As more and more customer insight leaders rise in influence within blue chip companies, it seems timely to consider this question: How can they use their insights to influence senior management? My last search on LinkedIn turned up nearly 50 customer insight directors (CIDs) in the UK (excluding research agencies, where this job title does not have the same seniority) and more than 700 of their American cousins, chief knowledge officers (CKOs), in the U.S. Whether or not you have risen to the seniority of being called a CID, you are, I hope, finding that your executives want to hear from you. So, when you get that call or regular appointment at the top table, what should you do? Here are four tips I learned through getting it wrong to start with: Find out what is on their agenda. To start with, don’t try to raise your own agenda topics, based on current work from the customer insight team. Instead, find out what is on their agenda. Bringing extra insight to one of their current dilemmas, a customer perspective that can be acted upon, will increase your influence. This is akin to Stephen Covey’s classic advice to focus on your circle of influence, not your circle of concern. Bring a regular customer update. Being the voice of the customer at the top table is almost a moral responsibility for any organization’s customer insight leader. However, it’s important to focus on where you can add value to what they know already. I found one approach was to take responsibility for the existing customer metric that they track (whether that be net promoter score (NPS), customer satisfaction (CSat) or customer effort score (CES)) and then enhance that program to bring a more granular understanding, which enables follow-up actions and evidence of impact. For example, additional questions captured in line with your learning of top concerns from qualitative research, plus analytics about what happens when the experience is changed. If your data and controls are sufficient, you may even be able to evidence retention rate impact from customer experience improvements and, as a result, provide direct financial benefit. Bring a regular commercial update. While not as expected from customer insight teams, an update on the performance of our targeted leads, direct marketing, etc. helped changed the perception of customer insight to being a commercial team. This was further improved by taking responsibility for measuring marketing effectiveness (with a combination of econometrics and other methods) and by sharing commercial targets. Once the top team realize how much of top line performance and retention impact is actually driven by targeting and insight-led media mix, the demand for updates on these parts of balanced scorecard increases, as does the team’s reputation. Update jointly with marketing and operations. Most of the CEOs I have known over the years are looking to see the kind of behaviors from their leadership population that give them confidence in their leadership pipeline. One of these is the ability to take a cross-functional view, to not just be concerned with achieving your targets or the reputation of your function, but looking to the good of the whole organization. Updating jointly with marketing and operations and allowing them to take some of your glory is a way to demonstrate this. It focuses, rightly, on what you do with insight and shows your collaborative approach. I recommend taking this risk. I hope that helps. What have you found helps you have most impact at your top table and get those big business decisions to be increasingly led by customer insight?

Parenting in the modern world means worrying about how much time your child spends in front of a screen. Pediatricians may recommend only two hours of screen time a day, but kids actually spend as much as seven hours a day looking at TVs, computer monitors, video games, tablets, and cell phones. Study after study has linked those sedentary hours to the skyrocketing rate of childhood obesity in the U.S. I realize that it’s not realistic in today’s high tech world to restrict screen time to two hours, especially for teenagers. So here’s an alternative: How about harnessing some of that technology to make our children healthier? The need couldn’t be more dire. One in three children in America is overweight or obese, and obesity remains one of the biggest threats to the health of our children, both now and as they grow into adults. That’s why the Robert Wood Johnson Foundation announced that it will pledge $500 million over the next 10 years to expand efforts to ensure that all children in the U.S. -- no matter who they are or where they live -- can grow up at a healthy weight. Building on a $500 million commitment made in 2007, this brings our funding of this issue to $1 billion. To get the biggest impact for those dollars, we need to come up with fresh ideas, creative approaches, and new tools that will help us build a culture of health for our children, and their children. What better tool than the digital devices our children have already mastered? And adults can lead by example, because many of us have already embraced digital health tools. There are currently 17,000 mobile apps designed to improve our health; according to industry estimates, half of the world’s 500 million smartphone owners will have a health app on their device this year. Plus, some 70 million wearable fitness trackers were sold in 2014, and people are expected to buy another 160 million by 2016. Of course, having health apps and using them is not always the same thing. And getting kids to use digital technology and social media for health is yet another challenge. But it’s not that big of a leap from Snapchatting with friends, or searching YouTube and Vine, to sharing stats and photos about how many days you walked to school, vegetables you ate or miles you rode on your bike. Almost 95% of 12- to 17-year-olds in the U.S. have Internet access at home or school. Why not meet them in their online world? We already know it can work. Zamzee, a children’s online activity meter and motivational website designed by HopeLab, with feedback from actual kids (and funding from RWJF) is meant to get kids moving more. Research shows that Zamzee increased physical activity in kids by 59% on average over a six-month study period. There is a growing number of such digital health tools designed with kids in mind. The Weigh2Rock.com website, founded by a pediatrician, allows overweight teens, pre-teens and their parents to form support groups, share tips and track their personal fitness goals online. It also allows healthcare providers to follow the progress and interact with their patients online. Leapfrog’s Leapband, introduced in August, is a personal fitness tracker for children. Worn like a watch, it uses games to get kids moving and allows them to rack up points as they progress though the challenges. FoodnMe.com, a site that promotes healthy eating, has a fun SmashYourFood mobile app that lets kids smash or explode a variety of foods (virtually, of course) while learning about their fat, sugar, and salt content. Actually, this one is fun for adults, too I’d like to see a lot more of these digital health tools for children. My hope is that developers, parents, health professionals and coaches will start thinking more like kids. Or, better yet, ask some kids what technologies and apps would most entice them to embrace healthier choices. I’ll bet they’d come up with some pretty creative ideas. Let's start now. If you have some ideas about how to harness personal data, digital technologies and social media in ways that can help kids, and their families, get and stay healthy, please share in the comments. Because even $1 billion won't solve this problem without lots of help.

