Capitalizing on Mini-Cap Ventures

IMA Select steps onto gig economy platform.

Gig economy businesses are underinsured. But a new niche product that capitalizes on digital connections between service providers and customers is an example of how innovative brokerages can carve out a specialized block of business that may lead to big accounts as gig startups mature.

1984 or 2019?

Who’s driving the next evolution of healthcare data?

When Apple first aired its now-famous 1984 Super Bowl commercial it sold us—in a really dramatic and masterful way—the promise that its technology would open the door to freedom of thought, freedom of expression and freedom of innovation. It started the journey that would lead to Apple being arguably ubiquitous in our society.

Our Washington, D.C.

We couldn’t resist tapping into our own local experts to cap off our coverage of Washington, D.C.

Caught Off Guard…and Online

Your cell phone and laptop could easily be hacked during your next business trip.

Your personal technology is vulnerable not only in your hotel room safe but tucked in your pocket walking down a street. We talked with technology expert David Holtzman about the unknown risks you take with your proprietary business information when you travel. —Editor

Tech for Life

One life insurance company is going all in on the mobile health app movement.


Health monitoring is evolving in workplace benefits.

It is estimated that one in six Americans now wears a fitness tracker or a smart watch and 77% own a smart phone, up from just 35% in 2011, according to the Pew Research Center. In the newest evolution of digital health monitoring in the workplace, these technologies are converging. 


The accumulation of personal data on wearable devices has changed the definition of employee wellness.

A key component in the evolution of tracking employee wellness is the ubiquitous smart phone.

Experts view consumer access to medical records via mobile devices as a logical next step in the health app revolution.


Read the Sidebars

Tech for Life

Setting the Standards

Public sector initiatives aim to create technical standards for health data sharing.

Healthcare Hold’em

The game is changing and so are the players. Who will end up with the cards?

In the summer of 2017, Seema Verma, administrator for the Centers for Medicare & Medicaid Services (CMS), spent several terrifying hours trying to access her husband’s medical records after he suffered a heart attack in an airport. 


A Trump administration initiative is designed to expand patient access to clinical data.

Proprietary and technical impediments to sharing data reduce patients’ ability to be effective healthcare consumers.

Data sharing enables third-party applications to better track the quality and price of care.


Read the Sidebars

Setting the Standards

Cloudy…with a Chance of Optimism

Blue Dogs to bipartisanship to herbal tea—The Council’s government affairs team gives their perspectives on 2019.

Once again we asked our Council lobbyists (this time including Government Affairs director Blaire Bartlett) to give us a read on where we are and where we are going. Here’s their 2019 outlook. —Editor

The Wharf

It’s time to check out D.C.’s new waterfront playground.

Water is magic. It brings out the best in everybody.

Health Negotiator

Q&A with Marilyn Bartlett, Special Projects Coordinator for the State of Montana’s Commissioner of Securities and Insurance

Bartlett discusses how crunching data and tough negotiations enabled her to save the state’s struggling employee health insurance plan.

Google Applies Itself

Q&A with Reid French, CEO, Applied Systems

Thinking About Tomorrow

NFP works with Tomorrow Ideas on app-based life insurance.

Jay Ajayi

Receiving from the Bench

Having a back fracture and one bum knee is no fun, but when Philadelphia Eagles running back Jay Ajayi tore an ACL in the other knee in October, he was out for the season. 

Andy Barrengos

CEO, Woodruff Sawyer, San Francisco

Fear is actually an amazing friend. 

The Bubble Continues to Get Bigger

And a burst is nowhere in sight.

I hope everyone had a very happy New Year! For those in the deal-making business, buying or selling, 2018 was likely a very fruitful year for you. The merger and acquisition marketplace ended 2018 strong with a flurry of transactions.

Single Payer in South America

A look into Brazil’s healthcare system offers insights for brokers across the globe.

When it comes to healthcare provision, every country offers a different service, though at their core, many of them face similar struggles. Brazil is known internationally as having the largest state-funded health system in the world.

The New Power Skills

Once dissed as “soft skills,” these abilities are high-value currency in today’s workplace.

Once dismissed by serious businesspeople as mushy nice-to-haves, so-called “soft skills”—critical thinking, problem solving, communication, leadership, adaptability and emotional intelligence—are in high demand and short supply.

Common Ground for the Greater Good

Civility, leadership and the talent war are tied more closely than you might think.

I’ve been in the brokerage business since 1973, and in virtually every year since, I’ve heard that the most pressing issue we as an industry face is the ability to attract and retain talent. Of course, that is likely true for every other industry, too.

It’s Not Easy Being Green, (It Is)

The new marijuana economy is, despite federal impediments, the fastest-growing sector of our economy overall.

The election is finally behind us. Or at least by the time you are reading this, the recounts and runoffs will all finally and officially be over (I hope).

Coffee Talk

Visiting an ASL Starbucks

Just a couple of blocks from the hustle and bustle of Union Station and the Capitol Building in Washington, D.C., lies a Starbucks on H Street.

James Corden

A Jewel of a Cameo

Every theft film has to have at least one insurance investigator, and perhaps the most unlikely one ever is James Corden, in Ocean’s 8

Hyper Scale

Q&A with Timothy Attia, CEO and Co-founder, Slice Labs


Puerto Vallarta is full of history and romance and prime for making memories.

This year, Puerto Vallarta celebrated 100 years of being a municipality and 50 years of being a city. But 1964 is when this then-remote fishing village made its debut on the world stage.

Mobile, Alabama

Allen Ladd, partner at Thames Batre Insurance, shares Mobile’s eclectic finds.

Council Foundation Scholars Soar

The Council Foundation’s scholarship program is drawing in and training the next generation of stellar insurance professionals.

In an effort to build our industry’s future, The Council Foundation’s scholarship program has again awarded $375,000 in academic scholarships to 75 college juniors and seniors interested in pursuing a career in insurance brokerage. Each receives a $5,000 grant.

Too Costly to Ignore

Q&A with Darcy Gruttadaro, director of the Center for Workplace Mental Health, and Mandie Conforti, director of health and benefits at Willis Towers Watson

Gruttadaro and Conforti discuss what employers and brokers should know about behavioral health and substance abuse coverage, which are costing employers increasingly more.

Going Places

A sampling of the ambitious students at Gallaudet University’s Maguire Academy of Insurance and Risk Management

Untapped Talent

Find talent in unexpected places.

Graham Forsey is a Senior eCommerce Technical Analyst for Whirlpool Corp, office suite mate of The Council. Graham also is hearing impaired and taught an informal ASL class for the Council staff, including ASL coffee chats.

In the late 1950s, an ambitious young agent beginning his insurance career at Metropolitan Life found himself in the midst of an entirely untapped and underserved market. James Maguire was attending church with his friends and neighbors, Victor and Helen Saggase. The Saggases were deaf, and the service was conducted in sign language.


As a senior at St. Joseph’s University, in Philadelphia, James Maguire volunteered to work with athletes from a nearby deaf school.

Among Maguire’s many gifts to Saint Joseph’s is a namesake Academy of Insurance and Risk Management.

In 2015, Maguire helped establish an RMI program at Gallaudet University, in Washington, D.C., whose students are deaf and hard of hearing.



Read the Sidebars

Going Places

Pushing the Edge

For 15 years, Rick Pullen did things differently than everyone else, changing the game for a trade rag.

Leader’s Edge editor in chief Sandy Laycox sat down with founding editor and game changer Rick Pullen for a conversation on his legacy and future. Rick will be leaving Leader’s Edge at the end of 2018. —Editor

Beyond Borders

WFII chair Rick Jensen discusses Brexit, blockchain and emerging markets.

Rick Jensen is chairman of the World Federation of Insurance Intermediaries. Leader’s Edge founding editor Rick Pullen talked with him recently about issues facing brokers in the United States and on the world stage. —Editor

Business Acumen Matters

Two human resource experts explain how a deeper understanding of the business can benefit you in any role.

Rod Fox

Managing Partner & CEO, TigerRisk Partners, Stamford, Connecticut

It’s perseverance. It’s the idea that anything’s possible, so you should think big.

Go Big or Get Out?

Just because everyone around you is getting bigger doesn’t mean you should stop trying to get better.

Everyone around you is getting bigger. 
This year, four firms with revenues between $150 million and $200 million sold—brokerages that were big enough to compete and didn’t need to sell to remain competitive.

Come On In, The Water’s Fine

Untapped pools of talent could make a difference in your firm.

It’s around this time every year that I force myself to recite the old adage, “If you always do what you’ve always done, you’ll always get what you’ve always got.” 

Who Owns the Data?

The emerging view is that individuals do and can direct who uses it.

The question of who owns the data has always troubled me. In our world, the question has roots in the debate over who owns expiration data, which predates our industry tenure by decades.

Preparing for New Cyber Threats

What’s on the horizon in 2019? Make sure you’ve got a comprehensive and tested plan.

As companies look to the year ahead, they should make sure they are prepared for the types of cyber attacks they might encounter in 2019. The cyber threat environment is more sophisticated than ever, and nation-states have increasingly played a role, often in coordination with other actors. 

Q&A with Chris Downer of XL Innovate

The Council also caught up with Chris Downer of XL Innovate.

The Council also caught up with Chris Downer of XL Innovate this week. Downer is a principal at XL Innovate who focuses on insurtech investments in North America, Europe and Asia. He is responsible for due diligence and deal sourcing. Downer also pens a daily email (signup required) highlighting the latest insurtech developments.

Plug and Play’s First Annual Broker Age Event Gathers Brokers and Insurtechs Together

The Council participated in the first-ever Plug and Play Broker Age event in Silicon Valley.

The Council participated in the first-ever Plug and Play Broker Age event in Silicon Valley. Plug and Play, an early-stage accelerator, focuses on technology startups from seed to series B funding rounds.

Business Program Bytes: Efficiency Rules

A panel on how brokers will stay relevant in a world inundated with new technologies.

The Council Dives In

World-wide meetings address insurance industry office inclusion.

You’re walking down the hall at work and pass the boss who makes a crack about your gender, race, religion or heritage. You cringe because you don’t want to make a scene, yet once again you’ve been made to feel like you don’t belong.

The Pharmaceutical Supply Chain

How money and services flow through the system

Lack of consensus about how to approach the complex pharmacy supply chain has prompted debate about the most effective way to lower prescription drug costs. Focusing on the inner workings of the entire supply chain may broaden how costs and solutions are discussed. 

Reinventing Beantown

Boston is under construction, with new business, restaurants and hotels adding to the city’s historic architecture.

In 2010, Boston’s late mayor Thomas Menino launched a plan to turn a stretch of dilapidated piers and underutilized warehouses and parking lots in South Boston into an “innovation district.” 

What Motivates Hate?

It takes courage to face what you don’t know.

Herman and Philip Roth

Lasting Lessons in Last Things

Many a celebrity has had a parent in insurance, but few are more famous than Herman Roth, father of the late Philip Roth. The younger Roth was one of America’s greatest novelists. (Portnoy’s Complaint, Goodbye, Columbus and 15 more). 

We Don’t Know

Diversity specialist Vernā Myers asks us to admit that we have no idea and start there.

For many years, Vernā Myers has consulted and lectured on diversity and inclusion in the workplace. She recently sat down with founding editor Rick Pullen and editor in chief Sandy Laycox to talk about her views and experiences. Shortly after our interview, she was hired as vice president for inclusion strategy at Netflix. —Editor


When Vernā Myers landed her first job as a lawyer, in Boston in 1985, she was the first black person the firm had ever hired.

When you make a mistake with a workplace comment, Myers says, don’t qualify the apology.

Myers believes we can’t make progress without first acknowledging our biases.


Read the Sidebars

What Motivates Hate?

Dark Angel

San Francisco wants insurers to cut ties with coal, oil and tar sands industries. Prudent plan or gross overreach?

The insurance industry appears to be becoming a political tool for politicians and advocates of popular causes.


San Francisco has become the first American city to urge insurers to divest from the fossil-fuel industry.

Insurance leaders contend that using the industry to achieve political aims sets a dangerous precedent.

If the movement is taken to its extreme, could the insurance industry be compelled not to insure or invest in other industries deemed unacceptable?

The Human Quirk

Behavioral economics provides key insights into employee engagement and a successful approach to benefits.

Can the “science of the irrational” help employees make better choices when it comes to benefits? That’s a key question for anyone involved in employee benefits.

The Long View

Most Americans have no plan for long-term care should they need it.

It’s no secret that most Americans do not understand long-term care insurance and have no idea who would pay for the treatment should they ever need it.

Primary Care Benefits


The majority of healthcare spend goes toward a small minority of patients. How can we better serve them?

In 2002, a young primary care doctor in Camden, New Jersey, began working with the city’s police department after witnessing a shooting near his home. Using the department’s data, he found there were “hot spots” in the city that were responsible for a large portion of its crime. 


With healthcare costs rising, brokers and employers want to identify their largest sources of spending.

A Colorado study found the highest-cost patients were those with terminal cancer and those receiving emergency dialysis.

Some experts believe predictive analytics can help determine future high-cost users; others say such projections are more difficult to achieve.


Read the Sidebars

Primary Care Benefits

Frankfurt, Germany

Jochen Köerner, Managing Director at Ecclesia Holding, offers tips to finding local gems in this diverse city.

Incubating Insurance

Q&A with Jean Vernor, Head of Incubator, New Strategic Markets, Munich Reinsurance America

Silent Cyber

The industry is raising the volume on hidden cyber risks.

Money Well Spent

Q&A with Shane Wolverton, SVP of corporate development for Quantros

Quantros is a healthcare analytics and risk management consultancy. Wolverton discusses why brokers should understand healthcare quality and how doing so may change their relationship with clients for the better.

Marty Hughes

Executive Chairman of the Board of Directors, HUB International, Chicago

Listening for Cues

Learn from what others are saying and doing.

As this year’s Insurance Leadership Forum event wound down at the Broadmoor, I had the pleasure of watching a one-hour interview with President George W. Bush. I found his message to be one of optimism and strength…mixed in with a significant amount of humor. 

Stand Up and Be Counted

Politics and D&I are not easy topics, but they shouldn’t be difficult to talk about.

The most important message I have this month is to vote. I’m so serious about it that I propose for all of us do our part and close our offices until 10:00 a.m. on November 6 so 100 percent of our employees can get to the polls without worrying about being late for work.

All Abroad!

Here’s a playbook for the first conversation when helping clients expand overseas.

As full-service brokers, we take pride in the fact that we’re ready for anything our clients need. But global expansion is growing ever more complicated with increasing regulatory issues, cross-cultural differences and privacy concerns, to name just a few. 

Creating Career Pathways

The Campbell Group revamped its hiring process and team structure to make a clear path for success from entry to retirement.

It’s no secret that the age demographic in the insurance industry has changed. When I started with the Campbell Group in 2013, the average tenure of the support staff was well over 15 years. 

IDD and the Pursuit of Clients’ Happiness

Now in force, the new EU directive will require better coordination among brokers and carriers.

The Insurance Distribution Directive (IDD) came into force on October 1, changing the operational and compliance framework for brokers based in the European Union. 

Benefits Data Bullseye

Healthcare and employee benefits data are gold for cyber criminals.

The HITECH Act requires covered entities to report breaches of unsecured protected health information affecting 500 or more individuals to the U.S. Health and Human Services Office for Civil Rights. 

NAIC 2018: State Ahead

The NAIC’s newest strategic plan is all about technology and innovation.

The state insurance regulators and their trade association, the National Association of Insurance Commissioners, have never been accused of being on the cutting edge.

ITC 2018: Q&A with Jay Weintraub, Co-Founder and CEO, Insuretech Connect

His perspective on ITC and how he expects the industry to evolve and adapt in the coming years.

On the last day of ITC we had the opportunity to sit down with Jay Weintraub for an exclusive interview to discuss his perspective on ITC and how he expects the industry to evolve and adapt in the coming years.

ITC 2018: Q&A with Ali Safavi, Global Head of Insurtech, Plug & Play

An emphasis on broker-focused insurtech solutions.

We met one-on-one with Ali Safavi to discuss Plug & Play’s investment strategies and how the investment firm is trying to put more of an emphasis on broker-focused insurtech solutions.

ITC 2018 Interview with Adam Demos, CEO of TowerIQ

A deep dive into TowerIQ and the product it offers.

We had the opportunity to sit down with Adam Demos, CEO of TowerIQ, for a deep dive into TowerIQ and the product it offers.

ITC 2018 Interview with Chris Cheatham, CEO of RiskGenius

Using AI to introduce efficiencies into the insurance value chain.

We asked Chris Cheatham, CEO of insurtech firm RiskGenius, to take us through how they used AI to introduce efficiencies into the insurance value chain, as well as how his firm engendered partnerships with incumbents.

ITC 2018: Spotlight on Small Commercial

Transform small business insurance.

In the Spotlight on Small Commercial panel Tuesday afternoon, we heard from innovators in the small commercial space to discuss how they plan to transform small business insurance, go direct, streamline inefficiencies, and remove friction in the process, with a heavy focus on the consumer journey.

ITC 2018: Moving Beyond Legacy

Bettering the customer experience.

At another panel Tuesday afternoon, John Drzik, President of Global Risk and Digital at Marsh, and Greg Hendrick, CEO of AXA XL came together to discuss the different areas of innovation at play in the insurtech space, including the study of new risks and bettering the customer experience, as well as the best path forward to move on from the legacy systems so pervasive in the industry today.

ITC 2018 Fireside Chat with Inga Beale

Attracting and retaining new, young talent.

Inga Beale, CEO of Lloyd’s of London, was at InsureTech Connect on Wednesday to discuss modernization and how to attract and retain new, young talent in the insurance industry.

ITC 2018 Interview with Debb Smallwood, CEO & President, Strategy Meets Action

Navigating InsureTech Connect.

We asked Debb Smallwood, CEO & President of insurance strategic advisory firm Strategy Meets Action (SMA) about their investment strategy and how they’re navigating ITC.

ITC 2018 Interview with Kacie Conroy, Director of Information Technology, M3

Innovation from a broker perspective and more at this year’s ITC.

We had the opportunity to speak with Kacie Conroy, Director of Information Technology at member firm M3. We asked her about the dialogue around innovation from a broker perspective, M3’s current investment strategy, and their mission at this year’s ITC:

Living Is Easy

With more than 70 beaches, life’s a breeze in this global city.

Shirley MacLaine and Jessica Lange

Feeling Their Whole Life Oats

In a 2016 film frolic, two old gray mares take a comic romp through la dolce vita after an insurance error loads them with dough.

INTERNal Perspective

What do your summer interns really think of brokerage? We asked them.

This summer we asked four Council interns to survey interns at member brokerage firms. We wanted some real feedback on how college students view the industry and how their perceptions have changed since working in it. After analyzing their survey data for trends and following up with multiple phone interviews, they wrote this article to convey their findings. —Editor


Internships provide companies with opportunities to identify rising talent and engage them in their business.

College students who don’t understand the industry overlook the opportunities that a brokerage provides.

Once students are exposed to all the industry has to offer, many of them can envision insurance as a potential career.

Intimate Relationships

QBE North America has a limited distribution model that promotes meaningful relationships and industry expertise.

No two farmers are alike. Whether it’s how they work their fields or pay for the land or grow their crops, farming is a uniquely specialized business venture. 

A Light in the Tunnel

Mining is one industry that has had proven success with wearables.

Caution: Falls Likely

Wearable technology is opening employers’ eyes to danger zones.

Eric Martinez spent six years as executive vice president of claims and operations for AIG in New York. In the course of handling 30,000 workers compensation claims a month, he concluded that insurers were investing big bucks in medical management programs for injured workers but not addressing why the injuries were occurring in the first place.


Wearable technology was all the rage a few years ago, but it has not taken off as quickly as anticipated.

Risk management experts believe wearables will ultimately have a significant impact on workers comp and other commercial lines.

The construction and manufacturing sectors and material-moving organizations have shown the greatest interest in wearable technology.


Read the Sidebars

A Light in the Tunnel

Mightier Than the Sword

Insurance has a role to play in protecting schools from mass shootings.

Like many of his colleagues in the insurance industry, Paul Marshall remembers a time when students routinely kept firearms in their cars or pickup trucks in the high school parking lot. “In Ohio, we went rabbit hunting and squirrel hunting,” Marshall, managing director of active shooter/workplace violence insurance programs at the McGowan Companies, recalls. 


To address the enormous costs associated with a mass shooting, insurers have introduced “active shooter” coverage.

Gun control advocates have called for insurers to treat firearms as an “attractive nuisance” liability risk, similar to a swimming pool or large dog.

The industry is moving toward providing stronger risk management to reduce the incidence of school shootings.

The Cost

Aided by technology, new players and the capital markets can step in.

A Terrible Tally

Can We Bear the Cost?

The planet is warming. How can we prepare?

It’s one thing to read about raging wildfires in California and quite another to experience the possibility of such a catastrophe. In early August, our secondary home in Idyllwild, a small town nestled in the San Jacinto mountains, was imperiled by the Cranston fire, just one of the many wildfires burning throughout the state.


Natural disasters caused $337 billion in damage in 2017, the second highest total on record.

Across the United States, wildfires burned more than 9.8 million acres last year, causing $18 billion in damages—triple the annual wildfire season record.

Climate change is a factor in higher precipitation events, such as the 60 inches of rain that engulfed the greater Houston area during Hurricane Harvey.


Read the Sidebars

A Terrible Tally

Can We Bear the Cost?

Our Road Forward

Innovators thrive during an era of accelerated change.

The insurance industry operates a lot differently—and a lot better—than it did even a decade ago.

Kurt de Grosz

President, ABD Insurance and Financial Services

Accelerating Change

Q&A with Ingo Weber, Co-founder and Group CEO, Digital Insurance Group

Ounces of Prevention

Internet-connected sensors are providing heavyweight savings.

Lafayette, Louisiana

Dwight W. Andrus IV, President of Dwight Andrus Insurance, shares the art and soul of Cajun Country.

The Dark Side of Winning

Each time we prove ourselves right, we make someone else wrong.

Winning is a concept that’s deeply ingrained in our culture. The problem is when we need to win all the time—even when the stakes are trivial or the price of victory is high.

At Your Service

Societal changes are requiring firms to keep up, especially in the hunt for talent.

We’ve spent much of the year focusing on tech-heavy structural changes in our industry (and our world, for that matter).

Build Pricing Transparency App-titude

Q&A with Mark Galvin, CEO of MyMedicalShopper

Galvin is an advocate of improving transparency efforts to reveal healthcare pricing while implementing high-deductible health plans and health savings accounts. These steps, he says, could not only reduce employers’ and employees’ healthcare costs but could also help transform the system overall. 

Are You a Blockbuster or a Netflix?

Read my letter to the brokerage owner of the future and see how being proactive, strategic and focused can help keep you relevant.

In 2000, a little-known company called Netflix knocked on the door of the movie-rental goliath Blockbuster and proposed a partnership. For about $50 million, Blockbuster could buy Netflix. 

Cyber Property

How much risk do you want to keep in-house?

Not so long ago, as outsourcing, co-location facilities and cloud services began to take hold, risk managers and information security personnel scrambled to manage vendor cyber-security risks. 

Navigating the Channel

As the Brexit deadline looms, insurance agents and brokers face complicated choices.

On March 29, 2017, the United Kingdom notified the European Council of its intent to withdraw from the European Union.

AmWINS’ Outgoing Steve DeCarlo

Retired CEO talks frankly about the wholesale business, life and his future.

Steve DeCarlo made AmWINS what it is today, the largest insurance wholesaler in the United States. In May, at age 60, he walked away from the business, proving there’s life after work and making money. In so doing, he paved the way for others at the firm to move up and continue his legacy. Founding editor Rick Pullen sat down with Steve just before his retirement to discuss his remarkable career and views on how to become a 150-year-old firm when you haven’t even reached 20 yet. —Editor

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.

Caught up in the logistics and pressures of being self-employed, many startup entrepreneurs are not fully prepared for injuries and liability damages. While some carriers have started to work with sectors of the gig economy, many self-employed workers still don’t know where to go for insurance or don’t have time to figure out all the logistics surrounding coverage. Tackling that time constraint and making it easy for gig economy businesses to get the right coverage are key to unlocking a growing swath of insurance customers.

Brian Sandy, president of IMA Select, a subsidiary of The IMA Financial Group specializing  in small business partnerships, says providing coverage in this new industry is about making things simple and short.

“How can we reduce the number of questions that we ask?” Sandy asks. “Left unfettered, there’s a lot of things they’d [insurance carriers] like to know, and some of their typical, standard applications have a lot of questions on them… How can insurance companies use some of the third-party data sources they have to help better understand the class, better understand the risk, without having the client fill out pages and pages of information—because you’ll lose them pretty quickly when you do that.”

IMA Select recently announced a new partnership with a gig economy company, Lawn Buddy, that capitalizes on the already developed relationship the platform has with its users.  Through Lawn Buddy’s app, gig workers can do everything from request information and quotes to purchase insurance through IMA select. Workers can receive confirmation of insurance within one business day of the request.

Lawn Buddy allows lawncare enterprises to connect with people who need their yards mowed. Through its app, Lawn Buddy also lets mowers estimate how much they should charge per lawn size, using Google maps.

“How can you create something that is there for them, tailored for them?” Sandy asks. With a few, easy questions, he says, “you’re really able to reduce the transaction component of that business. That’s what we really like about this partnership.”

Portable and Priced to Sell

Lawn Buddy allows lawn care enterprises to connect with people who need their yards mowed. Through its app, Lawn Buddy also lets mowers estimate how much they should charge per lawn size, using Google maps.

In the freelance sector, insurance has to become more portable and more affordable. Many gig economy workers move nomadically to find business, working across state—and even international—boundaries.

YouTuber and founder of The Rideshare Harry Campbell answers questions and educates fellow entrepreneurs on the gig economy.

“For drivers and other gig workers, flexibility is key,” Campbell says. “I’ve heard from many older drivers who drive between states, particularly if they work in one state and live in another state. How does insurance work for them? Many people are becoming increasingly price-conscious about insurance, and the ability to use insurance anywhere is a big benefit to many gig workers.”

Along with struggling to understand what they are and are not covered for, workers in the gig economy also look for low—very low—insurance costs.

“You get into the cost aspect too,” Campbell says, “particularly when you have somebody that’s doing a side hustle and it’s just a part-time gig. Oftentimes the insurance carriers have minimum premiums… [The entrepreneurs] are so far below those minimums that it becomes really prohibitively expensive.”

According  to a 2017 J.D. Power study, although the small-commercial insurance market grew in size, small-business satisfaction with commercial insurance declined 18 index points. Conversely, the satisfaction of commercial insurance for larger organizations rose 13.

“Insurers will have to play a larger role in the gig economy’s future,” Campbell said. “This is particularly important for auto insurance, but I could see all aspects of the insurance market playing a larger part in the gig economy in the future. You can see it now as people start their own companies, become gig employees, etc. The traditional insurance market isn’t there for them, and even the Affordable Care Act is pretty expensive for a lot of people in the gig economy. As this market grows, insurance will have to evolve and grow as well.”

When we began researching healthcare data and workplace wearables, we weren’t necessarily thinking about Apple, yet there it was—leading the adoption of interoperability standards for data transfer; working with leading healthcare institutions to pilot the use of its health records app for patient data; and essentially turning  its phone (and watch) into a medical device. These are just a few of Apple’s pursuits (for a deeper dive, check out the Apple in Healthcare briefing put out by CB Insights in early January).

Two of our features this month describe the healthcare universe in which Apple is just one participant. This universe combines legislative and regulatory initiatives, employer wants and needs, and technology-driven consumer behavior. The push for value-based care, the competition for talent, and, well, the smartphone are all converging. And they could, one day, lead to a utopia-like world of personalized, quality-driven, cost-efficient medicine…How’s that for a Super Bowl ad? 

They’ll tell you where to go and what to get there. This is your insider list for your next visit (in no particular order). —Editor

Bistro Cacao One of D.C.’s finest and niche French restaurants.

Mari Vanna Serious Russian dishes both bitter and sweet.

Comet Ping Pong Hand-crafted pizza and an assortment of ping pong tables

Penn Quarter Sports Tavern A quick meal before attending a sporting event (or even to watch an event there). I just love their fried Brussel sprouts.

The Source Layer carrot cake with ginger ice cream. Very thinly sliced and plenty to share.

The Smith Grilled chicken sandwich on a sesame baguette with all the works. A meal in itself and absolutely delectable.

Founding Farmers Chicken and waffles with homemade syrup. Must leave room for their kettle popcorn.

Tosca Outstanding scallops and pasta.

Sticky Fingers Infamous bakery treats as well as unforgettable vegan alt-tuna melt and black bean and green chili.

China Chilcano Funky, comfortable, artsy fartsy. Try the yummy citrusy Pisco Sour, Aeroporto (a noodly bunch of stir fired veggies with a bite of garlic and spice) and Passion Fruit Chicha Morada.

Beau Thai Voted D.C.’s best Thai (casual spot with the best drunken noodles).

Jaleo Great Spanish tapas and the perfect G&T.

All-Purpose Pizzeria Go-to spot for gourmet pizza and a glass of wine.

Etete or Chercher Where to dine on D.C.’s great Ethiopian cuisine.

BToo Contemporary Belgian with mussels and waffles.

Barcelona A happening cocktail place with a fire pit on the patio.

San Lorenzo Superb veal cheeks & polenta.

Tryst Best coffee and casual atmosphere with live music in the evening.

Bistro Boheme Authentic Eastern European cuisine.

Doi Moi Modern take on Asian favorites; anything with caramel fish sauce is a must.

Tabard Inn Drinks in front of the fire in the old hotel lobby or dinner in the back.

Estadio Spanish tapas, wine or Europe’s football—you choose.

SEI Best happy hour specials featuring the freshest sushi.

Tune Inn Hands down the best dive bar on Capitol Hill for reasonably priced beer and late night, greasy eats (they have tater tots!).

Indigo Hidden gem in NoMa that may have the best and most affordable Indian food I’ve ever had (don’t tell Rasika).

Biergarten Haus The most dog-friendly establishment in D.C.!

Trusty’s Another hidden gem on Capitol Hill that has the best burgers, board games and craft beer (a Hipster’s paradise).

Rasika For something unique—fried spinach and black cod.

Jack Rose Best bourbon spot.

Oyamel Best ceviche.

Chez Billy For dinner followed by Bar Au Vin by the fire…best date night.

Le Diplomat BEST brunch EVER.

Trump Old Post Office Excellent whiskey and Kansas City steak. And don’t miss the maple-encrusted bacon on a clothesline.

Martin’s Tavern (Georgetown) John Kennedy’s old digs—a historic haute pub that never got old.

Our readers are on the road a lot. What should they look out for?
It’s all risk/reward, you know. In this case it’s risk/convenience. I travel half the year and go to some pretty obscure places. I travel with a lot of computer equipment. So I spend significant time before each trip thinking through what electronics I’m going to bring. And then I think what happens if they get lost or stolen and what the likelihood is that is going to happen.

So if I’m going to Toronto, I don’t worry about it. If I’m going to Beijing, I worry a lot. China’s government is known to have programs to explicitly attack and hack almost any digital device that any foreigner brings in. They don’t want the money. They want the information.

When I went to Beijing this year, I took a second laptop with me. I scrubbed the laptop before I did anything with it. I formatted it, reinstalled the operating system—didn’t put anything personal on it. Everything I needed that was personal I kept on an encrypted hard drive I plugged in when needed. When I got back, I tested the laptop, and it had at least three malware programs that had been installed by somebody at some point while I was in Beijing.

Would they do that remotely, or do you think they got access to your computer?
Who knows? There’s a thing called an evil maid attack. Figuratively, if a maid in a hotel gets five minutes with your computer, you’re screwed. There isn’t a computer in the world that a good hacker couldn’t crack if they get their hands on it for five minutes with nobody looking.

What about leaving it in the hotel safe?
All hotel safes are made by a couple of manufacturers. There’s master key codes to get into them. Half the people in the hotel know what those are. Some of them have little holes in the back that you can press a paperclip in and make the door pop open. Because every couple of hours some guest is forgetting the combo for their safe, all the staff people need to be able to pop the safe open. It’s not secure.

The best way to protect something is to encrypt it—or just don’t bring it on your trip at all.

You also have to worry, depending on your nationality, coming back into the United States. ICE has a renewed interest in taking people’s computers and phones and downloading the contents, looking for who knows what. They’ve even done this to some Americans. This has happened at the Canadian border on many occasions recently. And there are a lot of cases in court right now challenging this.

Even if you’re American, if you have an iPhone with a bunch of encrypted junk and you cross the border into the United States, in theory these guys can grab your phone and try to force you to unlock it. And there are devices that will enable them to read it even if you don’t cooperate.

In Russia you should expect someone to try to take your data. I think that’s true in most countries. I would even worry about France.

At this point, if you’re travelling internationally, I think you should assume anything digital you have on you is probably going to get read. If you don’t want it read, encrypt it.

With Apple laptops, you can encrypt the whole hard drive pretty easily. If you encrypt the hard drive, it’s pretty solid. If they have a really good reason to go after you, they’re going to have to get your password to unlock it and at least you’ll know.

Wi-Fi is another big problem. One of the biggest scams in the world today is free Wi-Fi. Airport free Wi-Fi, coffee shop free Wi-Fi. There’s a device—I actually have one—called a Pineapple, which costs about $150. A Pineapple is totally legal in this country. You plug it into your laptop, you go into an airport or hotel, and it allows you to create a fake Wi-Fi network.

You can pick a name for it. So let’s say you’re in a Marriot Hotel and you create a Wi-Fi called “Marriot Guest Network #2.” Everybody will start seeing that. They’ve got the password from Marriott Guest Network, so they just assume it’s an extension and they type in the password. Since it’s a man-in-the-middle thing, everything you type in goes into that, and then it passes it through to wherever you were trying to go, like Amazon or your personal web account or your bank.

So if you type in your password to get into some website, a Pineapple has copied it?
Yeah. It’s very common. It’s used all over the world. I doubt there’s an airport in the world where there isn’t somebody doing that. It’s just so common. If you see free Wi-Fi anywhere, you should be very skeptical. Try very hard not to use it if you care about what’s in your computer and what you’re typing.

When I got back, I tested the laptop, and it had at least three malware programs that had been installed by somebody at some point while I was in Beijing.

If you’re surfing the internet, does that leave you vulnerable?
There are things that could be left on your computer if you click certain things. You know they talk about phishing and spear phishing with your emails. There’s stuff like that on websites. Each time you go from page to page, you’re essentially clicking a link. The way browsers are implemented is you’re actually running a small program. So it could be malicious code that tries to install a back door, a Trojan, a virus, a worm, something on your computer. You probably wouldn’t know. In theory, just even browsing could get you nailed. In practice, probably not, but you might.

I would guess at least one of every six computers is hacked and nobody knows. The hacker that put something on there isn’t ready to do anything with it. Or they just nailed a million computers at once and may turn them into a bot net. Or they may start pulling information out next Tuesday at 1 a.m. You just won’t know.

Is that the smart way hackers do it? They go in, don’t let you know, and they’re just taking your information.
The smart ones.

Because they can use that data later?
I got a call from a friend of my sister. She had just gotten an email that was addressed to her by name, and in the subject line it had a password that she used for a lot of her accounts. It said, “Hi, I know your password is blank, blank, blank.” And then underneath it, the text of the message says: I know you’re looking at porn. I took over your computer’s camera and I have pictures of you looking at porn. If you pay me $2,000 in bitcoin, I won’t tell everybody. And by the way, I downloaded your address book. I know who all your friends and relatives are, and I’m going to send them copies of pictures of you looking at porn on your computer unless you pay me.”

She was terrified. That’s called spear phishing because it’s targeted. It looked personal. I talked her down off the cliff and explained what it was. Then I went back and looked in my junk folder, and I had the same email. And it had one of my old passwords.

The theory used by hackers is that most people, if they use a password on this system, may use the same on another site. The truth is most people do. We need so many. I mean, I must have 500 passwords. Most people have at least 50 or 60, and when you have all these passwords you can’t make them up and remember them. Hackers can programmatically go after that.

To protect yourself, there is something called a password locker. You pay an annual subscription, and it encrypts your passwords so you get one master password and you use that to unlock each of the other passwords.

Of course, the problem is if you allow somebody to get your master. Now they have all of your passwords. So that goes back to my original point that there is no absolute security. These are mitigation strategies. Everyone should absolutely use one of these password lockers.

What about your cell phone when you travel?
Depends what you think is a risk, right? There is a device called a Stingray, and this is a problem in Washington, D.C., where we are. A Stingray is a fake cell phone tower. You can build one for a couple thousand bucks, or you can buy a really good one for $100,000.

A Stingray is not a tower; it’s just a box. The way cell phones work is your phone signal goes from cell to cell to cell. It just hands it off. If you walk down the block, you’re probably going to go through three different cells without even knowing it. There are probably 20 cell phone towers my phone could see right now. You put a Stingray down, anywhere, and it looks like one of those towers to your phone. So as you walk down the street, you may very well connect to that Stingray instead of a real cell phone tower.

It’s another variation of the man-in-the-middle concept. So now everything you type is going through that Stingray, which is then going out to the real internet. So if you use a password, guess what? They just got your password. If it’s a voice call, they got your voice call, they’ve got your text messaging. This is very common in congested urban areas like Washington and New York.

The reason this is so common is because law enforcement started using this and when citizens wanted to go to court and stop it, the government stepped in and protected their ability to use it. They want to do it without getting a warrant or a subpoena, which has allowed the industry to thrive. Everybody in the world has these things. I doubt there’s a single government that doesn’t have Stingrays.

This is one of a traveler’s biggest vulnerabilities. I don’t think the average person could tell. As a consequence, you have to assume anywhere you are in the world, anything you’re saying on a cell phone, anything you text, has been taken by somebody and looked at. So that’s a pretty big risk.

Another kind of risk is “snarfing.” This relates to Bluetooth. Bluetooth is a horrible protocol from a security viewpoint. The only saving grace for Bluetooth is its short range, but if somebody gets within 20 or 30 feet of you, it’s not impossible to use Bluetooth and go onto your phone and steal everything. That’s why it’s called snarfing.

Just by being close to you?
Yeah. You read a couple of years ago about celebrities whose nude selfies were published online. That’s how a bunch of them were caught. These guys would sit with snarfing equipment—something that looks like a laptop with a gadget stuck in a USB port. They’ll be sitting outside a movie premiere or the Oscars where you know a lot of celebrities are going to walk by. They just stand there and have this thing in a little bag, and as [the victims] walk within range, this thing is going to attack the Bluetooth on their phone and very likely will get in and take everything on their phone. That’s a pretty big risk.

There are special phones sold that can protect against all of these things. They’re expensive.

I would guess at least one of every six computers is hacked and nobody knows.

What about using your hotspot on your phone if you’re in a hotel? Is that any safer than hotel Wi-Fi?
It’s better than the Wi-Fi in the hotel. It’s not great, but it’s better.

Could someone still steal everything on your phone?
Not with a hotspot. The way the hotspot works is it’s got two connections: one cellular, going out, and one Wi-Fi going to you. The Wi-Fi is your Wi-Fi. Presumably you know what it is, so you don’t connect to anybody else’s Wi-Fi. But on the cellular side you’re still vulnerable to Stingrays picking up anything on your call. So you’ve got some protection.

If you’re doing something that’s potentially very lucrative and you’re a good target for industrial espionage, bottom line is just think long and hard about putting it on any device that’s out of your control. Don’t allow anybody physical access to your phone or laptop. Minimize the amount of interconnectedness you do. Use your own cell phone hotspot if you have one.

What about airline Wi-Fi?
Airline Wi-Fi uses GoGo. You connect, and then a popup comes and tries to make you pay or put in a password. All of it is open Wi-Fi. It’s basically a legitimized man-in-the-middle attack. They create a fake internet just like in that hotel. So on airlines, you can actually leave the popup and then go underneath and look at your email, even if you haven’t paid for it.

What is your vulnerability at 35,000 feet?
It’s enormous. I mean, you’re up there physically, but your internet traffic is going through this fake internet thing. If you use it too much, you’ll find sometimes your icons get taken over. All of a sudden a program that has an icon is replaced by the GoGo icon. It’s putting this crazy stuff into your computer.

From your perspective, you’re just browsing. But you’re not really, because the program is doing a bunch of complicated things so they can be sure they’re charging you for it. If they weren’t, it would just be a straight pass-through, and you’d be a lot safer. Because they want to make sure you don’t get it for free, they take over part of your computer, which makes you vulnerable.

Vulnerable to other passengers on plane?
There’s a thing called packet sniffing. It’s a software gadget. The most common is called Wireshark. It’s free, and it’s legal. If you run this thing on any network, it will show you every packet that goes across the network.

So I can be sitting three rows behind you in an airplane with this packet sniffer—
And you’ll see everything I’m typing that comes across the network.

I’ve got a couple of hours on a plane and want to look at my corporate financials. What’s my risk?
If you’re just looking at it, you’re a lot safer.

But if somebody emailed them to me?
Then you’re not safe.

Same with the sniffers three rows behind me?
Yeah, they got you. But they can get you through Bluetooth, anyway, or maybe some other way. All email is basically—I hate to sound paranoid about this—but you should assume all email is monitored by someone.

