Of the many definitions of governance, the simplest ones tend to have the most clarity. For the purpose of this piece, governance is a set of processes that enable an organization to operate in a fashion consistent with its goals and values and the reasonable expectations of those with vested interests in its success, such as customers, employees, shareholders and regulators. Governance is distinct from both compliance and enterprise risk management (ERM), but there are cultural and process-oriented similarities among these management practices. It is well-recognized that sound governance measures can reduce the amount or impact of risk an organization faces. For that reason, among others, ERM practitioners favor a robust governance environment within an organization. A few aspects of sound governance are worth discussion.  These include:  1) transparency and comprehensive communications, 2) rule of law and 3) consensus-building through thorough vetting of important decisions. Transparency  Transparency lessens the risk that either management or staff will try to do something unethical, unreasonably risky or wantonly self-serving because decisions, actions and information are very visible.  An unethical or covert act would stand out like the proverbial sore thumb. Consider how some now-defunct companies, such as Enron, secretly performed what amounted to a charade of a productive business. There was no transparency about what assets of the company really were, how the company made money, what the real financial condition actually was and so on. Companies that want to be transparent can:

• Create a culture in which sharing of relevant data is encouraged.
• Publish information about company vision, values, strategy, goals and results through internal communication vehicles.
• Create clear instructions on a task by task basis that can used to train and be a reference for staff in all positions that is readily accessible and kept up to date.
• Create clear escalation channels for issues or requests for exceptions.

Rule of Law Good governance requires that all staff know that the organization stands for lawful and ethical conduct. One way to make this clear is to have “law abiding” or “ethical “as part of the organization’s values. Further, the organization needs to make sure these values are broadly and repeatedly communicated. Additionally, staff needs to be trained on what laws apply to the work they perform. Should a situation arise where there is a question as to what is legal, staff needs to know to whom they can bring the question. The risks that develop out of deviating from lawful conduct include: financial, reputational and punitive. These are among the most significant non-strategic risks a company might face. Consider a company that is found to have purposefully misled investors in its filings about something as basic as the cost of its raw materials. Such a company could face fines and loss of trust by investors, customers, rating agencies, regulators, etc., and individuals may even face jail time. In a transparent organization that has made it clear laws and regulations must be adhered to, the cost or cost trend of its raw materials would likely be a well documented and widely known number. Any report that contradicted common knowledge would be called into question. Consider the dramatic uptick of companies being brought to task under the Foreign Corrupt Practices Act (FCPA) for everything from outright bribes to granting favors to highly placed individuals from other countries. In a transparent organization that has clearly articulated its position on staying within the law, any potentially illegal acts would likely be recognized and challenged. How likely is it that a highly transparent culture wherein respect for laws and regulations is espoused would give rise to violations to prominent laws or regulations? It would be less likely, thus reducing financial, reputational and punitive risks. The current increase in laws and regulations makes staying within the law more arduous, yet even more important. To limit the risk of falling outside the rule of law, organizations can:

• Provide in-house training on laws affecting various aspects of the business.
• Make information available to staff so that laws and regulations can be referenced, as needed.
• Incorporate the legal way of doing things in procedures and processes.
• Ensure that compliance audits are done on a regular basis.
• Create hotlines for reporting unethical behavior.

Consensus-Building Good governance requires consultation among a diverse group of stakeholders and experts. Through dialogue and, perhaps some compromise, a broad consensus of what is in the best interest of the organization can be reached. In other words, important decisions need to be vetted. This increases the chance that agreement can be developed and risks uncovered and addressed. Decisions, even if clearly communicated and understood, are less likely to be carried out by those who have not had the chance to vet the idea. Consider a CEO speaking to rating agency reviewers and answering a question about future earnings streams. Consider also that the CFO and other senior executives in separate meetings with the rating agency answer the same question in a very different way. In this scenario, there has clearly not been consensus on what the future looks like. A risk has been created that the company’s credit rating will be harmed. To enhance consensus-building, companies can:

• Create a culture where a free exchange of opinions is valued.
• Encourage and reward teamwork.
• Use meeting protocols that bring decision-making to a conclusion so that there is no doubt about the outcome (even when 100% consensus cannot be reached).
• Document and disseminate decisions to all relevant parties.