I was reading an article recently in an insurance technology magazine and was somewhat startled to see that an insurance executive said he was looking to customer house-holding (i.e., ability to pull together all of the insurer's customers living at the same address) to enable more sales. I agree that house-holding is important to increased sales (and better customer service, as well). I was startled because when I was at John Hancock in the mid-1980s we were challenged to come up with a house-holding solution. We wanted to be able to drive further sales, of course, but we also wanted to identify how many customers had more than one of our insurance products. I would have assumed that every insurance company did customer house-holding today (three decades later) just as every insurer is geo-coding every address in its core administration system, compensation system, financial system and other system records. (Well, I'm writing this on a Friday, so I allow myself to daydream a bit.) But the insurance executive's comment led to my thinking about... No Magic Bullet I have found through my decades of being in the insurance industry that insurers tend to expect technology vendors to deliver magic bullets. (For context, I am from the marketing/market research side of the insurance industry... not the technology side.) My clearest memory of this belief in magic bullets is from my time in the late 1990s at the META Group delving into customer relationship management (CRM). Salespeople told me that insurers considered "CRM" to be a dirty word. Insurers were upset that technology vendors over-promised and under-delivered about CRM's benefits. Putting aside that over-promising and under-delivering is what technology vendors do as a matter of course, I believe that a significant part of the blame concerning CRM rests with the insurers themselves. A Lot of Hard Work CRM requires a lot of hard work. This remains true whether it was the CRM solutions of decades ago or the current cloud instantiations. And I mean a lot of hard work by the insurers themselves. Insurers must hold themselves responsible for:

• the cleanliness of the data that flows into and is stored in their core administration systems, compensation systems and other operational systems. Not the technology vendors... the insurers.
• creating (and updating) authorization protocols for accessing, editing/changing and deleting customer data.
• identifying the "right" type of data to store and use in CRM systems. I'm thinking here of pictures, sound (phone calls) and video streams whether from customer- or insurer-initiated contact or insurers monitoring their customers' social media sites for information that can improve customer service, product development or target marketing. Insurers should also get customer opt-in to collect and use customers' social media data.

I could go on with the hard work involved with CRM, but there are many examples of other solutions that insurers should be using and that involve hard work: predictive analytics, big data, interactive visualization and geographic information systems (GIS), to name a few. My Point Is.... My point is that with every solution that technology vendors bring to insurers with their promises of "saving time," "reducing costs," "creating a competitive edge" or "improving customer experience," there is significant hard work involved ... that the insurers will have to accomplish themselves. There are no magic bullets ........................ Or am I off on a limb yet again? What do you think ... whether you are an insurer or a technology vendor supporting insurers? And how do you resolve these challenges?

Insurance modernization results in core business and administrative functions using commonly trusted sources of data to inform and enhance business decisions and reporting. The modernization journey will affect not just processes and technology, but also people and the organization. While modernization’s desired benefits may be clear – lower costs, greater efficiencies, better risk management, more effective use of resources and keener market insight – the path to realizing them is complex and needs effective management. The Case for Change Insurance modernization is much more than just leveraging leading-edge information technology. It is not only an operational effectiveness initiative or technology upgrade but also a transformational imperative that affects multiple corporate functions. Moreover, when properly executed, modernization delivers broad benefits, including improved management of financial and operational risk, as well as longer-term organizational viability. There is some concern that insurance modernization is expensive and disruptive and focuses on creating an idealized insurance organization. However, modernization is actually a transformational journey with sequenced milestones and measurable benefits that accrue over time. This incremental path to operational improvement requires systematic program management and sustained commitment. Accordingly, the roadmap for the journey should include a set of complementary initiatives that directly involve the risk, actuarial, finance and IT functions. This will enable an organization to adapt more easily to demographic, economic, social, regulatory and cultural changes. And, with an empowered program management office (PMO) leading the way, organizations are much more likely to realize their vision of the future. Characteristics of a Modernized Program Management Office (PMO) The insurance modernization agenda requires consensus across a much broader group of constituents than a singular initiative does and also requires a wide mobilization effort. Among the most pressing challenges is developing capabilities that enable cross-functional action and cooperative, multi-party decision-making. Modernizing also requires collaborative relationships between individuals and groups such as risk, actuarial, finance and IT that may not have had only limited interaction with each other in the past. In the journey toward a modernized organization, a PMO will play a key role in making the promise of insurance modernization a reality. It should not be an afterthought or considered just a “nice to have.” Because it plays such a large role in ensuring implementation, it is a vital part of any transformation. The modernized PMO function:

• Includes the “chief modernization officer,” a senior executive role that provides explicit leadership and governance over the selection and delivery of key priorities alongside C-level executives and members of the board’s risk committee.
• Is responsible for delivering on the vision by forecasting and mitigating roadblocks to success in a number of areas, including capacity and budget constraints.
• Owns data governance and drives the decision-making and consensus-building processes in the development of data and systems that provide commonly trusted sources of the truth to risk, actuarial and finance user groups.

