As we approach the close of 2014, virtually no one needs to be reminded that cyber liability is real and here to stay. Data breaches and cyber security incidents are on the rise. New York’s attorney general reported that breaches tripled between 2006 and 2013, and, according to a recent study, 43% of companies experienced a breach last year. What are some of the key issues accounting for this increase? First, information is the new oil, and it has value. Stolen financial and medical data can be purchased on the “dark web” and used for identity theft and fraudulent billing. Second, computer networks can be attacked relentlessly by hackers thousands of miles away, with little risk to the hackers. Third, entities are creating and storing more data than ever. It is estimated that the volume of data is doubling every two years, and too many entities have adopted a keep-everything approach to information management. Given this reality, it’s no wonder that sales of cyber insurance are rising. Cyber insurance can fill gaps left by traditional policies and provide a lifeline to entities affected by a breach or security incident. But cyber insurers require prospective insureds to complete detailed applications that address various areas relevant to cyber liability. Among the areas of inquiry are:

• Records and Information Management -- including identification of the types and volume of sensitive information the company handles. For example, do you handle or store payment card information, intellectual property of others or medical records?
• Management of Computer Networks -- including security management, intrusion testing, auditing, firewalls, use of third party vendors and encryption.
• Corporate Policies -- for privacy, information security, use of social media and BYOD (bring your own device), among others. Insurers often ask if the policy was prepared by a qualified attorney and how often it is reviewed and updated. Some insurers require such policies to be attached to the completed application.
• Employment Issues -- including whether employees go through criminal background checks. Many insurers also ask if the company has a chief privacy officer, chief information officer and chief technology officer.

The following are some basic steps a company can take to better position itself to complete the cyber application and obtain optimal cyber coverage. Locate Your Data You can’t manage and secure information if you don’t know what you have or where it is. Creating a map or inventory of all enterprise information is an invaluable step toward getting your data house in order. Paper records and data stored on inactive media and on mobile devices should not be forgotten. Delete What You Don’t Need It is estimated that between 60% and 70% of stored information has no business value. Keeping all this useless information is not a sustainable business practice. Disposing of data can reduce storage, e-discovery costs and security risks, and improve employee efficiency. Legally defensible deletion of useless information and adoption of a sound record retention and deletion policy are important parts of a successful information management policy. Control Access Entities should permit access to information, particularly sensitive information, on a need-to-know basis. A large number of data breaches result from employee negligence and disgruntled or rogue employees. Restricting access to sensitive data is an important step to mitigating that risk. Improve Policies and Training Depending on business activities, entities should consider adoption of policies that relate to cyber liability, including privacy, record retention and deletion, use of passwords, email and use of social media. Policies should be reviewed by a qualified attorney, updated regularly and enforced. Employee training and re-training is an important component of successful policy implementation. Conducting data breach workshops, where the entity can rehearse its response to a breach incident, can pay big dividends in the event of a breach. Because cyber applications require entities to take a close look at their information management and cyber vulnerabilities, it’s no wonder that a recent Ponemon study found that 62% of surveyed companies report that their ability to deal with security threats improved following the purchase of cyber insurance. Taking the steps outlined above in connection with applying for cyber coverage makes good business sense and can help an entity obtain the best cyber policy to protect itself against growing threats.

My wife is a project manager who is responsible for business operations at our local high school. She hired some people this summer to process and distribute new textbooks within the school, but they hadn't finished the job and school was about to open, so she needed someone to come in at the last minute and help get the work done. More specifically, someone who would follow her instructions and would not expect to get paid. . .  so I spent a long Saturday with her at the school, schlepping pallets and boxes of new textbooks to the classrooms, getting everything in place in time for the start of the new school year. I wasn't happy with the work (the school was hot, the textbooks heavy) and more than once I thought wistfully about Steve Jobs, who according to biographer Walter Isaacson had targeted the school textbook business as an "$8 billion a year industry ripe for digital destruction." Targeting textbooks seemed like a good idea to me, because not only are they big and heavy and expensive -- they don't update easily, either. Unfortunately, Jobs didn't live long enough to disrupt the textbook industry, but others are on the same path and, selfishly, I wish them well! Check out The Object Formerly Known as the Textbook for an interesting look at how textbook publishers and software companies and educational institutions are jockeying for position as textbooks evolve into courseware. Also, As More Schools Embrace Tablets, Do Textbooks Have a Fighting Chance? takes a look at how the Los Angeles Unified School District — second largest school district in the country — is equipping students with iPads and delivering textbooks digitally in a partnership with giant book publisher Pearson. Harvard professor Clayton Christensen, author of The Innovator's Dilemma, is credited with coming up with the term "disruptive innovation," which he defined as: "a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors." These days, we tend to associate disruptive innovation with a new or improved product or service that surprises the market, especially established, industry-leading competitors and increases customer accessibility while lowering costs.The notion is appealing, and it makes for exciting business adventure tales featuring scrappy, innovative underdogs overcoming entrenched, clueless market leaders. Of course, disruptive innovation has been happening for a long time, even if it was called something else, but lately technology has made it easier and cheaper for upstart firms to take on industries they think are "ripe for digital destruction." There are some who think we've gone too far in adopting the disruption mantra. In her recent article The Disruption Machine, Harvard professor and New Yorker staff writer Jill Lepore squinted hard at disruption theory: "Ever since The Innovator’s Dilemma, everyone is either disrupting or being disrupted. There are disruption consultants, disruption conferences, and disruption seminars. This fall, the University of Southern California is opening a new program: 'The degree is in disruption,' the university announced." By the way, USC's Jimmy Iovine and Andre Young Academy for Arts, Technology and the Business of Innovation is, in fact, opening this year and will focus on critical thinking with plans, according to the academy website, to "...empower the next generation of disruptors and professional thought leaders who will ply their skills in a global area." And, yes, that is Dr. Dre's name on the academy! But there are others who believe we have now entered a decidedly more treacherous innovation environment, one that Josh Linkner in The Road to Reinvention says is forcing companies to systematically and continually challenge and reinvent themselves to survive. His fundamental question is this: "Will you disrupt, or be disrupted?" And Paul Nunes and Larry Downes, who wrote an article for the Harvard Business Review Magazine in 2013 titled Big Bang Disruption (they have a book on the same topic, summarized by Accenture here), warn of a new type of innovation that is more than disruptive -- it's devastating: "A Big Bang Disruptor is both better and cheaper from the moment of creation. Using new technologies...Big Bang Disruptors can destabilize mature industries in record time, leaving incumbents and their supply-chain partners dazed and devastated." Should CEOs be worried? When Mikhail Gorbachev visited Harvard in 2007 and said, “If you don’t move forward, sooner or later you begin to move backward,” he was talking about politics and multilateral nuclear treaties, not companies, but the warning certainly could have been directed at CEOs. That message, refreshed to incorporate the disruptive innovation threats that have emerged since then, seems a bit unsettling: If you run a company and you aren't dedicating resources to continually scanning the marketplace for threats and improving and reinventing your business, if you are instead taking a "business as usual" approach, you are at risk of being marginalized or supplanted by competitors who will bring new products, services, experiences, efficiencies, cost structures and insights to your customers. Maybe not this year, or next year, but sometime soon.  It's not a question of whether it will happen, but when. Thus Linkner's question, restated:  Will you disrupt yourself, or be disrupted by someone else? Of course, some industries, like property casualty insurance, may not be high on anyone's "ripe for digital destruction" list, so maybe there's no need for insurance company CEOs to worry. Except perhaps about Google and Amazon. I keep thinking back to Blockbuster CEO Jim Keyes' comments to The Motley Fool in 2008:  "Neither RedBox nor Netflix are even on the radar screen in terms of competition." You know the rest of the story, which illustrates the real-life consequences of an incumbent underestimating and then becoming "dazed and devastated" by a competitor.

