My real estate clients have seen their share of fires, especially in apartments, and I have seen first-hand the devastating impact of a fire on an apartment complex. Often, these fires happen because of tenants' carelessness, especially with fires that start in the kitchen. So, in the spirit of Fire Prevention Week this week, I wanted to share information about a device that can prevent many fires from ever starting. The product, called Fire Avert, simply plugs into the wall socket behind an electric stove, and the stove is then plugged into the Fire Avert device. If a smoke alarm sounds in the apartment, the device hears the alarm and shuts off the stove. This simple step will prevent the many fires that start because someone forgets that the stove is on (perhaps even leaving the apartment), steps outside for too long and leaves the stove untended, etc. There are subtleties to the device (which the inventor describes here), but that's the basic approach: cut off the source of many fires before they ever start. A fire loss is disruptive and time-consuming. It hurts tenants and places hardships on the local property manager, who has to deal with the fire marshal, cause and origin experts, contractors and consultants hired by the insurance carrier. It affects the corporate insurance manager, who is often responsible for working with the insurance adjuster, documenting all costs, navigating through coverage disputes and providing extensive information to the forensic accountants to assist with calculating the loss of rents. Reconstruction can takes weeks, months or even more than a year. If law and ordinances increasing the cost of construction apply, the rebuilding is delayed further.  When all is said and done, the insurance carriers then scrutinize losses and often raise the premiums on renewal. Suffice it to say, a fire loss is an exhausting and costly endeavor for apartment owners. Just ask anyone who has been through one. After recently tracking a property owner that installed the Fire Avert device in all its units, I have become a true believer in its ability to prevent fires. There are many devices being sold today that "stop" a fire, but this is the only product that prevents the fire from ever starting. Don't get me wrong: The devices that "stop" a fire are better than no protection. Products that "stop" the fire often reduce the impact substantially. Instead of burning the entire building down, a fire might only take out the kitchen.  An $8,000 to $20,000 loss is better than a $250,000 to $1 million loss. However, no loss is the best outcome. Fire Avert can make that happen. I know many property owners that incur two to four kitchen fires a year. These fires have cost $60,000 to $2 million. Had the owners not had these kitchen fires, their portfolios would be loss-free. I am confident the premiums for these owners would be at least 30% less without kitchen fires. All property owners budget capital improvements each year. The cost of the Fire Avert (listed on the website for $196 a unit) can easily be rolled in over a two- or three-year period. If the current success of these devices is an indication, Fire Avert will pay for itself through future insurance premium savings. I have no stake in this company. I am just a fan of the product and the owner/inventor, Peter Thorpe, a firefighter. His inspirational story and more about this remarkable device can be found at http://www.fireavert.com. If all apartment owners installed this product, placing insurance would be much easier, insurance premiums would be substantially less, insurance carriers would pay less in claims and, most important, lives would be saved.

