According to NCCI, the number of lost-times claims has been on a downward trend for more than a decade. With the exception of 2010, the number of lost-time claims has been declining over the past decade at a predictable rate of approximately 2% to 3% a year. The question, though, is whether this trend will continue.
Many analysts are predicting a rise in the number and frequency of lost-time workers' compensation claims. This certainly may be true for 2014 as the U.S. is finally emerging from one of the longest recessions in history, coupled with the resurgence of the domestic oil and natural gas industry. However, this upward blip will have little, if any, effect on the long-term downward trend. I see several reasons why, except for 2014, this downward trend will continue:
Decline in manufacturing jobs
It should come as a surprise to no one that the U.S. economy has been shifting away from manufacturing jobs and toward a service-based economy. Even before to the Great Recession of 2008, manufacturing jobs were disappearing at an alarming rate. 2005 marked the first year since the Industrial Revolution that fewer than 10% of American workers were employed in manufacturing.
According to the Bureau of Labor Statistics, U.S. manufacturing employment fell from 19.6 million jobs in 1979 to 13.7 million jobs in 2007. Since 2007, the decline has only increased.
It stands to reason that as this trend away from manufacturing jobs continues, increased jobs in the service sector (where safety risks are often reduced) will lead to reduced lost-time workers' compensation claims. Even if 2014 is an outlier, this trend will continue for the foreseeable future.
Increased Social Security disability claims
Obviously, people who receive Social Security disability benefits are either out of the work force or have a reduced employment capacity. While the last three decades have revealed a sharp increase in the number of Americans receiving Social Security disability, this trend has increased even more sharply over the past few years.
According to the Wall Street Journal, the number of Americans receiving Social Security disability benefits is up a whopping 42% since 2004. The actual number of Americans receiving Social Security disability benefits hit almost 11 million in 2013.
Data for 2014 shows that the number of people filing new Social Security disability claims has leveled off. However, this plateau is above the levels seen before 2013, and there is no indication that the number of such claims will actually decrease soon.
Increased focus on safety
Over the past decade, we have seen the creation of an entirely new business sector -- workplace safety. Driven by both the requirements of OSHA and the workers' comp savings realized by reducing accidents, this workplace safety business sector continues to make strides.
According to the Bureau of Labor Statistics, 4,383 fatal work injuries occurred in 2012, with 3.2 injury deaths per 100,000 full-time equivalent workers. This is a drop from the 2011 figures of 4,693 fatal work injures and a rate of 3.5 deaths per 100,000 full-time workers.
According to Amanda Wood, director of labor and employment policy at the National Association of Manufacturers, OSHA has played a role in this downward trend, but the bulk of the credit for these improvements should go to employers who are focused on a safe work environment. “I think those numbers show business’s commitment to a safe workplace,” Wood said in a recent interview with Safety and Health Magazine.
Insurance carriers have also jumped on the safety bandwagon. In years past, I would often speak with “the” safety professional with an insurance carrier. Now, carriers have entire safety divisions and even local safety professionals in every major market -- all dedicated to reducing the number of workplace accidents.
A changing definition of 'workplace'
Two technology trends are truly changing our definition of the workplace -- mobile technology and internet/cloud technology. Telecommuting is now commonplace. There was a day when claims adjusters were all working from regional call centers scattered across the country. Now, more often than not, a claims adjuster is working from his or her basement…as are scores of other 21st century workers.
If all of the data accessed by an employee is available in the cloud as opposed to an office mainframe computer, it makes sense to give workers flexibility on where the actual work is performed. Employers can lower costs by reducing the amount of real estate that must be owned or leased, while employees spend less time commuting -- and the average number of claims related to workplace accidents keeps dropping.
Combine this trend with the current emphasis on mobile technology and one can easily see why “getting to work” may become as archaic as saying “saddle up the horse.” While using mobile technology does increase the opportunities for accidents while driving cars, this is more than offset by the physical removal of a large number of employees from company-owned “workplaces” that present even more opportunities for accidents and injuries.
Bottom line: Except for 2014, we should continue to see great strides in workplace safety and a continued downward trend in workplace injuries.
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J. Bradley Young is a partner with the St. Louis law firm of Harris, Dowell, Fisher & Harris, where he is the manager of the workers' compensation defense group and represents self-insured companies and insurance carriers in the defense of workers’ compensation claims in both Missouri and Illinois.
It’s important to ask yourself if you really need a new platform like LinkedIn. It won't be the last platform asking you to contribute content. |
A “Congrats!” email from LinkedIn lands in your in-box, inviting you to “publish” through them.Your initial reaction: “Cool! Now I’ve got another platform where I can publish myself!”
But before you start banging away on your keyboard, save yourself valuable time by first following these steps:
Ask yourself: “Do I reallyneed to publish on LinkedIn?”
If the answer is “yes,” map out your individual posts, using as your guide the10 most frequently asked questions, or FAQs, you field from clients.
Finally, schedule when you’ll set aside time each week to do your writing.
Following these guidelines is a quick and simple way to get going -- if you decide to proceed.
Do you really want to publish on LinkedIn?
It might seem like a silly question. But I’ve coached businesses that have witnessed growth in their website traffic of more than 600% in 60 days using just a single medium. In other words, they didn’t use a social media platform or online targeted advertising, otherwise known as retargeting. They used email marketing.
And let's be honest: LinkedIn's strategy here is no different from that of Google+. As with any smart platform, the real agenda is to get people to post valuable content through on LinkedIn. That helps a platform like LinkedIn to build interaction, nurture a community and promote engagement.