When I moved my securities litigation practice to a regional law firm from "biglaw," I made a bet. I bet that public companies and their directors and officers would be willing to hire securities defense counsel on the basis of value, i.e., the right mix of experience, expertise, efficiency and price -- just as they do with virtually all other corporate expenditures -- and not simply default to a biglaw firm because it is “safer.” My bet certainly was made less risky by the quality of my new law firm (a 135-year-old, renowned firm that has produced past and present federal judges and is full of superior lawyers); by discussions with public company directors, officers and in-house lawyers; by my observations and analyses about the evolving economics of securities litigation defense and settlement; and by my knowledge that I could recruit other talented full-time securities litigators to join me in my new practice.  But I was still making a bet. Well, so far, so good -- my experience has confirmed my belief. So, too, did a recent article titled, “Why Law Firm Pedigree May Be a Thing of the Past,” on the Harvard Business Review Blog Network, reporting on scholarship and survey results indicating that public companies are increasingly willing to hire firms outside of biglaw to handle high-stakes matters. The HBR article frames the issue in colorful terms: "Have you ever heard the saying: 'You never get fired for buying IBM?' Every industry loves to co-opt it; for example, in consulting, you’ll hear: “You never get fired for hiring McKinsey.” In law, it’s often: “You never get fired for hiring Cravath.” But one general counsel we spoke with put a twist on the old saying, in a way that reflects the turmoil and change that the legal industry is undergoing. Here’s what he said: 'I would absolutely fire anyone on my team who hired Cravath.' While tongue in cheek, and surely subject to exceptions, it reflects the reality that there is a growing body of legal work that simply won’t be sent to the most pedigreed law firms, most typically because general counsel are laser-focused on value, namely quality and efficiency." The HBR article reports that a study of general counsels at 88 major companies found that “GCs are increasingly willing to move high-stakes work away from the most pedigreed law firms (think the Cravaths and Skaddens of the world) … if the value equation is right.  (Firms surveyed included companies like Lenovo, Vanguard, Shell, Google, Nike, Walgreens, Dell, eBay, RBC, Panasonic, Nestle, Progressive, Starwood, Intel and Deutsche Bank.)” The article reports on two survey questions. The first question asked, “Are you more or less likely to use a good lawyer at a pedigreed firm (e.g. AmLaw  20 or Magic Circle) or a good lawyer at a non-pedigreed firm for high stakes (though not necessarily bet-the-company) work, assuming a 30% difference in overall cost?” The result: 74% of GCs answered that they are less likely to use a pedigreed firm, and 13% answered the “same.”  Only 13% responded that they are more likely to use a pedigreed firm than other firms. The second question asked, “On average, and based on your experiences, are lawyers at the most pedigreed, 'white shoe' firms more or less responsive than at other firms?” The result:  57% answered that pedigreed firms are less responsive than other firms, and 33% answered they are the “same.”  Only 11% responded that pedigreed firms are more responsive than other firms. The survey results ring true and are reinforced by other recent scholarship and analysis on the issue, including a Wall Street Journal article titled “Smaller Law Firms Grab Big Slice of Corporate Legal Work” and an article featured on www.law.com’s Corporate Counsel blog titled “In-House Counsel Get Real About Outside Firm Value.” As all three articles emphasize, skyrocketing legal fees are a notorious problem. And corporate executives are increasingly becoming attuned to this issue. Indeed, during the in-house counsel panel discussed in the Corporate Counsel article, a general counsel noted that in explaining outside counsel costs to the CEO and CFO of his company, “it’s very, very difficult … to say why someone should [bill] over $1,000 per hour . . . It just doesn’t look good.” The problem is especially acute in securities class action defense, in which the defense is largely dominated by biglaw firms with high billing rates and a highly leveraged structure (i.e. a high associate-to-partner ratio), which tends to result in larger, less-efficient teams. Now, as the economy has forced companies to be more aware of legal costs, including the fact that using a biglaw firm often results in prohibitively high legal fees, it is unsurprising that companies are increasingly turning to midsize firms. According to the WSJ article, midsize firms have increased their market share from 22% to 41% in the past three years for matters that generate more than $1 million in legal bills. Indeed, both Xerox’s general counsel and Blockbuster’s general counsel advocated that companies control legal costs by using counsel in cities with lower overhead costs. Some companies, and many law firms, see securities class actions as a cost-insensitive type of litigation to defend: The theoretical damages can be very large; the lawsuits assert claims against the company’s directors and officers; and the defense costs are covered by D&O insurance. But these considerations rarely, if ever, warrant a cost-insensitive defense. Securities class actions are typically defended and resolved with D&O insurance. D&O insurance limits of liability are depleted by defense costs, which means that each dollar spent on defense costs decreases the amount of policy proceeds available to resolve the case. At the end of a securities class action, a board will very rarely ask, “Why didn’t we hire a more expensive law firm?” Instead, the question will be, “Why did we have to write a $10 million check to settle the case?” Few GCs would want to have to answer:  “because we hired a more expensive law firm than we needed to.” That takes us to the heart of the HBR article: “Do we need to hire an expensive law firm?” After all, in a securities class action, the theoretical damages can be very large, often characterized as “bet the company,” and the fortunes of the company’s directors and officers are theoretically implicated. Certainly, when directors and officers are individually named in a lawsuit, their initial gut reaction may be to turn to biglaw firms regardless of price, if they believe that the biglaw brand name will guarantee them a positive result. Biglaw capitalizes on these fears. But, of course, hiring a biglaw firm does not guarantee a positive result. The vast majority of securities class actions are very manageable. They follow a predictable course of litigation and can be resolved for a fairly predictable amount, regardless of how high the theoretical damages are. And it is exceedingly rare for an individual director or officer to write a check to settle the litigation. Indeed, the biggest practical personal financial risk to an individual director or officer is exhaustion of D&O policy proceeds because defense costs are higher than necessary. Lurking behind these considerations are two central questions: “Aren’t lawyers at biglaw firms better?” and “Don’t I need biglaw resources?” “Aren’t lawyers at biglaw law firms better?” Not necessarily. That’s the main point of the GC survey discussed in the HBR article. To be sure, there are excellent securities litigators at many biglaw firms. But the blanket notion that biglaw securities litigators are more capable than their non-biglaw counterparts is false. And it’s not even a probative question when comparing biglaw lawyers to non-biglaw lawyers who came from biglaw. In the WSJ article, Blockbuster’s general counsel, in explaining why his company often seeks out attorneys from more economical areas of the country, pointed out that many of the attorneys in less expensive firms came from biglaw firms. Many top law school graduates and former biglaw attorneys practice at non-biglaw firms, not because they were not talented enough to succeed at a biglaw firm, but for personal reasons, including: a desire to live in a city other than New York, the Bay Area or Los Angeles; to find work-life balance; to have the freedom to design a better way of defending cases; or to develop legal skills at a faster pace than is usually available at a biglaw firm. There obviously is a baseline amount of expertise and experience that is necessary to handle a case well, and there are a number of non-biglaw lawyers in the group of lawyers who meet that standard. One easy way to judge the quality of firms is by reading recently filed briefs of biglaw and midsize firms. While this type of analysis takes more time than simply looking up a lawyer or law firm ranking, it will be the best indicator of the type of work product to expect from a firm. As with all lawyer-hiring decisions, the individual lawyer’s actual abilities, strategic vision for the litigation and attention to efficiency are key considerations. A lawyer’s association with a biglaw firm name can be a proxy for quality, but it does not ensure quality. Indeed, the opposite can be true -- by paying for the biglaw expertise and experience of a particularly accomplished senior partner (the partner likely to pitch the business), companies often end up with the majority of the work being done by senior associates and junior partners. A company should consider the impact of the economic realities of biglaw vs. non-biglaw firms. Senior partners at biglaw firms, with higher associate-to-partner ratios, must have a lot of matters to keep their junior partners and associates busy, and thus necessarily spend less time on each matter -- even if they have good intentions to devote personal time to a matter. Biglaw firms’ largest clients and cases, moreover, often demand much of a senior partner’s time, at the expense of other cases. And given the reality that partners practice less and less law the more senior they become, it is fair to question whether they are the right people for the job anyway. In contrast, senior partners at non-biglaw firms typically have fewer people to keep busy and have lower billing rates -- which means that they can spend more time working on their cases, and they spend more time actually practicing law. Further, for smaller and less significant projects that should be handled by associates, and should not require the higher billing rates of partners, biglaw is similarly unable to offer a cost-effective solution for companies. Associates at biglaw firms typically have less hands-on experience than their counterparts at mid-sized firms. In litigation, for example, biglaw associates generally spend their first few years solely on discovery or discrete research projects. The result is that many projects that could be handled by a junior or mid-level associate at a mid-sized firm would have to be handled by a senior associate or junior partner at a biglaw firm. So, even putting aside differences in billing rates between a fifth-year biglaw associate and a fifth-year midsize firm associate, going with a biglaw firm typically means that projects are being assigned to attorneys too senior (and accordingly too costly) to be handling the assignments. Don’t I need biglaw resources? There are two primary answers. First, from both a quality and an efficiency standpoint, securities litigation defense is best handled by a small team through the motion–to-dismiss process. Before a court’s decision on the motion to dismiss, the only key tasks are a focused fact investigation and the briefing on the motion to dismiss. As to both, fewer lawyers means higher quality. If a case survives a motion to dismiss, most firms with a strong litigation department will have sufficient resources to handle it capably. That, of course, is something a company can probe in the hiring process. There are cases that necessarily will require a larger team than some mid-size firms can provide. However, such cases are rare, and it is often the case that biglaw firms, in an effort to maintain associate hours at a certain level, will heavily staff associates on discovery projects such as document review. While the exceptional case will require a team of more than around five associates, for the most part discovery can and should be handled most efficiently by a team of contract attorneys supervised by a small team of associates -- or by utilizing new technologies that allow smaller teams to review documents more efficiently and effectively. Second, as reflected in the HBR article’s discussion of GCs’ answers to the second question, there isn’t a correlation between a firm’s pedigree and its responsiveness -- which is a key facet of law firm resources. Indeed, responsiveness is a function of effort, and it stands to reason that non-biglaw firms will make the necessary effort to give excellent client service. The bottom line of all this is simply common sense: Within the qualified group of lawyers, a company should look for value -- the right mix of experience, expertise, efficiency and cost -- as it does with any significant corporate expenditure.