In aviation, a concept was developed in the 1970s known as Crew Resource Management. The idea is that best practices require a team approach: While tasks may be delegated and shared, and one person does have command of the ship, other crew members should act as backup, and clear communication should occur. Before the research funded by NASA that led to CRM, the captain was indisputably in command of the aircraft. NASA's research uncovered that the culture that developed around this concept prevented other crew members from speaking up when something was missed or wrong with the captain's actions or decisions. This culture -- that the captain was not to be questioned -- led to failures by other crew members to question the actions of the captain even though flying an airplane is complex, and details are critical. Miss a speed, an altitude, a bank indication, and bad things happen. It took time, no doubt, for CRM to become standard practice because the old guard that flew under the captain-in-command convention had to retire. Eventually, attrition pretty much removed the captain-in-command mindset of flight crews. Some countries, however, have a culture where a captain-in-command mentality is deeply embedded, and generational change is not enough to shift the culture. Vanity Fair in this month's issue ran a lengthy article on the crash of Air France 447 in 2009. One of the conclusions of the author is that CRM was thwarted by the French aviation culture, as evidenced by in-flight cockpit recordings. One of the reasons Air France 447 crashed into the Atlantic was that the crew working beneath the captain (there were two subordinate pilots) did not speak up, or do so with sufficient authority or alarm, to make the captain question his decisions. Cockpit recordings reflect that the captain also failed to communicate in clear, concise language, which increased the confusion in the cockpit as the plane plummeted from the sky in an aerodynamic stall. Contributing to the cultural devolution was the high state of automation of the aircraft. My former next-door neighbor retired as a captain for United Airlines after flying B-1 bombers for the Air Force. He commented on occasion that the big commercial jets were more like flying computers. Ninety-eight percent of the time, flying computers is much safer than flying manually -- the dynamics of flight are so complex and change so frequently that a computer can do the job better than a human can. Most of the time. Until something occurs that is outside the machines pre-programmed ability to deal with the situation. Then a human who is skilled at what is called "stick and rudder" flying (how it was done in the old days before auto-pilots) does a better job because the human mind can deal with anomalies. Unless that human's skills have degraded from overreliance on automation. Flying is a depreciating skill -- if one does not do it constantly the ability to actually "fly" the airplane degrades. And this is one of the things that contributed to the Air France 447 disaster -- the crew used all the wrong inputs manually flying the airplane because they had become overly reliant on the machine's taking care of itself. The crew was inadequately prepared to actually hand fly the airplane in a CRM environment. By the time the captain had resumed authority, panic in the cockpit interfered with communication, decision making and execution of commands. I tell people that learning to fly should be mandatory education for professionals and executives because there are three basic skills in flying that are directly applicable to business: planning, decision making and communication. A failure in any one of those skills means disaster. Air France 447 demonstrates what happens when all of those occur simultaneously. “We now have this systemic problem with complexity, and it does not involve just one manufacturer," Nadine Sarter, an industrial engineer at the University of Michigan, said in the Vanity Fair article. "Complexity means you have a large number of subcomponents, and they interact in sometimes unexpected ways. Pilots don’t know, because they haven’t experienced the fringe conditions that are built into the system. I was once in a room with five engineers who had been involved in building a particular airplane, and I started asking, ‘Well, how does this or that work?’ And they could not agree on the answers. So I was thinking, If these five engineers cannot agree, the poor pilot, if he ever encounters that particular situation . . . well, good luck.” Workers' compensation suffers from complexity that begets poor communication, decision making and planning. When laws are created to "reform" the system, subcomponents are introduced that interact in sometimes unexpected ways, and system "pilots" don't know how to deal with these changes. This results in poor communication -- different forms are introduced to handle various subsystem requirements that may conflict with the overall direction of the case; poor decision making occurs because variables aren't recognized as potential outcomes; stakeholders (workers and their employers) can't plan because system degradation obscures destination. At the same time, we seem to have become overly reliant on automation in workers' compensation -- not in the machine production sort of way, but in a "follow the rules" sort of way. Decision making authority is more removed from the front lines than ever before in favor of pre-programmed, automated responses. Consequently some cases end up catastrophic when otherwise the outcome should have been routine -- something happens along the claim history where the automated systems fail, but the "team" has not been routinely training for those failures, and autocratic controls are too deeply embedded in either culture or practice. The result is disaster. This industry does a lot of training on new issues, on new laws, on new techniques. But we don't do a whole lot of recurrent training on the basics, and there are barriers in the way of challenging autocratic rule that interferes with quality decision making. The good news is that most of the time cases, just like airline flights, terminate successfully and without damage to person or machine. The bad news is that when something does go wrong, we aren't well-equipped to deal with the situation before the case degenerates into catastrophe. When an emergency occurs in aviation we are taught to aviate, navigate and communicate -- in that specific order. Fly the airplane first. That keeps you from getting killed. Figure out where you're going next, so you can land that plane. Then tell someone on the ground (usually air traffic control) what is happening so they can muster as many resources as possible to help out. The crew of Air France 447 clearly violated all of those basic tenets. I submit that most "disaster" claims could likewise be avoided by following those basic tenets, if our culture bends to allow that to happen, and we train outside of automated systems on a regular basis.

Republicans are primed to take over Congress. A new FiveThirtyEight.com projection gives the GOP a 60% chance of winning the Senate this fall. And, according to RealClearPolitics, there's virtually no chance Democrats will take the House. If the GOP succeeds, public displeasure with Obamacare may be why. A recent poll from Bankrate.com found that more than two-thirds of voters say that Obamacare will play a role in how they vote in the coming election. Nearly half said it would influence them "in a major way." Of course, the next Congress has little hope of repealing Obamacare outright. The president would just issue a veto. Overriding it — though technically possible — would be difficult with an intransigent Democrat minority. A GOP majority should instead focus on incremental reforms with bipartisan support — like tax cuts, regulatory reforms and repeal of some of Obamacare's most unpopular mandates. That's the most effective way for lawmakers to move our health care system toward one that puts markets and patients at its center. Step one? Repeal Obamacare's medical-device tax. This 2.3% excise charge on all device sales is expected to collect $29 billion over the next decade, according to government data. Device firms are compensating by cutting jobs. Stryker, for instance, has cut 5% of its workforce — about 1,000 people. Zimmer Holdings has chopped 450 jobs. In total, Obamacare's device tax could kill 43,000 jobs, according to Diana Furchtgott-Roth, an economist at the Hudson Institute. Getting rid of the tax is a no-brainer. In March 2013, 79 senators — including 34 Democrats — approved a non-binding resolution calling for its repeal. It's time to make that vote binding. Second, a GOP-controlled Congress should strengthen health savings accounts. These financial vehicles allow patients to stow away money tax-free for medical expenses. HSAs are typically coupled with high-deductible health insurance. Patients bear the cost of routine care, and coverage kicks in when needed, like in the event of a medical emergency. HSAs give patients a financial incentive to avoid unnecessary medical expenses. Converting someone to HSA-based insurance drops her annual health expenses by an average of 17%. This year, 17.4 million people are enrolled in HSA-eligible plans — a nearly 14% increase over 2013. Among large employers, 36% now offer HSA/high-deductible plans, up from 14% five years ago. Annual HSA contributions are currently capped at $3,350 for an individual and $6,550 for a family. Congress should raise them to $6,250 and $12,500, respectively. And patients with HSA coverage through the exchanges should be eligible for a one-time, $1,000 refundable tax credit to be deposited directly into their account. Third, the new Congress should reform medical malpractice. Frivolous lawsuits and the threat of baseless litigation are increasing health costs and degrading quality of care. Excessive malpractice suits drive "defensive" medicine, in which doctors order unnecessary procedures and tests simply to shield against accusations of negligence. This practice costs the country an estimated $210 billion every year, according to PricewaterhouseCoopers. Injecting common sense into the medical tort system would bring down that bill. Earlier this year, the House Energy and Commerce Committee passed a bill that restricted lawsuits against doctors by, among other things, limiting non-economic damage judgments to $250,000. It was effectively ignored once it moved out of committee. Republicans should dust it off and pass it. Finally, the GOP should repeal Obamacare's employer mandate, which slaps midsize and large companies with a fine if they don't provide sufficiently "robust" health coverage to full-time employees. The mandate is destroying jobs. Employers are holding off on hiring and ratcheting back workers' hours to avoid additional insurance costs. A Gallup poll found that 85% of businesses are not looking to hire. Nearly half cited rising healthcare costs. There's ample political support for repealing the employer mandate. The administration has already unilaterally — and maybe illegally — delayed its implementation. Several prominent backers have openly called for repeal. All of these reform ideas are imminently actionable. They could find broad bipartisan backing and avoid a veto. Most importantly, they would move U.S. healthcare closer to a consumer-driven system, with patients empowered to control their own spending and market forces pushing costs down.

