Fasten Your Seatbelts

Flying cars are already in production. Insurers, get ready for takeoff!

From the Jetsons to Back to the Future to Star Wars, the concept of flying cars is nothing new, but it is only just now becoming a reality. Before we can really get off the ground, though, insurance companies need to figure out how to cover them.


Statistics prove that engaging employees in mindfulness training could be a factor in improving work performance and satisfaction.

The Big Data Revolution— Is It Our Turn?

The information is out there. What are you doing with it?

As we all are reminded each and every day, we are now in the big-data era. In many respects, the insurance industry was the original big-data industry, relying essentially since its inception on the aggregation of massive amounts of claims and loss data to create underwriting algorithms to insure risk.

Kathleen Savio

CEO, Zurich North America, Schaumburg, Illinois

Two Islands in One

Aruba offers surprising adventures if you look past the typical tourist spots.

Antwerp, Belgium

Pedro Matthynssens, CEO of Vanbreda Risk & Benefits, offers history and culture in his hometown.

Sensor Alert

Millennial-run businesses are more likely to use sensors and other tech at work.

Blockchain Ecosystem

Q&A with Derek Lovrenich, Founder and CEO, and Phil Duncan, COO, of InsureEco System

Catherine Zeta-Jones and Sean Connery

The Bond of Insurance Fraud

It seems even Sean Connery and Catherine Zeta-Jones couldn’t lend sex appeal to the insurance industry. 

Medical Model

Q&A with Don Vaughn, a postdoctoral fellow at UCLA’s Semel Institute for Neuroscience and Behavior

Vaughn conducted research on predictive modeling for patients with inflammatory bowel disease. A multi-disciplinary group was able to predict future hospitalizations and the use of biologics by using insurance data. 

Quiet Your Mind

Clear your head and lead in the moment: a Q&A with Kevin Davis.

Kevin Davis, president of Kevin Davis Insurance Services in Los Angeles, a Worldwide Facilities company, is a devotee of mindfulness. He says it has enabled him to improve his business and, more importantly, his life. Editor in chief Sandy Laycox and founding editor Rick Pullen met with him over breakfast earlier this year for an enlightening conversation.—Editor

Fit for Service

Veterans are highly skilled, hard working and collaborative. How can they flourish in your company?

Patrick Doran spent eight years as a security specialist with the U.S. Marine Corps, but he might be the last person to tell you so. And it has nothing—and everything—to do with pride.


Your motivation for hiring veterans may not always adhere to their motivation behind the job search.

Veterans entering the workforce may experience a loss of camaraderie, mission focus and clear opportunities for job advancement.

Those who haven’t served in the military often find there are lessons to be learned when hiring veterans.

Government Policies

U.S. Ex-Im Bank looks for revival under Trump.

Investing in Emerging Economies

A World Bank case study in insurance-driven investment.

The Trading Game

Trade credit and political risk insurance encourage global trade flows and investment in an increasingly volatile world.

Big money is being invested in projects that aim to facilitate trade flows into and out of various parts of the world. The World Bank says it spends tens of millions of dollars every year to encourage private and public sector-led trade flows because it results in new investment activity. 


Financial and other crises across the globe underscore the persistent hazards of international trade.

Many consider trade credit insurance and political risk insurance to be vital tools for companies engaged in international trade.

In today’s marketplace, companies must offer competitive terms to vie for business against foreign players.


Read the Sidebars

Investing in Emerging Economies

Government Policies

Relationships Still Matter in a Tech-Driven World

Millennial business owners are looking to agents and brokers for guidance more than any other generation, and what they want from them is surprising.

When it comes to millennials, stereotypes abound. But it’s a fact that they are now the largest, most educated and most diverse generation in the United States, according to the Council of Economic Advisers.

Flexible Leadership

The ability to adapt to change, including shifting roles, is critical.

We live in constant whitewater. Uncertainty and ambiguity are the new normal. Today’s business environment is in a continual state of change.

Meeting Between the Aisle

Q&A with Reps. Tom Reed and Josh Gottheimer, co-chairs of the Problem Solvers Caucus

These days, politics has become overshadowed by the 24-hour news cycle, Twitter-mania, and extremist diatribe. But not all hope is lost. 

Asking for a Friend

There are some questions you may be apprehensive to ask in public, but the answers are important.

D&O in the Crosshairs

Data breach patience is waning. Corporate managers may experience increased oversight demands and D&O liability claims.

Boards and senior management are in the crosshairs of cyber security. Consumers, shareholders, regulators and legislators seem fed up with the endless stream of cyber attacks that has fueled headlines. 

Today’s Leadership Challenge

Take a step back and reflect…on you.

You’re stressed. I’m stressed. We’re all stressed.

Still Underwater!

Congress renewed NFIP again. What are these short-term patches doing to the surplus lines market?

Eliot Spitzer

The infamous attorney general inspired at least three films, none of which comes close in fright to the horror he unleashed upon the insurance industry.

Eliot Spitzer was a vigorous crusader as New York attorney general between 1999 and 2006.

Napa Valley After Hours

Napa is more than just wineries and elegant restaurants. For family friendly fun, float through the diverse array of sights, sounds and sweets.

Bogota, Colombia

Enrique Acevedo Schwabe, General Manager of Correcol, shows there’s much to love in Bogotá.

Open for Business

After wildfires hit hard in 2017, Napa Valley wineries have emerged largely ok.

New Beginnings

Our dynamic magazine is under the direction of new blood.

Our annual July/August double issue is one of my favorites. That’s because each year we focus the entire magazine on something that has been years in the making, challenging us each step of the way, evolving and disrupting (even though I hate that word) our business models at every turn—technology.

Agency Streamlining

Q&A with Reid Holzworth, Founder and CEO, TechCanary

Tech Goes Techno

ProSight uses DJ insurance as a gateway to a digital, gig-worker platform.

Relationship Management

Several crucial tools can strengthen the agency-carrier relationship.

No matter how you cut it, the traditional insurance distribution model is under pressure. Today’s customers increasingly desire new ways of purchasing insurance as they seek to receive the same levels of choice and convenience offered by other industries. 

Food Focus

Q&A with Seth Berkowitz, UNC-Chapel Hill, and Lori Tishler, Commonwealth Care Alliance

Seth Berkowitz, assistant professor of medicine at the University of North Carolina at Chapel Hill, and Lori Tishler, vice president of medical affairs at the Commonwealth Care Alliance, co-authored a study analyzing whether meal delivery programs could reduce healthcare costs among Medicare and Medicaid beneficiaries.

Steve DeCarlo’s Data Anomaly

He saw the value in big data long before the industry caught on.

Steve DeCarlo built AmWINS into the largest wholesaler in the industry. He is an industry leader in data analytics, having started years before any of his competitors. Steve retired in May and sat down with founding editor Rick Pullen to talk about his career. This is an excerpt on his views on data. —Editor 

RiskBlock Use Cases

Three for the Money

Proof of Value

Trust, It’s Verified

The RiskBlock Alliance is bringing together industry competitors who are working together to build a blockchain-enabled insurance value chain.

Anyone who has ever been in an automobile accident is familiar with the back-and-forth interactions with the insurance agent and carrier. It’s a worrisome, frustrating and time-consuming process. 


Blockchain, AI and predictive data analytics form a triumverate of tech.

RiskBlock Alliance is building a global, holistic ecosystem for insurance-specific blockchain activity. 

The alliance is tuning competitors into collaborators and may someday include state agencies and other third parties.


Read the Sidebars

Proof of Value

Three for the Money

RiskBlock Use Cases

Back to School

Claims professionals are determined to create a buzz on college campuses.

Claims Adjustment

New technologies are lengthening the tenure of older claims professionals, attracting younger ones and revitalizing a sagging field.

More than half of the insurance industry expects to add staff this year but not without a big struggle. As older workers retire, many companies are scrambling to find enough people to replace them, especially in claims processing.


As many as one third of insurance professionals will retire this year, a trend that will continue as baby boomers leave the workforce.

An array of high-tech tools is being used to fill gaps in the labor pool.

A 2017 study said the auto insurance sector is facing “a tumultuous time” as the industry struggles to replace retirees.


Read the Sidebars

Back to School

The Match Game

Data Sets Sail

A Capital Idea

Shop Around

Data Marketplace

By sharing granular risk data in an open market, brokerages and carriers can eliminate costs and create a new insurance model.

In Lloyd’s coffee house in London more than 330 years ago, the property and casualty insurance industry was formed to spread the risks of cargo-carrying ships plying the world’s seas. The industry grew and prospered, with little change in the underlying model. Now, an entirely new structure is taking shape. 


Insurers and brokerages must begin to share data to reduce acquisition costs and operating expenses.

If they don’t, a giant technology company might beat them to it.

Data analytics and other technology have created a potential entry point for non-insurance entities to compete against brokerages and carriers.


Read the Sidebars

Shop Around

A Capital Idea

Data Sets Sail

The Match Game

Kerry Finnegan

Senior Partner, Global Business Solutions, Mercer, Chicago

A Little Gonzo Journalism in Your Insurance Future?

Q&A with new editor in chief of Leader’s Edge, Sandy Laycox.

Leader’s Edge founding editor Rick Pullen recently sat down with new editor in chief Sandy Laycox to find out just who she is and how she got here. This issue is the first under Sandy’s leadership.—The Editors

It’s More Than Pink and Blue

Diversity buy-in requires mechanisms that actually attract and support diverse personnel.

These days, disruption is a hot-button issue on a variety of fronts for the insurance industry, and recruiting is no exception. 

The (Continued) Politicization of Employment?

There are recent developments in labor relations—good and not so good—that employers need to know.

We are now almost a year and a half into what is, for better or worse, the new world that is the Trump administration. From an employer’s perspective, it’s a little bit of both.

Data, Data Every…Where?

Very few companies know what data they have, where their data go or what protections they need.

With the European Union’s General Data Protection Regulation (GDPR) having come into force on May 25, companies around the globe have been struggling to ensure their operations are compliant.

Where Do You Stand?

It is imperative you understand where you fit in the competitive landscape in the market.

It’s a simple question, but one that’s not so easy to answer. Where do you stand in the market among competitors? 

Cave Dwellers

Are the naysayers in your organization causing more disruption than you think?

We all know at least one, the perennial naysayer. No matter what the discussion, from a great place to go on vacation to a major change in your organization, their response is always the same. “Nope. Not happening. I don’t think so.”

World Class Insurance

The World Cup is over but major events always need insurance.

One of the world’s largest sporting events just concluded with France taking the title at the FIFA World Cup held in Russia, and the insurance industry was a heavy participant.


In addition to commercial exposures, Russia is insisting that entry into its borders requires an insurance policy. According to Russia’s World Cup website, insurance for travelers should cover treatment costs for the minimum of €30,000, which translates into $34,822.

Last February during the Winter Olympics in Pyeongchang, South Korea, players from the NHL did not participate in the hockey tournament due to a controversy regarding which organization would foot the bill for player coverage. FIFA, however, has set aside $134 million in coverage for outside clubs and franchises whose players get hurt during the World Cup.

Denver, Colorado

Reed Smith, EVP at CoBiz Insurance, says fly-over city no more!

Polo Anyone?

Palm Beach, Florida, is a tiny town with big names.

Food Fight

Food product recalls are increasing in cost and scrutiny. Check your clients’ cover.

Tighter regulatory supervision, better detection technology and more complex supply chains are increasing the frequency and severity of food product recalls. Contrary to popular belief, property and general liability insurance do not always cover first and third party damages resulting from a product recall. 

Susan Hayes Is Fed Up

Editor in chief Rick Pullen sat down with Susan Hayes, principal at Chicago consulting firm Pharmacy Outcomes Specialists and head of Pharmacy Investigators and Consultants. She audits and investigates corporate prescription costs to help employers control medical expenditures. 

When a Business Should Purchase COLI

COLI is valuable protection for companies against long-term financial loss from a key employee death.

Although “COLI” (pronounced co lee) is a commonly used acronym, it refers to any company-owned life insurance contract on the life of a company employee. 

How Data Track Workforce Generations

Greatest, Boomers and X, Y, Z

Predictive analytics and integrated HR tech explain your multi-generation workforce’s differing wants and needs.

In the world of benefits brokers, one size no longer fits all. Clients today want benefits packages for workers from five different generations with five different desires. 


As compliance issues mount, brokers have an opportunity to separate themselves from the field.

Employers want brokers to assume a stronger role in making decisions about human capital management systems.

HR is evolving into a strategic function that includes change management, company culture and workforce demographic shifts.


Read the Sidebars

How Data Track Workforce Generations

Thought for Food

How one good idea inspired a recipe for changing lives.

Impressive though it may be, The Broadmoor—host to The Council’s Insurance Leadership Forum and Employee Benefits Leadership Forum during the last decade—is gaining some serious competition when it comes to delivering guest experience. 


Inspired by The Council, The Broadmoor has begun donating food to the Springs Rescue Mission in Colorado Springs.

Ken Crerar, The Council’s president and CEO, assigned lawyers Scott Sinder and Josh Oppenheimer to analyze the legal issues.

Crerar brought their research to Jack Damioli, president and CEO of The Broadmoor, who worked with Larry Yonker, president and CEO of Springs Rescue Mission.

Voluntary Benefit Snapshot

The array of voluntary benefits on the market is dizzying. Some are meant to make employees physically and financially healthy. 

Vendor Madness

Design-build is changing the benefits industry, but how do you choose from the endless options knocking on your door?

In today’s job market, companies are becoming more strategic about recruiting and retention. They’re also looking for solutions to rising healthcare costs and responding to changing consumer habits and demands. 


Workforce competition demands that employers offer a wide range of benefits, some paid for by the employer and some by the employee.

Some design-build plans cover a broad swath of employees; some look to pinpoint specific groups of needs.

Know what employees want, and get their feedback to make sure benefits are having the desired effect.


Read the Sidebars

Voluntary Benefit Snapshot


Are you honestly articulating your company brand? It’s essential to building your firm as well as trust with clients.

In today’s world, how do you define a brand? By definition, it is a name, a logo, a product or a service that distinguishes itself from others. 

Tech at Work

Q&A with David Wald, Aclaimant Co-founder

Aclaimant started with an app to report workers compensation incidents but realized technology has a much bigger role to play in managing risk in the workplace.

One Size Fits One

Q&A with Kim Buckey, Vice President of Client Services, DirectPath

DirectPath recently released its “2018 Medical Plan Trends and Observations Report.” The organization analyzed research from Gartner, looking at more than 900 employee benefit plans to gauge trends in employers’ 2018 strategies. Of particular concern to employers was managing their consistently rising healthcare costs.

A Good Run

From Eliot Spitzer and corrupt regulators to game changers and long-delayed postal permits, we’ve seen it all during the past 15 years.

It all began in June 2003 when Pirates of the Caribbean first exploded at the box office, Dan Brown’s The Da Vinci Code was creating a buzz and Apple had just opened its iTunes store. 


Blockchain in use, cyber market growth

Ernest Hemingway

Known for his killer novels, he had a hand in film noir.

The Killers, the 1946 insurance movie made from an Ernest Hemingway short story, is an overlooked classic that practically invented film noir. It’s in black and white and spookily lit. 

Shift Your Mindset

Escape the guilt of why you sell.

The dynamic M&A activity we saw through 2017 is still going strong, and with new private capital players entering the game, there is no shortage of opportunity for brokerages and agencies that are considering a play.

Matt Stadler

President, Marsh & McLennan Agency, Southwest

Uncover Your Friction Points and Gaps

Diversity accountability achieves a competitive business advantage.

Some say, “Ignorance is bliss.” I say, ignorance is a formula for failure—especially when it comes to creating a more diverse and inclusive culture for your firm.

Overseas Oversight

New EU personal data protection rules may slam U.S. brokers.

On May 25, the European Union’s new rules on personal data protection and privacy went into effect. And just what does that have to do with U.S. agencies and brokerages?

How to Recognize and Quantify Potential

Use a road map to get a leg up on your competition and retain your talent.

Did you know your high-potential employees are twice as valuable as other staff? This might explain why 66% of companies invest in programs to identify high-potentials and help them advance. 

The Wild West

Self-driving car accidents are making headlines. What does it mean for the industry’s future?

About 100 years ago, the last of the 48 contiguous American states were admitted to the Union, reaching from the Atlantic to the Pacific Ocean, and Henry Ford’s Motor Company soon began to pump out automobiles that drastically cut down travel through the country.

Porto, Portugal

José Manuel Fonseca, MDS Group CEO and Brokerslink Founder, talks charm and ease in Porto.

Chilling by the River

The newly finished Chicago Riverwalk is part of a 15-year project that has turned an open sewer into a unique urban asset.

From Abstract to Action

Diversity and inclusion initiatives are not the same thing.

Last month, I wrote about the importance—and benefits—of a diverse workforce. That elevating women, people of different ethnicities and abilities, and LGBT individuals, helps deliver a competitive edge when selling products and services to diverse end users. 

Come out and Play

State regulators say they are all for Insurtech regulatory sandboxes to spur growth.

What’s so hard about building a sandbox? After all, what do you need other than some planks and sand? 


Read the Sidebars

Regulators Not So Tech Savvy

Hawaii Commissioner Says We Will Innovate

Hawaii Commissioner Says We Will Innovate

Hawaii Insurance Commissioner Gordon Ito has seen the future, and it includes insurtech sandboxes in the Aloha State.

Regulators Not So Tech Savvy

Ultimately, lack of knowledge and budgets slow insurtech progress.

When it comes to technology, state insurance regulators are definitely of two minds, depending on who’s implementing it.

Blockchain Changes

Q&A with Pavel Bains, CEO of Singapore-based Bluzelle

Are ICOs the New IPOs?

A hot initial public offering was the dream for the first generation of internet companies, but today many startups are looking to initial coin offerings.

Cutting Drug Prices—German Style

Q&A with Elizabeth Seeley, adjunct lecturer on health policy and management at the Harvard T.H. Chan School of Public Health

The German prescription drug system known as AMNOG, the Act to Reorganize Pharmaceuticals Market in the Statutory Health Insurance System, is the country’s program for evaluating and pricing new medications entering the market.

Congressman Tom MacArthur

He conquered insurance. Then, he set out to legislate it.

What would happen to healthcare legislation if there were an insurance CEO in charge? U.S. Representative Tom MacArthur, R-N.J., is not quite in charge, but he’s trying hard to make waves in insurance legislation.

What Disruption?

Plenty have claimed it. One might do it. Meet Samir Shah.

A lot has been said about disruption in the insurance industry, but to date, there has been very little in the retail market. Editor in chief Rick Pullen recently sat down with Samir Shah, CEO of Ledger Investing, to talk about the future disruptive nature of insurance-linked securities.

Streamlining Drugs

How You Can Cut the Cost of Prescription Meds

When Michael Rea worked as a Walgreens pharmacist, patients always asked him why their prescription medication costs were always rising. So many asked, in fact, that Rea created a canned response for their queries.


Prescription drug spending in 2016 accounted for about $330 billion, or 10% of the nation’s total healthcare costs.

Prices for common medications are as much as 117% higher in the United States than in other nations.

A U.S. company with 1,200 employees sent employees for treatment abroad and saved $1 million in a year.

Elizabeth Krystyn

Founding Partner, BKS

We have made a conscious effort to recruit the best person for the job, and that is often a woman.

The I’s Have It

Inclusion and innovation are inextricably linked and immensely powerful.

If you have not yet embraced the ideas of diversity and inclusion in your workforce, here is another reason: boosting your current financial performance. Surprised? 

Losing Face

Facebook’s lack of governance may cost more than a mere breach would.

Facebook may become the textbook case on how a company’s poor governance and weak privacy practices cost it more than any breach in history. Congress, regulators (U.S. and international), state attorneys general, plaintiffs lawyers and the public at large have put Facebook in the crosshairs.

Buyers Don’t Know It All

Sellers who focus on driving value can leverage their skill sets and realize more opportunity than they imagined.

A midsize insurance firm sells to a private-equity backed company that is 50 times its size. At the deal table, there is an independent owner—an entrepreneur who worked hard at growing her business and team for a couple decades.

Affairs of Estate

Tax reform may make you rethink your perpetuation plan.

As the reality sets in of all that was and was not included in the generational tax reform legislation that was signed in December, one thing is clear: this is a terrific time to reconsider your agency perpetuation and estate plans.

Take Five

Knowledge converts into the kind of things money can’t buy.

We have all heard it said: money is king. There’s a song about it, a miniseries about it and even its own Facebook page. But no more. Move over money; there’s a new kid in town: knowledge. 

Ben Stiller

Somehow Gets It Right

In spite of a piddling 25 out of 100 review from Rotten Tomatoes and a Golden Raspberry “Worst Actor” nomination for its star, Ben Stiller, the 2004 film Along Came Polly was an audience fave. 

The Council Attends DC Blockchain Summit

Need to know from the annual DC Blockchain Summit, hosted by the Chamber of Digital Commerce.

The Council had the opportunity to attend the annual DC Blockchain Summit, hosted by the Chamber of Digital Commerce.

M&A 2018 As Printed

See the full supplement in PDF format.

Going My Way?

New relationships, same old economy... for now.

Private capital is more diverse, more long-term and more interested in the insurance industry than ever before.

Insurtech Number Cruncher

Regulating Across Industries

A Flexible Framework

Is Your Client Covered?

Here’s what a typical EPLI policy covers.

Which Businesses Have the Most Complaints?

Four industries account for more than half of all EEOC sexual harassment complaints.

According to Thom Rickert, vice president for Trident Public Risk Solutions, there is a lot more to take into account when providing coverage for flying cars than, say, ground autonomous vehicles—another up-and-coming auto innovation (see our previous article on insuring autonomous autos). “I think cars flying will present more significant hazards than autonomous vehicles, but I do believe the industry will find solutions to both,” Rickert says. “A vehicle hits another vehicle, it causes a chain reaction. A flying vehicle could crash into an apartment building. So that’s that difference. I see it as current aviation insurance recognizing these differences in when [and] how it will take off and how it currently integrates with the current air traffic.”

Although flying cars have yet to cause any deaths, insurers and policymakers may want to look to the May 16, 1977, New York City helicopter accident that killed five people as potentially similar in some ways. As a commercial helicopter proceeded to land on the city’s Pan Am Building, the aircraft’s landing gear broke, turning the vehicle upside down and instantly killing four passengers, with wings and parts spiraling out from the top of the building down into neighboring buildings and New York’s streets, killing a pedestrian. After the accident, public opinion of commuter helicopter travel tanked, as urban helicopter airline companies such as New York Airways shut down in the following years.

Forty years later, the perception and technology behind flying aircraft have changed. More planes, helicopters and now drones fill our skies than ever before. And two companies are currently making large strides in the American aviation car market: Uber, which promises an air taxi service as early as 2020, and a Google founder’s company, Kitty Hawk, which has already begun taking pre-orders for its model of the Flyer.

“At Kitty Hawk, we are building aircraft to be just as accessible and to have just as much utility as today’s cars,” a company spokesperson said. “Just as horseless carriages were once new, flying cars are new to the world, so there will continue to be comparisons to familiar vehicles and household machines.”

How will flying cars be used? According to the company, commuting is just one of many uses it sees for its product. Kitty Hawk sees its Flyer as merely a multipurpose vehicle for companies to apply to their industry. “The possibilities for Flyer are truly endless and up to our imaginations,” the company said. “Commercial partners are in discussions to operate fleets of Flyers to bring people to remote environments, natural landmarks, as well as offer Flyer rides in amusement parks and entertainment zones.”

While this may seem like a recipe for crowded, confused skyways, there are efforts under way to ensure a safe and controlled environment. Recently NASA and Uber technologies signed an agreement to work together and develop the safety and logistics that go into creating a realistic flying car environment.

Under the agreement, “Uber will share its plans for implementing an urban aviation rideshare network. NASA will use the latest in airspace management computer modeling and simulation to assess the impacts of small aircraft—from delivery drones to passenger aircraft with vertical take-off and landing capability—in crowded environments.”

When it comes to liability, Rickert sees manufacturers and operators, rather than passengers, fitting the bill for coverage. “The manufacturers just like any product are going to have to have certain standards that they meet and certain liability,” Rickert said. “The aspect of aviation could also result in more of a concept of strict liability, because it may be considered an inherently dangerous product. The way that it could be seen in any liability situation is that the passenger couldn’t assume any liability, because the liability relies strictly on the manufacturer because of the nature of the product.

“And, frankly, when you talk about damage, these vehicles are going to cost in the millions of dollars. The technology is so much more advanced. Just like aircraft hull insurance with very large values, the same will be for these types.”

As flying cars continue to be developed, the insurance industry will eventually be called upon to accommodate the demand for these sci-fi vehicles of tomorrow. An entire new sector of insurance will be created to cover George Jetson, his boy Elroy, daughter Judy, and of course Jane his wife.


That said, we seem to have lagged in some respects in fully participating in the current big-data revolution. New government-created health data collection and aggregation platforms may, however, give us the data resources to explore new opportunities, such as developing tools to help drive plan participants toward more effective and efficient healthcare providers.

At the federal level, the Centers for Medicare & Medicaid Services (CMS)— the largest single payer of healthcare services in the country—has created a publicly accessible Medicare claims database. Who may access what varies by the nature of the requestor and the intended use.

For example, to access data containing beneficiaries’ protected health information (PHI) (which can be used to individually identify them), a requester must plan to use such data for “research purposes,” sign a data use agreement, and be reviewed/ approved by CMS’s Privacy Board. The standard data-use agreement clarifies that, to qualify as “research,” CMS must determine that the use will result in “generalized knowledge” that will “provide assistance to CMS in monitoring, managing and improving the Medicare and Medicaid programs or the services provided to beneficiaries[.]”

However, CMS’s public-use files— which do not contain any data that can be used to identify the beneficiary—may provide our best opportunities for access because these data are readily available to the public for any purpose. The data sets are fairly robust and include information on, among other things:

  • Physicians and other suppliers (utilization, payment, submitted charges, place of service)
  • Inpatient and outpatient services (utilization, payment, hospital-specific charges)
  • Medicare Part D prescribers (number of prescriptions dispensed, total drug costs).

There are, however, practical limitations of the public-use files. First, they are by definition limited to Medicare participants and covered claims (CMS has embarked on a data collection/sharing initiative for Medicare Advantage plans, and access is, at least initially, restricted to researchers).

Second, none of the data are risk-adjusted to account for differences in underlying severity of disease of patient populations.

And third, the public-use files do not contain any information on quality of care (readmissions/follow-up visits/etc.). CMS has separately begun publishing quality of care ratings for group practices on its Physician Compare portal and intends to add ratings for individual physicians and other healthcare professionals in the future.

All-payer claims databases (APCDs) are state-sponsored, large-scale endeavors that systematically collect and require the submission of medical claims, pharmacy claims and dental claims, as well as additional information about provider and patient demographics from public (e.g., Medicare and Medicaid) and private payers. They are currently being implemented or operated in 19 states: Arkansas, Colorado, Connecticut, Delaware, Florida, Hawaii, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Utah, Vermont, Virginia, Washington and West Virginia (a 20th—Tennessee—apparently has abandoned its efforts to operate an APCD, at least for now).

APCDs generally were created as a tool to measure healthcare costs, quality and utilization and to support public transparency of that information. The Virginia APCD, for example, was created expressly “to facilitate data-driven, evidence-based improvements in access, quality, and cost of health care and to promote and improve the public health through the understanding of health care expenditure patterns and operation and performance of the health care system.”

APCD operation—e.g., what data are collected, the availability of such data, and who has oversight authority over the program—varies by state.

Some states—e.g., Colorado and Washington—publicize reports and data sources for public consumption via a consumer-facing website. This allows people to assess differences in pricing for common procedures, to check costs, and to effectively evaluate quality performance throughout the state. Other states—e.g., Maryland and Oregon— require interested parties to formally request access via application and/or to sign a data use agreement with the data management authority (which can be a state agency or an external nonprofit) to gain access to a specific data set.

As with the CMS data, limitations also exist in the state system. Notably, over half of states have not yet adopted a health data aggregation system. And some of those states that have begun collecting data have very restrictive access rules. Hawaii and Minnesota, for instance, currently will release their data to government entities only.

We have developed a comprehensive survey that outlines the current state of play for all of the state APCDs (what data are collected, who may gain access, etc.) at It may be helpful as you begin to assess whether these might be valuable tools for you. In the healthcare space, we really are at the inception of the big-data revolution. But data sources are out there. And recognition of the importance of such data—for businesses and patients alike—to encourage informed, value-driven purchasing and care decisions is growing.

The new tools that are being created are like first drafts. Together, we will have the opportunity to build upon and perfect them by identifying ways current data collection efforts can be enriched and standardized to maximize usefulness in our space. “We” can only do that, though, to the extent you are engaged—both with the new tools and in sharing your experiences and views of those new tools with us. Let’s get that conversation started.

Sinder is The Council’s chief legal officer and Steptoe & Johnson partner.

Gold is an associate in Steptoe’s GAPP group.

Jensen is a senior associate in Steptoe’s GAPP Group.

You joined Zurich in 1991 as an entry-level technical writer. What did that job entail?
I was responsible for updating phone-booksize manuals with step-by-step processes for people to follow to enter information into the green screen terminals.

Did you harbor secret aspirations to become CEO?
No! I was reflecting back on this recently. My very first performance review I said maybe someday I could become a manager. That was as much as I could foresee as a newer employee.

So what’s the lesson here?
No matter what you’re asked to do, do it in the best possible way every single time and learn something from that. And then the next time, apply what you learned, and you’ll keep getting better. Always be on the lookout for opportunities. You can find them, and sometimes you can make them.

I read that as a little girl you wanted to be an Egypt archaeologist. Where did that come from?
The King Tut exhibit was a big thing in that age. I imagined being on a dig and reconstructing what life would have been like. I was really fascinated by it for a number of years.

Do you see any connection with your current job?
The first things that come to my mind are the elements of problem solving and creation that I think both of them have. Putting pieces together and figuring out how something worked, how things were used to help people. Those puzzles are really interesting to me. In insurance, it’s about how we help put the pieces together to solve a problem or deliver a solution.

What would you tell other women pursuing upper-management positions?
The first thing I would say is, “Do it,” no question. Whether you are driven by data and analytics, technology, problem solving, relationships— those are all aspects of our industry. Women often have those capabilities, the skills to problem solve and coach teams. I’d like to see more diversity in general, and I’m working to encourage more of it.

You’ve described yourself as an “off-the chart introvert.” How does such a person become CEO of a Forbes 100 company?
On the Myers Briggs test, I get the highest score you can get in introversion. My energies come from within. The way that I try to maximize it, in a world that can sometimes be more extrovert-friendly, is to listen more than I talk and to be smart about picking my spots to get that energy out in ways that hopefully have the most impact.

You’ve been in the industry for 27 years. What has kept you in insurance?
Two things. I have been able to basically change careers multiple times within one company in one industry. As I’ve gotten to understand the industry more, and started to understand the impact that insurance has on people, on businesses, I key in on the relationships you can have with people. It’s a very big industry, but it can feel like a small community. At the end of the day, those relationships are what really keep me here.

How would your colleagues describe your management style?
They would say I listen well. They would say I ask a lot of questions. While I might be quiet, it shouldn’t be mistaken for not willing to be bold. If you could change one thing about the insurance industry, what would it be? This is an industry that is poised for cutting-edge thinking around data and analytics and technology. If I could change one thing, it would be helping to rebrand the image of what this industry is about and attracting different kinds of people than maybe we have historically done.

What gives you your leader’s edge?
I think being a good listener differentiates me. It gives me an edge and an advantage. The more I can listen, the more I can understand. Then I can go at the opportunities and the problems and engage with the right people to get those solved.

With many Caribbean islands and hotels still a work in progress after last year’s devastating hurricane season, your favorite might not be ready in time for your escape from the winter blues. If you are already contemplating where to go for some fun in the sun come January, put Aruba on your radar. South of the hurricane belt, the island averages only 20 inches of rain per year, temperatures stay in the mid-80s and there is a constant breeze.

Yes, Aruba has a reputation for mass market tourism. All-inclusive resorts line Palm Beach. Cruise ships stop here. But being a port of call means the shopping is fabulous. In the colorful 18th-century Dutch-style buildings in Oranjestad, you’ll find any designer brand you desire—Cartier, Gucci and Longchamps. There are also some great local stores, like the Cigar Emporium, where you can pick up some Cubans, and the Aruba Aloe Store, renowned for its Aruba Aloe Special Care lotion, one of the many pure aloe products that are made on the island.

But what you might not expect is the adventures you can have. Aruba is essentially two islands in one. Sugar-sand beaches flank the southern and western coasts. Because of the trade winds, wind and kite surfing are watersport staples. You can go diving at The Antilla, a 400-foot German freighter shipwreck, charter a sailboat or join one of the catamaran cruises to snorkel nearby reefs. The northern coast, where Arikok National Park covers almost 20% of the island, is a dramatic landscape of surf-beaten cliffs, rock formations and natural pools. Veering off into this desert, accessible only by four-wheel-drive vehicles, is such a stunning departure that you feel like you could be on an African safari minus the exotic animals, unless you count the wild goats roaming among the cacti.

Some new developments have raised Aruba’s profile over the last several years. The Ritz-Carlton Aruba opened on the less crowded end of Palm Beach five years ago, providing the first real luxury option for people who would normally vacation at one of their other Caribbean resorts. More recently, Sports Illustrated photographed its 2018 swimsuit edition here, its crew staying at the Hilton Aruba Caribbean Resort & Casino, which was renovated in 2016, and shooting at locations throughout the island, including Arikok National Park. The Hilton originally opened in 1959 as the Aruba Caribbean Hotel and was designed by the famous hotel architect Morris Lapidus. Set on 15 acres of white sand and lush tropical gardens, the concept of the renovation was to blend Lapidus’s mid-century style with a contemporary beachfront flair. It delivers.

Fun fact
In the first half of the 16th century, Antwerp was the richest city in Europe and the center of the global economy, accounting for 40% of world trade. It was a cosmopolitan city inhabited by merchants and traders from Portugal, Spain, Italy, England and Germany. Even the English government borrowed money from financiers in Antwerp between 1544 and 1574.

What’s to love 
Antwerp’s Central Station, Antwerpen-Centraal, the world’s most beautiful rail station, makes Antwerp a central location. It’s a one-hour train ride from Amsterdam, two hours from Paris and three hours from London. The railway station features four separate levels of trains and a public bar with gold leaf and mirrors.

Dining scene 
Antwerp has a world-class dining scene with just short of 100 restaurants mentioned in the 2018 Michelin Guide. In the summer, the city has a lot of pop-up bars and restaurants along the River Scheldt, including some of the center city’s best restaurants, such as Radis Noir.

Favorite new restaurant 
My favorite new restaurant is Restaurant K, a Japanese bistro with a Mediterranean twist. What I especially like about it is that this restaurant is located in the residential complex of Axel Vervoordt, Kanaal, where I live.

Very favorite restaurant 
My very favorite restaurant is the Michelin-star ’t Zilte. It occupies the ninth floor of the Museum aan de Stroom (MAS) and has a 360-degrere view of all the landmarks of Antwerp. I celebrated my 50th birthday with friends and family in their private dining room.

Best Belgian beer 
In Antwerp’s city brewery, De Koninck, you can walk through the active brewery and partake in a delicious beer tasting afterwards.

I would recommend Hotel Matelote, a boutique hotel with nine rooms in the old city center. Occupying a renovated 16th-century brick house on a tiny lane steps from the medieval Grote Markt, the intimate Matelote has nine individually designed rooms with Belgian contemporary art.

Don’t miss 
Do pay a visit to the newest museum in Antwerp, DIVA Museum. It is the home of diamonds in the diamond capital of the world.

Millennials are often called digital natives, and that’s clearly true in business, as Nationwide found in a survey of 1,000 owners of small and midsize businesses regarding their use of building sensors, wearables, drones and vehicle telematics.

“Technology continues to play a bigger role overall in the actual business owner’s daily operation,” says Tony Fenton, vice president of Nationwide’s commercial lines product and underwriting. He adds that this role will grow as millennials continue to create and grow businesses.

“Each one of these technologies plays a different role in operational efficiency and a safer work environment,” Fenton says. “The reason that they’re valuable is that they create economic value for the business.… Ultimately we’ll see more and more technology enable businesses to be more efficient and effective.”

Tell  us  about  InsurEco  System.
PHIL:   We’ve  created  a  system  that   connects  insurance  companies  with   independent  agents  and  provides  all   the  different  products  that  agents  are   seeking—everything  from  personal  lines  to   commercial  lines.  

DEREK:   We’re  an  aggregator  of   insurance  agencies,  we’re  an  aggregator   of  insurance  products,  and  we’re  an   aggregator  of  insurance  technology.  We’re   no  longer  a  platform.  We’re  no  longer   a  software  company.  We’re  truly  this   environment—this  ecosystem—in  which   commerce  exists.

PHIL:   Our  entry  into  the  system  comes   from  the  technology  piece  we  built  called   the  InsureBio.  It’s  an  app  and  a  tool  the   insurance  agent  can  use  to  create  the   insurance  profile  of  the  customer.  The   insured  creates  a  profile  that  answers  all   the  questions  that  are  needed  to  purchase   the  type  of  insurance  they’re  acquiring.   That  information  is  connected  to  an  agent   that’s  in  our  ecosystem,  whether  it’s  their   current  trusted  agent  that  they  do  business   with  or  they’re  just  looking  to  find  an   agent  to  access  the  products  that  are  in  the   insurance  marketplace.  And   if  their  current  agent  isn’t   already  part  of  the  ecosystem,   we  bring  them  on  and  give   them  permission  to  access  the   information  that  their  insured   has  given  them  access  to.  

DEREK:   We’re  getting   the  data  from  the  insured   and  passing  it  into  our   intelligence  appetite  engine.   The  carrier  comes  into   our  system,  they  program   what  their  appetite  is,  and   we  match  that  up.  We’re   that  last  mile  between  your   management  system  and   your  actual  sale. 

How  does  blockchain  come  in?
DEREK:   If  you  look  at  any  public   blockchain  system,  it’s  about  recording   value  and  putting  the  truth  back  into   the  participants’  hands.  In  insurance,   data  is  that  asset.  Blockchain  technology   enables  us  to  create  a  true,  immutable   ledger  of  exactly  what’s  going  on;  who’s   got  permission  to  what  data  points  and   who  has  access;  who  is  the  carrier  on  the   contract.  Our  main  objective  is  to  enable   the  broker/agent  distribution  channel  to   communicate  easily  with  reinsurers  and   carriers  regarding  production  and  quoting   in  real-time.  

How  will  this  ecosystem   help  agents?
DEREK:   We  focus  on  how   insurance  agents  can  market   their  products  better,  how  they   can  know  clients'  appetites   better.  We  coach  them  on  how   to  do  appetite-based  marketing   so  they  build  [for  example]  a   microsite  for  a  plumber  that’s   in  Texas  because  we  know   through  the  analytics  in  our   system  that  they  sell  a  lot   of  them  and  those  are  good   money  propositions  for  them.   We  coach  them  to  try  to  get   down  those  roads. 

How  do  blockchain  and  your   technology  help  people  control  data?
DEREK:   One,  knowing  is  half  the   battle.  You  have  to  know  where  your   data  is  going.  We’ve  proposed  to   the  regulatory  bodies  that,  just  like   insurance  agents  get  licensed,  insurtechs   should  be  licensed.  The  second  side  of   it  is  giving  customers  the  mechanism   to  be  able  to  say  no.  We’ve  created  that   in  a  smart  contract  where  the  insured   says,  “I’m  going  to  share  these  data   points  with  my  broker  of  record  for  this   amount  of  time,”  and  they  can  revoke   that.  We’re  just  trying  to  create  the   new  path  for  essentially  changing  the   mindset  of  the  insured  to  not  go  to  the   Google  machine  and  get  into  that  lead   gen  tax.  Don’t  go  that  way.  Just  go  raise   your  hand  and  say  I  need  insurance  or   say  that  you  got  married.  From  that  life   event,  we  know  you  need  insurance,   and  we’ll  connect  you  to  your  agent.   Your  agent  will  configure  data  points   that  he  needs  based  on  you  getting   married  or  having  a  baby.  We’ll  funnel   that  through  and  ask  permission  for   every  data  pull,  and  you’ll  have  the   ability  to  say  no.  You’ll  know  where  all   your  data  is  going,  what’s  being  used   on  it,  and  then  you’ll  have  the  ability   to  request  it.  That’s  the  two-headed approach we take. 

Where is blockchain going in insurance?
PHIL: We are trying to help customers create an insurance profile, similar to a credit report, that stays with us. Keeping accurate risk data will help clean up the industry.

If an opportunity comes to you [as a broker] and you’re not the right fit, let’s just say a captive agent at State Farm is a better solution for them, it will connect them to the right carrier that actually wants that risk. That should be the value that an insurance agent wants. They’re not trying to take a customer away from someone’s who’s doing a good job; they’re just trying to pick up business when the person isn’t being serviced properly. That will also clean up the marketplace.

DEREK: The consumer is losing trust in the insurance economy. That’s why they’re going to all of this other, the peer-to-peer, because what’s happened in the health industry has made everybody think it’s a scam and it’s not right.

How did InsurEco System evolve?
DEREK: We were born as a submission management tool for a wholesaler with premium finance baked right in. We moved into building custom raters for carriers and risk retention groups. Dealing with smaller outfits we could work on the workflows which were inefficient and focus on maximizing output while keeping overhead low. Once we started moving down that road, we realized the real magic— the thing nobody wanted to do—was deal with servicing and payments for smaller priced accounts.

