This is the Year of Awareness -- awareness by the general public about workers' compensation issues. There is the series by ProPublica, with three installments so far and more to come. You might not like it, but Michael Grabell and his team are accurately portraying pain points in workers' compensation. The Federal Occupation Safety and Health Administration's review of the literature over the past couple of decades also fuels the fire about the inadequacy of workers' compensation, and the spill of employer obligations onto the general taxpaying population. Last year, the Texas Tribune ran a series, "Hurting for Work," that criticized that state's work injury protection system (or lack of it). And a Florida trial judge has taken the position that workers' comp is no longer of constitutional grade. Now, Mother Jones has published an article it says exposes the true intent of the opt-out movement: to diminish benefits across the nation. Opt-out supporters contest that conclusion and say they only want employers (in this case, only big business can afford the resources to opt out) to be able to provide better benefits in a more consolidated manner to their workers. Proponents are not, however, shy about confirming that their intent is to take opt-out nationwide, to all states. The latest test case is Tennessee, where Sen. Mark Green's SB 721 has gone through several amendments in an attempt to address critics -- albeit, in my opinion, these amendments fall far short. There are two major problems with opt-out, and in particular with SB 721 if it is to be used as a model: 1) the cap on lifetime medical benefits; and 2) the lack of accountability to public regulators. Most state workers' compensation systems have a limitation on both temporary disability indemnity and permanent disability indemnity. There has been for a long time a debate as to the adequacy of indemnity benefits to keep the paycheck-to-paycheck worker sustained during recovery, and those benefits differ greatly from state to state. This debate is sure to continue regardless of what "reform" ever gets passed. This debate also applies to the adequacy of permanent disability indemnity-- whether it adequately compensates for the loss of an eye, etc. Again, where one gets hurt makes a huge difference in how much money a disability is "worth," and the debate about this will never settle. The provision of medical benefits for the lifetime of an injured worker, however, has never been on the table -- that is a topic that is simply sacrosanct, for the very simple reason that it was part of the original grand bargain. State reforms have, however, over the past two decades done as much as possible to eviscerate lifetime medical by requiring adherence to guidelines, by scaling based on co-morbidities, by forcing third-party reviews and by trimming reimbursement or rebalancing fee schedules, among other tactics. These efforts have been in reaction to perceptions that employers are unfairly paying for someone else's problem, or to abuses by unscrupulous providers. Broad-brush attempts to correct these problems reel in unsuspecting victims, just as tuna nets capture innocent dolphins. The Mother Jones article is critical of the lobbying efforts of the Association for Responsible Alternatives to Workers' Compensation, implying that its big-company sponsorships and spending is sinful. It's not -- it's just political reality. Just because a bunch of people with resources get together on a specific mission is not a reason to castigate either the people or the mission. It's done on both sides of nearly any debate. That's how we do things in America. Painful as it is for this industry, though, the fact is that workers' compensation is under attack -- from all sides. Employers are sick and tired of the cost of the system and how little control they have over it. They're paying for it and don't see much if any value or return on investment. And guess what? Workers who go through workers' compensation are likewise sick and tired over the cost of the system and how little control they have over it. Is this the fault of us, the professionals who have the task of administering benefits? In part, yes. But the larger issue is what society wants, and what all this attention lately is telling me is that society wants a way to provide security to both business and workers -- in a manner that is better than what workers' compensation has devolved into. I don't view opt-out as evil. I do view it as a necessary element in the debate about the adequacy of workers' compensation to deliver on its original promise: protect employers from economic ruin when someone gets hurt, and protect the worker who got hurt. If you take ARAWC's mission at face value, what the group wants to do is laudable. It is saying that state workers' comp systems no longer are a viable piece of the social contract, that private industry can do it better. Maybe it can, if there are reasonable protections that meet the essential elements of work injury protection -- and that means taking care of an injury for life and not stacking dispute resolution in favor of one party or the other. But this column isn't about ARAWC, or opt-out; it's about an awareness that is developing. Workers' compensation used to hide in the shadows of healthcare and disability. Ask anyone just a few years ago about work injuries and you'd get an earful about "workman's compensation" and how a neighbor is cheating the system. Now the public is beginning to ask: What are all these businesses doing for their pay when there's all these people who are being thrown to the curb for trash pick-up day? Why are businesses paying for services that don't seem to be delivered on time or in enough quantity? How is it that an insurance company that agreed to take care of an injured person for life can delegate that obligation to public welfare? As I see it, the public assault on workers' compensation, the trend that is developing toward opt-out systems and the overall malaise that seems to have settled over work comp portends a much-needed, long-deserved debate. The public is asking questions. Hard questions. Because the public isn't seeing the value in work comp that had been promised (and delivered) for so long. We're entering into a whole new era of business vs. labor dispute. The haves and the have-nots are drawing lines in the sand. The last time this happened, the federal government threatened imposition. It could happen again. What we rely on for work injury protection systems will be vastly different in 10 years than what exists now. It's clear to me this is what's happening. Less clear is what will actually exist in 10 years. This article first appeared at WorkCompCentral.

