This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Kevin Kerridge, the head of Hiscox Direct, who says, among other things, that the UK is five years ahead of the U.S. on small business insurance.

To see more of the "A Word With Shefi" series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

Building a business in the USA for Hiscox that is reinventing small business insurance -- selling policies direct to consumers and through a select group of distribution partners.

What led you to your career in insurance?

I wish I could say it was some form of grand plan, but it wasn't. I come from a very humble background and from the age of 11 found small jobs around the neighborhood to earn some extra pennies. It's served me well over the years in relation to work ethic and never taking anything for granted. Despite good grades at high school, my parents couldn't afford to send me to college, and so I decided to go straight into work -- the most attractive offer being an insurance company. The rest is history.

Describe the Hiscox brand in one sentence:

Bold, courageous and contemporary -- coupled with a sense of tradition where it matters, in areas like integrity, honesty and being human. As an insider, it feels like we're in the insurance industry but not of it.

Name one similarity and one difference between how consumers shop for insurance in the U.S. vs. the UK:

The UK is five years ahead of the U.S. in the small business insurance space. In the UK, the first place most small businesses go for insurance is the web, whereas in the U.S. it's still the local agent who dominates. One similarity is that small business consumers see insurance as a low-interest purchase -- they want to get the right coverage, fast and at good value for money -- so that they can focus their energy on running and growing their business.

Do you think insurance agents are a thing of the past for small business insurance?

Absolutely not -- but they will look different than they do today. At Hiscox, we've leveraged our investment in the direct-to-consumer infrastructure to enable agents to access our custom small business products for their existing customer base. Our wholesalers love it because it gives them a very efficient and effective way to win in the $500 premium space -- our slick technology solution coupled with their valued expertise is a powerful mix.

What has been instrumental in establishing Hiscox's presence in the U.S. small business insurance space in a relatively short amount of time?

Two things came together very quickly for us in 2010 - an obvious market opportunity where business consumers were moving to the web, and no market incumbents were serving that need. Having already built this business in the UK, the ace up our sleeves was our crystal ball in relation to an intimate understanding of what it takes to make that business model a success. In addition to our crystal ball, we are also lucky enough to have an executive team with the stomach to invest behind this opportunity - the investment required for success is material (think hundreds not tens of millions of dollars) and the path to profit is a long one. A patient executive team and shareholders are critical.

In 2010, Hiscox was the first insurer to allow the actual sale of small business insurance to occur online for your products and classes. What allows Hiscox to truly deliver the promise of omnichannel?

Too many insurance businesses are still inwardly focused; going into dark rooms to build very complex solutions they think they can sell to consumers. At Hiscox, we try to build around the customer. As an aspiration, we talk about being a marketing and technology company that just so happens to provide insurance products -- we're not quite there yet, but having that mindset is important.

What do you find the most challenging in Hiscox's digital operation?

The speed of change and building a technology infrastructure to keep up with that. We started building the blueprint for our U.S. small business operation in 2009 -- it feels like it was just yesterday, and yet the iPad didn't even exist then, and I think I was still using a 56k dial-up modem at the time.

Five years later, are small business owners ready to really buy insurance online?

I'm still trying to figure out whether that's a trick question! Hundreds of thousands of small businesses have already purchased insurance online in the U.S., and those numbers will only continue to grow. The real question is whether the insurance industry is ready to make the material shift needed to provide small business consumers with the online purchasing experience they're accustomed to experiencing online.

What is the strategy or the thinking behind Courageous Leaders, and what do you hope to achieve with it?

In our overall U.S. business, our brand platform is Encourage Courage. It's not about courage in taking insurance risk, but a more holistic view of the courage needed to build successful businesses and embrace those emotional fears we all have in life. In this respect, we have huge affinity with the small business community - many of whom put everything on the line to follow their passion. Courageous Leaders is a celebration of entrepreneurial courage -- and us tipping our hat to the courage they show. I hope it inspires others.

What other insurance brand (insurer, vendor etc.) do you admire and why?

There are a handful of small brands in the online small business insurance space that are showing tremendous entrepreneurial spirit in grasping the changing small business insurance landscape -- I have great admiration for them. They truly are the gold prospectors of our industry in these times.

Favorite quote?

Two come to mind, both from people who have had a massive impact on my career and life, and both quotes said to me in person. The first, from Robert Hiscox, was, "I don't mind you losing me money occasionally, Kevin, but never lose me my reputation." The second was from our Group CEO, Bronek Masojada: "In life there are good bets. And there are bad bets. But not all good bets are winning bets."

When you are not working in insurance, you are most likely…

I love spending time with my amazing wife and four wonderful children -- just taking in everyday experiences together, from cooking to traveling. I'm blessed that they've all been willing to make sacrifices along the way to support my passion for what we're doing at Hiscox. Outside of that, my one selfish passion is fishing -- the thrill of the catch, coupled with some downtime in the fresh air to collect my thoughts...