We took contractors general liability, and we took small trucking owner operators, and we focused on creating a real end-to-end environment to where the quote was brought to the system from the retail agent. We ran it through our rating algorithm. We delivered the policy through our policy issuance system. We gave the insured a mobile app, called the policySpot. We created a selfservice certificate option, and it allowed agents to deliver policies and ID cards.

About the end of last year, our R&D department developed policyBlockchain, and we started seeing the value that came from being a third-party entity for everyone to report their transactions to. No one was providing the big picture. That was the turning point for us, when we said, “We could just wrap this whole thing and just make it visible to everybody and just be good, honest custodians of the data, follow all the regulations.” 

What’s ahead?
DEREK: Short term we are working with about 10 different insurtech innovators from property data to cyber security. We are having some great successes with a joint project with Maxxsure, where we’re creating a cyber scoring and security platform. We’ve partnered with a wholesaler who has a commercial product for trucking, and we’ve built a complete blockchain solution for reporting production, cargo and claims. There are a lot of neat ways we’re going to start dipping into other industries closely related to insurance and supply chain.

PHIL: We’ve added on a partnership with a company that has imaging, and we’re working on this proof of concept that, if you take a picture of an item of value, it will produce an insurance quote kind of real-time and connect them to our agents, who can actually offer that product.

DEREK: We’re also working with an AI company that has a proprietary algorithm to detect and predict customer engagement, and we’re putting a scoring in that to allow us to tell agents and brokers how engaged the actual consumer is within the process. That’s going to be really key.

The two, in the 1999 movie Entrapment, were not exactly hot. In fact, readers of the movie magazine Film voted their love scene the second worst of all time, right after Sharon Stone and Joe Pesci in Casino.

But the rest of the scenes are packed with Bond-style action and Bond-girl duplicity. It’s one long series of treacherous escapes and nearly clever banter, great acrobatics and special effects, which no doubt contributed to its $300 million gross. The reviews were middling, but that never stopped the American public from buying a ticket for a great chase scene.

It’s a familiar insurance movie plot: Mac’s a wealthy thief who steals just for the intellectual challenge, and Virginia is a good-looking young insurance investigator who is posing as an art thief. Or vice versa. Or both. Anyway, Virginia opens the movie working on a crime she herself committed. As part of the job, she chases down the infamous Mac but only to partner with him on a few other larcenous adventures and learn his secrets.

Exquisite OCD planning goes into every heist, with glamorous settings from Mac’s Scottish castle to Kuala Lumpur. Eventually, proximity breeds sexual tension, but it’s hard to believe that the then 30-year-old Zeta-Jones is actually coming on to the 69-year-old Connery. He handles it well.

Though passion and chemistry are both lacking in Entrapment, it is considered Connery’s last romantic role. So far, anyway. He’s only 88, and he’s still looking good.

Their goal was to identify high-risk patients, which would enable providers to offer less-costly treatment up front and avoid high-risk, costly care downstream.

How did this partnership come together?
It was a multi-disciplinary collaboration between UCLA mathematics, the David Geffen School of Medicine and the neuroscience institute. Anthem was kind enough to let the inflammatory bowel disease clinic access some of their claims data for patients going through that system. And we decided to use it to try to predict big medical outcomes like hospitalization or the use of biologic treatments that cost tens of thousands per year.

What is the cost of IBD treatment?
IBD treatment annual expenditures are estimated at $12,000 for Crohn’s disease and $8,700 for ulcerative colitis. Hospitalizations and treatment with drugs called biologics account for the highest portion of these costs. For instance, one hospitalization can be more than $10,000, and biologics are usually more than $20,000 per person annually.

How did you use the data?
It was a combination of statistics and advanced math tools and different characteristics of patients. We developed a model that predicted if people would go to the hospital in the next year and if they would benefit from using biologics.

It’s one thing to say you can predict something that is a fun fact. But it’s not useful until you can predict something so well that it actually saves money. Even if it was good for patient care, it has to work within the healthcare economic system we have. You have to prove it can make a difference.

What were the results of the study?
We were able to predict hospitalizations with positive predictive values of 17% and the use of biologics by 11%, a 200% improvement over chance. And when we narrowed it down to four subpopulations—like one group that all had a recent history of small intestine endoscopy and just started budesonide—the predictive value of hospitalizations increased to 20%.

We were surprised that some of these features went together as predictors, because it’s not a human thing to zoom out and look at clusters. We think in terms of narrative and stories, and when you get down to fine and granular aspects, that’s something for machines, not humans.

We use this kind of data on Amazon to predict what people want to buy or Google Maps to predict where someone will go. But it’s not used in medicine. Using data has made such a big impact overall, I have to believe we are leaving something on the table by not using it in this space. We can look at more cases than any doctor can look at in an entire lifetime.

That’s the advantage of using a big-data approach to predictions. This model, used with an interventional treatment plan for high-risk members, could improve outcomes and reduce insurance costs.

What do you think it could mean for medical care and costs?
What if machine learning predicted when we were at risk and you could go to the doctor to help prevent it? That’s not happening much at all right now. Docs aren’t trained to discern symptoms that make you sick, just treat you when you are. A machine can diagnose someone’s entire medical history in nanoseconds.

We could create interventions where insurers pay for an office visit if it turned out you are at risk: like it was predicted to be highly likely someone would go to the hospital in the next year. Insurers would foot the bill preemptively to prevent that visit from materializing in the first place. Even if an intervention is only 10% effective—meaning it would reduce the risk of hospitalizations only 10% of time—it is still the right call for insurers because hospitals are so incredibly expensive. If you are going to be predicting who is likely to have an adverse medical outcome, you have to predict it so well that it is going to save an insurer money.

Were any of the results of the study surprising to you?
One thing that predicted someone wouldn’t go to the hospital was if they had been to the doctor in the past year. That gave them a 20% reduction in risk. This shows it is a good assumption that offering some sort of intervention might be effective.

And if an insurer foots the bill for someone showing up to the doctor, it lets the patient know the insurance company isn’t trying to get away with whatever they can just to save money. But telling them they are at risk for something and paying for a visit is a wonderful way to have a powerful bond with their insured.

Can this work with other medical conditions?
While we did this with IBD, we have no reason to think it doesn’t generalize to most, if not all, medical issues. There was no specific biology to it; we just used values of what was spent on care. There are patterns with care that are consistent. This zooms out and takes a big view of things happening and predicts where a disease course is likely headed.

If you zoomed out and looked at the first 30 years of someone’s life, you might be able to predict what they will be doing in the next year. That’s what machines are good at right now.

What are some of the challenges with predictive modeling?
Electronic medical records don’t encompass health data like a Fitbit and doctors’ personal interpretation of data or image files. If you have an MRI at one place, you have to go there and burn it onto a CD to look at it somewhere else.

It’s not necessarily effective now, because data isn’t centralized between hospitals and laboratories and doctors. We thought a good option was to use insurance claims data—that’s services they actually paid for. But you don’t actually get results; it just says, they got an X-ray or are on medications or had this many office visits. We had a nice set of well organized data.

Another difficulty with machine learning is it is sort of looking at things retrospectively. You can’t diagnose what factor is causing something to occur. This type of work we are doing is sort of on the forefront. There’s not even a good model for it.

You can just make a prediction and say someone scores above average on their number of endoscopies, so they may have to look at another type of solution. We can go to the doctor and say, “This person is likely to go to the hospital, and they are not showing any symptoms. Now
figure it out.” Maybe they haven’t tried as many medications, so it may be time to shift. Our job is to offer up some predictive model and leave it to the doctors to possibly avert that hospitalization. In the model, doctors start to do preventive medicine.

How far out are we from using this technology regularly?
We are at least five years out from it being implemented on a larger scale. That’s mostly because of red tape, wariness of the dollars it takes and the structure needed to set up care pathways of predicting and then training doctors on what to do about predictive medicine. I think it’s going to require a paradigm shift in medical education because everything is retrospective. They have to be taught how to retrospectively identify disease. But there are health benefits, and the monetary benefits are there, and they outweigh the red tape that’s in the way.

What will providers need to know about predictive modeling?
There’s not even a framework for doing this. We are having to develop it right now to train doctors to be predictive given no current symptom changes in a patient.

It’s important to have both doctors and scientists working together on the modeling. When we ran the numbers, we found some things that we thought were really predictive, and the doctors said they wouldn’t be. And we would go back and build the model again. You need multi-disciplinary teams working on this.

Where do insurers fit into the picture?
Like most things that get done that are new, we have to make sure we are doing something that is mutually beneficial. And we are kind of arguing that insurance companies are an unexpected ally here. A lot of the time, insurers get a bad rap because it’s in their business interest not to share information.

But if this does make a difference in the bottom line, they can become an unexpected ally with the potential of overcoming the limitations of the current American healthcare system. They can give us data, and we can look it over, and then the system can do something about it.

Anything else to know about predictive medicine?
There is so much power in machine learning, and you don’t need to look much farther than Google and Facebook. I’m highly confident this type of work can, and will, provide value to the system.

With this study, the general science takes much longer because it is the first time anyone has done it. It took a year and a half to get the data and clean it up. It comes in a messy format, and you have to go through and understand what everything means. You are just taking a bunch of data and building a model to see if it is cost effective.

This study establishes a general framework where we built a model from the biggest set of data that we have—from insurers. And you have to run through an economic analysis to make sure it is cost effective for the insurer; otherwise, it won’t happen. There’s always a trade-off for how much we are willing to pay to save people’s lives. Even if you have nationalized healthcare, there is a limit to how much they will spend.

How did you get interested in mindfulness to help your business?
I started Kevin Davis Insurance Services in April 2000 as part of the Sullivan Group. I met Jerry Sullivan and Hank Haldeman and put together a D&O program for community associations. I went from zero policies to 30,000 in a 10-year period. It was incredibly successful. But around 2010, Liberty International came into the market and just cut our rates. For the first time, we’re facing competition. We’re no longer the hunter. Now, we’re the hunted.

Two things happened. We were losing money, so I had to lay off people. When you have to make these kinds of decisions, you second-guess yourself. And when you second-guess yourself, the decision gets harder and harder and harder.

And then, on top of that, I had two children about to go to very expensive colleges.

You live in the land of mindfulness.
My wife and I, together, took classes because the stress at work and at home was affecting our relationship. I was disengaged, distracted and very unhappy. Everything was just as bad as it could be. I was stressed. I was stressing her out. So I said let’s try this thing together.

After six weeks, everything changed. Things began to finally make sense. That’s how important this stuff is. I was calmer. I was less reactive, and things started to get better for me.

So your issues were all stress-related?

But this goes beyond that?
Yes. The thing I needed was my creativity. I’d lost mine. When you’re stressed, you react to everything. Everything is react, react, react. When you’re not stressed, you pull back and you’re receptive to things, and you’re receptive to what’s happening around you, and all of a sudden you’ll be creative. That was reflected in our business. Within three years, we were doing pretty well again to the point where we were profitable and things were as good as they possibly could be in the organization.

Tell us about the substance of the classes.
The class is based off of Jon Kabat-Zinn, the guy who founded the Stress Reduction Clinic at the University of Massachusetts Medical School and made mindfulness mainstream. He was a professor there at a time when other doctors said they couldn’t help a lot of people there with severe anxiety and pain issues.

He created an eight-week mindfulness stress-reduction program. As a result, the patients’ pain was lessened, or they were better able to cope with their condition. Physical pain, emotional pain—it’s all the same thing. The program teaches you how to deal with all types of pain.

Number one is meditation. We are constantly reacting. Our brains operate this way. Our brain operates to do one thing: solve problems. That’s all our brain does. It’s our mechanism for us to get things done.

What your brain does is go into the past and says, “OK, I should have finished the project faster, earlier. I should have done this. I should have done that.” You worry about everything in the past. That creates depression. Or your brain explores the future, which creates anxiety. So once the project is done and you go back to your room, your brain doesn’t shut down; it just keeps going. It has to solve a problem. It just has to constantly solve a problem.

What mindfulness does—it doesn’t shut your brain off—it lowers it to the point where you’re seeing things. You’re aware. The perfect example: you’ve watched The Wizard of Oz, right? Everything is in black and white and then all of a sudden things are in color—rich and vibrant.

Mindfulness is awareness. It is the ability to be aware. The definition of mindfulness is being present. Just understanding and being present, which opens the mind to curiosity. The key is being willing to be with what is. And that’s the really important thing. Food tastes better. I take my time when I eat. I take my time when I’m listening. Everything is just incredible because of the amount of awareness you have.

How do you do that? How do you physically make yourself?
There’s informal and formal mindfulness practice. The formal is meditation.

Sit in your chair, and just like if a string is pulled, you pull it straight up. So you sit up. Close your eyes. Now, breathe in and out. Every time you notice when you breathe in and breathe out, you’re being present. By breathing, the in and out becomes an anchor to the present moment because when we breathe, it’s neutral, meaning we have no opinion about the breath at all. It’s just there. You’ll notice your mind will start to wander. You’ll hear noises, but just pay attention to your breath as you breathe in and you exhale. And when you hear a noise, that means you’re present.

As a writer and editor, my imagination is what I work with. My mind wanders. So you’re saying you always must work to bring it back?
Bring it back. Most people believe meditation is emptying your mind. That’s not real. You can’t. Your mind is always wanting to solve problems and looking for one to solve. What you don’t want to do is just be active all the time. You want to lower it to the point where you’re more receptive. The stress levels in our lives are so high we’re constantly reacting to everything that goes on. We’re not receptive. We’re reacting.

You’re in the moment right now. What does that mean to you right now?
The difference is right now I’m taking in everything that’s going on and I’m not judging anything. There’s zero judgment, and that’s the key. People judge, blame and criticize. That’s what we do. Once you’re able to put those three things away, then all of a sudden, whatever you’re giving me I’m aware of. Whatever we’re talking about, I’m aware of it. And all of a sudden I can react to you based on the information, not my preconceived ideas.

You cannot do anything if you’re not focused and you’re not present. Nothing happens when our minds are wandering. And the perfect example is when we go shopping. Whenever you go food shopping, you’re mindful about what you’re buying. You come back with exactly what you want. If you’re not mindful, you come back with a whole bagful of stuff you didn’t want.

The first thing I had to do was learn to become aware. So now all of a sudden, because of the awareness, I’m mindful.

After six weeks, everything changed. Things began to finally make sense. That’s how important this stuff is.

How did you incorporate this into your workplace?
I held an introduction into mindfulness class in the office for 30 minutes on Mondays and Wednesdays at 9 a.m. for six weeks. And I told the staff it’s not mandatory but it could help limit stress.

We had two classes of about 15 people. Once I got them in there, I realized there were group dynamics issues I had to deal with. Employees [sitting] next to supervisors was one. I realized it’s going to be hard to get them to open up and ask questions because of who they sat next to. And I didn’t realize opening up was very difficult to do because I’m the boss.

What I had to do was open up myself and be vulnerable. I told them about my 88-year-old parents and my sister who is taking care of them. My sister is the youngest. She has five brothers. She’s carrying all the weight. I live in California. They live in New Jersey. So that causes some interesting sibling dynamics.

I’m telling my class that I got angry at my sister because she said I wasn’t helping out enough. What happened is you realize that, by being mindful, you’re not really angry at her. You’re feeling guilty because you want to do more, but you’re afraid. It’s the fear that’s coming into play. By being mindful, you deal with the fear and not the anger. That’s the difference.

If you’re mindful and you’re afraid, you realize that you’re fearful about four things: shame, guilt, embarrassment and humiliation. Those four things matter. Nothing else matters. And they keep coming up over and over again.

Those are all very similar words.
Yeah, but they’re different. I bought a new car, OK, and I’m the boss. If I felt guilty buying a new car, the guilt would come from buying a car I can’t afford. My wife said, “You’ve got to be kidding. You can’t afford a car.” I feel guilty about that. But shame is what I felt. Shame comes into play because I’m the boss and I was able to buy a new car when other employees couldn't.

But mindfulness tells me that other people’s happiness and unhappiness depends on their actions, not your wishes for them. And that’s one of the things that we have to keep in mind all the time.

A mindfulness tool to use here is R-A-I-N. And that’s how you handle your negative emotions—like I was angry at my sister. “R” recognizes that emotion. So I’m angry right now. Then the “A” is accepting. Do you accept the anger? I couldn’t accept the anger. That’s when I found out it wasn’t anger. It was guilt, or shame. I recognize I want to help my parents more and I can’t. So now I was accepting the guilt part of it. “I” is investigate. This is, when we do a meditation, what I call body scanning. Instead of just breathing in and out, start with your face. Soften the face. Soften the jaws. Soften the mouth. All of a sudden the tension is often off your shoulders. It’s often in your chest. Then all of a sudden, at the end of the body scan you’re no longer upset. Whatever you felt beftore is kind of gone. So you are identifying it, you are investigating it.

Finally, “N” is not to identify with it. We end up identifying with that emotion. Am I an angry person? Or am I angry about the situation? I’m not an angry person. But what happens is we become the angry person and then all of a sudden we spend the rest of our day being angry. The key is to not identify with the emotion but separate it out.

Anger is our favorite emotion. There’s no better emotion out there than anger. It makes us feel good. It justifies our actions. It’s a survival mechanism to make us feel we’re right. Our minds are designed to keep us safe, nothing is more important for our survival than having the ability to use our minds to keep us safe. And whenever you feel agitated or stressed, all of a sudden we’re focused, and we can’t do anything else but deal with that situation. Anger comes out, and everything comes out. Now, we can’t do anything else.

What can your average businessperson expect if they decide to try this?
First, you have to be open to it. You can’t walk in and say, “OK, this is going to be a waste of my time.” What happens is most people feel uneasy about the process and decide not to do it. But if they decide to be open, they will see a change within six weeks.

How do you bring this into the office and convince people this is a good thing for business?
The problem today is there’s too much stress, too many distractions in business. You must eliminate your distractions if you want to become more aware and not always reacting. The key in business is you want to be receptive, versus reacting. The more receptive you are, the more productive you can be. Instead, everybody reacts to everything else and then we’re in that fight/flight mechanism. You’re in that survival mode, as opposed to taking a step back and realizing we probably can do business together if we just listen. That’s how you get things done. Mindful listening is one of the keys.

How does mindful listening help you engage in business?
What it means is I’m giving my full attention. My mind will wander, no matter what you say. There’s no way I can listen to everything you’re saying. The difference is that, when my mind starts to wander, I know it’s wandering. I feel my feet on the ground. I’m present again. Once I’m present, my attention is back.

Has this helped your business?
For me personally, this has been great in terms of the way I react to people. So there’s a calmness when I walk inside. I don’t overreact. They know when I’m in the office there’s a calmness. The office environment is a lot better.

How do you incorporate this into a business?
Mindfulness allows my staff to be more open. They learn about mindful speaking and listening. For example, a question we discuss is what brings you joy. I ask everybody in the room. It’s amazing when you answer that question; everybody feels better about everything. It brings everybody up to a point where most people feel just a little better than before.

Have you institutionalized this in your business? Do you have regular classes?
I haven’t yet. It’s hard. It’s harder to do it with my staff because they can’t express themselves as much as we could in a private class. It’s hard for my workers to share, but I hold classes quarterly and the group feels more and more comfortable each time.

With each other or with the boss?
It’s probably easier to do with me because I’ve made myself vulnerable. By me saying this is what happened to me, then it’s easier to connect with me. But now if you’re sitting next to your supervisor or your manager, it curbs what you can say.

Have you noticed anything surprising about your staff who have the most client interaction?
They’re more engaged. They’re a little bit happier at work. This understanding of awareness is important.

What about the bottom line? Have you been able to see anything yet?
You can’t measure it. This is an individual thing where managers say, “I can be a better manager if I take up mindfulness. I can approach problems better. I can solve problems better. I can be more creative.”

Each employee has to understand they are important to the operation to ensure, no matter who they are, they are connected. Connectivity is what we really want from our employees. When I first started it in the office, the idea was to make people more engaged in the workplace. So how do you get them engaged?

If you have more engaged employees, then you have people who are more enthusiastic on the phone and when you talk to that client on the phone, they are more receptive. You want receptivity, versus reactivity. You want employees who are fully engaged and who know their future is based on engagement.

The definition of mindfulness is being present. Just understanding and being present, which opens the mind to curiosity. The key is being willing to be with what is.

This could help employee retention.

If I’m a business owner wondering how can I do this, how do I get started?
Google mindfulness. Start there. It’s becoming a mainstream.

Also, consider a silent retreat. I’ve done one. You go away for a week and shut everything out. All of a sudden, no cell phones, computers or emails. Nothing like that. The first thing that happens? You will sleep. You can’t imagine how sleep-deprived we all are. You have no distractions, nothing. You come out with a whole different frame of mind for a little while. And then it kind of goes back to routine.

It was easy for me to accept mindfulness because deep down inside I was a guy that believed something was missing in my life and the qualities of mindfulness were already in my makeup. It was like life made sense to me for the first time. It went from a black and white world to everything in color.

The problem today is there’s too much stress, too many distractions in business. You must eliminate your distractions if you want to become more aware and not always reacting. The key in business is you want to be receptive, versus reacting. The more receptive you are, the more productive you can be.

“A lot of times, when people know, they’ll treat you differently,” says Doran, now a sales executive at Horton’s Risk Advisory Solutions. “They’ll want to help you out.”

Come face-to-face with a veteran, and a mere “Thank you for your service” doesn’t seem to cut it. There’s often a desire to do more, to offer special treatment or a leg up. But in doing so, even the most well intentioned gesture can cause an unintended result. Take job placement, for example. Companies may want to hire veterans because they believe it’s the right thing to do, but that’s not necessarily what will attract vets—or encourage them to stay.

“Somebody needs to make a business case and not just start a feel-good effort,” says Patrick O’Leary, another U.S. marine who is now veterans affairs manager for UPS, a company renowned for its successful efforts at recruiting and retaining vets. “This is not about being philanthropic but because it will help you be more competitive. You have to be in that mindset. It has to be, ‘Let’s hire veterans because they’re going to be great employees.’”

This combat plan, however, requires more than just changing your mindset. It’s the creation of not just a job but also a welcoming and supportive environment, one that is built around celebrating and fostering veterans’ inherent skills and understanding the true challenges they face when transitioning to civilian life.

Even the Best-Laid Plans

Speak to anyone about hiring veterans, and the reactions can be split. Some will advocate for giving back to those who have sacrificed so much. Others might worry about potentially violent or reactive behavior resulting from post-traumatic stress disorder or, if the veteran went into the service young, a lack of maturity and life skills. But there’s another part of the equation: a basic lack of understanding about the transition from military to civilian culture. Those who haven’t served often find there are lessons to be learned.

Jim Pender would be quick to agree. Back in 2012, Pender co-founded Disabled Veterans Insurance Careers (DVIC). The idea was to educate, train and secure meaningful employment for physically disabled veterans. These veterans would cross-sell personal lines insurance products on behalf of independent agencies, with a goal of making 80 calls and landing at least two appointments each day.

“Our initial assumption was that veterans would be ideally suited for the insurance business because they are mission driven and tech savvy,” Pender says. Veterans were accustomed to giving and taking orders, he and co-founder Gary Trippe reasoned, and used to working on teams. Pender didn’t have military experience himself, but both he and Trippe had disabled family members, as well as a sincere desire to help.

At the time, the men were principals with Florida-based independent insurance agency BB&T-Oswald Trippe and Co., and they wanted to share the success and sense of purpose they’d found in insurance with returning veterans. Other industry leaders joined the effort, with support from Marsh and McLennan Companies, Bankers Insurance, Chubb, Knapp Consultants, The Council, Liberty Mutual, United Way, and a host of others.

“But I think we got ahead of ourselves,” Pender says. “There were things about the transition from military to civilian life that we just didn’t understand.”

Those who work with veterans have found, for example, that there can be a loss of camaraderie post-service. There also can be a loss of mission focus, structure, oversight and clear opportunities for job advancement. Veterans might use different speech than their co-workers, defaulting to military terms and acronyms unrecognizable to civilians. They might find themselves overwhelmed by the number of decisions they now must make on their own and have difficulty finding basic services, such as healthcare, once provided by the military. They might have trouble relating to others who have not experienced the level of stress that service brings. They might encounter a competitive workplace that’s at odds with the more collaborative environment they knew in the military. And they might face cultural gaps that developed while they were deployed.

Shad Steadman, past chairman of The Council and current vice chairman of MMA-Mid Atlantic at Rutherfoord, said he was happy to be involved with DVIC as a strategic board member; the overall effort was enthusiastically received, he says, “almost to a person.” In retrospect, however, the focus might have been too narrow. Not everyone—military background or not—has an interest in or an aptitude for the type of sales that particular job required. The experience did, however, generate a lot of “interesting conversations around things veterans might need,” Steadman says. There’s always the possibility that strategic meetings in the future could explore different ways of bringing the insurance industry and veterans together in a more holistic, helpful way.

All told, DVIC, which has since closed its doors, helped place 18 veterans in insurance careers. One of those 18 was Doran, who discovered a love and appreciation for an industry he might not otherwise have considered.

“When I see those 18 people succeeding, my blood rushes,” Pender says. “I’m thrilled by that. I know what a great industry this is.”

Somebody needs to make a business case, and not just start a feel-good effort.

Jim Pender, co-founder, Disabled Veterans Insurance Careers

As for Doran, he continues to be grateful for the doors DVIC opened—and for the classroom training. “It was invaluable, and I still use it every day,” he says. “The biggest surprise for me, though, was that I always thought I wanted to work in an office. When I first came out of the military, I had a job in sales, and I hated it. I missed the camaraderie, the buddies I was with, the chance to be outside.”

After his time as a DVIC account manager, Doran became an account manager with Hub International’s private client group. He joined Horton Group in 2016 and believes he’s “finally found the perfect fit.”

“It’s the best job I’ve ever had,” he says. It doesn’t hurt that his supervisor is also a veteran.

Leveraging Talent

In recent years, times have changed for transitioning service members—and for their families. Eric Eversole, vice president at the U.S. Chamber of Commerce and president of Hiring Our Heroes, says that, when the program first began in 2011, “we were really facing a national crisis in veteran unemployment. Post-9/11, it reached 11%. We had a lot of service members coming home from warfronts and finding a tough economic environment.”

Within the first three years, Hiring Our Heroes held nearly 800 hiring events, working with a broad coalition of public and private partners, with tremendous results. Today, veteran unemployment is below 4%. But different challenges have emerged. In recent years, studies have shown that half of veterans leave their first civilian job after service within 12 months—typically looking for new challenges, more money or a better offer.

To help combat these issues, Hiring Our Heroes is putting more of an emphasis on finding veterans the right job—rather than just any job to make ends meet.

Hiring Our Heroes now holds hiring events on military bases, helping service members plan ahead up to a year before leaving the service. There’s also greater outreach to military spouses, who still face an unemployment rate of 16%. A report on this topic by Hiring Our Heroes, released in June 2017, found that, while less than 20% of employed spouses have seasonal or temporary jobs, 82% would prefer something permanent. According to the study, one in four employed spouses is working multiple jobs and roughly 70% don’t believe their education or past work experience is being fully utilized in their current job. Respondents said companies don’t want to hire active-duty military spouses because of the likelihood they’ll move. The spouses often can’t find flexible work schedules or affordable childcare, the study found, and they may have challenges explaining time gaps on their résumés. In addition, these spouses may be unable to transfer professional licenses; they may have fewer connections and social networks than others; and they may be unable to find meaningful jobs near military bases.

“What we’ve started to do is take a step back and understand where these men and women come from,” Eversole says. “Nearly 90% of service members come from blue-collar backgrounds. These are families making less than $70,000 a year. Nearly two thirds will be first-generation college students. It’s not that they’re not ambitious or don’t want a job. The reality is that they don’t know what they don’t know about economic opportunity and the careers available in this country. If businesses want to be successful in recruiting service members or spouses, they have to help underscore not only the types of careers available but also the long-term opportunities in their business and their industry.”

Some in insurance have been able to do just that. Marsh and McLennan has so strengthened its efforts to reach veterans and their families that it has become a key influencer in the veteran talent space at the national level. In 2017, the global professional services firm was named the No. 1 Military Friendly Employer in the U.S. by Victory Media; for 2018, it remained among the top three, along with IBM and Boeing.

James Tongate, program manager of Military and Veterans Affairs at Marsh and McLennan—he’s also a combat veteran and chief master sergeant with the Kentucky Air National Guard—says success has come through a holistic approach using the entire employment lifecycle. That encompasses acquisition, onboarding, engagement, development and redeployment. There’s an appreciation that veterans bring skills in areas like team building and resiliency, he says, “and our company is poised to leverage that talent and ease their transition.” Tongate contends it’s never enough just to check a box by hiring veterans—companies must do the necessary work to keep them fully engaged.

Marsh and McLennan currently has just over 600 self-identified veterans among more than 23,000 U.S. employees. Tongate believes there are others who, like Doran, would rather be recognized more for their skills than their military experience. Marsh and McLennan is global, with more than 65,000 employees in 130 countries, and its efforts to reach veterans apply to those from all nations, backgrounds, political beliefs and military organizations. “A veteran is a veteran,” he says. “And veterans bring a greater level of talent than the typical civilian.”

Eversole agrees. “I learned every bit as much about leadership and thought processes in basic training and officer school as I did in law school,” he says. “The military teaches a certain way of thinking from day one. It’s not as book-intensive as law school, but the thought processes and group dynamics, from a learning perspective, are really incredible. The concept of ‘team over me’ is ingrained from the start. So is mission accomplishment, a focus on analyzing and solving problems in what can be stressful environments.”

Company Culture

Helping veterans want to stay in their jobs, then, requires an effort to understand their mindset. Organizations like Marsh and McLennan and UPS make it happen by fostering a welcoming culture among non-veteran employees.

Our initial assumption was that veterans would be ideally suited for the insurance business because they are mission driven and tech savvy. There were things about the transition from military to civilian life that we just didn’t understand.

In 2013, in conjunction with the Obama administration’s “Joining Forces” initiative, UPS made a commitment to hire 50,000 veterans and log 50,000 volunteer hours within the following five years. The company met its hiring goal two years early and has now surpassed more than 250,000 volunteer hours. Veterans account for nearly 7% of the UPS workforce, about the same percentage of veterans as in the U.S. population.

Sure, it’s another industry. But for those in insurance who believe military experience can provide transferrable skills and potentially companywide benefits, there is a proper position for attack.

UPS’s many-pronged approach to creating the right environment includes, for example, the opportunity for managers to take part in Boss Lifts, a program of the Employer Support of the Guard and Reserve (ESGR). It allows those who have never served to visit military bases for a day.

“And when those managers come back, it’s great to see how excited they are,” O’Leary says. “They’ll say, ‘Those people are so impressive.’ I say, ‘Welcome to the party. We’ve been waiting for you.’”

The UPS program includes outreach to key veterans groups with direct connections to the Departments of Defense, Labor, and Veterans Affairs, in addition to veterans service organizations. And it goes beyond employment to include engagement, recognition and reputation. Engagement includes a host of opportunities for employees to get involved with military and veterans activities through the Neighbor-to-Neighbor (N2N) program. Employment recognition means increasing acknowledgement of those who are serving or have served. Reputation is about presenting the company as one that values the training, skills and life experiences of those who serve.

Other UPS programs provide managerial job shadowing, opportunities for non-veteran volunteers to build wheelchair ramps for wounded veterans, partnerships that supply professional-level tools for veterans becoming mechanics, and affinity groups for members of the military.

“But the military affinity groups don’t just want to meet,” O’Leary says. “They want to go plant some trees. Or march in a parade. Or volunteer at a VA hospital. Veterans, by their nature, want to engage, to stand up and to jump onto the field.”

It’s important to remember, O’Leary says, that since 1973, members of the military have joined by choice, willingly putting themselves in danger, making sacrifices for the greater good. “Not everybody has that inside of them,” he says. “But veterans do. We’re joiners. We’re fixers. We want to be engaged rather than just walk by. Those are the qualities you want in an employee.”

Veterans can’t be “repaid” for what they’ve done for the country, O’Leary adds. “But we should take every opportunity to show our appreciation and honor their service. Hiring a veteran into a good job with a great company is an excellent way to demonstrate that we appreciate their service to America.”

The Rumors

Despite the positive progress and the promise of engaged, well-trained and disciplined employees, those who work with veterans say they still hear the murmurs and concerns of potential danger. PTSD and traumatic brain injury are very real.

“The reality is—and this is the first thing I tell most companies—anyone in your business can be subject to PTSD,” Eversole says. “You have to get past the stereotypes of what you see on TV, become educated and then, from a business perspective, if you do find that any employee has PTSD, look at finding ways to help them get healthy and be a productive part of the team.”

Eversole’s father became a quadriplegic after completing his military service. And like anyone who was fully able before, he needed an adjustment period to get used to the new normal. Veterans—disabled or not—may simply need the same.

For his part, Doran finds his status as a disabled veteran a bit “weird,” especially since he’s very active, playing sports five or six days a week. According to the Department of Veterans Affairs, Doran is considered “30%” disabled. While in the military, he had surgery on a shoulder (accounting for 20% of the categorization) and on a knee (the remaining 10%).

It’s true that for veterans—as with anyone else—not all injuries can easily be seen.

If businesses want to be successful in recruiting service members or spouses, they have to help underscore not only the types of careers available, but also the long-term opportunities in their business and their industry.

Eric Eversole, vice president, U.S. Chamber of Commerce, and president, Hiring Our Heroes

And not all veterans—despite media reports, misconceptions and discomfort with the unknown—are the same.

“It seems like we’re all painted with the same brush,” Doran says. “‘Oh, you’re military. You’ll be like this.’ Everyone has their own preconceived notions.”

But he contends veterans don’t want special treatment. “We just want to be one of the group,” he says. “That’s how Horton has made me feel, that I’m a part of the team.”

Soltes is a contributing writer.

The Export-Import Bank of the United States (Ex-Im), the official export credit agency of the United States, offers export-only insurance policies that carry the full faith and credit of the U.S. government.

The Ex-Im Bank’s insurance programs require that transactions meet certain criteria to be eligible for Ex-Im coverage.

  • More than 50% of the product’s total cost must be U.S. content.
  • The shipment must be to a buyer located outside the United States.
  • The payment obligation must be with a foreign-based buyer.
  • The export product cannot be sold to a military or quasi-military buyer.

Like most export credit agencies, the Ex-Im Bank tends to provide coverage in difficult markets where the private insurance market is unwilling or unable to do so. The Ex-Im Bank has seen some controversy over the years, including lacking conservative Republican support and enough board members for a quorum needed to finance larger deals in recent years. But in June, the Trump administration nominated a new head, Kimberly

Reed, who, if confirmed, may breathe new life into the bank.

That said, one of Ex-Im’s important initiatives is to support small business exporters. And the benefits flowing to those small businesses that use the bank are evident in many sectors of the U.S. economy. Consider the story of Collection 2000 Corp., a longtime Ex-Im customer, as told by the bank.

[Collection 2000] used Multi-Buyer Export Credit Insurance to send dozens of shipments to foreign buyers. This insurance policy allowed them to sell to customers in many different countries, mitigating the risk of nonpayment, while equipping them to provide their customers open account terms. Then it happened. Collection 2000 shipped more than $100,000 worth of products to a longtime customer in Trinidad and Tobago. Up until that point, the buyer had always been diligent about paying on time. As with previous orders, the buyer was given 60-day credit terms. However, the invoice due date came and went, and the payment never arrived. Collection 2000 made several attempts to contact the buyer to collect the outstanding debt to no avail. The buyer kept saying it would wire the funds the next day but never transferred the payment as promised. In a last-ditch effort to collect the payment, Collection 2000 commissioned a law firm to follow up with the buyer one last time. With the invoice four months past due, Collection 2000 filed a claim with EXIM. Through EXIM’s policy, Collection 2000’s invoiced amount was covered at 95 percent against buyer default, with no deductible. After carefully assessing the situation and reviewing the supporting documents, EXIM approved and paid Collection 2000’s claim in June 2014, less than a month after filing.


This case study includes excerpts from a World Bank brief on the Multilateral Investment Guarantee Agency, also authored by Gordon Feller. —Editor

As with cross-border investments in many business sectors, there are non-commercial risks associated with manufacturing projects, especially in emerging economies. Despite the best intentions and thorough planning, unforeseen events can disrupt a project.

Newly stabilized governments could still be sitting on shaky political ground. Unclear or incomplete laws—on property ownership, for example—can obscure the profit-making picture. Investors may be worried about potential government takeover of land or assets. Restrictions on revenue repatriation could complicate a project’s finances even more, exacerbating imbalances between foreign-denominated debt and locally denominated revenues. Lastly, threats such as revolution or terrorism add an additional layer of uncertainty, potentially derailing even the most promising of investments. Combined, such political risks contribute to high costs of capital. Some lenders might not be willing to lend at all in the absence of political risk insurance policies.

Consider one example in which the World Bank’s key insurance agency, the Washington, D.C.–based Multilateral Investment Guarantee Agency (MIGA), provided much-needed coverage. Corona Group, a leading sanitary wares manufacturer in the Americas, acquired a majority-stake in Incesa Nicaragua, along with the rights to registered trademarks in the region. Founded in 1957, Incesa produces, imports and distributes a broad portfolio of sanitary ware, showers, faucets, furniture and accessories marketed under two brands: American Standard and Incesa Standard. The agency provided a guarantee of $11 million, covering Corona Group’s equity investment in Incesa as well as the trademark license, while covering the project against the risks of transfer restriction, expropriation and war and civil disturbance. This was the first time MIGA covered a trademark license as a non-equity direct investment. The project involved the transfer of a set of technologies to improve production processes, increase the plant’s competitiveness and introduce product innovations in the market. It will benefit from continuous managerial, technical, logistical and marketing support from the Corona Group.

MIGA derives its strength from its standing as a member of the World Bank Group and its structure as an international organization with shareholders including most countries of the world. The agency provides political risk insurance guarantees to private sector investors and lenders. Since its inception in 1988, MIGA has issued more than $28 billion in political risk insurance for projects in a wide variety of sectors covering all regions of the world.

The agency’s guarantees are designed to mitigate the non-commercial risks associated with manufacturing projects in emerging markets, thereby lowering the cost of capital. They can also reassure lenders their investments are protected. The agency helps equity owners engaged in costly investments in countries often seen (for good reason) as high risk.

But with cross-border investment comes a new set of risks. Just ask Evan Chuck.

A partner with the St. Louis–based law firm of Bryan Cave Leighton Paisner, Chuck says it’s vital to analyze the real-world situation facing U.S. companies. Chuck, Bryan Cave’s chief legal representative and

Shanghai office liaison, emphasizes the firm’s experience in dealing with export insurance, particularly in the context of U.S. buyers of Chinese goods. “Increasingly,” he says, “Chinese exporters use their export insurance as a sword against U.S. and foreign buyers. Particularly in pay disputes, Chinese exporters frequently threaten that they will file a claim with their Chinese insurance provider to make them whole for the amount they were expecting. This also can have the effect of putting the non-Chinese buyer on a blacklist, effectively shutting them out of the Chinese market. This puts enormous pressure on the non-Chinese buyer to negotiate a settlement with the Chinese party.”

Chuck also points out that typical commercial policies trying to cover risk in China may have “real-life” deficiencies in that the quasi-governmental nature of some bodies in China may make it difficult to determine whether “expropriation” has occurred (usually excluded from ordinary commercial insurance). “In recent years,” he says, “there have been disputes over coverage when, in China, a factory is abandoned by a foreign landlord, resulting in labor unrest that requires the intervention of the Chinese social stability agency. That agency may seize assets and try to organize their sell-off to pay liabilities. Whether such situations are covered has been the source of complex insurance negotiations and litigation.”

While regulatory uncertainty and different trade practices may plague investors in China, financial and other crises across the globe underscore the persistent risk of international trade.

In May 2017, the government of Laos revoked concessions for 15 mining operations after investors failed to implement their projects as agreed. Defaulting on government obligations is one of five recent investor experiences in cross-border transactions. The others are the repossession of privatized assets; the revocation of concessions given by previous governments; the inability to convert or transfer local or foreign currency due to government action or inaction; and contract frustration due to inadequate legal and regulatory frameworks.

Companies that pursue international trade opportunities and/or international investments can derive real benefits from both trade credit insurance (TCI) and political risk insurance (PRI). Both are not only easy to secure but are also affordable. In fact, many consider them to be vital tools for companies engaged in international trade.

“We have noticed an upturn in demand for a combination of TCI and PRI insurance products,” says Michael Sullo, commercial-lines damage insurance broker and trade credit specialist at BFL CANADA. “Where there is instability, there is concern. Where there is concern, there tends to be caution. With increasing political uncertainty on the horizon and disruptions between Canada and the U.S., it is no surprise that businesses are seeking shelter from potential payment issues, which could be triggered by political events.”

Trade Credit Insurance

In 2008 and 2009, the industry paid out claims to insured policyholders totaling more than €9 billion (US$10.4 billion). Many of them would not have survived without their TCI compensation.

TCI is a proven product whose history in supporting trade dates back over 100 years. TCI insures manufacturers, traders and providers of services against the risk that their buyer does not pay (after bankruptcy or insolvency) or pays very late.

Suppliers who deliver goods and/or services on credit have to manage this credit risk to ensure that payment is received on time. Outstanding receivables are usually the largest or second-largest item on a trading company’s balance sheet. Bad debt losses affect liquidity and profits. Even worse, they might cause a company’s ultimate financial ruin. By insuring these receivables against non-payment or late payments, the company ensures its cash flow and its profit.

The value of TCI was demonstrated during the recent global financial crisis. This period saw insured manufacturers and traders reimbursed for their losses on defaulting buyers. In 2008 and 2009, the industry paid out claims to insured policyholders totaling more than €9 billion (US$10.4 billion). Many of them would not have survived without their TCI compensation.

