This is Part 2 of a three-part series on flood insurance. The first part is here.  As you may know, the world of flood is changing. As of April 1, 2016, the National Flood Insurance Program (NFIP) is implementing changes flowing from the Biggert Waters Flood Insurance Reform Act of 2012 and the Homeowners Flood Insurance Affordability Act of 2014 (HFIAA). These affect residential and non-residential property rates, the process to communicate risk and related processes tied to flood insurance. An Upstream Challenge for Agents and Consumers Alike As an agent, you’re dealing with a greater focus on compliance and more regulations wrapped around the NFIP. While working to navigate increased surcharges, fees and assessments that are not eligible for commission, you’re trying to grow your business, mitigate E&O exposures and improve retention. What’s more, the federal program requires underwriting detail that is increasingly complex every day. This may feel like an upstream challenge. The idea of rising costs and gaps in flood coverage are understandably creating questions for consumers. In the wake of historic flooding across the nation and catastrophic events such as “Superstorm Sandy,” some homeowners are unprepared and unprotected. Exploring the Benefits of Private Flood According to Keith Brown, president and CEO of Aon National Flood Services, “NFIP continues to serve a vital need for many Americans now and in the future. ... At the same time, no one product can meet everyone’s needs, so it’s important for independent agents to understand available private flood insurance options, as well.” There are specific exposures the federal program doesn’t cover, such as swimming pools and spa equipment. If you live on the coast and a hurricane pushes a three-foot wall of water onto your property, the NFIP will offer coverage to help dry out the house and restore the first floor and above, but the NFIP won't cover digging sand out of the pool. What’s more, the NFIP does not cover additional living expenses or personal property in basements, so displaced homeowners or homeowners with built-out basements are left picking up these bills. Living expenses and basements are just two of the types of exposures to consider when weighing flood insurance protection options. The good news is that private flood options are continuously coming to market. Not every homeowner has the same needs. While price is often the key factor, you’ll find there are considerations that extend beyond price. In many cases, it comes down to educating the consumer about these options. For instance, policyholders may not be aware that they can supplement NFIP coverages with private options that allow a more customized coverage approach to address their individual needs. By adding private flood insurance to your portfolio, you can offer attractive options, such as:

• Ability to fill gaps in coverage;
• Improved loss settlement (adding replacement cost coverage to all losses);
• Reduced pricing;
• Broad eligibility;
• Shorter wait periods before coverage becomes effective;
• Coverage availability in all flood zones for single- and two- to four-family homes;
• User-friendly application process; and
• Possibly eliminating the need to purchase expensive elevation certificates.

As an example, the NFIP currently limits coverage on residential buildings to $250,000, but many U.S. homes are worth more than that amount.  Clients with high-valued homes may want additional coverage in the event of a catastrophic flood. Excess flood coverage enables you to offer higher limits of flood coverage to your clients so that your client may recover more. See also: Why Flood Is the New Fire (Insurance) Private Flood Resources and Outreach for Agents Agents who can effectively communicate risk by using advanced modeling and analytics are becoming more appealing to homeowners. Flood represents a complicated peril, and agents must turn to emerging technology to better educate their customers. Here are some steps you can take to enhance your flood knowledge, better understand flood risk, decipher changes with respect to emerging exposures and articulate valuable solutions for your clients: 1. Check into the resources available at the state level. Get to know the wholesale channels that agents can tap into to get flood options. Also, NFS has put together the handy visual guide that explains all the NFIP changes, “Making Sense of NFIP Regulatory Changes.” 2. Speak to your carriers. Understand their flood insurance product offerings, and talk to them about your clients’ exposures. Let them know what options you see in the market, and work with your carriers to add programs necessary to remain competitive in today’s changing environment. 3. Become familiar with new user-friendly technologies that help streamline the flood insurance application process. For example, we have developed a proprietary technology with Applied Semcat and Vertafore, the only comparative raters that allow agents to quote flood insurance at the same time they quote homeowner’s insurance. It allows agents to provide a premium indication and personalized flood proposal on all homeowner quotes. Using this application, agents can easily complete a flood policy by benefiting from the single sign-on and removal of duplicate inputs. These are just a few examples. Becoming well-versed in private flood insurance options and contracting to write flood insurance plans is a way to help build out your portfolio, retain more clients and add value to the services you provide your clients.

I recently had the opportunity to chat with two leading Silicon Valley risk managers about the Internet of Things (IoT). John Schaefer is with Lam Research, a leading supplier of fabrication equipment to the global semiconductor industry. And Leslie Lamb is with Cisco Systems, the world’s largest designer and maker of networking equipment. Lam Research and Cisco are two of the companies making our interconnected planet possible, and Schaefer and Lamb are well-positioned to give us a smart overview of the risks and opportunities IoT presents. Opportunities The clear benefits to people and businesses include:

• improved safety
• efficiency
• convenience
• health

See also: Are You Using Your Opportunities? Risks The risks are also obvious. Critical business operations are increasingly Internet-driven. Sensitive data that was once protected in a locked file cabinet can now be opened by anyone with computer file access. As we see hacking incidents become commonplace, "Internet security" is a relative term. A world filled with drones, self-driving cars, health devices and robotics is a linked-IoT world. As IoT links devices, it also links growing opportunity and growing risk in ways we cannot ignore. Addressing Risk Through Dialogue As insurance professionals grappling with these risk challenges, Schaefer, Lamb and I all use the same word to describe what we see as the most promising way forward: dialogue. This dialogue involves insurers, insureds and risk advisers. And there is a lot to talk about, including:

• The application of sublimits;
• Policy definitions that are outdated or unclear;
• Exclusions that do not address today’s business model risks; and
• Gaps in coverage for non-physical property damage or business interruption exposures.

