Tag Archives: customer driven

The Coming Renaissance

Insurance has been around for a long time … dating back to ancient times. The first written insurance policy was carved into a Babylonian obelisk; the “Hammurabi Code” offered basic insurance for individuals if a personal catastrophe made it impossible to pay back a debt. Insurance continued to grow and evolve across centuries and continents. The guilds in Europe supported master craftsman with a type of group coverage to subsidize them and their families upon injury, disability or death. Deals made in London coffee houses to cover maritime risks were the beginnings of the London Market. These efforts met a universal and timeless need to stabilize individuals and the economy against risk.

The evolution of insurance often followed emerging developments such as the agricultural revolution, the industrial revolution and the information revolution. Each of these revolutions created and reshaped businesses, including insurance. Insurance evolved with each revolution to meet changing needs and to adapt to new developments or technologies that changed businesses, markets and risk. Each revolution required a re-thinking and re-alignment. It required business leaders to shed sacred notions and wake up to the possibilities of rebuilding on a new foundation while maintaining the old structure long enough to move out safely.

Erasing the notion of moderate change

Our industry is waking up and finding itself in the midst of seismic shifts. A revolution is underway: the digital revolution. This revolution is different because of the complexity, breadth and depth of converging factors and global changes. Our industry, steeped in centuries of tradition, must erase the idea that we can ease our organizations into the new era with minor adjustments.

Think of how the digital revolution is going to reinvent your business model. Insurers are moving from product-driven to customer-driven strategies; from limited distribution channels (such as agents) to an array of channels based on customer choice; from line-of-business silos to customer-centricity and customer experience for all products across all lines; from simply containing risk to actively providing personal risk management; and from siloed solutions focused on transactions to a platform portfolio that brings together real-time interaction for all products and services for customers, giving them an Amazon-like experience. Whew! It stretches our minds to consider it all at once.

The rebirth of real opportunity

These influencers of change are challenging traditional insurance models, resulting in declining customers, loyalty and premiums. Whether it is the demand for mobile channels in addition to agents; or declining life insurance or personal auto and home insurance because of demographic changes; or declining premiums for products like auto insurance because of the emergence of technologies like crash avoidance, connected cars and autonomous vehicles, these influencers of change demand we have a re-imagination and a rebirth of insurance.

The promise of the digital revolution is that we can. Traditionally damaging business factors no longer have to be met with traditional business adjustments.

Insurers must look to reinvent the business model, not unlike how Uber reinvented the taxi model. Increasingly, insurance CEOs are speaking out about the coming disruption of insurance and the need for insurance to aggressively rethink the business model.

On May 27, 2015, Generali’s CEO, Mario Greco, commented in the Financial Times that insurers will disappear unless they embrace sweeping technological change. He went on to say that the insurance sector is “on the verge of a revolution and has been lagging behind every other industry — it has been paralyzed.”

On June 30, 2015, Lloyd’s CEO, Inga Beale, stated in the Financial Times that insurers are in danger of being “uberized” as technology allows companies from other sectors to undermine insurance sectors role to manage risk.

So how do insurers move forward? First they need to keep their current business viable and growing to fund the future. This requires transformation of the existing business by leveraging a platform of integrated solutions — laying the groundwork for a renaissance of insurance.

Insurers may enhance auto or life insurance policies, processes and customer interaction. Foundational transformations can also be used to reinvent insurance such as by offering a “family or lifecycle policy” that offers a single bundle to meet the broad risk of individual or family needs instead of individual policies for each of the needs. Alternatively, insurers could offer new risk mitigation or value-added services that leverage technology from the connected home and connected auto … all creating a new customer experience and engagement model.

In recent UK consumer research published by Majesco, one in every three customers feel that insurers are failing on minimum service expectations. Even the highest customer satisfaction score in the insurance industry — 69%, reached by motor insurance providers — compares unfavorably with world-class companies such as Amazon, which scores 87% based on the UK Customer satisfaction Index for January 2015. Furthermore, more than 70% of the market indicates they want a “family” product, combining motor, home, travel and pet in a single insurance policy. Nearly 42% would buy a family product tomorrow, while 30% were unsure but did not rule out the option – highlighting that a significant majority (72%) of the market expects access to a product that is not available today.

