When people are extraordinarily successful, examining their characteristics, values and attitudes can be instructive. The rest of us can learn from them and possibly adopt some of them to advance our own goals. Larry Page, co-founder of Google is an example of one who has achieved exceptional heights. Peering into his thought process can be enlightening. Page says, “Have a healthy disrespect for the impossible.” To conceive and develop the Google concept and then the massive company, its young founders had to have a very healthy disrespect for the impossible. Others besmirched the idea of collecting all the information in the world and then making it available to everyone in the world. Not only was it a bold idea, it was thought by most to be ridiculous and impossible. But Larry Page and Sergey Brin had a very healthy disrespect for the impossible. They made it happen. The concept of disrespecting the impossible could be entertained by those of us in the workers’ compensation industry. True, few of us are likely to reach the pinnacle level of Larry and Sergey, but we can borrow some of their bold thinking to get past the assumptions and barriers that keep us from achieving more. Everyone agrees workers’ compensation as an industry needs a healthy nudge to try new things. The industry is known for its resistance to change. Maybe the way to change the industry, to be an industry disruptor, is to begin with an attitude of disrespecting the impossible. Many people, including those in the workers’ compensation industry, focus on why something cannot be done. Reasons for this notion are many, but probably cultural tradition plays a role. Inventiveness is not expected or appreciated. Too often, the best way to keep a job in corporations is to keep your head down and avoid being noticed. Spearheading a new ideas is risky. Stonewalling new ideas or doing things differently or adopting new technology in an organization thwarts creative thought and certainly diverts progress. I was once told that to incorporate a very good product would mean doing things differently in the organization. So the answer was automatically no! We all know the old saying about the word "ass-u-me." It actually packs some truth. To avoid the trap, check assumptions for veracity. Incorrect assumptions can be highly self-limiting. Begin the process of problem-solving with new thinking -- disrespect the impossible. What could be done if the perceived barriers did not exist? What could be accomplished if new methods were implemented. Probably the most important ingredient for achievement in any context is tenacity. It’s easy to quit when the barriers seem daunting. Tenacity combined with a disrespect for the impossible might be unbeatable.

Free WiFi access points (APs) are a great convenience for consumers and can be a productivity booster for business travelers. But they also present ripe opportunities for hackers. ThirdCertainty asked Corey Nachreiner, WatchGuard Technologies’ director of security strategy, to outline this exposure. 3C: What risks do consumers and business travelers take when using WiFi services in public venues such as airports, hotels and coffee shops? Nachreiner: The exposure is potentially huge. It’s natural for people to congregate and wait in places like airports and hotels and use public WiFi access. So these are ideal locations for attackers to set up faked WiFi APs. This is possible because SSIDs (wireless networks) used in these locations are widely trusted; names like AT&T Wi-Fi, XFINITY WiFi, Boingo Wi-Fi and Free WiFi. It is easy for an attacker to broadcast a faked AP using these familiar names to entice victims to connect via the attacker’s AP. Furthermore, if your computer has connected to the legit access point in the past, it may automatically connect to the faked one. Best practices: 4 steps to using public-access WiFi safely 3C: If I connect to the Internet via a faked WiFi connection, do I still get on the web? Nachreiner: Yes, but now the attacker can see what you’re doing, infect your computer and set up man-in-the-middle attacks that can steal your account credentials and work files. 3C: Does part of this have to do with the venues – the hotels and book shops – not bothering to lock down the free WiFi access? Nachreiner: Yes. 80% of hospitality WiFi networks don’t require a unique password, and 50% do not secure or monitor their networks. I can share many stories about how easy it is to set up a faked AP in public areas and watch people join. 3C: This exposure has been out there since WiFi started going public more than a decade ago. So how intensively have the bad guys been exploiting this? Nachreiner: Bad guys are definitely exploiting this. I’m a fairly regular business traveler. I’ve found suspicious and very likely malicious APs on two out of 10 trips. l’ve been on hotel networks where my security tools show other guests on the network trying to connect to my shares. Whether they were just curious guests or malicious attackers is hard to say. But hotel networks are the perfect place for attackers to find victims. 3C: Right, that’s what happened in the so-called DarkHotel attack. Nachreiner: Exactly, one of our partners, Kaspersky, discovered attackers targeting the third-party WiFi vendor of a specific hotel. They were seeking intelligence on certain guests they knew would be staying at the hotel. They used the compromised wireless network to infect the computers of their targeted victims. This was a very sophisticated attack and not the norm. That said, it’s more common to find basic criminals putting up faked hotel network connections to steal information from guests opportunistically.