Other traditional program management office responsibilities – such as stakeholder engagement to status reporting – remain important and may expand to drive delivery of other business critical initiatives. Decommissioning of systems, in particular, will be important to achieve modernization milestones. The Benefits Committing to the journey is the first step. The key subsequent challenge is maintaining alignment on how and when to manage the portfolio of projects along the modernization journey. Ensuring that the PMO has appropriate stature within the modernization initiative can help establish a firm foundation for realizing the following objectives:

• Defining program and project level benefits.
• Stakeholder empowerment to govern the decision-making process, engaging the right people at the right time to drive consensus.
• Translating insurance modernization goals into strategies and programs that deliver on the corporate vision and objectives.
• Creating the fact base that drives decision-making:
  • Getting reliable, comparable data from project execution teams to make assessments.
  • Integrating project data (timelines, resource needs, financials, strategic data) in a way that supports good program-level decisions and effective demand management.
• Understanding demand and managing projects in the best interests of the enterprise and protecting against risk to goals.
• Forecasting demand and effectively managing capacity, based on resource availability and skill and competency alignment.
• Understanding and estimating the true impact of resource, schedule or scope alternatives.
• Estimating and tracking project value and worth (including continuing benefits tracking).The PMO’s leadership and holistic management of the breadth of an organization’s insurance modernization initiatives entails striking a balance between today’s near-term requirements and tomorrow’s “must have” capabilities.

Critical Success Factors Ensuring that the PMO has the appropriate, high profile requires unilateral support by the organization’s senior executives. The following key success factors will enable the PMO to drive successful delivery of each critical milestone:

• Business executive buy-in, including C-level sponsorship and support from risk, actuarial, finance and technology leaders.
• Strong commitment from stakeholders to carefully follow the process, including compliance with governance processes, decision rights and accountabilities.
• Multi-year commitment, which entails organizational and leadership support of the vision and its financial requirements each year along the journey. This will require sound investments and tracking progress to targeted objectives.
• Agreed-upon and formal prioritization criteria, including making principles-based decisions and choosing scoring mechanisms that measure results against principles.
• Supporting toolset that enables project leaders to adequately forecast, diagnose and course-correct as needed along the journey.

In exchange for organizational support, the PMO leader must commit to soliciting feedback from stakeholders to continuously improve the process. Success will include remaining aligned to changes in the economic and business climate and adjusting decision criteria as appropriate. Next Steps To be successful, insurance modernization requires a holistic view. The first steps toward modernization include a comprehensive assessment of the current PMO’s charter, roles, capabilities and processes. The PMO may be the first area of investment to deliver on the opportunities in the broader modernization roadmap. Executive sponsors and leaders with significant stakes in modernization should contribute to determining the ideal executive-level candidate to lead the charge. This leader should not only possess knowledge, skills and abilities to fulfill upon day-to-day duties, but more importantly should possess the leadership qualities that embody the vision of modernization and the interpersonal network to drive consensus-building and change. From strategic decision-making to driving results, the modernization journey depends on the right leadership and governance to drive movement and performance among the “gears” and delivery on the vision.

In workers’ compensation, the medical provider network philosophy has been in place for years. Most networks were developed using the logic that all doctors are essentially the same. Rather than evaluate performance, the focus was on obtaining discounts on bills, thereby saving money. Physician selection by adjusters and others has frequently been based on subjective criteria. Those include familiarity, repetition, proximity and sometimes just assumption or habit. Often the criteria is something as flimsy as, "We always use this doctor,” or “The staff returns my calls.” The question is, which doctors really are best, and why? The first assumption that must be debunked is that discounts save money. Doctors are smart—no argument there. So to make up the lost revenue for discounted bills, they increase the number of visits or services to the injured worker or extend the duration of claims by prolonging treatment. To uncover these behaviors, examine the data. Amazingly, even doctors do not always make the best choices about other doctors. They may recommend doctors they know socially, professionally or by informal reputation, but they may not know how the doctors actually practice. They may not know a physician upcodes bills, dispenses medications or over-prescribes Schedule II drugs. The data will reveal that information. Doctors may be unaware they are adding to claim complexity by referring to certain specialists. Again, familiarity and habit are often the drivers. On the other hand, duplicity among providers is fraudulent behavior, and it can be uncovered by examining the data. Analysis of data can expose clustering of poorly performing, abusive or fraudulent providers referring to one another. The analysis may also divulge patterns of some providers associated with certain plaintiff attorneys. Treating doctors influence claims and their outcomes in other ways. Management indicators unique to workers’ compensation such as return to work, indemnity costs and disability ratings can be analyzed in the data to spotlight both good and poor medical performance. These outcome indicators are either directed by or influenced by the physician, and they can be uncovered through data analysis. Claims adjusters and other non-medical persons simply cannot evaluate the clinical capability of medical providers, especially doctors. Performance analysis must take place at a higher level. Evaluations for specific ICD-9 diagnoses and clinical procedures such as surgery must be made. Frequency, timing and outcome can be examined in the data in context with diagnoses and procedural codes, thereby disclosing the excellence or incompetency of physicians. Negative clinical outcomes that can be analyzed include hospital readmissions, repeated surgery or infection. Physicians associated with negative medical outcomes should be avoided. When analyzing clinical indicators for performance, care should be taken to compare only similar conditions and procedures. Without such discrimination, the results are dubious. Specificity is critical. When using data analysis to find the best doctors and other medical providers, fairness is also important. Provider performance should be compared only with similar specialty providers for similar diagnoses and procedures. Results will not be accurate or reliable if performance analysis is not apples-to-apples. Medical providers may question data analysis to evaluate performance, claiming they treat the more difficult cases. The data can be analyzed to determine diagnostic severity, as well. Diagnostic codes in claims can be measured and scored, thereby disclosing medical severity. Now is the time to step up to a much more dignified and sophisticated approach to selecting medical providers. Decisions about treating physicians must be based on fact, not assumption or habit. Fortunately, the data can be analyzed to locate the best-in-class and expose the others.

