For anyone who has spent time on the open sea, especially in a small craft, you know the sea can be quite the moody mistress. Some days, the gale winds are howling. Some days the sea is as smooth as glass. The financial markets are quite similar.

In late August, the U.S. equity market experienced its first 10% price correction in four years. That ended the third longest period in the history of the market without a 10% correction, so in one sense it was long overdue. But, because the U.S. stock market has been as smooth as glass for years now, it feels as if typhoon winds are blowing.

Cycles define the markets' very existence. Unfortunately, cycles also define human decision making within the context of financial markets.

Let's focus on one theme we believe will be enduring and come to characterize financial market outcomes over the next six to 12 months. That theme is currency.

In past missives, we have discussed the importance of global currency movements to real world economic and financial market outcomes. The issue of currency lies at the heart of the recent uptick in financial market "swell" activity. Specifically, the recent correction in U.S. equities began as China supposedly "devalued" its currency, the renminbi, relative to the U.S. dollar.

Before we can look at why relative global currency movements are so important, we need to take a step back. It's simply a fact that individual country economies display different character. They do not grow, or contract, at the same rates. Some have advantages of low-cost labor. Some have the advantage of cheap access to raw materials. Etc. No two are exactly alike.

Historically, when individual countries felt the need to stimulate (not enough growth) or cool down (too much inflation) their economies, they could raise or lower country-specific interest rates. In essence, they could change the cost of money. Interest rates have been the traditional pressure relief valves between various global economies. Hence, decades-long investor obsession with words and actions of central banks such as the U.S. Fed.

Yet we have maintained for some time now that we exist in an economic and financial market cycle unlike any we have seen before. Why? Because there has never been a period in the lifetime of any investor alive today where interest rates in major, developed economies have been set near academic zero for more than half a decade at least. (In Japan, this has been true for multiple decades.) The near-zero rates means that the historical relief valve has broken. It has been replaced by the only relief valve left to individual countries -- relative currency movements.

This brings us back to the apparent cause of the present financial market squall -- the supposed Chinese currency devaluation that began several weeks ago. Let's look at the facts and what is to come.

For some time now, China has wanted its renminbi to be recognized as a currency of global importance -- a reserve currency much like the dollar, euro and yen. For that to happen in the eyes of the International Monetary Fund (IMF), China would need to de-link its currency from the U.S. dollar and allow it to float freely (level to be determined by the market, not by a government or central bank). The IMF was to make a decision on renminbi inclusion in the recognized basket of important global currencies in September. In mid-August, the IMF announced this decision would be put off for one more year as China had more "work to do with its currency." Implied message? China would need to allow its currency to float freely. One week later, China took the step that media reports continue to sensationalize, characterizing China’s action as intentionally devaluing its currency.

In linking the renminbi to the dollar for many years now, China has "controlled" its value via outright manipulation, in a very tight band against the dollar. The devaluation Wall Street has recently focused on is nothing more than China allowing the band in which the renminbi trades against the dollar to widen. With any asset whose value has been fixed, or manipulated, for so long, once the fix is broken, price volatility is a virtual guarantee. This is exactly what has occurred.

China loosened the band by about 4% over the last month, which we believe is the very beginning of China allowing its currency to float freely. This will occur in steps. This is the beginning, not the end, of this process. There is more to come, and we believe this will be a very important investment theme over the next six to 12 months.

What most of the media has failed to mention is that, before the loosening, the renminbi was up 10% against most global currencies this year. Now, it's still up more than 5%, while over the last 12 months the euro has fallen 30% against the U.S. dollar. Not 4%, 30%, and remarkably enough the lights still go on in Europe. Over the last 2 1/2 years, the yen has fallen 35% against the U.S. dollar. Although it may seem hard to believe, the sun still comes up every morning in Japan. What we are looking at in China is economic and financial market evolution. Evolution that will bring change and, we assure you, not the end of the world.

Financial market squalls very often occur when the markets are attempting to "price in" meaningful change, which is where we find ourselves right now.

What heightens current period investor angst is the weight and magnitude of the Chinese economy, second largest on planet Earth behind the U.S. With a devalued currency, China can theoretically buy less of foreign goods. All else being equal, a cheaper currency means less global buying power. This is important in that, at least over the last few decades, China has been the largest purchaser and user of global commodities and industrial materials. Many a commodity price has collapsed over the last year. Although few may realize this, Europe's largest trading partner is not the U.S., it's China. European investors are none too happy about recent relative currency movements.

Relative global currency movements are not without consequence, but they do not spell death and destruction.

