In 1973, I began my insurance career as a claims’ adjuster. We handled some of the first claims in the new NFIP Flood Program. There was chaos. A year later, I was hired by Cumis Insurance to staff a new sales office in Baton Rouge,LA. The market hardened dramatically, capacity was limited and our office closed before we sold a policy. I learned about market cycles. My next job was as an insurance producer. My job and the agency business were good. We were paid 25% commission on homeowners policies, there was no transparency (comparative rating didn’t exist in our part of the world) and the most exciting change was when Safeco allowed field men (yes, they were all men) to wear blue or buff-colored shirts in lieu of the traditional white. During my first week at work, a colleague dropped an article titled "Marketing Myopia" on my desk and said, “read it.” The author was Theodore Levitt. The piece was then and still is a classic -- and framed my thinking about an issue that has only grown in importance and must become  the future of insurance. Levitt opened with an observation on the railroad industry, which declined because it defined itself incorrectly – “railroad-oriented instead of transportation oriented... product-oriented instead of customer-oriented.” Levitt also mentioned a fundamental misunderstanding about the success of Henry Ford. “We habitually celebrate him for the wrong reasons: for his production genius. His real genius was marketing. We think he was able to cut his selling price and therefore sell millions of $500 cars because his invention of the assembly line had reduced the costs. Actually, he invented the assembly line because he had concluded that at $500 he could sell millions of cars. Mass production was the result, not the cause, of his low prices.” From 1978 to 1981, I represented Fireman’s Fund/FAMEX in its GM dealers program. At that time, the No. 1 concern of General Motors and its dealers was that GM would gain 65% market share and that the government would then break GM into Cadillac, Buick, Oldsmobile, Pontiac, Chevrolet and GMC corporations. We all know how this played out. In 1993, I opened my consulting practice focusing on CHANGE – its management and architecture. (“The best way to predict the future is to create it,” as Peter Drucker said.) I spoke to the leadership of a community bank and said that, although GM, IBM and Sears were the giants in their respective industries, “one of these three will ultimately go bankrupt.” The bankers rolled their eyes and laughed. We all know how this played out. (In my children’s lifetime, I may prove right on the other two.) Later that same year, Drucker offered an op-ed in the Wall Street Journal, titled "The Five Deadly Business Sins." It said, “The third deadly sin is cost-driven pricing. The only thing that works is price-driven costing. Most American and practically all European companies arrive at their prices by adding up costs and then putting a profit margin on top… their argument, ‘we have to recover our costs and make a profit.' "This is true but irrelevant; customers do not see it as their job to ensure manufacturers profit. The only sound way to price is to start out with what the market is willing to pay.” Levitt’s voice echoes his agreement from the "Marketing Myopia" article, when he says, “Our policy is to reduce the price, extend the operation and improve the article. You will notice the reduction of price comes first.” Drucker’s wisdom closed the circle that began with my reading of "Marketing Myopia." In 1994, I became the executive director of the Louisiana Managed Healthcare Association (LMHA) – the health maintenance organization (HMO) association. I quoted Drucker dozens of times as I attempted to explain the difference between the then-existing fee-for-service system and the new world of “capitation” and “managed care." I was shouted down more than I was applauded. That same year, a couple named Harry and Louise (in a TV ad campaign) defeated Bill and Hillary’s attempt to reform healthcare. Fast forward another 20 years and Obamacare is the law of the land. At its essence is managed care – a price-driven costing model. The market won’t go back to cost-driven pricing. Two more observations from Drucker as your prepare for tomorrow -- or choose to ignore it: -- “Because the purpose of business is to create a customer, the business enterprise has two and only two basic functions: marketing and innovation.” Innovation is so necessary because customers are constantly changing. We must be defined and driven by clients. --“There are now only three possible roads the financial services industry can take. The easiest, and usually most heavily traveled, is to keep doing what worked in the past. Going down this road means, however, steady decline….The second road – to be replaced, and probably fairly rapidly, by outside innovators – remains a possibility for today’s firms. But there is also a third and final road – to become innovators themselves and their own ‘creative destroyers.’” Your future depends on more production but only at a price the market will pay. Your sustainability depends on innovating your processes to ensure profitable delivery whether your commission is hidden in the premium or disclosed or whether premiums are quoted net of commission. Today, when I drive by a dealer, the genius of Drucker is reinforced. Look at a pickup truck on the lot. The window sticker shows the “cost-driven price.” The sign on the windshield celebrating a $12,000 discount is the price-driven cost. If you want to sell a truck in today’s world, discounts are not optional! The same is true for insurance.