The recent speculation about Google entering the U.S. insurance market adds to the growing list of non-traditional competitors turning their attention to insurance -- a list that already includes Overstock, Facebook, IKEA and Walmart. While personal auto remains the popular entry point for these outside competitors, the impact is more far-reaching for property and casualty insurers. The question is no longer "if" outside competition will affect the insurance industry, but rather "how" agents and insurers can maintain a competitive edge and protect their businesses. Agents need to adjust their customer service approach to reflect the reality that younger consumers are not as loyal as their predecessors, while at the same time facing the increased threat of a direct sales channel. Insurers must grapple with the reality that tech companies will be relentless in finding ways to lower costs for consumers and circumvent agents. Insurers like Progressive, Geico and State Farm are already playing in the digital arena and are better positioned than mid-sized and small insurers, because they understand how the online game is played. The same is true for large national agents vs. regional or local agents. The big question is: Will the industry as a whole take a step back, identify its distinct advantages in today’s rapidly changing insurance market and start a wave of unprecedented innovation? Or, will the industry go the way of those that have come before (i.e., Blockbuster, credit card lenders in the '80s, travel agents, Yellow Pages, taxicabs, etc.)? The New-Entrant Advantage Before we discuss agents, let’s look at the advantages of the non-traditional competitor. It should come as no surprise that major tech companies and e-commerce giants have an interest in insurance. It’s one of the last remaining industries to not reach full digitization and root the business in analytics -- a weakness that can be exploited by the data-rich competitors with deep pockets.  Additionally, with the lack of customer loyalty, the struggle will boil down to who will win the customer: the agent or a company like Google. At the forefront of customers willing to jump ship are Millennials, who have surpassed the Baby Boomers to become the largest population in the country at 76.6 million strong. If insurance doesn’t take the extra steps to innovate and entice this generation, Millennials will more than likely gravitate toward a well-known tech company that already understands what they are searching for and what they are buying. Most Millennials were raised on Google -- whether it be for research, directions or email -- so why wouldn’t they feel more comfortable purchasing insurance from Google? For this reason, it’s no surprise that the top three priority areas for agents this year are found in retaining and servicing customers, as opposed to growing their business. The opportunity for agents is that this disruption from new competitors is forcing an urgency to evolve the customer engagement model to better serve Millennials, who have grown up using technology. This needed to happen regardless, and the sooner the industry modernizes its customer acquisition and retention strategies, the better. The Agent Advantage Though there is increased pressure for agents to stay relevant in this quickly evolving insurance industry, agents who leverage their distinct advantages for both customers and insurers will thrive. According to an Accenture consumer survey, customers value the insights they gain from face-to-face interactions with their insurance agent more than any other method, yet agents themselves often downplay the importance of their expertise as a competitive advantage. This is a mistake. When you consider that insurance enters our lives at times of personal turmoil, agents serve as a trusted adviser during critical moments. Agents help both the consumer and the insurer navigate the process of making the consumers’ lives whole again when tragedy strikes. Agents who adopt digital technologies and analytics will gain greater customer insights and will bring insurers the right business at the right price. According to a recent Applied Systems survey, 48% of participants listed competition as a top factor driving agency technology investments. Agents who allow a disparity in analytically driven risk management between themselves and their insurers will begin to lose their foothold in the industry. The Insurer Advantage There’s only one place where mass adoption of data-driven decision making, product innovation and modern customer engagement strategies can all take off at the same time. Insurers alone yield the largest ability to transform the industry in better service of their customers and fight back against the pure commoditization of insurance. There’s likely no stopping this trend, but there is a lot of opportunity to provide innovative solutions so that traditional insurance players maintain ownership of the customer. There is no time to waste, however. Just because the early focus is on personal auto, it should not drive a “wait and see” mentality for the property and casualty industry. Learn from industries that have gone before us in the digital revolution and suffered from technology disruption. Once the trend takes hold, the ripple effect of change industry-wide happens very quickly. The Bottom Line The best chance for agents to stay competitive and relevant is to work together with insurers, utilize data-driven strategies and engage consumers on a more personal level using technology as an enabler. The face-to-face interaction with clients is still extremely important, and analytics can effectively collect and store invaluable insights so you can make the best connection between insurer and consumer. Remaining a relevant and trusted adviser is the name of the customer relationship game.