The promise is: "If you write for us, people will find you more easily." As a result, more people will ultimately come to your website.
But it’s still important to ask yourself if you really need a new platform like LinkedIn. It won't be the last platform asking you to contribute content.
If LinkedIn fits your current marketing agenda, great. If not, fine. It’s a reasonable bet they’ll be around if you change your mind.
Use your Top 10 FAQs as a writing guide
No need to bang your head against the wall for material. Take five minutes and jot down the top 10 questions you get from clients on a weekly basis. Then write a clear answer to each question. Those will be your posts.
Bang out as many responses as you can over a stretch of 20 minutes or so. You could probably handle about one question in five minutes.
If you hate writing, dictate your answers to your phone's recording application, like DropVox or QuickVoice2Text Email. Then, find someone online to transcribe them. Fiverr offers a great service for $5.
Once you get the transcript back, just edit, copy and paste away.
You may be asking what to do once you’ve dealt with your top 10 FAQs. Move on to your so-called “should ask questions,” or SAQs. These are the questions your target audience should be asking, but aren't. The SAQs will help position you as a true expert, taking your audience to a new level of thinking.
Schedule your posts
To avoid getting overwhelmed, block out 20 to 30 minutes each week to do your writing. Choose a time when you've got a clear mind and are feeling “on your toes.”
That's all there is to it – if, of course, you’ve decided to publish on LinkedIn.
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Labeled “One of the greatest marketing minds in the insurance industry” by insurance executives and thought leaders, Jeremiah Desmarais is the top-ranked award-winning insurance marketing advisor, strategist and marketer with over 23 awards and recognitions for his revenue-boosting initiatives at companies such as Norvax/GoHealth, Applied Systems, United Healthcare, Aetna, Humana, and Allstate.
Is Paying Small Work Comp Claims Out of Pocket Ever Smart?
In all the scenarios I've constructed, paying out of pocket is hard to justify.|In all the scenarios I've constructed, paying out of pocket is hard to justify.
Many of you are well-versed in the importance of medical-only claims to the experience modification rating process. In the vast majority of states, these claims, also known as injury or IJ code type 6 losses, are reduced by 70% for the purposes of the mod calculation. This reduction is known as the experience rating adjustment (ERA).The ERA was first implemented in many states in the late '90s to encourage employers to report all losses, not just those involving lost-time claims. At that time, it was common for companies to pay, rather than report, their small claims to avoid having those claims count against the mod. NCCI and other stakeholders were interested in collecting all possible data for statistical actuarial purposes, so the ERA was introduced. More than 15 years later, a reduction of medical-only losses now applies in 38 states, but within the industry I still hear a fair amount of talk about employers self-paying small workers’ compensation claims -- even in ERA states. The many responses to the March 9, 2014, question “Do Employers Have to Report First Aid Claims?” on the Work Comp Analysis Group on LinkedIn illustrate how complex this issue can be. (Claims designated as “first aid” often have a different connotation from “small medical-only claims” in some states and to some carriers, but the discussion definitely overlaps with this article.)
All of this talk raises the question of whether we can analytically show that it saves-- or costs -- the employer to pay small med-only claims “out of pocket.” With the help of ModMaster, that’s what I examine in this article. Before we look at some scenarios, let’s not forget the following points.
Key factors to keep in mind
Self-payment of small claims is not legal in all states, or may be subject to fines or penalties. Specific rules are determined by state workers’ compensation statutes. For example, the Missouri Department of Insurance specifically suggests taking advantage of the state’s Employers Paid Medical Program to reduce the cost of work comp coverage. Clearly, it’s important to know the rules in your state.
Self-payment of claims also has implications at the federal level if injured employees are eligible for Medicare.
Employer access to state or “reasonable and customary” fee schedules is an important consideration in the cost of self-paid claims.
Perhaps most important, employers paying small claims out of pocket may risk liability if those claims should develop into something more costly.
A sample scenario in states where ERA is approved
For this analysis, I’ve imagined a relatively small business, Mike’s Machine Shop, operating in Missouri and Indiana (both ERA states) with these attributes:
An effective date of 1/1/2014
Approximately $1.7 million to $1.8 million in payroll each year, in codes 3632 and 8810, generating a minimum mod of 0.73
Three itemized losses, all type 5: $8,000, $12,000 and $45,000
The assumption that the shop had one $1,000 med-only claim per month in 2012, for a total of $12,000 in type 6 losses. (I chose $1,000 as a value that’s clearly med-only and yet above what might be considered a first-aid-only claim in some states.)
The good news is that self-paying creates a lower mod and therefore a lower premium. In 2014, Mike will save three points on his mod and $1,500 on his premium if he doesn’t report those 12 small claims. And, because those claims aren’t hanging around on his mod for two more years, he’ll save about $1,500 in 2015 and 2016, too. But we’re not done with the story! The bad news is that the self-paid claims costs add considerably – in this case $12,000 – to Mike’s Year 1 total cost of risk.
Let’s look at Year 2 of this scenario and imagine that Mike has instituted some safety improvements so that the shop has had just one small claim per quarter in 2013, for a total of $4,000 in type 6 losses. Let’s also imagine, for the sake of this analysis, that payroll and the other itemized losses have stayed exactly the same, as have rating values.
If Mike is not reporting small losses, then his mod and premium are the same as in 2014. If he is reporting the small claims, then the new claims in 2013 drive his mod to 0.99 -- one more point than the 2014 mod. Cumulatively, the 2012 and 2013 small reported claims are responsible for four points, or approximately $2,000 in premium. Because Mike’s self-paid claims costs are considerably lower this year -- $4,000 -- then the Year 2 total cost of risk differs only by $2,000 between reporting and not reporting losses. Still, though, Mike has a financial advantage to report claims, especially when considered over the cumulative two-year total cost of risk.