This dialogue, happily, is also about insurance solutions and opportunities for new products. Consider the recent ISO endorsements to add drones to general liability policies. Or the social engineering protections being added to crime policies. As the future arrives, insurance can be ready to cover its risks. See also: Hot to Use Risk Maturity Models More work remains to be done, of course. In his risk management role, Schaefer sees the need to work with the insurance industry to identify and shape the products that the IoT will demand. He also sees the necessity of facilitating his organization’s response to the risks it faces with IoT growth. Again, the word "dialogue" came up. Lamb recommends bringing all a company's stakeholders together to explore the impacts of IoT, including IT, risk management, product development, marketing, operations and finance. Devices are connecting. It will take a connected approach to manage IoT risks. Fortunately, risk professionals like Schaefer and Lamb are currently working with other industry leaders to help drive optimal coverage changes.

“Claims advocacy” is fast getting the attention of workers’ comp claims leaders as a powerful approach to better claims outcomes. The on-demand economy has created cultural and multi-generational expectations around service, speed and simplicity, and some claims leaders have already figured out how to deliver. The workers’ compensation industry is in the throes of internal debate about mission and purpose.  Employee-centric claims models have become a large part of this debate. Some claims leaders say that payer organizations should move away from a compliance-oriented and, at times, adversarial style to an “advocacy” style of claims management. Research, too, indicates that claims advocacy is top of mind for industry executives. The responses of 700 participants in Rising Medical Solutions’ Workers’ Compensation Benchmarking Study confirm that many claims leaders know the building blocks of advocacy and recognize its potential value.  We recently interviewed claims leaders to better understand the practical meaning of the concept, as it applies to all claims operations, from self-administered employers to insurers handling claims for thousands of policyholders. What Is Claims Advocacy? We asked Noreen Olson, workers’ compensation manager with Starbucks, for a definition of advocacy.  (Starbucks employs 180,000 “partners” worldwide and has close to 12,000 outlets in the U.S.) Olson proposed this: “In workers’ comp, advocacy is a process grounded by the values of dignity, respect and transparency that coordinates activities to assist the injured worker effectively and promote expectancy and engagement in recovery, efficiently restores (and often improves upon) health and well-being, and resolves the experience in mutual satisfaction.” Others we spoke with endorsed this or a similar definition. They all have in mind not a checklist, nor a charm offensive, but a culture.  A claims culture that makes access to benefits simple and builds trust – and one that must be supported by executive buy-in, organizational values, technology and operating systems to be successful. Access to benefits from the worker’s perspective includes ease of filing a claim, ease in obtaining prescribed medications, access to medical specialists and help in navigating the healthcare maze. Along the course of injury recovery, there are many opportunities that affect access and trust as perceived by the worker. The highly respected Workers’ Compensation Research Institute reports in its Predictors of Worker Outcomes Series that “trust” is a key driver of claims outcomes. See also: How Should Workers' Compensation Evolve? Why Now? Tom Stark, technical director of workers’ compensation at Nationwide Insurance, told us that advocacy has been around for a long time. He’s practiced advocacy since the 1980s Several forces converge to promote advocacy in claims today. Claims leaders are emphasizing, or perhaps “reemphasizing,” the importance of interpersonal relations. As claims handling has shifted from onsite home visits to lower contact models, the importance of emotional intelligence, soft skills and customer service skills is greater than ever to dispel uncertainty and engender trust. Perhaps the biggest driver of customer service and transactional speed is the American retail sector. Its massive engagement in these areas has shaped everyone’s expectations – of all generations. Millennials, born in the 1980s and 1990s, in particular have grown up with this customer-focused approach and therefore bring to the claims environment high expectations for both delivering and receiving quality service. Slow, bureaucratic responses can shock injured workers. Darrell Brown, chief claims officer at Sedgwick, says, “We are now an on-demand economy. That is the way it is.” Why Is Claims Advocacy Attractive? Brown says that engaging the injured worker is key. Fast and helpful response to injury pays off in worker satisfaction and lower claims costs. “People file claims, but they don’t know what is going to happen. If you lose injured workers at the beginning of the claim, to anxiety and fear, they go to litigation.” Brown also says that when claims professionals engage more constructively with injured workers, their own experience is better. This leads to better morale and talent retention. For employers, claims advocacy provides a special opportunity to directly align work injury response with their corporate brand, core values, employee communications and benefit delivery. Walking the Walk Albertsons Safeway, with more than a quarter million “associates” in 34 states, has crafted its claims approach to reinforce engagement and confidence for the injured workers. Director of Managed Care and Disability Denise Algire, who is also the principal researcher for the Workers’ Compensation Benchmarking Study, says that staff talks with injured employees on the day of injury. “We focus on education and reducing uncertainty,” she says.  They avoid potentially intimidating or antagonistic terms like “adjusting,” “examining” and “investigating.” They also start with the positive expectation that every employee wants to return to work. “Workers’ compensation has become adversarial because we manage the system based on the deceptive few versus the deserving many,” she says. “Our claims approach is based on the majority, not the minority.” Brown talked to us about tangible actions. “If you can make a compensability determination in two days, even though the law gives you 14 days, imagine how much uncertainty and anxiety is removed,” he says. “The same applies to indemnity payments. The industry is often guided by regulatory requirements. If you can take action and make payments sooner, why make it later? You’ve got to walk the walk.” Starbucks, for example, direct deposits indemnity checks into employees’ accounts to increase speed. Advocacy does not hinder organizations from being compliance-minded. Rather, it becomes one aspect of a holistic, customer-driven framework that aims higher than the bar often set by regulatory standards. See Also: How to Win at Work Comp Claims Barriers to Overcome Stark sees lagging technology as getting in the way of engaging the injured worker. To him, claims tasks grew exponentially while support staff in claims offices were cut. Claims technology has often not kept up. He says, “Look at the work-arounds – count the number of sticky-notes on the adjuster’s screen. If technology is not there to support effective claims management, even in its most transactional form, you are really stressing the model. How are you going to be an advocate?” Olson brought up two challenges that Starbucks has solved but still confront most employers. She believes that it is important to make it as easy as possible for a partner to report an injury. At Starbucks, they not only have web, mobile and call center options, they also allow partners to self-report their injuries versus going through their manager or HR. Olson additionally stresses the importance of easily moving the partner to other benefit programs if the injury is not compensable and to avoid language like “your claim is denied.” She says that placing the award of benefits in the “right benefit bucket” needs to be done seamlessly so that the partner does not feel on the hook. In addition to the state mandated language in these instances, Starbucks includes its own letter that communicates that, while the claim isn’t eligible for workers’ comp, the partner may be eligible for other benefits to help with their injury/illness. One barrier that Algire notes – simply “rebranding” claims adjusters as advocates is not enough. “A true cultural shift will require organizations to move beyond performance metrics that are based primarily in cost containment to those based on clinical quality, functional outcomes and patient satisfaction,” she says. This shift is critical to “walking the walk” and reinforcing the advocacy approach with claims staff. Conclusion The on-demand economy has created cultural and multi-generational expectations around service, speed and simplicity – giving workers’ compensation a blueprint for claims advocacy. Embracing consumer-driven models around injury recovery is emerging as a competitive advantage, both from a claims outcomes and a talent recruitment/retention perspective. The 2016 Workers’ Compensation Benchmarking Study will be surveying claims leaders on advocacy, among other pressing topics, to better understand its current application and perceived viability.  A copy of the 2016 Study report may be ordered here.