A common question we often hear CEOs, CFOs and directors of businesses and public and private institutions ask is, “What terms and conditions should I consider when buying cyber insurance?” We have compiled a list of some of the most important terms and conditions to consider. However, you should discuss more nuanced industry and organization specific terms and conditions with your broker and insurance coverage attorney. 1. Crisis Services Crisis services include the costs for computer forensic investigations to determine the cause of the data breaches, obtaining legal guidance, notifying victims, providing credit monitoring to the victims, and promoting media or public relations campaigns. According to Net Diligence’s 2014 Cyber Claims Study, almost half of the total amount of insurance company payouts from data breaches was for crisis management services. The Ponemon Institute’s 2014 Cost of Data Breach Study: U.S. also reported unusually high churn rates following news of data breaches. Your organization will want professional assistance to communicate to your customers, regulators, business partners and vendors that you are taking appropriate and reasonable steps to protect your customers with respect to any loss of data and that you will take reasonable steps to try and safeguard your customers’ data going forward. 2. Regulatory Defense (including fines and penalties) Regulatory agencies, such as the Federal Trade Commission and Department of Health and Human Services, actively investigate data breaches within their jurisdictional powers. There are many examples of corrective actions, penalties and fines imposed by the Office of Civil Rights on behalf of HHS for HIPAA violations, including the $4.8 million in HIPAA settlements following the data breaches at New York-Presbyterian Hospital and Columbia University. This is especially important to keep in mind if your organization is a healthcare provider (a HIPAA-covered entity) responsible for its patient information or has a self-funded health plan (a separate type of HIPAA “covered entity”) where your organization is ultimately responsible for the security of the plan participants’ data. Many policies have a sublimit for regulatory defense. You may think you have a $10 million policy, only to find out that you have a sublimit for regulatory defense of $500,000, which may leave you woefully underinsured. Net Diligence reported that the average healthcare sector payout in 2014 was $1.3 million, with the median regulatory defense payout being a little more than $1 million and the mean regulatory settlement cost being $937,500. 3. Prior Acts Coverage/Retroactive Date Prior acts coverage provides protection against prior acts that may lead to a claim during the policy period. The “retroactive date” is the date when your coverage begins, and can be subject to negotiation. Although Verizon’s 2015 Data Breach Investigations Report noted that the time from compromise to discovering the compromise is at its smallest deficit ever recorded (days or less, 45% of the time), data breaches can take many months to detect. Here is a common example: On Jan. 1, 2015, a particular program offers a patch to mitigate certain security vulnerabilities. A hacker finds that your company failed to install the patch and uses it as a means to enter your network, sets up a program to start filtering and collecting your data and then installs the patch to prevent detection of the intrusion. You apply for cyber insurance soon thereafter. Just after closing the 2015 Christmas holiday shopping season, the hackers send your data out, at which point you detect the intrusion. Your insurer subsequently notifies you that it is denying coverage for the claim because of prior acts that occurred before coverage began. This is why you want the broadest “prior acts” coverage possible. You may also want to negotiate an extended reporting period, as a subsequent insurer may claim that the data breach events did not occur during its policy period. 4. Network Business Interruption Coverage This covers certain losses while your network is interrupted as a result of a data breach. This is especially important if your organization engages in e-commerce. How much profit would you lose if your organization was down for several days while law enforcement and your computer forensics consultants investigated the cause of a data breach? 5. Contingent Business Interruption Coverage (resulting from the acts or omissions of third parties) Many organizations rely on third parties for processing data. For example, many healthcare providers rely on third-party billing companies and clearinghouses to process payments, making them “business associates” under HIPAA. Similarly, self-funded health plans frequently contract with third-party business associates for claims management and other plan administration functions. If the business associate suffered a data breach affecting your patients’ (or enrollees’) data, your organization may bear the ultimate responsibility for the breach. Accordingly, your organization will want coverage to offset this potential loss. Your organization may also want to consider negotiating the self-insured retention or deductible in case of a loss so that the third party is responsible to pay for the deductible if it results from the third party’s acts or omissions. 6. Defense Option/Reimbursement of Costs Some cyber insurance policies require the insurance company to hire consultants and attorneys to defend your organization, while others agree to reimburse reasonable and necessary costs. Using your own consultants and attorneys make sense if they know your system and are familiar with your business, so you won’t have to pay for them to come up to speed on your organization. You will want to consider which path you will want to take. 7. Costs of Restoring and Recreating Data The cost to restore or recreate data if taken or damaged can be extensive. Your organization will need to assess the cost of this coverage and its need. 8. Extortion Coverage Criminals continue to run phishing scams where a user clicks on a link that serves to encrypt a laptop or other computer. Oftentimes, one laptop or computer can infect others, and you’ll want to negotiate this coverage to simply pay for the data to be restored.