The National Security Agency grabs every piece of traffic on the open internet it can get its hands on—every single email anywhere in the world. They capture and store it in a place in Utah at a data mountain facility called Bumblehive. This is well known. And they’ve been doing this for at least six years.

But they don’t necessarily look at it all?
No, they don’t.

But if it contains pejorative words, they check it right away?
Yeah. It’s a program that used to be called Echelon. It’s a classified NSA program. They’ve been doing this for almost 10 years. It will only go to a human being’s attention if you say words that somebody cares about, like Putin or atom bomb and North Korea or whatever words they care about.

Holtzman is president of Global POV.

Life insurers are beginning to link premiums to fitness and health data in an effort to extend the longevity of policyholders.

John Hancock, one of the oldest and largest life insurers in North America, announced in September 2018 that it would stop underwriting traditional life insurance and sell only interactive policies that track fitness and health data through wearable devices and smart phones. The insurer, which is owned by Canada’s Manulife Financial Corp., is applying the interactive life insurance model to all of its life coverage.

Under the program, policyholders receive premium discounts if they hit exercise targets that are tracked on wearable devices, such as a Fitbit or Apple Watch. In addition, policyholders who log their workout information and healthy food purchases in an app can receive gift cards for retail stores and other perks. To encourage use of the fitness apps, John Hancock is giving individuals who purchase policies reduced-price or free Fitbits and Apple Watches.

Consumers still have the option of not logging their activities to get coverage even though their policies are being packaged with the interactive program, known as Vitality, which John Hancock has already been using in South Africa and Great Britain. However, if the Vitality program is not used, the policyholder will not receive any of the offered benefits.

Company officials said it is too early to determine whether John Hancock is paying fewer claims because of the Vitality program, but that data collected so far for policyholders worldwide suggest they are living considerably longer than the rest of the insured population.

In addition, SCOR Life & Health Ventures (the strategic investment arm of SCOR Global Life) and TransAmerica Ventures (corporate venture capital arm of the Aegon Group and TransAmerica) recently announced they are making seven-figure investments in iBeat, a health tech company that makes the Heart Watch, a cardiac monitoring smart watch that detects if a person has stopped breathing and summons emergency help.

Officials from iBeat said the company will use the investments to advance product marketing and expansion for the Heart Watch and to offer the Heart Watch to the companies’ policyholders.

“It’s invigorating to see life insurers recognize the value in investing in technology that advocates for longevity,” said Ryan Howard, founder and CEO of iBeat.

While the incumbents clearly think this is the future of life insurance, it has yet to be determined whether this approach will be successful. True Blue Life Insurance recently conducted a survey to determine which demographic would be the ideal target for these types of life insurance products.

The company found that 77% of respondents were uncomfortable having their insurance premiums fluctuate based on their yearly physical results and that 70% of those 18-24 years old were uncomfortable with it. They also found that 59% of respondents are not willing to wear a fitness tracker that reports to insurance companies, even if it means potentially receiving a better premium. And among the 18-24 demographic, 54% of respondents were unwilling.

That being said, “What we ultimately found was that the 18-24 demographic was the most comfortable with the parameters of these ‘interactive policies,’” the company noted in its report. “Interestingly enough, they are also the demographic least likely to purchase life insurance.”

Using wearable devices to track employee fitness is not a new concept. As long as a decade ago, pre-Fitbit, some employers were using pedometers to track the number of steps their employees took every day and launching fitness programs in hopes of cultivating a healthier workforce.

“If anything, wearables continue to gain popularity,” says Deb Smolensky, NFP’s vice president and global leader for well-being and engagement. “We’ve seen an interest long ago with your basic Fitbit and wanting to track steps. That has exploded over the last four or five years into primarily a personal tool for any type of health monitoring.”

That monitoring might include how many steps an employee takes each day or how many hours of sleep the employee gets at night or even medical data such as the employee’s heart rate and glucose level. Taken collectively, such an accumulation of personal data has changed the definition of employee wellness.

Of course, a key component in the evolution of tracking employee wellness is the ubiquitous smart phone. When you take the ability to monitor and collect data on all different markers of your health, then house that data in a phone with apps that allow you to send that information to others, your wellness becomes much more actionable.

“As a practical matter, we all wear a wearable device today known as your iPhone,” says Robert Hartwig, a professor of risk management at the University of South Carolina. “It knows where we are, it knows where we go, it monitors how much we walk and it has a good sense of what we eat. So there is a potential convergence of technology over time of wearable devices in the workplace and other devices developed in the world of healthcare. All may converge to personal devices we all carry with us everywhere.”

Experts view consumer access to medical records via mobile devices, although still in its infant stages, as a logical next step in the health app revolution.

Changing Motivation

The number of employers offering benefits packages using health tracking devices is huge and growing annually. Mercer recently partnered with the Health Enhancement Research Organization in a study of well-being best practices that included around 2,000 employers. Of the employers completing the survey, 60% reported using a tracking device. “That may be high, but probably somewhere between 40 and 60% have something in place,” says Steven Noeldner, a health management consultant for Mercer.

In addition to using trackers, employers are increasingly using app-based digital platforms to deliver wellness benefits to their workers. Through apps, employees can engage in everything from tracking fitness goals to competitive challenges with co-workers or management officials.

As a practical matter, we all wear a wearable device today known as your iPhone. It knows where we are, it knows where we go, it monitors how much we walk and it has a good sense of what we eat.

Robert Hartwig, professor of risk management, University of South Carolina

For most employers, the original goal of fitness trackers was to cut double-digit increases in healthcare costs. While a healthier workforce certainly would seem to be a factor in controlling healthcare claims and overall healthcare costs, it was difficult then—and is difficult now—to actually prove that link.

And a far different reason than cost control is now motivating many employers to offer a robust employee wellness program: the desire to attract and retain a high-quality workforce in a tight hiring market.

“We are seeing these programs today more as a talent and retention tool than in the past,” says Kimberly George, a senior vice president and healthcare advisor for Sedgwick, a third-party administrator for self-insured companies. “If an employer has an attractive benefit package, today it includes some sort of digital platform focusing on the needs of employees. An employer or health plan or companies supporting those benefits are not going at it for just one angle—cost containment. It is the way benefits going forward are going to be.”

“Does a free Fitbit make me more inclined to go to that company?” muses Smolensky. “I’m not so sure. But if the employer cares about me with a whole suite of benefits—my health, my family’s, my training—and cares about me as a person, that human element is very important in helping me to determine whether to take that job.”

For employers, Noeldner says, one of the primary motivations behind wellness programs is simply to engage their employees. “We know that employees engaged in well-being are more engaged with the business and their performance is enhanced,” he says.

Some employers offer free tracking devices and provide financial compensation if an employee achieves certain fitness goals. Others find the challenge of competition, with individual co-workers or teams or even company executives, often gets more employees involved.

“The biggest challenge is educating the workforce as to what is available and then getting them to use it,” George says. “Most of the time we have found that providing financial reimbursement in the benefit space isn’t necessarily driving greater success. The apps that are offering motivation cues—recognition of miles or goals—those tend to be the apps that people stick with and use. If somebody’s not motivated to change, an app is not going to make that happen.”

Cost and Quality Challenges

But, as is the case with wearable devices in the workplace, there is little hard evidence that health apps are actually bringing about the promised results.

“The acceptance of these types of applications is growing,” says Zack Craft, vice president and national product leader at One Call Care Management. “It is exciting but difficult because multiple companies are putting up apps. These kind of health apps need to be validated. A lot of companies are coming in, and there is value around them, but the concern is: is that value of using health apps actually going to improve patient care or quality of care?”

Most of the time we have found that providing financial reimbursement in the benefit space isn’t necessarily driving greater success. The apps that are offering motivation cues—recognition of miles or goals—those tend to be the apps that people stick with and use. If somebody’s not motivated to change, an app is not going to make that happen.

Kimberly George, senior vice president and healthcare advisor, Sedgwick

Risk-management experts say mobile health will make its biggest impact from its capability to monitor a person’s blood sugar level for diabetes or other serious medical conditions, such as heart disease or autoimmune diseases.

“Some of the greatest benefits are likely to occur on the health insurance side of the business because of the fact that continuous monitoring of chronic medical conditions, and preventing those conditions from spiraling out of control, would have immediate and demonstrable benefits,” Hartwig says. “For instance, an individual who is diabetic and monitoring their blood sugar and their weight constantly, to the extent that these things could be monitored over time, could make doctors aware and help make adjustments.

“We know for a fact that an individual who is obese takes much longer to return to work and workers compensation costs could be several times more than for a healthy individual. Individuals in the workforce who have chronic and controllable and oftentimes preventable conditions, such as obesity and diabetes, account for a disproportional share of workers compensation costs.”

In addition to the difficulty of evaluating medical outcomes, there is also a cost barrier for many employers. Although companies of all sizes are involved in the well-being revolution, some employers are struggling with how to meet employee needs, because overall healthcare costs are still rising and the mobile health platforms are not cheap. The National Business Group on Health reported in August that annual per-employee benefit costs are expected to rise 5% in 2019, reaching $14,800, of which employers generally cover around 70%. And it costs employers an estimated $500 to $600 more per worker for employee engagement and well-being.

“While wellness and physical activity and nutrition and stress management are all still important initiatives for all employers of every size, it is difficult to prove that they will result in saving money on healthcare spending,” says Kyle Anthony, director of the human capital practice for Oswald Companies. “This has more and more people wondering if all the time they spent on wellness initiatives is worth it. There is an ongoing struggle to reconcile the relationship between wellness and healthcare costs.”

Smolensky agrees. Cost is an issue, she says, for employers who work with NFP, which she describes as “midsize market companies, not Fortune 500 companies.” While some want to “do the right thing,” she says, others would rather manage their medical expenses. “They are asking us what type of carrier system is providing support so they don’t have to spend money elsewhere,” she says.

Of all the sectors involved in mobile health services these days, insurers are the least likely to have the suite of digital wellness options employers are seeking.

“Major insurance carriers all do have something you would put in the category of wellness or care/condition management,” Noeldner says. “It is often built within, and they manage it themselves. Are they leading the charge? Probably not. But more are extending themselves and recognizing that their clients are interested.”

“If carriers are not in the business of well-being,” Smolensky says, “a lot of times they do not meet the mark in being robust or technologically innovative or engaging, so we come in and help our customers find a way to meet their goals.”

Booming Market

Does a free Fitbit make me more inclined to go to that company? I’m not so sure. But if the employer cares about me with a whole suite of benefits—my health, my family’s, my training—and cares about me as a person, that human element is very important in helping me to determine whether to take that job.

Deb Smolensky, vice president and global

Budgetary concerns notwithstanding, it is hard to imagine the trend will reverse. Millennials are now the largest generation in the workforce, and they are more health-conscious than their Gen X counterparts. And because they grew up online, they have an expectation they will have programs tailored specifically for them, which is what a digital platform of apps addressing well-being and wellness does.

The market for mobile health services is huge. A recent report by Market Research Engine estimated the global market for various healthcare apps and technologies will be $59 billion by 2020 and around $104 billion by 2022. According to the report, the market includes product lines such as blood pressure monitors, blood glucose meters, chronic care management, healthcare and fitness apps, women’s health monitors, diabetes monitors, various forms of motion trackers, ECG monitors, pulse meters, sleep apnea monitors, digital skin sensors, and weight-loss, fitness and nutrition apps. A 2015 article in Employee Benefit News estimated there were 40,000 available health-related mobile apps, and that was three years ago.

The potential for growth in the mobile health arena is so great, George says. “Everyone is trying to find their play with this.”

Some brokers have created alliances with various digital health tool providers to serve their clients, and some employers are hiring their own health advisors and setting up the systems themselves. Others are using brokers, consultants or third-party administrators to identify vendors that will provide the apps to meet their goals and handle the data that is collected.

At present, the most popular well-being programs involve motion tracking, fitness and weight control, areas that focus on physical health and personal accountability. But other programs are focused on medical issues such as diabetes, mental health and stress.

“Both are huge topics right now, primarily because of the number of people dealing with those conditions,” says Anthony, whose company collects mobile health data for its customers. “Stress is a big factor for a lot of people right now, and diabetes is an epidemic.”

“The medical side is becoming increasingly popular as a way of monitoring one’s own health, own conditions and gaining insight,” Smolensky says. “Those tend to be more complex and expensive based on conditions. It is a condition-management approach versus an overall well-being approach. ‘Mental health’ is the number-one buzzword right now. It replaced last year’s buzz word—'financial well-being.’”

Ben Hackett, a senior director of product management for Accolade, says the opioid epidemic has helped to fuel interest in mental health. Accolade helps employers assist their workers in understanding what benefits are available and finding apps and other medical assistance they need. “There are also challenges around loneliness in a digital world,” Hackett says, “and interest in financial stability. Companies are hiring millennials fresh out of college, and helping people pay down loans is a big component of those programs.”

The Next Evolution

As acceptance of mobile health apps grows, so has the interest in allowing employees to easily access their medical records. Apple is working to bring protected health information (or PHI) to iPhones, iPads and the Apple Watch. Having PHI on mobile devices would give individuals the ability to access, retrieve and share that information without the time-consuming processes of phone calls, faxes and appointments or the physical pickup of records from different providers.

Last year Apple introduced a significant update to its Health app, debuting a feature for consumers to see their available medical data from multiple providers whenever they choose. Working with the healthcare community—a host of hospitals and clinics are making this feature available to patients—Apple created its Health Records based on FHIR (Fast Healthcare Interoperability Resources), a standard for transferring electronic medical records.

Google, Amazon and Microsoft have followed Apple and adopted the FHIR data standard, which means all companies and devices will be able use the same standard to obtain and share medical records and other health information.

“Sharing medical records is still infant and still difficult,” Hackett says, “but Apple is paving the way, and other companies have followed.”

Arvidson is a regular contributor to Leader’s Edge.

Trusted Exchange Framework and Common Agreement: The Office of the National Coordinator for Health Information Technology (ONC) is developing a Trusted Exchange Framework and Common Agreement to establish guidelines and principles for how information travels between clinical systems in disparate networks. The goal is to help broaden access to healthcare data from provider-to-provider exchanges of clinical data. In early 2018, ONC released a draft Trusted Exchange Framework for comment. The office also released the United States Core Data for Interoperability, which outlines a road map for the industry that prioritizes which data elements should be released and when.

Quality Payment Program: The Quality Payment Program took effect in January 2017, replacing a formulaic approach to compensating Medicare providers with a system that rewards high-value, high-quality Medicare clinicians with payment increases while reducing payments to those clinicians who aren’t meeting performance standards. The program will require improved patient access to clinical data through application programming interfaces with third-party applications.

The Health Information Technology for Economic and Clinical Health Act: Known as HITECH, this 2009 legislation established the meaningful use of interoperable electronic health records (EHRs) throughout the healthcare delivery system as a critical national goal. “Meaningful use” is defined as the application of certified EHR technology that enables the electronic exchange of health information specifically to improve quality of care. Follow-up reports on successes and challenges must be submitted to HHS. CMS uses incentive payments to and penalties against providers based on their implementation and compliance with standards.

Blue Button 2.0: The CMS Blue Button initiative allows Medicare beneficiaries to download their Medicare fee-for-service claims information. In March 2018, CMS launched Blue Button 2.0, which is intended to improve patient access to and control of health data by offering a developer-friendly, standards-based API that enables Medicare beneficiaries to connect their claims data to secure applications, services and research programs. 

CMS is evaluating regulations that would extend Blue Button data exchange requirements to other contracted Medicare Advantage and individual market qualified health plans. CMS is contemplating future rulemaking in this area to require the adoption of such platforms by Medicare Advantage plans beginning in 2020.

ONC Tech Lab: In 2016, the ONC introduced a Tech Lab to organize and promote specific efforts and projects geared toward improving health IT interoperability, including assisting industry stakeholders in developing healthcare standards and policies to improve interoperability. The ONC Tech Lab is focused on pilots, standards coordination, testing and utilities, and innovation.

She recalled her horror last March at an annual conference sponsored by the Health Information and Management Systems Society.

“If it weren’t for the bystanders and the first responders at the airport, my kids would’ve watched their father die,” Verma said. “In the hours it took to get to my family, I tried to answer questions for the doctors over the phone about his medical history, but unfortunately I had few answers. So I desperately made calls to his doctors back home in Indiana asking if there was any information they had that could help save his life. When I arrived at the hospital, the doctors and nurses still didn’t know what was wrong with him or how to treat him. He had a multitude of tests…MRIs, CAT scans, blood tests, ultrasounds.”

While experts ultimately diagnosed and successfully treated his condition, Verma believes no one should have to endure what she did. And she is now spearheading efforts at CMS to increase consumers’ access to their health data. These efforts are part of a Trump administration policy initiative, MyHealthEData, that seeks to improve patient access to clinical data by improving the systemic architecture in place for consumers’ right to access data.

“Imagine a world in which your health data follows you wherever you go and you can share it with your doctor, all at the push of a button,” Verma said. “Imagine if, in turn, your doctor didn’t have to spend so much time faxing records and staring at a computer during an appointment. Imagine if you could track your medical history from your birth throughout your life, aggregating information from each health visit, your claims data, and the health information created every second through wearable technology.” 

The fact is, individuals’ lack of access to their medical records in emergency situations is just one component of a larger healthcare data challenge. Limits to clinical and claims data sharing, based on proprietary and technical impediments, reduce patients’ ability to be effective healthcare consumers.

Such information barriers also impede efforts to address spiraling healthcare costs, often by limiting competition on quality and price.

Clearer and more comprehensive records will allow consumers to track their healthcare issues, treatments and outcomes more easily. While consumers may not be able to fully interpret their data on their own, data sharing enables third-party applications to aggregate and thus better track the quality and price of care. Data sharing could also inform patients on optimal care choices.

“Software application access to the data will allow consumers to proactively determine which providers provide the best outcomes at the lowest cost through apps that could help aggregate that data on behalf of millions of consumers,” says Ryan Howells, a principal at healthcare intelligence consulting firm Leavitt Partners. Leavitt manages an alliance known as CARIN (Creating Access to Real-Time Information Now through Consumer-Directed Exchange), whose stakeholders represent hospitals, physicians, large payers, consumers and caregivers promoting health data sharing with third-party applications.

“Improving consumers’ ability to make more informed healthcare choices…will enable them to choose high-quality, low-cost providers, thus helping generate large improvements in healthcare experience and associated costs,” Howells says.

Close at Hand

While this may seem like a distant vision, some say it’s closer than we think. Aneesh Chopra, a co-founder of CARIN and president of CareJourney, an open-data intelligence service provider, says that 2019 could be a transformative year for the impact of health data upon the healthcare system—and one that calls for agent and broker actions.

“By this time next year, a new paradigm for delivering employer-based healthcare insurance will take hold in leading markets,” says Chopra, a former chief technology officer under President Barack Obama. “I recognize that such pronouncements might be construed as hype. But there are now three trends that are converging to empower employers in new and amazing ways, and I hope that employees will start to benefit in the next enrollment cycle.”

The trends are as follows:

  • For the first time, there is a movement to standardize the way consumers invoke their right of access to their health information via an application or service they trust.
  • A move to value-based care is driving the creation of clinically integrated networks willing to take on responsibility for total cost of care to help employers and employees manage healthcare costs and help consumers make the best use of their health information.
  • Digital standards for consumer-directed health exchange are on the rise. These standards enable the rapid exchange of digital information between different software programs via the use of a common language and internet architecture. They facilitate the functionality of software applications, such as Apple’s Health app, that can help consumers understand their health needs and evaluate healthcare options at no marginal connectivity cost. 

These three trends, Chopra says, make it possible for consumers to use software applications to access and understand their health records, manage their care, and access value-based medical networks that can help them optimize care and contain costs.

Data Types

There are two key data types of high interest to healthcare stakeholders, notes David Smith, founder of Chicago-based Third Horizon Strategies, an organization that assists healthcare companies in their strategic planning operations.

  • Claims data are submitted by providers and include documents with information on the cost and dates of procedures and billing codes. Payers such as employers, insurance carriers, the government and individuals maintain that information.
  • Clinical data are generated at the point of encounter with a healthcare provider and are captured in an electronic health record (EHR). In most of the country, clinical records are the intellectual property of the healthcare provider that captured and authored the information, such as a doctor or hospital. The technology infrastructure of the resident EHR and the contractual provisions between the provider and the EHR company determine access to these data. 

Both types of data are important factors in good and efficient healthcare. Clinical data can facilitate population health management because it is specific to an individual and contains the detail necessary to optimize care for that person. (For example, clinical data can help providers avoid duplication by sharing patient conditions, treatments and outcomes.)

Claims data can be useful for generating statistical profiles of a population, Smith notes. That can assist underwriters, actuaries and insurers in pricing risk and learning things about populations or geographies.

Any party that stands to benefit economically from eliminating inefficiency or improving healthcare at the same or lower cost should be mining data, says Jon Prince, president of DataSmart Solutions, a data warehousing and analytics company in Helena, Montana.

Imagine a world in which your health data follows you wherever you go and you can share it with your doctor, all at the push of a button.

Seema Verma, administrator, Centers for Medicare & Medicaid Services

Privacy Protections

As we look toward the future of data-driven healthcare, it’s useful to understand the current legislative and regulatory boundaries that govern healthcare data. Traditionally, the limited data sharing that has occurred has been under HIPAA (Health Insurance Portability and Accountability Act of 1996). Within HIPAA, payers can access patient-protected health information to evaluate and pay a claim, says Dawn Paulson, director of HIM Practice Excellence at AHIMA, the American Health Information Management Association. Payers also can access and use data for healthcare operations, including population health management and care coordination, says Jodi Daniel, a partner at Washington, D.C., law firm Crowell & Moring and a former policy director at the U.S. Department of Health and Human Services.

A December 2018 article in Leader’s Edge noted that HIPAA’s Privacy Rule includes provisions that authorize permissible data sharing—and mandate it under certain specified conditions (

Scott Sinder, a co-author of the article and The Council’s chief legal officer, says the Privacy Rule allows a carrier to share plan data with the employer sponsor without employees’ consent or authorization but there are limitations. For example, carriers can share summary health data (such as anonymous information on claims history and claims expenses) with employers for premium bid purposes or for modifying, amending or terminating the group health plan.

The Privacy Rule permits carriers to share more granular personal health information with employer sponsors for underwriting purposes and with other healthcare operations, Sinder says, as long as certain anti-discrimination safeguards are satisfied. The Privacy Rule also gives individuals the right to see copies of the information in their medical and other health records maintained by their providers and health plans. As

Leader’s Edge reported: “Employees may extend their ‘right of access’ to their own personal health information to their employer and/or the employer’s broker—as designee(s)—and plans must then provide the information as requested by the employee.”

As data sharing expands to include the exchange of information via consumer authorizations to third parties, the duty to comply with HIPAA requirements will be supplemented by the challenges of addressing data exchange ethical and legal issues outside of a HIPAA environment.

In late November, CARIN released a code of conduct that third parties can follow to ensure their applications are gaining consumer consent whenever they handle healthcare information on behalf of the consumer. The code, Howells says, is designed to help third parties follow industry best practices for securing information outside of HIPAA.

Some software company-specific efforts are also under way. “We have done work to include patient education when patient-authorized applications would share information,” says Sasha TerMaat, a director at Epic, a Wisconsin-based software company targeting healthcare providers. “We work with app developers to identify aspects of information sharing significant to them and make that more accessible to patients than if it was hidden in a 20-page terms-of-use document.”

Howells says he anticipates a new “data-sharing ecosystem” that will enable employees and patients to access their health information under HIPAA. Such access, he says, will empower consumers to share their information with any third party of their choice.

Information Blocking

Privacy isn’t the only issue to consider in increased data sharing. There’s also the matter of overcoming proprietary interests by parties who currently hold and own electronic health records. Many say healthcare providers and payers can limit access to such data to protect themselves from competition and to facilitate relationships with other parties.

In fact, this may be among the hardest challenges to overcome, though a variety of federal efforts seek to prevent this trend, often called information blocking.

The federal Office of the National Coordinator for Health Information Technology (ONC) is required to establish regulations that improve access to clinical information by parties requesting the underlying clinical data. The statute requires electronic health record vendors and hospitals to confirm they are not engaged in information blocking. The Department of Health and Human Services is expected to provide guidance on information that should not be blocked as well as fines to be imposed for information blocking.

The Centers for Medicare & Medicaid Services is moving to require similar data transparency regarding claims from insurers. In her March speech, Verma called upon all insurers to give patients their claims data electronically. She said over the course of the year CMS would reexamine its partnerships and relationships with health insurers to find ways to persuade them to give patients control of their records.

An executive at a data analytics firm says information-blocking concerns are real and addressing them is critical. “When we get information from large payers for our clients, they require in their nondisclosure agreements that we not do anything with the data that would allow someone to determine provider price or quality decisions, which we think they include because the hospitals make them put those clauses in their contracts,” the executive says. “Yet that is the most important reason to be using the data, because a handful of claims drive all the costs. If you can ensure that that 10% of the population makes the right decisions, that makes all the difference.”

Jodi Daniel, of Crowell & Moring, says information-blocking provisions will likely require data holders to release data “for purposes that are good for patients but may not be in the data holders’ best interests.”

Technical Challenges

There are also legitimate technical challenges to data sharing—in particular, setting the standards and frameworks to enable it. There are disparities in the types of data recorded. Not all data with value are recorded, and much that is recorded is captured in different formats.

In the past, common electronic standards that would allow the sharing of different types of information from different types of applications did not exist. However, both public and private sector initiatives are said to be achieving remarkable progress in this area. (For details of public sector initiatives, see the sidebar “Setting the Standards.”)

By this time next year, a new paradigm for delivering employer-based healthcare insurance will take hold in leading markets.

Aneesh Chopra, president, CareJourney

In the private space, Fast Healthcare Interoperability Resources (FHIR), a non-proprietary application programming interface (API) standard for sharing and exchanging health information, is rapidly being adopted as a common industry standard. Several factors are increasing its adoption. The Argonaut Project, launched several years ago, is a private-sector initiative to advance industry adoption of modern, open interoperability standards. Participants in the Argonaut Project are working to rapidly develop an FHIR-based API to help expand health data sharing.

As part of these efforts, Apple has integrated the clinical API standard into its iPhone iOS, including a health record feature within its Health app that was introduced in January 2018. A variety of other tech vendors and providers also support the Argonaut Project, including Cerner, Epic, AthenaHealth, Meditech, Accenture, and McKesson.

A second effort, the Da Vinci Project, is more focused on payers. The project includes Allscripts, Cerner, Optum and Epic on the technology side and many of the country’s biggest commercial payers, including Anthem, the Blue Cross Blue Shield Association, Humana, and United Healthcare. Last August Amazon, Google, Microsoft, Salesforce, IBM and Oracle signed a joint pledge to accelerate interoperability across healthcare by leveraging cloud-based technologies and data standards in pursuit of the common good. 

In October, ONC released a study that found 10 certified health IT developers with the largest market share across hospitals and clinicians use FHIR. About 82% of hospitals and 64% of clinicians use these developers’ certified products, which Howells characterizes as unprecedented in terms of the speed in which an open standard was voluntarily adopted by industry.

The Use of Big Data Is Under Way

As the ability to share data improves, it is important to think about what can be done with those resources. For that, we can look to the health data analysis already under way.

“Scientists, clinicians and others have long recognized that large quantities of health-related data…can be analyzed to detect forthcoming health problems as well as to validate superior interventions,” DataSmart Solutions’ Jon Prince says, noting that such information is already used by employers, insurance carriers, hospitals, and other care providers.

Healthcare analytics companies are leading this research, Prince says, together with some university hospital systems, such as the Johns Hopkins Bloomberg School of Public Health. Some large insurance carriers and consulting firms contract with or acquire analytics units to produce useful information from raw data.

“In short, there is great value to be found within data for the field of public health,” Prince says. “In addition to traditional medical and prescription claims history, supplemental data, such as biometrics, vision scans, routine blood panels and even questionnaires, can have predictive value. A striking correlation, for example, has recently been found between consumer data, such as the FICO score, and health-related behaviors such as adherence in taking prescribed medications.”

The study of health data patterns enables many disease states to be foreseen, permitting early intervention and better outcomes. Data are also used to evaluate quality of care, efficiency of care facilities and providers. The performance of individual plans can be carefully analyzed to reveal cost trends upon which corrective action can be taken.

In broad terms, Prince says, the findings from healthcare data research fall into categories of predictive risk scoring (e.g., identifying individuals in greatest need of immediate intervention), improving traditional diagnosis (e.g., providing doctors with a more complete story on a patient) and recommending improvements in plan design and networks.

In all cases, however, to extract value from research, findings must be interpreted and acted upon by experts, Prince says, and that requires action by brokers. “Brokers must ensure that this interpretive, action-taking component is included,” Prince says. “A complete analytics-care coordination ecosystem consists of more than colorful reports that accumulate in someone’s inbox. Brokers need to ask, ‘Who will act upon the findings at the level of my client?’”

The adequacy of data analysis can produce tension between employers and insurance carriers, Prince notes. “Some large insurance carriers assert that they have all of the above—analytics as well as onboard care coordination,” Prince says. “But experienced brokers know that, in spite of these reassurances, in some cases renewal rates can climb significantly, if not suspiciously. Hence, the trend for plans to migrate from fully insured to self-insured continues, along with the search for transparent, end-to-end solutions that begin with data and culminate in better plan performance, lower renewals, higher reserves and healthier members.”

Insurance brokers today are connecting valuable research to employer plans in a variety of ways, Prince says. “Many of the large consulting firms conduct RFPs on behalf of clients to identify the best total solution that includes analytics and care coordination team action,” he says. “These firms constantly vet analytics vendors, care coordination companies, and others from which an effective ecosystem can be built. Other mid-market brokers may hire and organize internal clinical, care coordination and reporting teams of their own and contract with analytics vendors for the underlying research. Smaller brokers outsource all these functions and are still able to deliver effective, economical products to their clients.”

Today, Prince adds, analytics and care coordination services are quite affordable. “The field is highly competitive,” he says. “The addition of this service to a broker’s product line is vital in a market where differentiation is crucial to a successful sales campaign.”

Driving Value-Based Payments 

As data sharing increases, so does the potential for creating a value-based healthcare payment system.

“We cannot effectively transition to a value-based system,” Verma said last year, “unless we provide to both the doctor and the patient all of the clinical and payment data required at the point of care to help them mutually make a different and better decision than they could have today.”

President Trump last year reinforced efforts to move toward a value-based compensation system through an executive order aimed at improving access to reliable information that consumers need to make informed healthcare decisions, including data about prices and outcomes.

In addition, Sen. Bill Cassidy, R-La., in early 2018 launched a proceeding to learn why consumers cannot compare the cost of care effectively. In September, Cassidy—who is a gastroenterologist—and several Senate colleagues, members of a bipartisan Senate healthcare price transparency working group, introduced draft legislation to protect consumers from surprise medical bills, often termed “balance billing.”

A complete analytics-care coordination ecosystem consists of more than colorful reports that accumulate in someone’s inbox. Brokers need to ask, ‘Who will act upon the findings at the level of my client?

Jon Prince, president, DataSmart Solutions

There are also data-sharing efforts included in existing value-based care initiatives. In the Qualified Entity Program, established by the Affordable Care Act, organizations approved as qualified entities (QEs) receive access to Medicare claims and prescription drug data for use in evaluating provider performance. QEs are required to use the Medicare data to produce and publicly disseminate reports on provider performance approved by the Centers for Medicare & Medicaid Services. QEs are also permitted to create non-public analyses and provide or sell such analyses to authorized users, such as employers. CMS also publicly releases information about providers through the Medicare Compare website.

Brokers Tie It Together

“If I were an insurance broker focused on the mid-market, I’d like to play the role of general contractor to tie these three key general trends together,” says Chopra, referring to the increased standardization of patient right of access and data transfer and the rise of value-based care.

For example, says Chopra, brokers could include a standardized digital form for employees’ right of access to their data in the open enrollment process, perhaps connected to an app. “The employer’s job might be to curate a set of apps under which, under certain terms and conditions, the consumer designates access to health information, starting with claims,” Chopra says. “Apps might be tied to clinical networks, should employers design ACOs, or to a retailer like Walmart, or to tech-focused online service providers like Apple or Google.”

Regarding the value of aggregated data, Howells says brokers can serve as aggregators and educators of consumers and employers. “They can also act as enablers by encouraging consumers to aggregate their healthcare data using their own platform and third-party applications to make more informed decisions regarding their coverage and treatment,” Howells says.

As we look to see what 2019 will bring to this field, experts warn of potential and patience. “This is still the first inning of efforts to unleash the power of data in healthcare,” Smith, of Third Horizon Strategies, says. “Billions of dollars have been invested in capturing clinical data well, but that doesn’t mean that all doctors and hospitals involved in care have access to it, and it doesn’t necessarily translate into the intelligence that may be possible with greater data quality, interoperability and availability, including intelligence that may benefit agents and brokers. Value-based care and fully integrated delivery systems are still the exception to the rule. Still, with as much as has already happened, the potential is very exciting.”

David Tobenkin is a contributing writer.

From: Joel Wood
Sent: Wednesday, December 19, 2018 10:08 AM
To: Joel Kopperud <>; Blaire Bartlett <>
Subject: Happy New Year


Well, guys, let us begin on a note of new-year cheer, recognizing two things—first, that commercial insurance brokerage issues generally aren’t partisan, and second, that while extremes on the left and right continue to polarize our politics, there is a great silent majority in the middle who just want everybody to get along and get things done. Can we hope for this, at least?


From: Joel Kopperud
Sent: Wednesday, December 19, 2018 1:09 PM
To: Joel Wood <>; Blaire Bartlett <>
Subject: RE: Happy New Year


That’s absolutely right, Joel. I look at the issues facing our members and I look at the incoming Congress, and I’m feeling pretty decent, considering it’s a divided government and not a whole lot is going to reach the president’s desk. What’s even more exciting, is that this really IS a new Congress! 100 new members total. 66 New Democrats and 44 new Republicans. This is the closest we’ve had to a fresh start in a LONG time!


From: Joel Wood
Sent: Wednesday, December 19, 2018 1:15 PM
To: Joel Kopperud <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Yea, right. And so much for all your new fresh Democratic leadership. Your numbers 1, 2 and 3 are all over 78 years old and have occupied their same positions for more than a decade. Hope, change and fresh vision?


From: Joel Kopperud
Sent: Wednesday, December 19, 2018 1:20 PM
To: Joel Wood <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Ugh. Look. 40% of the Democratic caucus is female. That’s refreshing. We have a record number of veterans in this Congress. More members under the age of 40 than I can ever remember. This is a new day. They were largely ushered in on the messaging of protecting the ACA and preserving protections for Americans with preexisting conditions (by the way, how many Republicans voted 57 times to repeal the ACA and then ran a poll and magically campaigned on PROTECTING preexisting conditions this time around?). But we all know the driving force behind all this is the president. I don’t know where to begin on that note…but we have front row seats for an amazing, historic showdown.


From: Joel Wood
Sent: Wednesday, December 19, 2018 3:19 PM
To: Joel Kopperud <>; Blaire Bartlett <>
Subject: RE: Happy New Year


I’m pushing 60, and so I do wonder who all of these children are who are wandering around Congress. Look, save your “preexisting conditions” crap for your stump speech. The reality is that your party barely outperformed historic trends for midterm elections and Republicans expanded their Senate majority.


Sent from Nine


From: Joel Kopperud
Sent: Wednesday, December 19, 2018 3:28 PM
To: Joel Wood <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Ha. I love watching the GOP try to minimize everything that’s happening. Yes, it would have been wonderful to take back the Senate, but nobody expected that to happen, and considering Dems were defending 24 seats—10 in Trump country—they did pretty good. And Pelosi, love her or hate her, is going to be a force. I don’t know who better to navigate the oversite and impeachment pressures while pursuing the people’s business than Nancy Pelosi. And watching Trump mansplain things to her in public settings does not bode well for suburban independent women.


From: Blaire Bartlett
Sent: Wednesday, December 19, 2018 3:33 PM
To: Joel Kopperud <>; Joel Wood <>
Subject: RE: Happy New Year


The people’s business? Pelosi? Even as a woman I find that hard to believe.


From: Joel Kopperud
Sent: Wednesday, December 19, 2018 3:41 PM
To: Blaire Bartlett <>; Joel Wood <>
Subject: RE: Happy New Year


Look at their agenda and it’s not far off from ours. Drug pricing, stabilizing individual health insurance markets, reauthorizing TRIA, and reforming NFIP. Yea. And, for better or worse, I understand she’s reinstating pay-go rules, which means that every dollar spent needs to be accounted for. No more borrowing from China. When the last speaker took the gavel, our deficit stood at a little under $500 billion. This year, it will be at $1 trillion because everything was borrowed. So, pay-go rules could work against us in some areas, but restoring order and sanity is—or at least should be considered—the people’s business.


From: Joel Kopperud
Sent: Wednesday, December 19, 2018 3:43 PM
To: Blaire Bartlett <>; Joel Wood <>
Subject: RE: Happy New Year


If you’re watching Fox though, this might not come through…


From: Blaire Bartlett
Sent: Wednesday, December 19, 2018 3:47 PM
To: Joel Kopperud <>; Joel Wood <>
Subject: RE: Happy New Year




I do agree that *some* of the issues facing our industry in the next Congress (NFIP and TRIA reauthorizations) should have smoother sailing than in the last two Congresses. However, I will be surprised if the House Democrats will be able to do anything else than reauthorize because they will be so focused on impeaching President Trump. I doubt the president is going to want to work with House Democrats while all of the executive agency staff are getting subpoenaed by House committees. Yet again, we must rely on the Senate...


From: Joel Kopperud
Sent: Wednesday, December 19, 2018 3:52 PM
To: Blaire Bartlett <>; Joel Wood <>
Subject: RE: Happy New Year


Speaking of, Joel, how do you see drug pricing legislation getting through Senate Finance and HELP Committees? There’s no shortage of bills being considered in the House—everything from allowing drug reimportation to regulating PBMs and shining light on manufacturing costs. The White House seems open to some of these ideas. Our members have a vested interest in how this plays out. We just have to find the right sweet spot.


From: Joel Wood
Sent: Thursday, December 20, 2018 12:25 PM
To: Joel Kopperud <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Perhaps I’m just being a sunny optimist here, but I do tend to think that drug pricing might be one sweet spot, given bipartisan dissatisfaction on the issue. And incoming Finance Chairman Chuck Grassley is an industry critic, as opposed to his predecessor, Sen. Orrin Hatch. But, checking myself, the drug industry is deeply enmeshed here, and all they need to do is continue to stoke the partisan differences. It’s always easier to beat stuff in this town than it is to pass it—that’s the way Madison created our government. We’ve got Congress, not Parliament. So, on that basis, I will now proclaim a premature victory in defeating Democrats thoroughly on the issues surrounding single-payer, Medicare for all, Medicare buy-in. And we shouldn’t let any of these Democrats off the hook who fire up their base promising that stuff.


From: Joel Kopperud
Sent: Thursday, December 20, 2018 1:03 PM
To: Joel Wood <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Ha. I was wondering when you were going to go there. Took you long enough. Here’s the deal, and I bet you agree with me. This whole fuss over single-payer and Medicare for all was ignited by the relentless pursuit to repeal the ACA with absolutely no plan in place on how to guarantee affordable coverage and protect preexisting conditions. The irony behind the entire scenario is so ridiculous, considering that even Newt Gingrich supported the key elements of the ACA and a former Republican presidential candidate tested out these key tenets in his home state. It doesn’t matter though, I know. The far left of the Democratic party—now dubbed “the herbal Tea Party”—grew in reaction the original Tea Party’s mindless pursuit of ripping up the ACA. So if we’re holding progressives accountable, then we need to hold conservatives equally accountable for intentionally eroding the markets.


I’m actually heartened, though, that the messaging and policies we’ve been doggedly pursuing with Democrats in last year’s campaign actually seized the day. And that is: don’t throw the baby out with the bathwater. Their job should be to ensure every one of their constituents has equal access to affordable, quality healthcare. Full stop. The ACA sought to do just that by building on employer-provided benefits, and if we allowed the ACA to function, and even worked to strengthen in it, I think most Democrats believe that we could achieve that goal. And, by the way, the 156 million Americans who receive their coverage primarily through one of our members would be left unscathed.


Trying to steer the party to focus on the end, not the means, is clearly a herculean task, but it’s working. The most consistent messaging that ushered in newly elected Democrats in Republican seats was based around protecting preexisting conditions. Which means strengthening the ACA and restoring the individual mandate, CSR payments, and the like. Medicare for All was the not the message that delivered Democrats the majority. To be clear, 64% of the 42 seats Democrats flipped will be held by members of the Blue Dogs or the moderate New Democratic Coalition; only 27% of those seats will be held by members of the Progressive Caucus. And of the 20 seats now held by Democrats but that favored Trump in 2016, 11 are Blue Dog or New Dem members; only three are in the Progressive Caucus.


Sure, there will be efforts to expand Medicare and some members will always see single-payer as the north star, but right now they need to fix what they’ve inherited, and I can tell that Democratic leadership well understands that this means restoring the ACA. And we will stand by them.