We have all heard the continued drum beat regarding hacking. Anthem, Sony, Target, Home Depot, Experian and various government and military branches have all been hacked and have received their fair share of negative press. In each case, people were harmed, leaders were fired, brands were damaged and no one was really surprised. I am not a singularly focused cybersecurity expert, but I have been up to my neck in tech for 30 years and have a knack for seeing emerging patterns and macro trends and stitching those together to synthesize consequences and outcomes. In the case of the Dark Web, none of that is good news; The emerging patterns should worry us all. As English historian (1608-1661) Thomas Fuller wrote, “Security is the mother of danger and the grandmother of destruction.” See also: Best Practices in Cyber Security Below is my list of the “Top 10 Scary Macro Cyberthreat Trends” --and this is still early days for them. 1. The Dark Web Pareto  Over the last decade, the hacker population has gone from 80% aficionados/hacktivists/deep-end-of-the-pool techies and 20% professional criminals to 80% professional criminals and 20% "other." To be clear, by "professional criminal" I mean organized criminals who are there for the money, not just to someone who broke the law. 2. “Lego-ization” of the Dark Web Over the last few years, technology in the Dark Web has been changed from intricate, end-to-end hacks to a place where one merely assembles “legos” that are commercially available (albeit inside an anonymized criminal environment.) People don't just buy tool kits with instructions but also the ability to buy “lego-ized” services like illicit call center agent time for more complex criminal activities such as getting access to someone's bank account. Parts of the Dark Web look like IKEA without the assembly difficulty or the inevitable leftover parts. 3. The Dark Web embraces the capital-lite approach Of course, the Dark Web has embraced the cloud-computing model for the reasons we see in the enterprise world. What this means to the criminal hacker or, more likely, hacker organization, is that they can now go asset-free and rent the assets they need when they need them. For example, there are services for running a few hundred million password permutations in less than an hour for a few hundred dollars. Hackers no longer need to infect a massive amount of computers to fire up a denial-of-service hack; they can simply rent time on a botnet, a massive amount of “hijacked” computers up for sale in the Dark Web. Most companies still do not have a botwall to deflect bots. Gameover ZeuS is a massive example of a botnet with one variant able to generate 10,000 domains a day with more than three million zombie computers — just in the U.S. Botnets are sometimes referred to as “zombie armies” (surely there’s a TV series in there somewhere.) The Bredolab botnet may have had as many as 30 million zombie computers. See also: Demystifying "The Dark Web" 4. Clandestine versus brazen  The bragging rights for revealing a hacking “accomplishment” was once a hallmark of this space. Over the past decade or so, that factor has greatly diminished. The criminal enterprise would like nothing more than to go unnoticed. The recent massive Experian hack only came to light after the Secret Service let Experian know some of its stuff had been found for sale in the Dark Web. Focusing on avoiding detection by adopting smarter methods, targets, distribution models and revenue capture is better business and is in line with a longer, sustainable view of profit. None of the criminal organizations have boards of directors that pressure them to hit the quarterly sales and operating income figures. A hack is not a moment in time; if a hacker can go undetected, he or she can milk the hack for years. This is worrisome. 5. The total available market has grown and is target-rich  The target space for crime connected to an IP node has grown tremendously, and so has the value of the content. The massive increase in mobile IP addresses, the online transactions we do and IP-related things like stored value cards or mileage points makes a rich target for crime. It is 100x bigger than what it was just 10 to 15 years ago. The target space’s growth is accelerating. After banking regulations on the minimum size of banks were relaxed in 1900, 2,000 banks were added in two years along with growth in the relatively new credit union sector. This increase in “target space” spawned bank robbers. The target space for Dark Web crime loves the increase in the target area and doesn’t mind that the “banks” are smaller. The number of people using the Web and the average amount of time spent on the Web continues to increase. I think with the advent of things like the Internet of Things, 5G, Li-Fi and a quantum leap in cloud computing capacity per unit cost, this increase will accelerate. 6. Small many versus big few  Over the past decade, the trend in conjunction with the above items moved toward smaller “heists” but a lot more of them. Someone in Venezuela took $2 a month off my credit card for 18 months before it stopped. How many people would miss a dollar or two off a stored value card/account that has an auto-refill function like my Skype account does? What sort of statistical controls would you put on your revenue flows (as a business) to even recognize that leakage? Of course, there are still big hacks going on, but a lot of those are just the front end of a B2B transaction that then sells off that big pool of hacked data to buyers in the criminal bazaar. Small, often and dispersed is harder to catch and more clandestine by nature. 7. Automation of the Dark Web Timing is everything. As the Dark Web evolved into a scale-based, organized criminal environment, it leveraged modern automation from provisioning to tool sets to communications and even to billing. Blackshades creepware is a great example of automation extending into the consumer product end. Available for $50, it has a point-and-click interface and has internalized all of the complexity and has automated hacking even for actors with very low-level tech skills. It allows the bad actor to browse files, steal data/passwords and use the camera (often relating to extortion). Blackshades infected more than 500,000 computers in more than 100 nations. A lot of the people who bought this did not have the skills to do any hacking without this kind of automation. 8. Tech getting better, faster, cheaper while talent improves Late last year, TalkTalk, an ISP quad-play provider in the U.K., got hacked and held for ransom by four teenagers. The company estimates $90 million of cost tied to this hack, and no one really knows what the cost of the brand damage has been. There’s also a third of the company's market cap gone, and it lost 95,000 customers. In all fairness, TalkTalk's security was poor. The point here is that the technology in the Dark Web is getting faster, better and cheaper. At the same time, the average talent level is rising, which may not be the case in the non-criminal tech world. There are three factors at play:

1. Communities of collaboration and learning are becoming commonplace. Blackshades is a great example of a malicious tool with a super-low point of entry (price and tech skills) backed up by great online help and a community site.
2. The likes of the Metropolitan Police Cyber Unit (London), the FBI, Interpol, etc. are all very effective and are continually improving organizations that stop crime and lock up cyber criminals. In some ways, this is a culling of the herd that also serves to create a positive Darwinian push on the average talent in the Dark Web.
3. The giant upside financial opportunity to using tech skills for nefarious purposes creates a big gravitational pull that is only enhanced by recent economic and national turmoil, especially in places like Eastern Europe, Russia and Ukraine. In addition to that, state-sponsored or affiliated hackers with military-like rigor in their training can often make money moonlighting in the criminal world.

The combination of forces raising the talent level and the continued improvement of technology make for a bad combo. The Dark Web is also embracing open sourcing. Peer-to-peer bitcoin-based plays may become the next dark commerce platform. 9. The Dark Web itself The Dark Web has evolved over the past decade or so from a foggy, barely penetrable space to a labyrinth of loosely connected actors and now to a massive, modernized bazaar thriving with commercial activity with a huge neon sign on the front door saying “Open for Business.” It is not just a bazaar, it is a huge B2B marketplace where the best criminals can resell their wares whole or in “lego-ized” pieces. Some of these criminals even offer testimonials and performance guarantees! The Dark Web has moved from what economists call "perfect competition" to a more imperfect model trending toward oligopoly. In simpler terms, it is not a sea of malevolent individuals but, rather, the domain of organized businesses that happen to be largely illegal. These are organizations of scale that must be run like a business. This new structure will evolve, adapt and grow so much faster than the prior structure because these organizations have mission-focus and cash-flow pressures. Of course, the market forces common in a bazaar will winnow out low-value and defective products quickly, simply because word travels fast and customers vote with their wallets.  10. The truly ugly “What’s next?” section Like many thriving businesses, there is a tendency to move into adjacencies and nearby markets. This has already happened. There is a lot of money in fiddling with clickstreams and online advertising flows. Bots account for about 50% of the traffic on the Internet; of those, about 60% are bad bots. There is money to be made in transportation. One can buy fake waybills on the Dark Web to ship a crate to, say, Kiev at a fraction of the price FedEx or UPS would charge, even though the package will travel through FedEx or UPS. Here are four emerging and even more worrisome areas that could be leveraged (in a bad way) by sophisticated, tech-savvy commercial criminal enterprises that are alive and thriving today in the Dark Web.

• Internet of Things – It is just the beginning for the IoT. If you click here, you can read a paper on what may drive the amazing growth and where the potential is. The available talent who know how to secure devices, sensors and tags from hacks and stop those hacks from jumping five hops up a network are few and far between, and they don’t normally work in the consumer and industrial spaces that make stuff and that have decided to make an IP-enabled model. Few boards in the Fortune 500 can have an intelligent conversation about cybersecurity at any level of detail that matters. In short, over the next few years, IoT may be a giant hunting ground. For instance, what if a hacker goes through the air conditioning control system to point-of-sale devices and steals credit card info? That is a target with a big bull’s eye on it. (That is what happened to Target.)

• Robotics – This is a little further out, and the criminal cash flow is a little harder to predict, but IP-connected robots is a space that will grow exponentially over the next decade and be at key points in manufacturing, military and medical process flows. What is the ransom for holding a bottling plant hostage? The Samsung SGR -1 (no, not a new phone) is a thermal imaging, video-sensing robot with a highly accurate laser targeting gun that can kill someone from 3,000 yards out. The Oerlikon GDF005 is a less-sophisticated antiaircraft “gunbot” that is, in part, designed to be turned on and left to shoot down drones. These things are both hackable. 

• Biochem – What if some of the above Dark Web trends extend into this area, renting assets and expertise, point-and-click front-end designs? The bad news is that this seems to have started. 

• The over-the-horizon worries – Nanotech, Li-Fi, AI, synthetic biology, brain computer interface (BCI) and genomics are all areas that, at some point in their evolution, will draw a critical mass of criminal Dark Web interest. The advances in these areas are at an astounding pace. They are parts of the near future, not the distant future. If you have not looked at CRISPR, google it. Things like CRISPR, coupled with progressively better economics, are going to supercharge this space. Li-Fi, coupled with 5G and the IoT (including accelerated growth in soft sensors), will create a large target space. The Open BCI maker community is growing quickly and holds enormous promise. Take a look at the Open BCI online shop and see what you could put together for $2,000 or  $10,000. The Ultracortex Mark IV is mind-blowing (not literally) and only $299.

