini-microprocessors. These technologies will enable vehicles to perform a variety of tasks now done by humans – from assessing the damage caused by accidents and ordering replacement parts to booking rental cars and assessing liability. Tomorrow’s vehicles will, in part, assume the roles of insurance adjusters, collision-repair technicians and drivers. And “tomorrow” may not be too far off. “Smart Skin” Already, engineers at the British defense, security and aerospace company BAE are developing a “smart skin” – a thin surface that could be embedded with thousands of micro-sensors (aka “motes”). The company says that when this layer is applied to an aircraft, it will gain the ability to sense wind speed, temperature, physical strain and movement with a high degree of accuracy. According to several articles, the micro-sensors could be as small as dust particles and could be sprayed on the surface of the aircraft (and on a car or truck). The motes would have their own power source and, when paired with the right software, communicate in much the same way that human skin communicates with the brain. Once sensory and virtual-reality technologies have evolved to the point where our vehicles can genuinely “feel” and evaluate changes to themselves and their environment, the main thing needed to complete this automotive Internet of  Things will be data – lots of real-time data that is freely exchanged between car owners, insurance companies, auto repair shops and auto manufacturers. Achieving a consensus among consumers and corporations about when, what and how much data should be exchanged may be a sticking point, but, once that agreement is reached, it will be just a matter of time before self-diagnosing cars start hitting the roads. The Car of Tomorrow Imagine a future in which your car is covered with an intelligent “skin” that monitors every component and function – from the engine to the exterior sheet metal. Now imagine the moment your car gets into an accident. The car will instantly calculate how much damage has been done, where it was done and what needs to be repaired or replaced. This information will be quickly ascertained and collected by the vehicle’s computer. From there, it will be transmitted to the cloud, where it can be downloaded by a repair facility or insurance company. By viewing a three-dimensional virtual-reality image of the automobile, the repair technician and insurance adjuster could literally “see” – and almost feel and touch – the damage. Imagine a time when all that damage is self-assessed by the vehicle. It diagnoses itself, feeds the information into estimating software and tells the collision-repair shop what needs to be done. The vehicle also determines how long repairs should take and even orders parts by automatically sourcing suppliers. All this ensures that your vehicle is fixed ASAP. In addition, your hyper-smart car can order a rental, so you’ll have alternative transportation while the claim is being processed. All the information regarding your accident – the speed at which you were traveling, location, direction of travel, etc. – will be instantly transmitted to your insurer, enabling the adjuster to make more educated decisions. Think of all that information being fed to a predictive, cognitive claims system that can make intelligent recommendations, helping consumers receive the best possible outcome on every claim. This is the future – an era when data, sensor and cognitive computing technology are meshed to create a seamless auto claims process that speeds repairs, handles claims more efficiently and provides an amazing customer experience.

Despite sluggish economic growth and troubling inflation in key markets, the 2016 insurance market outlook for Latin America remains relatively bright. The rollout of new insurance products and distribution approaches at a time of low market penetration should drive strong growth for insurers. Insurance premium growth is expected to rise by around 6% to 7% in 2016 and possibly beyond should the economic environment improve as expected. At the same time, the emergence of end-to-end digital capabilities is transforming the Latin American insurance market. This digital market disruption will force insurers to make rapid revisions to existing business models to stay competitive and build market share. Customer expectations rising Commercial customers will continue to require more sophisticated insurance solutions in 2016, including coverage for business interruption, cyber security, civil unrest and errors and omissions. Latin American consumers, many of whom are young, cosmopolitan and tech-savvy, will continue to push for new insurance channels and services that fit their lifestyle. To respond, insurers will need to simplify and adapt products for Millennials and sharpen their focus on mobile and social media interactions. Evolving customer needs throughout the region are compelling insurance companies to rethink their strategies, processes and services. The rise of financial technology, or fintech, companies is causing insurers, particularly in the consumer insurance sector, to reconsider their business models and increase their investment in new digital technologies. Despite a desire to avoid conflicts with legacy models, insurers realize that flexibility, efficiency and innovation are critical for success in a more demanding marketplace Competition heating up The liberalization of industry regulation across Latin America has opened insurance markets to wider competition. The abundance of insurance capital has intensified competition from various directions: from global insurers seeking a foothold in the region to local insurers looking to expand cross country to entrenched insurers defending their turf. These competitive trends are keeping insurance rates flat through much of the region and, in some cases, pushing them lower. The most substantial rate decreases have been in non-catastrophe property. Pockets of premium increases can be found in areas of instability, such as Venezuela. However, insurance capacity is very limited for Venezuelan political risk, with most risks dependent on the international reinsurance market. As markets develop in Latin America, commercial demand is increasing for new forms of insurance coverage, such as environmental liability. The opening of the oil industry to the private sector in Mexico, for example, is exposing new oil exploration and production entrants to potential losses from environmental damages. But market capacity is still restrained in key markets, such as Brazil, where only a few insurers offer such liability coverage. Read our Market Outlook for LATAM Insurance in 2016 to understand more about the dynamics facing the South America Market here.