Psychosocial issues can influence chronic pain just as much as the biologic damage from an injury. Job or financial concerns, depression and anxiety, feelings of helplessness, family problems, enabling environments, substance abuse,and past physical or sexual abuse top the list of factors contributing to extended disability. Yet, workers’ compensation has traditionally downplayed psychosocial impacts on the claimant’s motivation to get better and focused instead on “medicalizing” treatment through physician visits, surgery, chiropractic care, a round of physical therapy and especially drugs that, ironically, often make the situation worse.

About 19% of the medical cost of a workers’ compensation claim goes to pharmacy, and a disproportionate amount of those drugs—between 21% and 34%—are opioids. Although neither the Food and Drug Administration (FDA) nor any other treatment guideline recommends opioids for long-term chronic pain, 55% to 86% of claimants are taking them just for that, according to the white paper “Opioids Wreak Havoc on Workers’ Compensation Costs,” published by Keith E. Rosenblum in August 2012.

Its research also found that one-third of claimants who start taking opioids are still on them after a year. Studies show that claimants who take opioids longer than 90 days are not likely to return to work. Patients using prescription painkillers for a long time typically suffer side effects, such as opioid-induced constipation, and experience related diseases such as kidney or liver damage from non-steroidal anti-inflammatory drugs.

There also are side effects from the medications prescribed to combat the side effects of the original prescriptions (for example, Nuvigil often is prescribed to wake patients from over-sedation). Ironically, opioids themselves can create an increased sensitivity to pain (hyperalgesia), thereby feeding the exact problem they are designed to solve. There needs to be a better way.

Behavioral Therapy

All patients bring psychological baggage—both good and bad—to their workers’ compensation injuries. Self-motivation, discipline, self-esteem, a sense of entitlement or victimhood, addictive behaviors and a true desire to get better are factors in recovery.

Some claimants recover and return to work with medical treatment alone; many do not. Claims with unaddressed psychosocial issues are the ones that go off the tracks, drag on for years and pile up costs. In workers’ compensation, “psych” is a four-letter word, but, unless you consider it in the treatment plan, the chances of full restoration are reduced.

Workers’ compensation is just beginning to venture into the psychosocial realm with cognitive behavioral therapy (CBT) to address opioid addiction. CBT's use is fairly new because of the deep-seated, industry-wide phobia of owning a psych claim. Payers fear never-ending psychiatrist visits and a new set of drugs and costs likely to accompany a psych diagnosis.

However, CBT is not the same as traditional psychotherapy. It is a psychotherapeutic treatment tool that does not produce an additional diagnosis. Plus, CBT is surprisingly affordable. Provided in-person or telephonically—both requiring extensive “homework”—it is usually limited to eight to 12 visits at $100 to $150 per visit. In many cases, a payer’s total investment in CBT is less than the claim’s monthly drug spending.

The science and success of CBT are still evolving, but some studies and anecdotal outcomes show that it is a helpful tool, both in workers’ compensation and the healthcare industry in general. The focus is on patients who seem stuck in their treatment plans. CBT works on the concept that a person’s thoughts are the primary cause of that individual’s behaviors and feelings. Thought patterns—not circumstances, events or other people—dictate the individual’s motivation and sense of well-being.

A psychologist or other therapist asks questions and poses statements to help patients open up and self-identify the psychological elements standing in the way of their recovery. In that way, CBT gets to the root of motivation issues. Some claimants hate their jobs or bosses and consciously or subconsciously resist returning to work.

Family members can be motivation-killers and enablers, as in a case where a claimant took so much Celebrex that he developed cirrhosis of the liver. He and his doctor wanted to reduce his opioid intake, which also was damaging his liver, but his wife resisted. She said he was easier to manage when sedated and had to be convinced that he would die prematurely before she acquiesced.

The belief that “I don’t deserve to feel better” churns the cycle of pain for some. Many pain patients have low self-esteem that stems from any number of factors, including: hyper-critical parents, absent or neglectful parents, past sexual or physical abuse or other traumatic experiences.

The goal of CBT is for the patient to self-identify the issue through prompting by a professional and then correct fundamental errors in thinking, such as victimization, generalization or catastrophizing.

To be clear, CBT does not cure motivation problems. Instead, this “talk therapy” helps patients identify barriers to recovery and replace negative thoughts with positive, empowering ones.

Functional Restoration

While CBT is provided as a standalone, it also figures prominently in functional restoration programs (FRP), which help patients work through psychosocial issues while detoxifying and participating in physical therapy and other exercise programs that increase their physical activity and capability.

The whole functional restoration process enables individuals to acquire the knowledge and skills to make the behavioral changes needed to take primary responsibility for their own physical and emotional well-being after an injury. The ultimate goals of FRP and CBT are to implement lifestyle changes that will last a lifetime and manage pain.

A functional restoration clinic should be multidisciplinary, preferably with an addictionology, orthopedic or pain management and rehabilitation (PM&R) specialty, a psychologist and licensed physical therapist acting as a team to customize and coordinate treatment for the patient. Other treatments such as yoga, chiropractic and biofeedback also can be included, along with services like vocational counseling. The best programs involve between 120 and 160 total hours of therapy.