What would it take to convince people that your business delivers a great customer experience? For tech giant Microsoft, the answer was more than $1 billion. That’s how much the company reportedly spent on its Windows 8 marketing campaign when the new operating system was launched in 2012. (See, for example, “Microsoft Betting BIG On Cloud With Windows 8 And Tablets,” Forbes, Oct. 11, 2012.) And how’d that work for them? Not so well. Windows 8 sales were underwhelming at launch, garnering far less market share than Windows 7 at the same point in its release cycle. So, what went wrong? In a word, it was the experience of using Windows 8. The software was designed to support both touchscreen tablets and traditional desktop PCs, but it handled neither particularly well. Many software reviewers and design gurus found the Windows 8 interface just plain confusing. One even declared that it “smothers usability” (Jakob Nielson of Nielsen Norman Group, Nov. 19, 2012, article titled “Windows 8 -- Disappointing Usability for Both Novice and Power Users.”) But this isn’t a story about the usability of a new software program. It’s a sobering reminder that great, loyalty-enhancing customer experiences -- the kind that get people talking and buying -- can’t be created with Super Bowl ads, stadium naming rights, public relations blitzes or any type of advertising campaign. Those marketing instruments may help pique people’s interest in what you have to offer, but it’s the actual interactions they have with your company -- the customer experience itself -- that will ultimately drive long-term engagement. Microsoft isn’t the only organization that’s erred in this regard. Many companies, across many sectors, try to use their marketing muscle to win the hearts and minds of consumers. The property/casualty industry spent more than $6 billion on advertising in 2013, according to research firm SNL Financial. And that’s just the carriers. It doesn’t include marketing expenditures by agents and brokers that, albeit smaller in absolute terms, are nonetheless material expenses for many field offices. Some in the industry would argue that these are necessary expenditures, required elements for raising brand awareness and consideration among one’s target market. That’s a fair statement, but in reality what often happens is that the marketing of a company’s brand promise gets far more attention than the fulfillment of that brand promise. And it’s that disconnect for customers that will undermine even the most carefully orchestrated branding campaigns, as Microsoft learned. How can you help your organization avoid this kind of misstep? Use the three tips below to reconsider what it really means to manage your company’s brand experience: 1. Think about brand in a brand new way. If the term “brand management” conjures up images of your chief marketing officer or advertising agency, then it’s time to think more broadly. People’s impressions of a company’s brand will be shaped by the totality of interactions they have with the firm. Granted, some of those interactions will be more influential than others, but they all serve to shape customer perceptions in some fashion. Companies that cultivate intense customer loyalty recognize the broad array of touch points that compose their brand experience. And they actively manage those touch points to create great, even legendary, brand impressions. For them, brand is about much more than a billboard, radio spot or TV advertisement. It’s about the end-to-end experience, from pre-sale to post-sale. It’s about their website, their call center, their retail outlets, their customer correspondence, even their billing statements. Every live, electronic or print interaction you can imagine. Case in point: Amazon.com’s obsession with packaging. The online retailer, perennially rated among the most loved brands in any industry, obsesses over every detail of their brand experience, right through and including the act of opening up the box they send you. Amazon recognizes that, even if subconsciously, the mere act of opening up a package will necessarily influence customers’ perceptions about the purchase process. And so they’ve tried to make even that as easy as possible by introducing “frustration-free” packaging that eliminates metal twist ties, razor-sharp plastic clamshells and other annoying wonders of modern packaging. As a result, it isn’t just buying from Amazon that’s effortless (thanks to their patented one-click purchase button), so, too, is opening the package they send you. That’s what end-to-end management of the brand experience looks like in practice. Think of all the customer interactions that will either reinforce your company’s brand promise or undermine it: coverage quotes, sales proposals, insurance applications, policy contracts, loss control programs, renewal communications, premium audits. The list goes on and on. No matter what you choose to have your brand stand for -- simplicity, expertise, helpfulness, sophistication, expediency or some other attribute -- ask yourself if that theme truly permeates your company’s brand experience, and not just its advertising. If it doesn’t, remedy that by better balancing investments in promoting your brand promise with investments in actually fulfilling it. 2. Don’t just say it, prove it. Talk is cheap when it comes to brand promises. Any company can claim through its marketing to be something that it isn’t: fast, friendly, knowledgeable, client-focused, easy to do business with. What ultimately matters to customers isn’t what you say but what you do. The most compelling brand promises are those that are backed up with tangible proof points -- things that demonstrate very clearly to customers (or prospects) that your business really walks the talk. Take Southwest Airlines, a company that aims to make air travel a bit friendlier, fun and hassle-free. Among the proof points: warm, personable staff and no baggage fees. Or Trader Joe’s, a company that’s sought to make the grocery-shopping experience less overwhelming. (How many varieties of ketchup does the world really need?) Proof point: The company stocks shelves with just a fraction of the number of SKUs carried by competitors, each carefully selected based on target consumer tastes. Patagonia, a maker of outdoor clothing and gear, has marketed itself as an environmentally responsible company. Proof points: The company uses organic cotton -- and even recycled soda bottles-- to make clothing and also donate 1% of revenue (sales, not profit) to environmental organizations. All three companies are beloved by their customers, in part because people know what these organizations stand for and see them delivering on their brand promise in very demonstrable ways. Does your company’s brand promise pass the “proof point” test? Consider what your firm has chosen to be famous for, what brand attributes you’ve claimed, and then ask yourself: What could you point to that proves it? If you’re at a loss to identify some tangible proof points, start creating some. Look at your customer touch points through the lens of your brand promise -- coverage quotes, applications, policy documents, correspondence, premium audits, etc. Think about how those touch points could be reshaped (or new ones added) to help bring your brand message to life during routine interactions with customers. And even if you are able to identify some existing proof points, it’s worth asking: Are you adequately highlighting them in your marketing campaigns? You might be aware they exist, but your customers and prospects might not. Don’t keep them a secret. Follow the lead of companies like Southwest, Trader Joe’s and Patagonia and show the marketplace that your organization’s claim to fame is anything but hollow. 3. Don’t sabotage your sales. While you can’t advertise your way to a great customer experience, you can at least hope to fill your sales pipeline via those marketing efforts. But even that marketing investment is pointless if it’s not easy for people to comprehend and buy your products. The purchase experience is an integral part of the customer experience. Sales interactions are as important to shaping your brand as service interactions. Yet companies often sabotage their sales (and undermine their marketing efforts) by making it difficult for people to buy their products. From poorly staffed retail stores to ill-equipped telephone sales reps to unnavigable websites, businesses erect obstacles that exhaust even the most interested prospects. BlackBerry, a company that dominated the mobile handset business for years, learned this the hard way as its product portfolio burgeoned and sales process became increasingly complex. The inflection point came around 2011, when consumers who visited BlackBerry’s website were met with a wall of more than 20 device images-- all with confusingly similar names (Bold 9780, Bold 9700, Bold 9650, etc.)-- presented on a black screen that made it difficult to even see the devices. Plus, the site offered no “electronic wizard” to help prospective purchasers narrow down the handset selection based on how they intended to use the device. Contrast that with what visitors to Apple’s iPhone website saw: just three smartphones, presented on a beautiful, bright and transparent background, making it easy to not just discern the devices but to choose the one that best met their needs. Comparing these two product purchase experiences, is it any wonder that Apple’s handset business thrived while BlackBerry’s stumbled? Oftentimes, it’s not the best product that wins in the marketplace but rather the one that’s most easily accessible and understandable to the customer. Our brains are wired for the path of least resistance. The more thought and energy required to navigate the purchase process, the more likely it is that people will just abandon the effort -- and buy something that’s less taxing on their minds. Maximize the effectiveness of marketing programs by carefully shaping the customer experience -- long before they’re a customer. How easily can prospects navigate your product portfolio? Comprehend product features? Interpret a sales proposal? Get purchase guidance when they need it? These are the questions you should be asking to create a purchase experience that not only burnishes your brand but also turns more prospects into customers. No matter what you’re selling, the real battle for people’s hearts and minds isn’t waged on billboards and airwaves. Marketing campaigns may provide air cover, but the hand-to-hand combat of each customer interaction is where true loyalty is forged -- the simplicity of your sales process, the usability of your products, the clarity of your communications, the helpfulness of your staff, etc. So, before you hang your hat on an expensive marketing campaign to convince people how wonderful your product or service is, ask yourself why they need convincing at all. This article first appeared at Carrier Management.

