Tag Archives: .policy management

‘Sharing Economy’ Has Tricky Insurance Issues

Imagine the unimaginable – you accidentally injure a passenger or pedestrian with your car. How much insurance do you carry to protect them or yourself? Like many, you may carry only $15,000 per individual injury (the minimum, unchanged since 1967, required by California). If your income is low enough to qualify, you may carry a Low Cost Auto policy with only a $10,000 limit. Such minimum limits are a compromise. Insurance is expensive, and states try to balance the utility of car use against insurance costs that, if too high, would reduce that utility. You may, of course, carry higher limits. Or, perhaps, you are like approximately one in seven California drivers, and you illegally drive with no insurance.

Now assume that you are among the many auto owners who have joined the “sharing economy.” You use a smartphone app to match yourself and your car with others willing to pay you for a lift. Uber, Lyft, Sidecar and others (“Transportation Network Companies,” or TNCs) offer these apps, share the fees with you and make this popular service available to thousands.

Again, imagine the unimaginable – a collision injuring your passenger or a pedestrian. Keeping in mind that any insurance cost is ultimately passed on to the passenger, how much insurance should be required for a TNC driver?  $10,000? $15,000? $50,000 (the maximum required for private autos in any state and the minimum required in California if you allow others to rent your auto)? Or perhaps $106,841 (the value in 2014 dollars of $15,000 in 1967)? $750,000 (the minimum required of limousine companies)? Some other figure?

Put another way, the question about how much insurance to carry is asking: How much should those who benefit from the sharing economy share the burden when the activity damages them or others?

Unlike most driving for personal reasons, TNC driving generates cash flow. To many, it seems only fair that some of that be used to extend additional protection to those injured by the activity. What should trigger the additional protection – when one turns on the TNC’s app to seek a fare, when a “match” is made or when a passenger enters the vehicle? Also, who should carry the insurance – the TNC, the TNC driver or some combination?

Currently, these questions are debated among legislators, regulators (such as the California Public Utilities Commission, or CPUC), TNC operators and others. Requiring lots of insurance by setting a high limit may chill innovation; setting the limit too low unnecessarily burdens injured parties or others (e.g., taxpayers, who support Medi-Cal or Medicaid and may end up paying for expenses not covered by private insurance) and may unfairly create a disadvantage for competing sources of transportation that may be subject to higher insurance limits.

Raise the price of insurance, and the price of a ride goes up. (This issue is hardly unique to TNCs. Congress is also debating whether to raise the federally mandated $750,000  truckers’ minimum insurance limit.) Not only might an increase in insurance costs for TNCs stifle a popular and convenient form of transportation, but it may lead some less safe drivers back into their vehicles (e.g., teenagers, intoxicated drivers, impaired drivers, poorly insured drivers, uninsured drivers or drivers with unsafe driving records). This, in turn, may lead to the unintended result of even more unnecessary injuries and deaths.

Much of the debate about TNCs is colored by a New Year’s Eve accident in San Francisco that occurred when a TNC driver with his app on (there is some evidence he may have been looking at it) struck and killed a pedestrian and injured several others. This is a tragic accident, but it also gives the debate an emotional overtone that may make it difficult to strike the correct balance. This accident could also have happened while a non-TNC driver was texting or talking, and there may have been minimal or no insurance available in that case.

In this author’s view, comprehensive legislation or regulation shaping the future of TNCs is premature. These fast-moving innovations are new enough that insurers, legislatures and regulators have been caught on the back foot. At the same time that policy makers are moving forward with regulations, insurers and TNCs are developing new products and strategies to address these issues.

While there is no shortage of those eager to express their opinions (perhaps this author included), there is little credible data on which to base sound policy decisions. Here are some of the many open questions:

–On average, how much would different limits add to the cost of a 10-mile ride? Ten cents? Ten dollars?

–How much will new insurance products cost?

–As the use of TNCs expands, will overall accident rates rise, or will they fall?

–If you drive to a ballgame with your daughter and a fare, will your daughter’s injuries be covered if you have an accident? (Your liability would not be covered under most personal auto policies – surprise!). Put another way, what terms and conditions will appear in any new insurance products or endorsements?

–Does the display of a TNC’s trade dress (essentially, its visual appearance) create ostensible or apparent authority should a passenger suffer injury? Would liability extend to an injured passenger who hailed a car displaying the TNC’s trade dress, even though the driver did not engage the TNC’s app so he could keep the entire fare? If the TNC is liable, could it seek reimbursement by claiming indemnity against the driver?