Are you allowing insurance premium trends to "soften" your approach to preventing injuries and accidents? Or are you following the lead of the most astute risk managers and improving your company's financial results?

Regardless of the industry or corporate strategy, those risk managers have discovered that a culture that values employees, accompanied with a rigorous pursuit of loss prevention and safety, pays dividends through engaged, satisfied workers and low turnover. Forward-looking risk managers also are leading their organizations' efforts to protect their reputations and brands with clearly defined strategies that prevent regulatory actions.

A key is to understand how workers truly think and work to shape their mindsets, rather than take the traditional, rules-based approach to safety.

In 2013, there were some 3.8 million recorded accidents (Bureau of Labor Statistics) for a workforce of 155 million (Department of Labor). When you consider that the average work-related injury costs $38,000 (National Safety Council) to companies, we now have losses to America's industry around $140 billion, or almost 1% of the GDP. "Far too many people are still killed on the job - 13 workers every day taken from their families tragically and unnecessarily," U.S. Secretary of Labor Thomas Perez said when he commented on the 13% increase in fatalities to women and an overall workplace increase of 2% from 2013 to 2014.

Phil Walker, a national trial counsel for employers in California workers' compensation cases, predicts that cases will double within 10 years. It should be expected that the cost of accidents is going to continue to rise. Insurers will be forced to increase premiums, and providers will raise consumer prices if we continue to approach safety from the present paradigm.

Additionally, there is the risk of criminal prosecution. A recent article by Howard Mavity and Edwin Foulke, former head of the Occupational Safety and Health Administration (OSHA) from 2006 to 2008, stated: "The administration and many of its allies really do want to put employers in jail." The authors were struck by statements from the administrator of OSHA Region 4 at the recent Georgia Safety, Health and Environmental Conference, indicating that he's recently contacted all the U.S. attorneys in his region to encourage increased criminal prosecution of workplace fatalities and OSHA violations, and will soon do the same with state attorneys general.

While workplace deaths and reported occupational injuries have dropped more than 60% in the 40-plus years since OSHA was created, the biggest factor causing accidents has yet to be addressed - the person's mindset. If you review the OSHA website, you will see that programs focus on the work environment and safety procedures. You will NOT see programs focused on changing the individual's mindset that caused the accident. Years of study have proven that "rules-based behavior modification" has limited effects and is often simply confined to the modification environment.

Today's approach, while improving results, still misses an opportunity to identify underlying mindsets that drive the behaviors leading to accidents (and errors). At the core of every individual are motivations that affect the way they seek life's rewards. Employees who remain safe in their work environment have different motivations from those who have accidents, according to a five-year study conducted in four separate industries. In that study, 37 components of an individual's motivations were analyzed, comparing participants who were accident-free to those who had a reportable incident. The differences were quantifiable and distinctly different in the two groups. The most interesting factor was that the counterproductive factors were remarkably similar, regardless of the industry. The study proved conclusively that there are distinct motivational differences between people who are involved in accidents and those who are not, and these differences can be quantified and used as a basis for addressing the mindset that "caused" the accident.

It should be noted that this problem is not going to be quickly resolved, because you are dealing with individuals who have taken a lifetime to formulate a value system that justifies non-productive beliefs, like:

• "If I do not sacrifice some of my personal desires, then I will never be promoted, move ahead or improve my financial status in this company."
• "I realize that I should be more careful, but we are under deadlines, and if I do not meet those deadlines it is going to cost me."
• "The odds are against that happening to me. I have done this for a long time, and I've never had a problem before, therefore I will continue to do things my way."
• "Yes, there may be a better solution, but I have to work in this environment with my co-workers. We have bills to pay - they gut it out, and I will, too."

To change those types of mindsets, there is no quick fix. Therefore, the sooner an organization initiates the mental benchmarks and addresses the counterproductive motivations, the sooner the impact to the organization's bottom line. A minimum of 12 to 15 hours of workbook application, seminars or training sessions are required to implement mindset and process change. With a methodical approach using human data and people metrics, the impact will be individually targeted and last longer, producing productive environment and behavioral mindset changes.

OSHA's gains over the past four decades have been a positive beginning. However, if the insurance industry and Corporate America want to continue to improve the risk and productivity factors affecting safe working environments and profitability, they must address the mental source of accidents, not just the environment in which they occur. This will require a focus on the employee's motivations and how they get their "rewards." Reducing reportable incidents, increasing employee engagement and improving the organization's bottom line will only occur when the factors affecting an employee's motivations are addressed.

While each organizational culture is distinct, the process for reducing accidents requires reducing counterproductive mindsets. For example, some people may view love and attention as much more powerful than a $100 bonus for being safe the past month. Being pampered, receiving special attention and meals and having people you love visit you while you are injured can be a powerful incentive: To someone who feels isolated, it's priceless! A common belief in our society is, "No pain, no gain," and, in this case, the reward for this counterproductive mindset is worth the agony.