From: Blaire Bartlett
Sent: Thursday, December 20, 2018 2:13 PM
To: Joel Kopperud <>; Joel Wood <>
Subject: RE: Happy New Year


Oh…Joel…those anti-Obamacare votes were “messaging” votes…just like all those Democrats who signed onto HR 676, the “Medicare for All” bill, was a message to their base.


You know what keeps me up at night? We have two big programs that need possible reform and reauthorization this next Congress: the Terrorism Risk Insurance Act (TRIA) and the National Flood Insurance Program (NFIP). While NFIP reauthorization seems to never go away, TRIA is a big one.


From: Joel Wood
Sent: Thursday, December 20, 2018 3:05 PM
To: Joel Kopperud <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Thank you for your interruption, Blaire, and attempt to steer me away from a head explosion and on to important property/casualty issues. But first, puh-lease, Joel K. Democrats are for socialized medicine because Republicans didn’t like Obamacare? And we should just ignore it and not judge them on it? And we should be heartened that all these newly elected (and newly vulnerable) House Ds are slapping their names on Blue Dog letterhead? I remember when Blue Dogs were Blue Dogs and were willing to defy their leadership to support business-friendly goals. That’s been damn near a decade ago. Name me the issue that caucus is now willing to defy Nancy Pelosi on and vote with Republicans. Just one.


But, OK. I’m breathing in, out, in, out now. I will go ahead and note what Joel K is anxious to say—that despite her liberal, Trump-hating, firebrand reputation, Rep. Maxine Waters (D-Calif.) as chairman of the House Financial Services Committee does not alarm me on any of our parochial issues. TRIA reauthorization will be a big issue next year, and she has been nothing but a supporter on TRIA since day one. Her predecessor, Rep. Jeb Hensarling (R-Texas) tried and largely failed to significantly roll back the program. And on flood insurance, she’s been practical and engaged, and she has superb staff. Weirdly, I think we’re going to have more bipartisanship on that committee, and thus it will totally evade the headlines. The new ranking Republican on the committee, Patrick McHenry (R-N.C.), is and has always been a tremendous friend to us.


And in the Senate, it’s steady as she goes. Sen. Mike Crapo (R-Idaho) remains the chairman of the Senate Banking Committee, and ranking Democrat Sherrod Brown (D-Ohio) is someone with whom we also have had an excellent relationship, even though he frustrates me on his opposition to expanding private flood insurance (essentially by guiding banks to accept non-admitted paper) out of concern for “cherry picking.”


From: Joel Kopperud
Sent: Thursday, December 20, 2018 3:16 PM
To: Joel Wood <>; Blaire Bartlett <>
Subject: RE: Happy New Year


We’re going to win so much, you’re going to be so sick and tired of winning, you’re going to come to me and go, ‘Please, please, we can’t win anymore, we don’t want to win anymore. It’s too much. It’s not fair to everybody else.’” And I’m going to say ‘I’m sorry, but we’re going to keep winning, winning, winning…”


From: Joel Wood
Sent: Thursday, December 20, 2018 3:17 PM
To: Joel Kopperud <>; Blaire Bartlett <>
Subject: RE: Happy New Year


Your Trump Derangement Syndrome continues to flare up.


From: Blaire Bartlett
Sent: Thursday, December 20, 2018 3:17 PM
To: Joel Wood <>; Joel Kopperud <>
Subject: RE: Happy New Year



This is certainly the case at Washington, D.C.’s new waterfront playground, The Wharf. Happy people are everywhere. Eating oysters. Cocktailing on rooftop bars. Buying a good read at D.C.’s beloved bookshop Politics and Prose. Listening to live music. Playing an oversized game of Scrabble. Roasting s’mores at a fire pit. Just sitting on a park bench taking in the scene along the Potomac River.

Formally known as District Wharf, the revitalized 74 acres of land and water in Southwest D.C. is the most new public space in the city since the redesign of the National Mall in 1902. The Southeast/Southwest Freeway cut the neighborhood of residences and Federal buildings off from the rest of the city in 1970. Except for the bustling Maine Avenue Fish Market (founded in 1805, it’s the longest continually operating fish market in the country), this stretch of waterfront hasn’t seen this much action since the river was the main transportation artery in the early 1800s.

Since the opening of the first phase of The Wharf on Oct. 12, 2017—amazingly right on schedule—it has been packed with both locals and tourists enjoying the many different experiences you can have. A pedestrian walkway along the waterfront provides access to the Potomac River. Cafés front the brick, glass, stone and steel buildings along Wharf Street. Spaces for music—in public squares, on the District Pier, at The Anthem music hall, in bars and small clubs—make for a happening social scene. Parks and piers, where you can tie up your boat or rent a kayak or paddleboard, provide plenty of ways to enjoy the water.

The Council’s annual Legislative & Working Groups Summit will once again be held at the Mandarin Oriental, Washington, D.C., Feb. 11-13. Two years ago, the hotel completed a renovation of the rooms, and it is as elegant as ever. You can walk to The Wharf in less than 15 minutes. To be in the center of the action, check out The Intercontinental Washington, D.C. - The Wharf. The most luxurious of the three hotels at The Wharf (The Canopy by Hilton and Hyatt House are the others), it ranked No. 1 in Conde Nast Traveler’s Top Hotels in Washington, D.C.: Reader’s Choice Awards 2018.

As for dining, the days of Phillips Crab Deck are long gone. The goal was to attract best-in-class chefs and challenge them to do something new. Del Mar, by chef Fabio Trabocchi of the acclaimed Fiola, and Officina, by chef Nicholas Stefanelli of the Michelin-starred Masseria, are both outstanding. There are also plenty of kiosks selling all kinds of food to go and no-reservations restaurants. Savor oysters at Rappahannock Oyster Bar or Southern Italian “street food” at Lupo Marino (think fried artichokes hearts served with aioli). The former is located in a restored oyster shack that dates back to 1912 at the fish market. You can still see fishermen heaping Chesapeake Bay blue crabs into bushels at this open air, floating market, where a new distillery, a market hall and pavilions are in the works.

When you were hired to work in the insurance office, the state’s health plan was in trouble. What was the situation at the time?
The state of Montana employee health plan has 31,000 total lives covered, including dependents, legislators and retirees. It’s the largest plan in Montana, and they hired me in late 2014 with the clear direction to turn the plan around financially. If we didn’t do something drastic, it was projected to be $9 million in the hole in 2017 with the contracts they had at the time.

People were mad because the plan was losing so much money, the governor’s office was looking bad, and employees and unions were angry. Vendors all tended to have a solution. They would say we needed to go with this or that new plan. But there wasn’t any kind of strategy, and data wasn’t available or being used to make decisions or manage contracts.

So how did you begin? What was your strategy to understand where the excess costs were in the system?
I’m an accountant and CPA, and I knew I had to get my hands on the data to see where the spend was. I needed to find out where to target.

I found that 43% of costs were coming from Montana’s hospitals and, of that, 87% was from 11 acute care hospitals, which are the largest in the state. Only 13% were critical access, rural facilities. I also focused on pharmacy, which was 18% of our costs.

The area that was getting a lot of talk in the legislature was on-site health centers, but I realized that was a political issue. It was getting lots of noise and attention but was only about 3% of the plan’s spend.

So you knew where the spend was. How did you move forward from there?
We needed quick results because we are a state agency, so we focused first on hospitals. We could have gotten better rates by narrowing networks and kicking out the high-cost hospitals, but the governor didn’t want to narrow networks.

We prepared a graph using hospital semi-private room and board fees, which are easy to find in the data, from 2012 to 2014. I was able to chart the chargemaster fee and see the allowable costs. It clearly showed that, no matter what discount you get, you are going to follow an upward trend in cost. They control the chargemaster, so they can say they are giving you a better discount but then just raise the price that discount is based on.

If we had, instead, used a fee that is 200% of Medicare during that same time, the prices weren’t as far apart, and they didn’t go up as much, because they were limited to Medicare inflation.

A lot of people understand these chargemaster rates vary pretty dramatically, but there doesn’t seem to be a lot payers can do about it. What was your plan to manage these costs?
What I put in place is what I call contracted reference-based pricing. In the ACA, reference-based pricing is where an employer works directly with a hospital and tells it the price the employer is going to pay for services, and that’s all you pay. But the hospital has no traditional insurance contract with you, so it can go back and charge the member for the balance of the bill the employer didn’t pay. We didn’t want that. We wanted contracts where they would accept payment as a kind of Medicare-plus instead of a discount off of the charge rate.

I put out an RFP and hired Allegiance Benefit Plan Management to do the work. They looked at what our costs would have been for a year’s worth of claims if we’d reimbursed on a Medicare-plus basis. The lowest costs were around 109% of Medicare’s rates, and the highest were 611%. In that 200% range I wanted, there were about four hospitals. I knew I needed to bring the outliers in.

Were the local hospitals on board with your plans?
Four hospitals helped develop a payment model based on Medicare pricing, and a couple others came in as well. When some held out, I asked them what the problem was. Medicare makes adjustments for things like risk, geographic differences and case load. When I asked them why their adjustments were different, I never did get a really good answer. One said it was planning an expansion and needed the money to pay for it.

How did you convince the holdouts to take part?
By July 2016, I had all but one hospital on board: Benefis Health System. They refused to sign, and they went public with their decision. The CEO told the Great Falls Tribune [where Benefis is located] he couldn’t give the state what it was requesting because their largest payer was Blue Cross Blue Shield and he wouldn’t give anyone a better deal than them.

But I kept pushing because this is taxpayer money paying for these benefits. I steered union anger toward that one hospital. I said, ‘OK guys, help me.” Their pay raise was dependent on lowering the benefits, so I posted the phone numbers and addresses of the CEO and CFO and they began putting a lot of pressure on them. After that they signed, and it went into place in July 2016.

You tackled pharmacy as well. What did you do there?
I dug into our pharmacy benefit and analyzed the contract that was through a purchasing co-op. We didn’t have direct contracts with a PBM [pharmacy benefit manager]. We had one with a PBM to adjudicate claims and one with CVS to manage rebates. Then another one for specialty medications and care management for utilization review and another for formulary drugs. There were so many, but I was able to get my hands on only four of those contracts.

The state always assumed we had a transparent pass-through model and there was no spread pricing [which means a PBM pays the pharmacy one price for a drug and charges the employer a much higher price]. Rebates were capped at $20 per prescription, which was low, and the rest went to the co-op or CVS. The spread pricing excess went to the co-op, and there were tons of administrative fees.

So we did another RFP. In our new plan, we get 100% of the rebates, and we can audit that. The new plan also cut out spread pricing on brand drugs.

This seems like a huge overhaul of the normal system. What were your results?
We had significant dollar savings. In the first year, we saved $7.4 million, and that included more than 25% off our total spend on drugs. In December 2017, we were $112 million positive instead of minus $9 million, which was what had been projected. The employees haven’t had any increase in premiums or change in their out-of-pocket expenses.

Did you make other changes aside from the hospital and pharmaceutical contracts to cut back on costs and waste in the system?
I was also able to save in other places by reducing staffing, moving to cloud-based enrollment and getting rid of duplicate wellness contracts.

Members get a premium incentive if they have an annual physical at one of the state’s health clinics. There’s also no co-pay for that visit. That has improved access and is less expensive for us than if they go to a private-sector provider.

Our medication therapy management [MTM] was mostly done by phone or letter before. I worked with an independent pharmacy group and the University of Montana School of Pharmacy to create an MTM program where they did personal outreach. They analyzed our pharmacy data and identified more than 3,000 members who could be targeted for help with the medications. That began in July 2018.

Montana’s employee plan has a lot of purchasing power. How can others with fewer covered lives duplicate your efforts?
They can immediately look at their pharmacy plan, and they’ll get hits there. I wrote up a clear RFP asking for a transparent pass-through with rebates and no spread pricing. They also couldn’t collect fees from other sources and couldn’t sell our data and keep the profit from that. There ended up being two that offered this kind of model, and I just chose the one that was cleaner.

I have seen small school districts that have joined together to create a purchasing co-op. I encourage them to join an employer forum or something similar where they can get access to data, education or training.

And as a small employer, they really have to delve in and ask questions about their contracts. You can’t just look at the reports you are given by a broker or TPA [third-party administrator].

I saw a group in Indiana when I was speaking there once with 700 covered lives, and they have done a lot to manage their coverage. But they have a disruptor. Their HR director who leads the efforts is on top of it all and is calling the shots. She has a large health center nearby and does direct contracting and has saved a lot of money that way.

You really have to get the data and find out what you are paying. You can’t let the insurance company tell you what the repricing of Medicare is. Get an independent entity to see what you are really paying. That’s the first step, and you can do that pretty fast. Most companies could compile the data and turn it around for you within a month. It’s not all that costly. Once you have that, you can start a dialogue with providers. You just have to remember that everyone involved is going to have to give up something.

What about among employees? They knew you were there to make changes. How did you communicate what was happening to them?=
Employees in the beginning were upset and worried they were going to be balance billed for services or that there wouldn’t be adequate provider networks.

We did a lot of communication with employees about what we were doing just because it was causing some anxiety. We focused on working on incentives and helping employees take charge of their own health. We pulled in the vendor who manages our health centers and had a nurse and wellness coordinator involved at the health centers to get people more engaged. The jury is still out on the effectiveness of wellness programs, but it was good to offer them something they could take action on to reduce some of the fear of change.

If you were to ask them about it now, they would probably say they really didn’t know that much about it and they don’t see anything different. You’re probably not going to hear much from your employees. All of the hospitals have had record profits in the past couple of years and are doing just fine, which I was glad to hear.

Anything else you learned during this process?
The system is completely chaotic. I have been shocked at all of the ways people make money in the system. You have to check everything, because you probably don’t know what money is coming back to you and what is not. When everyone has a hand in the pot, you almost can’t follow where it’s all going.

Tell us about the investment by Google’s CapitalG in Applied Systems.
We think it’s really great for our company. We also think it’s great for our customers and the market in general. Google became a minority investor in Applied Systems. The transaction allows us access to the people, the culture, the expertise, and frankly also the technology that Google has as a part of its company. We intend to put that to use for the insurance vertical and for our customer base.

Why does Google invest in larger-scale technology firms? The primary purpose is being able, through the investment, to provide technology to an industry vertical that they care about. Let’s take Lyft, the competitor to Uber. The reason for Google’s investment in Lyft is obviously the core of that app is mapping. They wanted Lyft to utilize their mapping technology. Second, they have the Waymo division, which is focused on self-driving cars. As people look into the future, it’s certainly possible that Lyft wouldn’t be “Bob” pulling up; it would be the self-driving car pulling up. That’s another area of interaction.

For us, you come more specifically to insurance brokerages. Google has great expertise around machine learning and artificial intelligence. Applied is a $400 million company, but it’s still hard at our size to access some of the incredible minds to be able to put that technology to good use. We now have an avenue to be able to do that. To make it real, we had 20 of our top engineers in New York in Google’s office doing machine learning and artificial intelligence boot camp. It’s the same boot camp they put on for their own internal employees. We get to access that because of the CapitalG investment. It’s really great for our company. We think it’s great for brokers.

Why are those technologies important for insurance?
Insurance is a multitrillion-dollar market on a global basis. You have lots of decisions around risk management, risk mitigation and coverage. Those decisions can mean either a profitable account or a super costly account. Making those decisions is based on lots and lots of data inputs. That is perfect for software, perfect for machine learning; it’s perfect for artificial intelligence. Take huge amounts of data and boil it down to an essential answer to the question: should I cover this or not? If I’m going to cover it, how much should it cost?

Very large agencies have a huge book of business, yet rounding out that book of business perfectly is not something any owner or CEO of a large agency would be able to say they’ve done. Machine learning and artificial intelligence can look through that kind of data much more quickly, much more effectively, much more systematically than a person can.

It’s a digital age today. Google is the master at digital marketing. The search engine really controls an enormous amount of flow of traffic around the internet, and that’s relevant to commercial lines and personal lines brokers. People a lot of times go to personal lines around that, selling to a consumer, but I think it’s super relevant in a commercial-lines environment. It’s too early for us really to be able to give specific examples as to what we intend to do.

What technology strategies and initiatives is Applied planning, particularly for Epic?
I would hesitate to give some specific examples this early on. The main categories of interest are machine learning and artificial intelligence. Digital marketing is one for sure. The last thing is a very simple transaction in lots of systems, but let’s not forget Google does it exquisitely well—search. There are many, many searches that happen within Epic, and maybe that’s an area that’s a focus. Epic is the most used broker management system in the world. We have almost 100,000 users live on it, and we intend to put the Google relationship to use for that.

To what extent will Google have access to Applied data?
The agreement specifically calls out that Google has no access to any data—either Applied data or customer data. Zero. Not one data field. The reason is that data is owned by our customers, and we’re not sharing that with anybody. We knew that would be a question. That’s specifically written into the agreement.

Relative to access to Google data, the same is true on the flip side. We really didn’t enter this with the thesis that we were going to leverage Google data for the purpose of underwriting or that kind of thing. It’s more on the technology side. We have enormous amounts of data already that are available to us. That really wasn’t the point of the investment or the partnership.

Applied has categorized the deal as a nine-figure investment. Can you be more precise?
It’s a material investment to us.

What is the attraction in the insurance and brokerage sectors for big tech companies?
First off, if you’re a large technology firm, you have to look for large markets. You need to focus on markets that are sizable, because you want to get your technology into sizable areas so that it moves your needle. Insurance is very large. It’s a very large ecosystem, and it’s not just in the United States; it’s all over the world.

Second, the great thing about Google is it truly is high tech—really great technology and really useful at looking at very large data sets. Based on that simple description, insurance fits that very well—very large data sets and very important questions to answer. They want to put their technology to use in that vertical. They talked to a number of different folks. It’s a great validation of Applied because they can invest in anyone on the tech side.

You saw this with Amazon and Travelers doing their partnership around connected devices and their online storefront. Amazon has to come up with new categories that they’re going to sell products through, and they need something that’s big in order for that to happen.

Do you expect to see more technology companies investing in the industry?
 I do. Frankly, I think that’s good for the market. It brings new opportunities for brokers and for agents. It gives us access to things we wouldn’t have as a stand-alone firm. It’s good for brokers. I think you’ll see more of that. Applied succeeds only if brokers succeed.

Will Applied be seeking similar investments from other large technology companies?
We certainly would consider anything that makes sense for our customers. If we thought there was an angle with another large tech firm that made sense for our customers, we would do that. We did not need the money. We were interested in the technology and the relationship. We were interested in that because we thought it would enable us to be a better provider and better partner for our customers. If another opportunity like that came around, we would seize it.

How do you see the agent and broker business changing with technology?
We obviously are strong believers in the independent agency and brokerage channel. If you look out 10 years from now, the average agency is going to be larger, and it’s going to generate more revenue and be more profitable. That’s been a journey the industry has been on for 40 years. Technology will continue to be leveraged by good agencies to complete transactions better, provide better risk management advice, and ultimately free up people to be good risk advisors and good partners for the benefit of their customer base.

I think you’ll find much more automation between carriers and brokers around the provision of the product. You’ll also see much more digital connectivity between the insureds and the agencies. You’ll find the providing of the policy documents and the providing of financials and the claims information, all of that, to be much more streamlined. The reality is that we’ll have systems that in essence fill that information out for you.

Today, the insurance industry is compared against other experiences outside of insurance. It’s, “I had a wonderful process to open a bank account yesterday. Why is it so painful for me to get my business owners policy?” That’s the call to arms. Let’s make it better.

What’s next?
It’s too early for us really to be able to give real specific examples as to what we intend to do. I would say we will launch things in 2019 that are based upon our Google partnership. We look forward to bringing to bear the partnership for the benefit of the customer base. We think they’re really going to enjoy it and it should be fun. We are hard at work at it already.

As technology transforms the insurance industry, it’s also opening up new avenues for agents and brokers to enhance their client relationships. Brokerage NFP saw an opportunity to address the dire lack of estate planning among Americans with an app developed by Tomorrow Ideas that enables individuals to create a living will on their mobile devices in minutes. NFP’s venture arm invested $1 million in Seattle-based Tomorrow in a deal that expands access to the subscription version of the app, Tomorrow Plus, to more than eight million people served by NFP’s financial services.

The Tomorrow app lets individuals create a will for free, offers a trust as an upgrade, and recommends an appropriate amount of term life insurance.

“It’s a social and visual way to create a will completely for free on your phone, and a percentage of people buy life insurance through the app,” says Tomorrow founder and CEO Dave Hanley. “It turns out that creating a will and filling out a life insurance application have a lot of overlap.”

NFP marks the first distribution partner for Tomorrow’s brokerage and carrier program, under which it will provide the premium version of Tomorrow to customers and offer that partner’s products inside of the app.

Tomorrow is also looking toward voluntary benefits, such as disability insurance, long-term care and group life insurance. The most recent version of its premium app, announced in November, includes free access for spouses and the ability to sync a family’s accounts. The app also allows families to create video “memories” to share with other family members.

A number of insurtechs have set out to make buying life insurance easier online, including Bestow, Ethos, Ladder and Policy Genius. Carriers also have their own efforts, including MassMutual’s Haven Life.

Tomorrow, which already has 10 life insurance carriers on its platform, also counts Aflac and Allianz among its investors.

The Tomorrow app began as an effort to tackle what Hanley calls a huge social problem—the lack of a financial backstop for families to protect themselves. It is particularly an issue among younger families.

It is also an easy-to-use service that can help brokers better engage with their customers.

“It’s a way to enhance your relationship with a customer who might not pick up a phone and is doing this after putting the kids to bed at night,” Hanley says.

Tomorrow’s technology can also allow carriers to add new products more quickly.

“These carriers have lots of customers, but they don’t have much a of customer engagement strategy, especially on the life side,” says Hanley. “While the industry wants to test and wants to get involved in doing something a little outside the box, it’s hard to get all the approvals in place to do something that is completely blue sky.”

So by enabling brokers and carriers to better serve their clients, Tomorrow can simultaneously accomplish its mission of encouraging millions of Americans to finally put together estate and financial plans.

Fortunately, there’s a little painkiller to help: he stands to claim up to $5 million after taxes because of a loss-of-value policy he wisely bought before the season.

Ajay, 25, who helped the Eagles win their first Super Bowl in 2017, was only five weeks and three touchdowns into the new season when he stumbled during pass protection during the second half of the Eagles loss to the Minnesota Vikings. With a torn ACL in his right knee, he played through the injury for the rest of the game. He had surgery several days later, but the typical recovery time from ACL surgery is nine to 12 months, which means he won’t take the field again until training camp in 2019.

The well-dreadlocked London-born running back has been injury prone since his days at Boise State and was wise enough to know how to handle further hurt. Ajayi’s business manager, Josh Sanchez, told NFL reporter Ian Rapoport that Ajayi was “valued as a significant free agent” and decided “to protect him against exactly what ended up happening.”

Ajayi paid an estimated $80,000 to $100,000 for the policy, just a slice of his current annual $1.9 million salary. The final payout will depend on the value of his free agent contract in 2019.

Though injury policies are standard for college football players, they’re relatively new for pros. Last July, Eagles offensive lineman Chance Warmack was the first NFL player to collect on a loss-of-value insurance policy.

Warmack signed a one-year, $1.5 million deal with the Eagles in 2017 and thus bought insurance that would pay out if his second NFL contract paid less than $20 million. Lloyd’s of London announced it would give him $3 million. Unlike pour Ajayi, only his pride was hurt.

How does a busy insurance executive become a competitive open-water swimmer?
If I’m not active, it’s sad for everyone within 100 yards of me. I’m limited in what I can do competitively due to a lot of injuries, so I just got into pool swimming. Then my physical therapist, who I see almost as much as I see my family, suggested competitive open-water swimming.

When do you train?
I go out at 5:30 in the morning three to four days a week to a high school pool in my neighborhood. On off mornings, I do resistance training and aerobic work. I try to take Sundays off.

If I had one night in San Francisco, where should I eat dinner?
I love Kokkari, a Greek restaurant downtown.

What’s your favorite dish?
Everything is great. This is going to sound snotty, but they have great grilled octopus. And they have amazing lamb and sole.

What’s kept you in the insurance business for so long?
The appeal for me is the delight and the challenge of building and helping people in their careers and, more broadly, in their lives. That really has become my life’s work. And there are so many opportunities to do that in this industry. It is one of the most misunderstood aspects about our business.

Helping people in their lives specifically within the insurance industry?
There are so many opportunities and career paths in our industry, and, as a result, we have more opportunities to develop, sponsor and build team members than ever before. I think this requires a more fluid view of leadership, where we shift from the bifurcated lens of 30 years ago, where you lead and develop people in their work lives and their personal lives are this separate, private thing. Our younger colleagues have helped show us that is not the case.

How so?
They want a different level of sponsorship and support for their development and ability to make an impact and be relevant. We’re talking about making a real commitment to the people we work with—who are going to have our jobs tomorrow and who will inherit this company. That’s not work-work, that’s life work.

So you put a big emphasis on company culture?
After people, culture is the most important asset we have at the firm. It’s the filter through which we attract and retain great people, the filter through which we choose not to pursue certain people or some of the acquisitions we consider. Simply put, it’s the behavior and value set that we’ve developed over 100 years that define who we are, who we aspire to be, the kind of people we want, the kind of clients we want and, at the end of the day, the way we behave when no one’s looking.

Any new year’s resolutions?
Mine are always kind of the same. I want to constantly improve in every aspect of my life. That translates to continuing to learn at a faster, more aggressive pace in just about everything. Another resolution is to wrestle a little more successfully with the depth of my love for all things dessert.

What’s the best advice you ever got?
“Fear is the only thing in life that gets smaller the closer you get to it.”

Who told you that?
I don’t recall. I think Christina Harbridge. She is the founder and “mischief” executive officer of a firm called Allegory.

Why is that the best piece of advice?
I think at our core we are wired and taught to avoid fear, concern, doubt, uncertainty. And that avoidance keeps us from learning. These challenges actually teach us the very things we need to know to get better—at everything. Fear is actually an amazing friend. But we’re all built to think of it as a dental visit with no novocaine. You gotta dance with it.

If you could change one thing about the insurance industry, what would it be?
The way we design, build and articulate meaningful and relevant career paths and opportunities for our young and our as-yet unhired professionals. It’s an industry that has infinite possibilities.

Last question: What gives you your leader’s edge?
A combination of a few things: an absolute commitment to being a learner and not a knower, a desire to be wrong in order to get better, and a clarity of vision for our people and our firm.



The Barrengos File
Favorite vacation spot: Anywhere I can be with my wife and kids.
Favorite San Francisco movie theater: Kabuki [1881 Post Street]. They have the comfy first-class airline seats and real food. It’s a pricey movie, but the food’s good and the seats are great.
Favorite director: Martin Scorsese
Favorite Scorsese film: It’s a tie—Mean Streets and The Departed.
Favorite musician: Bruce Springsteen
Favorite Springsteen song: Unfair question. There are over 300, I think. “Jungleland” and “Streets of Philadelphia.”
Favorite author: Eudora Welty
Favorite Welty book: The Optimist’s Daughter
Wheels: BMW 540. It’s a Clark Kent car—low-key on the outside, vroom vroom on the inside.

The preliminary numbers, based on announced deals as of Jan. 2, 2019, have the year finishing with 552 announced transactions. This is just off the 2017 total of 557, but we are very likely to set a new record, as year-end deal announcements continue to flow in.

It truly has been an incredible year. Consider the following sampling of deal activity that occurred in 2018:

  • Sale of two of the largest bank-owned agencies: Key Insurance & Benefit Services (to USI Insurance Services) and Regions Insurance Group (to BB&T Insurance Holdings)
  • Sale of five firms in the top 35 (in terms of annual revenue): Jardine Lloyd Thompson Group (to Marsh & McLennan); Integro Group Holdings (to EPIC Insurance Brokers & Consultants); Hays Companies (to Brown & Brown); Crystal & Company (to Alliant); and Wortham (to Marsh)
  • Initial public offering of franchise-focused Goosehead Insurance
  • New private equity infusions into Hub International (by Altas Partners), Acrisure (by Blackstone), Propel Insurance (by FlexPoint Ford), Navacord (by Madison Dearborn Partners), and Renaissance Alliance Insurance Services (by Long Arc Capital).

Nearly 80% of the announced transactions within the space were completed by independent insurance brokerages, similar to 2017. The majority of these buyers were backed by private equity; this subsegment completed almost 60% of all transactions during the year. The three most active buyers during 2018 were Acrisure (59), BroadStreet Partners (37) and Alera Group (33), all private-equity backed in some form.

More than half of the total transactions during the year involved property and casualty agencies, while the remaining 45% were evenly split between employee benefits agencies and those that have both P&C and employee benefits (multi-line agencies).

We saw valuations increase across all deals MarshBerry was involved in on both the buy side and the sell side. We believe these multiples are above average given the visibility we have on other deal activity. The average base purchase price payment in our database increased by 8% in 2018, with a pro forma EBITDA (earnings before interest tax depreciation and amortization) multiple of 8.58. Maximum valuation potential (maximum earnout) averaged 10.85x EBITDA.

Platform transactions continue to grow in value as well. A platform is defined either as a seller that is a large brokerage or a buyer that is entering a new geography or niche. The selling firm will typically have an ongoing leadership role in the firm. The average base purchase price for a platform increased 7% in 2018 with a pro forma EBITDA multiple of 9.77. The maximum valuation potential (maximum earnout) averaged 12.43x EBITDA. It is important to note that these are averages. We are seeing pricing as high as 11x paid at closing for firms that would barely make the Top 100 listing. These valuations were historically reserved for the national brokerages. However, demand for high quality firms and the need to deploy capital continues to create favorable market conditions for selling brokerages.

Even though private-equity backed brokers continue to lead in the deal count, the three most active public firms—Marsh, Brown & Brown, and Gallagher—played a much more significant role in this year’s domestic activity than in last year’s. The three firms collectively increased their deal count by 47% in 2018. We will have to keep an eye on the volatility of the stock market to see if it has any impact on deal volumes in the short term.

As turmoil continues in the stock market and the Federal Reserve raises interest rates, we continue to hear rumbles of concern in the distribution space. There is general concern over the sustainability of the pace, volume of deals, and valuations that exist. Investors, at this point, don’t appear to have the same concerns. With at least five major private capital infusions into the space in 2018, there are no sure signals that the market is going to slow down.

Additionally, on Jan. 1, 2019, Patriot Growth Partners, led by CEO Matt Gardner, concurrently acquired 17 firms to create the next national brokerage. Patriot is backed by Boston-based Summit Partners.

While the dust is still settling, one thing seems abundantly clear: supply and demand remain robust. Investors are flocking to the distribution space, and many independent firms are still owned and controlled by those from the baby boomer era. Most of the buyers are proclaiming they have very full deal pipelines, and the momentum of a robust 2017 and 2018 is anticipated to continue into and throughout 2019.

Trem is EVP of MarshBerry.

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Its system is seen as a touchstone of free, universally accessed healthcare.

Brazil’s 1988 Constitution declared: “Health is a right for all and the government’s duty to provide.” Building upon this ethos, Brazil created the Sistema Único de Saúde (SUS), a single-payer health system exclusively funded through tax collection at federal, state and municipal levels. Governed by the principles of providing a national, fair and full range of healthcare, the SUS supports more than 200 million Brazilians, giving them free access to public health services, offering a wide range of medical treatment and assistance, depending upon their needs.

But does the Brazilian healthcare system really guarantee quality medical services to all who need it? Sadly, no. In theory, the Brazilian model is very efficient; in reality however, the country runs into the same hurdles as its neighbors: hospitals, clinics and laboratories with failing infrastructures, a scarce number of professionals meeting the needs of many, long wait times and underfunding. And Brazil’s difficulties are made more intractable because of its vast territory and massive population.

Working in parallel to the public system is privately funded healthcare, known as Saúde Suplementar—supplementary health. It is used by a quarter of the country’s population, about 50 million people, who also can still use SUS services. Saúde Suplementar is highly thought of in Brazil; it has a better infrastructure than SUS, providing a higher-quality service with shorter wait times. But it’s not a panacea—the private system has its own problems to solve.

On one hand, employers, who fund 80% of private healthcare, are facing difficulties maintaining healthcare as a benefit due to its constant increase in costs. The market may have to make critical decisions in the future in terms of employees’ care and wellness and apply management strategies to avoid a total collapse. In this context, the services provided by brokers and consultancies are in great demand. On the other hand, to Brazilians, a healthcare plan is the most important and desirable benefit a company can provide, which underscores the importance to companies of keeping it.

Overcoming the Barriers

In general, the South American systems all push against the same barriers:

  • Low-efficiency services operating under disease-focused, rather than health-focused, models (most system demands are linked to health recovery, while basic primary care is rarely incentivized)
  • Bad resource deployment with inefficient management and excess bureaucracy
  • Corruption and waste.

While we cannot ignore the need for judicious intervention in the health sector, there are still positive lessons to learn.

The Family Health Strategy in Brazil is an example of good practice in primary care. Under this program, trained community teams support individuals and families with their holistic well-being and enroll them proactively in the healthcare system, which promotes better health and helps prevent future complications. The coverage of the program is universal, but the fact is that not all citizens are being served due to the shortage of healthcare professionals.

Technological advancements are equally crucial positive steps forward. One example is the growing implementation of the Prontuário Eletrônico do Paciente (PEP), Electronic Problem-Oriented Medical Record. PEP logs patients’ medical data and provides a central database for other systems, consolidating information and so improving the quality of medical services. Telemedicine is another example of technology supporting medical care: it facilitates remote care and increases patient trust and speed of service. Although in its early stages, remote monitoring of health data and goal-setting could help bring down the number of unnecessary visits to medical units.

Despite these efforts, adequate funding and an efficient and transparent administration are fundamental to delivering sustainable health services. Although Brazil’s free and universally accessed healthcare is internationally recognized, it shows us a brilliant theoretical model is not enough.

Solving public and collective health problems is complicated. And it’s made more critical when you consider the fact that errors might cost lives and fast decisions can save them. With so many factors to be considered, in order to prevent these models from collapsing, all those with a role in healthcare must work together and have their voices heard.

This is why the role of service mediators—insurers, operators, brokers and consultancies—is so important. Given their position in the market, they have the ability to undertake holistic analyses and propose corrective measures that may mitigate the risks and reduce companies’ exposures in this area. Many types of data, such as medical and administrative information, are available for modeling and evidence-based decision making.

All healthcare players, be they government, private initiative, suppliers or mediators, need to work together for their collective aim: to structure systems for sustainable funding and supply quality healthcare to the population.

Quintão is executive director of employee benefits at MDS Brazil.

Now more appropriately referred to as “power skills,” a term coined by Dartmouth University president Philip Hanlon, these abilities tend to be less tangible and are often correlated with the personality traits that determine the way we act and interact with others.

The labor market is increasingly rewarding interpersonal skills. In the past three decades, jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the United States labor force. Jobs requiring fewer social skills, including many STEM (science, technology, engineering and math) occupations shrank by 3.3 percentage points. Recent studies from Harvard and Stanford reveal that jobs with high social skill requirements have experienced greater wage growth than others.

Critical Thinking and Creativity

Power skills are not new to insurance, an industry that thrives on attracting and retaining clients and the ability to solve problems. But three trends are driving an increase in their demand.

The nature of work is rapidly changing. Study after study shows that millions of jobs are at risk of becoming automated. Artificial intelligence and other forms of technology will significantly transform the industry in the next three years. Chatbots are increasingly capable of handling routine client service functions from quoting to claims. According to Lemonade, its “AI Jim” can process a claim 316,800 times faster than the top-ranked insurer’s claims department. Similar technology will be adopted for managing simple commercial claims.

With machines capable of doing more routine service functions as well as sophisticated data analytics, smart organizations are reassessing what they look for in the people they hire. Technical knowledge, industry certifications and on-the-job experience aren’t enough. Billionaire entrepreneur Mark Cuban predicted in a recent Money magazine interview that “a liberal arts degree in philosophy will be worth more than a traditional programming degree.” Cuban’s belief is that AI and automation will transform the job market so much that degrees that teach how to think in a big-picture way and to collaborate more effectively with our colleagues will become more prized.

Increasingly, people are valued based on their ability to do what machines can’t do. Machines can produce and interpret data, but only humans have the critical thinking and creative skills to find ways to apply the data to gain a competitive advantage. Only people have the ability to simulate real human interaction. Reading the minds of others and reacting, interpreting social cues, adapting and playing off each other’s strengths are skills that have evolved in humans over thousands of years. The ability to manage these interactions is at the heart of power skills and humans’ advantage over machines.

The pressure to innovate is intense. With more than $2.5 billion invested in insurtech over the past 18 months, innovation is the word of the day. As technology facilitates new ways of doing business and enables insurance buyers to assume greater control, traditional companies are striving to remain relevant and at the forefront of superior customer experience. Meaningful innovation, not just increased efficiency, requires people with power skills that include deep empathy for the customer experience, the ability to think creatively and critically, the flexibility to adapt to new realities and the interpersonal skills to work effectively across department lines to accomplish difficult tasks.

The workforce’s expectations of leadership are changing. Projections indicate that within the next two years millennials and Generation Zers will comprise more than half the workforce. They are more educated, based on undergraduate and advanced degrees, than previous generations, and in many ways they view the business world differently. A company’s culture and reputation for social responsibility, equality, inclusivity and diversity in management are major drivers in choosing a place to work.

These young professionals have little regard for hierarchies and traditional forms of authority. They expect equal access to information and to be involved in company decision making, including how, when and where they work. They anticipate their jobs will be collaborative, interesting and challenging with continuous opportunities for growth.

Millennials and Gen Zers place a high value on the human element at work. They want to feel like they belong, to feel valued and to work in a supportive, culturally compatible environment. According to a 2018 study conducted by Rainmaker Thinking, a firm that monitors the impact of generational change in the workplace, “supportive leadership” and “positive relationships at work” rank as Gen Zers’ top two most important considerations in accepting a job.

In a different job market, leaders had the luxury of expecting employees to adapt to the prevailing corporate culture. Given the high demand for quality people and a limited talent pool, the pressure is on leaders to adjust. That means beefing up key power skills, such as communication, flexibility and emotional intelligence.

Building Power Skills

From small businesses to major corporations, companies are finding it increasingly difficult to hire applicants who can communicate clearly, problem solve, take initiative and get along with co-workers. According to an Adecco Staffing study, nearly half of executives believe that workers lack the power skills necessary to help a business succeed.

Part of the problem is basic power skills are assumed. People figure that, by the time you reach the workplace, you’ve learned to get along with others, be part of a team, communicate your ideas, write clearly and solve problems. Once you enter the business world, especially in a field like insurance, technical training is a necessity, and management and leadership training tends to focus on more advanced skills (while assuming the foundational skills are already in place).

Colleges and universities are rushing to fill the skills gap, but businesses can’t afford to wait. They need the skills now, and the payoff can be significant. An MIT Sloan study found that power skills training in problem solving, communication and decision making yielded a 250% ROI in eight months. Success factors included an overall boost in worker productivity, faster turnaround on complex tasks, and improved employee attendance. A Harvard, Boston University and University of Michigan study showed that training on power skills that included problem solving, self-awareness and interpersonal communication produced real results on metrics such as productivity and retention. The ROI on the skills training was 256%.

Power skills are essential to the way we work today and closely tied to a company’s success. It’s time for power skills to stand shoulder to shoulder with technical skills in every organization’s training and development efforts.

Paterson is executive coach and president of CIM.

I’d argue insurance brokerage has more of an uphill climb though, seeing that insurance doesn’t have a great track record of exciting the most talented candidates. But the best firms figure it out, so to me, it comes down to leadership. Show me a firm with strong leadership, and I will show you a firm that is, in most cases, a winner that attracts and retains talent.

Fortunately, in my humble opinion, the insurance brokerage industry has many strong and effective leaders. This leadership bodes well for the future, in spite of the disruption that is sure to come. However, with leadership comes responsibility. Remember the quote, “Heavy is the head that wears the crown.”

In this spirit, I would like to challenge our leaders to join together and commit to support the practice of civil discourse. When we see the incendiary nature of the ordinary day-to-day discussion that is taking place on both sides of the political spectrum, one cannot help wondering how in the world we are going to move things forward in the best interests of all. I believe that, because of the nature of our business, we are uniquely positioned to have an outsized influence on the entire process.

As you think about our industry, you realize that we cut across every economic sector and every socioeconomic element of our society. Consequently, our ability to influence major issues is considerable. Just think about the nature of the work of The Council’s Government Affairs team and you know this is true. Why should we care? As leaders, I think it is both a moral and practical necessity that we contribute to an environment where civil discourse is both expected and respected.

So let’s start with leading by example. Let’s start at home and at work by encouraging our families and our fellow employees to debate but, more importantly, to listen. At the end of the day, it won’t be a matter of whether we have changed each other’s minds but whether we respect each other’s opinions. If we can achieve that, we will certainly be able to find common ground—common ground for the greater good.

Doing this will, by nature, create honest and open work environments and will open us up to healthy debate, new perspectives and different ideas. That is where we can make our mark as leaders. And that is where we can make our mark in the fight for new talent. The next generation is watching us.

In closing, I’m excited about the year ahead and the opportunity and the responsibility that comes with the position of Council chairman. It will be a meaningful and fun year for me, and I look forward to being of service to you and your firm.