–If you drive 12,000 miles a year, but 2,000 of those miles are driven as a TNC driver and are insured by some form of TNC policy, should your personal auto insurer base your rate on 12,000 miles or on 10,000 miles? If the latter, how are the different miles to be confirmed?

–If you carry higher limits on your personal auto policy (e.g., $300,000 plus a $1 million umbrella), will the protection for you and anyone you injure drop to a lower TNC policy limit when you act as a TNC driver?

–One current bill in California (AB 2293 — Bonilla) provides that the TNC must assume ALL of the driver’s liability, without limit. By contrast, the CPUC’s proposed rules do not provide for unlimited liability. When is it appropriate to impose liability on the provider of an app as if users of apps were employees or agents of the app provider? Would the operator of an app that matches homes with those who want accommodation (e.g., Airbnb) be liable should a guest trip on an unsafe carpet or step? Would the operator of an app that matches car sellers and buyers be liable for an accident during a test drive? Would an app marketing tickets be liable if the bleachers collapse or the cruise line runs aground?

–Should liability turn on whether the app provider is more than passive? If so, what more is required? A profit motive? This would sweep up many apps. What if the app provider imposes rules on its users (e.g., vetting drivers for their safety record, adopting a zero-tolerance alcohol policy and reviewing ratings by customers)? If so, then forcing app providers to assume unlimited liability may discourage them from taking measures that could enhance safety. For these reasons, this liability provision in AB 2293 could have enormous implications and should be carefully considered.

–If, under AB 2293, the operator of the app is liable without limit, what purpose is served by mandating policy limits? If the operator of the app has sufficient net worth, it would be liable regardless of any policy limits that might be imposed.

–How, if at all, should one weigh the evolving existence of near-universal healthcare under the Affordable Care Act (Obamacare)? Covered parties who suffer injuries will at least have access to healthcare without limit and regardless of fault. Depending on any number of factors, the bulk of these health costs may fall on health insurers, liability insurers, the public or some combination.

Who knows answers to any of these questions? Without answers to these and related questions, it is likely that regulating in a partial vacuum will strike the wrong balance. Like emergency physicians, legislators and regulators should stabilize the patient but “Do No Harm.”

In the meantime, the public deserves protection. There should be no gaps in coverage (whatever trigger or limits are chosen). To keep rates reasonable and predictable, insurers also need clarity with respect to which insurers are responsible.

Prudence, however, suggests that any current legislation or regulation should have a firm sunset date. Otherwise, like barnacles, awkward legislation sticks and impedes progress.

During this initial period, the legislature should require (not just request) that the Public Utilities Commission and the Department of Insurance gather appropriate data and report back to the legislature before the legislation or regulation reaches its sunset. Regulators and legislators may, then, make informed, data-driven decisions that strike the most appropriate balance among all of the legitimate interests.

The Winning Way To Work Past Objects

As an insurance professional, working with objections can be difficult. The only way to grow is to show people that you’re a professional and offer suggestions to help them solve problems based on your products or services.We need to work through objections and not try to overcome them. When we try to overcome objections, someone wins and someone loses.

Objections are not only a natural part of the sales process, they help you to clarify what is on the prospect’s or customer’s mind. For you to help the prospect or customer with a problem, it’s important to understand what and where are the roadblocks. In other words, what concerns do they have about what you are offering?

Their perception is their reality. Asking questions is the way to learn where they are coming from, what their reality is.


Consider the people you are going to contact. What is the best time to call them? Misunderstanding can cause a loss of rapport and potentially a sale.


Test yourself on all of the questions that could possibly come your way so you are fully prepared. Continue to learn regarding the offers and services you are providing.

However, when you receive an objection, it’s common to start explaining all the reasons why the prospect or customer should choose your offers and services. We’ve been taught by the “professionals” to respond that way. Well, guess what? It doesn’t work. If you are patient and listen closely, an opportunity will present itself for you to begin to ask questions instead of explaining. Ask first, then tell.


Let’s face it, most people do not like being approached by a salesperson. Why? Because they have probably had a bad experience. Prospects or customers might believe that if they needed your products or services they would have contacted you. The reason for a sales call is to remind potential or past customers of what you have to offer and how you can potentially solve their problems, even problems they might not be aware of.


