Tag Archives: InsurTech

Insurance Outlook for 2021

It may feel like the end of the pandemic is in sight, but for the insurance industry the shock waves created by 2020 will be reverberating for years. From premiums to policy language, and from underwriting to governmental action, changes are coming in 2021. 

In addition to the obvious influence of the pandemic, 2020 was also a monumental year in terms of insurance losses. It is easy to forget the historic hurricane season with its 30 named storms, the hellscape of wildfires that ripped through much of the West, the tornados and derecho that ripped through the Midwest and the civil unrest that caused huge losses for businesses in city centers throughout the nation. 

All of that loss will likely add up to higher premiums. 

Even still, the elephant in the room was COVID-19. While much of the industry already had policy language excluding communicable diseases, pandemic exclusions are a certainty in nearly every new policy. And even without pandemics, underwriters will likely be taking closer looks at nearly every risk for a while. 

But, just as risk isn’t going away, neither is insurance. Here are a few specific ways the industry is likely to change in the next 12 months. 

Business

Perhaps the biggest disappointment for business owners during the pandemic was realizing that business interruption insurance policies excluded pandemics. But that didn’t stop them from suing.  

Barring legislative mandates or judicial intervention, pandemic exclusions won’t be changing any time soon. 

Instead, business owners are turning to practical ways to limit their liability while reopening as safely as possible. Still, liability is a concern. 

Some states have issued liability waivers for businesses that follow safety best practices, but no federal protections have yet come down. Absent that, businesses are going to have to rely on their business owners’ policies if an employee or a customer claims they caught the virus in their place of business. 

Liability may also bleed over into workers’ compensation. 

One place the federal government has stepped in is unemployment insurance. While the federal supplement has softened the blow for employees, the open question that isn’t being widely discussed is the fate of state unemployment trust funds. 

State-based unemployment insurance was never designed for an event of this scale, and many state funds are nearly empty. It will be interesting to see if federal money will top off those funds or if state statutes will kick in, passing the responsibility on to employers in the form of higher taxes. 

Travel insurance 

The two traditional components of travel insurance were trip cancellation and supplementary health. 

The health component was essential in overseas trips where a U.S.-based policy may not carry over. But with overseas travel all but shut down, that element also largely fizzled. 

The cancellation portion is continuing for now, with a huge caveat. Pandemics in general, and COVID-19 in particular, will not be covered. 

As overseas travel begins to open up later in the year, the health portion may return, but, because COVID-19 is a known event, chances of finding a policy willing to cover its risk are slim to none.  

See also: 2020 Catastrophes; Preview for 2021

Event cancellation and contingency  

Like trip cancellation, event cancellation policies can also be found, but they, too, are all but certain to exclude COVID-19, much less any communicable disease. The policies that are available now tend to only cover small-scale events.  

Before any event will be covered, though, it has to be held in a locality where that event is allowed and legal. Presuming it is allowed, the next step is going to be increased scrutiny by underwriters, who most likely won’t sign off on any event unless it’s incredibly aboveboard. 

Underwriters will be looking at event size as well as logistics. An outdoor concert will be more likely to get a policy than an indoor electronic dance music show. 

Film/TV production 

Cameras are rolling again, and, in many cases, producers have secured insurance policies protecting their productions. That said, many of those policies are requiring massive self-insured components and monstrous deductibles. 

Even with the tighter pandemic protocols, some of those productions have still suffered COVID-19 outbreaks, in many cases causing the productions to shut back down. 

For the time being, the entertainment industry will likely continue that stuttered start-stop pattern, but the profit motive of new content will make that struggle worth it. 

Health/life

COVID-19 has thrown a wrench in the normal operations of health and life insurance policies. 

In terms of health insurance, paying for pandemic costs is the least of the worries. The bigger issue is that patients have foregone normal preventative care. That is reverberating in three major ways. 