The same scenario in a non-ERA state
If Mike were operating in a state that has not approved the ERA reduction, then the impact on the mod of small med-only claims is certainly more significant, and it’s easier to see how the scales could tip in favor of not reporting. However, in this example, using all the same assumptions as above, the overall cumulative cost savings still favors reporting of claims.
In states that have not implemented the ERA reduction, the total cost impact of paying work comp claims out of pocket requires especially close analysis.
Summary
These, of course, are just a couple of scenarios, and there are myriad reasons that ultimate costs could vary from these simple examples. However, in all the scenarios that I’ve constructed (many more than discussed here), paying small claims out of pocket seems hard to justify in ERA states. Even in non-ERA states, deciding whether to pay small claims out of pocket demands a detailed analysis that accounts for all associated costs, such as any fines and applicable medical fee schedules. In all cases, knowing your state rules is imperative. Refer to your state’s Department of Insurance or to the NCCI’s Unit Statistical Reporting Guidebook for more information.
As an analytics enthusiast, I tend to believe that claiming all losses results in better data -- not just for the bureaus or insurance carriers but also for employers. And better data, of course, leads to more meaningful analysis opportunities. If an employer is working with an agent, broker or other risk management professional to analyze and act on their mod data, then why not have the complete picture and reveal all trends and drive the most appropriate operational initiatives toward improvement?
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Kory Wells became involved with workers' compensation almost 20 years ago as one of the first programmers of ModMaster experience rating analysis software. A frequent speaker and published author in both professional and creative genres, she’s now a senior adviser for P&C technology with Zywave.
Restaurants, pubs and diners all over the country serve hungry and thirsty people every day. From white tablecloth establishments to the local taco joint, almost all restaurants take credit/debit cards for the vast majority of their payments. One swipe, and customers go on their way. However, behind the scenes, restaurants nationwide are suffering at the hands of cyber thieves who target restaurants in an effort to steal their treasure trove of daily credit card information.
A recent Visa report indicates that restaurants now account for close to 73% of the data breaches in the U.S. Why restaurants? Low effort, high yield.
The smaller the better! Cyber thieves know that the smaller the establishment, the more likely it is to have weak security in place. With a single hack, a thief can reap a whole day’s worth of stored credit card data, while a continual harvest can produce months and even years of data. How is this possible? Thieves break through weak firewalls, take advantage of the all-too-common use of default passwords, hack into one web device (such as security cameras, payment processors, computers, DVR, WiFi) and then access all the other systems that are not segmented (all Web-based systems can talk to each other if not segmented). Once in, thieves can steal current data or install malicious software (“malware”) on the establishment’s system. This malware allows thieves to routinely access the credit card information that is collected each day. Failure by the establishment to detect and remedy this intrusion can lead to legal liability from customers alleging failure to adequately protect their credit card information.
Companies that have been breached often do not learn of the breach until they are notified by customers who have had their credit cards compromised or, even worse, when Visa/Master Card detects a pattern of compromised cards from one point of sale and contacts the establishment for reimbursement. Following a breach of customer credit card information, establishments will be required to notify affected customers of the breach. Notification is complicated and costly and must be done in a timely manner. Often, the effects of a breach include significant IT costs to remedy the breach, determine what information was compromised and repair the system. Lawsuits by customers and a significant drop in business revenue is also common, so there’s significant exposure to both first- and third-party loss.
Why are these types of breaches on the rise? Because hackers and thieves can earn quick cash. The going rate on the black market for credit card information is about $20 a card, and a single small restaurant can yield many dozens in a single day. Not bad for a day’s work! (Or not having to do a day’s work....)
Restaurant owners should take heed and take the security of their clients’ information very seriously. Establishments that process credit card information should review their security systems, update virus software routinely, train employees on security and best practices and consider a risk management plan that would include cyber insurance.
As restaurants are a growing target for cyber crime, if you have restaurant clients (or other clients that take credit card data) you should consult with them about their risks and liabilities. Based on their risk tolerance, consider whether the risk of being a victim of cyber theft is a risk they want to self-insure, or whether they would prefer to outsource this exposure via a cyber/network security policy. In today’s high-tech world, a well-thought-out risk management plan is invaluable and should work in conjunction with cyber/network security insurance, as no computer system -- regardless of size or sophistication -- is hack-proof.
A well-tailored cyber policy can provide a restaurant that experiences a breach with a forensic expert who will examine the systems to find out how and when the breach occurred, determine what information was compromised and assist in notifying the affected individuals. Depending on size and revenues, cyber policies can be as cheap as $1,000 and provide $1 million in coverage.
Hackers are just like the rest of us: They like to eat! Take precautions so your restaurant clients are not the ones that feed them. In the event that hackers get hungry at one of your client’s establishments, strong security controls and vigilance, combined with a well-drafted cyber policy, can prevent what otherwise could be a devastating blow to a small eatery, franchise restaurant or family diner.
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Laura Zaroski is the vice president of management and employment practices liability at Socius Insurance Services. As an attorney with expertise in employment practices liability insurance, in addition to her role as a producer, Zaroski acts as a resource with respect to Socius' employment practices liability book of business.
