2015 was the year that InsurTech emerged from the shadow of Fintech. This story has been told through my last 40 research notes published on DailyFintech.com over the past eight months. Including 28 interviews with the CEOs and founders of InsurTechs, this story spans the globe from the U.S. to China, from South Africa to Estonia, and a few stops in between. So, what does this tell us about the next chapter of this story? Here, I give you my Top 10 InsurTech predictions for 2016. In no particular order... Prediction #1 Insurers will create lifestyle apps that provide additional consumer value on a continuing basis. Continuous consumer engagement will start to replace price as the key buying criterion. The result will be sticky insurance with strong brand loyalty. Prediction #2 The person-to-person (P2P) insurance business model will struggle to reach scale in its current form. This will drive the P2P insurers to find new ways to replace the traditional carrier model, and we will see signs of a completely new business model for insurance. That will scale. Prediction #3 Much greater levels of personalized rating will become widely available using new sources of data from technology such as wearables, the Internet of Things and smartphone apps. This will lead to variable premiums over the policy term to encourage better behavior (although insurers will hold back and not introduce corresponding punishments in 2016). Prediction #4 "All in one policy" cover (aka, all-risks insurance) will emerge for consumer protection. Policyholders will be able to insure their lifestyle (their home, motor, dog, holidays, iPhone, treasures, travel) in a single policy based on highly personalized risk assessment through a digital platform. Prediction #5 "All in one place" platforms (aka a concierge service) will replace traditional intermediaries with a digital broker. These services will consolidate multiple policies, converge with financial planning tools and provide robo-advice on gaps and duplication in cover. Prediction #6 New entrants will come into the market with highly sophisticated data modeling and predictive analytics solutions. They will exploit mass-scale technologies, high-performance computing and techniques developed in high-frequency trading. Prediction #7 Convenience and the ability to digitally turn insurance cover on and off as needed will be steadily accepted and adopted. As will microinsurance, sharing insurance and pay-per-mile. Unit premiums will be higher, but this will be outweighed by Millennial attitudes toward insurance cover and paying a price for convenience. Prediction #8 The poorest in our world are the ones who need insurance the most. In 2016, the insurance industry will (finally) start to better serve the massively underinsured populations in developing countries. This will be driven by a combination of the massive market opportunity that exists for insurance, global economic forces and a socio-political agenda. Prediction #9 There will be widespread deployment by traditional insurers of new digital solutions to reduce cost of claims and loss handling. Serving both ends of the insurance workflow, these tech solutions will enable better collection of data and evidence to improve risk rating at the front end and the claims handling processes, especially at first notice of loss (FNOL), at the back. Prediction #10 2017 will be the year of block chain and insurance. No list of predictions would be complete without reference to block chain, but IMHO it is going to take all of 2016 for the insurance industry to get to grips with what block chain is, what it can really do for insurance and (most important) why we should use block chain as opposed to any other database or enabling technology. Don't get me wrong, for I am squarely in the camp that believes "block chain is the next Internet." And we will continue to see a lot of block chain insurance activity throughout the year. But adoption in insurance won't take hold until we've seen 2016 out.

It has become fashionable to trash Millennials. They lack a strong work ethic, have no grit, aren't respectful or patient and definitely don't understand corporate culture. The trashing fits with how people romanticize the 1950s as the golden age of American culture, when everything was just somehow better.

I don't know whether Gen X is just irritated that they're getting older or whether people are forming their opinions solely based on Buzzfeed, but I think the stereotype is wrong - dead wrong. In fact, I will go out on a limb and state that Millennials may actually be the best generation of workers we've ever seen.

And I say this having hired hundreds of new college grads - and seasoned professionals - over the past 20 years. Here's why:

1. They're too big for their britches.

Today's young job seekers have grown up with a startup mentality. The value of embracing failure has been etched into their psyche by entrepreneurs and tech titans like Steve Jobs and Elon Musk. So, unlike past generations, they are not necessarily looking for stability. They don't dream of landing a job at GM or IBM. They approach positions with the understanding that they may have to put in 110% to succeed, even with the near certainty that their employer won't be around five years from now.

Put that in contrast to the stigma of entitlement attached to Millennials. It's true that many baby boomer parents have raised them with a perspective of possibility. They've been encouraged to follow their dreams and passions. And from watching Mark Zuckerberg or President Obama, they've learned first-hand that it's not just dogma; anything really is possible.

So where some see entitlement, I see greater authenticity and audacity.

Millennials will shoot for the stars - and if they fall down, they'll get right back up and try a different way.

2. They just don't communicate the way you do.

If you've watched "Mad Men," you've seen the fast-paced advertising world struggle to become more connected with innovations like... the speaker phone. Fast forward to today, where first-time job seekers not only understand and embrace collaborative technologies but don't know anything different.

While many offices struggle to get their workforce to embrace services like Yammer or Basecamp, Millennials have been doing those things for years. They've been learning with social classroom tools and chatting on Facebook, Twitter and Instagram every waking hour. As a result, they actually conceive of communication in a one-to-many paradigm, which is a huge plus for companies that are spread out globally and interact primarily in a virtual environment.

3. They expect things to happen instantly.

I don't know anyone over the age of 50 who doesn't complain about how fast the world is moving these days. However, in the case of job performance, that's a very very good thing. Think about it. Thirty years ago, everything took a lot more time. The data you needed to make critical business decisions was delivered weeks later by a mail truck. Someone had to physically be sitting in a predetermined location at the right time for you to call on the phone.

Our expectations for accomplishing tasks were, naturally, based on the resources and structures we had in place. Simply put, we moved much slower. And, God bless them, there are many professionals out there who still work the same way.

Not Millennial workers. With the pace of news, communication and responsiveness nearly instant, that's how they approach work. They know nothing else. Plus, they have the necessary tools to support them. Give a Millennial employee a research assignment on your competitors, and you’ll get the project back in 24 hours. Twenty years ago, the same project might have taken a month. One piece of advice: Just make sure you attach a deadline to the assignment.

4. They expect too much.

Studies show that young job seekers today are passionate about how their jobs affect the world. In fact, they value job fulfillment over monetary reward. Many balk at the traditional model of doing charitable good only when you have reached a certain level of economic wealth or solely in your free time. They want to reach financial well-being and achieve social good simultaneously .