The quote in the headline -- "The customer's perception is your reality" -- is from the renowned business trainer Kate Zabriskie, and I hope you agree it is absolutely true. No matter how excellent you think you are, or your company is, at service delivery, your future success as an enterprise depends principally upon how good you are in your customers’ minds when responding to their ever-changing needs. Or, as John Mackey (CEO, Whole Foods) put it, “For us, our most important stakeholder is not our stockholders, it is our customers. We’re in business to serve the needs and desires of our core customer base.” But what are those needs? Are they those that you may have already identified, based on your experience? Has your considerable operational expenditure, in people and systems, really met what your customers need? Or is our thinking unconsciously restricted by our knowledge of what we can and cannot easily achieve? There are many publications, a plethora of business processes ideas and of course the Internet itself, all crammed with customer relationship management theories. I don’t suggest that these are wrong, but what I do believe is that most financial services customers want something better than the superficial contact often delivered regularly by mailshots or e-mails. The “relationship” they require is more like that of their general medical practitioner! Namely a service that is accessible, resulting in knowledgeable and courteous attention, one that is effective, on call always but available only when needed. This article focuses on customer perception and service delivery for existing insurance customers and associated stakeholders. More specifically about how appropriately the enterprise responds to customers’ post-sales questions, claims and changes about personal lines policies. It might first be helpful to consider, in general terms, the prime means of post-sales service delivery in the UK currently deployed by insurance companies, brokers, claims service companies, etc. These channels are principally face-to-face in offices; via the Internet; over the telephone, including SMS texting; and, to an under-developed extent, through mobile service platforms. Branch contact used to be normal, but face-to-face customer contact seems on the decline. No doubt the cost of staff, the use of alternative technologies and the need to drive down costs have all contributed to the demise of the branch office. The challenge then is how to achieve the goal that Sam Walton (founder of Wal-Mart) described as “customer service that is not just the best but legendary.” Well, I imagine that the words “call center” do not spring immediately to your mind as “legendary.” At their best, call centers provide a good and necessary service, but I do not believe that the sophisticated telephony statistics and in-house customer surveys yield an entirely accurate picture of customer perception. In the main, customer perception is that call centers are a dismal fact of life. They often describe their experience as an endless series of numerical options and pre-recorded messages. These are followed by an interminable wait brought to an unsatisfactory climax by what they perceive as a “factory service,” so often a conversation with an underpowered and strictly timed operator, who seems in a hurry to deal with the next call. Is this the sort of post-sales service your customers deserve? Does it really surprise and delight your customer with “legendary” service? From an enterprise point of view, call centers are generally sub-optimal. Staff turnover can be high, recruitment and training costs significant, with onerous levels of supervisory oversight. Management often experiences prolonged stress, justifying service delays and fretting how to improve service without incurring more costs. Most call center staff cannot make significant changes to policy records, or handle customers' resulting needs themselves; instructions have to be prepared for other processing technical staff. Is there a better or additional way, other than a call center, in which the increasing expectations of existing insurance customers can be met and exceeded? Is it possible to achieve this and at the same time drive a huge chunk of operational costs out of the business? The answer is emphatically yes! In fact these benefits can be achieved quickly and cheaply compared with traditional legacy and Internet technology. The solution is to deploy the latest and powerful mobile technology directly to customers, to empower them to access their own records and to make self-service changes, raise claims and initiate inquiries directly to a database or a secure copy. Today’s customer is never far from a smartphone or tablet. The expectation from an enterprise is that of mobile technology being available to post-sales and post-renewal. Customers do not want to be pinned down to call center hours or a static location from which to call to make changes or to deal with claims. Any company that offers a post-sales insurance service that suits the time and place of their choice must surely have a significant and differentiated product. If that same company, as a result, is able to eliminate a huge percentage of its operational costs, then it also will derive a massive commercial advantage. Let’s see how this can be achieved. To explain and to avoid confusion with traditional legacy solutions, I will briefly describe the provenance of modern mobile technology platforms. It was not long ago that mobile phones were used solely for voice calls and texts. Today’s smart phones and tablets are multifunctional devices that can insert themselves into the very DNA of the customer-enterprise relationship. This is possible by means of developing intelligent mobile processes. Operating systems for smart phones such as Mac iOS, Android, Windows and RIM are now fully mature and open a window of opportunity for the development of third-party software. But quality matters, too, and development needs to be easy and intuitive to use because mobile users demand more choice, more ways to use their phones more functionally. The Internet just allowed us to connect with anyone in the whole world. But with mobile technology we will connect anytime and anywhere with everything through “the Internet of Things” (IoT). Manufacturers and retailers are investing immense amounts of money in intelligent appliances, and very soon your home will be as smart as your car. This technology offers a unique chance for insurance enterprises to integrate intelligent mobile devices in their post-sales service delivery. For example: How would this work in practice? Mobile and tablet applications are limited only by vision and imagination, and space in this article permits only a brief summary. There are two principal post-sales areas where advantage can be gained, namely policy changes/inquiries and claims reporting/progress. Imagine your home and contents policyholder receiving a renewal notice and reviewing the cover. This might show that the sums assured need revision and that a newly acquired item of jewelry should be added; perhaps an optional extra such as legal expenses cover is to be considered. By means of an appropriate mobile phone or tablet, the policyholder “logs in” and views current policy details. No doubt this will include a reminder that renewal is almost due. Using the form of graphic display the policyholder is used to (sliders and check boxes on smart phones for example) the cost of changes are modeled. More information about the legal expenses cover is requested, received and possibly some questions answered. Mid-term changes are frequent, too, so any relevant date and details of change may subsequently be selected once the policy records are accessed from the mobile. When the customer is satisfied with the modeled changes, the new risk profile is sent to the insurer and a new premium generated. If accepted (or remodeled), payment details are collected, and no doubt certain questions required by the insurer are “check-boxed,” instant confirmation is given and promptly afterward updated documents e-mailed to the policyholder. All of these events take place at a time, day and location of the customer’s choice. Unless the customer chooses otherwise, no call center conversation is required; no staff are needed to manually process the changes. In this example, all the requested changes were within the insurer’s underwriting and rating rules; had they not been, then an appropriate message would be generated ensuring, that a call center contact is focused upon more specialized and justified issues, requiring a smaller number of trained and empowered people. In effect, the call center becomes a skill center, a quite different entity. Reporting claims and dealing with claims progress issues can easily be imagined, and again the limit is process appetite and creativity. Mobile technology has the advantage of a camera, GPS and verifiable date and time. So this data can be assured and becomes invaluable within the claims oversight process. Photographs can be taken, with assured dates/times/locations of loss-related events, damage, articles etc. These can be attached to a mobile claims notification, with appropriate inbuilt guidance, and sent to the claims department to initiate the process. The mobile can be used to receive calls, texts and e-mails. Even voice messages or videos from the customer can be attached. Adjusters can be appointed automatically subject to a “rules engine”; replacement goods can be selected and offered via the mobile connection; estimates and invoices can be generated or photographed for sending on to the claims department. The effect of these customer processes upon service delivery is abundantly clear. But what of the opportunity to save costs? In my experience, between 25% and 50% of inbound customer calls are of a standard, non-exceptional nature. Conservatively, once fully operational, I would expect mobile technology for post-sales activities to drive out 30% of staff and call center costs of the enterprise. For those who also use call center or technical staff to actually manually process changes, as well, similar levels of savings could be achieved in that part of the operation. At this stage it is reasonable to ask, if the technology is available now, the advantages so attractive and already being employed by other enterprises, why have insurers, generally, not yet filled this space? I speculate that there are five reasons: - The skills required to build mobile technology platforms are not generally available in most insurers' computer departments. Mobile process development is new and different, and simply importing legacy or internet systems on mobiles produces ugly, cumbersome customer applications. The solution is the careful selection of a third-party provider, working with staff, to introduce these new skills into the computer department. - Core processes and enterprise data is jealously guarded by departments. Security is also of paramount importance. They are right to be careful! These assets must not be put in harm’s way. Until complete confidence is established, the safe solution is to use replicated rules engines and validate changed data outside the core processes. The use of the latest and most secure encryption technology is paramount. - Most IT departments have a tremendous backlog of legacy system updates. It’s essential but difficult to focus on a new mobile future when you are trapped in the technology of the past developments. By using a third-party provider to quickly develop applications and train existing staff, an enterprise can begin to move forward and avoid being left behind by newer competitors. - Development is seen as possibly expensive and probably protracted. In fact, the opposite is true. It is surprisingly quick and relatively inexpensive to develop the latest generation of applications for mobile platforms compared with legacy systems. Payback can often be achieved within months of launch. - There may be a lack of imagination or strategic understanding of what mobile applications can achieve. It is, in my opinion, dismally true that some of the few mobile insurance “apps” available download little more than contact details, or a claim form. Recreating on a mobile what an enterprise already does on the Internet misses the point entirely and wastes a unique opportunity. In conclusion, mobile technology has rendered the call center, in its current form, obsolete. The only question is how long the process will take. It will be fascinating to see the more agile and visionary insurance enterprises seize the opportunities presented by mobile technology.