A divided Workers' Compensation Appeals Board has issued its long-awaited en banc decision to the defendant’s appeal in Dubon v. World Restoration and substantially modified its prior en banc holding to limit the ability of the WCAB to decide medical issues only in cases where utilization review (UR) is untimely. In doing so, the WCAB completely retracted its prior holding that UR decisions that were “procedurally deficient” were subject to WCAB jurisdiction to address medical issues. In reversing itself, the WCAB effectively disagreed with its own rule ADR 10451.2 to the extent it made such procedural issues the subject of WCAB review. The new holding of the WCAB, decided on a 4-1 vote, with Commissioner Lowe concurring and dissenting and Commissioner Sweeney dissenting, is set out as follows: 1. A utilization review (UR) decision is invalid and not subject to independent medical review (IMR) only if it is untimely. 2. Legal issues regarding the timeliness of a UR decision must be resolved by the Workers’ Compensation Appeals Board (WCAB), not IMR. 3. All other disputes regarding a UR decision must be resolved by IMR. 4. If a UR decision is untimely, the determination of medical necessity may be made by the WCAB based on substantial medical evidence consistent with Labor Code section 4604.5 The decision provides a substantial change from the former broadly worded opinion giving wide discretion to trial judges to find UR defective based on multiple defects beyond timing. Workers' compensation judges (WCJs) in the interim had a field day finding such perceived “procedural defects” -- some of which, based on WCAB panel decisions, appeared to be very minor -- a basis to assume jurisdiction over medical care. The WCAB, in removing the ability to review UR-based issues other than untimeliness, emphasized the language in SB 863 that medical issues should be decided in UR and IMR and not by WCJ: “Commissioner Sweeney suggests that a UR decision that does not comply with the mandatory requirements of section 4610 is not a decision subject to IMR. (See § 4610.5(c)(3).) We disagree. The legislative intent is clear. IMR is the sole mechanism for reviewing a UR physician’s opinion regarding the medical necessity of a proposed treatment. Consistent with this, we hold that where a UR decision is timely, IMR is the sole vehicle for reviewing the UR physician’s expert opinion regarding the medical necessity of a proposed treatment, even if the UR process did not fully comply with section 4610’s requirements….With the exception of timeliness, all other requirements go to the validity of the medical decision or decision-making process. The sufficiency of the medical records provided, expertise of the reviewing physician and compliance with the MTUS are all questions for the medical professional….” The WCAB, however, has also concluded that IMR is limited to resolving medical disputes and is not authorized to address timeliness issues. Only the WCAB can decide if UR is timely in the absence of some statutory authority for IMR to consider the issue. SB 863 did not specifically address this issue; the board’s decision continues to rely on the decision of the California Supreme Court in Sandhagen v. WCAB, which held the WCAB had authority to resolve medical disputes where UR was timely: "Sections 4610.5 and 4610.6 limit IMR to disputes over 'medical necessity.' Legal disputes over UR timeliness must be resolved by the WCAB. (§ 4604 ('[c]ontroversies between employer and employee arising under this chapter shall be determined by the appeals board, … except as otherwise provided by Section 4610.5' (italics added)); § 5300 (providing that 'except as otherwise provided in Division 4,' the WCAB has exclusive initial jurisdiction over claims 'for the recovery of compensation, or concerning any right or liability arising out of or incidental thereto'); see also Cal. Code Regs., tit. 8, § 10451.2(c)(1)(C).)" The WCAB continued to emphasize that, on those occasions when the WCAB determines UR was untimely and therefore subject to decision of the WCAB, the decision is not automatically to award the disputed medical treatment but to require the decision to be based upon substantial medical evidence, with the applicant having the burden of proof. Dissenting Opinions There were two additional opinions in this matter. In a concurring and dissenting opinion by Commission Lowe, she agreed with the majority's analysis and holding in this matter but would have dismissed the entire appeal as moot because the applicant’s surgery has since been authorized based on further review. Commissioner Lowe noted that while she would “unequivocally concur in the majority holdings, I maintain that it was not necessary to reach the merits here.” Commissioner Sweeney, however, issued a strongly worded dissent indicating she would uphold the initial decision in Dubon I. Making essentially the same arguments that were outlined in the original decision she argues for WCAB jurisdiction to review medical issues on the much broader scale than the majority opinion. Comments and Discussion This decision essentially leaves the state of the law much the same as it had been before the first en banc decision in this case. While some defendants would occasionally raise the issue of WCAB jurisdiction to decide medical issues where UR was untimely, the issue did not come up nearly as often as the “procedural defects” the WCAB identified as a basis for the WCAB to decide medical treatment. Issues that had been raised to the WCAB included completeness of the medical record in UR, adequacy of the UR physician’s discussion, UR physician specialty, signature of UR by a physician (as opposed to the actual decision being made by a physician) and delay notices issued by a nurse rather than a physician. Based on the new WCAB decision, all of those issues are the kind that can be addressed in IMR when the full and more complete review of medical necessity is made. It will be interesting to see if this case is appealed further. Certainly, there is very little reason for the applicant attorney to take this case up as his client has received the requested treatment, and should he do so the argument for mootness of the decision would probably convince an appellate court that this case is no longer ripe for dispute. For defendant, the decision must be considered a substantial win. The WCAB has significantly pulled back on the very expansive decision of Dubon I, returning the worker’s compensation community to the status quo before Dubon I. It is probably worthwhile for the employer community to attempt to obtain appellate review of the issue of WCAB jurisdiction over untimely reviews, the urgency of that issue is not as great as the potential chaos that Dubon I caused and was continuing to develop. Whether the commissioners were influenced by the flood of hearings challenging UR on every conceivable issue, real or not, is something only the majority knows. Certainly, the potential for reversal at the next level with the very thin justification for the original decision must, and should have, played a role in the reversal. The new decision of the WCAB is one that is certainly much easier for the WCAB to defend in the event the case goes up. The argument that the WCAB gets to decide timeliness of UR is probably supportable on the basis of the statutory scheme. The question of whether the WCAB’s remedy for such untimeliness, that a WCJ can then decide the issue, is probably still open to question at the next level but is certainly decided at this level for now. The takeaway from this decision is clear: UR needs to be timely!

