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.

Sensor Alert

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

Blockchain Ecosystem

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

Catherine Zeta-Jones and Sean Connery

The Bond of Insurance Fraud

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

Medical Model

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

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

Quiet Your Mind

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

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

Fit for Service

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

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


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

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

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

Government Policies

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

Investing in Emerging Economies

A World Bank case study in insurance-driven investment.

The Trading Game

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

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


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

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

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


Read the Sidebars

Investing in Emerging Economies

Government Policies

Relationships Still Matter in a Tech-Driven World

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

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

Flexible Leadership

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

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

Meeting Between the Aisle

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

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

Asking for a Friend

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

D&O in the Crosshairs

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

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

Today’s Leadership Challenge

Take a step back and reflect…on you.

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

Still Underwater!

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

Eliot Spitzer

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

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

Napa Valley After Hours

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

Bogota, Colombia

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

Open for Business

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

New Beginnings

Our dynamic magazine is under the direction of new blood.

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

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. fionasoltes@aol.com

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. megan.thom@hakco.com

McDaid is The Council’s SVP of Leadership and Management Resources. elizabeth.mcdaid@ciab.com

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. phil.trem@marshberry.com

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

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. ssinder@steptoe.com

Jensen is a senior associate in Steptoe & Johnson’s GAPP Group. kjensen@steptoe.com

Gold is an associate in Steptoe & Johnson’s GAPP Group. cgold@steptoe.com

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. westby@globalcyberrisk.com

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. russ@russbanham.com

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. tammy.worth@sbcglobal.net

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. phil.trem@marshberry.com

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

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. richard_polak@ajg.com

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. shayward@thecampbellgrp.com

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. vladimir.gololobov@ciab.com

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. westby@globalcyberrisk.com

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 some catching up to do. That said, it’s unrealistic to expect government regulators to be as agile and entrepreneurial as the private sector. They view their role differently: to protect consumers and foster a strong marketplace through solvency and market conduct regulation.

Logically, this means they will be reacting to industry and marketplace activity—and thankfully so—not leading it. But it also means they need to be prepared. Regulators realize they need the tools to understand how new technologies work, and they can’t be seen as holding up progress because they aren’t up to that task.

So what has the NAIC been doing to get there?

The regulators started the year by adopting and publicizing their latest three-year strategic plan. Titled “State Ahead”—get it?—the plan is designed to focus the association’s efforts on developing itself into a hub of technology and innovation resources for the state insurance commissioners and their departments. The organization is aiming to be a nexus of innovation for the states, capable of providing the expertise and support the states will need going forward.

Strategic plans sometimes overdo it by focusing on everything, and “State Ahead” is guilty of that to some degree. And while many specific priorities are not concretely defined, the document, both in its overall message and in some of its specific goals and objectives, does provide helpful direction to the NAIC in terms of the use and development of resources.

The association already has a lot of data and sophisticated technology. It has the largest insurance database in the world and, with the National Insurance Producer Registry, holds millions of financial, licensing and other records of insurers and producers, all in electronic form.

The plan directs the organization to bolster its use of those resources and to be more agile in its application and development of technology, continually innovating to stay current and to provide the help the states need to stay current.

In terms of what specifics are there, the NAIC will continue to use the Center for Insurance Policy and Research to analyze and educate regulators and others about insurtech and corresponding regulatory innovation.

The center and the NAIC’s Innovation and Technology Task Force have highlighted individual insurtech start-ups and what they bring (or might bring) to the sector. Much of their focus has been on personal lines and consumers—new smart phone apps and streamlined claims processes, for example. Their interesting presentations tend to demonstrate that insurtech is really an evolution, not a revolution, for the industry.

The task force also has continued its discussion of regulatory sandboxes. There isn’t much support for the concept structurally, although some states are comfortable with providing more regulatory flexibility to integrate new technologies and concepts into the insurance marketplace. As a general rule, however, regulators don’t like to be seen as loosening the rules or favoring some players (such as insurtechs) over others.

It doesn’t look like there will be a uniform state approach or a model act any time soon.

Cyber security continues to be an NAIC theme this year, even beyond its mention in the strategic plan, which directs the association to create a cyber-security insurance institute. (It’s not clear what they’re going to try to do there.)

The NAIC adopted its Insurance Data Security Model Law last fall, moving the issue onto an October conference call instead of holding it for its fall national meeting in order to give regulators a chance to incorporate the model into their legislative proposals for the 2018 state legislative sessions. Only one state, though, ended up enacting the model this year (thank you, South Carolina). Efforts in several other states failed, but we expect renewed efforts to enact the model in those and several other states in 2019.

Speaking of next year, the ranks of the state insurance commissioners are likely to change significantly after the 2018 elections. Four states—California, Georgia, Kansas and Oklahoma—are electing new insurance commissioners this year. The commissioners in those states are either retiring or term-limited. And 36 states are holding gubernatorial elections. As of this writing—prior to election day—we don’t know how much turnover there will be in the governors’ ranks, but a number of races are predicted to be toss-ups. In several, a change in party control is likely. In many cases, the new governor is likely to install a new insurance commissioner, bringing change and new blood to the NAIC’s ranks and providing new challenges for its leadership and staff in implementing their “State Ahead” plan.

Sinder is The Council’s chief legal officer and Steptoe and Johnson partner. ssinder@steptoe.com

Fielding is The Council’s general counsel and lead advocate at the NAIC. john.fielding@ciab.com

Can you speak to the overall conversation at this year’s event, and how it’s changed over the past three years? Where do you see it going forward?

If we think back to three years ago when we first began, the audience makeup was predominantly early adopters—and who are the early adopters? The early adopters are the investors, the insurtechs and a handful of the forward-thinking—primarily carriers—who are seeing this happening. By and large, it was very early adopters, which meant tech-first, investor first.

“Insurtech” is made up of two things: insurance and tech. We always wanted, from day one, for this to be an insurance show. Tech can be a lot of things, but it’s only as powerful as the people that wield it. For us, insurtech only exists not because of tech but because of insurance. For us, one of the things that’s the most gratifying, and one of the things we always hoped for, was insurtech’s adoption by the broader insurance industry. It’s not just a trend, it’s a movement.

Do you see this conference growing in the same way it has in the past three years?

Insurance is still so large and there is still so much that can be improved that we see no reason why the conference can’t continue to grow. But it’s not about size. For us, it’s about the relationships. There’s a reason this isn’t webcasted, there’s a reason this isn’t a virtual conference. There’s a magic that happens when people are in the room. Our priority from day one has always been quality over quantity.

A lot of emphasis has been on carrier innovation. Where do you see the broker’s role going forward and how do you see ITC engaging with the broker in the future?

I’m glad you asked, because if there’s one thing we’ve become more and more convinced of, it’s that the role of the broker is an essential element to the industry. As we enter into next year, making sure that we can understand and serve their needs is one of our top priorities as we go into the next year and the years to come.

Would you say you see more of an emphasis from your sponsors and attendees on the broker?

I think we’re finally getting there. It won’t surprise anyone the emphasis has been on SMEs, as SMEs are expensive to serve with a human being. And I think that’s where some of the disruption conversation has been misunderstood. People have said, “Oh, I’m taking out the broker or the agent”—they’re really not. They’re actually finding a way to serve a customer that today is too expensive to serve and is actually better served in a self-service manner.

I think we’re finally reaching a point now where enough insurance knowledge has come into the space that people are starting to understand what the real problems and pain points are in the industry. There’s a certain level of sophistication we have to get to and I feel like we’re getting there and that’s exciting.

You come from outside the insurance industry. How has your perception of this industry changed over the past three years and how do you see the role of the trusted advisor as well as the role of carriers evolving?

I’m excited for next year, because I will understand this topic that much better. The trust advisor piece is easy for me to answer: we see time and time again, that when there’s complexity, there’s a need for a trusted advisor. And when there’s choice, you need a trusted advisor. You need that one person that has your back and can fight for you, and I think that keeps everyone in good shape.

Going forward, do you see any opportunity to work with associations like The Council? Where do you see the biggest opportunity for Council members in this space?

To hear what your guys want is what really gets me excited. There are a whole bunch of companies out here at ITC that would alter what they were doing if they had the insights that associations like The Council have into their members. Because what they want to know is, “What does this customer base want?” They’re an idea in search of a customer right now, but you could have instead “I have customers with a problem, so we’re going to give you some good ideas.”

What’s disruption versus collaboration? Investment versus partnerships? How has it changed and what do you see?

I think disruption has been vague. Insurance is, at its core, a mutual peer-to-peer platform. That’s why even if you create the most optimal peer-to-peer platform, it’s not so much disruption as it is improvement. I think a lot of people have a positive view towards it, rather than being scared.

In terms of investment versus partnership, day one everyone thought if we’re talking about a startup that means investing in them, but now they’re looking at startups as a service vendor or service provider. That fundamentally has changed the way everything works.

Plug & Play has a heavy focus on pre-seed or Series B investments. Are you thinking of moving upstream to invest in more established companies?

We’re an early-stage investor, and we figured out early on that to be a good investor we need an ecosystem. What the ecosystem does is provide insights into who to invest in and traction for the companies we work with. We currently work with over 10,000 insurtech startups across 14 industries and different stages. Through that, we try to engage them with our corporate network and decide who would benefit most from investment.

You’re having your Broker Age event on November 15. What made you want to become involved in the space, and where do you see specific opportunities in broker-focused innovation?

It didn’t take us that long to realize how important brokers were in completing our ecosystem.  We see a lot of values in collaborating with brokers and agents—the people who are in the middle. We can get more access, more insights—they have a lot of relationships… The problem is, sometimes, a lot of the smaller firms don’t have the resources to collaborate with Plug & Play on a direct level, so we needed an event that could talk to everyone, not just the Marshes, Aons, Willises.

How many brokers are you expecting to attend? Who are you targeting for this event, and what insurtechs in the broker space will be attending the event?

The big brokers will definitely send a lot of people, but we’re also working with associations and carriers to bring other people. I imagine it won’t be too many people—we want a focus on dialogue.

When you’re looking at potential investments, what is your decision strategy?

Our model is built on seeing which startups get traction with our ecosystem. We outsource a lot of our due diligence to the partners we have, on the broker side or the carrier side. There are also a few key things that we focus on—for me, the team involved is number one.

When you’re looking at the team, are you looking at whether they have both tech-focused expertise and insurance expertise? Do you take that into consideration?

We see a lot of startups that are headed by entrepreneurs but bring in people with extensive experience in the industry as someone VP-level that can fill the knowledge gap. As long as someone is passionate about doing something and is willing to put in the hours, a lot of problems could be solved. Having the tech in-house is very important, though, because it’s not something to outsource if you’re a tech startup.

The best combination would be balance: someone that’s business-savvy, someone that has knowledge of tech, someone that has knowledge of insurance. But sometimes you don’t have all the pieces.

If you could offer the mid-market broker one piece of advice on how to become more involved in the insurtech industry and how to incentivize innovation from within, what would it be?

Based on our experience working with brokers, innovation from within is about changing the process as it is today, but a lot of the times brokers would like to serve their clients better. Engagement with the insurtech industry with an open mind and being willing to commit time to it is really what drives the excitement that itself drives a culture change. Everything else follows from that.

Can you give any examples of any companies in the broker space you have an eye on?

We recently made an investment in Broker Buddha. They’ve proved their value by partnering with some of the big names in the space, and they’re slowly providing more and more value to the space. And then you have companies like New Front Insurance or ABE—I like their model a lot. It’s a very smart model, but very disruptive for the bigger firms. Companies like Indio and Bold Penguin have also made their mark.