First, because premiums are set according to prior-year payouts, setting rates for 2021 was challenging. Second, insurers are worried that the backlog of procedures will come flooding into the system in 2021, prompting corresponding payouts. Finally, with people not taking care of chronic conditions, industry watchers worry that health will worsen in the long run. 

In terms of life insurance, the biggest question is the paramedical exams. While many of the hard lockdowns have been lifted, people are still reluctant to invite nurses into their homes to get the data needed for proper underwriting. 

Some companies have responded by offering no-exam policies, but how that will play out is the biggest question mark. 

See also: 11 Keys to Predictive Analytics in 2021

Big picture

The biggest intermediate impact is going to be defined by Washington and the courts. 

The courts are going to have to weigh in on whether business interruption policies and event cancellation policies will be forced to pay out despite contractual pandemic exclusions. 

Lawmakers may also step in with a liability shield for businesses. 

But the biggest issue industry insiders are watching is a potential federally backed pooled risk system for pandemics similar to the Terrorism Risk Insurance Act. Without that kind of intervention, pandemics won’t likely ever be covered. There are a few pending bills that might do just that.

Cyber Tips for Work From Home

The global pandemic has brought forward an unprecedented rise in remote working worldwide. What was once considered a luxury offered to only a handful of employees has become an obligation for hundreds of millions of people. 

Yet, with this abrupt shift to working from home, are companies leaving themselves more exposed to online cybercrime threats? It seems so, as a massive 71% of business owners are expecting the increase in remote working to result in some sort of a cyber breach. To say the data privacy lawyers have got their hands full would be somewhat of an understatement!

With that said, here are some quick tips you can implement into your business so you can better protect both your company and employee data. 

Provide employees with basic security knowledge

Employee negligence remains the most significant threat of company data breaches, with 20% of all registered attacks occurring due to an employee mishap. Here are some of the main ways employees expose company data:

  • Phishing attacks one in every eight employees shares information on a phishing site.
  • Unprotected personal devices — 45% of business owners are concerned about a potential data breach occurring due to a security issue on an employee’s personal device. 
  • Poor password management — 73% of businesses are now running additional training for employees on how to remain safe when working remotely, with training focused on implementing better password management.
  • Using public Wi-Fi — 63% of employees admitted to using public Wi-Fi to access company emails and files, and a staggering 21% admitted to leaving a work device unattended in public while working remotely.

So what can you do to better protect your company data?

  • Amp up training on cybersecurity 
  • Make cybersecurity a priority for employees
  • Restrict the use of personal devices when accessing company data 
  • Encourage the use of proper password management
  • Forbid employees from accessing company data while using public Wi-Fi

See also: Navigating Security in the Remote Paradigm

Provide your people with VPN access

In the wake of the current global situation, 79% of business owners have decided to increase their cybersecurity procedures to manage high volumes of remote access. One of the leading ways of doing this was by giving employees access to a highly encrypted VPN.

If you aren’t already with what a VPN is, it’s basically a service that allows you to create a secure and encrypted connection between any of your devices and the internet server. It creates an encrypted tunnel for all of the data transmissions to be sent and received through, and thus it makes it extremely difficult for hackers to intercept. These days, running a VPN is becoming a necessity as cybercrime rates continue to increase, especially as they are relatively cheap and easy to use. Companies that use a VPN provider will likely continue to do so even after the pandemic is over. 

Run a password audit

A password security audit is an excellent way for you to test the strength of your employees’ passwords and how they would fare against an attack. A thorough audit should help uncover weak passwords and also provides an excellent opportunity to further educate staff on “password hygiene,” especially when working remotely.

You should also consider investing in a password manager for your employees, which will massively reduce the risk of a successful password attack. 

Password managers work by creating a unique password for each site that your employee visits. The passwords they generate are highly secure and typically consist of an extremely long alphanumeric sequence that is next to impossible to guess. 

Use an MDM/EMM solution

Mobile device management (MDM) or enterprise mobility management (EMM) is a set of technology, processes and policies that help to bolster the security of corporate and employee-owned devices within your organization. 

