Tag Archives: business

What’s Next for Life Insurance?

If you are thinking that what’s next for the life insurance industry has something to do with the experience surrounding buying and owning life insurance products, think again.

Yes, the life insurance industry has a big opportunity to improve the customer experience. Companies are improving the complex and inauthentic language used in communications, improving engagement levels with consumers, reducing friction in the underwriting process and creating the ability to transact in an omni-channel way. We are even seeing new peer-to-peer models cropping up for other insurance lines, and it is just a matter of time before life insurance becomes a focus within them.

And, yes, the life insurance industry now at least has a handle on what needs to be done to improve the experience. Companies are putting significant effort into catching up to other categories. Some of the progress is coming from within the established carriers, and even more of it is coming from disruptors that are improving the model rapidly, giving established carriers new capability to buy instead of building.

So the industry is just a short time away from meeting the demands of today’s consumer. Bravo!

But the industry needs to get beyond improving today’s experience and focus on what’s next. And what is that?

Are you ready? Well, here it is: Death just isn’t what it used to be.

Social, scientific and technological advances have dramatically reduced the probability of death for those under the age of 55. This is the group of people whose untimely death would cause the greatest financial burden on families and businesses and is the group we depict as needing life insurance most.

Granted, many life insurance policies sold are issued on older people to implement tax strategies. However, the original intent of the insurance industry was to protect families and businesses from becoming destitute as a result of the loss of a breadwinner or key person.

What happens if that probability is significantly reduced? Do we continue to try and find more “death pool” needs. Or, do we find new needs that our unique skills and competencies can solve?

What’s next, in my opinion, lies in the latter. We can define our business more broadly. Are we in the business of “insuring” lives or “assuring” them? In other words, are we assuring that someone will live longer by avoiding or recovering from the things that are likely to cause death, such as drug use, cancer and suicide?

What does this question mean for what’s next in the insurance industry?

First, let’s examine avoidance. Could life insurers use technology and probability to help individuals and communities further reduce the likelihood of accidents? We need to go beyond driving and household safety tips and into true early warning systems or algorithms that can enable consumers to be proactive.

Could we better predict the likelihood of suicides or accidental drug overdoses? Could we help people understand the role of new, emerging risks such as “hackccidents”? (This is my term for an accident that is a result of human intervention into a computer system that may be controlling a car, a train, a plane or some other technology.)

Secondly, let’s examine recovery. Suppose someone has an incident, and death is now imminent. Could the life insurance industry guarantee access to the latest technology? Could it design investment futures (similar to investments in gold or pork belly futures) in the ability to get an organ transplant or expensive medicine or to be frozen until a cure arrives?

This may all sound far-fetched, but how far-fetched did the innovations of today sound just 10 years ago?

Hmmm.

This article first appeared in National Underwriter Life & Health Magazine

How to Address Eating Disorders at Work

In America, 30 million people will struggle with an eating disorder at some point in their life. With statistics this high, it is likely that someone you know, or perhaps even you, has struggled with this mental health issue. Family members, friends and even coworkers can struggle with anorexia, bulimia and binge eating disorder. Despite their prevalence, eating disorders are treatable. It is important to know the signs and symptoms as well as what to do if someone you know is at risk—especially in the workplace.

Our workplaces are often a source of stress. Deadlines, long hours and strained relationships can leave us feeling tired and vulnerable. When we feel down, we can be more susceptible to mental illness, including eating disorders, and stressful times can exacerbate existing conditions. With eating disorders, as with most illnesses, early intervention is important.

Businesses are in an excellent position to help employees who may be struggling with an eating disorder. Wellness programs can help raise awareness and encourage treatment. And anonymous screening programs can be an effective way to assist employees.

Anonymous and confidential mental health screenings are designed to help individuals examine any thoughts or behaviors that may be associated with eating disorders. After completing the self-assessment, users are provided with helpful resources and treatment information, if necessary. Although the screenings are not diagnostic, they will determine if someone is exhibiting symptoms associated with an eating disorder and if that someone should seek help.