The best way to work with objections when making sales calls is to attend sales training sessions, learn from other people and learn from your mistakes. You should also care for your customers and take their feelings and families into consideration. When you do these things, you’ll have more success.

How many times have you heard the objection, “I’m working with someone else” or “I’m happy where I am”? It happens all the time, doesn’t it?

If you want to engage the prospect, you must begin by asking questions. Stay focused on the purpose of the call and be persistent. However, you always want to leave them better than you found them. When you state the purpose of your call, be sure to listen. If the prospect reveals something to you, capture it. Don’t be so focused on your script and saying what you want to say that you miss an opportunity to engage the customer.

Formula for Success:

  • Listen and don’t get defensive
  • Begin to ask a series of questions
  • Get of of the objections and focus back on the purpose of the call.

Examples of questions begin with:

  • Who
    • Who are you currently working with?
  • What
    • What type of strategies have you implemented that will ____?
  • When
    • When was the last time you sat down with your adviser and reviewed your plan?
  • Where
    • Where are you in the process?
  • How
    • How long until you ____?

After you have asked a series of questions, ask for the appointment again. Say things such as:

“I am not asking you to change anything, and I don’t want to duplicate anything you are doing. The purpose of the meeting would be to give you an opportunity to compare our unique approach with what you have done and see if it makes sense. Okay?”

Always focus back on the purpose of the call.

Refrain from getting defensive. Focus on asking questions and listening to responses. Re-engage the prospect, then restate the purpose, be persistent and ask for the meeting or sale.

Remember, you must offer suggestions to help prospects solve problems based on your products or services. Work through objections without trying to overcome them, seek to leave the prospect better than you found him and focus on win-win results. This is the way to work with objections as a professional.

Five Steps to Improve Your Sales Process

Early in my sales career, I had the privilege of being under the leadership of Tom Vanyo, a master salesman, motivator, mentor and friend, who said to me one day in the spring of 1984, “If you don't make a major change today, you will be doing the same thing next week, next month and next year.”

Tom had underscored on several occasions the importance of keeping track of my numbers. I typically responded, “What does it matter? I'm already one of your top producers.” I made all the excuses: “I'm too busy. It's more paperwork. I don't have time.”

Here was the bottom line: Did I really want to know? It was too easy to go home at the end of the day, pat myself on the back and say I had a busy day. But busy doing what?

There was something in Tom's tone that day in 1984 that really got my attention. It was a day I will never forget.

I went back into my office and started making some major changes to my sales process. I kept track of every dial, contact, appointment, sale and how many times each day I would ask for a referral. The numbers revealed how little I was actually doing each day. I thought I was really productive, but I wasn't. I got faked out by being busy. My paycheck revealed I was one of Tom's top producers, but my daily numbers told the whole truth.

Over the next year, I made several significant changes, and those changes showed in my results. I doubled my income that year and — what I found interesting — didn't work more hours. I was simply more productive.

You will never know what's working and what's not unless you keep track.

Are the fundamentals of sales the same today as they were in 1984 or even 100 years ago? My answer is yes! I love what Jim Rohn, the great business philosopher, said many years ago, “There are no new basics and fundamentals.” It's so true. The basics of sales have not changed in thousands of years of recorded history.

What has changed is how we connect, educate and engage with our prospects and customers. Years ago, we connected by foot or horseback. Then along came the railroad, then the telegraph and telephone, then the Internet, websites, Twitter, Facebook, LinkedIn and so on.

Selling is a contact sport. In other words, you have to be in the presence of the prospect or customer, but certain principles always apply, whether the connection is by phone, voicemail, email, face-to-face or even through social media.

Do you have a sales process? If you do, and it is documented and honed, it will serve you as you grow.

Here are the five most important steps in a sales process:

Step 1: What is the purpose of this phone call, email, voicemail or meeting? This step establishes the “why.” Sticking to the purpose of a call, meeting or voicemail will keep you on track throughout your presentation.

Step 2: Who is the right person I need to talk with to get the right results? This step identifies the “who” — it will point you to the decision maker. It is important that you are speaking with the right people.

  • How much time do you waste talking with the wrong people?
  • Who is your target audience?
  • Where are they located?

Step 3: What is the game plan for this call or meeting? This step establishes the “how” — preparing for each call or meeting is how you project knowledge, confidence and a professional tone.