Last year’s hurricane season passed off relatively quietly. Gonzalo, a Category 2 hurricane, hit Bermuda in October 2014, briefly making the world’s headlines, but it did relatively little damage, apart from uprooting trees and knocking out power temporarily to most of the island’s inhabitants. It is now approaching 10 years since a major hurricane hit the U.S., when four powerful hurricanes -- Dennis, Katrina, Rita and Wilma -- slammed into the country in the space of a few months in 2005.

There have been a number of reasons put forward for why there has been a succession of seasons when no major storms have hit the US. It shouldn’t be so quiet. Why?

Put simply, the warmer the Atlantic Ocean is, the more potential there is for storms to develop. The temperatures in the Atlantic basin (the expanse of water where hurricanes form, encompassing the North Atlantic Ocean, the Gulf of Mexico and the Caribbean Sea) have been relatively high for roughly the past decade, meaning that there should have been plenty of hurricanes.

There have been a number of reasons put forward for why there has been a succession of seasons when no major storms have hit the U.S. They include: a much drier atmosphere in the Atlantic basin because of large amounts of dust blowing off the Sahara Desert; the El Niño effect; and warmer sea surface temperatures causing hurricanes to form further east in the Atlantic, meaning they stay out at sea rather than hitting land.

Although this is by far the longest run in recent times of no big storms hitting the U.S., it isn’t abnormal to go several years without a big hurricane. “From 2000 to 2003, there were no major land-falling hurricanes,” says Richard Dixon, group head of catastrophe research at Hiscox. “Indeed, there was only one between 1997 and 2003: Bret, a Category 3 hurricane that hit Texas in 1999.”

There then came two of the most devastating hurricane seasons on record in 2004 and 2005, during which seven powerful storms struck the U.S.

The quiet before the storm

An almost eerie calm has followed these very turbulent seasons. Could it be that we are entering a new, more unpredictable era when long periods of quiet are punctuated by intense bouts of violent storms? It would be dangerous to assume there has been a step change in major-land-falling hurricane behavior.

“Not necessarily,” Dixon says. “Neither should we be lulled into a false sense of security just because no major hurricanes -- that is Category 3 or higher -- have hit the U.S. coast.” There have, in fact, been plenty of hurricanes in recent years -- it’s just that very few of them have hit the U.S. Those that have -- Irene in 2011 and Sandy in 2013 -- had only Category 1 hurricane wind speeds by the time they hit the U.S. mainland, although both still caused plenty of damage.

The number of hurricanes that formed in the Atlantic basin each year between 2006 and 2013 has been generally in line with the average number for the period since 1995, when the ocean temperatures have risen relative to the "cold phase" that stretched from the early 1960s to the mid-1990s. On average, around seven hurricanes have formed each season in the period 2006-2013, roughly three of which have been major storms.

“So, although we haven’t seen the big land-falling hurricanes, the potential for them has been there,” Dixon says.

Why the big storms that have brewed have not hit the U.S. is a mixture of complicated climate factors -- such as atmospheric pressure over the Atlantic, which dictates the direction, speed and intensity of hurricanes, and wind shear, which can tear a hurricane apart.

There have been several near misses: Hurricane Ike, which hit Texas in 2008, was close to being a Category 3, while Hurricane Dean, which hit Mexico in 2007, was a Category 5 -- the most powerful category of storm, with winds in excess of 155 miles per hour.

That’s not to say there is not plenty of curiosity as to why there have recently been no powerful U.S. land-falling hurricanes. This desire to understand exactly what’s going on has prompted new academic research. For example, Hiscox is sponsoring postdoctoral research at Reading University into the atmospheric troughs known as African easterly waves. Although it is known that many hurricanes originate from these waves, there is currently no understanding of how the intensity and location of these waves change from year to year and what impact they might have on hurricane activity.

Breezy optimism?

The dearth of big land-falling hurricanes has both helped and hurt the insurance industry. Years without any large bills to pay from hurricanes have helped the global reinsurance industry’s overall capital to reach a record level of $575 billion by January 2015, according to data from Aon Benfield. But, as a result, competition for business is intense, and prices for catastrophe cover have been falling; a trend that continued at the latest Jan. 1 renewals.

We certainly shouldn’t think that next year will necessarily be as quiet as the past few have been. Meanwhile, the values at risk from an intense hurricane are rising fast. Florida -- perhaps the most hurricane-prone state in the U.S. -- is experiencing a building boom. In 2013, permissions to build $18.2 billion of new residential property were granted in Florida, the second-highest amount in the country behind California, according to U.S. government statistics.

“The increasing risk resulting from greater building density in Florida has been offset by the bigger capital buffer the insurance industry has built up,” says Mike Palmer, head of analytics and research at Hiscox Re. But, he adds: “It will still be interesting to see how the situation pans out if there’s a major hurricane.”

Of course, a storm doesn’t need to be a powerful hurricane to create enormous damage. Sandy was downgraded from a hurricane to a post-tropical cyclone before making landfall along the southern New Jersey coast in October 2012, but it wreaked havoc as it churned up the northeastern U.S. coast. The estimated overall bill has been put at $68.5 billion by Munich Re, of which around $29.5 billion was picked up by insurers.