What does that mean for employers? I would hope it could open the doors to two things. First, we have the ability to retain skilled and valuable Millennial workers by creating environments where social impact is lauded. That will reduce employee turnover and save companies thousands of dollars each year in recruiting, hiring and lost productivity.

More important, Millennials are a driving force toward significant, scalable and lasting social change that will benefit everyone, whether it's about the environment, socioeconomic diversity or just a healthier work-life balance. In case you've forgotten, the U.S. ranks the worst among all modern economies in vacation time and pay.

5. They think differently from you.

Millennials are the most diverse generation in U.S. history. Minorities, roughly a third of the U.S. population today, are expected to become the majority by 2042. So Millennials don't just embrace diversity on the job; they expect it.

From race and religion to gender and sexuality, they've come of age with a greater comfort of multiplicity of all kinds. They've entered adulthood with an African-American president and been the catalyst for many states legalizing same-sex marriage. Female leaders like Hillary Clinton and Sheryl Sandberg have shaped their views on gender equality.

Imagine how that translates in the workplace. The payoffs touch every single area of a business by opening the doors to increased creativity, agility and productivity, new attitudes and language skills, a more global understanding, new solutions to difficult problems, stronger customer and community loyalty and improved employee recruitment and retention.

6. They are obsessed with technology.

Today even the industries that historically have been slow to innovate are finally adopting a web- and mobile-first philosophy. Century-old brick-and-mortar stores are fighting to keep Amazon at bay; healthcare finds itself transformed by the Affordable Care Act. Job seekers with coding and programming skills from Java to Ruby to SQL are desperately needed at all types of companies right now. Big data analytics, video game design, app development, software architecture - the list goes on and on for highly sought Millennial workers with tech expertise. But the issue isn't just about the hard skills they bring.

If you've spent any time with a child lately, you've probably noticed that they can master an iPad within minutes. It's mind-blowing - and a little frightening - to imagine how future generations of consumers will interact with technology.

Millennial workers are the bridge to that future, through social media, mobile, the cloud and other real-time technologies that haven't even been invented yet. They are graduating with both academic skills and innate behavioral skills that companies will need to engage with customers in much more meaningful (and profitable) ways.

It's the way Millennials think about technology, and their relationship with it, that is changing everything. So, having Millennial employees on staff to advise on your customer relations strategy or spearhead innovative new mobile and social media programs is invaluable for any business of any size, place or industry.

Cyber attacks were once on the periphery of American business consciousness. That mindset changed over the past two years. A series of devastating events, including the 2014 cyber attack against Sony, catapulted cyber liability concerns from an IT department issue to a major priority for boardrooms across America. As U.S. government officials concluded that North Korea was behind the attack, many C-suite executives suddenly found themselves asking questions. Is this the start of a cyber war? Could we be the next victim? If we are, how will it affect our operations and our bottom line? Do our insurance policies cover any of these costs?

Today, many insurance buyers look to their cyber insurance policies to fill coverage gaps that often exist in other policies. For example, a property policy may respond to physical damage from a named peril, but it will likely exclude loss for non-tangible assets as a result of a cyber attack. Similarly, a commercial general liability policy will likely provide liability coverage for causing bodily injury because of negligence but exclude coverage for liability because of a failure to secure sensitive data from hackers.

Many policyholders may be unaware that some, though not all, of these cyber policies contain specific terrorism and war exclusions. As a result, gaps in cyber insurance coverage can exist in cases like the Sony breach, where government agencies, like the FBI, conclude that a foreign government or terrorist organization is responsible for the attack.

Is a Cyber Attack "Terrorism" or "War"?

Immediately following the Sony attack, President Obama referred to it by saying, "I don’t think it was an act of war . . . but cyber vandalism." Then, on April 1, 2015, President Obama signed the Executive Order on Cybersecurity with the goal of protecting the private sector against hackers and thereby bolstering national security. The order seeks to identify and punish individuals behind attacks, but it could also lead some to categorize an apparent hacking event or act of cyber terrorism as an "act of war."

Changes in government definitions trickle down into coverage disputes because many policies that exclude or include "war," "terrorism" or "cyber terrorism" either fail to define those terms or define them by referring to standard government definitions.

Government Definitions of Terrorism, Cyber Terrorism and War

THE TERRORISM RISK INSURANCE ACT (TRIA)

"Act of terrorism" is defined as any act certified by the secretary of the Treasury in concurrence with the secretary of State and the attorney general of the U.S. to be:

» an act of terrorism

» a violent act or an act that is dangerous to human life, property or infrastructure

» an act resulting in damage within the United States or Outside (on a U.S.-flagged vessel, aircraft or U.S. mission)

» an act committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population, U.S. policy or the U.S. government.

The secretary of the Treasury may not delegate his certification authority, and his decision to certify an act or not is not subject to judicial review.

DEPARTMENT OF DEFENSE (DOD)

The DOD defines "terrorism" as "the unlawful use of violence or threat of violence, often motivated by religious, political or other ideological beliefs, to instill fear and coerce governments or societies in pursuit of goals that are usually political." The term "act of war" is understood to mean "a use of force [that may] invoke a state's inherent right to lawful self-defense."

DEPARTMENT OF JUSTICE (DOJ)/FEDERAL BUREAU OF INVESTIGATION (FBI)

The FBI defines "cyber terrorism" as "the premeditated, politically motivated attack against information, computer systems, computer programs and data [that] results in violence against non-combatant targets by subnational groups or clandestine agents."

DEPARTMENT OF HOMELAND SECURITY (DHS)

The National Infrastructure Protection Center (NIPC), (formally a branch of DHS), defines "cyber terrorism" as "a criminal act perpetrated through computers resulting in violence, death and/or destruction and creating terror for the purpose of coercing a government to change its policies."

Cyber Terrorism and the 'Act of War' Exclusion

Cyber policies are relatively new and manuscript products; as such, the wording varies significantly. Many policies contain a standard exclusion for "war, invasion, acts of foreign enemies, hostilities (whether war is declared or not), civil war, rebellion, revolution, insurrection, military or usurped power, confiscation, nationalization, requisition, or destruction of, or damage to, property by or under the order of any government, public or local authority..." An attack by the Taliban, for example, would probably fit within the exclusion as an act sponsored by a "public or local authority."