When speaking about the power of having different technical disciplines converge to yield customer insights, it's common to focus on analytics and research. However, another rich territory for seeing the benefit of multiple technical disciplines to deliver customer insight (CI) is measuring how effective your marketing is. One reason for calling on the skills of two complementary CI disciplines is the need to measure different types of marketing spending. The most obvious example is probably the challenge of measuring the effectiveness of "below the line" vs. "above the line" marketing. For those not so familiar with this language, born out of accounting terminology, the difference can perhaps be best understood by considering the "purchase funnel." Most, if not all, marketers will be familiar with the concept of a purchase funnel. It represents the steps that need to be achieved in a consumer journey toward making a purchase. Although often now made more complex, to represent the nuanced stages of online engagement/research or the post-sale stages toward retention/loyalty, at its simplest a purchase funnel represents four challenges. These are to reach a mass of potential consumers and take some on the journey through awareness, consideration and preference to purchase. The analogy of the funnel represents that fewer people will progress to each subsequent stage. Back to our twin types of marketing: Above-the-line marketing (ATL) is normally the use of broadcast or mass media to achieve brand awareness and consideration for meeting certain needs. Getting on the "consideration list," if you will. Traditionally, ATL was often TV, radio, cinema, outdoor and newspaper advertising. Below-the-line marketing (BTL) is normally the use of targeted direct marketing communications to achieve brand/product preference and sales promotions. Traditionally, this was often direct mail, outbound calling and email marketing. In recent years, many marketers talk in terms of "through-the-line" (TTL) advertising, which is an integrated combination of ATL and BTL messages for a campaign. Social media marketing is often best categorized as TTL, but elements can be either ATL or BTL, largely distinguished by whether you can measure who saw the marketing and have feedback data on their response. Let's return to the theme of using multiple CI disciplines to measure the effectiveness of these different types of marketing. The simpler example is BTL. Here, the data that can be captured on both who was targeted and how they behaved enables the application of what is called the experimental or scientific method. In essence, the skills of database marketing teams, to set-up campaigns with control cells and feedback loops. To merge the resulting data and evidence incremental changes in behavior as a result of the stimuli of marketing campaigns and optimize future targeting. ATL is more of a challenge. Because control cells do not exist and it is impossible to be certain who saw the marketing, the comparison needs to be based on time series data. Here, the expertise of analytics teams comes to the fore, especially econometric modeling. This can be best understood as a set of statistical techniques for identifying which of many possible factors can best explain changes in sales over time and then the ability to combine these into a model that can predict future sales patterns based on those inputs. There are many skills needed here, and the topic is worthy of a separate post, but for now suffice to say that analytical questioning techniques to elicit potential internal and external factors are as important as modelling skills. I hope you can see that my definition of today's TTL marketing campaigns thus necessitates making use of both database marketing and analytics team skills to measure marketing effectiveness. But beyond this simply being a division of labor between ATL elements being measured by analytics teams and BTL by database marketing ones, there is another way they need to work together. Reaching the most accurate or helpful marketing attribution is an art as much as a science. In reality, even BTL marketing effectiveness measurement is imprecise (because of the complexities of media interdependencies and not knowing if the consumer really paid attention to communications received). In a world where your potential consumers are exposed to TTL marketing with omni-channel options of response, no one source of evidence or skill set provides a definitive answer. For that reason, I once again recommend convergence of customer insight evidence. Best practice is to garner the evidence from: (a) incremental behavior models (econometric or experimental method); (b) sales reporting (reconciling with finance numbers); (c) market position (research trackers); (d) media effectiveness tracking (reconciling with behavior achieved throughout purchase funnel). Converging all this evidence, provided by data, analytics, research and database marketing, provides the best opportunity to determine robust marketing attribution. But do keep a record of your assumptions and hypotheses to be tested in future campaigns. I hope that was helpful. How are you doing at measuring the effectiveness of your marketing? I hope you're focused on incremental profit, not "followers."