Informed risk-taking is what insurance underwriting is all about. It is also how consumers and business owners navigate every financial decision every day -- including whether to stick with their insurance carrier. Insurers often mistake in-force retention for “customer loyalty,” when the reality may be that a customer is actively shopping for better value. You cannot stop customers from shopping; you can only benefit from the fact that they want to learn more about where their money goes. The cost of insurance is top of mind to customers, and they are now intensely seeking to lower their insurance expenses, mostly via direct channel distribution over the Internet and via telephonic access to agents. Information drives decision making (data and analytics combined with underwriting judgment) in a process where accurate risk assessment, coupled with knowledge of expenses, lets an insurer add a profit factor to get to a market price. If the insurer’s cost structure and risk-taking appetite meet successfully with customers’ needs, then it should grow profitably. If not, then it either grows at a loss or only writes those risks in niches where it find itself competitive (either by choice or by happenstance). The need to drive down costs is the primary reason to adopt Internet and mobile-computing applications for distribution -- you can follow the consumers' own expense-minded shopping behavior as they are now accessing multiple on-line resources and then either buying online or contacting an agent (often with a mobile device). Insurance customers see thousands of their dollars disappear to protect them from financial ruin -- a “lesser of two evils” trade-off. No wonder they want to avoid spending more time and money than necessary. The traditional, intermediated marketplace for insurance keeps customers from caring which “big box” carrier provides their coverage -- whether for auto, home, business or life -- as long as the institution can pay any claims. In survey after survey, few customers even know who actually insures them. They only know that they are insured because they pay premiums. Given customers’ agnosticism about who underwrites their risk, and given the state of communications and transaction technology, insurers need to be prepared for changes in how insurance is distributed. Behavioral economics have shown repeatedly that customers shop, give their time and personal data, and then cease shopping for a period while covered under a policy. But we can expect the emergence of intermediaries who can shop for a customer on an hourly, daily, weekly, monthly basis for the cost of the customer opting in for a free service (data and receiving cost-saving promotions is the only fee). That intermediary will then auction the right to provide coverage into a competitive landscape of carriers looking for customers vs. customers accepting off-the-shelf products. With an active market and modern bill pay options, the new term of duration may be significantly less than a six-month auto policy, and now underwriters can more accurately price usage-based insurance (UBI) in real time. Carriers have not proven themselves yet worthy of real loyalty -- where the consumer won't toss them aside in return for 15% less in premium. Perhaps carriers will never be able to win that kind of loyalty, if insurance is truly a commoditized transaction simply waiting for progress to catch up. But if carriers aggressively push the best risk-assessment techniques to their current customers and prospects, then they may be able to win genuine customer loyalty by demonstrating that they are attuned to their customer’s individuated risk.
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A batter looks at the pitch coming at him and, in milliseconds, decides—am I going to swing or not? In the insurance industry, we are increasingly having to make fast decisions, so I segmented my customer base of carriers, reinsurers, wholesalers and retailers to find a handful of traits that you can quickly identify, so you can have elite performers by your side, whether you are looking for talent for an internal team or an outside adviser to bring a different lens to your growth strategies. Every client I’ve found to be doing really interesting work fit this profile. Smart, tough, curious
The executives who get that what has gotten them here may or may not be the answers to their evolution as an individual, a team or an organization, are smart. You cannot train, coach or elevate the performance of people who lack a certain level of intelligence. These are people who’ve been there and done it; they have credibility and grit.
They’re tough. They don’t accept fluff. They don’t need pedestrian advice. They’ve been there, they’ve seen it, and they have earned the acumen, not just read it in a clever op-ed piece. They need key people around them to constantly raise the bar on what they’re doing, not set the bar and forget it!
They’re naturally and insatiably curious. They want to know about the thought or practice leadership others can bring. They ask deeper questions, like, “We have a conservative business model. How do I develop a robust digital strategy that allows us to think and lead very differently?” That’s an example of thought and practice leadership.
The focus of interactions is very much on output, not input. The best executives don’t care about some CYA report. The outcome they care about is, “How am I better off because of your unique insights or independent perspective?” They care about benchmarking global best practices, about ols that help them collectively raise the bar on their human capital agility and contextual intelligence! They care about attracting and constantly developing a world-class organization – with diversity of thought. They care about finding a methodical approach to gain mindshare and wallet share, which often translates into market share. Those are all “what’s in it for them,” outcomes, not deliverables, meetings or countless conference calls to discuss a meeting that’s coming up about a meeting that we need to meet about! Above all, action These smart, tough, curious insurance industry executives share a fundamental trait: They are very action-oriented. That demands a high tolerance for prudent risk. They realize that a conservative business plan will seldom suffice and that the need for making bets is no longer a luxury, it’s a necessity. I was recently referred to the president of a global insurance company. During our second interaction, we had a chance to really delve into an intelligent conversation around what I call adaptive innovation – based on the ability to sense and respond to market trends. We soon got around to, “how do we introduce the team to some of your ideas?” I said, “A speaking engagement, an opportunity to share some of these insights with them, is always a good opportunity to plant a seed.” He immediately replied, “I’m getting my senior team together in Singapore in 10 days. I know it’s incredibly short notice, but could you be there?” That’s an example of an action-oriented mindset. He didn’t say, “Let me think about it, have my actuarial team analyze it, let me get 17 other proposals, discuss it with 18 layers of bureaucracy in my organization and get back to you in 2020.” I often say, perfection is the enemy of progress. And what I’ve learned in the past decade of advising truly visionary leaders is that power doesn’t corrupt; powerlessness corrupts! The elite performers of the insurance industry, as in the world of professional sports, have a bias for decisive action. They’re not afraid to make a bet. They know that not every hit will be a home run but definitely understand, and make sure their organizations understand, that lots of singles and doubles often add up to a winning score after nine innings. That’s how the best of breed stay ahead of the competition. How would John Madden tackle this? When you work with advisers, you should do a John Madden on their assessments. Circle in green what you love, things you want to focus on. Circle in red what you don't see value in. These circles will start conversations: Why did you cross that out? What is that belief founded on? The answers will lead to more questions: You say you have a great relationship with your customers, but you do you really know? Are you going to point to some stale survey you did five years ago? By the way, when your metrics are at their best is the most dangerous time to become complacent. That’s when you really want and need outside counsel. You grew by 22% last year. Good for you. How do you know it shouldn’t have been 34%? How do you know the growth will continue this year? Surround yourself with people who will push you with tough questions, and tell you what you need to hear vs. what you may want to hear. The 21st century is an arena in which you cannot afford to stay still. That agility has to come from the top. You can’t tell me you want your workforce to be nimble and agile, if you don’t demonstrate that agility yourself. Don’t stay on the bench, or you’ll attract other benchwarmers. Are you going to swing or not? Takeaways 1. If you segment the people with whom your work has had the most impact, you are likely to find the elite performers share certain characteristics. Figure out what those are, and aim to attract, retain and develop a lot more of them. 2. For me, “smart, tough, curious and ready to act” sums up the characteristics of my most amazing strategic relationships. 3. To put a scope to a strategic relationship, go at it like John Madden would—iteratively, in active conversation, with plenty of healthy pushback from both sides.