Traditionally, war exclusions were relatively narrow; they required an actual war or, at the very least, "warlike operations"; "for there to be a 'war,' a sovereign or quasi-sovereign must engage in hostilities." Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1005 (2d Cir. 1974) (finding that a Jordanian terrorist group that hijacked a plane was not a de facto government for the purposes of applying the war exception).

However, the events of Sept. 11, 2001, changed the way certain events and groups were perceived and classified, ultimately leading many to label the 2014 cyber attack on Sony an "act of war."

Litigation surrounding the Sept. 11 attacks led directly to an expanded view of the war exclusion. For one thing, the Second Circuit Court of Appeals ruled that the attacks were an "act of war." In re Sept. 11 Litig., 931 F. Supp. 2d 496, 512 (S.D.N.Y. 2013), an owner of a building near the site of the World Trade Center attacks sought to recover cleanup and abatement expenses for removing pulverized dust that infiltrated into the owner's building after the collapse of the Twin Towers. He sued under the Comprehensive Environmental Response, Compensation, and Liability Act [CERCLA], which allows strict liability claims in pollution cases, but the court applied CERCLA's "act of war" exception to strict liability.

In concluding that the attacks were an act of war, the court commented that "Al Qaeda's leadership declared war on the United States, and organized a sophisticated, coordinated, and well-financed set of attacks intended to bring down the leading commercial and political institutions of the United States," id. at 509, and that "as we learned in the twentieth century, and as has been true throughout history, war can take on a formal structure of armies in contrasting uniforms confronting each other on battlefields, and war can persist for years, fought by irregular, insurgent forces and capable of causing extraordinary damage," id. at 511.

This expansion of the legal definition of "act of war" to include acts by "irregular, insurgent forces and capable of causing extraordinary damage" could lead to attacks by hacktivist groups or foreign intelligence services being considered acts of war and therefore excluded from cyber policies.

Cyber Insurance and TRIA

The Terrorism Risk Insurance Act (TRIA) is a government program designed to provide a backstop for reinsurers in the event of large terrorism-related losses (more than $100 million). There is debate over whether TRIA applies to cyber policies at all. TRIA applies to commercial property and casualty insurance coverage, but some cyber policies are written as another line of coverage, such as professional liability, which is not included in TRIA.

Even assuming that TRIA would apply to cyber insurance, for TRIA coverage to be in effect, (1) there must be losses, resulting from property damage, exceeding $100 million; and (2) they must be caused by a certified terrorism event:

(1) Property Damage: For TRIA to apply, physical property damage must occur, and what constitutes "physical damage" in the context of a cyber attack remains an open question. What we do know is that TRIA will probably not cover business interruption or reductions in business income absent some physical loss or property damage. Many cyber attacks do not involve any physical damage, which would exclude TRIA coverage.

(2) A Certified Terrorism Event: For TRIA to apply to any event, the event would need to be certified as an act of terrorism. This onerous and political certification process requires the secretary of the Treasury, secretary of State and attorney general to agree that an incident was an "act of terrorism." Many political and economic issues factor into certifying a terrorism event, which can lead to counterintuitive results. For instance, as of the date of this publication, the April 2013 Boston Marathon bombing has not been certified as a terrorist act.

Conclusion

To ensure coverage for cyber terrorism and cyber warfare, buyers of cyber insurance will need to seek out a cyber risk insurance policy that explicitly includes this coverage in the broadest terms possible. As more insurance carriers enter the cyber insurance market, one must be wary that policy terms will vary from one policy form to the next, and some will have coverage terms superior to others.

When I Googled "should I buy the rental car damage waiver, I got 40.6 million hits. Needless to say, much has been written about this issue. But much of what has been written is BAD (aka horrible and dangerous) advice.

If you have auto insurance, is that good enough? What about credit card coverage? This article explores the issues and suggests some answers, at least one of which you might not like. (Note: This article builds on an article I first published in 1998, titled "Top 10 Reasons to Purchase the Rental Car Damage Waiver."]

The vast majority of consumer articles suggest that the purchase of the loss damage waiver (LDW) is not necessary if you have auto insurance or credit card coverage. For example, in a 2014 article in U.S. News & World Reports titled "7 Costly Car Rental Mistakes to Avoid," the very first "mistake" involves buying insurance you don't need. The article says your auto insurance policy "may" cover collision and quotes someone who says, "The credit card coverage will kick in for anything your personal policy doesn’t cover." Needless to say, "may" and "will" are two different things.

While many auto policies and some credit cards may provide coverage for damage to a rental car, it is almost certainly not complete, and four- to five-figure uncovered losses are not at all uncommon. The purchase of the LDW (with caveats), along with auto insurance, provides a belt and suspenders approach to risk managing the rental car exposure.

Let's explore the value and deficiencies of auto insurance, credit card coverage and loss damage waivers.

Personal Auto Policies

In the article I wrote in 1998 and have since updated, I enumerate many reasons why buying the loss damage waiver is a good idea. I won't repeat those reasons in their entirety, but I'll highlight the more important issues that have resulted in uncovered claims that I'm personally aware of, based on more than 20 years of managing such issues. We'll start with the current 2005 ISO Personal Auto Policy (PAP) as the basis of our discussion, with some references to non-ISO auto policies.

The ISO PAP extends physical damage coverage to private passenger autos, pickups, vans and trailers you don't own if at least one declared auto on your policy has such physical damage coverage. But physical damage coverage does not extend to a motor home, moving truck, motorcycle, etc. that you are renting.

Damage valuation is on an actual cash value (ACV) basis, while most rental agreements require coverage for "full value" (translation: whatever the rental car company says is the value), and most PAPs exclude any "betterment" in value.

Many non-ISO PAPs have an exclusion or dollar limitation on non-owned autos or specific types of rental vehicles such that rental, for example, of an upscale SUV or sports car may have limited or even no coverage.