While some insurers will dismiss the findings as not relevant to them, they should instead see a warning signal that policy bundling is growing in demand. The Internet has created a market with “no borders” because customers research online to seek out offerings and options to meet their needs. In today’s digital world, what happens in one region does not stay in one region. Rather, these new developments from products to services, new channels and new approaches to risk are rapidly rippling to other regions.

The examples are many. John Hancock’s new life product uses South Africa’s Vitality concept. Google’s Compare site was the result of a UK acquisition. Direct-to-consumer models cropped up first and most strongly in Australia and the UK. Any one of a hundred multi-national insurers can send an idea rippling across continents at the speed of an e-mail. Meeting the digital revolution with real transformation is going to require an acceptance that everything we have known about insurance was good for yesterday. The only thing we can count on is the necessity of insurance that has held true from the Hammurabi Code until today.

So as you attend industry events and read articles, blogs and reports, put the topic of business transformation into strategic perspective. Is business transformation helping you move from legacy software solutions to modern, configurable solutions that will handle the unexpected future? Are you providing a foundation to change traditional business assumptions and business models to provide an enhanced customer experience and value? Will you be the traditional retailer or an Amazon? Will you be the traditional taxi or Uber? Your answer will influence your strategic direction and relevance in an industry that is on the precipice of disruption. Will you be disrupted or be the disruptor? Majesco is focused on transformation as a path to renaissance. Are you?

Obesity as Disease: A Profound Change

The obesity rate in the U.S. has doubled in the past 15 years. More than 50% of the population is overweight, with a BMI (body mass index) between 25 and 30, and 30% have a BMI greater than 30 and are considered obese. Less than 20% of the population is at a healthy weight, with a BMI less than 25.

On June 16, 2013, the American Medical Association voted to declare obesity a disease rather than a comorbidity factor, a decision that will affect 78 million adults. The U.S. Department of Health and Human Services said the costs to U.S. businesses related to obesity exceed $13 billion each year. With the pending implementation of ICD (International Classification of Diseases) 10 codes, the reclassification of obesity is is fast becoming a reality and will dramatically affect workers’ compensation and cases related to the American Disability Act and amendments.

Before the AMA’s obesity reclassification, ICD-9 code 278 related to obesity-related medical complications rather than to obesity. The new ICD-10 coding system now identifies obesity as a disease, which needs to be addressed medically. Obesity can now become a secondary claim, and injured workers will be considered obese if they gain weight because of medications, cannot maintain a level of fitness because of a work-related injury or if their BMI exceeds 30. The conditions are all now considered work-related and must be treated as such.

The problem of obesity for employers is not confined to workers’ compensation. The Americans with Disability Act Amendment of 2008 allows for a broader scope of protection for disabilities. The classification of obesity as a disease now places an injured worker in a protected class pursuant to the ADA amendment. In fact, litigation in this area has already started. A federal district court ruled in April 2014 that obesity itself may be a disability and will be allowed to move forward under the ADA (Joseph Whittaker v. America’s Car-Mart, Eastern District of Missouri).

Obesity as an impairment

Severe obesity is a physical impairment. A sales manager of a used car dealership was terminated for requesting accommodation and won $128,000. He was considered disabled, and the essential function of the job was walking, so he was terminated without reasonable accommodation.

The judge ruled that obesity is an accepted disability and allowed him to pursue his claim against his employer. This could have substantial impact for employers as injured workers could more easily argue that their obesity is a permanent condition that impedes their ability to return to work, as opposed to a temporary life choice that can be reversed.

The Equal Employment Opportunities Commission (EEOC) has recently chimed in on obesity. According to the EEOC, severe [or morbid] obesity body weight, of more than 100% over the norm, qualifies as impairment under the ADA without proof of an underlying physiological disorder. In the last year, we have seen an increasing number of EEOC-driven obesity-related lawsuits. Federal district courts support the EEOC’s position that an employee does not have to prove an underlying condition, especially in cases where there is evidence that the employer perceived the employee’s obesity as a disability or otherwise expressed prejudice against the employee for being obese.

Workers’ compensation claims are automatically reported to CMS Medicare with a diagnosis. When the new ICD-10 codes take effect, an obesity diagnosis will be included in the claim and will require co-digital payments, future medical care or continued treatment by Medicare.