Many of the most active insurers that cover the market today were established between 1925 and 1946. TCI has had wide market acceptance in the United States for more than 25 years and in Western Europe for more than 50 years. There are two primary sources of trade credit insurance: private sector insurance companies and the federal government.

The three largest and oldest private insurers—Euler Hermes, Coface and Atradius—are based in Europe, where the trade credit insurance market developed much earlier and more rapidly. Given the size of most European countries, combined with their political and legal systems, companies there were forced to develop their export business to fuel sales growth much sooner than their U.S. counterparts.

TCI developed because of the special challenges facing exporters. The list is a long one, but here are the six biggest challenges:

  • The buyer and seller don’t know each other
  • Different languages, customs, laws and regulations
  • The cost and terms of bank finance
  • The buyer wants time to pay
  • The seller wants immediate payment
  • The transfer/payment is done in a foreign currency.

In today’s marketplace, companies sell to international buyers and face competition from suppliers across the globe. A company must offer competitive terms to vie for business against foreign players. Banks lend more capital against insured receivables and usually do so with better financing terms since they can transfer the payment risk to the insurance company. This type of insurance also offers release for intercompany credit facilities.

“An important factor, which is also a huge benefit to exporters, is the bankability of the TCI product,” Sullo says. “Lenders will typically exclude export receivables from the borrowing base, which is a limiting factor for companies requiring additional working capital in order to fuel export growth. By insuring these export receivables, lenders can include this asset up to 90% in the borrowing base. This is a huge opportunity for exporters to take full advantage of this underleveraged asset.”

The TCI market has evolved and expanded, and there are now several private insurance players offering many alternatives to companies. Every credit insurer has three primary missions: prevent and control the inability of customers to meet their financial obligations; indemnify up to 90%; and recover unpaid invoices. A good TCI policy pays a percentage of the outstanding debt, usually ranging from 75% to 95% of the invoiced amount. But the payout may be higher or lower, depending upon the type of cover that was purchased.

Any company is eligible for TCI coverage. The companies that benefit the most from TCI include firms with limited fixed assets, those that require more efficient debtor management, those experiencing rapid growth and those that offer longer payment terms to their customers.

An important factor, which is also a huge benefit to exporters, is the bankability of the TCI product.

Michael Sullo, commercial-lines damage insurance broker and trade credit specialist, BFL CANADA

In the absence of TCI, many transactions need to be consummated on a prepaid or cash basis or they might not happen at all. This is why TCI is such an essential credit management tool. And this is why it’s used to control risks, improve payment behavior, obtain vital buyer information, and monitor exposures. “In most cases, without a combination of TCI/PRI in place, exporters would typically transact via L/Cs [letters of credit], upfront payment or very restrictive terms of sales, giving them less of a competitive edge in foreign markets,” Sullo says.

In fact, many consider a company’s executives to be legally obligated to use TCI. It’s also one key factor the major rating agencies consider when they assess companies. The agencies view measures taken to mitigate credit risk in a very positive light.

Political Risk Insurance

When the TCI market began to grow following World War I and the Great Depression, the private market was not willing to cover political risk. In order to fill this need, many countries formed export credit agencies (ECAs). “Most of the countries in the world have their own ECAs to cover political risk—what the private market was not able or willing to cover,” says Xavier Monsaingeon, director of Platus, a TCI- and PRI-focused subsidiary of Verspieren Group. “It became a tool for the countries to support the exports of their nationals.

“In the ’70s, the private market started to reconsider political risk insurance.... Today, the market has hugely grown up, and there are now probably between 50 and 60 players who have now become involved in private PRI in competition with credit export agencies all over the world.”

Monsaingeon says the private market has the size and financial strength to compete and collaborate with the other market players. “When we syndicate the risk among various players we can find capacity for up to $1 billion U.S.,” he says, “so it means that they are capable of providing significant things.” Monsaingeon says this is also why the export credit agencies, the Multilateral Investment Guarantee Agency and the African Trade Insurance Agency not only compete but cooperate with the private market. “Insurers like to share the risks,” Monsaingeon says.

PRI covers those events, actions or omissions of a government that are outside the control of the parties to a commercial transaction. PRI coverage excludes force majeure events, currency depreciation or devaluation, events in the control of a party in the commercial transaction or lawful actions of a government. Trade and investment activities covered by PRI include equity and quasi-equity, shareholder loans and loan guarantees, and commercial loans, among others.

PRI enhances a project’s financial viability by transferring political risks from the control of the parties associated with the project to a third party, which is better able to bear the risks through specialized knowledge and portfolio diversification. Further, the third party possesses the expertise needed to share the risks through the use of reinsurance. PRI reduces the degree of risk, and the cost of capital is lowered. This is achieved by lengthening the term of the borrowing, reducing the capital charge (and thus the loan margin) and potentially the amount of debt provided.

Mike O’Malley, the senior vice president of public policy at the American Insurance Association, says more companies and investors should consider political risk insurance to protect their overseas investments. “Because this specialty product can and should be tailored to fit a client’s unique exposures, AIA has been actively encouraging the states to exempt this line of business from policy form and rate filings,” O’Malley says. “Our hope is that, through such commercial lines modernization efforts, the market for political risk insurance will expand as more contractors, importers and exporters, financial institutions and investors routinely request quotes for this important coverage.”

Sullo adds that products like TCI and PRI play a vital role in global trade and in promoting export growth. “If we look at Canadian companies who export their goods abroad, a combination of TCI/PRI can help gain insight on potential export markets, prospective clients, potential long-term investment partners and can also allow for more favorable terms of sale to foreign buyers.”

Insurers like to share the risks.

Xavier Monsaingeon, director, Platus

Growth in Africa

To see insurance-fueled growth at work, turn to Africa, home of one of the fastest-growing economies in the world. The World Bank’s leading project created a financial facility that pools the capital contributed by African governments through their subscription in the share capital of the Africa Trade Insurance Agency (ATI). These funds enable ATI to underwrite insurance policies to cover short-term to medium-term political risk as well as three other conditions: comprehensive credit insurance for private-sector buyers; the non-honoring of sovereign obligations (covering loans against losses resulting from a government’s failure to make a payment under a guarantee); and trade cover for sub-sovereign obligors, wherein a local or state-level government entity is the obligated party (as bond issuer, borrower, debtor, insurer, etc.) to repay a debt.

In addition, the financing issued by ATI can be used to fund eligible investments and share repurchases and to make insurance facility-related payments.

According to its founding document, ATI was established at the initiative of the Common Market for Eastern and Southern Africa (COMESA) to “[f]acilitate private sector-led trade flows, investment and ‘productive activities’ through the provision of insurance, coinsurance and reinsurance, financial instruments and related services.” COMESA, headquartered in Zambia, was created as an organization of sovereign states that agreed to cooperate in developing their natural and human resources for the good of all their people and to promote sustainable economic development. In this context, the main focus of COMESA has been on the formation of a large economic and trading unit to overcome trade barriers faced by individual states.

The rationale behind the founding of ATI was straightforward: the relatively small volumes of trade and investment in many ATI member states do not merit the establishment of national insurers. ATI helps reduce the cost associated with doing business in Africa by offering five types of solutions:

  • Cost-effective use of underwriting capital
  • Reduced overhead costs
  • Regional integration through international cooperation and risk sharing
  • Enhanced possibilities for risk diversification by creating a regional risk portfolio (reducing the impact of an individual country’s volatilities and sector dependencies)
  •  Encouraging private sector insurers to assume risk in Africa.

ATI is owned by the African governments that signed the charter and subscribed to the share capital. (Although ATI is open to all member states of the African Union, not all of them have joined.) ATI is supported by the World Bank and partners with Lloyd’s of London and other major private insurance companies and with private and public credit insurers.

ATI’s multilateral status—as well as the strong support it enjoys from the World Bank—creates a very powerful deterrent for any country to leave ATI in the lurch for a loss. In other words, there’s an underlying country obligation to make ATI whole for any political risk losses the government might cause. Governments worry that, by creating an incident that would require insurance to be paid, the international organizations behind ATI would, in turn, hesitate or even cease doing business in that country—a bad outcome for an economy hungry for capital. Plus, having invested directly in ATI’s capital means member states enhance ATI’s ability to resolve disputes without loss.

As shareholders of ATI, member states also have a vested interest in maintaining the investment environment and ensuring that disputes are resolved. Multilateral insurers such as ATI act as neutral parties between the investor and the host government to ensure that investments stay on track.

Growing Global

When a company ventures into international markets or sets out to grow within those markets, one factor that can help differentiate success from failure gets little attention: it’s the courage to make an honest assessment of risk factors, which means analyzing the costs of mitigation and then implementing active risk management strategies.

“As brokers, it is important for us to discuss these solutions in a proactive way with clients,” Sullo says. “In this context, it definitely creates opportunities for serious dialogue about these insurance products and the value they can bring. These insurance products are definitely weapons to wield with a potential trade war looming and should be a part of every exporter’s credit management arsenal.”

The company that ignores these kinds of tools will only have itself to blame when competitors move into those markets, grab customers and reduce their risks. When 95% of the world’s purchasing power lies outside the United States, smart business leaders must look outward to see what it takes to grow globally.

“I remember 10 years ago, people were thinking classical war was over—with weapons and the shells coming from one side to the other—but unfortunately, it still exists,” Monsaingeon says. “Countries such as Libya, for example, were considered very stable thanks to a very strong dictator, and the dictator disappeared in two weeks’ time. On the other hand, there are countries where everyone says, ‘This country will explode next week.’ As a broker, I just have to try to get the widest possible coverage because we don’t know what will happen.”

Feller is a contributing writer.

They are also the first generation to have access to technological innovations like the internet during their formative years.

But that doesn’t mean technology is more important to them than relationships. While studying Nationwide’s fourth annual Business Owner Survey of more than 1,000 business owners, I noted that millennial business owners say they are more likely (almost 70%) to have a relationship with an insurance agent, compared to 63% of all business owners. They also say they are more likely to look to an agent for guidance on everything from retirement and banking to cyber security and disaster planning. The list of topics for which business owners say they are relying on agents for advice includes:

  • Insurance
  • Retirement
  • Employee benefits
  • Safety/loss control
  • Business interruption (disaster planning)
  • Cyber security
  • Succession planning.

“Many millennials grew up during the recession of 2008,” says Michael Pesch, U.S. CEO of Brokerage Services at Gallagher. “This raised tremendous awareness around planning for the future and having the right advice to be personally financially stable. People of all generations still need great advice, and it becomes even more important when you are talking about intangible products and services like insurance and financial planning.”

I couldn’t agree more. The Nationwide study shows that business owners—especially millennials—want your guidance on these topics. In fact, according to our survey, more than a third of business owners say that an existing professional or personal relationship is an important characteristic when selecting an agent.

At the same time, technological innovations still matter for business owners. According to our survey, almost one third of business owners now rely on connected technologies to support workplace safety. Millennials are leading the charge, as 71% of them use connected technologies for safety efforts in their workplaces. That’s more than double the average rate across all business owners (32%).

But our survey also found that almost one third of business owners are specifically looking to agents for guidance with their safety/loss control plans. In fact, the survey revealed some alarming statistics about those companies’ overall safety efforts:

  • 51% do not employ a dedicated safety professional.
  • 38% do not offer formal safety training.
  • 51% do not have a contingency or succession plan in place.

What does that mean for you as an agent or broker? It shows that, because of your relationships with business owners, you have a remarkable opportunity to educate them on the protections they need to account for—issues like safety, loss control and so much more.

We’ve thought about this at Nationwide, and we have begun building a new set of tools that align with how you and your clients do business. In early 2016, we launched a venture fund to invest in startups that are evolving the insurance and financial planning process. So far we have invested more than $100 million in startups like blooom, Nexar, Sure, Matic and Betterview.

We have built an innovation lab where we experiment with new business products and processes that help your clients meet their insurance and financial needs in novel and digital ways and protect their digital assets, especially in the evolving area of mobility. We’re doing this because we know that this is what you need and what your clients need. Because at the end of the day, relationships will always matter.

Gary Douglas is president of Nationwide National Partners.

This is just everyday life in our modern business world. New processes, technologies, regulations, industry fluctuations, customer demands, political changes and cultural shifts require companies to adapt their business model to adjust to the change. To respond to this turmoil, we need flexible leadership at all levels of an organization, from the CEO to the frontline employees.

What does a flexible leader look like? In this context, flexibility is having the agility and ability to readily respond to changing circumstances and expectations. Flexible leaders change plans as situations change. This results in an ability to remain productive during times of upheaval or transition. They embrace change, are open to new ideas and enjoy working with a wide spectrum of people.

In a B2C article entitled “Flexible Leadership: Learning to Lead and Manage,” Rick Lepsinger tells us that in these fast paced times, to be truly flexible, we must wear two hats: that of the leader and that of the manager. “Huh?” you say. You always thought that managing and leading were mutually exclusive roles that required different skills and values. Well, it turns out that you are half right. According to Lepsinger, while they are distinct roles, they can and should be enacted by the same person. Both roles are necessary for success. Both roles produce vital outcomes for the organization. Managing produces predictability and order, and leadership produces organizational change.

The challenge comes in keeping the two roles in balance. If management is overemphasized, then taking risk may be discouraged and bureaucracy can be created, which may not serve any purpose. When leadership is too strong, without the balance of management, there can be disruption in order and the risk of creating impractical change. Lepsinger tells us “the importance of leading and managing depends in part on the situation.” Management increases in importance as organizations grow in size and complexity. When the external environment is dynamic and uncertain, the need for leadership increases. While one person needs to be able to perform both roles, “few executives are effective at both leading and managing.”

To help with this delicate balancing act, he offers guidelines for integrating the leader and manager roles.

  1. Increase Situational Awareness – Understand the external factors that can hurt or help the effectiveness of your organization and determine what strategies have the best chance for success given your internal processes and resources. To maintain high situational awareness as a leader, you need to obtain accurate, timely information about the organization, its members and the external environment. As the manager, you measure these important key variables and understand how they change over time.
  2. Embrace Systems Thinking – Leaders need to understand how making changes in one area can affect others. Every organization has many interlocking systems, and alterations to one system can have a domino effect on the organization as a whole. Anticipating these effects helps leaders compensate for any impacts. Typically, this type of strategic thinking is associated with top leaders, but it is also an important skill set for managers at all levels within the organization.
  3. Coordinate Leadership Across Levels and Subunits – No one leader has absolute control over the success or failure of a change initiative. To achieve lasting commitment to change, every leader at every level of the organization needs to coordinate efforts to manage the change. To achieve seamless coordination across the organization, managers must have shared values and beliefs that guide their decisions. Top management ensures the organization has a core ideology, but leaders at all levels must support that ideology and use it to guide daily actions.
  4. Lead by Example – Modeling the behavior that is needed for success is one of the most important tasks for any manager or leader. Equally important is avoiding setting a bad example by falling into old habits when you are implementing a change.
  5. Maintain Focus – As new challenges and situations arise, flexible leaders need to avoid letting these things distract their attention and decrease their commitment to meeting their objectives.

In the Strategic Finance article “Keys to Flexible Leadership,” Jeanette Landin tells us, “In some situations, you might have days or weeks to consider courses of action; in others, you may have minutes or perhaps even seconds.” She suggests using the following questions to guide your action:

  • What do my followers need me to do?
  • What are appropriate alternatives?
  • What’s the best course of action for all involved?

To enhance your flexible leadership skills, be open to experiences and seek the learning opportunities that each situation presents. As you become more flexible, you will become more effective. Remember that becoming a flexible leader takes time and patience. The Council’s Leadership Academy has many resources to assist you. Just reach out. We are here to help you navigate the turbulent water!

McDaid is The Council’s SVP of Leadership and Management Resources.

In between the finger pointing, name calling and shaming that has become the norm in D.C., the Problem Solvers Caucus has emerged as one of the leading voices of reason on Capitol Hill. 
Co-chaired by Congressman Tom Reed, R-N.Y., and Congressman Josh Gottheimer, D-N.J., with a membership of about 48 members of Congress (evenly split among the two parties), the Problem Solvers Caucus lives to take on the tough issues. Bound by a can-do attitude, sense of humor and unending fighting spirit, these members cut through the nonsense and legislate from not fear or ideology, but common sense. 
We sat down with the fearless leaders to get a better understanding of the Problem Solvers Caucus, how they work, and what’s next on their agenda. 
How did you guys meet? Was it at a Problem Solvers Caucus meeting? Was it Tinder? 
Rep. Gottheimer: The first time we met—remember, it was a panel?—was actually in Manhattan, and someone had basically set us up to talk to each other.
So it was like speed dating! 
Rep. Reed: It was speed dating. It comes out of the No Labels type of history. 
Gottheimer: They had a panel that they invited us to. Our caucus, the Problem Solvers Caucus, is 24 Democrats and 24 Republicans. There was a version that existed before Tom and I—and others—sat down and decided to reconfigure it and make it less of a place to go have a cup of coffee and spend with time with folks. [We changed] the by-laws and added a level of commitment that we were going to make as a group that, if we got to 75% of us on a particular issue or policy area, we vote together on it as a block to counter the extremism and show that we are really serious about governing and we’re trying to get to yes on some of these issues. 
Tom had been involved before me, because I was a new member of Congress at the time, and people kept telling me, “You’re not going to agree in every policy area, but you’re really going to like each other and really hit it off. You have the same approach and mindset to want to get things done. Tom is such a great guy, you’re going to like him.” 
We spent some time talking, and we both ran. That was before we reconfigured the organization.
Reed: Yes, that was in the fall of 2016. 
Gottheimer: Then we actually sat down and both ran for our respective leadership, because it’s a co-chair setup; me on the Democratic side and Tom on the Republican side. We talked about having the same objectives and started from there. 
When the Caucus isn’t at 75% agreement, how do you move on? 
Reed: If we can’t get to 75%, we just walk away and remember “it is what it is.” That has actually happened a few times, and then we have gotten back into it. You give it a little bit of time; other events happen. We were working hard on the healthcare package, for example, in the beginning. It got further apart and then crashed in the Senate, which really was a factor to motivate people to get to the 75%. 
So we roll up our sleeves. 
When Josh talks about coming back to work at 9 o’clock at night or 10 o’clock at night, that’s accurate, very true. I have been over to his place with a group of members until about one or two in the morning. I get coffee, and he gets hot cocoa. We just keep working at it. It’s a level of respect we have. If we can’t get there, we can’t get there. We put it aside and work on other issues, and if we can get back to it, we come back to it. 
Why isn’t your membership list publicized? 
Reed: This is something we were very sensitive to. We wanted to give control to the members. You have to remember, what we’re doing to a large degree is, to many, very common-sense with a large energy of support, but to many, it’s a threat, and to many it’s not helpful for their political future.
Gottheimer: Because you’re standing up against leadership, against the grain. They don’t love it when you do that. 
Reed: What we tell members: “If you want to publicize it, publicize it. If you don’t want to publicize it, we’ll keep it quiet, and it’s your prerogative on how best to use this relationship.” 
Gottheimer: I think you’ll see that most members do make it public. Our job is to actually represent the members. You can imagine that, when we’re trying to put an agreement together, the littlest things can push back an agreement, and the whole idea is to keep working until you get there, until you make the announcement. We try not to let the excitement of getting there get in the way of actually coming across the finish line. 
How do you determine what you work on? You have worked on healthcare, transportation.
Reed: Generally, it happens organically. A member will bring up an issue with other members at our meetings or say, “This is something I want to get involved with. Can we consider discussing it here?” Then, we’ll break off into a working group. Or, what’s been happening more and more recently—since the brand has gotten out there—the White House reaches out to us, certain stakeholders may reach out to us and say, “Is this something you can potentially discuss and come to some agreement?” We’re becoming known—I like to use the term “test tube”—as the place to see if there is consensus in Congress. 
Gottheimer: We’ve dealt with some of the biggest issues of the day that people didn’t think we could find agreement on: healthcare, budget, infrastructure, immigration reform, gun violence… Tom mentioned the White House. Jared Kushner from the White House came to us a couple of weeks ago on prison reform.
Reed: Mike Bloomberg has spoken with us. Influential people come. We’ve had a lot of exciting leaders come, and they start a conversation about the issues they’re passionate about, and some of our members catch up with them after the meeting and go from there. 
Congressman Reed gets up to head back to a Ways & Means Committee markup. He offers to come back, but Congressman Gottheimer suggests we call him and we can talk on the phone while he walks. Of course, they’re on each other’s speed dial.
Healthcare is a big issue for our members, especially employer-sponsored insurance. We’re concerned about prices and transparency. Are you seeing that in your districts? Are your constituents concerned about drug prices, the overall rising costs of healthcare? 
Gottheimer: Honestly, drug pricing is the number one issue people bring up with me all the time. Part of why we wanted to take on this issue—ACA reform—and take a piece and really look at the individual marketplace and say, “Can we help stabilize things and get premiums down for folks?” is because the issue people talk to us about is their premiums, whether they’re in the individual marketplace or have employer-sponsored insurance, because with ESI you have the ripple effect and it’s all connected. Premiums keep going up, and it’s untenable. With the Problem Solvers Caucus, we took on the overall cost of healthcare, which was under attack. We still think the individual marketplace needs to be stabilized. Tom will tell you that we need more experimentation at the state level, from the states having the ability to have more ideas that can be put into play to raising the employer mandate from 50 to 500, which, on my side, was a tough pill to swallow, but it ended up being a part of the agreement we put together. 
Reed: Obviously drug prices are something I see in the district and with the work I do on the Congressional Diabetes Caucus (my son is a Type 1 diabetic). I am co-chair with Rep. Diana DeGette [D-Colo.]. Insulin, I think, is a poster child of our efforts to force transparency and ask some hard questions on why insulin prices are going through the roof, and that relates to a lot of drug prices across the country and how those are set. 
What do you think about the payment system: fee for service versus value based? 
Gottheimer: I don’t think you’re going to see much movement there in this climate. 
Reed: There is whole movement afoot—as you’re well aware—of getting away from a fee for service payment system. That’s what the “Doc Fix” was all about, that’s what value-based reimbursement policies are all about. I think you’re going to see more of that on a regulatory side than—Josh’s point—a legislative vehicle that can get through the 60-vote threshold in the Senate. 
Do you think the Centers for Medicare and Medicaid Services will continue to put forth more regulation on various payment systems? 
Reed: I do believe that will be the primary vehicle and there will be opportunities on the House Ways & Means Committee for opportunities on Medicare and others so we can continue to reformat. 
Do you think there is any possibility of considering anything in Congress on healthcare, whether it’s fee for service, drug price transparency, etc. through legislation? Or will it just be on the regulatory side? 
Gottheimer: I agree with Tom. With the stabilization of the marketplace, it would be really helpful [to consider and pass legislation], and we were really close and worked all last summer with Senators [Lamar] Alexander [R-Tenn.] and [Patty] Murray [D-Wash.], but it was ultimately stripped out. It was not the result we wanted. Hopefully it could still happen, but I’m not optimistic, and you’re getting toward the “silly season.” 
Is the Caucus working with Health and Human Services and CMS and presenting them with ideas? 
Gottheimer: We certainly spoke to them at the time. Again, I think Tom is right that you will see changes happening on the regulatory side. 
Bartlett is The Council's director of Government Affairs.

Q: Why does there seem to be so many M&A deals recently, and will this pace continue?
A: The industry is averaging 485 announced transactions over the past three years and trending to exceed 500 transactions in 2018. We hit an all-time high in deal activity in 2017 with 557 announced deals. I believe the industry will continue at this brisk pace for at least the near future.

Q: What’s sparking the M&A activity in the first place?
A: Private equity! The world is searching for a place to invest capital. Investors have found the insurance industry is a great place to park their money.

Q: Why does private equity like the space so much?
A: The insurance distribution space has many characteristics that are favorable to private equity investors. It has a low capital expenditure requirement. It is highly fragmented, which is conducive to acquisition. It has high recurring revenues and stable cash flows. And it has proven in recent years to be recession resilient.

Q: Is the money going to dry up?
A: It sure doesn’t look like it. We are seeing more and more money being allocated to the insurance industry by private equity firms, and the new tax cuts in the United States should create more cash flow for the publicly traded buyers to allocate toward acquisitions.

Q: What’s going on with valuations?
A: For now, they appear to still be rising, based on MarshBerry’s proprietary database. In 2017, the average firm sold for a maximum value of 10.37x earnings before interest taxes depreciation and amortization (EBITDA). For the 12 months ending June 30, 2018, the average maximum value of a firm has increased to 10.96x—an increase of 5.7%. In the same time periods, maximum value for platform agencies went from 11.64x in 2017 to 12.12x for the 12 months ending June 30, 2018—an increase of 4.1%. Values will likely hold strong for the near term but are expected to be impacted by tax changes slated for 2022. (Maximum value includes the maximum potential payment based on future performance, “earnout.” A platform agency is typically a larger firm where the buyer is looking to establish a presence in a specific region or niche.)

Q: Who is selling—just a bunch of aging owners?
A: That’s what may people think: that older owners are all selling out. However, many firms are deciding to join an established firm instead of building their own. Many owners are choosing to sell today when they truly have a choice as opposed to selling when their backs are against the wall.

Q: Should I be considering a sale, too? Am I missing something by not playing in the market?
A: Today’s market is a unique one. Actually, it is one of a kind since we have never seen valuations or deal counts like today’s. I am recommending to my clients that, if they would consider a sale in the next three to five years, they owe it themselves to take a look today.

Q: What does it mean for the rest of the independent agency group?
A: It means you have to grow—at all cost. I believe in the independent agency. But complacency isn’t an option.

Q: Should I sell, or should I wait?
A: It depends on what you are willing to do. If you are running a lifestyle business, you should probably sell and take some chips off the table. If you are running your business as if someone else owns it, then double down and grow it. There is truly no better investment (in my personal opinion) than owning an insurance agency. But you shouldn’t just sit around and watch the market pass you by. Control your future and your firm’s value.

Q: What can you tell me now about M&A so I can sleep tonight?
A: The good news is that your value is likely significantly greater today than it was a decade ago. The tough part is that you have to figure out what you are going to do about it.

Market Update

The market’s busy summer continues, with 42 and 37 deals announced in June and July, respectively. The year-to-date total is up to 289 announced transactions, compared to 336 announced transactions for the same time period in 2017. As we continue into the last quarter of the year and the market continues to remain very active, it is shaping up to be a busy second half of 2018 for buyers and sellers.

BroadStreet Partners and AssuredPartners are now tied for the most active buyers at 19 transactions each year to date. Next is Alera Group with 18 announced transactions, and 2017’s most active buyer, Acrisure, is catching up to the pack with 17 announced transactions so far this year.

June and July proved to be exciting months within the insurance brokerage industry, especially in the state of Texas. First, Houston-based Wortham Insurance, 2018’s 33rd-largest brokerage ranked by 2017 brokerage revenue generated by U.S.-based clients, was acquired by Marsh, a wholly owned subsidiary of Marsh & McLennan Companies, on July 31, 2018. The business will now operate as Marsh Wortham, a division of Marsh USA Inc.

Additionally, CLS Partners, an Austin, Texas-based employee benefits agency, was acquired by Alliant Insurance Services. The transaction was announced on July 9, 2018. This transaction greatly increases Alliant’s already strong presence in Texas, where it now has offices in Austin, Dallas, Houston, and Fort Worth.

Trem is EVP of MarshBerry.

Securities offered through MarshBerry Capital, member FINRA and SIPC. Send M&A announcements to M&

Their patience seems to be waning.

Verizon faced a shareholder proposal from the New York State Common Retirement Fund and Trillium Asset Management, which called for linking executive compensation to the company’s success at protecting its networks and assets from cyber attacks. “Executive compensation is already linked to key metrics such as earnings per share, free cash flow and revenue,” said Jonas Kron, Trillium’s senior vice president. “Cyber security and data privacy are equally important, mission-critical concerns.”

The proposal was triggered, in part, by Verizon’s 2017 acknowledgement that all three billion user accounts of its latest acquisition, Yahoo, had been compromised in data breaches a few years before, making it the largest known breach in history. Verizon’s announcement came four months after the company paid $4.48 billion for Yahoo—which reflected a $350 million reduction in price after the breach of 1.5 billion Yahoo users was revealed before the acquisition closed. (Verizon did not know at the time that twice as many user accounts had been breached.) In April 2018, the Securities and Exchange Commission also fined Altaba, the new name for the part of the Yahoo business that wasn’t transferred in the Verizon deal, $35 million for failing to inform investors about the 2014 breach.

Although Verizon reported that the Trillium/NY Common proposal failed on a vote before shareholders in May 2018, the concept has not been lost on other shareholder activists and SEC staff. Indeed, the proposal noted that a parliamentary committee in the United Kingdom had made a similar recommendation.

Patience with cyber breaches might be waning because of a growing awareness that initial reports often don’t reflect the full extent of the breach. Several serious cyber attacks in 2017 were worse than first reported. For example, although losses for Merck and Federal Express’s TNT Express division were first estimated at $300 million each after they were hit by the NotPetya malware, The Wall Street Journal reported in June 2018 that the losses were actually $400 million for Fed Ex and $670 million for Merck. The Equifax breach was also initially underreported, though not by nearly as much; The Washington Post detailed in March 2018 how Equifax repeatedly updated the number of consumer records breached from its initial estimate of 143 million records to 147.9 million.

Blatantly lax internal policies and procedures are other reasons why patience over cyber breaches is running out. Shortly after the latest numbers on the Equifax breach came out, the SEC charged Equifax’s chief information officer with insider trading due to his sale of nearly $1 million of Equifax shares between the time of the breach and its public disclosure. Equifax also reported that four executives, including its chief financial officer, sold shares worth $1.8 million prior to the disclosure, but the company said these execs were unaware of the breach at the time. This announcement caused many cyber-security experts to wonder about the effectiveness of Equifax’s incident response plan, since best practices require executives and board members to be informed.

Nationwide, companies are still struggling to understand how they should govern cyber security. Generally, boards treat cyber security the same as other board issues and assume the business judgment rule will protect them against shareholder lawsuits. Under the rule, directors’ decisions are respected by courts as long as they appear to have been made in good faith, with the care of a reasonable person, and in the belief the decision is in the best interests of the company.

So far, this has been a sound conclusion. In a number of shareholder derivative suits following highly visible breaches, courts relied on the business judgment rule when examining whether management was negligent in managing cyber risks and dismissed cases against Heartland Data Systems, Target, Wyndham, and Home Depot. A similar suit filed against Wendy’s was recently settled. That’s the good news.

Here’s the bad news: a new type of lawsuit makes directors and officers more vulnerable. Kevin LaCroix, author of the well-regarded D&O Diary, noted that, since the 2016 Wendy’s suit, “plaintiffs’ lawyers have not filed any further data breach related shareholder derivative lawsuits…[but] have continued to file data breach related lawsuits…in the form of securities class-action lawsuits.” In the past year, securities class-action suits were filed against Equifax, Yahoo and PayPal. Securities class-action suits regarding breaches generally allege a company made materially false or misleading statements about its cyber-security program in its public filings or omitted material facts about the security of its data, causing the statements to be misleading to investors.

The suit against Yahoo alleges the company made false and/or misleading statements because it failed to disclose that users’ personal information was not encrypted, making it vulnerable to theft, and a data breach involving such information could “foreseeably cause a significant drop in user engagement with Yahoo’s websites and services.” Thus the complaint alleges that “Yahoo’s public statements were materially false and misleading at all relevant times.”

The Equifax and PayPal lawsuits allege that executives and officers failed to maintain adequate security measures to protect systems and data and to detect breaches, resulting in materially false and/or misleading statements to investors, who were injured by a drop in stock price after the breach. Securities class-action suits have not been filed in previous breaches because the share price was not impacted enough to justify such a suit. Equifax’s stock price dropped around 40% following its breach, but PayPal’s dropped only about 6%. LaCroix called the PayPal suit “event-driven litigation,” noting, “Certainly if a stock price drop on the order of magnitude that PayPal experienced is enough to attract a lawsuit, we could expect to see more of these kinds of lawsuits in the months ahead.”

Although there are standards and best practices on cyber governance, they have not received the attention they deserve at the C-suite and board levels, primarily due to reliance on the business judgment rule. (Refresher tip: see my September 2017 article discussing governance standards and best practices.) The securities class-action suits, however, usher in an entire new line of reasoning, backed up by losses shareholders have had to pay for.

Some experts now predict that cyber-governance standards, which outline specific responsibilities for directors and officers, and regulations that mandate board and executive governance of cyber security (such as those promulgated by the New York Department of Financial Services), will raise the bar for oversight of cyber security above the business judgment rule and open the door to D&O liability claims. Their conclusion is worth repeating: this development will effectively place a corporation’s D&O insurance program directly in the crosshairs when corporate management fails to live up to those heightened duties. D&O insurers should be forewarned.

Westby is CEO of Global Cyber Risk.

That’s the reality of today’s business world, particularly for those of us who lead organizations.

Life is more complex than ever before, both at home and in the office. Humans are addicted to distraction and sit prey to the world around us, which is moving faster than the speed of light. We are both hyperconnected and disconnected. We are experiencing dramatic generational changes up and down the ranks. We are under extreme pressure to be successful at all costs. No wonder our mental clarity is foggy at best.

At the same time, it seems like there has been an explosion of people who are all different from everyone else. Therein lies the catch. People today are more likely to be who they are and how they are. It’s not so much an explosion of differences, rather a movement to being authentic. Being authentic means being mindful and taking the time to reflect on yourself first so you are primed to move ahead—for you, your family and your employees.

The key to all of this is having self-awareness. New York Times best-selling author Daniel Goleman says the “essence of authentic leadership is emotional intelligence.” And the most important step in developing your emotional intelligence is gaining self-awareness. Put simply, take a step back from our hectic 24/7 lifestyles and reflect…on you. The sooner you develop a stronger understanding of yourself, the more authentic you can become as a leader.

Of course, there are risks to being authentic. At the top of the list is how and when to be vulnerable. This brings us to one of the feature topics in this month’s issue: our Q&A on page 50 with Council board member Kevin Davis. Kevin’s story about his journey toward mindfulness is compelling, and he’s brave to share it with all of us. It makes him vulnerable, and that, to me, is very authentic.

Mindfulness is being in the present moment with a calm and open mind. Studies have shown this short and simple science-based mental exercise can make a significant difference in breaking the cycle of anxiety, unhappiness and exhaustion. It is becoming an integral part of companies’ well-being strategies worldwide. Fortune 500 companies including Google, Apple, McKinsey, Intel and Goldman Sachs are teaching mindfulness as an effective tool in improving workplace culture as employees learn to manage their stress and increase their productivity.

In our own industry, Aetna has reported a savings of $2,000 per employee in healthcare costs and a gain of $3,000 per employee in productivity after implementing its mindfulness program in 2011. Aetna says its participants reported a 35% decrease in perceived stress and a 20% improvement in sleep—impressive results for a program implemented simply because CEO Mark Bertolini found personal success with the practice. Here at The Council, we offer 60-minute yoga classes in our office twice a week. We haven’t conducted any formal polling since we started the offering in 2015, but anecdotally, classes are popular both with employees and our interns.

It’s not to say there aren’t challenges. Kevin admits that it’s hard to measure any bottom line changes, and not all employees are comfortable practicing in an open environment. But for a low-cost wellness program that has shown to improve decision-making, communication and engagement and has created a healthier work environment for all, it’s certainly worth considering.

So take a moment to sit quietly and breathe. It’s not about stopping your thinking; it’s about focusing your attention. As a leader, it’s important you create time to gain some self-awareness and be vulnerable. There’s no wrong way to do mindfulness, and there’s no better time to try it than now.

On July 31, the National Flood Insurance Program was approved for short-term renewal for the sixth time. This program is currently the backbone of U.S. flood insurance, making it a critical piece in both policyholders’ and insurers’ financial stability amid flood catastrophes.

However, this renewal lasts through Nov. 30 only, meaning the bill will resurface in just four short months. These temporary band-aids to a long-term problem simply kick the issue to the curb for a while rather than implementing real fixes to an increasingly dangerous financial quagmire caused by flood losses.

The bill did not include any reforms or measures to relieve the more than $25 billion of debt falling on taxpayers but, rather, seems to suggest that number will only rise as the hurricane and flood season pans out. While the renewal prevents a lapse in protection right now, the risk for future gaps is great, creating uncertainty in the housing and insurance markets.

It’s possible a long-term plan for NFIP could promote greater involvement of the private market in flood risk coverage. However, a dismantling of NFIP in favor of a private-market solution is not in the cards.

“Despite increasing support for greater private participation in the flood insurance marketplace, observers agree that NFIP isn’t likely to disappear any time soon,” Mark Hofmann wrote in an October 2017 Leader’s Edge feature on the impact on the surplus lines market of continual short-term renewals of NFIP.

There are currently 5.2 million policies in place under NFIP; therefore, a lapse would be detrimental to the flood insurance market, policyholders and brokers alike; however, the current plan offers no future promise of stability.

Evan Greenberg, chief executive of Chubb, in an Aug. 12, 2018, interview with The Wall Street Journal, discussed the increasing opportunity for and proper place of commercial-market flood insurance. “Our country requires a more comprehensive solution that includes the expertise and capacity of private insurers. The science around flood insurance has improved,” Greenberg said. “We have modeling and geomapping capabilities today that we didn’t have a decade or two ago. The private sector would charge an actuarially sound rate—that’s to everyone’s advantage because it brings stability to the system.”

Congress is being called upon to find a more solid solution for flood insurance. Strengthening and encouraging private market involvement in flood insurance would be among the list of highly sought-after reforms to NFIP.

In a May 2016 Leader’s Edge article tackling this same issue, Joel Kopperud, vice president of government affairs at The Council, said that private insurers can issue flood policies that will open the door to more business opportunities for surplus lines insurers. Additionally, he said the private market can provide more competition, which should result in more accurate flood risk models and better premiums for consumers.

For now, we look to November for possible and passable improvements to the public flood insurance program that capitalize on the strengths and appetite of the private market.

Tough and ambitious, he battered away at financial institutions, corporations and, memorably, the insurance industry. He spent one year as governor of New York, until his 2008 resignation over an alleged $80,000 worth of prostitution bills.

Add to his accomplishments his role as muse for at least three filmed productions on the theme. There is the Alex Gibney documentary called Client 9: The Rise and Fall of Eliot Spitzer, for which the ex-governor cooperated, admitting he created his own downfall.

Most famous was the hit television series “The Good Wife,” starring Julianna Margulies as the wife of a state’s attorney who is jailed for political and sexual scandals. She returns to work as a junior litigator to support the family and struggles with the idea of divorce. The show’s creators say they were inspired by the stories of John Edwards and Eliot Spitzer and the wives who stood by while they apologized. “The Good Wife” and its actors won 28 major awards and scooped up a slew of nominations during its years on the air (2009-2016).

The most graphic of the Spitzer-inspired production is the 2015 feature film Zipper. Patrick Wilson does praiseworthy work as the hotshot lawyer Sam Ellis who is Southern, slick and happily married.

Unfortunately, he possesses a sexual drive that cannot be dispelled by a wife, a serious jogging habit, or 100 pushups. When he’s tapped to run for attorney general, he tries to clean up his act, but the addiction will not bow to reason.

He’s a sympathetic character—one who might inspire just a shred more sympathy from the insurance industry than his real-life inspiration, whose mere mention may still conjure nightmarish visions.

Napa Valley Balloons, Inc.

Experience wine country from a different view with a scenic hot air balloon ride. Napa Valley Balloons offers a 1 hour trip over the hills in a hot air balloon to get a bird’s eye view of the beautiful landscape, wineries and skyline sunrise. The package deal also includes a complementary buffet breakfast and pre-flight snack as well as an in-flight photo to take home as a memory of the experience.

Napa Riverfront

Not much for balloons? Take another approach to seeing the city with the Riverfront walk. Featuring the famous photo opp. with a large wooden chair, string lights over shops and restaurants and a gorgeous view of the water, the Napa riverfront is the perfect place to spend an evening out.

Oxbow Public Market

If breweries, specialty coffee and roadside food is your niche head on over to the Oxbow Public Market where you’ll find shops and restaurants such as the Fieldwork Brewing Co., Kara’s cupcakes and Olive Press – where you can try delicious blends of spices and olive oils. Right next door to the market is Gotts Roadside – the perfect American food spot. Sitting across the market is a quaint pizza shop, Filippi’s Pizza Grotto and just a short walk away is the Napa Riverfront (see previous).

Yountville Bouchon Bakery

If you’ve got a sweet tooth—and a taste for renowned chef Tomas Keller’s work (think French Laundry)—just a short drive from the city of Napa itself is Keller’s Bouchon Bakery in Yountville. Tucked amid a group of high-class restaurants, this hidden gem serves freshly made croissants, muffins, cookies, macarons and dips into the savory side with sandwiches, rolls and bread loafs. The bakery also will cater to events such as meetings and weddings and will take pre-orders online for ease and convenience.

What’s to love
Bogotá is a diverse metropolitan city that has a wide range of gastronomical, cultural and outdoor activities. It’s in the top 10 cities of the world and is known for its urban art scene. It also has festivals such as Estéreo Picnic, which showcases an important lineup of international and national artists.

Dining scene
You can find a vast variety of cuisines, from French, Italian, Mexican, Peruvian and Asian to traditional Colombian food. A hot trend is the invitation-only clandestine dinners and degustation menus. You follow instructions to gather in a particular place, and when you arrive there’s a table set for maybe 20 people and a chef preparing a multi-course meal.

Favorite new restaurant
At the Four Seasons Hotel Bogotá, Harry Sasson, one of the most famous chefs in Colombia, owns NEMO, which fuses classic Colombian and international cuisines. I love the food, the wine selection and the ambience.

Classic eats
Andrés Carne de Res serves excellent Colombian dishes in a very Latin atmosphere. I love the Arepa de Choclo, a traditional starter of corn cakes topped with fresh cheese.

