Tag Archives: John

Challenging Drugs’ Moonshot Price Tags

Q: Some American pharmaceutical companies are well-known for pricing drugs at whatever the market will bear. In oncology, some specialty drugs seem to have price tags completely unrelated to the proven effectiveness of the drug. Your company has been taking a lead in confronting this problem. What do you envision as possible solutions?

A: New oncology therapies carry astronomical price tags—most people know this. Receiving far less attention is the question of actual therapeutic value. Drug manufacturers spend billions on advertisements and PR, but unfortunately, real-world patient results are frequently unimpressive. Two recent articles in BMJ make this point, 1) No evidence of benefits for popular oncology therapies and 2) Do cancer drugs improve survival or quality of life?

Why do high-cost oncology therapies with questionable results continue to be prescribed? Let’s examine a situation my company is dealing with right now. VIVIO Health received a request for neratinib, an FDA-approved extended adjuvant therapy for early-stage HER2 positive breast cancer. Our system analyzed all available performance data from sources such as the FDA, ICER and NICE. The drug approval was based on a newly created surrogate endpoint called invasive Disease-Free Survival (iDFS), which only scored 94.2% vs. 91.9% in the placebo arm. Even worse, 29% of the patients dropped out of the trial due to adverse side effects, 16.8% for diarrhea alone. Not surprisingly, the FDA committee patient representatives voted against approval.

See also: ‘High-Performance’ Health Innovators  

Neratinib’s manufacturer PUMA Biotechnologies provided data on the current standard of care, trastuzumab, showing a disease-free survival (DFS) rate of 89%. Interestingly, the use of iDFS as an endpoint led to an increase in the placebo arm of ~3%, which is larger than the neratinib-to-placebo arm difference of ~2%. Ultimately the creation of a new endpoint made a larger impact than the therapy itself. The trial design itself had been altered so many times; the FDA suspected the trial had been “unblinded” and attempted to determine statistically whether unblinding had occurred. Even with these highly questionable results, the FDA approved neratinib in July.

After being shown the questionable data and asked, “Why neratinib?” the requesting oncologist explained that it’s an FDA-approved drug and that “MD Anderson is giving it to everyone.”

Granted it’s hard, but physicians should have the courage to do the right thing. In the context of high-dollar, high-tech therapies and billion-dollar windfalls for pharma execs like Puma CEO Alan Auerbach, physicians must be America’s frontline ensuring that only the right therapies get to the right patients. Using neratinib as an example, here are seven steps every physician should consider before prescribing oncology therapies:

  1. Police endpoint games. Don’t allow drug companies to define arbitrary and meaningless endpoints for your patients. Prescribe medications with objective data on meaningful endpoints such as life expectancy. Anything less should be considered experimental at best, and pharma should pay for that.
  2. Do the math. In the case of neratinib, a 2% probability of potential benefit means that for every two patients who might be helped, 98 are subjected to real side effects or other harm. In the neratinib trial, this equates to the “lucky” 33 out of 1,420 total patients, which is quite a needle in the haystack.
  3. Consider the actual cost. Spending $5 million per patient “helped” with such uncertain outcomes makes no sense.
  4. Consider societal opportunity cost. Spending money on therapies that don’t work diverts dollars away from developing therapies that do.
  5. Stop listening to key opinion leaders (KOL). Dig deeper and make your own decision. A KOL’s opinion isn’t data and is too often wrought with conflict.
  6. Require companion tests. Don’t prescribe low-probability therapies without some form of a companion diagnostic and insist that the drug company provide it for you.
  7. Prescribe therapies as if you’re the patient and you’re spending your own money.

See also: U.S. Healthcare: No Simple Insurtech Fix  

Physicians, you hold the key to changing the cost curve for ineffective therapies. Drug companies will get the message when you refuse to prescribe treatments that don’t work and cost too much.

A Test Case on Sanity of Drug Prices

In both traditional healthcare and pharmaceuticals, the phrase “value-based purchasing” is all the rage. Rightfully so, we want to spend our precious healthcare dollars on the care that is most valuable. In other words, we want to pay for care and drugs that are effective and not pay for those that aren’t. Like everything else, the shortest path to value is a truly competitive market. The gorilla in the room is that healthcare, and especially pharmaceuticals, severely lack this fundamental capitalist feature that we have benefited greatly from.

