What a stunner and brilliant outside-in move by AXA – to position itself as a dominant digital insurance company by partnering with Facebook! You baseball fans will know the phrase, “the shot heard 'round the world,” which was said about the game-winning home run by a New York Giants player against the Brooklyn Dodgers in 1951 to win the National League pennant. Just like that home run, this shot is a game-changer for insurance, propelling AXA ahead of the competition and redefining the customer experience.

AXA and Facebook plan to leverage the scale of both businesses via ground-breaking innovation and access to research, training and capabilities, particularly on mobile. The power partnership of the world’s top insurer and the dominant social media company has the potential to completely innovate, transform and redefine AXA’s customer experience, customer engagement, digital presence and growth potential to levels not yet seen in insurance.

AXA’s game-changer move has the potential to establish a new bar for customer excellence, loyalty and engagement that many insurers talk about, but that few have actually taken the bold actions to make happen. This move goes well beyond having a presence on social media, to embracing the power of a social media platform as the foundation of a new customer engagement model.

What is it that makes this so fascinating and game-changing?

Facebook’s mission to give people the power to share and make the world more open and connected – by building a network of more than 1.23 billion (and growing) monthly active users. The influence and pervasiveness of Facebook's platform continues to grow. It is used by 57% of all American adults – and 50% of those adult users have more than 200 friends in their networks, according to the Pew Research Center.

Facebook started 10 years ago on a U.S. college campus, and it expanded across all demographics around the world, creating a powerful network of relationships that influences decisions, other relationships and outcomes. We all have seen or experienced Facebook’s power from making possible the most basic of connections with childhood friends and family to its expansion across the U.S. and the world. Beyond its original purpose of social connection, the platform has grown to have the power to save lives, influence buying behaviors and customer loyalty and motivate social and political change. And it gets more impressive.

In announcing 2013 fourth-quarter financial results, Facebook reported even more milestones that highlight the potential for AXA to turn the insurance model on its head. Consider these:

• On a daily basis, 757 million people were active users as of December 2013, representing an increase of 22% from the previous year. Even more astounding was that 556 million people were mobile active daily users, an increase of 49% over the previous year.
• Most impressive was a monthly average of mobile users totaling 945 million, an increase of 39%, and representing nearly 76% of the base.

Facebook’s vision, reflected in its milestones and influence, emphasizes why this partnership opens up a whole new model of customer engagement for insurance:

• It can create a modern customer experience, like the ones people have every day with companies like Facebook, Amazon or Zappos, where there is a new level of engagement beyond the three common areas of quote and buy, bill payment and claims – the things that are not necessarily delightful! Imagine a new experience where the customer is getting more value through new services, offerings and knowledge sharing with an insurer that is offering a more omnipresent relationship.
• Customer loyalty – and our typical manner of measuring this through a net promoter score (NPS) – is transformed through a branded customer network of relationships that share experiences, recommendations, costs, product ideas and much more.
• Imagine leveraging the Facebook platform as a means of managing the customers' portfolios of assets, products and policies, offering life and P&C product recommendations based on their life stage or activities, or helping them during a claim or catastrophic event. Customers can also use mobile technologies in a self-service manner to find assistance with claims or to access information to help protect themselves and their assets.
• Consider the explosion of new data that will be available and valuable in understanding the customers better so as to personalize their experience, provide insights, uncover new needs and identify new products and services that they may be unaware of.

Most insurers today are using Facebook, mobile and data to just do the same things differently within their operations. This powerful partnership that is leveraging next-gen technologies has the potential to do completely different things– going well beyond what has already been done today, creating a digital strategy and experience that will reinvent AXA and, subsequently, the insurance industry.

Game on! What will your next move be?

Think back to the last time you listened to a great story. There was a fantastic cast of characters, breathtaking scenery and, of course, a plot line that hooked you. For a brief moment, you were there, right in the middle of it, living the story.

Each time a successful salesman sit downs with a potential customer or client, he weaves together a story in which the product or service has already become an integral part of the listener’s life. The customers, through the picture painted by the salesman’s words, soon realize how beneficial this particular product or service could be and start to wonder how they existed without it for so long.