A lot of the other technologies that clients are interested in is client technology, which means enterprise tech. It could be HR, or IT—a lot of the benefits brokers are interested in HR tech, which has nothing to do with insurtech.

How has/will IT change the basis of competition in the insurance industry?

We look at the emergence of Fintech within financial services as a good indicator as to how insurtech companies will impact the insurance ecosystem. While in both instances many startups initially tried to disrupt incumbents, partnerships ultimately created many of the most successful companies.

We believe as a whole, the relationships between all parties within the industry are integral and here to stay. That being said, the introduction of cutting edge technologies does put pressure on existing participants. This will eventually force innovation that improves the overall customer experience. There are many processes within insurance that can be advanced through the implementation of new technologies.  Improving the purchase and servicing of policies, streamlining communication and creating new insurance products are areas we believe technology will have the greatest impact on.

Coming from an insurance background, where did TowerIQ first see opportunity in the broker space? What did you choose this segment and what aspects of the commercial insurance value chain does TowerIQ target directly?

While this may be a bit biased since one of my co-founders is a former broker, we have long been believers that brokers and agents provide unsung value within the industry. We picked up on inefficiencies such as redundant data entry and outdated forms of communication that we believe can be greatly improved.

At TowerIQ we focus on improving all commercial insurance from small business to large enterprise, whether that be the application to binding process or certificates of insurance. We prioritize giving the insured a modern and more knowledgeable experience while buying coverage or requesting services. On the backend of our technology, we standardize all forms of insurance data so that it can be easily ingested by carriers. This creates greater efficiency within a brokerage or agency, improves client retention and most importantly allows employees to get out from under paperwork and data entry to better serve their clients.

Can you talk a little more about your product, and how TowerIQ aims to enable the broker? Opposed to disrupting commercial insurance.

We are partnering with brokers and agencies with the goal of modernizing the insurance buying process, rather than completely disrupting the system. Since every broker's workflow is slightly different we are building a flexible platform that allows any size brokerage to start eliminating overly complex or outdated spreadsheets, PDFs and survey forms.

By digitizing many of these processes we are able to provide our partners with more analytics and insights into how their people and books of business are performing. This allows brokerages and agencies to become more targeted in their prospecting and hiring processes.

Can you speak to the value of partnerships in the insurtech space? What is TowerIQ’s current investment/partnership strategy and where does it find the most value, capital or strategic partnerships? Are there any brokerages that you are currently collaborating with?

This is a great question and one that we spent a lot of time discussing. We are huge advocates of partnerships because we believe the existing relationships within the ecosystem are what created such a long period of sustained success. Our goal has always been to be a neutral communication layer within the insurance industry. We were fortunate enough to raise capital from some of the top fintech and insurtech investors in the country, but avoided raising from any industry participants. We believe that this unequivocally allows us to remain a trusted agnostic software solution.

At the end of the day we want to improve the experience of the insured, brokers and carriers through more efficient use of data and communication. We are partnering with everyone from carriers, brokers, AMS systems and third-party data providers to make this a reality.  

What is the most important thing that you are working on right this moment and how are you making that happen?

At the moment we are taking a two-pronged approach in anticipation of our enterprise launch in January. On one hand, we are working hard to nail the user experience, whether that is the broker, client or carrier. Design and usability are of the utmost importance and we are tapping into our partners to get constant feedback on how this can be improved and what features make their lives easier.

The second focus is on data standardization it's extremely important that we keep data clean, accurate and easily ingestible. We are tackling this with a fantastic technology team that is implementing a variety of machine learning technologies at the core of our product.

RiskGenius uses artificial intelligence to allow brokers to better understand policy language and create more efficient underwriting workflows. Can you provide a brief case study on how RiskGenius’ technology aided the broker and ultimately created a better end experience for the client?

I was reviewing an example this morning. Imagine you have an insurance policy from Carrier A and a proposal (or quote) from the same carrier. Often times (too often) there are discrepancies between what was quoted, what gets negotiated and what ends up in the final policy (most carriers have this issue). With our GeniusCheck software, I was able to identify that a form that was included in the proposal never made it to the bound policy. Identifying these types of errors can reduce errors and omissions exposure.

What is RiskGenius’ current strategy around forging partnerships with brokers? How important is raising capital vs. establishing broker relationships?

We are focused on partnering with brokers that want to bring automation to back-office operations. We have some amazing financial partners (like QBE Ventures) that have supported our mission to organize the world's insurance policy information. We like to partner with brokers that are willing to work with us to find problems and solve them with machine learning technology. I believe the commercial insurance market, particularly on the broker side, has been vastly underserved by technology firms. It's time that changed. 

What is the most important thing that you are working on right this moment and how are you making that happen?

At the moment, I am thinking a lot about how we standardize insurance data. When we first launched RiskGenius, we focused on categorizing insurance clauses (e.g. Exclusion - War). Now we are about to introduce a new Insurance Naming Taxonomy for labeling clauses; I think it's groundbreaking and is a game changer for simplifying insurance language. We are also undertaking a similar categorization process for numerical values, like Limits, Deductibles, and Premiums. Once this categorization is in place, we will be able to automatically compare quotes across carriers.

According to Scott Ham of McKinsey & Company, small business is said to be over a 40 billion dollar market, and still remains underinsured, suggesting a wealth of untapped opportunities for brokers and insurers.

Ilya Bodner, founder and CEO of Bold Penguin, said that his firm was taking a more broker-focused approach by providing an online marketplace so brokers can spend time on what really matters: serving as the trusted advisor to their client. On the other hand…

…James Hobson of Attune, Guy Goldstein of Next Insurance, and Ted Devine of Insureon said their efforts focused on going direct-to-consumer and disintermediating the small business segment. Goldstein in particular had a particularly “disruptive” outlook: he believed agents, especially in the small business space, are the most ripe for disruption and may not even exist in the next 5 to 10 years.

However, one thing they could agree on was that in the end, the most important thing in small commercial is smoothing out the customer experience and removing the friction in distribution. And with the exception of Goldstein, all panelists believed that brokers are here to stay, even if the “agent of the future” will take a different form. Bodner even pushed back on the idea that agents may become obsolete in the future, declaring that though the agent of the future might work through different models or under a different definition, agents will always play a role as the trusted advisor, and there will always be areas of insurance “that are too complex to fit on a 4 inch screen,” especially as you move upstream.

The key question—and there is no clear answer—was whether these new and innovative solutions in the small business segment will be able to move upstream to underwrite, price and sell larger risks. Ham’s view was that the winner in this space will ultimately be the incumbents as they move from learning from innovative models, to building their own and partnering with innovative solutions.

Highlighted at the panel was the fact that insurtech is not one solution or one segment, and there is opportunity in both the small and large risk segments. And the reason innovation is hard, said Drzik, because the insurance industry is so complex, and tying new innovations into legacy systems poses a number of challenges—not to mention the fact that outside players often do not understand the regulatory aspect of selling (re)insurance. However, Drzik emphasized that making the transition to digital would allow for streamlined communication and connectivity; and that transition would be easier, added Hendrick, if startups, carriers, and brokers all worked together to help achieve it, thus bringing the discussion back around to the ongoing theme at ITC of “collaboration over disruption.”

Drzik and Hendrick were then asked if they thought any areas of innovation suffered from the curse of too much hype. Both agreed that the one area that stood out in this case was blockchain: AXA XL is working on a blockchain cargo product, Hendrick said, but it’s hard to use blockchain across all industry segments. While blockchain may be overhyped from a “timing” perspective, explained Drzik,technologies includingblockchain,AI, telematics and machine learning can all have an effect on the industry. Nonetheless,  blockchain is likely a“longer term bet” in contrast to AI, which could have an immediate impact in the next year.

Nevertheless, “no matter how much tech we have and how we evolve, we will always be in a people business,” Hendrick said. “We will be investing in and focusing on talent for a long, long time.”

According to her, one of the key ways the insurance industry can attract millennial talent is by engaging them; people with extensive experience in the insurance industry, wise though they may be, she said, have a tendency to give advice, rather than ask for it. But by seeking the insight and opinions of the younger generations—all of whom have grown up steeped in technology, which can spur innovation—the insurance industry can begin to make itself into a more open, welcoming, and attractive sector for young professionals.

Beale also emphasized the importance of the human element in insurance: “When I arrived at Lloyd’s, I realized I wanted to keep the uniqueness of the trusted human relationships. The trust has to be there. Technology will be at the heart of everything but the human element will still play a critical role.” Like many others at ITC, Beale believed that though insurtech will certainly transform the way brokers do business, it would be very difficult to replace them wholesale, due to their extensive, specialized knowledge. She offered an anecdote to highlight that, telling the audience about how she had invited a group of insurtech professionals to Lloyd’s early in her career and asked them to “disrupt us.” “They came for an evening,” she said, “and then we never saw them again. Insurance is just too complex, too daunting.”

But Beale acknowledged that insurance is in need of modernization. And one of the ways that the insurance industry can tackle that, according to Beale, is through collaboration and compassion. “The problem with our sector is we don't often think about the people that we’re serving,” Beale said. “Somehow we have created a monster and it’s time to turn it on its head for our customers and think about providing some certainty of protection.”

Because in the end, what would the insurance industry want for their customers? “Well,” chuckled Beale, “if they could enjoy buying insurance, that would be a start, wouldn’t it?”

What does SMA look to achieve at ITC this year?

Every year we send more people, and this year we have a booth as well.  Our strategy is twofold – gauge the pace change happening in our industry and expand our insurer network.  There is a lot of hype and noise, but under it all – there are successes and stories of lessons learned.  Between the conversations at our booth and formal meetings and dinners, we hope to gather new insights and validation on what is hot, what is not, and the speed of the momentum on innovation, transformation and insurtech.

What are the most important shifts you see in the investment strategies of the commercial p/c insurers this year?

The three major shifts in commercial around first the clarity of strategies, plans and investments on small commercial with overlaying of digital transformation investments.  Insurers are leveraging many emerging technologies like artificial intelligence, new customer experience technologies, and new data sources and advanced analytics to expand self service capabilities, and helping agents/brokers with servicing. And the third is expanding risk management services to the middle market, and deepening the agent/carrier relationships as well. 

The annual SMA Summit: Transformation in Action just took place on September 17 in Boston. What were your big surprise takeaways?

Our 7th annual summit was a reflection of the transformation that is occurring in insurance.  Seven years ago, we were defining big data, social media, cloud, and innovation. This year, insurers presented and shared stories on their maturing innovation initiatives, changing business models, and transforming the customer experience.  Artificial Intelligence and digital platforms were the two common technology highlights, and the SMA partners shared insights on the new era of computing.  The big surprise is the acceleration of change in just one year.

From a broker perspective, how has the conversation around insurance innovation changed since the conference began 3 years ago?

Arguably, innovation wasn’t much of a conversation 3 years ago.  With the rise of insurtech, we are not only talking about it but strategizing about it.  We now have a market to access to help us address opportunities and solve business problems in ways we never could in the past.

What is M3’s current strategy around insurtech and how do you plan to leverage this year’s InsureTech Connect conference?

Our strategy is to focus on three areas: customer experience, effectiveness, and advisor-enabled solutions.  It’s not accidental that all three areas have a direct and positive effect on our customer.  Each time we attend this conference we focus on solving business problems, first, in these three areas, and seek technology providers that solve them.  By first understanding the pain points, it gives us a great lens into the real needs along with a set of criteria by which to assess a fit.  All this together allows us to have very targeted conversations that translate into great progress.