Some common eating disorder signs and symptoms include:

  • Frequent comments about feeling “fat” or overweight
  • In general, behaviors and attitudes indicating that weight loss, dieting and the control of food are becoming primary concerns
  • Skipping meals or taking small portions of food at regular meals
  • Hiding body with baggy clothes
  • Evidence of binge eating, including disappearance of large amounts of food in short periods or lots of wrappers and containers indicating consumption of large amounts of food
  • Maintaining an excessive, rigid exercise regimen—despite weather, fatigue, illness or injury—because of the need to “burn off” calories
  • Drinking excessive amounts of water or using excessive amounts of mouthwash, mints and gum

If you are concerned that a coworker may have an eating disorder, there are things you can do to help. Rather than focus on issues related to their physical appearance, let your coworker know you have noticed a change in their behavior. Perhaps the quality of their work has suffered or their mood has changed. Let them know that you care and offer helpful resources. If your workplace offers a wellness or screening program, share that information. Anonymous eating disorder screenings are always available at MyBodyScreening.org. Be sure to follow-up with the coworker to see how they are doing. Support systems are important as they work toward recovery.

The National Action Alliance for Suicide Prevention is a public-private partnership advancing the National Strategy for Suicide Prevention, put forward by the U.S. surgeon general. The alliance supports mental health and suicide prevention programs in the workplace and endorses mental health screenings as part of those programs. Screenings can make a difference in mental health and suicide prevention.

As millions of adults struggle with eating disorders, workplaces can make an impact by spreading awareness, offering screenings and encouraging treatment. It is in the best interest of an employer to help workers stay healthy and productive. Wellness and screening programs are a proven way to do this.

Zenefits’ Troubles Don’t Let Brokers Off

Zenefits is in trouble. Serious, existential trouble. Some community-based benefit brokers are watching the calamity at Zenefits unfold with a mixture of schadenfreude and relief. Given the scorn and ridicule Zenefits heaped on these brokers, taking pleasure from its misfortune is hard to resist. Feeling relief, however, misreads the situation and is dangerous to one’s career.

Zenefits’ Troubles 

Zenefits could go out of business, and several of its employees could be jailed as a result of the business practices reported by William Alden of BuzzFeed News and other journalists. While unlikely, this is a possibility because:

  • Zenefits created software enabling some California employees to lie to regulators concerning the time they spent on pre-licensing training. California law requires those applying for an insurance license to devote 52 hours to this curriculum. Zenefits employees signed a form, under penalty of perjury, that they had done so. Some may not have. Perjury is a felony in California, and conviction can result in as much as four years’ imprisonment. If Zenefits cheated in qualifying agents to sell in California, other regulators are no doubt looking into whether the company did this in their states, too.
  • If found guilty of violating consumer protection laws, state regulators could revoke Zenefits’ insurance licenses. Without the license, Zenefits could no longer sell new policies, and insurance companies would likely terminate, for cause, their Zenefits contracts. The insurers would then stop paying commissions to Zenefits even on previously sold policies. License revocation in one state could result in losing their licenses elsewhere. A cascade across the country of revoked licenses and terminated contracts could cost Zenefits tens of millions of dollars.
  • If Zenefits loses its licenses, commissions on current policies and ability to sell new ones, then some of its more recent investors may demand their money back. (Let me be clear: I am not accusing anyone at Zenefits of committing fraud or any other crimes. What follows is totally and only hypothetical and speculative.) In May 2015, Zenefits raised $500 million in a capital round led by Fidelity Investments and private equity firm TPG. If Zenefits management knowingly hid legal problems from them (and I’m not accusing anyone of doing so), then Fidelity and TPG could claim inducement by fraud, seek to rescind their contract and demand Zenefits return their investment. I’m not saying this happened or that investors were misled in any way. Nonetheless, I’d be surprised if Fidelity and TPG lawyers are not also speculating about this.