American healthcare dwells in never-never land. We have neither explicit price controls through regulation nor implicit controls through a functional market, resulting in the worst of all possible worlds: a system that’s entrenched, opaque and dysfunctional. It gets worse when we narrow our focus on the drug market. We don’t even understand what it is that we are purchasing because buyers neither spend much time understanding drug effectiveness in the real world nor tie effectiveness to payment. Instead, in an attempt to save dollars, employers, health plans and the government have turned to intermediaries, pharmacy benefit managers, to manage the problem on their behalf. PBMs’ efforts to manage pharmacy costs rely on typical buzzwords like “formulary management,” “prior authorization” and “step therapy.” And PBMs are, as Bloomberg News explains, “the middlemen with murky incentives behind their decisions about which drugs to cover, where they’re sold and for how much.”

See also: 9 Key Factors for Drug Formularies  

This leads us down an unintelligible labyrinth of perverse financial incentives, with zero transparency for the payer or patient on the actual costs, alternatives for therapy and individual outcomes. That’s a problem especially in specialty pharmacy, the fastest-growing sector of pharmacy spending. Only a few years ago, specialty drugs composed a reasonable-sounding 10% of our overall drug spending. Last year, it bloated to 38%, and by 2018 it will be an astounding 50%, which is an increase of $70 million a day!

Contrary to what we often think, there are better options even for many specialty drug therapies. Mavyret, manufactured by AbbVie, is the first example of a new brand name Hepatitis C drug that is actually better for patients and costs far less since Sovaldi hit the market at a price point of $1,000 a pill (never mind that you can purchase it for $4 per pill in India). Eighty percent of patients with Hep C can do an eight-week course versus alternatives manufactured by companies like Gilead and Merck, which generally require 12 weeks. Mavyret is the only drug that works for genotype’s 1-6 and has a list price that is less than half of what competitors charge, even after factoring in middleman shenanigans such as rebates. The final cost to cure a patient of Hep C is approximately $26,000. If that sounds high, consider that specialty medications for chronic conditions such as psoriasis are now $60,000 to $120,000 or more per year.

If you’re like most payers, our current system locks you into paying more for drugs for your members that are less effective than proven, cheaper alternatives like Mavyret. For starters, your PBM may only provide more expensive drugs on its formulary because of large manufacturer rebates, the majority of which they retain. Formulary decisions, of course, are not based on what is most effective for the patient or cheaper for you, the payer.

We feel the financial pain of this broken system every day, but it doesn’t have to be this way. Two decades ago, the internet revolution made the travel agency obsolete for most Americans. Uber and Lyft have done the same to parts of the transportation industry, and Amazon continues to do this to many others. What have these disruptive innovations taught us? That we might, in fact, be able to make better decisions ourselves, without non-value-added middlemen. It is time for this type of disruptive innovation to hit the pharmacy world.

Today’s system focuses on controlling suppliers through PBMs, which in reality just limit our choices and prevent the functioning of a real market. Instead, if we were to focus on value, we could use patient data to give us an objective understanding of whether the patient was getting the right outcome at the right price. This scenario represents an opportunity for better health outcomes and savings compared with the status quo. Here’s the catch: To enter this world, we have to start saying “no” to the current “travel agents” and their obsolete model.

See also: Opioids: Invading the Workplace  

In many ways, Mavyret is like the canary in the coal mine. If this drug isn’t successful – we know it is better for the patient, more effective and costs less – what signal does this send pharmaceutical companies? Don’t bother discovering better drugs that cost less because they won’t sell!

We salute AbbVie for doing what is right for patients and payers. America is the leader in driving innovation and investment in new drug discovery, and our inability to make the right choice not only reduces therapy choices for millions of Americans and their physicians but also for billions of others around the world who depend on us for leadership. Now is the time for payers to demand a functional market and stop overpaying for less effective therapeutic options.

EpiPen Pricing: It’s the System, Stupid

Drug manufacturers can’t catch a break, but are they the real culprit?

Sure, we could wave our finger at Heather Bresch, CEO of Mylan, but didn’t we just do this to Martin Shkreli from Turing Pharmaceuticals and Michael Pearson from Valeant? The key question isn’t, who’s the offender du jour? Instead, it’s why do these pricing “scandals” keep happening, and is our best offensive strategy public shaming?