Finance functions and actuaries face regulatory pressure to enhance reporting, markedly improve response times and provide increasingly demanding business partners with better and more actionable information about their businesses. Advanced analytics from IT improvements will help achieve the strategic objectives. Naturally, insurers should provide themselves with the best reporting platform they can reasonably afford. However, unlike in years past, cutting-edge reporting is just table-stakes, not a competitive advantage. Rather, competitive advantage will come from:

• An information strategy that enables transparent and compliant financial analysis and facilitates the ability to make informed business decisions.
• Information management capabilities that are foundational and support finance (broadly defined) and the business overall.
• Establishing a clear and practical vision: Identifying what will make the vision a reality will enable organizations to create a road map for change.
• Gauging the appropriate spending rate to determine how quickly the company can implement the roadmap.

Companies that do not go beyond their reliance on core reporting systems for their financial insight will be at a competitive disadvantage. There is no silver bullet for building needed capabilities, and companies will need to rethink their IT portfolio allocations and approach to spending. A steady investment will help companies build their strategic information infrastructure and effectively assess their needs on an iterative basis. The case for change Many insurance companies have invested in cleaning data for the purpose of reporting and analysis. Whether your company has started doing this or not, the following are important considerations to keep in mind:

• No organization has the financial resources to cleanse and array all the data and information it may ever want and make it available whenever it wants it. Efforts to boil the ocean fail.
• Companies will need to build capabilities in three areas:

–        Develop focused information strategies to support actuaries, financial executives and the other people in the organization who rely on financial and reporting information. –        Frame the future-vision build and fund a flexible road map for implementation. Ensure that the road map prioritizes the most important things first and that it can change to meet new demands and realities as they arise. –        Manage data and information, including data ownership, data governance and the ability to cleanse and provide the data in such a way that it can be presented in advanced tools and manipulated by end-users, while maintaining integrity in the source-information.

• Companies currently spend a great deal of time and money on information management, but the information tends to reside in disconnected platforms, projects, data-bases and tools. Investment levels need to match the company’s vision, and there needs to be an organizational awareness that combining disparate efforts into a cohesive information strategy can partially offset high costs.
• While finance and actuarial are the primary drivers of insurance modernization because of their needs to report and book results, there is a related need for all business partners to supply, receive, analyze and explain financial and related operating data.
• Furthermore, insurance modernization will create the foundation for an enterprise-wide range of data and analytics. HR, marketing, customer, distributor and operations information and analytics all will rely on the same core capabilities, disciplines and infrastructure. A uniform approach is what will provide a real competitive advantage.

Characteristics of a modernized company In a modernized company, a synergy of efficient, well-tuned processes with clearly defined expectations by stakeholder group exists between the risk, finance, actuarial and IT functions.