A final component in the current market volatility is uncertainty about whether the U.S. Fed will raise interest rates for the first time in more than half a decade. Seriously, would a .25% short-term interest rate vaporize the U.S. economy? Of course not, but if the Fed is the only central bank on Earth possibly raising rates again that creates a unique currency situation. Academically, when a country raises its interest rates in isolation, it makes its currency stronger and more attractive globally. A stronger dollar and weaker Chinese renminbi academically means China can buy less U.S.-made goods. Just ask Caterpillar and John Deere how that has been working out for them lately. Similarly, with a recent drop in Apple's stock price, are investors jumping to the conclusion that Apple's sales in China will fall off of the proverbial cliff? No more new iPhone sales in China? Really?

The issue of relative global currency movements is real and meaningful. The change has been occurring for some time now, especially with respect to the euro and the yen. Now it's the Chinese currency that is the provocateur of global investor angst. Make no mistake about it, China is at the beginning of its loosening of the currency band, not the end. This means relative currency movements will continue to be very important to investment outcomes.

We expect a stronger dollar. That's virtually intuitive. But a stronger dollar is a double-edged sword -- not a major positive for the near-term global economic competitiveness of the U.S., but a huge positive for attracting global capital (drawn to strong currencies). We have seen exactly this in real estate and, to a point, in "blue chip" U.S. equities priced in dollars, for years now.

In addition to a higher dollar, we fully expect a lower Chinese renminbi against the dollar. If we had to guess, at least another 10% drop in the renminbi over next 12 months. Again, the price volatility we are seeing right now is the markets attempting to price in this currency development, much as it priced in the falling euro and yen during years gone by. Therefore, sector and asset class selectivity becomes paramount, as does continuing macro risk control.

Much like a sailor away far too long at sea, the shoreline beckons. We simply need to remember that there is a "price" for being free, and for now that "price" is increased volatility. Without question, relative global currency movements will continue to exert meaningful influence over investment outcomes.

These are the global financial market seas in which we find ourselves.

Workers' compensation was established more than 100 years ago as a "grand bargain" between employers and labor. Injured workers gave up their right to sue employers in civil court for workplace injuries, making workers' compensation the "exclusive remedy" for such injuries. In exchange, injured workers received statutory benefits in a no-fault system. Over time, we have seen a number of different challenges to this grand bargain.

Is Exclusive Remedy Exclusive?

The answer to this question is clearly no. Nearly every state has a very narrow statutory exception to exclusive remedy if the injury was caused by an "intentional act" of the employer. Some states have a lower threshold if it is determined that the employer's actions were "substantially certain" to cause injury. In both of these cases, lawsuits filed by injured workers against their employer rarely succeed, and most suits do not survive past summary judgment.

However, there are many other ways in which the exclusive remedy of workers' compensation can be circumvented. These include:

• Statutory Exceptions - New York employers in the building trades are still exposed to civil litigation in addition to workers' compensation under the Scaffold Law. This allows workers in the construction industry to file suit against their employer if the injury arose from an "elevation-related hazard." New York is currently the only state that still has such legislation in place, with Illinois repealing its Structural Work Act in 1995.

• Third-Party-Over Actions - Some states allow civil litigation surrounding a work injury under a third-party-over action. In such cases, the employee sues a third party for contributing to the injury and then the third party brings in the employer on a contributory negligence action. For example, if an accident involves machinery, the machine manufacturer can bring the employer into the suit, alleging that it trained employees inadequately, that the machine was not properly maintained or that it was modified by the employer.

• Dual Capacity Suits - Dual capacity suits allow the employee to sue the employer as supplier of a product, provider of a service or owner of premises. For example, if a worker is injured using a machine manufactured by the employer, some states allow that injured employee to file suit against the employer based on its negligence as the manufacturer.

• RICO Suits – Filing claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) is a more recent method to attempt to avoid exclusive remedy protections. This federal law was originally designed to fight organized crime. In Michigan, Colorado and Arizona, the courts allowed injured workers to pursue a RICO complaint against their employer on the grounds that the employer "conspired" to deny medical treatment to injured workers by limiting physician referrals and prescribing practices and exercising undue influence over treating physicians.

• Constitutional Challenges - Constitutional challenges are the latest avenue for attempting to circumvent exclusive remedy protections. There was much attention given to the Padgett case in Florida, where a judge ruled that the workers' compensation statutes were unconstitutional because statutory changes that reduced benefits to workers and raised thresholds of compensability had eroded the "grand bargain" to the point that it was no longer valid. This case was reversed on appeal because of a technicality, so the higher courts never ruled on the merits of the argument.