Complaining about Mylan is pointless because, as a publicly traded company, it is doing exactly what we would expect it to do to meet the profit and growth expectations of investors. Why is it Mylan’s responsibility to compete against itself? If this were the financial services industry, Bresch would be hailed as a genius.

The real issue here is market failure because of the lack of effective competition. Until we solve this underlying market dysfunction, we’ll just experience the same event again and again, much like Bill Murray in Groundhog Day, just with different names and companies. Maybe the best way to explain the real problem is, “It’s the system, stupid.”

So, what’s the hubbub about?

The EpiPen is a decades-old technology first developed for the U.S. military and paid for by the American people. An EpiPen is a branded auto-injector that delivers a metered dose of epinephrine, a cheap and generic lifesaving drug that has been in use for more than a century. A single dose vial can be purchased for less than $2. Assume another couple of dollars for the auto-injector, add some enormous margins and, voilà, the selling price is $635. This is profitable capitalism — effectively a monopoly.

See also: A Radical Shift in Pricing Cancer Drugs?  

A monopoly for an inexpensive generic drug encased in plastic? Really?

A fair and competitive market requires three things: 1) real supply options, 2) the freedom to choose any of these options and 3) regulations that prevent monopolies and promote the public good. Let’s analyze how the EpiPen fares on each.

First, supply options. Are there alternatives to Mylan’s version of an epinephrine auto-injector? Yes. Two pharmaceutical companies, Amedra and Lineage, manufacture less expensive, directly competitive products.

Screen Shot 2016-08-29 at 12.10.00 PM

Next, how easy is it for us to choose these EpiPen alternatives? This is where the friction starts. Unfortunately, most physicians aren’t aware of the available options because most pharmacy benefit managers (PBM) and health plan formularies exclude them, making choice virtually impossible. To understand why, let’s consider who really makes drug-purchasing decisions. A drug purchase starts with a prescription written by a physician. So are physicians responsible for the EpiPen monopoly? Partially. Rather than prescribing EpiPens, physicians should prescribe epinephrine auto-injectors, of which there are multiple options in the market.

What’s the consumer’s and taxpayer’s next line of defense? Wasn’t this why an intermediary, such as a plan or a PBM, was hired in the first place? Yes. Then, why does our advocate, the intermediary, steer us in the direction of the highest-cost option?

Unfortunately, the financial incentives don’t work the way we think they do. Intermediaries don’t make decisions based on what is best for the actual payer. Rather, they participate with manufacturers in complex rebate schemes (really kickbacks, even if they don’t meet the legal definition), allowing them to collect steep profits on brand drugs.

Bresch states that Mylan pays rebates in excess of $300 to intermediaries who aren’t passing them back to the payer. This isn’t altruism; instead, all drug manufacturers know the intermediaries keep large portions of their rebates. This profit incentive is the mechanism that kicks competing drugs out of PBM and plan formularies, locks out competitors, drives market share and creates monopoly (or near-monopoly) conditions.

Let’s review how drug purchases are made in today’s dysfunctional system:

  • Consumer: Follows the physician’s choice as long as someone else is paying for it.
  • Physician: Prescribes what she is familiar with. She’s not paying for it, so what does she care?
  • Manufacturer: Designs incentives to maximize market share and profitability—and gets a monopoly if all works as planned.
  • Intermediary: Steers consumers to drugs that maximize their profit.
  • Payer: Stuck without data about what works, out-of-control drug spending and no real options.

As John Quelch from Harvard Business School & T.H. Chan School of Public Health, puts it, “Monopolistic pricing is a political issue, especially in healthcare. If the industry cannot self-regulate, increasingly empowered consumers will have their elected officials do the job for them.”

I believe breaking significant healthcare monopolies is not only legal, it’s a regulatory obligation. While policymakers have responded, their strategy unfortunately seems to rely heavily on public shaming. A more useful role for them would be to break existing significant monopolies and create legislation to prevent the formation of new ones. The healthcare industry isn’t going to fix itself. Long-lasting, effective change will only occur when external economic and regulatory pressure mandates it.

Are we dreaming an impossible dream? Not at all.

See also: New, Troubling Healthcare Model  

After we get past the completely understandable anger of millions of Americans, healthcare is no different than many other industries once driven by dysfunctional systems that resulted in similar monopolistic behavior. In fact, our path forward could be easier because of successful precedents in our recent past.