At Apache, on the rooftop of The Click Clack Hotel in the city center, enjoy the great cocktails and beautiful views. Another good option is Gamberro, a Spanish restaurant where you can order tapas with your drinks.

The Click Clack Hotel is an excellent place for someone who loves design, great food and a convenient place to stay. It’s definitely the best hotel at the moment.

We have an exciting art movement going on right now. Every two months you can find different art and design fairs like ARTBO, Feria del Millón, Expoartesanías and BURO, to name a few. These fairs gather curious people who enjoy national design and art pieces.

If you are visiting on a Sunday, check out Ciclovía Bogotá, when the city blocks off some main roads so people can cycle safely with their friends, family and dogs. You can exercise and also see and enjoy the beauties of the city.

Don’t miss
Bogotá has many hidden treasures, such as the Gold Museum, which holds the largest pre-Hispanic gold exhibits in the world (55,000 pieces), an underground engineering wonder called the Salt Cathedral of Zipaquirá, and Lake Guatavita, which is known for the legend of El Dorado. If you come to Bogotá, these are places you must visit.

Napa Valley is open for business. While the October 2017 wildfires directly affected the people who live and work in wine country, because the fires burned predominantly in the forested hillsides, the Napa Valley floor between Highway 29 and the Silverado Trail was largely unscathed. According to the Napa Valley Vintners, a nonprofit association, 10 of the more than 400 Napa County wineries suffered significant damage. However, like Signorello Estate, which lost its winery buildings but was spared its 40 acres of vineyards, most were not completely wiped out.

Overall, the Napa Valley wine industry was lucky. Because of a heat wave, vineyards harvested their grape crops early last year, picking nearly 90% of the grapes before the fires started. The first 2017 wines, like Sauvignon Blanc, rosé and other aromatic whites, were released in the spring. And since most wineries store their wines off site, there was not a major loss of inventory. Even Signorello Estate did not lose any wines barreled in 2016 or any of its bottled wines.

The hotels of Napa County were also spared—none were burned. In fact, there are several new and refreshed places to tuck into high-thread-count linens. Vintage House in Yountville emerged from a transformative multimillion-dollar renovation last October. Archer Hotel Napa, a new luxury boutique hotel in downtown, recently opened and will soon be surrounded by First Street Napa, a new complex of upscale shops and restaurants. This month, both the Tuscan-inspired Vista Collina Resort (a destination unto itself with nine onsite tasting rooms and a Food & Wine Center) and Francis House in Calistoga (a luxury inn located in a landmark Second Empire-style building) are slated to make their debuts.

Several new restaurants have also opened. Last spring, chef Charlie Palmer opened Charlie Palmer Steak and Sky & Vine Rooftop Bar at the Archer Hotel Napa. Also downtown, Gran Eléctrica Napa, the second outpost of the Brooklyn-based original, is now dishing up its upscale Mexican cuisine on Main Street. Up north, Calistoga Kitchen has reopened as Lovina after closing for remodeling. The charming, chef-owned restaurant features meat, produce and fruit sourced from local farms, ranches and orchards as well as wines from small producers in Calistoga, which you can enjoy on the patio. 

The upshot: if your jam is Napa Valley wine—Cabernet Sauvignon, Merlot, Pinot Noir, Chardonnay, Sauvignon Blanc, Zinfandel, Cabernet Franc—the best way to show your support for the vineyard owners, winemakers and agricultural workers who collectively produce bliss in a bottle (as well as everyone who works in Napa’s blissful hotels and restaurants) is to book a trip to wine country. You can expect rows and rows of neatly pruned vines as you drive along the Silverado Trail, copious amounts of wine to taste and ship home, sublime dining experiences from a Croque Madame on Bistro Jeanty’s terrace to a picnic-to-go from Napa Valley Olive Oil Company, and plenty of exceptional places to stay.

As technology continues to offer innovative resources and new partnerships, it’s important to remember that the client must remain at the heart of our innovation efforts. If there is an overarching idea that runs across the stories in this issue, it’s that technology is consistently changing the way the industry works, enhancing the opportunities it presents to us all.

On another note, this issue of Leader’s Edge represents a turning point for this magazine as it marks the first for our new editor in chief, Sandy Laycox. You’ll get to know Sandy in her Q&A with founding editor Rick Pullen on page 6, but I wanted to welcome you (and her) to this, her inaugural issue.

When it was time to look for a new editor, we underwent an extensive search. We talked with some very seasoned and talented editors who wanted to build upon what we’ve built here. I share this because I believe it’s instructive to all of us.

Sandy put her hat in the ring to be considered for the position. On paper, she may not have had the same years of experience but she was hungry. She asked to be considered so I challenged her to build a business plan for her magazine. I wanted to see her vision for the future, how she thinks about content delivery and the economics of it all. The process allowed us to make sure she understood the depth and breadth of the job. Her plan was comprehensive and made it clear to me that she understood the job and all the challenges that go along with it. The decision ended up an easy one. Sandy is smart, young and passionate, and filled with ideas. This new position will certainly challenge her to put her own imprint on the magazine while continuing to honor its well-respected, well-establish brand in our industry.

And that is what you’re seeing here for the first time.  

We pride ourselves at The Council on hiring people and then moving them around and giving them opportunities to grow. Interns have become VP’s over time. In my case, a young government affairs guy was handed an association and told to build it. A former chairman said at the time, “He’s young, he’s smart, he’s hungry. If he fails, we fire him. Simple as that.” In this case, Sandy was an easy pick and we know she is going to do great things with the magazine. She has the complete confidence of the leadership team here at The Council and we look forward to continuing to produce a dynamic, fearless magazine reflecting the energy and success of our members and the firms they lead.

One of Sandy’s tasks will be to grow the magazine’s digital footprint, exploring new ways and new channels to deliver content to you and your clients. We know there are opportunities to evolve what we’re doing in print, expand the conversation and give the content a longer lifespan online, and Sandy is focused on doing just that.

As for Rick, well, he isn’t going too far. He’ll continue to write and advise the magazine in several capacities. But with his retirement approaching, I’d like to thank him for his 14 years of service to both The Council and Leader’s Edge. He created a fun and impactful insurance magazine over the years, winning awards and accolades far and wide, and he guided this publication through one of the most wildly chaotic periods in publishing history. Our magazine survived the shift toward digital and a downturn in the economy when many others did not. We have Rick to thank for that. He has done an incredible job building a foundation on which Sandy can grow with energy and creativity in this new generation of publishing.

How did you come to start an insurtech company?
I have one of those very cliché stories. I’m a serial entrepreneur. I started my first business when I was 12 years old. When I was going to college for business and finance, I started a business that became very successful, and I quit school. Years later, friends of mine purchased a small insurance agency—they’re a top-100 agency now—and they convinced me to come on board and run an agency for them. This was the first real job that I had.

A couple years later, I started my own agency, and I looked at the agency management systems that were available. What I wanted didn’t exist, and based on my prior experience of struggling with the systems, I decided to build one for my company. We built the first agency management system on top of [customer relationship management platform] Salesforce. At the time, people looked at Salesforce as just a CRM, and nobody really understood that it’s truly a platform that can be molded into anything.

Our agency was very successful. We turned it into a franchise company and opened up multiple locations. Because we were a franchise, we built the company to be a business in a box, and the technology had to be very scalable and intuitive. A few years later, Salesforce approached me about partnering with them and bringing that agency management system to market. That was about 2012. I had to rebuild the solution to more of a vanilla one that would work for all agency types, not just mine. I released the product in the third quarter of 2013 live on the Salesforce app exchange. At that point, I walked away from the agency business. I said to my partner, “You keep the agency. I’m keeping the technology.” I’ve been focused on that ever since.

What was that business you started at 12 years old?
I sold pet supplies to all my friends. I got a wholesaler license and the whole nine yards. I didn’t make a ton of money, but it was an official, real business. My dad’s a serial entrepreneur as well, and that’s where a lot of that comes from.

What lessons did you learn from running your own agency?
One of the biggest ones that people are still struggling with today is that revenue from commissions is slimming. They’re getting smaller for a number of reasons. Because of that, it’s so important to streamline what we do and to make our people more efficient—less time doing redundant tasks to focus on things that drive additional revenue to the company. So many agencies are so focused on doing just the day-to-day redundant tasks because they’ve done it that way over the last 30 years.

Another one from owning my own shop, and prior to that managing one, is that everybody sells very differently. Just because they sell something doesn’t mean it’s the right way to do it. Being able to analyze data on sales and how these people are doing, you can fine-tune the sales process to help them sell better. In my industry now, technology sales, it’s very driven by data—who’s doing what, what are they doing, what are they saying, what is their conversion ratio and what is the retention, the attrition? In insurance, overall, people aren’t really doing that.

Was it daunting to enter the agency management arena?
It’s been very challenging as a newcomer in this world because of all the barriers to entry. But you know—just pure tenacity—we have overcome. Now it’s a really great place to be. Since I’ve owned this company, we’ve seen four other companies try to build an agency management system in Salesforce and fail. It’s not easy. There are so many things when you talk about getting traction with the carriers, getting certified for download and things like that. I joke sometimes and say, “Looking back, it would have been easier to build some small little app than try to take on this monster.” Here we are now, and I feel that we have definitely overcome that, which is awesome.

Why is operating within Salesforce important?
It depends on the agency and the needs of the customer. For some people, we’ve told them just because it’s a new, shiny toy doesn’t mean you should buy it. Some shouldn’t because they’re fine doing what they’re doing now, but for the ones that really want to transform their organization utilizing technology, there is no better platform. It’s not because we’re part of it; it’s because of their whole partner ecosystem and all of the other apps that connect to it. The world is on Salesforce. Ninety percent of the insurance industry is on Salesforce already in some way or another. It doesn’t mean that they’re using it end to end. All of the big brokers, all of the carriers, they already have Salesforce in some way or another. There’s a reason for that.

What is your target market, and how is that changing?
It’s changed tremendously. In the beginning, I bootstrapped this company. Our customer was anybody that would buy. As time has gone on, we’ve really found that our customer is probably less about size and more about priorities. It’s somebody who is struggling in certain areas of the organization and they need help streamlining and making it better. They have true management that’s going to make sure the organization adopts this solution. They are shops that can really utilize technology to make them more efficient or drive additional bottom line through sales. That’s our customer. It’s all shapes and sizes. Primarily, we’re agencies and brokers, independents. We’re also in Canada. MGAs, MGUs and carriers use our system. Carriers typically use us for their internal agency or distribution management.

What are the challenges that independent agencies face that technology can address?
Single view of a customer is overall challenging. I’m talking about all of the other systems that they have to use today to do business with a customer. Recently, we worked with one of our customers that had 37 core systems to do business. We consolidated that down to four, saving them millions of dollars a year in tech costs but bringing in millions of dollars in new business because they were able to focus elsewhere instead of all this constant swivel-chairing. Most large agencies are in that same boat. It’s not only the carriers; it’s all the systems. It’s the personal lines rating, the CRM, the lead management system, the marketing automation system, the agency management system—all of this stuff is detached, or if it is connected, it’s connected with duct tape and twine.

How is technology going to change the way agents and brokers work?
In my opinion, regardless of whether we solve this or someone else does, everybody is going to look to a single platform, and they’ll want to build on top of it utilizing the tools that are on that platform. They need the stand-alone technology, but they are going to want to build their own secret sauce on top of it. That’s what our customers do today. By giving people these tools, you’re enabling innovation internally.

Does technology replace or augment relationships?
I’ve heard all sides of this. I’ve heard people say relationships are dead. That’s not true. Relationships are very, very real, but technology can help better the relationship with your customer. Think of a simple example: a customer can call me today and my phone will bring up through my CRM who that customer is and what’s going on. As soon as that phone rings, I’m on their account looking at what their favorite things are and what they like to do, but what’s really important is what’s going on—do we have some case outstanding, did someone not answer an email—and I’m already in front of it. Things like that strengthen the relationship.

For the people that don’t want that relationship and don’t care, you need to offer them the technology to communicate the way they want to communicate. Without those tools, you’ve lost them. With technology for the modern age, people aren’t going to wait around for three days to get a quote. They want to call up, and they want it now, and it needs to be served up very quickly, efficiently and professionally. Technology really helps to give you that edge.

The leading insurer for live entertainment is moving to a different beat in the insurtech space. ProSight Specialty Insurance, which launched its online platform with insurance for DJs earlier this year, stresses that it is taking a different approach from a typical startup.

“We wanted to get the traditional part of a true insurance company right first,” says ProSight CEO Joe Beneducci. “Now that we’ve done that, we have the ability to expand into this insurtech environment much more effectively than anybody else because we have a profitable business strategy.”

Since its founding in 2009, ProSight has grown to become the number-one insurer for live entertainment such as touring bands and DJs, but that’s just one of its nine niches. Based in Morristown, New Jersey, the company also provides coverage in construction, consumer services, marine and energy, excess workers compensation and four other areas. ProSight posted gross written premiums of $275 million in the first quarter of 2018 and $819.5 million for all of 2017.

As it starts up its ProSight Direct online platform, the company plans to expand beyond DJs with coverage for personal training, health and wellness beginning this fall.

“There’s enormous growth potential, but we’re going about it differently. We don’t have to expand it excessively to start,” Beneducci says. “We want to ensure we get the profit model right and the service and value model right for the client. If we do that correctly, we can certainly increase the throttle.”

Darryl Siry, ProSight’s chief digital officer, says the company, having established itself as a successful insurance business, is not under pressure to show rapid growth to raise cash in successive funding rounds.

“We’re not worried about raising that next round of financing,” Siry says. “And we’re sitting on a double-digit ROE. It’s not like there’s a countdown. That’s a distinct advantage. This is really a long-term thing. It’s not about who wins in the next year. It’s about who’s going to lead in the insurtech space in the next 10 years.”

ProSight launched its online platform with DJs because live entertainment is a business it knows well, as it already insures 50 of the world’s top 100 DJs.

“We knew the customer, and we knew the space,” Siry says. “And we said, ‘Let’s build the whole technology platform around this target.’”

DJs want a platform optimized for mobile to handle tasks such as obtaining and providing certificates of insurance for venues. The DJ market also sets the stage for the expanded rollouts in the fall in specific niches.

“The goal is to stabilize that technology platform, to learn with real customers on the platform, to ensure that we can manage the risk online effectively before we launch in the fall with a much larger target market of personal fitness and health and wellness,” Siry says.

DJs, personal trainers and yoga instructors are part of the larger gig economy of non-employee businesses that accounts for a large and growing share of the workforce. Intuit estimated that gig economy workers made up 34% of the American workforce in 2017. Siry says the broader spectrum of non-employee businesses represents a $7 billion market opportunity tailored for an online platform.

“It’s an underserved segment of the marketplace,” Siry says. “They prefer to buy insurance online, and they prefer to buy from a company that is not only selling them the insurance but backs it up with service and claims experience. It’s exactly what we’re offering these folks.”

Gig Insurance

Start-up Verifly is also taking aim at the gig economy, targeting the more than 60 million Americans expected to be working independently by 2020. The New York-based company has launched on-demand, by-the-job insurance for freelance workers in construction, personal services such as photography, as well as events, entertainment and other areas.

Freelancers often find that clients demand insurance for jobs that may last just a few hours, but insurance is typically sold by the year. The Verifly mobile app enables freelancers to buy “bite-sized” insurance, underwritten by Markel, for single jobs for as little as $5 for one hour and $1 million of business coverage.

“Savvy independent workers view insurance not just in terms of minimizing risk, but as a tool to maximize their income,” says Jay Bregman, co-founder and CEO of Verifly, which launched insurance for commercial drone pilots in 2016. “By radically increasing access to insurance, Verifly is helping to professionalize and institutionalize the future of work.”

Launched in 11 states, Verifly’s app enables freelancers to select coverage from a single hour to a full month and obtain insurance certificates for their clients. Nationwide coverage is expected by 2019.

“The expansion of the gig economy has put the insurance industry on notice — innovate now or risk being disrupted or made irrelevant,” says Scott Whitehead, managing director at Markel Digital.


This—coupled with the advent of new technologies and the proliferation of insurtech startups—is propelling a significant shift across the distribution landscape and the entire insurance industry as we know it.

According to a June 2013 report by McKinsey, the evolution of the distribution channel is “both a challenge and opportunity for carriers and agencies,” which must develop new capabilities and shift mindsets to thrive.

At its core, the insurance industry is about relationships, and the organizations that can strategically leverage technology will further grow and enable those relationships. One such relationship that holds significant promise is between agencies and carriers. A strong agency-carrier relationship is mutually beneficial, as this foundation can weather the storm of a variable market and changing consumer needs and helps drive reciprocal success. With agencies and carriers at the heart of the insurance industry, the benefits of successful collaboration extend beyond their relationship to impact the end consumer.

How should these two groups foster collaboration and work together to respond to customers with efficiency? By streamlining content management and workflow visualization and providing historical and real-time data to drive better decision making.

Driving Growth

People are at the heart of the insurance industry, but delivering exceptional customer service can be difficult when also navigating large volumes of work. For agencies and carriers alike, an effective content management and workflow tool helps solve this problem by delivering real-time insights into day-to-day company functions, identifying opportunities to streamline operations and increase productivity. With these tools, agencies and carriers can evaluate:

  •  How are my teams functioning?
  •  Where is our time being spent?
  • Are we meeting service levels?
  •  Do we need to adjust staffing levels?

Workflow visualization also helps answer these questions, with benefits ranging from improving visibility to standardizing processes. Establishing roles and workflow through a visualization tool simplifies employee training, streamlines processes and can help an agency with a number of branches feel united as one organization. One of our longtime customers has many smaller branch locations and was struggling to provide real-time backup when an employee was sick or on vacation. Through workflow visualization tools, the main office was able to jump in and help, aiding smaller branches in eliminating backlogs and demonstrating that the full team, no matter the location, was in it together.

In addition to real-time data, visualization tools can also provide insights into historical data. This enables agencies to have a better understanding of seasonal workloads, improve efficiency, and better allocate resources to and strategically plan alongside carriers for the future.

Above all, content management and workflow tools drive measurable results. Agencies often report productivity increases from issuers due to the accessibility and mobility offered with digital documents. Without a delay in finding documents, agencies can also respond to clients more quickly, offering strengthened customer service and enabling long-lasting relationships.

Leverage a Data and Intelligence Solution to Glean Insights and Remain Competitive

Access to timely, accurate data is a necessity in today’s world. A sophisticated data and intelligence solution provides more than just the numbers, though; it enables both agencies and carriers to make smart, informed decisions by providing insights about customers, the market and the entire insurance distribution channel.

For agencies, these tools can also be used to support carrier relationships through engagement, planning and negotiations. For example, data helps producers and account management team members identify markets and assess and price risk at an accurate level to ensure clients are protected. When working with carriers, agencies have the ability to easily gather and share data in a useful manner, often providing carriers with new insights into their own book of business.

With data, carriers and agencies can also gather market intelligence to elevate their relationships and drive profitability. While they may have their finger on the pulse of one or two markets and their appetite for a certain type of risk, data-driven platforms can provide a high-level understanding of risk in new markets and propel expansion. This enables agencies to plan and grow alongside carriers in targeted areas.

With the insurance distribution model in a state of flux, agencies and carriers can set themselves up for success by leveraging the power of data. Data-driven tools not only enhance this crucial relationship but enable both agencies and carriers to strengthen the most important relationship of all: their customers.

In the era of the empowered customer, it is more imperative than ever that carriers and agencies find ways to better collaborate and deliver the omni-channel experience that customers are looking for in insurance. The combination of content and workflow solutions that streamline processes and data intelligence can help drive both efficiency and an overall improved experience for customers.

Ray is senior vice president for product and strategy at Vertafore.

What was the point of the study?
Berkowitz: We wanted to find out if home delivery of meals would reduce the use of a handful of healthcare services and medical spending. We looked at three different groups: one received medically tailored meals customized to participants’ healthcare needs (diabetes, renal conditions, etc.); the second received healthy, non-tailored food; and the third received no food. Five days of lunches and dinners were delivered each week.

Who took part in the study?
Berkowitz: Nutritionally vulnerable patients of the Massachusetts Commonwealth Care Alliance, a nonprofit community-based health plan. The organization works with adults who are dually eligible for Medicare and Medicaid.

What were the results of the study?
Berkowitz: People taking part in the medically tailored meals program had fewer emergency room visits and inpatient hospital admissions and used less emergency transportation than those in the control group. People in the non-tailored program also had fewer ER visits and less emergency transportation. They didn’t, however, have fewer inpatient admissions.

When you subtract the program costs from the estimated healthcare savings, participants in the tailored meal program saved $220 per month. The non-tailored program reaped savings of $10 per participant per month.

You chose food delivery. Why that particular solution?
Berkowitz: The association between good nutrition and good health is clear. When people are really sick, they may not be able to go out and shop or prepare food for themselves, so food delivery can help solve that problem.

Tishler: In Massachusetts, between one in six and one in eight people are food insecure. That doesn’t necessarily mean they don’t have food, but they aren’t exactly sure where their next meal is coming from. And that will include people in the commercial market, there is no question on that. Particularly for large employers, their low-income workers may have real challenges. Look at people with children. I would be willing to bet a number of their workers’ children are getting subsidized meals at school or in the summer. Given that, it’s really easy to think about this area.

What do commercial payers need to know about “social determinants” of health?
Berkowitz: Adverse social determinants of health, that is, social circumstances that increase the chance of getting sick or that make it more difficult to manage illness, are very common in the United States even among individuals with commercial insurance.

Tishler: About 80% of things we think about that affect people’s health and illness we can’t fix with a visit to the doctor or an antibiotic. It’s much more related to the neighborhood they are living in, what kind of food they are eating, how much education they have had, what language they speak and if they are socially isolated.

There is also data in other studies showing that hospital readmissions markedly decreased when people got meals delivered to them after a hospitalization. People who are much more likely for readmission and increased cost are exactly the people who aren’t going to have a community that is able to bring them food.

It is so compelling to see what seems like a pretty simple solution and see if it can move the metric on things that are causing us to spend so much money on healthcare.

Most of the work in this space has been done with Medicare/Medicaid. Why do you think that’s the case?
Berkowitz: Medicare and Medicaid are set up specifically to care for more vulnerable members of our society, so the populations they care for often have a high prevalence of adverse social determinants.

Social determinants don’t just affect low-income individuals, correct?
Berkowitz: Social determinants are important for everyone—even individuals historically considered to be middle class are finding it harder to afford housing or nutritious food. People often expect the prevalence of food insecurity or housing instability to be lower in middle class samples than it is. It’s hard to know how common it is unless you ask.

What can commercial payers learn from what Medicare/Medicaid are doing in this space?
Berkowitz: I think it’s really important to realize that a lot of what goes into staying healthy, or into managing chronic illness, occurs outside the healthcare system. Working with other sectors, like social services, makes it much easier to help people stay healthy.

What did you learn from this study’s outcomes?
Berkowitz: I was really encouraged to see the association with lower emergency department visits and hospitalizations. These are outcomes that I think patients really care about—not having to go into the hospital.

Tishler: It surprised me that there was such a significant difference between the medically tailored meals and the non-medically tailored ones. I think that surprised all of us. We would like to say that food is food, but this article suggests that there may really be advantages to certain kinds of food. They both made a difference, but the medically tailored meals actually saved more money in monthly medical costs.

I think their average cost was $843 versus about $1,400 for their comparison group. We would all like to see more research that confirms this or begins to answer that not only that happened but why it happened.

Many of our members live on a fairly low income and in relative food deserts [areas with little or no access to healthy foods because of lack of farmers markets and grocery stores]. One of our medically tailored meals was broccoli and red peppers and salmon. And it would be harder for them to put that kind of meal together on a good day and even more if they’ve been ill or in the hospital.

What kind of barriers do you see for employers/brokers to do work in this space?
Berkowitz: I think finding the right partner agency is really important. People need to be dedicated to making nutritious and tasty culturally appropriate food.

Tishler: Barriers are really about seeing food (and other social determinants) as an important thing to improve health and reduce costs. Delivery of food might seem out of scope for a healthcare organization or health plan, but according to our data and others’, it might be a cost-effective way of preventing more expensive care—at least in certain settings.

How could they overcome challenges?
Tishler: I think there are different ways to do this. There are home-delivered meals that make sense for a population like ours. But in another setting, like after someone is hospitalized for myocardial infarction, you could send people heart-healthy meals so they know what to eat or teach them how to make healthy food. For the commercial market where people have a lot of resources, there would be a lot of ways to think about this.

It will require health plans and companies to think more broadly about what health is and what’s worth paying for. It would be a great benefit but would also benefit people’s health. Especially if the company made its choices wisely.

What other opportunities are available in the social determinant space? Are there areas other than food to target?
Tishler: Stable housing can make a huge difference in someone’s use of the healthcare system, costs and quality of life. And we also see that people live longer with stable housing. I’m not saying that every health insurance company or employer should get into the housing business, but when they think about what they want to work on in employee assistance programs, I guarantee there are homeless people in their workforce.

I was seeing patients at a homeless shelter for women, and it’s amazing. You can’t always tell who is homeless and who the staff are. Some of those women were putting themselves together and going to work. So that’s something to think about for companies.

Improving access to exercise is one thing, and that can be done relatively easily. They can subsidize gym memberships or make sure there are places to walk at work or start a walking program for the company at lunchtime.

They can help people find community resources, which are there in all different kinds of communities. And some people like education about what healthy food is. You don’t have to buy it for them, but you can do some demos at work and people can see a great way to use a zucchini.

Anything that helps decrease chronic stress—whether around social stressors or creating workplaces that are welcoming—all of those really do contribute to health. Helping people understand they are valued helps a lot.

What can employers and brokers expect regarding results when targeting social determinants?
Berkowitz: I think the most important thing is to focus on improving health. It may not be easy, as the consequences of adverse social determinants accumulate over the lifetime, but organizations that just get into this trying to make a quick ROI are unlikely to prioritize the right interventions.

What kind of measurement should be used when seeking population health improvements?
Tishler: While metrics having to do with improving cholesterol or blood pressure are impressive, the cost ramifications of those are much longer-term. Generally, I would look at measures having to do with emergency room visits, hospital costs and readmission. It’s much less expensive to feed people than to pay for three nights in the ICU.

Some payers are beginning to use social assessments along with traditional health risk assessments. Are these a good option?
Berkowitz: Incorporating social risk will likely be important, but there are a lot of unanswered questions—how to collect the data, how often, what questions to ask and what to do with it. Getting too far out ahead of the evidence could wind up leading to disappointing results.

Tishler: There are many different measures that people can use to look at social determinants of health. They can be tailored to specific populations or more general, but I definitely encourage organizations to find out more about their populations. I think there will be some obvious things they find, but they may also be surprised at the level of need.

Where did your love of data get its start?
I started my career as an accountant, so I was always dealing with data. I purchased my first personal computer in the ’80s and used technology as it grew and advanced. We were using Lotus123, not Excel. When we were starting Royal Specialty Underwriting, I was able to buy an IBM AS/400 in the summer of ’88. I hired a programmer because I wanted to take what we were doing in Excel spreadsheets and program that data. So he created a way for us to build a database, and I bought green screens for everybody. We put this system on everybody’s desktop, and all of a sudden, we’re designing software.

Just one programmer doing all this?
One guy—Kelly Walls—the guy who sat next to my office. We would sit there and try to figure out how to do binders and quotes, and then we started thinking about documents and policy issuance and coding and accounting and reinsurance. We designed and built. It helped our firm understand its portfolio.

When did it become important that you could see and use the data you’d collected and then maintain it?
I’ve learned building and maintenance are two different words. Building—whoa! Maintenance—hard. But we have to do maintenance. So we were in the wild period. We had nothing to start with, no legacy systems.

No legacy system is an advantage.
A huge advantage. I’m an accountant brain, but I’m in the insurance game.

How long did this take you?
We worked on it every day from ’88 on. We began attracting capital because our data was so good. They’d say, “I’ll give you reinsurance because I can see my portfolio.” I was a young accountant working with spreadsheets, so for me it was just a tool. But it was analytics, it was data, and it’s one of the things that made our business so good.

How much do you know about actual software?
Not much. I know insurance. It’s just data. To me, it’s linear.

Describe a couple of “aha” moments using your data.
The first time we blew people’s minds was with a limits and attachment point profile. It was so basic, but back then, nobody had it. Nobody had the concepts to be able to do it. Ultimately, you could negotiate better reinsurance terms because you had better transparency in your data. That’s the war that’s going on now. So that was educational. That was foundational.

You never shared this outside the company?
No. We didn’t sell the software to anyone. When dot-coms were coming out in ’97, ’98, people were telling me, “Steve, you need to go do this.” And I told them, “I’m an insurance guy. I know what I’m good at.”

Back in the ’80s and ’90s of course, we were using old languages. So we became a dot-net shop and basically committed to Microsoft. That was an early lesson. We made lots of mistakes. There was no cloud, so you had to buy servers and put them everywhere. You had to have server farms. At AmWINS, when we started partnering with firms, they came with technology that needed to be updated. First you had to control their hardware, then you had to convince them to migrate away from their legacy systems. In the early years that was hard, because we were just getting started and building. Ultimately, we didn’t give them a choice.

We said, “You’ve got to throw away your legacy system.”

Today, if you sell an account in Seattle, it dings in my office [in Charlotte], and people are amazed at that. But if you walk into a 7-Eleven and you buy a bag of potato chips, it tells somebody that you bought that bag of potato chips. And guess what? That night they’re going to deliver another bag of potato chips to that store. It’s called a cash register, and it’s not that big of a deal. But in insurance, the reaction is, “Oh my God, you can see what you are binding?” People think it’s a wow, and it’s not a wow.

So what does that say about our industry?
Lots. But the industry continues to have a lot of legacy systems. I’m now trying to figure out how we’re going to use Microsoft’s Cortana audible digital assistance. This is the way we’re going to work. We’re not going to type on a computer, anymore. Right now, I ask questions. “How much is this?” “How much is that?” “Where do I get this?” And our data team gets me what I want. In the future, I’ll ask for information using these new technologies, and our databases should be able to provide it to me verbally.

I built a “valet” phone app because when our brokers go to lunch with a client and they hand the keys to the valet, they say, “I wish I knew how much volume I did with this client.” That’s the only time they thinks about it—instead of running a report, like we used to.

Now, it’s on their phone. They type the client’s name in and up comes their file. They doesn’t have to run a report. In the future, brokers are going to say to their phone, “I’m having lunch with Joe Smith. Give me Joe Smith’s financial biography.” It’s all going to come out of databases. Nobody is going to print off a report anymore.

So you are in the process of tying your database to the digital assistant right now?
Exactly. Just asking it questions. Just like you ask it what the weather is. “Give me AIG’s premium.” That kind of thing.

The thing about data is that it’s just data. I’m a little frustrated that I won’t see that come to fruition as part of my career, but the young people are working on that. AmWINS’ biggest advantage now is the amount of effort we’ve already put into this easy stuff, which leads to the next level of implementation.

Which is more sales.
More sales, exactly. We’re in the small-business arena now. We’ve invested an amazing amount of money in technology and small business. Everybody talks about small business. It’s easy to talk about it. It’s easy to do it the way you have always done it. You’re just not going to do it in big volumes, and then you’re not going to have the analytics.

How do you make small business profitable?
With better process, data and analytics. Today, we partner with an insurance company that built a small team to implement a small-business strategy. They actually trusted our data. So now, instead of them typing it in and me typing it in, they just analyze me. They trust me. That’s a step forward that most people—that the industry—has got to get to.

Who owns the data?
The insured owns the data. Clearly the wholesale brokers, the retail broker and insurance company all use this data to make decisions. What we don’t do is give carrier data to a competitor. So if I work with insurance Company A on a data structure, I can’t give that to insurance Company B. We receive one million submissions a year. That data is valuable.

What’s the value proposition?
Knowledge. The advantage is analytics—the ability to see how to correlate different subjects. I do business with 20,000 retailers and 500 insurance carriers, so I have a view on a lot of business.

What do you share, and what don’t you share?
I don’t share competitive data. I may say I have knowledge that the Florida marketplace pricing is X because I have a broad perspective, and people are interested in that knowledge. They may say, “Well, show me that knowledge.” I will, as long as I hide the source. You have to be careful with data.

Basically, you’re tech savvy. Your ability to collect data gives you business opportunities other people don’t have.
They have them. They don’t see them. Here’s a great example: an insurer gave us the ability to underwrite on their behalf. They started losing business. They couldn’t figure out why. So they asked, “What are you doing? You’re not giving us business.” We told them their price was no longer competitive. Then, we explained that three new carriers had entered the market and they were pricing their products differently. We told them, “You’ve been around 50 years, and you can’t rest on what you think you know.” So they changed their pricing, and now they compete in the marketplace.

Where are your competitors compared to you?
Well, I try not to know what the other competitors are doing, because I have enough to worry about on my own.

But you still hear. C’mon, you’re out there. You know, a lot of them still use packages, and packages are limited by when the guy can get to it. A lot of them don’t see value in data.

Still. I was at an industry event recently, and they brought in Billy Beane, the Oakland A’s GM who went into analytics about baseball. Michael Lewis wrote a book, Moneyball, and they even made a movie about him. The establishment called him a fool. I sat there thinking, “That’s what they said about me: ‘He’s just an accountant.’” But Billy Beane analyzed the statistics of baseball to look for the hidden gems. I thought to myself, “That’s what we did.”

Everybody in baseball is now following Beane’s example. How about you?
They’re trying to, but they have legacy issues and money issues. It’s expensive. You know, we’ve been doing this a long time. Now, everyone is trying to play catch-up. Catch-up is hard.

Everybody is afraid to share data.
Today, people are in a war to get data. If every insurance company had the exact same data, then it’s the company’s beliefs that change the price, not the data. I think we should share data. I think we should build one database that all insurance companies can share. We’d all have the same information. We’d all pay for it. If we did that, then how we price insurance using the same data would be based on our beliefs, our capital structure and how we buy reinsurance protection.

Do you think that’ll happen someday?
I’ve talked about it enough. AIG believes that they can do small business better than everybody else. Chubb believes they can do small business better than everybody else. I believe both of them. But their confidence is based on their beliefs around risk selection, their capital structure, and their claims-handling ability—actually paying losses.

How difficult is cyber security for a company like yours?
I’ve seen millions of dollars being wired incorrectly because of fraud, so the need for robust cyber-security systems is real. The perception is that all brokers are equal. We’re not. I’m not your mother’s wholesale broker.

You don’t see any drawbacks to sharing data? I mean, as long as you restrict its identity?
Yeah, you have to be careful with that. But, you know, I’m trusted with the insured’s data. They give me their financial information. I have their loss information. I’ve got to be good at what I do. I’ve got to protect it.

Four use cases demonstrating the value of exchanging data in a blockchain platform are under way at RiskBlock Alliance, with one (proof of insurance) already completed as a digital application for use by alliance members. This fall, the other three use cases will similarly result in a digital application.

This is just the beginning. Future use cases in sight by the alliance, based on member brainstorming sessions this year, are listed below in no priority order.

  •  Certificates of Insurance
  •  Commercial Trucking Fleet Identification
  •  Surety Bonds
  •  Multiple Payees
  •  Salvage
  •  Real-Time Regulatory Monitoring
  •  Tokenization of Titles, Deeds and Liens
  •  Digital Inspections of Physical Assets
  •  Internet of Things
  •  Agent and Broker Licensing
  •  Policy Cancellation and Non-payment
  •  Fraud Register
  • Commercial Liability
  •  Foreign Sovereign Identification Linked to Insurance
  • Technical Accounting
  •  Use of Existing Data for Smart Contracts
  •  Plugging in Data from Third Parties, e.g. Government Agencies
  •  Marine
  •  Life Insurance Valuation


Digital applications for three traditional insurance processes will become available to member carriers of RiskBlock Alliance in the third quarter of 2018—first notice of loss, subrogation and parametric insurance.

As with the first production application on proof of insurance that became available in April, several insurers and brokerages are collaborating in their development. Farmers Insurance, Liberty Mutual and Marsh are among the members of the alliance engaged in developing the first notice of loss application.

Agents and/or carriers typically receive a text, email or phone call from a policyholder indicating who has been in a car accident. The other policyholder does the same thing. This triggers the first notice of loss—the initial report that some sort of loss, theft or damage has occurred, the first step in the claims process.

What occurs next, says Mike Annison, head of global operations for the claims practice at Marsh, is a case study in inefficiency. “Each carrier contacts the other carrier to exchange information related to the accident, resulting in a back-and-forth process that consumes inordinate time and effort,” Annison says.

Since data on each policyholder is already in the blockchain, the two carriers don’t need to formally exchange their data. “Multiple parties eliminate handoffs,” Annison says.

In a commercial lines insurance context, today’s processes for reporting a first notice of loss slow down the flow of information. “An example is a broker that is not notified at the time of a claim because the insured has excess layers of exposure protection across different insurers,” says Matt Lehman, a managing director in the insurance practice of Accenture, a RiskBlock partner. “By sharing information in the blockchain, all parties to an insurance policy are notified simultaneously of the loss.”

With this first step in the claims process now completed, the next one—subrogation, the financial squaring of the net payment of a claim between two insurers—can occur. Marsh is involved in a RiskBlock use case addressing subrogation with Farmers Insurance, Liberty Mutual and other partners.

“With subrogation, carriers are focused on the net settlement of the claims payment, as it may involve some money coming from one insurer and some money coming from the other,” explains Bennett Neale, an enterprise architecture consultant at Farmers Insurance, a RiskBlock Alliance member. “Today, all these details are negotiated between the carriers over the phone and through emails, and a manual check is cut or a wire transfer made to make up the difference. This eats up a lot of time.”

Since the data on the claim are now in the blockchain via the first notice of loss application, much of the information needed to negotiate the ultimate settlement is already there, reducing the interactive interactions between the carriers. “In cases where both parties quickly agree to the settlement, a payment can be made in real-time funds from one carrier to the other on the platform, or an IOU form of payment could be executed,” Neale says. “More protracted cases would proceed on to arbitration, as they do today.”

The third application in development is parametric insurance, in which payment of a claim is tied to a particular weather-related metric. An example is an outdoor concert that has to be canceled because of rain. An insurance policy can be structured to cover the lost ticket income if rainfall exceeds a particular threshold, such as 10 inches of rain.

Another example is crop insurance that hinges on other parametric triggers like rainfall, temperatures or sunshine. Information provided by third-party organizations like the National Weather Service can be made available to alliance members on the Canopy platform. Additionally, data from internet-enabled sensors measuring rainfall, temperature, humidity and other meteorological conditions also can flow to the platform.

“The value of parametric within the blockchain is that it allows a variety of parametric sources to be aggregated into one source of truth for claims purposes,” says Christopher McDaniel, president of RiskBlock Alliance. “Say you have multiple sources providing flood-level information for a given area. By aggregating and creating one source of truth on the blockchain, there is now a single trusted source that multiple claims processes can rely upon.”

In the formative stages of RiskBlock Alliance, The Institutes discussed the importance of aligning a handful of insurer and brokerage members behind the development of a specific digital application for use on the Canopy platform. Proof of insurance perfectly fit the bill, given its relative simplicity.

At present, when two people are in an accident, the social compact is to exchange each other’s insurance information. Each driver typically photographs the other person’s proof of insurance and then presents this information to his insurance agent or carrier in preparation for the next stage in the insurance claims process—first notice of loss.

“We felt it would be a great test for us to undertake, as it isn’t difficult from a technical perspective,” says Seth Flory, vice president of IT strategy and technology innovation at Nationwide Insurance, which co-led the proof of concept initiative with Farmers Insurance. “There was much efficiency to be gained by having a digital alternative on the blockchain. Both insurance companies are alerted of the incident, triggering the first notice of loss.”

Instead of having each party to the car accident email a photo of the other party’s proof of insurance to their insurers, they generate a QR code on Canopy that provides proof of their insurance, which the other party scans. “This is real phone-to-phone connectivity and data exchange,” Flory says. “And it takes anxiety out of the process.”

Asked what he meant, Flory says one never knows if the other person’s paper-based proof of insurance is the real thing. “There’s a lot of emotion produced in the aftermath of an accident,” he adds. “Perhaps someone is hurt. Maybe the person is at fault. The car is damaged, and it might be the first time this has happened.”

Aside from the value to policyholders, carriers benefit by improving back-office efficiencies, says Vishal Garg, senior enterprise data architect at Farmers Insurance. “By putting this on the Canopy platform, the typical back-and-forth emails and phone calls that occur between carriers to verify the policyholders’ proof of insurance is eliminated,” Garg explains. “It’s typically a five- to 10-minute phone call just to get basic data. Now that information is right there in the blockchain.”

Down the line, Flory can see other value accruing to the proof of insurance application. “What happens when law enforcement pulls over a car today for some infraction—the police officer asks for evidence of insurance, which is typically stored in the dashboard,” he says. “The driver now reaches into the glove compartment, creating a moment of anxiety for both parties, particularly if the incident occurs on a dark night. By syncing up the law enforcement community on the Canopy, they can immediately have proof of insurance when they run the person’s license plate.”

In November 2016, we introduced blockchain in Leader’s Edge, unsure of where it was headed or when it would take off. Since then, we’ve added to our blockchain dialogue in various columns and briefs. Now, we’re taking a deeper dive to see how groups of industry stakeholders are applying it to standard insurance processes. Please visit and search “blockchain” to read more of our work on this topic.—Editor

Anyone who has ever been in an automobile accident is familiar with the back-and-forth interactions with the insurance agent and carrier. It’s a worrisome, frustrating and time-consuming process. Policyholders aren’t the only people aware of these miseries—so are brokers, carriers, reinsurers and other parties to an insurance contract.