An employee’s peace of mind is equal in concern with the physical injury when it comes to a worker's comp claim. An upset employee can lose motivation, incur a bad attitude and rationalize the over-use or abuse of WC benefits. I am adamant that employee satisfaction is as key a factor in WC claim outcomes as it is in overall employee productivity and job performance. It is not the adjuster’s primary role to manage an employee’s peace of mind at the start of a new report. While we expect good “bedside manner” from an adjuster, she must reserve a defensive position and be a “bad-cop” if necessary. An astute employer sees the opportunity in meeting an employee’s concerns at the time of an injury. It is like adding another critical brick to strengthen the foundation of employee satisfaction. The immediate task can be simple. A little bit of confident communication goes a long way. Step one is to put yourself in the injured employee’s shoes and imagine being faced with an inability to work. It is not a comfortable feeling. Quick Tip: Prepare a “Top-10” Information Sheet for Quick Use Concept: Include a quick-reading “Frequently Asked Questions” checklist as part of an overall information packet for new WC claimants. Suggested Top 10 and Recommended Answers: 1) Which doctor do I use? – Identify the preferred list, contracted clinic or emergency facility. Explain degrees of employee choice if any does exist in your jurisdiction. 2) What if I can’t do my job? – “If the doctor determines you cannot perform your job, we will try to match you with a temporary alternate assignment. If there is no ability for you to work, your wages will be paid as a WC benefit.” 3) How much will I be paid? – Provide the statutory calculation formula for the comp rate and specify that the employee’s specific rate will be determined by the claims adjuster within 48-72 hours. 4) When do I start getting checks? – Explain the jurisdictional waiting period. 5) How do medical bills get paid? – “All bills will be paid directly to the doctors/providers. You do not pay any bills for accepted and covered treatment.” 6) Do I need an attorney? – “We will help facilitate your benefits. An attorney is not necessary unless you face a disputed issue and want it to be heard by a judge. However, it is your option and right to consult an attorney at any time.” 7) What do I do next? – Explain any other internal steps and forms; explain that an adjuster will make contact and go over additional information. If you have a designated adjuster, provide a name and contact info. 8) What about my health benefits / 401k contributions, etc? – Explain your policies and the jurisdictional requirements that continue benefits during a WC claim 9) Will I lose my job or be fired? – Explain that filing a WC claim is not a basis for termination but also reserve the right for progressive discipline because of safety violations, attendance, job abandonment, fraud and any internal policies that might relate to WC situations. 10) What if I have other questions? – Provide a designated internal WC contact with an open-door policy.

The federal government is likely not the first place you would look for innovative inspiration and lessons on implementation. The old stereotypes of stacks of paper gathering dust in corners, outdated technology and endless processes still exist to some degree, but the government is making huge strides in the digital space, and insurers can take note. Recently, I read an article from Yahoo Politics about some new features on FEMA’s (the Federal Emergency Management Agency) mobile application. The app has been around for nearly three years, but in the last few months FEMA has rolled out social media features and geo-spacial weather alerts that allow the app to be customized to users’ own experience before, during and after a disaster. Claims organizations can learn these lessons and offer some of these features to customers. For example, following a disaster, the FEMA app now has a “Disaster Reporter” tab where survivors can upload pictures from their phone and also view other photos or damage or loss of property. If applicable, companies could offer the same services for its customers following a major disaster; it could build a sense of community and also offer insurers valuable information shared directly from the disaster source. Not only would insurance companies benefit from having this capability for their own use, but now they can also leverage information being gathered and publicly accessible directly from FEMA. Claims organizations can also verify data being uploaded from a disaster zone to filed claims. This capability is part of a systemic change in claims where data can be gathered and analyzed from both internal and external sources. In addition, because FEMA is taking a step to modernize its messaging through mobile applications, the agency is making the country more prepared and more resilient, which equates to less risk of loss of property after a disaster. The government will only continue to modernize its public services. While they don’t move at the same rate as private enterprise, what we are starting to see is unique sets of public data gathered by the government that can be repurposed in insurance. The privacy and verification of taking data from the government remains to be seen. But for now, the playing field looks promising to capitalize on these opportunities.