In short, an MDM solution manages the features on the mobile device, whereas an EMM solution manages the entire device. Both are great ways to fortify company data security when employees are working remotely, regardless of whether they are company devices or employee-owned. These solutions allow you to do things such as:

  • Enforce the use of security policies on devices
  • Remotely control devices
  • Track the device location in real time
  • Wipe the device when reported lost or stolen

Foster community and care for employees

It’s important to remember that company data is not the only data at risk during a breach. Most companies are required to hold sensitive information about their employees, such as their date of birth, address and Social Security number. This information is a prime target for hackers looking to commit identity fraud, and you must protect your employees’ data to the best of your ability. 

After all, employees are putting their faith in you the same way you put your faith and trust in them. This is why it’s a great idea to foster a sense of community and care for employees to create an atmosphere where everyone is committed to taking care of each other’s online security. 

As always, the best way to do this is through education, so make sure you take the time to set up training sessions and encourage participation where possible.

Provide clear guidance and encourage communication

Last but not least, you must make cybersecurity a part of your company policy. Given that employee negligence is still one of the biggest causes of breaches, you must put steps in place to limit the likelihood of such an event.

If possible, lay out clear company guidelines on what is expected of your employees, including best practices such as:

  • Avoid opening pop-ups and unknown emails
  • Use a strong password (preferably a unique one for each site)
  • Only connect to secure Wi-Fi 
  • Use a VPN where possible
  • Enable firewall protection at home and at work
  • Keep antivirus and system software up to date
  • Back up data regularly

See also: Time to Focus on Cyber Resilience

Finally, it’s important to encourage communication around cybersecurity incidents. If an employee suspects there has been a breach or has located a potential threat/weakness, make sure the employee has a clear channel to communicate concerns.

Claims Development for COVID (Part 1)

The latest Out Front Ideas With Kimberly and Mark webinar brought together a panel of industry experts to explore current trends being seen in COVID-19 claims, as well as long-term medical complications and what risk managers should be monitoring in the future. 

Our guests were:

  • Teresa Bartlett, MD – senior medical officer, Sedgwick
  • Max Koonce – chief claims officer, Sedgwick
  • Tim Stanger – vice president – partner relations, Safety National
  • Alex Swedlow – president, California Workers’ Compensation Institute

One of the most significant challenges in analyzing workers’ compensation data is that a single data source that collects and analyzes all the data does not exist. Data is currently provided through multiple sources such as the National Council on Compensation Insurance (NCCI), independent bureaus, monopolistic jurisdictions and self-insured employers. The California Workers’ Compensation Institute (CWCI) and the Workers’ Compensation Research Institute (WCRI) also provide analyses around workers’ compensation data.

To fill in some of the major gaps in data, panelists from CWCI, Sedgwick and Safety National break down their individual data sources to provide a clearer picture of COVID-19’s impact on workers’ compensation.

CWCI Claims’ Data Trends

In tracking the various components of COVID-19, CWCI has developed studies and on-demand webinars that cover the history of presumption laws, early adjudication decisions and how the industry leveraged telemedicine as a response to shelter-in-place initiatives. In addition, webinars are now available regarding legislation. When developing early COVID-19 models, essential elements were considered, including:

  • Infection rate
  • Symptomatic/asymptomatic rates
  • Hospital admissions
  • Intensive care admissions
  • Mortality rate
  • Cost per claim

Early projections related to COVID-19 claims were skewed based on a lack of stability in data modeling. The earliest data contained areas like China, Iceland and Greenland, with infection rates that were much different than other parts of the world. Once data became available regarding COVID-19 in the U.S., it was clear that the U.S. held a disproportionately large percentage of worldwide infection rates and deaths. 

California alone currently accounts for 13% of U.S. infections and 9.6% of U.S. deaths. When studying workers ages 18 to 65 in California, they account for 78% of the state’s infections and 26% of the deaths. However, when looking at the number of workers’ compensation claims in the state, only 4.7% of infections and 5.6% of deaths have an accompanying claim.