In my next article, I will address the various types of motivators that should be addressed and how a person's inner dialogue changes the mindsets. In the following article, I will provide you with a five-step process any insurer or company can use to identify, quantify and address removing counterproductive motivations from their work environment. As with any prescription, it takes some time, but not four decades.

These are three websites I read every day and from which I draw a huge amount of useful information:

1. The Doctor Weighs In, hosted by Dr. Patricia Salber. TDWI is truly mind-expanding. She explores topics from the relationship between morality and religion to detecting post-surgery respiratory problems. Here is a link to The Doctor Weighs In.
2. They Said What?, hosted by the inimitable Al Lewis and Vik Khanna. They go about exploding one healthcare myth after another and do so with appropriate satire, hilarious quotes and self-immolating vendor screenshots. I can't go to this website without learning valuable information and having a good laugh. Who doesn't like a good satire? Here is a link to They Said What? My advice: start with "This is your brain on wellness."
3. Not Running a Hospital, hosted by Paul Levy. Not Running a Hospital goes way beyond what the title implies...and way beyond healthcare in general. It, too, is mind-expanding. He covers topics from math education to healthcare myths and back again. Here is a link to Not Running a Hospital.

I urge you to add these websites to your bookmarks and visit them often.

Virtual reality (VR) is no longer a technology reserved for the gaming industry. The applications are manifold in industries such as education, engineering, healthcare, insurance, sports and telecommunications. But, unlike other technology disruptions such as telematics, IoT, mobile, digital and cloud, which I have outlined in a previous blog, VR is yet to catch up in terms of adoption by insurers.

However, there are some applications from which the early adopters of this technology have started benefiting and others from which they could soon start benefiting.

Current Enterprise Applications

The Applications: VR simulation of car crashes - Insurers better understand what happens in a car crash for a safety demonstration

The Benefits: Improvement of driving behavior by creating awareness on safety and reducing accident claims

The Early Adopters: Australian insurer NRMA Insurance built a car crash simulation in collaboration with an ad agency and a film production studio and provided the experience to customers through an Oculus Rift headset in a crashed car showroom exhibit.

The Applications: Training - Safety experts and workers in manufacturing plants and warehouses are trained on safety practices and risk handling by creating a virtual world with various scenarios

The Benefits: Immersive and effective training experiences

The Early Adopters: Travelers insurance is working with AppliedVR in developing a VR mobile application aiming at industrial safety

The Applications: Advertising - Ad campaigns in VR gaming and on other platforms

The Benefits: Connecting better with the tech-savvy audience

The Early Adopters: Axa partnered with Google Niantic Lab Ingress to protect the gamers in a virtual real world using Axa Shield.

Ideas Insurers Can Explore

The Applications: Risk Assessment - Underwriters can look at all the possible risk hazards in a building without actually visiting the building.

The Benefits: Cost saving on travel and hiring

The Early Adopters: Insurers can steal ideas from the travel industry and see how they can customize VR for their needs. Marriott Hotels "teleports" guests to places like Hawaiian beaches and downtown London with sensory experiences.

The Applications: Analytics - Data scientists can analyze and visualize large dynamic datasets in VR, and executives can interact with the dashboards and take decisions

The Benefits: Quick and informed decision-making, scenario analysis

The Early Adopters: Insurance industry can draw inspiration from solutions developed for power, oil and gas and logistics industries. Space-Time Insight has recently demonstrated the capability of big data analytics and VR for power substation maintenance using Oculus Rift.

As an array of companies such as Google, Facebook, Samsung and Sony beef up their investments in VR and the number of enterprise applications spread across industries, the technology will soon prove to be disruptive for the insurance industry. Though customer experience, product demos and employee engagement are the key applications for the insurance industry, the ideas could be limitless as the technology matures. The day when we will compare the insurance product, take a driving test, purchase by interacting with an agent and talk to the customer care executive for claims, all through VR, is not too far away.

Three solution providers have been recognized for truly ground-breaking projects and initiatives with demonstrable real-world impact, following the recognition of three insurers. SMA also published a collection of case studies on all the solution provider award submissions this year, showcasing the remarkable innovation taking place in the industry today.

The insurance ecosystem encourages the holistic spread of innovation, with insurers and solution providers working together to create new capabilities and adopt new technologies. Next-Gen Insurers that are reinventing the business of insurance for the 21st century depend on advances in four main areas: business models, infrastructure, products and services and customer engagement. The solution providers to watch understand and support these changes, helping insurers to actualize the value from the market's shifts and ultimate evolution.

This year's submissions for the SMA Innovation in Action Award for Solution Providers demonstrate the strides that solution providers are making in those areas. By developing creative solutions that are embracing new technologies and leveraging innovative approaches to solve important business challenges, the 2015 award winners show what kind of value insurers can gain from their solutions and their partnership.