Not too long ago, the travel and financial services industries were also plagued by a dearth of information available to the consumer, a lack of choice to real buying options and lax regulatory oversight. Not only was the fix possible; it happened a lot faster than anyone expected!

Together, we can do the same for healthcare.

See also: Keep the Humanity in Healthcare  

Imagine a world where: we have a functional market because we reward companies that have innovative solutions; the people who actually pay for these products and services have true control; and the ugly veil on pricing and business model opacity is finally lifted.

We need to ensure the dollars we spend directly (and through taxes) are used to solve these problems rather exacerbate them. As Quelch points out, we are either going to have to solve this problem or the government will step in. I believe it’s better we fight to fix it instead of relying on the government to make our healthcare decisions for us. The government needs to ensure a level playing field exists for all, and we need to innovate and offer better solutions for less.

As much fun as it is to shame Mylan, a much better way to punish the company would be to buy the lower-cost alternatives from Lineage and Amedra. That is how a real market system works.

Our Real Problem With Drug Pricing

Over the past few months, many of us have heard of the abuses surrounding Martin Shkreli (who is in the news again after a judge set a 2017 trial date for his securities fraud case) and separately, Valeant Pharmaceuticals, which was recently under fire for drug price increases. What we haven’t heard is that these sensationalized cases are truly insignificant when compared with the enormity of the problem facing America.  Only a few years ago, specialty drugs composed a reasonable-sounding 10% of our overall drug spending.  Last year, it bloated to 38%, and by 2018 it will be an astounding 50%, which is an increase of $70 million … a day.

See also: Cutting Prices of Drugs Dispensed by Doctors  

The reason we pay many multiples more than other countries for the same drug is because we have a rigged system in which America is the only globally unregulated market. Worse, we have actually created laws to protect large healthcare monopolies. So, we as Americans have the worst of all worlds: neither a single payer system with explicit price controls nor a free and fair market.

Consider the hepatitis C drug Harvoni, which sells for about $95,000 in the U.S. for the required 12-week course. The same therapy costs less than $1,000 in India, for products that are officially licensed by Gilead, the manufacturer of Harvoni.

The argument that this is a result of us having to subsidize drug R&D costs for developing countries is a farce. In developed countries such as France, Harvoni is available for about half the price we pay in the U.S.

Unfortunately, the same dynamic extends beyond specialty products into other commonly used drugs. The price for a 30-day supply of Crestor is about $200 at most U.S. drugstores, but the price in India is only $6 for a product that in both cases was manufactured in Puerto Rico by AstraZeneca.

I’m excited that VIVIO Health, which I’ve joined as CEO, is tackling this large and complex problem. We represent the vast majority of Americans, who pay far more than they should for healthcare. I dream of a better country for my three children, and I know you do the same for yours.

I have been asked whether I feel like Don Quixote. No question, reforming how healthcare is purchased in America is a daunting task, but our team has clarity on enough of the puzzle pieces to make a difference. Reform is an achievable goal, with many precedents in other industries, such as travel, stock brokerage and retail.

See also: AI: The Next Stage in Healthcare  

The VIVIO Health solution reimagines the way we buy, use and measure specialty drug therapies. Our solution starts with the outcome and works backward, collecting data at every step. We’ve reversed the current purchasing model that starts with profitability for intermediaries and suppliers and instead prioritize the best alternatives for both patients and employers who foot the bills. The data we collect coupled with external data allows us to answer perplexing questions surrounding cost, efficacy and choice.

We foresee a day, with everyone’s participation, when America saves billions on healthcare costs.  We need your support and are asking you to join us in saying NO to legacy and YES to a better system.

 Sources:

What Risks Will Emerge in 2015?

Our list of emerging risks for 2015 covers the kind of perils that keep risk managers up at night: cyber risk, oil price volatility, the changing demands of today’s workforce, the over-confidence corporations have in the ability of their entity to withstand a negative event and more. It’s a long, eye-opening – but certainly not all-encompassing – list. [To read the full article from which this post is taken, visit WillisWire.]

While it is a bit axiomatic to say, it doesn’t make it less true: The world is becoming increasingly complex and uncertain. As the Internet of Things continues to grow, we have access to more and more data on anything and everything. This is good news – more information tends to lead to greater understanding. However, in this age of information overload, it is important to make sure you are using the right data to answer the right questions. We believe the rise in analytic tools will make a significant difference in the way risks are understood, measured, mitigated and transferred.