Is No Fault Really No Fault?

Again, the answer is clearly no. Many states allow for a workers' compensation claim to be disputed if it is proven that the injured worker was intoxicated at the time of the accident. In addition, some states allow for a reduction in benefits if the accident occurred because the worker violated a safety rule, such as not following lock-out/tag-out procedures or not using protective gear.

Unintended Consequences of Statutory Change and Litigation

Courts in Missouri, Illinois and Pennsylvania have ruled that, if a work injury is excluded under the workers' compensation statutes, the employee can bring a civil suit against the employer. The courts are hesitant to provide no means for an injured worker to pursue compensation, so when statutory language is tightened up and certain conditions are excluded from workers' compensation coverage it opens the door for potential civil action.

This issues also arises when the workers' compensation claim is denied because the worker is not in "course and scope" of employment. If the worker falls on the employer's premises, and the employer denies the claim under workers' compensation, then the employee can sue under civil liability.

Not All Workers Are Protected

In many states, there are workers who are not required to be covered under workers' compensation. In 14 states, smaller employers with five employees or fewer do not have to secure coverage. In 17 states, there is no legal requirement for coverage of agricultural workers. Finally, half the states do not require coverage for domestic workers, and five states specifically exclude coverage for these employees.

Opt-Out Legislation

Opt-out legislation, by its very nature, allows for an option to the grand bargain of traditional workers' compensation. What many do not realize is that workers' compensation has always been optional in Texas. Both employers and workers can choose to opt out of the workers' compensation system and, instead, be subject to civil litigation in the event of employee injuries.

Oklahoma now allows employers an "option" to traditional workers' compensation. Plans must be approved by the state and must provide the same level of benefits as workers' compensation. Such plans provide employers greater control over choice of medical providers.

Opt-out legislation is currently being considered in Tennessee and South Carolina, and it is likely that similar legislation will be introduced in additional states in the future.

Causation Thresholds

There is significant variation among states in the threshold for a condition to result in a compensable workers' compensation claim. In Tennessee, the injury must "primarily arise" from work (50% or greater). However, in California and Illinois, if the work is a contributing factor (1% or greater), the employer is responsible for that condition under workers’ compensation. Employers argue that these low causation thresholds undermine the grand bargain by greatly expanding what is considered a workers' compensation injury.

Conclusion

As workers’ compensation has evolved, there have been many exceptions to the original premise behind the “grand bargain.” The courts have continued to allow exceptions to exclusive remedy and expanded causation standards. Statutory reforms have also resulted in classifications of employees and work conditions that are excluded from workers’ compensation. These trends are expected to continue.

Recently, I wrote about innovation and changing the way we acknowledge, nurture and incorporate it into our organizational culture. There are many areas where our industry desperately needs transformation and innovation. Our very survival depends on new ideas.

We at SMA are witnessing remarkable progress -- innovation is on a bullet train! -- but we have some observations about the opportunities and the obstacles for new ideas. There are high hopes for a boatload of great ideas -- creative product offerings, process improvements, better ways to engage the customer, more effective service modes, new approaches to capitalize on maturing and emerging technologies, etc. But the reality is that in many organizations, the innovation path is lined with obstacles that leave potentially success-producing concepts off the table and out of the picture. In many cases, these roadblocks are not intentional -- in fact, they are not even apparent to the very leaders who are working hard to stimulate innovation.

Some insurers are open to any and all new ideas -- every single one! Any and all innovation ideas are nurtured. In contrast, other insurers have targeted their innovation efforts by assigning teams to look at specific process areas or business lines. A project approach makes it easier to manage and measure but can limit the scope of the vision. Other insurers designate the responsibility for innovation to a department head, frequently IT or a line of business. With this approach, responsibility is assigned, typically with accompanying funding, but it too can be limiting because of unintended gatekeepers and biased priorities.

Innovation requires a nurturing environment, one that encourages people to submit ideas with the confidence that this is a place to explore and experiment - to assess the state of readiness, address potential obstacles, find probable pitfalls and measure the potential for success with the assurance that failure is acceptable. Once an idea is explored, there needs to be a place for it to mature and flourish or a graceful way to table it until timing is right, and in some cases a gentle way to kill it. The ideal is an environment with no gating criteria, no judgment, no politics.

Embracing true transformation and innovation requires a thorough and straightforward examination of the current role innovation is allowed to play within your organization. To discover the roadblocks, begin by asking these five questions:

• Is there a genuine acceptance that valuable ideas can come from any level within our organization?
• Are employees empowered to offer suggestions without the fear of embarrassment or possible reprimand?
• Is there authentic encouragement for an exchange of opinions?
• Does a pathway for fresh ideas exist?
• Have we demonstrated administrative as well as executive support for innovation in general?