Although Dixon acknowledges that the current barren spell of major land-falling hurricanes is unusually long, he remains cautious. “It would be dangerous to assume there has been a step change in major-land-falling hurricane behavior.”

Scientists predict that climate change will lead to more powerful hurricanes in coming years. If global warming does lead to warmer sea surface temperatures, then evidence shows that it tends to make big storms grow in intensity. Even without the effects of climate change, the factors are still in place for there to be some intense hurricane seasons for at least the next couple of years, Dixon argues.

“The hurricane activity in the Atlantic basin in recent years suggests to me that we’re still in a warm phase of sea surface temperatures -- a more active hurricane period, in other words. So we certainly shouldn’t think that 2015 will necessarily be as quiet as the past few have been.”

Storm warning

Predictions of hurricanes are made on a range of timescales, and the skill involved in these varies dramatically. On short timescales (from days to as much as a week), forecasts of hurricane tracks are now routinely made with impressive results. For example, Hurricane Gonzalo was forecast to pass very close to Bermuda more than a week before it hit the island, giving its inhabitants a chance to prepare.

Such advances in weather forecasting have been helped by vast increases in computing power and by "dynamical models" of the atmosphere. These models work using a grid system that encompasses all or part of the globe, in which they work out climatic factors, such as sea surface temperature and atmospheric conditions, in each particular grid square.

Using this information and a range of equations, they are then able to forecast the behavior of the atmosphere over coming days, including the direction and strength of tropical storms. But even though computing power has improved massively in recent years, each of the grid squares in the dynamical models typically corresponds to an area of many square miles, so it’s impossible to take into account every cloud or thunderstorm in that grid that would contribute to a hurricane’s strength.

This, combined with the fact that it is impossible to know the condition of the atmosphere everywhere, means there will always be an element of uncertainty in the forecast. And while these models can do very well at predicting a hurricane’s track, they currently struggle to do as good a job with storm intensity.

Pre-season forecasts

Recent years have seen the advent of forecasts aimed at predicting the general character of the coming hurricane season some months in advance. These seasonal forecasts have been attracting increasing media fanfare and go as far as forecasting the number of named storms, of powerful hurricanes and even of land-falling hurricanes. Most are not based on complicated dynamical models (although these do exist) but tend to be based on statistical models that link historical data on hurricanes with atmospheric variables, such as El Niño.

But as Richard Dixon, Hiscox’s group head of catastrophe research, says:  “There is a range of factors that can affect the coming hurricane season, and these statistical schemes only account for some of them. As a result, they don’t tend to be very skillful, although they are often able to do better than simply basing your prediction on the historical average.”

It would be great if the information contained in seasonal forecasts could be used to help inform catastrophe risk underwriting, but as Mike Palmer, head of analytics and research for Hiscox Re, explains, this is a difficult proposition. “Let’s say, for example, that a seasonal forecast predicts an inactive hurricane season, with only one named storm compared with an average of five. It would be tempting to write more insurance and reinsurance on the basis of that forecast. However, even if it turns out to be true, if the single storm that occurs is a Category 5 hurricane that hits Miami, the downside would be huge.”

Catastrophe models

That’s not to say that there is no useful information about hurricane frequency that underwriters can use to inform their underwriting. Catastrophe models provide the framework to allow them to do just that. These models have become the dominant tools by which insurers try to predict the likely frequency and severity of natural disasters.

“A cat model won’t tell you what will happen precisely in the coming year, but it will let you know what the range of possible outcomes may be,” Dixon says.

The danger comes if you blindly follow the numbers, Palmer says. That’s because although the models will provide a number for the estimated cost, for example, of the Category 5 hurricane hitting Miami, that figure masks an enormous number of assumptions, such as the expected damage to a wooden house as opposed to a brick apartment building.

These variables can cause actual losses to differ significantly from the model estimates. As a result, many reinsurers are increasingly using cat models as a starting point to working out their own risk, rather than using an off-the-shelf version to provide the final answer.

Conventional wisdom is that blockbuster innovations are most likely found in new product categories. Business celebrities like Steve Jobs, Bill Gates and Mark Zuckerberg -- three college dropouts who made billions with stunning innovations that ignited whole new industries -- reinforce this perception. This conventional wisdom is even codified in business theory. In the multimillion-copy bestseller, “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant,” two business school professors argue that “lasting success comes not from battling competitors but from creating ‘blue oceans’-- untapped new market spaces ripe for growth.” Businesses are encouraged to avoid “bloody ‘red oceans’ of rivals fighting over a shrinking profit pool.” One of the insights from an excellent new book by John Sviokla and Mitch Cohen is that the vast majority of today’s wealthiest persons made their billions by ignoring this notion. The book also offers important guidance on how both entrepreneurs and established companies should innovate. In The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value, Sviokla and Cohen found that 80% of the self-made billionaires that they studied made their fortunes in contested market spaces. Their research sample consisted of 120 self-made billionaires (as opposed to those with inherited wealth) operating in relatively transparent and competitive markets. These 120 were randomly selected from self-made billionaires on Forbes’ Billionaire List, adjusted to mirror the larger list’s geographic and industry distribution. Sir James Dyson, for example, did not stop reimagining the vacuum cleaner just because Hoover got there first and the market was crowded. Instead, Dyson went through 5,127 iterations to develop a production-ready design of his dual cyclone vacuum. Sir James Dyson with his Dyson Vacuum If the term had existed, the board of Dyson’s company at that time might have labeled Dyson’s effort an ill-conceived “red ocean” strategy. It rejected his request for funding to produce the vacuum -- even though Dyson owned a third of the company. Dyson was told:

If there really was a better type of vacuum cleaner, then surely one of the big manufacturers would be making it.