This year's solution provider winners are:

Livegenic, which offers a patented, mobile, real-time video platform to help insurance organizations reduce claims handling costs and improve customer satisfaction. Livegenic connects a policyholder with a claims customer service representative through live video without disconnecting the phone call. Claims professionals can see what the customer sees while on the phone, enhancing first notice of loss, underwriting, field operations and supplemental claims.

Social Intelligence, which offers a sophisticated scoring platform that leverages publicly available social media data and the Internet of Things for improved risk assessment. The solution helps insurers by aggregating data and offering access to new predictive, reliable and less expensive data sources. Social Intelligence's Social Media Risk Scoring provides another layer of risk assessment that insurers can utilize in real time across life and personal and commercial P&C lines of business at critical stages in the policy lifecycle, including point of sale, claims filing, first notice of loss and renewals.

Wallflower Labs, which offers a patent-pending solution to reduce the number of unattended cooking fires and associated claims. Wallflower's Electric Range Smart Cord and Gas Range Smart Valve enable ranges and cooktops to remind homeowners that they are operating, through smartphone push notifications, and to allow for remote or automatic shutoff. Wallflower solutions can also provide insights into cooking behavior and trends by capturing information about household range/cooktop use to improve how insurers price their homeowners insurance products.

By delivering new tools that help insurers to improve their businesses, the winners of this award are blazing a trail with innovative approaches and raising the bar for solution providers everywhere to provide creative offerings and help insurers achieve real-world value. This year's submissions for the solution provider awards show the vital role that innovation plays within the industry and offer commendable examples of innovation in action.

When an injured worker submits a claim, it initiates processes aimed at returning the injured worker to gainful and sustainable work at the earliest possible time. In this journey, checkpoints and milestones are the best means to monitor progress. Checkpoints generally relate to visits with a medical practitioner where medical conditions are checked against expectations and, if necessary, treatments are adjusted. Milestones are associated with reaching a goal.

At the first medical appointment, the physician is required to prepare a report for the claims administrator based on a comprehensive medical examination of the injured person, including a review of the medical history. At the same time, the physician can access CURES (Controlled Substance Utilization Review and Evaluation System) to check whether the patient has received any scheduled controlled substances in the prior 12 months. Through this access, the physician can identify an at-risk patient and accordingly establish a treatment plan that considers both medications and adjunctive treatments. Also, if a patient is identified as an addict, he can be referred for rehabilitation and social re-integration. With subsequent medical appointments, the physician can again use CURES to check for any changes to the patient's scheduled controlled substances usage since his last visit.

The importance of a physician using CURES to check a patient's use of scheduled controlled substances cannot be overemphasized, especially in workers' compensation, where a patient may not be forthcoming in sharing comorbidity information because of a lack of trust. Not knowing if a patient is currently taking scheduled controlled substances, the physician could jeopardize the patient by prescribing inappropriate medications.

In addition to the medical profession, CURES is available to Department of Justice investigators and law enforcement agencies to identify persons who visit a number of physicians to obtain supplies of scheduled controlled substances for abuse and diversion (i.e. physician shopping). Pharmacists and numerous regulatory boards from the medical board to the veterinary board also have access to CURES, providing them with the opportunity to monitor the medical profession for aberrant prescribing of scheduled controlled substances.

While states like Florida implemented a PDMP (prescription drug monitoring program) as late as 2011, California has monitored Schedule II controlled substances since 1940 and with the introduction of CURES in 1996 extended its monitoring to include Schedule III and IV controlled substances. Online access to CURES has also been available to the medical profession since 2009. Consequently, California has not experienced the abuse and diversion that Florida has with its "pill mills."

Access to CURES by claims administrators or their representatives (i.e. third party payers) will not deliver improved quality of care or reduce prescription drug fraud and abuse and will add unnecessary costs through duplication of efforts already being performed by others using CURES. Close monitoring of checkpoints, however, by the claims administrator will provide benefits. Monitoring is accomplished through what is commonly referred to as "encounter data" and includes diagnoses, services performed and medications dispensed along with amounts charged and paid. Diagnoses, medical procedures and pharmaceuticals translated into coding systems such as ICD-10 (International Classification of Disease, 10th revision), HCPCS (HeathCare Common Procedure Coding System) and NDC (National Drug Code) provide excellent opportunities to automate the monitoring of encounter data.

Have claims administrators been able to implement technology solutions to automate the monitoring of encounter data and achieve outstanding results? Over the past two decades, many claims administrators have opted to outsource the management and control of critically important functions such as utilization review, medical bill review and pharmacy monitoring. Many of the outsource organizations only focus on that part of the encounter data that directly applies to their function -- for example, pharmacy benefit managers only monitor the pharmacy. But using all the encounter data can promote a vibrant synergy very capable of achieving outstanding outcomes and results for the injured worker.