He had just launched China Chilcano, the latest in his burgeoning empire of restaurants, only three days old at the time, and was only a month away from opening yet another concept. He asked how I was doing, and I told him I’d had a great week—that a bill I’d been working on for literally 23 years at the Council (NARAB, attached to the TRIA extension), was passed by the Senate just the day before. About then, another well-wisher approached José and congratulated him on his latest achievement. “Meet my friend Joel,” he says to the guy. “He’s either the best lobbyist I’ve ever met—or he’s the [worst].” Rightly or wrongly, I’ve been majorly associated with NARAB (“National Association of Registered Agents and Brokers”) in its multiple iterations since the early 1990s. It’s not the biggest thing I’ve worked on by any stretch—the Terrorism Risk Insurance Act, the Affordable Care Act and Dodd-Frank are all far more important to the nation, our member firms and your clients. But NARAB has been the most painstaking. We’ve snatched defeat out of the jaws of victory on so many occasions that it almost seemed preordained we’d lose again when TRIA failed in December. Facing implacable opposition to NARAB from retiring Sen. Tom Coburn, R-Okla., then-Majority Leader Harry Reid, D-Nev., pulled the plug on TRIA and adjourned the Senate for the year—astonishing all of us who’d worked so hard on the legislation. Much of the blame at the time went to Coburn, as he was the only announced senator down the stretch with a “hold” on the TRIA/NARAB legislation, but the truth is more complicated, as there was considerable liberal discontent with the legislation. That’s all water under the bridge now. Within a couple days of the disaster, House Speaker John Boehner, R-Ohio, and incoming Senate Majority Leader Mitch McConnell, R-Ky., both released strong statements saying they would put TRIA passage on the “early” priority list for January. Both kept their word. Congress convened Jan. 6. The House bill passed in December was re-enacted Jan. 7, and the identical bill cleared the Senate Jan. 8. President Obama signed the bill into law Jan. 12. This followed critical leadership on the issue from Chairman Jeb Hensarling, R-Texas, of the House Financial Services Committee, and Sen. Richard Shelby, R-Ala., the new chairman of the Senate Banking Committee. Now the work can begin to actually create NARAB—an interstate licensure clearinghouse for nonresident producer licensure. Decades of compromises to get the legislation to the finish line will now become complications you’ll hear about in the coming months. The governance of the body will come principally from state insurance commissioners and the National Association of Insurance Commissioners. Funding problems will emerge because no federal dollars or borrowing will be allowed. And there will be disagreements about the standards for NARAB membership. The basic deal is this: Any producer first has to be properly licensed in his or her own state. Then on a purely optional basis, he or she can apply for membership in NARAB and meet whatever requirements are established. The applicant can then check off the states in which he or she needs a nonresident licensure, paying the applicable state fees. That all sounds really simple, but we’re sure in practice it will be akin to giving birth to a live squirrel. The protracted lobbying effort initiated in 1992 by the Council’s forerunner organizations (the National Association of Casualty and Surety Agents and the National Association of Insurance Brokers) seems disproportionate. At its core, NARAB is simply an administrative mechanism to facilitate nonresident producer licensure. But since its inception NARAB has been caught up in the push and pull of the broader debates over federal-vs.-state insurance regulation. Many colleagues of mine are putting their children through college in this continuing war of attrition. My own children, meanwhile, are nonplussed by the history of NARAB, but here it is anyway. First it was a purely federal option, as a part of now-retired Rep. John Dingell’s, D-Mich., insurer solvency legislation, which would have created an Optional Federal Charter for insurers. That went nowhere. Then we spun it off as a stand-alone and waged a lonely battle for years, culminating in the “NARAB 1” title of the Gramm-Leach-Bliley Act of 1999. To sneak it through Congress over the opposition of then-Sen. Phil Gramm (for months, my colleagues referred to me as “Dead Man Walking” on the assumption that Gramm would prevail), we had to dumb down the provision. If a majority of states passed reciprocal licensing laws, there would be no NARAB. So a majority of states did so, which was welcome. But it wasn’t enough. In the past decade, the coalition of NARAB supporters has grown substantially, with other producer organizations and the NAIC itself moving from a position of opposition to strong support over the years. In that decade, NARAB passed the House on at least six occasions (I lose count), both as a stand-alone measure and as part of other reforms. As we now move to implementation issues, I will pause to give thanks for the many in Congress who made this happen. Most recently, our champions and authors were Rep. Randy Neugebauer, R-Texas, Rep. David Scott, D-Ga., Sen. Jon Tester, D-Mont., and now-retired Sen. Mike Johanns, R-Neb. We can’t thank them enough. And I think back to the 1999 Gramm-Leach-Bliley debate, when Rep. Sue Kelly, R-N.Y., and the late Sen. Rod Grams, R-Minn., fought so hard for NARAB. I guess it’s easier to be gracious in victory, but we wish all the best for Sen. Coburn, who did everything he could to beat NARAB. I regarded him as an obstinate SOB for many months, but he always acted out of his own federalism principles. He retired from the Senate when his cancer recurred, and we have high hopes he can beat it. Because he’s just that obstinate. This article first appeared in Leader's Edge magazine.

April Fools.

Of course wellness doesn’t save money. Even the industry trade association itself, the Health Enhancement Research Organization, admits wellness loses money.

That doesn’t mean the industry lacks other benefits, such as levity. And in the spirit of the wellness field’s most appropriate holiday, we present “On the (Even) Lighter Side,” a compendium of the funniest moments in recent wellness history.

Unfortunately, the joke is that wellness is not a joke. Besides damaging morale, things are being done to employees that could even harm them -- medical interventions that the U.S. Preventive Services Task Force (USPSTF) urges not be done. Even routine screens that are done to employees -- only for cholesterol and related blood values -- shouldn’t be done annually, and shouldn’t be done on everyone, according to the USPSTF.

Still, we’ll let it go this one day and urge you to do the same and enjoy the one contribution that wellness advocates are bringing to the healthcare policy debate: merriment.