Many PAPs limit or do not cover the rental company's loss of rental income on a damaged auto. There is often an option to provide increased limits for this coverage, but many price-focused consumers may decline such coverage. Even where this coverage is provided, many insurers may only be willing to pay for the usage indicated by fleet logs while the rental agency wants the full daily rental value. In one claim, the renter was charged $2,000 more than his insurer was willing to pay. In another claim involving a luxury car that was stolen from his hotel parking lot, the renter was hit with the maximum daily rental rate of $300, for a total loss of use charge of $9,000 (that he negotiated down to $4,500). In still another claim, following the 2011 tsunami that hit Japan, replacement parts for a rental car were unavailable for several months, and the renter incurred a $6,000 loss-of-use charge by the rental car company.

Probably the most significant deficiency in the PAP is the lack of coverage for diminished value claims. That's the #1 reason I always buy the LDW. I’m personally aware of uncovered diminished value charges of $3,000, $5,000, $7,000 and $8,000 and read about one from a reliable source that totaled $15,000 on an upscale SUV rental.

In one case, a Florida insured traveled to Colorado for a rock-climbing vacation. He passed on purchasing the LDW for his four-day rental because "I'm an excellent driver, and I've got car insurance and credit card coverage." Apparently, the driver of the vehicle that sideswiped his rental car while it was parked was not an excellent driver. The damage totaled $4,400 for repairs, $370 for administrative fees, $620 for loss of use and $3,100 in diminished value. Of the $8,490 total, $3,990 was uninsured and not covered by his credit card, the biggest component being the $3,100 diminished value charge. In addition, the driver ended up having to hire a Colorado attorney to assist in resolving the claim. The cost of the LDW for the entire trip would have been less than $100, a small fraction of the total cost of his vacation trip.

When insureds travel on business or vacation, a rental car is often valet-parked at a hotel or restaurant. The ISO PAP extends physical damage coverage for non-owned autos "while in the custody of or being operated by you or any 'family member'." So, the question is whether the vehicle is still in the custody of the insured while it's being valet-parked or otherwise in the custody of the valet service. If you don’t know and you’re relying on your PAP for coverage, the best advice is probably to not valet-park a rental car.

There are many other deficiencies in the ISO PAP that apply, and you can read about them in the previously mentioned "Top 10" article on our website. The last point I'll make is a reminder that the majority of auto policies in the marketplace are not "ISO-standard" forms. (To learn more about that, Google "independent agent magazine price check.") Despite what you may be led to believe by auto insurance advertisements or articles that imply that all auto policies and insurers are the same, there are potentially catastrophic differences, including coverage deficiencies with regard to rental cars. There are unendorsed non-ISO policies that don't cover non-owned autos, period; others that exclude business use of such autos or non-private passenger vehicles (this one shows up in policies of major national carriers, not just "nonstandard" auto insurers); others that exclude vehicles that weigh more than 10,000 pounds; and so on.

Conclusion? An auto policy simply is not adequate to cover the rental car physical damage exposure.

Credit Card Coverages

Read a few of the many articles on the Internet about using credit card programs to fund damage to rental cars, and you would think that little more is needed to adequately address the exposure. Unfortunately, credit card programs have as many, or more, deficiencies as does the PAP alone. Anyone relying on auto insurance and credit cards would be well-advised to study the credit card programs. In his article, "Rental Car Agreements, LDWs, PAPs, and Credit Cards," David Thompson, CPCU writes:

"Many major credit cards provide some limited, free coverage for rental cars. Most post the provisions related to rental cars on the card issuer's web site. While these can run several pages, three specific conditions [that] limit, restrict or invalidate the free coverage are show-stoppers. For example:

"The following conditions limit, restrict, void or invalidate the auto rental damage waiver (DW) coverage provided by your credit card:

"(1) This auto rental DW supplements, and applies as excess of, any valid and collectible insurance. For coverage to apply, you must decline the DW offered by the rental company.

"(2) The following losses are not covered by this auto rental DW coverage: (a) Any loss [that] violated the rental agreement of the rental company; (b) Any claim for diminished value of the rental car.

"(3) Any loss or damage to certain types of vehicles—see list."

In other words, (1) credit card coverage is excess over ANY collectible insurance, (2) you must decline the rental company's LDW, (3) violation of the rental agreement precludes coverage, (4) like the PAP, there is no coverage for diminished value, which we've seen can total thousands of dollars and (5) certain types of vehicles are excluded. Excluded vehicles may include pick-up trucks, full- sized vans and certain luxury cars.

And these are only part of the full list of limitations often found in these programs. Another common limitation is that loss of use is only paid to the extent that the assessment is based on fleet utilization logs. One major credit card only covers collision and theft even though the rental agreement typically makes the user almost absolutely liable for all damage, including fire, flood and vandalism. Some credit cards offer broader optional protection plans, but typically they also exclude coverage if there is a violation of the rental agreement and don't cover diminished value.

Another issue with reliance on credit cards is that the rental company may charge uncovered fees that max out the credit limit on the card. If you're 1,000 miles from home on vacation with a maxed-out credit card, that can present problems.

Loss Damage Waivers

Many people don't buy the rental car company's LDW because they think they have "full coverage" between their auto policy and credit cards. Many see what can be a significant charge and choose not to buy the LDW on the premise, "This'll never happen to me."

I rarely rent cars on business trips or vacation, but I experienced a major claim with a hit-and-run in a restaurant parking lot the night before a 6 a.m. flight. I had bought the $12.95 LDW for my four-day trip, so I simply turned in the vehicle at the airport with little more than a shrug.

Thompson, who rents cars fairly often, says he has walked away from damaged cars three times. Returning a rental at the Ft. Lauderdale airport, Thompson asked the attendant how many cars a month are returned with damage. She responded that, in her typical 12-hour shift, 15 cars are returned with damage and, in most cases, the damage was allegedly caused by someone else, not the renter. She estimated that only about 15% of renters buy the LDW.

The cost of the LDW admittedly can be significant, especially if you extrapolate what the effective physical damage insurance cost would be at that daily rate. But that's only one way to view the investment in peace of mind, not to mention the avoidance of what can be significant claims.

On an eight-day vacation last year, the LDW cost me more than the actual rental and, in fact, more than my airline ticket. But I considered the LDW part of the cost of the vacation.