As the various public healthcare exchanges have gained more publicity, employers are increasingly aware of the availability of their private sector counterpart.  A legion of brokers, third party administrators and experienced legacy benefit administrators are striving to reconfigure and brand themselves as a private healthcare exchange (PHX), providing service to employer groups rather than individuals. However, the genuine article is nearly nonexistent. Out of the nearly 100 companies that are identified as a PHX, only a few possess the technology, industry knowledge, backing and other necessary qualities to succeed over the long term. How is the investor, carrier or broker able to evaluate a PHX for partnership and ensure he picks not only a survivor but a winner? There are three essential capabilities any contender must possess.

• Intuitive shopping experience (i.e. Amazon)
• Multiple medical carrier and plan options
• Direct integration of consumer-directed account(s) in both the shopping and enrollment processes

Intuitive shopping The PHX experience must model other consumer Internet shopping experiences in all aspects for universal adoption. If a PHX is unable to do this, brokers, HR administrators and other service providers will engender unsustainable, escalating costs while providing little service. A PHX must move to the self-service model of e-commerce. It is unlikely that the insurance industry, so mired in its own protocols, can design such a system on its own. For the PHX industry to thrive, outside experts from e-commerce must be welcomed inside the business to effectively couple their expertise with that of individuals with deep knowledge of the employee benefits sector. Multiple options It would seem intuitive for an employer to offer employees a range of national and regional insurance carriers. Yet the health insurance industry has always gravitated to restricted choice. It is a golden scenario for a carrier to have enrollees choosing exclusively from its options in an electronic marketplace. This leaves brokers in a precarious position. Although they currently control the health insurance marketplace, brokers are vulnerable to the almost certain risk that the current carrier will raise rates; brokers may lose clients or have to abandon the platform and seek another carrier. The problem is further complicated by several factors. Carriers require digitalization to facilitate rating, enrollment, eligibility and billing. Retroactive risk adjustment is often required to account for employee population variables. Finally, and perhaps most importantly, individual state “exchange shops” mandated for small groups under the Affordable Care Act all have multiple medical carrier options, raising the bar for private healthcare exchanges. High-deductible health plans coupled with health savings accounts are now approaching 50% of plan populations after languishing for years with only 5% to 10% adoption rates. Although the reasons for this increase are not necessarily clear, the statistic is well-documented, as illustrated in the May 2014 joint study by John Young and Todd Berkley. It is clear employees making unfiltered decisions are voting with their feet. Consumer-directed accounts (read health savings accounts) can no longer be treated as just a minor option for early adopters. Integration of accounts While the consumer may choose a high-deductible plan, it is quite possible that when the first claim happens there will not be funds to pay it. It is imperative that the consumer bank account is enrolled concurrently with enrollment into the medical plan. This does not take place in most situations today. The importance of assessing other mechanisms of providing the consumer liquidity cannot be overstated as a means to ensure accounts are adequate to pay claims under deductible or co-pay responsibilities. Conclusion While there are stiff challenges, an incredible opportunity exists to offer a PHX that is an integrated, superior product that belies the complexity underlying the system it serves.

No one wants to deal with a property claim. Unfortunately, claims do happen, and that is why you buy insurance. There are right ways and wrong ways to manage a claim -- here are three common mistakes and how to avoid making them:

Too many cooks...

One of the first things you should do after a loss is assign a point person to handle communication and dissemination of information to the insurance company. Oftentimes, this role defaults to the risk manager, but she is not always the best choice. Obviously, the risk manager needs to be part of the team, but you need someone who can dedicate a substantial amount of time to the claim. This ensures consistent communication and avoids the insurance team's relying on information that has not been vetted.

Not controlling the schedule...

As with most projects, planning and execution are necessary for a successful outcome. It is critical in the claims process to assign responsibility to the team members at the policy holder and require that they provide information in a timely manner. This compels the insurance company to provide feedback in a similar fashion. A timeline should be established early on, and the parties should be held to it. For example, claims will be submitted by the fifth day of the month; feedback will be provided by the 15th day of the month; and payment will be received by the end of the month. Scheduling like this can improve cash flow and ensure progress on the claim. Get the parties to commit to this early!

Unreasonable expectations...

It's true that the insurance company is not likely to accept your entire claim, but building up your claim to unrealistic expectations is not the answer. By claiming a "pie-in-the-sky" number, you can hurt your credibility and dramatically slow down or prevent a reasonable settlement. The better approach is to present a reasonable claim that is fully documented. This prepares you to counter the insurance company's rebuttal with confidence. It's reasonable to be aggressive, and, by all means, do not lower you claim in anticipation of pushback from the insurer. Just do not build up the claim to unrealistic totals with the plan to fall back to a lower position -- this gives all the credibility to the insurance company.

An open mic session at the California Workers Comp & Risk Conference in Dana Point featured insurance industry leaders identifying emerging market trends that are important to employers in California. Panelists were: moderator Pamela Ferrandino, national practice leader at Willis North America; Bill Rabl, chief operating officer at ACE Risk Management; Robert Darby, president at Berkshire Hathaway Homestate and former chairman of WCIRB; Duane Hercules, president at Safety National; and Michele Tucker, vice president at CorVel. The panelists indicated that their short-term outlook on rates was flat to slightly higher, but not as high as over the last couple of years. For first-dollar accounts (those with no deductible), competition is increasing because there are more carriers entering the California marketplace. For the self-insured and those with large deductibles, the rate tends to matter less than the amount of risk retained by the employer, because the goal of these loss-sensitive programs is for the carrier to only cover unusual claims such as catastrophic injuries. Managing medical costs also continues to be a challenge. Opioids are still driving costs, so there must be an aggressive pharmacy management program in place. The industry is starting to see complications such as organ damage arise from opioid abuse. This could become a cost driver. Almost half the opioids in California are dispensed by physicians, so it may be necessary to address this issue legislatively, as other states have done. Predictive analytics are becoming increasingly important in the workers’ compensation industry. Some third-party administrators (TPA)s and carriers are doing excellent work in using psychosocial questions to identify issues that could complicate claims handling and increase costs. This allows them to intervene and devote additional resources to these claims. Analytics are also useful in the pricing process to assist carriers in identifying accounts that are performing above and below average and trends related to them. Municipalities face significant, long-tail impact from presumption claims (for diseases that have uncertain origins but that may be presumed to have been caused by an occupation). Defending against these claims is extremely difficult, and, once accepted, the claims have a tendency expand. Claims for high blood pressure can eventually morph into claims for advanced heart disease or a heart attack. In many municipalities, a large percentage of police officers and firefighters retire under presumption claims. There are currently bills sitting on the governor’s desk that would expand presumption laws in California, including one bill that would create presumptions for certain healthcare workers in the private sectors. If these bills are signed, they will increase California municipalities’ workers’ compensation costs even more. Finally, panelists were asked what they expect the key issues will be three years from now. Panelists predicted that mobile technology and the ability to communicate with injured workers will advance through apps that help with early intervention. They also expect to see an increased focus on wellness to address co-morbidities. Finally, everyone anticipates that within three years we will be talking about yet another California workers’ compensation reform bill and the continued expansion of presumption laws.