Losing control of encounter data eliminates the claims administrator's ability to establish and monitor adherence to best evidence-based practices. When physicians have not adhered to their proposed treatment plans, opportunities to trigger yellow and red flags for investigation are lost.

Claims administrators who have automated the monitoring of their encounter data can assist states in reducing abuse and diversion by monitoring the quantities of medications being dispensed in a progressive or step therapy pain management plan, for example, and encouraging unused supplies to be returned to the physician at the next appointment. This can be achieved at no additional cost to the claims administrator and reduces the quantities of unused or unneeded prescription medications in circulation, which has been the focus of the DEA's (U.S. Drug Enforcement Agency) "take back" initiatives. To date, the DEA has collected in excess of 1,400 tons of unused medications, which could otherwise have found their way into the illicit drug market.

For as long as the U.S. remains the biggest licit and illicit drug market in the world, claims administrators will remain challenged to deliver on their workers' compensation claims handling obligations.

With a changing workforce, claims administrators will need to move more and more toward a biopsychosocial approach to managing medical conditions. They must provide quality care at the lowest possible cost, which can only be achieved through the fine analytics of consolidated encounter data.

Capturing encounter data through the claims administrator's processes and fine analytics will consistently yield the best claims outcomes, from earlier return-to-work to lower costs associated with medical treatment through to automated overseeing of a claim, including provider performance monitoring and evaluation. All of these are the essence of superior workers' compensation claims management.

The follow-the-leader principle works on a trail that has proven to be relatively safe from perils and predators. However, when new frontiers are breached, a new kind of leadership is required for survival.

Insurers have generally been able to just follow the leader for ages, but now a new frontier has been breached. The insurance industry is vulnerable to three game changers that consumers are eager to embrace.

Drawing on remarks I made recently at a keynote for the National Association of Mutual Insurance Companies Annual Conference, here are the game changers:

The first big disrupter is data collection. Insurance is built on the principle of using accurate data and statistics to build underwriting financial models that serve to predict behavior and events from an actuarial or probability standpoint. London's Edward Lloyd figured this out when he opened his coffee shop in 1688, and people started selling insurance to merchants and ship owners. His motto was fidentia, Latin for confidence. We now refer to "confidence factors" when estimating future losses.

Insurers have been notorious for using forms to collect data. But, today, a person is subjected to more new information in one day than a person in the Middle Ages saw in his entire life. If modern competitors to the insurance industry can obtain more accurate data in a faster and more in-depth manner, they may beat insurers at their own game.

With cloud computing and its infinite data storage/retrieval capability, trillions of bits of information relating to insureds are available. Data sources track things like profile patterns, such as personal Internet searches or satellite surveillance data. Relevant data can be mined and analyzed to build a risk model for every insurable consumer or business peril from property and vehicle insurance to earthquake and weather insurance.

The five biggest data collectors on the planet are Google, Apple, Facebook, Yahoo and Amazon. These high-tech companies have the ability, financial resources and potential desire to foray into the insurance industry. Keep in mind that in 2014 the world's top 10 insurers received $1.2 trillion in revenue, yet surveys have shown that people around the world have grown to use and trust the products and services provided by the five biggest data collectors.

Accessibility and familiarity are allowing profitable new brands to replace old brands. Consumers also prefer and use third-party validation and independent comparisons found on websites.

What does this spell for the insurance industry? Sadly, consumers have grown more uncomfortable with reliance on and interaction with agent relationships. John Maynard Keynes once said: "The difficulty lies not so much in developing new ideas, as in escaping from old ones."

The second emerging threat to insurance is botsourcing -- the replacement of human jobs by robotics. The robots haven't just hatched in agriculture or auto assembly plants -- they're expanding in a variety of skills, moving up the corporate ladder, showing awesome productivity and retention rates and increasingly shoving aside their human counterparts.

Google won a patent recently to start building worker robots with personalities. Move over, Siri.

Author and entrepreneur Martin Ford, in his book Rise of the Robots, argues that artificial intelligence (AI) and robotics will soon overhaul our economy. Increasingly, machines will be able to take care of themselves, and fewer jobs will be necessary.

Reassessment of the way we employ our workforce is essential to cope with this new industrial revolution. The lucrative insurance realm of personal and product liability insurance lines and workers' comp is being tempered as human risk factors -- especially in high-risk areas -- give way to robotics. The saying goes: "Management is doing things right, but leadership is doing the right things."

How will the insurance industry react to the accelerating technology of bot-sourcing?