Unlike companies in quite a few other industries, insurers have a book of business of clients who potentially expect to conduct business in a different (and "older") manner than new prospects might. Life insurers have to provide service to clients for three, four, five or more decades. P&C insurers selling long-tail coverage also have to provide service for multiple decades.

Why does this matter?

This matters because insurers that keep the same clients for 10 or more years have to approach applying technology like a juggler striving to keep multiple objects in the air. Insurers must juggle the technology expectations of present clients with what future clients will be comfortable using.

I'm not saying that insurers can expect to succeed in the present or the future by keeping the multiplicity of unique core administration systems that most insurers have. I am saying that insurers must craft their client go-to-market strategies and concomitant technology tactical initiatives to enable the insurers to service clients using a range of capabilities.

Commerce, and many other aspects of life (e.g., work and entertainment), are rapidly becoming mobile. Millions use social media channels throughout each day. But ... that does not mean that insurers should look to mobile or social media to interact with all of their clients.

Continually probe

Insurers must continually probe the manner in which current and future clients want to interact with them.

I think the result will be a client interaction choice board supported by current and emerging technologies that will continually change at the pace of insurers' clients' comfort levels.

What do you think?

There is a navigational term called "dead reckoning." It is taken from the period before radar and GPS. Back then, navigators used the sun and the stars to get from point A to point B, until point B got to within sight.

It worked as follows: Once you knew where you started, knew where you were going and knew your speed, you could use the sun and the stars to set your bearings and chart a course. There was always much uncertainty and large margins for error built into navigational estimates.

This is what board risk governance looks like today. Instrumentation is poor. Most available data is not current. It does not tell us where we are today. It is historic. It's a bit like buying last month's newspaper today. Interesting, useful, but not up to date.

In the board room solace, or concern, can be taken from management information. However very many non-executive directors are nervous. They know that they are getting old news. They know that they carry the same statutory obligations as their executive director colleagues but that the executive directors have the most up-to-date news.

The boardroom equivalent of the crow's nest includes strategic and integrated reports as well as risk reports on what today are highly networked organizations. Organizations are no longer vertically integrated. Organizations no longer have jurisdiction or control over all of the non-financial activities (i.e. the operations) that drive business results. To make matters worse, we live in a hyper-connected, multispeed, uncertain world where multiple things can have multiple impacts on reputation and business operations.

In the boardroom, there is an awful lot more uncertainty than certainty.

What Nassim Nicholas Taleb has told us is his seminal, spine-chilling Black Swan and Antifragility is that not only are we buying yesterday's news but that the news we are getting is hugely erroneous. He talks of the ludic fallacy, much of which is embedded in contemporary risk management practices.

What Taleb is also telling us is that discontinuity is the new norm. And that the organizations that will thrive in the future are the ones that will take their energy from that discontinuity.

But how is this to be done?

From 35,000 feet, it looks like integration of risk, strategy and decision-making processes.

At 500 feet, it looks like measurement of alignment (remember this is dead reckoning!) with both internal organizational and international proven and accepted guidelines linking risk, strategy and decision-making processes.

Can organizations move beyond dead reckoning and get better instrumentation? Absolutely! I will come back to this in a later post.

In the meantime, consider the prize:

Empirical evidence underpinning an assured calculation of:

1. Sustainability of current performance,
2. Enhancement of future performance,
3. Soundness of transformational strategies,
4. Management capability to defend reputation and operations under abnormal and adverse conditions,

This makes a difference when talking with credit raters, funders, investors, regulators and a whole swath of other stakeholders.

What's the barrier to entry for organizations?

Is it cost? Not really.

It is:

1. Integration of board audit/risk/strategy committee(s)/terms of reference
2. A track record in seeking and receiving external attestations
3. Already understanding:

a. The value of linking corporate objectives, strategies, governance and risk management decision making processes,

b. Setting organizational agility as a strategic imperative,

c. The need to integrate governance, risk and compliance roles, processes and key performance indicators (KPIs)

The immediate gains? Access to, and lower cost of, capital than your less capable competitors

The immediate benefits?

• Increasing management's understanding of strengths and areas for improvement in integrating risk, strategy and decision-making processes across the organization

• Supporting implementation of the organization's strategy through improved alignment of objectives with mission, vision and values of the organization

• Achieving and maintaining abilities to make, and execute, decisions across the enterprise, and seamlessly shift direction (called organizational agility), when called to:

- Grasp opportunities,

- Increase performance,

- Avoid threats and risks.