I have spent the bulk of my software career as a member of the sales camp. My comfort zone is nurturing big ideas and helping to motivate clients to embrace change. It is thrilling to earn the right to engage with clients through the decision-making process, help clients gain confidence that transformation is possible and support the first steps in execution. Pretty lofty, I know. But something happened this past year…the tables turned, and I became a software-buying customer. The loftiness of strategic vision met the cold, hard pavement of execution. I found the descent both rapid and eye-opening. First, a little context -- my sales enablement team convinced me the time had come to implement a learning management system (LMS). A LMS was a necessary platform for our team's and company’s growth ambitions. A LMS system would eliminate a ton of manual processing, freeing resources on the team. At the same time, it would help us focus learner and management attention on building skills that matter, a benefit to the larger sales organization. I agreed, and, in doing so, I stepped into the shoes of our customers. For sure, a LMS implementation is not the size, scale or complexity our Guidewire customers face replacing core systems. But, even at a smaller scale, the implementation has been a valuable education.

• Success depends upon strong partnership between business and IT. There is just no way IT can run a project without involvement from the business, and the business needs strong project management partners and the technical subject matter expertise from IT. It’s just that simple.
• If you don’t have the resources to dedicate to the project, don’t do it. It’s hard to find the time to focus on software implementation when there is a business to run. But if there isn’t someone on the business side getting up every day to advance the project, the project is at risk. Asking someone from the business to manage a software project as a part-time job is the myth of multitasking in action. Projects by their nature need focused attention.
• Process matters. I can hear the words of Alex Naddaff, senior vice president, programs, at Guidewire (who led our professional services organization for the first decade of our company’s history), ringing in my ear: “Project success depended on small teams, empowered to make decisions, who can do so quickly.” He’s right. Without an agile process that promotes consistent communication and team transparency, the project will find rough going.

These aren’t new lessons. These are the same lessons we bring to the table every time we engage with Guidewire prospects and customers. We preach that success depends on:

• Strong business and IT partnerships;
• Focused dedication of small teams; and
• Transparent processes.

The lesson for me is just how hard it is to stay true to these principles. It requires trade-offs, budget allocation and the prioritization of team members’ time. It means accepting that some things won’t get done. I will share the good news: Because we are following these fundamentals, our project is green, and we are closing in on our deployment date. I’ve got nothing but thanks and praise for the team leading the charge (Sarah from IT and Wendy from enablement, you both rock). We’re not there yet – there are more weeks and months of tough decisions and trade-offs ahead. But we’re close, the goal line is in sight and the realization of benefits is just around the corner. Even more than the deployment, the biggest win for me is that next time I get the chance to talk to customers and prospects about the perils of software implementation, I can engage with this first-hand experience and empathy for the process. I can say with complete sincerity that the work sucks, but that it’s worth it.  

The world continues to buzz about cyber security (or, perhaps we should say, insecurity). Now we have the Chinese government apparently admitting that it has a cyberwarfare capability: not just one unit, but three. Other nations, including the U.S., Japan and some European nations, are talking about their ineffective defenses and the need to develop an offensive capability. What can the targets, not only any public or private company, but each of us as an individual target (yes, our personal devices are constantly under attack), do about this? The first step is to get our collective heads out of the sand and understand that we are all, collectively and individually, at risk. The level of successful attacks is enormous (a billion records with personal information were hacked in 2014, according to IBM, as reported here). According to a survey discussed in Fortune, 71% of companies admit they were hacked last year, and the majority expect to be hacked this year. However, nearly a quarter, according to Fortune, have not only kept their heads in the sand but do so with unbelievable confidence; they think a successful cyber attack is “not likely” in the next 12 months. The trouble is that very often successful attacks are not detected! It took a long time before JPMorgan Chase found out it had been hacked, and even longer before it knew the extent of the damage. Organizations need to be ready to respond effectively and fast! The JPMorgan Chase article reports that, “The people with knowledge of the investigation said it would take months for the bank to swap out its programs and applications and renegotiate licensing deals with its technology suppliers, possibly giving the hackers time to mine the bank’s systems for unpatched, or undiscovered, vulnerabilities that would allow them re-entry into JPMorgan’s systems.” All is for naught if successful intrusions are not detected and responses are not initiated on a timely basis. In the Target case, reports say that the security monitoring service detected suspicious activity, but the company did not respond. According to ComputerWeekly.com, many companies make the mistake of “over-focusing on prevention and not paying enough attention to detection and response. Organizations need to accept that breaches are inevitable and develop and test response plans, differentiating between different types of attacks to highlight the important ones.” Another insightful article discusses the critical need for pre-planned response capabilities. IT cannot do it all itself; business executives need to not only be involved but actively work to ensure their operations can survive a successful intrusion. What else should we do? We have to stop using passwords like "password," the name of a pet or our birthday. Password managers are excellent tools (see this article on the top-rated products) and merit serious consideration. I have one. (BTW, I don’t plan to replace it with the latest idea from Yahoo of one-time text messages. However, I do like the fingerprint authentication on my iPhone.) A risk-based approach to cyber security is the right path, in my view. But that does mean that organizations have to continuously monitor new and emerging risks, or new observations about existing risks. An example is a new article on insecure mobile apps -- both from in-house developers and from external sources. Organizations need to allocate resources to cyber and information security commensurate with the risks, and individuals have to take the time to update the software on their personal devices. Internal audit departments should make sure they have the talent to make a difference, providing objective evaluations and practical suggestions for improvement. Companies and individuals, both, need to make sure they apply all the security patches released by software vendors. They address the vulnerabilities most often targeted, and, when there is a breach, very often it’s because the patches have not been applied. As individuals, we should have a credit-monitoring service (I do), set up alerts for suspicious activity on bank accounts and use all the anti-virus and spam protection that is reasonable to apply. Finally, as individuals and as organizations, we need to make sure we and our people are alert to hackers’ attempts through malware, social engineering and so on. It is distressing that so many successful intrusions start with somebody clicking where they should not be clicking.