Undeterred, Dyson had to set up a new company to manufacture the G-Force Dual Cyclone vacuum cleaner. It would go on to capture immense market share -- as high as 50% in the UK -- and generate billions in sales. Svioka and Cohen offer numerous other case studies of self-made billionaires who succeeded in markets that “would by any measure be considered ‘red.’” Here is a partial list from their thoroughly researched book.

• John Paul DeJoria, a haircare products salesman, and celebrity stylist Paul Mitchell successfully launchedJohn Paul Mitchell Systems into the populated market of high-end hair care.
• Bharti Enterprises founder Sunil Mittal got his start importing known, legacy technologies such as portable generators and telephone handsets into India.
• Sara Blakely’s Spanx shapewear prospered in a hosiery market dominated by L’eggs and Hanes.
• Eli Broad built affordable starter homes without basements in part because he saw others doing it successfully.
• Glen Talyor grew a mom-and-pop local printing shop into one of the largest custom printing companies in the U.S. by, at first, focusing on the immensely competitive and fragmented industry for wedding stationery and related accessories.

Sviokla and Cohen are not arguing for red oceans over blue ones. Their research shows that self-made billionaires ignore the distinction. To them, all oceans are purple -- a blending of available opportunity within established practice. The vast majority of self-made billionaires operate in markets “that are a blending of new approaches within old modes that reveal ways to re-create the space.” This is an important lesson for both entrepreneurs and innovators in established companies. The opportunities are there -- all the time -- to create a blockbuster product within an existing market. No market is owned solely by a single product or idea. Those who can take advantage of the constant change are the ones most likely to win.

The health insurance market is changing. And the changes are not good. Even before there was Obamacare, most insurers most of the time had perverse incentives to attract the healthy and avoid the sick. Now, the perverse incentives are worse than ever. Writing in the New York Times, Elizabeth Rosenthal gives these examples:

• When Karen Pineman of Manhattan sought treatment for a broken ankle, her insurer told her that the nearest in-network doctor was in Stamford, Connecticut – in another state.
• Alison Chavez, a California breast cancer patient, was almost on the operating table when her surgery had to be canceled because several of her doctors were leaving the insurer’s network.
• When the son of Alexis Gersten, a dentist in East Quogue, NY, needed an ear, nose and throat specialist, the insurer told her the nearest one was in Albany – five hours away.
• When Andrea Greenberg, a New York lawyer, called an insurance company hotline with questions she found herself speaking to someone reading off a script in the Philippines.
• Aviva Starkman Williams, a California computer engineer, tried to determine whether the pediatrician doing her son’s two-year-old checkup was in-network, and the practice’s office manager “said he didn’t know because doctors came in and out of network all the time, likening the situation to players’ switching teams in the National Basketball Association.”

But aren’t these insurers worried that if they mistreat their customers, their enrollees will move to some other plan? Here’s the rarely told secret about health insurance in the Obamacare exchanges: Insurers don’t care if heavy users of medical care go to some other plan. Getting rid of high-cost enrollees is actually good for the bottom line. To appreciate how different health insurance has become, let’s compare it with the kind of casualty insurance people buy for their home or their cars. Dennis Haysbert is the actor I remember best for playing the president of the U.S. in the Jack Bauer series, 24.  You probably know him better as the spokesman for Allstate. In one commercial, he is standing in front of a town that looks like it has been demolished by a tornado. “It took only two minutes for this town to be destroyed,” he says. He ends by asking, “Are you in good hands?” The point of the commercial is self-evident. Casualty insurers know you don’t care about insurance until something bad happens. And the way they are pitching their products is: Once the bad thing happens, we are going to take care of you. Virtually all casualty insurance advertisements carry this message, explicitly or implicitly. Nationwide used to run a commercial in which all kinds of catastrophes were caused by a Dennis-the-Menace type kid. In a State Farm ad, a baseball comes crashing through a living room window. Nationwide’s “Life comes at you fast” series features all kinds of misadventures. And, of course, the Aflac commercials are all about unexpected mishaps. Now let’s compare those messages with what we see in the health insurance exchange. Federal employees have been obtaining insurance in an exchange, similar to the Obamacare exchanges, for several decades. Every fall, during “open enrollment,” they select from among a dozen or so competing heath plans. In Washington, DC, where the market is huge, insurers try to attract customers by running commercials on TV, in print and in other venues. If the health insurers followed the lead of the casualty insurers, their ads would focus on what could go wrong and how good they are at treating the problems. After all, why do you need health insurance? Because you might get cancer, heart disease or some other expensive-to-treat condition. And when that happens, you would like to be in a plan that give you access to the best doctors and the best facilities for your condition. In fact, this is what you never see in a health insurance commercial in Washington, DC. There is never a mention of cancer, heart disease, diabetes, AIDS or any other serious health condition.  Instead, what you see are pictures of young healthy families. The implicit message is: If you look like the people in these photos, we want you. What explains the difference between the health insurance and casualty insurance markets? In the latter, people pay real prices that reflect real risks. In the former, no one is paying a premium that reflects the expected cost of his care. The healthy are being overcharged so that the sick can be undercharged. So, insurers try to attract the healthy and avoid the sick. The perverse incentives don’t end after enrollment. The incentive then is to under-provide to the sick (to encourage their exodus and avoid attracting more of them) and over-provide to the healthy (to keep the ones they have and attract even more). Rosenthal explains what this means for people who need care: “For some, like Ms. Pineman, narrow networks can necessitate footing bills privately. For others, the constant changes in policy guidelines — annual shifts in what’s covered and what’s not, monthly shifts in which doctors are in and out of network — can produce surprise bills for services they assumed would be covered. For still others, the new fees are so confusing and unsupportable that they just avoid seeing doctors.” So what’s the answer? In a previous post, I argued that we can denationalize and deregulate the exchanges. And by instituting “health status insurance,” we can have a market with real prices that gives real protection to people with pre-existing conditions. There is no reason why the health insurance marketplace cannot work just as well as the market for homeowners insurance and auto liability insurance. This article originally appeared at Forbes.