What is M3’s story around technology? What is the key message your organization is communicating to business partners and clients?

Our message is simple.  Insurance shouldn’t be hard, and we are actively involved in making this a reality. We are working to implement broker-enabling solutions. Our focus is how we can lead the change on behalf of our customers.  We see this movement as a positive and play an active role in reimagining an improved client experience.

How has and will IT change the basis of competition in the insurance industry?

While we all have access to the same set of technology, there will be differences in what we do and how we do it.  This will result in deeper differences between our competitors.  The legacy operational systems of IT are table stakes, and the current and future role of IT is to be innovation advisors to the agency.

As actor Russell Crowe says of Sydney, Australia, “There’s an ease that I have living in Australia. The best things about Sydney are free: the sunshine’s free, and the harbor’s free, and the beach is free.”

Crowe definitely has the pulse of Sydney. Yes, Sydney is a global city. International banks and multinational corporations have based their regional headquarters here, establishing the city as a financial hub in Asia Pacific. You could plunk down celebrated Sydney restaurants like Firedoor, Momofuku Seiōbo and Ester in culinary capitals like New York City, and they’d be right at home. On any given day, you can see world-class opera, ballet, classical music and theater at the iconic Sydney Opera House.

With more than 70 harbor and ocean beaches in the metropolitan area, Sydney feels like a big beach town. If you’re planning a trip to Sydney for business or fun, carve out time to explore the beaches, preferably by foot. From Palm Beach in the north to Cronulla and the Royal National Park in the south, Sydney’s Pacific coastline boasts some of the most beautiful trails you’ll find anywhere. One of the most impressive is the Bondi to Coogee walk on the east coast. Shy of four miles, it can be completed in two hours, but there are plenty of reasons to linger along the way.

Begin at the Bondi Icebergs Club, where you can swim laps in the ocean pool or have a cocktail and seafood at the Icebergs Dining Room and Bar on the second floor. It has a bird’s-eye view of the swimmers and a nothing-but-blue-water view of the ocean. Stop to see the aboriginal rock carvings of a shark and whale as you follow the paved path to Mackenzies Point (an ideal whale-watching spot from June to November). Round the headland to reach Tamarama, known locally as “Glamarama” because of the well-to-do locals who frequent the beach. It was once an amusement park with exhibits of sharks, seals and one penguin; today, you can explore its rock pools and watch serious surfers.

The next stop is Bronte, another upmarket Sydney neighborhood. Here, you can swim in Bogey Hole, a naturally sheltered rock pool best accessed between high and low tides. There’s a row of very good restaurants behind the park, where you can pick up fish and chips to eat by the beach, grab a flat white to go, sit down for brunch, which the Aussies do very well, or enjoy a glass of wine at an outdoor café.

The scenery is quite dramatic as you continue onto a boardwalk, where the next landmark is the historic Waverly Cemetery, the final resting place of famous Australians like poet Henry Lawson. The boardwalk ends at Clovelly, where you can play a game of lawn bowls at the Clovelly Bowling and Recreation Club before the steep climb over to Gordons Bay, a remote cove of fishing boats accessible only by foot or water.

The walk around the next headland brings you to Coogee. Offshore, Wedding Cake Island protects the beach from ocean swells, making it the calmest surf along the walk. Reward yourself with a piece of wood-fired pizza or an ice cream at one of the cafés along the promenade.

In Wild Oats, a new widow is supposed to get a $50,000 life insurance check. The company writes it for $5 million instead. Thus begins the adventure for Shirley MacLaine and Jessica Lange, who play a geriatric Thelma and Louise.

Oh, they do call the Beneficial Insurance Company to report the mistake but only to get tangled in a long and frustrating taped telephone web where no actual humans are ever available to talk. So they take the money and run to the Canary Islands, where they meet a charming elderly con man (Billy Connolly) who preys on wealthy widows. 

When Beneficial discovers the error, they send their oldest, palest, weakest, most ineffective employee (Howard Hesseman) to get the money back. He lands in the Canaries, and hilarity ensues as the ladies struggle to keep the cash away from both the insurance man and the con man.

The happy ending belies the backstage struggles. The film was five years in the planning, and the production began $500,000 in debt. Gran Canaria made the lowest bid for the resort scenes. Filming would pause now and then because the production ran out of money for simple daily expenses, like taxis. The actors and crew deferred their salaries.

MacLaine called it “amateur hour” in a book she penned about the experience, titled Above the Line: My Wild Oats Adventure.

The book may have made a profit. The movie did not. First aired on Lifetime, it spent two weeks in limited theaters and then went off to DVD and streaming land. The budget was estimated at some $10 million, and the total worldwide gross came up to $242,312. But Shirley MacLaine, at least, was able to turn Oats into some bacon.

For many of us, beach trips and barbecues define our summers. But for thousands of young adults, summer is also internship season. Every year, companies around the country offer summer positions to college students who are looking to gain experience in a potential future career. Companies benefit from finding rising talent and engaging them in their business, which can lead to full-time employment once they graduate. But getting these interns in the door isn’t always easy, especially for an industry that is so often misunderstood.

Companies such as Google, J.P. Morgan and Nike have the advantage of a name-brand reputation and other vast resources to recruit highly qualified interns. Many college-age students don’t understand the insurance brokerage industry, which often leads them to overlook the opportunities that a brokerage provides. Because of this, recruiting summer interns at brokerage firms often comes down to relying on personal connections or sifting through piles of résumés. These aren’t always the best ways of finding top-notch interns, so taking a new approach to recruiting is vital.

“There’s not a lot of people in college who are going to say, ‘I’m going to study insurance’ or ‘I’m going be an insurance agent,’” says Noah Exlerben, a student at Michigan State who interned with Sterling Insurance Group’s sales department over the summer.

Ironically, once students are exposed to all the industry has to offer, many of them can envision insurance as a potential career. This summer, in a survey of nearly 100 interns at brokerages across the country, 92% answered “yes” or “possibly” when asked if they could see themselves having a career in the insurance industry or a full-time job at the firm of their internship.

In One Ear, Out the Other

The experience of an internship can be instrumental in shaping graduates’ opinion of the industry. About 75% of interns in our survey said their view of the brokerage industry had changed since starting their internship. But how do you shape that view before those internship decisions are made?

“I think there’s a disconnect between the younger generation and the insurance industry,” says Evan Barclay, a student at the University of Toledo and an accounting intern at Hylant this summer. The brokerage industry, he says, “gets written off as this old-fashioned, boring or unnecessary service, which obviously it’s not.”

I think there’s a disconnect between the younger generation and the insurance industry.

Evan Barclay, University of Toledo, Hylant intern

To Barclay, counteracting this perception requires different ways to explain the business of insurance. He suggests going so far as to change and simplify terminology within the industry, and he says trying to show a younger side of brokerage will help gain the attention of more young people. “Hearing about policies and claims,” he says, “goes in one ear and out the other.”

Changing common perceptions is not an easy task, but embracing trends in technology and media can help to make that message clear.

“When it comes to social media, I don’t see anything about insurance,” says Kyle Andrew Campbell, a student at the University of Virginia who worked as a sales intern at Marsh and McLennan this past summer. “When I turn on the TV, I’ll see an insurance commercial. But if I’m watching a YouTube video, or on Twitter, or on Facebook or Instagram, I don’t see any social media outlets or advertisements concerning insurance. A social media effort to show exactly what the insurance industry is about would be very beneficial.”

Campbell also says focusing on the tangible benefits the insurance industry provides would greatly improve the common perception of the industry. “When it comes to changing that mindset that insurance is a necessary evil,” he says, “it could be something like an informative advertisement that explains that insurance is the reason we can sleep at night. It’s the reason that we don’t have to worry when we go to the doctor’s office. When we drive our cars, if we get hit, yes, it stinks. But we have someone watching our back who is going to help us through this. I think that’s the one part as individuals or as an industry that we don’t stress enough.”

Sales or Nothing

Brokerages are big, dynamic organizations with myriad opportunities that could appeal to a wide range of interests, but that variety isn’t always apparent.

“I think one of the biggest misconceptions about insurance is that it’s sales or nothing,” says Kaylin Renfro, a student at California State University, Chico, and one of InterWest’s summer interns who worked mainly in the sales department.

Interns are looking to gain experience in a field that can become a career. As our research demonstrates, marketing the variety of opportunities within brokerage firms could show students there’s much more to a brokerage than strictly sales and account management. Offering internship opportunities in human resources, marketing and IT, for example, could greatly increase the intern recruiting pool.

When I turn on the TV, I’ll see an insurance commercial. But if I’m watching a YouTube video, or on Twitter, or on Facebook or Instagram, I don’t see any social media outlets or advertisements concerning insurance.

Kyle Andrew Campbell, University of Virginia, Marsh and McLennan intern

Allowing interns to rotate through different departments can also increase their interest in the firm through exposure to different aspects of the industry. Even if they don’t find every department interesting, a rotation will likely help them identify their strongest interests.

“If you have an internship that’s going to expose you to everything, you might not enjoy all of it,” Renfro says. “I did not particularly love workers comp, but I’m thankful that I was exposed to it, and being exposed to all of it really showed me the area where I caught on a little quicker. For me, that was employee benefits. I kind of just understood it faster than the other areas, and it also gave me a direction about the area that I was going to be happy in.”

And for those who are considering the sales path, there’s still opportunity to shift perceptions of what this career is all about. “I think building a book is super exciting,” Exlerben says. “Being able to look back 20 years down the line and say, ‘Hey, I did that. I have all of these relationships, and I’ve successfully maintained all of this business.’ That’s what excites me.”

As Exlerben shows, even known careers can be seen in different ways. He was drawn to the interpersonal aspect of the sales role. Highlighting that aspect of the job could spark new interest among interns considering this path.

Back to School

Figuring out exactly where to market to potential interns can be just as difficult as figuring out what to market to them. Many college students find internships through personal connections, but recruiting interns through these connections can sometimes be limiting. To access a broader base of students, it may be worth meeting them on their turf.

“If you’re trying to increase the workforce for the insurance brokerage industry, you’re going to need to really heavily recruit on campus,” Barclay says. “That’s what everyone else is doing, and there’s some real competition there.

Every other industry is pushing on college campuses by having tables, connecting with students and creating events, and that’s how they’re getting their pool of interns and their eventual pool of full-time offers.”

Being able to look back 20 years down the line and say, ‘Hey, I did that. I have all of these relationships, and I’ve successfully maintained all of this business.

Noah Exlerben, Michigan State, Sterling Insurance Group intern

Participating in job fairs, setting up informational tables in the student center and hosting events on campus are some of the best ways to reach potential interns in an environment they’re comfortable in. About 36% of interns surveyed indicated they prefer to search for internships at university job fairs, while 39% said they usually use personal connections. About the same percentage of college students look for jobs through their school as those who look through personal connections, so colleges provide a huge pool of potential talent.

Recruiting at schools also allows firms to better target what kind of interns they would like to fill the position. A firm looking for a marketing intern can actively recruit at a school known for its stellar marketing program. This approach enables firms to fill more specialized intern roles and thus attract to the brokerage industry interns with a variety of skills. The companies that get the best interns often are the ones that distinguish their campus recruiting strategy from the rest of the crowd.