New York City has been a leader in the future of healthcare. Listing calories on menus, banning soda sales in sizes larger than 16 ounces and now requiring a designation on menus for any items with more than 2,300 mg of sodium (or a teaspoon of salt) are, if you haven’t figured it out, great ideas. While they seem a bit big brother-ish, I applaud the intent. Today’s healthcare is a losing battle. Incentives are completely misaligned. Providers get paid for dispensing care, and we keep introducing better — and more expensive — solutions that cure health conditions that inevitably develop as we age. Today’s usage of the word "healthcare" is “care for the sick.” The only way we are going to solve our cost crisis is to change healthcare to mean “well care.” By aligning incentives to encourage well care, the system will be a lot less frictional. So, how would this work? The HMOs of the 1980s and 1990s had it right. Provider reimbursement rates would be based in part on compliance by their patients. And providers would be free to decline to treat patients who, because of lifestyle choices, would affect their compensation. Public awareness and support of this new well care normal can be tied to affordability, and I would envision a new class of coverage developing for those who opt in to a well care lifestyle. Accountability would be directly tied to affordability and also to provider choice. Seemingly insurmountable issues call for creative solutions. We need to change course now.

A bright market pundit could probably offer up her ideas on just which day it was that insurance distribution fell markedly out of sync with retail technology and consumer expectations. Was it the day Amazon was launched? Was it the day that the first app was purchased on the app store? Did it involve Google search engine optimization or the switch from print to email or social media marketing? It is interesting and a little painful to think about, but most experts would say that, of course, it wasn’t just one day or one event. It has been building slowly, silently and stealthily…where the insurance industry allowed the friction of change to impede modernization and place itself at risk. Shifting consumer mindsets and rapidly evolving markets, like tectonic pressures, built up along a fault line, and then one day the ground shakes. And it didn’t stop shaking. Now the industry is waking up and finding itself on a precipice in the midst of continual, seismic shifts. A new business environment has arrived. The environment is different because of the complexity, breadth and depth of converging factors and global changes. To an industry steeped in centuries of tradition, this new business environment represents significant disruption. The shifting and realigning of fundamental elements of the business require us to erase the idea that we can ease our organizations into the new era with minor adjustments. Instead, we need to match the rhythm of perpetual aftershocks with a model that sways to the beat of a new agenda. We need to reinvent the insurance business model so that it is built to predict seismic activity and capture future opportunities. Today’s insurers are moving from product-driven to customer-driven strategies; from reliance on limited distribution channels (such as agents) to an array of channels based on customer choice; from line of business silos to customer experience threads for all products across all lines; from simply containing risk to providing personal risk management; and from siloed solutions focused on transactions to a platform portfolio that bridges together real-time interaction across all products and services for customers, giving them an Amazon-like experience. Together the changes represent a disruption in the industry’s traditional market rhythm. The industry’s response demands two concerted efforts:

• First, it requires optimizing the front end with a digital platform that orchestrates customer engagement across multiple channels.
• Second, this multi-channel environment must be supported by an optimized back-end that effectively manages the growing array and complexity of multiple distribution channels beyond the traditional agent channel.

Together, these two efforts compose a “2D Strategy” for insurers to succeed in this new business environment of customer engagement and channel choice. What composes the 2D Strategy? It is simply digital and distribution. Majesco’s new thought leadership report, "A 2D Strategy: Distribution and Digital for High Performance," discusses this two-pronged strategy in more detail. But first, let’s spend some time diagnosing the developments that have led the industry to this point. We see four fundamental drivers: • New expectations are being set by other industries; the “Amazon effect” • New products are needed to meet new needs and risks distributed in new channels • Channel options are expanding • Lines are blurring between insurance and other industries New Expectations Customer expectations based on their experiences with other companies and industries are setting a new bar for customer experience and are a key driver in expanding distribution choice. What are these companies doing that customers like so much? Fundamentally they offer choice, create delight and surprise and make both a personalized and emotional connection. – Amazon and Netflix have a huge variety of products and use data and analytics very well to know what customers would like, before they even know it themselves. – Southwest makes things simple and transparent and has a great culture that creates a welcoming environment for customers. – Google is the very essence of surprise and delight – every time you do a search you never know what you’ll find. – Costco customers experience a “thrill of discovery” every time they go there and have access to “members only” deals on a large variety of products and services – including insurance. Availability creates a seamless line between online and in-store. – Apple designs all of its products and services to create a feeling of simplicity, function and elegance and makes shopping, buying and servicing available through multiple channels. Underpinning these new expectations is the use of technology, with mobile as a key enabler. Why? Simply put, mobile empowers customers. It used to be called the third screen (behind TV and the PC), but now it’s the first screen. Pew says that 68% of all American adults have a smartphone now, and some younger age groups are hitting saturation levels. Other studies show that more than 40% of organic search engine traffic now comes from mobile devices, and 50% of insurance shoppers start their shopping process using mobile. We frequently talk about mobile enabling ANYTIME and ANYWHERE interactions. Recent Google research quantified the times and places consumers use mobile for researching and purchasing products. Usage levels generally increase as the day progresses, peaking in the late evening. But if you look at the first two and last two parts of the day together, an estimated 46% of mobile research time is spent in the early morning, late evening or when customers are in bed — not an ideal time to meet with an insurance agent. A majority of this activity is done at home, but almost as much is done outside of the home. Customer experiences created by other companies and customer empowerment created by technology are powerful forces shaping customer expectations and driving the need for insurance companies to adopt a 2D strategy. In my next blog I’ll explore the other drivers on our list: new products, expanding channel options and blurring industry lines.