During the ERM process step wherein risks are paired with mitigation plans, improved governance is often cited as the remedy to ameliorate the risk. No surprise there. Clearly, good governance reduces risk of many types. That is why ERM practitioners are fervent supporters of strong governance.

One of the most powerful technologies for spying on cyber criminals lurking in the Dark Net comes from a St. Louis-based startup, Norse Corp. Founded in 2010 by its chief technology officer, Tommy Stiansen, Norse has assembled a global network, called IPViking, composed of sensors that appear on the Internet as vulnerable computing devices. These “honeypots” appear to be everything from routers and servers, to laptops and mobile devices, to Internet-connected web cams, office equipment and medical devices. When an intruder tries to take control of a Norse honeypot, Norse grabs the attacker’s IP address and begins an intensive counterintelligence routine. The IP address is fed into web crawlers that scour Dark Net bulletin boards and chat rooms for snippets of discussions tied to that IP address. Analysts correlate the findings, and then IPViking displays the results on a global map revealing the attacking organization’s name and Internet address, the target’s city and service being attacked and the most popular target countries and origin countries. Stiansen grew up tinkering with computers on a Norwegian farm, which led him to a career designing air-traffic control and telecom-billing systems. After immigrating to the U.S. in 2004, Stiansen began thinking about a way to gain a real-time, bird’s-eye view of the inner recesses of the Dark Net. The result was IPViking, which now has millions of honeypots dispersed through 167 data centers in 47 countries. Norse recently completed a major upgrade to IPViking, which has led to some stunning findings. Stiansen explains: 3C: Can you tell us about your most recent milestone? Stiansen: We have managed to do a tenfold (increase) to where we can now apply millions of rules in our appliance. 3C: So more rules allow you to do what? Stiansen: It allows us to have a lot more threat data and apply a lot more intelligence to a customer’s traffic. We can start applying more dynamic data. Our end goal is to apply full counterintelligence onto traffic. Meaning when we see a traffic flow coming through our appliance we will be able to see the street address, the domain, the email address used to register this domain. We can see who a packet is going to, and the relationship between the sender and receiver, all kinds of counterintelligence behind actual traffic, not just for blocking but for visualization. 3C: That level of detail was not available earlier? Stiansen: Nope. This is something we’ve pioneered. This is our platform that we built so we can enable this (detailed view) to actually happen. 3C: So what have you discovered? Stiansen: We’re learning that traffic and attacks coming out of China isn’t really China. It’s actually other nations using China’s infrastructure to do the attacks. It’s not just one country, it’s the top 10 cyber countries out there using other countries’ infrastructure. 3C: So is China getting a bad rap? Stiansen: Correct. 3C: Who’s responsible? Russia? The U.S.? North Korea? Stiansen: Everyone. 3C: What else are you seeing? Stiansen: We’re also seeing how hackers from certain communities are joining together more and more. The hacking world is becoming smaller and smaller. Iranian hackers are working with Turkish hackers. Pakistani and Indian hackers, they’re working together. Indonesia hackers and Iranian hackers are working together. 3C: Odd combinations. Stiansen: It’s weird to see these mixes because there’s no affiliation, there’s no friendship between the countries on a state level. But the hacker groups are combining together. The borders between hackers have been lifted. 3C: What’s driving them to partner, is it money or ideology? Stiansen: All of the above. That’s the thing, the people who have similar ideologies find each other on social media and start communicating with each other. And the people with the financial means and shared goals meet each other, that’s the evolution. And when they do that, they become really powerful.