  • How often have you found yourself in the middle of a meeting or phone call not prepared?
  • What happens to your confidence?
  • What communication tools are you going to use to connect with your prospect or customer?
  • What days and times during the week are the best times to contact your prospect or customer?
  • What skills have you developed to work though their objections?

Remember this, if you are confident, others will be confident in you.

Step 4: What is the solution for this prospect or customer? This step defines the “what” — key questions will help you identify their problems, which will allow you to recommend the right products and services. So often a customer is not even aware of his problems or is not sure what he wants. It's important to help prospective customers become aware of the problems they may experience without your product or service. 

Step 5: Have I clearly communicated the next step? This step directs the “where” — communicating the next step helps guide the prospect or client to make decisions that serve her well.

  • Is the prospect or customer clear about the next steps that will help her solve her problems?
  • How are you going to ask for her business?

Following these five steps will help you develop a simple, repeatable sales methodology that will take the guesswork out of each call you make or meeting you conduct. You'll be prepared for anything you face, even the tough ones.

What does your list look like?

Disjointed Reinsurance Systems: A Recipe for Disaster

Insurers’ numerous intricate reinsurance contracts and special pool arrangements, countless policies and arrays of transactions create a massive risk of having unintended exposure. The inability to ensure that each insured risk has the appropriate reinsurance program associated with it is a recipe for disaster.

Having disjointed systems—a combination of policy administration system (PAS) and spreadsheets, for example—or having systems working in silos are sure ways of having risks fall through the cracks. The question is not if it will happen but when and by how much.

Beyond excessive risk exposure, the risks are many: claims leakage, poor management of aging recoverables and lack of business intelligence capabilities. There’s also the likelihood of not being able to track out-of-compliance reinsurance contracts. For instance, if a reinsurer requires certain exclusion in the policies it reinsures and the direct writer issues the policy without the exclusion, then the policy is out of compliance, and the reinsurer may deny liability.

The result is unreliable financial information for trends, profitability analysis and exposure, to name a few.

Having fragmented solutions and manual processes is the worst formula when it comes to audit trails. This is particularly troubling in an age of stringent standards in an increasingly internationally regulated industry. Integrating the right solution will help reduce risks to an absolute minimum.

Consider vendors offering dedicated and comprehensive systems as opposed to policy administration system vendors, which may simply offer “reinsurance modules” as part of all-encompassing systems. Failing to pick the right solution will cost the insurer frustration and delays by attempting to “right” the solution through a series of customizations. This will surely lead to cost overruns, a lengthy implementation and an uncertain outcome. An incomplete system will need to be customized by adding missing functions.

Common system features a carrier should look out for are:
  • Cession treaties and facultative management
  • Claims and events management
  • Policy management
  • Technical accounting (billing)
  • Bordereaux/statements
  • Internal retrocession
  • Assumed and retrocession operations
  • Financial accounting
  • AP/AR
  • Regulatory reporting
  • Statistical reports
  • Business intelligence
Study before implementing

Picking the right solution is just the start. Implementing a new solution still has many pitfalls. Therefore, the first priority is to perform a thorough and meticulous preliminary study.

The study is directed by the vendor, similar to an audit through a series of meetings and interviews with the different stakeholders: IT, business, etc. It typically lasts one to three weeks depending on the complexity of the project. A good approach is to spend a half-day conducting the scheduled meeting(s) and the other half drafting the findings and submitting them for review the following day.

The study should at least contain the following:

  • A detailed report on the company’s current reinsurance management processes.
  • A determination of potential gaps between the carrier reinsurance processes and the target solution.
  • A list of contracts and financial data required for going live.
  • Specifications for the interfaces.
  • Definitions of the data conversion and migration strategy.
  • Reporting requirements and strategy.
  • Detailed project planning and identification of potential risks.
  • Repository requirements.
  • Assessment and revision of overall project costs.
Preliminary study/(gap analysis) sample:

1. Introduction
  • General introduction and description of project objectives and stakeholders
  • What’s in and out of scope
2. Description of current business setting

3. Business requirements

  • Cession requirements
  • Assumed and retrocession requirements
4. Systems Environment Topics
  • Interfaces/hardware and software requirements
5. Implementation requirements
6. System administration
  • Access, security, backups
7. Risks, pending issues and assumptions
8. Project management plan

The preliminary study report must be submitted to each stakeholder for review and validation as well as endorsement by the head of the steering committee of the insurance company before the start of the project. If necessary, the study should be revised until all parts are adequately defined. Ideally, the report should be used as a road map by the carrier and vendor.