An initial assessment should predict the person’s anticipated compliance, and the better functional restoration clinics have high denial rates (50% or more). Applicants may not be in good enough health, or they may lack the motivation to change. There’s no point in spending $30,000 on a program if the claimant refuses to work or accept responsibility for his health and outcomes. A pre-emptive CBT program can help weed out unmotivated patients.

Vital signs and physical capabilities need to be measured and objectively managed, and a baseline should be taken upon admission, followed by daily to weekly measurements and adjustments. Following patients upon discharge is just as important. Best practices show one year of follow-up, by telephone or in-person, achieves the best results in cementing lifelong change. Without consistent encouragement and personal instruction, claimants may relapse and turn back to drugs.

When selecting an FRP, access to an inpatient program or a strong alliance with a hospital or other inpatient detox facility can be critical. It cannot be overstated how vital the appropriate venue for detoxification is to overall success. Often, the treating physician who prescribed the drug cocktail in the first place is ill-equipped to develop a discontinuance strategy or provide the clinical oversight needed to wean patients off the drugs. Initial inpatient care may be needed if respiratory depression or cardiac issues could significantly complicate the weaning process.

Power of Yoga

Many functional restoration programs offer yoga, an interesting combination of physical and mental/emotional exercise. Studies show that it improves flexibility, strength and balance on the physical side. Its focus on “centering” helps participants calm their minds and relax their bodies, relieving pain and giving them an empowering sense of control.

An Austin, Texas, clinic saw such a positive response to its once-a-week yoga class that it expanded it to five days a week. Not only was patient satisfaction high, but overall functional outcomes improved. Patients say it helps them cope with pain, improves flexibility and increases their functionality, and they plan to make it a permanent part of their lifestyle. Yoga by itself is typically not sufficient, but incorporating it into the multidisciplinary functional restoration strategy can yield very positive results.

A holistic pain management approach can get runaway claims back on track. Weaning a claimant off an opioid-laden cocktail, which often does much more harm than good, is a great thing. Stopping the financial losses on a claim is a great thing. Returning a clear-headed, self-directed employee to work is a great thing.

Adjusting Mindsets

The focus of workers’ compensation, when it was originally created more than 100 years ago, was to return an injured worker to health and function and work as quickly as possible. Historically, it has been an insurance function; after all, workers’ compensation is part of the property/casualty industry. However, over time, workers’ compensation became part of the healthcare industry because restoring function and health is entirely related to the competency of the clinical and psychological strategies employed.

As evidence mounts that patient motivation is vital to actual recovery, it’s time for another transition from a “medicalization-only” mindset to a holistic approach that takes into account all the variables that affect recovery. It’s time for all stakeholders within the system to think more broadly and be open to new concepts that comply with best practices and correspond with treatment guidelines.

In other words, maybe the injured workers are not the only ones who need to have their motivations adjusted.

  SIDEBAR Prevention Is Key

Keep claims from going off track in the first place by having treating physicians conduct risk management before prescribing opioids. Some questions include:

• Has there been past substance abuse?
• Is the patient receiving narcotics from other physicians?
• How many other physicians are prescribing medications?
• Is there depression or anxiety involved?
• Did the claimant experience sexual or physical abuse (a prime predictor of addictive behavior)?
• Will the patient submit to random urine drug tests?

Additionally, there are a number of screening tools to identify potential drug dependency and addiction. Some examples include:

• For prior substance abuse: Diagnostic Criteria for Substance Dependence – DSM-IV from the American Psychiatric Association
• For potential addiction/dependence issues: Opioid Risk Tool (ORT) or Screener and Opioid Assessment for Patients with Pain  (SOAPP)
• For depression: Patient Health Questionnaire (PHQ-9)
• For general psychological analysis: Minnesota Multiphasic Personality Inventory (MMPI)

Unfortunately, most payers do not have a mechanism for reimbursing physicians for conducting a detailed risk analysis. This needs to change. Payers could assign a CPT code for physicians to use to conduct a thorough risk analysis. Spending a few hundred dollars up front can save hundreds of thousands of dollars on a long-term, opioid-laden claim. The assessment would also shed light on the physician’s capabilities to manage a chronic pain situation.

Thousands of insurance defense law firms across the country have built a steady business over the years by defending the claims of insurance carriers and self-insured clients.

The traditional business model for defense lawyers is undergoing significant change, however, as the personal client relationships that served as the foundation for many law firms are giving way to highly sophisticated litigation management programs maintained by carriers.

This article will explore the risks faced by insurance defense law firms in today’s competitive market, as well as risk management actions that can be taken to protect the law firm’s revenue base.

By way of background, it is important to understand that insurance defense law firms must typically be approved in advance by the litigation manager of an insurance carrier before they are assigned any cases. Getting on a “panel” of approved outside counsel can be a difficult process for two primary reasons. First, the market for panel positions is intensely competitive. Secondly, it is not easy for a law firm to determine who is in charge of a panel to get the initial introduction.

Panels of interest to a law firm will vary with the firm’s areas of expertise. Many law firms concentrate their practice in certain types of cases, like the defense of auto injury, inland marine, premises liability, product liability or professional liability. Other firms take more of a full-service approach by handling cases across a wide range of practice areas.