Does this sound like some sort of trick?    

Does it seem like some sort of mind game played on unsuspecting victims? 

No. By painting a picture with words, by telling a story rich in substance, the insurance professional accomplishes a number of things. First, he helps to develop the conversation with the potential client. By offering details, and making sure that everyone is seeing the same picture, he can see where miscommunication may occur. Also, the potential customer is more likely to think of more detailed questions to ask to help fill out the remaining part of the picture.

Remember that people make the connection with an item or a service not through rational thought but through emotion. Sure, a potential client needs to know the good points, the bad points and the mechanics of how something is going to work, but the final decision is greatly influenced by how he feels about something.

Does your product or service instill confidence? 

Does it feel familiar? 

Does it cause excitement? 

All these feelings and emotions can help make the sales process a success.

So, how do you craft an emotionally engaging story?

First, it is important that you, as the storyteller, believe and are emotionally connected to your story. Remember, a client will hear the sincerity in your voice, or the lack thereof. This is where the knowledge and personal use of your service or product can be so important. By using your own experience, or that of other customers, you can easily convey a believable story that extols the virtues of your product or service.

Second, a great story has structure. We have all heard stories that seemed to go on forever, with no point in sight. We have also all heard stories that jump around so much we tune out because we are lost. There are different ways to structure a story. One is called a “hero’s journey” model. The hero’s journey follows a departure, an initiation and a return.

Steve Jobs was a master storyteller. Watch one of his keynote speeches and observe how he weaves a story throughout his entire presentation. Case in point: his Stanford commencement speech in 2005. (Text is here. Video is here.) His first story connects the dots of his childhood to his success. The second story tells about his loves and losses. The final story is about death. He really gets personal, connecting with his audience on an emotional level. You hear jeers, cheers, laughter, and when the camera pans the audience in the video you see tears. His message is to trust the process, love what you do and don’t settle. Don’t live anyone else’s life. When you listen to this speech, as well as his others… you pay attention, you listen and you feel. You are emotionally connected.

As you formulate your presentation, remember how we, as humans, communicate. Surprisingly, when a person is talking, research shows that most people only give a fraction of their attention (7%) to the words that are being spoken. Over half (55%) is given to the various pictures and images that are created during the conversation. The remaining amount of attention is allotted to the mechanics of speaking itself, such as our mannerisms and body language.

To be an effective sales person, you must engage your potential client and make the entire story memorable. Like an artist, you need to create an emotional picture with your words and bring what you are trying to communicate to life. Don’t be a stick in the mud while talking; use your hands naturally. If you feel enthusiastic about your product or service, don’t be afraid to let those around you know. Chances are the excitement that is coming from you will encourage them to take a second look at what you have.

The art of selling isn’t really about selling at all. It is about sharing a story and bringing your potential client into the creation of the next chapter. By guiding them to a vision where their success and their satisfaction is an integral part of this story, you’ll have a great chance of convincing them of what they truly need.

Are you connecting emotionally to your audience? 

When was the last time you told a good story?

The California legislature is considering a bill that could rewrite the relationship between employers and temporary staffing agencies. Assembly Bill 1897 (Hernandez, D-48) would make employers that hire laborers from temporary agencies liable if those agencies fail to provide workers’ compensation insurance, violate wage and hour laws or fail to withhold proper taxes.

This legislation could, effectively, end the staffing agency model by making it difficult for most small businesses to use the services. (The text of the bill is here.)

Employers hiring temporary staffing agencies would be responsible for performing due diligence by checking into the internal practices of the staffing agencies to determine whether agencies are properly funded to comply with labor laws and regulations. The employer, as a client of the agency, would be held responsible if the staffing agency failed to meet these requirements. Under the current version of the bill, it would be impossible to “contract around” this requirement, as a waiver would be deemed to violate public policy.

Promoters of AB 1897, including the California Labor Federation, claim that the bill is designed to protect employees of staffing agencies from wage theft and lack of workers’ compensation coverage. But the goal seems to run deeper. Proponents also hope to address wage disparity between full-time and temporary workers, benefit differences and impediments to collective bargaining by temporary employees. 