The wellness emphasis in the Affordable Care Act is built around the Centers for Disease Control and Prevention’s (CDC) call to action in 2009 about chronic disease: The Power to Prevent, the Call to Control. On the summary page, we learn some of what the CDC calls “arresting facts”:

•  “Chronic diseases cause seven in 10 deaths each year in the U.S.”
•   “About 133 million Americans -- nearly one in two adults -- live with at least one chronic illness.”
•   “75% of our healthcare spending is on people with chronic conditions.”

Shocking -- that is, in terms of how misleading or even false the claims are and of how they created the wellness legend. Take the statement that “chronic diseases cause seven in 10 deaths.” We have to die of something. Would it be better to die of accidents? Suicides and homicides? Mercury poisoning? Side effects of measles vaccinations gone awry? The second statistic is also a head-scratcher. Only 223 million Americans were old enough to drink in 2009; divide 133 million into that number, and you see that a whopping 60% of adults, not “nearly one in two,” live with at least one chronic illness. Sloppy math and wording is common on the CDC site, as elsewhere it says that almost one in five youths has a BMI in the 95th percentile or above, which, of course, is mathematically impossible, as is the CDC's calculation of our risk of death. More importantly, how is the CDC defining “chronic disease” so broadly that so many of us have at least one? Is the CDC counting back pain? Tooth decay? Dandruff? Ring around the collar? “The facts,” as the CDC calls them, are only slightly less fatuous. For instance, the CDC counts “stroke” as a chronic disease. Although a stroke is likely preceded by chronic disease (such as severe hypertension or diabetes), it is hard to imagine a more acute medical event than one in which every minute of delay in treatment increases your odds of ending up like the Kardashians. The CDC also counts obesity, which was only designated as a chronic disease by the American Medical Association in 2013 -- and even then many people don’t accept that definition. Cancer also receives this designation, even though many diagnosed cancers are anything but chronic -- they either go into remission or cause death.   “Chronic disease” implies a need for continuing therapy and vigilance. If cancer were a chronic disease, instead of sponsoring “races for the cure,” cancer advocacy groups would sponsor “races for the control and management.” And you never hear anybody say, “I have lung cancer, but my doctor says we’re staying on top of it.” That brings us to the last bullet point. Convention typically attributes more than 80% of healthcare costs to fewer than 20% of people, meaning that costly ailments are concentrated in a relatively small group. The implication would be that, if you address that small group, your savings are disproportionate. Instead, the CDC’s data attributes 75% of costs to about 50% of the adult population, implying almost the exact opposite of the 80-20 rule: The cost of chronic disease is widely dispersed. Indeed, if you remove the rare diseases that afflict about 1% of the population but account for about 7-8% of cost, you come very close to parity between the proportion of the population with chronic disease and the proportion of total health spending attributable to chronic disease. So what? This urban legend based on the CDC's call to action, appearing verbatim more than a million times on Google, is among the single biggest causes of uncontrolled healthcare spending…and is responsible for essentially the entire wellness industry. In reality, if you strip away the expenses of those chronically ill people unrelated to their chronic condition (which are included in the CDC’s 75% statistic); prevention and management of those conditions (ditto); those aforementioned rare diseases; and unpredictable or uncontrollable exacerbations: That 75% crumbles to about 4% of expenses that fit the category of wellness-sensitive medical events. Achieving a 10% reduction in those categories -- a feat rarely accomplished, which is why vendors never disclose this figure -- would reduce overall spending by 0.4%, or about $25 a year per employee or spouse. Hence, few employers would ever bother with wellness. Instead, the CDC's  wellness legend, suggesting that 75% of costs can be attacked, encourages employers and health plans to focus on the opposite of what they should focus on. Penn State, citing this 75% statistic as justification for its controversial wellness program, provides a classic example of this wrongheaded focus, with unfortunate consequences for the university’ reputation and employee relations, with no offsetting financial benefit. Typical of the wellness industry’s embrace of this wellness legend is Bravo Wellness -- also the first wellness company to brag about generating savings by punishing employees. The company takes this fallacy a step further. It deftly substitutes the words “lifestyle-related and preventable” conditions for the CDC’s language “chronic conditions”; that implies that everyone with a chronic condition, even a congenital or unavoidable, rare condition, has only his lifestyle to blame. Vendors like Bravo encourage employers to get more employees to view themselves as chronically ill, or about to become chronically ill -- and encourages them to access the system. Encouraging overdiagnosis, overtreatment and overprescribing isn’t just a bad idea on its own. It distracts employers from real issues such as provider pricing disparities, hospital safety, outliers (the small percentage of employees who really do account for half the cost (usually not because of a chronic ailment, though) and pharmacy benefit managers (PBMs), whose per-drug margins are about twice what they would be if anyone spent any time weed-whacking their obfuscations of rebates, implementation fees, etc. and simply negotiated the margin directly. What to do next? It seems like all our posts end the same way: Stop poking your employees with needles. We’ve debunked wellness’s science and math, its outcomes, its philosophy … and now its epidemiological premise. Even as their credibility is shredded, most wellness industry players have steadfastly refused to defend themselves at all. Instead, they avoid all debates on this site, because, although many of the vendors and consultants appear to be incapable of critical thinking, they are smart enough to realize that facts are their worst nightmare.