Martin Hughes is executive chairman of the board of directors at Hub International in Chicago and the 2019 chairman of The Council.

If you like to view your political outcomes in color, it was a mixed bag for the Reds (who lost the House but increased their majority in the Senate) and the Blues (who won the House but lost ground in the Senate). So with no clear red or blue wave in sight, many are calling this election the rainbow wave—more women than ever before were elected to all levels of the federal, state and local governments (including at least 121 members of the House, a record), and they included the first Muslim and Native American female members of the House and the first openly bisexual member of the Senate.

But I think the big winner coming out of the 2019 midterm elections was Green, as marijuana legalization advocates may have emerged most victorious. Michigan voted to legalize recreational use, and Missouri and Utah voters legalized medical marijuana. This follows Oklahoma’s June 2018 vote legalizing medical marijuana and Maine’s passage of legislation in May 2018 facilitating the administration of the state’s marijuana marketplace, which was first approved by voters in 2016. In January, Vermont legalized recreational use by legislation, becoming the first state to legalize recreational use outside of the election process.

This means that only four states—Idaho, Kansas, Nebraska and South Dakota—have not yet legalized some marijuana use. The District of Columbia and 10 states—Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington—have fully legalized.

Vermont does not authorize recreational sales (but you can grow your own). The D.C. statute does authorize sales, but the Republican House repeatedly blocked the expenditure of D.C. budget funds to enact and effectuate a regulatory oversight scheme for such retail activities (Congress has budget oversight over D.C.). One fallout of the Democrats taking the House is expected to be the removal of those impediments, and D.C.’s mayor, Muriel Bowser, already has announced plans to begin the process to permit recreational sales through the promulgation of a regulatory scheme (and the imposition of sales taxes, which is one of the great boons to legalizing states).

Another 23 states—Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Illinois, Louisiana, Maryland, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Utah and West Virginia—now have full medical legalization regimes in place.

The other 13 states—Alabama, Georgia, Iowa, Indiana, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia, Wisconsin and Wyoming—have limited medical legalization regimes in place that permit treatment of specified maladies, like epilepsy.

The biggest developments, though, may be coming. In New York, Governor Andrew Cuomo (who once called marijuana a “gateway drug”) has put a process in place that is expected to result in full legalization through legislative action early next year. In New Jersey, one issue that is dividing legislators from Governor Phil Murphy is how heavy the sales tax should be (with the governor’s budget projecting a 25% rate while the most recent legislative proposal specified a 12% tax rate).

Newly elected Illinois governor JB Pritzker also has announced plans to work with the Illinois legislature on full legalization, and many other states, including Connecticut, Rhode Island and Virginia, are actively evaluating legalization through alternatives to legislation. It is only a matter of time.

Or is it? As much as it seems like we are on the cusp of full legalization at the state level, marijuana use and marijuana-related business activities remain (very) illegal under federal law. Former United States Attorney General Jeff Sessions—perhaps the nation’s biggest marijuana legalization opponent—abruptly “resigned” the day after the election, and rumors are rampant in D.C. that Congress will formally vote soon (now that the new Congress is sworn in) to remove any federal prohibitions on marijuana-related activities.

If this does occur as projected, the United States would, in effect, “catch up” with its neighbors to the north and south, which both fully legalized earlier this year (Canada through federal legislation and Mexico by court order). That would open the door to the provision of full banking and insurance services to the fledgling industry. Canadian dispensaries, for example, are having no issues accessing banking services their U.S. counterparts are denied, and the credit card issuers also are embracing the Canadian marijuana economy they continue to shun in the U.S. (because for both U.S. banks and U.S. credit card companies, providing such services is a felony under U.S. law).

Removal of these federal impediments likely would usher in an era when big business starts to take over at least parts of the new marijuana economy, which remains—despite those federal impediments—the fastest-growing sector of our economy overall. So, if you count yourself a member of the real Green Party, your happiest days and your most lucrative opportunities may be yet to come.

Sinder is The Council’s chief legal officer and Steptoe & Johnson partner.
Gold is an associate in Steptoe & Johnson’s GAPP Group.

Big deal, right? But this particular store stands out among the other 80+ Starbucks locations in the District in a way you may not have thought possible. One visit there, however, and you’ll begin to see its uniqueness. The H Street Starbucks has no music playing in the background, very little vocal chatter and baristas taking orders through sign language. 

Located near Gallaudet University, the renowned educational institution for the deaf and hard of hearing, the H street Starbucks enlists the expertise of a staff that is fluent in ASL (American Sign Language.)

Inspired by our December feature, Untapped Talent, I wanted to check out this new ASL Starbucks and learn more from the deaf community. At first glance, the coffee shop looks like any other Starbucks, but a closer look reveals subtle ASL artwork and graphics adorning the walls. Some of the artwork and signs even go so far as to teach customers certain signs for ordering and basic communication in ASL. If you don’t know any sign language, like myself, you are handed a tablet with a writing utensil to submit your order. I received my drink just a minute later when my name flashed on a monitor. My inaugural trip to this new ASL Starbucks was a rewarding experience.

A store like this allows for more connection and interaction between the deaf and hearing communities, which got me thinking about the surrounding community. In another recent Leader’s Edge article, Verna Myers, vice president for inclusion strategy at Netflix said, “If you’re going to have diversity, you’re not going to have effectiveness unless you’ve got the inclusion part. Because if you put a bunch of people together and they’re different but they don’t know how to really work across differences, it’s not going to work.” Echoing her advice, this Starbucks allows for inclusion at the marketplace. This experience didn’t just allow me to interact with the deaf community as a hearing person, but also as someone with Dyslexia, who at times also has a communication barrier.

For more tweets from Zach's trip, check out his takeover on Twitter.

The pudgy, plain, British actor, singer and comedian, who has been hosting The Late Late Show since 2015, was an insomniac’s secret until he suddenly started turning up everywhere. His Carpool Karaoke skits with famous singers flood YouTube. (Grab a hanky before you watch the Paul McCartney episode.) He hosted the Tony Awards in 2016 and the Grammy Awards in 2017 and 2018. It was even rumored he had a bit part in Star Wars: The Last Jedi. Alas, not true.

Predictably, Corden’s overnight ubiquity is backed by 22 years of solid work, and he’s only 40. He has written and starred in British television series, appeared in 30 films, and twice hosted the Brit Awards. He has won 38 honors himself, has starred in three music videos, and even has a role in the video game Fable II.

In Ocean’s 8, he’s a thorn among roses, investigating the jewel theft perpetrated by an all-girl gang: Sandra Bullock, Cate Blanchett, Anne Hathaway, Mindy Kaling, Sarah Paulson, Awkwafina, Rihanna, and Helena Bonham Carter. The setting is the Metropolitan Museum of Art’s Annual Costume Gala, awash in celebrities and designer duds.

Amidst this visual flurry, Corden’s appearance is brief and late in the game. Really, how much of the insurance angle do you want in a sexy heist flick? As he told Movie Extras, with a straight face, “The studio called me and said they were worried this film didn’t have much star power. Eight very talented actresses, but they needed a big star. And I said, ‘Sure, I’ll do it.’”

Just kidding. In fact, as one online fan site noted: “Corden is basically a case study in how to take over Hollywood with almost no one noticing until it’s too late, and that’s kind of impressive. Really, we should all be taking notes.”

Slice is just three years old. A lot has happened since it was founded.
We started three years ago, and that was ground zero. That’s three of us sitting around the dining room table. Our first year, what we were setting out to be was two things. One was seeing if we can reimagine insurance. We’re very big believers in on-demand. It’s an on-demand world, and things are going to be more on-demand and digital. The other was the new economy. We realized the world was shifting. People didn’t imagine cars driving themselves, their houses being shared or things like cyber risk. We thought that, if we wanted to get to where we wanted to be, we’d have to focus on the gaps, and there are lots and lots of gaps in insurance.

Our first year was primarily around testing our hypothesis on how we could change things. We wanted to completely depart from any existing process or system. We did things like imagining there was no application for insurance, because that didn’t make sense. You don’t apply when you hit the buy button on Amazon. We wanted to focus on the customer experience backward, because we’ve entered the age of customer engagement and the insurance industry was still thrusting quote, bind, issue, endorsement—all these arcane transactions on customers that really don’t make any sense for customers.

What became your initial business?
Slice designs and develops its own policies and provides all customer service, including claims. Slice underwrites on the paper of Great Lakes Insurance SE, a member of Munich Reinsurance Group, under a binding authority agreement. In October 2016, we wrote our first policy, which was a home-share policy for Airbnb, HomeAway and VRBO for short-term rental in the great state of Iowa. After the first year, we were very certain it would work, but we were also fairly certain that we can’t scale on our own. You take Airbnb—I think they’re in 191 countries. The largest insurer in the world after 150 years might be in 68 countries.

How did you set out to grow, to scale?
We needed a different model. We thought we could innovate, but in order to scale, we’d have to partner with incumbents. In October of 2017, we went live under the Progressive brand. It’s a very high-volume website. It was a win for us, and it forced us to grow up. That was our second-year goal—product, market, fit. We got into 50 states fairly quickly. We’re in our “scale” year this year, and next year we’re going to work on how we can hyper-scale and get as many products out in as many jurisdictions as possible. That was the reason for our recent $20 million funding.

That was for Slice Insurance Cloud Services. Tell us about it.
We launched Slice Insurance Cloud Services in January of 2018. These are cloud-based offerings that help insurers build on-demand, usage-based products. We had started a beta of it in October of 2017 with Legal & General in the United Kingdom. We thought we’d do maybe three of these relationships in our scale year, but by the end of the first quarter of this year, we could say it’s going to go a lot quicker than we thought. Because of that, we raised more money, so we could go more quickly. The whole hyper-scale is coming quicker than expected.

Does Insurance Cloud Services represent a change in focus for Slice?
When you’re a startup, you come up with a hypothesis, and you test, and you do these things called “pivots.” You try things out, and you decide to do next things. You could plot our trajectory by our past. We used to build policy, claims and billing systems for carriers. We used to build back-end systems for carriers for 12 years, and all three co-founders were doing that. In our last life, we built a distribution platform. For us, it’s just an evolution. From outside, it might look like a pivot.

There’s no way for us to scale on our own. How do you go head to head with somebody who has a $1.2 billion ad spend or a $2 billion ad spend? Our hypothesis was the only way for us to scale and hyper-scale would be to collaborate. If we truly have the innovation and a new way to do insurance—and it performs significantly better than traditional insurance—then the only way to scale it globally would be to partner.

Who are some of your other partners?
We are licensing our ride-share product to a large auto carrier in the United States. We want to show that homeowners and auto and commercial insurance and all property and casualty insurance can be digital and can be brought into the on-demand world.

We’re working on a large pilot in the United Kingdom with a 130 million to 200 million subscriber telecommunications company on embedding a travel accident product. From there, you can draw the trajectory by looking at our investors, like JetBlue and Veronorte, which is Grupo Sura in Central and South America. That’s the model that we’re looking at. We didn’t create the market, but we have something that people are looking for. Our appeal is that insurance will be part of a different experience. It will be part of the mobility experience or the travel experience or the habitational experience.

What does this mean for Slice’s own ride-share and home-share products?
I think we will continue to build our own products. Again, we have less capacity to build products than a top-10 global insurer. If they had our platform, they could build a lot more products quicker. We’re going to continue in the jurisdictions where we’re licensed, the United States and now the United Kingdom. We’ll continue to build and sell product under our own brand or white-label to other brands. We think that’s consistent.

What are some other products you’re working on?
We are doing a cyber product with Axa XL in the United States. That’s important because that shows that we can take the platform and—as long as the product is digital and as long as it meets the experience of Netflix and Uber and Amazon—we can put out a completely different digital product in a very short time frame.

What are the technologies transforming insurance today?
We know that tomorrow’s technology will be exponentially better than today’s. Technology on its own does not sustain competitive advantage for insurers. Removing expense does. In insurance, the product is data and being able to understand that data and understand that risk—that is what insurance is all about. I think data and AI is sustained competitive advantage. And to that point, we’re looking to launch a Slice line, which is our next offering, along the AI/data science side.

How do you see technology changing the role of agents and brokers?
In our previous life, we were online agents. We were licensed in 50 states. It was very frustrating because, when you’re an agent, you have to go out and get all the business and you have all these ancient carrier systems and processes and somehow you have to make it look like a good experience. I say that’s why we created Slice.

I always say if we eliminated the agents, the next day I would open an agency. It would be similar to Amazon opening a bookstore now. It would be a new kind of agency. It would be a base digital agency, and it would have good products that are easy to buy and easy to use. Agencies are going to morph. They will go the digital route as well.

That was the year the movie The Night of the Iguana, directed by John Huston, was released. Filmed on location at a nearby beach in Mismaloya, this tropical slice of the Pacific Coast of Mexico was a star.

As is now legend, leading man Richard Burton and actress Elizabeth Taylor began an affair during filming. As a gift for her 32nd birthday, he gave her a villa perched on a hill in town, Casa Kimberly, and bought the casita across the street for a pool, connecting the two by a bridge modeled after the Bridge of Sighs in Venice. Not only did they fall in love with each other, they also fell in love with Puerto Vallarta, using the villa as a place to escape and entertain friends during their on and off romance and putting the seaside city on the tourist map.

Taylor sold the property after Burton’s death in the 1990s. Hotelier Janice Chatterton bought the two homes, which had suffered decades of decay. She restored and expanded the complex, which opened as the Casa Kimberly hotel at the end of 2015, a luxurious stucco and Mexican tile enclave of nine magnificent suites, each named after one of Taylor’s movies. Most have private terraces that offer sweeping views of the Sierra Madre Mountains, a cascading tangle of lush jungle, and Banderas Bay, a 62-mile stretch of beaches anchored on the north by Punta Mita and on the south by Cabo Corrientes.

Many people who fly into Puerto Vallarta head straight from the airport north to the Four Seasons Punta Mita, where the beaches of the Riviera Nayarit are more pristine. With the opportunity to make memories where Dick and Liz did, you’d be remiss not to spend a few days at Casa Kimberly, an exquisite base for exploring the cobblestone streets and architecture, taking a four-wheel drive tour of the mountains, and boating to Huston’s beach hideaway for a day of snorkeling, kayaking and swimming.

Puerto Vallarta has also become one of Mexico’s top gastronomic destinations, much of the credit due to chef Thierry Blouet. In 1987, this Frenchman fell in love with the city (there’s a pattern here) while working at the Camino Real hotel, when resort fare defined the culinary scene. Seeing an opportunity, he opened Café des Artistes, a nouvelle cuisine French restaurant in El Centro. He was the first to start bringing food in by air: vegetables from Mexico City and the state of Mexico, as well as seafood and imported meats from Guadalajara.

Dining at Café des Artistes and other chef-driven restaurants, like The Iguana and Trio, is a must. However, some of Puerto Vallarta’s best food can be found in the most casual places—Pancho’s Takos for tacos al pastor to go, Joe Jack’s Fish Shack for fresh fish sandwiches and Mexican craft beer, and Café de Olla for traditional fare like queso and chorizo with freshly made tortillas.

What’s to love
Spanish, French, British, Creole, Catholic, Greek and African heritages have shaped everything in Mobile, the oldest city in Alabama. From architecture to cuisine, “Port City” is somewhat of a melting pot. Nearby, you can explore the battlegrounds of Civil War forts, tour the USS Alabama battleship that permanently resides in our bay, go crabbing or kayaking on the delta, or bury your toes in the sand at a beach.

Gulf cuisine
The farm-to-fork movement is a popular shift in many Mobile restaurants like The Noble South, which dishes up Southern classics with a creative twist. But fresh Gulf seafood has always been the heart of Mobile’s culinary scene. It’s as abundant as it is delicious. BLUEGILL Restaurant on the causeway is a great local dive that’s been the pride and joy of our seafood restaurants since 1958. They’re known for their flaming oysters and prime location on the Mobile-Tensaw River Delta. The sunset views are glorious.

Fuego is a Mexican fusion restaurant that has a fun happy hour. They serve a variety of margaritas and local craft beers. The fact they’re located across the street from our office is a bonus.

The Battle House Renaissance Mobile Hotel & Spa. Located in the heart of our revitalized downtown, this historic hotel has been recently renovated. It’s also a short walk to Wintzell’s Oyster House, the oldest oyster bar in town, for fresh Gulf oysters shucked right in front of you.

Don’t miss
Getting out on the water. The Mobile-Tensaw River Delta is the second largest “swamp” in the United States. From fishing to a sightseeing cruise to kayaking and canoeing, there are many ways to roam the waters.

Most people don’t know that Mobile is the birthplace of America’s original Mardi Gras. Originating in 1703, it was revived after the Civil War when Mobile citizen Joe Cain, fed up with post-war misery, led an impromptu parade down the streets of the city. We’ve been carrying on the tradition ever since with parades, colorful floats and flying MoonPies (a locally made graham cracker, marshmallow, chocolate snack).

Side trip
Gulf Shores and Orange Beach are just south of Mobile. The 32-mile stretch of beach has white sugar sand, a laid-back pace and a family friendly environment with plenty to see and do.

This year’s class of scholarship recipients includes 56 seniors and 19 juniors. Of the winners, 34 are female and 41 are male. Frequent majors include business administration, communications, computer science, economics, finance, government, healthcare administration, risk management and insurance, sales, and business marketing.

The Foundation’s Scholarship Program partners with the internship programs of member firms of The Council of Insurance Agents & Brokers. The program exposes college students from across the country to the commercial insurance brokerage sector with the ultimate goal of keeping them in the business after graduation. Of the 125 students who received scholarships over the past two years, nearly 53% have been hired or repeated an internship with a Council member firm.

“Recruiting the next generation of industry leaders is perhaps the biggest hurdle our industry faces, and being able to make a difference in the career trajectory of these students—particularly within the walls of our member firms—is both exciting and rewarding,” says Ken Crerar, president and CEO of The Council.

Students must be formally nominated by the respective brokerages at which they interned, which also must be participants in the scholarship program. Awardees are then determined by an independent committee.

For more information on how to participate in the 2019 scholarship program and nominate interns next summer, please contact Jess Hilb, foundation associate for The Council. 

What do employers need to know generally about mental health coverage and healthcare in the workplace?

Gruttadaro: It’s costly to ignore. Mental health costs employers $200 billion annually. It impacts not only the cost of care but also lost productivity—not coming to work or showing up but working at a subpar level.

Mental health conditions impact one in five employees at all levels of an organization, including the C-suite. We know mental health conditions don’t discriminate based on education level, race, ethnicity or income. And about half of all employees with depression aren’t getting the care they need. This is common in the workplace.

Conforti: We are starting to see both mental health and, more specifically, substance use pop up among employers’ high-cost claimants. I worked with an employer where the care for one member over a three-month period at one treatment facility was $250,000. Those kinds of costs are getting people’s attention.

We also do have a shortage of psychiatrists, and we have for the last five to eight years. We are starting to see that many therapists aren’t joining managed care panels, because they realize they can get paid more on an out-of-network basis. If you look at it broadly, we are seeing an increase in costs and a shortage of good, solid clinicians.

The Center for Workplace Mental Health recently released guidelines employers can use to improve access to mental health services. Why now? Didn’t the Affordable Care Act and federal mental health parity laws improve coverage in this space?

Gruttadaro: The ACA required that all small group and individual market plans that were new had to cover 10 essential health benefits, and mental health and substance use were included for the first time. The federal parity law required parity for medical/surgical care and behavioral health if you offer that coverage.

But we have found from repeated reports and studies that employers and health plans aren’t complying with parity. A Milliman report released in 2017 made it clear it’s not happening with psychiatrists’ payments and network adequacy.

Employers need to be asking why they don’t have an adequate network of behavioral health providers. They should be asking how much insurers are seeking providers to join their networks and if plans are connecting with the local psychiatry and social work associations to recruit providers to insurance networks. Employers also need to know how much they are paying for services and what the criteria are for those payments.

The non-compliance we are seeing could be from confusion and a lack of understanding about how to comply. But this has been an ongoing concern, and we are finally seeing the U.S. Department of Labor and state insurance commissioners looking at compliance and going after those that aren’t in compliance. And employers, if they are self-insured, are liable if they are not in compliance. The buck stops with them.

What should a plan look like that has true parity between medical and behavioral health benefits?

Gruttadaro: In a broad sense, it exists when insurance for mental health and substance use benefits are the same as their medical/surgical benefits. If a plan provides unlimited visits for someone with diabetes, it should do the same for mental health. This includes treatment limits, co-pays and deductibles.

Where employers are getting tripped up is in areas of non-qualitative treatments, like in pharmacy benefit management using step therapies. If they are using that for mental health but not on the medical side, they could be at risk of being out of compliance. Other areas are health plan management criteria, utilization review and when medical necessity is applied more strictly in mental health.

Another area is provider payment levels. The Milliman report found there was a disparity in provider payment levels for primary care doctors and psychiatrists. In the report, primary care doctors were paid 20% more on average than psychiatrists for evaluation and management office visits.

The other aspect is network adequacy. Plan participants shouldn’t be required to go out of network to see a behavioral health provider more often than they do for a primary care or specialty physician. It’s the responsibility of the health plan to ensure network adequacy, because if it is not adequate, [employees] won’t have access to the care they need.

To help employers, the Department of Labor released a set of frequently asked questions that are helpful in describing the qualitative treatment limitations and non-qualitative treatment limitations where there are common violations occurring.

Stigma tends to be a consistent barrier to people seeking mental health treatment. What can employers do to reduce this and encourage use of needed care?

Gruttadaro: The good news is more employers are engaging in workplace mental health and seeing it as an important topic to include when talking about broader health and wellness. They are raising awareness and bringing in speakers to talk about mental health when they have a health fair. It normalizes behavioral health issues as health conditions that are common and also makes it safe and OK to talk more about it. It’s about creating a culture where there are those conversations, and if an organization’s leadership can speak to it, whether it’s personal or a close friend or family member, it creates a safer culture and climate for employees to get the help when they need it.

What do brokers need to know about ways to improve mental health access for their employer clients?

Conforti: Behavioral healthcare tends to consistently be about 3% to 5% of overall spend, and employers may have to end up spending more to ensure employees get the help they need. What we talk a lot about internally is making sure the programs in place are being utilized and set up appropriately. If you have a program but it isn’t communicated, how do you get that information to them? Utilizing more web- or app-based services is important.

Many employers bundle behavioral health with disability in their EAP [employee assistance program], but it generally doesn’t get communicated. They often just offer an 800 number for anyone that needs the service.

There are lots of programs where we integrate vendors, and you have to make sure employees know what programs are in place. If you have an employee who is struggling with sleeping and their Ambien usage is increasing, it might be helpful for them to know they have a cognitive behavioral therapy program online that helps them create better sleep patterns so they get more rest. You have to push through the vendors to make sure people are aware the benefits are there and available, and that is critical.

The other piece is better navigation. When employers have an EAP, wellness program, medical coverage and behavioral health coverage all in different areas, they need to make sure people know where to go to get help. Many times people are going to need help not at noon but at 3 a.m. Employers need to make sure the treatment is accessible and people know how to use it.

They can also offer broad programs like talking about substance use through the lifetime. For instance, a big concern now is kids vaping when they are young. Employers could put information out there about the topic or say they are offering a webinar where people can go online and listen on the topic. They can take what critical, relevant issues are going on and talk about them.

Are there any new or innovative programs out there that brokers or employers are using in this space?

Conforti: Some are doing things like positioning behavioral health clinicians at on-site and near-site clinics. They are incorporating medical and behavioral health in one space and not keeping them separate. That’s something I’ve seen to help increase usage and reduce stigma by having it all there in one location.

Some companies are providing access and navigation services—bringing someone there to help employees wade through the system. I work with one employer that likes to put in specialized programs, and it is paying in the six figures to bring in mental health clinicians to help employees navigate through the system and get the care they need.

There are also home-based services being used. One example is bringing someone to a person’s house to provide something like applied behavior analysis treatment for autism. They are trying to figure out how to keep someone out of the hospital, and there are some enhanced options that help abate crises we see that keep people out of inpatient care.

You mentioned EAP plans. Have those been effective in helping to treat behavioral health conditions?

Gruttadaro: Only about 5% of employees in general are going to access support in an EAP. Employers are looking at more innovative approaches to get people involved with EAPs, including packaging behavioral health around other things like offering caregivers for the aging. They are bundling issues together so people feel comfortable calling and are more engaged and more encouraged to open up.

Conforti: Creating policies and procedures with an EAP has been effective as a resource for people having issues. It allows employees to get help and not worry about confidentiality or termination. Employers can say, “We have this program, and we don’t need to know why you are going. But we just want to know that you are getting help for whatever the reason is that you are always leaving early or you may not be showing up on Mondays.”

One employer I worked with was affected by three suicides in one of its locations, so it enhanced its EAP program around stress reduction and mental healthcare and resiliency. Sometimes [an employer] implements things around a specific problem like that, and sometimes it’s just by trial and error. It depends on what the threshold is in terms of what an employer can and can’t do. And it will look different for various employers. What a hospital will do is going to be different from what you might see at a construction company or a technology firm.

Emelda Sanders interned with Philadelphia Insurance Companies in the summer of 2018. “It is important to understand that there are different levels of deafness, from hard of hearing to profoundly deaf, and that deaf people learn visually,” Sanders says. “Because of this, it is important to create equity in an environment that is mainly designed for hearing people. To create equity, communication access is of key importance. Ideally, have the other employees learn at least some basic American sign language (ASL), and hire qualified ASL interpreters. Along with language, it is also important to have at least a basic understanding of deaf culture…. The invention of technology has made every impossibility possible these days. For instance, deaf and hard-of-hearing workers have access to communication devices like video phones, ZOOM Video Communications for conference calls, email, text messaging, FaceTime, and many other technological communication devices.”

Chrissy Sze explored how Siri and other voice-activated systems help insurance companies during an internship at the Washington, D.C., Department of Insurance, Securities and Banking. She graduates this month and would like to find a job in New York City that merges her RMI major and love for numbers. “I learned that it was not a shame to ask for help,” she says. “There is nothing wrong with that. It is important to follow your heart and try your best as much as you can.”

Jerome Dupuis says he fell in love with RMI after taking an introductory course. Before that, he thought he’d be a stockbroker. He interned with the D.C. Department of Insurance, Securities and Banking, investigating scams and frauds and researching and presenting on cryptocurrency and blockchain technology. “I became really interested in the hands-on of internet research,” he says. “Investigating scams and fraud is never boring. It kept me curious and forced me to dig deeply to find answers. Before this, I thought these issues only existed in fictional worlds, such as movies.” People who work alongside deaf interns, he says, should take initiative “to show them the entire scope of the job. This would allow deaf or hard-of-hearing students to more fully experience the real world.”

Sarah Bakos-Killian, who interned for the World Wildlife Fund for two semesters her junior year, expects to graduate in May 2019. “The most valuable thing I learned from my internship is that risk management principles can be applied to nearly any industry or interest, so there is endless opportunity,” she says.

Jake Grindstaff has had three summer internships: with the D.C. Department of Insurance, Securities and Banking in 2016; with NFP Insurance Agency in 2017; and with Marsh in 2018. “Those internships have taught me so much about myself and the workplace in this industry,” he says. The experience increased his confidence in his work performance, in addition to helping him focus on what kind of job he’s interested in post graduation.

Nabeela Shollenberger spent 10 weeks as an intern in the underwriting department at Philadelphia Insurance Companies. In addition to learning about a great variety of projects, she particularly enjoyed a women’s networking session, and she had the opportunity to get out of her comfort zone and give a presentation to department heads and the CEO.

Montray Roberts was an intern at AHT Insurance in the spring of 2018. He expects to graduate in December 2019 and hopes to explore a variety of careers in insurance, including being a broker and actuary and working in risk management. One of his projects at AHT involved creating a game for the many kids who attend Take Your Child to Work Day so they could learn about insurance.

When the minister opened his sermon by introducing Maguire to the congregation, “Victor leaned to me and said, ‘Stand up now,’” Maguire recalled. “I had no idea what was happening. They told me that there may be some people who wanted insurance after the service. I sat in the back of church that day, writing policies for hours. And that’s how it started.”

Maguire had already realized the deaf community didn’t have access to standard-rated policies, so it didn’t take long for a mutual respect to form between him and his new clients. He had such a flood of business that others marveled at his success. That flood continued for the next 55 years. He established the Maguire Insurance Agency in 1960, then Philadelphia Insurance Companies in the 1980s. Maguire is now 84 years old, and the Maguire Foundation that carries his name has impacted countless lives—including a new generation of the deaf community.

Cloning Saint Joseph’s

Born during the Great Depression into a large family, Maguire moved around a lot due to his father’s job with Met Life. Moving from city to city meant new schools for Maguire. He struggled with his studies and eventually fell behind academically at Niagara University, which he attended on basketball and work-study scholarships. He left school and was conscripted into the Korean War. After two years in Japan with the U.S. Army, he enrolled in Saint Joseph’s University on the GI Bill.

It was during this time at Saint Joseph’s that Maguire’s life would begin to take a new direction. As a senior basketball player, he volunteered to work with athletes from a nearby deaf school. His father, who died unexpectedly of spinal meningitis at age 45 on the night Maguire graduated high school, had also been partially deaf. Before long, Maguire had formed a relationship with the local deaf community.

It was also at Saint Joseph’s that Maguire met Reverend Hunter Guthrie, a noted pioneer in the study of dyslexia. Maguire credits Guthrie with first recognizing that his educational struggles were related to dyslexia. That discovery radically transformed Maguire’s life. After working with Guthrie, Maguire graduated from Saint Joseph’s with a 3.0 GPA.

Forever grateful to the school that helped him finally succeed academically, Maguire has given many gifts to Saint Joseph’s over the years. One of the most significant is the Maguire Academy of Insurance and Risk Management, which supports the school’s risk management and insurance (RMI) program. The program is an industry leader, graduating 400 students last year. A handful of years back, Maguire had the idea of cloning it.

And while he didn’t quite clone it, in 2015 Maguire’s two passions came together when he helped establish an RMI program at Gallaudet University in Washington, D.C. Founded in 1864, Gallaudet is a private university for the deaf and hard of hearing.


The Gallaudet program, now in its third year, has 38 students, and 19 students have declared RMI as a major. In 2017, a new chapter of Gamma Iota Sigma, the international risk management, insurance and actuarial sciences fraternity, was chartered at the school, with 28 members inducted. December 2018 will see the program’s third graduate, and six more students are expected to graduate throughout 2019.

The program focuses on creating fresh opportunities for students and the industry alike, on changing mindsets, and on providing exposure in a time when the field desperately needs a new source of talent. Maguire calls it “a fantastic success.”

“The idea of teaching insurance to the deaf community seemed like a natural,” Maguire said. “Today, 90% of the communication in the insurance industry is done through the computer. These kids are smart. They can’t hear, but that’s their only handicap. And with a computer, that handicap is overcome.”

He Never Forgot

While Maguire is the vision and support behind Gallaudet’s RMI program, it has taken the work of many to get it off the ground, particularly Jim Bruner. The executive director of the Maguire Academy, Bruner was a member, in the 1970s, of the first integrated class of deaf and hearing students at the Rochester Institute of Technology. The school is home to the National Technical Institute for the Deaf. Initially Bruner gave little thought to what it would mean to have a deaf roommate—but it opened him up to a new world and a whole new language.

But when you leave your comfort zone, that’s where the true growth happens.

Jim Bruner, executive director, Maguire Academy of Insurance and Risk Management

After graduation, Bruner went on to spend 30 years in risk management and insurance in various capacities, including time as an account executive with Wausau Insurance Companies/Liberty Mutual Insurance Companies and area vice president with Gallagher.

But he never forgot.

And in 2015, as an empty nester looking for a new life experience, he found himself living in a dorm with deaf students once again—this time preparing for his new role at Gallaudet. “I wanted to immerse myself in the culture,” Bruner says. “And three years later, here we are.”

“Brokers, insurance companies, we all want diversity and inclusion within the workplace now. It’s a real priority. But deafness has fallen through the cracks. We just don’t think about it. We have an amazing talent pool here that everyone should know about.”

Does it take a little bit of adjustment? Sure.

“But when you leave your comfort zone,” Bruner says, “that’s where the true growth happens.”

Thriving Interns

Once Bruner became executive director of the RMI program, it didn’t take long for him to recognize that industry internships would be an important component of its success. In 2016, he was invited to attend a meeting organized by the District of Columbia Insurance Federation, at which he and Robert Shilling, a representative from the Maguire Foundation, told those gathered about the program.

Stephen Taylor, commissioner of the DC Department of Insurance, Securities and Banking (DISB), liked what he heard. Supporting the effort was an easy decision, Taylor says, especially since it fit with his department’s goals to partner with academia and financial services providers through its Financial Services Academy. “The program has an excellent mission and focus, and, more importantly, it has an amazing advocate and leader in Jim Bruner,” Taylor says. DISB brought on its first intern that same year, another in 2017 and two more this year.

“We found that communicating with the interns was not the obstacle that some may imagine,” Taylor says. “Rather, we found various ways to express ourselves, such as using notes, interpreters and text messaging. What we also found were impressive, driven and outgoing students who would make valuable contributions to any internship program.”

In 2018 alone, 10 students have taken part in industry internships. In addition to DISB, they’ve worked at organizations such as Marsh, AHT Insurance, World Wildlife Fund, NFP and Philadelphia Insurance Companies, focusing on projects like telematics, blockchain, underwriting, policy analysis and wearable medical devices.

“These students are incredibly bright,” says Randy Jouben, a 30-year risk-management veteran who teaches several courses in the Gallaudet RMI program. “They have a desire to do well and to prove themselves. I think a lot of people might look at the fact that they’re deaf or hard of hearing as a negative, when it’s actually not. They’re gifted, imaginative students and have experiences that a lot of others haven’t had. It makes them adaptable. That’s a soft skill that’s hard to teach, but these students have it.”

Immediately Contagious

As the internship opportunities for Gallaudet students have continued to expand, so has student interest in working with brokers, insurance companies and risk management departments—and those entities have responded in kind.

Last spring, Sean Gormley, the director of commercial brokerage at AHT, and Kate Armfield, AHT’s chief operating officer, found themselves visiting the Gallaudet campus to interview five candidates.

These students are incredibly bright. They have a desire to do well and to prove themselves. I think a lot of people might look at the fact that they’re deaf or hard of hearing as a negative, when it’s actually not.

Randy Jouben, risk-management veteran and teacher, Gallaudet RMI program

“It was a very exciting experience,” Gormley says. “A lot of energy came from that initial meeting.” The candidates all brought enthusiasm and confidence, he says, “and it was immediately contagious.” Gormley had no previous experience with the deaf or hard of hearing, and he didn’t know what to expect. “But I was eager to expand what I knew about the community,” he says.

Gallaudet helped prepare the brokerage—a service it offers all host organizations—through a deaf awareness workshop. A dozen or so AHT employees attended, along with Montray Roberts—the inaugural intern—and several representatives from the university. The workshop offered insight into the deaf and hard-of-hearing experience, as well as practical suggestions for overcoming barriers both perceived and real. Take, for example, communication.

“Our work is so oriented toward technology that it really wasn’t a hindrance,” Armfield says. “Having worked around that, I think we would be game to have any kind of intern now, whether hearing impaired or a blind person. It was a real game-changer for us in terms of how we can bring on more talented people.” It simply came down to accommodating people with different needs.

At Marsh, meanwhile, Charmaine Davis, a senior vice president and Gallaudet board member, was having learning experiences of her own.

“The nature of the work we do, it’s about high expectations and constantly delivering,” she says. Working with the interns, however, she found that she had to stop and slow down to interact—and to think about how she communicates with others.

One of the things that surprised her was how many of her colleagues took an interest in the interns. Some had hearing challenges of their own. Others had family members who were deaf or hard of hearing. “They were so engaged, having the students here,” she says. One colleague in particular learned enough sign language to invite the first two interns to lunch and carry on a conversation. Charmaine says she knew “a little bit” of sign language and the interns appreciated any attempt she made to use it. The company also displayed presentations on video screens and made use of instant messaging.

“They never seemed to be frustrated with us, even when we were trying to find ways to communicate,” she says.

Marsh has a complex diversity and inclusion program, and Charmaine says the partnership with Gallaudet allows the company to “cast a wider net.” Next time around, however, she says she’d like to see more interpreters available to help out. In some instances, there were workarounds, but it still could be better. “That was a missed opportunity for all of us,” she says. “From a board member’s perspective, we all buy into the mission. We all have empathy because of our personal experiences. Mine is about education, and therefore, there are no boundaries. Anyone who’s interested, I’m on board. I’m so privileged to be a part of people who are so passionately devoted to this community.”

Two-Way Learning

Aside from the direct lessons on underwriting, risk management, analysis and the like, the Gallaudet RMI program offers one other decidedly distinct element: a deaf insurance broker teaching classes. Gary Meyer, who also has 30 years of experience, believes he may be the only deaf insurance broker in the property and casualty business. He is vice president of DHH Insurance Agency, which he founded in 1996 (in 2005 the company became a division of C.H. Insurance Brokerage Services). DHH Insurance has provided insurance programs to the deaf and hard of hearing population since its start. Meyer met Maguire when his company approached Philadelphia Insurance Companies about setting up a national initiative to provide professional liability insurance for sign language interpreters, and the men became friends.

In pulling the Gallaudet program together, Maguire asked Meyer if he’d be willing to serve on the board and offer consultation. “We were always keeping in mind that someday I would be an instructor at Gallaudet, and now I am,” Meyer says. Video conferencing software allows him to teach remotely from Rochester, New York.

“I provide direct communication with the students,” Meyer says. “By that, I mean, it’s not relayed through an interpreter. It’s from me, right to them. Most deaf individuals would prefer direct communication. There’s a personal relationship that can be built that way, and wanting that is a very common feeling in the daily lives of deaf people.” He believes it makes an impact that he’s able to understand how deaf students think and to understand the culture. He says it’s also important to be able to be a positive role model for the younger generation.

While the students are learning from the instructors, the instructors are learning from them.

“I normally confuse people who ‘can’ hear me,” Jouben says. “When the interpreter is there, I have to slow down. I have to be conscientious. I’ve learned to pick up when there’s an understanding gap.” And that, he says, has transferred over to conversations with all people. “I know that people don’t understand me when I talk about risk management and insurance,” he says. “Now, I’m more cued in to the visual cues that people have lost my train of thought. I also am adapting to the usage of particular words, words that have multiple meanings.” 

Continuing the Relationship

Most deaf individuals would prefer direct communication. There’s a personal relationship that can be built that way, and wanting that is a very common feeling in the daily lives of deaf people.

Gary Meyer, vice president, DHH Insurance Agency

At Philadelphia Insurance Companies (PHLY), where the deaf community has richly been woven into the organization’s history, the partnership with Gallaudet began in 2015. There were two interns that year, placed within a larger 10-week summer program that typically brings 40 to 50 interns. Each year since, PHLY has brought in two more.

Laura Boylan, vice president of human resources, says the first year in particular was “a learning experience all around—for us, for Gallaudet and for the interns. We had done all of the research and homework and felt like we had the tools and resources in place to help them be successful in their internships. What we didn’t really factor in was that the students didn’t have any work experience in an office environment. The beautiful piece of that is we were open with one another and candid. We learned as we were going along together.”

The story of how the company started has long been emphasized among employees, she says. “And knowing we’re able to continue that relationship with the community of people that Mr. Maguire started the company on, to say that is a feel-good story seems underwhelming,” she says. “But it goes along with what the people here would expect us to do. The core values that shaped us back then still shape us today.”

As for Maguire, he’s still shaping the younger set, too.

Consider Emelda Sanders, who expects to graduate from Gallaudet in December 2019. As an African hard-of-hearing woman, she says, “I had lost all hope in obtaining a meaningful career.”

But then, opportunity arose. She spent the summer of 2018 with PHLY and found the experience very inspiring. In one pivotal moment, she met Maguire and his daughter, Megan Maguire Nicoletti, who is trustee, president and CEO of the Maguire Foundation. They encouraged Sanders to stand strong and believe in herself and to know that she could make her dreams come true.

“The diverse group of people I worked with encouraged me to be creative, motivated and innovative,” she says. “I am especially thankful for my supervisor and mentor, who were supportive role models. Our team collaborated in designing a new product for a competition, in which we took second place.” PHLY’s summer associates team up to revamp products that PHLY writes and then make presentations to senior leaders.

Her team’s diversity, collaboration and mutual respect was its strength, she says, and that wasn’t the only positive aspect of the experience. “All levels of management and employees were approachable and treated each other professionally, equally and respectfully. When I continue with my career in RMI, I would like to emulate these skills, because it felt like a place where everyone can grow and it contributes to the company’s success.”

Soltes is a contributing writer.

You’re retiring after 15 years of running Leader’s Edge. What was your vision when you and Ken Crerar first created the magazine, and do you think that you’ve achieved it?
I’ll answer the second question, first. Yes, I think we have. Ken used to send me notes when I was editor in chief of IA magazine, Independent Agent. And he liked what I did there, so he hired me to create a whole new magazine for The Council.

We had a lot of discussions and found right away there was no publication in this niche. I mean, it seemed kind of silly. There were probably 20 insurance business magazines at the time, and not a single one targeted commercial insurance brokers.