• Data – Data strategy is defined, and the organization executes its responsibilities according to this strategy. Rather than the traditional bottom-up data approach where the analysis capabilities flow from the collected data, data is strategically viewed top-down. The company identifies analytical needs and then adopts a data strategy that supports them. In a modernized company, data flows from a “single source of the truth” and can be extracted for analytical purposes with minimal manual intervention.
• Tools & technology – Tools and technology enhance the effectiveness of the finance and actuarial departments by providing them information faster, more accurately and more transparently than traditional ad hoc, end user computing analyses (usually performed in Excel). Specifically, tools that focus on data visualization can more effectively convey trends and results to management. Algorithms can be programmed to automate first-cut reserving analyses each quarter based on a rules engine (e.g., how loss development factors are selected or weighting methodologies), which can help point staff to business segments that may require deeper analysis in the quarter.
• Methods & analysis – Modernized organizations emphasize robust methods and analysis that yield superior insights over traditional methods. Examples include predictive analytics, which have transformed personal lines pricing and are currently being adopted in the commercial arena, and stochastic analysis, which adds additional statistical rigor to deterministic analysis and thereby helps actuaries transparently prepare reserve range indications that help management understand reserve risk.
• Organizational structure – Delivering superior business intelligence to management is often dependent on organizational structure and resources, and many companies are debating the merits of centralized, decentralized or hybrid organizational structures. PwC believes the organization of the future will align its capabilities as much as possible with the end-user, with IT serving as a backstop that can provide what end-users need.
• Spending – A concerted, cohesive insurance modernization program will require a change in the portfolio spending on information management. Spending will change from covering disparate efforts to strategically aligned ones.

The benefits The primary benefit of insurance modernization is better and more responsive reporting, actuarial analysis and the ability to support financial decisions. The second, and perhaps more critical benefit, is improved analytics and decision making for the rest of the organization. More specifically, insurance modernization:

• Aligns data management initiatives and governs the success of their implementation by clearly articulating both the company’s strategic mission and a measurable definition of success.
• Aligns projects and initiatives with desired outcomes by creating a road map with measurable milestones from vision to project completion.
• Facilitates prioritization of capabilities and initiatives based on overall goals and objectives, as well as realizable benefit.
• Measures the business value of initiatives and projects by linking desired outcomes (goals) and measuring progress against objectives.
• Enables measurement of program progress during rollout and informs the release planning and investment process by linking performance indicators and objectives.

The thought of potentially overhauling entire systems, processes and functional areas may understandably seem overwhelming for company executives as they set out to modernize their organizations. Modernization, indeed, is a long journey that will most likely have a high price tag. However, even if the ideal goal of modernization is holistic improvement, there is value in identifying the individual areas that most need modernization. As one area becomes more streamlined and efficient, then other areas will begin to reap the benefits. Critical success factors Business leaders are frequently frustrated by the fact that tactical initiatives’ results do not reflect their organizations’ mission or vision. Frequently, strategic goals are mistranslated or forgotten when it comes to defining and developing how to achieve them. In addition, efforts to improve organizational effectiveness tend to focus narrowly on the execution of existing tasks. As a result, functional improvement efforts often fail to result in meaningful benefits for the organization overall. Strategic business architecture (SBA), which we advocate using, translates high-level business direction into tangible goals and objectives. SBA documents business-driven priorities and decisions and aligns projects and initiatives with desired outcomes. As a result, business and technology leaders can prioritize initiatives and measures their progress. At the same time, operational business architecture (OBA) documents how functions and the overall organization realize business strategy and goals. OBA helps improve the functional core by identifying relevant stakeholders within the context of the larger architecture. OBA aligns operational stakeholders in a consistent way with the strategic and technical stakeholders that may not be involved in a given functional or process improvement initiative. Call to action – Next steps Insurance modernization is not about technology modernization for its own sake. It is about how technology can enable risk, actuarial and finance to share a “single source of the truth” and serve the entire enterprise with consistent, actionable information. Strategies to realize effective organizational modernization will require a holistic consideration of all data, methods/analyses, tools/technology, processes and human-capital requirements and will need to address the business and operational changes necessary to deliver new business intelligence metrics. Any weak links between these closely connected components will limit the effective realization of a modernization effort. If we view dimensions of insurance modernization as gears that spin together (i.e., efficiencies/ inefficiencies in one dimension(s) have repercussions for other dimensions), then improvements in any dimension will yield improvements in all dimensions and vice versa. Although a modernization vision should be holistic to avoid “digging up the road multiple times,” it is possible to tackle modernization issues in logical, progressive ways.

One of the most undertreated and misunderstood mental illnesses in the workplace is depression. The mood disorder is more than a passing feeling and is a major—but treatable—illness. Depression affects all walks of life and even a formerly outstanding employee can be affected. No job title, organization, or personality type is immune. It is likely that you, and every employee in your place of work, know someone who has struggled with depression, anxiety, alcohol or maybe even an eating disorder.  In fact, it is estimated that about one-third of those with a mental illness are employed. Nearly a quarter of the U.S. workforce (28 million workers ages 18-54) will experience a mental or substance abuse disorder, according to the National Institute on Mental Illness. How can employers address this issue? Early intervention and prevention programs can be fundamental in preventing progress toward a full-blown disease, controlling symptoms of mental illness and improving outcomes. Anonymous online screenings are an effective way to reach employees who underestimate the effects of their own condition and are unaware of helpful resources. A screening program can also work well for small organizations that lack official employee assistance program (EAP) services. Quality mental health programs for employees can reduce stigma, raise awareness, teach managers how to recognize symptoms and help organizations deal with depression and effectively and compassionately manage employees. How should employers address mental health in the workplace? Framing prevention efforts in light of nationally recognized days is a great starting point. Oct. 9 is National Depression Screening Day (NDSD), which is a day to promote education and awareness of common mental health disorders. This year, NDSD will focus on viewing and treating mental health with the same gravity as physical health. Your organization may provide free blood pressure screenings, or encourage weight-loss support groups. Treating mental health with the same importance as physical health reinforces that your workplace is one devoted to overall health of your employees. Encouraging a Mentally Healthy Workplace In addition to highlighting nationally recognized days, the following are several areas to consider when making your workplace mental health-friendly.