In my next post, I will talk about how we can get from dead reckoning to up-to-date calculations of risk, strategy and decision-making process integration -- at the pace of change!

There seems to be a growing mismatch between what consumers want from their insurers and how insurers are attempting to satisfy them. Is it intentional, or is the lack of alignment between insurers and their customers because of some unforeseen technology hurdles that require too much work to correct? Key relationship indicators are all pointing toward growing communication issues. To build long-lasting relationships, insurers need to address their external communication issues, but only after they have determined that they are truly interested in listening to what the customer has to say. In April 2015, Majesco commissioned a survey of 1,000 insurance customers in the UK. The respondents came from a broad cross section of occupations, ages and incomes. The survey pointed out some insurance industry issues, with implications for all geographic markets, and also uncovered some details that may be worth further exploration. In a two-part blog, I am going to focus on the findings and what we should do about them. The first of our findings was striking. What insurers seem to think is important to consumers isn't always what consumers say is a priority when it comes to choosing an insurer. Insurers and consumers agree on the importance of pricing -- insurers say they want to provide a competitive price, and consumers say they want a reasonable and understandable price -- but then the two sides differ. Insurers want to build loyalty and referrals through branding. Customers want relevant products, a high level of service from a wide array of options, clarity about products and a simple process. Here is where we begin to find some problems. Pricing Problem #1 - Majesco's study found that many consumers are focused on price -- but not all. Companies that focus on price and not a) service levels, b) relevant products or c) ease of access may alienate 30-40% of insureds. The policyholders least focused on price are naturally those who are more affluent - those who can afford more products and higher premiums to cover greater assets - so insurance companies are putting their best customers at risk. Pricing Problem #2 - Clients are more likely to find pricing information on aggregator sites than on their own insurer's website. While some insurers were digitally sleeping, aggregators cropped up and stole their territory. Aggregators may be a source of fuel for new business, but they are most certainly also poised to be a major contributor to client attrition. Technology improvements and marketing efforts aimed at price messaging within the client base can help stem the flow of lost policyholders. Besides pricing problems, there are two service problems that cropped up in Majesco's survey, as well. Service Problem #1 - One in three survey respondents felt that insurers were failing on minimum service levels. The Majesco survey found that between 47% and 60% of respondents are contacted by their insurance company only once per year! The irony here is that insurers are traditionally risk-averse, doing anything to avoid incurring an additional 1% to 2% of risk. Yet disruptive technologies have brought to market a new breed of competitor that could grab 33% of their business because of inattention. That is a tremendous risk! Improving service through more digital and mobile communication (and even through more phone calls and mailings) will lower insurer risk. Service Problem #2 - Insurers don't seem to realize that what consumers are asking for, such as improved self-service through improved technology, will actually save on administrative costs. While some insurers seem to be waiting for a better scenario, there is no time better than now to build a labor-saving business case that improves customer communications. In this case, listening to the customer will do more than improve relationships; it will improve the bottom line. The Majesco survey uncovered additional surprising data, as well, related to desired products vs. product offerings. Younger insurance customers (under 35) were surprisingly less influenced by price than older customers; price, while always important, may become even less important than service, brand trust and product types in the coming years. It is clear that often insurer perceptions are no match for consumer realities. To clear away these notions, insurers need to listen to their customers, listen to trends and embrace the idea that giving the customer what she wants can be a key to success. In my next blog, we will look at the practical aspects of developing a listening organization. What actions can insurers take to hear their customers, act upon their needs and anticipate the development of products that will take them into the next generation? How can technology assist insurers as they rebuild a relevant relationship? I hope you'll join me as we discuss several options that insurance companies can use to stay effective and remain competitive.

Imagine you're the CFO at a firm involved in sensitive M&A discussions with your bankers, and you receive an email asking for a small bit of non-public information on your company, the kind you've passed on before. You send the information - and later find you were the victim of a sophisticated cyber-attack.

Now imagine you're in charge of operations at a manufacturing facility. Out of the blue, your employees report that they have lost control of key systems. It's impossible to shut down a blast furnace correctly, endangering the safety of employees and others and threatening massive damage. You, too, have been the subject of a cyber-attack.

These events underscore the new reality in cyber risk management: It is no longer just an IT issue. Everyone - from individual employees to risk managers to your board of directors - now has a stake in managing cyber risk comprehensively, across the enterprise.