Is the LDW all you need? Is it foolproof? Well, kind of, as long as you follow the rental agreement. If you violate the rental agreement, you are likely to void the LDW. Many rental agreements consider the following to be violations:

• Driving on an unpaved road or off-road (often the case in state or national parks or states like Alaska and Hawaii).
• Operation while impaired by alcohol or drugs.
• Any illegal use (parking violations?), reckless driving, racing or pushing or towing another vehicle.
• Use outside a designated territorial limit.
• Operation by an unauthorized driver.

This illustrates the advantage of using the belt and suspenders approach of the PAP plus the LDW. The ISO PAP does not exclude the first three rental agreement violations, and the territorial limit is usually broader than any restrictive rental agreement territory outside of Mexico.

As for unauthorized drivers, some rental companies may automatically include a spouse or fellow employee or authorize them to drive for a fee. More often, the renter never reads the rental agreement and presumes anyone on the trip can drive. In one claim, a father and son were on vacation, and the father rented a car. The son had a driver's license but was too young under the rental agreement to drive the car. The rental clerk made this clear at the time of rental. Despite knowing this, the father allowed the son to drive, and he wrecked the vehicle. Not only was the LDW voided, the father’s non-ISO PAP excluded the claim because the son was not permitted to drive the car.

A special case of unauthorized drivers could be-valet parking at a hotel or restaurant. Some agreements might except valet parking, so it's important to determine at the time of rental whether valet parking is covered.

A note on third-party LDWs: In 2011, a fellow CPCU rented a car through Orbitz or Expedia, which offered an LDW at the time of the reservation. He mistakenly assumed this was the same LDW offered by the rental car company, but it was underwritten by a separate entity. During his trip, the rental car was damaged by a deer on a rural Montana road. To make a long story short, the third-party LDW was not a true "no liability" LDW warranty of the type offered by the rental car agency, and the result was, after negotiations on the uncovered portion of the charges (including diminished value), he had to pay in excess of $1,000 out of pocket.

Conclusions

When I rent a car on a business trip or vacation, I price the rental to include the LDW and make my decision, in part, on that basis. The peace of mind alone is invaluable, and, again, I consider the cost to be comparable to my decision to stay in a decent, secure hotel.

If you rent cars frequently, consider negotiating a price including LDW with one or more rental car agencies. Otherwise, caveat emptor. If you are an insurance professional giving advice to consumers about whether to purchase the LDW, it would likely be in your and your customer's best interest to recommend consideration of the LDW. Your E&O insurer will appreciate it.

In "Colin's Kaizen Corner"--a 26-part learning series, I explain the principles of kaizen, lean manufacturing and respect for people -- each a cornerstone for transforming a culture, improving productivity and implementing a continuous improvement program.

In addition, each week I'll digest a principle of kaizen to achieve these outcomes, explain what we're doing today, what happens when we get it wrong, what happens when we do it better and why it matters today more than ever, to stay on a continuous journey of improvement.

The value of a new corporate improvement or strategic acquisition is easily estimated for most investors. Calculating future anticipated cash flows, measured over a specific period in today's dollars, yields the improvement's net present value.

But leadership isn't so easily measured, nor is the future value that an effective or ineffective leader begets.

Sure, tools like return on investment (ROI) and earnings before interest and taxes (EBIT) help us measure whether executives are investing money wisely to maximize dollars that may sustain the future of the company. But the tools are based solely on what we know, not what we don't. Of course, there's no way to value something you don't know exists; that is, until someone discovers it does.

Valuing human productivity and the intrinsic satisfaction employees receive from being able to do their jobs well doesn't show up anywhere on even the most complex of income statements. Neither does the value created or destroyed from a lifetime of leaders who either nurtured man's most important attributes, or ruined them altogether.

The problem is that ROI, EBIT and similar tools do nothing to help place a value on, and encourage, man's discovery of the unknown. To identify and fix that which isn't broken. To look outside the box.

It is this intrinsic curiosity-our yearning for learning-that makes us unique within the mammalian class. We aren't just members of a "clade of endothermic amniotes distinguished from reptiles and birds by the possession of hair, three middle ear bones, mammary glands and a neocortex" (as Wikipedia defines mammals). Nor do we just survive on instinct as other mammals do.

We're provided with daily opportunities to detect and correct errors in our thinking. Our intrinsic yearning for learning constantly encourages us to explore that which we think we understand.

Man has the choice to continuously improve upon his own knowledge base, or demand that others accept pre-determined answers-a radical difference in leadership style between those who lead by kaizen and those who lead by control.

Like scientific discovery, effective leadership creates for the curious a culturally acceptable and true belief in the ignorance of experts.

But man's creativity and curiosity still don't show up as direct value or loss through the eyes of a customer. And they're certainly not measurable; that is, without the proper tools.

And that's why ROI and EBIT -- the preferred tools for modern investing and modern valuation -- are precisely the wrong tools for measuring human productivity, the value of an acquisition and the value of a business itself.

For if human capacity is assumed to be x, and man's true capacity is actually y, without regular corporate and personal discovery neither man nor machine gets its best chance at material improvement.

Using ROI and EBIT, we've created a culture of mind-numbed business robots. Really smart children, teenagers and adults, being robbed of their intrinsic motivation because of diminishing human valuations. It's as if they were rusting old farm equipment, with just a few years of straight line depreciation left on an otherwise highly appreciable asset.

Nothing could be further from the truth. People have exponential value.

Years of poor parenting, leadership, primary education systems and business school professors have finally brought our chickens home to roost. In fact, as Dr. W. Edwards Deming said nearly 50 years ago, if the U.S. wanted to destroy a country, then all it had to do was export its business management and leadership practices.

Today, we know the enemy even better, and it is still us.

An enemy where large lots of wasteful activities exist, yet few executives are visible to help employees improve; an enemy where waste prevents employees from doing their jobs with purpose, joy, accuracy and speed.

Sadly, more executives today than ever before are searching for value within a spreadsheet or income statement. We fail one another when we refuse to look for loss at the precise location where value is created and where crimes of waste are most frequently reported.

To create a better opportunity for human development and true personal productivity, let's turn to respect. Because respect leads productivity by a long shot as the single most important aspect of man's institutional existence.

Let's provide an institutional daily dose of improvement that is eloquently simple: Continuously help me change, and always help me make it for the better. Because good change nurtures and replenishes my mind, heart, body and soul's constant need for continuous improvement.