The third emerging threat to the insurance industry that has received enormous attention this past year autonomous vehicles. More than a half-dozen carmakers, as well as Google and Uber, predict that self-driving vehicles will be commonplace on our roads between 2017 and 2020. Tesla Motors CEO and general future-tech proponent Elon Musk has predicted that human drivers could someday be outlawed. Humans cannot outperform an autonomous vehicle, which can assess and react to more than 7,000 driving threats per second. There are no incidents of driver impairment, reckless driving, DUIs, road rage, driver texting, speeding or inattention.

With a plethora of electronic distractions, increased safety can only be achieved when human drivers are removed from the equation. Automakers have employed an incremental approach to safety in their current models. These new technologies are clever and helpful but do not remove the risks. There's a phenomenon called the Peltzman Effect, based on research from an economist at the University of Chicago who studied auto accidents. He found that, when you introduce more safety features like seatbelts into cars, the number of fatalities and injuries doesn't drop. The reason is that people compensate for it. When you have a safety net in place, people will naturally take more risks. Today, 35,000 vehicle occupants die in the U.S. because of auto accidents. Autonomous vehicles are expected to cut auto-related deaths and injuries by 80% or more.

One of the biggest revenue sources to insurers is vehicle insurance. As autonomous vehicles take over our roads and highways, you need to address all the numerous unanswered questions relating to the risk playing field. Who will own the vehicles? How can you assess the potential liability of software failure or cyberattacks? Will insurers still have a role? Where will legal liabilities fall? Who will lead the call to sort these issues out?

Clearly, the lucrative auto insurance market will change drastically. Insurance and reinsurance company leadership will be an essential ingredient to address this disruptive technology.

As I told the conference: Count on Insurance Thought Leadership to play a significant role in addressing these and other disruptive technologies facing the insurance industry. A Chinese proverb says: "Not the cry, but the flight of a wild duck, leads the flock to fly and follow."

Unnecessary surgery: When is it going to end? Not any time soon, unless a documented and proven approach is used by health benefit plan sponsors.

I began my healthcare career 35 years ago when, as a graduate student at Columbia University School of Public Health, I was awarded a full scholarship as a public health intern at Cornell Medical College in New York City. Dr. Eugene McCarthy at Cornell was the medical director of a Taft-Hartley joint union/management health benefits self-administered fund at the time and my mentor. I worked on the Building Service 32 B-J Health Fund, which was the focus of an eight-year study sponsored by the then-Department of Health, Education and Welfare (now Health and Human Services, or HHS) and which was the first study on second surgical opinions.

The study (1972-1980) followed union members and their families who were told they needed elective surgery and documented that roughly 30% of recommended surgeries turned out to be medically unnecessary. The study found 12 surgeries that generated the most second opinions that didn't confirm the original diagnosis. This list comprises: back surgery, bone surgery and bunions of the foot, cataract removal, cholecystectomy, coronary bypass, hysterectomy, knee surgery, mastectomy, prostatectomy, hip surgery, repair of deviated septum and tonsillectomy.

What has changed on this list 35 years later? Very little, if anything.

USA Today on March 12, 2013, reported on a study that found that; "tens of thousands of times each year patients undergo surgery they don't need." After the release of this study, a former surgeon and professor at the Harvard School of Public Health stated that: "It is a very serious issue, and there really hasn't been much movement to address it."

A CNN special on March 10, 2013, reported that the U.S. spent $2.7 trillion on healthcare per year and that 30%, or roughly $800 billion, was wasted on care that did not improve outcomes. Sound familiar? The Cornell study said the same thing 31 years earlier.

Public and private employers, health, disability and workers' comp insurers and state and federal programs such as Medicare and Medicaid are doing very little, if anything, to effectively address this problem. The solution to preventing unnecessary care and surgery is not in raising co-pays and deductibles and other out of pocket costs unless they are tied to consumer education and well-designed second-opinion programs.

In response to the USA Today article, a leading medical expert said, "You can shop for a toaster better than prostate surgery, because we don't give patients enough information." Another leading surgeon stated; "Far too many patients are having surgeries they don't need, with associated major and severe complications such as long-term disability and even death." Furthermore, "I see patients with neck and back problems, and at least 1/3 are scheduled for operations they don't need, with no clinical findings except pain."

What is the principal focus of today's multibillion-dollar managed care industry, especially in workers' compensation? Provider discounts, that's what. But how is it a savings if the patient receives a discount on an operation he doesn't need?

Most often, when I ask that question I am met with blank stares.

The New England Journal of Medicine in 2009 stated that a common knee surgery for osteoarthritis "isn't effective in treating patients with moderate to severe forms of the disease." Yet, according to federal researchers, 985,000 Americans have arthroscopic knee surgery each year, and 33% (more than 300,000) are for osteoarthritis "despite overwhelming medical evidence that arthroscopic surgery is not effective therapy for advanced osteoarthritis of the knee."