In a world where transactions occur instantaneously, the business of insurance—sales, underwriting, distribution, claims and so on—remains unduly sluggish. That’s about to change for industry players and their customers, thanks to the convergence of three technologies: blockchain, artificial intelligence and predictive data analytics.

Four consortia have been created to leverage blockchain technology for the purpose of sharing policyholder data and other insurance-specific information. When people think of blockchain technology, they typically consider its use in the development of crypto-currencies such as bitcoin. While true, this is only a small piece of the value the underlying blockchain and distributed-ledger technologies will provide for the insurance industry.

Blockchain is a live network of distributed ledgers used to record and verify transactions. A ledger is distributed to participants or members in a transaction network, each having the ability to store a copy of the ledger on a computer called a node. The members don’t need to trust each other to know that the ledger is accurate. That is because transactions are validated prior to inclusion on the blockchain, are unable to be changed after they are posted, and are highly secure because the distributed, immutable nature of the network makes it very difficult to attack.

Among the most promising blockchain consortia in the insurance industry is RiskBlock Alliance, a not-for-profit consortium of 27 insurers, brokerages, reinsurers and third-party industry participants collaborating to make the repetitive, manual process of insurance more efficient. Its goal is to develop a blockchain-enabled platform in the cloud to gather, store and automatically exchange a wide variety of information from insurance brokerages, carriers and third parties to create an insurance ecosystem, allowing for more cost-effective insurance processes to the ultimate benefit of policyholders.

The alliance is the brainchild of The Institutes, the insurance industry’s venerable professional education organization. It is owned by alliance members and administered by The Institutes, with assistance from a roster of well known partners like Accenture and Deloitte.

“This is an industry-driven effort—our members decide what is being built,” says Peter Miller, president and CEO of The Institutes. “For several years running, we’ve seen AI, blockchain and other technologies come on-stream, all of them proclaimed as the industry’s savior. Separately, they provided some value, but now we are at an inflection point where their convergence puts us at a watershed moment. What we’re doing has the potential to transform the industry.”

Serious Business

The Institutes is seizing the moment, retaining a veritable “Who’s Who” of consulting and technology partners—Deloitte, Accenture, IBM, EY, Amazon Web Services and Capgemini—to create the RiskBlock technology platform called Canopy. With help from these partners, the 27 (and counting) members of the alliance are collaborating on more than two dozen use cases involving different aspects of the insurance transaction.

“If you think about the various processes that occur in insurance, they are all part of a supply chain,” says Bennett Neale, an enterprise architecture consultant at Farmers Insurance, an alliance member. “Each use case, like proof of insurance and first notice of loss, represents a link in this supply chain. Proof of insurance, for instance, leads into the first notice of loss, which leads into subrogation (another use case). The data related to these processes is not shared at present. Each carrier does their own thing, resulting in tremendous inefficiencies and costs.”

Other alliance members agree. “All too often, we in the insurance industry go off and do our own thing,” says Mike Annison, head of global operations for Marsh’s claims practice. “As a result, we’re plagued with multiple processes that don’t align with a common agenda. You’ve got all this data that sits with the broker and all this data that sits with the carriers, but none of it syncs up on behalf of the client.”

Synchronizing the disparate data is the blockchain. As a secure, decentralized way to register and store digital data online, the technology presents a way for industry participants, as well as third parties like state motor vehicle departments, weather stations, auto repair shops, utilities and the ever-expanding array of internet-connected sensors in the internet of things, to automatically process insurance payments and transactions through prearranged “smart contracts.”

Miller provided the following example. “Suppose I have a water sensor in my basement,” he says. “On the blockchain is a rule that says if the internet-enabled sensor measuring moisture reaches a certain threshold, all the water will be shut off in my house. Otherwise, a pipe may burst. The sensor instantly sends this information to Canopy. A smart contract is automatically executed to signal the utility to turn off the water, since I may not be home to do it myself. Another smart contract automatically contacts a plumber to check the situation.”

This is an industry-driven effort—our members decide what is being built.

Peter Miller, president and CEO, The Institutes

What might have resulted in a substantial property loss for the policyholder and its insurer has now been avoided. “In my example, no longer is insurance purely a risk-financing activity for brokers and insurers,” Miller says. “It’s risk mitigation at its best.”

Under the Canopy

Three other industry-driven blockchain initiatives also are simultaneously under way—B3i, R3/ACORD, and Hashed Health, the latter involving health insurance. Each are engaged in proofs of concept. Taken as a whole, these efforts indicate that the outmoded processes inherent in insurance transactions will change dramatically in the years ahead.

This is certainly the expectation of Christopher McDaniel, the former lead of Deloitte’s insurance blockchain practice whom Miller recruited as RiskBlock’s president. “I’m the one driving this crazy bus,” McDaniel says. “Originally, I got involved with The Institutes in doing the strategy engagement on the platform. The value proposition was so good I threw my hat in the ring. It’s much better to be a driver than a consultant.”

McDaniel brings a varied career to the task, including stints as a chief information officer and chief operating officer in both the insurance and insurance technology industries. He believes what The Institutes is piloting will result in an insurance ecosystem—a holistic community of interacting parties—as opposed to today’s disconnected processes and dissimilar data.

“From the beginning, The Institutes wanted to build the world’s first true enterprise blockchain framework,” McDaniel says. “The goal was to create a reusable insurance ecosystem that could support multiple applications, such as proof of insurance, first notice of loss, subrogation, and so on,” he says. “We think the Canopy framework will become the ubiquitous source of insurance information over the next few years. And we can see even more creative use cases emerging in the future that are not possible in today’s disparate data environment.”

The first use case to commence, conclude and go into production is proof of insurance. (See Sidebar: Proof of Value.) Alliance members collaborating in building out a digital application to verify evidence of policyholder insurance include Nationwide, Chubb, Marsh and Farmers Insurance. Although the app is now available for use by members, these businesses continue to meet and discuss other possibilities to enhance the process.

Nationwide was one of the first insurers to join the alliance. “Early on, it was decided that proof of insurance would be the initial use case, as it involves the relatively straightforward exchange of insurer data by two policyholders in an automobile accident,” says Seth Flory, Nationwide’s vice president of IT strategy and technology innovation.

This process is paper-based today. The objective was to create a digital application on Canopy that member insurers would provide to their respective policyholders.

“Using their respective Canopy applications on their smart phones, each party to a vehicle accident would generate a QR code that the other party would scan for insurance verification purposes,” Flory explains. “This information is simultaneously captured in the blockchain, triggering the next link in the insurance value chain—first notice of loss. We wanted to make this as digital and frictionless as we could.”

Alliance members and their automobile insurance policyholders can now use the proof of insurance application, which recently became available in Version 1.0 of Canopy. Carriers are expected to rebrand the application with the names of their respective claims systems.

Three additional digital applications will be provided to members once Version 2.0 of Canopy becomes available in the third quarter of this year. The apps address first notice of loss, parametric insurance (the use of weather-related data in establishing coverage and loss) and subrogation (the financial adjustment of the net payment of a claim between two insurers). (See Sidebar: Three for the Money)

Nearly 20 other use cases are in the works and will be part of Version 3.0. All the use cases (and future ones) are predicated upon enhancing the efficiency of processes for alliance members, thereby lowering their transaction costs for the benefit of policyholders.

Down the line, McDaniel sees Canopy as a trusted platform for insurers and brokerages to develop new insurance coverages and bespoke products. “Right now, 80% of the use-case work is focused on efficiency and 20% on new-product development,” he says. “In the next several years, as more data enters the platform from the industry, third parties and especially the IoT, this percentage ratio will reverse.”

There is also a level of data ownership that still exists in Canopy. “Only the members will be able to use the applications that eventually reside on Canopy, which is a private-permission blockchain,” Miller notes.

You’ve got all this data that sits with the broker and all this data that sits with the carriers, but none of it syncs up on behalf of the client.

Mike Annison, head of global operations for claims, Marsh

And if member Marsh were to want to look at specific data owned by member CNA Insurance for a particular purpose and period of time, the brokerage would request permission, which CNA could allow or disallow. “Each member would receive a notification to accept or deny another member’s request for information,” Miller explains.

Laying Down Arms

What’s interesting (if not revolutionary) about this industry-driven effort is that the alliance members compete against each other in the real world but are putting that aside in this collaboration.

During World War II, Boeing, Grumman, McDonnell and other competing aircraft manufacturers put aside their competition and joined forces to make planes for the war effort. While this initiative doesn’t carry the same historical heft, there is a sense of that sort of collaboration for the mutual benefit of alliance members and that of policyholders. For example, Farmers Insurance and USAA, two personal lines insurers in intense competition, are collaborating to develop a digital application in the first notice of loss use case.

Most alliance members are involved in more than one use case. Marsh, for example, is engaged in four: first notice of loss, proof of insurance, parametric insurance and subrogation. Many members were already working on internal blockchain initiatives when The Institutes knocked on the door.

“We’d been discussing blockchain opportunities and had the technological capabilities to build something on our own,” says Flory, from Nationwide. “We were investigating the various insurance consortia formed to leverage blockchain technology and discovered a lot of alignment in the industry around what The Institutes was looking to do.”

This alignment, he says, is needed for a blockchain platform to succeed. “The nature of the technology requires developing a network of participants that trust each other,” Flory explains. “The Institutes’ reputation made the decision very straightforward. Ultimately, we felt the alliance was the fastest path to market to deliver the value the industry was after.”

Ted Epps, leader of Deloitte Consulting’s insurance blockchain practice, agrees that the strategic value of RiskBlock is its creation of a network connecting diverse insurance industry stakeholders and third parties. “This is a fairly universal consortium of members launching a broad range of use cases that will culminate in actual production applications,” he says.

In good part, the speed of development of applications is attributable to the sophisticated expertise of The Institutes’ partners. Deloitte is the primary strategic partner and Accenture the primary technology partner, with other partners engaged in mainly security and applications development. Nevertheless, all the partnering firms are working together to develop the Canopy platform, the various use cases and the digital applications. “It’s an all-hands-on-deck approach to partnership,” Miller says.

In making the decision to partner with The Institutes, Deloitte and Accenture pointed to its sterling reputation. “If we were going to collaborate with one of the consortia developing an insurance blockchain, it had to be at the center of things,” says Deloitte’s Epps. “Since blockchain technology is all about trust—different entities sharing data in a network—it was critical for us to have major industry players involved. The Institutes’ reputation guaranteed that would happen. That said, I don’t see the other blockchain initiatives as competitors but as complements.”

Only the Beginning

RiskBlock began its work in earnest in 2017, creating the strategy and business model for the Canopy platform. An early goal was to make the platform “blockchain agnostic,” meaning it could run on all three available blockchain technologies—Ethereum, Corda and Hyperledger Fabric, as well as newer distributed-ledger technologies coming down the pike.

Another goal was to create an indeterminate number of digital applications addressing all insurance-related processes. Consequently, the use cases extend beyond personal lines and commercial lines property and casualty insurance to include life insurance, annuities and reinsurance. “Unlike other consortia, we’re not involved in proofs of concept or science experiments,” McDaniel says. “We’re developing real production applications that members can use as soon as they’re up and running.”

Yet another objective was for Canopy to be global, ultimately used by the insurance industries within Asia Pacific, Europe and Canada. A year or two from now, McDaniel predicts as many as 50 applications will be ready for alliance members’ use on the Canopy platform.

“Through our partnerships with Deloitte, Accenture, IBM and Capgemini, we’ve set up a virtual software factory to build as many as 20 apps per year both offshore and onshore,” he says. “As soon as a use case is completed, we’re able to scale very quickly.”

I’m the one driving this crazy bus. The value proposition was so good I threw my hat in the ring. It’s much better to be a driver than a consultant.

Christopher McDaniel, president, RiskBlock Alliance

Not surprisingly, RiskBlock Alliance will be a growing, living ecosystem for some time. Matt Lehman, a managing director in Accenture’s insurance practice, says the firm’s involvement is expected to be long term. “Chris McDaniel is doing an unbelievable job generating interest in the industry in developing a wide-ranging set of use cases,” Lehman says. “The Institutes has a comprehensive vision and an endless amount of insurance processes to improve.”

Ultimately, the platform will be “all things insurtech” for the global insurance industry, McDaniel says, with data flowing into Canopy from countless sources outside the insurance industry, such as the IoT. “The combination of the IoT and blockchain technology, in addition to the use of predictive analytics and AI, will transform the insurance industry, creating new business models and revenue streams,” he projects. “Canopy will be all that is needed in the future for carriers and brokers to do what is best for their customers.”

If McDaniel is right, this future cannot come too soon for insurance-buying businesses and consumers and the industry as a whole. Time will tell.

Russ Banham is a Pulitzer Prize-nominated business journalist and author of 26 books. He writes frequently about insurance and technology.

Millennials are expected to make up 75% of the U.S. workforce by 2025, but so far, it doesn’t appear many of them want jobs in the insurance industry.

Rohit Verma says he hasn’t taken a formal survey when he visits college campuses, but his show-of-hands questions tend to mirror industry research: fewer than 5% of students are interested in a career in insurance. Ask them about a career in claims, he says, and the interest dwindles even more.

Verma, global chief operating officer of the claims management organization Crawford & Company, is among industry leaders determined to get more hands in the air on college campuses—and more young people in the offices of insurance brokerages, agencies and TPAs.

“If I look at the insurance industry today, one of the disruptors that always gets talked about is technology,” he says. “But there is another disruptor that we’re not talking about, which is the lack of talent. Unfortunately, this gap in talent is only increasing.”

Crawford is in the early stages of developing new apprenticeship and internship programs and exploring ways to introduce insurance-related courses in community colleges in Georgia and elsewhere. Verma says the industry needs to bolster education programs, in part to ensure there’s a sufficient workforce when a crisis hits.

Last year’s busy hurricane season illustrated just how dire the labor shortage is in the industry. If Hurricanes Maria or Irma had taken paths over more land, Verma says, many companies would have been at a loss to find enough adjusters to handle all the claims. Crawford, with more than 700 offices in more than 70 countries, was able to redirect adjusters from the United Kingdom, Canada and elsewhere and had adjusters on standby in India. But the outlook was grim across the industry.

“It would have been a much harder event if there had been just a slight change in either of those hurricanes,” he says.

Crawford is working with the Technical College System of Georgia to create a registered apprenticeship program. A partnership is under development with Gwinnett Technical College to leverage existing business management and marketing management curriculum to add specific content on insurance fundamentals, property/liability insurance principles, personal insurance and commercial insurance, Verma says.

Specializations in property, casualty, liability and disability may be added later. Apprentices will be hired as benefits-eligible employees and split time between job training and the classroom.

“We’re also targeting different disciplines where you work a lot with hands, such as construction, auto mechanics and engineering, and seeing how we can take those disciplines and orient those individuals to have an apprenticeship with us,” Verma says. “One challenge we have had in the past is recruiting from risk management programs. Usually these programs are small, and competition for recruiting from brokers and carriers is very strong. While the earning potential in adjusting is quite comparable to the other areas, initial years in adjusting may require significant outdoor work in some cases. So we purposely are targeting associate degree programs that relate to construction and auto maintenance training. We believe individuals from these programs would be more receptive to adjusting work.”

Crawford is also looking at partnering with carriers and brokerages in existing apprenticeship programs at universities and community colleges across the country, as well as helping to develop insurance-related courses in those schools.

Growth in insurance-related curriculum could be critical in responding to the talent shortage. Degrees or certificates in insurance and risk management are currently offered at 74 universities, colleges and community colleges in 34 states, according to the Association of Insurance Compliance Professionals.

In the meantime, Crawford’s global TPA, Broadspire, is sponsoring 58 internships in 17 offices around the United States. The 12-week paid internship program can lead to full-time positions. Three returning interns are graduating this year and will be offered full-time positions.

“Our goal is to start partnering with colleges that are local to offices where the internship opportunities will be held,” Verma says. “We’re also participating in national virtual career fairs, which allows us to reach students at 30-plus colleges throughout the U.S. We’re also participating in veteran career fairs.”

Others in the industry, including InterWest Insurance Services, are actively promoting careers to college students. The brokerage recruits at campus career fairs and sends speakers to financial and business classes at several regional colleges in California.

Jennifer Weathersbee, vice president and director of claims at InterWest, says the brokerage had four interns last year, including two who received scholarships from the Council of Insurance Agents and Brokers Foundation. Three of them later accepted jobs with the company. “This year, we’re doubling the internship program, and next year, we’re quadrupling it,” she says.

The CIAB Foundation awarded 75 scholarships for college students around the nation to work as interns at member agencies during the 2017-18 school year. More than $1.45 million in scholarships have been awarded since the program began in 2006.

InterWest has started having its interns talk to students during campus presentations. “We need to share the excitement and show these new folks why this is a good industry,” Weathersbee says.

Interns and recent recruits to the insurance profession could be the best way to spread the word about the vibrancy of the industry, according to a survey of millennials last year by the technology firm Vertafore. The survey found that 82% of young people who work for insurance companies would recommend jobs in the industry to friends and family members. Respondents cited career opportunities, compensation and work/life balance as the chief appeals.

Sedgwick Claims Management Services tells prospective employees the claims profession has evolved significantly in recent years, according to Jason Landrum, global chief information officer. “Once thought of as a process-oriented, administrative position, a claims career today offers meaningful work and a chance to care for others during a critical time of need,” Landrum says. “At Sedgwick, we believe that helping people is at the heart of everything we do. By focusing on advocacy and care, Sedgwick has become a more attractive option for those looking for a meaningful career path.”

To encourage young people to join the industry, Verma says, Crawford has established a goal of promoting from within its organization to demonstrate that insurance careers are dynamic with potential for growth.

“We are a very traditional industry, a highly regulated industry, so the perception is that we’re going to be slow, we’re going to be boring, that we probably don’t provide as attractive a career path as banking or consulting,” he says. “By creating a dynamic workforce, where we are pushing for growth—not just growth of the business but growth of the individual—we create an attraction in the marketplace to come and work with us.”


Despite welcome growth in the insurance business and the economy, the industry “continues to face an unprecedented talent recruitment environment,” according to the annual Insurance Labor Market Survey by the Jacobson Group and the Ward Group.

“Today’s increasingly challenging labor reality,” researchers found, “is being impacted by increased staffing demands, a growing mid-level talent gap, impending retirements, virtually non-existent industry unemployment and a shallowing talent pool.”

As many as one third of insurance professionals will retire this year, according to a McKinsey and Company study, and more departures lie ahead as baby boomers leave the workforce. “In the next three to five years, I think this is going to be a significant challenge for the industry. I think it is going to be a huge disruptor,” says Rohit Verma, global chief operating officer at Crawford & Company, the Atlanta-based claims management organization.

Jennifer Weathersbee, vice president and director of claims at California-based InterWest Insurance Services, says the effects are already evident among carriers that her brokerage works with nationwide. “From our relationships with our various insurance partners, I know that the aging workforce, that knowledge gap, is a challenge for the industry,” she says.

Yet innovative companies are finding promising solutions through technology that can lengthen the life of the current claims workforce.

An array of high-tech tools are being leveraged with elements of America’s gig economy to fill gaps in the labor pool. These innovations are also helping to improve efficiency and customer satisfaction—and boosting the insurance industry’s appeal to younger workers eager to dive into new technology.

“It’s an exciting time to be part of the claims industry,” says Jason Landrum, global chief information officer for Sedgwick Claims Management Services. “We expect to see more technology advancements and a greater evolution of the business itself.”

Like others in the industry, Landrum says technology is becoming a greater part of the workday for claims professionals. “Web-based communities, mobile applications, internet robots, drones, satellite imagery and AI are quickly becoming everyday tools of the claims professional,” he says. “Social media, data integration and AI are also being increasingly used to assist with activities such as triage of loss assignments, strategic decision making, and improved allocation of resources.”

Using Gig Workers

A year ago, Crawford & Company purchased WeGoLook, then known as the “Uber of inspections,” to help bridge the talent gap. The company, founded in 2009, primarily used its online platform to dispatch “Lookers” to check out used automobiles for prospective buyers, but Crawford saw greater potential.

“We have been keenly aware of the fact that the world around us is changing, and we have to be sure to continually relook at our model to see how it needs to evolve,” Verma says. “That’s how we came across WeGoLook, which we believed was doing some transformational work.”

With the acquisition, Crawford can now deploy 40,000 independent contractors in the United States, the United Kingdom and Canada to respond quickly to claims and other client needs. The operation is expanding to Australia soon.

WeGoLook’s team includes licensed adjusters and appraisers, certified mechanics, registered notaries, professional photographers and others who are selected through a rigorous vetting process. About one third of applicants are accepted, according to Verma, and contractors receive training and continuous assistance from an online app that explains the details and needs for each assignment.

Lookers can be sent to notarize a signature at a home or business, pilot a drone to inspect roof damage, pick up products subject to a recall or handle other time-consuming duties to ease the workload for WeGoLook’s clients. “Because we have such a diverse, on-demand workforce and we track them based on their skills and geography, we can figure out who is the best person to do a task,” Verma says.

His work life was extended by a good eight to 10 years because he no longer had to manually climb these stockpiles and risk injury. The drone could now fly overhead, collect data and enable all the biometric measurements and analysis of inventory. I think a similar narrative will play out in the insurance industry.

George Mathew, CEO and chairman, Kespry

Other innovators, such as Snapsheet, are also helping the industry fill the talent gap. The Chicago-based company, founded in 2010, uses cloud-based software to help insurance providers gather photos and other information from their customers about auto claims. More than 60 carriers, including USAA, Liberty Mutual, The Hartford and MetLife, are now using Snapsheet’s mobile app to process claims.

CJ Przybyl, Snapsheet’s co-founder and president, says many carriers are struggling to replace retirees on the adjusting and especially the estimating sides of the business. “Snapsheet is able to help with that because we augment the staff as needed,” he says.

In its Future of Claims study last year, LexisNexis Risk Solutions said the auto insurance sector is facing “a tumultuous time,” with auto claim frequency and severity increasing and the industry struggling to replace retirees. “Questions are starting to arise as to who will ‘work’ the increased amount of claims going forward,” the study found.

Technology is helping to ease the auto claims workload, and the increased automation should ease the training process as well. “From a carrier perspective, you can hire a younger work staff that won’t require as much training to backfill as people retire,” Przybyl says.

Extending Work Life

Not all older claims professionals are ready to retire. But certain requirements get harder with age. Drone technology is helping ease the labor shortage among adjusters inspecting damaged roofs.

All of the top 20 insurers in the nation now have some form of a drone program in place, according to George Mathew, CEO and chairman of Kespry, a five-year-old company based in California that provides a variety of aerial intelligence for insurance carriers and other industries. Its clients include 12 of the top carriers in North America, Europe and Australia, including Farmers Insurance, which added drones last year.

Drones can extend the careers of older inspectors, who often must leave the workforce if their mobility declines and they can no longer climb onto high roofs. Mathew recalls an inspector for a client in the aggregate industry who was facing an early retirement because of hip replacement surgery.

“His work life was extended by a good eight to 10 years because he no longer had to manually climb these stockpiles and risk injury,” Mathew says. “The drone could now fly overhead, collect data and enable all the biometric measurements and analysis of inventory. I think a similar narrative will play out in the insurance industry.”

Those extended careers and safety improvements are significant gains for the industry, according to David Tobias, COO and co-founder of Betterview, a San Francisco-based provider of aerial imagery from drones, satellites and command aircraft for claims and underwriting and for the real estate industry. “You can still lean on the experience of these folks who don’t want to get out on roofs anymore,” he says.

Betterview has flown for more than 115 companies, including Munich Re and Maiden Re; Nationwide recently became a client and investor. Drones will drive down workers compensation claims, according to Tobias.

When he speaks to groups of adjusters about drones, he asks how many have fallen off a roof or a ladder at some point in their career. “Everyone’s hands go up,” he says. “Absolutely everyone. That’s a real problem.”

Changing Impressions

Drones, artificial intelligence and other technology are also helping the industry combat a negative impression among younger workers. The Hartford 2015 Millennial Leadership Survey found that only 4% of millennials thought insurance offered an attractive career, with many describing it as “boring.”

That’s an especially troubling view as technology takes on a larger role in the offices of brokerages and carriers—and younger, skilled workers are needed to introduce and manage those innovations.

Web-based communities, mobile applications, internet robots, drones, satellite imagery and AI are quickly becoming everyday tools of the claims professional.

Jason Landrum, global chief information officer, Sedgwick Claims Management Services

“The insurance industry—traditionally cautious, heavily regulated, and accustomed to incremental change—confronts a radical shift in the age of automation,” a recent study by the McKinsey Global Institute said.

“With the rise of digitization and machine learning, insurance activities are becoming more automatable, and the need to attract and retain employees with digital expertise is becoming more critical.”

Kespry’s Mathew says embracing technology would help the industry draw younger people. “I think the generation that came up with mobile technology, Facebook and other social media is delighted to have very capable technology in their hands to get work done,” he says.

Przybyl at Snapsheet agrees. “We’ve gone through this little bit of a revolution where a lot of cool stuff has come on the market pretty quickly, and it’s got the whole market really excited,” he says. “When estimators come to work for our organization, they’re excited because they’ve got a whole suite of new technology tools that make their job a lot easier. It’s absolutely helpful for recruiting.”

Streamlining, Engaging

The use of technology in claims is doing more than just easing workforce issues, it is creating efficiencies and streamlining work in a way that is changing the profession and consumer engagement. Take drones, for example. “With the drone-assistive approach of collecting this data, analyzing it, and adjudicating the claim, you can just get more work done than when you were manually climbing that roof surface, manually collecting that data and manually processing the claim,” Mathew says.

Traditional inspections require at least two employees, including one to climb the roof and inspect and another to steady and hold the ladder, but an adjuster piloting a drone can work solo and inspect the entire roof, rather than a sample, and do it more quickly.

“You have enough detail to adjudicate and close a claim within that day,” Mathew says. “Now we’re looking at ways that we can do it within the first hour of the drone flying, whether that be a residential roof or a commercial roof.”

Przybyl shares a similar view. “Once we get photos, it’s going to take us about three hours on average to have an estimate, and that’s pretty much independent of the severity of the damage,” he says. The average cycle time for a traditional auto claim is 10 to 15 days, with a fast-track process considered to be four to six days, according to LexisNexis Risk Solutions.

Rapid turnarounds lead to greater customer satisfaction. The added transparency, through mobile apps and online tools, also pleases customers, particularly younger ones.

Przybyl says his company’s mobile app enables the person reporting a claim to track progress at each step along the way. “It’s in their hands in the way they’re used to consuming information—on their phones,” he says.

Tractable, which uses artificial intelligence to help insurers process photos from auto claims, is also helping the industry streamline work. The company, founded in 2014 with offices in London, California and Texas, counts the Belgium-based insurer Ageas and three of the top insurers in the United States among its clients.

Using proprietary algorithms and a web-based platform, Tractable taps into an extensive database to provide estimates from photos—in minutes, in some cases—and help prioritize claims that need further human involvement, according to Ahmed Zifzaf, the company’s AI engagement manager.

Zifzaf says Tractable’s software can save time and money by discerning whether a damaged panel on a car must be replaced or can be repaired instead. “Questions like that can be answered by a machine or the artificial intelligence algorithms, therefore saving both time and money for the insurer,” he says. “We can review thousands of claims in minutes, as opposed to an expert, who might need to spend 30 minutes or so per claim.”

AI is expected to take on a larger role in insurance and other industries in the years ahead, as new technology is developed to automate many labor-intensive processes. “The great thing about artificial intelligence is that it learns,” Zifzaf says. “The more that we use it, the better and smarter the tool gets.”

Everything seems very cool when you see it in PowerPoint or when you see it on a demo, but when you try to implement it inside of a really large organization, the change management can be extremely complicated.

CJ Przybyl, co-founder and president, Snapsheet

Zifzaf also notes that younger workers tell his company that “this is the most exciting technology they’ve worked with in their role.”

Insurers are swiftly adapting photo technology for auto claims, either from third-party providers or by developing in-house capabilities. Allstate, for example, closed its drive-in repair estimating centers last year and is now using its QuickFoto mobile app to process claims.

Other efforts are under way to streamline tasks. Last year Crawford & Company began using robotic process automation, or RPA, to reduce repetitive tasks for adjusters. The changes include simple steps like eliminating the need to copy and refill information from one computer screen to the next, but Verma says the company is looking at AI for more involved tasks like scoring and prioritizing claims for supervisors to review as part of the company’s quality assurance process.

At Sedgwick, which has 21,000 employees in 65 countries, similar steps have been taken to maximize claims resources. “Automated file setup has reduced the time commitment required of the traditional, manual setup process and enabled the claims professional to spend more time with the person experiencing the injury or loss,” Landrum says. “Business and data analysts now monitor the automated process and assignment activity.”

Technology hasn’t fully alleviated the shortage of adjusters, according to Landrum. But, like Crawford, Sedgwick is using it to help streamline work and maximize the use of time. “For example, we have introduced new decision optimization models into our process that help analyze data within a claim and then prescribe and automate the most appropriate path to take,” Landrum says. “Tech innovations like these help free up claims professionals to be available when a higher level of care is needed and allow them to focus more on the impacted individuals and businesses at the heart of their actions.”

Nat Cat Testing Ground

Last year’s busy hurricane season turned out to be a testing ground for new technology in the insurance industry, with innovators able to demonstrate how the use of drones and mobile apps can improve efficiency and response time while holding down costs.

When Hurricane Irma struck the East Coast, Crawford & Company was able to dispatch its team from WeGoLook to the scene for drone flights and other visual inspections within a matter of hours, according to Verma. Ordinarily a claim in a disaster scenario might take a month to adjust, but WeGoLook’s turnaround time is an average of 4.7 days for a catastrophe claim and 3.7 days for a non-catastrophe claim. “The advantage of having a Looker workforce is that it’s a 24-by-7 workforce. There isn’t a specific time of day they’re working,” he says.

The rapid turnaround reduced the potential for further damage and for fraud, according to Verma. “We thought it was a win-win situation for us, the insured and the carrier because they move on with their lives much faster as well,” he says.

Drones were a critical part of the response for WeGoLook and other companies, a point that wasn’t lost on federal officials monitoring the scene. “I don’t think it’s an exaggeration to say that the hurricane response will be looked back upon as a landmark in the evolution of drone usage in this country,” FAA administrator Michael Huerta said.

Mathew says Kespry was able to take advantage of a ready team of drone pilots who lived in or near hurricane-damaged states. Kespry flew more than 700 missions around Houston and many of the impacted areas in Florida.

“As soon as it was safe to fly, we had them out flying, collecting imagery,” he says. “Some of our clients couldn’t get their claims folks from Texas to Florida because they were either still working on claims in Texas or travel was difficult. We were able to start getting imagery back before they could even get boots on the ground in the state, let alone out to insureds’ properties.”

The experience was similar for Betterview’s drone operations. “We would fly things in the morning, imagery would get uploaded in the field, and checks were getting written that night,” Tobias says. “The roadblock is not the technology usually. It’s the carrier or the TPA or the members utilizing the technology.”

What the Future May Hold

Despite the speed and efficiency their services bring, high-tech providers acknowledge limits to AI and other innovations. Verma, for one, doesn’t expect technology to replace adjusters or underwriters any time soon.

“While it may be possible in the future, I don’t see it as a possibility in the next three to five years,” he says. “Claims is a very emotional experience, and when you have an emotional experience, you want to rely on people, not just machines.”

At Sedgwick, Landrum says technology is creating more time for claims professionals to care for the client and the consumer. “We don’t envision the human touch being replaced by machines,” he says. “When health and well-being are impacted or when property losses are significant, people want to know someone is working for them and that their issues are not solely being addressed by a machine.”

Weathersbee at InterWest agrees. “When you get into the human aspect of claims—the tort aspect, bodily injury and things like that—you can’t lose touch with how to deal with that human being from a psychological standpoint,” she says. “I still think there’s a component of hands-on both for our carrier partners and on the insurance brokerage side.”

Yet technology will inevitably be applied more broadly across the industry. Mathew, whose company is expanding into the commercial sector, says he expects drones will be more heavily used there, as well as in risk and underwriting. As more drones fly, the bigger and better photo libraries will become, enabling the greater use of artificial intelligence in analysis. “It’s not a limitation of the algorithms,” he says. “It’s a limitation of the data sets available.”

Tobias at Betterview also thinks drones will become commonplace across the industry soon. “I come from the commercial loss control world, and I saw the transition from film cameras to digital, and I’m starting to see a lot of the trend markers with drones,” he says. “This is another tool in the adjuster’s tool belt.”

Sedgwick, which has used aerial imagery to assist with property damage assessment, also expects drones will take on a broader role. “While the practicality of drone utilization has not yet been perfected for daily claims handling, we expect drone usage will increase as costs for hardware drop, regulations relax, and the technology continues to improve,” Landrum says.

The industry is likely to invest in more data tools and forecasting technology, according to Landrum. “In the property world, leveraging AI to determine pre-loss exposure will help us with resource assignments, projected loss figures, and assembling resources for post-loss restoration,” he says. “If we can be ahead of what is needed after a loss, it will decrease the loss period altogether.”

Weathersbee expects data analytics, particularly for regional firms like hers, to grow more widespread in the years ahead, along with the use of technology that employees wear in the workplace. The health side of claims is already using devices to track fitness, but she and others believe there’s greater potential for so-called wearables in improving workplace safety and reducing claims and insurance costs. At tech conferences in recent years, companies have demonstrated the use of wearables in hardhats and safety vests to track workers in hazardous areas and alert them as they approach machinery and other risks.

“I’m excited about the technology that our carrier partners are going to be utilizing,” Weathersbee says.

Some insurance companies have been slow to adapt technology, but once an innovation catches on, the changes can be swift industrywide. At Snapsheet, much of that acceptance has come in the past year. “In 2012,” Przybyl says, “when we first started talking to insurance carriers seriously about doing estimates through a mobile, self-service app, pretty much every carrier said it was not possible for a human to write estimates from a photo. And now here we are in 2018, and everybody is asking when artificial intelligence is going to write an estimate by photo.”

Przybyl says he expects technology will become pervasive in the industry, which presents its own challenges. “Everything seems very cool when you see it in PowerPoint or when you see it on a demo, but when you try to implement it inside of a really large organization, the change management can be extremely complicated. I think a lot of insurance carriers are now realizing that they’ve got to focus on how to implement the technology, not just having the technology. I think over the next few years that’s what a lot of the carriers that succeed are going to be focused on.”

Tobias thinks companies would be wise to accelerate the change. “They need to start moving a little faster because there are companies out there who will eat their lunch if they don’t,” he says, pointing to Amazon’s forays in health insurance and perhaps other sectors. “If that happens, they’re going to use whatever the newest and best technology is. As a whole, our industry needs to start not just testing things faster but actually putting them into production faster so they don’t get left behind.”

Weathersbee says brokerages and carriers would be wise not to resist technology that can help fill the talent gap and enhance services. “Organizations that are nimble and embrace it and use it to innovate and create efficiencies are going to succeed,” she says. “I think those that view it negatively or view it as a disruption or ignore it are going to get passed by.”

The industry’s struggle to replace retirees—and the subsequent need to embrace technology more quickly to help fill the gap—may be a blessing in disguise.

“While some see this talent gap as a crisis, we have seen it lead to some very positive developments,” Landrum says. “The claims work we do has evolved from a series of process-oriented administrative tasks that sometimes led to adversarial positions to our industry, to now being focused on providing very meaningful assistance to those experiencing an unexpected loss or injury. It’s forced us to take a look at technology as a means for supporting and streamlining the work our colleagues take on every day.”

Lease is a contributing writer.

In the electronic equivalent of a giant convention, 380 insurers and managing general agencies gather on a daily basis with more than 30,000 independent insurance agencies to streamline their business dealings. The means of this extraordinary sharing of information is an industry exchange launched by IVANS, a division of Applied Systems.

The exchange gives the MGAs and agents a real-time way to transact electronically with the carriers, from identifying markets to quoting and servicing insurance business. The carriers share their data with IVANS, which in turn shares it with the agencies on the exchange.

Previously, agencies using their agency management systems needed to log on to one carrier’s website to download an insurance policy and then on to another carrier’s website to do the same—obviously not an efficient process. “By automating the process of sending information from the carrier system to the agency management system, we’re helping agents to spend more of their time on servicing their customers and growing the client base,” says Thad Bauer, vice president and general manager of the IVANS division.

The exchange is averaging about 700,000 daily transactions between agencies and carriers. While the exchange focused initially on standard lines of insurance business, it’s now expanding its scope to more complex lines like surety and employee benefits.

Applied also expects to use the exchange to create statistical and benchmarking data to be shared internally and with the broader industry. For example, IVANS Index can use the data to measure the year-over-year premium difference for a single insurance policy.

Other opportunities that emanate from connectivity and data sharing also are being explored. “We have developed a new search tool called IVANS Markets, where agents and brokers can see which carriers have an appetite for a particular type of risk and carriers can see in real time when agents are searching for markets to assume a particular risk,” Bauer says. “Just by moving data back and forth, risks can be rated and policies can be issued in one, fast, comprehensive process.”

Five years ago, the sharing of data in the industry was disdained, he adds. “The various parties did not want their data touched for reasons of trust,” Bauer says. “By creating an exchange in the middle of these transactions, trust is no longer an issue. We’re helping carriers streamline their workflows and agencies receive client and policy information instantly. And we’re providing data-driven insights on the state of the industry, like premium renewal pricing, which benefits all parties. Now, no one disputes the value of sharing data.”


A group of partnering organizations from the insurance, technology, management consulting and shipping industries has announced the introduction of the world’s first data-sharing platform for the marine insurance sector. The blockchain-enabled platform connects shipping clients with brokers and insurers to more seamlessly transact marine insurance.

Partners in the revolutionary venture include Microsoft, consultancy EY, insurance data standards company ACORD, broker Willis Towers Watson, global insurers XL Catlin and MS Amlin, software security provider Guardtime, and Danish shipping conglomerate A.P. Møller-Maersk A/S. Following a successful, 20-week proof of concept phase in 2017, the platform, which is built on Microsoft Azure global cloud technology, went live in a phased rollout earlier this year.

Data on a wide variety of exposures from multiple parties are integrated on the platform with information about insurance contracts. The goal is to remove the friction between these parties to speed up the insurance process. By having all the data involving a risk transparently available on the blockchain—and all the parties needed to transact insurance in this secure ecosystem—traditional manual data entry and rekeying of information are eliminated, speeding up insurance processing times and reducing related costs.

“This first-of-a-kind effort has the potential to dramatically reduce time, cost and risk across the entire insurance value chain,” says Bill Pieroni, ACORD’s president and CEO.

Simon Gaffney, chief data officer at Willis Towers Watson, says, “The initiative has the potential to streamline and simplify insurance transaction efficiency using new technologies—an essential development for the insurance industry.”

As the novel data-sharing platform is rolled out across the rest of this year, the partners anticipate a learning process that will guide the development of additional blockchain-enabled platforms for other lines of insurance. “We look forward to deploying this technology across the marine insurance industry,” says Shaun Crawford, EY’s global insurance leader, “and are exploring how these findings and insights will be applied to other specialty insurance markets and beyond.”

The interest in developing a new model for insurance based on data sharing is not confined to brokers and carriers. Institutional investors like pension funds and hedge funds that have long invested in catastrophe bonds will soon have the ability to make similar investments in a range of other property and liability exposures, trading insurance risks much like they currently trade stocks.

This opportunity will be available when a new and completely novel reinsurer launches a one-of-a-kind trading platform this summer for capital markets investors. Will Dove, chairman and CEO of Extraordinary Re, the reinsurer behind the platform, says it creates the means to free up more than $20 trillion of liabilities currently held on insurance company balance sheets, which would be available to investors interested in diversifying their portfolios with an uncorrelated asset class.

“Why should a single insurer handle underwriting, marketing, distribution and servicing, given the costs this eats up,” Dove says. “A trading platform offers risk-bearing capital in a vastly more flexible, efficient and less costly way, especially one like ours using blockchain technology.”

Unlike a catastrophe bond that investors acquire and must hold until the bond’s multi-year duration has elapsed, the trading platform markets so-called liquid insurance contracts (LICs), which enable investors to trade in and out of the insurance liabilities. The absence of liquidity was a problem with catastrophe bonds. Dove says the opportunity to sell an investment in one insurance risk to buy an investment in another insurance risk will be of great interest to the capital markets.

Here’s how this unique facility, which uses technology created and hosted by Nasdaq, works: a broker, insurer or reinsurer electronically submits a particular risk or different elements and tranches of a risk to the platform; underwriters at Extraordinary Re review the submission to make sure it suits its guidelines; and investors review the exposure-related details of the submission with an eye toward a return and portfolio diversification objectives. If interested, they invest in the risk.

The risks are priced much the way insurers currently underwrite exposures. “The market value of each LIC is set by the collective opinions of the market participants, who take into account the loss activity observed to date, plus expectations about future loss activity,” Dove explains.

In return for taking a share in an LIC, an investor would receive a premium and be obligated to participate in the payment of losses up to a set amount—much like traditional insurance. “When loss payments plus market expectations of future losses exceed premium received and the investment income, the investor would be in a loss position,” Dove says. “At any time, investors can sell their LIC shares to other investors to eliminate their exposure to future adverse developments.”

Good news for the capital markets, but what’s in it for traditional insurers and reinsurers? “We’re offering a way for insurers and reinsurers to spread their risks more widely at less cost overall,” he replies. “These risks include marine, workers compensation, cyber, terrorism, aviation, product liability, and life and health exposures in addition to both long-tail and short-tail liabilities.”

With regard to the impact on brokers, Dove says Extraordinary Re provides another way for reinsurance brokers to access capital markets capacity for their clients. “Because risk comes into our market in reinsurance contract form, we will depend on brokers for distribution and getting access to the types of insurance risk that Extraordinary Re’s investors are looking for,” he explains.