According to the California Chamber of Commerce, which opposes the bill, employers that do not have dedicated human resources or legal departments rely on temporary agencies to prescreen employees, to fill seasonal and short-term positions, to provide cover for employees who are absent and to protect the core group of employees from workforce reductions (the use of temporary workers would be reduced during slack times, instead.)

AB 1897 would make life harder for small businesses by holding them responsible for performing due diligence by seeking agency data outside of their purview and making them financially responsible for factors that are beyond their control, including businesses issues that could drive staffing agencies into bankruptcy. While most staffing agencies are properly insured and funded, this bill will cause small businesses anxiety over increased fines and litigation and create a chilling effect throughout the California labor market.

AB 1897 is currently before the Assembly Committee on Labor and Employment.

A new study of employment practices litigation (EPL) data by Hiscox found four states -- California, Illinois, Alabama and Mississippi -- along with the District of Columbia, to be the riskiest areas of the U.S. for employee lawsuits. Businesses in these five jurisdictions face a risk that is substantially higher than the national average for being sued by their employees.

According to the study, a U.S.-based business with at least 10 employees has a 12.5% chance each year of having an employment liability charge filed against it. California has the most frequent incidences of EPL charges in the country, with a 42% higher-than-average chance of being sued by an employee. Other high-risk jurisdictions include the District of Columbia (32% above the national average), Illinois (26%), Alabama (25%), Mississippi (19%), Arizona (19%) and Georgia (18%). Lower-risk states for EPL charges include West Virginia, Massachusetts, Michigan, Kentucky and Washington.

Bert Spunberg, a colleague at Hiscox who is a senior vice president and the practice leader for executive risk, says: "Federal level information on employee charges is generally available, but state specific information is more difficult to aggregate. Understanding employee litigation risk at a state level is a crucial step for an organization to establish the processes and protections to effectively manage their risk in this changing legal environment."

State laws can have a significant impact on risk. For example, the employee-friendly nature of California law in the area of disability discrimination may contribute to the high charge frequency in the state. Discrimination cases filed at the state level in California are brought under the Fair Employment and Housing Act (FEHA). FEHA applies to a broader swath of businesses, covering any company with five employees, vs. a 15-employee minimum for cases brought under federal law as outlined in Title VII of the Civil Rights Act.

Mark Ogden, managing partner of Littler Mendelson, the largest employment and labor law firm in the world, says: "Not only are employment lawsuits more likely in those states, but the likelihood of catastrophic verdicts is also significantly higher. Unlike their federal counterparts, where compensatory and punitive damages combined are capped at $300,000, most state employment statutes impose no damages ceilings. Consequently, employers in high-risk states must ensure that their workforces are adequately trained regarding workplace discrimination, harassment and retaliation and that policies forbidding such conduct are strictly enforced.”

For more on the study, click here.

The following slides show a promising picture for workers' comp as the economy continues to recover and as certain industries -- such as construction, manufacturing, oil and gas extraction and healthcare-- are poised for growth. At the same time, the industry will have to be prepared for potential disruptions such as those that will come as the workforce ages, such as might occur because of the Affordable Care Act and such as are facing companies because of declining returns on investments. 

The slides were part of a presentation to the AMCOMP Conference for workers' compensation professionals on March 27, 2014. For the full presentation, click here.

In the Missouri Court of Appeals' recent decision in Stewart v. Second Injury Fund, the facts were not in dispute: Ms. Stewart worked at Subway for a few months, suffered a moderately severe injury at work and could not return to any type of employment.

Here’s where the story becomes interesting: The claimant qualified for Social Security disability in 1997 -- more than 10 years before she started working at Subway. 

Her Social Security disability was awarded based on confirmed medical conditions including arthritis, reflex sympathetic dystrophy, degenerative joint and bone disease and carpal tunnel syndrome. She continued to receive Social Security disability benefits even while she was working at Subway.

After her work injury in 2009, she filed for workers' compensation benefits, claiming that she was permanently and totally disabled.

Was the claimant permanently and totally disabled before her injury at Subway? Apparently not, because she was able to obtain that job and perform the duties associated with that job. In the absence of her injury, she would have presumably been able to continue working. 