Political: Oil Volatility

Sumit Mehra

The price of a barrel of oil has slipped by almost 40% in the last few months. Although this price reduction should contribute toward the growth of the world economy in the long run, it has a potential adverse and significant impact on oil-producing countries. These countries are now faced with the risk of either having their economies de-stabilized or run the risk of defaulting on their debts. As a consequence, some of the de-stabilized economies may begin witnessing a mix of risks.

Cyber: The Risk of the Cloud

Peter Armstrong

Cloud computing is rapidly becoming a key component of many organizations’ technology-enablement strategies as they continue to seek differentiation in competitive markets. Cloud, however, is a significant issue from a risk perspective, both in the context of governance and compliance. An example: geographic location of data – are you sure where personnel data is resident, and is that consistent with the jurisdiction of geographies where client organizations operate? Also, distributing data across many cloud service providers means that accidental aggregation that can compromise the re-aggregated credentials is a real issue. Cloud, therefore, constitutes an arena where we are only now coming alive to some of the dimensions of complexity with which we are going to have to wrestle in the coming 12 months.

Aviation: Drones

Steve DoyleSteve Doyle

With oil prices tumbling and margins expanding, the fuel-intense transportation industry is perhaps a little more relaxed about the risks it is facing. There is, however, a fast-growing aviation risk that could affect businesses across all sectors: drone usage. Unmanned aerial vehicles (UAVs), or drones, are now being used by utility, construction, leisure and media companies, to name but a few. Our lives would really change if our online orders were delivered to our drone landing pad! Regulation of the operation of these aircraft varies widely across the world, and, sadly, as a result of this and some ignorance, “near miss” stories are frequent. Drone technology is very familiar from military activity, but commercially it does have the power to change, save and protect lives. With these rewards come risks, and these need to be understood and managed if you have an eye in the sky!


Terrorism: Growth of Islamic Extremism

Terrorism blogger Tim HoltTim Holt

The risk I’m keeping an eye on this year is a development of one that is already extant: the further growth of Islamic extremist ideology and militant action globally. With the so-called Islamic State seeking to consolidate fundamentalist governance in Syria and Iraq and al Q’aeda and its affiliates seeking to expand further into South Asia, the risks to organizations and individuals from new recruits to and returnees from jihad will grow and mutate. This will include the cyber-sphere as a vehicle for the spread of the ideology that drives militant fundamentalism and as a means of attack. Fragile states will find difficulty in containing Islamic extremism while intelligence agencies will be challenged to detect small armed cells or individuals acting on their own initiative.

Financial Institutions: Technology Partners

 Financial Services blogger Richard Magrann-Wells

Richard Magrann-Wells

Banks jumping into bed with Apple and person-to-person lenders? Isn’t that fraternizing with the enemy? Maybe, maybe not. Financial institutions are smart to be pragmatic about how fast the world is changing and trying to find the right technology partners, but mistakes will be made. I have no doubt that there will be regrets by some institutions as they find their partners are not who they thought they were. Partners may become direct competitors or their partner’s technology may create weaknesses in the company’s online security. Or partners will be accused of bad behavior (think red-lining or insider trading), and suddenly your firm has serious regrets, and your reputation is damaged, as well.

ERM: Outsourcing

Dave IngramDave Ingram

Outsourcing might just be the most common business management earnings booster of the past 10 years – which means that it is also a top candidate for becoming a major emerging risk in the near future. There are two basic ways of controlling the risks of outsourcing – by specifying standards at the outset of the arrangement and by inspection of the process and output on a continuing basis. But with the explosion of outsourcing over the past 10 years, even firms that had set down extensive and clear standards at the time of the original agreement and that have allocated the needed resources for inspection of the processes and outputs are at risk from the complacency that comes from the passage of time without serious incident, the changing individuals on both sides of the agreement and the changing pressures on both organizations. An outsourced process is out of sight. If it also becomes out of mind, then it will likely move out of the emerging risk category into the current problem category.