When Texas announced an 80% drop in the cost of “N” drugs prescribed for new injuries, workers’ compensation stakeholders took notice. (Medications designated as “N” in the Official Disability Guidelines are not appropriate for first-line therapy.) Since that announcement, the implementation of a closed formulary has placed near the top of the list on several state legislative agendas. While the results being reported out of Texas are still fairly recent, the concept of a closed formulary is not a new idea in that state. Although changes in Texas’ work comp medical cost trends appear sudden, the process for achieving these was anything but. When HB 7 was passed in 2005, it created the Division of Workers’ Compensation (DWC) within the Texas Department of Insurance and, among other things, authorized “evidence-based, scientifically valid and outcome-focused” medical treatment guidelines and a closed formulary for prescription medications. These steps, along with the existing preauthorization and dispute-resolution processes, provided the solid regulatory infrastructure needed to implement a successful closed formulary. The Texas Closed Formulary (TCF) requires preauthorization for medications identified as “N” drugs in the current edition of the Work Loss Data Institute’s Official Disability Guidelines (ODG). These guidelines are updated on a monthly basis to encompass new medications and new research surrounding current medications. The TCF excludes not only “N” drugs but also any compound medication that contains an “N” drug, as well as experimental drugs that are not yet broadly accepted as the prevailing standard of care. Naturally, implementing these requirements would mean a substantial change in prescribing habits. (That was the point.) The problem was that immediate and strict implementation could mean that injured workers were suddenly denied previously prescribed medications without allowing proper time for weaning. To counter this problem, the DWC created a “legacy period” during which older claims would not yet be subject to the closed formulary, even while providers had to comply with formulary requirements when treating newly injured patients. This approach allowed providers to adapt to the new preauthorization requirements and adjust their treating habits over time in existing claims. At the same time, it ensured formulary compliance from the outset in new claims. After the conclusion of the two-year legacy period, all claims became subject to the TCF. In effect, this legacy period was a compromise that allowed Texas to begin implementing the TCF in all of its claims without hurting patients already on long-term prescription therapy. The first (and, to date, only) state to attempt to replicate the Texas model was Oklahoma. Oklahoma followed the Texas model closely and, in some places, added improvements. For example, while the TCF excludes all compound medications containing an “N” drug, Oklahoma's closed formulary excludes all compound drugs, regardless of ingredients. Unfortunately, there are also some drawbacks – the main one being limited application. Because the Oklahoma Closed Formulary is contained within the rules for Oklahoma’s new Workers’ Compensation Commission, it applies only to those cases within the commission’s jurisdiction. The commission has jurisdiction over all claims with a date of injury from Feb. 1, 2014, on. Older claims are handled by the Workers’ Compensation Court of Existing Claims, which has no closed formulary provision. This means that a doctor treating a worker who was injured on Jan. 31, 2014, and another who was injured on Feb. 1, 2014, will only have to abide by evidence-based treatment guidelines for the second worker. While Oklahoma has adopted medical treatment guidelines and taken steps to require preauthorization, these requirements are relatively new within the Oklahoma workers’ compensation system. As a result, providers, patients and payers are still adjusting to the new system, and there has been a fair amount of confusion. Implementing a successful closed formulary does not happen overnight. Texas started the process 10 years ago and has been consistently working to ensure that its reforms were successful. After taking the time to establish the necessary regulatory infrastructure, adopt treatment guidelines and create a logical solution to ensure a unified standard of care issue across all claims, the state is finally seeing clinical and economic benefits. As Arkansas, California, North Carolina, Tennessee and other states start thinking about replicating the results of Texas by implementing their own closed drug formularies, they would do well to have conversations about these principles first. This article was originally posted at: WorkCompWire.