On the carrier side, multiple panels might be managed by a single gatekeeper or could each have a separate panel manager. The litigation management chain of command within an insurance carrier or self-insured varies from firm to firm, adding complexity to the law firm’s business development process.

While rates paid in the insurance defense market can be significantly less than a law firm’s “retail” rates, the attraction is in the high case volume that can result once a law firm gets named to an insurance panel as approved defense counsel.

Insurance defense law firms that have been approved as panel counsel for multiple insurance companies can inadvertently find that their revenue base is threatened by a shrinking number of insurance accounts over time. In the section that follows, we will address the primary revenue risks facing insurance defense law firms.

The Imperative of Client Diversification

Insurance is about risk management, specifically the process of identifying, assessing and quantifying risk. Attorneys practicing in the area of insurance defense may find it beneficial to apply some risk assessment principles to the business development efforts within their own law firms.

There are three primary practice management mistakes that managing partners make, as outlined below. The solution is to establish a business development process that seeks to reduce the risk associated with unexpected account loss.

Risk #1: Too Many Eggs in One Basket

A leading risk facing insurance defense law firms is that a small number of clients can represent a large portion of the firm’s revenue base. In fact, many law firms (large and small) rely on three to five primary insurance clients to generate the majority of their revenue stream. While reliance on a handful of clients is a common situation early in any law firm’s lifecycle, the lack of client diversity puts the long-term viability of a firm in great danger.

There is no hard and fast rule regarding the number of clients needed for the long-term success of a law firm. Rather, the managing partner should start to worry when the loss of any single client would put the firm at a serious financial disadvantage. For many firms, this might be when one client starts to approach 15% to 20% of total revenue.

While the loss of any client is not desirable, an account that represents only 5% of total revenue presumably can be offset relatively easily by the inflow of other small accounts.

A long-term negotiated agreement with one primary client can look appealing initially but suddenly turns into a major risk factor when the viability of the account comes into question.

Risk #2: Failure to Recognize Changing Dynamics Within the Insurance Market

The times they are a-changin, as Bob Dylan warned in his well-known ballad. Listed below are several real-world examples where insurance defense managing partners either lost or risked losing a major insurance account.

The Industry Consolidation Scenario

“We were the lead insurance defense law firm in our state for a respected insurance company,” a managing partner for a Midwest law firm recalls. “Suddenly, without any advance notice, our insurance client was acquired by a larger insurance company. Not only did we lose the work, but many of the claims managers at our insurance client lost their jobs in the post-merger consolidation.”

The “Out for Bid” Scenario

“After its founding, our law firm grew extremely rapidly in response to the needs of our primary client,” a founding member of a Southeastern law firm reports. “We opened new offices and added attorneys simply to keep up with the client’s case load. The quality and pricing for our legal services was widely acclaimed, but a new vice president of claims brought in by the insurance carrier after a reorganization decided that he wanted to put our work out for bid. We eventually retained our work, fortunately, but it was a hard-fought RFP process.”

The Attrition Scenario

“Our insurance defense practice has a 20-year history of success,” explains the managing partner of a six-attorney firm who spends his work day as one of the lead litigators. “Over the years, however, I did not have the time to develop new business while also serving the needs of current clients. We found ourselves overly reliant on one client, and without the benefit of an established business development process.”

The “No One Told Me” Scenario

“I suddenly noticed that we were not receiving the same level of incoming cases,” reports a practice group chair with a long history of providing specialized legal services to one of the country’s leading banks. “In researching the problem, not even our internal contacts could tell us who was now responsible for panel appointment decisions. It took many days to identify the bank’s panel manager and realize that they had decided to favor regional law firms over single-location firms like ours. We ultimately got back on the panel, but it was a very nerve-wracking process.”

Insurance defense law firms also face more routine risks, including:

• Departure of a partner who leaves with her book of business
• Retirement of a founding member who served as the primary rainmaker
• Insurance clients that decide to hire more in-house attorneys
• Centralization of the insurer’s litigation management team

Risk #3: Lack of Time to Expand the Book of Business

Once approved as outside panel counsel, law firms frequently enjoy a steady stream of cases that arrive at their doorstep with little additional business development effort.

Of course, panel members must perform satisfactorily, maintain good relations, be available around-the-clock for the infrequent (one hopes) emergency and offer billing rates that are attractive to the insurance company.

The challenge is that existing clients, particularly large accounts, can easily consume all available capacity within a law firm, leaving little time for courting new clients.

It is indeed a juggling act to manage the day-to-day requirements of meeting court deadlines and responding to client requests, while also trying to devote time to business development.

Looking at the risks, however, it may be easier to make time for marketing after considering what would happen if you lost one of your largest clients. The loss of a major account could result in lay-offs, as well as possible difficulty making lease and other overhead payments. In an extreme case, a law firm may need to quickly affiliate with another firm, thereby losing its independent status.

Minimize Revenue Risk With a Law Firm Marketing Committee

Insurance defense law firms or practice groups that plan for long-term success may find it helpful to create a marketing committee responsible for establishing panel counsel relationships among a broader range of insurance companies and other entities.

Marketing committee members can address issues like:

• Where to expand geographically. This can be a difficult question, because it may involve an acquisition or opening an office.

• Development of new insurance defense skill sets. A firm that handles auto cases may want to expand into related forms of transportation, like trucking, railroads or aviation.

• Exploration of adjacent market segments. Staying with auto for the moment, law firms could try to create business opportunities with fleet managers or delivery services.