So we sat down and started talking about what we could do and do differently. Because with 20 or so magazines out there, we had to be different or we’d never get noticed. And that was a big concern of ours: how do you step into a field that’s already loaded with publications?

So we created Leader’s Edge to be really smart, visually pleasing, and totally about our members. It wasn’t about The Council.

We didn’t want to bore our readers, which a lot of the established publications did. So we decided to try something daring. I give Ken a lot of credit for doing this because we ran into a few obstacles along the way, but he stuck with it.

Leader’s Edge is visually different from everything else, and content too. But the first thing you do is you see it. What gives you your inspiration for the design and the way it looks?
I like it to look more like a consumer magazine. We have really long art meetings, as you know, to try to come up with cool ideas to visualize a story. Ask yourself this question: how in the world do you visualize insurance? I mean really, the whole idea is crazy. And yet, for 15 years, we’ve managed to do some really interesting things to achieve that. It’s not easy. We have stories that are very, very difficult to visualize. And so you use a lot of imagination. You find some really good designers, and you just put your heads together and throw stuff around, throw it up against the wall, and you see what sticks.

You are being honored as a game changer this year. Can you talk about what that means and also how you see Leader's Edge in that role, as well?
Well, it’s a real honor. There’s no doubt about that. I think I’m a game changer because Leader's Edge is a game changer. It really is just a lot different from all the other publications. One of the nicest compliments we had as a publication was when our competitors started to copy us. And several have over the years. So, yeah, it’s a very nice honor. But Leader's Edge is really the game changer in the industry. It’s a first. The industry never had anything like it before.

Alright, now some fun questions. What was your favorite piece over the years? Favorite article?
Oh, that’s difficult. Early on, we did some investigative stuff, which is fun, about some of the regulators. Actually, the recent Q&A we just did with Vernā Myers I thought was fascinating.

Favorite cover?
There’s a story behind the covers. It’s indicative of the evolution of Leader’s Edge. We did a story about insuring body parts. It covered hand models, surgeons, actors and all types of people who insure different body parts because they rely on them in their profession. It was a fun story. So our creative director at the time, Ted Lopez, came up with this art, which was a pair of women’s legs in fishnet stockings, upside down, covering the table of contents.

We were very much a visual magazine, but we were still a little bit conservative back then. And when Ken saw that, he said, “That’s the cover.” And that sort of opened up, “OK, we can do a lot more with the magazine, as far as covers go.” So then we did. We started really pushing the edge on covers. Sometimes, too far, and they didn’t get published.

But one of my favorites was actually before the “legs” cover. The story was about benefits for aging baby boomers and the headline read “Aging of Aquarius.” We had a bunch of elderly people on the cover, and they were all women. My boss at the time, Barbara Haugen, said you can’t put just a bunch of hippie women on the cover. It was sexist. But we loved the art. So Ted put a beard on one of the women, so it looked like we had three women and a man on the cover. And you couldn’t tell he was a she. And they were all dressed in tie-dye and head bands. It was a classic.

There have been so many good covers. Another one of my favorites was about drones. We used a takeoff on a movie poster of Alfred Hitchcock’s The Birds, and in place of birds on the cover, our creative director Brad Latham put hundreds of tiny drones. I really love that cover.

Is there any specific issue that has been your favorite to cover?
I guess it would be regulation. Our industry has a history of coping with a lot of shady regulators. I’d love to do more on that. It’s just so hard to dig into it and find it, but it’s out there. And that probably comes from my background of being an investigative reporter. I love the challenge.

What has been your biggest regret over the 15 years?
I always wanted to do a big takeout on the NAIC and just really dig into what’s behind the NAIC, but that would take about a year’s worth of work.

Biggest lesson learned? And this will be helpful for me.
Biggest lesson learned. Oh, jeez. Well, I guess it’s this. No matter how hard you try, it’s never going to be perfect. And so work to make every issue a little bit better than the last one. You can’t do it all at one time.

I think that’s great, and I was going to ask you: what would be some advice for me? And I’ll take that.
Yeah, I think I just gave it to you.

So tell us what you’ll be up to come January.
Well, I write novels. I love to write thrillers. I’ve written three so far, that have been published. The first one, Naked Ambition, became a bestseller, which was nice—and shocking. The sequel, Naked Truth, was just published in September. I’m working on my fourth thriller, now. It’s a stand-alone. The working title is Borderline. It’s for my agent who has been bugging me for a long time to do a stand-alone. That’s due next summer, so I’ll be busy this winter.

I want to write a lot of books. Probably not all novels. Because writing novels means you sit alone for hours and write. I’d like to write some non-fiction books where I have to actually go out and play reporter again.

Well, we’ll look forward to what’s to come and maybe even a little more writing for you at Leader’s Edge?
Totally possible. After a few months’ vacation.

Tell us about yourself.
I had been teaching French and planning to be a professor, and I entered a program that was kind of experimental at the time to rehabilitate humanists and turn them into functioning business people. I interviewed with various firms in the business world of which I knew nothing and wound up going to Johnson and Higgins. Basically, they seemed like very good people. I had no idea what insurance brokers did.

I did lots of things at J&H over the years and eventually moved in 1992 to France. Having taught French at one time and being pretty good at it, it paid off. I wound up in Paris for four years with J&H. When I came back, I became international practice leader. We were acquired by Marsh. I went to HRH, which was bought by Willis.
So how did that bring me to WFII? I talked with people at The Council somewhere around 2002 and became one of their representatives at WFII.

How did you become chairman?
I’ve been around a long time, so sooner or later they were going to get to me. The chairmanship rotates among five regions of the WFII. It was our turn.

Where is WFII on opening new markets and the effects of Brexit?
Expanding into new markets is always very much on the agenda, specifically liberalization, so brokers can freely operate once they get licensed.

Brexit may be an issue because freedom of services where brokers could easily move around the European Union is potentially going to be much more challenging. The large brokers are already situated in and out of the new EU. But it’ll be interesting for other brokers. And we have many small broker members who are represented by the WFII. So Brexit’s an issue.

What about trade issues with the Trump administration?
The answer is potentially yes. There’s been a lot of discussion about border adjustment taxes, taxes on reinsurance and potential retaliatory trade barriers. We’re throwing up as many barriers as other countries are, but we could be facing some headwinds.

In the overall trade picture, insurance intermediation is collateral damage. But that doesn’t discount the importance of the insurance and broking function to make markets and provide crucial services to the global economy.

WFII seems like the only organization that can deal on a global basis with opening new markets. True?
We’re the only organization that lobbies on an international level for opening new markets. Plenty of private companies do too. We are all pressing for further liberalization in India, which is not a new market but which is certainly one that has been evolving. But WFII is not going to change it on its own.

There are countries that tend to be more challenging than others. I think we’re an influencer and an enabler and not unimportant, even if we’re not terribly well known.

What do you face when you want to expand into a market?
Who must get licensed. That has changed over time. You could be licensed to operate in this country or in that one, but you couldn’t necessarily be licensed to operate everywhere.

There are countries where our members are very welcome. Some countries love to have new brokers. Many in Africa are more than happy to have more brokers.

Then there are the unofficial things. What kind of informal hurdles are there? How fast do the authorities move? What are you allowed and not allowed to do?

We want a level playing field so intermediaries already in country don’t have any advantage over the next broker entering.

Is that always a problem entering a new market? Are regulators always looking out for the locals?
Historically, yes. It’s been a problem. I won’t say it’s a problem everywhere, and it’s less of one today. There are countries where our members are very welcome. Some countries love to have new brokers. Many in Africa are more than happy to have more brokers.

But, remember, the regulator’s job is often a mix of things. It protects consumers. It is insuring the health of the insurance industry in a given country. So inevitably you could run into some challenges. There are examples in the past where markets have been a little protectionist—either for brokers or insurers—in continents such as South America and Asia.

What do you see as some of the new emerging markets or potential growth markets in the next decade?
Certainly India, which has liberalized a lot of components of its market such as rates, policies and allowing in more insurers. The same for brokers. Originally, there were no brokers. Then a broker could establish itself. Then foreign brokers were allowed with a 26% ownership investment and 74% local partner. Now that’s changed to 49% foreign ownership. The 51% can still be a challenge. But India is focused on a long-existing and thriving insurance market.

It’s obviously a big country, and everyone wants to be there. But you could be present there in a bigger way no matter what size you are now—whether you have two people or 2,000—if all of the hurdles are removed. We need to remember it’s a process. At various times the winds blow a little more nationalist and a little bit more liberal.

Everyone talks about the continent of Africa, which is 54 countries. So it’s a matter of picking and choosing. Brokers have—the larger ones—advanced and retreated. They’ve bought into more businesses and then sold off some.

The Middle East is another focus. Saudi Arabia. UAE. Qatar is now problematic, given the political tensions in the area. That’s another area where there’s a lot of local control and the local regulations have been tightened on insurers and brokers in recent years. Saudi and the UAE, being the biggest economic engines there, are an area of focus. Those are definitely on the radar.

Then there’s always Asia, where things can always improve—and they have a lot. And, remember, China and Korea have been steadily liberalizing over the past couple of decades.

What is WFII’s biggest future challenge?
There are three things. One is regulation for principles, which are promulgated by international organizations. We’re in favor of the principles and in favor of the principles being explained with some guidance. But when they get too prescriptive and grab onto an idea and send out a model for everyone—that’s an ongoing concern.

The second is the level playing field, particularly with respect to new kinds of entrants. Think about insurtech in its broadest sense. Let’s say we have a firm that brings insurtech solutions to the intermediary space.

We’re in favor of the principles and in favor of the principles being explained with some guidance. But when they get too prescriptive and grab onto an idea and send out a model for everyone—that’s an ongoing concern.

Let’s make sure that firm plays by the same rules as do the established brokers or agents in that space.

The last one that is an ongoing concern is regulatory concern about life insurance. Regulators should not mix up a property/casualty and a life insurance with no investment component. That’s been the subject of discussion here in the U.S. and around the world.

Where there is an investment component, there’s the potential for greater risk to the consumer. So there is sometimes a commingling by regulators where they feel everybody should be regulated exactly the same.

We’re very, very concerned about FATCA. Does that apply to property/casualty or not? It shouldn’t. It’s a different kettle of fish.

Where do you think brokers will be disintermediated in the future?
It’s always a subject of discussion. The members of WFII who are closer to the personal lines and small commercial spaces have a greater concern than others. There has been an expansion of the direct market and online insurers in developed countries, which has been a trend for some years. It’s definitely in personal lines and in some low-end commercial.

Certainly in the lower end of the market I could see technology continuing to enable that. I don’t know how much disintermediation there is going to be as you move up market. If we looked out decades, I’d say we’ll probably have robo brokers 30 years from now. But who can accurately predict anything 30 years from now?

There may be some interesting experiments that really do pay off and change the nature of the market in terms of capital. Capital’s got to play by the same rules too. There ought to be a level playing field for capital, just as there is for conduct and intermediation and licensing and the rest. So I could see that perhaps changing some components of the market.

But I don’t see any reduction in intermediation in the near future as you move higher in the market. I see a whole lot more professionalization. Everybody knows professionalism, advice, service are really important.

They’re more important, in many cases, than the transaction and the delivery of the product.

Where does Blockchain stand with WFII?
It’s definitely on the agenda. It has been a subject of discussion. AIG made some noise about the first multinational contract, and there have been marine contracts done with blockchain. My own specialty has been multinational programs. And I can see a real benefit for them.

It’s definitely better than a bunch of marked-up pieces of paper or marked-up binders or cover notes. Revisions will be memorialized too. And everyone will be able to see it. Right now it’s kind of an expensive proposition. We’re still working on it. So even though it’s supposed to be frictionless, there’s still a lot of grinding of the wheels at this stage.

How long do you think it will take to implement into daily use?
I wouldn’t be surprised in five years if we didn’t see a notable increase. It would start among large companies.

Blockchain is good for complicated contracts. So there’s a lot of work that’s being done. One of the big things about multinational programs is doing it right, on time and with contract certainty. With an efficient, well understood blockchain convention and mechanism, we can do this.

Jensen is a managing director in Global Services and Solutions at Willis Towers Watson.

Defining Business Acumen

Thom: Almost a decade ago, I interviewed for my first human resources business partner role. In my interview, I was asked this question: “How would you rate your business acumen, and how do you plan to apply it to this role?” After spending hours preparing for this interview, I was ready to answer questions on advising managers on recruiting, employee relations, compensation practices and talent development. I hadn’t thought about business acumen. Not surprisingly, I didn’t get that job.

Fast forward to the present and studying to take my insurance licensing test. My 10-year old came downstairs and said, “Hey mom, why are you studying this when you don’t sell insurance?”

What was missing from my answer 10 years ago was an understanding of why business acumen matters. Business acumen is defined as keenness and quickness in understanding and dealing with a “business situation” in a manner that is likely to lead to a good outcome. In a study on Business Acumen and Strategy Execution by the Economist Intelligence Unit, “65% of surveyed leaders agreed that insufficient business acumen limits their organization’s ability to realize strategic goals to a strong intent.”

McDaid: Business acumen doesn’t just mean “having a head for business.” It is the ability to use experience, knowledge, perspective and awareness to make sound business decisions. When business acumen is well-developed, you can make better decisions because you have better judgement. You think strategically about your ecosystem and can leverage this information for success both today and in the future.

Broker Business Acumen Improves Client Service

Thom: After nearly 20 years working in roles involving employee experience, my success or failure at effectively influencing people strategy is my understanding of the industry. It’s a key piece of the puzzle in any role, at any level of an organization.

Our stakeholders in business need us not only to deliver what we sell but also to bring forward business solutions with effective business acumen.

Here are some questions to ask yourself if you want to determine whether you are consistently demonstrating business acumen to your clients to deliver a value-added consultative experience.

  • Do you understand the key financial drivers for their line of business?
  • What are the organization’s growth goals for the next five years?
  • How do the risk management decisions the company makes impact whether or not the company meets those goals?
  • What are the key obstacles in the market to achieving their revenue goals?

McDaid: Here are just a few tasks that strong business acumen will allow a sales professional to perform:

  • Plan and execute customized engagement strategies based on specific business context
  • Build trust because of the strong understanding of the customer’s business priorities
  • Obtain important information quickly by knowing the right questions to ask
  • Identify challenges, problems and pain points
  • Have relevant, insightful and meaningful business conversations
  • Act as a true collaborative partner when building solutions to pain points

Without business acumen, it is more difficult for sales professionals to keep their pipeline filled, because they lack the knowledge needed to discuss trends and issues facing prospects. It becomes more difficult to keep the conversation moving forward and the prospect moving through the funnel. With customer-centricity becoming the predominant factor on the emerging business landscape, business acumen becomes as important as sales acumen.

David Fisher, a speaker, coach and author, offers in a Hubspot post another interesting perspective on why business acumen is important to sales. In the past, producers were “lone wolves.” They hunted alone, bringing home their kill and tossing it over the fence for the service folks to handle. However, the interconnectedness of business today invalidates that model.

To be truly effective, producers need to operate within the big picture of their firms. They need to have impact today and consider how what they do can benefit their organization in the future. Business acumen will allow them to do this. It will allow them to become better internal collaborators because they understand how what they do has an impact on other departments within the firm. Strong business acumen allows sales professionals to see the interconnectedness of all the departments and the impact their piece of business has on everyone.

Thom is vice president of human resources for the Harry A. Koch Co.

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

You played football and lacrosse at Middlebury, and now you compete in the Ironman endurance race. Why Ironman?
I’ve just always wanted to do an Ironman. [Editor’s note: For the couch potatoes among us, that’s a 2.4-mile swim, followed by a 112-mile bike ride, then a 26.2-mile run. Yes, a marathon.] I’ve done one full and one half Ironman. I did Florida as a half first, then Houston the full after that. I’ve probably run eight marathons.

I’m already out of breath.
I tell people to forget the Ironman for a second. Doing a marathon is a great learning experience for any businessperson. If you really want to run a marathon, it’s months of preparation, training and nutrition.

Why is the marathon such a great learning experience for businesspeople?
Because you have to start at an actual event and work backwards and do your training progressively. To me it’s a skill—it’s long-term planning and execution—and a lot of business people don’t have it.

What lessons have you taken from your Ironman experience that could be applied to your business experience?
It’s perseverance. It’s the idea that anything’s possible, so you should think big. One of the things I try to teach our people is just expanding their mindsets.

What’s next?
I ran the Boston Marathon two years ago. Some people tried to talk me into running the New York Marathon again. I’d like to do a Tough Mudder.

How do you manage your time?
I will tell you I am not perfect by any stretch. You’ve got to look ahead and say, “OK, I’m flying to Germany on this day, so I’m not going to be training, so I have to move it around.” You use your time as wisely as possible, but you have to dedicate time for training. Time management is another critical business skill.

How did you get into the insurance business?
It’s a long story. I was going to be a football coach coming out of college. After my sophomore year, I was on a family vacation on a dude ranch in Montana. I really didn’t want to be there. I was kind of a naïve younger college student. I was sitting at the back of the pack—we were herding cattle or something—talking to an older gentleman. At the end of trip, he said, “You should come work for my company next summer.” His name was Ted Blanch. I asked, “What do you do?” He said, “Reinsurance.” And I said, “Oh my god, that sounds horrible.” Lo and behold, over the next year or so, I learned more about the business. The next summer I needed to get a job, and I worked at the E.W. Blanch office in Minnesota for six or eight weeks. Then they offered me full-time job. Along the way, I managed to burn Ted’s house down that summer.

How did you manage that?
I was staying in a house on his property. There was a bird’s nest on top of a floodlight that caught on fire and burned the place to the ground.

I’m guessing he wasn’t happy.
No, but a number of years later I ended up as president of E.W. Blanch.

Where did you get your entrepreneurial streak?
When I was in high school, I had my own landscaping business on the side.

What was the appeal of being a business owner?
I had this insatiable appetite to win and be successful—and I’d say, around that, build great teams. And thankfully I’ve been surrounded with really great teams over time.

That insatiable appetite has worked out for you.
Early in my career at E.W. Blanch, they sent me to Philadelphia to work for this guy who was a big hotshot but who ended up leaving shortly after he was hired. I’m 26 or 27 years old, and I’m down in Philadelphia by myself. I wrote a business plan that said I was going to produce the Cigna reinsurance account. I faxed it in, and they thought it was the funniest thing they’d ever seen. A year later, we had the Cigna account. I got a good laugh out of that when it was all said and done.

How would your co-workers describe your management style?
I’d say loose but amped. I can get very, very involved when I have to. I want them to show me the intensity with which they’re going to attack our goals. My challenge is to help them realize their full potential.

If you could change one thing about the insurance industry, what would it be?
Inertia. The fear of change. I think there’s always a lot of talk about it, but I’m not sure there’s enough action around it, including by ourselves. I’d like to see more action around change.

Last question: What gives you your leader’s edge?
Building and working with great teams of people.



The Fox File
Favorite vacation spot: Bahamas.
Favorite movie: Gladiator
Favorite actor: Russell Crowe
Favorite author: Tim Ferriss (The 4-Hour Workweek, The 4-Hour Body, The 4-Hour Chef, Tools of Titans, Tribe of Mentors)
Favorite musician: Bruce Springsteen
Favorite Springsteen song: “Born to Run”
Wheels: GMC Denali pickup

But they did anyway. And three of the four deals had public brokerages as the buyers, proving that, in spite of all the private equity flooding the insurance market, the large industry players are staking their claim. After nearly a five-year cycle of private equity dominating deals, we are seeing that public brokerages are back in a big way.

Brown & Brown bought The Hays Group in early October and a couple weeks later announced an 11.6% increase in quarterly revenues. A month earlier, in September, Marsh & McLennan Companies acquired Jardine Lloyd Thompson Group. In the second quarter, Alliant Insurance Services bought Crystal & Company. Not to be outdone, Arthur J. Gallagher & Co. has been very active in the merger and acquisition space and just announced its 6.3% organic growth, which is notably strong. This shows that not only are the big guys growing through acquisition, they’re also investing internally to help drive high performance. 

What does that mean for everyone else?

Are you watching from the sidelines as the big guys get even bigger, wondering when it will be your turn? Are you wondering if you should sell now and cash in on the record high valuations? Should you cash out right now?

A client recently asked me that question. He’s the owner of a successful high-growth firm with plans for perpetuation. The record M&A deals—the flurry of activity happening in the last five years—had him second-guessing whether his original strategy was the right answer. “Tell me why I shouldn’t sell,” he said to me—a request that, honestly, I had never received before.

In my opinion, owning an insurance brokerage is the greatest investment in the history of mankind, and that hasn’t changed, I told him. With reliable recurring income and low capital requirements, we believe you can’t beat investing in this industry. (Look at all the PE-backed players that continue to enter the market for that very reason.) He had dedicated resources to building a bench of talented people, and he was focused on organic growth. He had no reason to sell if he didn’t want to.

Owners sell to transfer risk. Owners sell because they’re bored with the business and are ready to get out. They sell because they have worked hard their entire career and want to cash in on record valuations. They sell if they feel like they can’t or won’t make the necessary investments in their businesses to continue growing at a highly profitable rate—if they can’t compete, they sell.

Where do you stand? 

Just because everyone around you is getting bigger doesn’t mean you should stop trying to get better. Your insurance brokerage provides jobs that improve families’ quality of life—it offers services that protect what people care about most in life. But to continue doing that, we believe, you’ve got to commit to developing talent, driving profitability, adopting technology and creating a culture that attracts the next generation of insurance producers, support staff and executives.

What this means is there’s opportunity either way you decide to go. Buyers are hungry. But if you’ve got the appetite to grow a sustainable, successful business, to us, it appears that there’s a promising future ahead.

Market Update

The M&A market within insurance distribution continues to mirror that of the domestic private equity scene. According to PitchBook, U.S. private equity firms invested $508.8 billion across 3,501 deals in the first nine months of 2018. Deal making has increased, median deal values are on the rise, and multiples paid remain at elevated levels. These are all similar trends we continue to see in the insurance distribution space.

Year to date through October 2018, there have been 438 total announced transactions, with the addition of 46 new deals. This marks the second month in a row with more than 40 announced transactions, and retroactive announcements continuing to come through. The gap between deal activity in 2018 and a record-setting 2017 continues to close, as the deal total is only 6% lower year to date compared to the same time period in 2017.

Acrisure has taken the lead among top buyers, announcing an additional four transactions, bringing its total to 30 deals so far in 2018. BroadStreet Partners and AssuredPartners are close behind with 29 and 28 year-to-date 2018 transactions, respectively.

After the announcements of Marsh & McLennan Companies’ acquisition of Jardine Lloyd Thompson Group and American International Group’s acquisition of Glatfelter Insurance Group in September, the October headlines continued to buzz with the announcement of Brown & Brown’s agreeing to acquire Hays Companies. Hays Companies was ranked 22nd on the list of the 2018 100 largest brokerages of U.S. business ranked by 2017 brokerage revenue generated by U.S.-based clients. This transaction is expected to close later in 2018. Additionally, Ed Broking Group announced its agreement to sell to New York-based BGC Partners. BGC also acquired Besso Insurance Group in 2017. The two acquired firms will make up a large part of BCG’s insurance vertical that will be led by Ed group CEO Steve Hearn.

Trem is EVP of MarshBerry.

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

As we close out 2018, we must start the process of thinking (differently) about the new year ahead. I’m always struck by organizations that want to improve their end results but are not willing to change the way they do things. It’s time we change that way of thinking, particularly when it comes to solving one of the industry’s most looming challenges: the talent crisis. We need to quit just talking about it and finally start acting on it.

According to our recently released Q3 2018 market index, “recruiting and developing talent” remains among the top organizational priorities for your firms. We all need talent to remain competitive, so I know the challenge in front of us is not from a lack of trying to recruit the best and brightest. But perhaps we need to look beyond the obvious and explore other pools of candidates who may have the attributes but not all the skills or the confidence to apply.

Whether it be persons with disabilities, veterans who have been out of the workforce for an extended time, stay-at-home parents, freelancers in the gig workforce, or other untapped groups of professionals, there are thousands of skilled and experienced individuals who could turn the tide in our respective organizations if only given the chance.

And that brings me to our feature on Gallaudet University’s risk management and insurance program, which is creating new opportunities for both students and the insurance industry by providing exposure to an impressive source of talent eager to join our industry. Located in Washington, D.C., Gallaudet is the premier institution of learning, teaching and research for deaf and hard-of-hearing students. As Gallaudet’s RMI program (led by a former Gallagher vice president) has grown and internship opportunities for students have expanded, so too has students’ interest in the brokerage business. I highly encourage you to read the story.

A few years ago, the global tech company SAP set out to tap into the abilities of a very talented yet underrepresented segment of the workforce—individuals on the autism spectrum. Finding success, SAP’s now internationally recognized program, Autism at Work, employs more than 140 individuals in 12 countries.

Then there’s the Starbucks on H Street NW (just a few blocks from Gallaudet), which opened its first “Signing Store” earlier this year for the deaf and hard of hearing. Of the location’s 25 employees, 19 of them are deaf, and the other six are proficient in American sign language.

Similar examples are all around us. And it makes sense—hiring talent with different viewpoints, experiences and intellectual skills fosters diversity, and study after study has found that diverse businesses tend to perform better.

Among other things, the challenge of leadership is to be bold. As we dive into 2019 with fresh ideas and (hopefully) some creative, out-of-the-box thinking, remember that, while keeping up with changing business models is hard, it shouldn’t be scary. There are populations out there poised to make an impact on our industry, and the opportunity for organizational growth from these efforts may far exceed your expectations.

There’s a lot of talent out there. Go out and get it.

I think, though, that that question effectively was whether or not the issuing carrier and the placing broker are both entitled to use the data for marketing purposes. And the historical industry answer was that only the broker could use the data for those purposes, and that practice was memorialized in some state laws and in contracts.

But, of course, the carriers could and did use that data for non-marketing internal purposes and in communications with brokers on renewals. And, of course, the policyholders always had the right to use their data for whatever purpose they wanted to irrespective of those statutes and contractual agreements.

The current “big data” world actually adheres to this historical practice: whoever has data in their possession can use it for any purpose whatsoever unless there is a regulatory or contractual prohibition on doing so.

There are, though, more and more regulatory impediments to using some data, especially data that relate to individuals and not commercial enterprises. The emerging view is that not only do individuals “own” their own data but they can also direct anyone who has certain data related to them to delete it under their “right to be forgotten” (see California and the European Union).

Some of these same laws may, however, actually offer tools for helping resolve the problems some businesses (and their brokers) have been confronting in terms of gaining access to and using their group plan data.

In other words, how can we make sure brokers and employers get the information the law permits them to receive? And once you have the data, what can you do with it?

Brokers have been agitating for greater access to meaningful health data for themselves and their employer clients. More access, we think, would allow brokers and employers to comparison shop, develop tailored benefits and tools for employees, and ultimately help control costs. The good news is that the Health Insurance Portability and Accountability Act’s Privacy Rule in place today, when properly leveraged through business arrangements, allows you and your clients to get the data and use it to satisfy these objectives.

The Privacy Rule restricts information flow from covered entities, like carriers, to non-covered entities, like brokers and employers. The Privacy Rule, however, also includes provisions that authorize permissible data sharing and mandate it under certain specified conditions.

First, the Privacy Rule allows (but, critically, does not require) a carrier to share plan data with the employer sponsor without employees’ consent or authorization, but there are limitations on what information may be disclosed and how it can be used. The rule, for instance, permits carriers to share summary health information with employer plan sponsors for purposes of getting premium bids from insurers or modifying, amending or terminating the group health plan.

Such summary information includes anonymized information on claims history and claims expenses. Going a step further, the Privacy Rule permits carriers to share more granular personal health information with employer sponsors for underwriting purposes and with other healthcare administration/operations, provided certain anti-discrimination safeguards are satisfied.

Second, the Privacy Rule requires carriers to share personal health information if it is directed to do so by an individual in accordance with its requirements. It appears that nothing in the Privacy Rule prohibits employers from conditioning plan participation on the providing of such designations by participating employees. Employees may extend their “right of access” to their own personal health information to their employer and/or the employer’s broker—as designee(s)—and plans must then provide the information as requested by the employee. This avenue does not place restrictions on how the recipient may use the data as long as HIPAA’s anti-discrimination rules are followed. But it is likely an easier sale to plan participants if the authorization limits recipients to using the data for purposes related to underwriting and quality/value of care.

HIPAA acts as a federal floor for privacy protections, so states are free to create their own data-sharing structures provided they do not conflict with any of the HIPAA protections. Some states, like Kentucky and Indiana, have given large-plan sponsors the right to obtain relatively robust data directly from plans. It may be well worth our while to encourage other states to move toward this model.

Despite what current law allows in terms of data sharing with employers, several Council members report having difficulty obtaining—for themselves and/or their clients—useful information from carriers. This may be more a matter of how you structure your business relationships than of legal obstacles.

Here are a few suggestions to help you make the most out of the tools we have under the law:

  • Turn the Privacy Rule’s “may share” approach for non-employee-authorized data into a “must share” by having the employer contractually require the carrier to share all information permitted by HIPAA (e.g., PHI for underwriting purposes).
  •  Encourage your clients to write employee HIPAA authorizations and/or designations into their employment contracts so that, as a general matter, the employer sponsor (and/or the broker) can receive health information.
  • To the extent you are interested in obtaining the health data, consider writing into your own client contracts requirements that the employer share the data and/or provide a way for you to get the data directly based on employees’ consent.

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

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

Gold is an associate in Steptoe & Johnson’s GAPP Group.

Even the best chief information security officers are evaluating their programs against current threats and beefing up.

Many companies, however, have inadequate cyber-security programs and are not prepared for multipronged attacks or those that could create significant business interruption. For example, in nearly every cyber-risk assessment we conduct, the two lowest-scoring areas are incident response and business continuity/disaster recovery. In addition, many organizations have not identified mission-critical functions, do not have current or adequate inventories of their applications and data, and have not assigned ownership to these assets. When trouble hits, these gaps make for a pretty hot mess.

So it’s a two-pronged problem: an organization must first understand its assets and what they are used for and then understand the types of attacks that could hit them. When an organization has not paid attention to its assets, chances are it is clueless about its threat environment, its preparedness to counter an attack, and its ability to keep functioning.

Engage Business Units

Internally, many organizations still tend to view IT and cyber security in a silo and try to be involved as little as possible with them. They just want the systems—and business—to keep running. That attitude ignores the accepted best practice that business units should “own”—and be responsible for—the data and systems they use to perform their business functions. Business owners should approve access to their applications and data and authorize a system to operate, thereby taking responsibility for the risks the system and data bring to an organization. This is how risk management is spread across an organization.

In reality, however, managers somewhere in the organization usually request access to applications or data for new hires and send the request to IT, which then implements access. Business owner approval is not a common practice.

If business owners are not engaged in controlling access to their systems and data, they are likely not very involved in what happens during incident response or disaster recovery. Thus, a major incident sends IT and security teams scrambling to identify critical applications, their dependencies and the business functions that have been affected.

Test Your Plans

Well developed disaster recovery plans, based on an analysis of the impact on business, are an essential element of cyber-security programs, but they must be tested. Consider the company whose IT team confidently told management it did not need to pay a ransom because the company could simply restore the data—except that the company hadn’t tested its plan and ended up losing six months of data. Or consider the companies that thought they had it made in the shade with constant replication from one site to another, enabling them to switch to the alternate site at any moment. Those companies forgot about ransomware, which ran through their systems encrypting all their data—and their replicated site data (because they forgot about needing an offsite backup).

New Threats

Now, consider the new threat environment, which utilizes the treasure trove of NSA cyber tools and zero-day exploits that were released in 2016 by the hacking group Shadow Brokers. Portions of these were used in the severe WannaCry, Petya, and NotPetya attacks in 2017. Projections on 2019 cyber attacks continue to list malware, ransomware, botnets, denial of service, website “drive-by campaigns” (which infect when you visit a website), phishing attacks, and advanced persistent threats (malware that lurks inside your system and stealthily attacks).

The exploitation of internet of things devices has been behind several of the worst cyber attacks in the past couple years, such as Stuxnet (and its offspring), which attacked programmable logic controllers in industrial control systems, and the Mirai botnet and similar bots, which attacked IoT devices and used them to cause huge denial of service attacks, shutting down major websites and turning off heating in buildings.

Expect more IoT attacks in 2019.

An estimated 23 billion IoT devices are connected to the internet now—everything from appliances to thermostats to building monitors and controls—with growth expected to reach 31 billion by 2020. Many of these devices are not patchable, were not built with embedded security, and are not included within the inventories of hardware in many cyber-security programs.

In 2019, we also will see more “clickless” attacks that exploit vulnerabilities in out-of-support hardware and software, such as WannaCry and NotPetya. This type of malware presents a major risk to the many organizations that have hung on to old equipment and applications.

Dmitri Alperovitch, co-founder and CTO of CrowdStrike, investigated and brought to light some of the most serious cyber-espionage attacks. Regarding the current threat environment, he said: “CrowdStrike research indicates that on average it takes an adversary one hour and 58 minutes to break outside of the initial point of intrusion and get deeply embedded into the network. This means that the best organizations should strive to detect intrusions within one minute, investigate within 10 and eject the adversary within the hour to stay ahead of the threats.” That’s a tall order, but it underscores the severity of attacks we are facing in 2019.

When organizations consider their cyber coverage in 2019, they would be well advised to think beyond breaches of personally identifiable information and look under the hood to see if some of the basics in their cyber-security program—such as asset inventories, incident response and business continuity and disaster recovery—are well developed and tested. The threat environment sets the pace, and companies that do not keep up with mature cyber-security programs and test their data recovery capabilities will be the easiest targets and suffer the biggest losses. Brokers and agents will do well to help their clients assess their vulnerabilities and the maturity of their cyber-security programs and develop a coverage plan to match.

Westby is CEO of Global Cyber Risk.

Do you see any notable shifts or surprises over the last 18 months regarding commercial insurtech investment trends?

What has surprised us is how little activity commercial insurtech has seen, relative to personal lines. Our analysis, based on CB Insights data, shows that over $1 billion has been invested in companies that are addressing commercial insurance since 2015, which equates to roughly 10 percent of total insurtech investment. What does that mean? Regardless of how you slice it, commercial insurtechs have been woefully under-financed relative to insurtechs addressing personal lines, distribution, and other areas. As a result, commercial insurtech is heavily under-penetrated relative to the broader insurtech movement. Even existing commercial ventures have been concentrated in more obvious areas like distribution and auto. In fact, since 2015, those two categories account for over half of commercial insurtech funding to date. Very few startups are looking at more complex areas. This has to—and will—change.

XL Innovate portfolio companies—Cape Analytics, Pillar Technologies and Windward—all share the capability of transforming real-time data into risk management insight on properties, construction sites and maritime operations respectively.  Do you see brokers as a channel to deploy these tools in addition to insurers?

Absolutely. Brokers cannot be satisfied with the status quo and will need to continue to integrate new technologies into their offerings in order to add value to the end client. Brokers can leverage this wave of technology to differentiate themselves in the market and prove they have their finger on the pulse of insurtech. For the broker, the customer is the centerpiece and insurtech is a vehicle in which to ensure that centerpiece remains a client.

Embroker, a digital commercial broker, is obviously of keen interest to Council members. Three years into the company, what aspects of Embroker and their value proposition to customers has XL Innovate, as an investor, most excited?

Where do I start? We think Embroker has a huge lead in dealing with larger, more complex customers and larger more complex insurance products—something competitors in the market don’t have experience with. Embroker also recently launched a customized digital insurance product through their new digital Startup Program. Their new program, which includes D&O, EPLI and fiduciary liability insurance, allows customers to buy complex coverages directly online, without paying brokerage commissions and policy fees or dealing with archaic manual underwriting processes. What took startups at least three weeks, takes 60 seconds with Embroker. That’s pretty cool.

Plug and Play is currently working with over 10,000 startups across 14 different industries, with a keen focus on the insurance sector. The company is known for their unique investment approach, one that relies on a constructed “ecosystem” of insurance industry incumbents and established corporations to provide startups with guidance and insight while giving incumbents/traditional players an inside look at which insurtechs are truly proving value in their space.

Check out our interview with Plug and Play’s Ali Safavi, global head of insurtech.

With over 150 registrants, Broker Age saw a very mixed bag of attendees, including 25 attendees from brokerages, 11 of whom are Council members. The majority of attendees were from the insurtech community—over 50 attendees came on behalf of 30 insurtech companies. Outside the conventional insurtech and incumbent space were VC and consulting firms and NAIC representatives.

At Broker Age, Brent Rineck, CIO of ABD Insurance and Financial Services, Aon’s managing director of treaty reinsurance Chris Gallo, Joshua Rockoff from insurtech firm Omni:us, and Kevin Morreale, chief sales & marketing officer of American Modern Insurance Group participated in a panel on how brokers will stay relevant in a world inundated with new technologies.

One of the biggest themes that came out at the panel was how technology introduces efficiencies and adds value for the client. Rineck, for example, delved into the history of the ABD team, whose success—it’s only 6 years old yet one of the top 50 brokers in the U.S.—he ascribed to the fact they built their architecture from the ground up to streamline processes that were historically quite time consuming and improve the customer experience.

Rockoff, too, leaned into the theme of efficiency, describing how his company can transform unstructured data into structured data: “Instead of spending 30+ days getting the info in our back office systems, we can do it in a matter of minutes, allowing brokers to spend more time focusing on customers.”

However, most brokers, the panelists agreed, don’t want to change because there is no incentive. “Human beings are the killer app,” according to Gallo, especially in the large commercial space. “Aon can use tech and solutions to improve product for the consumer, but the human team will be there for the large transaction.” So if brokers still need that face-to-face contact, technology will play the support role.

Because, Rockoff said, “the purpose of technology is to give brokers tools so they don’t have to change. Technology allows brokers to become more efficient without having to completely rehaul the way they do business.” And efficiency is all the more important nowadays, when the idea that “time is money” is so pervasive. The role of the broker will not become irrelevant, but they can become irrelevant in terms of competition if they cannot add a competitive advantage by adopting enabling technologies.

You have just experienced a microaggression and you question whether you handled it properly. After all, was your boss trying to make an innocent joke and out of ignorance used hurtful words and expressions, or was it intentional? Should you have confronted your boss or just let it lie?

Everyone has experienced this type of microaggression at one time or another. Some minorities, especially, have experience it quite frequently. And almost everyone is guilty of expressing this behavior at one time or another—whether intentional or not.   

That is why the insurance industry has launched “Dive In, The Festival for Diversity & Inclusion in Insurance,” in an effort to improve diversity in the workplace. The insurance industry is notorious for its lack of diversity, and executives want to change and create a better working environment for everyone. They also fear business will suffer if they do nothing, and if they do diversify, it will open new business opportunities all across the industry.

The Council sponsored a meeting in its Washington, D.C., headquarters on Sept. 25 for industry professionals. Speaking at The Council’s event were Jeffrey Smith, of Jennifer Brown Consulting, and Jacquline Morales, of Legal & General America. The Council event was one of more than 50 events in 27 countries. The first event was held in 2015 in London and the sessions since then appear to be having an effect. This year a survey of insurance professionals in London found 52% responded favorably to the diversity and inclusion culture. That was up from 21% just last year.
Explaining how microaggressions should be handled. Smith and Morales admitted how difficult the issue is to deal with and how uncomfortable it makes employees. Yet not dealing with it, they agreed, was not the answer.

Microaggressions, they explained, may be small in nature but have a big impact on work, mood and even an employee’s health, especially if they have been bombarded by a lot of microaggressions in the office during their careers.

“Your identity is being attacked,” Smith said.

Dealing with microaggressions from other employees can lead to “covering,” where employees actually change their behavior to deal with the onslaught. This can result in minorities barely acknowledging each other in large office gatherings that include many of their white male colleagues. Shockingly, 53% of employees said their bosses expected them to do this. As a result, employers struggled to get 50% of their workforce to be committed to their organization.

To deal with this, Smith suggested employees learn inclusion behaviors to make others in the office feel welcomed, valued, respected and heard. When another employee makes them feel uncomfortable because of their aggressive behavior, the worker should confront the aggressor without blaming them. Instead, Smith said, they should explain how their hurtful language made them feel.

Morales said employees should not let themselves become victims of microassaults, where an employee says something inappropriate and then says they were just kidding. The insults are either based on ignorance and innocence, or deep-seated prejudices, she said. Either way, you need to address it.

She suggested the employee ask their colleague to repeat the hurtful words they just said. That puts them on the spot and may force them to become more aware.

She said if you are a perpetrator of microaggression, own up to it immediately and apologize so you can move on. If you are a bystander and witness it, speak up. “Silence,” she explained, “is an endorsement.” 

They also touched on restrictive company cultures and hiring. Hiring someone who “fits the culture,” Smith said, “is a cop out.” He explained it’s a lazy boss’s way of not having to deal with diversity and inclusion. Many bosses, he said, tend to hire someone just like themselves, and consciously or unconsciously limits diversity in their office. Numerous studies, he said, have shown the more diversity and inclusion there is in an organization, the better it does.