As of January 2021, there have been 123,674 COVID-19 workers’ compensation claims reported. Projections show about 143,432 claims expected through the end of January 2021. Reported claims from March 2020 to January 2021 show a 12% drop in all non-COVID-19-related claims. However, projections show that by the end of January the overall decrease in claims frequency will be around 4%, with almost 20% of all claims being COVID-19-related.

See also: 9 Months on: COVID and Workers’ Comp

The occupational characteristics of COVID-19 claims have changed with the fall wave of the virus. From October 2020 to January 2021, the healthcare industry share of claims dropped around 10%, accounting for around 29% of all COVID-19 claims. First responders have seen minimal change over the year in terms of their percentage of the total claims. Claims for the transportation sector doubled in the fall, now accounting for 8% of COVID-19 claims. Skilled nursing facilities still share a significantly higher percentage of COVID-19 claims in health care. 

Safety National Claims’ Data Trends

As a leading provider of excess workers’ compensation for self-insured entities, Safety National has seen that around 50% of its accounts consist of three industries: public entities, health care networks and education. Self-insured data is missing from bureau analysis, making Safety National’s data unique.

Consistent with CWCI’s data, overall workers compensation claims for Safety National clients dropped around 26% in 2020 compared with 2019, excluding COVID-19 claims. When including COVID-19 claims, the drop is around 10%. There were roughly three peaks throughout the waves of COVID-19, including early April, early July and early December, with the December peak being the highest number of claims seen all year. 

By age, the 20-55 bracket accounted for 84% of Safety National claims, with the average claim cost being $4,300. When looking at workers over age 55, the average claim cost was more than three times higher at just under $15,000. 

63% of death claims were age 56 or older, 43% were between the ages of 56 and 66. 61% of deaths were male. 51% of death claims were in healthcare, and 22% were from municipalities (mostly first responders).

Among the COVID-19 claims with an incurred cost of over $100,000, 15% have incurred more than $1 million. Some claims have over $2 million incurred, including organ transplants, long intensive care stays and even paraplegia caused by renal failure. 

Sedgwick Claims’ Data Trends 

Sedgwick also carries many self-insured accounts, with 24% of its business being in the retail sector. Like the rest of the industry, Sedgwick’s claims also saw high volume during the three peaks of infection rates. Although healthcare only represents 11% of all of the company’s accounts, most COVID-19 claims were reported from that sector, accounting for just over 50% of all reported COVID-19 claims. The retail industry and the public sector round out the top three industries reporting COVID-19 claims. The top five states reporting COVID-19 claims are California, Texas, Michigan, Florida and Illinois. 

When it comes to the severity of the claims, Sedgwick created a model to project where claims would fall, grouping claims into buckets, including:

  • Cases that only required quarantine 
  • Cases that required nominal medical treatment
  • Complex moderate cases 
  • Complex severe cases, requiring ICU
  • Fatalities

These severity groupings have closely trended with original predictions, with fatalities, for example, accounting for just over .5% of all claims. Approximately 1.5% are severe cases involving ICU stays, 8% are moderate cases involving several medical treatment visits and 90% are mild cases involving very little medical treatment. When reviewing these claims’ value, 73% are valued under $5,000, and 85% are valued under $10,000. 

See also: 20 Issues to Watch in 2021

There has been a fairly even distribution of claims among the age groups due to various industries’ claims. However, the more severe claims that include ICU stays are trending in the over-60 age group. The healthcare industry is accounting for a higher rate of hospitalizations than the other industries, trending 3% to 4% higher than the rest.

Overall, Sedgwick saw a decrease in workers’ compensation and liability claims across the country due to economic shutdowns and various employers not operating at full capacity. Even retail clients deemed essential saw a decrease in overall claims, which could be due to a lower customer count within the stores and an overall increase in safety measures. There has been a slight increase in work-from-home claims due to ergonomic-related issues.