"'We’ll all be rooned,’ said Hanrahan….” So goes the famous Australian bush poem by John O’Brien about the plight of farmers going from drought to flood to bush fire – one extreme weather situation after another. And though we are nearly 100 years on since that poem was written, we seem to be no further along in being able to predict weather with any certainty more than a few days into the future. In fact, extreme weather seems to be hitting more frequently and with greater ferocity because of the apparent effects of global climate change. The extended 2013 winter in Europe cost the economy there more than $7 billion – that is just from being cold for a month longer than usual. Extreme weather events have dominated the headlines, especially where they impinge on highly developed insurance markets such as North America and Europe. But from the perspective of the impact on human lives, the greatest risk lies in Asia and Africa, where a vast majority of people depend upon subsistence farming and there is very little penetration of traditional financial services. A number of governments in the region, in partnership with semi-government, educational institutions and private organizations, have established a range of programs to foster the development of sustainable microfinance and microinsurance services for the most at-risk segments of their communities. In India alone, there are more than 700 million farmers and farm workers who struggle with extreme weather risk every season. Building sustainable programs, now there's the trick! In one program in India that ran from the mid-'80s through to the end of the twentieth century, the cumulative premiums were $80 million, while the cumulative claims were $461 – hardly a sustainable proposition. In another program, a World Bank study showed that the microinsurance proposition was advantageous to farmers only in very extreme situations, so in most cases it was uneconomic for farmers to buy the insurance. From 2001, the Indian government has ensured the growth of microinsurance through a regulatory framework set up as part of the entry of private insurers into the market. Popular products in the sector are weather index policies, where payouts occur if rainfall is below a trigger level, in a particular area. The premium for these types of policy have proven to be expensive, but, with government subsidies and an education program, awareness and acceptability of this kind of financial service have grown in communities in rural India. Governments in China, Bangladesh, Indonesia and the Philippines are following suit, by introducing their own agricultural insurance programs. The major problem for insurers writing this kind of business is getting a good handle on the risk, to enable correct pricing. For the most part, insurers have to rely on historical data, which really only establishes a wide range of outcomes; with extreme weather trends continuing, insurers tend to be very conservative in risk pricing. This is where big data and analytics come in. In the commodities sector, at least one player has marketed reports that help predict the price of commodity futures. A case in point is the recent U.S. drought. By using National Oceanic and Atmospheric Administration (NOAA) and NASA remote Earth-sensing data, and coupling with advanced climate predictive analytics, the U.S. drought was predicted three months in advance of the U.S. government's declaring drought. The model enabled the assessment of the weather impact on particular areas of the U.S., as well as the impact on the particular commodity crop grown in that area (corn), and, consequently, a prediction of the price of the commodity at harvest time based on the expected overall yield, with drought factored in. Currently more than 15 petabytes of public data is produced annually that is global in nature, and the amount of data is set to increase to more 300 petabytes as more satellites come on line over the next few years. The computing power and technology to cope with huge data sets continues to improve each year with big data solutions. These rich data sources and new technology solutions represent an unparalleled opportunity for governments and communities to turn microinsurance from a subsidized, unprofitable activity, to a sustainable model to spread economic stability and prosperity. By enabling the weather risk to be more accurately modeled, underwriters will be able to price policies on a more accessible basis. Studies are showing that, where microinsurance is in operation, microfinancing is supported, as farmers can have certainty around being able to meet their loan commitments. These financial services are being used by farmers to improve their farms’ yield by investing in appropriate weather risk mitigation (irrigation, soil moisture conservation, etc) and productivity enhancements (planting automation, genetically modified seeds, fertilizers, improved pest control, etc). This virtuous cycle lifts this sector from depending on subsidies and government programs to being commercially viable and self sustaining. Definitely a win, win, win proposition. Far from the pessimistic, doom-mongering of Hanrahan, I see a world more in line with Peter Diamandis’s vision as outlined in his book Abundance: The Future Is Better Than You Think. I don’t know about you, but I for one would love the bragging rights to say my industry is helping to improve the lives of billions on planet Earth, while still making a commercially reasonable profit. Hey, I wonder if it’s going to rain today?

Life is unpredictable. So, even when doing very well in life, you are never sure what the future holds for you or your beloved family. Perhaps nothing  provides more peace of mind than securing your family’s financial future for the day “when you are not there.” The question is: How? It takes more than just saving

• You will have a hard time securing your family’s future just by saving and cutting expenses.
• A life insurance policy can fulfill your family’s immediate cash flow requirements.
• Your family can face no, or minimum, disruption financially if something happens to you.

Getting the best of an insurance policy

• You need a well-thought-out insurance plan and must pay attention to various aspects of a policy.
• Remember: Insurance is a long-term investment, and it’s difficult to make changes in a policy’s terms later.