All of this is going to get worse before it gets better. This is clearly not a fair fight. This is a target-rich environment that is growing faster than almost anyone anticipated. The bad actors are progressively getting better organized, smarter and better built for “success.” Interpol, the FBI and other law enforcement agencies do great work, but a lot of it is after-the-fact. Enterprises need new approaches to network-centric compartmentalized security. New thinking about upstream behavioral preventative design is needed for robustly secure IoT plays. National organizations in law enforcement and intelligence need to think through fighting a borderless, adaptive, well-funded, loosely coupled, highly motivated force like those under the Dark Web umbrella. Those national organizations probably need to play as much offense as defense. Multiple siloed police and intelligence units that are bounded geographically, organizationally, financially and culturally probably will start out with a disadvantage. This article was originally published on SandHill.com. The story can be found here.

I predict that in the brief time you spend reading this article you will get several social media and email notifications. You will receive at least one text message and possibly one or more voicemails. At some point later today, you will log in to at least one news website, content aggregator or feed reader and skim the headlines. In other words, I predict that you are already suffering from information overload and that this condition will only intensify as the day goes on. I don’t have to tell you that you aren’t alone here. We all deal with information overload on a daily basis. Colleges study this condition, and news outlets seem to be in love with the topic — even though their articles about the topic feed into the disease itself! The problem with information overload isn’t necessarily that too much information is a bad thing; it’s that our brains are not capable of consuming, digesting and properly processing all the information thrown at us in a single day. It’s like those lines from the Rime of the Ancient Mariner: Water, water everywhere, Nor any drop to drink. We have access to information everywhere, yet it’s so overwhelming that we don’t have the mental capacity to really absorb and understand it. See also: 4 Technology Trends to Watch for In underwriting, information is vital. The more information we have to process, the more accurate our quotes are and the better our risk assessment is. But with large quantities of applications, increasingly stringent underwriting standards and the sheer volume of information we now have access to — including big data — it’s difficult for human underwriters to keep up, analyze data and sift through the irrelevant to find the relevant.  It’s like trying to drink water from a firehose. This is where automation comes in, both for group insurance or individual underwriting. By automating part of the underwriting process, you give human underwriters a leg up that helps them do their job more efficiently. While simplified-issue products can be fully underwritten by an automated system, more complex cases can benefit from the integration of automation and human review. Automated underwriting can be configured to notify human underwriters when certain red flags are found. It can score applications based on rules — regarding medical history or concerning drug combinations or third-party information that wasn’t mentioned on the application. It can then route the application to a specified team of underwriters based on the initial risk assessment or send to “jet issue” if deemed “clean.” See also: Here Comes Robotic Process Automation An automated underwriting system gives the insurance industry time, better margins and the ability to maintain consistent standards even as demand rises. These systems not only process and analyze data more efficiently — they can quickly disregard irrelevant data without suffering the mental fatigue and strain of information overload, freeing underwriters for more complex cases and allowing more business to be written in less time. It’s time to give all underwriters the automation they need to do their jobs.

When an athlete gets hurt on the field, there’s often a lot of finger pointing.  The athlete might point the finger at the opposing player who hit her. The opposing player might point back. Then coaches get involved. After all the finger-pointing, though, who’s ultimately responsible for the medical care that might be needed for the injury? Is it the athletic program? Certainly, insurance has been factored into that program’s budget, but it might not be the kind of insurance that helps its athletes. And what about youth sports injuries or those sustained by professional athletes? When it comes to sports injuries, insurance liabilities aren’t as black and white as you might think. While insurance policies are mandatory for nearly every athlete, it may surprise you who pays for what, especially for medical care after the end of an athlete's career. Youth Sports With more than 30 million children participating in sports, it’s no wonder about 10% of them, aged 14 and under, end up in emergency rooms for injuries related to those sports. The most telling aspect of these injuries is that the majority of them occur during practices rather than games (nearly 62 %). In the game of who pays for what, it’s difficult to determine when an injury occurs during practice rather than competition. One Seattle-area high school’s student athlete handbook simply states that participants may be covered by the school district’s insurance or by a plan that is its equivalent or better. There is no mention of coverage based on practice versus competition, and the stipulation that students can be covered by a better plan puts the onus on parents to pay for the insurance, even though the students are representing the high school. Parents and guardians, of course, should be responsible in general for health insurance for their kids, but is it going too far to ask them to provide sports health insurance? Most regular health insurance plans will cover the basics of a child’s sports participation, but once a child becomes highly competitive, separate coverage for sports may be necessary.  It can also be argued that more specialized coverage is becoming necessary as youth sports are attracting bigger, more powerful players. College Athletics Once an athlete graduates to the college level, insurance liabilities don’t change much. While the NCAA requires all athletes be covered by insurance, it doesn’t require that all colleges pay for that insurance. In some cases, as sports medicine specialist Dr. David Geier points out, colleges and universities have limited budgets and cannot afford to fully cover athletes. While many institutions provide basic on-field care for their student athletes, the buck stops when those athletes get injured. Geier writes about the difference between the University of Alabama and Auburn, a large- and small-market team in the same state. While Alabama covers everything from basic medical and dental for its athletes to their rehabilitation for injuries sustained during an official team activity, Auburn only pays for expenses not covered by a family’s insurance. If an athlete’s family doesn’t have insurance, the school with then cover that athlete. Covering college athletes’ insurance expenses doesn’t come cheap for any school; Alabama paid nearly $2 million five years ago, Auburn nearly $900,000. Yet with so many college athletes suffering catastrophic injuries, does it behoove the NCAA and its member colleges to provide more comprehensive care? Professional Leagues If an athlete can make it to the big leagues, insurance coverage becomes a different game, literally. Professional athletes who play individual sports such as golf or tennis must pay for their own insurance. Team athletes, however, are covered by multiple policies. Leagues such as the NBA and the NHL have plans that blanket many of their players. For a league like the NHL, where injuries are prolific, this tactic is smart. These types of policies are based on a modest percentage of the players’ salaries. The NBA’s policy is only obligatory for a team’s top five players, essentially the starting line-up. Insurance for professional athletes has to do as much with financial losses for a club as it does with physical pain endured for an injury. Policies typically won’t kick in until an athlete has been unavailable for at least a few months.  Athletes sidelined for an entire season (think: Peyton Manning) cost their teams and insurers millions of dollars. However, because athletes of the highest caliber carry private insurance, they themselves are covering their medical expenses and covering potential income losses. After Manning’s neck surgery, the Denver Broncos guaranteed the first two years of his contract; after that, his salary could have been voided if he hurt his neck again. Now that Manning is retired, he is likely paying a disability policy.  He famously stated that he expects to have debilitating medical problems as he ages, simply because of his playing days. Should the NFL or the Broncos pay for his treatment? As with any other employer-employee relationship, it can be argued that Manning is now responsible for his own medical care. With the continued research into post-career injuries, the responsibility for covering them will likely evolve.