• Employee wellness programs that incorporate mental health
• Manager training in mental health workplace issues
• Support for employees who seek mental health treatment or who require hospitalization and disability leave
• An EAP or other appropriate referral resource
• Health care that treats mental illness with the same urgency as physical illness
• Regular communication to employees regarding equal opportunity employment, wellness and similar topics promoting an accepting work environment

The National Action Alliance for Suicide Prevention’s Workplace Taskforce has additional information and resources. Promoting National Depression Screening Day is a great way to introduce mental health topics with your workforce. From employee morale to the company’s bottom line, mental health can affect all areas of the workplace. When the mental health of one employee is made a priority, the entire organization will benefit.

I’ve spent a substantial amount of my insurance career reviewing workers' comp claim files in my capacity as a claim supervisor, a manager and a consultant for a large insurance broker. Those years allowed me to come to the following conclusion: Unless the employer is prepared, it's wasting its time sitting through a workers' comp file review. I know…pretty simple, right? While it seems like common sense, you’d be surprised how many employers don’t do their prep work. Many times, I’ve seen an employer sitting in the meeting nodding approvingly while the examiner provides a lackluster or imprecise update. The employers -- neither being experts nor adequately prepared -- don’t know the difference. And because they allowed themselves to be bamboozled, the file reviews are basically for naught. Don’t get me wrong. I’m not saying file reviews are total rubbish. The mere fact that you requested the file review shows you are somewhat interested and will most certainly motivate the examiners to update files. But a file review will only scratch the surface. You might as well call the file review, “Tell-me-what- you-want-me-to-know-in-three-minutes-or-less.” I always advocate for an actual file audit on occasion to supplement your quarterly file reviews on all high value/high exposure cases. When it comes to a file audit, there’s no place to hide. Stone after stone will be unturned so no doubt remains as to whether the file was handled right by the examiner. You see, oftentimes what the examiner tells you -- and what the file ultimately reveals -- are totally different scenarios. The audit isn’t a way to catch the examiner slacking but rather to find out if your money is well-spent on that particular examiner or, more importantly, on that third-party administrator or insurance carrier.  Basically, an audit answers the nagging question: Am I getting the bang for my buck? Back to file reviews: So what constitutes prep work? This is pretty straightforward. It all boils down to how much you know about the injured worker's current situation. Do you know his diagnosis and the effectiveness of the treatment regime? The treating physician? The return-to-work situation? Claimant attorney? Employee’s work history? Personnel history? Medical history? Did the examiner establish a plan of action and stick to it? Did he share that plan with you prior to the claim review? Most importantly, did the examiner continually move forward in regard to file management and expedition to closure? Some employers would say, “Why would I need to know all that when the file review will tell me everything I need to know?” If that’s the case, I’d suggest you go back and read the first paragraph. An employer can’t be an active participant if it doesn't what it's dealing with. You must also remember you’re most likely sharing the examiner with several other employers, and the examiner only has so many hours in a day. Her time will be focused on the employers who either squawk the most, or (and this is crucial) closely follow their files. Disinterested employers will always fall to the wayside. Yes, it will take time to keep up to speed on the claims. But it’ll pay dividends when it’s time for the file review because you’ll be a functioning part of the decision-making. So be interested. Be involved. And do you prep work. If you’re not prepared, it’s pretty easy for an examiner to gloss over prior missteps, especially if the employer is a workers' comp neophyte…and missteps cost the employer money.

If you are like most companies, the annual ritual of filling out the business interruption worksheet is a nuisance administrative task. The worksheet is generally required by the insurance company to track changes in the business and may be used as the basis to price your program.  Along with general industry knowledge, this worksheet may be the most important item that underwriters have at their disposal to price your risk. However, the worksheet is woefully inadequate to explain the intricacies of most businesses and is biased to err on the high side – which usually means a higher premium for you. For a routine that is regularly glossed over, the results can have some pretty substantial consequences.

The worksheet is meant to estimate the business interruption exposure for the policy period by estimating a value for the coming year. The business interruption value (BI value) is revenue minus certain specific direct variable costs, possibly adjusted to account for the payroll of for skilled wage employees who may be retained even if operations cease for a period. The result is an annual ratable BI value that assumes a complete outage for 12 months with no mitigation.

Only by coincidence can this BI value number come close to a realistic exposure to business interruption loss.

What does the ratable BI value tell the underwriter? In theory, the premiums required to cover the risk. How can this be when the number used is so unrealistic?

The underwriter would like to know more about your business. His problem is that he needs some mechanism to measure your risk against others in your industry. The BI values worksheet is an attempt to do this.

But, if the worksheet is so far off, what else can you do to tell your story?