According to the chairman of cardiovascular medicine at the world-renowned Cleveland Clinic, the U.S. health system is "doing a lot of heart procedures that people don't need." For example, angioplasty stent surgery in heart patients will likely relieve pain but "will not help a person live longer and will not protect against having another heart attack... What's worse is that many of these surgeries will lead to bad outcomes." He said, "This procedure should be performed for patients having a heart attack, but 95% of patients who have angioplasty surgery are not the result of a heart attack."

The estimate on the direct medical costs to American businesses for low back pain is $90 billion a year; this doesn't include workers' compensation indemnity and litigation costs, disability costs, sick days and indirect costs such as lost productivity. As reported in my previous article, The Truth about Treating Low Back Pain, the Journal of the American Medical Association (JAMA) estimated that 40% of initial back surgeries, which amounts to more than 80,000 patients per year, have "failed back surgeries." These unsuccessful back surgeries most often lead to a lifetime of debilitating back pain and billions more in long-term disability and Social Security Disability Insurance (SSDI) costs. These patients -- four out of every 10 -- all wish they had received a second opinion now. Yet when I recommended a second-opinion program to a union health fund in New Jersey, the manager said: "I am not going to tell my union members they need to get a second opinion." True story.

Although we were scheduled to have an informal lunch meeting, after I recommended the fund consider a second-opinion program the "lunch" part of the meeting disappeared, even though I had driven two hours to get there. Maybe that is where the expression there is "no such thing as a free lunch" comes from? The health fund manager was downright indignant about my suggestion even though the first-second opinion program was conducted on behalf of a union health fund and was overwhelmingly successful.

He did describe, however, how upset he was about the fund's rising healthcare costs. I guess he just wanted to be able to complain about it instead of actually doing something about it on behalf of his members. (The president of the union confided in me afterward that he had failed back surgery many years ago and wished he had gone for a second opinion.)

A colleague of my mine who is a senior vice president of product development for a leading third-party administrator (TPA) confided that insurance companies and TPAs will not implement programs that I could design and implement for their clients because they would never admit it was a good idea, given that they didn't invent it.

I also hear all the time from so-called experts that second surgical opinions don't work and don't save money.

But large self-insured employers and health, disability and workers' comp insurers should follow the lead of the top sports teams who send their top athletes for second opinions all the time to places like the Hospital for Special Surgery (HHS) and New York-Presbyterian Hospital/Columbia Medical Center in Manhattan or UCLA Medical Center in Los Angeles.

When I send client employees or friends and neighbors for second opinions, they often tell me that their appointment was with the same doctor Tiger Woods or Derek Jeter went to. My response is, "exactly." Very often, conservative treatment is recommended and produces great patient outcomes, especially for back injuries and diagnoses for conditions like carpal tunnel syndrome. (See Carpal Tunnel Syndrome: It's Time to Explode the Myth.)

Most, if not all, top surgeons I have met welcome second opinions for their patients because, when surgery is recommended, they want their patients to be assured that another expert also believes it is in their best interests.

I interned at the first second-surgical opinion in the country. I wrote my master's thesis at Columbia on what I learned and how to improve upon the design and administration of the very successful Cornell program. Although the phrase, "I want a second opinion," is now common terminology in America from auto repair to surgery, it has not reduced the overall amount of unnecessary surgery. If your program is not successful or not saving money it is because there is a serious flaw in the design and administration.

What I have documented since I designed or administered the first corporate second-opinion benefit programs back in the early 1980s are several key components of a successful program. First, it must be mandatory for the plan member to receive a second opinion for selected elective surgeries. Remember, elective surgery, by definition, means scheduled in advance, not for life-threatening conditions. Second, the second-opinion physician must not be associated with the physician recommending surgery. The physician must truly be an independent board-certified expert. Third, the second-opinion physician cannot perform the surgery; this provision removes any conflict of interest.

In addition, although a plan member should be required to receive a second opinion to receive full benefits under the health plan, the decision on whether to have surgery is entirely up to the patient. The whole idea is to educate the patient on the pros and cons of proposed surgery and the potential benefits for non-surgical treatment or different type of surgery (lumpectomy vs total mastectomy, for example). (I also developed a process of administrative deferrals for instances when it would be impractical to obtain a second opinion or when the conditions were so overwhelming that the need for a second opinion could be waived.)

It is only by helping to make patients truly informed consumers of healthcare and educating them on the benefits of alternative surgical treatments that a program can be successful. Voluntary programs simply don't work. Rarely do patients seek second opinions on their own, and most often do not know where to obtain and arrange for a top-notch second opinion. In addition, they often feel uncomfortable and do not want to tell their physician they are seeking a second opinion. That is why I found that a program only really works when patients can state that their "health plan requires that I get a second opinion." The mandatory approach reduces unnecessary surgery dramatically and saves the plan sponsor money with at least 10:1 return on investment.