In a Senate Banking Committee hearing earlier this summer, Sen. Elizabeth Warren (D-MA) and Federal Reserve Chairwoman Janet Yellen played their parts brilliantly. They acted out a time-tried political science convention, that legislators and journalists are judged on results while bureaucrats and professors are judged on rules. At issue is Federal Reserve Board enforcement of its statutory obligations under Section 165 of the Dodd-Frank Act, to see to it that JP Morgan has orderly resolution plans in the event of failure. Broadly stated, that section of the Dodd-Frank Act empowered the Fed to impose "prudential standards" on bank holding companies with assets of at least $50 billion if an institution’s failure could affect “the financial stability of the United States.” The section also required the Fed to report its determinations annually to Congress. The hearing demonstrated the limits of our current system and the need for interactive finance, by which I mean rewarding institutions and individuals with financial or strategic advantage for revealing information that details risk. Interactive finance will provide indispensable liquidity to crucial markets that currently see little trading. More importantly, interactive finance addresses the core challenges of concentrated market power in banking and of sclerotic market administration -- of which Fed efforts to manage orderly resolution of JP Morgan are but a single, frightening circumstance. The issues are crucial not just for our economy as a whole but for insurers, in particular, because they are such large investors in securities offered by major financial institutions. The investments generate a high percentage of the insurance industry’s operating profits but expose it to catastrophic losses. For instance, in mortgage-backed securities, insurers hold more than $900 billion in commercial and multifamily real estate mortgages, according to the Mortgage Bankers Association’s Q4 2013 report. (That’s $343 billion in commercial and multifamily mortgage debt plus $567 billion in commercial mortgage-backed securities, collateralized debt obligations and asset-backed securities.) The Federal Reserve tallies life insurance companies’ holdings of residential mortgage-backed securities (RMBS) at $365 billion as of the end of the first quarter, 2014. In that wonderfully well-acted hearing, Sen. Warren asked Chairwoman Yellen if JPMorgan could sell its assets without disrupting the economy and impelling a taxpayer bailout. Warren also asked: Where are those reports the Fed is to provide annually? Warren was raising a key question: Is the Fed forbearing, being lenient on JPMorgan and other huge financial institutions? Congress enacted Dodd-Frank in July 2010, and this March the Federal Reserve Board published 100 pages of rules and regulations implementing Section 165. That is a gap of 33 months. Congress has yet to see any Federal Reserve reports, but for a wholly lacking 35-page document, Warren asserts. It’s possible that market administration is so complicated that it simply takes inordinately long to articulate and implement regulation and to report outcomes to Congress and the public. But the Warren-Yellen exchange revealed vastly more, specifically what appears to be a Federal Reserve policy to forbear on implementing its statutory obligations under Dodd Frank 165 in connection with JP Morgan and orderly resolution. In the hearing, Sen. Warren expressly asked Chairman Yellen, “Can you honestly say that JPMorgan can be resolved in a rapid and orderly fashion…with no threats to the economy and no need for a taxpayer bailout?” And, “Are you saying the plans [for resolution] are not credible, and you’re asking them to change their plans?” Yellen never really indicated that JPMorgan has any credible plan in place for its orderly resolution or has submitted any since 2012. Instead, she articulated process, iteration and feedback. Dodging Warren’s direct questions, Yellen essentially said that complexity drives inconclusiveness and explains the lack of annual reports to Congress. Yellen used the word, “feedback,” five times in her replies. Both Yellen’s circumlocution on JPMorgan resolution and its outsized concentration are but symptoms of market and market administration sclerosis, which Warren is trying desperately to treat. Absolutely brilliant performances by each woman. No question about it. As a legislator, Warren underscored that she wants results. As a regulator, Yellen adhered to processes and rules and the Federal Reserve Board’s traditional discretion in so weighty and complex a matter. Requests for clarification from the Federal Reserve Board for this article elicited no further information about the important question: Is the Federal Reserve forbearing on implementation of Dodd-Frank 165 bank resolution? End of story? No. Two problems remain. First, what of the JPMorgan resolution elephant in the room? Why couldn’t Yellen assert simply to Sen. Warren that JPMorgan -- with its $2.5 trillion in assets and 3,391 subsidiaries -- has credible plans in place for rapid, orderly resolution without triggering a systemic threat or taxpayer bailout? Could it be “the economy, stupid,” in James Carville’s bald turn of phrase? Monetary policy regulators repeatedly assert they have a very small palette of choices. At a conference of central bankers in Jackson Hole on Aug. 22, Yellen acknowledged that monetary policy makers are grappling with how to determine the best mechanisms to foster growth and to maintain price stability. “While these assessments have always been imprecise and subject to revision, the task has become especially challenging in the aftermath of the Great Recession, which brought nearly unprecedented cyclical dislocations and may have been associated with similarly unprecedented structural changes in the labor market -- changes that have yet to be fully understood,” she said. Eleven days earlier, in a speech to a finance conference in Sweden, Fed Vice Chairman Stanley Fischer cautioned of protracted economic slowdown well over a dozen times as he articulated policy-making constraints. “In the United States, three major aggregate demand headwinds appear to have kept a more vigorous recovery from taking hold: the unusual weakness of the housing sector during the recovery period; the significant drag -- now waning -- from fiscal policy; and the negative impact from the growth slowdown abroad -- particularly in Europe,” he said. In such weak economies, the last thing Yellen or any senior regulator with any sense of self-preservation would do is to acknowledge that JPMorgan cannot credibly assert that it can resolve itself. Milton Friedman and Anna Schwartz’s analysis (1963) that regulators -- and not a spending crisis -- triggered the Great Depression through monetary policy yet resounds in economic thinking. Hence all of Yellen’s process talk, for it would be incautious to respond negatively to Sen. Warren’s unambiguous questions whether JPMorgan can resolve itself without wreckage or bailout. In the pantheon of Federal Reserve Board chairs, if one thinks of Fed Chairman William McChesney Martin (1951-1970) for probity, Arthur Burns (1970-1978) for concision, G. William Miller for brevity (1978-1979), Paul Volcker for decency (1979-1987), Alan Greenspan for obscurity (1987-2006) and Ben Bernanke (2006-2014) for agility, Yellen may be laying