There is good news on the horizon. Reporting of a claim only happens if there is a change in condition not primarily for obesity. It is recommended that baseline testing for musculoskeletal conditions be conducted at the time of hiring and on the existing workforce. In the event of a work-related injury, if a second test is conducted that reveals no change in condition, it results in no reportable claim and no obesity issue. In the event of ADA issues, the baseline can serve to determine pre-injury condition or the need for accommodations.

What does this mean to employers?

Obesity is now considered a physical impairment that may affect an employees’ ability to perform their jobs and receive special accommodations pursuant to the ADA.

An increasingly unhealthy workforce will pose many challenges for employers in the next few years. Those that can effectively improve the health and well-being of their employee population will have a significant advantage in reducing work comp claim costs, health and welfare benefits and retaining skilled workers.

Recent studies

In a four-year study conducted by Johns Hopkins with an N value of 7,690, 85% of the injured workers studied were classified as obese. In a Duke University study involving 11,728 participants, researchers revealed that employees with a BMI greater than 40 had 11.65 claims per 100 workers, and the average claim costs were $51,010. Employees with a BMI less than 25 had 5.8 claims per 100 workers, with average claim costs of $7,503. This study found that disability costs associated with obesity are seven times higher than for those with a BMI less than 30.

A National Institute of Health study with 42,000 participants found that work-related injuries for employees with a BMI between 25 and 30 had a 15% increase in injuries, and those with a BMI higher than 30 had an increase in work-related injuries of 48%.

The connection between obesity and on the job injuries is clear and extremely costly for employers. Many employers have struggled with justifying the cost of instituting wellness programs just on the basic ROI calculations. They were limiting the potential return on investment solely to the reduction in health insurance costs rather than including the costs on the workers’ comp side of the equation and the potential for lost business opportunities because of injury rates that do not meet customer performance expectations. Another key point is that many wellness programs do not include a focus on treating chronic disease that may cause workers to be more likely to be injured and prolong the recovery period.

Customer-driven safety expectations

There are many potential customers (governments, military, energy, construction) who require that their service providers, contractors and business partners meet specific safety performance requirements as measured by OSHA statistics (recordable incident rates) and National Council on Compensation Insurance (NCCI) rating (experience modifiers) and, in some cases, a full review by 3rd party organizations such as ISNet World.

Working for the best customers often requires that your company’s safety record be in the top 25th percentile to even qualify to bid. To be a world-class company with a world-class safety record requires an integrated approach to accident and injury prevention.

Challenges of an aging workforce

The Bureau of Labor Statistics projects that the labor force will increase by 12.8 million by 2020. The number of workers between ages 16 and 24 will decline 14%, and the number of workers ages 25 to 54 will increase by only 1.9%. The overall share of the labor force for 25- to 54-year-olds will decline from 68% to 65%. The number of workers 55 and older is projected to grow by 28%, or 5.5 times the rate of growth in the overall labor force.

Employers must recognize the challenge that an aging workforce will bring and begin to prepare their workforce for longer careers. A healthy and physically fit 55-year-old worker is more capable and less likely to be injured than a 35-year-old worker who is considered obese.

Treating chronic disease

Employers who want a healthy work force must recognize and treat chronic disease. Many companies have biometric testing programs (health risk assessments) and track healthcare expenditures through their various providers (brokers and insurance carriers).

The results are quite disappointing. On average, only 39% of employees participate in biometric screenings even when they are provided free of charge. For those employees who do participate and who are identified with high biometric risk (blood pressure, glucose, BMI, cholesterol), fewer than 20% treat or even manage these diseases.

This makes these employees much more susceptible to injury and significantly lengthens the disability period. The resulting financial impact on employers can be devastating.

Conclusion

Best-in-class safety results will require a combined approach to reduce injuries and to accommodate new classes of disability such as obesity. It is important that employers focus on improving the health and well-being of their workforce while creating well-developed job descriptions, identifying the essential functions, assessing physical assessments and designing job demands to fall within the declining capabilities of the American workers. It is important for an employer to only accept claims that arise out of the course and scope of employment. This is especially true with the reclassification of obesity as a disease. Baseline testing will play an essential role in separating work-related injuries from pre-existing conditions in this changing environment.