Here are 9 things to bear in mind before buying or upgrading an insurance policy: 1. Figure out your insurance needs

• Your insurance needs depend on whether you are single, married with children, married without children, a single parent, an empty nester or a retiree.
• The first thing you need to figure out is who and what needs to be covered under your life insurance policy -- mortgage, utilities, healthcare, education of any children, etc.
• Ideally, your family, home and the status of your career should be reflected in your insurance policy.

2. What type of insurance do you need?

• There are two types of life insurance policies: term insurance and cash value insurance.

Term insurance

• It has no investment component.
• It provides coverage for a specific period at fixed premiums.
• Compared with cash-value insurance, term insurance has lower premiums
• You need to decide the amount and period of coverage – 10, 15, 25 or 30 years.
• In the event of the insured’s death, beneficiaries get the face value of the policy tax free.

Cash-value or permanent life insurance

• It covers the lifetime of the insured.
• Permanent life insurance is of many types: whole life, universal life and variable life.
• Such policies have a cash value – you are paid back a portion of your premium.
• Tax is not charged on such policies until you withdraw the cash value or surrender your policy before your death.

3. Make sure premiums are affordable:

• Keep your financial limits in mind.
• Go for a policy whose initial, as well as future, premiums are within your range.

4. Read policy terms carefully

• It’s imperative to carefully review the terms, coverage premiums, benefits, renewals and termination clauses of the policy before buying it.
• Understand the time period for providing the insurance benefits to beneficiaries in case of untimely death.
• Your beneficiaries should also have information about your insurance policy and its terms and conditions.

5. Study before dropping or replacing a policy

• Weigh the pros and cons before dropping your current policy in favor of a new one.
• Insurance companies charge to drop or replace your current policy with a new one.

6. Keep track of renewal policies

• Even if your health status changes, most term insurance policies can be renewed for a term or more.
• The premiums for renewed term policies are higher.
• Ask about the amount of premiums to be paid if renewal is sought after a certain age.
• Ask for the age up to which you can renew your term insurance policy.

7. Review your policy every few years

• You can upgrade your existing policy if your requirements change.
• Take inflation, current economic status, changing family size and future plans into count while reviewing your insurance policy.

8. Be accurate on your application

• Hiding personal health information or filing wrong information to get lower premiums can later lead to the loss of coverage and benefits.
• Insurance companies can deny full benefits to beneficiaries if you die of an illness you had before signing the policy and did not reveal.

9. Avoid solely depending on your employer’s insurance

• Life insurance should be 10 to 12 times of your salary, but your employer may not offer that amount.
• You’ll lose your coverage if you change your job or your health declines.
• Employer-provided life insurance tends to get more expensive as you age.