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David Nour is a growth strategist and <em>the</em> thought leader on Relationship Economics -- the quantifiable value of business relationships. Nour Group has attracted consulting engagements from more than 100 marquee organizations to drive unprecedented growth through unique return on their strategic relationships.
The rise of social media has leveled the playing field and even tilted it toward independent agents.
Suppose you walked into a store to look for a new television. If the store only carried one brand, would you shop there? Of course not, but that’s just what today’s insurance behemoths want you to do when you buy insurance.
With an abundance of information just a few key strokes away, today’s consumers demand choice. From automobiles to zucchini, consumers do research online before they make a purchase. Today’s policyholders no longer accept a single company quote. It’s hard to satisfy this consumer demand if you’re an agent who can only offer one product. It’s why the era of the captive agent is coming to an end. Only independent agencies that “meet” their customers online by leveraging their customers’ desire for information and choice will succeed.
The rise of digital media—the web, social media, the smartphone and other mobile devices—has leveled the playing field and even tilted it toward independents. Independent agents can now compete against the industry’s brand behemoths by making their brand even more powerful in their area. They can become local brand behemoths.
Digital tools enable you to provide a better experience to existing clients. Online lead generation allows you to more efficiently find new clients.
Improving customer experience
In a commoditized industry like insurance, the only way you can differentiate yourself is to provide excellent customer service. In the digital age, that means providing your customers with the opportunity to interact with your agency whenever and however they want. From policy changes to evidence of insurance, customers today would rather do things themselves online than have to wait to call your office when it’s open.
One of the most surprising things is how much people love self-service. Surveys show that companies of all types, including insurers, consistently get better service scores when they let consumers manage their account themselves.
Does your website allow customers to make policy changes, track their claim, get a quote or review their policy limits? Consumer tastes also require that your website be mobile-compatible. The smartphone has replaced the computer as the device of choice for consumers. A mobile-compatible site must be clean, because smartphone screens are small. Users must be able to navigate and read your site quickly on a smartphone. Is your company’s website easy to use on a smartphone?
Your website can’t be static and one-dimensional. People don’t want to read gobs of copy online. Your site should give visitors interactive experiences. For instance, display the icons of the companies you represent instead of listing them.
Attracting new customers
Use online resources to expand the reach of your marketing efforts.
LinkedIn provides a great example. Start by identifying people on LinkedIn whom you are connected to indirectly (i.e. through an existing contact but not directly) or are members of the same business group as you. These are your LinkedIn prospects. Next, go through your existing business network and identify a service provider like an accountant, photographer or other small-business owner. Ask if they would be willing to provide a discount to customers you refer to them. If they agree, send an email to your prospects identified from LinkedIn letting them know they can receive a discount. This creates a win-win for both of you.
Here’s a real-life example: I received an email from an executive coach introducing herself and offering me a 75% discount on professional executive photographs. All I had to do was contact the photographer, mention the promotion and schedule a time for my photo shoot. At the end of the email, the executive coach asked me to add her to my network on LinkedIn. While I didn’t need a professional photo taken, I was intrigued by this online joint venture.
It turns out that one of the executive coach’s referral sources is a professional photographer, and they created a photo day for the executive coach’s clients and prospects. The photographer could give a deep discount because he only had to set up once for all of the photos that day.
Thirty people set up appointments. Existing customers of the executive coach were impressed with the value she brought in addition to her coaching. Prospects were introduced to the executive coach in a positive way – you just saved me a lot of money and introduced me to a quality photographer. The executive coach attended the whole day and used the time in between photo shoots to introduce herself or reacquaint herself with past clients. It was a win-win situation for both the coach and the photographer.
Digital giveaways
No one gets excited about a birthday card from his agent. Instead, how about giving away a mobile app so your business can stay top of mind? An app that gets your name on a client's phone is a great way to stay in touch—and provide something of real value.
Facebook, Twitter, Tumblr and more….
You need to be on social media. Although engaging with social media takes time, what you learn online provides you with valuable customer insights. It’s like getting the questions to a test in advance. You have a real advantage.