Now known as the Seaport District, it’s the fastest-growing neighborhood in the city. GE, PwC and Reebok set up shop here. Luxury condominiums are the priciest in town. New boutique hotels like The Envoy Hotel are opening, and established destinations, such as the luxurious Boston Harbor Hotel, have undergone renovations. New restaurants, including the modern seafood eatery Lola 42, have garnered good reviews, and the party never stops at waterfront watering holes such as Legal Harborside and Lookout Rooftop.

With cranes towering over the entire scene, there’s more of everything to come. So if you’re attending a conference at the Boston Convention and Exhibition Center or Seaport World Trade Center, both located here, you’ll have plenty of new places to stay, eat, drink and shop over the years to come.

Yet despite the harbor setting, with all of the shiny new skyscrapers and contemporary architecture, it doesn’t feel a lot like Boston, one of America’s most historic cities. If you want to soak up history when you walk down the street, stay at a place near Boston Common, the beginning of the Freedom Trail or close to the Federal-style row houses lining the narrow streets of Beacon Hill. Even in Boston’s oldest neighborhoods, hotels have been reinventing themselves, and new restaurants are popping up. The classic-meets-modern mash-up is giving buttoned-up Boston a new vibe.

The Ritz-Carlton Boston Common, one of the city’s most luxurious hotels, and Nine Zero, one of the first design-forward hotels, have undergone multimillion-dollar renovations. Both redesigns reflect a modern colonial design aesthetic, using traditional materials—wood, metals and leather—in contemporary interpretations of the furnishings and décor.

While Boston’s dining scene hasn’t received the acclaim of cities like New York and San Francisco, there are restaurants here that can compete anywhere. In 1998, self-taught chef Barbara Lynch raised Boston’s culinary profile when Bon Appetit named her first restaurant, No. 9 Park in Beacon Hill, one of the “Top 25 New Restaurants in America.” Twenty years later, Lynch has compiled eight restaurants in her BL Gruppo hospitality empire, as well as Stir, a demonstration kitchen and cookbook store, and three James Beard awards. Many of Boston’s rising-star chefs and hospitality industry professionals have honed their skills under her guidance. One, Colin Lynch (no relation), opened his coastal Italian eatery, Bar Mezzana, in the South End in 2016. It has become one of the hottest restaurants in town.

Will we ever see equality of the races in the United States?
We can end it if each person decides they are going to do something about it, including teach their kids. Some of us are teaching our kids, but some of us are not. And even worse, some of us are teaching our kids to hate and to bully.

In this difficult political season, which I hope was just a season, our behavior, no matter what side you’re on, is problematic for the young people. They are seeing something that they should not be emulating.

Do you think that’s going to cause a shift in politics and public discourse?
I hope. I’ve seen so much hope in the younger generation. I also know that the younger generation was in Charlottesville with the tiki lamps. We keep asking, “Why hasn’t this changed?” I don’t think parents and schools are doing enough to educate people and to teach the truth about structural racism.

Debby Irving, in her book Waking Up White, does an incredible job as a white person talking about what she realized about what whiteness means and what she was taught growing up. And she has some really great resources on her website, too. And then there’s A People’s History of the United States by Howard Zinn.

I think education has to go deeper. What do we do with our children? They’re getting backlash from other children. A woman told me her two sons, who are in their late teens, asked her, “Why do we have to pay for what other men did?” and “Why do girls get more than we get? It’s not our fault.”

You’re going to have to break down patriarchy for them. It’s not going to be enough to treat people nice. We need the architects of new systems. If you don’t understand the way the system works and you can’t make the connections, you really can’t be an innovator in this space. We need kids to be innovators.

Wealthy people also have to learn to do that. Like when your kid goes, “We live in the best neighborhood,” you’ve got to be able to say, “Yes, I wish everybody got to live a life of dignity the way we do.”

So when they say, “I don’t like that person. They’re brown,” you have to say, “Do you know where that comes from?”

We haven’t wanted to have those conversations because we’ve been deeply in denial. We have to get out of denial. We’ve got to learn language. We’ve got to read. We’ve got to watch, and then we’ve got to be able to translate it to our kids.

Equality really talks about sameness. Equity talks about giving people an opportunity—not just the opportunity but positioning them, taking into consideration what more it will take for that person to get the same opportunity that someone else does.

Do you think money always triumphs?
You know what always triumphs? Rationalizations. People have their own best interests in mind, and they have not realized we are all connected, that none of us are going to make it unless all of us do. People actually think they can build a high enough fence, they can move far enough away, or they can displace people from neighborhoods because they have the power to do so and that will keep them safe and secure.

This is about the “isms” versus prejudice. Prejudice goes back and forth between you and me. But the “ism” is about power. So if you give the advantage to the same groups of people over and over again, they cement that advantage into power, into opportunity, and consequently, they are positioned to make the decisions that benefit themselves and everyone else.

What else are you working on?
I’m really focused on four things right now. I am focused on consciousness, which is people getting a better idea of what actually is true.

I’m thinking about curiosity. Culturally curious is also a different way of being in the world than culturally judgmental.

I am really looking at courage. It takes courage to face what you don’t know. Like it takes courage to trust somebody.

The last piece is compassion. It’s kind of the highest form of love. And I feel like we need compassion towards ourselves as individuals. There are reasons why we don’t know what we don’t know and ways that we are complicit and ways that we don’t want to think.

We also have to be compassionate to others, which means that we’ve got to let people apologize to us. We’ve got to care deeply about somebody up in North Dakota who we’ve never met. Or on the borders, who are fleeing persecution. Like we also have to be compassionate towards people who are so discouraged that they don’t mind hurling epithets at other people. What motivates people to be haters?

Isn’t it weird to have compassion for haters? I heard someone say, compassion is the ability to love those, to understand those, who don’t understand. I mean that’s the true test.

Roth wrote about being Jewish, midlife crises, alienation and general disillusionment. Nobody ever accused him of frivolity.

On the other hand, his father Herman Roth was lively and endearing, with a celebrated gift for remembering and recounting colorful anecdotes about Newark, New Jersey, where he lived all his life. Herman was a first-generation immigrant who left school at 13 to work in a Newark factory. For most of his life, he was employed by Metropolitan Life; he started out as a door-to-door insurance agent and retired as a district manager in 1964. It was a creditable climb for a man who often felt passed over because of his religion. His son Philip once described him as a cross between Captain Ahab and Willy Loman.

Any modicum of fame Herman gained was from the 1991 memoir Patrimony, which Philip wrote while watching his father die from a brain tumor, a struggle that ended in 1989. He follows the timeline of his father’s impending death with curiosity, anxiety and love. Patrimony won Philip Roth the National Book Critics Circle Award in 1991.

Philip Roth learned much and wrote often about death, but in Patrimony he learns a lesson about insurance as well. He writes of fearfully approaching his father with a living will to read and sign, terrified of further depressing a man so close to the end of his life.

“How could I have forgotten that I was dealing with somebody who’d spent a lifetime talking to people about the thing they least wanted to think about?” he wrote. “He used to tell me: ‘Life insurance is the hardest thing in the world to sell. You know why? Because the only way the customer can win is if he dies.’”

Who is Vernā Myers?
I grew up in Baltimore, which is significant in the sense that I was gone for 32 years and I made a conscious decision to move back home. I went up to high school here and then left to go to college in New York. Then I went to law school in Boston. I got married, had a baby and was practicing as a lawyer.

I ultimately started working on diversity and inclusion. I was first an executive director of an organization that dealt with diversity in the legal field, and then I worked for the attorney general of Massachusetts as his deputy chief of staff.

Finally, I went out on my own and created my own consulting business, mostly for legal professionals. It guided them on how to create more diverse and inclusive workplaces.

Was working on diversity and inclusion a conscious decision or a job?
I graduated in 1985 from Harvard Law School. I went to my law firm, and I was the only black person they had ever hired.

Pretty typical?
In Boston, I was actually pretty shocked by it. I had no idea I would be breaking the color line in 1985. It seemed strange to me. Nevertheless, as law firms go it was a fine experience. But, little by little, I started to think that it wasn’t the best environment for me.

How long have you been consulting?
Twenty years.

It must be working.
Well, that’s a good question. I have enjoyed what I’m doing. I never knew it would become something this essential to business. I was always a little worried it could be a flash in the pan. But it just keeps evolving into something that is really important and not just an issue.

Have you seen a change in the last two years since Trump was elected?
That’s a good question. We just put out a white paper about five rules for meeting inclusively in a politically tough time. I’m in companies usually—almost always—where the leaders have said, “Come make us better.” So they are acknowledging there’s some strife, there’s discord, and maybe people are saying things.

One of the most difficult things is to get people not to say bad things about Trump in the workplace. In some workplaces, if you support Trump you’re like persona non grata. And that’s not fair.

It’s not OK to insist a person have a certain political leaning. People should be able to believe whatever they believe. What you say and do in the workplace is a different story. As a leader, you have to demand—if you say you’re into inclusion and diversity—that diverse voices be heard but that they be delivered in respectful ways. Bias is not tolerated.

This is important if people are going to figure out how to work well together. The workplace is kind of the last place where diversity has an opportunity to flourish. One thing that really works well for people with differences is to have a common goal, to work on something together.

In many cases, people leave work and they go to their silos, to neighborhoods where they are well represented. Many people do not live, and have never lived, in any kind of integrated neighborhood. Still, in the United States, there are very few. So the workplace becomes a place where we have an opportunity to teach people, for people to become aware, to get closer and face their discomfort instead of getting uncomfortable.

So how do you create that kind of environment where we don’t all agree but we agree to be kind and respectful and inclusive? Where we agree to let go of assumptions and biases and stereotypes against people? It’s a hard balance, but it’s something leaders have to figure out how to do.

We all basically think of ourselves as good, moral people, but you talk about taking that next step to recognize what we are missing.
I’d like to see us go deeper. But to go deeper you have to have more skills. Because if you try to go deep and you don’t know how to talk and if you don’t have awareness about other people’s backgrounds, you can blow it up. The only way I think people go from being, like, “nicey-nicey” to authentic is for you to take risks.

You’ve got to decide that everybody’s culture is valid, even though you may not agree with everything. Your culture is not superior. That’s a hard thing for people to do.

But it has to be mutual. People have to learn basic cultural competency skills. You’ve got to decide that everybody’s culture is valid, even though you may not agree with everything. Your culture is not superior. That’s a hard thing for people to do. Once you do it, you talk differently, you’re more curious, you ask questions.

Notice your own biases. That’s an important skill, to be able to see your own cultural lens. There are certain kinds of skills and competencies that enable us to be more authentic, but people have to want to do it and it has to be mutual and it has to be modeled. It’s just not easy.

An example?
I used to take the train into Boston, and there was a fellow passenger who was blind. Every day he was on the platform, and no one says anything to him. Never says anything. Because they think he can’t see them. So you just go on acting as if he doesn’t exist.

My blind friend said people talk to his dog but they don’t talk to him. Because people know dogs but they don’t know blind people. Can you imagine how discounting that is? You’re like “Hey, doggie, doggie,” and then there’s a person, a human, with the dog, but you only talk to the dog.

We’re scared of what we don’t understand or know.
We don’t know. We are going to make mistakes, constantly. Stop expecting and pretending to know. Even with race, there are reasons why we don’t know stuff. It’s not because we’re bad. It’s because—and I’m not a conspiracy theorist—but people of power have decided whose story to tell and how to tell it.

So let’s not talk about it. Let’s not talk about the GI Bill. Let’s not talk about American Indians. Let’s not let people know that we basically made Chinese people work for free to build railroads.

I was in Montgomery, Alabama, where my friend has created the Legacy Museum. It’s amazing. It’s very sad and also amazing what he’s doing. But I did not know as much about the domestic slave trade. I knew about Triangular Trade that brought slaves to the U.S. But I didn’t know about the domestic slave trade in the U.S., where our country decides, after the international slave trade is abolished, to continue to trade slaves within the U.S.

So we couldn’t get more slaves, anymore, but we sold them up and down the East Coast and the West. We made them build railroads so they could be transported. We pulled a bunch of free black people from the North and sold them.

So a lot of times the conclusions that people put together about race and about culture and about black people, about Hispanics, is devoid of a lot of facts. And so we pretend to know. We pretend to be cool with stuff. But if we really knew, we would be devastated. And that’s why there’s this whole movement. People are just starting to see what is real about our country.

I got to college and went to the bookstore, and there were like three rows of novels and science and political theory written by black people I didn’t even know existed.

I didn’t even know about the Harlem Renaissance. I didn’t know anything. So it’s not just white people who don’t know. Black people don’t know. And it influences their sense of self.

So stop pretending to know. If you pretend to know, then you don’t get curious and you don’t ever know and then you’re just trying to hide your ignorance all the time. And then there is the idea of apology. So when you make a mistake, learn to apologize. Don’t hide behind your intent.

The other really huge thing is that—and this is happening a lot in the workplace—people make mistakes, they say the wrong thing. They say something like, “For a mother, you’re doing an incredible job.” Or they say, “You should be really happy to get this promotion. You must have been really surprised.” And they’ll say that to a black person who has been working their tail off and thinks of [himself] as very deserving.

Or they’ll say things like, to an Asian American, “Your English is really good.” But that person grew up in Jersey. It’s like, “Why do you think every Asian person is foreign? They’ve been here for a long time.”

So when someone replies, “That’s offensive,” they say, “Well, that’s not what I intended.” Which is legit, but it takes away an apology. Or they say, “Sorry, that’s not what I meant. You took that wrong. You’re overly sensitive.” That takes away from the apology.

In many cases, people leave work, and they go to their silos, to neighborhoods where they are well represented. Many people do not live, and have never lived, in any kind of integrated neighborhood.

You have to be more interested in the impact of what you’re saying than your intent. Mistakes are OK, because if people are constantly like, “I don’t want to make a mistake,” it really means they don’t interact. Because you can’t hear what’s wrong. You don’t know what you’re missing. You can’t see how people are doing things differently.

Go somewhere and make yourself a minority. Stay engaged. Start the dance of engagement. You purposely create friendships. You purposely go to different parts of town. You purposely read books about other groups. You engage.

There is a story about an Asian kid working at a law firm who came into a cafeteria, and one of the partners says to him, “OK, you need to stop right now what you’re eating and you need to go. You need to do this, and you need to do that.” The kid is like, “I have no idea who this is or what he’s telling me to do.” So he doesn’t say anything. He tries to figure out who the guy thinks he’s talking to. When he does figure out the guy who the partner thought he was talking to, he calls him and says, “Look, man, I don’t know what’s up, but there’s something happening on your matter and you better figure it out.”

That guy then calls the partner and says, “Look, no big deal, but I think you thought you were talking to me in the cafeteria. Can you tell me what I need to do?” The partner is mortified. After the deal, the partner never works with that guy again.

That’s the disengagement that happens because people are so mortified that they’re human and they made a mistake. Instead, you should be like, “OK, man, you know what? My bad. Can we go to lunch? I owe you this.”

Basically you’ve been working with a person who you haven’t been paying attention to. Now you really need to dig in instead of pulling back.

Basically, he doubled down instead of making things better.
Yes. I call that adding insult to injury. Many organizations I’m involved in, the power brokers at the top are white, male and straight. If they decide they are so uncomfortable because of some mistake they made, they ruin your opportunities. So you must find somebody else to work with or you’ve got to tiptoe around this person because they’re tiptoeing around you. It doesn’t work well.

Diversity and inclusion are good from a moral sense. From a business sense, how do you make that case?
It’s interesting, because for me the business case, or rationale, is multifaceted. I don’t care which reason is most compelling to you. There are so many. You’ve just got to find one. For example, we feel fairly certain from every study that groupthink cannot be broken up by people who think the same.

The whole concept of competitive edge is based a lot on a company’s ability to come up with a different product, a new way of doing things, some kind of innovation, a different framework, or whatever. That requires diversity of thought. Diversity of thought is very closely linked to diversity in life experience.

It’s how you solve problems. So you might have a super technical problem, but you can get a janitor who knows nothing about the field who understands something about how plumbing works who can help solve a technical problem.

Businesses have found when they started doing open-source stuff—trying to solve certain problems—some of the people who came up with the best solutions weren’t in the field. So you’re applying a different approach to solving problems.

Team effectiveness is another argument for inclusion. If you’re going to have diversity, you’re not going to have effectiveness unless you’ve got the inclusion part. Because if you put a bunch of people together and they’re different but they don’t know how to really work across differences, it’s not going to work.

So once you decide you want diversity, then you’ve got to go for inclusion. A lot of our companies have clients that are steadily changing. So if you’re going to come up with a product, how are you going to relate well to a diverse, larger-society customer base? How are you going to do that if you don’t have people within your system who think like or have a similar experience to those who you’re trying to serve?

There are now enough companies that have made enough mistakes and now recognize they need other people informing them on a lot of their decisions. It’s not necessarily about that kind of book intelligence. It’s about the ability to see things differently.

So who is going to make a difference in our business? We don’t understand what’s changed. You are especially vulnerable if your business fails to have inroads, doesn’t have networks and doesn’t have the right language.

You have to believe you’ve been missing something. But it’s hard to believe you’re missing something when you’re doing well.

Does it really matter for people to have someone who looks like them sell them insurance?
Some clients would like to have someone who thinks like them. When you’re girlfriends with the person you’re doing business with, it can’t hurt. I started to realize that’s why men don’t want us to change things. Because it’s not just that they are doing business with each other; they become friends and they trust each other. Their kids go to the same schools, and they hang out and they do whatever. It makes doing business and working so much more fun.

Our business is based on trust.
If your social and business professional circles are really small, then you actually think there’s only one option of the kind of person who you would trust. But if you have a much broader base, you would see that isn’t limited to race or gender. It’s just a different possibility for a relationship.

But it is also true that I feel like in some situations—like insurance, banking and medicine—people of color are suspicious, and they have good reasons to be suspicious. There are all these studies now on how doctors treat black people differently than they do white people—and not as good. There are ways in which black people have been taken for granted and taken advantage of when it comes to insurance.

So, in many cases, having someone who has a similar background as you gives that person the benefit of the doubt. But they also may tell you things that make you feel more comfortable. They understand your life in a particular way. It’s a certain kind of way people get to relate. If you’re in the trust business, I think it’s important.

The problem is we’ve advantaged one group. You’re limiting your talent base, but you have to believe that. This is the hardest part, I think, for super successful companies. You have to believe you’ve been missing something. But it’s hard to believe you’re missing something when you’re doing well.

Our industry has a lot of success. How do you get people who are using their own networks, working with people just like them, that they’re comfortable with, to look beyond? How can they be compelled to recognize they are missing something?
They have to see the writing on the wall. That majority will turn into a minority. That’s just the truth. The world has shifted. So how well are they going to be able to do down the line?

Maybe it takes a situation that doesn’t work well for you to notice. There was a case where a guy had been selling insurance to a family forever. The husband died. He thought he’d keep the client. The wife said no: “For 25 years you’ve never even looked at me in these conversations. You’ve never listened to me. I will be getting a new agent.”

That’s the kind of stuff where people start to realize. They made assumptions that they’ll always have this opportunity. More interracial families are happening every day. So now you start telling jokes to a man and he has black children. Or you start saying something, and he’s gay or he has a transgender daughter. That’s going to be a problem.

Those kinds of things make people realize they must make change. But, quite frankly, you must get there on your own in your own life experiences. Leaders have to decide it’s important to the company.

The insurance industry struggles to attract young people—even white young people.
On the recruitment side of things, I think, one is that we’re often looking for ourselves. Which is to say we think we’re looking for excellence, but what we’re really doing is hiring according to preference. So it’s who we prefer to work with, who we think is a fit, who we think—and usually fits—are people who are like us.

Fits our company culture.
Yes. Now, if your company culture has been monocultural for a very long time, it is unlikely that you will see yourself in someone who looks different. If you do, that person will come in and be successful.

You’ve got to get in the door first. Which means that I’m always telling people, “Look at your criteria. Make sure it’s not you and your gut that you’ve identified as the competencies a person should have.”

Then don’t over-hire. Don’t find somebody with an MBA if all you need is a BA. This happens a lot if you’re an outsider or come from a different racial background. They ask, “Are they really smart enough?” So your new hire will have an MBA…yet you just hired a white person who has only a BA.

We need standards, but we need to be suspicious of what you call standards. For example, if someone doesn’t have on the right clothes, can’t you just tell them? Instead, you’re going to be like: if you fit here, you would know you don’t have on the right clothes.

Isn’t that a boss’s insecurities? “I don’t know you well enough, and I don’t know your culture well enough.”
You can make mistakes in this regard. However, if you see a person with promise and potential, we usually give them the hard stuff as well as the praise. If that’s what you do with everybody, don’t not do it with someone who’s different. You may need to do more to make sure that person understands you’re not acting out of bias. You may need to make sure that that person gets what they need. Really offer support and feedback.

A lot of people just don’t know the workplace. They’ve been excluded for a really long time.

When we start talking about privilege, lots of people just get freaked out. They think I’m saying they didn’t work hard. Like, yeah, you worked hard. But those ladies who are at the bus stop at 6 a.m. and are working three jobs—they’re working hard, too.

So it’s a problem that perpetuates itself for lack of diversity?
It’s hard to get started if you don’t have diversity. People have lots of potential. They may not come in the perfect package right now. And certainly if you want to really work on diversity and inclusion, you’re going to have to see through the packaging and help make some adjustments. Because, quite frankly, all of us had people to help us make some adjustments.

What about those who can’t make the connections because of their privilege?
That has blown my mind, to see really intelligent people not be able to make those connections. I don’t know if it feels too destabilizing. When we start talking about privilege, lots of people just get freaked out. They think I’m saying they didn’t work hard. Like yeah, you worked hard. But those ladies who are at the bus stop at 6 a.m. and are working three jobs—they’re working hard too. And you have to ask yourself, how well were you positioned to take advantage of your hard work? It’s not whether you worked hard. It’s about no matter how hard my father worked, up until 1957 he was not allowed to be a firefighter. It didn’t matter how brave he was.

Or to get an education.
Or to be a lawyer. I mean women couldn’t even go to Harvard Law School until 1953. It didn’t matter what an incredible jurist they would make. Women weren’t even allowed to vote until the last century. My father couldn’t get a job that your father could get. This stuff is all iterative. Consequently, my father, who was discriminated against getting many good-paying jobs, today struggles financially at 92. That means my generation must help him. That puts my generation at a disadvantage.

So when people ask why black people can’t get it together, remember this: in Baltimore, free men who were working on the docks and making great money used it to buy a house and to take care of their kids. So we’re working on the same docks, but my money is going to buy my relatives out of slavery. These are not the same worlds. We are not on the same platforms.

How do you answer the argument that slavery was 150 years ago? By now blacks should be equal, or they should be able to stand on their own two feet? I hear those arguments all the time.
Go back as recent as 1950 and the ’60s. Let’s just go to Jim Crow. In Isabel Wilkerson’s book The Warmth of Other Suns, she explains why six million black people moved out of the South over a period of years to escape discrimination. People say blacks are not immigrants, but they are.

They were looking for more opportunity and looking for safety, because they were being lynched. And those are either our fathers or our grandfathers, right?

Black teachers made something like $10 a month. White teachers made 10 times that. All you’ve got to do is add up the decades of that money, which is why there is still just a huge financial gap.

People don’t know that, when you came back from the war as a black doctor, you still could not practice medicine in the South. You had to go all the way to California. That’s why there are some wealthier black folks on the West Coast. Most black people grew up in the South. So that is where the oppression remained.

How do you make up for hundreds of years of not having opportunity?

How do you deal with that on a personal level?
I feel like I am the beneficiary. As a beneficiary, I can’t afford to be mad.

Why can’t you be mad?
I can be mad as a feeling but not as a way of being or in the way of just carrying myself in life. There are some people who I don’t begrudge if they’re pissed. They’re at bottom. I’m not at bottom. I managed through a lot of people’s sacrifice to be here. So I need to put all my energy into making it better for others.

I don’t want to take on—no one can take on—all this injustice internally. Sometimes I’m just like bewildered. Sometimes I’m not. But those are emotions I give myself a very short time to dwell in. There’s just too much work to do.

What about people who say, “I didn’t own slaves. It’s not my fault.”
No, it’s not your fault. This is not about who’s at fault. The question is how comfortable are you living in a world with such deep inequity? Today. Right now. In this space. That’s all I want to know.

It might be helpful for you to go back and think about the ways you’ve been positioned. I just need you to have some compassion. They just don’t know exactly what they should do. That’s my audience. My audience is not people who want to keep their eyes closed and want to keep themselves safe and cordoned into their way of seeing the world. They want to understand. So you’ve finally hired the diverse workforce. Now you don’t know what to do with it.

Walk a CEO through this. What’s next?
Most CEOs are asking me: “Is there something wrong with our culture that we have people come but they’re not having a good time?” Your culture reflects. There are aspects of your culture that’s very good, but it reflects a very singular, narrow kind of monocultural way of being.

There are lots of cultural differences that people bring. Even people right now who pretend that they’re having a good time in your company—they might actually benefit from you thinking about how to make that culture much more inclusive.

It’s about no matter how hard my father worked, up until 1957 he was not allowed to be a firefighter. It didn’t matter how brave he was.

What that means is people are coming into the environment, they feel welcomed, they feel like they belong. They’re expected to be good. They’re respected in how people use language and in the policies and the practices, like what holidays you’re celebrating or what food you serve.

I was just talking to a client about where they choose to have business outings, on what dates, whether they’re accessible for disability, is it a part of town that people feel safe in? Certain people do, other people don’t.

Is your system set up so the only people who get heard are those who are boisterous and aggressive? Or do you have the kind of skill to conduct a meeting where you actually are hearing from people with different personality types?

Or maybe you’re dealing with a person who’s from a deferential culture. Maybe they’re not going to interrupt, because they’re showing deference to you.

Are you the type who insists if someone has a conflict they come directly to you? There are other types of communication styles that are indirect, or there are less emotional styles or more emotional styles. This is the work of creating an environment where people of different backgrounds can thrive. It means you have to pay attention to the ways in which the institution that’s been working well for you is not necessarily going to work as well for others.

And it’s about mutual adaptation. What I have noticed is the people who are new to the workplace or who are underrepresented in it or are historically excluded, they know a lot more about adapting. So they know how to tolerate difference. But the group that is in the majority, that haven’t had to make adjustments, are not very skilled.

You’ve described whites as having this rugged individualism trait whereas blacks are more team oriented. The big thing now is changing office environments to promote teamwork. It seems like that would fit right in with inclusion.
The real question is what’s in the water? Is it still the individual who comes up with the brilliant idea on their own? Are they still more valued? If I want to go down the hall and ask someone what they think before making a decision, is that going to be used against me?

Cultures can change the structure. You can change how pretty the offices are, but the embedded value is still individualism. Many people, no matter what culture they ultimately come from, have learned the trick of individualism. They have been convinced that’s the only way to get ahead. Now people are talking about soft leadership or emotional intelligence. That goes to the idea of how you involve people in your conversations and decision making. It’s a very powerful skill. But again, it’s about how much it’s valued. And is it going to be valued the same if it comes from a majority person or a minority person?

You’ve cited victims of Hurricane Katrina in New Orleans. A photo in the newspaper of blacks finding food noted they were looting. A similar photo of whites noted how smart they were to find food.
We don’t even know we do that. We see people on the street and we see them in a predicament and we make a whole story up about them, depending on what they look like.

Teamwork and countless meetings can take a lot more time to accomplish something. Talk about that.
I was reading the book Essentialism. It’s really interesting. The author is an essentialist, which means he only spends time doing things that he thinks are productive. For example, he says something like, “This is not going to be a good meeting for me. I’m only going to stay for 20 minutes because I have better things to do.” He believes if the workplace allowed people to be responsible and professional and do only what is best for them, we would have more productive workplaces.

I’m such a non-essentialist, this book was such a challenge for me. At first I thought he’s awfully selfish. But by the time I got to the end, I realized what he was saying.

He’s trying to be productive.
Not only that. He believes he has a calling to do something no one else but he can do. He believes this is true about everyone else as well. He says too many of us are wasting our time trying to make people happy and we’re not getting to the core aspect of who we are and what we were meant to do and to give to the organization.

He has some really good techniques. He was talking about, if you’re trying to solve a problem, most people are going to attack the biggest part of the problem. He says no, solve the smallest pieces of the problem that you can. Go for the thing you can fix first. Never occurred to me, but it makes sense.

I talk about introversion and extroversion a lot. I talk about different communication skills. I talk about deference. I talk about conflict management. All the things that I know are influenced by culture.

Culture’s a big idea. It’s not just about ethnic background. It’s about your values, your personality, what you think is beautiful, what you grew up understanding and ways you have changed who you are based on that.

Helping people to see themselves as cultural beings is a lot of my work. If you think you’re just normal, you don’t understand a lot of your decisions and judgments. Your social circle is based on your culture.

People say, “I love culture. I wish I had one.”

You have a culture, and it’s shaping everything you do. If I can get people to see that, then they start getting more suspicious, more conscious and more curious. And if they can do that, they let new ideas in. And that makes their world shift.

You just have to know where you are. You’ve got to be willing to be wrong. You’ve got to be willing to examine your background. You have to be willing to say you’re sorry. As long as you do that, you can build some really powerful, authentic relationships.

As a boss, how do you relate to a person who is different from you?
This person may feel isolated. So you ask yourself, “How do I get to know this person as an individual? How do I build a relationship with this person?” You bring no assumptions but also are clear you are open and interested in hearing anything about what difference might mean for this individual.

Don’t say, “Hey, you’re black. Is it different?” Instead, say things like, “Hey, I grew up this way and blah blah blah, and I really think this, and I really like this. What are you interested in?” The relationship is important because you’re trading information. You share who you are, and you’re asking them to share, just like any other relationship. And you start to build trust.

The second thing is, you start to make sure that it’s clear to that person that you’re invested in them. You’re going to make a mistake at some point, but the fact you’ve shown your commitment, the willingness to listen, that will smooth out your mistake.

So then one day you’re out late at night, and you say something like, “Well, black people really seem like this.” The person looks at you. You notice they’ve got a different face. You’re like, “What? Did I just step in it?” They’ll say something, and, depending on your response, you’ll be giving them a cue you’re either up for the difference or you’re not.

You just have to know where you are. You’ve got to be willing to be wrong. You’ve got to be willing to examine your background. You have to be willing to say you’re sorry. As long as you do that, you can build some really powerful, authentic relationships. And it won’t be with everyone and you cannot make everyone happy and you cannot make decades of injustice go away.

First there was pressure from New York Gov. Andrew Cuomo and Maria Vullo, New York’s financial services superintendent, on the industry to dump the National Rifle Association as a client—even fining brokerage Lockton Affinity and insurer Chubb for selling and underwriting an NRA insurance policy.

Now, insurers are being asked to take sides on the climate change debate. It began with an epiphany, the realization that all fossil fuel companies shared a common feature—they bought property and casualty insurance. What if their insurers could be pressured to no longer underwrite the companies’ risk exposures or invest in their securities? The answer was obvious—the companies would flounder. 

It was a brilliant concept, one that its originator—The Sunshine Project—has since set in motion. In July, the San Francisco Board of Supervisors became the first municipal body in the United States to call upon insurers to stop insuring and investing in the coal, oil and tar sands industries. The board also urged the city and county of San Francisco to screen insurers’ underwriting of and investments in these industries and to formally cut ties with those carriers that did not comply with its wishes. 

“Cities have nothing to gain from collaborating with insurance companies that prioritize dirty energy companies over communities,” said Aaron Peskin, a San Francisco supervisor, in announcing the decision.

The decision was a major early victory for The Sunrise Project, the Australia-based organization that devised the idea of using the insurance industry as a battering ram to clear the world of harmful emissions produced by oil, coal and other fossil fuel businesses. “Pretty much any business in the world, if they don’t have insurance, they can’t operate,” says Ross Hammond, Sunrise Project’s senior campaign advisor in the United States.

For people fretting that humanity is at the brink of extinction from global warming, the modus operandi of The Sunshine Project is a stroke of pure genius, and it has arrived just in time. For insurance leaders, even those who support a transition away from fossil fuels, there is concern that using the industry as a blunt instrument to achieve political aims sets a potentially dangerous precedent. “It is not the role of insurance to steer politics,” says Jochen Körner, the executive managing director of specialist insurance brokerage Ecclesia Group, headquartered in Germany.

Nevertheless, Körner concedes he is conflicted on the subject. “On the one hand, I endorse the aims of the San Francisco resolution because we brokers and insurers can be enablers [of The Sunshine Project’s goals] by shutting down the support system for fossil fuel companies,” he says. “This can be a quicker way to ban coal and tar sands than through politics.”

On the other hand, Körner adds, “If insurers are the means to a political end, where does it stop? Who decides what is right and what is wrong?”

Körner is not alone. “The burning of fossil fuels is a concerning issue, but requiring property and liability insurers to abandon a multibillion-dollar business like the energy industry and to limit the diversification of their investment portfolios is bad public policy,” says Robert Hartwig, a professor of finance and co-director of the Risk and Uncertainty Management Center at the University of South Carolina.

In Hartwig’s view, if the Sunshine Project’s approach were taken to its extreme, the insurance industry could be compelled not to insure or invest in other industries deemed socially unacceptable. “There are people opposed to logging companies, pharmaceutical companies, tobacco companies, businesses that make pesticides and herbicides, airlines that produce high emissions, and cars that do the same,” Hartwig says. “Do we ban insurers from insuring or investing in these companies, too?”

Governing Issues

It’s possible, of course. According to the Environmental Protection Agency, the U.S. transportation sector produces more greenhouse gas emissions than the burning of fossil fuels for utilities. If insurers can be politically compelled to forsake the energy industry, automakers and airlines may be next.

Hammond has a different opinion. “Scaling a social movement that results in a healthier planet is a very good thing,” he said. “Insurance companies are investing in and insuring the very industries which are making climate change worse. If insurance companies want to protect us from catastrophic risk, they must break ties with the fossil fuel industry.”

In other words, insurers and reinsurers that continue to underwrite and invest in fossil fuel companies are directly contributing to a future in which they will experience more severe property catastrophe losses. Dump them, and losses will eventually moderate.

Cities have nothing to gain from collaborating with insurance companies that prioritize dirty energy companies over communities.

Aaron Peskin, supervisor, city of San Francisco

That might be a pretty enticing argument if the decision were left up to individual insurers. For years, organizations like the American Sustainable Business Council have advocated that companies voluntarily divest from fossil fuels and invest instead in low-carbon alternatives. The Business Council’s DirectInvest campaign asks companies to sign a pledge to this effect and lists the names of the top 200 oil, gas and coal companies.

But that decision belongs to the companies themselves. In San Francisco, government is calling the shots.

The Sunrise Project sees nothing wrong with this scenario. “Insurance companies are supposed to protect us from catastrophic risks,” the organization states. “Yet when it comes to the largest threat to humanity—climate change—many insurers are fueling a dangerous future through their investments in and underwriting of fossil fuels.”

In their corner is California’s insurance commissioner, Dave Jones, who wants insurers to voluntarily divest from thermal coal investments. Jones’s position is that these investments will experience a precipitous decline in value as the world shifts to renewable sources of energy. Jones has directed that the state insurance department maintain a searchable database of insurers that have invested in oil, gas and coal companies. This is all part of his Climate Risk Carbon Initiative, which was designed to provide the public with information on potential financial risks caused by climate change that California insurance companies face as a result of their exposure to investments in fossil fuel.

Not surprisingly, the initiative was met with virulent opposition in coal- and oil-producing states such as Oklahoma and Kentucky. In June 2017, nearly a dozen state attorneys general threatened to sue Jones for violating the Commerce Clause of the U.S. Constitution, arguing that by targeting energy companies, employment in their states will suffer. (One in four Oklahomans works in the energy industry.) “This initiative is misguided as a matter of policy, questionable as a matter of law, and inconsistent with the principle of comity among the United States,” the group maintains, promising legal action unless Jones relents.

Jones subsequently replied in a statement that he was “undeterred.” In May 2018, as the litigation threats from the 12 state attorneys general hovered above the department, Jones launched the nation’s first-ever stress test of climate-change risks on insurer investments in fossil fuels. Initial findings indicate that insurers in the state have more than $500 billion in fossil fuel related securities issued by power and energy companies, including $10.5 billion invested in thermal coal enterprises.

The California Insurance Department did not reply to requests for an interview with Jones. Leader’s Edge also reached out to the National Association of Insurance Commissioners, the organization representing state insurance departments, for its perspective on the subject. Spokesperson Erin Yang replied, “Unfortunately, it is not an insurance regulatory issue that the NAIC has taken up.”

Hartwig calls this position untenable. “Regulators are required to ensure the financial solvency of insurance companies,” he said. “The industry is one of the largest institutional investors on the planet. By limiting their ability to invest in the energy industry, this reduces the diversification of their investment portfolios. A less diverse portfolio is a risker one. … Ultimately, this will lead to higher insurance rates for people and businesses.”

Although Jones has called for insurers to voluntarily divest from coal and other fossil fuel companies—he’s issued no such mandate—industry groups like the Property Casualty Insurers Association of America (PCI) likened Jones’s position to calls for a boycott. “Politicians have every right to express their desires and set their own policy,” says David Kodama, a PCI assistant vice president. “It’s our role to inform them about the potential ramifications of their decisions.”

Like other insurance industry participants and watchers, Kodama believes the ramifications of San Francisco’s efforts could be precarious. “Our concern is that the Board of Supervisors’ decision will become a template to push a social agenda against companies in businesses that groups of people dislike,” he explained. “It could be used as the model to fight against companies that make certain chemicals, tobacco and e-cigarettes. I could see it used against marijuana businesses, abortion clinics, casinos and adult entertainment enterprises. All of these businesses buy insurance.”

He also disapproves of limiting insurer investments. “The inference is that insurers should invest in green companies providing sustainable and renewable energy instead of oil and coal companies,” Kodama says.

“But what if these investments are less secure and more speculative in nature? That would jeopardize the stability of insurers’ investment returns, to the detriment of their policyholders.”

Hartwig agrees. “Some environmental advocates believe the future will involve the massive storage of energy in industrial batteries, but the environmental consequences of these activities are becoming clearer,” he says. “Could this result in insurer prohibitions from investing in companies that make electric cars? What about other zero carbon energy technologies like hydroelectric dams that impact fish and wildlife or wind turbines that kill birds? Once you go off in this direction, there is no end in sight.”

His point is obvious: under such a scenario, insurers would be required to restrict their investments solely to politically correct companies. Körner provides another unsettling scenario. “If insurers and reinsurers don’t assume coal mining and coal plant risks, the government may need to provide insurance,” he says. “However, no government is equipped to underwrite coal-related risks. If losses exceed premiums, taxpayers will be on the hook. … The government is never a good risk-taker.”

One need look no further than the federal government’s National Flood Insurance Program for an example of how not to underwrite U.S. flooding risks; the program has been in the red since Hurricane Katrina struck the Gulf Coast in 2005.

If insurers are the means to a political end, where does it stop? Who decides what is right and what is wrong?

Jochen Körner, executive managing director, Ecclesia Group

Taking the Pledge

Despite these concerns over government overreach, many of the world’s largest European insurers and reinsurers are doing what The Sunshine Project, Commissioner Jones and the San Francisco Board of Supervisors have urged. Swiss Re, Zurich, Allianz, Aviva and Axa have decided to no longer underwrite and to divest from coal companies, according to a recent report by an organization called Unfriend Coal. In August 2018, Munich Re joined them. Altogether, the insurers have divested about $23 billion from coal companies.

“Climate change generates enormous economic and social risks,” says Oliver Bäte, CEO of Allianz. “It is already harming millions of people today. As a leading insurer and investor, we want to promote the transition to a climate-friendly economy.”

And the insurer doesn’t see the move as detrimental to its bottom line. “We are convinced that our approach will further improve the risk/return profile of our portfolio in the long term and that we will strengthen our position as a forward-looking investor,” says Günther Thallinger, a member of the board of management of Allianz who is responsible for investments and environmental, social and governance criteria. “As a long-term investor, we want to shape the change to a climate-friendly economy together with our clients. We will thus also strategically develop our investment opportunities in new technologies.

“It is important to limit global warming as quickly as possible. This will only succeed if business and politics pull in the same direction.”

It is not clear if these commitments by the foreign insurers and reinsurers also apply to their business in the United States, Hammond says. However, last summer Swiss Re announced it would no longer provide reinsurance to insurers with more than 30% thermal coal exposure.

No U.S. insurer has made such commitments. “The big gaping hole is the United States,” Hammond says. “Even though the coal industry is pretty much in a terminal decline, there are still plenty of coal-fired plants in the U.S. and plenty of proposals in the Powder River Basin and in Appalachia for more coal mining. Our goal is to get U.S. insurers to do what European insurers have done and are doing.”

Hammond is confident The Sunrise Project will prevail. In July, the group sent a letter to 22 insurers asking them to voluntarily stop underwriting and investing in fossil fuel companies. Among the companies receiving the letter are such large insurers as AIG, Liberty Mutual, Berkshire Hathaway, Chubb, Nationwide and The Travelers Companies. “We need a U.S. company to get out in front of this,” Hammond says. “Axa apparently got a lot of pressure from the French government to do something on climate change, given the Paris Accord. We’d love to see a big company like AIG take the lead on this here.