claim as the Fed's Rocky Balboa. In winter and early spring, she said weather was the economy's problem. In mid-summer, she gamely parried Warren’s Ted Kennedy, who was insisting government can do better. Second, what of sclerotic market administration? This represents the graver challenge. Warren got no answers or reports. Yellen advertised she cannot or will not enforce Fed rules. All they achieved is good video. Both came up empty. Citizens voted for change six years and again two years ago. Certainly, voluminous regulation -- the rules and regulations on Section 165 fill 100 pages with single-spaced, eight-point type -- is a change in a very narrow sense from Bush-Cheney deregulation, outsourcing and selling of public resources and lands. However, such extensive regulation raises regulatory costs and seems to mainly benefit practitioners of crafting and evading the regulations rather than providing broader economic benefits. Interactive Finance Technology now affords near-real-time or even real-time market administration, providing the kind of protection that the Fed can’t and removing the JPMorgans of the world as existential threats to the economy. Interactive finance animates the next step to create wealth with the data and meta data. There’s everything to gain and nothing to lose. Prudential valuation based on credit ratings has had its run. In terms of evaluating securities, the system is so laden with conflicts of interest between the rating agencies and the offering firms that it is amazing it has persisted after having such catastrophic effects in the 2008 asset crisis. An International Accounting Standards Board/International Finance Reporting Standards draft report is exploring new approaches to risk management generally. And confidence accounting is receiving more traction for its greater transparency and accuracy than traditional, prudential valuation. Its robust explanatory powers support greater prospective certainty and exactness determining value and risk. But the most promising possibility is interactive finance, which administers markets more efficiently than the incumbent regulatory system, so frustrating to Warren and Yellen alike, and more effectively than the compromised prudential valuation system. Let’s begin with a shared orientation that information and data are the crucial wealth generation engines of the 21st century. Large search firms like Google and online retailers like Amazon or news and information content providers like Bloomberg and Thomson Reuters necessarily seek to exploit first-mover advantages and deep domain competencies by controlling as much of the data associated with their online businesses as possible. The new wealth in information is no less hoarded than pre-Internet wealth in fiat currencies, art, precious metals, insurance and real estate. But remember: The markets are liberalized. Better mousetraps beat the world to innovators’ enterprises. Airbnb is using an overlay of information to disintermediate hospitality and accommodations incumbents, and Uber is throwing hackney licensing for a loop. New entrants Datacoup and Meeco are enabling users to sell their data, even challenging the largest Internet firms in the world. And, because of liberalized markets, more and more innovation and individual and institutional wealth creation with data and meta data will take place. Marketcore, a firm I advise, is pioneering interactive finance to generate liquidity by rewarding individuals and institutions for sharing information with financial or strategic advantage for revealing information that details risks. Think of it this way: Interactive finance crowd-sources market participation by rewarding individuals, organizations and institutions seeking loans, lines of credit or mortgages or negotiating contracts with monetary or strategic incentives and rewards. Whether risk takers are a bank, insurance company or counter party, granters define rewards. A reward can constitute a financial advantage -- say, a discount on the next interval of a policy for individuals purchasing retail products. The reward can express a strategic advantage -- say, foreknowledge of risk exposure for institutions dealing in structured risks like residential mortgage-backed securities or bonds, contracts, insurance policies, lines of credit, loans or securities. As crucially, transaction credits empower any and all market participants to act as granters of rewards. Individuals, organizations and institutions grant strategic or monetary incentives to counter parties seeking to acquire risks, too. All this transpires on currently existing broadband, multimedia, mobile and interactive information networks and grids. Interactive finance realizes a neutral risk identification and mitigation system with a system architecture that scans and values risks, even down to individual risk elements and their aggregations. As parties and counter parties crowd markets, each revealing specific risk information in return for equally precise and narrowly tailored rewards and incentives, their trading generates fresh data and meta data on risk tolerances in real time and near real time. This data and meta data can then be deployed to provide real-time confidence scoring of risk in dynamic markets. Every element is dynamic, like so many Internet activities and transactions. Talk about efficiency! Crucially, interactive finance constantly authenticates risks with constantly refreshing feedback loops. Risk determination permits insureds, brokers and carriers to update risks through “a transparency index. . . based. . . on the quality and quantity of the risk data records.” Component analysis of pooled securities facilitates drilling down in structured risk vehicles so risk takers, including insurers and reinsurers, can address complex contracts and special pool arrangements with foreknowledge of risk. Real-time revaluation of contracts clarifies “the risk factors and valuation of [an] instrument” and, in so doing, “increases liquidity and tracks risks’ associated values even as derivative instruments are created.” Through these capabilities, Marketcore technologies connect the specific, individual risk vehicle with macro market data to present the current monetary value of the risk instrument, a transparency index documenting all the risk information about it and information on the comparative financial instruments. Anyone participating receives a complete, comprehensive depiction of certainty, risk, disclosures and value. Think how readily Chairwoman Yellen could respond to Sen. Warren with information replenished constantly and willingly by market participants and verified by constantly updating feedback loops. Think how much Sen. Warren could ask regarding transparency. She’d receive a verifiable response, with great confidence. Interactive finance allows for transparent markets capable of clearing and self-correcting. With interactive finance, legislator and regulator can get results and adhere to rules. Sen. Warren could administer vibrant, efficient, self-stimulating and self-correcting markets powered by information and data-verifying risks and clarifying confidence. Chairwoman Yellen could enforce Fed rules. Both could get well beyond JPMorgan’s compliance issues to apply their appreciable talents administering information economies, the wellsprings of 21st century commerce and economic growth.