“At my college, they do a mock interview process,” says Lauren Czeshinski, a student at Loras College who has interned with Cottingham & Butler for two summers. As a first-year student, she participated “just for the heck of it.”

Among the companies taking part in the mock interview process was Cottingham & Butler. “At the end of it, my team wound up winning,” Czeshinski says, “and the feedback I got from them was, ‘Hey, we don’t usually hire freshmen, but we’d love to hear back from you in the future.’”

So Czeshinski kept in touch with the Cottingham & Butler recruiter. “And when it came time to interview and apply,” she says, “I ended up applying, and I started my sophomore summer.”

Czeshinski wound up sticking with Cottingham & Butler for an entire year, as their office was close to her school and she had time to work during the academic year. Last summer she returned for her second full-time summer internship with the company. Not only did this strategy help Cottingham & Butler stand out alongside other major companies recruiting on campus, it also helped establish close relationships with potential interns and develop their interest in the industry.

There are so many positive aspects of the insurance brokerage industry that can be used to attract qualified interns. Increasing recruiting efforts will help bring in young talent, and it’s not inconceivable that last summer’s intern could be next summer’s top young producer.

Cella is a junior at Tulane University. scella@tulane.edu

Johnson is a junior at Temple University. jmone426@gmail.com

Schoonhoven is a senior at California Baptist University. tess.schoonhoven@gmail.com

Stiller is a senior at Elon University. rstiller@elon.edu

“Each farmer has a little bit different structure as far as their debt loads,” explains James Korin, president of NAU Country, which offers crop insurance through QBE. “Whether they own it outright, whether they are buying new land or need equipment, everybody needs a little bit different coverage to get their operating loans from the bank.

“It’s a complicated program, but that’s what makes it successful because there is a choice for everybody. There’s not one policy that every farmer must fit into. There’s more than 100 different crops and literally hundreds of different options on coverage they can take.”

The ability to effectively serve such a diverse group requires deep expertise in the industry itself, and as the third largest crop insurer in the country, QBE takes this quite seriously.

“In our crop business the team lives and breathes the American farmer, and, in most cases, our people are farmers themselves or grew up on a farm,” says Russell Johnston, CEO of QBE North America.

Korin echoes the sentiment. “We’ve got close to 800 employees working in our crop unit. They’re either part-time farmers, farmers themselves or people who grew up on a farm and are looking to stay in agriculture,” he says. “The crop program is unique. It requires knowledge of crops when you’re going out to talk to the farmers. That even includes our programmers, where we design and develop all our computer systems. We get a lot of those folks out of either ag colleges or right off the farm, and they come in and do the programming. They understand the crops and the cycle. That’s important because, if you’re trying to build a system that works for the American farmer, you have to know what you’re building.”

Broker Specialization

QBE’s approach to farming is indicative of its overall strategy of limiting partnerships to agents and brokers it knows are compatible with its focus. This strategy allows QBE to get to know its brokers on a deeper level and gives its partners access to products and services that are distinctive and exclusive.

QBE North America, part of QBE Insurance Group, is an integrated specialist insurer offering specialty, property and casualty, crop and reinsurance products.

“We set out to create a company that would offer integrated specialized solutions for a limited and preferred network of brokers. That approach allows us to build the strongest partnerships with our brokers and customers so we can better understand their needs,” says Johnston. “At the end of the day, if we are doing our jobs, our brokers and customers won’t feel like they are dealing with an insurance company. They will feel like they are dealing with an extension of their company.”

QBE North America is sharpening its focus on industry solutions, and the brokers it chooses to work with emphasize specialization as well.

“We see our partners making tangible investments to shift from generalization to specialization,” says Mark Cantin, president of QBE North America’s field operations. “They are looking for carriers that can match the specialization on their side, and at the same time, they’re looking to do more with carriers that are willing to customize products to help them grow organically.

“What that goal leads to is brokers’ needing to rationalize their book of business and conduct more business with fewer carriers. They want carrier partners who are going to provide them with bespoke solutions rather than simply quoting product.”

QBE North America believes that shifting from generalization to specialization can help brokers better serve their clients—farmers being a case in point.

Data Farm

Moving forward, QBE is innovating and investing in technology that will drill down even further into the specifics of farmers’ needs. “There clearly has been an explosion of data,” Korin says. “We’re using that data just as farmers are using it in their planting and harvesting equipment. Five to 10 years ago, the geospatial industry was just taking off. Our innovation in mapping goes back to the time Google maps was just taking off. Up until that time, farmers needed to use the old legal description—township, range and section—in order to complete their yearly acreage report. The process was very complicated, especially if fields were split in between multiple crops.”

Now, new mapping technology allows NAU Country to put each farmer’s information into a visual map so farmers can identify precisely which fields to insure based on actual planting data. “If you are a farmer with multiple fields, you can easily make mistakes regarding township, range descriptions, what you are reporting,” Korin says. “There is a lot of 600-acre farms that are split—half corn and half soybeans, for example. To legally describe a split farm was not only tough; it was inaccurate. Using these geospatial tools, we can now know exactly what has been planted down to the tenth of an acre.”

NAU Country is using field insights to help with risk management. “We’re taking all this weather data, soil temperatures, soil moistures, soil conditions, and we’re putting it into a model to help our farmers determine when they should be planting, when they should be harvesting or spraying chemicals,” Korin says. Adjusters also use drones to survey damaged fields much more efficiently, helping to service claims more quickly.

“We are making great progress on our journey to provide distinctive value to the market through applied expertise, an experience of excellence and our global strength,” Johnston says. “I want us to be known for these values. And the idea behind that is simple. It’s not just having expertise or offering an experience of excellence. It is leveraging those core values in a way that our brokers and customers will feel it. That is how we will be successful.” 

Although wearable sensors such as Modjoul’s SmartBelt and Triax’s Spot-r have not been proven to improve workplace safety, there is evidence other types of wearables have had a major impact in another injury-prone sector—mining.

Fred Smith, head of U.S. mining and metals at Willis Towers Watson in Knoxville, Tennessee, says two examples of effective wearable tech are smart caps, which monitor operator fatigue, and proximity detection devices, which warn workers about the presence of heavy mobile equipment operating in underground mines.

“You have all kinds of mobile equipment operating underground and employees walking around this equipment,” Smith says. “It is dark and sometimes wet, and people sometimes get to where they are not supposed to be, so there are more injuries because a machine can move and crush them or back up and hit them. Proximity detection has been around for a decade or more but continues to advance and get better. Now you actually have equipment manufacturers selling equipment that is ready to go with integrated proximity detection.”

In the underground mines, workers wear a transmitter that communicates with mobile equipment in the vicinity. If the employee gets too close to the equipment, the sensor provides an increasingly urgent series of alerts to warn the employee of danger. If the situation is extremely unsafe, the detector will shut the machine down.

“You still read about people getting hit by a major piece of equipment, but I don’t think I have seen a case in the recent past that resulted in an injury if proximity detection was in place,” Smith says. “There was a case where an employee was struck and, when he was asked why, he said he had taken the transmitter off.”

The smart caps are relatively new wearable devices that have the potential of reducing accidents involving heavy equipment due to fatigue. Smith says the majority of human-error accidents in both underground and surface mining involve fatigue.

“They were treating the symptoms but not the root causes of the injuries,” Martinez says. “I decided there was a better way.”

Martinez left AIG in 2016 and headed to Clemson, South Carolina, to find that better way. Today as founder and CEO of Modjoul, he’s a pioneer in the field of wearable technology. His company is marketing a “smart belt” that can track everything from workplace falls, lifts and strains to the actions of forklift drivers or environmental conditions that pose safety threats.

Wearable technology encompasses a wide range of devices, clothing items, sensors, monitors and other equipment that can identify problem areas; collect environmental data; provide information on the location, physical condition and actions of individual workers; and sound alerts about dangerous developments or accidents. And that’s just a partial list.

A few years back, wearable technology was all the rage and was being widely characterized as a game changer in the world of workplace safety and workers compensation insurance. But it has not taken off as quickly as anticipated, prompting some skeptics to question whether wearable technology will be the transformative force in workplace safety that was once hoped.

“It is a lot of sizzle and not a lot of steak,” says Mark Walls, vice president of communications and strategic analysis at Safety National, which provides specialty insurance and reinsurance. “In my opinion, that is because the technology is just not there yet to make it make sense. A lot of what you hear is what it could be used for, but I don’t see its use being that widespread.”

“It hasn’t moved as quickly as I thought it would have three or four years ago when it was a hot topic,” agrees Thomas Ryan, senior principal in Willis Towers Watson’s national practice. “It seems as if some of the employers who have an interest realized that a lot of vendors didn’t have readily available tools and devices. They were still in the development stage—prototypes, basically—so there was a concern about being able to market and distribute quality devices to meet the needs.”

Christopher Hernandez, who works in risk engineering for Chubb, says several factors have led to the slow adoption of wearables. “Middle-market companies are facing numerous business challenges with financial pressures limiting the use of capital,” Hernandez says. “Commercial wearable products are not as mature as their consumer counterparts, and because of this, the technology is not widely understood and the benefits are largely unknown. Lastly, adoption of wearables can be cost prohibitive, considering price per unit and monthly or annual fees for access to the data and analytics.”

Pilot Potential

Nevertheless, despite the slow liftoff, most risk management experts are convinced that wearable technology will eventually have a significant impact on workers compensation and other commercial lines.

“Sometimes you hear about a technology that is promising, and two or three years will pass while it is trying to catch its toehold,” says James Lynch, chief actuary for the Insurance Information Institute. “It is rare that a revolution takes place overnight.”

Jim Smith, of Gallagher, concedes that wearables have not yet gained traction in the workplace, but he says they’re gaining in popularity. A regional leader for Gallagher’s risk control and safety services, Smith sees “great potential” for wearables to limit or minimize lifting injuries and to protect lone workers in isolated places, such as a water treatment plant.

“Wearable technology is critical if you look at some of the positions we have today. It used to be that some of these places had two or three people, but now there may be only one, and that lone worker is out there with only limited communication. These sensors can track them and make sure they’re OK,” he says.

Hernandez says Chubb recently partnered with The Ohio State University’s National Center for the Middle Market and found that 40% of the middle-market manufacturers surveyed either use or plan to use wearables to monitor employee movement and location. Also, 63% said they either already use the technology to measure environmental conditions or plan to use it in the next five years.

Wayne Maynard, a product director in Liberty Mutual’s risk control division, says he has been approached by a number of startup vendors anxious to get into the wearable space and is working with several to help improve the accuracy of sensors that collect work-related information.

“It seems like every day there is a new one,” Maynard says. “With over 500 vendors out there hyping their technology as the magic bullet, employers are faced with a plethora of options. Employers need to approach the issue of wearables as part of a broader program. They need to work with their insurer to see why they are having accidents, what they can do to prevent them, including wearables, evaluate the range of wearable options and see what likely will have an impact on their safety process.”

Maynard says employers considering wearables also need to be aware that there is a lack of scientific studies showing that either a certain type of device or wearables in general have actually had an impact on workplace safety.

“There is a place for wearables, for sure,” Maynard says. “This technology will continue to evolve and most definitely will benefit workplace safety, but it is early. The algorithms need work. Now a lot of work is in pilot, and there is no research whatsoever that this technology is preventative. If you have a vendor that knocks on your door and says this will prevent 80% of your back claims, just know they have no evidence to back this up. That is not to say companies can’t have great successes with their product. And going forward, I expect there will be good studies on the preventative capability of the products.”