The idea of a fully connected world has become quite popular in the press, and it is driving much of the innovation and start-up activity these days. At SMA, we continue to articulate that there will be many different ecosystems in the connected world, such as smart homes, connected cars, smart cities, intelligent farming and so forth. Each will have many participants and contributors to its particular ecosystem, including device manufacturers, systems integrators, data/analytics companies, service providers and, yes, even insurers. It is interesting to consider how connected the connected world might really become. I am thinking of the potential related to big cities and rural areas. See also: 'Smart' is Everywhere, but...

The digital divide has been a concern for quite some time. The digital haves and have-nots are usually described in terms of socio-economic terms, with the less economically advantaged missing out on the benefits of the digital world — and now the connected world. But the divide may also occur between cities and rural areas. What are some reasons to think this gap may widen?

• Innovation test beds: Let’s face it, it seems like half the stories you see about innovative new companies and ideas emanate from San Francisco. While innovation originates in many places, the test beds for new ideas are most often the big cities.
• Communications infrastructure: The explosive growth of the mobile world has already created significant challenges for telecommunications capacity. As connected-world devices and sensors come online, new communications platforms and dramatic increases in capacity will be required. The dense structures and populations of big cities make it easier to test and deploy new wireless and wired solutions.
• Concentration of business and government: More of the institutions that, and people who, run the world are located in big cities. For political and other reasons, it is often easiest to begin technology experiments in their backyard, so to speak. Also, the concentration of businesses, healthcare facilities, utilities and transportation systems makes big cities a better target for initial implementations of new connected-world applications.
• Smart cities: Cities have the scale that is often required for broader testing and for cost-effective implementations. The smart city movement recognizes this while also working to address many of the unique problems of the world’s largest cities (such as traffic congestion, pollution and energy consumption).

The one connected-world ecosystem where rural areas will certainly forge ahead is in intelligent farming. Smart agriculture solutions are already being broadly tested and implemented. From highly automated and connected farming machinery to sensors in the soil to robotic milking operations at dairies, there is great potential to improve the yield and quality of agricultural output.

What does all this mean for insurance? First, this is not to say there will not be smart homes, buildings, health care facilities, etc. in rural settings. Of course there will be, but it may happen that we evolve to a world of highly connected cities and loosely or marginally connected rural areas. Suburbs will fall somewhere in between in terms of connectivity. Insurers should conduct scenario planning to assess the implications of this potential new divide in the connected world. This may be especially important for those with a focus on urban areas because the risk landscape is likely to change the most over the next decade due to the growth of the connected world.

There has been a new virus spotted in some insurance operations. digital myopia. It is often found in the presence of another related issue — transformation shock. Together, they often bring about framework chaos. Fortunately, there is a straightforward vaccine in use —systematic analysis. The ever-rising digital bar for the insurance industry creates challenges and opportunities and a bit of chaos. The opportunities can help insurers build customer loyalty, compete, transform customer engagement and improve retention, which can lead to improved profitability. But how can insurers overcome the challenges of the digital transformation journey, and at the same time rid themselves of the feeling that they may be approaching digital transformation in the wrong way? See also: Why 'Digital' Is So Important To gain a new perspective, insurers can look at their key issues from a systematic approach. They can start with a few simple, but pertinent, questions.

1. Where does our organization sit on the spectrum of digital need?

In working with a broad array of insurers, from the largest to the smallest, from the traditional to the new start-ups, Majesco sees and helps many customers battle a variety of challenges on their paths to digital leadership. Often, they are confronted with pressure to “go digital.” We hear statements like this: “My board is pushing me to go digital, but I don’t know where to start, what to prioritize and what the ultimate goal is.” If this is you, welcome to the club. So many organizations try to think about their digital efforts before they ever consult their core business strategy. This throws off the ability to make wise digital decisions. It’s important to remember that digital strategy begins with the most basic, non-digital question — “Who are we?” So you start with your business strategy. Do you have one? If so, do you then focus on the gaps between your current digital capabilities and your target operational model — the one that fits your business strategy? Does your organization want to be a quick follower to current market leaders? Or, alternatively, does it want to be a market leader and disruptor? Finding the right model and approach that aligns with your business strategy instantly empowers your business priorities and aligns your organization’s DNA to the digital strategy it will adopt. Once this happens, a sense of relief will often flow throughout the organization —even before the digital work has commenced. Organizations need to know where they fit before they can grasp where they sit on the spectrum of digital need. 2: Do we need to create a coherent, comprehensive digital strategy? If your organization has its core business strategy defined, then you are ready for the next level of systematic analysis. Your organization (and often a technology partner) will assess the current environment and the array of digital initiatives underway. It is at this phase that we often hear, “We seem to have too many digital projects and initiatives going with no real plan or strategy behind them.” Many organizations started their digital initiatives before the digital strategy came into play. They are now realizing that the sum of the initiatives (parts) is less than it should be, sub-optimizing the business strategy and customer experience. This is often where most companies find themselves requiring urgent action to avoid a scattering of digital islands that do not connect to each other. Evaluating and consolidating these initiatives against your business strategy is crucial to digital transformation. Decide which initiatives are critical to your business success and kill those that do not align, creating clarity and focus for resources. There is nothing like the feeling that comes at this stage of the digital strategy. The organization and projects are aligned, the moon and the stars have moved into place and order is emerging from the chaos. The vaccine (systematic analysis) is working! See also: Waves of Change in Digital Expectations 3: Is our digital road map clear, but legacy issues stand in our way? If you find yourself in the position where you have a clear digital strategy and road map, but you can’t do as much as you wish because of legacy core insurance systems, then there are innovative approaches to address this obstacle. We advise insurers to adopt a digital platform that can provide a multi-speed digital transformation approach. This digital platform provides two critical components: First, it holds an enterprise service bus platform that can easily orchestrate transactions and data flows between multiple systems (including legacy) easily and efficiently. When the organization replaces the legacy systems, the new systems can be easily plugged into to this platform. This provides a quick win, using an underlying business and technology architecture that provides the foundation for your digital road map. And the best part is … it requires no change to your legacy systems, and it can be completed quickly. Second, the organization should look at key functional areas, like service areas, that need a digital mobile or portal to meet customer engagement expectations. Identify the few processes that are discrete and can be revamped, digitized, automated and integrated into the digital platform without major changes to your legacy systems. Digitize them and expose them to a federated or a self-serviced model. This digital transformation approach helps you meet the most immediate needs of your customers by turning obstacles into opportunities. It also gives you time to address the most pressing strategic obstacle, your legacy core system transformation. These two steps, once completed, will help build confidence and momentum in your organization’s business strategy. They will accomplish most of your digital transformation goals with your customers and staff and help make your total business transformation more viable, and more agile. A cohesive IT strategy and a successful business strategy nearly always go hand in hand. Your reward in pursuing a systematic digital transformation will be a clearer road map, a sense of direction and a group of people unified behind a common path.