By appreciating systems thinking and human psychology-only two parts of a four-part system, but integral components nonetheless-we can easily find opportunities for mankind to improve.

An entirely new system, which identifies what value means to customers rather than stakeholders, can easily bring about a different culture. A culture that even our most seasoned leaders currently don't believe in, currently can't measure and clearly don't currently understand. A culture that should be helping everyone improve that which we cannot see or measure.

This keynote address was delivered to the EY/Insurance Insider's Global Re/Insurance Outlook conference at the Hamilton Princess Hotel in Bermuda.

It's a pleasure to be here this morning. I appreciate being invited to offer some thoughts on the state of our industry and where we seem to be headed.

If you'll indulge me for a few minutes, I'm going to look back at 2015 before I look forward to 2016. It feels like the right thing to do, given the year we've had.

I don't know about all of you, but for me 2015 has come and gone in the blink of an eye.

And what a year it's been.

You could invoke Dickens and say: It was the best of times. It was the worst of times.

This was the year that a youthful head of state swept into office in Canada on a promise of "sunny ways" - and it was the year that terror ripped through a nightclub in Paris, and a Christmas party in San Bernardino, CA, shattering our personal sense of security.

It was the year that the pope declared a Holy Year of Mercy, and it was the year that more than a million refugees streamed out of the Middle East and into Europe, in a desperate attempt to escape a jihadist war.

It was the year that almost 200 nations signed a landmark agreement to address climate change, and it was the year that another once-in-100-year flood lashed northern England for the second time in less than 10 years.

It was the year that the concept of "the singularity" - when human computing is overtaken by machines - became a distinct possibility.

It was also a year when driverless cars, packages delivered by drone and 3D printing became tangible realities.

Here in Bermuda, 2015 was the year that signaled the demise of a brand name close to my heart - that would be ACE - as M&A fever reshaped the island's market landscape. It was also the year that the Bermuda Monetary Authority pulled off a coup - seven years in the making - by getting the European Commission to grant us Solvency II equivalence.

2015 was the year when Millennials - the generation born between the late '80s and the turn of this century - became the largest demographic ever. Think about it. More than half the world is now under the age of 30.

And it was the year when we truly began to exit a world driven by an analog mindset and woke up to the fact that we're living in a digital age. Labels like digital immigrants and digital natives were used to describe two of the four generations now making up our labor force.

I was invited to speak at a number of different venues this year, and, at each, I tried to describe this sense of being between two worlds.

I'd like to share some of the highlights with you, as I think these issues are going to be key to transforming our industry.

The first speech I gave this year was called "Risk in 140 Characters."

I was speaking to a group of Millennials in London, and I used Twitter as an example of stripping out inefficiencies to get to the core of a business model. I challenged them to figure out how we can leverage technology to make our industry more efficient.

I also challenged them to spread the word about the industry to their peers. Millennials don’t think much of insurance as a career. With 400,000 positions opening up in five years in the U.S., this lack of interest is creating a talent crisis.

The next speech was "Can We Disrupt Ourselves?"

I spoke to the International Insurance Society in New York a few weeks after I spoke to the Millennials in London, and described some of the game-changing forces our industry is facing - driven by disruptive technology.

I challenged this group - who represent executive management - to figure out how to attract a new generation to our industry, AND to figure out how to work with them. The solution to our disruption will come from the digital natives among us.

Then there was "Where Are the Women? One Year Later."

In 2014, I gave a speech called "Where Are the Women?" I asked why there aren't more women in the C-suites and boardrooms of the insurance industry.

This year, I looked at whether much has changed in a year - the answer is no - and what might be done.

The short answer is that people like me - the white males who dominate our industry - need to make gender parity and diversity a priority, and mean it.

A speech I gave to St. John's University's School of Risk Management was called "The Canary in the Coal Mine."

St. John's organized a day-long conference on issues facing the industry. I talked about M&A, alternative capital and the changing roles of brokers, cedants and reinsurers.

I also addressed the talent crisis, making the point that Millennials are the canaries in the coal mine.

If we don't pay attention to what they're telling us about our workplaces and work policies - and this includes our attitude toward diversity and inclusion - they're going to continue to snub our industry. And we can't afford to let that happen. Not only are they our future workforce, they're our current and future customers.

An address to 400 top producers of a brokerage firm was called "Do You Know How to Think Like a Unicorn?"

In Silicon Valley, companies backed by a $1 billion or more in capital are called unicorns, and those backed by more than $10 billion are called "decacorns." There are more companies with this level of capitalization now than at any other time.

And remember, most of these are tech start-ups, many of which are behind the disruption that's transforming our world.

I told the brokers that, in the digital world, they need to know their clients' business, and their clients' risks, better than the CEO does.

There's currency in knowing how to interpret data, and brokers have a great opportunity to develop specialized skills that they can monetize.

That's where the real value-add is.

According to a recent study by IBM, C-suite executives around the world are kept awake at night worrying about being ambushed by so-called digital invaders.

More than 5,000 executives participated in the IBM study. More than half of them told researchers that, above all else, they fear being "Uberized" - blindsided by a competitor outside their industry wielding disruptive technology.

While loss activity, interest rates and pressure on terms and conditions will always affect underwriting and financial performance, it's now a given that technology and talent will determine who will succeed and who will fail.

So, I asked the brokers: do you know how to think like a unicorn?

I was told later that this firm is now describing itself as a technology company whose product is insurance - so I guess they took my suggestions to heart.

So this year, I focused on five main themes:

• We still have rampant inefficiency in the way much of our business is conducted.
• We're threatened by technological disruption.
• We have unprecedented risks for which there are no actuarial data.
• The roles we play are being reinvented in real time.
• And we have a looming talent crisis.

Not a pretty picture, and not for the faint of heart.

But what scope for innovation!

I really do believe this is one of the most exciting times to be working in this industry in the 40 years since I joined it.

We enter 2016 with the hope that terms and conditions will improve, and the expectation that industry consolidation will continue.

[The recent increase] in interest rates could mean that our capital may take a hit, but we're likely to earn greater investment income over time, leading to increased revenue.

But these are the traditional hallmarks of a market cycle. This is the easy stuff.

There's nothing easy or traditional about what's facing our industry right now. Those of us who cling to the old way of doing business aren't going to make it.