Despite the brouhaha over the ProPublica articles that say companies are unfairly denying treatment to injured workers to save on costs, I still regard the high cost of workers' compensation (for those companies that do have high costs) mostly as a management problem. The companies I see -- which are the ones that have huge problems -- are clueless about workers' comp. They turn their claims and injury process over to their claims administrator or carrier, hardly participating in the process, then they blame the TPA or carrier when costs go up even though they have done nothing internally to manage safety or injuries. These companies never budget for workers' comp management, don't staff the risk department (if there even is a department) properly. THAT would cost money, and our headcount would increase, they say. Often, if they do have staff, they do not allow the staff to attend conferences or seminars, join organizations or purchase resources. THAT would cost money, they say. Sometimes, their brokers offer to help by providing consulting resources, but the companies with high workers' comp costs do not see the merit in such an approach. I worked with a major entertainment facility, speaking with them once per week, on behalf of their broker, hoping to gain insight. I offered to consult with the staff because I am a consultant: Getting to the root of the problem, finding the cost drivers and fixing them is what I do. They did not need a consultant. Then, one day I said I could "help them develop their training program," and they accepted instantly! I had used the wrong word -- they needed "training help" not "consulting help." Within months, the high cost of their workers compensation program went down to almost zero. Problem solved. Several things employers can do, but usually don't, are: 1. Contact employees within a week or two after the injury to do a survey of their medical and claims adjuster experience. Speak to them via phone, just as you would ask a good customer about her experience. Jennifer Christian, chief medical officer at Webility, contacts employees to find out if each injured worker felt that care was poor, fair, good or excellent. Often, poor treatment by medical providers and callous indifference by adjusters causes employees to become angry, seek counsel or even delay recovery because of lack of expertise during the initial treatment experience. 2. Have claims reviewed periodically by an independent auditor with a medical provider on the team. Only an MD is qualified to read the medical reports to determine whether treatment was appropriate and sufficient, whether alternate causation has been considered and whether aggressive and excellent (yes, perhaps more expensive) treatment has been provided. Make sure adjusters are not using utilization review (UR) to deny care. Audit, audit, audit. Care, care, care. Do weekly roundtables with your third-party administrator (TPA) -- for instance, every Friday discuss 10 claims, etc. Don't wait until claims reach $25,000. Discuss them when they are small, BEFORE they get astronomical. 3. Retain an MD to be part of your claims team. This can be an on-site MD part-time or full-time who also speaks with treating physicians and injured employees. Adjusters and nurses do not know "medicalese." Applause to those insurers who have MDs on staff BUT employers still need to have their own medical advisers on the team. Employers often forget we are talking about medical injuries, not simply "claims." 4. Assess the key cost drivers of your workers' compensation costs. Nine out of 10 times, employers misdiagnose the cause of their high workers' compensation costs. In one case, the employer was ready to fire the insurance company because "they thought" there was too much nurse case management. Upon more detailed analysis, including an independent review by claims experts and an MD, we found the claims were handled well 98% of the time. The cause of the problem was misidentified. The REAL problem was a lack of a post-injury response -- employees and supervisors did not have steps to follow within the first 24 hours after the injury. We then held 19 training sessions over three weeks to improve best practices related to rapid medical care and RTW/SAW (return to work/stay at work) in this mega-entertainment theme park. The workers' compensation costs dropped 20% in a year-over-year comparison of total incurred losses with the previous 12-month period. 5. There are no tools to guide employees and supervisors. In the above case, we provided: employee brochure, physician brochure, wallet cards in English/Spanish for supervisors and employees, and other tools. 6. And, most importantly, provide the best quality medical care available. Yes, even if it's more expensive. Pennywise is pound foolish. Get the best, not the cheapest. Pay the doctor more to spend more time with your injured employees, not less time. 7. Establish bundled pre-approval of care in account instructions so UR is not necessary -- e.g., "All PTP (primary treating physician) treatments and as many as five visits to specialists are pre-authorized by insured. All testing requisitioned by PTP and specialists including physical therapy (PT) and MRIs is to be approved; do NOT submit to UR. If you strongly believe treatment or testing is unwarranted, contact the insured's medical director before denying request." If you don't manage and monitor it, the process (any process, not only workers' compensation) will not work well. It's time for employers to become involved in their own business! The first step is assessing the problem at your company, not the industry in general or another company. Get that mirror out and have a look. You are most likely looking at the problem.

The seizure on March 26, 2015, of the Marshall Islands-flagged Maersk Tigris cargo ship by Iranian forces off its coast at the Strait of Hormuz on a years-old dispute over containers is something that should get everyone’s attention. What is even more troubling than the seizure of a commercial vessel is that Maersk had agreed to settle the dispute. Iran is appealing for more money in the courts, but, rather than let the courts proceed, took the matter into its own hands. Understand that one fifth of the world’s oil passes through the Strait of Hormuz in a given year. We know that piracy, especially off the east coast of Africa and in the vast Asian Pacific, has become a major concern to shippers. So much so that Rolls Royce has announced that one of the benefits of its proposed crewless ship is that it would be much easier to take down pirates, because there will not be the crew hostages to deal with, as there are today. However, if nations begin to seize ships outside the law and with as flimsy an excuse as Iran has in the Maersk case, this is cause for alarm. While the U.S. will be escorting U.S.-flagged vessels in the area of the seizure, our military fleet is simply inadequate to serve all potential hot spots. Even with escort protection, the risks of confrontation accelerate. Confrontation can include blockades, using vessels to buzz or interfere with navigation or otherwise harass shipping and their escorts, firing shots across the bow, ramming and even firing on vessels and their escorts. Recall that the U.S. entered World War I and World War II and increased our presence in Vietnam as the result of the Germans' sinking of the Lusitania, the Japanese bombing of Pearl Harbor and the very questionable U.S.-North Vietnamese Gulf of Tonkin incident—all military events involving the sea. Not all military maneuvers on the seas are necessarily problematic. The U.S. Coast Guard has become adept in hunting down drug traffickers and human smugglers in U.S. waters and cooperates with Central and South American countries to interdict traffickers in the greater Gulf of Mexico. However, these small ships, submarines and speedboats are not like the huge container vessels that large shipping conglomerates operate worldwide. Even so, there are times when even larger ships pose challenges to countries and militaries, generally for contraband, drugs or illegal shipments of weapons. In 2013, Panamanian officials detained the North Korean-flagged Chong Chon Gang en route from Cuba to North Korea on suspicion of drug trafficking. The investigation uncovered cargo that looked like weapon systems subject to international sanctions against delivery to North Korea. The Panamanian Government consulted with the UN, and the dispute was resolved. In this incident, international law was followed. In the Iranian incident, it is much less clear that its military had the authority to seize the Maersk ship over a payment dispute already in the court system under appeal.

The Shipping Juggernaut

The World Shipping Council reported that world container shipping alone in 2009 produced an annual economic contribution of:

• Direct gross output or GDP Contribution -- $ 183.3 Billion
• Direct capital expenditure -- $ 29.4 Billion
• Direct jobs -- 4.2 million
• Compensation to those employees $ 27.2 Billion

The global supply matrix relies heavily on container and bulk shipping to move raw materials, parts and components and complete product between producers, suppliers and customers to virtually every large-vessel navigable port in the world. Some of the biggest container vessels can carry 11,000 containers, and the loss of even one could strain world marine insurance resources. The increase in traffic and size of vessels has led to major efforts to widen the Panama and Suez canals. The Port of Long Beach 20-mile Alameda Corridor went online in 2002 to speed rail traffic under the streets of Los Angeles to remove a major bottleneck to the U.S.’s busiest container port. We can only speculate that one reason why Warren Buffett purchased the Burlington Northern Santa Fe (BNSF) railroad in 2009 was because he saw the spectacular increase in container rail traffic from ports on all U.S. coasts to all parts of the interior. The modern insurance industry has its roots and owes even much of its policy language to marine insurance beginning with Lloyds during the first tranche of globalization when Britain and other European powers needed to cover commercial trade to and from their vast worldwide colonies. The ocean is big business.