The California Workers’ Compensation & Risk Conference in Dana Point opened with a session featuring employers and stakeholders in the industry weighing in on the current state of California workers’ compensation and the outlook for 2015. Panelists were: moderator Mark Walls, vice president of communications and strategic analysis at Safety National; William Zachry, vice president of risk management at Safeway; Tim East, director of risk management at Walt Disney; Bill Mudge, president and CEO at WCIRB California; Kurt Leisure, vice president of risk services/asset protection at Cheesecake Factory; Seeta Ambati , a defense attorney who is a partner at Laughlin, Falbo, Levy & Moresi; and James Butler, a plaintiff attorney with Butler Viadro. The panel began with a look at where California workers’ compensation is today: • California holds a quarter of the nation’s workers’ compensation business. • To date, 80 new carriers have entered the California market since 2004. • California is among the top three states in terms of average medical costs per claim. • California has experienced double-digit increases in premiums over the last two years. Cost drivers to the California workers’ compensation system include: • A high frequency of claims handling in the state relative to payroll, with Los Angeles County having the most claims in the region. • A multitude of expensive permanent disability claims that include attorney involvement. • Opioid prescriptions, which have doubled in frequency. SB 863 is California’s answer to addressing these costs, but it is too early to provide tangible data on whether the reform has been successful. Some early data shows that costs related to liens are down, but costs related to independent medical reviews (IMR) are significantly higher than expected. Panelists were split. Some say that, although it is too soon to judge, they are seeing the following indications that SB 863 is working: • Generally, rate increases have been cut in half because costs are showing a downward trend. • The highest costs are coming from old medical claims rather than recent claims. • Because this is the first time that California has experienced cost decline in quite some time, panelists thought that the cost cuts may make the state appear more employer-friendly, which will encourage companies to return. Panelists said there are still some kinks to work out in the reform. One stated that the IMR process, which has been designed to take non-medical professionals out of the medical decision-making process, is working well. On the other hand, the opioid decision-making process in place is not currently solving the costly opioid problem. Overall, people are still learning the new process, but panelists said they think that outcomes will be positive over time. They think that the measures are in place to help get the injured worker healthy and back to work. Most on the panel felt that peer-to-peer review is the right approach and that the system is better than it was. The California Applicants Attorney Association (CAAA) strongly disagrees, however, and views the reform as a failure that is harming citizens. A representative said that the CAAA saw more employees returning to work before the reform and that the system is averaging 4.3 medical denials per patient. The CAAA cites the cost of administering workers’ comp as one of the largest costs that a business can endure. In addition, the CAAA believes that peer-to-peer review is not working efficiently. CAAA thinks that legislative efforts to reform workers’ compensation are aiming at the worst-case scenarios, rather than the majority and, therefore, have not provided the best solutions for most companies. Panelists were asked what changes they would make to the California workers’ compensation system if they were governor for the day. Ideas included: • Take a fresh look at the 101-year old system, which is overloaded with rules, legislation, audits and controls. It is time to simplify a system that has layers of new rules on top of old rules and, as a result, enormous costs related to it all. • Do away with cumulative trauma, which is a major cost driver that creates complexity. Some states have already done this. • Make use of alternative dispute resolution. California has gone from incentives and positive reinforcement for providing prompt payments and benefits to a system focused on penalties. It needs a system that rewards promptness and minimizes disability. • Address the opioid abuse and CURE system to make every effort to avoid addiction. • Look at the system through the eyes of the injured worker and simplify accordingly. Employees can’t understand the current complex system, which is why they seek legal representation. The session served as a great kickoff for the conference, providing both an overview of the current workers’ compensation cost drivers and offering suggestions for improving the system.