It's the manner in which we navigate from the analog to the digital - how we move between two worlds - that will set our future course. This is going to take bold, courageous moves, some leaps of faith and a willingness to fail as often as we succeed.

I think it's telling that [in November] about 200 industry representatives and entrepreneurs gathered in Silicon Valley to figure out how to change the traditional insurance model.

They felt we need to flip the value proposition from protection to prevention, using data analytics to define the characteristics of a risk and identify how to avoid it.

A report on this conference described it this way:

"One of the biggest challenges for successful executive teams is to reframe a company's purpose away from its past greatness, and toward a different future."

We've been an industry where past is prologue. But for many of the risks we're facing, there is no past.

It really shouldn't matter. We're awash in data, but data pure and simple isn't the point.

We need to harness data to predict the future - in other words, adopt the prevention mindset.

The issue isn't simply gathering massive quantities of data. We need to take the data we have and know how to ask the right questions, and refine the right algorithms, to get the analysis we need to provide our products quickly and efficiently to a world doing business on smart phones.

To create the best risk solutions, we need to redefine the relationships we have with each other and build new organizational ecosystems. This is no time for staying in our traditional comfort zone.

And as an industry whose purpose is to secure the future, we have a collective obligation to address the massive protection gap between the developed and emerging economies.

In 2014, there were an estimated $1.7 trillion in losses. $1.3 trillion of that number was uninsured.

With collaborative undertakings like Blue Marble, the microinsurance consortium that was launched this year, we can begin to close this gap. This not only helps prevent disaster for the underserved, it helps build a sustainable planet.

I know we can figure out how to re-create our workplaces, finding ways to meld the experience and traditional perspective of Baby Boomers like me with the open, diverse, purpose-driven focus of Millennials.

This might be one of our greatest challenges, because it aims straight at the heart of our industry's old-school DNA.

By the way, I like that Millennials are purpose-driven - because what industry can more rightfully lay claim to purpose than insurance?

As I said in one of my earlier speeches, insurance should be catnip to a Millennial.

Several of us are banking on that being true by supporting an awareness program to let the younger generation know that this is a great career choice.

I've been joined by Marsh's Dan Glaser and Lloyd's Inga Beale in signing a letter urging our fellow CEOs to put their companies' weight behind this initiative.

The first phase of this plan is an Insurance Careers Month that will be launched in February 2016. This is primarily a U.S.-based project because that's where the urgent need is, but other markets will be participating, too. We were aiming to enlist the support of at least 200 carriers, brokers, agents and industry partners - and at last count we had almost 260 signed up. The response has been great.

So, in closing:

It HAS been quite a year.

The way we live and work is changing faster than I think any of us thought possible. We have some amazing challenges and opportunities ahead of us - here in Bermuda, and in the countries where many of us do business.

I'm excited about where we're going and how we'll get there, and I hope you are, too.

I believe it's the best of times.

In the meantime, I hope you all have a great morning of provocative thought and discussion, and I wish you a safe, happy and healthy holiday season.

A lot of ink has been devoted to the looming talent crisis in insurance, bemoaning the difficulty of attracting qualified young people to careers in an industry that is a cornerstone of commerce and one that helps countless people and businesses around the globe recover when the worst occurs. And one need not look far to see the cause of the problem. More often than not, we --insurance professionals -- are the cause.

How many of us have felt a twinge of embarrassment when strangers at cocktail parties ask what we do? How many of us have worried about being perceived as leading boring, little lives?

Yet, we in insurance get to spend our days thinking about hurricanes, tornadoes, wildfires, earthquakes, car crashes, cyber crime, fraud, pandemics, terrorism and a host of other equally exciting risks affecting people in all walks of life and businesses in every field of endeavor. And we are increasingly using cutting-edge technology, big data and predictive analytics to enhance risk assessment, pricing, loss adjudication and every other aspect of insurance operations. Moreover, insurers are intimately involved in capital markets, managing billions upon billions in investments, not to mention that insurers' very reason for being is to provide vital help when people and businesses need it the most.

Bottom line, if you're concerned about the amount of grey hair you see in the insurance business and the difficulty of enticing budding data scientists, technologists, entrepreneurial spirits and the best and brightest of tomorrow's leaders to consider careers in insurance, please allow me to suggest that you become an ambassador in service to the cause.

All it takes is talking with pride about the problems we solve, the good that we do and the fun that we have along the way.

It's no longer a question of whether insurers should prepare for the Internet of Things (IoT), but when and how to do so. Connected cars and homes are already here, with Ford's CEO predicting driverless cars on the road by 2020 (the same year that Toyota plans to launch its driverless car).

But preparing for the IoT isn't just about adapting existing business models or launching new services. It's an opportunity to innovate and develop new business models, ways of working and ways to understand risk. It's a chance to better connect with customers, to reinvent the claims process and to become an integral part of people's lives.

Keys to success in the IoT

Accenture has identified five keys to success for insurers to capitalize on IoT opportunities. This week, I'll look at two of them:

• Choose the role you intend to play. Accenture's Technology Vision for Insurance 2015 identified the need for insurers to become part of a digital ecosystem. Insurers must consider how they will collaborate with their ecosystem partners, and whether they will play a leading or supporting role. Either way, how will they administer the claims that result from the ecosystem and its partners? Further, insurers may need to tailor their approach for each market, business or region-and must bear in mind that, no matter what, they must offer a differentiated customer experience that delivers more than just claims administration.

• Adopt a three-layer model for claims. The IoT demands a shift from one-to-many (one experience for many customers) to one-to-one (personalized service, delivered at scale), and a three-layer model can help insurers achieve this. As shown below, it's based on a foundation of product, upon which is layered technology and then service. Together, the layers enable insurers to offer a customer experience characterized by convenience and seamlessness-which should be cornerstones of the overall experience, and especially the claims experience. For claims leaders, the three-layer model presents opportunities to leverage new forms of technology for a more nuanced understanding of risk and liability. For example, a car accident involving a connected car can provide precise data about speed, direction and driving conditions. Claims leaders should also consider how they can plug into the extended services that are part of the three-layer model. How can they work with lifestyle partners within an ecosystem to ensure that claims can be administered effectively and efficiently?