Analytics: Balance Sheet Overconfidence

WillisWire analytics blogger Phil EllisPhil Ellis

An emerging risk I’d like to mention is the overconfidence corporations have in the ability of their balance sheets to withstand a severe reversal of fortune. Many if not most of the world’s largest companies are looking for ways to retain more risk and in the process to reduce their insurance expenditures. One of the reasons mentioned is that many insurers have lower credit ratings than the corporation itself; so why would a company entrust its financial health to weaker institutions? This argument makes sense in an average year, or indeed in most years. However, when a crisis strikes a company, its strong credit rating is a mirage, and insurance coverage becomes very welcome. Approaching the issue of optimizing insurance as a hedge to protect corporate financial objectives is therefore a critical need for most large corporations. When looked at this way, insurance takes on its rightful role as a way to reduce volatility of financial results.

Environment: Extreme Weather Related Risk

Anthony WagarAnthony Wagar

Weather-related environmental risk and natural hazards and disasters continue to make the Top 10 list for many risk managers and insurance professionals across the globe. Why? Because we learned some very unfortunate lessons over the years, thanks to the likes of super storm “Katrina,” “Sandy” and other natural catastrophes in terms of the unexpected frequency and severity of pollution losses because of excessive rain, storm surges and overall damage caused by water (e.g., pollution release from floating drums of chemicals, cross-contamination of neighboring properties from historic/pre-existing contamination, sewer authority system back-ups, landfill containment breaches, mold growth, etc.). Many businesses were hurt financially via legal liability, penalties, government regulations, financial disclosure requirements or simply public relations problems surrounding responsible corporate citizenship. If there are any golden rays of sunshine forecast to break through the dark clouds up ahead, then it would be the increased level of awareness by the risk management community and the acknowledgment of the need for adaptation and proper planning. Some can be in the form of reducing overall carbon footprint and greenhouse gas emissions and others via amendments to site improvement or development plans that incorporate better surface water management systems. We’ve blogged about this risk in the past (here and here), and it’s important to address this business risk now as the underwriting community will continue to modify the risk appetite and terms and conditions for certain classes of risk.

D&O: Certification Requirements

Directors and Officers blogger Francis KeanFrancis Kean

Directors have rightly been concerned for some time about the uptick of claims activity and the focus on individual personal liability. Less attention has been paid to the tactic now deployed increasingly by regulators to tilt the evidential burden in their favor when a claim is brought. The single most-favored method of achieving this is “certification”: i.e. the process whereby regulators insist as part of a senior manager’s duties that she certify that everything in her particular part of the garden is rosy. Then, when a storm comes along – perhaps several years later – the certificate is taken out of the filing tray, dusted down and relied on as evidence of neglect in having “allowed” the problem to have arisen. Whether these “early trigger” exposures are adequately addressed in conventional claims made policies is open to question.


Executive Risk: Derivatives
WillisWire financial instsitutions blogger Andy Doherty

Andy Doherty

Warren Buffett famously said in his 2002 annual report to shareholders, “In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” In the world of D&O insurance, “derivative” refers to a specific type of lawsuit that is brought by a shareholder on behalf of a company against a third party – usually the D&Os of that company. In a nutshell, the allegations are that the D&Os mismanagement harmed the company. While not a new exposure, it sure seems to have increased. The unofficial top three derivative litigation settlements (not including judgments) that have the largest cash component have now occurred in the last 24 months, with each well over $100 million. And those cash component settlements would most likely have to be funded by the personal assets of the individual D&Os…or, and, more likely, the oft-discussed Side A portion of a D&O insurance program. But what could a board of directors allegedly mismanage?

  • M&A transactions
  • Cyber-security issues
  • Compliance issues (think costly FCPA or other regulatory (civil or criminal) investigations)
  • Environmental issues
  • Whistleblower issues
  • Questionable executive compensation programs

The list goes on!

Asset Management: Demand for Transparency

Mary O'ConnorMary O’Connor

A key emerging risk in the asset manager space is fees, transparency and conflicts of interest.  As the number of retirees increases, there will be increasing pressure on asset and wealth managers and annuity and pension providers to demonstrate value for money and to maximize the size of retirees’ pension pots. Regulators, in particular, will be under political pressure to look closely at this sector. Asset managers should act now to ensure that they understand their obligations to all stakeholders and to ensure that they have achieved a sufficient level of disclosure and transparency.