The dawn of a new industry and the Next-Gen Insurer is unfolding, influenced by levers of change from within and outside the industry, accelerated by an explosion of data and new technologies and fueled by innovation. Some insurers are embracing innovation to inspire a renaissance of competitiveness and customer value, reinvigorating what made them successful leaders in the first place or making them new market leaders of the future. There is an unparalleled opportunity to ignite a new future that is powered by the human imagination – and that is what China insurers are doing, as indicated in a recent article titled “Chinese Insurance Policies Cover Some Really Bizarre Things,” by Clare Baldwin and Diana Chan in Business Insider. While the insurance policies being created may seem bizarre to some, they epitomize the spirit of product innovation, personalization and customer engagement that are identified as key trends in SMA’s research, The Next-Gen Insurer: Fueled by Innovation. Understanding rapidly changing customer demographics, needs and expectations is critical. The ability to reinvent the way to develop, package and deliver products and services is vital for insurers if they are to be relevant, let alone successful, in today’s new digital world. So why are these innovative policies important for U.S. insurers to understand and consider? First, the inspiration for innovation can come from other markets and geographies. The inspiration may stimulate the imagination, prompting new ideas and uncovering opportunities that can be built upon. In many cases, the thinking in markets, such as China, with less-strict regulations can help identify, incubate and market test new ideas. With more customers researching insurance on the Internet, they will see these innovative products and ask for them … and ask you why you don’t have them, or something similar. Second, taking an innovative approach to meeting smaller, more defined needs provides a great entryway to other insurance products. What a great way to introduce your brand as innovative and personal. In general, with trends like the connected car, driverless car, connected home, connected health, sharing economy and more affecting the future of traditional insurance products such as auto, home and health, to name a few, insurers must be as creative as possible in adapting to the shifting landscape. Interestingly, niche-focused insurance products like those in China have been emerging in other areas in Asia Pacific, with “hole in one” insurance, and in Europe, with “wedding” insurance. Zurich’s wedding insurance, which covers all of Europe and which covers the costs of canceling or postponing a wedding, is an example of such a product and has been a big success in terms of sales, marketing and brand recognition. In the U.S., Warren Buffett’s Berkshire Hathaway insured the $1 billion prize to anyone who accurately picked the winner of every 2014 NCAA tournament game, a competition sponsored by Quicken Loans. And while no one picked the winners in the brackets, Buffett and Berkshire Hathaway got a lot of coverage. Each of these examples engages customers in a fun way while also meeting a specific need. They have an element of “the cool factor” associated with them, something profoundly needed in an industry deemed stodgy. So, while the article about quirky Chinese insurance policies seems to take an “aren’t they cute” approach, the examples are actually highly relevant for the customers they target, not to mention helping to educate a large population about the broader value of insurance. The massive interest in these untapped nooks and crannies exposes the fact that there are ready customers, regardless of geography. The insurance industry has offered personalized, unique products in the past to selected individuals, but not on a mass basis. Remember when Tina Turner’s legs were insured, David Beckham’s legs were insured, Keith Richards' hands or Bruce Springsteen’s voice … all for millions of dollars? The difference here is that these are high-value, highly customized situations that were all one-off products. In today’s digital world, with the customer demanding personalized offerings, mass product personalization will increasingly be a key driver in product innovation, shifting the industry away from the legacy of mass production of personal insurance products. Fueling this change will be customer demographics and preferences. With product personalization, insurers need to develop products or product components that customers can shape to their unique needs – within days or weeks – according to new customer expectations. The mass personalized products will include new services that will strengthen customer loyalty and retention. These trends will help insurers differentiate themselves in the market and open market opportunities that can drive revenue and profitability. So instead of the “naughty child insurance” offered in China, maybe it could be child care insurance that covers the costs of holding the child’s place while the child is out because of significant illness. Instead of buying insurance for smog's ruining your holiday, you could buy insurance against weather such as hurricanes or snowstorms that could cause cancellation or limits to your vacation. And instead of covering pregnancy before the honeymoon, insurance could cover a health issue or death of a key wedding participant that could affect the wedding plans, and insurance could be the thing that could make a painful time a little less painful. Major forces are converging that are fundamentally changing the entire paradigm of insurance, creating the Next-Gen Insurer in the process. Today’s insurers are faced with choices that are more intense, complex and transformational than ever before. An era of new leaders will be determined by their ability to respond to change and become innovators, embracing and capitalizing on each new wave of disruption. Some of the waves with vast possibilities will be product innovation and mass personalization. Insurers in other geographies are catching the wave of customer needs and expectations. Are you prepared to ride the wave of mass personalization? If not, your competitors will!