That's some food for thought in the holiday season. I wish you a safe and happy holiday season and look forward to wrapping up this blog series in the new year. I'll be back in January to share three more keys to success for insurers in the IoT.

In Bay of Pigs, the Untold Story, Peter Wyden reveals that when asked by President Kennedy to assess the CIA invasion plan, the U.S. Joint Chiefs of Staff responded that it had a "fair chance" of success. Kennedy took that as a positive assessment. Instead, the Chiefs meant that they judged the chances of success as "3 to 1 against." But the misunderstanding wasn't clarified at the time.

Unfortunately, Kennedy's misinterpretation of the Joint Chiefs' assessment is not uncommon. For whatever reason, they gave a qualitative answer. Perhaps "fair chance" was well-understood terminology at the Pentagon. Kennedy certainly didn't get the intended meaning.

A straightforward method to dispel such confusion comes from my friend, Gordon Bell. Gordon is a pioneer in the computer industry, having developed the first minicomputer at Digital Equipment and having managed that company's 4,000 engineers. After leaving Digital, Gordon headed computer science research at the National Science Foundation, where he was instrumental in the commercialization of the Internet. After that, Gordon became an active "angel" investor in start-ups.

Gordon has a wonderful bluntness about him. At Digital, he was known for saying things such as, "The most reliable parts of a computer are the ones you leave out." As an investor, he used that bluntness and found one remarkably simple way to at least see whether innovation proponents had the courage of their convictions.

For example, when someone made a presentation on critical assumptions and forecasts underpinning a proposed strategy, Gordon would zero in on one number and ask the CEO: "Wanna bet? A side bet, you and me, for $1,000. I'm saying you won't hit that number."

If the CEO gulped, Gordon knew that in his heart he had doubts.

Even though executives clearly take the issues seriously when they are making corporate commitments of millions or billions of dollars, there's something about betting your own money that makes you think twice.

More generally, framing forecasts as personal bets forces those involved to be very clear. Also, the use of odds in bets forces everyone to be precise about probabilities. Had President Kennedy, for example, forced the Joint Chiefs to quantify their estimate, he would have realized that their "fair chance of success" estimate really translated to a "three in four" chance of failure.

Structuring bets clarifies time estimates, as well. For example, senior managers at one client generally held the assumption that an important revenue stream from information was going to go away as the information became available from public sources online. The assumption was so widely held that no one thought to get more specific, until we asked everyone to write down how long they thought it would be before the revenue fell below a certain level. Some thought the group was six months away from that level. Some thought six years. Getting the assumptions on the table led to a valuable discussion that produced a sharper strategy.

I'm not suggesting that personal bets should replace rigorous analysis. Still, betting on the most critical assumptions upon which a complicated, ambitious strategy depends serves as an invaluable gut check on likelihood of overall success. If you're not willing to bet on it, at acceptable odds, it is important to figure out why.

Pondering New Year's resolutions? Check out these seven helpful insurance calculator tools:

If you're like most Americans, one of your New Year's resolutions probably involves cutting spending in the coming year. But, rather than planning to avoid expensive shopping sprees, consider saving money in other ways - like reevaluating your insurance coverage. This may seem like an overwhelming amount of work, but you don't need to spend hours on the phone to find out if you can save money.

Instead of jumping right in with insurance quotes, consider using insurance calculators to get started - they require less personal information while still providing accurate estimates based on your needs. These seven insurance calculators are a great place to begin if you want to save money in 2016.

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1. Bankrate: Auto Calculators

To get an idea of how much you'll be paying in car-related expenses every month, Bankrate provides you with a wide variety of automotive expense calculators. Once you have an estimate of how much you can save each month based on your interest rate and auto loan term length, you can then more accurately plan your auto insurance budget.

Additionally, while Bankrate focuses a lot of its research on automotive expenses, you can also learn more about home and retirement insurance plans with its other financial planning calculators.

2. CarInsurance.com: Car Insurance Calculators

CarInsurance.com offers in-depth information about all areas of car insurance. The simple and organized layout of the calculator interface gives users easy-to-read results, and it provides additional explanations on overall cost and coverage.

The CarInsurance.com calculator section also serves to connect visitors to other informative resources that can help make lowering their car insurance premiums much easier.

3. The Hartford: Car Insurance Coverage Calculator

The Hartford car insurance coverage calculator avoids using ballpark estimates, meaning that it requires specific details about your coverage needs to create a more relevant figure. While it does ask more questions than some of the other insurance calculators on this list, it is still an efficient and quick way to get customized results.

The Hartford calculator page also provides links to relevant articles that discuss different available benefits and options for auto insurance.

4. HomeInsurance.com: Home Insurance Calculator

This basic calculator requires you to answer only three simple questions - ZIP code, square footage and home layout - to get an idea of how much coverage you need. The calculator also provides higher coverage ranges and explains the protection you can expect from each type of plan.

If you have questions about coverage terminology, the HomeInsurance.com calculator offers an extensive FAQ section.

5. Liberty Mutual: Home and Auto Insurance Coverage Calculators

With an extremely user-friendly and visually appealing platform, the Liberty Mutual home and auto insurance calculators ask simple questions about your life to help you determine which plan is right for you. The home insurance coverage calculator tells you which areas you should be spending more to protect, while the auto insurance calculator allows you to see suggestions for towing and rental coverage. The major elements of the calculator are adjustable, making it easy to customize the estimate to reflect your needs.

6. Geico: Coverage Coach

Like the Liberty Mutual tools, the Geico Coverage Coach offers estimates for auto and home insurance, but this calculator does both at once. The calculator gives accurate coverage estimates for a wide variety of demographics, and the platform is straightforward and engaging — it takes just a couple minutes to fill out the seven simple questions.

7. Allstate: Insurance Calculator Tools

Allstate's insurance calculator tools address all your major coverage needs, including auto, home, life and retirement. The calculators come with all the information necessary to help you decide which plans will work best for you and your family. Additionally, the thorough platform acts as an all-in-one learning center for the most common questions about various types of coverage.

It's not hard to figure out where you can save money on your current coverage policies. Try these seven insurance calculator tools to find the best home, automotive and life insurance coverage to suit your budget for the coming year. Once you've done some preliminary research, you can start seriously shopping for home coverage, life insurance and automotive protection.

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