• Growth in the self-insured market. Many large retail, municipal or corporate accounts self-insure up to a certain level (known as “self-insured retentions”).

The time to start looking for more clients is now! Attracting a new account takes time, so it is advisable to work on business expansion while the firm has a satisfactory level of business already in place.

In Summary

The best defense is a good offense. Paying close attention to existing clients, while maintaining an active business development process, is an effective way to minimize revenue risk in the insurance defense sector.

Start early. Marketing for insurance defense success is a long-term process that benefits from a continuous focus on business development campaigns.

An associate professor at Harvard Business School recently gave the world an inadvertent lesson on opportunity cost when he spent several days taking a family-owned Chinese restaurant to task, to the point of threatening legal action, for an apparent overcharge of $4. (Happily, he has since offered a sincere apology.)

Opportunity cost is the loss of benefit associated with an option that is not chosen, given a set of mutually exclusive alternatives. In our restaurant example, the professor gave up not only the refund that was immediately offered to him but also the benefit of the myriad other things he could have done instead of composing those emails – from advancing his research to enjoying a nice glass of pinot noir.  In the heat of the moment, it’s easy to overlook the possibility that what we’re doing right now isn’t, in fact, the most beneficial thing to be doing right now.

In my Value Consulting organization, we spend a lot of time with insurers exploring the value of transforming their business with a modern software platform. But recently, we’ve had some really interesting conversations focused on the converse of that: What is the opportunity cost of not moving forward? What is the cost of doing nothing? What is the cost of delaying a decision?

Let’s imagine that you’ve built a case for change in your organization. You’ve estimated that your company could realize a benefit of $12 million a year, beginning at the conclusion of a two-year project that will cost $25 million. But, with limited budgets and scarce human resources, approval for that $25 million could be a long way off.

Overcoming the big-ticket anxiety is difficult, but the math is pretty straightforward. In this simplified example, the investment pays back in year five, with a 10-year net present value of $31 million. So a choice in favor of the status quo will hurt your company by a net of $31 million over the next 10 years. Allocated evenly, that’s a loss of $8,500 per day – every day, including weekends and holidays – for the next 10 years. A six-month delay in moving forward will cost you $1.5 million. In the time you’ve spent reading this blog post, you’ve already lost 20 or 30 bucks.

Of course, an opportunity cost calculation is no guarantee that you’ll actually realize that benefit. The business case must be strong and realistic to begin with. The right software must be chosen, and the right decisions must be made during implementation to ensure success. The hard work of implementing the project must be done. But sometimes a simple, potentially cheeky data point is enough to start a much bigger, more serious conversation.

My recent post on functional capacity exams (FCEs) is a great lead-in to considering another level of related technology. Let’s explore electrodiagnostics as arguably a more powerful arrival in functional exams.

First, let's recap what quality means in a functional capacity exam: An FCE requires a process that is objective and consistent with the proper balance between specificity to body parts and sensitivity to critical indicators, including pain, range of motion and strength. An FCE must indicate illegitimate effort and attempts to “game” the test by subjects.

I submit to you that, the more a functional exam process can move away from human-tester interventions and totally separate testing steps, the closer it gets to nirvana. This construct is the essence of electrodiagnostics.

A routine FCE process involves various separate tests, including nerve conduction, range of motion and strength. Even with the most advanced equipment, this presents separate processes to assess for validity and to try and formulate into a whole-body issue. What if one test did all of this at once?

Contemplate the electrodiagnostic functional assessment (EFA), where a test subject performs a single test sequence on specialized EFA equipment that measures multiple factors. This provides instant objective credibility. Stated simply, combined factors of muscle strength, pain and range of motion and others need to align in a logical pattern as depicted by computerized readout, or the subject is immediately shown as self-limiting his capability.

The EFA is arguably more accurate than the common FCE in assessing work capacity. EFA has also been proven useful in more specific applications, such as determining the need for hardware removal in post-surgical cases with alleged recurring pain problems.

Consider further that, because the EFA is such a consistent test, it is highly credible as a comparison to prior baseline. The EFA used as a base-line test at time of hire can be saved as a data file without opening until an employee might have an alleged injury at some later period. At such occasion, a new EFA can be performed to compare with the baseline to see what, if any, alleged changes in capacity and pain threshold have occurred. This definitive comparison has held up in court cases, making the EFA evidence as worthy as an MRI would be in comparing pre- and post-injury pictures of a joint or body part.

Quick Tip: Learn More About EFA and the Possible Application to Your WC Claims

– Google “electrodiagnostic functional assessment” to review white papers and scholarly details around the EFA and its applications and case studies.

– For more information, search out Emerge Diagnostics, which has pioneered the application of EFA and which is making efforts to bring EFA to the forefront of medical and legal use. I do not promote specific vendors in “Quick Tips,” and this article is for informative purposes only. However, the EFA is currently a sole-source situation, and reviewing the studies and successes of Emerge Diagnostics is of educational benefit.

– If you want to be cutting edge, do a trial. Pick a WC case or two that is stalled without adequate determination of disability, causation, apportionment or need for surgery, etc. Work to get an EFA entered as evidence and see if the case can turn.

– If you do try EFA, let me know your results. I would like to continue related reporting on this and see how much future influence EFA might have on the larger WC landscape.

The breadth and depth of predictive modeling applications have grown, but, of equal importance, the percentage of participants reporting a positive impact on profitability has dramatically increased, Towers Watson's most recent predictive modeling survey finds.