All project risks and issues identified at this stage will be incorporated into the project planning. It saves much time and money to discover them before the implementation phase. One of the main reasons why projects fail is poor communication. Key people on different teams need to actively communicate with each other. There should be at  least one person from each invested area—IT, business and upper management must be part of a well-defined steering committee.

A clear-cut escalation process must be in place to tackle any foreseeable issues and address them in a timely manner.

A Successful Implementation Process
Key areas and related guidelines that are essential to successfully carry out a project.

Data cleansing
Before migration, an in-depth data scrubbing or cleansing is recommended. This is the process of amending or removing data derived from the existing applications that is erroneous, incomplete, inadequately formatted or replicated. The discrepancies discovered or deleted may have been originally produced by user-entry errors or by corruption in transmission or storage.

Data cleansing may also include actions such as harmonization of data, which relates to identifying commonalities in data sets and combining them into a single data component, as well as standardization of data, which is a means of changing a reference data set to a new standard—in other words, use of standard codes.

Data migration

Data migration pertains to the moving of data between the existing system (or systems) and the target application as well as all the measures required for migrating and validating the data throughout the entire cycle. The data needs to be converted so that it’s compatible with the reinsurance system before the migration can take place.

It’s a mapping of all the data with business rules and relevant codes attached to it; this step is required before the automatic migration can take place.

An effective and efficient data migration effort involves anticipating potential issues and threats as well as opportunities, such as determining the most suitable data-migration methodology early in the project and taking appropriate measures to mitigate potential risks. Suitable data migration methodology differs from one carrier to another based on its particular business model.

Analyze and understand the business requirements before gathering and working on the actual data. Thereafter, the carrier must delineate what needs to be migrated and how far back. In the case of long-tail business, such as asbestos coverage, all the historical data must be migrated. This is because it may take several years or decades to identify and assess claims.

Conversely, for short-tail lines, such as property fire or physical auto damage, for which losses are usually known and paid shortly after the loss occurs, only the applicable business data is to be singled out for migration.

A detailed mapping of the existing data and system architecture must be drafted to isolate any issues related to the conversion early on. Most likely, workarounds will be required to overcome the specificities or constraints of the new application. As a result, it will be crucial to establish checks and balances or guidelines to validate the quality and accuracy of the data to be loaded.

Identifying subject-matter experts who are thoroughly acquainted with the source data will lessen the risk of missing undocumented data snags and help ensure the success of the project. Therefore, proper planning for accessibility to qualified resources at both the vendor and insurer is critical. You’ll also need experts in the existing systems, the new application and other tools.


Interfaces in a reinsurance context relate to connecting to the data residing in the upstream system, or PAS, to the reinsurance management system, plus integrating the reinsurance data to other applications, such as the general ledger, the claims system and business intelligence tools.

Integration and interfaces are achieved by exchanging data between two different applications but can include tighter mechanisms such as direct function calls. These are synchronous communications used for information retrieval. The synchronous request is made using a direct function call to the target system.

Again, choosing the right partner will be critical. A provider with extensive experience in developing interfaces between primary insurance systems, general ledgers, BI suites and reinsurance solutions most likely has already developed such interfaces for the most popular packages and will have the know-how and best practices to develop new ones if needed. This will ensure that the process will proceed as smoothly as possible.

After the vendor (primarily) and the carrier carry out all essential implementation specifics to consolidate the process automation and integrations required to deliver the system, look to provide a fully deployable and testable solution ready for user acceptance testing in the reinsurance system test environment.

Formal user training must take place beforehand. It needs to include a role-based program and ought not to be a “one-size-fits-all” training course. Each user group needs to have a specific training program that relates to its particular job functions.

The next step is to prepare for a deployment in production. You’ll need to perform a number of parallel runs of the existing reinsurance solutions and the new reinsurance system and be able to replicate each one and reach the same desired outcome before going live.

Now that you’ve installed a modern, comprehensive reinsurance management system, you’ll have straigh-tthrough automated processing with all the checks and balances in place. You will be able to reap the benefits of a well-thought-out strategy paired with an appropriate reinsurance system that will lead to superior controls, reduced risk and better financials. You’ll no longer have any dangerous hidden “cracks” in your reinsurance program.
This article first appeared in Carrier Management magazine.