Zenefits’ worst case scenario, then, is that the company pays millions of dollars in fines, loses many millions more in revenue, sees employees jailed, can no longer sell insurance, irreparably damages its brand and must repay some investors.

Maintain Perspective

That’s a pretty scary worst-case scenario. Based on we know today, it is also highly unlikely to happen. No regulator has found Zenefits in violation of anything. Regulators are unlikely to impose the most severe penalties available to them if their investigations do not reveal consumer harm. The steps David Sacks, Zenefits’ new CEO, is taking will likely mitigate any penalties imposed on the company. Several employees, including former CEO Parker Conrad and sales VP Sam Blond have already left the company, and more may follow. Zenefits now has its first compliance officer. Mr. Sacks also seeks to change Zenefits values.

I’m skeptical, however, that Zenefits can or will quickly change its culture and core values. I respect Mr. Sacks’ intentions, experience and abilities. He deserves a chance to make his turnaround work. Yet changing a company’s culture usually takes considerable time, and Zenefits’ culture is deeply infused with the Silicon Valley ethos of speed, innovation, disruption and risk taking. To transform Zenefits requires a different world view. Yet in announcing Mr. Parker’s resignation, the company added three board members—all current investors with no domain expertise.

In fact, no current Zenefits board members or executives listed on the site appear to have any experience in running a human resources firm, payroll company or insurance agency—the services Zenefits delivers. What they share is deep experience in well-known tech companies. Zenefits may be a technology company, but that tech is supposed to accomplish something. Only in places like Silicon Valley would lack at the top of the company of this domain expertise be celebrated. Zenefits seems to exist in a Valley-sized bubble, and it’s tough to change what’s in a bubble from the inside.

The Real Lesson of Zenefits

Yet Zenefits is likely to survive. It reportedly has enough cash on hand and no need to seek more. The most probable outcome from the various investigations is that, absent findings of intentional and substantial criminal malfeasance, Zenefits will keep its licenses, carriers will continue paying commissions and investors will keep their money in the company.

We don’t yet know how Zenefits’ saga plays out. What we do know are some lessons this scandal teaches, especially to brokers:

Lesson one: Consumer protection laws matter. Violate them, and there’s a huge price to pay; as there should be.

Lesson two: Arrogance is unbecoming and unhealthy. Zenefits is a company whose leaders proclaimed that community-based brokers were dead meat, promised to drink brokers’ milkshakes, claimed brokers barely knew how to use email, described their profession as a dead beast lying in the desert and, well, you get the idea. The danger is that arrogance of this magnitude easily morphs into hubris. Zenefits’ hubris was the apparent belief that it could ignore rules if they get in the way of achieving the growth promised investors.

Lesson three: Even broken companies get some things right. Zenefits identified a latent customer demand. Clients want more from brokers than help with benefit plans. They want to focus on their businesses and not be distracted by HR and benefit administration. Zenefits success makes clear there’s a disadvantage to only selling and servicing insurance plans. Clients want more from their brokers. Even in the unlikely event Zenefits goes away, this client need will not.

Lesson four: There’s more where they came from. Zenefits’ demise would not mean the end of well-funded tech companies challenging community-based benefit brokers. If Zenefits falls to the wayside, others are ready to take its place using the same tactic of giving away software to employers in exchange for being named the employers’ broker of record on benefit policies.

Seeing a bully humbled is always fun, and there’s no harm in brokers enjoying the sight of Zenefits in disarray. Those brokers who believe Zenefits predicament means they no longer need to step up the services and value they deliver their clients, however, are making a costly mistake.

Zenefits: Disrupting Lives, Not Just the Insurance Industry

I’m sure you are as tired of reading about Zenefits as I am of writing about it, but, as much as I may want to, it’s hard to turn away from a train wreck in progress.

Wendy Keneipp and I have spent more time reading, writing and talking about Zenefits than we care to admit. We have spent time analyzing its model, discussing how to compete against the company and breaking down its impact on the industry. But this past week has had us shaking our heads at its arrogance and recklessness. I would like to promise this will be my last article about Zenefits, but, well….