When a property claim occurs, with or without business interruption, it is very common to assume that it will be straightforward. Just submit your invoices, and your insurer sends you a check. You may think, "We can do it ourselves," or, "We have it under control." If this has been your approach, you need to read on.

There are many potential issues when preparing a property claim that are commonly overlooked or misunderstood. The challenge is even greater if there is a business interruption component to your claim.

From experience, my partners and I have identified the most common property claim issues that can slow down the claim process and have an adverse affect on recovery.

1. Repair vs. Replacement

Repair vs. replacement comes up in almost every significant property claim. The issue arises when it becomes a battle of opinions and assumptions. We all know the humor on opinions and assumptions -- but your property damage claim is no laughing matter, so let's explore what can happen.

If you have a replacement policy, you have the option to repair or replace. If it makes more sense to replace with a new and improved item, then you should do what's best for your business. However, if repairs are possible and at a lower cost, the adjuster will undoubtedly dispute the claim, and you'll be debating a matter of opinion. When the adjuster's experts recommend repairs that you know are not guaranteed to work, especially long-term, you face a challenge. As a business, you cannot afford to risk a failed repair, so you elect to go with new equipment with a warranty. The repair option will now be a theoretical scenario that your insurer can leverage to adjust your claim payment. Regardless of the adjuster's position, you did what was best for your business, but there's a way to neutralize this potential adjustment.

• First, the worst thing you can do is proceed on a plan without sharing your logic with the adjuster. Include the adjuster in the initial assessment and decision-making process. While you have the right to do what is best for your business, the adjuster's involvement and buy-in early on will make her part of the decision and can help to avoid an issue down the road.
• Next, get several (at least three) independent quotes to repair or replace the equipment -- these quotes should include the time, expense and predicted reliability of the repair. If you only get a quote from the original manufacturer, there could be a perception that it has an ulterior motive. Armed with data, you will have an easier time justifying your decision. For example, the repair option may be cheaper, but if it takes longer to complete, it will add to your business interruption claim and ultimately cost more.
• Finally, perform a realistic analysis of various failed repairs scenarios and the potential impact on timing and costs. Discuss your findings with the adjuster to ensure any subsequent repairs and resulting business interruption would be covered as part of this claim and not a separate occurrence. After all, everything is technically repairable -- it is just a matter of determining the most practical solution given all the circumstances.

2. Betterments

Losses often present opportunities to make useful changes and improvements to operations. Adjusters anticipate this and will be prepared with reasons to limit recovery by labeling certain repairs, reconfigurations, and replacements as betterments. Most of the time, newer is better, and that is why you pay for a replacement policy. However, just because something is better does not mean you should not get full replacement value.

Let's say you are replacing a piece of production equipment that was damaged as part of your loss. In searching for a replacement, you find that the as-was capacity replacement for your equipment is no longer available and that the alternative equipment has a 10% greater production capacity than the damaged property. In this case, the adjuster may argue for a credit for the increased capacity. Though the new equipment is clearly a benefit to your business, because the exact model that is being replaced is no longer available, you don't have an equivalent alternative. If required to justify and validate your decision, simply compare the cost/time differential between your decision and a custom order built to spec. In cases like this, you should not be penalized for the betterment.

There are valid adjustments for betterments, but it's important to understand the difference between a betterment and your rights to a replacement of like kind and quality.

3. Property Damage vs. Extra Expense

From a policyholder perspective, the types of expenses related to the claim do not really matter because they are necessary to get back in business. The insurance company, however, needs to see expenses segregated into their proper insurance claim buckets. To ensure a smooth claim process, knowing how best to account for expenses is critical to the outcome of your claim. Let's say you have payroll expenses for cleanup and remediation. If you consider that property and extra expense are subject to different limits and deductibles, it makes good sense to claim them according to your coverage limits. As a rule of thumb, look at the property bucket first for expenses related to cleanup and repair of the property because the extra-expense bucket will offset business interruption, thus allowing you to operate as normally as possible during the indemnity period.

As an example, assume you have production labor working overtime to keep production going and to clean up and repair damage from the loss. This time should be separated as normal labor, property damage cleanup and repair and extra expense. To complicate things further, both normal rates and overtime rates need to be factored into each calculation. Finally, you have to keep detailed records that document the who, what, when and where that is involved in the work being done.

Remember, when appropriate, it's best to claim expenses as property damage, provided the costs can be documented. It is a more tangible approach and will avoid conflicting with the business interruption calculations for extra expense and inefficiencies, which are based on assumptions and subject to debate.