Following are seven key stakeholders to consider as you look at your cyber risk management strategy:

1. Risk manager: Risk managers can ensure various stakeholders are connected in terms of assessing, managing and responding to cyber risk. Understanding the evolving cyber insurance market and overall risk finance options is also important.
2. CFO: Concerns range from the potential costs of a cyber event and what the impact could be on the bottom line to the security of the office's sensitive information.
3. CEO/board of directors: Accountable for overall business and company performance, they have a fiduciary duty to assess and manage cyber risk. Regulators, including the Securities and Exchange Commission and Federal Trade Commission, have made clear they expect companies' top leadership to be engaged on the issue.
4. Legal/compliance: As regulations around cyber develop, legal and compliance roles become increasingly important in keeping other stakeholders informed and engaged. And, if a cyber incident occurs, lawsuits often follow within hours.
5. Operations: Maintaining daily operations, business processes and workplace stability is critical during a cyber event.
6. Human resources/employees: Simple errors - or deliberate actions - by employees can lead to costly cyber incidents. Training on best practices is critical, especially with the rise in sophisticated "spear phishing" attacks targeting specific employees.
7. Customers/suppliers: Interactions with customers and vendors can open you up to an attack. You need to understand the protections they have in place so they don't become the weak point in your cyber defenses.

Protecting your organization's data and individuals' privacy is becoming more difficult by the day. Successful cyber-defense strategies are comprehensive and multi-pronged. A critical component is understanding and defining the roles and responsibilities of all key stakeholders.

To participate in a webcast on how to assess cyber risk, click here.

There's a thundering herd running through Iowa this year -- and not just the herd of presidential candidates. There also is a herd of technological innovators driving considerable change in insurance. Many people find it intriguing that technology innovators are coming through Iowa, but Iowa is an insurance state and home to some of the largest insurance companies in the U.S. Iowa also is home to niche companies that price out very specific risks to targeted markets. In my role as Iowa's insurance commissioner, I've met with many entrepreneurs whose ideas will improve, enhance and create value for insurance companies and consumers. In these meetings, I hear a fairly consistent and constant theme: State insurance regulators are a major burden for entrepreneurs and, in turn, for their ideas for innovation. However, when I walk them through what regulators do and provide them a copy of the Iowa insurance statutes and regulations that empower my office, I've found that most haven't read even one word of insurance law before working on an idea or creating a product or service. To be clear, I don't believe I stand in the way of innovation. On the contrary, I am very supportive of innovation. But my fellow regulators and I do have an important job -- consumer protection. Insurance is one of the most regulated industries in the nation because, for the insurance system to work, when things go wrong and a consumer needs to make an insurance claim the funds to pay the claim must be available. The days on which people file insurance claims may be the worst days in their lives, and they may be very vulnerable. Perhaps a loved one passed away; a home is destroyed; an emergency room visit or major surgery is needed; someone may be entering a long-term care facility; a car is totaled; or injuries are preventing a return to work. Insurance is a product we buy but really hope we never use. However, when we need to use it, we want the company to have the financial resources to pay the claim. It's our job as regulators to make sure the companies in our states are financially strong enough to pay claims in a timely fashion. Insurance is regulated at the state and territorial level by 56 commissioners, superintendents or directors. The state-based regulatory system has served consumers well for more than 150 years and demonstrated extreme resilience in the last financial crisis. My fellow commissioners and I are public officials either elected or appointed to our respective posts. We are responsible and accessible to the citizens of our states or territories. However, I do understand that complying with the laws of all the states, District of Columbia and territories poses challenges to entrepreneurs. In recognition of this, state regulators have worked together to help minimize differences between states through the National Association of Insurance Commissioners, thereby creating a more nationally uniform framework of insurance regulation while recognizing local markets and maintaining power in the hands of the states. The job of an insurance regulator sounds easy. We exist to enforce the state's laws, to make sure that companies and agents follow that law and to ensure that companies domiciled in our state are in financial position to pay claims when required. As with many things, the duties of regulators are more difficult than they appear. Regulators need to have great knowledge of multiple lines of insurance, technological advances, financial matters and marketing practices. In reality, the execution of our job duties in enforcing our state's laws may at times cause friction with some innovative ideas. As I stated, I don't believe that I or my fellow regulators stand in the way of innovation. I believe that a robust and competitive market that delivers value to the consumer is one of the best forms of consumer protection. However, our insurance laws are also designed to make sure that insurance companies stay in the market and keep the promises that they have made to their customers when the products were originally sold. In executing my duties as commissioner, I pay a great deal of attention to innovation and developments. I personally spend time with entrepreneurs, investors and others to learn about new trends and ideas. My commitment to enforcing state laws, combined with the laser focus on protecting consumers, requires keeping abreast of innovation. My office addresses more than 6,000 consumers' inquiries and complaints every year. People on my staff address issues quickly and care deeply about their roles in helping Iowans. I've learned in my nearly three years as commissioner that many consumers don't understand the insurance they own. They may have relied on an agent, or purchased insurance coverage on their own, hoping it will suit their needs. However, when life happens and an insurance claim needs to be made, consumers may discover the coverage they purchased did not suit their needs. For instance, some people may discover their health plan network doesn't have healthcare providers near their home. Others may discover too late that certain items lost in a fire were not covered under their homeowners' policy. Some consumers may discover that the very complex product that they bought simply did not measure up to their expectations. Having consumers be comfortable with making a purchase and not understanding what they purchased is a culture we need to change. Some consumers desire to simply establish a relationship with an insurance agent or securities agent they feel they can trust, schedule automatic withdrawals from their bank account to be invested or submit their premiums for their insurance products as required so they can ultimately focus their attention on all the other activities that occupy our busy lives. In essence, they forget that they purchased the coverage, and, while it may have been the right purchase at that time, it may not fully suit their needs now or when they need to file a claim. Insurance regulators and the insurance industry need to encourage consumers to learn more about their coverage needs and the insurance they actually purchase. Innovation that leads to personalizing insurance and better consumer understanding is a good thing. Innovation that increases speed-to-market, enables better policyholder relations through in-force management and provides more value to the consumer is a good thing. However, all that innovation must comply with our state’s laws. To that end, I've met with several entrepreneurs to highlight issues that would arise with certain proposed business models. I enjoy discussing ideas about our industry and sharing Iowa's perspective. Innovation can help consumers, and it's my hope that entrepreneurs continue to work with regulators to develop new products and services. This collaboration helps both the regulators and the entrepreneurs and has led to some very positive and healthy dialogue in Iowa.