No doubt you have recently read about Zenefits’ allegedly selling insurance without proper licenses, and we have now learned the company “may have” (according to new CEO David Sacks) taken shortcuts on at least some of the licenses it did have. May have?! At least take real ownership of the failures, Mr. Sacks!

According to several online articles, the shortcut Zenefits “may have” taken involved writing a program called Macro, which made it appear as if individuals were completing the 52 hours of online training required by the state of California to obtain a license when, in fact, they weren’t. According to a BuzzFeed.com article, those wannabe brokers were then required to sign their name, under risk of perjury, certifying they had completed the required training when, in fact, they hadn’t.

The lack of conscience, level of arrogance and number of culpable “leaders” required to execute on something like this is absolutely mind-blowing. It was bad enough when we thought this was simply a misguided company, confused as to whether it was a tech company or an insurance broker, but that possibility pales in comparison with the malicious company it is proving to be.

Zenefits garnered untold positive press for disrupting an industry and for becoming the fastest-growing SaaS (software as a service) company in Silicon Valley history, but now we are learning just how ugly the reality was behind that thin veil of success.

More than disrupting an industry, Zenefits has built an organization that is disrupting people’s lives—and not in a positive way.

Here are the victims:

INVESTORS

I don’t have a lot of sympathy for this group because they provided the currency that fueled Zenefits’ reckless behavior; they are clearly part of the problem. It was investors who perpetuated a RIDICULOUS valuation and, in doing so, put untold pressure on the company to grow at a rate that would somehow validate the investors’ irrational exuberance over the Zenefits machine.

But, in addition to fueling the behavior, the investors are also victims; they invested in an illusion. They had every reason to believe their investment would be protected by legitimate (albeit misguided) business practices. It should have been reasonable for investors to assume the growth they were witnessing—and using to substantiate their investment—was being driven in a legal manner. It wasn’t.

We have already seen Fidelity cut the valuation of its investment in half. What will be the final financial toll on other investors once the dust settles? How much of investors’ collective $500,000,000 will be lost?

CLIENTS

Zenefits’ clients are potentially victimized in two ways. The first potential problem they could run into is having policies canceled as a result of having been written by non-licensed brokers. While I’m certain this is a possibility, I think it is unlikely the carriers would want to take that black eye. What is a more certain, yet difficult to measure, victimization is the fact that Zenefits’ clients did not have access to adequate advice and guidance in making policy decisions in the first place.

It would be one thing if Zenefits was simply in the online gaming business (as an example). If it was, the model would be to allow customers to download a free game and then make money by selling additional services/features. Essentially, if the game sucks, oh well. Unfortunately, Zenefits chose to play a much more serious game in a highly regulated industry.

Zenefits’ model infringes on two of the most critical aspects of client’s lives: their financial and medical well-being.

When Zenefits takes this responsibility as carelessly and recklessly as it has, it puts people’s financial lives at risk. Even worse, Zenefits could put people’s (literal) lives at risk. That may sound overly dramatic, but protecting the financial lives of its clients (employers and employees alike) and ensuring clients have coverage in place that provides for the right medical attention at time of need, is at the core of what this industry does, has always done and must continue to do for its clients.

For Zenefits, insurance is merely an afterthought, a means to an end, a way to finance the technology it touts as “free.” The company really should be ashamed for hijacking something so critical to people’s well-being and using it so carelessly.

ADVISERS

This may surprise you, but I also see the young advisers of Zenefits as victims. While I have been more than willing to share my criticism of their inexperience in the past, I believe these are mostly well-intentioned young professionals.

The Zenefits leadership team sold these young men and women on a vision that is simply proving to be an illusion. They were sold on the idea of disrupting an industry, being a part of a “unicorn” organization doing something that hasn’t been done before. Who wouldn’t buy into something like that?