You need to supplement the ratable BI value with information to differentiate your business from the pack. Developing realistic, worst-case loss scenarios, known as maximum foreseeable loss (MFL) and probable maximum loss (PML), and measuring them using a methodology that would actually be used in a claim is a better way to present your exposure. Measuring MFL and PML exposures will allow you to highlight your ability to mitigate losses through business continuity planning (BCM).

Just as improved physical safeguards generate lower premiums, adequate business continuity planning should also result in premium savings. This step is completely missed when providing the worksheet alone.

The effort to identify and measure exposures can be challenging -- after all, it is impossible to predict everything that might happen. History of actual claims and current industry experience can be very helpful. In most cases, it is best to tackle this project in manageable pieces and try not to do it all at once. For example, start with the largest or most troublesome businesses or locations and work down from there.

This may end up being a multi-year project that will require some dedicated effort from you and third parties. But chances are the cost of a project like this will be justified by allowing you to make more precise decisions on coverage and possibly reducing premiums.

The risk management practices of insurance companies have been scrutinized by rating agencies, regulators, analysts and others for years because insurers are financial institutions that deal with high levels of risk that, improperly managed, could not only hurt their creditworthiness but damage the financial well-being of their customers. As a result of this scrutiny, insurers have developed robust and comprehensive risk management processes, increasingly known as enterprise risk management (ERM). The ERM process covers the entire company, from strategy setting to core business operations and even relationships with external stakeholders. The maturity of insurers’ models means that there are some best practices worthy of emulation or adaptation by other industries. A selection of these is presented in this article: aggregation of risk, correlation of risk and opportunity risk management. Aggregation of risks Within the ERM process step of “risk identification,” insurers pay special attention to aggregation of risk. How much of the same risk can be prudently taken, and how much risk is represented by one catastrophic event? A simple example would relate to how much property insurance is being written in Florida, which is prone to hurricane losses. Or, how much workers' compensation is being written for one industry group that could be affected by a pervasive occupational health hazard such as mesothelioma. A proper assessment requires: 1) knowledge of what business is being written (sold), 2) fine-tuned understanding of that business (e.g., not all property in the state of Florida is subject to the same degree of hurricane loss), 3) recognition of what could be a potential risk issue within a book of business (e.g., workers in industries that still handle asbestos or operate in older buildings that have not been remediated). Having taken account of accumulations, insurers proceed to reduce their exposure to them. This can take many forms, including: 1) writing less business within the geography, customer segment or type of coverage making up the accumulation, 2) adding exclusions or sub-limits into the insurance policy to eliminate or reduce what is covered if the risk produces a loss, 3) requiring/ helping customers to make themselves less vulnerable to the risk and 4) developing rapid responses to minimize the extent of loss after the risk has created a loss. Moving outside the insurance company realm, any company can be subject to a variety of types of aggregations that can be above a normal, acceptable range of risk. Some examples might include: • Shopping center management companies with many centers in neighborhoods with poor economic outlooks • Banks with loan portfolios too heavily balanced toward governments or businesses in countries with low ratings for economic or political stability • OEM manufacturers that supply parts to only one industry -- one that may be in the process of technological obsolescence or some other life cycle dip • Consumer goods manufacturers with narrow product lines that are tied to one demographic group that is fickle or is becoming economically pinched Consider a large company with many silos, one that is not very good at sharing information and not tightly managed. What would happen if: 1) one unit of that company placed its call center in one of the BRIC countries (Brazil, Russia, India and China), 2) another unit opened a major manufacturing plant in that country, 3) another unit outsourced its IT code development to that country and 4) the finance unit invested in bonds from that same country -- and that country suddenly had a debilitating natural catastrophe, the government or currency collapsed or a nationwide problem developed? The point is that the company in the example should be aware that it is creating an aggregated risk potential by having so many ties to that country with varying exposures. Any significant concentration of geography, market segmentation or product offering can pose a risk to a business. What makes ERM so powerful is that all important risks get identified, whether insurable or not, especially strategic risks, and that these risks get addressed through mitigation action plans. It is surprising how often companies do not see the magnitude or variations of risks they are facing; an effective ERM process should prevent that blindness. Having identified an aggregation risk, companies can create mitigation plans for managing the risk. Mitigation tactics for aggregation risks in non-insurance businesses could include: • Diversification in geographic spread • Diversification in product portfolio • Diversification in customer segmentation • Innovation around uses of current products • Innovation around ways to be more profitable with current products such that margins could increase while sales decrease • Growth limits in risky areas; growth goals in less risky areas Correlation of risks Insurers have also become adept at identifying correlated risks. These are risks that may not appear to be connected but could be realized as part of the same event. Or they could be risks that have a cause and effect relationship on each other -- a domino effect. Correlated risks could dramatically strain an insurer’s ability to pay claims or remain fiscally viable. A hurricane, for example, might not only trigger covered property damage but also business interruption, supply chain, losses from canceled event and so on. Unless the insurer understands the totality of correlated losses, it cannot determine how much business it should write in any single hurricane-prone territory. Also correlated to the hurricane is an increase in the cost of repair and rebuilding property because of what is termed “storm surge” -- when goods or services are in greater demand after a major event. So, the insurer is not only paying out on claims from different policies (or lines of business) but may also be paying more than usual because of inflated costs. The concept of correlated risk is not very prevalent in non-insurance companies but could be just as serious an exposure. Consider an electrical power company. It knows that its dependence on an adequate supply of water leads to a risk that drought could affect its output capabilities and its customer satisfaction. The utility may not be fully cognizant of the correlated risks. Therefore, its risk mitigation and contingency planning may not include those risks. These might include: 1) the risk that government subsidies or support could be cut as the government attends to other issues arising from drought; 2) the risk that the cost of water or expense for routing the water supply will increase because of low water levels; 3) the risk that malfunctions will occur with power plant equipment because of lower or inconsistent water supply feeds, or 4) the risk that business customers that do not get sufficient water for their operations may sue the supplier. Without a robust ERM process to help identify both insurable and non-insurable risks, these risks may go unrecognized and unmitigated and without an effective response plan. In fact, all companies fear that “perfect storm” where many risks materialize at once that could damage and destabilize the business. Yet, some correlations might have been identifiable and action taken to ameliorate the risks, had an effective ERM strategy been in place. Opportunity risks There is risk in both taking and missing a potential opportunity. It may be too much to ask businesses to identify the risks and calculate the cost of not taking every opportunity that management decides against for strategic, risk-related or other reasons. However, it is expected, within an ERM oriented business, that the risks of taking or avoiding an opportunity are considered and addressed. When an insurer offers a new type of coverage for exposures such as supply chain, or cyber or reputation for the first time, the risk is great. That is because there is often no historical loss data upon which to estimate losses and price the product. For initial losses, there is no historical data to use in setting up an adequate reserve. Additionally, there is no guarantee that enough business will be written to create a large enough pool of policy holders (law of large numbers) to spread the odds of loss enough to produce favorable outcomes. The ERM process that insurers employ compels them to look for opportunity risks and to devise ways to ameliorate the risks. How do insurers do this? They build their risk mitigation action plans using expertise across their many functions. For new product risk, insurers might start out by: 1) offering low limits, 2) requiring higher deductibles or self-insured retentions, 3) buying more reinsurance or partnering with a reinsurer on the new book of business, or 4) charging prices that may appear to be high but that take into account the risk-adjusted cost of capital. In other industries, new products also pose opportunity risks. Key questions to ask include: Will the new product reach the required ROI set for it within the timeframe set? Will the new product cannibalize some existing product or products? Will the new product create issues related to product recall, patent infringement or other lawsuits? Through the application of a robust ERM process, all or most of the risks can be identified and mitigation action plans developed. This creates a safety net for the company and makes it more likely that it will get more comfortable and proficient at product innovation. There are so many types of opportunity risk beyond new products. ERM can help with each of them.