Bottom line: Remarkable innovations are underway disrupting the traditional model of insurance, requiring all parties to rethink how they will transact business in the future.

In the United Kingdom, roughly 3,000 independent insurance brokers place about 90% of the country’s commercial insurance risks. Brokers tend to dominate the commercial market, since complex commercial risks typically require professional advice. To write the risks, U.K. insurance markets conduct most of their business through these intermediaries.

Broker Insights is about to change this dynamic, solving a problem that has long daunted the London insurance market—the inability of insurers and reinsurers that would love to interact with the regional brokers but cannot get their attention.

“All these insurers are running around prospecting for opportunities and knocking on broker doors, but brokers tend to have their favored markets—even though these insurers may not be the best option for their commercial clients,” says Fraser Edmond, Broker Insights’ CEO and co-founder. “It’s just so inefficient. We figured there had to be a better way.”

Broker Insights was designed to be just that: brokers share data on their clients’ exposures on the platform, and insurers cull through these exposures to determine whether or not to insure them.

“The platform has a unique searchable database for insurers to look for business,” says Edmond. “Because it is searchable, insurers can look for criteria on risks that suit their underwriting appetites. We’re pulling data from many different sources to provide this information.”

In addition to the exposure, these data include the type of business, where it is located, number of employees, and financial information—to scratch the surface. “Say a carrier wants to write marine insurance for a particular client during certain months of the year in a specific geography within a particular premium band,” Edmond says. “For the first time, the carrier can search these words in the database to find which brokers have this type of business available. This creates tremendous efficiencies from a sales and marketing standpoint.”

Broker Insights flips the traditional model of insurance on its head. Instead of a broker reaching out to insurance markets, the insurers reach out to the broker. In doing so, the platform creates competition among carriers to provide optimal coverage and higher financial limits of protection at the best rate. “We’re promoting more choice, which is great for the broker’s customers,” Edmond says.

For insurers, Broker Insights offers a way to achieve more balanced risk portfolios. “Instead of wasting resources, brokers and insurers each achieve endless efficiencies through a simple data-sharing experience,” Edmond says.

What’s in it for brokers? Broker Insights will pay brokers an undisclosed fee to share their information with carriers on the platform, although this is not the main attraction, says Edmond, former head of broking at Aviva, a large U.K.-based global insurance company with 33 million customers in 16 countries. “The platform puts a far wider range of brokers on the insurers’ radar, enabling more informed and timely sales,” he explains.

The platform, which went live in June, has lined up 30 brokers accounting for nearly $203 million of regional commercial business. The company recently signed its first contract with Hiscox, a large U.K.-based insurer. “We’re also in advanced discussions with Zurich, Axa and Allianz and are going through the contract phase at the moment,” Edmond says. “The demand has been nothing short of fantastic. We’re bridging the customer information gap between insurers and brokers.”

The compelling reason for building this new model is the existential threat of keeping things as they are. If insurers and brokerages don’t begin to share their own and client data in novel ways to reduce acquisition costs and operating expenses, some other entity—like, say, a giant technology company—might squash them like a stack of yesteryear’s CDs.

“The cost base from which we all are working is fast becoming unsustainable,” warns Alastair Burns, chief marketing officer at London-based insurance holding group Navigators International. “A war on cost must be waged in the insurance marketplace.”

This cost base is predicated on the traditional ways of providing insurance to businesses that have not changed much since Edward Lloyd ground his first cup of coffee. Companies from the largest corporations to the smallest Main Street businesses rely on an insurance broker or agent to understand their risks and transfer them to an insurance carrier willing to absorb these exposures. The insurer then spreads these risks through global reinsurance markets.

This system has worked pretty well for centuries. Then along came data analytics—the ability to search through massive volumes of data to discover useful information for decision-making purposes. This technology and others—machine learning, robotic processing automation and artificial intelligence—have created a dangerous entry point for non-insurance entities to potentially compete against brokers and carriers, leveraging capital in some cases from institutional investors.

Other industries have collapsed from such incursions. The new insurance model under discussion would fortify the barricades. By sharing client data, brokers and carriers can reduce the cost of insurance, pave the way toward the development of innovative new types of insurance, and, most important, keep non-insurance entities at bay.

“Whoever has data is king,” says Jonathan Prinn, group head of broking at Ed Broking, a wholesale insurance and reinsurance brokerage company based in London. “If this data isn’t shared amongst us, we will fail to provide value to our clients. And if we fail, someone else will provide this value.”

Need for a New Model

One of the clear concerns facing the industry is client acquisition costs, which are much higher than the acquisition of new customers in other industries. Prinn blames high acquisition costs for Lloyd’s of London’s dismal 114% combined ratio in 2017, meaning the venerable insurance marketplace paid out more money in claims than it received in premiums.

“The cost of underwriting and broking commissions at Lloyd’s was about 42%, which is unacceptable and untenable in the world going forward,” he says. “No intermediary model I know of is anywhere close to 42%.”

In the United Kingdom, Prinn says, “real estate agents charge around 2%, credit card companies like Mastercard charge around 1.3% and moving $2 from a bank account to buy coffee using Apple Pay is free.”

The 42% figure he cites is composed of 30%-plus broker commission levels and the carriers’ administration costs, which last year ranged between 10% and 12%.

One could argue these expenses are less in the United States—according to A.M. Best, incurred broker commissions/expenses plus underwriting expenses are between 30% and 31%—but that’s beside the point. “Too much of the money that comes into the system is now consumed by acquisition and operating costs,” says Jamie Garratt, who heads the digital underwriting strategy at Talbot Underwriting, a London-based underwriting services provider.

The culprit, the interviewees contend, is the traditional linear process of transacting insurance, whereby a business goes to a broker who goes to a carrier that goes to a reinsurance broker who goes to a reinsurance carrier. The alternative is the sharing of data among brokers and carriers in a free marketplace. “If brokers share client exposure data with all and not just some insurers, everyone’s cost base reduces,” Burns says.

Garratt agrees. “If we can move data quickly and with much less friction between a client and the end risk bearers,” he says, “we can remove the replication of work up and down the value chain, reducing the high cost this produces for all of us.”

The cost base from which we all are working is fast becoming unsustainable. A war on cost must be waged in the insurance marketplace.

Alastair Burns, chief marketing officer, Navigators International

An Architecture Emerges

How might this new model look and operate? Instead of the customary linear progression, clients would share operating, financial and other data with brokers; the brokers would evaluate and package these data into discrete elements of risk; these elements would be submitted to the global insurance markets for their review; and insurers and reinsurers would decide whether to assume these risks based on their underwriting appetites and portfolio diversification objectives.

Prinn provided the example of how this might work in the commercial aviation insurance market, which is currently divided between one set of carriers that provide insurance to smaller courier-type aircraft and another set that services large commercial airlines.

“The reason for the split in the market is risk—smaller aircraft take off and land a lot to drop off freight, and the biggest risks in flying occur when landing and taking off,” he explains. “Consequently, the risks for the smaller air carriers are significantly higher.”

Assuming all aircraft owners provide their altitude, speed, turbulence and other data to a broker, cost theoretically would come down. “Airplanes produce an extraordinary amount of data coming off sensors that could be dropped into a blockchain or other type of distributed ledger technology,” Prinn says. “If the data from every airline was available in this platform, there would be many thousands of data items related to every step of the journey, fundamentally changing how insurance is structured.”

The job of the broker would be to gather and assess these granular levels of exposure data and present them to the insurance markets for consideration. Were this to occur, Prinn describes what might happen next: “An insurance carrier might say it will insure this many planes taking off to 1,000 feet in particular regions of the world; this many planes going from 10,000 feet to 20,000 feet across the Atlantic; and this many planes going from 25,000 feet to 35,000 feet across specific land masses.”

The carrier might also decide to insure similar elements as the plane makes its descent to the ultimate landing. “If this happened,” Prinn says, “the need to separate the aviation insurance market into two sectors would be eliminated.”

What he has just described is a far cry from the current model of providing commercial aviation insurance, in which a broker representing a specific airline submits that company’s breadth of risks to an insurer with which the broker often does business. The new model would democratize the process to offer pieces of risk to all aviation insurance carriers in a free marketplace.

Can the risks of other industries be similarly sliced and diced by brokers and offered to the insurance markets? “Absolutely,” says data scientist Henna Karna, chief data officer at global insurer XL Catlin. “We’re continually looking at data that exists in our environment and creating ways to measure it.”

These data are not limited to a company’s internal financial and operating data. “Exogenous credit data, political risk data, cyber risk data, and unstructured data can all be part of the picture,” Karna says. “The goal is to model the risk by considering every available and quantifiable factor that may affect it. We’re getting closer and closer to mining, analyzing, modeling and managing all this data for insurance purposes.”

Better Data, Better Risks

The sharing of detailed client exposure data in a digital platform provides the opportunity for insurers to diversify their risk portfolios by reducing exposure accumulations in specific areas. Karna provides the example of a global manufacturing plant that operates 9 a.m. to 5 p.m. Monday to Friday.

“Say the data coming from the sensors attached to factory equipment indicate the company makes most of its products on Tuesdays and Wednesdays, with the bulk of these items coming off the production line between 9 a.m. and 11 a.m.,” she says. “A blackout or machine glitch during this period on a Tuesday or Wednesday would cause a much bigger business interruption risk than other times of the day the rest of the week.”

Today, the company’s insurance policy from a single carrier does not distinguish these risk factors. By breaking up the risk into difference pieces, and bringing in other quantifiable data like seasonal weather and machine maintenance, other carriers have the opportunity to choose which exposure elements they may want to bear. In turn, this helps the insurers balance their risk portfolios with exposures that are uncorrelated, Karna says.

Burns agrees. “By modeling and sharing risks, carriers can avoid aggregating too much of a single risk,” he says. “Insurers have a finite amount of exposure they can take. Their balance sheets are only so big.”

If this data isn’t shared amongst us, we will fail to provide value to our clients. And if we fail, someone else will provide this value.

Jonathan Prinn, group head of broking, Ed Broking

The new model would present a way for brokers to spread risks among different insurers to their clients’ benefit. “If we have a system where brokers share client risks with all the insurance markets in a centralized shared services model,” Burns says, “this would be a far more efficient way for insurers to spread their risks and for clients to receive more competitive premiums.”

Current expenses up and down the insurance value chain would wither, Garratt says. “If clients share their data with brokers, and brokers share this data with insurance markets, it will result in reduced costs for all parties,” he explains. “All those inputs, calculations and equations that each broker and carrier must do on their own would be removed from the process. There would be no more need for rekeying all this data as it’s passed along the value chain. Instead, the exposure data would move seamlessly and transparently from the client to all potential risk bearers, dramatically reducing acquisition and operating costs.”

This would certainly be a positive development for business clients. “If a broker presents a good commercial risk to all the insurance markets—which is apparent in the client’s exposure data—carriers can compete to charge less in assuming this risk, based on their respective underwriting appetites,” Garratt says.

Although the new model would produce less traditional income for brokers, the loss of revenue would be offset by heightened efficiencies. “Brokers have significant operating expenses that are a reflection of the current inefficiencies in the market,” Garratt explains. “If you remove these inefficiencies, brokers can reduce their costs to maintain current profit margins.”

Moreover, the broker’s enhanced knowledge of clients’ exposures presents the opportunity to become more involved in mitigating clients’ risks. “If a broker comes to us with a client whose exposure data indicates is risky, we would charge more to assume the risk or not take it at all,” Garratt says. “But crucially for the client, the broker and the underwriter now have the ability to help the client manage these exposures, working to reduce the activities and behaviors that resulted in the company being perceived as a higher risk.”

This creates value for the client and possibly a new revenue stream for the broker, while furthering the closeness of the relationship brokers enjoy with clients. “Less money is consumed by process and transaction, and more is used to pay claims, provide value-added services and develop new products,” he adds. “The outcome in all cases is better, quicker and cheaper service for our clients, which is what we all must focus on.”

Customized, Complex Products

By participating in the proposed data-sharing model, brokerages and insurers will be in a more opportune position to create bespoke insurance products. “All that exposure data in the hands of a carrier or a broker can be an engine of innovation,” Karna says.

She provided the example of a large retail chain caught in the crosshairs of a reputational disaster. By mining social media data, the company’s broker may learn that flash mobs are forming to protest the business in a variety of store locations.

“For the sake of argument, let’s assume the organization has comprehensive property insurance absorbing losses caused by vandalism that occur in its stores’ parking lots, which generally have 300 to 400 cars parked per lot,” Karna says. “Now let’s assume the financial limits on this insurance policy are $1 million. Would this amount cover the potential vandalism of cars in the aggregate?”

Possibly not. Even if it did, how much of the total limit would be left over to absorb additional property losses throughout the remainder of the policy duration? “The opportunity now exists for the broker to craft a bespoke insurance policy absorbing the one-time property damage losses caused by vandalism and present it to carriers for their consideration,” Karna says.

Prinn cites similar value. “Brokers and carriers have the ability to take a very complex commercial insurance program like one sees in the oil and gas sector and ferret out comparisons across different oil and gas companies,” he says. “You now can take a common look at these risks, which wasn’t possible before, allowing complex (insurance) products to be packaged.”

There is even the opportunity for brokers and carriers to share customer data with other industries, assuming the owners of the data opt in for this use to avoid privacy regulations.

“Wouldn’t it be great if I bought travel insurance and the carrier shared this data with a rental car agency to set up a vehicle for me when I landed?” Prinn says. “Or the pension side of my insurance company knows I have children and recommends setting up a college plan at a local bank? The future broker or carrier might well be able to help with these things, which is very exciting. And we’re still really at the beginning of all this.”

Nevertheless, he is confident the current model of insurance will be relegated to the trash bin of history. “I was a street broker at Marsh placing Fortune 500 risks for 20 years with carriers that I knew from pure personal experience alone could take on these risks,” he says. “I can tell you unequivocally that this art form is dying. The broker of the future will know how to use data and analytics to find the right insurance markets for their clients, as opposed to relying on experience alone. The model of tomorrow will be a blend of art and science.”

If we can move data quickly and with much less friction between a client and the end risk bearers, we can remove the replication of work up and down the value chain, reducing the high cost this produces for all of us.

Jamie Garratt, head of digital underwriting strategy, Talbot Underwriting

Whenever he talks on the subject, Prinn frequently mentions his 10-year-old daughter’s interest in playing the online game Minecraft. She listens to the YouTube videos of a young man in his 20s named Daniel Middleton, a professional gamer who plays Minecraft and comments about the game’s intricacies to his online listeners.

“I mention Dan because last year he made something like $16 million,” Prinn says. “If you told me five years ago that some guy who sat in his home commenting to kids on a video game would make this kind of money, I would have fallen over laughing. In no way could this have been predicted.”

He feels the same way about the new model of insurance. “Ten years ago, if you told me the traditional model would change so the customary parties to the transaction could share data, I would have dismissed it out of hand,” he says. “And now it is upon us.”

The Tools Are Here

Change is tough for any industry, but the alternative is stark. Just look at the many industries that failed to heed the disruption caused by a technology interloper. “If a broker believes its future value remains as a middleman, where it is being paid merely to access an insurance market, it is dead before it knows it,” Prinn says. “The entire industry is under siege by technology companies that will create better models unless we do it first.”

Down the line, as the internet of things becomes ever more mainstream, millions of sensors will produce an abundance of data, sharpening the ability of brokers to analyze complex risk exposures to a fine point—if they take pains to make this happen.

Yes, there are obstacles to be overcome, including the need to structure data into common formats. But these are relatively easy hurdles to surmount, and organizations like ACORD are already tackling the problem. “Once we have structured data, the entire ecosystem can move in sync to share information and bring down costs,” Burns says. “There’s no going back to the ways things have been.”

Others agree. “We now have the tools to do things we’d only dreamed about before,” Karna says. “Much of our work here now with data is focused on seizing these opportunities.”

The future is as bright as the industry allows. “There’s a tremendous amount of excitement now why the traditional insurance market must change and how this can occur,” Garratt says. “And that can be a catalyst for needed change to occur at a really fast speed—to the benefit of the insurance market and our clients.”

Banham is a Pulitzer Prize-nominated business journalist and author who writes frequently about the intersection of technology and insurance.

Community health is a pretty important topic, the whole issue of heath inequity.

You recently became chair of the CIAB’s Council of Employee Benefits Executives advisory committee. What has been the biggest benefit you’ve taken away from your time on CEBE?
Some of the smartest people in the industry make up the CEBE advisory committee. I’ve always been impressed with the depth of knowledge and the understanding of their clients and the market. That’s pretty important to have at a time of change and disruption.

You’ve lived near Chicago your whole life. Where did you grow up?
I was born in the hospital where Ernest Hemingway was born, in Oak Park, Illinois. Right now I’m re-reading For Whom the Bell Tolls. My father’s parents were the first generation of our family from Ireland. They worked on the canal that was part of the project to reverse the direction of the Chicago River. It used to flow into Lake Michigan. Now it flows from Lake Michigan.

OK, let’s get this out of the way—Cubs or White Sox?
I’m a huge Cubs fan and Blackhawks fan. One of my sons is a White Sox fan, like my father was.

How did that happen?
My younger son took to the relationship he had with my dad and just followed suit. Sometimes I mention that I dropped him on his head as a small child.

I guess that would explain it.
My father served in World War II. I have a letter he sent home to his parents while he was in France. The note starts: “Dear Mom and Dad, I’m doing ok. I understand the White Sox beat the Yankees in a doubleheader.”

As a Yankees fan, I can appreciate that.
I think my son was well into his teenage years before he realized Damn Yankees was actually two words.

Who have been your most influential mentors?
My father, Patrick. He came back from World War II and went to school on the GI Bill. He became legally blind in his late 30s from a rare eye disease, yet he worked and supported our family through various jobs. He found a way to hit fly balls to me based on feel. I’d say he’s probably my biggest influence. I also had a great debate coach in college, Dr. Jack Parker. I went to school on a scholarship for intercollegiate debate. I think many things—how I execute in business, how I drive processes in business—really can go back to Dr. Parker, who was just a really strong influence in my time in school.

I didn’t know there was such a thing as a scholarship for debating.
I went to a boarding school in Wisconsin. We took a class called Extemporaneous Speech. They give you a topic, and 15 or 20 minutes later you give a speech. My Irish gift of gab probably helped.

Have you used those debating skills in your business life?
I’d say the most significant thing is having a critical-thinking focus. You would walk through arguments from start to finish, and the most important work in business has involved step-by-step logical thinking. It also helps you build passion in others around the vision you have.

You’re the immediate past chair of Community Health Charities. Why have you been so committed to that group? 
"Some element of my career from the start has involved healthcare, so it was a group I had an affinity for. They organize worksite giving campaigns for health charities, with both the federal government and private employers. Community health is a pretty important topic, the whole issue of heath inequity. Your zip code might be more of a determining factor of your health status than your genetic code.

How would your co-workers describe your management style?
Strategic. Collaborative. Process-oriented. Outcomes-driven.

If you could change one thing about the insurance industry, what would it be?
To be able to reach more people more fully. Folks like myself, who have been in the business for more than 30 years, have been providing coverage, advising retirement, etc. Yet some people still don’t have adequate coverage and are not prepared for retirement. There is more we can do.

Last question: What gives you your leader’s edge?
Demonstrating an obvious passion for my vision and relying on and supporting my team.



The Finnegan File

Favorite vacation spot: The Southwest (“Anywhere in the desert.”)

Favorite place to watch a game at Wrigley Field: “There’s nothing better than a hot day in the bleachers.”

All-time favorite Cub: Don Kessinger. (“I was a shortstop as a kid.”)

Favorite movie filmed in Chicago: Ferris Bueller’s Day Off

Favorite Hemingway book: For Whom the Bell Tolls

Favorite musician: Stone Temple Pilots (“But I enjoy any concert I can attend with my sons. Music has been and is a great point of connection for us ever since they were very young.”)

Wheels: 2010 Lexus 350 (“It doesn’t have 50,000 miles on it yet. I drive to the airport basically.”)

So Sandy, tell us about yourself.
I grew up in Miami, Florida, and ended up in Washington, D.C., by way of North Carolina. I studied history and philosophy as an undergrad and decided I loved writing and wanted to get better at it. After a few years out of college, I went back to school and earned a master’s in fine arts in creative non-fiction writing. Since then, I have been trying to meld all those skills into one job, which has proved interesting along the way.

I’ve worked as an editor. I worked for a tiny publisher, in Charlotte, North Carolina. I also worked at a heritage management company, where we dug through archives of companies and created histories of their organizations. It was a talented team of archivists and curators.

Eventually, I went to work for a hospital association, where I began a digital magazine with one of my colleagues. I loved the way we were able to create really compelling stories about people and tie them with the business of how hospitals operate. They were stories through the eyes of the patients.

I eventually found my way to The Council, where I’ve been working with you on Leader’s Edge and expanding my knowledge of insurance, which was limited to healthcare, before coming here. It’s been a great learning experience.

When did you first really understand in your head you wanted to write?
I was working after college for The Princeton Review, which is a test prep company. It was a great job. I learned a lot. I ran some of the programs they offered, and it was a great group of people. But, you know, I reached a point after a few years where my boss said to me, “You’re doing a great job and this could be a career for you. But you’re going to have to want to go run a small office in the middle of the country and go from there.”

So you’re kind of either up or out, basically. I just knew that wasn’t what I wanted to do. And it had never left me how much I enjoyed the way of thinking and writing and recording that I learned about when I studied the new journalism in college. I just decided I wasn’t anywhere near where I needed to be as a writer, but I knew it was what I wanted.
At that point, I left that job and started looking at grad schools and did a lot of really odd jobs for a while. That was the point at which I decided I’m going to try this career path and I might fail miserably at it. If I do, I’m going to be a really good lawyer instead.

But how did you fall in love with journalism?
When I was in college, I was studying history and philosophy. As a history major, you had to take a deep-dive course before you graduated. There was one topic, and it was a very small class and there was a thesis-style paper at the end, and it was a big deal for a history major.

So I kept looking at the offerings each semester as I moved on in my college career. Nothing ever really interested me enough until they posted the topics before my senior year. There was a new course, and it was “A Study of Countercultures.” I was like, OK, this looks really interesting. And it was bohemians and beats and hippies, all the way through roughly the 1980s. I loved it. It was so interesting to read about these groups of people in American society and how they changed some things. And I ended up focusing on the rise of the new journalism for my thesis.

So you must be a fan of the late Tom Wolfe?
I was, but he’s not the only one. It was Norman Mailer’s reading of The Armies of the Night that I found so compelling. I also loved Wolfe’s Electric Kool-Aid Acid Test and In Cold Blood. The writers were there, and they were in it. I found it interesting how the story and the outcome changed because of their presence in the story. It was just so compelling to me, from a writer’s perspective and from a philosophical perspective.

Try that at Leader’s Edge?
A little gonzo journalism?

You never know.

Are you a Hunter S. Thompson fan?
Oh, absolutely, yes.

What’s the best thing you’ve ever written?
I don’t think I’ve done it yet.

Up till now.
Up till now. I guess some of the work I did for the digital magazine we developed at my previous job at America’s Essential Hospitals. The magazine was called Walls Down. We were trying to take down the four hospital walls and show what happens inside. We interviewed some patients—some incredible people—and I think some of the writing I did there is probably some of the work I’m most proud of at this point.

How do you go from writer to editor?
I was always good at editing, but I didn’t love it the way I love writing. I had to work much harder to be a decent writer. At this point, I think writing is an ongoing journey. Editing was the opposite for me. It came naturally, and I could do it fairly easily.

What makes you a good editor?
For me, I know the rules of grammar, but I pay attention to them only some of the time.

Good writers break them all the time.
I worked with someone, years ago—she was a great editor, and she always said, “You know, style and grammar are tools that you should use to make writing more digestible and easy to read, but you should not be bound by those tools.”

It’s something that I very much agree with. So, for me, I hear it. I hear it in my head, and if it sounds right, it usually is.

Every magazine has a voice. What voice will you have for Leader’s Edge?
I think you’ve done a great job of creating a voice for the magazine, and I think I would be somewhat in error to trample on that. I think over time my voice will trickle in, and I hope it’s thoughtful.

When it comes to securing a workforce for the future, the industry had been particularly challenged to move from the stereotypical insurance executive of days gone by, but members are now working to fold thoughtful diversity and inclusion initiatives into their recruiting best practices.

Progressive industry leaders can take action by building on some of the work pioneering organizations have undertaken in recent years, moving beyond the diversity dilemma of just pink and blue issues. An older work force is bringing the retirement equation into the mix. A rising minority population makes racial and ethnic diversity an increasingly important factor as well.

The Cool Factor

Research shows companies now are exploring diversity at different levels of the organization and are considering a broader understanding of the issue beyond gender. That’s partly because the industry’s employees are getting older. In the next five years, 25% of the people now employed by the insurance sector are expected to retire. That makes recruitment of the next generation a top priority.

In the past, the insurance industry has been slow to make a concerted effort to recruit talented young professionals out of college. Not only do we have to be present on campus to be competitive in luring top talent, we have to find ways to sell a career in the industry. One way to do this is to show how insurance can wield positive influence in the world. That means promoting some of the unique aspects of the business. For example, do they know that coral reefs have their own insurance policies or that women in emerging markets use insurance to protect their crops? Closer to home, insurance protects local communities, and the data we collect on a variety of sectors—manufacturing, technology, medicine, food and more—helps these businesses adapt to global change.

Many people, including myself, end up in insurance by accident. I once aspired to be a politician and work at the United Nations before falling into insurance as a risk analyst in Washington, D.C. I quickly discovered insurance is the oxygen for building societies and economies. I fell in love with a business that allowed me to engage in different societies around the world and see how everything is interconnected.

From my own experience, I’ve seen how recruiting becomes easier when there’s something exciting to sell. Insurance has it, but we have to do a better collective job of promoting the industry to the next generation.

An Industry Charter

While work still needs to be done in terms of diversity and inclusion, there has been a shift. That momentum is continuing.

Earlier in my career, I was raising young children and spent far too much time working—admittedly for fear of losing my position. I now know I’ll never get that time with my children back. Women and their spouses with young families shouldn’t feel pressed to make a choice between work and having children. Industry leaders can—and, I know, will—continue to establish and promote flexible work policies to appeal to a broader and younger workforce.

At AXA, it is the responsibility of every one of our CEOs to infuse diversity and inclusion into the business. There’s an open communication policy around diversity and parental leave and how all groups should operate around issues such as extended family matters. Personal experience has shaped me as a leader who stresses to my junior colleagues the importance of feeling comfortable taking the time to introduce a child into the world without the fear of damaging their career.

Strategies like these are being discussed in every boardroom these days because of the link between diversity and improved financial performance. There are volumes of research showing that diversity is tied to above-average profitability across a variety of industries. This demonstrates the need for the industry to draft and implement a tangible industry commitment that’s based on proof points tied to diversity and financial performance.

Companies that voluntarily engage would make a commitment to embrace diversity best practices and foster policies that boost inclusion and diversity commitments. Verna Myers, a nationally known speaker and consultant on diversity and inclusion issues, has said, “Diversity is being invited to the party; inclusion is being asked to dance.” I want the industry to go beyond patting itself on the back for new diversity and inclusion policies, which are often perceived to be the domain of human resources departments, and shift to something that is owned and embraced by an entire business.

Industry Leadership

With broader recruitment strategies coming to the fore, there are some blueprints the industry can look toward to move diversity discussions into something tangible.

The Insurance Supper Club is a business network for women operating in or involved with insurance. It has formed a groundbreaking partnership with the Chartered Insurance Institute, a professional body dedicated to building public trust in the insurance and financial planning professions. The two groups are working in tandem to make insurance more visible to aspiring females and are showcasing a variety of women who are working across the industry. Together, they have created the Insuring Women’s Futures Program, which is working to reinvent insurance for women by promoting and enhancing the role of insurance and financial professionals regarding women and risk.

The Insurance Industry Charitable Foundation also does tremendous work to raise awareness about diversity in the industry and in recruiting. This past June, I presented at the Dallas forum of the Foundation’s Women in Insurance Conference Series. There, I shared my personal experiences in the industry—experiences that have taken me all over the globe in transactional risk, government relations and energy sector roles.

What’s Next

The truth is the insurance industry is being disrupted on several fronts. There’s the pace of digital change, new technologies like artificial intelligence, and different ways of working that will need to be adopted to attract younger workers. As the industry continues to tackle these, it will need to do a better job of reaching out to the next generation—which, as we all know, is inclined toward innovation and access to information.

Creating another mentoring program isn’t the trick. It will take higher-level solutions to meet the challenges ahead. That means making an investment in articulating the value of a career in the industry. Change agents will work to buck the insurance sector’s staid image as they reach out to the next generation. They’ll also use data to make the case for diversity, continue to tout the industry’s importance and value—and of course, empower us to recruit those who will champion for innovation and disruption.

Miller is president and CEO of AXA Insurance Company (US), AXA Group’s Property & Casualty Company in the United States, and global lead for AXA’s Women as Entrepreneurs initiative.

First, the good. The National Labor Relations Board overturned the Obama administration’s definition of “joint employer,” under which one business can be held liable for the workplace violations of another business. Critics of the administration’s position claimed it disrupted the normal corporate control rules. For example, it would have allowed franchisee employees to bring employment actions against franchisors (think McDonald’s) and employees of small firms that contract with larger companies to bring such actions against those larger companies.

In a perhaps even more impactful development, the United States Supreme Court ruled in May, in Epic Systems Corp. v. Lewis, that employers can—through arbitration agreements requiring individual proceedings—lawfully require employees to waive their rights to pursue employment-related class actions. There had been an open question as to whether such employment-related arbitration requirements violated the National Labor Relations Act.

In light of this decision, your firm and your clients might want to revisit your employment agreements to determine whether mandatory employment-claim arbitration and class- and collective-action waivers make sense for your businesses. Such waivers can provide significant risk-mitigation and cost-savings to employers. For example, thousands of wage-hour class actions are filed each year, including some prominent cases in which insurance agencies/brokerage firms are defendants. Many of them, in the words of the Supreme Court in Epic, “unfairly ‘plac[e] pressure on [employers] to settle even unmeritorious claims.’”

Plaintiff’s lawyers undoubtedly will attempt to pivot to attack waiver requirements under state-specific contract unconscionability principles. Your firm and your clients will need to review state-specific legal assessments to determine how much you can rely on the ability of the waiver agreements to survive such attacks.

ERISA Questions

The extent to which you may compel or want to compel arbitration and waiver of class-action rights under ERISA plans raises some interesting questions. The ERISA statute itself allows breach of fiduciary duty claims to be brought by a plan participant on behalf of the plan itself, effectively expressly authorizing collective class-type actions for such claims. The Department of Labor also has a long-standing regulation in place that prohibits group health plans from requiring mandatory arbitration of adverse benefit determinations.

The Epic decision is grounded, however, on the Federal Arbitration Act’s strong federal policy in favor of arbitration, including agreements requiring arbitration of disputes using individualized rather than class- or collective-action procedures. The Epic opinion therefore holds that congressional intent to bar such requirements must be expressly stated. In the words of the court, Congress cannot be presumed to “hide elephants in mouseholes.”

Under Epic, it appears that ERISA cannot be read to bar mandatory arbitration of any claims, because it does not include any express statement to that effect. The Department of Labor regulation barring mandatory arbitration of adverse benefit determinations thus appears to violate Epic, and there likely will be efforts to encourage the department to withdraw that regulation.

Plan sponsors and their benefits providers will have choices to make in deciding the extent to which they want to require arbitration of plan participant claims, and they need not necessarily impose a single rule for the resolution of all claims. For example, there may be sound reasons to allow (or even require) breach of fiduciary duty claims brought on behalf of the plan to be litigated in court. And some plan sponsors might not want to take on the litigation risk associated with compelling arbitration of adverse benefit determinations unless or until the Labor Department withdraws its regulation purportedly barring such arbitration requirements.

The Not So Good

Many employers have not been aware that all employers—regardless of size, industry, location or workforce composition—must verify the employment authorization of all their employees through the use of the U.S. Citizen and Information Services Form I-9 documentation process. As part of its overall immigration policy under President Trump, the Department of Homeland Security has committed to increasing immigration enforcement activity fourfold to fivefold, primarily through the use of raids and unannounced Form I-9 audits. The president’s 2018 budget also includes a provision that would require mandatory use of DHS’s E-Verify employment eligibility verification system by all U.S. employers.

Penalties for violating the I-9 requirements range from $216 to $2,156 for failing to properly complete or maintain the I-9 forms and from $539 to $4,313 for knowingly hiring, recruiting, referring or continuing to employ unauthorized workers. Egregious violations also can result in criminal felony prosecutions. Penalties are assessed on a per-error or per-omission basis, not on a per-employee or per-form basis. A single Form I-9 easily can contain multiple violations, each of which can result in a separate penalty, increasing the overall penalty exposure exponentially. The Second Circuit has ruled the failure to properly fill out or sign the I-9 form is a violation, even if all of the requisite documentation has been collected and the employee is legally authorized to work (so even if there is no harm, there can still be a foul).

The applicable regulations require employers to produce their Form I-9s and the requisite supporting documentation within three days of receiving a Notice of Inspection from Immigration and Customs Enforcement. Unprepared employers can find this short time frame to be very burdensome, disruptive and costly.

To best prepare for an audit and to minimize any penalty exposure, there are some actions your firm and your clients should consider.

  •  Have procedures in place for the proper collection and maintenance of I-9 forms and the requisite supporting documentation, including E-Verify reports if they are collected. These procedures should include properly calendaring employment authorization expiration dates for Form I-9 reverifications.
  •  Train staff responsible for the I-9 and E-Verification process on a regular basis to ensure they are kept current on the ever-changing form and process requirements.
  •  Audit the procedures and collected forms on a regular basis to ensure the procedures are being properly followed and the forms accurately filled out and maintained.

Sinder is The Council’s chief legal officer and Steptoe & Johnson partner.
Wheeless is chair of Steptoe’s labor and employment practice group.
LaRocca is chair of Steptoe’s immigration practice group.
Serron is a partner in Steptoe’s employee benefits and ERISA practice group.

In doing so, they have come face to face with a huge reality check: although it has been more than 20 years since EU privacy laws went into effect, very few companies know what data they have, where it all goes, or what protections they are supposed to have. This is because (1) many companies do not have data inventories and (2) privacy compliance requirements are not thoroughly integrated into cyber-security programs.

Digital asset management is one of the cornerstones of any cyber-security program: an organization has to know what assets it has in order to secure them. Internationally accepted best practices and standards for cyber-security programs require (1) asset inventories of hardware, applications and data with assigned asset owners and (2) the designation of information classifications for data based upon risk and magnitude of harm. Common classifications for data are Top Secret, Secret, Confidential, and Public. Although some organizations may have more or fewer classifications, asset management experts discourage organizations from establishing too many classifications, because compliance becomes more difficult and information may be inconsistently classified.

Where Oh Where Is My…Data Inventory

The risk posture of any company is weakened if it does not have a data inventory with formally assigned business owners and information classifications. Even with basic data inventories, very few companies have mapped data flows so they know which users access sensitive data and the jurisdictions involved. As a result, it is difficult for cyber-security personnel to know what data are subject to privacy protections or to determine effective privacy and security controls.

Let’s take this apart. Companies need to know:

  • What data they have and the data classifications assigned
  • What software applications use the data
  • What users access the data and where those users are located
  • Where data are collected and stored.

IT departments and cyber-security teams focus on inventories of hardware and software applications because these assets have to be maintained. Many companies do not have formal data inventories because they assume data used by a system will be protected as part of the application controls. Thus, they develop and maintain only software application inventories. Companies commonly assign application owners, but not data owners, making the application owner the de facto owner of the data that are generated and maintained by the application. For example, the chief financial officer may be designated as the owner of an organization’s financial application and, as such, is the implied owner of the financial data that are used and maintained by the application.

Under this approach, the application owner approves access to the application and data used by it. Application owners know what the application does, but they generally are not well informed about the various data that the application may use or know the data classifications of these data. The problem, of course, is that an application may use data owned by other business units. For example, a financial application may use employee data that are owned by the human resources department. When access is approved for the financial application, access to the data it uses is also approved.

Disconnect Between Privacy and Cyber Security

If an organization does not have a data inventory, data classifications often are not formally assigned and documented. Some classifications of data may have been established as part of a records management process, but these classifications might not have been extended to electronic forms of data and recorded in a data inventory. At the core of this problem is a disconnect between privacy and cyber-security personnel.

Privacy personnel attempt to identify personally identifiable information (PII) and data subject to privacy laws and regulations or contractual requirements. They develop policies and procedures and train personnel on privacy requirements and proper data handling, but they are seldom responsible for an organization’s data inventory.

One must remember that organizations have lots of data that are not considered PII and aren’t under the purview of a chief privacy officer, such as pricing and customer lists, intellectual property (IP), trade secrets and other business know-how, customer data, strategic plans, etc. It is equally important for these data to be protected and have adequate controls in the cyber-security program, because these data are highly targeted by cyber criminals and insiders.

As organizations increase in size and operational complexity, problems occur when data ownership and information classifications are not formally specified. Without proper owner control over data, access may be granted to personnel who do not have a need, or the access may be broader than necessary, increasing the insider threat.

Best practices require the owner of an asset to determine data classifications, approve access to the system and data, and approve change management. It is critical that privacy personnel understand how privacy controls are integrated into a cyber-security program. Controls to protect data are supposed to be based on the information classification and the risk categorization that is assigned to the application. These controls should be jointly determined by the company’s data owners and cyber-security and privacy personnel. All too often, however, controls are determined solely by the IT and cyber-security teams.

When an organization suffers a cyber attack that impairs its IP and business data, the company will be not be able to demonstrate to regulators and investors that it is in alignment with best practices if it doesn’t have data inventories, information classification, and data mapping. The company won’t even be able to show it was controlling access to the data, because it was controlling access to applications only. With the EU GDPR effective only since May 25, it is uncertain how the regulation will be enforced, but many privacy experts expect some stiff penalties will get levied against infringing companies to set an example of enforcement under the GDPR.

“The identification of data in an organization and inventorying it is a critical element of review in a risk assessment,” says Tom Smedinghoff, a privacy and cyber security partner with Locke Lord in Chicago and former chair of the Science & Technology Law Section of the American Bar Association. “Whether a control is required by GDPR, the New York financial regulations, HIPAA, Massachusetts breach laws or any other regulation, if a company doesn’t know its data and how it flows through the business processes, it cannot adequately assess the risks,” he adds. “Many of the activities in cyber-security programs are also compliance components of privacy laws, so there has to be better coordination between privacy and cyber-security personnel if organizations hope to manage their compliance risks.”

Coordination between legal, IT, cyber-security, and privacy personnel is not very mature in most companies. Although these personnel are generally aware of each other’s activities, they lack coordination on controls and risk management. Performing a risk assessment is an excellent first step in getting them to work together, and it enables them to engage with the risk manager on cyber risk insurance and risk mitigation.

Insurance agents and brokers can play a role in helping their clients understand their data and compliance risks and develop effective risk strategies. “There is great interest now in insuring against GDPR violations. Insurers offering these policies may require companies to have mature data inventories and other optimal privacy practices in place so they can better manage the risk,” says Jeffrey Batt, vice president of Marsh’s cyber practice.

Westby is CEO of Global Cyber Risk.

How are you positioned to grow? What’s your angle, the edge that will attract clients and candidates to your business?

How do you fit in?

If you haven’t stopped to strategically consider where your firm stands in the market as you plan for the future, now is the time. With the influx of private equity investors and new private capital showing interest in the insurance industry, if you’re like most agencies, you’re in a landscape where mergers and acquisitions are a theme. Maybe your competitors have partnered with a larger national organization, maybe they got bought out by a major regional player, or maybe—like you—they are holding on to hope. The misperception that many owners have in a market where everyone is “selling out” is that their status as an independent is the ultimate advantage. They think they’ll attract people from those selling businesses—that the acquired firms will shed talent and their client base will diminish. That’s just simply not the case.

The reality is that people usually don’t leave firms that have undergone a successful acquisition. Most typically recognize opportunity. They see personal and professional growth for themselves, and they’re excited about what this means. However, in the instance where key employees aren’t sticking around for career growth and new opportunities, the selling shareholders will buy their loyalty and lock them up with new restrictive covenants.

Leadership is usually hyper-motivated to grow in a way they never did historically. They can leverage their new partner’s resources and become stronger, more efficient, more influential. They can bring better service and ultimately value to their client base.

Now, how does this picture change where you stand in the market?

Stop. Look. Listen. Get real about your surroundings. Here are some areas of focus to consider as you get a grip on the market and your place in it.

How are you addressing growth? In MarshBerry’s State of the Industry analysis, we found that the three-year compound annual growth rate of the 14 most active private-equity funded brokerages is 28.4%. Insurance firms posted an average 5.8% growth in 2017, with the top firms growing at a rate of 14.9%. What does this mean? If you aren’t growing by 6% or more, you’re shrinking. And most agencies are not exceeding this average—they’re kicking the can down the road.

Are you taking the meetings? I wonder how many calls you have received from a buyer in the marketplace who wants to just get together for an introductory meeting. Do you blow off the voicemail, or do you take the call? Even if you have no plan to sell your business, there really isn’t harm in saying yes to a meeting. How often do you get a chance to sit down with a peer or competitor and learn what best practices they’ve adopted to succeed? Use your time to find out what they think about the market and determine where they fit in. This will help you better understand your position. Personal meetings with owners who want to get to know your firm provide an opportunity to ask questions and get a real, honest snapshot of how another business is positioned and where you stand relative to your peers in the marketplace.