Law of the Seas Doctrine

Who owns the sea? We all do. However, after World War II, many countries led by the U.S. increased the size of their territorial waters for security, fishing and other purposes. In 1967, the UN decided it was time to convene a group to develop an international law of the sea. Unlike trade agreements, the international law of the sea is a framework not for tariffs, taxes and other international economic activities, but for how we may use the sea as our collective heritage. We might compare the international law of the sea to the rules promulgated by the National Parks Service for what people can and cannot do while visiting, working in or otherwise using the natural resources of Yellowstone Park. The convention can be summarized as follows: The seas are open and free to all states, coastal or landlocked. Passage shall be free and unhindered. The sea is the heritage of all humanity, which includes conservation and protection of these resources from pollution or overfishing or other adverse activities. The seas shall be used for peaceful purposes. Ships and states have a duty to render assistance to vessels and persons in trouble. Cooperation is expected to repress piracy. These are some of the key provisions relevant to the discussion of the Iranian seizure:

• 12-nautical-mile limit on territorial waters.
• “Ships and aircraft of all countries are allowed 'transit passage' through straits used for international navigation; States bordering the straits can regulate navigational and other aspects of passage”
• “All other states have freedom of navigation and overflight in the EEZ [Exclusive Economic Zone], as well as freedom to lay submarine cables and pipelines”
• “Land-locked and geographically disadvantaged states have the right to participate on an equitable basis in exploitation of an appropriate part of the surplus of the living resources of the EEZ's of coastal states of the same region or sub-region; highly migratory species of fish and marine mammals are accorded special protection”
• “All states enjoy the traditional freedoms of navigation, overflight, scientific research and fishing on the high seas; they are obliged to adopt, or cooperate with other states in adopting measures to manage and conserve living resources”
• “Land-locked states have the right of access to and from the sea and enjoy freedom of transit through the territory of transit states”
• “State parties are obliged to settle by peaceful means their disputes concerning the interpretation or application of the convention”
• “Disputes can be submitted to the International Tribunal for the Law of the Sea established under the convention, to the International Court of Justice, or to arbitration. Conciliation is also available, and, in certain circumstances, submission to it would be compulsory. The tribunal has exclusive jurisdiction over deep seabed mining disputes.” (United-Nations 2012)

Iran is a 1982 signatory of the International Law of the Sea and included this statement: In accordance with article 310 of the Convention on the Law of the Sea, the Government of the Islamic Republic of Iran seizes the opportunity at this solemn moment of signing the Convention, to place on the records its "understanding" in relation to certain provisions of the Convention…that only states parties to the Law of the Sea Convention shall be entitled to benefit from the contractual rights created therein. [including] The right of Transit passage through straits used for international navigation…The notion of "Exclusive Economic Zone" (Part V). - All matters regarding the International Seabed Area and the Concept of "Common Heritage of mankind" (Part XI)…In the light of customary international law, the provisions of article 21, read in association with article 19 (on the Meaning of Innocent Passage) and article 25 (on the Rights of Protection of the Coastal States), recognize (though implicitly) the rights of the Coastal States to take measures to safeguard their security interests including the adoption of laws and regulations regarding, inter alia the requirements of prior authorization for warships willing to exercise the right of innocent passage through the territorial sea…The right referred to in article 125 regarding access to and from the sea and freedom of transit of Land-locked States is one which is derived from mutual agreement of States concerned based on the principle of reciprocity. However, Iran included this provision which may have led to its thinking it could lawfully detain the Maersk vessel. Furthermore, with regard to "Compulsory Procedures Entailing Binding Decisions" the Government of the Islamic Republic of Iran, while fully endorsing the Concept of settlement of all international disputes by peaceful means, and recognizing the necessity and desirability of settling, in an atmosphere of mutual understanding and cooperation, issues relating to the interpretation and application of the Convention on the Law of the Sea, at this time will not pronounce on the choice of procedures pursuant to articles 287 and 298 and reserves its positions to be declared in due time." We can expect that there will be incidents that involve questionable cargo subject to international restrictions and conventions, such as drugs, piracy, and prohibited weapons. We can expect that some of these interdictions will involve questions of fact that will be disputed or will later be found to be the result of false or misleading information or observation. However, disputes over cargo payments or other commercial activities whether between commercial ventures or states and commercial ventures deserve to be heard in arbitration procedures, courts of law or other internationally sanctioned dispute resolution venues. Global trade has become too important for individual states to begin regulating the high seas on their own. There are many places of narrow passage like the Strait of Hormuz that border on many countries. We need to be especially vigilant in these areas and all agree to this specific International Law of the Sea provision: “Ships and aircraft of all countries are allowed ‘transit passage’ through straits used for international navigation; States bordering the straits can regulate navigational and other aspects of passage.” We need also to prevent harassment or other restrictive activities so that border states in these narrow straits only introduce navigation and rights of passage regulations that are consistent with legitimate safety and security concerns. Slowages, frequent boardings, detentions and other activities that unnecessarily and intentionally restrain trade should be vigorously protested and prosecuted by international bodies and global industry.