The Consumer Electronics Show (CES) has been the preeminent show for seeing, hearing and feeling what is emerging and hot in consumer electronics. It is the place to go to see new electronic games, mobile devices, TVs, home appliances and other electronics that will be coming to market to amaze and excite us. Remember Onewheel, a self-balancing, one-wheeled, motorized skateboard? Occulus Rift virtual reality? The curved HDTV? Or the best in laptops, tablets and smartphones? The 2015 show may have been an inflection point, where CES also becomes the leading edge for emerging technology that should be of keen interest for businesses, especially insurance. It is the year where new products will go from science fiction and future thinking to Main Street reality and demand! Move over, George Jetson. For insurers, the future starts right now! Emerging Technologies The proliferation of emerging technologies seen at CES is considered by many to contain some of the greatest change agents since the introduction of the Internet, offering breakthroughs that will challenge businesses in many ways. In our 2014 research report, Emerging Technologies: Reshaping the Next-Gen Insurer, insight into the adoption, investment plans and opportunities for business of nine emerging technologies reveals the vast potential for transforming insurance. The research found that adoption is being led by the Internet of Things (IoT) followed by wearables, artificial intelligence (AI) and drones/aerial imagery, with driverless vehicles coming up quickly behind. In fact, five of the nine technologies are projected to arrive at or go well beyond the tipping point within three years, and all nine to surpass the tipping point within five years. CES has reinforced this view. Insurers that have not accepted as fact the fast-paced adoption and impact of these emerging technologies should take great pause. Here are a few reasons: Autonomous vehicles became one of the hottest items during the show, and even before. Audi drove its autonomous vehicle from Silicon Valley to Las Vegas, generating pre-show buzz. Kicking off the show was Mercedes showing a concept car that looked more like a futuristic living room than a car. These and the other major automotive companies all demonstrated their acceptance, commitment and fast adoption of this new form of transportation introduced by Google just a couple of years ago. At this show, many of these automakers announced their plans to offer autonomous vehicles beginning in 2017! Note they did not make the announcement at the traditional Detroit Auto Show the following week. The future of autonomous vehicles will quickly be a reality, and so much sooner than most thought. So share the road, George J! The Internet of Things (IoT) was everywhere, exemplified in the connected car, connected home and wearables ... highlighting a fast paced market that is reinventing how we work, live and play in a connected world. Wearables with fitness and activity bands were prevalent, along with innovative devices like a pacifier that can monitor a baby’s health. Also included were wearables that were integrated with autos to enable the starting of parked cars. But it was the connected car and connected home that had the highest profiles. The connected car was touted by many major car manufacturers. Ford, Volkswagen, GM, BMW, Toyota, Audi, Mazda, Daimler and others were showcasing their connected car capabilities and the growing array of services that come with them. The media noted that Mark Fields, Ford’s CEO, sees Ford as thinking of itself as a mobility company rather than an automotive company, delivering a wide array of services and experiences via the auto instead of the mobile phone. Added to this are Apple’s CarPlay and Google’s Android Auto systems that mimic and integrate the functions of smartphones on the auto dashboard touchscreen. Quite a reimagination of the automotive business! All the devices and capabilities for the connected home added to the IoT's momentum. Familiar tech companies like Google, Microsoft, Amazon and Apple, along with traditional companies like Cisco, GE, Bosch, Samsung and others, are powering ahead with innovative capabilities that will drive rapid adoption. In fact, Samsung Electronics CEO Boo-Keun Yoon indicated that, by 2017, 90% of all Samsung hardware (TVs, ovens, refrigerators, purifiers and more) will be connected, creating a home personalized to your unique needs. Many of the companies also announced the development of connected home hubs to integrate these wide arrays of devices from various manufacturers and third-party providers. Data from the connected home devices can be used to offer new services. The Jetsons' home is finally here! And drones were flying everywhere to demonstrate the high interest and potential for many businesses – from phone and video purposes to building inspections, surveying, delivery, weather data gathering, traffic and much more. The Federal Aviation Administration (FAA) had a booth at the event, announcing that it expects well over 7,000 drones in use by 2018. All of this indicated that, literally, the sky seems to be the limit for drones! Insurance Implications What does this all mean for insurers? The event emphasized the need for insurers to take these emerging technologies seriously and to quickly explore, experiment and consider their uses in the business. Why? Because traditional competitors like Progressive and USAA made announcements at the event concerning the connected car and connected home and the potential of new competitors that are looking at how they might leverage these new technologies. The SMA 2014 emerging technologies survey indicated that these technologies would reach a tipping point in three to five years -- or from 2017 to 2019. Based on the announcements at the CES about autonomous vehicles by 2017, home hardware being 90% connected by 2017 and large numbers of drones in use by 2018, the estimated arrival time at the tipping point is right on track, or could even come much earlier. The results? New customer demands and expectations. Decreased risk. New insurance product needs. New service revenues. New competitors. Redefined customer relationships. Reimagined businesses and industries. To stay in the game, let alone win it, insurers must aggressively find a way to embrace these technologies and uncover their potential. And, to do so, they must have modern core systems as the foundation to integrate the use of these technologies for innovation, as well as plans to pilot some of these technologies, because the future is coming fast. The Consumer Electronics Show 2015 has foretold that 2015 will be a pivotal year for many businesses and industries, including insurance, for emerging technologies. Adoption of the emerging technologies is on track or accelerating toward the tipping point. It is no longer science fiction. It is science reality. Welcome to the future … today!