Are you self-aware? Be honest about what you are doing today to grow. When you stand on the pulpit and scream to anyone who will listen that you are going to remain independent, is it a hollow promise? Step back and take stock of how you are truly investing in your firm’s growth. Are you recruiting production staff and spending your hard-earned profit on reinvestments in value-additive resources? Are you focused on coaching and mentoring? Do you have a plan for succession? What are you doing today to position yourself for tomorrow? All great questions that will help you be honest about your position in the marketplace and determine whether you can honestly accomplish your goals.

Where are you going? Once you nail down where you stand in the market, you can plan for the future. You can determine what steps are necessary to drive growth, attract talent, increase value and create a competitive advantage that will serve you well whether the end game is to perpetuate or sell.

Market Update

As spring heated up, so did market activity among buyers, with 36 deals announced in May 2018 compared to 29 announcements in April 2018. While the market appears to be slower than last year, with 168 announced deals through the end of May compared to the 230 deals announced over the same time period in 2017, several pending transactions of top 100 brokers, along with the expectation that there are more to come, give a sense that the market is as active as ever.

After announcing four deals in May alone, Alera Group is now tied with Hub International at 13 deals announced through May this year. AssuredPartners is in second place with 10 announced deals but is followed closely by BroadStreet Partners, NFP and Gallagher, which have all announced nine deals thus far in 2018.

The Hilb Group, which published 14 deals in 2017, announced its first transaction of 2018 with the acquisition of a New York-based property-casualty agency, The Bentson Insurance Group (May 1, 2018). This acquisition bolsters Hilb’s presence in the New York/New Jersey region, making this Hilb’s fifth office in that region and bringing its total office count to 58 across 17 states.

Trem is EVP of MarshBerry.

Well, these folks have a name. They are CAVE dwellers (Citizens Against Virtually Everything). Unfortunately, they are not as much fun as Fred Flintstone or his pal Barney Rubble. They cause disruption in your organization, and their attitude is contagious. So how do you handle this dangerous species?

The first step when dealing with CAVE people is to understand what type of naysayer you have. Yes, they come in different flavors. Writer Susan Milligan broke down four types of naysayers in a blog post for the Society for Human Resource Management titled “The Whiner, Know-It-All and Naysayer Can Make the Workplace a Drag.”

The Whiner, Milligan wrote, engages in a steady stream of complaints. They complain about everything from the boss to the color of the paint in the break room. What to do? Here are three pieces of advice from Mike Rogers, president of The Teamwork and Leadership Company:

  • Ask questions. When they whine, ask them what they are going to do about it. This shifts the responsibility back on the employee.
  • Help them see the bigger picture.
  • Create team dos and don’ts and put “No Whining” at the top of the list. Create a “No Whining Jar” and use the money to treat the group to lunch.

The Negativist, Milligan wrote, can be counted on to rain on the parade. Negativists have a dozen reasons why something can’t be done. Susan Heathfield, in “How to Manage a Negative Employee” on The Balance Careers website, offers these coping tips:

  • Inform these employees that their negativity is having an impact on co-workers, bringing everyone down.
  •  Ask them what is causing the negativity at work. Actively listen to the response.
  •  Focus on creating solutions. Look for options for how these employees can create positive morale.
  •  Focus on the positive aspects of their performance and potential contributions.
  •  Try to compliment them in future interactions.

The Excuse Maker, Milligan wrote, substitutes excuses for results. Nothing is ever their fault. The Excuse Maker accepts no responsibility, instead placing blame on colleagues, clients, the computer—and sometimes even you. Anne Loehr, in a Huffington Post blog titled “How to Effectively Manage Difficult Employees: The Excuse-Maker,” offers the 5Cs when working with such an employee:

  • Commit or quit. If you decide to try to salvage these employees, you must remember that you are making a firm and serious commitment to their future.
  •  Communicate. Have a frank and open conversation in which you come to an agreement on a definition of the problem. Determine how you will work together to solve it.
  •  Clarify Goals and Roles. Don’t assume these employees know exactly what is expected of them. Have a detailed discussion on responsibilities and goals.
  •  Coach. These employees will need your assistance if you want a long-term change of attitude. Coaching is your most powerful and flexible tool.
  •  Create Accountability. To avoid any backsliding in behavior, create a system to hold them accountable for their results.

The Gossip, according to Milligan, can be the most dangerous CAVE dweller of all. The emotional damage that workplace gossip can cause destroys trust, the foundation of high-functioning teams, resulting in a loss in productivity. In a Forbes article, “5 Ways to Stop Negative Office Gossip,” Lisa Quast offers the following tips:

  • Address the perpetrators, face to face, in a confidential location. Help them understand the impact their behavior is having on the team and the consequences if their behavior continues (from a written warning to a demotion and job loss).
  •  Meet with the entire team and let them know you will not tolerate gossip.

Zane Safrit, in his blog “Beware the C.A.V.E Dwellers in Your Organization,” tells us, “These are the…nattering nabobs of negativity, the expert marksmen who shoot down every idea with a question or a snark or sarcasm or a poignant pause. They are expert in all the reasons things don’t work, won’t work, never will work.”

While you can’t change them, you can inspire them, offer them resources and remove obstacles. If they insist on remaining in the CAVE, you might need to remove them from your group. They will only lead your team into unhappiness and failure.

Safrit offers ideas on how to entice them out of their caves.

  •  Offer them food. No, not literally (unless you think that would work). Offer incentives that are meaningful to them. Reward the right behavior.
  •  Entice them to take small steps toward change and reward each step with meaningful incentives.
  •  Create a safe environment for change, which is excellent for everyone but especially important to risk-averse CAVE dwellers. They learned somewhere along the way that mistakes are bad and are punished. You need to teach them a new process.

With time, patience and some of these tips, you will be on your way to helping your CAVE dwellers channel their heart and their positive energy to the benefit of your firm.

McDaid is The Council’s SVP of Leadership and Management Resources.

Coverage could be spotted everywhere, protecting players, tourists, sales promotions and construction.

According to FIFA, 2014’s World Cup racked up 3.2 billion viewers. While Russia provides a venue for the rest of the world to compete, such a large audience also provides a prime opportunity for terrorist groups and mounting safety concerns.

History has shown that major sporting events are not immune to acts of terror, and some have been devastated by them. For example, during the 1972 Summer Olympics in Munich, eight terrorists from a Palestinian terrorist organization known as Black September breached the apartments of Israeli athletes in the Olympic Village. After a 20-hour hostage crisis, 11 Israelis had been killed, along with one Munich police officer and five of the terrorists. More recent incidents include the 2013 Boston Marathon bombing that killed three people and injured more than 260 and the 2015 attack outside Stade de France in Paris, in which suicide bombers detonated their vests in three different areas around the stadium. This was part of a coordinated set of shootings and bombings around Paris that left 130 people dead and hundreds wounded.

According to underwriters Chris Parker and Chris Rackliffe at Beazley, the key to covering terrorism exposure is to take into account the location and assets that are being insured. “Whether there will be any high-profile or controversial individuals or companies present at the location to be insured; the physical security that an insured has in place at the locations to be insured; and their previous loss record—all of these factors have an effect on the premium rate that would be charged.”

With 64 matches played by 32 countries across 11 different cities, all within a month’s span, security and safety are a high priority for the host country. But Russia’s participation in the Syrian Civil War and policies across its Caucuses have heightened terrorist tensions inside its borders, and the last few years in Russia have seen a number of terrorist attacks, including a 2017 bombing in the St. Petersburg subway that killed 11 people and wounded more than 40. These attacks have not gone unnoticed, and premiums for covering terrorist attacks have risen almost 10% since Brazil’s 2014 World Cup. Beazley estimates that kidnap and extortion coverage runs about $25 million while policies for terrorism and loss of attraction total $250 million. For cyber attacks and data breaches, coverage can cost over $200 million.

Beazley World Cup

With Russia dealing with high costs and stakes, the post-Soviet country has ordered its authorities to withhold from the media information regarding murders, thefts and police investigations. This blackout will be carried out until July 25, 10 days after the World Cup ends.

“From a terrorism and K&R [kidnap and ransom] perspective, we assess each risk on its own individual merits and would not take into account the fact that information might have been withheld by the Russian Interior Ministry—unless there was another sporting event in Russia, of course,” Parker and Rackliffe said. “We would ask for the same information that we need in order to assess any exposure, and if the answers to the questions are unsatisfactory, then this would have an effect on our risk appetite for that particular event.”

While insurance companies have certainly done their homework for covering this year’s soccer tournament, it could pale in comparison to the plans and underwriting needed for the 2022 World Cup being held in Qatar. News of corruption, poor working conditions and terrorism could escalate premiums even higher when compared to today’s standards.

“We would say that there has actually been a much more recent turning point,” Parker and Rackliffe said. “Over the past 18 to 24 months, attacks at music and sporting events have changed the nature of risks and now mean much greater exposure for event organizers.”

The vibe
Denver isn’t a fly-over city anymore. We have an exciting downtown, great public transportation, four major sports teams and a zeal for fun, activity and wellness. The city is booming with construction and jobs across diverse industries. New restaurants and shops are popping up all over town, and there’s a thriving arts, culture and nightlife scene.

What’s to love
Denver is one of the healthiest cities in the country. We have four seasons, 300+ days of annual sunshine, and the largest public park system of any U.S. city, providing year-round activities for people to enjoy. It is truly a great place to raise a family.

Dining scene
Zagat ranked Denver No. 4 on the 2017 “Most Exciting Food Cities in America” list. Our dining scene is continuously growing, offering a diversity of cuisines, craft brews and spirits. We’ve embraced the market-hall food trend with The Denver Central Market and The Source.

Favorite new restaurants
Stoic & Genuine for caviar and oysters. Tavernetta for Italian food and great service. Tamayo for modern Mexican with flare (conveniently located next door to our office!).

Local favorites
You’ll find locals dining downtown at Cholon, an Asian fusion restaurant known for its delicious soup dumplings, and Guard and Grace, a steakhouse that offers happy hour specials and small plates. But to experience a true Denver classic, check out the Cherry Cricket in Cherry Creek. Go for the burgers and stay for the beer.

Watering holes
Williams & Graham is a favorite (be sure to make a reservation). From the front, it looks like a bookstore, but once you’re inside, it feels like you’ve passed through a time machine into a 1920s speakeasy. Ocean Prime has a fun martini selection. Dry ice makes for a crowd pleaser.

The Brown Palace Hotel and Spa in downtown is a must-see historic hotel. The surrounding area has so much to offer that is within walking distance or a quick ride share away.

Thing to do
Catch a Colorado Rockies baseball game. Coors Field is one of the most beautiful ballparks in the country. There’s not a bad seat or view in the house. The selection of beer and food is excellent and affordable. The Rockies are an exciting, up-and-coming team. Home runs fly out of the stadium, ensuring drama from the first inning to the last.

Don’t miss
Everyone should experience Red Rocks Amphitheatre. Attend a concert, or just hike the actual amphitheater and surrounding areas. It is beautiful!

Industry titans, socialites, glitterati. Rockefellers, Vanderbilts, Astors. U.S. presidents, European royalty. The tony town of Palm Beach, Florida, has been attracting a wealthy, powerful and connected crowd ever since Standard Oil Company executive Henry M. Flagler leveraged his millions to buy and build railroads in Florida and develop the coast. He opened his first resort for the monied class in 1894. The Royal Poinciana in Palm Beach was a six-story, Georgian-style hotel, which eventually became the world’s largest. As the story goes, the hallways were so extensive that the bellhops delivered messages and packages from the front desk to guest rooms by bicycle.

Flagler opened The Breakers, one of the grandest of grand hotels, just after Christmas 1926, which then and now is the start of the Palm Beach season. The Florentine Fountain near the entrance to the hotel is reminiscent of one at Boboli Gardens in Florence. The twin Belvedere towers on either side of the Italian Renaissance building are a nod to the Villa Medici in Rome. The Great Hall of the Palazzo Carrega in Genoa inspired the intricate paintings on the ceiling of the expansive lobby, to which 75 artisans from Italy applied their talents.

For more than a century, Palm Beach has never gone out of style for society folks and the well heeled, but this island enclave has certainly received a lot more attention over the last couple of years. In case you have just awakened from a Rip Van Winkle nap, President Donald Trump spends about half of his weekends at his Palm Beach club, Mar-a-Lago, aka the “Winter White House.” So, if you haven’t attended a meeting at The Breakers or vacationed at this charming seaside village, there’s no time like the present to check it out.

While you can enjoy fresh ocean breezes, shop on the beautifully landscaped Worth Avenue, play golf and tennis, and lounge by the beach year round, plan to escape the cold by arranging your Palm Beach escape during the winter season (the end of December through April), when you can take in a Sunday polo match at the International Polo Club Palm Beach. The caliber of polo (it hosts the largest field of high-goal teams and the most prestigious polo tournaments in the United States) and people watching (it is truly a jet set gathering) is outstanding. With the champagne pouring freely, it is also an awful lot of fun.

Instead, specialist product recall insurance has evolved significantly in recent years and can provide better financial protection and a more effective crisis response.

Product contamination and recall is the central risk facing food manufacturing and distribution companies. There were nearly 450 food recalls in 2017. Trends toward stricter regulation and advancing analytics have continued as the FDA and USDA, in conjunction with the Centers for Disease Control and Prevention, use whole genome sequencing to assist in identifying the source of food and beverage contamination and outbreaks.

Whole genome sequencing reveals the DNA makeup of an organism, enabling precise differentiation between organisms. The FDA performs whole genome sequencing analysis on samples taken during inspections of food manufacturing facilities and food products in the market. During foodborne illness outbreaks, the CDC compares clinical isolates from sick patients against the FDA database, which helps identify the source of the outbreak and the responsible companies.

The 2011 Food Safety Modernization Act (FSMA) has shifted food safety focus from reaction to prevention and covers all parts of the supply chain. The FDA now has the authority to stop production and distribution of products. Improved analytics can trigger a cascade of secondary results if the contaminated ingredients are traced to other products. These developments have occurred as the food supply chain has become increasingly global and has, therefore, added complexity. From 2004 to 2014, U.S. foodstuffs and animal and vegetable product imports nearly doubled—from $66.9 billion to $126.6 billion. Although it may be economically sound to make products in regions that afford lower labor and ingredient costs, product quality can be critically affected. Moreover, food safety protocols and regulatory oversight may be very different, particularly in developing countries.


Product recall is costly. The financial consequences range from the immediate costs of the recall and the value of condemned products to damaged brand reputation that may continue for years. Those at risk include importers, manufacturers (including contract manufacturers and private-label companies), distributors (including storage warehouses and transportation) and retailers.

The cost of contamination depends on the nature and extent of the contamination; the regulatory response; the level of negative publicity; and whether the product is an ingredient or final manufactured good. Ingredients, such as spices, can contaminate a large number of third-party products. The aggregated cost may far exceed the value of the contaminated ingredient.

Expenses include clean-up costs, consultancy testing and analysis, product replacement or repair, and product recall and/or destruction. And don’t forget the distribution costs for replacement products. There may also be third-party property damage and the associated defense costs.

Food contamination and recalls are particularly susceptible to common exclusions and coverage limitations in property and general liability policies. There may be limited, if any, property insurance coverage if the damage If direct physical damage is absent, recovery against typical property or general liability insurance becomes problematic. The pollution exclusion and impaired exclusions may also bar general liability coverage.

A vast majority of food manufacturers rely on supplier or contract-manufacturer indemnity to cover product contamination and recall losses. But contamination often occurs during the manufacturing stage. Even if the loss is attributable to third parties, indemnity is far from certain. The vendor may crash under the weight of multiple claims and limited coverage. A recent spice recall triggered recalls affecting more than 100 brands and nearly 800 products with different packages. A similar sunflower seeds recall affected more than 100 products.

Specialist product recall insurance has evolved significantly in the last two decades. This provides first-party coverage, thus removing the uncertainty associated with third parties. The insurance contains the key building blocks of a property policy: 

  • Property damage: replacement of contaminated (recalled) product and recall expenses
  • Clean-up costs: removal of the contaminant from the site
  • Business interruption: loss of gross profit plus expense to reduce loss resulting from the recall of product or reduction in manufacturing output. The most significant development in recent years is the emergence of coverage that includes thirdparty losses resulting from the recall of a contaminated product—typically a private-label product or ingredient. For bulk ingredient manufacturers in areas such as sugar, flour and whey powder, third-party coverage may be the most important. The coverage has been increasingly broadened to protect against third-party costs not covered by general liability. As many manufacturers have found, the nature of food recalls and the sensitivities around consumer safety mean a significant share of third-party claims fall outside general liability.

Most policies provide crisis consultants’ services. Typically, these services help companies understand the nature and severity of an incident and make decisions about a recall or communication with customers and regulatory bodies. In particular, smaller companies stand to benefit from this advice. The nature and extent of the contamination must be quickly understood together with the health risk to the public as well as any potential damage affecting commercial customers. Prompt response to food contamination incidents is critical since social media has accelerated the speed and breadth of communication. Information and misinformation can be quickly transmitted to a wide audience.

A company’s response within the first 24 hours is, therefore, crucial.

Alexandru is U.S. head of crisis management at Aspen Insurance. 

Susan is currently working on her Ph.D. at the world’s leading center in healthcare fraud, the University of Portsmouth in the United Kingdom. During her career, she has seen a lot, including her share of fraud, while saving her clients millions on prescription drugs. Her biggest concern today in the pharmaceutical sector of the healthcare industry is the lack of transparency in prescription drug pricing, and she is not shy about sharing her views. —Editor

Explain what you do.
We help benefits plan sponsors find pharmacy benefits managers, monitor their performance, review their clinical programs and review their contracts. I have a second firm, Pharmacy Investigators and Consultants, which essentially does fraud, waste and abuse analysis. We help managed-care organizations and some small PBMs uncover corrupt practices.

Describe the PBM landscape.
It’s dominated by three large PBMs that have 80-100 million lives covered under each one of them: Caremark, Express Scripts and Optum. Then there’s a second tier that includes MedImpact, Envision, Navitus, Marken Healthcare, WellDyne and Magellan. There’s probably a total of a dozen in this category. Finally, there are the tiny PBMs, which are basically resellers.

If I’m a corporation with 1,000 employees, how many PBMs do I have to choose from?
Realistically, probably 15 to 20.

CVS is about to buy Aetna. Cigna is about to buy Express Scripts. What does this hold for employers and the insurance brokers who represent them?
I don’t think it’s a good thing. The lack of transparency that is already in the industry will just get murkier. We now have an insurance company owned by a PBM, with the Caremark-Aetna deal, if it goes through. So you can underwrite a medical plan, keep all the rebates and it’s all within one company. You really have no ability to understand what the rebates are in the prescription drug plan.

Is the medical loss ratio meaningless in this case?
Exactly. The same thing has happened already with Optum merging with United Healthcare. That was the writing on the wall. Cigna’s claims processing system is owned by Optum. That meant Cigna had to find its own claims processing system not owned by a competitor. They needed to buy a PBM, so Express Scripts was something that was inevitable. It doesn’t bode well for employers or consumers, because there will be a lot less transparency.

How does CVS buying Aetna fit into this?
CVS is really two companies—a pharmacy chain and the PBM Caremark.

Anthem will be using Caremark while Caremark owns Aetna. There are geographic markets where Anthem and Aetna compete. I don’t see this relationship lasting long.

One reason reported for the Express Scripts deal was it would keep Amazon out of the PBM business. What is the threat?
Amazon announced it’s getting into the PBM business last year. The scuttlebutt is they’re now looking for a backbone claims processor.

The Affordable Care Act is not what it used to be when Obama was president. Amazon’s thinking is we have all of these young millennials in high-deductible plans. They’re going to want to purchase drugs cheaply, and they’re going to want them delivered next day—just like they get their groceries and everything else from Amazon.

I think that’s Amazon’s play. But it will need a claims processing system to adjudicate that and tie into other PBMs. The question is will other PBMs play nice with Amazon?

I know from experience with my PBM that they’ll say a prescription has been shipped, yet it takes a week or 10 days for it to arrive. Are PBMs high-tech at all?
No. They can’t get the drugs out the door because of their legacy systems.

You’ve got all these different legacy platforms and huge 70,000-square-foot mail order facilities, which are just nothing but overhead. You don’t need to house these medications in one central location. That’s how Amazon gets things to you quickly. It has the product out in the field, and it never really takes possession of it.

I ordered a book on a Saturday, and literally it was in my mailbox the next day. That’s what millennials are expecting from their prescription drugs, and that’s what Amazon promises to deliver.

When we help an employer with a pharmacy benefit plan, if it’s a traditional or spread contract, it’s difficult, if not impossible, to figure out what the PBM is going to make.

What do you predict will happen?
About 10 or 15 years ago, when the whole concept of banking went online, people said, “Who needs tellers? We can just have an online bank. We’ll keep your money, and you just do transfers over the internet.” Fifteen years ago people were skittish about that, but now it’s caught on. I think the same thing will happen in the prescription drug industry. Which kind of begs the question: what happens to the role of pharmacist? If you’ve been on a drug for a period of time, you don’t need a pharmacist telling you how to take it.

Does that might mean pharmacists will be working in PBM warehouses instead of at your local pharmacy?
I think so or a lot of retail pharmacies will go to dispensing and delivering in their area. Amazon will transfer the prescription to the local Walgreens, which will deliver it to me within hours. They’ll use Whole Foods or some variety of retail pharmacies they can get to deliver things quickly.

Brokers are complaining about transparency. Where is the lack of it, and where does it exist?
Everywhere within the cycle of a prescription drug there is lack of transparency. I think most notably when people say there’s lack of transparency what they’re talking about is a lack of understanding of prescription drug pricing.

Here’s an example. You buy your Lisinopril. You have a $10 co-pay, and you pay the pharmacist. She gets another $2. It’s a $12 prescription. And then your employer gets charged $25. The PBM takes the $13 spread and does not disclose it to the plan sponsor or to the pharmacy. Neither understands where the money went. Who made $13 on that prescription? They just never tell you.

When we help an employer with a pharmacy benefit plan, if it’s a traditional or spread contract, it’s difficult, if not impossible, to figure out what the PBM is going to make. You also don’t know what fee they’re going to take behind my back on claims.

I’ve read examples where the consumer pays “x” amount, which is actually more than the actual cost.
Yes, that’s right.

Let’s say it costs $5 for a prescription and the sponsor is paying $25. Where does the money go?
In your example of a $25 co-pay, say the member has paid the entire co-pay based on the contract between the PBM and the plan sponsor. That contract allows them to take the entire co-pay, even if the cost of the drug is lower. Certain contracts allow that. That’s one side of it.

And then you go to the pharmacy and they’re not being told what’s going on. The pharmacy’s arrangement with the PBM is to be reimbursed a lower price—or the lower of the cost of the drug and the co-pay. Then the PBM claws back the amount that the pharmacist has already taken as part of the co-pay.

The pharmacist gets what?
The pharmacist gets $5 or whatever. He initially collected $25, thought he was going to get $25, and then he gets $20 taken back, or $5, or $2 or whatever it is, taken back.

What kind of profits per prescription do PBMs make?
It’s estimated in the research that we’ve done that it’s about $15 to $20 a script. Some may only be $1 or $2—like a generic—but the brands may be $40 or $50.

PBM salespeople’s commissions are based on profitability. They know exactly what the profitability of each new sale is going to be. The PBM salesperson plays a delicate game. If he sets the price low enough to obtain the business, he then faces the conundrum that he must get the margin as high as possible so he can be compensated.

What kind of profits do PBM companies make?
It depends on each individual PBM. There are probably some making 3% to 5% profit, but then they’ve outsourced everything. The more insourcing, the more ability they have to make profit.

Express Scripts now even owns a wholesaler. Do you realize how bizarre that is? Because wholesalers are the ones that establish pricing. When your PBM owns a wholesaler, think about that. They buy drugs from that wholesaler. That wholesaler sets the price. You’re buying from a wholesaler you own and control and you tell what to do. 

It’s fair to say they raise the price of drugs.
Absolutely, it’s fair to say that.

And pharmaceutical companies can charge anything they want in there.

When your PBM owns a wholesaler, think about that. They buy drugs from that wholesaler. That wholesaler sets the price. You’re buying from a wholesaler you own and control and you tell what to do.

If the insurer is independent, it would be on the other side of this equation.

And it would be fighting for better pricing.
Absolutely. But when they’re buying PBMs there’s no incentive. In fact, their incentive now becomes to play the game with everybody else.

Are smaller PBMs more transparent?
You have smaller PBMs that have their own retail network contracts, and those can be transparent because they own the contract between their company and the pharmacy chain. They know exactly what they’re going to be reimbursing the pharmacy chain.

Some smaller PBMs resell other PBMs’ networks. A small PBM may go to Magellan, for example, and Magellan owns their own contracts. Magellan will then sell them the retail network. At that point, the PBM that’s using Magellan does not know what Magellan’s spread is. So, yes and no. Some of these smaller PBMs are transparent, and some aren’t.

You’ve got to ask some really deep questions. Do you own your own retail network? Are you leasing another PBM’s retail network system? Do you know what spread the networks are taking? And then do the same thing with rebates.

How can everyone be satisfied: consumer, sponsor, pharmacy, PBM, carrier? People need to make a profit.
I totally agree. I want that on the record. PBMs need to make a profit. We want them to make a profit because they provide a very good utility in the industry. We want them to be viable, we want them to be profitable, but we don’t want them to have undisclosed spread where you can’t evaluate how much they’re taking on your pharmacy bill.

Are mergers with insurers a conflict of interest?
Absolutely. In my view of the world, I think it’s absolutely a conflict of interest. When you’re hiring your medical carrier or you’re hiring a PBM, you don’t think the two are in cahoots. There’s no separation of duties here, where the PBM says, “Maybe you don’t need all those high-cost drugs.”

Isn’t the PBM supposed to be representing the corporate client and the consumer?
I think originally in 1985 that was their mission. I think their mission today has become much murkier. They changed their allegiance somewhere between 1985 and now—depending on the company—to the drug manufacturers and insurance carriers as they merge.

If you are a very large health plan and you want to have a PBM relationship, you don’t have many choices. There’s not a middle tier that’s going to have the ability to take on five million or two million lives. That’s probably why Kaiser does it themselves. But others don’t have that ability.

For most employers between 1,000 and 10,000 lives, you don’t want to go to those big PBMs. Big PBMs are already serving 80 million lives. They’re not going to love a client with 5,000 or 1,000 lives. They’re not going to give them attention or account service or be beholden to them.

If you’re a 1,000-life employer, you’re going to probably go to the middle tier and get very good service. And then it’s going to depend on you and where you are and who’s your account rep. If you’re a hospital, you probably would go to American Healthcare. They excel in that line of business. If you want to go with Magellan, you’re probably some kind of government. You know, they do really well with government plans.

Each one of these middle-tier PBMs has a personality. You can’t really say who the best is. It depends on you and who you are and what your baggage is.

What excuses do PBMs give for not being transparent?
They say it’s none of your business. I contract with you for a certain price— you, in this case, being the corporate client. You either like that price or you don’t. And I may contract with a pharmacy for another price, and that’s nothing to do with you.

What can brokerages do to help clients with this?
Most of the national brokerages have PBM experts. They understand this. Smaller brokerages need to be able to plug into some kind of expertise. This is an extremely complicated industry with extremely complicated contracts, and you need to know all the little angles within the contract to advise your client.

A lot of states are digging into PBMs. What do you think they find?
That is a whole can of worms. The state of Arkansas passed legislation that basically told PBMs they couldn’t reimburse a pharmacy less than what you could buy that drug for. Arkansas is pretty unique. Arkansas has a lot of rural pharmacies. You don’t have a lot of big chains buying in huge bulk. The state is saying PBMs can’t reimburse anyone less. The trade association representing PBMs sued Arkansas to stop this. I think they will prevail.

They are a utility we desperately need in America, and they ought to be regulated like a utility where there aren’t these gross and excessive profits. That’s the kind of thinking we need to evolve around.

South Dakota has similar legislation. Alaska has talked about it. It is nuanced because it is so spread out. One of the things PBMs forbid their pharmacies in network to do is mail prescriptions. They don’t want competition with their own mail order facility. But in Alaska, where you have to go an hour and a half to get a prescription drug—that’s the local pharmacy—a lot of the local pharmacies there mail drugs, and PBMs want to kick them out of the network. I mean, how else are these people living in small villages in Alaska going to get their prescriptions?

Connecticut is considering legislation promoting transparency, saying you need to be able to understand prices. If you ask your PBM, they have to explain the differentials in pricing as well as you may choose an auditor of your choice. I don’t know where that’s going in Connecticut, but Hartford is the insurance capital of the world. Will that affect transparency?

What about the feds?
I think the feds have missed the boat. I think when President Bush passed Medicare Part D, the federal government could have required they negotiate pharma pricing. They did not. That’s unfortunate because now we’ve got Medicare Part D where you’ve got the same thing going on with spread pricing. Allegedly, there’s not supposed to be spread pricing in Medicare Part D, but there are all kinds of other games that are being played.

The federal government had the opportunity to negotiate drug prices, just like Canada, just like England, just like every other first-world country. Instead, they let the market compete, and that was a mistake. Can the feds ever catch up now that the cat’s out of the bag? I don’t think so.

What’s the biggest problem we face with PBMs that we can do something about?
I think when PBMs became publicly traded entities where they had to make Wall Street earnings every quarter, all of a sudden they had perverse incentives. They are a utility we desperately need in America, and they ought to be regulated like a utility where there aren’t these gross and excessive profits. That’s the kind of thinking we need to evolve around. We have seen where 25 to 30 years of market pressure has done nothing to control costs.

As a consultant, how much money can you save your clients?
Probably 10-15%, easy. And, you know, like for one of my clients, we have been auditing them and their PBM for 12 years. You would think that by this time the PBM would be aware that we were auditing and that we’re going to have findings every year and that they would do things the right way. And every year we have money coming back to our clients because we audit.

To give the PBMs credit, this is a hard business to come up with a financial projection. Because you have a bunch of employees on January 1 and even after a completely transparent pass-through arrangement, you don’t know where those employees are going to go. You don’t know if they’re going to go to Walgreens or independent pharmacies. You have to bet on where they’re going for their prescriptions and then come up with a discount off average wholesale price that’s going to meet that.

PBMs are not always accurate in their forecasting. They’re going to make mistakes. They’re going to make projections that they know they can’t meet just to get the business. That’s where we come in to audit these programs. And that is a major problem right now of auditing.

How do PBMs charge their employer clients?
In a transparent arrangement, they have an administrative fee where they may charge $5 per member per month for services for account management and their eligibility maintenance and their rebate negotiation. We audit performance guarantees. If they don’t meet them—maybe because the retail brand claims aren’t at 15% as projected but come in at 14.76%—that 0.25% difference we’ll get back for our clients.

And that’s substantial?
Even a half a point or a quarter of a point is substantial when you’re spending $100 million a year.

Do most businesses of that size hire someone like you to do this?
No. Probably less than 1%. And the PBMs are making it harder and harder to audit. Four of them decided about a year ago they were not going to let audits proceed. And so they came out and said my firm and other firms like mine— independent, small auditors—would not be allowed to audit them. Now, they can supposedly give clients fantastic discounts off average wholesale price and they’ll never be held accountable.

Can we operate without PBMs?
No, not in the current healthcare system. The government isn’t going to get involved. We don’t have a national health service like the United Kingdom. So we need PBMs, but we need them to operate similar to the 401(k) fiduciary role. That’s what’s going to change PBMs. When they have to act solely for the benefit of the member—the beneficiary—that’s when the PBM industry will change. And I predict that will be the demise of some of the biggest in the business.

Is there any movement to put pressure on PBMs?
I think there is within the Department of Labor. I think there’s more of a move than I saw four or five years ago. It was under the Trump administration that ERISA, what’s called the fiduciary rule, got implemented for 401(k) plans. I’m hopeful that within the next three years that happens to PBMs.

Brokers are trying to lower costs for clients, and they’re really frustrated with the current system.
I guess if I was to advise consultants, fellow consultants and brokers, I would say educate yourself, get expertise. These contracts are really complicated. These are 40-50 page documents full of “I gotchas” and “get out of jail free cards.” They’re very complicated. I think attorneys who work in this area often don’t understand the nuances of these contracts. I’ve had top-shelf attorneys look at a contract and read right through where it says, “mutually acceptable auditor.” That seems like nice language. Yet you don’t want an auditor who is somebody’s brother-in-law that’s never been in the PBM industry. But if you have 22 years’ experience in the PBM industry, a PBM can still block you from an audit.

What’s one of your most interesting cases?
We’ve done some really interesting work with hospitals. A lot of the rural hospitals in America are small and typically contract for pharmacy benefits with Blue Cross/Blue Shield and whatever PBM comes along with a big carrier. What we’ve done is carve out those PBM relationships. In one case, we eliminated the spread pricing at the hospital pharmacy for its employees. That did two things: it eliminated spread, which was about 15%, and it enabled better bulk purchasing because we’re driving all that volume from the employees into the hospital pharmacy.

When a bank owns COLI, it is referred to as BOLI (bank-owned life insurance), and when an insurance company owns COLI, it is often referred to as ICOLI (insurance company-owned life insurance). No matter what terminology is used—COLI, BOLI or ICOLI—it is simply life insurance owned by and payable to an employer on the life (or lives) of one or more of its employee(s). In this context, we use “COLI” to mean any type of employer-owned life insurance on one or more of its employees.

Businesses purchase COLI for a variety of reasons. These are the most common.

Buy/sell agreements
It is common practice among closely held businesses to have the company purchase life insurance on each owner to fund a buy-sell agreement. When an owner dies, the company receives a tax-free life insurance death benefit that is used to purchase the decedent’s share of the business from his or her heirs. Using cash value life insurance may also provide the company with a source of tax-free income to buy out an owner when he or she is ready to retire.

Key person protection
The death of a key employee can be disruptive to the business, and it may take a long time to be able to find a replacement. Life insurance can provide cash to the business to ease the financial stress while recruiting and training a new employee to replace the decedent.

Economic benefit (endorsement) split dollar life insurance
To help executives obtain personal life insurance coverage, as well as provide the employer with key person coverage, companies often purchase COLI on their key employees and then “endorse” a portion of the death benefit to the employee, usually for only as long as the employee is employed. Each year, the employee must pay tax on the value of the death benefit that would be paid to his/her personal beneficiary. That value is measured either by the IRS Table 2001 rates or by the carrier’s annual renewal term rates.

Nonqualified deferred compensation plans
COLI has long been a financial asset used by companies of all sizes and industries to informally fund a nonqualified deferred compensation plan (NQDCP). The employer owns and is the beneficiary of life insurance contracts on the lives of the executives who are eligible to participate in the NQDCP. Most plans permit participants to allocate their NQDCP balances among a variety of notional investment options. The employer chooses those options from among sub-accounts in variable universal life COLI and allocates the COLI cash values to match the participants’ balances so that the NQDCP liability and the COLI cash values move in tandem on the company’s balance sheet. In addition, the COLI cash values can be withdrawn or loaned to the employer on a tax-free basis and used to pay benefits to employees in future years. Finally, tax-free death benefits can be used to recoup some or all of the costs of the NQDCP.

Funding other employee benefit plans
COLI is also purchased, primarily by banks and insurance companies, to fund the costs of other employee benefits, such as a 401(k) matching contribution, employer-provided medical and disability insurance, among others. When COLI is purchased for these purposes, the employer asks employees who fit within the categories outlined in Code sec. 101(j) (discussed later) to consent to being insured.

Funding an ESOP’s repurchase obligation
Companies that are wholly or partially owned by an employee stock ownership plan have a responsibility to purchase stock that is distributed to ESOP participants upon the participant’s termination of employment, death, disability, when the participant diversifies his/her account balance and when the participant is due an in-service distribution or required minimum distribution from the ESOP. There are a number of ways in which companies fund to meet this obligation, including the purchase of COLI on the lives of key executives. Similar to when COLI is used to offset the costs of a NQDCP, the tax-free withdrawal and loans from cash value along with tax-free death benefits make COLI, either alone or in conjunction with another asset, an appropriate and cost-efficient method for funding the repurchase obligation.

Insurable Interest
The owner of a life insurance contract must have an insurable interest in the person who is insured when the policy is purchased. This means that the policy owner (or the owner’s named beneficiary) would suffer a financial loss in the event of the insured’s death. Any individual is permitted to purchase a life insurance contract on his/her own life and designate the beneficiary.

Each state has its own statutes regarding insurable interest in the life of an insured individual. There is no federal statute specifically addressing this issue, so it is important to know and understand the statute of the state in which a life insurance policy is issued. In some states, a policy issued to someone who lacks insurable interest and where the insured did not consent, may be paid to a person who is equitably entitled to the proceeds and who is someone other than the named beneficiary, if a court so orders.

Code Sec. 101(J): Make Sure Death Benefits Are Income Tax-Free

Under Code section 101(j)(2)(A), death benefits paid to an employer will be free of income tax if notice and consent were obtained from the employee and that employee falls into one of the following categories:

  • The insured was an employee at any time during the 12-month period before death
  • At the time the contract is issued, the insured is
         o A member of the board of directors
         o A highly-compensated employee          
         o One of the five highest-paid officers
         o A shareholder who owns more than 10% in value of the stock of the employer 
         o One of the highest paid 35% of all employees.

When determining if an employee falls into one of the exempt classifications above, the date the contract is issued controls, not the date a consent to insure is signed. In this context, “issued” means the latest of: (1) the date of application for coverage; (2) the effective date of coverage; or (3) formal issuance of the contract.  If an employee signs a consent form but terminates employment prior to the issue date, that individual does not fall into one of the exceptions above.

The employer’s notice to the employee must state the maximum face amount for which the employee can be insured, that the employer (or policy owner) will be the beneficiary and that the coverage may continue after the insured is no longer employed by the employer.

Every taxpayer that owns one or more COLI policies issued after Aug. 17, 2006, must file a Form 8925 with its tax return showing the number of employees insured at the end of the year, the total amount of insurance in force at the end of the year, and stating that each insured consented to the insurance.

COLI Products
COLI products are specifically designed and institutionally priced for the corporate market. These products generally have lower upfront loads, high early cash values and lower insurance costs than products designed for the individual market.

COLI is a valuable asset to companies that have a long-term need for protection against financial loss due to the death of a key employee or owner of a business; to informally fund nonqualified retirement plans; to recover the cost of those plans through the receipt of tax-free death benefits; and to provide a source of tax-free income through cash value withdrawals and loans to the company. COLI products are specifically designed to provide the purchasing company with income on its financial statements in the early years to satisfy the needs of shareholders, partners and potential creditors. When designed properly, a COLI program may help mitigate losses due to the death of key person or because of costly employee benefit plans.

Companies that integrate their HR technology can make better use of their data to gain insight into what their employees want. By being able to analyze reports and learn from benchmarking, brokers can offer clients actionable insights that can help:

  • Find opportunities to improve their benefits strategy and allow their people to take control of their options
  • Bridge the gap between perception and reality by strategically addressing employee engagement and communication
  • Understand how they compare to other companies and take action to stay competitive.

ADP believes a benefits technology solution should allow clients to streamline employee eligibility, benefits calculations, communication and workflow management within a safe and centralized digital environment. One way brokers can help advise clients on what their employees want is to encourage the client to review HR and benefits technology systems to determine:

  • What information is available and how current it is
  • What reports can be pulled and what they can tell someone
  • What kind of functionality there is for integrating data and automating those reports
  • What actionable insights the people-data suggest
  • What’s missing and what can be done to get it
  • What the employee experience is like
  • If an intuitive enrollment experience and tools are in place to help employees select the plan that best meets their needs
  • If there is a mobile app for easy access to benefits information for employees.

That can be good news for brokers: the increasing amount of regulation and compliance issues that HR departments must deal with gives brokers an opportunity to separate themselves from the field.

As human capital management matures from leading edge to must-have for many clients, employers want brokers to assume a stronger leadership role in gathering information and making decisions about HCM systems. That’s according to the “ADP Employer & Employee Benefits and Human Capital Management Study,” conducted by SourceMedia Research in 2016.

Bruce Whittredge, ADP vice president of channel sales for major accounts, says the workplace is evolving at a rapid rate and brokers increasingly are asked to lead conversations regarding their client’s HCM strategy, systems, people and resources, strengthening the broker’s position as a trusted advisor.

It’s a trend Darren Brown, executive vice president for employee benefits at ABD Insurance & Financial Services, has seen developing over the past decade.

“Over the last 15-plus years, we’ve seen an emergence of the employee experience and how technology can play a key role in the retention and recruiting of employees,” Brown says. “Procurement of insurance programs is probably the easiest part of the job today. It’s the strategy, buildup and delivery of the programs that provides the most value today to people managers and requires the most thoughtful work. Today’s leading brokers and consultants understand how technology plays a prominent role in this cycle and are right in the middle of how to improve this experience for HR and the employees they support.”

For many clients, HR is transforming from an administrative role that operates in silos and is tactical in nature to a strategic function that includes change management, company culture, workforce demographic shifts, process improvement and more. Benefits brokers are recognizing the need to extend their ability to add increased value around this HR transformation.

“Brokers have always been front and center on the benefits administration process for employers,” Brown says. “The great news is that technology over the last 20 years has replaced paper and improved this process for all parties. The trend over the last 15 years has been identifying and introducing software-as-a-service-type product to the rest of the employee life cycle—onboarding, recruiting, performance management, etc. This is the challenge of the business but also the most rewarding, because as a trusted business advisor, you are addressing much broader themes for the clients you serve.”

It’s the strategy, buildup and delivery of the programs that provides the most value today to people managers and requires the most thoughtful work.