“Data makes all the difference.” This is according to a white paper published by LexisNexis, titled, “More Data, Earlier: The Value of Incorporating Data and Analytics in Claims Handling,” which states that carriers can reduce severity payments by as much as 25%. This is true for P&C carriers but especially true for workers’ compensation payers, where medical costs have steadily increased for decades. In workers’ compensation, medical services are not limited by plan design. The costs for medical now amount to more than 60% of claim cost, and they continue to climb. Nevertheless, data managed correctly can make all the difference and save real dollars. Everyone is talking about big data as a panacea. The notion is that organizing and analyzing copious amounts of data will produce new and improved insights. But it needs to be complete, consistent and accurate, and purity is rare, regardless of the size of the data set. Duplicate records must be cleansed and merged, for starters. More importantly, bad input processes must be altered upstream, where data is created. Standards for quality must be set and enforced. Automated imaging systems must be regularly calibrated to ensure accuracy while individuals who input data along with their managers must be held responsible for the quality of the data. In workers’ compensation, as with all insurance lines, comprehensive data is a fete accompli. Data has been collected digitally for decades, driven by claims payment requirements. In workers’ compensation, the claim is set up in the payer’s system and continually fed by incoming data. Mandatory reports of injury are submitted by employers and treating physicians. Bills from medical providers and others are streamed through bill review systems, then to claims systems throughout the course of the claim. Events such as litigation, court dates and bills paid are documented in the claims system. The PBM (pharmacy benefit manager) sets up an additional database related to the claim. Most payers also collect medical utilization review and medical case management data. The question is not the amount of data, but its quality and what can done with it. How is it applied? Unfortunately, in workers’ compensation much of the data remains in separate silos. The focus has been on collecting the data. Now the question is how to make data an operational tool that achieves the kind of savings results reported in the LexisNexis study. A different approach is needed. Making data a useful work-in-progress tool is a matter of first integrating the data across multiple data sets relating to claims. This is sometimes a tedious process but is invaluable. The request and funding must come from the business units, where anything related to data is not usually a priority. Business managers must begin to value the process of collecting good data and converting it to action. Once the data is collected and integrated, analyzing it to gain the business knowledge is the task. Business managers can learn to articulate for IT what they want and need for decision support and other initiatives. IT has a role in assisting business managers in understanding how to ask more effectively for what they need. Cost drivers and trends can be uncovered in the analyzed data. The power of data is best exploited when it is analyzed and made available to the business units as concurrently as possible. Intervention is far more effective when it is mobilized early. The data must be analyzed and presented to the business units in ways that can be easily accessed, understood and applied. Through analytics, the data is transformed to knowledge: knowledge about conditions in claims, events, costs and performance of vendors. Individuals can be prompted by the system to take specific initiatives based on the knowledge, thereby creating a structured and powerfully enhanced approach to medical management with measurably positive results.

In the book Trust Agents, authors Chris Brogan and Julien Smith chronicle the emerging power of employees who become the manifestation of brands, especially in the online and social media worlds. Scott Monty, who until recently was the global head of social media for Ford, is one example of an employee whose social media aptitude and thought leadership created a halo effect for his employer. I am living proof of the impact of this concept, as I purchased a Ford Flex in 2011 only after being given a ride in one by Monty at the SXSW interactive festival two years prior. The car (and, frankly, the brand) weren’t even in my consideration set before then. I recently traded in the Flex for a Lincoln MKT, so Scott Monty indirectly and unofficially has sold me two cars on behalf of Ford. The same dynamics exist in the insurance industry. Dynamic professionals who publish on InsuranceThoughtLeadership.com and elsewhere, who are active in social media and at conferences, who are associated with specific expertise, become (at least in part) the flesh and blood embodiment of their employers' brands. Despite some notions to the contrary, this is nothing but good news for those brands. Here's why: 1. Thought Leadership Is Owned by People, Not Logos Brands are not "thought leaders," because brands are solely a collection of the attitudes human beings have about a company. That's why I cringe when consulting clients sometimes tell me they "want the company to be known as a thought leader." In reality, the company can only be known as an organization that attracts and retains thought leaders. The actual expertise and leadership is possessed by the individuals and loaned to the company during the period of employment. 2. All Exposure Is Good Exposure I sometimes feel like companies are jealous of their thought leaders, believing that notoriety for their individual experts somehow comes at the EXPENSE of notoriety for the brand. In reality, it works in the opposite direction: Individual thought leadership provides awareness and credibility to the employer of the expert...always. 100% of the people who know Scott Monty know he worked for Ford, and it markedly changed how some of those people (including me) thought about that company and its products. 3. You Can Build a Bench I often hear from companies that they are concerned about encouraging their employees to grow personal brands and become thought leaders because at some point (the companies fear) the expert will depart, and all that work will have been for naught. At some level, companies are right to think this way. Very few employees are in it for life these days. However, thought leaders benefit from the power of the brands they represent the same way those brands benefit from the thought leaders' activities, and I believe this symbiosis causes many thought leaders to stay in their roles for a longer (not shorter) time than average. But, assuming that the thought leader will depart at some point, brands would be wise to not put all their expertise eggs in a single basket, and instead work actively to build multiple thought leaders in each division of the company. (This is why I encourage companies to have multiple/many contributors to ITL.) If you have several thought leaders representing your division or your brand, the departure of one becomes a mere wobble. 4. It Works for LeBron James Lastly, companies must think about this as the LeBron James effect. James went to Miami and became the best (and best-known) basketball player on the planet. His personal brand grew, and simultaneously shined a spotlight on the Miami Heat organization. Harmony. Then he left and took his hoops thought leadership back to Cleveland. Does Miami take a temporary step back in notoriety? They do, but they are still relevant, still in the playoffs, and are building new stars. But the most important questions are these: Does Miami wish they still had LeBron? Of course. But did they benefit from having him temporarily, and would they do it all again the same way? 100% yes. Find the LeBrons in your company and use ITL and other opportunities to build their expertise, notoriety and thought leadership. You may not benefit forever, but you'll definitely benefit.