This is the first part of a three-part series on the innovation needed in flood insurance. If you are an insurance agent trying to survive in today’s competitive marketplace, you may have dipped your toes in the flood insurance waters, so to speak. If you have not, get ready to jump in, because there’s a “perfect storm” of opportunity ahead. Flood insurance is a vastly under-penetrated market. According to a recent report from the Federal Emergency Management Agency (FEMA), approximately 10% of U.S. residential property is located in areas where flood insurance is required for federally backed mortgages, yet fewer than half of these homes carry the coverage. Total penetration in the U.S. is less than 7% for the roughly 95 million residential structures. That 7% penetration is compelling when you think about the prospective flood universe. Every single state in the country has suffered flood losses. So the question becomes: How do we leverage the opportunity to expand flood insurance beyond those 7%? When you consider the current state of the industry and of the National Flood Insurance Program (NFIP), the climate is ripe for change. The federal program is upside-down by $23 billion, resulting in additional fees and charges, and the Biggert-Waters Flood Insurance Reform Act of 2012, followed by the Homeowners Flood Insurance Affordability Act, injected new complexities into the NFIP. These — and related — conditions have created a “perfect storm” of opportunity to grow the number of homes that buy flood insurance. See also: Why Flood Is the New Fire (Insurance) Taking Advantage of Emerging Private Flood Options Legislation has paved the way for private flood insurance, which has come in response to different markets having different views and different appetites for risk, and additional measures pending in Congress further clarify the critical role of private flood insurance. Those diverse interests or private markets call for the independent development of product and service solutions to address various flood insurance needs and to differentiate their programs from others. The resulting innovation and product specificity directly benefits consumers. Accordingly, the conversation around flood has really evolved from "What is private flood?" to "Why now private flood?" One significant challenge for agents will be helping consumers understand that flooding (unlike earthquakes or hurricanes) is the only natural disaster where people actually influence the event itself. Whether through urbanization, the clearing of land for agriculture or artificial levee systems, we influence where floods happen and the severity of floods when they happen. Areas that were not in danger yesterday are exposed today. Private industry has an opportunity to help educate Americans on how these changes drive future flood risk through modeling techniques and data analytics. We need to help homeowners understand that yesterday’s safety does not necessarily equate to safety today. I see this playing a pivotal role in helping educate homeowners on their true risk of flood. Getting an Edge in a Competitive Marketplace Education remains a critical charge for insurance agents who want to obtain an advantage in this evolving market. Agents want loyal customers, and a flood insurance solution represents one more policy that agents can deliver to deepen existing relationships. From my perspective, there are fundamental strategies to employ to your advantage:

• Understand the impact of flood in your area

Every state has been touched by flood, so the risk is widespread. By familiarizing yourself with the history of floods in the areas where your agency is operating, you will better understand the potential impact to your customers.

• Get to know your customer

Does your customer have a man cave in the basement? Is your customer living in a high-value home? Is your customer in a home that is not elevated or that is exposed to flood more than other homes? Is your customer at risk of being displaced for weeks or months at a time if flood happens? That knowledge will help an agent determine what is appropriate for a client and then to match those specific needs with product options in the private market.

• Leverage flood tools available

Take advantage of tools that enable independent assessment of flood risk outside of FEMA flood maps. For example, through www.floodtools.com, agents and homeowners can learn about their potential exposure to flood. By entering an address, they receive an easy-to-understand visual representation of where they are positioned with respect to floodwaters and flood plains.

• Stay current in the evolving product environment

New, more relevant private products are becoming available every day. Staying informed in the changing product environment will help improve your ability to meet the diverse needs of customers with contemporary offerings such as: —Additional living expenses —Enhanced basement coverage —Increased limits for various risk classes

• Be clear on who is backing the product and the capital structure behind it

There is an abundance of capital looking for new business to write. Know who is backing the product and the capital structure supporting the private program. Consider the financial strength and financial rating of the insurer and inquire about flood underwriting experience. See also: Modeling Flood — the Peril of Inches Setting Course for the Challenges Ahead We are seeing a lot of interest in the flood space and the emergence of a host of new products. Many employ a so-called “coupon” approach by offering a percentage discount on the NFIP premium, but they haven’t changed the experience at all. Agents still need to manage extensive applications, an elevation certificate and property photographs. The experience needs to be improved, for the agent and for the customer. Are there opportunities for agents to sell flood insurance on a larger scale? Certainly, but more work is necessary to make that happen. When it comes to flood insurance, we need to find solutions attractive to both agents and homeowners for the purpose of increasing overall participation. We need to address the existing challenges. Constituents entering this space cannot solely focus on a price-to-coverage configuration angle. Ultimately, without product and service innovation, we can’t expand the market.