This summarizes a session from RIMS that was headlined by Google Risk Manager Kelly Crowder as well as Google Global Safety Manager Erike Young. I served as the event host and moderator, teeing up the subject matter. We focused on four major areas of technology that are driving transformative change in the way we do things and, thus, changing risk. Disruptive technology, as the panel pointed out, forces risk managers and insurers to imagine and forecast how various advancements affect: safety; risk assessment; regulatory and legal parameters; and insurance implications. Albert Einstein set the course for the future when he said: “The true sign of intelligence is not knowledge but imagination.” Ideas can reach beyond probable or practical restraints. Google takes that notion to heart at Google X, a semi-secret lab located in Silicon Valley that aims via research and development to advance scientific knowledge and fuel discoveries that can change the world. “What if” abstract concepts, also known to Google as “moonshots,” are tireless experiments that often fail but that occasionally produce disruptive technology. The mantra is “fail fast, fail often, fail forward.” Learn and change. Sergey Brin, one of Google’s co-founders, and scientist Astro Teller (Captain of Moonshots) seek to improve existing technologies by a factor of 10. Google began with the self-driving car in 2010. Google X now includes a life sciences division involved in bionics. As with the radical transportation shift to horseless carriages 130 years ago, the technologies are changing risk in profound ways, but the positive and negative impact of new technology can be hard to predict. Starting with Botsourcing and Robotics, the panel highlighted the trend of companies to utilize robots and artificial intelligence for a wide array of service industries, manufacturers, medical providers and first responders, which seek safer, more efficient and cost-effective ways of serving clients or conducting business. While more dangerous occupational risks and blue-collar jobs are expected to be safer and more efficient, it remains uncertain whether the demand for labor will continue to grow as technology marches forward. Within 10 years, more than 40% of the workforce is expected to be affected by or replaced with robotics. One positive sign noted in the presentation is that many American companies using robotics and 3D printing technologies, are transferring production facilities from overseas back to the U.S. and creating homeland jobs in the process. New job skills will become necessary to sustain broad-based prosperity. With respect to the highly advanced robots expected to integrate into society, the panel if their cognition will ever replace emotionally oriented skills. Will the warmth of human interaction remain a value in the future? Another area of advancement is Surveillance and Wearable Biometrics. The Internet of Things represents the embedding of physical objects with sensors and connectivity. Devices like smart thermostats, as Google pointed out, are able to learn from our behavior patterns to anticipate our needs at home or work on a 24- hour basis. Our security and monitoring systems are tied to public safety, medical providers and our smartphones. Data collection is growing at an enormous pace, effectively tracking our every move. This, as pointed out, has created concern for privacy and for the increasing vulnerability to cyber threats. Fixed and mobile surveillance cameras have facial identification technology. Unmanned aerial vehicles (UAV’s), also known as drones, can be preprogrammed to operate autonomously, although the panel pointed out that current FAA restrictions require an operator following visual line-of sight rules below 400 feet of altitude. It’s expected that, within the next few years, there will be autonomous drone surveillance and product delivery systems. Utilities can use drones to monitor power transmission lines at 1/10^th the cost of a helicopter and with safety and efficiency impossible with helicopters. Public safety departments can use UAVs to assess damages as well as risks. Four U.S. insurers are currently using human-operated drones to assess property damage claims arising from natural disasters. The panel showed photos of UAVs that look like insects that are the size of a fingertip. Wearable biometrics are much more sophisticated than Apple watches and Fitbits. Google explained the company’s quest to improve health monitoring systems. With 9.3% of the U.S. population alone (29 million) suffering from diabetes, Google sells a revolutionary contact lens, developed with Novartis, that monitors glucose levels and corrects vision similar to an autofocus camera. Other panel photos show tattoo-like patches thinner than a human hair that stick to the skin. Using microfluidic construction, these nearly invisible patches monitor EKG and EEG bodily functions and transmit the data 24/7 wirelessly. Similar monitors, known as smarty pants, can be sewn into underclothes and bras. Exoskeleton Technologies are being developed by more than a dozen major manufacturers, as the panel demonstrated, and their products are expanding human capacity and endurance far beyond most expectations. These are wearable machines that combine human intelligence and machine power to achieve nearly any conceivable task without falling. Used by the military, public safety, hazmat teams and industries and for medical rehabilitation, exoskeletons let humans perform feats that would have been physically impossible a few years ago. Neuro interfaces with bio-logical signals allow paraplegics to relearn lost functions. Some patients can actually experience running a four-minute mile or play certain sports. Lifting is painless and commonplace with weights of 40 to 60 pounds, with new technology allowing a person to run without falling down with 200 pounds of weight on their back. A la “Iron Man,” exoskeleton suits are being designed into wearable fabrics with micro energy packs. This area of technology has the greatest potential of protecting workers from soft tissue strains and back injuries. In addition, it serves a dual purpose of advancing an injured worker’s rehabilitation and recovery process without the inherent risk of getting reinjured. As pointed out, experts expect industrial injuries to be reduced as much as 70% as exoskeleton technology is woven into the workplace as personal protective equipment (PPE). Perhaps a bigger question, with an aging workforce and population, is the unknown cost and whether employers, insurers or individuals will bear the expense. The fourth and final technology covered by the panel was Autonomous Transportation Systems and Devices. Google pioneered self-driving vehicles and leads in the development of its associated technology, but autonomous vehicles are now being produced and tested by a growing number of manufacturers. In March 2015, Delphi sent a driverless Audi SUV on a 3,400-mile trip through 15 states from San Francisco to New York City in eight days without an accident. Auto manufacturers are approaching self-driving features on an incremental basis with self-braking, self-parking and other autonomous safety-related features. Google has inspired a jump to a fully autonomous vehicle with no steering wheel or brake. These self-driving vehicles perform 7,000 safety processes per second at high speeds with far safer results than any human driver. The impact of self-driving vehicles, including trucks, is expected to be commonplace within 20 years or sooner. A recent national survey of drivers indicated 44% are looking forward to autonomous vehicles. Respondents cited safety as their first priority. Their second reason was their expectation that they would not be paying for car insurance, which averages $820 per licensed vehicle per year in the U.S. Statisticians expected a drastic reduction of injuries as well as reduced violations like DUI, speeding and running red lights. With 35,000 motor vehicle deaths each year in the U.S., increased safety coupled with increased freeway efficiencies of ultimately more than 10 fold are issues that will make this a disruptive technology that will seem long overdue. As the Google risk management team pointed out, insurers don’t know how to react or respond to the inevitable switch to autonomous vehicles. Even on a road test basis, auto insurance underwriters are scratching their heads trying to assess the risk implications. As the panel pointed out to the inquisitive audience during the Q&A session, it may be relatively simple to determine the impact of new technology from a measurable, scientific basis. But the big challenge for risk managers is imagining the implications these various technological advancements will have on our organizations, workforce and insurers. Auto insurers have at least $500 billion in annual premiums at stake in the U.S. alone. What will happen to that revenue when we shed our need to get behind the wheel every day? Google also pointed out that each of the technological areas cover a wide range of regulatory implications. While they attempt to notify every conceivable regulatory entity as they develop and test new products, it’s clear that there often aren’t clear legal or regulatory guidelines in place. How will regulators be able to promulgate new rules, regulations and laws as these science fiction-like inventions come to reality? As Dr. Seuss said so profoundly, “Think and Wonder. Wonder and Think.” ITL and its 400-plus thought leaders are providing the kind of wisdom and insight we will need to help bring all the parties together to solve these challenges. We welcome you to the conversation.