When I started as director of marketing at RWH Myers, I asked a lot of questions of the partners. With the firm specializing in loss accounting, I wanted to understand the most important attributes in a successful claim. What I learned seemed too obvious at first, but I soon discovered why each component was essential.

The five keys to successful claims are not rooted in complex business interruption equations or piles of documentation. They are critical fundamentals. Fundamentals in any endeavor are easily missed and hard to execute without practice. But if you master the fundamentals, you'll be on your way to a positive outcome. Get them wrong, and you'll struggle to recover what you deserve.

When millions of dollars are on the line, risk management cannot afford to come up short on recovery. Our firm exists to help policyholders in their attempt to be made whole after a loss, so we thought it would be valuable to share what we found to be most important.

Here are the five keys to successful claims:

1. Define the Claim's Priorities

When you have a loss, it is important for everyone to understand what is important to the organization at that time. Is it the recovery amount? Is it the speed of settlement? Is it a smooth process? Is it cash flow? Is it resource relief? It may be all of these and more.

Risk managers should discuss the priorities with executives and other key personnel to ensure all considerations are accounted for. When cash flow is critical, the claim preparation strategy should incorporate interim claim filings. If the primary need is to get the loss off the books before financial reporting, the strategy may focus on speed of settlement.

Knowing the priorities of the organization will enable a claim strategy that can meet those needs. As the old saying goes, "If you don't know where you are going, any road will take you there." With a property and business interruption claim, everyone involved needs to know where to go.

2. Have the Right Team in Place

If you've been through a significant property claim, you know that your insurer(s) will have a team of experts whose job it is to adjust and audit your claim filings. Their goal is not to pay out the claim amount. It is to minimize the exposure to the underwriter to preserve profitability. Insurance companies are for-profit enterprises, and they take their profits seriously.

Knowing what their priorities are should reinforce the need to have a skilled team representing you. You will undoubtedly need to involve internal personnel to assist you, but know that they do not have the experience to match the insurers team's acumen.

It is in your best interest to assemble your own team of experts ahead of a loss. Savvy policyholders may specify certain adjusters to be written into the policy in an effort to minimize potential claim issues. No matter what, you should avoid relying on the insurer's forensic accountants' calculations as the measure of your losses. An independent loss accounting firm can not only provide you with an accurate loss valuation but will be instrumental in guiding the claim to meet your goals.

Experience matters greatly, and you will need it to ensure success. Professional fees coverage is available for this service. It is there to pay for the experts you'll need. Take advantage of it. Having your team in place in advance will make a big difference.