In a deep dark recess of the Federal Register this week, large corporations quietly received permission to “play doctor” with their employees. Corporations can now impose even more draconian and counterproductive wellness schemes on their workers. The hope of the corporations is to claw back a big chunk of the insurance premiums paid on the behalf of employees who refuse to submit to these programs or who can’t lose weight. A Bit of Background on Wellness The Affordable Care Act (ACA) allowed employers to force employees to submit to wellness programs under threat of fines. Specifically, the ACA’s “Safeway Amendment” — named after the supermarket chain whose wellness program was highlighted as a shining example of how corporations could help employees become healthier — encouraged corporations to tie 30% to 50% of the total health insurance premium to employee health behaviors and outcomes. (As was revealed while ACA was being debated, Safeway didn’t have a wellness program. The fictional Safeway success was a smokescreen for corporate lobbyists to shoehorn this withholding of money into the ACA.) Once this 30% to 50% windfall became apparent, many corporations figured out what this vendor (Bravo Wellness) advertised: There is much more money to be made in clawing back large sums of money from employees who refuse to submit to these programs than in improving the health of employees enough to allegedly reduce spending many years from now. “Allegedly” because — unlike simply collecting fines or withholding incentive payments — improving employee health turns out to be remarkably hard and ridiculously expensive to do. It is so hard and expensive that:

• The entire wellness industry has not avoided even a single heart attack or case of diabetes, statistically speaking, according to data compiled by a wellness consulting firm for the federal government;
• The only wellness company willing to release results of its own wellness program on its employees admits the program failed;
• Even the employers whose wellness programs have won awards as the best in the field have made only trivial improvements in employee health.

Most importantly, the complete lack of regulation has allowed the wellness industry and health plans to expose employees to significant potential harms to maximize revenue. See also: Wellness Promoters Agree: It Doesn't Work The Federal Government Green Lights “Wellness-or-Else” Programs There are no regulations, licensure requirements or oversight boards constraining the conduct of wellness vendors, and there is only one agency — the Equal Employment Opportunity Commission (EEOC) — providing any recourse for employees. The Business Roundtable has taken on the latter at every opportunity. First, the Business Roundtable threatened President Obama with withdrawing its support for the ACA unless he declawed the EEOC. Then, the Business Roundtable arranged for sham Senate hearings titled “Employer Wellness Programs: Better Health Outcomes and Lower Costs.” Finally, it threatened to push the “Preserving Employee Wellness Programs Act” to legislatively eviscerate the EEOC’s protections. But it turns out the legislation was not necessary; the EEOC has now caved in. These programs are defined as “voluntary,” yet, as of now, employees can be forced to hand over genetic and family history information or pay penalties. So, as in 1984, where “war” means “peace,” employees can now be required to voluntarily hand over this information. Let’s be clear. Genetic information isn’t about employee wellness programs, which do not work. It is all about the penalties. Genetic information is worthless in the prevention of heart disease and diabetes, as Aetna just showed in a failed experiment on its own employees. Knowing family history does have some predictive value, but it is unclear how employees are going to benefit from employers collecting it. Self-insured employers could either fire the employee or do nothing. Neither is useful for the employee. If the employer is fully insured, this information is akin to a “pre-existing condition” in the old days. The employer’s premiums will increase as long as employees with bad family histories remain on their payroll. See also: The Yuuuuge Hidden Costs of Wellness The Good News, Part 1: Corporations Wising Up The Business Roundtable — and its friends at the U.S. Chamber of Commerce — might want to connect their computers to the Internet. It turns out that many companies are finally realizing that compelling employees to submit to medical screens just to claw back some insurance money isn’t worth the morale hit. Increasingly, employers are learning that what the national data shows is also true for themselves: These programs simply do not work. For example:

• The prestigious journal Health Affairs confirmed previous analysis that fining or bribing employees to lose weight is a waste of time and money;
• The state of Connecticut (also in Health Affairs) admitted that its program has caused costs to increase;
• The Health Enhancement Research Organization (HERO), the wellness industry’s trade association, admitted wellness causes such massive cost increases that it loses money — even when HERO acknowledges fabricating data to try to show savings.

And the morale hit? A formerly obscure faculty member who led the successful employee revolt against the Penn State wellness program was just elected president of the Penn State Faculty Senate — largely because employees were so grateful for his leadership in that revolt. The Good News, Part 2: Wellness for Employees As a result, many companies are deciding that clawing back some insurance money is not worth the damage done to their workforces. They are replacing “wellness done to employees” with “wellness done for employees.” These companies are improving the work environment, upgrading their food service, encouraging fitness or simply adding features like paternal leave or financial counseling. They might still hold a “health fair” every now and then, but their medical tests are conducted infrequently (based on actual clinical guidelines) instead of allowing vendors to screen the stuffing out of employees to find diseases that do not exist. Or, companies are actually focusing efforts where they can make a difference, such as steering employees to safer hospitals or educating employees on how to purchase healthcare services wisely. (Disclosure: My own company, Quizzify, is in the business of teaching employees how to do the latter.) Notwithstanding this disruption and regardless of the harm it has caused, the $7 billion wellness industry has excelled in perpetuating its own existence. Industry thought leaders recently proposed a scheme to encourage companies to disclose how fat their employees are and have even managed to get a few large employers to sign on to it. The sheer audacity of that scheme and the complete disregard for its consequences on overweight employees means the war on “voluntary” wellness-or-else programs is by no means over. Like every other industry threatened by reality but supported by deep-pocketed allies such as the Business Roundtable, the wellness industry can rely on the government to delay the inevitable. Consequently, it might be quite some time before the inevitable course of reality overcomes the wellness-or-else pox on the healthcare system.