Why would she be entitled to Social Security disability benefits if she was able to compete in the open labor market? If she was disabled in 1997, should she be entitled to more benefits when she was injured at a job that she should not have been able to obtain?

What if Subway had told the claimant during her initial job interview that she could not be hired because of her multiple disabilities? She could have sued Subway under the Americans with Disabilities Act, arguing that Subway was discriminating against her. Subway, not wanting to be sued, could have been forced to hire the claimant only to face the prospect of being liable for permanent total disability after only a few months of work.

I’m not attempting to disparage the claimant. She obtained benefits that are legally provided. My question is this: Is it fair to place employers in no-win situations where they face litigation if the employee is not hired, yet still face litigation if the employee IS hired?

This situation arises because of the myriad of state and federal laws that regulate every facet of the workplace. Every employer must wade through an alphabet soup of overlapping laws every single day (ADA, FMLA, COBRA, EFCA, EAD, ERISA, FLSA, FCRA, INA and a host of others). 

One cannot swing the proverbial dead cat without hitting five politicians giving a speech focused on creating jobs. Yet, can jobs be created by strangling the very companies that create these jobs?

Many agency owners take great pride in generating low loss ratios year after year. These agencies are often very, very profitable -- they are the perfect cash cows, in business school parlance. But, in my experience, their growth is painfully slow. Often, their agencies are not managed closely, beyond the focus on loss ratios. And the agencies are often small. 

These agency owners are not happy with the many carriers who have deemphasized loss ratios. They cannot fathom why any carrier would not LOVE their good loss ratios. The result has become stressed, or even fractured, agency/company relationships.

These agency owners do not understand that loss ratios that are too low (and each company will define “too low” differently) are not in some companies’ best interests. How can too high a profit margin be bad?

1. When loss ratios are too good, it may mean rates are too high, resulting in too little growth. Companies, particularly stock companies, need to show growth, especially after the softest market in industry history.
2. If growth is too slow, companies may be losing market share. Company management often has considerable pressure to attain specific market share.
3. Loss ratios that are too low may also mean that profit is not being maximized.

Maximizing profit is not the same thing as achieving a high profit margin. The former is in dollars, and the latter is in percentages. This is a crucial difference between running a company and running an agency, and agency owners are well-served to understand it. If a company wants to maximize profit, it might want to increase revenue by lowering rates even though that would mean higher loss ratios. For example, if a company has a 35% loss ratio and $100 million in premiums, its gross profit (excluding expenses) might be $65 million. However, if it decreased its rates and subsequently increased premiums to $125 million at a 45% loss ratio, it would generate $68.8 million in gross profit. That is a $3.8 million improvement.

Many agency owners would like to increase their books 25% and go from a 35% loss ratio to a 45% loss ratio, too, but those that focus on low loss ratios probably will not get their share of that 25% growth, yet their loss ratios will still increase.

Frustration at agencies greatly increases when companies price to a 55% , or higher, loss ratio. The company still makes plenty of profit at a 55% loss ratio (if it does not, then the company has serious expense issues that go far beyond the points of this article). However, agency owners make most of their money in contingent bonuses from carriers for growth, retention, low losses and so on, and profit sharing by carriers declines precipitously at 55%. The agency owners' lifestyle is curtailed. The value of their agencies is impaired. Their business model is in shambles.

If a company is truly pricing to a loss ratio in the mid-50s or even higher, agency owners might consider doing business with different carriers whose philosophies more closely match theirs. Easier said than done, obviously, so maybe a better solution is updating their business model. Growth is more important today to many carriers. Sitting on a cash cow annuity for a decade or more is not as feasible as it once was, and wishing otherwise will not help.

Many companies desire fast growth because:

1. Some executive bonuses are tied to fast growth.
2. The company is being set up to sell.
3. The company has reserving issues and needs the extra premium to dilute the effect of a reserve increase. Growth is only a temporary solution, but companies have used it forever. The fast growth, which makes executives look heroic, is almost always created by low, unsustainable rates that eventually result in higher loss ratios. Nonetheless, growth is initially far more important than profit. (The smartest executives are gone by the time the problems arise, leaving their successors to sort out the mess.)