“Do no harm.” That’s part of the doctor’s oath, and it was the underlying thinking behind Progressive’s launch of usage-based insurance (UBI) into the U.S. insurance market back in 2010. The message was straightforward – try our Snapshot device, and your insurance premium can only go down; how far down depends on how well you drive. Fast forward five years of “Flo” hammering way at the virtues of UBI: Progressive claims $2.5 billion in annual premium emanates from UBI, and nearly every tier 1 carrier emulates Progressive’s format...and Progressive has announced, in March 2015, that it is going to charge higher premiums for the worst-behaving drivers, effectively dumping the concept of “Do no harm.” And why not? As the pioneer of UBI in the U.S., Progressive has accumulated the trip data of millions and millions of customers over a number of years – tens of billions of miles of journey data coupled with hundreds of thousands of claims – giving the company unique insights into the behaviors that cause accidents. Based on listening to customers, the marketing program has now shifted from “Plug it in. Drive. Save.” to the concept of “Rate suckers” – bad drivers getting a free ride on the premium that safe drivers pay. Progressive’s research showed that 89% of drivers would be upset to find out that their premiums were subsidizing bad drivers. So loading the premiums of bad drivers backs up the marketing message and should further fuel the positive selection of good drivers moving to Progressive, while chasing away the bad drivers to cheaper, less-data-savvy carriers. This adverse selection for Progressive’s competitors will eventually move the market to fully data-driven underwriting over the medium term. All this goes to show is that UBI is not your typical Insurance product. Key to success for Progressive has been:

1. the ability to accurately model the risk and develop a compelling pricing model based on the new data made available from the telematics device
2. creating an attractive customer proposition and educating the market in the benefits of the proposition with a targeted campaign
3. implementing the operational processes that deliver on the promise of the marketing message

Many insurers get dazzled by the telematics gadget and technology and lose sight of the fact that success really turns on delivering a compelling customer proposition fueled by deep customer insight. I find it intriguing that many UBI programs are still being run by IT departments, as the proposition will only be truly successful when the strategy, marketing, product development and operations teams become involved. I have run a number of telematics engagements, and the technology is quite straightforward. Arguably, the hardest part is finding where to plug in the telematics sensor on the vehicle. Usually, data starts to flow almost immediately, and drivers start getting scores the following day. However, that UBI plugging-in and data flow marks a “moon landing,” as your relationship with the insurance customer will be forever changed. Let’s face it, in the past a customer usually shopped for the cheapest price of motor insurance, bought it and then tucked the policy away in the glove compartment of the vehicle with little or no contact with the insurer until it came time to claim or renew. With UBI, the insurer provides customers with a companion mobile app (and website) that gives daily feedback on their driving skills and opens up a range of value-added services like:

• Real-time vehicle location viewing
• Teen safety monitoring (geo-fencing)
• Driver feedback (rating, score) -- continuing tips to improve driving style and reduce accident risk
• Trip replay capability, with mapping
• Driver behavior indicators (harsh braking, reckless driving, acceleration) within trip
• Logbook – trip information – tax and fuel log expense claims
• Parking meter reminder
• Vehicle fault notifications
• eCall (emergency/panic button) and bCall (breakdown)

You may have noticed I have skirted the issue of “push” marketing offers, which this connectedness will certainly open up. If handled with the mindset of truly benefiting the customer, then this could be a good thing, but it’s a fine line between good and “spam.” I have advocated elsewhere that dynamic affinity offers, when coupled with a high degree of personalization, will present much greater value to the customer rather than the scatter-gun coupon books that typically prevail today. In China, over the last 18 months, quite a few insurers have piloted UBI propositions in advance of the deregulation, and affinity offers – value-added services – have figured prominently. Most have offered a flat 10% insurance discount for simply trying out UBI. PICC, in partnership with Tencent and Shell, launched the “Lubao” box in early 2014. It’s a plug-in device that connects to a mobile App that displays the current status of the car, runs routine diagnostics, offers advice on fuel-saving driving techniques, provides discounts on Shell products, provides road-side assistance and funnels all that data back to the insurance company and its partners. Seems like a dress rehearsal for rolling out a full “Progressive-style” pay-how-you-drive insurance program when regulations allow. Other insurers have offered time-saving features like streamlining the payment of traffic violations, which I am told can be quite inconvenient in China. In some Asian markets, women’s safety while driving has been seen as a good landing place for the UBI proposition, with a “panic” button being built into the app. In other markets, where organized fraud is rampant, UBI provides the data to effectively be a silent witness to what really happened and protect the interest of the customer and the insurer. In Ireland, a fraud ring was systematically targeting drivers on country-side round-abouts and making phony whiplash claims at more than $20,000 per person. The data from the UBI device would help stamp out those kinds of claims, sparing the customer from the resulting increased premiums and months and months of mental anguish during the claim settlement process. In several markets, the advent of UBI has been the key to making insurance affordable for young drivers and families with young drivers. And in Europe, where discrimination based on gender was banned several years ago, a new insurer, Drive-like-a-Girl, launched a telematics proposition quite similar to Progressive’s, where anyone with good driving habits (driving like a girl) earns a discount, eliminating the need for proxy rating factors such as age and gender. The UBI proposition winds up being quite beneficial all around. Firstly, the community wins with improved road safety and easier-to-understand motor insurance contracts – pay for what you use. Secondly, customers win with cheaper insurance, with the ability to control the cost by improving their skills, plus they get a whole range of new features from vehicle fault monitoring through to faster claims settlement. Finally the insurer wins, as it accurately monitors risk and uses data to find new ways to engage customers – moving the conversation from price to value and establishing life-time brand associations with customers. Do no harm. It’s certainly a good starting place as it gets you thinking from the customer’s perspective, but UBI presents a whole lot of value simply waiting to be unleashed for everyone. Just find what’s most important for your customers, and you should have a success when you launch your own UBI proposition. See you in the parking lot. :-)