To listen to the archive of our complete COVID Claims Development: Workers’ Compensation & Beyond webinar and view a full list of FAQs from this session, please visit https://www.outfrontideas.com/.Follow @outfrontideas on Twitter and Out Front Ideas With Kimberly and Mark on LinkedIn for more information about coming events and webinars.

7 Ways to Innovate With Purpose

President Kennedy is quoted as having said, “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger, the other for opportunity. In a crisis, be aware of the danger — but recognize the opportunity.”

As I write this, the news coming out of Texas regarding the week’s extreme weather is today’s reminder that we face continued crises. (Hoping that everyone there reaches the end of this ordeal soon.)

Innovators can contribute to harnessing crises as opportunities, ensuring that collectively we focus beyond directing efforts to reverting to the way things were.

Now is the time to ask the basic question — “what is our purpose?” — because the answer will provide the means to align strategy, people, capital and other resources to innovate under remarkably different circumstances than most of us imagined a year ago.

Why should innovators focus on purpose?

Evidence suggests that purpose-led brands:

  • Always know where they are heading
  • Use their defined purpose to guide them through uncertainties
  • Sustain a workforce that brings their best selves to the organization
  • Increase their ability to overcome challenges and achieve results.

What more useful and practical tool could there be to drive innovation?

What is the path to create a purpose-driven organization?

  1. Believe it is possible to inspire a purpose-led workforce.
  2. Sponsor and empower a diverse team to lead a collaborative, iterative and disciplined process to define the business’ purpose.
  3. Commit to constant communication.
  4. Know that the organization must, to paraphrase the late author, futurist and businessman Alvin Toffler, “Learn, Unlearn and Relearn.” This is transformative.
  5. Avoid a top-down approach.
  6. Connect the organization’s purpose to execution — to individual actions and decisions.
  7. Identify and enlist change makers and influencers on the team and from outside who can be role models, helping peers build the confidence to embrace the change.

Two examples

Patagonia was well ahead of the times on being purpose-driven. The brand’s purpose: “To build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”

On Black Friday 2011, Patagonia ran this now famous ad in the New York Times.

This ad is one example of what being authentic to a purpose means. Business priorities are supported by Patagonia’s purpose: reinforcing brand values and product durability, justifying premium pricing and differentiating in a busy category.

Consider CVS’ commitment to purpose, beginning with its name change in 2014, from CVS Caremark to CVS Health. The change aligns with the company’s purpose: “Helping people on their path to better health. Whether in our pharmacies or through our health services and plans, we are pioneering a bold new approach to total health. Making quality care more affordable, accessible, simple and seamless.”

CVS decided to halt selling any tobacco products as part of a deliberate realignment, including establishing new health partnerships and in-store services and merging with Aetna. CVS gave up a reported $2 billion in annual tobacco sales and then saw overall growth. A further stakeholder impact has been that the move out of tobacco created public health benefits as studies have linked overall declines in tobacco purchasing with CVS’ decision — and the decline also includes other tobacco sellers.

Ways to test the strength of purpose

Look to these execution indicators as a starting point:

  • Is the purpose evident in the organization’s daily behaviors, or is it stuck inside presentation decks?
  • Is the purpose equally relevant to internal and external stakeholders?
  • Does the purpose inspire employees, vendors and partners and guide their daily actions with respect to the brand?

See also: Pressure to Innovate Shifts Priorities

Three Ways to Learn More and Take Action

  1. In The Change Maker’s Playbook: How to Seek, Seed and Scale Innovation In Any Company, the Seek phase of the methodology is packed with practical stories and advice on how to embed purpose in the innovation effort, and why it matters to create business results from these investments.
  2. I’ve also launched a prototype of a workshop engaging leadership teams to experience the Playbook in a compact, action-oriented session.  Reach out if you would like to learn more; you can shape the content and make it your own. 
  3. In the current issue of Carrier Management ,you can find an expanded version of this letter, specific to the insurance sector. 