Early-Stage Success

Some of the greatest interest in wearable startups is coming from the construction and manufacturing sectors and material-moving organizations, such as warehouses, that want to make their workplace safer.

The algorithms need work. Now a lot of work is in pilot, and there is no research whatsoever that this technology is preventative. If you have a vendor that knocks on your door and says this will prevent 80% of your back claims, just know they have no evidence to back this up. That is not to say companies can’t have great successes with their product. And going forward, I expect there will be good studies on the preventative capability of the products.

Wayne Maynard, product director, Liberty Mutual

According to the Bureau of Labor Statistics, there were 5,190 fatal occupational injuries in 2016, a 7% increase over 2015. Fatal work injuries from falls, slips or trips continued an upward trend that began in 2011.

A recent study by Nationwide Mutual found that more than 30% of the workers compensation claims in the construction industry come from falls from elevated surfaces. And according to The Construction Chart Book, published in February by the Center for Construction Research and Training, 3.6% of employer compensation costs in the construction industry was spent on workers compensation, 71% higher than the spending percentage for the entire sector of goods-producing industries.

These numbers are compelling and likely driving some employers to action. “Some clients are looking at workers comp losses and exposures and where they might introduce a wearable to pilot and reengineer to reduce workers comp claims,” Willis’s Ryan says. “The employers I have spoken to are in exploratory mode. There are a few that have engaged in pilots, but the vast majority of employers we are talking to are still trying to understand the pros and cons of wearables in the workplace.”

Gilbane Building Company, a large construction firm headquartered in Providence, Rhode Island, was an early user of wearable technology and sings its praises. Don Naber, senior vice president and director of risk management, says the company has been using the Spot-r line of wearable and sensor devices developed by Triax Technologies of Norwalk, Connecticut, for about 18 months.

“What drew us to it immediately was that, in the event of a fall at whatever level, this particular technology sends a notification to whomever we designate on our site as the person managing the first response to any type of fall,” Naber says. “This was unique in terms of other products. Also, we appreciated the vision of Triax in emergency evacuation capabilities, and we are beginning to deploy sensors to monitor what is happening on site from a temperature, moisture and dust standpoint. Those are all critical elements, not just in terms of safety of people on site. They also impact work in progress.”

Currently, Gilbane is using the Spot-r devices on eight projects and is looking to implement them at four more construction sites. Eventually, Naber says, the company hopes “to expand this across as much of our portfolio as we can and make it more a norm than an exception.”

Pete Schermerhorn, president and chief operating officer of Triax, said Gilbane and a number of other large general contractors across the country are using Spot-r and have been alerted to several falls, enabling them to get medical personnel to the scene of the accident quickly. In addition, management has received some push-button alerts from workers wearing the sensors who are concerned about a possible safety issue.

“We’re definitely seeing an enhanced safety culture on these sites,” Schermerhorn says. “In terms of a reduction in claims, we haven’t been in the market long enough to amass that data, but certainly that is where this is going.

“When you look at data in the insurance industry, there are falls from the same level that tend to come with frequency—tripping and falling over material on site because of housekeeping issues—or you have falls from heights,” Naber says. “You don’t have a lot of frequency with falls from heights, but they tend to be more severe in terms of overall injury. This was an opportunity for us to really identify what was going on around the fall and be able to get to the location where the fall happens so, if a person needs medical attention, we have the opportunity to get them all the services they need in a very quick fashion.”

In addition to location, the sensor lets the company know who fell, which subcontractor that individual works for, and which other workers were in the general vicinity of the incident. And Naber says the fall alert has provided another, unexpected benefit—the ability for both the workers and the company to change behavior.

“At one of the projects where we first used it, we were finding a lot of falls. We would go to the person involved, and that person would say, ‘I didn’t fall,’” Naber recalls. “When we looked at the data, we found these alerts were falls from two or three feet, when people actually were not falling but jumping down rather than using appropriate exits we had made available or jumping down from the back of a pickup truck rather than stepping down.

“When you jump down from two or three feet, you are putting yourself at risk of hurting your knees or spraining your ankle. So we talked to people and asked why they were jumping down, and the answer was, ‘You didn’t have a ladder for me to use,’ or, ‘The exit stairs were too far away to use in getting materials down.’ So this gives us the opportunity to better manage around the project site and help change behaviors on these sites to avoid repetitive-type injuries.”

Spot-r devices also provide an alert when the construction site needs to be evacuated in an emergency.

“We tested that evacuation piece a number of times,” Naber says, “and we found when we evacuate the site without the emergency notification product, it takes roughly five or six minutes longer than when we use the product. Plus, now we know if John Smith is off the project, because we know from the clip where he is or if he is still somewhere in the project area. In an emergency situation, we would know where to send emergency responders based on where the clip says he is.”

Naber says it is still too early to see an overall impact on the company’s safety record. “But based on the behavior change that we have seen on a couple of projects because of this, we firmly believe that, in time, we will see a reduction in terms of our overall loss experience as well as loss from a questionable claim or fraud situation,” Naber says.

Another company, Eby-Brown in Naperville, Illinois, is just beginning a trial of Modjoul’s SmartBelt in hopes it will help cut down on muscular and skeletal injuries. Eby-Brown is a distribution company that stores, supplies and distributes virtually every product found in convenience stores except for alcohol and gas. The company has warehouses in eight states and employs about 2,500 people.

“Our warehouses are not an ergonomically friendly environment,” says Paul Brandel, the company’s risk and claims manager. “Some people are 6’5” and some are 5’2”, but the racks don’t change size, so there is a lot of twisting, reaching and bending to load trucks so the drivers can distribute the products.

“Most of our injuries are sprains and strains from pushing and reaching. So we are looking for wearables to show us those motions; then, we will bring in a physical therapy company to see how we could do it better. Our goal is to cut down on workers comp costs.”

Modjoul is the first wearable product Brandel is testing. He also plans to test four other wearable products, some of which clip on to a belt and others that clip on to a shirt pocket or shirt.

“This is new to me in our space, and I don’t know what the right one is right now,” Brandel says. “It is something I have been thinking about for a while. I looked at some high-tech suits that help with posture, but they are too bulky for us. The wearables would be friendlier to the worker. You definitely need buy-in from employees. You want them to wear it and forget about it.”

When we looked at the data, we found these alerts were falls from two or three feet, when people actually were not falling but jumping down rather than using appropriate exits we had made available or jumping down from the back of a pickup truck rather than stepping down.

Don Naber, SVP and director of risk management, Gilbane Building Company

Martinez says the SmartBelt can measure worker location and motion as well as environmental factors such as ambient temperature and humidity outside and around the worker. The belt vibrates if a worker bends more than 60 degrees, and it also tracks walking, standing, twisting, squatting, and outdoor and indoor driving.

Using statistics from some sensor devices placed in automobiles, Modjoul’s Martinez projects the SmartBelt can reduce workplace injuries by 30% to 40%, though he acknowledges there’s no concrete evidence to support those numbers.

Brandel is not troubled by a lack of hard data for that projection. “Whenever I meet with any provider in my business, they all have their claims,” he says. “They all have their sales pitch. I will take their claim as what they said it will do and then see our own data. I will pilot it myself and see if it works for me.”

Brandel’s biggest concern is finding the right device before making a big investment in wearable technology. “Wearable technology is definitely the right move for the industry,” he says, “and it is very exciting. I have shown some colleagues what we are doing, and they are all waiting to see my data and possibly try it out if it works well. Risk management is not a revenue generating department, so I try to do everything I can with our safety manager to cut costs by having fewer claims.”

Martinez also thinks the time is right for wearables.

“We are really on the cusp of the pioneer curve,” he says. “We’ve gone from zero to 21 customers in four months, so it is happening.”

The Trust Issue

Naber says his company has overcome resistance from employees and subcontractors skeptical about wearing the sensors by assuring workers the monitoring starts and stops at the job site.

“I think with any type of technology, the biggest pushback is ‘Big Brother is watching and you can track where we are,’” Naber says. “What we have impressed upon our subcontractors and unions where we are using this product is that, once you leave the job site, this product can’t track you. It is not a GPS.”

Schermerhorn says the Spot-r sensor is small—“literally the size of an old pager.” On some sites, workers receive the sensor at the beginning of the job and take it home at the end of the shift. On other sites, they return the sensors at the end of each workday. Either way—and this has proven critical to worker buy-in—the employee is monitored only when on the job site.

“The trust element is one of the biggest challenges,” Safety National’s Conference Chronicles reported following a 2016 industry discussion on wearables. “You need to gain employee trust in why you are using the wearable technology and how it benefits them. You need to be clear who has access to the information and what it will be used for. There is a cultural change associated with this, and there will be a long learning curve to make this change.”

Another potential issue involves the use of information gathered by the wearable sensors for purposes other than the stated intent.

“You don’t want to appear to be doing this to make everybody safe when in reality you are using it as a time and attendance tracker,” says Miki Kolton, an attorney with Greenberg Traurig in Washington, D.C. “Then your credibility is shot.”

If workplace sensors are used to monitor time and attendance and an employee is fired as a result, Kolton says, the employer could be subject to a wrongful termination claim.

A blog on ethical issues involving wearables on the website of the National Institute of Occupational Safety and Health poses a series of questions that any employee-monitoring program should address: “What are the goals of the monitoring program? How will the results be communicated? How will the data be used? Will informed consent be sought?”

“I think the potential is unlimited if we use it properly,” Gallagher’s Jim Smith says. “From the workers’ perspective, we don’t want to watch them 24/7. So privacy protection is one reason you need to be sure it is used for the right things for the right reasons.”

Fred Smith, head of U.S. mining and metals at Willis Towers Watson in Knoxville, Tennessee, says he isn’t aware of any resistance to wearables from the union representing miners. (See sidebar: “A Light in the Tunnel.”) But the technology also may be too new to have captured much union attention. The AFL-CIO did not respond to several phone calls and emails seeking information on union concerns over wearables in the workplace, and a spokesman for the International Brotherhood of Teamsters said the union was not aware of wearables being an issue for any of its members. But that could change fast if companies seek to monitor their employees after they leave the job site.

For example, airline pilots do not wear any sort of monitoring devices now, but they are subject to frequent blood tests and physicals to ensure they are healthy and not drinking alcohol before they fly a plane. Similarly, a wearable device might alert a trucking company if a driver was overtired or had been indulging in performance-impairing substances such as alcohol, marijuana or other drugs. But would that be considered an invasion of privacy?

Monitoring workplace activity has historically been permitted by the courts, but the courts and regulators have stopped short of setting legally permissible limits to that monitoring. Issues of privacy on what can be reported to whom may also arise as issues that need guidance or that spur court actions. In addition, if the information being gathered falls into the area of health data or other sensitive areas, there is the issue of data security to consider—no small feat in the current cyber environment.

“There is a lot of personal data floating out there and, with that, a lot of risk,” Walls, of Safety National, says. “Cyber security being what it is, whenever you’ve got something capturing somebody’s data, security is an issue. Who else can get that data, and what are they going to do with it?”

We’ve had over 5,000 deaths in 2016, and we are spending $59.6 billion a year in workers compensation medical costs, expenses and wage replacement. That is just unacceptable. We’ve got to do a better job.

Jim Smith, regional leader, Gallagher

If wearable technology does become a significant force in improving workplace safety, its impact on workers compensation costs will probably not be felt in overall workers comp premiums for at least three years, says Lynch, the I.I.I.’s chief actuary. But an individual company’s rates may go down if their safety initiatives—whether wearables or not—result in fewer accidents and claims and a better experience history with their insurer.