Now, don’t get me wrong; while inexperienced in the business world, these young folks still had a personal responsibility to know right from wrong. They had to know they were cheating when they skirted the 52-hour requirement. And, they had to know the personal risk they were taking when they signed their name claiming to have completed training they hadn’t.

Bad on them for not taking a stand. But, even worse on the leadership team for putting them in that position.

I can hear the arguments against me on this point, and I don’t necessarily disagree. However, anytime someone in a position of authority uses their power to coerce and take advantage of a subordinate, there is a level of victimization.

NOW WHAT?

Of course, I don’t know how the rest of this story is going to play out, but I have my suspicions.

I don’t see how David Sacks can be allowed to remain as CEO. He has received great praise for the email he sent to the Zenefits employees, and he is being hailed as the leader who will correct all of what ails Zenefits. Maybe he will be, but I have serious doubts.

The positive media response to his succession scares me. Not that I think Parker Conrad should have remained CEO, but because the change seems to be providing Zenefits a free pass—if not in the eyes of regulators, at least in the public eye.

Outside our industry and Silicon Valley, most people have no idea about how this company has been operating. I guarantee you that Zenefits is about to take its marketing and sales machine to a much higher gear. And there are countless business owners oblivious to the potential danger of a purchase through Zenefits who are awaiting promises of easier HR, shiny user interface and no cost. These business owners need, and deserve, to be protected by the regulators put in place to provide such protection.

In my opinion, Sacks, as the chief operating officer, was as culpable for Zenefits’ failures as anyone. As the executive in charge of all things operational, how could he not have known about the lack of licenses or the fraudulent acts taking place under his nose? And, if he somehow didn’t know, that is simply another kind of failure on his part. How can he be allowed to remain?

I also don’t see how state insurance departments can allow Zenefits to earn another dollar off another insurance policy. The company has left too many victims in its wake, and I believe it is about to go on an even more aggressive hunt for even more “victims.” How can Zenefits be allowed to remain in the insurance business?

It’s time for Zenefits to transform its business model, get out of the insurance business and operate as the technology company it has always been; it’s time for the company to start putting people ahead of growth. After all, done properly, taking care of people first ensures growth will take care of itself. And, if you can’t take care of people and turn a profit, you don’t deserve to be in business.

I’m not holding my breath, however. As a self-described “hyper-growth addict,” Sacks has to manage his addiction with the demands and responsibilities of his new role—a role in which he will have to balance the demands of leading a company in a highly regulated industry (requiring attention to detail and ethical behavior above all else) against the demands of delivering an acceptable return for investors who have entrusted him with $500 million of their money. Early results are not very promising.

Stay tuned. I’m certain there’s more to come.

A version of this article was originally published on Crushing Mediocrity. The article appeared here at Q4intel.com.

Why Healthcare Costs Soar (Part 2)

This is the second of a two-part series, by David Toomey and me, on why healthcare cost growth has historically been much higher that general inflation. 

In the last blog post, we outlined the complexity of the network negotiation process and the challenging dynamics among the insurance companies, the providers and the employers. The majority of employers have not seen financial data or interacted with providers enough to understand the quality and cost variation within a network. The big question looming is what to do around contract negotiations tied to network access, patient disruption and costs.

David invited a half-dozen large, self-insured employers in a market to delve deeper into the clinical care and cost variation analysis. The intent was to share performance data with the employers, so they could understand the positive financial impact that could come from channeling members to higher-value providers.

Reports showed that, within physician groups, there was wide variation in physician performance. But this took time for the employers to grasp because their businesses were focused on a consistent consumer experience—each cup of coffee made the same way with the same ingredients.

After a basic grounding in the data, the next step was to have the employers meet with the largest systems and physician groups, so the companies could get a sense of these suppliers’ value propositions beyond just claims-based performance reports. The employers felt they were ready for the first meetings with a major health system that we will call “the provider,” which outlined its capabilities and introduced its mission statement as well as its commitment to patients.

After the overview, the first employer question was, “Who is your customer?” The provider’s response: “The patient, of course.” Second employer question: “Who pays the bill?” The pr