Ray Rice hit his fiancé in an elevator. The video is shocking, and the response by the NFL and Commissioner Roger Goodell has been infuriating to many. How this will all play out, no one knows at this point. It feels as if we are only in Act One. As a leader, you will almost certainly face at least one crisis during your career. In business, “stuff rolls uphill.” Knowing how to effectively handle a crisis may mean the difference between survival and devastation. The keys are:

• be truthful
• be pessimistic
• be definitive

In one of my previous companies, we created and ran a program for future Fortune 500 CEOs. Our faculty consisted of the most respected chief executives of a generation: Anne Mulcahy, A.G. Lafley, Jim Kilts, Carlos Gutiérrez, Jack Welch and more than two dozen others. One topic that would consistently come up in discussion was what should a senior leader do when confronted with a crisis. While their individual approaches were as personal as their leadership styles, here are four things that top CEOs stressed any leader should do in a crisis. 1. Get the facts. Quick. Ask your direct reports to get every detail of the facts out on the table. Then ask again. During a crisis, those who work for you at all levels of the organization will be reticent to bring you more bad news. But finding out later will often lead to a far worse outcome. Be relentless in your pursuit of what really happened. The good, the bad and the ugly. 2. Come clean with the truth, the whole truth and nothing but the truth. You must act as though all of the facts you have now discovered will eventually be public -- and they almost always will be. Isolated crises turn into full-blown organizational meltdowns not typically from the initial act, but from the response to those acts. Heed the lessons of Nixon and Clinton. It’s the cover-up that leads to impeachment. 3. Estimate the broadest possible fallout from the crisis. Then triple it. I remember a specific discussion with Welch and a small group of CEOs about this topic. Jack said that, in nearly every single public crisis he was confronted with in a five-decade career, the final damage was far worse than anyone had estimated at the onset. By being aggressively pessimistic about the outcome from the beginning, he found his leadership teams were much better prepared to deal with the ultimate reality of the situation. 4. Realize that someone big is going to fall. “I wasn’t aware of it!” “It was the act of a rogue employee.” As a leader, it is impossible to keep your eye on everything. You can’t control the actions of everyone you lead. So, when a crisis occurs, it is tempting to rationalize that it wasn’t your fault. How can you or senior people on your team reasonably be blamed? But, in the end, the organization and the public will demand definitive action, and someone senior will ultimately take the hit, including potentially you. The more you resist, the angrier the villagers will get, and the more heads they will go after. Make the difficult decisions earlier than later, or your options will quickly turn from bad to worse. Here's hoping you navigate your entire career without ever having to face a crisis. But the odds are against you. Be prepared to act truthfully and decisively, and you may just make your way through the storm.