The insurance marketplace is transforming, creating openings for some and challenges for others. According to the PwC Global CEO Survey of insurance industry CEOs, 59% of insurance CEOs believe there are more opportunities than there were three years ago, but 61% see more threats. The fact that people are living longer and have more wealth to protect presents insurers with an opportunity. The threats to insurers include mounting commoditization, the squeeze on margins and increase in self-insurance. These threats reflect both intensifying price competition and difficulties in conveying the true value of the coverage that insurers sell. Regulation is creating upheaval and more costs on the one side and diverting attention from other strategic challenges on the other. Disruption on multiple fronts Insurance CEOs believe that new regulation, increasing competition, technological developments and changes in distribution will have more of a disruptive impact over the next five years than CEOs in almost all other industries. Realizing the digital potential Insurance CEOs recognize how digital technology can help them sharpen data analytics (90%), strengthen operational efficiency (88%) and enhance customer experience (81%). Yet are they making the most of digital’s potential? Most insurers are still primarily focused on e-commerce -- doing what they already do just via a different channel. Leaders are using digital to engage more closely with customers, fine-tune underwriting and develop customized risk and financial solutions. They’re also pushing back frontiers in areas like real-time risk monitoring, more active risk prevention and lowering the cost of life and pensions options for younger and less wealthy consumers. Questions to ponder:

• Can you meet the challenge of a changing business environment, including from technology and other financial services (FS) companies?
• Is change a threat or an opportunity?

Seeking out complementary capabilities Nearly half of insurance CEOs plan to enter into a joint venture or strategic alliance over the next 12 months. Two-thirds see these tie-ups as an opportunity to gain access to new customers (much more than in other FS sectors). Business networks, customers and suppliers are seen as the most important focus for strategic collaborations. Examples could include affinity groups or manufacturers. A further possibility is that one of the telecoms or Internet giants will want a tie-up with an insurer to help it move into the market. More than 30% of insurance CEOs see alliances as an opportunity to strengthen innovation and gain access to new and emerging technologies. Yet two-thirds currently do not have plans to partner with start-ups, even though such alliances could provide valuable access to the new ideas and technologies they need. Attracting fresh ideas and skills A rapidly changing market requires a more diverse workforce with new talents. 80% of insurance CEOs now look for a much broader range of skills than before. At the same time, they recognize the challenges; 71% -- even more than last year -- seeing the limited availability of key skills as a threat to growth. Diversity is now recognized as a key way to enhance business performance, innovation and customer satisfaction. Nearly three-quarters of insurance CEOs have a strategy to promote talent diversity and inclusiveness or plan to adopt one. But nearly 40% have no plans to seek out talent in different geographies, industries or demographic segments. Questions to ponder:

• How could collaboration help you reach new markets and sharpen innovation?
• Is your definition of diversity broad enough to identify and hire tomorrow’s workforce?