Our 2014 Predictive Modeling Benchmarking Survey indicates the use of predictive modeling in risk selection and rating has increased significantly for all lines of business over the last year, continuing a long-term trend. For instance, in the personal auto business, 97% of participants said that in 2014 they used predictive modeling in underwriting/risk selection or rating/pricing, compared with 80% in 2013, a 17-percentage-point increase. For standard commercial property/commercial multiperil (CMP)/business-owner peril (BOP), the number jumped 19 percentage points, to 51%, during the same time period (Figure 1). In fact, the percentage of participants that currently use predictive modeling increased for every line of business covered in the survey.

Figure 1. The use of predictive modeling in risk selection/rating has increased significantly for all lines of business over the last year

Does your company group currently use or plan to use predictive modeling in underwriting/risk selection or rating/pricing for the following lines of business?

Sophisticated risk selection and rating techniques are particularly important in personal lines, where models have now penetrated most of the market. An overwhelming 92% of survey participants cited these techniques as essential drivers of performance or success. To a significant degree, this was also true for small to mid-sized commercial carriers, with 44% citing sophisticated risk selection and rating techniques as essential and another 42% identifying them as very important.

Even as the use of predictive modeling extends to more lines of business, there is an increasing depth in its use. Predictive modeling applications are increasingly being deployed by insurance companies more broadly across their organizations as their confidence in modeling increases. For example, 57% of survey participants currently use predictive modeling techniques for underwriting and risk selection, and another 33% have plans to use them over the next two years. Although a more modest 28% currently use predictive modeling to evaluate fraud potential, a sizable additional 36% anticipate using it for this purpose over the next two years. Survey participants report plans to deploy predictive modeling applications in areas including claim triage, evaluation of litigation potential, target marketing and agency management. These applications will favorably affect loss costs, expenses and premium growth.

THE BOTTOM LINE

Eighty-seven percent of our survey participants report that predictive modeling improved profitability last year, an increase of eight percentage points over 2013 (Figure 2). The increase continues a pattern of growth over several years.

Figure 2. Companies implementing predictive models have increasingly seen favorable profitability impacts over time

What impact has predictive modeling had in the following areas?

A positive impact on rate accuracy helps explain the improvement. In fact, the percentage of carriers citing a positive impact on rate accuracy has increased every year since 2010, when 70% cited a positive impact. In three of the past four years, the percentage-point increase in carriers citing a positive impact has hovered around 10%. In this year's survey, nearly all (98%) of the respondents reported that predictive modeling has improved their rate accuracy. Improved rate accuracy has both top- and bottom-line benefits: It boosts revenue because it enables insurers to price more effectively in very competitive markets, retaining existing customers and attracting potential customers with rates that accurately reflect their level of risk. At the same time, rate accuracy drives profit because it also helps carriers identify and write more profitable business,and not focus solely on market share and price.

More accurate rates also improve loss ratios, which have improved in parallel, according to our survey participants. In 2014, 91% of survey participants cited the favorable impact of predictive modeling on loss ratios, an increase of 14 percentage points over 2013. When premiums more accurately reflect risk, losses are more likely to be properly funded.

TOP-LINE GROWTH

The bottom-line fundamentals — profitability, rate accuracy and loss ratio improvement — identified in our survey are complemented by top-line benefits. Positive impacts were registered on renewal retention (55%), underwriting appetite (46%) and market share (41%).

THE NEXT STEP

Sophisticated risk selection and rating are cited as essential by many of our participants, but our survey indicates that, despite favorable trends, insurers are still far from leveraging sophisticated modeling techniques to their fullest, even in pricing. Two-thirds of participants aren't currently using price integration (the overlay of customer behavior and loss cost models to create metrics that measure different rate scenarios) for any products. A few are past price integration and are currently implementing price optimization (harnessing a mathematical search algorithm to a price integration framework to maximize profit, volume and other business metrics) for some products.

The disparity between what is viewed as the optimal use of modeling techniques and the current level of implementation needs to be bridged if insurers want to leverage predictive modeling as a competitive advantage to identify and capture profitable business. Increasingly, insurers are making greater use of analytics including by peril rating (which replaces rating at the broad, line-of-business level with specific rating by coverage), proprietary symbol (customizing vehicle classifications for personal automobile policies) and territorial and credit analysis.

Those insurance companies that can't employ sophisticated risk identification and management tools face the possibility of losing profitable business and adverse selection.

MORE PROGRESS IS STILL POSSIBLE

Profitability is hard-earned in the current competitive property/casualty market, and predictive modeling is recognized by a steadily growing number of companies as an invaluable tool to improve both top- and bottom-line performance that ultimately reflects in earnings growth. Our survey suggests that insurers are increasingly comfortable with predictive modeling and are using it in a growing number of capacities. However, participant responses also indicate that there are still many benefits offered by predictive modeling and other more sophisticated analytical tools that have not been achieved, such as treating data as an asset and more effectively using predictive modeling applications to improve claim and other functional results. Improving performance on these issues alone could make a significant difference in the profitability of insurance companies and offers all the more reason to explore new ways to benefit from data-driven analytics and predictive modeling.

ABOUT THE SURVEY

Towers Watson conducted a web-based survey of U.S. and Canadian property/casualty insurance executives from Sept. 3 through Oct. 22, 2014. The results discussed in this article represent the views of 52 U.S. insurance executives. Responding companies represent a significant share of the U.S. property/casualty insurance market for both personal lines carriers (17%) and commercial lines carriers (22%).