“With workers comp,” Lynch says, “the rates a company pays are very heavily based on the experience rate. You probably need a couple of years of experience for the workers comp policies to be impacted. If your experience improves, your rate would go down, but the full impact would take three to five years.”

Martinez says the impact of wearables on safety and workers comp rates could be felt sooner for large companies that self-insure. “Insurance companies are going to be slower to react because they need years of data to react to a trend,” he says, “but a risk manager for a large company and captive will be able to react faster.”

Jim Smith is less concerned about wearables’ impact on workers comp premiums than he is about the potential reduction in workplace injuries and deaths.

“We’ve had over 5,000 deaths in 2016, and we are spending $59.6 billion a year in workers compensation medical costs, expenses and wage replacement. That is just unacceptable,” Smith says. “We’ve got to do a better job.”

Arvidson is a contributing writer. cheryl@carvidson.com

“We had guns in the trunk. It’s what everyone did.”

That’s unthinkable today, of course—just as it was inconceivable a few decades ago, when Marshall was still in school, that the insurance industry would ever offer something called “active shooter” coverage for school districts across the United States.

The policies emerged a few years ago as insurers and educators realized that most general liability policies either didn’t cover or weren’t sufficient to address the enormous costs associated with a mass shooting.

The availability of the policies drew widespread attention from school administrators after a Valentine’s Day shooting at Marjory Stoneman Douglas High School in Parkland, Florida, left 17 dead and 17 injured.

“We had a tenfold increase in the number of inquiries, submissions and quotes,” says Marshall. In May, after the second major school shooting of the year—at a high school in Santa Fe, Texas—the company provided more than 300 quotes to agents and prospective clients.

The scope of active-shooter policies varies, but many offer medical payments or death benefits to victims along with an array of crisis management services such as grief counseling and media consulting for the schools. One element of the coverage is drawing particular notice: highly detailed security assessments designed to reduce the chances of a shooting spree.

Robert Hartwig, former head of the Insurance Information Institute, says those assessments are consistent with the industry’s centuries-old mission of not just protecting people and institutions against financial losses after a crisis but helping them reduce or avoid the losses before they occur.

“Increasingly, what businesses want from their insurer is not just basic, pure insurance protection. What they want is some help with risk management,” says Hartwig, now director of the Center for Risk and Uncertainty Management at the University of South Carolina.

Business Community Backlash

In recent months, the insurance industry has been drawn into the national debate over what can be done to reduce the frequency and severity of school shootings.

Within days of the Parkland shooting, a well-organized group of student survivors joined gun control advocates to push business leaders, including insurers and bankers, to reevaluate their relationships with gun owners, dealers and manufacturers.

Among those prominent in the campaign was New York Governor Andrew Cuomo, who suggested the insurance and financial industries’ relationship with the National Rifle Association and similar organizations “sends the wrong message to their clients and their communities, who often look to them for guidance and support.”

Maria Vullo, New York’s financial services superintendent, sent a letter to insurers and bankers reminding them of the business community’s history of taking leadership positions “in areas such as the environment, caring for the sick, and civil rights in fulfilling their corporate social responsibility.”

Gun safety, Vullo said, is another issue that warrants guidance from the business community. “Our insurers are key players in maintaining and improving public health and safety in the communities they serve,” Vullo wrote. “They are also in the business of managing risks, including their own reputational risks, by making risk management decisions on a regular basis regarding if and how they will do business with certain sectors or entities.”

Vullo’s department fined Lockton Affinity $7 million for selling “Carry Guard” liability insurance to NRA members and fined a subsidiary of Chubb Group Holdings $1.5 million for underwriting similar coverage. Vullo said the policies “unlawfully provided liability insurance to gun owners for certain acts of intentional wrongdoing and improperly provided insurance coverage for criminal defense.”

This summer, the NRA filed suit against New York, saying the state’s actions are endangering the group’s survival. The organization said it lost its own insurance coverage, including media liability coverage, from an unnamed carrier and has been unable to replace it. The suit alleges the state’s actions also could “deprive the NRA of basic bank-depository services…and other financial services essential to the NRA’s corporate existence.”

The NRA has lost numerous business relationships since Parkland. Chubb and Lockton severed their ties, and other companies, including MetLife and several airlines and rental car firms, ended discount programs for NRA members. Dick’s Sporting Goods announced it would stop selling assault-style rifles and joined Walmart in ending sales to customers younger than 21.

Meanwhile, Citigroup announced it would no longer do business with companies that sell firearms to people under 21, and Bank of America said it would stop lending to companies that manufacturer military-style weapons. Gun control advocates pushed for credit card companies to join PayPal, Apple Pay, Square and Stripe in prohibiting the use of their services for any gun transaction.

Homeowners insurance policies also have drawn scrutiny, with advocates of gun control calling for insurers to treat firearms as an “attractive nuisance” liability risk similar to a swimming pool or a large dog. The rationale is that carving out possession of firearms as a separate risk would prompt homeowners to take additional steps to reduce the likelihood that their weapons are used in mass shootings.

Hartwig says he doubts homeowners policies will ever be restructured to reflect the presence of a gun in the house. From a regulator’s perspective, the data don’t support an extra charge, he says.

“If the claims experience does not warrant that firearms be treated separately and distinctly, the question is why would the insurer do that. The insurer cannot charge a premium unless that premium is a reflection of actual risk,” he says. “As a practical matter, what is being proposed that insurers do? Would insurers be required to continuously and constantly monitor millions and millions of policy owners to ensure that 24/7/365 their guns are locked up?”

Rather than restructure all policies, Hartwig says, carriers are more likely to address the issue on a claim-by-claim basis, responding to any court decisions holding a gun owner liable for a weapon used in a mass shooting. A typical homeowners policy carries a maximum liability limit of $100,000. “An insurer may determine that in an instance like this it is simply easier to pay the policy limits,” he says.

The insurance industry’s primary focus in the gun safety debate remains, at least for now, on the active shooter policies.

Duty of Care

This issue crosses every single line of insurance when you talk about casualty, even property. There is no part of insurance that is immune to this situation.

Harry Rhulen, co-founder, Firestorm

Like Hartwig, brokers and agents see the coverage as a concrete way for the industry to make a difference in improving safety in America’s classrooms.

“We think we should always be looking at how we as an industry can provide solutions that are preemptive and supportive rather than just dealing with the aftermath and the impact of something happening,” says Alistair Fox, deputy CEO of JLT Specialty Credit, Political and Security Risks Division.

Given the number of shootings in the United States, Fox says, there’s “a duty of care” for insurers to help schools minimize the risk. His firm’s coverage evolved from terrorism policies it provides in Europe and the United States.

Hartwig says the policies similarly evolved to focus on prevention after the 9/11 attacks in the United States. “Very quickly the market recognized that, while insurance coverage was necessary, it’s best when the insurance product is coupled with a service that would help lower the likelihood of a terrorist attack occurring or potentially at least lowering its severity,” he says.

Chris Parker, an underwriter who leads Beazley’s political violence, terrorism and kidnap and ransom team, says his company has talked to prospective clients in school systems with varying levels of preparedness. They share one thing in common, though—“a desire to have responsible consultants involved in this and getting their wisdom and experience.”

Harry Rhulen, former CEO of Frontier Insurance Group, is co-founder of Firestorm, a crisis- and risk-management firm that works with a half-dozen major carriers to assess and improve security for its school clients. He believes insurers can play a decisive role in reducing school violence.

“There are lots of ways for the insurance industry to get involved,” he says. “It’s about thinking proactively and holistically about the risk management process as opposed to just looking at it from an indemnification standpoint. That’s a big change in the thought process.”

The industry has a large stake in resolving the issue, from a social leadership as well as a business standpoint, Rhulen says. “This issue crosses every single line of insurance when you talk about casualty, even property,” he says. “There is no part of insurance that is immune to this situation.”

Marshall believes the policies spur school systems to work harder on security. “That which we pay for, we pay attention to,” he says.

Although still relatively rare, shootings are now becoming a routine exposure for agents to discuss with school officials at renewal time, according to Nate Walker, a senior vice president at Special Markets Insurance Consultants (SMIC), an AmWINS Group company.

SMIC has insured schools since 1985 and began offering active shooter coverage in 2014. “Historically, we’ve covered students and athletes—sports, events, all of the stuff that is deemed fun,” he says. “We never thought we’d be involved in something like this.”

Sadly, the policies advertise themselves whenever another school is attacked. “After every event, the phones ring,” Walker says.

First Look vs. Last Stand

The moment, outside a high school in Santa Fe, Texas, was unexpected but, sadly, unsurprising. A TV reporter, conducting an all-too-familiar round of interviews with survivors of a mass shooting, asked 17-year-old Paige Curry if there was ever a point during the chaos that she told herself, “This isn’t real. This would not happen at my school.”

No, Curry said quietly, her eyes averted from the camera. “It’s been happening everywhere,” she said. “I’ve always kind of felt like it eventually was going to happen here too.”

Her comments, replayed repeatedly on cable news and social media this spring, caught the attention of many Americans, including Firestorm’s Rhulen.

“If I could bottle what she said and feed it to every school board in the country, I would,” he says.

The Santa Fe shooting was the 16th of the year at a U.S. school during school hours, according to an analysis by The Washington Post. Since the assault at Columbine High School in Colorado in 1999, there have been an average of 10 shootings a year at U.S. primary and secondary schools, killing at least 141 students, educators and others and injuring 287 more. Since Columbine, the analysis found, more than 215,000 students in U.S. schools have been exposed to gun violence. The figures do not include shootings at colleges and universities.

Rhulen, whose company responded to the Virginia Tech shooting in 2007, says too many school officials are in “disaster denial.”

“The biggest problem we have with schools and with school administrators is they don’t believe it’s going to happen to them,” he says. “None of them are running around with their hair on fire thinking, ‘I’m next.’ And if you don’t have that sense of urgency, your school very well could be next.”

Rhulen says schools typically focus on hardening their facilities—securing doors, setting up cameras to monitor entry points and hallways, adding school resource officers. “All of those things are necessary,” he says, “but they are all ‘last stand’ technology. They’re designed to limit the number of casualties. They are in no way prevention oriented.”

Insurers work with consulting firms like Firestorm or with local law enforcement agencies to establish what Rhulen calls “first look” technology, such as programs to monitor social media and anonymous reporting systems for students, faculty and others who see signs of trouble.

“Social media is one thing we have introduced,” Marshall says. “We think that is going to be very effective because 30% of all perpetrators in a school shooting leave some sort of social media trail. By studying that, we’re able to come up with solutions that we hope will stop and prevent shootings and save lives.”

Beazley’s Parker says behavioral threat assessments help schools develop a clear process for responding to signs of trouble. “If you notice changes in people’s behavior, what do you do about it? If you overhear someone saying,

‘I’m going to go kill so-and-so over a bad exam result,’ what do you do about anonymously reporting that?’ Once it is reported, who monitors those reports? Who acts on them?”

Social media is one thing we have introduced. We think that is going to be very effective because 30% of all perpetrators in a school shooting leave some sort of social media trail. By studying that, we’re able to come up with solutions that we hope will stop and prevent shootings and save lives.

Paul Marshall, managing director of active shooter/workplace violence insurance programs, McGowan Companies

Rhulen’s company has published a free guide for school districts (sharetheformula.com) to help them strengthen their prevention and security. He encourages educators and parents to use it as a starting point for discussions about a school district’s readiness. Church Mutual Insurance and others also offer guidance at their websites, as well as online training programs.