Last week, the U.S. Equal Employment Opportunity Commission (EEOC) released its data for FY 2014 for enforcement litigation related to employment practices liability (EPL). Continuing a recent trend, the EEOC reported that the percentage of charges that contained retaliation claims rose to a record 43% in 2014. This is significant for EPL because the elements that an employee must establish with respect to a retaliation claim are quite different than the elements in a discrimination or harassment claim. Specifically, an employee does not need to establish that the employer discriminated against or harassed him to prevail on a retaliation claim. Rather, the employee only needs to prove that the employer took action against him in response to an internal or external complaint of discrimination or harassment that may deter the employee or others from lodging similar complaints in the future. The EEOC report highlights that, for EPL, preventing retaliation is just as important as promptly addressing workplace complaints of discrimination or harassment. A breakdown of all charges filed with the EEOC is as follows:

• Retaliation -- 43% of all claims
• Race (including racial harassment) -- 35%
• Sex (including pregnancy and sexual harassment) -- 29%
• Disability -- 29%
• Age -- 23%
• Religion -- 4%
• Color -- 3.1%
• Equal Pay Act -- 1.1% (but note that sex-based wage discrimination can also be charged under Title VII's sex discrimination provision)
• Genetic Information Non-Discrimination Act -- 0.4%

In fiscal year 2014, the EEOC obtained $296.1 million in total monetary relief through its enforcement program for cases that were settled before the filing of litigation. Monetary relief from cases litigated, including settlements, totaled $22.5 million. Takeaway: From a risk management perspective, the aggressive investigations and litigation filed by the EEOC only emphasize the need for employers to faithfully obey what we kindly refer to as Socius’ “Three Cardinal Rules of Employment Practices Risk Management”:

1. Continually update employment practices (i.e., adapt personnel policies to always be current with the EEOC’s strategic initiatives, litigation trends and new statutes).
2. Keep all management and supervisory personnel thoroughly and continually trained (this ensures a smooth implementation of procedures and education of management’s agreed strategies to respond to retaliation, harassment and other employment-related allegations), and
3. Further mitigate this risk through the purchase of a robust EPL insurance policy.

One of the biggest challenges faced by the U.S. homeowners insurance industry are the losses driven by hazardous conditions or poor maintenance. Field inspections help carriers learn more about the many unknowns about a structure and a property before they underwrite the risk. But the inspection report, which costs between $30 and $100, then gets archived and is never touched again. If the homeowner moves to a new carrier, it either has to conduct a new inspection or underwrite the risk without having all the required information. This scenario got me thinking about applying a "Netflix approach" to home inspections. You can buy movies that you want to watch, or, under the Netflix approach, you can, in essence, share the initial investment by renting them from Netflix. With a centralized investment, you gain a higher level of value than your individual investment would provide. Here are a couple of questions to consider:

1. A significant percentage of most U.S. homeowners insurance carriers’ books never get inspected because of limited budgets and underwriting resource constraints. Is there a cheaper and more effective way to learn more about the true condition of every property risk that is being underwritten?
2. Should the industry continue to look at inspection dollars as an expense and continue to operate in silos? Or would it be possible to monetize a carrier’s historical investment in its inspection program for the greater good?

The Inspection Data Exchange Network Those two questions provide a compelling reason for U.S. homeowners carriers to come together and consider an Inspection Data Exchange Network. In an imaginary world, this central data exchange platform would allow carriers to share address-specific historical inspection reports with participating carriers for underwriting purposes. In a majority of risks, the condition hazard profile of a given address is unlikely to change drastically within 12 to 18 months from the date of the original inspection. Depending on a carrier’s risk tolerance and inspection budget, the carrier could either order a new report or decide to use historical inspections. The carrier that would rent the historical inspection report would pay a fraction of the full price back to the carrier that contributed the original report. Proper measures would need to be implemented to ensure everyone gains appropriately from participating in the network and to avoid scenarios where a small group of participants subsidize the inspection investment for others. This Inspection Data Exchange Platform should ensure the "content creators/artists" -- in this case, the inspection vendors -- also benefit from this solution. Even carriers that order inspections based on predictive model-based solutions should be able to benefit from the reduced spending by renting a section of the inspection reports from the network. Imagine the benefit of monetizing something that was considered a sunk cost, while having the ability to get valuable insight on the true condition of all the policies on your book? Every $7,000 condition hazard-related claim that can be avoided goes straight to the carrier’s bottom line. The Inspection Data Exchange Network could be an additional lever that can help drive profitability in the homeowners line of business. Are we ready as an industry to do this?