Personal auto liability is U.S. property/casualty insurers’ largest line of business, and personal auto insurers face a long and daunting list of challenges. But many of those challenges will merely alter competitive dynamics within auto insurance markets, enabling the best insurers to gain market share at the expense of weaker competitors (e.g., those insurers that master telematics and the associated big data issues can look forward to stealing share from those that don't.) Unlike the majority of other challenges, the advent of autonomous vehicles threatens all personal auto insurers, because liability will shift from vehicle owners to auto manufacturers or those who provide the systems and software that enable autonomous driving. Simply put, the market for personal auto liability insurance is likely to shrink dramatically at some point, with a number of auto manufacturers already committing to accept liability when their autonomous vehicles are at fault in accidents. None of this would be of any consequence if the cost of autonomous vehicles placed them out of reach of the typical consumer. But technology costs for autonomous vehicles are plunging. According to a recent article in the Washington Post, the cost of LIDAR (the "eyes" for autonomous vehicles) is poised to drop from $75,000 to a mere $500 or less. (See here) Yes, it will be years before autonomous vehicles constitute the lion's share of the vehicles on the road, and today's personal auto liability insurers have some good years ahead of them. But change is coming, and, as Sun Tsu said, all battles are won or lost before they are ever fought. Is it really too soon for personal auto liability insurers to begin positioning for the world just now coming in to focus on long-range scanners?  

As the insurance industry continues its slow but steady journey into a digital future, the skills required by the insurance workforce of tomorrow will also change. Here is my take on some of the insurance jobs we can expect to see in (I hope) the near future.

Digital Forensic Investigator

It's happening more and more - fraudsters submit an insurance claim only to have it thrown out because someone's discovered footage showing the whole thing was staged. My two favorite examples of recent times are the pregnant woman case and the Bugatti Veyron case. With more of our lives shared online, it's easy for insurers to check our digital alibis, and digital forensic investigators (basically people who get paid for trawling social media) are the mechanism to do this.

Cyber Actuary

Cyber insurance is becoming a must have for corporations, but it won't be long until it becomes a must have for individuals, as well. To effectively price this insurance, a new breed of digital natives with actuarial skills will be required to work out the risk and loss associated with a personal hack of your Facebook, Twitter, Instagram, LinkedIn and email accounts.

Drone Pilot

If you're currently working as an insurance assessor, I recommend you start learning how to fly a drone. On any given day in the future, you could have five drones at your command, each one automatically programmed with a flight path of claim sites to visit. As each drone arrives on site, you take manual control to get a good look with the on-board camera. Same job, but no more climbing roofs or visiting wreckers.

Telemedicine Nurse

Panel doctors beware! Five years from now, most medical examinations will be done at your local "telemedicine booth," where you'll self-assess using the same tools a doctor would use. A live telemedicine nurse, located anywhere in the world, will be on a video conference screen located in the booth to guide you through any tricky parts and to verify that it's actually you taking the tests.

Internet of Things Solution Architect

It's already possible to control many Internet-connected things in your home - televisions, fridges, air-conditioners, door locks, lamps and pet food dispensers - using smart phone apps. So, in theory, it should also be possible for these devices to notify you when they've been stolen (televisions), had food spoil because of a power failure (fridges) or been broken into (door locks), or when a pet stops eating and falls ill (pet food dispensers) - all of which are also insurable events. The challenge for IOT solution architects is to take the data and use it to trigger automated claim applications and approvals. It's an exciting (though less private) future.

Have we missed anything?

These are just a few of the jobs that insurers can expect to start recruiting for shortly, if they haven't already. Do you agree? Have we missed anything? Please comment below!