“Most behaviors of concern in the beginning are very subtle,” Rhulen says. “It’s not like Johnny wakes up this morning and says, ‘Oh, I think I’m going to bring a gun to school today and shoot up my classmates.’ That’s not how it happens.”

Shifts in behavior are typically incremental, Rhulen says, and attacks typically involve months of planning. A student experiencing bullying at school or trouble at home may lose interest in schoolwork, with grades gradually declining.

The student may become more withdrawn. He may be seen looking at websites that are violent or involve guns. Those are things that teachers, staff and students need to be trained to look out for, Rhulen says.

“One of the first things we see after any of these events is the Facebook page of the perpetrator, and they are generally holding a weapon,” says JLT’s Fox. “There are consistencies in the background of the individuals who do these things and patterns in their behavior ahead of acting.”

Schools can put those lessons to work, he says. “There are always anomalies; however, there are always common patterns to these events. Understanding this may increase our ability to identify a problem before it actually manifests into a violent event.”

Rhulen says it’s essential for schools to ease the reporting process at schools and encourage participation. “No one wants to be a tattletale, and no teacher or staff member wants to report a fairly innocuous change in behavior that they might chalk up to just normal teenage angst,” he says.

Under Firestorm’s systems, school officials, mental health counselors and others regularly monitor reports and intervene when necessary.

Hartwig cautions against creating watch lists that violate privacy and unfairly mark a student for the rest of his school career. “It’s a risk management issue, but it is fraught with legal land mines,” he says. “It’s likely that, from district to district and state to state, the approach to this will vary tremendously.”

“It’s tricky, isn’t it?” Fox says. But he and others say it can be done successfully. “After an event, you’d be heavily criticized if you had a concern and you had not acted on it. It needs very, very careful handling.”

Arming Teachers

After the Parkland shooting, President Trump promoted the idea of arming “gun-adept” teachers to help defend against attacks. The insurance industry’s reaction to the proposal has been mixed.

EMC Insurance is the largest insurer of schools in Kansas, one of more than a dozen states that allows school personnel to carry guns under certain conditions. In a letter to its agents, EMC said it wouldn’t insure schools that arm teachers, calling it a “heightened liability risk.”

Parker agrees that the presence of firearms could affect the cost or even the appetite for insuring the risk. “When we ask questions about security, it’s focusing on how we keep a gun out of the workplace or out of the school,” he says. “If the gun is already there, it is a different proposition as far as the risk is concerned.” That said, Beazley doesn’t have a position on arming teachers and wouldn’t rule out insuring a school that allows concealed weapons.

Church Mutual Insurance is also staying out of the debate. “We’ll let public policy go where it goes on that one, and we will be prepared to insure teachers whether armed or unarmed,” says Ed Hancock, the company’s chief underwriting officer.

Tory Brownyard is president of the Brownyard Group, a program administrator that specializes in providing insurance to the security industry. His company has turned down coverage for schools planning to arm teachers. “Unless the teacher is a retired police officer or former law enforcement, we would have a hard time accepting a risk with armed teachers,” he says. “We just don’t feel there is the adequate training there.”

However, Brownyard says his opinion has changed over the many years he has given interviews since the shooting at Columbine.

“In the past, I would say putting a firearm in a school is unwarranted, that these shootings are rare occasions and by putting a firearm in a school every day in the hands of a security guard, you’re really increasing the chances of something very bad happening,” he says. “Now, as the father of two school-age children, I do feel better with a security guard at a school with a firearm, assuming the security guard is properly trained and vetted.”

Marshall says McGowan currently does insure schools that have teachers who have been trained to carry guns as employee resource officers and also provides coverage to churches, car dealerships and other places that have an armed individuals on site. He has no problem with seeing that expand. “It’s not unique to education,” he says.

Marshall doesn’t believe arming teachers will increase the risk of a shooting, as some critics of the idea contend. “I don’t think there’s any data that’s proving that out,” he says. “There’s no actuarial data. It’s more of a political, knee-jerk reaction on their part. In our opinion—of course, we’re the underwriter, so we get to have an opinion on this—we think a properly trained resource officer will make the school a safer school.”

Rhulen thinks it’s unwise to put teachers in that role. “It’s absolutely a horrible idea,” he says, pointing to a New York City Police Department study of situations where its officers fired guns. About 80% of the shots failed to hit their intended target.

“And that’s with a trained police officer,” he says. “Think about it in terms of Mr. Smith, who’s not a trained police officer—this is a guy who went to school to try to help people, to try to educate our youth—and now he’s going to get into an armed firefight with a student who has a mental illness? The whole thought process around it makes no sense.”

Hartwig says the idea is likely to be handled differently in each state. “I would expect the insurers would go through a vetting process for this,” he says. “Who? How many? How well trained are they? What is their experience? What are the criteria for the use of a weapon? How is the weapon stored during the day? And many other questions that would affect the willingness or likelihood of an insurer to offer such a policy and what it might cost.”

The Parkland Effect

After every major school shooting since Columbine, there is a renewal of the debate over what America should do to address the violence. Then there’s another shooting.

One of the first things we see after any of these events is the Facebook page of the perpetrator, and they are generally holding a weapon.

Alistair Fox, deputy CEO, JLT Specialty Credit, Political and Security Risks Division

Brokers and agents who sell active shooter coverage sense there’s something different about the public’s reaction to the assault in Parkland.

“Normally, in two weeks people forget about it. They have the attitude that it’s not going to happen to me; it’s going to happen to someone else,” Beazley’s Parker says. This time, though, it appears the focus has remained, he says.

“More people are taking notice. More people want something done about it.”

Rhulen hopes that’s the case but isn’t so sure it will last. He says his firm’s research shows the media’s focus on shootings has shortened in recent years. “What you see is it’s about 22 to 23 days from the time of a shooting to the time it drops out of the media,” he says.

Parkland was an exception and stayed in the news much longer, Rhulen says, but the coverage of the next major shooting—in Santa Fe, Texas—faded more quickly than the typical 22 to 23 days.

Given the increase in calls to insurers about active shooter policies, it is clear school officials are thinking about their own vulnerabilities more. “We have more clients wanting clarity over coverage from their GL carriers,” says Parker, who encourages clients to get those answers in writing.

Although still relatively new, many of the policies have added new features as schools and carriers reevaluate how coverage can fit potential needs. “As we’re going along, more and more schools are asking, ‘Can we do this? Can we do that?’” Parker says.

At Beazley, Parker says, he expects coverage to expand to cover things like construction of memorials for victims and replacement of lost tuition fees for private schools affected by violence.

As a result of security assessments, Brownyard expects more schools to add school resource officers, metal detectors and security systems. “Unfortunately, it’s becoming an expense that’s going to be necessary to protect the children,” he says.

Marshall concurs. “Society, I think, is going to change and allow this,” he says. “Kids will say, ‘Yeah, I’ve got to walk through a metal detector in the morning to go to school. I just do.’”

Premiums also have undergone changes since the policies were introduced, with costs falling as more competitors join the field, similar to the dynamic seen in terrorism and cyber-security coverage.

At McGowan, Marshall says premiums can be priced at about 50 cents to $1.50 per student, depending on the level and type of coverage. “Our minimum premium is $1,200 for a small charter school for a $1 million policy,” he says.

Walker says budget-conscious school districts often have a misconception that coverage will be expensive and are surprised they can afford it. A recent quote for $1 million of coverage for a private school in the Orlando suburbs with about 350 students amounted to $1,500 a year, he says.

Unlike many companies, Church Mutual provides coverage for “catastrophic violence response” as part of its GL policy. Hancock said it was added at no extra charge after Columbine. It pays $50,000 per victim and $300,000 per violent incident.

Hancock thinks other companies will begin offering a basic level of coverage in their GL policies. “I think and I hope you will see the industry provide more insurance products that respond regardless of fault, whether it’s medical payments or catastrophic violence response coverage,” he says. “There is a need to compensate both the innocent victims and bystanders in these shootings and provide a more effective response to let the school districts get on with their lives.”

As the policies continue to evolve, Hartwig says, insurers need to introduce the topic with their clients. “This is where a broker, an agent, demonstrates value,” he says. “Sometimes they have to have a conversation that the client may not want to have because they don’t even want to think about something like this. But the client in many cases would probably be relieved if the agent or broker broaches the topic and has a solution at hand that is reasonably priced and can explain how it complements their existing coverage.”

The status quo probably isn’t a wise choice for schools that don’t have some sort of coverage, Hartwig says. After a crisis, a school district can face millions of dollars in expenses. “If there is a shooting on your premises, you are almost certainly going to be on the receiving end of lawsuits, whether you’re a school, a religious institution, a retail establishment or an employer,” he says.

Marshall encourages agents to talk to local media about the coverage available to let local officials and parents know there is expertise available through insurers. School officials will welcome the discussion, he says. “Each of the clients we talk to as an insurer feels better off than before they spoke to us,” he says. “That doesn’t always happen to us in insurance, right?”

Hartwig says brokers and agents need to educate themselves on available products and ensure they can access a market in which the products are available. Then they need to have that uncomfortable discussion with a client.

“Tragically,” he says, “the agent or broker need only point to a recent newspaper.”

Lease is a contributing writer. daryl.lease@gmail.com

Natural disasters across the United States caused $337 billion in estimated damage in 2017, but less than half that amount, about $144 billion, was insured. The remainder was borne by Uncle Sam. Can insurance companies and reinsurers help fill this gap to reduce the financial burden on taxpayers? The answer seems unclear.

But let’s assume municipalities enact building codes and zoning regulations that reflect realistic climate change threats and regulators approve homeowners insurance rates based on insurers’ actuarially derived premiums. In that scenario, would the industry have the will to risk more capital on something as uncertain as the potential impact of climate change?

“Climate change affects trillions of dollars of property at once, assuming there were multiple simultaneous events producing losses,” says John Seo, co-founder and managing principal of Fermat Capital Management, an investment management company specializing in structuring catastrophe bonds. “The challenge is the ability of the insurance and reinsurance markets to absorb the resulting losses, which would amass into the hundreds of billions of dollars.”

Seo cites the example of a major property catastrophe happening in a coastal metropolis. “The equivalent amount of capital required would be the equivalent of 10 million cars colliding at once, which is extremely unlikely and would be considered uninsurable under current insurance frameworks,” Seo says. “The traditional industry will not risk this amount of capital on a single event.”

Even if it had that kind of money, the industry wouldn’t bet it all on one gargantuan risk. “The total amount of capital for a major property catastrophe that all the insurers and reinsurers in the world can take on in a single location like Miami or Tokyo is $30 billion to $45 billion,” Seo says. “We know this estimate from their public filings. Maybe they can take on a few billion more, but nowhere near $60 billion, much less a couple hundred billion dollars.”

Nevertheless, more risk-bearing capital is available from the capital markets to narrow the gap between economic damage costs and insured losses from the capital markets. “Our expectation is that a significant amount of the payouts made by federal, state and local governments in the aftermath of a natural disaster can be borne by insurance-linked securities,” Seo says.

He’s referring to catastrophe bonds, which have been around for more than three decades but have matured rapidly in the intervening years. In 2017, the cat bond market endured its largest losses to date from Hurricanes Harvey, Irma and Maria. Yet in the first quarter of 2018 the market snapped back to tally a record $4.24 billion in new catastrophe bonds issued across 17 separate transactions.