Social media isn’t just about following people. Post or tweet information about how to prepare for catastrophes unique to your area so people can prepare for them. The more you engage digitally, the more relevant you become online.
You’re probably thinking: “I don’t have time for this!” You’re right! Find someone who uses these tools everyday – a student or a young person in your office and put that person in charge.
All the pieces have fallen in place for independent agents. Seize the digital moment now and prosper!
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Trying to catch up with the front-runners in usage-based insurance is likely to be costly -- even more so as time goes by.
Personal auto carriers are rapidly approaching a moment of truth when it comes to usage-based insurance (UBI) programs, in which a driver’s behavior is monitored via a telematics device. That goes both for insurers that have already launched such products, as well as those that have remained on the sidelines for a variety of reasons.
Early adopters of UBI are gaining a wealth of first-hand experience and insights that stand to provide a long-lasting competitive edge against insurers that until now have been undecided about whether or when to follow suit, as well as those either unwilling or unable to do so. The trailblazers are rapidly collecting a critical mass of data that can be analyzed to reveal driver behaviors that provide a basis for greater precision in underwriting and pricing.
For example, current rating methods would likely rate two drivers identically if they had the same credit scores, automobiles and demographics and lived in areas with similar geographic profiles. However, what if we knew through telematics observation that one of the insured persons drives her car one-tenth as much as the other, or at less risky times of the day? In that case, an insurer would be in a position to potentially leverage this new experiential information and underwrite the respective risks posed by the two drivers differently, as well as price coverage more accurately.
Having such first-hand driving data at their underwriters’ disposal could give existing UBI carriers a considerable leg up over those not using telematics, should the nonusers remain on the sidelines for long. For example, standard carriers could lose profitable policyholders who are cherry-picked by UBI-capable insurers that have acquired the capability to discern driver risk more granularly. Trying to catch up with the frontrunners in the UBI race is also likely to be costly—even more so as time goes on and the early birds get a bigger head start.
Of course, early adopters still face many challenges in executing a viable telematics program. For one, widespread consumer acceptance is no certainty, given privacy concerns for some and skepticism among others as to whether having their driving so closely scrutinized will benefit them in the end, or perhaps even be used against them in a number of ways—and not just by their auto insurer. Indeed, a January 2014 survey by the Deloitte Center for Financial Services exploring consumer use of mobile devices in financial services reveals that about half of the overall driving population is not open to the idea of UBI—at least for the moment.
In addition, while regulators have been supportive in the early stages of telematics development, down the road their acceptance may depend on a number of factors, including the eventual impact on rates for those who fail to meet whatever standards are attributed to “less risky” drivers. There may also be regulatory resistance if drivers face higher prices just because they choose not to be monitored, for whatever reason.
Wherever a carrier stands on the subject, we may have already reached the point of no return when it comes to telematics and UBI. The genie is out of the bottle. The industry as a whole is not likely to go back to relying only on its traditional methods of assessing auto risks. A growing number of carriers will likely adopt behavioral-based telematics as a way to at least supplement traditional underwriting factors.
Indeed, before too long the use of sensory technologies that permit behavioral underwriting by insurers is likely to be expanded beyond auto insurance into homeowners, life and health coverages, and perhaps even non-auto commercial lines as well, such as workers’ compensation. Smart homes, biometric monitoring, wearable technologies and the Internet of Things are all developing trends that could support and accelerate such initiatives.
But even if UBI is merely part of the natural evolution of auto insurance underwriting in an increasingly data-driven age, carriers of all stripes will likely need a strategy to respond to those that embrace telematics. Some will decide to go along for the ride, while the rest will have to figure out alternative routes to survive and prosper.
How big is the market for UBI products?
For a variety of reasons, UBI programs based on telematics data-gathering will probably not be for every driver. Indeed, our general hypothesis that only certain segments will permit their driving to be monitored by insurers was validated by Deloitte’s recent survey, which examined mobile technology experience, perceptions and expectations among financial services consumers. The survey, conducted in January 2014, drew 2,193 respondents representing a wide variety of demographic groups, broken down by age and income, split evenly in terms of gender.
Respondents were asked about their willingness to be monitored by auto insurers through an app on their smartphone, as opposed to having to install an additional piece of equipment into their vehicle, or having a car in which such equipment was already included by the manufacturer.
While most drivers who have signed up for telematics programs are currently monitored by a special device that’s part of their vehicle, going forward it’s likely that such technology could be largely displaced by a mobile app. Not only would the use of smartphones for telematics monitoring lower insurer costs for device distribution and retrieval as well as data transmission, the technology would also enable consumers to get more immediate feedback.
The survey identified three distinct groups among respondents when asked whether they would agree to allow an insurer to track their driving experience through their mobile device if it meant they would be eligible for premium discounts based on their performance. They were:
Eager beavers: More than one in four said they would allow such monitoring, without stipulating any specific minimum discount in return.
Fence sitters: The same percentage of respondents were a bit more cautious, noting they might get on board with UBI if the price was right, given a high enough discount to make it worth their while.
Naysayers: A little less than half said they would not be interested in having their driving monitored under any circumstances.
Among those who were open to the idea of telematics monitoring, about one in five expect a discount of 10% or less, with the vast majority anticipating 6% to 10%. About half expect between 11% and 20% (with 27% anticipating between 11% and 15%), while nearly one-third think they would be entitled to discounts greater than 20%.