How Giving Back Pays Dividends

In business, change is constant. After spending years (or even decades) building your company, common sense tells you that future success relies on change as new organizations enter the market. For an industry to grow, expand and move forward, companies that have already achieved success should look for ways to give back to the industry that helped them flourish.

When leaders view their industry counterparts as collaborators, this attitude has a way of infiltrating the entire organization. Employees within a company can begin to take on a mentality where success and opportunities are unlimited, affecting everything from teamwork to innovation. Over time, employees feel even more confident about sharing ideas, making mistakes and taking chances.

Not investing in your counterparts only squelches the potential of innovation in your industry. Besides, industry dedication can inspire others in your company to do the same — creating a work environment of collaboration, self-development and creative thought. It’s like reinvesting in your business.

Take Doug Conant. The former CEO of Campbell Soup did many things to improve the business, but one of his most significant moves was weaving “abundance” into its DNA. While this abundance took the form of corporate social responsibility by focusing on sustainability in the agricultural supply chain, the notion that people want to work for aspirational organizations is universal.

Giving back to the business community provides a similar effect. People become more engaged, creating a better workplace and positioning their businesses to succeed in the marketplace. Even in the more competitive “niches” of the insurance industry, there is room for more than a handful of players.

Investing in the Community Is an Investment in Yourself

Engaging with industry colleagues builds connections that create more promising opportunities for success for everyone involved. This is certainly true in insurance and financial services.

“The rising tide of a strong marketplace with continuing growth lifts all boats,” said Scott Berlin, senior vice president at New York Life and a member of the board at PIMA, a trade association that brings companies throughout the insurance and financial services ecosystem together to learn from each other and improve the industry.

Instead of competing for a larger share of the same pie, Berlin said companies are better off working together to grow the size of that pie. These partnerships also provide insights into shared industry challenges, offering an opportunity to develop new approaches. These actions don’t just ensure a healthier marketplace — they also deliver new perspectives to all participants.

“Working together within one’s business community provides the opportunity to grow personally as a leader,” Berlin said. “Sometimes, the best lessons are learned when not doing your day job.”

See also: Navigating Confusing Insurance Regulations

Aside from obtaining growth or insights, sharing expertise can differentiate an individual as an industry thought leader while also inspiring others — cementing your reputation as a leader. This does more than give you added clout. It provides an opportunity to enact real change, helping your industry raise awareness and better serve consumers.

All it takes is for you to raise your hand and share the wins, challenges and insights you’ve gained through years of experience. This level of collaboration can help the entire industry grow.

“In the insurance industry, we have an opportunity to better position ourselves with consumers,” Berlin explains. “We sell valuable products and services, yet we’re hindered by a general lack of awareness. Working together, we can better educate consumers on potential solutions to their needs and highlight the benefits and guarantees we provide.”

One way to start is with “co-opetition.” Partnering with a competitor ends up benefiting both parties and providing stronger value to consumers. For example, Australian-based financial services company Suncorp often partners with innovative, tech-focused startups to offer on-demand services to its customers.

One easy way to practice coopetition is through peer groups. PIMA members, for instance, can join peer advisory forums, interest groups and a private online community. We’ve also formed an agency CEO forum that enables CEOs to meet with competitors throughout the year, to learn from one another and share insights on ways to improve the industry. It can be difficult to start conversations with people we perceive as competitors, but peer groups make it simple. And don’t be afraid to include new entrants or people outside the industry in your peer groups — inspiration can come from anywhere.

New York Life, for example, has its own venture capital arm that has tapped into startups that address the challenges experienced by many life insurance companies. The startups receive the invaluable backing of an established organization, and New York Life gains important insight into the future of life insurance.

To elevate the industry as a whole, be open to collaborating with industry peers while creating opportunities for mutually beneficial connections. You have the power, the capacity and the resources to support collective industry success.

Are you interested in sharing your perspectives with industry peers? Learn more about the PIMA community at www.pimainsights.org.