Amid promising growth, companies in the insurance industry are being pressured to evolve their business models because of rising consumer expectations, new technologies and a widening skills gap in the workforce. These changes, in turn, threaten current workforce models and require changes in six jobs. There’s economic promise in the insurance industry: A recent survey of property and casualty, life and health insurance companies found that 62% of respondents are planning to add staff in 2014. The U.S. insurance industry projects the addition of 200,000 employees between 2012 and 2022, and in March 2014 its unemployment rate (3.3%)  was half of the national average (6.7%). While the industry growth is a boon, insurers must overcome employment challenges before seeing its benefits. Attracting talented people is a particular stumbling block for insurers: Just 5% of students in the millennial generation are very interested in working in the insurance industry. As the insurance workforce continues to age — more than half of the current insurance workforce is over age 45 — insurance companies will have an ever-widening gap to fill. Moreover, as with many other industries, the insurance industry is plagued by a skills gap that prompts industry representatives to cite difficulty filling open positions with qualified candidates. Graduates and entry-level workers lack the industry experience and knowledge of those who are retiring. Career insurance employees are often missing the technology skills and savvy that are increasingly required to handle new systems being adopted by insurance companies. Incumbents are pressured to evolve or dissolve Ezekiel Emmanuel — one of the architects of the Affordable Care Act — writes in his new book that “because of health care reform, new actors will force insurance companies to evolve or become extinct. The accountable care organizations (ACOs)…and hospital systems will begin competing directly in the [health care] exchanges and for exclusive contracts with employers." The healthcare exchanges are be­coming a game changer for the way consumers purchase their coverage. Now providers will be competing on “the best quality, service and price.” Robert Pearl, M.D. — a contributor to Forbes — contends that these healthcare exchanges “will create more transparency and make the coverage-selection experience resemble purchasing airline tickets on Expedia or Orbitz.” Consumers will be empowered with technology, information and choice in a process that traditionally has been out of their control. This expectation of the “consumerization” of insurance is not limited to healthcare. A 2013 survey of more than 6,000 insurance customers in 11 countries reveals that they desire:

• More personalized services from their providers
• Reduced risk
• Engagement through continuing conversations
• Access to information via online, in-person, mobile and other channels
• Information that is consistent across all of those channels.

Customers will begin to flock to insurance companies that can provide the consumer-centric experience they’ve become accustomed to in other industries and businesses. A recent survey of 2,500 insurance customers by Accenture shows that more than 90% of respondents choose insurers based on:

• Speed at which their problems are resolved
• Availability of products and services that meet their specific needs
• Competitive pricing for products and services
• Transparency of prices and charges
• A high level of information about proposed products and services
• Knowledgeable and responsive phone support.

To attract and retain customers, insurers will need to move toward customer-centric models, which will require adoption of new technologies and employee skills. Evolving business models spur changes in business systems and roles Many larger insurance organizations have been relying on legacy computer systems that were built around regulatory requirements for paper-based documentation. With such regulations now lifted, insurers are free to modernize their systems and implement more automation, self-service features and access to real-time information to meet consumer expectations. They can also build into their insurance business systems new features that improve customer-centricity, such as:

• Robust customer relationship management tools with integrated communications channels — such as email, online chat and click-to-call voice
• Customer segmentation
• Big data and predictive analytics

With these technologies and customer expectations, today’s frontline and operational insurance workers need to be more tech-savvy and have better communication skills and better problem-solving capabilities. There will be significant effects on six key frontline and operational positions, which collectively made up more than 35% of the industry’s workforce in 2012. Table 1: Key frontline and operational positions in the insurance industry Source: Bureau of Labor Statistics Hiring and promoting in the new insurance landscape These six key job roles span much of the career spectrum of the industry. For example, individuals who have not yet earned a post-secondary degree can perform well as customer service representatives and then continue their studies while on the job to advance their careers. Those with associate’s degrees may be able to begin as entry-level sales agents. As workers progress through their careers and gather additional education and experience, the insurance industry offers them myriad growth opportunities in sales, finance, human resources and technology. While these positions differ in required education, responsibilities and technological complexity, they share a number of skills or detailed work activities (DWAs) — an occupational classification system of the Federal Government O*NET system. DWAs describe business work tasks that can be found across mul­tiple occupations and remain constant over time. We’ve been able to identify nine skills or DWAs that largely cut across the positions examined in this report: Table 2: Cross-cutting skills Source: O*NET. For full DWA descriptions, go to onetonline.org. DWAs are logical units of analysis for hiring and promoting employees, as well as curriculum and training program development, because they transcend frequently changing industry staffing patterns and company–specific job descriptions. A closer look at key frontline and operational positions Below is a snapshot — including employee profiles, typical education and career paths, responsibilities and impacts of technology — for customer service representatives. These insights are the result of the research performed by the workforce strategies team at College for America — a nonprofit, accredited college dedicated to providing more accessible, workplace-applicable degree programs to working adults. Its findings reflect labor market data, real-time job listings and feedback from insurers nationwide. Snapshot: Customer service representative Source: Bureau of Labor Statistics Tony had worked throughout high school at a local retail store. After graduation, he wanted to enter a ca­reer path that would offer advancement and tuition reimbursement so he could pursue a college degree. With the people and listening skills he learned from working retail, he was offered a position as a custom­er service representative at a life insurance company. Before working with clients at his new position, Tony participated in the company’s training program to learn about products and services, customer management, departmental responsibilities and where to find information. He also learned telephone techniques to better interact with clients. As a customer service representative, Tony spends his day answering questions, providing information to clients and resolving complaints. He has become adept at dealing with conflict, as his clients often call under stressful circumstances. Tony is currently taking courses at a local college and hopes to make his way into a sales position in his company. Education Customer service representative positions require a minimum of a high school diploma, though often employers are seeking people with an associate’s or bachelor’s degree. Representatives generally receive company-specific training before beginning work. These positions provide an opportunity for individuals to learn the insurance business, and they serve as a stepping stone to other insurance careers. Responsibilities A customer service representative may be expected to:

• Work with policyholders and clients to answer questions, respond to requests for information and handle and resolve complaints
• Play a critical role as the “face” of the insurance agency to clients
• Respond to client needs and provide information about products and services
• Take orders, determine charges and oversee billing and payment
• Ensure client information is complete and accurate
• Keep detailed records of customer interactions
• Notify customers of claim investigation results and planned adjustments
• Refer unresolved grievances to the appropriate department
• Review insurance policies to determine if a loss is covered
• Communicate with clients in-person via telephone, emails, and online chat
• Manage angry or unhappy clients
• Speak with clients who are dealing with stressful situations such as a car accident, illness of a loved one or a natural disaster.

Impact of technology Customer service representatives are now engaging with customers in modalities other than on the phone, such as through email, online chat and social media. Soft skills in writing, communication and active listening are increasingly important as the connectedness of the Internet makes it easy to broadly share representative-to-client communications — whether good or bad. Similarly, customer service representatives are being fed customer data from across the Internet and from within their business systems (known collectively as big data). These representatives must learn how to use the right information to inform interactions with customers and engage them in the selling cycle by providing information about products that would likely be of interest to them. For the full report, including snapshots of the other five, key job types, click here.