When broken down by various demographic factors, age was the biggest differentiator. Nearly two-thirds of respondents aged 21–29 were willing to give UBI a go, compared with only 44% of those 60 or older. More than twice as many in the 21–29 age category than in the 60-or-older group (35% vs. 15%) said yes to telematics without stipulating a particular discount. This trend was somewhat less pronounced but still significant when comparing respondents under 30 with those in the 46–59 segment, among whom only 24% would allow monitoring with no stipulated discount.
Younger respondents were also less likely to expect a discount of greater than 20%—26% of the under-30 crowd compared with 38% of those aged 46–59. This could be because fewer older consumers are open to the idea of monitoring in the first place (perhaps out of “Big Brother” concerns, or the fact that they did not grow up in a fully Web-connected environment), and therefore would demand a bigger financial incentive before allowing an insurer to monitor their driving. Or it could be that the older segment, making more money on average than the youngest segment, is less likely to be won over by a relatively small discount—at least in dollar terms.
Income was not a differentiating factor, which was surprising considering that one might expect those with less discretionary funds to place more emphasis on how much they would save on their auto insurance premiums by signing on to a UBI program. Yet, only about 30% of both the highest (above $100,000) and lowest (below $50,000) income groups surveyed said the size of the discount would determine whether they would allow their driving to be monitored. Expectations about the size of the discount in return for signing on were also similar across income segments.
However, given the fact that higher-income consumers are generally considered potentially more valuable to insurers, seeing a significant segment of that coveted group open to the idea of UBI without worrying about the size of the discount could be a positive factor for telematics marketers.
While gender did not make a major difference in whether a respondent would allow insurers to monitor their driving, women did generally expect a higher discount for doing so, with 59% anticipating a rate break of 16% or higher (including 34% who expect more than 20%) compared with 48% among men (with 28% looking for a discount of 20% or higher).
What are the implications?
Looking at the big picture, with nearly half of the respondents in this survey indicating that UBI is not for them, a bifurcated market may eventually develop, with those who choose to be monitored representing a separate class of drivers who are underwritten in a different way, supplementing at first and perhaps later supplanting traditional pricing factors. In the end, serving the “naysayers” may become a specialty market niche for some carriers.
Still, this research, along with our interviews with insurer executives and media reports of UBI programs being tested or rolled out across the country appears to indicate that there is indeed a significant consumer segment ready, willing and able to at least test-drive telematics-based auto insurance programs. But that doesn’t mean the road to achieving growth and profitability through telematics is without speed bumps, potholes and other potential hazards.
Kevin Bingham is sharing this excerpt on behalf of the authors, Sam Friedman and Michelle Canaan, who can be reached through him. The full report, Overcoming Speed Bumps on the Way to Telematics, can be found here.
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Here are the 10 environmental factors that, in combination, are triggers of the Risk Revolution that will hit by 2020.
The world, the world of risk and risk in the world will be as different in 2020 as the original 13 colonies were from the U.S. as it is today.
The bad news is that Paul Revere won’t ride through your town alerting you.
So you'll have to settle for me -- and I am, in fact, giving you enough warning to design your future, and not just manage toward it.
Understand: When one thing is different, it is change. When everything is different, it is chaos.
Change works for dinosaurs. Chaos doesn’t.
But chaos brings opportunity for those who are prepared, and, if you’ve survived in this industry for any length of time, you are able to adapt. Your only issue is one of willingness.
What follows are the 10 environmental factors that, in combination, are triggers of the coming Risk Revolution. These cultural changes are fissures in the foundation of the “good old days” and render vulnerable all traditional institutions and structures that have done so well for so long.
Loss of innocence: When President Nixon said during the Watergate scandal, “I am not a crook,” he acknowledged the end of command and control. Raw power could no longer sustain the most powerful man in the world. As citizens, we confronted the “feet of clay” of our leaders. What Nixon did to weaken our trust in our political leaders, terrorists in airplanes on 9/11 did to our confidence. We won two world wars and are insulated and isolated from the “evil” out there by oceans on our coasts, but it is not enough. We have to accept we are vulnerable.
Katrina was a “girl” but she was no lady: When Hurricane Katrina hit the Gulf Coast in 2005, it breached levees and created a Mad Max world that none were ready to face. Our institutions – federal, state and local government, the Red Cross, etc. – were supposedly built for catastrophes but failed us. Our confidence in our system of order was lost. We must rethink the world.
“Hell no, we won’t go”: war protests, burned bras, tie-dyed T-shirts, Elvis and the Beatles, hippies who protested everything except the right to protest. This was the marketplace speaking for the first time. Tomorrow, the market won't be quieted.
________ - Americans: African-Americans, Asian-Americans, you-name-it-Americans. We're no longer a homogeneous nation. One size does not fit all. The change will accentuate the world of niches, affinity groups and “verticals” and so fragment the market that mass customization will be required, down to a niche of one. We want it “our way,” and not just in fast food.
The front porch and the back fence are gone: Time and place now have little value, and “pace” is as fast as the buyer wants it to be. The question is: If Gen Y is known for a lack of empathy, how do you sell in a nonverbal world?
Tennis balls and Patty Hearst: Sgt. Gill, an intelligence officer, told me in 1972 about satellites that could read the label on your tennis ball while you were playing. In 1973, Jim, another military intelligence guy discovered that, while his data mining model couldn’t help the FBI find Patty Hearst, he could find everyone in America who was just like her. In an era of satellites/drones/etc. and big data, what happens to privacy?
Miss Hathaway: In the finance department of LSU, Joan always reminded me of Miss Hathaway from "The Beverly Hillbillies." She told me decades ago, “Mike, this LexisNexis thing is going to be big.” She was talking about the Internet. She was right.