The most amazing reduction of unnecessary surgery and resulting savings to the plan sponsor comes simply by implementing and communicating the benefits and requirements of the program design that I outlined above. The reason is known as the "Sentinel Effect." What the original Cornell study and others have documented is at least a 10% reduction in the amount of recommended elective surgery simply from announcing the program is now in effect. No need for an actual second opinion; merely require one!

Now that is cost-effective!

A breach to one of Experian's servers - discovered on Sept. 15 - has resulted in 15 million compromised records with personal information like names and Social Security numbers. The breach included information about T-Mobile customers from as far back as 2013. Here are the details and action steps you can take if you think you’re a victim.

The server that was attacked housed records of those who applied for T-Mobile's services between Sept. 1, 2013, and Sept. 16, 2015. Overall, the compromised information included…

• Names
• Addresses
• Dates of birth
• Driver's license numbers
• Social Security numbers
• Passport IDs

The affected server was not part of Experian's consumer credit bureau; nevertheless, a data breach is good reason to check your defenses when it comes protecting your personal information, and there are plenty of ways you can protect yourself.

Make sure hackers didn't steal your information and use it for their advantage. Annually check your credit reports and bank statements for suspicious activity, like a new line of credit or purchases you didn't make.

Be cautious! When a breach like this occurs, fraudsters may call the victims and say they're from the affected companies. They may ask you for your personal information, so they can "help" you. Keep in mind that T-Mobile and Experian made it clear that they will not send a message or call and ask for personal information connected with the incident.

Consider some of the major data breaches we've had in the past couple years:

• JP Morgan Chase - 76 million customer records
• Anthem - 87.6 million
• Home Depot - 56 million
• Target - 110 million

Whether or not you think you're a victim, employing an identity theft protection plan is relevant and important.

Ironically, T-Mobile is offering resolution services through Experian's ProtectMyID, for those who were affected by the data breach; however, full, continuing coverage demands an identity protection service that has more robust features than those provided through the complimentary membership.

ProtectMyID's complimentary membership includes SSN and credit-card monitoring, but you also need monitoring for high-risk transactions and data sweeps. ProtectMyID includes credit monitoring and an Experian credit report upon entry, but you also need your credit score and identity risk score (showing how vulnerable you are to identity theft). ProtectMyID has lost wallet/purse assistance and alerts for suspicious activity, which is good. It is backed by $1 million identity theft insurance coverage, too, but you also need coverage that will reimburse you for the expenses you incur while returning your life to normal. ProtectMyID has fraud resolution agents who can offer assistance to victims, but you also need a financial consultation, a legal consultation and more.

You need stronger layers of protection against identity theft, help creating an action plan and professional assistance with addressing compromised information and accounts.

The Experian data breach is a big reminder of how a robust identity theft protection plan is absolutely necessary.

"The boat is safer anchored at the port; but that's not the aim of boats." -- Paulo Coelho

The scenes are now all too familiar. Waters rising, dams breached, cars drifting away, homes and properties inundated with water. As of this writing, 13 people have died in the Carolinas as the "one in a 1,000 years" flood continues to ravage the area. Losses should easily exceed $1 billion.

If all of that was not bad enough, what's worse is that you and I will be paying for this.

Unfortunately, the song remains the same after all these years:

1. Property insurance policies exclude flood coverage
2. Property owners either believe they have coverage or choose not to purchase it
3. The biblical rains arrive, causing damage, and property owners seek help from the largest wallet available and willing to help...the U.S. government
4. (Alternatively, and unfortunately, property owners may buy flood coverage, but, because the coverage was mispriced, the National Flood Program will not have the funds to pay the claims and will need to borrow from us taxpayers).

The system is a mess, and my criticism lies directly with the insurance industry. We can solve this problem. These floods are insurable events. We are flush with capital, and each week it seems another technology firm is releasing a flood model to help us manage this risk.

But that sound you hear is crickets. We are not making much progress at all.

The solution cannot be separate, private, flood coverage. That is a nice start but is not the solution, because it's more of the same, just with a different wallet writing the check.

What we need is to "loosen the exclusion." Flood needs to become a standard component in the homeowners policy. Just as fire, wind, lightning, theft, vandalism and liability are all standard components of a homeowners insurance package, flood needs to be included as that form of standard coverage.

The advantage to homeowners is true peace of mind.

• Every homeowner has some ground water risk, and we can eliminate this coverage concern once and for all.
• We can eliminate policy juggling, with one single policy.
• A single claims adjuster can determine any losses without needing superhuman insights to know whether water or wind caused the damage.

The enterprising insurer gets to differentiate its personal lines business with a non-correlated premium source. The insurer eliminates the headache of defending flood exclusions and the bad publicity and court judgments around those issues.

Some insurers will be rightly concerned about the increased risks. But isn't this the business we are in? It may feel safe to exclude coverage, but our role in society is not to exclude coverage. Our role is to find a way to profitably make our capital available for these type of events.

We have all the tools and capital we need to make this happen. Do we have the will?