Darren Brown, EVP for employee benefits, ABD Insurance & Financial Services

A company’s benefits package can be a tool to separate it from its competitors to find and retain the best talent. Because there are many options and clients have different needs, brokers increasingly must create more specialized packages. Today’s workers aren’t only switching employers for higher wages, they’re considering other factors like flexibility, meaning in their work, philanthropy and company environment. Keeping workers happy can be the difference between retaining them and losing them.

A 2016 study by Guardian Life Insurance found 84% of employees who have high satisfaction with their benefits also have high job satisfaction. That means the brokerages that stand out from competitors will be the ones that can help employers create benefits options specific to the client’s workforce.

“What’s the cost of not having a great benefits package?” Whittredge asks. “It could be more turnover or losing the war on talent. What your benefit package says is a direct reflection of the culture you are trying to build as more people look at benefits as a huge play for them.”

Data Dissection

Determining what is a good benefits option for the client is challenging. But big data can offer brokers precise insight for helping craft a benefits program. It can help them understand more about what a client’s employees need and want and then begin to tailor a package. One of the leaders in compiling workforce-related data is ADP, which administers benefits for one of every eight private sector employees in the United States.

ADP is the largest provider of HR services in North America, Europe, Latin America and the Pacific Rim. It pays 26 million workers in the United States and 13 million elsewhere. In 2016, it processed nearly 60 million W-2s within the United States and electronically moved $1.7 trillion in client tax, direct deposit and related client funds in the United States. It has more than 650,000 clients worldwide and access to 30 million people-records.

These data can provide employers more clarity into what benefits their workforce wants. That can be critical as employers try to manage five generations of workers.

THE SILENT GENERATION consists of workers ages 71-89 and makes up less than 1% of the U.S. workforce. According to the Society for Human Resource Management, these workers place a strong emphasis on rules, lead with a “command-and-control” style and prefer face-to-face interaction but communicate best formally.

What your benefit package says is a direct reflection of the culture you are trying to build as more people look at benefits as a huge play for them.

Bruce Whittredge, VP of channel sales, major accounts, ADP

BABY BOOMERS, ages 54 to 70, make up 27% of the U.S. workforce, but their numbers are declining. Baby boomers are retiring at a rate of 10,000 per day, yet many can’t afford to retire and want to work part-time or seek contract work.

The ADP Research Institute notes baby boomers are delaying retirement, making it more difficult for workers in subsequent generations to reach senior-level positions and key leadership roles. However, baby boomers have an immense amount of knowledge and skills and are looking for a way to share them before they retire.

GENERATION X, ages 34 to 53, make up 35% of the workforce. Data indicate they prefer independence and fewer rules and want to balance work and family. These workers are sandwiched between a large population of baby boomers and an even larger population of millennials. This group is starting to focus on future-oriented areas like retirement, while also climbing the career ladder and looking for ways to continue advancing. Coaching and leadership development are critical for these workers.

MILLENNIALS, ages 20 to 33, make up 37% of the workforce. They tend to take an entrepreneurial approach to work, prefer direct communication and feedback, and want a social, friendly work environment. Data from the ADP Research Center indicate these workers want opportunities to learn, grow and advance their careers. Their reputation for changing jobs often reflects the failure of organizations to train them.

GENERATION Z workers, under 20, are just entering the workplace and make up 1% to 2% of the workforce. According to SHRM, they are likely to use Twitter to find jobs and communicate best by smart phone/email. They came of age during the recession and put money and job security at the top of the list.

A 2017 study found few senior executives and HR professionals can translate human capital management data into predictive insights. According to the Mercer 2017 Global Talent Trends study, nearly one in five is generating only basic descriptive reporting and historical trend analysis. Brokers who can analyze big data can help their clients identify emerging trends and make better-informed business decisions.

ADP, the largest provider of HR services in North America, Europe, Latin America and the Pacific Rim, pays 26 million workers in the United States and 13 million elsewhere.

Whittredge says brokers who can dig deeper into data will be able to identify areas where clients should consider changes. For example, he says a company may think employees want a high-deductible plan with certain options but the data indicate only boomers are using the plan as intended. Upon examination, the data may indicate that millennials require different healthcare options and that segment is growing by 10% a year. Brokers who are armed with these numbers can make plan recommendations that will better serve their multi-generational employee population in the years to come.

Just a few miles away from the five-star luxury resort in Colorado Springs, the Springs Rescue Mission endeavors to treat those experiencing homelessness with dignity, respect and honor. That might mean they sit down to dinner at a table adorned with tablecloths and flowers. Or it might mean they get to use high-end towels to dry off after a shower. Or they receive a delicious banquet-quality meal.

The mission, home to Mission Catering (the organization’s for-profit social enterprise) and a culinary arts program for men in addiction recovery, recently added a rich new source of meals and ingredients. Local hotels, led by The Broadmoor, have begun donating banquet extras to the mission in significant quantities.

The initiative has taken almost a year to pull together. The Council provided help in dealing with legal issues. The hotel worked to garner community support. And the mission was able to secure donations for a new refrigerated truck for deliveries. And it all began with a question posed at a Council event.

Making It Work

Molly Cohen attended the June 2017 Employee Benefits Leadership Forum at The Broadmoor with her husband, Rob Cohen, then chair of The Council. She noticed the considerable amount of leftover food prepared for the meeting and spoke with her husband about it. As a pediatric nurse who worked for 31 years at Children’s Hospital Colorado, Cohen had long taken an interest in issues of global hunger and poverty. “It’s something I’m mindful of every day,” she says. She has volunteered with Denver-area food banks, making sandwiches with her church group for residents of low-income housing, and was bothered by the waste.

Rob Cohen, chairman and CEO of The IMA Financial Group, in Denver, mentioned it to Ken Crerar, president and CEO of The Council. Crerar previously had seen food recycling efforts work through the DC Central Kitchen—a community kitchen that works to reduce hunger and poverty. Crerar had casually mentioned the possibility of food recovery to the hotel before, but the conversation hadn’t gone far; there had been many unknowns, including concerns about potential liability. Now, however, the time seemed right to revisit the opportunity with a more formal, researched approach.

This time he decided to dive in headfirst and brought a small legal team on board to explore the possibilities before presenting the idea to The Broadmoor.

“We go to Colorado Springs twice a year for meetings, and this was our 16th meeting in eight or nine years,” Crerar says. “We’re invested in the community, and people were excited about giving something back.”

On the surface, it would seem to be a no-brainer: people are hungry, and others have food to share. But it’s not so simple. Packaged donations are one thing; excess prepared foods are another. Restaurants and hotels often have been reluctant to donate these items, concerned that they might result in food poisoning due to improper handling.

We were able to meet the needs of the more than 300 guests that we shelter every night with this extraordinary food. There was a lot of protein. A lot of vegetables. And it would have been thrown away.

Larry Yonker, president and CEO, Springs Rescue Mission

That’s where Scott Sinder and Josh Oppenheimer entered the picture. Sinder, a partner in the Washington, D.C., office of law firm Steptoe & Johnson, is chief legal officer for The Council. He previously joined Billy Shore, founder of Share Our Strength, a nonprofit that aims to end childhood hunger, in working on the 2004 John Kerry presidential campaign. That experience, Sinder said, provided a “conceptual perspective” of food rescue efforts.

But it wasn’t until Crerar approached him about the legalities of making it happen at The Broadmoor that Sinder learned about the multitude of laws in place. He discovered Good Samaritan legislation that protects donors who give without malicious intent or knowledge of contaminated food.

“I’m an American lawyer, so the idea that, if something goes awry, people will sue you does not surprise me,” he says. As there are interlocking state and federal laws in place, one being more straightforward than the other, “we had an internal process in working this out.”

When Oppenheimer, an associate at Steptoe & Johnson, performed much of the initial legal analysis with Sinder’s assistance, they discovered a distinct lack of case law. It’s possible people haven’t sued because restaurants and hotels have not been willing to take the risk in the first place. It’s also possible the beneficiaries of such programs don’t want to bite the hand that feeds them.

In 2016, the Food Waste Reduction Alliance reported 25% of retail/wholesale respondents to a survey—and 39% of restaurant respondents—were concerned that food donations would expose them to liability. The FWRA also reports that up to 40% of the food grown, processed and transported in the United States will never be consumed and that nearly 50 million Americans, including 16 million children, are short of food.

And yet, Sinder and Oppenheimer were able to do what Crerar asked. They found a way to make it work. “It reminded me why I love working for Ken,” Sinder says. “It was another example of how he gets you into good things.”

Crerar brought the team’s research, combined with strategy from DC Central Kitchen, to Jack Damioli, president and CEO of The Broadmoor. He asked about donating surplus food items to an area organization during The Council’s next meeting. Damioli, already familiar with the good work of the Springs Rescue Mission, contacted Larry Yonker, the organization’s president and CEO. The Broadmoor confirmed it would be able to certify the food for donation to meet health requirements and even volunteered to deliver it.

“It’s such a wonderful thing to be able to do,” Damioli says. “I just wish it hadn’t taken so long to implement. I’m a resident of Colorado Springs, and I see what happens in the city on a daily basis. I see the need.”

Teamwork, Recovery and Growth

Springs Rescue Mission, founded in 1996, provides about 600 meals a day, seven days a week, to those experiencing homelessness. That’s nearly 220,000 meals a year, not counting special events at Thanksgiving, Christmas and Easter. The organization has seen the need rise significantly since 2014, when it provided 104,000 meals.

Less food waste is going to the landfill and, in turn, helping those in need—a true win-win situation for all.

Jack Damioli, president and CEO, The Broadmoor

“The number of people experiencing homelessness here has doubled in the last few years,” Yonker says. “Everybody wants to blame the legalization of marijuana. I do think that has an impact on the behavior of our guests and the hopelessness they feel. It has brought transients to town, but I don’t think it has affected the chronically homeless.”

Yonker points instead to the fact that Colorado Springs is a “big military town,” with Fort Carson, the U.S. Air Force Academy, Peterson Air Force Base, the North American Aerospace Defense Command (NORAD) and Schriever Air Force Base all nearby. Recent expansions and increases in housing prices have had a significant impact, as have the number of veterans challenged by post-traumatic stress and alcohol or drug addictions.

As part of serving its community, Springs Rescue Mission offers a behavioral, trauma-based residential recovery program in addition to job skill training in facilities management, warehouse management, customer service and culinary arts.

As for the meals, however, the mission spends between $100,000 and $120,000 annually on its food budget in addition to receiving items from the area food bank and other organizations. Receiving banquet excess, then, could mean an extensive drop in costs and the ability to expand.

In several trial runs last fall, starting with The Council’s Insurance Leadership Forum in October, The Broadmoor donated more than 3,500 pounds of food to the mission. The resort’s traditional practice is to prepare extra food for banquet buffet meals to ensure various items won’t run out, so none of the food donated had been previously served—or even taken out of the kitchen.

These donations, however, are not just about quantity; they’re also about quality. Beef tips and leg of lamb, for example, may be served as prepared or, more importantly, repurposed in other recipes to feed more people. Some guests, Yonker says, have tasted asparagus for the first time.

“You would expect the food from The Broadmoor to be great,” he says. “From the standpoint of the impact it had on us, with that first trial, for four days we were able to serve our homeless guests with these items.

We were able to meet the needs of the more than 300 guests that we shelter every night with this extraordinary food. There was a lot of protein. A lot of vegetables. And it would have been thrown away. It was an amazing experience.”

An Awesome One

But Damioli wasn’t finished. In early January, he met with the Pikes Peak Lodging Association, which includes hotels in the Colorado Springs area. He explained the program and asked for assistance, and four additional hotels immediately stepped up to participate. “I’m still working on other properties,” he says. “It’s still early, and it’s taking everyone a little while to work through the logistics and figure out this is a good thing for everyone. Less food waste is going to the landfill and, in turn, helping those in need—a true win-win situation for all.”

According to the Food Waste Reduction Alliance, nearly 50 million Americans, including 16 million children, are short of food.

A refrigerated truck has now been purchased with a combined $50,000 donation from the El Pomar Foundation and Anschutz Family Foundation. The Denver-based Anschutz family owns The Broadmoor; the foundation is the charitable organization co-founded by Spencer Penrose, the Philadelphia-born businessman who settled in Colorado Springs in 1892 and opened The Broadmoor in the summer of 1918.

There have been other collaborations, too. Guests from Springs Rescue Mission and other local nonprofits helped serve hot chocolate at an event at The Broadmoor’s Seven Falls attraction during the holidays and received proceeds from admission. The resort’s owners have contributed to a current expansion project at the mission to accommodate increasing demand. And Damioli hopes for further collaboration and training opportunities between the culinary staff of both organizations.

“This was just a great example of teamwork, where one person comes up with an idea and somebody else jumps on it and then somebody else takes it to the next level,” Rob Cohen says. “We get together as an industry, and the meeting is phenomenal from the standpoint of us exchanging ideas and information. But if you think about the fact that we can affect and change the world at the same time, that takes an already great meeting and turns it into an awesome one.”

Yonker, always happy for additional resources and compassionate hearts, knows that stereotypes and misconceptions still exist about those experiencing homelessness. In whatever way possible, the mission works to meet people where they are and help them get back on their feet. In the last two years, 40 men have graduated its addiction recovery program gainfully employed. Even on the mission’s campus, there’s a focus on optimism with bright colors and well maintained facilities—with all of the cleaning and facilities work performed by those the mission serves.

“You see smiles,” Yonker says. “Sometimes they’re toothless smiles, but they feel like they have a purpose again. They feel like they have value. And serving really nice food like this, it’s kind of over-the-top as far as giving people the sense of being just like anybody else. It’s nice to be treated that way…. We try to make the experience as positive as we can so they can see hope and they can see their lives differently.”

In coming days, Yonker says, he sees “a lot of things blossoming” in the relationship between the mission and the resort. “They’re the five-star hotel, and we’re the no-star hotel,” he says. “But with this kind of food rescue, we just might turn into a two-star.” An added bonus: The Broadmoor donated the luxury towels that mission guests use after showers.

“I joke that 70% of the people in Colorado Springs have never dried off with a Broadmoor towel,” Yonker says. “But I’ve got 300 guests using them here. It’s kind of funny, but it’s also fun. These little touches affect people in ways we can’t explain. It’s really neat to see The Broadmoor understand how blessed they are and how unique they are in a community like this.”

Soltes is a contributing writer.

Some manage speeding tickets. Some pay for adoption services. The following are just a handful of benefit options and how they work.

Purpose: Six years ago, Peerfit was created to redefine the way employers were engaging in wellness. Emma Maurer, vice president of enterprise health, says the company sought an answer for employers subsidizing unused big-box gym memberships.

Peerfit built a network of fitness studios offering yoga, Pilates and boot camps. Employees have access to any of the available classes via credits an employer purchases. Employees can go online, check out their options and book the classes.
“This is important in the age of personalization because they can customize it for each employee,” Maurer says. “People can do things they are interested in and can physically do.”

Cost: Employers pay only when people go to classes. They typically make one class each week available to an employee. The cost varies depending upon the location and the number of credits purchased, but Maurer says a 500-employee company in New York might expect to spend $10,000 per year for coverage.

ROI: Wellness programs can be difficult to measure, Maurer contends, because it’s hard to measure when something like cardiovascular disease is prevented through exercise. But Peerfit can show employers exactly how money is being spent, who takes part and the percentage of overall engagement.

Extras: Part of the engagement process is enabling people to invite others to attend classes. An employee can send invitations to others, and with the click of a button, the class is reserved for them as well. Maurer says this encourages the social aspect of the classes, like a healthy happy hour.

Purpose: The company introduced its first legal plan to the market 46 years ago. The goal was to provide assistance to people “in the middle,” says Emily Rose, LegalShield’s senior vice president of broker and partnership sales.

“People with lower incomes can get legal aid, and those on the high end probably have a private attorney on retainer,” she says. “Plans were brought to the marketplace to ensure the general public had reasonably priced access to attorneys.”

The program has evolved into a package of services covering common legal matters like speeding tickets, estate planning, adoption and bankruptcy.

Cost: Everything is covered in one plan from initial consultation to legal representation, if needed, for a $200 annual payroll deduction. This covers the employees, spouses and dependents.

ROI: Money in versus money out is the best way to figure ROI, Rose says. On average, someone would be charged $300 per hour for an attorney (as opposed to $200 annually for their services). Uptake is typically 12% to 15% of employees in the first year and grows in subsequent years.

Extras: The organization takes a white-glove approach to customer service, according to Rose. Attorneys in the network respond to calls within eight hours; the industry standard with legal plans is 48 hours, she says. They also have a mobile app that allows clients to take a picture of a speeding ticket and send it to their attorney “before the police officer is back in his cruiser,” she says.

Healthy Paws Pet Insurance
Purpose: Pays for unexpected accidents and illnesses for cats and dogs. Healthy Paws helps pet owners save up to 90% on veterinary bills. Employees take their pets to the veterinarian of their choice, pay up front and get reimbursed for the expense.

Rob Jackson, Healthy Paws CEO and co-founder, says the insurer doesn’t cover preexisting conditions, wellness and preventive services. The company aims to cover accidents and long-term, chronic conditions which can easily add up to thousands of dollars.

Cost: Rates start around $15 a month for cats and $30 a month for dogs.

ROI: Pet insurance is an increasingly requested voluntary benefit, with a more than $2.5 billion market in 2016, according to Research Nester. The organization says much of this growth is because more than 65% of Americans have pets in their homes. Spending on the health of household pets has increased 11% in the past decade.

Extras: Employees can upload a photo of the vet bill through the phone and get reimbursed for the care within days. There are also no maximum limits or caps on payouts.

Purpose: The new kid on the benefits block, Sum180 offers a dizzying array of financial wellness options, from budgeting apps to student loan repayment. Sorting through this can be confusing for many employers.
“It is the Wild West, and we are still in the early days of figuring it out,” says Carla Dearing, CEO of Sum180. “Companies want to know what is offered in the marketplace and what they can hope to provide.”
Because of this, Sum180’s program aims to cover all of the most common financial issues in one stop—from beginning budgeting to paying off debt and saving for retirement. Participants in the program enter information, including what they make, spend, own and owe, and are given “next steps” for their finances. The program also provides tips, advice and support.

Cost: The fee is $1 per employee paid monthly or $12 per employee paid annually.

ROI: Engagement in this kind of behavioral-change program is often low, Dearing concedes. The information is confidential and participants aren’t outwardly ranked, but there are internal categories through which an employee moves up as his financial situation improves by paying down debt or fully participating in a 401(k) program.
“Over time, as people come back in, you monitor their situation,” Dearing says. “Ideally, you can report that people have moved up in their financial health.”


Sum180 uses a “gamified” approach to financial assistance. This essentially means it’s easily understandable. Users can access information simply by swiping their phones or can dip their toes in by watching short videos or getting tips, then move up to budgeting and saving.

“It’s about small steps and positive reinforcement, which are powerful features for change across all kinds of behaviors,” Dearing says.

The need for a design-build approach to benefits is here, and it’s beginning to play out among employers large and small. These days, brokers must increasingly work to uncover their clients’ unique needs and pull together the resources to serve them.

“Employee benefits are getting deliciously complicated,” says Joe Ellis, senior vice president of CBIZ’s Employee Services Organization.

But it can be a challenge to determine the right package to offer, especially when brokers are fielding offers from hundreds of vendors. How do you figure out where the value is?

Ellis says the key is creating an overall benefits strategy. “You have to build out a plan that will meet the needs of as many people as possible,” he says. “But you have to do it in a way that isn’t just the company giving out more and more money.”

Jack Wilkinson, a senior vice president in the Benefits Advisory Group at J. Smith Lanier & Co., says the move beyond traditional benefits has changed the way he does business.

“I was recently with a prospective client and had an hour and a half scheduled to meet. We were 50 minutes in before we talked insurance,” Wilkinson says. “Before that, we talked about how we engage employees and if they have focused action to manage specialty pharmaceutical costs. The insurance wrapper is around everything else we are offering.”

Ellis says the design-build world hearkens back to the formerly popular cafeteria plans, in which employers offered a range of benefits and employees decided where to spend their money. The market is different today, and many cafeteria plans have gone by the wayside. But competition for a solid workforce demands that employers offer a wide range of benefits, some paid for by the employer and some by the employee.

Some cover a broad swath of employees like legal assistance, pet insurance, wellness programs and tuition reimbursement. Some look to pinpoint specific groups of needs like fertility insurance or adoption assistance.

A wide group of offerings allows for self-selection by employees. This is desired specifically by millennials who may not need long-term care insurance but might want to cover veterinary expenses for their 80-pound Labrador. It allows them to choose benefits that are tailored to their lifestyle over time. From a broker’s perspective, Ellis says, it’s good to have a “generationally balanced team” to tease out what the employer and employees want. He tries to ensure this happens at his organization. That way, when he comes in with employee feedback for one of his clients, he gets input on the results from millennials to baby boomers.

“One group can offer what they teased out of the results, and another generation can say, ‘This is what I’m hearing,’” Ellis says. “A good, broad benefit plan would have the ability to cover a wide population, and the only way to find out what they want is to ask.”

Still an Uphill Battle

IMA Financial Group has nearly 700 employees scattered across four states. Their needs and desires vary as widely as their individual personalities. But through dedicated data collection and benchmarking, IMA has been able to gain a clear understanding of what benefits they value and what will continue to make IMA a desirable place to work.

They have days allocated for biking to work, volunteering at a charity and even raising funds with an outdoor ping pong tournament. Another popular benefit is the firm’s internal dream coach. His job is to help employees accomplish whatever goals they may have, big or small, work-related or not.

“This is something they wanted and cared about,” says Jessi Ryan, IMA’s Total Rewards practice lead. “It’s very unique and could only have been known by using our data.”

Like identity theft protection—who would have thought that would be something employers would be thinking about? But whatever the consumer is purchasing—and employees are consumers—you can let them buy it at work.

Joe Ellis, SVP, CBIZ

The company’s Total Rewards Program employee benefits package was created using feedback from its employees. IMA is vigilant about benchmarking—to find trends in the employee benefits industry, understand what its competitors are doing and, most importantly, understand what is valuable to its employees.

IMA’s program demonstrates the expanse of options for employers who want a custom package, but Wilkinson says the industry is still far ahead of where many employers currently stand. Most, he says, still prefer to offer traditional benefits and nothing else. Paying up front for benefits that might lower their total spend (like reducing healthcare costs over time or improving retention to lower administrative spending on new hires) can be a tough sell for many employers. “Getting them to spend nickels to save dollars has been more of an uphill battle than we expected,” he says.

But that doesn’t mean brokers should give up on offering a wide array of options. In fact, good ones should be able to walk into a meeting and say, “Here are things you probably don’t know about but you should,” Ellis says. “Like identity theft protection—who would have thought that would be something employers would be thinking about? But whatever the consumer is purchasing—and employees are consumers—you can let them buy it at work.”

This approach also benefits brokers. Instead of just working with an employer for one or two products, brokers become consultants, advising clients on their entire benefit portfolio.

Brokers should also be motivated to stay abreast of benefit trends by the fear of missing out. The last thing a broker needs is clients knocking on the door asking why they hadn’t been told about a new benefit they heard about through another agency.

Sorting Through Options

Whether employers are asking for abundant benefit packages or brokers are (or should be) introducing them, options are nearly endless. So how does one wade through the possibilities? Very carefully.

Wilkinson has a small checklist of considerations when choosing which products to bring into the fold. He tries to determine if the program or service is new to the market or another iteration of what is already available.

“There is lots of duplication on the market,” he says. “You have to wade through vendors to figure out which products are truly disruptive. And our market is ripe for disruption.”

Brokers need to understand if the programs and services put in place are actually working to attract and retain employees. Given the nature of many products, this can be yeoman’s work. IMA relies heavily on employee surveys for this task and, while the staff specifically asked for a dream coach, IMA often finds that the core benefits are still highly relevant for its employees.

“In our data set, we find that medical benefits and options for retirement, savings and rich, paid time off are still popular,” Ryan says. “These are all things we are continuing to see rise to the top in terms of value.”

Some of the initiatives offered at larger companies, such as “napping pauses” and buses to transport employees to work, may not have value at other organizations. At IMA, for example, employees value paid time off more than pet insurance.

Ryan stresses the importance of understanding what employees want and how those products may fit into the workforce culture. Then, use employee feedback to make sure they are having the desired effects on retention, recruitment or employee health.

“Brokers can use tools to do the heavy lifting and compile data, but they need in-house expertise to make sense of it and come back to the client and say, ‘Here are our recommendations based on employee feedback,’” Ryan says.

Vetting the Vendors

There is lots of duplication on the market. You have to wade through vendors to figure out which products are truly disruptive. And our market is ripe for disruption.

Jack Wilkinson, SVP, J. Smith Lanier & Co.

Joe Miller, president of Shortlister, in Park Ridge, Illinois, says his organization was created out of necessity. Coming from a background in wellness, he understood that brokers and employers couldn’t manage the ever-increasing number of vendors knocking on the door trying to get face time.

So he began compiling lists for brokers. Soon after, others were knocking on his door for more information. His lists now cover more than 40 different categories of vendors. And doing this for a living has made him sympathize with brokers attempting to do it on their own.

“We are the experts behind the experts, and we have a hard time,” he says. “Employers expect brokers and consultants to have a good understanding of the selection out there, and that’s not even possible right now.”

Shortlister is aptly named because it provides lists to self-insured employers and brokers seeking to find vendors for different aspects of their benefits program. An employer group takes a quick survey discussing its goals, philosophies, demographics and other pertinent information. Shortlister compiles this and returns with a list of prequalified vendors that might fit the employer’s needs. The brokers analyze that and narrow it to a handful of options. Then, Miller gets quotes, meets with the vendors and has them answer questionnaires. That information is then returned to the client, enabling the client to choose its best option.

Dave Kerrigan, founder and managing director of Sante Nasc, in Woburn, Massachusetts, is also working to help brokers wade through the vendor sea. He has designs to build a searchable database, primarily of early-stage vendors, for brokers to peruse. He hopes to make the market easier to navigate by centralizing intake and standardizing the evaluation of vendors and then compiling that information in one place.

“Some of these vendors are better than others, and brokers and consultants may not be equipped to evaluate these companies,” says Kerrigan, a former broker. “Brokers out there are going to be able to go into the database and search for companies based upon key criteria.” For example, a broker could search for a category of company such as property and casualty or student loan services. Then within that, they’ll be able to dig down deeper into specifics, such as mental health services within the health and wellness sector. “They will be able to find new things, differentiated offerings or new vendors in the spaces where the usual players aren’t cutting it,” he says.

If brokers want to keep the process in-house, Ryan says, research is a must. She uses a site called On Owler, brokers type in the name of a vendor, such as Gradify, which helps repay student loans. Owler provides some company information, news on the organization and a list of competitors in that space.

One good marker to use during the vetting process is inquiring about a vendor’s dedication to employee engagement. Benefits can be added to a program, but if employees don’t know about them, they’ll go unused. Both vendors and brokers need to understand new, interactive ways to talk to employees.

“A blue-collar employee might not use the internet” on the job, Wilkinson says, “but they do have a smart phone, so they need to have built-out apps to engage them. Engagement should be year-round, not just at open enrollment.”

In fact, Kerrigan says a vendor’s fees could be based on engagement, whereby employers pay only for the employees who use a program instead of an across-the-board fee.

Brokers can also ask if vendors will return fees if they fail to bring people into the fold. No employer wants to spend a lot of money on a program only to find no one is using it. And there are ample resources to get employees on board—chatbots, mobile apps, texting and artificial intelligence can all be employed to get the workforce engaged.

Tech-Enabled Engagement

On the employer’s side, decision support tools are an increasingly important resource, even using artificial intelligence to help employees sort through benefit options.

Businesssolver’s Sophia and Jellyvision Lab’s ALEX are both AI systems that walk employees through the enrollment process virtually. These are intuitive programs that ask employees questions, such as their family history of cancer or how many dependents they have, and use that information to determine what kind of benefits are best for them.

“Benefits are confusing, especially to the younger generations,” says Jamie Hawkins, president and CEO of Benefit Technology Resources in Tampa. “They didn’t grow up with union benefits like their parents. And they aren’t going to read a book about their options. This dynamic education is what they need.”

It’s the decade of bright and shiny objects, and brokers need to be able to figure out what is pyrite and what is gold.

Michael Turpin, EVP and managing consultant, USI Insurance Services

And on the healthcare side alone, there are copious applications and programs to help employees take better care of themselves.

“Brokers are overwhelmed because the sky is dark with the number of tools and applications and capabilities” in this space, says Michael Turpin, executive vice president and managing consultant for USI Insurance Services. “It’s the decade of bright and shiny objects, and brokers need to be able to figure out what is pyrite and what is gold.”

There is technology that targets people with high body-mass indices, women with high-risk pregnancies and people taking costly specialty prescription drugs. Offerings range from telemedicine office visits to smart phone apps that help diabetics regulate blood glucose levels by being more compliant with their healthcare plans.

“There is a whole side of consumer engagement communication tools to speak to a person who doesn’t have more than two minutes to listen to a message and understand what to do to be a better healthcare consumer,” Turpin says.

Internal Change

The many options on the market are only working to make benefits procurement more complicated as brokers try to administer custom plans for every client. It used to be common among larger organizations, Hawkins says, but even smaller companies are seeking this flexibility.

This change has left brokers analyzing internal processes like benefit procurement, onboarding customers, enrollment meetings, communication and renewal. And they are increasingly looking at technology to make the process smoother for themselves and their clients.

Hawkins, for instance, worked with an agency in New Orleans that was sending a staff member to enrollment meetings in five different locations. During his entire day presenting in various conference rooms to employee groups, he mostly saw people staring at their phones while he was talking. “It clicked for them that today’s workforce learns and wants to access information differently,” Hawkins says.

The firm implemented a benefits administration system where employees could upload videos on various benefits. This allowed employees to decide which programs they want to explore and then watch at their leisure. Not only is this a time saver for the brokerage, but the employer doesn’t have to pull people away from work for tedious enrollment meetings.

This newer technology can help improve processes, engagement and benefit reporting and analysis. But there is so much on the market that brokers definitely need to determine what will work with their organization’s culture and use it to its full potential.

“The technology is there,” Turpin says. “But, like anything, theoretically it enhances or makes processes better. But it can also fall flat on its face if not used correctly.”

Programs like TechCanary’s agency management system can customize operations for an array of uses. Reid Holzworth, founder and CEO of the Milwaukee-based company, says the system was built inside Salesforce, so it enables brokers to streamline the process of working with various vendors by adding them into one system. Then, on the back end, brokers can build out analytics that show whether each product is truly helping to attract and retain employees.

One important note for any technology that is adopted, Turpin says: it has to be used systemwide. Historically, brokerages with a national presence have tended to work in silos. Consolidations have resulted in firms with offices in various states banded under one umbrella but operating under completely different systems. A firm in Atlanta might find a great new product for its clients while its sister organization in California has no idea the program exists. Some of the newer technologies can help link those offices and share institutional knowledge.

“We need to eliminate the 100-year-old practice of each producer having their own way of doing things, with their own team and a million redundancies,” Turpin says.

Tech Differentiator

There are probably few brokers who got into the employee benefits industry because they were lovers of math and technology. It’s inherently an occupation guided by Excel spreadsheets, handshakes and customer relations. But technology is changing the way business is done.

“Lots of large brokers like Marsh & McLennan, Lockton and Gallagher have entire tech divisions,” Hawkins says. “It has definitely changed the structure of brokerage firms.”

These newer divisions both implement the technology brokers use, such as Employee Navigator, and vet new technologies on the market. Smaller brokerages may not be able to afford entire technology divisions, but they do have options, Hawkins says. Often, they can partner with consultants or choose one technology and focus on learning it well.

“Honestly, it is hard for smaller brokerages without some help,” Hawkins says. “The HR/tech landscape is changing so fast even the large brokerages are struggling to keep up.”

The industry has reached a tipping point at which productivity is going to have to come from somewhere other than “the backs of people,” Turpin says. For the most part, there is already a high level of productivity, and there’s not a lot of spare time or energy on the part of brokers to do more.

So the industry will need to change for the sake of its survival, Turpin says. Customers no longer want to meet over a long lunch to discuss their plans. These days, they want to talk by text.

When it comes to technology, a lot of brokers are “fast followers.” No one wants to be first in line, but they aren’t going to be fifth either, Turpin says. His organization has chosen to be decisive about its adoption. “You can’t blink when people push back,” he says.

CEOs will need to be “bilingual” in technology instead of delegating the issue to someone else. This is, in part, because the marketplace is crowded with tools; some of them work well, and others are over-engineered and hard to adopt. It’s going to be crucial to know the difference.

Organizations will have to understand how to move into the digital age, and part of that change may be cutting some jobs considered of lower value.

But Turpin tempers that outlook with caution about making too many changes at once. At least, in the near future, technology will require the use of people to understand, interpret and relay it to clients.

“At a certain point, people are saturated with change, and you have to decide when to put a stake in the ground and when to be patient with adoption,” he says. “The best firms can improve their productivity if they can automate their business, but sales will always be where they are looking someone in the eye. Trust is currency when someone is hiring eyes and ears in the marketplace.”

Worth is a contributing writer.

But in the evolving world of marketing that bar is set much higher.

A brand is more than your age-old unique selling proposition (USP), that long-valued mainstay essential to every good marketing campaign. Today, branding is about your voice, knowing what you stand for and what you value. It’s your story. Can you tell it?

We are all competing for best in class talent, a larger market share and stronger customer engagement. The marketplace is constantly changing and saturated with options. So how do we get their attention? How do we tell our story so customers will want to do business with us and employees will want to work for us?

Our customers continue to be more diverse. They are likely multigenerational, of varied race, gender, ethnicity and sexual orientation. They speak various languages and one of those will probably be digital. They have skills we aren’t familiar with and have deep expertise in areas we barely understand. If our workforce doesn’t reflect this diversity, how can we meet their needs? Or know how to reach them? 

It’s not as simple as just expressing our core values or revising our mission. People want to align themselves with companies that share similar values and beliefs. They want to see themselves in your brand. Will you be able to identify with them and respect them? Will you infuse these values in the way you talk about your firm, in the way you approach hiring new people? Seth Godin, an author and lecturer on the digital age has said, “being able to connect with customers and meet them where they are on a mental, emotional, or spiritual level, rather than trying to bring them in to where the brand is will allow for them to feel like they are being seen, heard, and respected. When a customer or, even more broadly, when a person feels respected, their affinity for the brand will build, and they will talk about it.”

In marketing, this means ensuring messaging and materials reflect these values and beliefs. Our Customers are changing and so should the way we portray them. In an Ad Age magazine story, Shelly Zalis writes, “It’s not just about making sure ad campaigns feature different races, genders and ages; it’s about making sure that different kinds of people are portrayed in a fair, accurate and realistic way—instead of cynically or lazily relying on age-old stereotypes that prey on and reinforce society’s existing biases.” 

This may seem obvious, but are you auditing your website, marketing and promotional collateral and social media channels regularly to ensure you aren’t using dated stock images or generic copy that is not representative of the values you want reflected back to your customers?

Starting on the Inside

Messaging alone, however, won’t bring a diverse workforce to our doors. Before you start selling your story externally, you have to truly build the culture internally. From the moment recruiting begins, you have an opportunity to shape your story and help define your culture. How you sell your firm and what you do matters. If customer service is paramount, then put a marker right up front about the value your firm places on building long-term relationships. Your sales process will not be a one and done event. If you value an entrepreneurial spirit, craft a job description around rewarding new ideas and putting them into action even if they result in failure the first go-round. Infusing your brand into the things you value and the ethos your firm honors, will give your employees the voice to share and reinforce it with everyone they connect with.

We must also broaden our recruiting channels and experiment with different approaches to successfully target new talent. We have to be creative in seeking them out and suspend the tried and true methods we’ve relied upon. One initiative yielding great success is a re-entry paid internship created by The Society of Women Engineers. This STEM Task Force brings women engineers who are ready to re-engage in the workforce after taking a career break. In a male dominated field, the program gives employers to the opportunity to increase the number of mid- to senior-level women in their ranks and it gives these talented women a chance for re-entry. In two years, the Task Force is gaining traction with conversion rates of over 60% along with some firms hiring 100% of their interns. 

Targeting and recruiting candidates of varied backgrounds, experiences and perspectives will illustrate the value you place on those who bring diverse thinking into your organization. Studies show that diverse teams deliver results that enhance performance metrics and foster innovation. 
A study by Garr, Atamanik, and Mallon, High-impact talent management, finds that companies with inclusive talent practices in hiring, promotions, development, leadership, and team management generate up to 30 percent higher revenue per employee and greater profitability than their competitors.

Woven Together

Your employees are your single, most effective brand resource for your organization. They convey trust and extend your voice to a broader audience. Aligning them around your values, right from the start, makes their barometer for success more tangible. It gives them a standard to uphold and to share.

“It doesn’t matter if your company culture is friendly or competitive, nurturing or analytical. If your culture and your brand are driven by the same purpose and values and if you weave them together into a single guiding force for your company, you will win the competitive battle for customers and employees, future-proof your business from failures and downturns, and produce an organization that operates with integrity and authenticity,” says Denise Lee Yohn in “Why Your Company Culture Should Match Your Brand,” in Harvard Business Review.

She also says it helps to break down organizational silos because everyone is singularly focused around the same priorities. Yohn asks: “how can you tell if your culture and your brand aren’t interdependent and mutually reinforcing?” There are telltale signs, she explains:

  • A disconnect between employee experiences and customer experiences. If you engage your employees differently from how you expect them to engage your customers, your firm is operating with two set of values.
  • A lack of understanding of and engagement with your brand. Your employees should understand what makes your brand different and special from a customer’s perspective. They should clearly understand who the company’s target customers are. They should use your brand purpose and values as decision-making filters and should understand how they contribute to a great customer experience—even if they don’t have direct customer contact.

The 2016 Edelman Trust Barometer revealed employees are among the “most trusted of all company spokespeople—even more than the CEO.” They are essential advocates for your firm.  Ensuring they understand and can articulate your values and beliefs not only enhances your brand equity but strengthens your competitive advantage. Equally as important, it helps you hire the right people, develop and grow your employees and create a more engaged and committed workforce. Aligning values and beliefs equals a better customer experience.

What more could you want?


Rushford is The Council’s SVP of Marketing and Communications.

What was the driving idea behind Aclaimant?
A family friend was running a work comp captive in the staffing industry. At the time, I was at the Lightbank venture fund in Chicago, and he, just like many people in the workers comp industry, was experiencing all kinds of problems related to getting claims filed on time, accurately, with complete information, and having policyholders who knew what to do when something went wrong. One day, he asked me as a technology guy if I could help him build an app because he thought it was crazy he could get an Uber on his phone but he couldn’t get somebody to report a work comp claim. We began to dig into this space, and that nugget led us to what became Aclaimant.

Can you talk about Aclaimant’s evolution from a mobile app?
Our initial hypothesis was a mobile app to report work comp claims was the solution. We realized the problem was actually significantly larger than originally thought. It wasn’t just about claims and getting claims reported. It was companies either don’t know how to manage risk at their business or don’t have enough resources to do it effectively.

We felt we had to address this holistic problem and not the symptom. We revisited the technology approach and built what we now call resolution performance systems. The idea is to help companies see risk more clearly and do something about it. Effectively, that means streamlining every phase of workplace safety, incident and claims management into a single tool to help these clients supercharge their safety, risk management, claims and incident management programs to become a better risk by optimizing every step of the process.

Walk us through those steps.
Obviously, it starts with prevention. On the workplace safety side, we’re helping companies do digital safety initiatives—everything from observations, site inspections, audits, job hazard analysis or job safety analyses—that kind of holistic safety approach. When things start to go wrong, we’re starting at the near hits and near misses, walking through every phase of that incident management piece, the reporting, the documentation, the internal management triage and follow up, and ultimately producing analytics for reporting and understanding what’s happening. Think about the data capture, the workflow, the task management, the material creation. That’s the area that we live in and the area that creates the most paperwork for safety and risk managers. It’s also the biggest opportunity to help them enhance their risk profiles.

Why does improved incident reporting matter?
We find the most common challenge is lag time in reporting. Can I get a claim reported more quickly? Statistically, if I can get it reported more quickly, it should cost less. If I can get in front of it, better things happen. Very often companies that want to get things reported more quickly want to make their reporting experience better but don’t really know how. It’s because the people who are involved in this process are generally outside that risk management suite. Very rarely would someone get hurt sitting right next to a risk manager. They’re getting hurt out in the field. They’re on a job site. They’re on a truck. They’re working at a branch or a different facility. You have this gap, both spatially and cognitively, between the knowledge center of risk management and the actual risk-inducing event.

For us, being able to find a way to help democratize that knowledge throughout the organization is where you begin to drive meaningful improvement. Not only do you get that event reported immediately, our real finding is how you can improve those outcomes. When an event has happened, it’s happened, but the companies that are really differentiating themselves are the ones that are being proactive with injured employees, that are immediately doing everything to address the potential liability for the company, and protecting their employees and their P&L.

What’s important is being able to truly help these companies effectively streamline their risk management process, because the people who are doing a better job of managing those processes are actually doing a better job of protecting their businesses and consequently doing a better job of reducing risk and reducing the cost of risk to the business.

What markets are you working with?
We initially thought we would be a fit for the small and mid-market. We actually found we apply to large enterprises as well as medium to small enterprises and also brokers. We are targeting industries that either have a focus on safety and prevention or have a frequency or severity problem when it comes to incidents and claims. We’re geared toward industries like staffing, construction, and the insurance agencies and brokerages that they work with.

Can you talk about your work with agents and brokers?
Agents and brokers are always looking to find new ways to add value for their clients. On the one hand, they look at us as a tool to help their clients help themselves. A lot of times, they’ll offer consulting services—loss control, risk-management type activities—to help those team members they’re working with do bette