4. Actual Cash Value

Immediately after a loss, you are entitled to recover the documented actual cash value (ACV) of your damaged property. You may claim ACV as the amount you are due before exploring replacement options. This is a good tactic if you want to get the cash flowing early in the process while the replacement values are being determined and decisions on replacement are made. However, accurately determining ACV can be challenging.

Typically, the starting point is the asset ledger that shows a depreciated value of the asset. However, this number is usually used for tax purposes and may not represent the actual value of the asset. Other options to value the asset include pricing based on what a willing buyer would pay or replacement less physical depreciation based on the actual life of the asset. These methods vary state by state. Do your research to value the asset appropriately under the circumstances and know that there is not one right answer.

Additionally, some policies allow you to recover full replacement value for assets even if you do not replace them. The policies usually require that you spend the money on a capital project that was not approved at the time of the loss. The capital improvement does not necessarily have to replace capability of the lost assets. If this is of interest, check with your broker about adding this option to your program.

5. Period of Indemnity Impact

In general, the period of indemnity is the length of time it takes (or should take) to make property repairs. Once repairs are complete or should have been complete, the period of indemnity terminates. While you can, and should, attempt to settle portions of the property claim as you go, any agreements related to the property side of your claim can have a costly impact on the indemnity period for the time-element portion of the claim. It is critically important to address property issues in tandem with time element, to avoid unnecessary recovery issues.

This can be a little confusing. As an example, let's assume you have a total loss to a piece of equipment, and the replacement cost is known. It would be reasonable to settle for the replacement cost of that equipment. However, the adjuster assumes an aggressive timeline to order and install the equipment, not considering how installation might affect continuing production. When this happens, make sure the timeline and assumptions for installation are clear and acceptable before settling on the cost to replace the equipment. Otherwise, you might get what you want on the property settlement and then lose on the time element.

If you have a separate team working on the property and time-element claims, collaboration is essential to avoid assumption-based adjustments, This becomes especially important when repairs are theoretical, as this will be the basis for the time-element recovery. Always remember to consider all assumptions needed for time-element claims as part of any property settlement.

6. Residual Value Adjustment

If you have a significant property claim, you may need to purchase equipment or supplies on a temporary basis. The validity of these purchases is not in question, but their use once permanent repairs are made is. For items such as this, the adjuster may look to take a residual value credit. Essentially, the adjuster agrees that you needed that item, but when the permanent repairs are made (and paid for), you will no longer need it. This may be true, but this does not always mean you should not get full value for the item.

For example, you have an electrical loss that will keep you out of business for an extended period. You purchase a generator to provide basic power to areas of your business. When repairs are complete and power is restored, you no longer need the generator but still have the unit. Because you still have it, the adjuster takes a residual value credit. Is that fair?

The first question you need to ask is whether you want to keep the generator. If there is some value to you, a fair credit can be negotiated with the insurance company. If you do not want to keep the item or do not feel the credit is reasonable, you can have the insurance company take possession -- after all, the insurer paid for it. If the insurance company thinks it can get value from the generator by taking possession and selling it, the company will probably take you up on this. More often than not, this is not cost-effective, and you can minimize or eliminate the residual value credit.

7. Documentation

If you have never been through a significant property claim, you might not appreciate the level of detail that is required to document your claim. The general perception is that you gather some invoices and quotes on a sample basis, and that should be enough. Unfortunately, the requirements for an insurance claim are more detailed than most capital projects and audits. Quotes and estimates need to be extremely detailed, and proof of payment needs to be documented almost entirely -- if you cannot properly document a claim, it will likely not be paid. It may not be acceptable to the insurance company to use a dollar threshold for charges because the company will insist on auditing 100% of the charges.

To demonstrate the level of scrutiny that claims come under, I refer to an experience I had on one of the largest claims I worked on. The property portion of the claim was close to $200 million. Months of work and tons (literally) of paper were presented to support this claim. During a meeting between the accountants and engineers, one of the engineers made copies for everyone of one invoice presented for payment. He adamantly pointed out that the invoice had been duplicated in our claim submission. It was for one $5 roll of duct tape.

The point is that handling and organizing all the documentation required to support your claim can be daunting. To avoid mistakes, it is advisable to assign a dedicated person or team to locate, scan, print and manage all the support documentation. Bringing in an expert forensic accountant is always a good option to consider, especially for larger, complicated claims or just to relieve your team from these tedious and burdensome tasks. Forensic accountants that specialize in claim preparation may be covered in your policy to work on your behalf. Though you will still have some work to do, your claim will go more smoothly, with fewer pitfalls.

Now you know why property claims are not as easy and straightforward as you might expect. After decades of preparing claims for policyholders, we can attest that what you don't know comes at a cost in both time and money. We hope the information above can help you prepare for at least some of the issues you might encounter should you have a future property damage claim.