“This is an extraordinary opportunity for the industry to make a huge difference—a chance to make a mark when nothing positive is going to happen at the federal level,” he says.

At present, Hammond is doing outreach in other U.S. municipalities to consider initiatives similar to the one issued in San Francisco. He also recently visited Silicon Valley to discuss The Sunrise Project’s goals with large technology companies.

“We’re hoping that companies like Google and Facebook that already have done quite a bit on climate change will start a dialogue with their insurers—if they want to keep their business, they’ll need to distance themselves from the fossil fuel industry,” Hammond says. “Changing insurance companies is not a big deal.”

He’s also targeted the cities of New York and Los Angeles as likely to follow San Francisco’s lead in breaking ties with insurers of coal, oil and tar sands companies. “Both cities that have already taken actions on climate change,” he explains. “We want them to put their insurers on notice that these are their expectations going forward.”

Crossing the Line

Certainly, the overarching ambition of The Sunrise Project is clear. It wants coal, tar sands and other fossil fuel companies to fold up their tents for good, by whatever means necessary. Without insurance and insurer investments, the organization figures the companies cannot survive, and it’s probably right.

Some would agree this is a good thing. The question is whether the property and casualty insurance industry should be the means to such an end.  

The industry is one of the largest institutional investors on the planet. By limiting their ability to invest in the energy industry, this reduces the diversification of their investment portfolios. A less diverse portfolio is a risker one.

Robert Hartwig, co-director, Risk and Uncertainty Management Center, University of South Carolina

It’s a Solomon-like determination. As Körner says, “I have nothing against requiring insurers to demonstrate how they are individually reducing their carbon footprint, but to require them all to stop writing the risks of an industry that is doing nothing illegal crosses a line.”

Once a line is crossed, there is no going back.

Russ Banham is a Pulitzer Prize-nominated financial journalist and author who writes frequently for Leader’s Edge.

And because the answer is yes, at least according to some practitioners, everyone involved in the benefits transaction gains from an embrace of the approach.

The “science of the irrational”—properly known as behavioral economics—abandons the assumption from classical economics that people are always rational. This nuanced difference allows behavioral economics to focus on and study the impact of unconscious drivers on people’s decision making.

The good news, says Jordan Birnbaum, vice president and chief behavioral economist at ADP, is that irrational doesn’t mean unpredictable.

“If we’re able to predict the likelihood of irrational decisions, we can create nudges or interventions in ways that will anticipate that irrationality and counter it, helping people make better decisions for themselves,” Birnbaum says. Behavioral economics “puts the ‘would’ ahead of the ‘should,’” he adds, noting that how people should behave is irrelevant to behavioral economists. “All we care about is how they would behave.”

Engaging Behavior

Behavioral economics (or BE) provides key insights into employee engagement, which is critical to a successful approach to benefits. Employee engagement refers to how committed an individual is to the organization’s success, and it can predict a great deal of the worker’s discretionary effort. Organizations whose employees are highly engaged have much better metrics than those whose employees are not.

According to a recent Gallup State of the American Workplace Report, organizations with high levels of employee engagement score much higher on the metrics that matter most: profitably is 21% higher, productivity is 17% higher, customer satisfaction is 10% higher, voluntary turnover is 59% lower, absenteeism is 41% lower, employee safety incidents are 70% lower, and engaged employees demonstrate 61% greater innovation as measured by new ideas provided to customers.

But, asks Birnbaum, in terms of success, “How are organizations doing in driving employee engagement? Terribly.” In fact, the same report found that two thirds of American workers are disengaged.

This is where behavioral economics can play an important role. “Unfortunately, a lot of organizations think about what should drive employee engagement instead of what would,” Birnbaum says. Organizations focusing on the “should” believe that factors such as salaries, vacation time, free lunches and even perceived Silicon Valley perks, such as workplace ping pong tables, would drive employee engagement.

But such items aren’t the key contributors to promoting employee engagement. Gallup has a measure called the Gallop Q12, which over the years has identified the 12 most important predictors of employee engagement. Guess what? Compensation is not there. Neither are perks. Instead, the overwhelming majority of factors driving employee engagement are relationships with bosses and/or colleagues. For benefits brokers, this means there is one important item on the Q12: “My supervisor, or someone at work, seems to care about me as a person.” To the extent that providing benefits can engender feelings of being cared for, benefits brokers play a crucial role in driving employee engagement.

In fact, studies have shown that, as employees engage with their benefits, their general employee engagement goes up. A 2017 survey by Optum and the National Business Group on Health found that, when employees use their benefits, the transactions yield positive returns for organizations in terms of both costs and employee engagement. The survey found that employees who frequently participate in programs are 267% more likely to say their employer makes healthy choices the path of least resistance and that employees who have seven to eight health and well-being program categories are 169% more likely to recommend their employer as a place to work. “Investment in clinical programs, pharmacy benefits and a work environment that supports healthy decisions can significantly drive employee engagement,” the survey found.

“So benefits can play a very meaningful role in terms of driving employee engagement,” Birnbaum says. “But employees have to be taking advantage of these benefits for there to be a positive impact on engagement. Therefore, it makes sense for organizations to spend a bit more time and focus knowing the different ways return on investment will follow.

“How can we start thinking about how we might use BE to understand how best to make that magic happen?” asks Birnbaum. “How can we get our employees to engage with the benefits we provide them so our costs will go down and our employee engagement will go up? What would help and what would hurt?”

To begin with—and it may seem counterintuitive—companies need to avoid choice overload. Too many choices can end up serving as a disincentive to engage, Birnbaum says. Having too many choices requires a lot more cognitive work, which is exhausting. As a result, people can end up avoiding making a choice at all. To get people to sign up for benefits, the process can’t take up too much time or be overwhelmingly complicated.

Is adjusting benefits by generations the answer? “The answer is no but yes,” Birnbaum says. “I say that because I don’t subscribe to the idea that generations have common characteristics across all members.

Where it becomes useful is about life stage. Someone in their 20s and someone in their 50s are likely to have very different priorities, very different needs and very different focuses.”

For example, while everyone should pay attention to retirement savings, people in their 20s might be more focused on flexible work hours. “If we can make the offers more salient to their life cycle, we’re minimizing the amount of choices and time they have to spend on things that aren’t terribly relevant to them,” Birnbaum says.

Psychological Levers

Another technique to consider is the use of cognitive heuristics. Many people know of heuristics as a way of learning, researching or problem-solving based on the empirical testing of things already known, rules of thumb so to speak. Cognitive heuristics describes mental shortcuts people take in order to expend less mental energy—a primary, if unconscious, motivator for people in most situations.

One particular cognitive heuristic is called the “availability heuristic,” which describes the tendency for people to be more influenced by thoughts and images that are more readily available. This is why it’s a good idea to advertise flood insurance right after a flood—the images are fresh in people’s mind, and the idea of buying flood insurance will be more appealing to them than five years after the flood, when the images are less “accessible.”

“Organizations can use this human quirk to make sure to highlight the importance of benefits close to the time that people have to start making choices about them,” Birnbaum says. “Demonstrating how benefits can positively affect people’s lives, and how the organization cares about people, becomes another lever by which you can prime employees to be more inclined to take advantage of those benefits when they cross their desk, and you can drive employee engagement through that process.”

Another technique is to leverage the power of pre-commitment. If people express an interest in taking advantage of benefits before an offer is tendered, Birnbaum says, they are far more likely to follow through.

People have a powerful psychological urge to remain consistent with past positions they have taken.

Loss aversion also plays an important role in human behavior. Humans are wired to be more motivated to avoid losses than to secure gains, Birnbaum says, pointing out that most research suggests it’s twice as strong. For example, the experience of losing $20 is twice as powerful as gaining $20, even though people are reacting to the same amount of money, albeit in different directions.

“We can talk about what people stand to gain by engaging in benefits or what they stand to lose by not engaging in benefits,” Birnbaum says. The latter is going to be twice as motivating. “You can say, ‘If you sign up for this package, you will achieve a level of wellness that will positively impact your family.’ Or you can say, ‘Not signing up for this package means you will lose the opportunity to achieve a level of wellness to positively impact your family.’”

Another idea is social norming. Birnbaum explains that people become more motivated to engage with benefits when they see other people benefiting from them. Therefore, providing images and examples of the improvements that others are enjoying through the use of benefits can support greater engagement.

“We can also look at incentives that would make people more likely to engage,” he says. This might include providing wearables, like a wristband that counts steps, to encourage employees to walk more.

“There are all these different psychological levers that we can pull to make engaging in benefits more likely,” Birnbaum says. “When you do that, the employees become healthier. For the organization, costs will go down, and employee engagement will go up. There’s good reason for benefits administrators to spend a lot of time thinking about how they can leverage behavioral economics, including how these benefits are offered and how the sign-up processes are structured to maximize the likelihood that employees take advantage of them.

“Hopefully the art and science of behavioral economics brings a new and important strategy set to the table,” he says. “We have to remember that, when it comes to predicting how employees will respond, ‘should’ is irrelevant and ‘would’ is all that matters.”


But there is $3 trillion currently invested in annuities that could be repurposed to better position consumers for their future.

While all factors should be weighed before replacing an existing life insurance or annuity, by using what is known as a 1035 exchange, insurance and financial advisors can take existing qualified annuities and life insurance contracts and exchange them for newer, tax-advantaged policies. The 1035 exchanges were included in the Pension Protection Act (PPA), which was approved by Congress in 2006 and became law in 2010, to help consumers better plan for long-term care. Section 1035 of the IRS code provides tax advantages to qualified policies that are converted to so-called asset-based LTC products.

“Most financial advisors and insurance professionals are generally familiar with 1035 exchanges and how they work, but they may not know that you can use a 1035 exchange to reposition an existing asset for LTC planning,” says Tracey Edgar, OneAmerica vice president of sales for Care Solutions. “That’s really what we’re trying to educate them about.” OneAmerica is a leader in providing asset-based LTC products.

“What we’re trying to do is get advisors to have the right conversations about planning. A lot of times, financial professionals don’t want to have the conversation at all or they just don’t understand how LTC insurance works, so they’ll tell their clients, ‘You’re OK. You have enough money. You can handle this on your own.’ We teach financial advisors about LTC planning as part of their clients’ whole financial picture, to help them understand the leverage it provides and how it protects not only finances but families.”

It’s a potentially lucrative conversation, says Jesse Slome, director of the American Association for Long-Term Care Insurance.

“There’s approximately $60 billion of potential commissions waiting to be earned by insurance and financial advisors,” Slome says. “The 1035 exchange market potential for annuities alone is enormous and continues to be vastly overlooked.”

The PPA allows consumers with qualifying annuities or life insurance policies to pay LTC expenses without tax consequence. Before, consumers had to use taxable gains before they could spend the principal tax-free. With a 1035 exchange, consumers can use their qualified annuity to pay for LTC expenses tax-free.

Brian Ott, certified LTC planning specialist at 525 Advisors, recognizes the potential of a 1035 exchange.

“I’m just blown away when they talk about the number of people who are sitting on annuities,” Ott says. “And the vast majority of annuities never get annuitized. The vast majority of annuities just pass on when the people die. There’s a lot of clients who have annuities and they don’t even know it.

“From the producer point of view, I am absolutely baffled. I tell my case manager we should get ourselves a motorhome and set up in the Safeway parking lot and just write business on annuities because so many people have them.”

Increasing Awareness

The American Association for Long-Term Care Insurance has declared November Long-Term Care Awareness Month to call attention to the need to plan for potential LTC issues. It’s an important concern because recent surveys indicate most Americans are mistaken about who pays for assistance with daily living due to illness or injury for an extended time. A recent survey conducted by Harris Poll on behalf of OneAmerica asked adults how they would pay for assistance with daily living due to illness or injury, either in-home or in a care facility, for an extended time (i.e., longer than 90 days). More than half (55%) said they’d use Medicare or health insurance—even though, in most cases, neither will pay for long-term assistance with daily activities. The same survey found 75% of Americans say they don’t have LTC insurance.

As baby boomers continue to age, the number of Americans with age-related diseases such as Alzheimer’s disease and Parkinson’s disease is increasing at alarming rates, threatening the futures of millions of Americans and their families. A U.S. Department of Health and Human Services report says someone age 65 today has more than a 50% chance of needing some type of LTC services.

“Just the sheer size of the aging population is increasing the prevalence of these conditions,” says Chris Coudret, OneAmerica vice president of strategy for Individual Life and Financial Services. “In the past, people weren’t correctly diagnosed with Alzheimer’s; it was just something that was occurring with old age. As the medical community and everyone became more aware, it’s being diagnosed more. It’s quite prevalent.”

How prevalent? Ruth Drew, director of information and support services at the Alzheimer’s Association, says on average, someone in the United States is diagnosed with Alzheimer’s disease every 65 seconds.

“The reality is that very few people are prepared for the cost of caring for someone living with Alzheimer’s,” Drew says.

A 2016 Alzheimer’s Association survey found that two thirds of people incorrectly believe that Medicare will help pay for nursing home care or are unsure whether Medicare pays for nursing home care. It does not. Medicaid does, but often families have to spend down their assets to qualify.

The Alzheimer’s Association says about 5.7 million Americans are living with Alzheimer’s and that number is expected to increase as the population aged 65 and older increases. By 2050, the association projects, nearly 14 million Americans will be living with the disease unless treatments advance.

Meanwhile, other age-affected diseases are also increasing. According to the Parkinson’s Foundation, nearly one million people will be living with Parkinson’s disease in the United States by 2020. That number is expected to reach 1.2 million by 2030. About 60,000 Americans are diagnosed with Parkinson’s disease each year.

The incidence of Parkinson’s disease increases with age, but an estimated 4% of people with Parkinson’s disease are diagnosed before age 50, according to the Parkinson’s Foundation.

The foundation estimates medications alone cost an average of $2,500 a year and therapeutic surgery can cost up to $100,000 per person.

Given the long duration of Alzheimer’s, the strain on caregivers can last several years and produce serious declines in caregivers’ physical, emotional and financial well-being. According to the Alzheimer’s Association 2018 Facts and Figures Report:

  • In 2017, the lifetime cost of care for a person living with dementia was $341,840, with 70% of this cost borne directly by families through out-of-pocket costs ($95,441) and the value of unpaid care ($143,735).
  • The physical and emotional impact of dementia caregiving is estimated to have resulted in $11.4 billion in healthcare costs for Alzheimer’s and dementia caregivers in 2017.

“Long-term care insurance can be a big help for families, but most do not have it,” Drew says. “The best time to plan for long-term care expenses is before you need it, but unfortunately many families do not have these important discussions until they’re in crisis.”

Edgar says many consumers believe they have enough money to self-insure—that is, pay for any LTC expenses themselves.

“Usually, when a person is using their own money to pay for care, they do so because it is the default plan,” Edgar says. “It’s the plan you get when you have no other plan. Many Americans think they have enough money, but they’re not taking into consideration that they have expenses that continue to exist while they’re needing care. The new expense created by their LTC situation has to come from somewhere.

“Usually, a person will have to start raiding their principal, which was created to provide income to cover the cost of living while in retirement. When they take money from the base principal, it reduces the amount of income the base produces, causing them to need to take even more principal. It’s a downward spiral that most people can’t recover from.”

OneAmerica has entered a strategic relationship with the Alzheimer’s Association to help provide financial advisors information about Alzheimer’s and related services.

“Our relationship is all about increasing awareness with the ultimate goal of ending Alzheimer’s,” Coudret says. “The relationship with the Alzheimer’s Association gives us the opportunity to provide advisors and their clients more information and education. Additionally, we can communicate to them the support that’s available to them and their clients through the Alzheimer’s Association. We would love to help our representatives get involved on a local level to join the fight to end Alzheimer’s.”

Connecting patients with primary care is a fairly easy, low-cost lift for employers that can have many benefits. In addition to giving them access to regular and preventive care, connecting patients with primary care can help them avoid hospital readmissions. Those patients who spend the most on healthcare are typically those most likely to be in and out of hospitals, according to an April 2013 Agency for Healthcare Research & Quality report. The readmission rate for people with congestive heart failure was almost 25%, schizophrenia was 22%, and renal failure was 21%. Primary care doctors can help patients transition out of the hospital more successfully and avoid readmissions.

The Camden Coalition of Healthcare Providers created a hospital transition program called the 7-Day Pledge to mitigate this issue. The coalition reached out to local primary care providers to get them to agree to keep some appointments open, regardless of how busy their schedules get, so they can see Medicaid recipients within seven days of a hospital release. By doing this, the coalition is able to provide follow-up support for things like needed tests or medication reconciliation. To encourage patients to follow up, Camden offers $20 gift cards to patients who make their appointments.

“There’s a lot that goes on with a hospitalization,” says Natasha Dravid, director for clinical redesign initiatives at the Camden Coalition. “It’s a very vulnerable moment after a hospitalization, and there is lots of opportunity for things to go wrong.”

According to Dravid, they found that patients who saw their primary care provider within seven days of leaving the hospital had fewer readmissions at both 30 and 90 days after discharge than people who saw their physician later or not at all.

Another coalition program gets women to see a primary care provider within three months of delivering a child. Many of the supports pregnant women receive fall off after they give birth, so the Camden Coalition works to ensure they continue to receive care, particularly for women who had high blood pressure or diabetes during their pregnancy.

After he unsuccessfully attempted to change Camden’s policing around these locations, the doctor, Jeffrey Brenner, transferred this knowledge to his own field. Brenner aggregated data from area hospitals and found a similar phenomenon. People from just two of the city’s neighborhoods, one with a large nursing home and another with a low-income housing complex, accounted for more than 4,000 hospital visits and $200 million in healthcare costs.

Brenner had found his own hot spots. Just a small group of patients with unmet healthcare needs were accounting for an enormous percentage of Camden’s healthcare costs.

Out of his work was borne the Camden Coalition of Healthcare Providers, which began identifying patients who had been to the hospital two or more times in the past six months and were battling social complexities that might be impacting their health. They sent out care teams to meet people at their hospital bedsides while in crisis. They determined their needs, then provided short-term, wraparound services such as housing assistance, transportation to doctor’s appointments, and substance use assistance to help them better manage their health. For his work, Brenner was awarded a MacArthur Fellowship—the so-called Genius Grant—in 2013.

Like Brenner’s work, much of the research surrounding these superusers has been focused on lower-income people or Medicaid recipients. But it’s not just these populations that have a top tier of patients responsible for well more than their share of costs.

According to the Agency for Healthcare Research and Quality, 5% of patients in the United States account for 59% of all healthcare costs. Dr. Ronald Leopold, chief medical officer at Lockton Companies, says among its 1.67 million covered client employees, 3% account for 56.5% of healthcare costs. And 1.4% of that population spends more than $50,000 a year.

“We are increasingly seeing more and more of our clients’ overall dollar spend jam-packed into a very small number of members, and that trend is growing,” Leopold says. “If you are looking for cost mitigation, the real runaway costs are in this population.”

With healthcare costs consistently on the rise, being able to identify where a large portion of the spending is going is a valuable skill for any broker or employer. But it’s not an easy thing to do. It takes access to gads of data, followed by careful analysis, and then a range of solutions to meet the needs of the population. It may not be simple, but some groups, such as Lockton and the Camden Coalition, have found ways to improve care for these superusers while realizing healthcare savings.

Cohort Turnover

A group out of Denver Health and the University of Colorado School of Medicine performed a comprehensive study of this medically complex, high-cost population in 2015. They analyzed records of more than 4,500 publicly insured or uninsured superusers at an urban safety-net system over a two-year period. They found 3% of adults over that time met superuser criteria, accounting for 30% of the adult healthcare costs in the system (costing more than $113,000 per capita).

They also found the top 3% tended to have the same demographics, health status, payer source and spending. A vast majority had multiple chronic conditions, and nearly half had a serious mental health diagnosis.

The highest-cost patients were those with terminal cancer and those receiving emergency dialysis.

What was even more interesting about the discussion, however, was that the superusers weren’t the same people from year to year. Fewer than half were still superusers just seven months after being identified as one, and even fewer were superusers a year later.

“What we found was dramatic,” says Tracy Johnson, director of healthcare reform initiatives at Denver Health and the study’s lead author. “The population nearly turns over in a two-year period.”

And though this was a group of Medicaid patients, private insurers are likely to find similar results. It can be called regressing to the mean—or what essentially amounts to the ebb and flow of an individual’s health.

Dr. Alan Glaseroff, an adjunct professor of medicine at Stanford, says it’s normal for about two thirds of superusers in any population to reduce their healthcare spending the year after they are in that group. It makes sense, he says, that someone who has uncontrolled diabetes and needs to have surgery or another costly intervention won’t have those same charges again immediately.

“The person doesn’t change,” he says. “They will just have periods that cost more or less.”

Identification Is Critical

The revolving character of this population is partially why identifying them can be like hitting a moving target. Each organization’s complex, high-cost group is going to look slightly different, so it’s important to choose a segment and tease out who among them may be able to receive better, low-cost care.

Lockton breaks groups into three sections: people whose annual healthcare costs run between $25,000 and $50,000, those who fall between $50,000 and $100,000, and the $100,000-plus spenders. While Lockton tries to reduce spending in the upper echelon, Leopold says the company focuses mostly on the $50,000-$100,000 group because of the higher likelihood of improving preventable conditions, such as diabetes, and thus lowering costs.

One in three people in the $50,000 group can trace their healthcare spending to hospitalizations and attached complications. Among the rest, 23% have chronic conditions such as diabetes and congestive heart failure, 20% have experienced trauma and musculoskeletal issues, and 16% are being treated for cancer.

Dr. Eric Bricker, chief medical officer at Compass Professional Health Services, an Alight Company, says among its 1,700 clients, about half of the top spenders have unmanaged chronic conditions, mental health and substance use disorders, or some combination of both. The chronic conditions among the fully insured tend to be related to musculoskeletal problems, cancer and cardiovascular disease. At businesses with a younger workforce, maternity and its complications also rank high in spending.

Prediction Versus Real Time

There is typically one of two tracks used when it comes to identifying high-cost patients. Both tracks are performed with the help of some sort of proprietary algorithm or intensive data crunching.

The first is trying to determine risk in advance. For example, Glaseroff’s group employed predictive analytics to help determine future high-cost users. The group used Milliman Advanced Risk Adjusters, which Glaseroff says could predict with about 30% accuracy who was going to be a high-risk claimant next year. Milliman takes a person’s health information and analyzes factors like medications and claims to try to understand what spending might occur in areas like hospitalizations, ER visits and pharmacy.

We are increasingly seeing more and more of our clients’ overall dollar spend jam-packed into a very small number of members, and that trend is growing. If you are looking for cost mitigation, the real runaway costs are in this population.

Dr. Ronald Leopold, chief medical officer, Lockton Companies

In 2017, Aetna launched a new program called AetnaCare, in which the insurer works with accountable care organizations in New Jersey to identify and provide support to high-need, complex patients. Aetna uses its own algorithm to determine who might be high-risk.

Dr. Sunny Ramchandani, Aetna’s deputy chief medical officer, says the company runs data from a given population through its program to determine who has the highest risk scores. “We went to the ACOs and said, ‘We’ve found some high-cost folks in your market, and we can work with you to tackle them,’” Ramchandani says. “We’ve been able to lower healthcare costs for many of them.”

But some say predictive analytics in healthcare can be tricky. Mark Rosenberg, president of healthcare analytics benefits and HR consulting at Gallagher, concedes that healthcare is the toughest industry in which to use predictive modeling, because each patient is so very different.

“You can have five 50-year-old males brought up the same, living in the same place with the same condition, and they may all react differently to certain medications or treatments,” Rosenberg says.

That theory leads to a second way to stratify high-risk patients, which is to do it in real time, like the Camden Coalition. “Lots of insurers love working with predictive models and algorithms,” says Natasha Dravid, director for clinical redesign initiatives at the Camden Coalition. “We are real-time in our data. We are able to look at who was in the hospital yesterday and identify them when they are in those high-risk moments.”

The Camden Coalition uses hospital utilization as a proxy for high-risk patients—they search for people admitted to the hospital two or more times a month or those going to the ER more than six times in a few months. Dravid says this is a good option because they are able to connect with people at the moment their spending is high to improve care. And also because of the regression to the mean: high users today might not need as much care next year.

“We really think that looking at who is going to the hospital is where to start,” she says. “If they are there that much, something’s going wrong with their care. It’s about getting the right care for the right folks at the right time.”

Finding the Gaps

In addition to stratifying employees into cost groups, organizations also must determine the care gaps and other cost drivers.

There are always two pools in any high-cost group, says Jeff Hadden, partner and president at LHD Benefit Advisors. One consists of those with unpreventable conditions, such as the birth of a preemie. The second, which Hadden says accounts for more than one third of high-cost claims, is made up of those dealing with generally preventable conditions like diabetes or its complications. Catching these early is critical to reducing costs.

But even among the preventable conditions, identifying where to put resources can be a challenge. “Just because you have a group of diabetics, it doesn’t mean you can bring in a vendor and make them cost less,” Rosenberg says. “They may be high-cost but are already doing what they need to do—see their doctor, take medicine and track their glucose levels. You have to understand where the gaps are, and then you can bring in a solution.”

While Gallagher does work with clients’ higher-cost populations to make change, the brokerage really focus its efforts on the middle of the pack—those responsible for 30% to 35% of spend—because, Rosenberg says, they can have the most impact on that population.

The upper echelons can be difficult to change because their expenses may be incurred during an event like a premature birth or come from people with multiple complex conditions. For the latter group, Rosenberg says, Gallagher works to make sure employees are seeing physicians who are in-network (which can dramatically lower costs) and provides individualized case management to help them better navigate the system.

In the rare case there is a group of these employees with similar conditions, outside vendors like diabetes management groups may be called on to improve care.

Mary Delaney, president of Vital Incite, a population health consulting firm that works with employers, came from the healthcare side of things, where she learned that most employers didn’t know what kind of programs to use to improve their population’s health and that many advisors didn’t know if solutions they were putting in place were working.

But data like that which her organization crunches can create risk scores based on an individual’s disease burden. Using this can help identify which people are likely to become high-cost claimants and what resources they may need beforehand to keep that from happening.

“We can analyze every health plan to find where the waste is and needs are that, if they are met, could drive down future dependency on the healthcare plan,” she says.

According to one of the organization’s case studies, they were able to reduce emergency rooms visits and lower hospital costs per admission by almost 35% over a two-year period. Vital Incite did this by analyzing employee data, health plans and healthcare usage. To plug gaps in the system, it worked to increase use of an on-site clinic (where it completed new-hire physicals), connected employees with primary care providers, and implemented programs for diabetes and high blood pressure.

Some Simpler Solutions

There are a host of options for improving care and reducing cost among the top healthcare users. They begin with simple and free options, such as changing plan design to encourage employees to make better health choices. One possibility Rosenberg recommends is encouraging—and paying for—second opinions when a major diagnosis is given. He says this often leads to better decisions on potential treatments.

Or insurers could offer free prescriptions to people who manage their care well. Diabetes patients may get metformin at no expense if they get regular blood work and do a physical and eye and foot exams. These initiatives could be coupled with creative solutions like a communications campaign around a particular condition to encourage people to manage it better.

One of Rosenberg’s recent clients found the top three conditions for which people used the ER were headaches, sore throats and urinary tract infections. When Gallagher looked at the client’s plan, it realized patients paid only a $25 co-pay for emergency room visits. These conditions could easily be treated at a primary care provider, so the client changed the plan to deter employees from ER overuse. The co-pay was increased to $100, and the client saved $1.2 million in medical costs in one year.

“Members suddenly had some skin in the game and were thinking more about which provider to use even though it was just bumped to $100,” he says. “An answer could be as simple as that.”

Delaney favors requiring people to get annual physicals. First, she says, a physical can identify conditions earlier, preventing an employee from going into the high-risk group. They also can help people who are already diagnosed with complicated conditions from amassing significant costs down the road.

Hadden says just connecting people with a primary care provider can make a big difference in costs down the road. He says studies have shown that cancer tends to be detected earlier in people who have a good relationship with a primary care provider, mainly due to increased screening rates among these patients. (For more on the advantages of primary care, see the sidebar “Primary Care Benefits.”)

We went to the ACOs and said, ‘We’ve found some high-cost folks in your market, and we can work with you to tackle them. We’ve been able to lower healthcare costs for many of them.

Dr. Sunny Ramchandani, deputy chief medical officer, Aetna

Many of these solutions are good for employers who are apprehensive to try moving the needle even though they may want to reduce their costs. Typically, businesses with fewer than 500 employees will have a tougher time implementing programs that require much financial input on their part.

“It will be dependent upon the client and their appetite for change and ability to spend a little money to save a lot,” Rosenberg says. “They are spending a fixed amount of known money to hopefully reduce cost, but because it’s not guaranteed, they see it as a cost.”

Going All In

For larger organizations with more spending power, high-touch case-management options can be effective in better serving complex patients. Glaseroff was able to use the resources of Stanford to back his program, which he labeled an ambulatory intensive caring unit, or AICU.

The unit began by determining the top spenders in the workforce and interviewing them to create an individualized care plan. Among the top of the spending spectrum, the unit found high rates of diabetes and hypertension and some cancers and neurologic conditions, along with chronic obstructive pulmonary disease (COPD) and asthma.

Healthcare providers set goals for the patients and worked with them to ensure success. For example, Glaseroff says, if a patient says she needs to start exercising, the provider might prod her by asking what type of exercise she wants to do, when she would do it, with whom she plans to exercise, and how confident she is about following through. If walking is her goal, the provider might request she do a short walk the next day, just to get started. The day after that, the provider would call the patient to see how the walk went.

Glaseroff’s group averaged about one contact each week per patient via messaging, phone or in-person visits. They worked with pharmacy, physical therapy, diabetes educators, nurses and social workers to provide wraparound services. Providers were paid through capitation and received shared savings when a patient’s costs were reduced.

Ramchandani says Aetna’s program is similarly high-touch for a short duration. When superusers are identified, nurses located near the patients are dispatched to their homes. Seeing the patients face to face helps Aetna design a more personalized care plan, he says. This plan, or care map, offers health actions members can take to improve their chronic conditions, including treatment adherence, meeting social needs and improving lifestyle behaviors. The goal is to improve patients’ health while making sure they have the knowledge and skills to manage their condition after a two- or three-month intervention.

Aetna has measured its results on more than 100 patients, and Ramchandani says engagement rates are 65% (compared to the 20% to 30% industry average for this type of program), inpatient hospital use is down 70%, and per-member per-month cost is down 45%. Part of Aetna’s success, Ramchandani says, is because they “curate and integrate a host of ecosystem services.” This includes a medical estimator tool that helps plan recipients purchase more inexpensive medications and a partnership with a local grocery store where members can shop for groceries with a nutritionist.

Alcohol Under the Radar

Because of the tremendous costs of some of these top-tier individuals and the complexity of their conditions, Leopold says, he has seen a proliferation of vendors coming to the market offering programs that target specific high-cost populations. “There are a lot of third-party players and carve-out opportunities where employers can plug in cost-management solutions,” he says.

Annum Health is one of these. It was created by Michael Laskoff in 2008 when he realized there was one major population flying under the wellness radar: people with alcohol issues.

And there is a large unmet need here. According to Laskoff, one in four Americans binge drinks, and one in six does so more than four times a month. Two thirds of all people with a self-admitted drinking issue are employed, which he estimates costs the workforce $80 billion annually in lost productivity.

Most of the more than 16 million people who meet clinical guidelines for an alcohol-use disorder never get help for the condition, Laskoff says, even though there are thousands of addiction clinics across the country.

And even if they do, a vast majority relapse even with costly inpatient rehabilitation, which can run well over $30,000.

These grim rehabilitation statistics led Annum to focus on a modern treatment alternative for heavy drinkers. “The product has to be better,” Laskoff says. “Right now, it’s expensive, stigmatizing, inconvenient and generally ineffective. People would rather live with the problem than pay for the solution.”

Laskoff says a majority of people with drinking issues wish their employer would offer some sort of private, effective treatment option. But this can be a tricky proposition. To avoid HIPAA issues, Annum reaches out to all employees to see if they would like to take part in the service. This helps Annum and the employer avoid pointing fingers and allows employees who might be worried about seeking treatment to get the help they want.

People who enroll in the program are eligible for a year’s worth of treatment. During this time, the employee meets with a local social worker in six to eight live sessions. Employees can also meet via video with physicians who can prescribe medication or guide the employees to reducing or stopping their drinking. They also receive a year’s worth of support and coaching through an app and texts. And for those who want a social component, they can take part in private, online, moderated group sessions.

The goal is to track the amount of alcohol consumed and help employees drink less or stop altogether. Employees are monitored via the app, on which they answer basic questions each day: “Did you drink yesterday?” “If so, how much?” “Did you work yesterday?” “If so, how was your mood and productivity?”

Laskoff says the yearlong program is offered for about 75% less than the cost of inpatient treatment. Annum partners with the health plan to offer the program and gets paid only for patients treated. Laskoff couldn’t provide specific results at this point but says the program has shown to be two to three times more effective than traditional behavioral health interventions.

“Our results are terrific, and a lot of that is because we don’t dictate what success is,” Laskoff says. “They have a goal of zero unsafe drinking days per year…at the same time, they are reminded that lapsing is a normal part of recovery.”

Specialty Drugs

Another vendor, Mymee, works with people who are severely ill with autoimmune diseases to see if they can stop taking expensive specialty medications.

About 24 million Americans have at least one autoimmune condition. Mymee doesn’t target the whole spectrum of specialty drugs for these conditions but instead focuses on the most costly ones, such as Humira and Enbrel, which treat a range of autoimmune disorders, including rheumatoid arthritis and Crohn’s disease. These are the two most expensive drugs on the market that treat these autoimmune conditions, costing $50,000 to $60,000 annually per person.

Mymee also works with people who are already on specialty medications. This enables them not only to improve patient care but also to track their results, as patients are able to reduce the amount of medications they take. The program is a 16-week digital therapeutic, which uses digital technology treatments including health monitoring, apps and virtual health coaching to treat health conditions.

Just because you have a group of diabetics, it doesn’t mean you can bring in a vendor and make them cost less. They may be high-cost but are already doing what they need to do—see their doctor, take medicine and track their glucose levels. You have to understand where the gaps are, and then you can bring in a solution.

Mark Rosenberg, president of healthcare analytics benefits and HR consulting, Gallagher

Mymee is tailored to each participant and is a high-tech, high-touch, functional medicine approach to this population. They work to zero in on each person’s triggers—lifestyle, diet and environmental factors—so those can be avoided, helping reduce their symptoms. It begins with participants tracking their diet and activity for six weeks. Then they are onboarded through a call with a health coach to talk about how they are functioning. Each week they work with the coach to find ways to avoid problematic foods, activities or other triggers and, in this way, to make their body run better.

Mymee is a risk-based system for the organization. They work with self-insured employers and treat employees who cost $50,000 or more a year. Employers pay for the service only when employees begin to see results. They are planning to begin working with insurers in the coming months.

Mymee did some testing to prove its worth among patients with lupus. It focused in this space because there are not a lot of options for treatment among this population and treatments can sometimes be dramatic.

Patients can take steroids or immunosuppressants or have surgery to remove affected organs.

Their test was small, consisting of only 18 people, three of whom had experienced organ removal prior to working with Mymee. By the end of the study, eight of these patients were off some or all of their medications. All 18 also reported an improved quality of life with its use, says Mette Dyhrberg, Mymee’s CEO.

Mymee is currently working with people who have active, moderate to severe symptoms of lupus, rheumatoid arthritis, Crohn’s disease, inflammatory bowel disease and Sjögren’s syndrome. Mymee will also work with psoriatic arthritis and some less common autoimmune diseases, such as hidradenitis suppurativa, Mette says.

Measuring Success

Delaney says the first lesson she learned moving from the healthcare space into consulting was that the results weren’t as good on almost every product out there as they expected them to be.

For this reason, Vital Incite sets very clear goals with vendors it works with—on-site clinics, diabetes management programs, wellness groups. Vital Incite reviews its specific expectations with the vendor (like a 1% reduction in A1c levels among uncontrolled diabetics) and determines whether it will help the employer meet its ROI. Then, Vital Incite measures the results and meets with vendors regularly to ensure those goals are being met. Another thing she learned, Delaney says, is that outcomes improve when performance guarantees are put in place.

Hadden cautions against jumping on board with each new product a vendor offers to improve the health of top-tier spenders. “There are a billion of them now, and they don’t all improve health outcomes,” he says.

“The problem is they are difficult to vet without putting them in place.”

Whatever option an employer picks to tackle the issue of complex, high-cost employees, Rosenberg recommends implementing a three- to five-year strategic plan on ways to address the issue. And be prepared for wins and losses.

“Different solutions can be short- or long-term, and clients all take different approaches,” Rosenberg says. “They just have to try to move the needle, because they are not going to be able to address the whole problem or even a majority of it. They just have to try to chip away at it. Look at better ways to deliver care and make sure people are getting it at the right place.”

Worth is a contributing writer.

What’s to love
Frankfurt is Germany’s most international city (OK, I’ll include Berlin, too). You see people from all walks of life, which makes living and working here enriching. The relocation of the European Central Bank and Brexit made it even more international. Yet you can still enjoy the typical life of a Frankfurter with hard apple cider and kraut.

Dining scene
The dining scene mirrors the city’s diversity. You can find everything from modern Asian fusion hotspots to local homey restaurants that serve green sauce (cold herb sauce) and sour milk cheese. As in most cities, trendy restaurants pop up in areas that were formerly neglected. Low and slow BBQ and vegan places seem to be the flavor of the moment.

Favorite new restaurant
There are so many, but my pick would be Moriki, a modern sushi place with a lounge atmosphere.

German fare 
Zum Rad is in Frankfurt-Seckbach. It’s off the beaten path but the place to go if you want to experience a true Frankfurt hard apple cider evening. They serve all the classics of the traditional Frankfurt kitchen. I would try a cooked cheese as a starter followed by boiled knuckle. End your dinner with a medlar schnapps—but after that you should go home directly.

Watering holes 
For casual, definitely go to one of the open-air pubs. For more formal, check out the Kameha Suite. It’s in a former headquarters of Allianz Frankfurt, in a 19th-century sandstone building, and has a great bar (and a fine-dining restaurant).

If you like classic luxury hotels, stay at the Grandhotel Hessischer Hof. A more modern, hip place (nice bar, too) is the Hotel Roomers. One good thing about Frankfurt is that no place is more than 30 minutes from the airport.

Don’t miss
The recently rebuilt, old city center. It was destroyed during WWII, and then officials committed every construction sin to it. But it was recently restored to its former glory.

If you like soccer and big sporting events, definitely go to the Commerzbank-Arena to watch a game of Eintracht Frankfurt (Frankfurt Eagles). More than 50,000 supporters create a buzzing atmosphere, and this is coming from somebody who supports a different team.

Tell us about the Munich Re incubator and the Innovation Lab. 
The incubator is a regional innovation unit, and we focus on accelerating growth in new areas of risk where we don’t currently operate. We focus on longer-range innovations, three to five or more years out that expand new capabilities or address new customer needs, breakthrough innovations or looking at new technologies that are entering the insurance or reinsurance space.

The incubator has several components. There’s a lab team that runs pilots and an underwriting unit. There are two strategic domains. One domain is focused on mobility, and the other is insurance on demand. These are two big themes within the space. Mobility is about getting people and goods from place to place. Insurance on demand is focused on how data, digitization, technology and consumer preferences are disrupting insurance as we know it—although we don’t see this as disruption but, rather, as an opportunity for our industry to evolve.

The underwriting unit is taking on what we’re calling frontier risks, like autonomous vehicles, car sharing and ride sharing, and we provide insurance coverage for companies that are operating in those areas. This is really exciting, learning how to underwrite these risks when there still is very little, if any, historical data to refer to for insights.

The team of specialists in the lab take on very early-stage ideas that have been through a vetting process to help us determine if we want to pilot them. The lab operates with a mix of lean startup tools as well as agile and design thinking. These help us shape minimally viable pilots to test them in the market before scaling. If a pilot is successful, we take some time in progressing it toward scale. And if the opportunity is very far removed from our existing business model, we might consider creating an entirely new business unit or spin the company out.

Outside of the incubator, across Munich Re’s North American operations, each of the company’s U.S. businesses has a group dedicated to innovation. These business units are working on innovations that align with their core business.

Can you give an example of an innovative idea? 
One of the projects launched out of the incubator is Smart Mobility. Smart Mobility is the simple solution to the complex issues surrounding auto risks. We use a patent-pending data analytics tool called LossDetect, which is an online, automated text-analysis tool that examines claim descriptions for commercial fleets to recommend potential solutions. It also identifies the potential for quantifiable savings. Based on this analysis, we outline the technology solutions to address a client’s causes of loss. These solutions include collision avoidance, telematics, driver coaching, and advanced fleet monitoring. Our partnerships with leading-edge companies in these areas provide us with an easy and efficient way to offer the technology to our clients. At the same time, we’re gathering loss data that can prove the benefits of new technology.