Agents doing business with companies that emphasize growth may want to evaluate whether there is risk to the agency and its clients. If so, creating a plan to offset these risks can create excellent opportunities.

Agents can fight reality, and fighting will feel good for masochists, but few will be able to avoid doing business with at least a few growth-focused carriers. Don’t keep telling carriers how short-sighted they are. Capitalize instead by understanding their perspective and using your resources to deal with the carriers you choose.

NOTE: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules and regulations.     

Heard recently: “Our organization has lots of analytics, but we really don’t know what to do with them.”

This is a common dilemma. Analytics (data analysis) are abundant. They are presented in annual reports and published in colorful graphics. But too often the effort ends there. Nice information, but what can be done with it? 

The answer is: a lot. It can change operations and outcomes, but only if it is handled right. A key is producing an analytics delivery system that is self-documenting.

Data evolution

Obviously, the basic ingredient for analytics is data. Fortunately, the last 30 years have been primarily devoted to data gathering.

Over that time, all industries have evolved through several phases in data collection and management. Mainframe and minicomputers produced data, and, with the inception of the PC in the '80s, data gathering became the business of everyone. Systems were clumsy in the early PC years, and there were significant restrictions to screen real estate and data volume. Recall the Y2K debacle caused by limiting year data to two characters.

Happily for the data-gathering effort, progress in technology has been rapid. Local and then wide area networks became available. Then came the Internet, along with ever more powerful hardware. Amazingly, wireless smartphones today are far more powerful computers than were the PCs of the '80s and '90s. Data gathering has been successful.

Now we have truckloads of data, often referred to as big data. People are trying to figure out how to handle it. In fact, a whole new industry is developing around managing the huge volumes of data. Once big data is corralled, analytic possibilities are endless.

The workers’ compensation industry has collected enormous volumes of data -- yet little has been done with analytics to reduce costs and improve outcomes.

Embed analytic intelligence

The best way to apply analytics in workers’ compensation is to create ways to translate and deliver the intelligence to the operational front lines, to those who make critical decisions daily. Knowledge derived from analytics cannot change processes or outcomes unless it is embedded in the work  of adjusters, medical case managers and others who make claims decisions.

Consulting graphics for guidance is cumbersome: Interpretation is uneven or unreliable, and the effects cannot be verified.  Therefore, the intelligence must be made easily accessible and specific to individual workers.

Front line decision-makers need online tools designed to easily access interpreted analytics that can direct decisions and actions. Such tools must be designed to target only the issues pertinent to individuals. Information should be specific.

When predictive modeling is employed as the analytic methodology, certain claims are identified as risky. Instead, all claims data should be monitored electronically and continuously. If all claims are monitored for events and conditions predetermined by analytics, no high-risk claims can slip through the cracks. Personnel can be alerted of all claims with risky conditions. 

Self-documenting

The system that is developed to deliver analytics to operations should automatically self-document; that is, keep its own audit trail to continually document to whom the intelligence was sent, when and why. The system can then be expanded to document what action is taken based on the information delivered.

Without self-documentation, the analytic delivery system has no authenticity. Those who receive the information cannot be held accountable for whether or how they acted on it. When the system automatically self-documents, those who have received the information can be held accountable or commended.

Self-documenting systems also create what could be called Additionality. Additionality is the extent to which a new input adds to the existing inputs without replacing them and results in something greater. When the analytic delivery system automatically self-documents guidance and actions, a new layer of information is created. Analytic intelligence is linked to claims data and layered with directed action documentation.

A system that is self-documenting can also self-verify, meaning results of delivering analytics to operations can be measured. Claim conditions and costs can be measured with and without the impact of the analytic delivery system. Further analyses can be executed to measure what analytic intelligence is most effective and in what form and, importantly, what actions generate best results.

The analytic delivery system monitors all claims data, identifies claims that match analytic intelligence and embeds the interpreted information in operations. The data has become a work-in-process knowledge tool while analytics are linked directly to outcomes.