History has seen different technology revolutions: the industrial revolution in the late 1700s, the information and telecommunications revolution in the mid 1900s and the digital revolution of the present. Each revolution has taken advantage of the new technologies of its day, creating disruption, innovation and business transformation. Businesses have either grown or died based on how they adapted to and innovated with the new technology and responded to customers’ reactions and expectations. Today is no different. But it is much more intense. The digital revolution is being powered by today’s hyper-connected world and the convergence of multiple influencers -- maturing technologies, emerging technologies, the shared economy and demographic trends, to name just a few. And the revolution is creating experiences, products and services, new outcomes and new business and revenue models. It is generating an explosion of data from new and emerging technologies such as mobile, social media and the Internet of Things. The combination of these factors is transforming existing businesses and creating new ones within insurance. From managing value chains to managing ecosystems, the business transformation is powered by the fusion of technology and data. At the same time, these factors and the pervasive use of technology are lowering the entry barriers for disruptors and competitors from other industries, changing the competitive landscape for insurance in profound ways. In today’s new world, Next-Gen insurers must be digital insurers. They must reimagine themselves and embrace the full breadth and depth of the mature and emerging technologies that are changing customer engagement, transforming products and services, redefining business and revenue models and breaking down the barriers to new entrants, as discussed in SMA’s "The Next-Gen Insurer: Fueled by Innovation" research report. Insurers must embrace digitalization to reshape the way their businesses approach value creation and offer a compelling customer experience. In today’s world, insurers must move from managing value chains to managing ecosystems to power their businesses as digital companies. Many insurers indicate that they are on the strategic journey toward becoming a digital insurer. They are making investments in digital initiatives and technologies, often in a tactical and reactionary approach that is reflected in fragmented strategies and investments in technologies. Forays into new websites, smart-phone apps, agent portals, customer portals, collaboration, connected environments and social media are a start, but these can result in an inconsistent and incomplete customer experience. More importantly, they may delay the establishment of a competitive digital business model foundation with technology embedded. The issue is that these silo-based approaches lack a strategic framework that cohesively brings together the unified digital strategy that will become the driver of market differentiation, business growth, innovation, collaboration and profitability. A unified digital strategy recognizes that all business strategies and technologies touch the customer in some way and that a one-size-fits-all channel model is obsolete. In today’s digital world, this means making a serious commitment to provide real ease-of-doing-business based on customer expectations for every type of interaction through any channel, via any device, to win and retain customers. The strategic components of a unified digital strategy will connect the right people, processes, and technologies. The unified digital strategy is multi-dimensional and brings together areas of business strategy to drive design and develop efficiency and consistency, while providing the foundation for unified experiences across all the customer touch points, now and in the future. Each of these business strategies reflect existing, new and emerging aspects based on the influence of demographics, behaviors and technologies. The strategies include the brand strategy, marketing communication strategy, customer relationship strategy, web strategy, mobile strategy, IoT/connected strategy, social strategy, collaboration strategy and intranet strategy. Today’s and tomorrow’s insurance customers are looking for much more than interacting online. They are looking for choice, engagement, social alignment and more. Some insurers have begun or are well along on the digital transformation journey. But becoming a Next-Gen Insurer that will be recognized as a digital leader demands both technology and leadership dimensions that move the company forward in a coordinated and effective way. From a technology perspective, the digital insurer business architecture framework provides a transformation road map to assess and define a path that helps guide the organizational change, leveraging a wide-array of technologies from core business solutions to emerging technologies like mobile, the Internet of Things, collaboration and analytics. In the leadership dimension, digital leaders seek capabilities that envision and drive the transformation across the organization in a coordinated, consistent manner. These digital leaders work across the traditional departments and silos of an organization to ensure that the strategies are cohesive and working toward the common vision to shape a new future brought about and inspired by technology change. Becoming a digital insurer demands leadership from the top and leadership to drive the digital transformation. This requires a unified digital strategy fortified by existing, new and emerging technologies. So embrace the digital world. Re-envision yourself as a digital business. See the possibilities. Define a unified digital strategy that brings the business strategies and technologies together to cohesively guide your transformation. Make it happen, because the digital future is already well upon us.

A classic SWOT (strengths, weaknesses, opportunities and threats analysis) is usually considered as a good start for strategic planning efforts and further analysis. A disruptive and cascading SWOT can re-position the whole strategic plan to seriously pursue disruptive innovation. A great strategic plan should not just be about beating the competition at their game, but about redefining the game as no one has done before you. The hyper-connected and cascading behavior of global risks The World Economic Forum (WEF) has published a global risk report since 2006. The WEF pleads the case that the more connected our world becomes via a globalized economy, social media, the Internet, etc, the more vulnerable the whole world is to any weak links in the system. The reports include constant references to the connected risks that can cause global system breakdowns. The descriptions of the potential threats include combinations of slow-building and creeping risks that are hyper-connected, capable of linking to create unforeseen and high-energy cascade effects that can create tipping points into a perfect storms with high local and even global fallout. The hyper-connected and cascading behavior of internal risks My independent research into the causes of historical disasters, which started in 2004, has identified certain cascading principles and mechanisms of how the combined effects of underestimated internal risks can wreak havoc and self-destruction even without the help of external forces. If your SWOT ignores the cascading and hyper-connected nature of internal and external risks, your efforts could be futile. Too often, risks are assumed to approach from over the horizon from the outside. This mindset ignores the fact that most organizational failures stem from internal risks and a dysfunctional work culture. The triggers of such havoc can emanate from the top of the organization and quietly ripple through the organizational cascades to create undesirable events. A SWOT analysis on the SWOT analysis A SWOT analysis is a mini-risk assessment and mitigation brainstorm tool.  However, its strengths will become weaknesses if the assessments are superficial. If the SWOT is reconfigured to meet the realities of a hyper-connected and cascading world, this tool can be very insightful. What follows is a short SWOT analysis on the SWOT analysis tool to assess its capabilities to pursue true disruptive innovation. This exercise can be viewed as a self-diagnostic of a SWOT: Strengths:

• Simple and easy to understand
• Helps you identify and understand challenges and opportunities
• Can be used to develop a robust action plan
• Concentrates on the most important factors

Weaknesses:

• Its simplicity will not always prompt its users to go deep enough to make its analysis meaningful
• It does not prompt its users to investigate hyper-connected risks that can cascade and ripple through an organization in a destructive manner
• It does not prompt its users to investigate slow-burn/slow failures (aka creeping risks) that can build up over time and create tipping points that produce a perfect storm of unintended consequences
• It does not prompt its users to solicit true and candid cultural perceptions and threats for all employee levels
• It will not lead to disruptive innovation in its basic form

Opportunities:

• Invigorate the classic SWOT into a cascading SWOT to match the way in which the world and modern organizations actually operate
• Identify hidden threats and uncomfortable and unspoken talk rules
• Include assessment of internal leadership gaps
• Include factual assessments of cultural health of the organization
• Include assessments of internal process inefficiencies and risks in key business processes
• Assess the quality of your business metrics
• Assess the organization's responses to critical situations
• Assess how your organization learns from its mistakes and makes the necessary changes
• Assess the internal and external customer satisfaction levels
• Include a "points of pain" assessment as perceived for various levels of employees

Threats:

• The assumption that SWOT-KISS (keep it simple, stupid) is the right approach may not fit well in the complex and cascading world in which we live
• It can misdiagnose luck as skill; the organization will be ill-prepared for adverse events
• It assumes that, if you ask fellow employees for inputs, they will tell you the whole truth, without fear of punishment

Summary of the SWOT analysis on the SWOT analysis A good SWOT should be provocative and assess the sensibility on your own strategies, track your efforts to solicit and address internal taboo talk rules, monitor employee frustration levels and assess your internal culture's momentum toward success or failure. Most importantly, do not forget to gather multiple perceptions on the above opinions from leadership, mid-management and non-management employees. If the perceptions are vastly different, determine why the same people under the same roof are describing the same company in very different manners. Transforming the SWOT into the foundation for disruptive innovation It must be stressed that an energized SWOT is only the foundation of a good strategic plan. It is not the final analysis or strategic planning tool. The annual corporate strategic planning cycle is usually time-consuming and interactive and must get off to a good start with the right tone if anything of value is to be expected. SWOT expansion to include internal cascading risks The biggest opportunities to achieving strategic objectives lie in the ability of leadership to identify, assess and manage the internal cascading connections and cause-and-effect relationships that exist. The main areas of internal, hyper-connected top-to-bottom cascading elements and loops include:

• Leadership strategies, attitudes and behaviors
• Cultural behavior
• Process efficiency
• Performance outcomes
• Responses to shortfalls in performance metrics
• Feedback loops to leadership that either incorporate lessons learned or ignore such lessons, offering the next cycle of adverse events the opportunity to sink the ship

Each of the above mentioned elements of internal cascades should be SWOT-ed separately with candid and honest inputs from all levels of employees (See graphic below). Embracing such logic allows leaders to create a cascading strategic plan that can energize the organization instead of just addressing the symptoms of issues with sugar-coated Power Point slides or adding a fresh coat of paint to the Titanic while it is sinking. Figure 1. Each element of internal cascades should be SWOT-ed separately with candid and honest inputs from all levels of employees SWOT expansion to include external cascading risk assessments External risks need to be listed, rated for connectedness and assessed for their impact and likelihood of affecting the business. This offers a good start for subsequent strategic risk management efforts. The World Economic Forum's annual Global Risk Report offers a good reference to use as a starting point for possible risks to consider. Separate SWOT analysis should be carried out for the six main areas of global risks:

• Economic
• Environmental
• Geopolitical
• Societal
• Technological
• Real-time feedback loops to leadership on the status and changes in global risks

Conclusion Organizations and the world are hyper-connected communities that are exposed to threatening invisible cascade, ripple and domino effects. Today's risks can easily leap past national borders, firewalls and other security safeguards and trigger very unexpected circumstances that can threaten the reputation and existence of the business. Modern applications of the SWOT analysis should consider this complex and cascading nature in which the world now operates. A thorough SWOT analysis can be a good start for any level of strategic planning, including the ultimate wish of any organization, which is to create disruptive innovation and value that will ignite the passions of its employees and customers.