Why is it important for a global company like Munich Re to work with startups? 
The insurtech space exploded over the past few years, and certainly Munich Re was on the forefront of that. We started by sending several colleagues to Silicon Valley. They moved there and began to interact with the startup community. It’s important for big incumbent companies to have their ear to the ground and see where advancements in technology are taking place. We’re members of several accelerators. We were the founding partner for Plug and Play in their insurtech accelerator. That has fueled a lot of insight, whether it’s for the incubator or different innovation practices within our corporate innovation ecosystem. We don’t have to build everything ourselves—and that’s the answer to the question of why insurtech is important. We don’t have to be the experts in certain technology advancements. We can offer startups capacity, stability and, importantly, expertise in the insurance and reinsurance markets. Sometimes startups don’t have any of those things.

At a very high level, our role as a company is to continue to focus on our need to help protect people, our clients and businesses from the unknown. There’s a lot of change going on. It’s amazing to see what has happened in the last three to four years and to see whether the technology that you are investing in today will stand the test of time. Some may see this as disruption, but we see it as an opportunity.

What trends are you seeing in insurtech? 
We’re seeing things shift now. A few years ago, startups were focused on certain parts of the front end of the ecosystem and making it easier and simpler to purchase insurance products. Now, we’re seeing a growing interest in commercial products and an emerging trend within risk avoidance. It’s not just about the insurance product and covering new and emerging risks but also using data and technology to avoid or prevent risk.

We’re thinking more about how, as a reinsurer, we can add value to our clients by leveraging the data and insights that we see across all these areas of risk, as well as providing solutions and services beyond traditional reinsurance.

How do you recognize the good ideas? 
Recognizing a good idea takes a disciplined approach—it’s essential to initially frame up the problem succinctly. You need to obsess about the problem and not the solution. Then it’s time to rank ideas and decide which ones to invest in for further exploration. That’s the approach we’re taking in the incubator. We need to be disciplined in learning about what the customer and the market is telling us about the idea. That’s hard, but it’s really important not to fall in love with an idea, because you can make costly investment mistakes and build something nobody wants to buy. Finding that out as early as possible in the innovation stage is an important way to avoid unnecessary costs.

How does Munich Re work with brokers on innovation? 
Brokers are another important part of our ecosystem. Some of the products that we have launched, or are in the process of launching, are a direct result of listening to brokers and what they say are gaps in the market. They are an important part of what I was just discussing—listening to your customer and listening to your market and understanding what it is that they need and then putting that idea into a process that allows for you to shape it well and then pilot it.

How did you get into insurtech? 
For the last 15 or so years, I’ve been leading business units of large corporations and leveraging innovation, product development and technology to fuel business transformation and growth. Running the incubator is a great opportunity to focus 100% on innovation and leverage all the interesting innovation in insurtech. I love that because there is so much change going on in the industry. This is a great place to make an impact.

Doing this well can help fuel transformation and growth for us, for our clients and for the industry. That’s what I think is so exciting. It’s a really fascinating time to be in the industry. If we do this well, it’s going to change the way we handle risk in the future. It’s a really cool place to be.

As cyber attacks cause increasing losses in the physical world, the insurance industry is turning up the volume on so-called silent cyber risks.

“Silent cyber is the danger that’s lurking in the existing policy coverage that insurers have been offering and something that could be triggered by cyber,” says Prashant Pai, vice president of cyber offerings at Verisk. “That’s something [insurers] haven’t really thought through.”

The hidden, or silent, risks arise when cyber-related exposures are not specifically included or excluded in policy language. Unlike stand-alone cyber insurance, which clearly defines the parameters of cyber cover, such as security and privacy breach expense and liability and business interruption, traditional insurance policies in many cases will not specifically refer to cyber and could end up paying claims for cyber losses. This exposure is also referred to as non-affirmative cyber, in contrast to affirmative cyber coverages that are explicitly outlined in a policy.

And these hidden risks can come with a high price tag. Last year’s global ransomware attacks NotPetya and WannaCry highlighted how cyber attacks can affect multiple lines of business and lead to massive losses. FedEx reported a $300 million impact on its operating earnings from the NotPetya attack, and shipper Maersk put the financial impact at $250 million to $300 million. The risks continue to grow as internet-connected devices multiply throughout all aspects of businesses and modern life.

To help bring these silent risks to light, Verisk’s risk modeling company, AIR Worldwide, is collaborating with global reinsurance brokerage Capsicum Re to expand its cyber modeling capabilities to include silent cyber.

AIR Worldwide’s existing cyber models estimate the potential frequency and severity of cyber attacks as well as the financial impact. As part of their development project, AIR Worldwide and Capsicum will identify which non-cyber lines of business are more likely to be exposed to losses related to silent cyber. Finding the cyber cause behind what looks on the surface like a traditional loss can prove challenging.

“Even if you think about it, and even if you implicitly include cyber-induced risks, there could be many different ways where you may not be able to attribute that back to cyber,” says Verisk’s Pai. For example, if an overheating printer hijacked by hackers causes a fire, it may be possible to attribute the fire to the printer but not necessarily to the malware planted in the now-destroyed printer.

AIR Worldwide hopes to finish the initial version of the silent cyber model by year-end and to release it early next year. The first version of the silent cyber model will focus on about a half-dozen lines, Pai says.

Working with a reinsurance brokerage allows AIR Worldwide to see a broad set of data from across the industry, Pai says.

“Our focus is to really sink our teeth into it and do a detailed job of analyzing and coming out with a view on what that risk really means,” Pai says.

Among other industry moves, Aon announced in September that it has sourced $350 million of reinsurance capacity from firms in Bermuda, London and Europe to help insurers mitigate their silent cyber exposures. Aon also has launched a silent cyber solution to help insurers identify, quantify and mitigate these exposures. The goal is to help insurers get a clearer picture of their cyber risks with an option to exclude or recognize the exposure in each portfolio.

Another development may tempt alternative capital into the silent cyber market. Verisk’s Property Claim Services is adding a cyber catastrophe component to its PCS Global Cyber loss index and estimates. The cyber cat estimates will include both affirmative and silent cyber losses of at least $250 million. That may help fuel the growth of trading in alternative solutions such as industry loss warranties, PCS says.

Why should brokers understand quality differences among healthcare providers?
What we are finding is more brokers are interested in understanding quality, irrespective of whether or not they discuss it with clients or how they use that knowledge.

Providers have been aware there is greater focus here and are attempting to remediate poor quality where they can. Carriers are trying to bring network solutions to employers through their brokers. Employers are more aware of significant quality variations across hospitals and physicians, but they, and the broker community, are lagging behind in understanding how significant that quality variation is and how to measure in a way that can be helpful.

Can understanding quality affect a broker’s relationship with clients?
The business impetus for them is to be at the table as informed stakeholders…[regarding the] tremendous variation in quality among providers.

By 2025, up to 32% of state and local governments’ costs could be on their healthcare spend. That’s such a large number, and private employers aren’t far behind. There is a role to play beyond just connecting clients to solutions. I think [brokers] could play a valuable part in helping these folks spend money more wisely and navigate toward higher quality.

How might this change how brokers do business?
They are going to have to be adaptive. A lot of people are talking about quality variations and reference-based pricing and bundling to get prices fixed. The role of brokers is being redefined.

How would they move to focusing more on quality for clients?
Turning the focus to the lowest-cost/best-quality option would be a different model where there is commission and shared savings. If they are trying to reduce costs and improve quality, a broker will be working with the client to achieve objectives that are in their [the client’s] best interest.

Brokers’ interests are best served in recognizing that they may have to maintain more flexibility in different revenue models and approaches. Brokers want to keep clients and keep them happy and recurring. They also want to have a good relationship with health plans and other organizations that can help meet their clients’ needs. They will need to be flexible to emerging models and the risk sharing they might be asked to participate in because of the escalation of health costs and the problems it introduces to a client.

For example, they could use service level agreements around their client’s total healthcare spend. They could use a per employee per year (PEPY) spend calculation where the broker gets a percentage of savings from the previous year. This can also include “kickers” where the percentage increases as savings increase. Specialty pharmacy is also an area of significant spend where they can partner with vendors to reduce [costs] and share in that savings.

They may also want to implement programs like concierge care or navigational tools to help beneficiaries find higher-value providers. The actual instrument might vary depending upon the risk tolerance of the client.

This sounds like a lot of change for some brokers. Are they reasonable to be wary of this kind of change?
It is intimidating for brokers. Their role is to connect a plan sponsor with a healthcare solution. Now that they know that different healthcare solutions provide tremendous variability in cost and quality, it puts a broker in a complex position.

Sometimes you get high quality at a lower cost, and other times you just get average quality at a lower cost. Navigating that and understanding those concepts can be difficult. They have to understand how, as brokers, they can become more informed about how to measure quality in a precise and reliable fashion, then know how to guide clients toward solutions that best meet their needs. Brokers are exploring ideas about how to become more aligned with the plan sponsors in terms of transparency, acting on their behalf, driving solutions to manage costs, but also helping to understand ways to achieve greater value.

Measuring quality can be a challenge for any organization. What do providers need to know about how to do this for their clients?
There are technology platforms that allow quality information to be compiled, and it comingles with pharmaceutical data and claims. There are a couple of ways this can happen. The employer can have its own platform and allow its broker access to that to help understand employer spend.

Or brokers can inject all of their clients’ data into a technology platform to better understand and help clients manage their healthcare spend. It allows them to say, “Hey I have a line of sight into other clients’ information, and here’s what we were able to do to improve quality for the same spend or lower cost.”

They would be looking for data aggregators or technology companies that are aggregating information from multiple clients so they have insight into what is going on within their healthcare spend. Deerwalk, for instance, has a nimble platform and can link its quality information to claims information from employers and brokers and benefit consultants. It allows quality information to become part of the analytic framework to relate with the client. They can look at providers and understand resource utilization, total cost of care, efficiency and efficacy of care. They have to become accustomed to getting quality as part of the other information and thinking about it as a dimension of network performance.

What about brand? Does it play into the perception of quality?
Yes. Consumers are oriented toward brands. They know Mercedes, for instance, might have higher quality than, say, Honda. Not that Hondas are bad cars, but they are based on reliability and cost of ownership and good value. Mercedes is about luxury and a different experience and aesthetic. Healthcare services can be seen that way as well sometimes, but the perception isn’t always true.

For instance, in the U.S. News & World Report hospital rankings, a large portion of their approach is reputational. It’s based on surveys sent to physicians about where they would send patients. But these physician respondents usually have no understanding of what the outcomes are at these particular institutions. It’s not to say these places have poor quality, but when you are talking about quality variations, there are different ways to measure that. And it doesn’t always match up with the brand equity that lots of provider organizations have. 

There are so many things that go on at every different hospital—from spinal surgery to cardiothoracic care to heart failure or obstetrics. It’s going to vary across clinical areas, and within clinical areas you have physicians that will vary in their quality. Brokers have to determine what the clinical need is for clients and which providers those clients have access to are the ones that provide the ultimate in cost and quality.

Any other considerations when measuring quality?
Risk adjustment is essential. Patients have different propensities for outcomes based on age, gender, the type of clinical condition they have, co-morbid conditions, etc. If brokers are going to measure quality precisely, it has to be risk adjusted in a way that removes differences in clinical and demographic risks across providers. That’s a foundational principle to measuring risk.

If their measurements have solid risk adjustment that is adequate, they will have to measure whether variation across providers is meaningful, and the way to do that is use statistical significance testing to see if providers are different from each other in their outcomes.

How does it benefit brokers to understand quality?
Brokers who continue to assert that the value they bring is delivering the biggest discount to a client are going to have a more difficult time retaining those clients than other brokers who begin to discuss how much variability there is in quality. Brokers can help clients by helping them understand the options delivered through the health plans, what their quality really is and how to navigate that.

If they don’t, brokers may not be viewed as a stakeholder for the client. Clients might become more transient or use more products and services that move them away from using brokers as their primary relationship and relegate them to a different role.

But if brokers become more informed about quality variability, they can act on behalf of clients to connect them with a plan that works for them and then optimize their benefits.

Is this going to be needed with all clients?
Some clients are content to select an offering and roll it out in open enrollment and be done with it. Others are asking what other options there are, knowing they need to make a change. And others are saying, “I need to understand my spending and value and need you to come alongside and help me with it.”

Some stakeholders—benefit consultants, brokers and clients—are awakening to this idea of delving deeper into quality. A lot of younger brokers get this and know that their financial relationship with carriers has to move and that their revenue has to be at risk, based on performance. Brokers have a fiduciary responsibility to clients to help find solutions and navigate healthcare because it’s so complex. They have to decide if they want to be the person working at table alongside their client as they are working all of this out or if it will be someone else.

You’re a born-and-bred Chicago guy. Cubs or White Sox?
Definitely White Sox. I’m a South Side guy. But unlike most White Sox fans, I’m OK with the Cubs winning. I think it’s good for the city.

What’s the best thing about Chicago that people on both coasts don’t understand?
It’s a Midwestern mentality. People are friendly to each other. When you walk down the street, people look you in the eye and kind of nod, and they smile.

Who were your childhood heroes?
I can tell you the starting lineup for the 1959 White Sox, who won the American League pennant but lost to the Dodgers in the World Series. So my heroes were Nellie Fox and Luis Aparicio. The Yankee guys—Mantle, Berra—they were mystical. But we hated them.

You’ve been in the insurance industry for 45 years. What’s the most important thing you could tell a young person thinking about a career in insurance?
You really better understand what it is you’re selling, and you better be able to articulate what it is you’re selling. Those two things are absolutely essential.

You just began as chairman of The Council. What do you hope to accomplish in your year at the helm?
I intend to do whatever [CIAB president and CEO] Ken [Crerar] tells me to do. Kidding, of course, but CIAB is a great organization because we have great leadership. Several initiatives introduced by prior leaders Rob Cohen and Dave Eslick, especially the one on diversity, need to be supported.

When you were starting out, did you have a mentor who was especially influential?
A guy by the name of Lance Sanberg. I was probably 24 or so. Lance was probably 50. He used to say, “You can’t tell the players without a scorecard.” What he meant was, if you didn’t know who the players were and what motivated them, you were not going to be successful. He also drilled into me the need to document things.

And now you have a son in the business.
My son Neil is one of our six regional presidents.

Did you want him to go into the business?
In second grade, the teacher asked the class to write an answer to the question of what they wanted to do when they grew up. He said, “I want to do what my dad does.” He’s the only kid I’ve ever known who actually knew he wanted to go into insurance.

What business leader, in any industry, do you most admire?
Tim Cook, at Apple. I think the guy is disciplined, innovative, but he’s also somebody with a high level of ethics. He has a healthy dose of humility. That’s something else I’ve always believed in: better to be a plow horse than a show horse.

What does your perfect weekend look like?
I get out of Dodge at noon on Friday, get to our house on Lake Michigan in time to play a round of golf, then have dinner. My wife and I have three kids and 13 grandchildren, and the oldest is 11. They love coming to the lake, so we have a lot of great days on the beach.

If you could change one thing about the insurance industry, what would it be?
There has always been a massive amount of duplication of effort surrounding the submission, quotation and correct issuance of insurance policies. The process chokes both brokers and insurers. If we could fix this, it would be beneficial to all, including the insured.

Last question: What gives you your leader’s edge?
I think people have always found me to be trustworthy. One thing I still do to this day is I encourage debate. When there’s an important decision that needs to be made, if I sense that people are just going along with what I have to say, I will often take the opposite position, even if I don’t believe it, to stimulate the kind of debate it takes to come to the right conclusion.



The Hughes File

Favorite vacation spot: “The most fabulous vacations I have ever taken are family vacations that are kind of action-packed. In July, my wife and I took the kids and grandkids—21 of us—to a dude ranch in Montana, just outside Glacier Park. The kids were asking on the second day if we were coming back next year.”

Favorite movie: The Godfather

Favorite actor: Paul Newman

Favorite Paul Newman movies: Hud and Cool Hand Luke

Favorite musician: Bob Dylan (“I’m a child of the ’60s.”)

Favorite Chicago athlete: Mark Buehrle (“He was a pitcher for the White Sox on the team that won the World Series in 2005. I never saw a guy have more fun playing baseball.”)

Wheels: Mercedes AMG E 43

Favorite charities: The Chick Evans Caddie Scholarship, Mount Carmel High School (where he sits on the board), and the Cullen Hughes Memorial Fund, named in memory of his late son, who died at age 12 after being struck by a car while on his way to a Little League baseball game.

He spoke of many leadership qualities, but “listening” struck me as one of the most important. In a story about Vladimir Putin, he commented that we can learn a great deal by really listening to what people say—to the words they use when speaking. That’s a very simple yet profound concept we can all probably learn from: to slow down and pay attention to what others are saying.

As I continue to meet with business owners across the United States, I hear a consistent message of staunch independence. But in retrospect, the words they use are important. They frequently say that, unlike their peers, they will never, ever “sell out.” With deal counts continuing to rise as multiples in 2018 creep higher and higher, those two words take on added meaning. “Selling out” is different from “selling,” it would seem.

Bush also said that successful leaders recognize what they are good at and surround themselves with other capable people to help them with whatever they aren’t good at. This basic acknowledgement is what typically separates an average insurance brokerage from a top-quality brokerage. Those who recognize they don’t have all the answers tend to focus on what they can do best, and they seek help on everything else.

Enter, private equity. In recent years, the insurance distribution sector has enjoyed a generous infusion of private capital, record-high multiples and an unprecedented number of deals. But last year’s tax reform could be the pin that pops that bubble. Tax reform may be helping to stimulate the economy, but we anticipate it will negatively affect cash flow for firms with significant leverage on their balance sheets. As the leader of your firm, listen for indicators of change that could affect your M&A potential. For example:

Interest rates are rising. This is no secret after the hike in late September 2018, and another increase is expected before year-end. The cost of debt is going up, and only time will tell if the credit markets will continue to have seemingly unlimited capacity and flexibility.

The interest deduction is evaporating. The new tax law puts a cap on deductible interest that will tighten even more in 2022. For many private-equity backed brokerages, paying tax will become a new reality for them, and cash flow will be reduced.

We’re not really sure how investors will react, so we have to continue to listen to the messages they send. I don’t anticipate any one buyer is going to jump up and tell us that it is going to lower its pricing. The first one that does probably won’t get a deal done for a year because of the stigma that action would place on it.

What is likely to happen is that buyers and sellers will share the burden of this pending decrease in cash flow. The rising cost of debt and expected increase in taxable income will influence cash flow and possibly the returns investors receive. It all comes back to return on investment. Private-equity backed brokerages are driving the M&A market. If these firms have to pay more taxes along with more interest on their debt, the result could be a decrease in their investor groups’ returns.

Will financial investors be willing to take the lower returns? Perhaps to some extent. But it’s highly possible investors will choose to share the pain with sellers. We expect a general decline in valuations as acquiring brokerages reduce their leverage ratios, meaning they’ll likely pay less to buy firms.

So your actionable takeaway this month is to listen. Listen to the acquirers and their investor groups. Perhaps their words (or what they do) will signal a shift in the market. Listen to your partners. Determine if they are truly committed to the independence they claim to support. And listen to your own instincts as you figure out how to position your future. You may reject “selling out,” but maybe your future includes “buying in” with another firm. Alternatively, upon evaluating all you hear, you could find you truly can remain independent, which may be music to your ears.

Market Update

September added 45 more transactions to the year-to-date total, which is up to 392 announced transactions. This compares to 418 deals announced over the same time period in 2017. With the continuance of retroactive announcements, it appears as if 2018 has the potential to outpace 2017’s 557 total deals.
Private-equity backed agencies/brokerages remain the most active buyers in the marketplace, with AssuredPartners announcing 28 deals year to date and BroadStreet Partners and Acrisure each announcing 26 deals through September.
Several large transactions hit the headlines in September. Marsh & McLennan Companies is set to acquire Jardine Lloyd Thompson Group, and American International Group agreed to acquire Glatfelter Insurance Group. Although public brokerages have remained quiet within the marketplace, accounting for only 9% of total announced transactions through September this year, it seems that when they do announce a transaction it is certain to make noise. MMC has received board approval for its acquisition of JLT, which was ranked 16th on the 2018 100 largest U.S. brokerages measured by 2017 brokerage revenue generated by U.S.-based clients. The JLT transaction is anticipated to close in the spring of 2019. Headquartered in York, Pa., Glatfelters is one of the largest specialty program and insurance brokerages in the United States. The Glatfelters transaction is expected to close later in 2018.

Trem is EVP of MarshBerry.

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

One of the messages coming out of our Insurance Leadership Forum last month was that democracy is only as good as the willingness of its citizenry to participate. So let’s lead by example. If you’re with me, tweet at us @TheCIAB and let us know you’re taking the pledge.

Voter turnout in midterm elections historically has been significantly lower than the turnout in presidential elections, which is why we need to make this coming Election Tuesday a top priority. Statistics show that turnout of eligible voters in midterm years hovers around 40 percent, while the turnout in presidential elections from 2000-2016 ranged between 54-58 percent. Those numbers are staggering to me, revealing more than anything that there are several million voters out there who don’t get out and perform their civic duty. It’s incomprehensible. It’s also the cause of many of our major issues. 

This year, dozens of competitive House and Senate races as well as 36 gubernatorial seats up for are grabs. We are in a critical time, each day headlined by an increasingly toxic political environment. And whether you like or dislike what's going on, the best thing we can all do is vote.

We have one major obligation as members of a democracy and that is to make our voices heard. If you don’t vote, you don’t get to complain—simple as that.

One way to see change is to vote different people into office, which brings me to our continued efforts around diversity and inclusion. In recent months, The Council hosted a “Dive In” event at our DC offices (one of more than 50 Dive In events held across 27 countries, as part of the insurance industry’s global effort to improve diversity in the workplace), adopted a formal D&I resolution at the Board level, and continued our relationship with inclusion strategist and cultural innovator, Vernā Myers (who spoke at both our Employee Benefits Leadership Forum in May and the Insurance Leadership Forum last month). Check out our exclusive interview with her. 

We are doing these things to highlight the importance of cultivating environments of inclusion in workplaces all over the world. As one of our Board members commented recently, diversity and inclusion are not HR issues; they are leadership issues.

Both politics and D&I are not easy topics, but they shouldn’t be difficult to talk about. As citizens and as leaders, we have to be open to engaging in the conversation. If we show a willingness to come to the table on difficult issues, maybe those in office will follow suit. If we create safer office environments for all to feel included and valued, maybe the barriers we have been living with will break down. These require long-term, incremental changes. Progress will not happen overnight, but it will happen. As Vernā Myers tells us, “The approach we need is courage.”

Now, more than ever, leaders need to learn how to embody the principles of democracy and of diversity and inclusion on a daily basis. Only then can we lead effectively across difference. This is important for our organizations, for our communities, and for our country.

When we’re at the polls, we are in the best position we can be to create change. And when we’re at the office, we are in the best position we've ever been to move diversity and inclusion forward. Together, we can make a difference.

With the right playbook, you won’t have to scramble when you get that call, saying, “We’re expanding overseas. Can you help?”

There is some initial information you need to gather to assess how you can best help an organization prepare to expand outside U.S. borders. With the basic questions in hand, engage your client in your first conversation about their new venture, starting with where they’re headed. Here’s how that conversation might look, with some advice along the way.

1. Where will you be opening the office(s)?

First, confirm where your client is headed. Let’s say it’s Amsterdam. Everyone is going to Ireland and, because of Brexit, London is out. Your client feels like Amsterdam is not quite off the beaten path, is still a major city, and has lots of talent.

2. Do you have a legal entity set up in that country?

If you’re lucky, the client answers, “Yes, Finance is on top of it.” After all, it’s important to have a legal entity if your client intends to stay in the country. If not, there are alternatives such as GEOs (global employment organizations), which can help your client get set up quickly. As part of working with a GEO, your client can spend 24 months determining if they want to stay in Amsterdam or anywhere else. There’s a premium to pay (generally 25%) for this service, but it reduces risk.

3. Do you have a payroll provider in that country?

You can offer to help source a payroll provider or even manage the process—though the client’s accounting firm may already be handling it. And banking, accounting, office space? Are those being managed?

4. How many people do you intend to hire?

Ask about the people they intend to hire. Are they U.S. expats? Third-country nationals (TCNs)? Local nationals?

Perhaps they’re transferring a few expats to start, to plant the flag, and are planning to hire locally over the next year—a best practice for startups. So you ask about relocation. They’ll need a relocation policy, which is a document that explains all aspects of the employee’s experience in Amsterdam, including relocation expenses, tax equalization, how often they can come back to the States, what to do with their home here, goods and services, and any other cross-border issues. You could also recommend a relocation firm if that applies.

U.S. expats are managed differently from TCNs, which are managed differently from local nationals. Each type of employee requires a different approach. Off-shore retirement savings plans are mostly, if not all, restricted to TCNs and local nationals because of onerous reporting standards required under U.S. legislation. Know that many U.S. expats move from country to country throughout their careers. Often, they are not vested in retirement plans because of their mobile work history. Special programs need to be designed for these individuals.

5. Do you need help with compensation plans, benefit plans, and even an employee handbook? Or just benefits?

The expatriates will need an international medical plan. There are specialty carriers that focus just on expats. And your client will eventually need comp and benefit programs for the local nationals in the Netherlands.

Benefits, as you may know, vary from country to country—and sometimes greatly. The Netherlands, for example, has a mandatory private system, requiring employers to contribute on behalf of the employees, yet there are choices. Many countries have a national health system, and more and more, countries are struggling with the high cost of medical care. Services are reduced, and in many cases the quality has suffered. Private health programs are expanding. Countries are welcoming the relief, and many employers are as well because it gets their people back to work faster.

You move on to comp data, which your client probably needs to price jobs for local nationals. The client will also have to decide how to pay the expats—for example, are they receiving a bonus to go over?

Your client might not know the answers to all of these questions initially and may even balk at the cost involved, but you can remind them of the importance of building the infrastructure correctly. If not, they’ll have greater consequences down the road. We’ve even seen organizations have to leave the country in which they opened offices because they didn’t prepare the infrastructure correctly to follow governance and compliance procedures.

Moving Forward

You’re done for now. You’ve completed your initial assessment and can start to build out a holistic strategy to support your client’s growth overseas. Now it’s time to bring in your international strategic partners who specialize in this and will dig deeper and help your client get set up properly with local representation on the ground that can place policies.

With this playbook in hand, you will once again prove your value to your client. You’ve helped them grow their business and attract, engage and retain employees. Congratulations. A win for everyone!

Polak is EVP, Multinational Benefits & HR, Benefits & HR Consulting for Gallagher.

That’s great for knowledge and client service but a decided threat for succession planning. The agency was fairly traditional, having just added a second service layer (CSR) in the prior year. Team issues ran the gamut, from lack of delegation and consistency to book size imbalance to struggles with backup support. You name it.

Since that time, we’ve been through three senior-level service colleague retirements. The first one left everyone frustrated by lack of qualified talent, over-hiring, underperformance, and dissatisfied clients. We’ve learned a few lessons since then and have revamped our hiring process and team structure as a result. The next two exits were extraordinarily successful. And with an expected 40% of key account managers retiring in the next five years, I’m now confident we can handle the changes.

Our commercial property and casualty middle-market service team has three basic layers: account manager (A/M), client service representative (CSR), and client service representative assistant (CSRA). We also have a separate Service Processing Department that handles certificates of insurance, policy three-ring binders, printing and binding documents, etc. Claims are handled by our specialized claims consultant department.

Entry Point

We’ve created entry-level positions at three points: service assistant (SPD), CSRA, and our receptionist. When I interview qualified candidates, I take them through our team structure graphic and show them their potential career path. Many candidates are from employers without career paths, so it is exciting for them to see a future. Additionally, I include time for the candidate to meet promoted employees, and I let them explain how they have been trained and promoted and what they like about our employee culture. For me, this is where the rubber hits the road. I’m so proud of what we’ve created when I hear the positive feedback from our current staff.

It’s important to note that I’m hiring for the next level, and I explain that to our candidates. I’m hiring someone who is promotable, so they need to understand there will be parts of the entry-level position that are tedious. These are also foundational positions that provide a service to many clients—for example, certificates of insurance—and that may be the only communication clients receive from us on a regular basis. But showing up, taking notes, doing excellent work, and having a great attitude will get them in line for promotions as soon as possible. I prefer to keep entry-level employees in a position for six months or more, but it doesn’t always work out due to internal promotions and staff changes.

We do not use any outsourcing firms for our entry-level work, such as policy checking or certificate issuance. In our job market, we are most effective hiring and training our entry-level employees in our culture, systems, team structure and expectations. CSR assistants begin their training by learning our Applied Epic agency management system. During this time, they are also learning to check policies by comparing the issued policy to the policy detail in the system. The CSRA learns to understand where to find limits, coverages, and application, premium and transaction information, even if they don’t understand the nuance behind the screens. Policies are double-checked with a CSR, questions answered, changes requested, etc., until such time as the CSRA becomes proficient. We are also following our Training Boot Camp timeline, planning for licensing school, then sending the licensed CSRA to CISR (Certified Insurance Service Representative) courses to support an insurance designation. CSRAs are involved in most team meetings with the producer and other colleagues. Over time, the CSRA learns how best to support the CSR and back up the CSR when he is out. Ultimately, the CSRA learns the CSR role. Then, it’s only a matter of time before a CSR position opens due to internal promotion or growth within the department.

On the other end of the spectrum, we begin identifying retiring employees well in advance. We consider anyone within three years as “high risk” and a high priority. Using a succession planning spreadsheet, we look at who would be ready now, ready in one to two years, or ready within three to four years. We maintain this conversation at the team leader level throughout the year. In this structure, one of our most important positions is the senior CSR. This is a mentored, safety net position. Successful CSRs who want to become account managers begin by taking approximately 10% of the book of business they work on as a CSR and move into the A/M role on those accounts. The former A/M is now a mentor, assisting and guiding as needed.

We’ve moved beyond theory to actual nuts and bolts. In the past 18 months, two longtime A/Ms retired, with a combined 50+ years of service between them. We followed our process and had a smooth transition, especially key when one of the retirees ended up taking the last two months on an emergency medical leave. Our system was in place, and we pulled the trigger just a little earlier than we’d expected.

What we did:

  • Added an additional CSR position so that every A/M shared a CSR who supported their book of business.
  • Reassigned the book of business by account so that the future A/M began working on the account while being mentored by the retiring A/M. We used our Applied Epic system to keep both A/Ms on each account.
  • At the same time, the CSRs were trained to fully support the A/M so that the A/M could delegate 100% of what needed to be flowed down. (This also begins the training process for the CSR to move into a future A/M position.)
  • Once the big day arrived, the A/M was able to handle the accounts with familiarity and confidence. Clients didn’t suffer any service issues, because there weren’t any service gaps.

The true additional staffing cost was the new CSR. Investing in this employee in advance, or any entry-level employee, creates a training opportunity that ultimately translates into satisfied clients, reduced staff stress and disruption, and opportunities for future internal promotions.

New voices and fresh eyes make a difference. Our CSR and CSRA colleagues formed their own working group to be able to discuss issues, training, coverages and recommendations as a group. They are a strong voice for continuous improvement.

Hayward is SVP of Client Services for The Campbell Group.

The directive introduces requirements for insurance brokers, carriers and “ancillary intermediaries” to provide impartial advice to clients and sets potential parameters for future business conduct, spanning conflict of interest, insurance intermediaries’ remuneration disclosures, marketing strategy, and product overview.

For those following EU regulations closely, the IDD is a known commodity. Brussels issued the directive back in 2016, with an implementation date of February 2018. When it became apparent that only half of the members had transposed the directive by February, the deadline was moved to October. In the meantime, the European Insurance and Occupational Pensions Authority adopted mandatory delegated acts and technical standards, clarifying IDD provisions on product governance, conflicts of interest, and inducements. According to Carlos Montalvo, a former executive director of the authority and a PwC partner, “Some jurisdictions, including Spain, will transpose the full package of IDD requirements only in 2019. But when disputes arise, even if the directive has not been transposed into national law, the implementing regulations are directly applicable and enforceable.”

Diminishing Minimum Harmonization

The IDD is one of those alphabet-soup rules intended as a common denominator for the EU’s disparate regulatory landscape. It replaces the Insurance Mediation Directive, which was transposed into local legislation after 2002. It is a minimum harmonization rule, which still keeps the door open for local authorities to differentiate themselves, always upwards, in how strictly they treat insurance distribution.

The regulations make an important distinction between insurance manufacturers and distributors, resulting in varied responsibilities. If insurance distributors are required to advise on the product in a professional and impartial manner and pass on disclosures from insurance manufacturers, those manufacturers must implement a process for a new product’s approval to ensure consumers’ demands and needs are adequately met.

They also must preempt any conflicts of interest and put in place an infrastructure for product management, review, oversight and governance.

In practical terms, this means a stronger coordination of marketing efforts and business strategies by carriers and brokers to show evidence that insurance products meet the target market’s needs. A broker’s role might also be somewhat fluid, as brokers might act as manufacturers when they make important decisions on costs, coverage, risks and target markets.

To strengthen the IDD provisions on consumer protection, the European Union Commission issued several delegated acts on how insurance products should be distributed. They are clear and detailed when it comes to personal insurance and overall business practices but not on commercial brokers’ product disclosures. Starting in October, non-life clients must be provided an Insurance Product Information Document (IPID), a standardized summary of terms and conditions accompanying any insurance contract. The European Insurance and Occupational Pensions Authority has acknowledged little benefit to commercial clients from having an IPID and left it to European Union states to decide on types of covered customers. In the end, EU members are likely to specify their own disclosure requirements for commercial property and casualty insurance products.

Similarly, the Insurance Distribution Directive does not provide solid policy guidance on insurers’ commissions. Even though some EU states pioneered a ban on commissions in the most aggressive way, the directive simply reiterates each broker’s responsibility to provide adequate and professional advice in the client’s best interests. As one of those responsibilities, brokers need secure and continuous quality control over fee transparency, commissions and professional qualifications. It is yet to be seen how these requirements will play out in practice, but both insurance product manufacturers and distributors must align their distribution strategies with the target market’s evolving needs.

Cross-Border Clarity

The IDD gave more clarity on cross-border insurance product distribution to brokers with an EU presence, though at the cost of adding another layer of compliance requirements. On a global scale, these rules will have precedent-setting consequences when we factor in regulators’ present focus on the quality of brokers’ advice and overall consumer protection. Earlier, the EU General Data Protection Regulation paved the way for stronger data transfer and processing rules, which have had a ripple effect worldwide. We have seen a proliferation of similar rules in other developed countries, including state-level regulations in the United States and Canada and in developing economies such as India.

As regulators unroll their insurance distribution rules, brokers and carriers with EU offices may need to assess the implications of local regulators’ implementing the IDD, because the conduct requirements fall under the host country’s remit. The passporting provisions in the IDD allow brokers to operate in a host country under their home regulations, unless most of the broker’s business takes place in the host country.

Under a negative Brexit scenario, this is far from reassuring. Even though the United Kingdom has transposed most IDD provisions into law, the directive does not allow for “enhanced equivalency,” dealing another blow to London-based brokers’ ability to serve clients in Europe and to EU companies’ access to the London market. As Britain makes its way out of the European Union, brokers with London offices will be left in the cold, as passporting will not be extended. Since bilateral negotiations are stalled, the prospect of anything close to passporting grows dimmer every day.

Order to Chaos

Brokers with an EU presence face the daunting task of reviewing clients’ operation and transaction flows and adjusting their internal processes and product marketing accordingly. Yet brokers are presented with a valuable opportunity to review risks in a comprehensive way and align internal operations with global best practices in business conduct and consumer protection. “Insurance brokers and manufacturers alike can use IDD for some housekeeping and initiate business and operational review internally,” Montalvo says. “For business review, brokers can assess their product portfolio against present risks, including prudential, reputational and other risks. A review of distribution relationships with carriers will ensure the IDD’s guiding principles are observed and senior managers are clear about their responsibilities. An important element of the IDD is that responsibilities will not be diluted: both manufacturers and distributors will be held accountable for that.”

So where can you start? “Prioritize the impact of these changes on IT systems and solutions, both existing and under development,” Montalvo suggests. “You will avoid headaches and save money.”

Gololobov is The Council’s international director.

This includes health plans, group plans and employee benefit plans subject to HIPAA, including self-insured group health, dental, vision, pharmacy benefits, healthcare reimbursement spending accounts, employee assistance programs, health reimbursement arrangements and long-term care plans.

By September, the civil rights office had more than 400 such cases under investigation, with more than 200 reported thus far in 2018. The office lists the types of breaches as hacking/IT incident, unauthorized access/disclosure, theft, loss and improper disclosure. The location of the breached electronic data includes email, network server, desktop computer, electronic medical record, laptop and other portable electronic devices.

Cyber criminals go after the gold. Electronic medical records can contain a vast amount of personal information, including address, phone, email, Social Security number, birth date, banking information, medical visits and diagnoses. Healthcare and employee benefits data, especially electronic health record data, are much more valuable on the black market than credit card numbers. That’s because the data usually contain static information and can be used in fraudulent operations longer than credit card numbers that are invalidated shortly after a breach.

Although the value of breached data can vary widely, in 2017 Forbes claimed Social Security numbers are worth 10 cents and credit card numbers are worth 25 cents, while electronic medical records can bring hundreds or thousands of dollars when sold to cyber criminals. The Forbes article noted that, in 2016, 65% of the 450 breaches of health data that year were not caused by external hackers but by insider actions.

In early September, Marsh & McLennan published a report on cyber risks in the healthcare industry that indicated healthcare was one of the most vulnerable industries for high-profile cyber attacks. The report noted that healthcare “is the only industry that has more internal threat actors behind data breaches than external.”

Even if a hacker has not broken into a system or an insider has not committed an action to disclose personal data, malware attacks can cause equivalent or greater damage. Malware today is sophisticated and can change internal system settings, turn off anti-virus software, allow remote access and export data. These attacks can also trigger breach notification laws, increasing reputational risk. In 2016, Deven McGraw, then the privacy chief at the Office for Civil Rights, noted, “If the breach definition is met, which in many times in a ransomware attack it would be, then the presumption is to notify.”

Cylance’s 2017 Threat Report noted healthcare was the most impacted industry sector by ransomware in both 2016 (34%) and 2017 (58%). It’s vital to note that, although the healthcare industry is in the bullseye, so are all organizations that store and process employee benefit data. Even though some benefit data may not be protected under HIPAA, the data held in an organization’s benefit program can contain a lot of personally identifiable information about employees and their dependents, a rich repository for cyber criminals.

Data Protection

Companies are struggling to keep pace with an increasingly sophisticated threat environment, and gaps in the maturity of their cyber-security programs are easily exploited. The Cylance Threat Report declared that, “many of the attacks we saw in 2017 were initiated by exploiting vulnerabilities that were reported more than nine months before the attack was detected and blocked.”

A steep increase in the sheer amount of malware identified is also a factor. This includes polymorphic malware, which constantly changes its identifiable features to enable it to avoid detection, and single-use malware, which is custom-built for one-time use against a specific organization. In his security blog GData, Ralf Benzmüller noted an average of 959 new malware specimens per hour in 2017, a 63-fold increase since 2007. It is difficult for any organization to hold the line against such an army of malware.

So what can companies do to protect their benefit data from being compromised? The best defense is a strong security program that has integrated controls for privacy compliance requirements. This includes having a data inventory, assigned data ownership, restrictions on access, system monitoring, and policies and procedures for handling, storing, and sharing personally identifiable information, protected health information and benefit data.

Additionally, it is very important to remember that privacy compliance requirements remain a responsibility of the organization that owns them. “The organization is ultimately responsible for its compliance requirements, even if it involves outsourcing the administration of its health benefits plan,” says Philip Gordon, head of Littler Mendelson’s privacy practice. “In the contracting process, the company needs to be sure it is protecting itself in the event the provider has a breach.”

Organizations also have to remember that U.S. privacy laws are fluid. The expansion of privacy laws in several states, including Arizona, Colorado and Oregon, sweeps in some personal data that was not previously within the scope of the law. Under Colorado’s new privacy law, effective Sept. 1, Colorado’s definition of “covered entity” is so broad that it effectively covers every business “that maintains, owns or licenses personal identifying information in the course of the person’s business, vocation, or occupation.”

As Gordon notes, “Employee benefit data outside the scope of HIPAA may qualify as protected data under many of these new laws.”

A company should also ensure that proper cyber governance is in place at the board and executive levels. The Marsh report indicated that 83% of healthcare respondents relegated responsibility for cyber risk management to the IT department. Across industry sectors, only 70% assign cyber risk management to IT, which indicates the sector with the highest risk—healthcare—has the poorest cyber governance practices.

A key component of cyber risk management involves purchasing adequate cyber insurance to transfer risks associated with an attack. Less than half of Marsh healthcare respondents indicated they have cyber insurance coverage, while the industry average is only 34% (by contrast, 52% of the financial industry reports having cyber insurance).

All too often, the risks associated with benefit data are not adequately factored into cyber risk management. Agents and brokers should work with their clients to evaluate the benefit data they have and conduct risk assessments to determine their loss exposure and the types of cyber coverage that will best protect them.

Westby is CEO of Global Cyber Risk.

At times it has been tagged (for the most part unfairly) with the moniker “NAIC: No Action Is Contemplated.” We could talk for hours about issues on which the regulators should have moved faster…or not moved at all. But one arena in which regulators are trying to move with due haste is technology—and the related regulatory innovation made necessary by technological change.

To be clear, the NAIC is not where the industry is, and it has