Real Estate: Cyber Risk of Tenant Data

WillisWire real estate blogger Brian RuaneBrian Ruane

Real estate is a brick and mortar (OK, glass and steel) industry that would seem to be immune from cyber crime. But owners, particularly residential owners, are increasingly interacting with tenants online, which may include payment of rent. If owners are taking online payment (or if they’re just keeping online records), they are going to be collecting potentially sensitive information. While the tenant portals that the owners maintain are likely to use up-to-date security measures, we’re learning that there may be no place in the cyber realm that is completely safe. A large residential REIT just sustained a data breach of tenant information when someone hacked into its tenant portal. This is probably the leading emerging risk for the real estate sector.


Benefits: The Changing Face of Human Capital
WillisWire employee benefits blogger Lester Morales

Lester Morales

The Millennial generation is at your door with fresh ideas about making work (and life) meaningful. It’s time to stop just strategizing on how to manage Millennials – and time to start truly retooling your human capital strategies to succeed and grow with a workforce that will be driven by their generation. From the C-suite, human resources and every management level on down, reviewing your organization’s value proposition and its ability to attract, retain, motivate and engage employees should be your highest priority heading into 2015. (Because you’d better believe, Millennials absolutely require engagement.) I’ll be going into this in more detail in my Thursday post, The Changing Face of Human Capital in 2015.


Brazil: Corruption
WillisWire Brazilian Corporate Risks DirectorAlvaro Igrejas

Alvaro Igrejas

Brazil is at a delicate time. The news of corruption cases is growing, and it creates consequences in some types of insurance. The search for protection by these executives is increasing the number of D&O claims. This situation also affect the works and construction sector, because many engineering companies are under investigation; construction and infrastructure suffer a delay in the works, which decreases the hiring of engineering insurance risk. Cash flow problems are also now faced by engineering firms because the irregularities found in their contracts are generating delays in payment of invoices. This makes the public and private works – even those that are not under investigation – have trouble in meeting their schedules, which certainly result in an increase in guarantee insurance claims/sinister. Faced with this whole picture, and if the economy does not grow in 2015, other sectors will also be vulnerable, such as:

  • Transport insurance: because of the decline of the industry and trade
  • Automobile insurance: impact generated by the decrease in production and vehicle sales
  • Benefits insurance: reducing the number of employees as result of the fall in trade


Personal Risk: Device Ubiquity

WillisWire personal insurance blogger, Kevin O'BrienKevin O’Brien

One of the fastest-growing risks we face on a daily basis is being victimized by the accessibility and convenience offered through the growth of online devices. One of last year’s most alarming revelations was a Russian website broadcasting thousands of unsecured webcams from across the world, including several infants in cribs. More than likely, this is the first in what will be a growing trend as the number of Internet-connected devices grows into the Internet of Things (IoT). The more our devices are connected to the Internet, the greater the opportunities available to hackers for exploiting potential security lapses. Exploiting security flaws is especially easy when one installs a new device but does not change any of the default settings. Fortunately, taking an active role in your home’s Internet security can mitigate most of the potential for risk. As the British Information Commissioner’s Office pointed out,

The danger of using weak passwords has been exposed… after a new website was launched that allows people to watch live footage from…insecure (Internet connected) cameras across the world. The website, which is based in Russia, accesses the information by using the default login credentials, which are freely available online, for thousands of cameras.

This type of revelation should immediately make everyone take a few moments to examine the settings on all their devices and the quality of all passwords used in home Internet security.


Global: A Risk Is a Risk Is a Risk

WillisWire global risks blogger, Geoff TaylorGeoff Taylor

As I have maintained for some time, “emerging risk” is a somewhat misused term.  It has been used in the insurance industry to mean new risks that were not or are not currently insurable in any meaningful way; i.e., the market is not sufficiently developed by way of capacity, geographical spread or the number of capital providers. In fact, I believe risks are the same as they ever were; it’s just which ones come to prominence. What drives this may not be the apparent real threat but more a perceived threat, which, fueled by media, can become the risk of the moment. Think H1N1, Ebola, terrorism, gun control, data privacy, etc. The real measure of a risk is still severity and likelihood, and these are not constant; they are continually moving.  It is therefore really important to stay focused on which risks are the real threats to achieving the enterprise objectives and manage these as a priority. Of course, some of the issues I mention may be more or less significant depending on your sector and location. My consistent message is that risk managers should maintain the position of the voice of reason in their organizations so that resources do not get diverted away from managing, reducing and controlling the risks that will have the most impact on the organization into the latest ’emerging’ risk.