3. Develop a Claim Strategy

The claim process involves many activities that could be daunting and burdensome to everyone in your organization, but the demand to achieve your priorities is relentless. It is critical to develop an effective strategy to get the best results from your claim. Engaging experts can help develop your strategy as they will know the obstacles you will face and can plan for them. The strategy should incorporate your priorities and the steps to achieve them. It should involve analyzing possible adjustments and ways to overcome them.

To keep the claim moving, create a timetable that maps each milestone. It should include request for information (RFI) responses and feedback, interim claim filings and audit results, periodic meetings and requested settlement date.

Don't rely on hope or faith that your carrier will do the right thing. The carrier will do what's right for it, not for you. Engage your experts immediately after a loss so that they can be involved in the design and execution of your strategy from the onset. If you are looking to recover millions of dollars, you better have a solid plan to do so.

4. Give the Claim Appropriate Attention

At the beginning, claims get a lot of attention, but, as time passes, other items will distract from your claim. Managing an insurance claim is not a normal part of the job for anyone involved unless that is their job. For the insurer's team, managing the claim is their job. It's what they do everyday.

If you engage a loss accounting firm that specializes in preparing claims for policyholders, the firm will help to ensure your claim gets the appropriate attention. Not only will the firm keep your attention on the claim, but the firm will hold the insurer's team accountable to the timetable.

Claims take time. You must be patient, but persistent. You can ill afford to lose attention. Don't let your claim get lost amid all your other duties.

5. Prepare a Logical Claim

When I worked for one of the largest brokers in the world, I often wondered what exactly our claims group did to help clients with claims. I was surprised to learn that the onus was on the client to actually put the claim together -- all the financials, the calculations, all the invoices, the claim report, everything.

This documentation is the basis of the claim. It's what's reviewed, audited and adjusted. As the broker, I thought our claims group did it. I came to realize it's not our responsibility, nor should it be. After all, we're the broker, not the policyholder.

For the clients that used a loss accounting firm, the claims went much more smoothly and were resolved faster. I didn't understand why until I joined RWH Myers. Putting the claim together is only half the battle. There is a technique to it that makes the difference from start to finish. As the claim progresses, there are always gray areas. Sure, you'll recover some of your claim regardless of your approach, but that gray area may represent 20% or more of your losses. If recovery is important, that 20% matters greatly.

When claiming time element as business interruption, you are claiming earnings that you would have earned had the loss not occurred. There is an art to the model used to calculate these losses and a science to showcasing the logic behind it. A simple, logical and easy-to-understand claim will meet less resistance and recover more than a complicated, confusing and overbearing claim. Unfortunately, there isn't a cookie cutter formula. You can't just teach it. Experience is the only way to ensure this "key" will lead to a successful claim.

The bottom line is that claims have lives of their own. There are two opposing sides with opposing agendas. Claims ultimately come down to a negotiation. The amount remaining at the negotiation table tells the tale of how well the claim was prepared, including all the fundamentals -- the priorities, the teams, the strategy, the attention and the claim report. It all matters to recovering your losses efficiently and effectively.

There is a tremendous amount of change taking place in healthcare right now as the Affordable Care Act is in the early stages of implementation. Patient home, accountable care organization (ACO) and other clinical integration models are top-of-mind, and, with them come new potential risks to be considered. The same is true for "telemedicine."

Also known as "telehealth," telemedicine is a way of delivering healthcare to patients when the physician is not in the same room as the patient. Doctors can use two-way video systems and reach many more patients in remote locations. Many patients do well with telemedicine and find it more comfortable than coming into the physician's office or an urgent care center.

Telemedicine has been expanding its reach for healthcare systems across the U.S., adding services as technological advances allow. The associated savings - mostly in time for both patients and physicians - create additional incentive. Routinely, emergency departments use remote access to consult with specialists around the clock, and home-care services provide follow-up via phone and video for patients with chronic diseases.

But even though delivering care through telemedicine channels saves money, it is not reimbursed by Medicare. Medicare only reimburses providers and healthcare facilities if the physician is bedside. And Medicare reimbursement sets the trend for the private insurance market. Limited reimbursement is a major barrier to the expansion of telehealth.

Only time will tell if the seemingly inherent risks involved with little or no direct patient contact will outweigh the convenience and cost savings. As the healthcare landscape changes, so will the potential liability of healthcare professionals. And that means that insurance companies - both direct healthcare insurers and professional liability insurance carriers - will have to adapt based on the risks associated with a new, less personal way of delivering care.

An article about the Mayo Clinic, where telemedicine technology is used to deliver care in an intensive care unit, makes the case for reimbursement. As the article explains, unfortunately, technology is way ahead of figuring out how to get reimbursed for these services.