From Ozzie and Harriet to Archie Bunker to the Huxtables to the Simpsons to the Modern Family and maybe to the Jetsons: The world keeps changing, and lots of people don't like that. They want to hold on to the past. Political correctness, shouts of racism and sexism, a bipolar political process, extremes, etc. all limit our willingness to hold hands and sing “Kumbaya.” We are changed forever, and so is our society and its most basic building block – the family. Deal with it.
“If you have all your eggs in one basket, make sure it’s a strong basket.”: That line, from a Volvo ad, circa 1980, applies today because we are betting the economy and our world on technology . What happens if a natural disaster, a terrorist, an enemy or sun spots disables our technology for a week, a month, a year?
Addictions: Addiction to the status quo is the worst. In this most serious form of dependency, we sacrifice everything to do nothing but protect our comfort zone. The insurance industry once owned the world of risk. Now we have done more than “let the camel’s nose under the tent.” We are now sleeping with the camel. When the market demanded innovation, we too often failed to provide it. Instead we gave up our responsibility and let government and others do what we didn’t want to do. Captives, alternative risk funding, HMOs, the ACA, self-insurance and the National Flood Insurance Program are all examples of decisions being made without us. That is the nature of markets. We were too slow, and something else filled the void. We still face two fundamental challenges: Our products are priced beyond the ability of many consumers to pay, and some embrace a “nanny state.”
The trends identified are not all right and they are not all wrong. They just are. What will 2020 bring your world? What will you do to prepare?
Remember the admonition from Peter Drucker, “Whom the gods wish to destroy, they send 40 years of prosperity.” The last decades have been good to us. The next decades can be, too, but only with the right amount of awareness, preparation, discipline and commitment.
George C. Scott, playing Gen. George Patton in the movie "Patton," said: “In times of war, all other forms of human endeavor shrink to insignificance.”
Are you ready, willing and able to fight and prevail in the coming Risk Revolution?
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Construction Risk Management in the Rollercoaster Recovery
The level of risk in construction is increasing, and profits are facing new pressures.
Although the long-term forecast for the construction industry is robust, it is experiencing malaise as it recovers from the recession. Week after week, positive reports from the government are offset by negative industry news reports, only to be followed by yet another optimistic outlook. So goes the rollercoaster recovery.
The continuing uncertainty of the economic recovery makes strategic risk management more important than ever for contractors. Insurance and risk management -- which are major expenses -- can be a source of competitive advantage or disadvantage for construction firms.
Insurance is an important product, and its purchase should never be considered as a commodity. The value of having the right insurance coverage (by means of policy, endorsement or extension) and limits cannot be overstated. There are direct, indirect and opportunity costs, all of which can affect your bottom line. The intelligent buyer knows there is a difference between price and value.
Insurance is also an important service. The existing trends and emerging opportunities in the construction industry are driving specialized and customized insurance, surety and risk management solutions. The discipline of strategic risk management is one such development. It is recommended that your company partner with your insurance adviser to conduct a strategic risk analysis and to evaluate your company’sresilience and risk accountability culture.
It is important to embed a risk management mindset into strategic business planning processes. As a strategic discipline, risk management serves several important purposes, including decision making, risk and cost allocation and business-process improvement.
Contractors need to be mindful of two important concurrent developments:
1. Pressures in the construction insurance market
2. Changing nature, scope and complexity of risk in the construction industry
Pressures in the construction insurance market
The construction insurance market is experiencing pressure from various disruptive forces. Some of these occurred independent of the recession while others were made worse by the recession. In either case, these trends will continue to be disruptive:
• Growing severity of workers' compensation losses
• Escalating alternatives to traditional insurance including captives, owner- or contractor-controlled insurance programs (OCIPs/CCIPs) and subcontractor default insurance
• Increasing number of owner insolvencies and subcontractor defaults
• Increasing challenges on property and builders risk placements with coastal wind and other catastrophic loss exposures
• Rising threat of increasing general liability premiums
• Growing pressure on professional liability because of increasing frequency and severity of large design-related liability losses
• Increasing regulatory and administrative requirements for employee health benefits under the Affordable Care Act
Expanding risks in the construction industry
To further complicate matters, the level of risk in the construction industry continues to expand. A number of industry developments are continuing to change the risk profile at the individual company level and for the industry as a whole. The following representative eight industry trends illustrate the growing nature, scope and complexity of risk to be managed by contractors:
1. Expanding use of alternative construction delivery methods, including design/build and integrated project delivery
2. Growing number of accelerated fast-track projects
3. Changing project finance methods, including public/private partnerships
4. Expanding number of joint ventures to meet project capitalization and surety obligations
5. Reemerging skilled workforce shortage
6. Growing reliance on technology, and vulnerability to disruptions of business systems and networks
7. Expanding use of building information modeling (BIM) and online collaboration on construction design
8. Continuing migration of construction defect claims and litigation from residential to commercial construction
A word of caution: This list of risk trends and developments is not exhaustive. Other risk exposures and issues may be important for your company depending on your scope of work, industry sector and geographic region.
Conclusion
Risk is inherent to the construction industry. Risk management is the bedrock of the construction industry. There is opportunity in risk. Strategic risk management is not about saying no to opportunity. Rather, strategic risk management is focused on protecting your business from being blindsided by hidden risks and cascading costs.
Strategic risk management will help you remain calm and composed during the rollercoaster economic recovery. More importantly, strategic risk management helps contractors identify factors and make decisions that improve their competitiveness, growth, profitability and reputation.
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