Generally, investors in cat bonds include pension funds and hedge funds looking to diversify their investment portfolios with a new asset class that does not correlate with the risks of other investments. Sponsors range from insurers and reinsurers to large multinational corporations and governments seeking to spread the risk of loss from natural disasters.

Cat bonds function much like reinsurance contracts structured over several years. When the sponsor’s property damage losses exceed a specified financial indemnity trigger like $3 million, the bond activates to absorb a layer of risk up to a stated limit. Other catastrophe bond losses are pegged to parametric triggers like hurricane wind intensity.

Seo is confident that insurance-linked securities can complement traditional insurance and reinsurance in picking up more of Mother Nature’s tab. “The capital markets have more than $100 trillion in play, giving it the potential to be effectively the largest and most efficient insurer in world history,” he says. “I can also see governments and state agencies acting more like private market insurers, while shifting the financial burden away from taxpayers.” Rather than dig into government treasuries to bail out affected businesses and homeowners, the bond would trigger to make the needed payouts.

Seo is not alone in this prognostication. “There is a role for capital market capacity to step in through the issuance of insurance-linked securities or other kinds of structures like ours,” says Will Dove, CEO and chairman of Extraordinary Re, a new reinsurer about to unveil a trading platform run by Nasdaq, on which investors will trade assets tied to insurance liabilities.

Like cat bonds, the unique platform presents investors with the opportunity to diversify their portfolios outside traditional stocks and fixed-income assets—albeit with a couple twists. Other property and casualty risks besides property catastrophe exposures can be invested in and traded like liquid securities, such as aviation, marine, workers compensation, terrorism and even life and health insurance risks. An investor can sell an interest in one risk and buy an interest in another.

Another novel startup is Jumpstart, launched in June, which has created a parametric-triggered renters insurance policy absorbing earthquake risks in California. “Nine out of 10 people in California don’t buy earthquake insurance, and half of them are renters,” says founder and CEO Kate Stillwell. “We’re offering a one-size-fits-all insurance policy for $20 per month on average to absorb up to $10,000 of losses, completely reinsured.”

Stillwell notes the insurance doesn’t just pick up the cost of damaged or destroyed personal contents like furniture and laptops. Other compensable losses include an inability to get to work because streets are closed. The parametric trigger is based on U.S. Geological Survey reports measuring peak ground velocity, a fancy way of saying ground shaking. If the earth moves 30 centimeters per second and more, the insurance kicks in.

Let’s hope it doesn’t.

How bad has the weather been in recent times? Really bad and really costly. Natural disasters caused $337 billion in damage across the United States in 2017, the second costliest year on record for such activity. According to the National Oceanic and Atmospheric Administration, 16 natural disasters last year caused more than an estimated $1 billion in damage each. A sampling of Mother Nature’s wrath:

  • Hurricane Harvey, a Category 4 storm, produced an unprecedented volume of rainfall, estimated at nearly 60 inches. Flooding in the greater Houston area exceeded all other known U.S. flooding events. Harvey also produced the highest storm surge level in the Houston area since 1961. Nearly 200,000 homes and business structures were damaged or destroyed.
  • Hurricanes Irma and Maria, both Category 5 storms. Irma’s 185 mph winds lasted for 37 hours, the second longest duration on record. Maria’s 175 mph winds devastated Puerto Rico, which was woefully unprepared for a hurricane of such magnitude. Maria ranks as the second deadliest hurricane in U.S. history, consuming more lives than were lost in Hurricane Katrina in 2005. It was the first Category 5 hurricane to strike Puerto Rico.
  • In October 2017, northern California’s wildfires burned at least 245,00 acres as high winds raged across eight counties. The fires incinerated 8,900 buildings, claimed 44 lives and caused $9.4 billion in damage. Two months later, the Thomas fire in southern California burned more than 282,000 acres, causing $2.1 billion in damage.
  • This summer in California the Mendocino Complex fire consumed more than 400,000 acres, the Carr fire burned nearly 230,000 acres and the Ferguson fire burned more than 97,000 acres. Total economic damages are still being tallied.

The blaze was started by an arsonist, and all 3,000 residents of Idyllwild were evacuated.

For five nail-biting days, we waited, fearing mostly for our neighbors’ primary homes and their pets left stranded when the roads to the town were closed. A friend in the California Highway Patrol snapped a picture of a giant plume of smoke from our front fence line. It was a half-mile away. Winds blew westerly, not a good sign.

And then our prayers were answered. The ground and aerial firefighters who arrived by the hundreds to battle the blaze finally got it under control. Although the fire consumed more than 13,000 acres, the town and all but a half-dozen homes were spared. Other municipalities throughout California have not been so fortunate. The largest wildfire in state history burned for more than a month and encompassed more than 400,000 acres.

The costs of such natural disasters are borne by all of us—in our taxes and our insurance premiums. That cost was made clear in 2017. A study by the Swiss Re Institute found the economic damage caused by natural disasters last year totaled $337 billion, the second highest on record—of which $144 billion was insured, the highest on record. Three hurricanes that year—Harvey, Irma and Maria—ranked among the five worst hurricanes in history, in terms of financial costs. Insured losses from all wildfires in the world totaled $14 billion in 2017, the highest ever in a single year. In the United States alone, more than 9.8 million acres burned in 2017, costing $18 billion—triple the annual wildfire season record. Among these wildfires was the Thomas fire, California’s worst fire in history at the time in terms of acreage burned.

For businesses, natural disasters represent a serious risk management issue. Many surveys of large and midsize companies rank natural catastrophes among their top three risks. For small companies, such disasters are an even greater threat.

In the years ahead, diverse structures in regions vulnerable to natural disasters are bound to experience substantial property damage and destruction. Large companies will endure significant supply-chain disruptions, delays in business operations and reduced revenues. Many smaller businesses will fail.

What is being done to prepare for this dystopian possibility? The paradoxical answer is: quite a bit but not enough.

For example, in ZIP codes designated by the Federal Emergency Management Agency as susceptible to natural catastrophes, 40% of small companies experienced natural-disaster related losses that curtailed business operations.

Only 17% of them had business interruption insurance, according to a 2017 study by the Federal Reserve.

Leaving aside potential causes, more than 97% of climate scientists in peer-reviewed studies in notable scientific journals concur that the planet is warming. And more than 80% of climate scientists in studies conducted by groups supported by the oil and gas industry affirm that climate change is happening.

“The evidence is unequivocal that the planet is warming, with literally thousands of studies using all sorts of evidence to draw what are pretty rock-solid conclusions,” says Richard Black, director of the Energy and Climate Intelligence Unit, a U.K.-based nonprofit that publishes on energy and climate change issues.

What does this mean for natural disasters? It depends. Among the scientific community, some potential effects are generally agreed upon, while others have less consensus.

Hurricane Flooding

As the planet warms, ocean levels rise for two reasons: thermal expansion (water expands as it warms) and the flowing of melting land-based ice like glaciers into seas. “We can measure sea levels year by year and have seen gradual increases that may accelerate in the future,” said Robert Muir-Wood, chief research officer at catastrophe risk modeling firm RMS.

There are arrows that go from climate change to things like food security, geopolitical stability and economic growth, all of which create risk management implications for companies

Howard Kunreuther, co-director, Center for Risk Management and Decision Processes, Wharton School

When hurricanes form, they create an additional abnormal rise in sea level—called a storm surge. The greater the rise in sea levels, the higher the risk of extreme flooding along coastal areas, given the expanded volume of water.

“There’s no doubt that hurricanes will inflict heavier damage due to rising sea levels caused by climate change,” says Michael Oppenheimer, a climate scientist and professor of geosciences at Princeton University. “That’s a no-brainer. The flooding will be greater and will extend more inland from coastlines.” That said, 90% of Harvey’s insured property losses derived from inland flooding and not hurricane wind intensity.

Climate change also is a factor in higher precipitation events, such as the 60 inches of rain that engulfed the greater Houston area during Hurricane Harvey. “As temperatures rise to warm oceans, water evaporates [faster] and produces more moisture content,” Oppenheimer explains. “On that, we climate scientists can agree.”

Muir-Wood shares this opinion. “There’s pretty good evidence to suggest we will have more intense rainfall resulting in extreme flooding events like we saw with Harvey,” he says.

Another factor in hurricane flooding is duration of the storm. Hurricane Harvey lasted 16 days—from August 17 through September 2. According to the journal Nature, climate change affects what scientists call “translation speed”—the speed at which a hurricane travels forward. This speed is slowing, indicating that storms may linger longer in a particular geographic area, increasing the risk of flooding.

“There’s a theory that shows a warming planet stalls atmospheric circulation patterns like trade winds and the jet stream, stalling storms in one place for longer periods,” Oppenheimer says. “But there is no scientific consensus yet that this is explicitly caused by climate change.”

The changing climate might also explain why scientists expect more Category 4 (130 mph to 156 mph winds) and Category 5 (157 mph or higher) hurricanes. That’s because hotter oceans provide more energy, fueling wind intensity.

“We may even need to create a new Category 6 to take into account more intense winds,” Oppenheimer says. “But most scientists are not willing yet to say that the observed change in wind intensity is due explicitly to climate change. Again, we’re not at a point yet to nail this down.”

If there is a silver lining in these dark clouds it is this: more frequent hurricanes generally are not anticipated, with some climate experts predicting a potential decrease in the overall number of future hurricanes, based on models involving warming temperatures. According to the National Oceanic and Atmospheric Administration’s Geophysical Fluid Dynamics Laboratory, three or four small hurricanes might merge into a single large hurricane, although the organization acknowledges uncertainty on this subject.

Droughts and Wildfires

Last year was the second-worst year on record for wildfires in the past 60 years, with 10 million acres burned, exceeded only by 2015, when about 10.1 million acres went up in flames. This year is well on track to break the record. (See sidebar: A Terrible Tally.)

Prior to the 1970s, wildfires in the United States received little attention from the government and the public, as they were generally smaller and sporadic and occurred in mountain regions with scant habitation. Then all hell broke loose. According to the Union of Concerned Scientists, between 1986 and 2003, wildfires burned more than six times the land area, occurred nearly four times as often and lasted almost five times as long as wildfires reported between 1970 and 1986.

More recent statistics indicate that wildfire seasons were 84 days longer on average from 2003 to 2012 than they were from 1973 to 1982. Large wildfires also are taking more time to contain, burning an average of more than 50 days between 2003 and 2012, compared to six days between 1973 and 1982.

Is climate change the cause of all this misery? “It’s a complicated peril, with a lot of actors in play,” Muir-Wood says. “You must take into account the previous history of drought and extreme heat waves.”

He’s referring to the fact that our world has seen weather like this before. Ancient Egypt was lost to one of history’s most withering droughts, and the United States’ most protracted drought occurred during the Dust Bowl years from the 1930s to the 1950s.

However, we do know that the increase in air temperatures due to climate change does cause drier conditions, such as decreased soil moisture and increased evaporation of water from lakes, rivers and other bodies of water—all of which can exacerbate drought conditions.

There is no single set of people other than the actuaries at insurers and reinsurers who are better at understanding these risks and calculating their frequency and severity.

Richard Black, director, Energy and Climate Intelligence Unit

“Another factor is natural weather occurrences like El Niño events that cause year-by-year variability in drought potential,” Oppenheimer says. “What we do know is that future conditions will be progressively more favorable to these kinds of fires in many areas. The reasons are complicated, but the science is getting close to nailing it down.”

The Human Factor

While climate change can be blamed in part for the recent scourge of natural disasters, human folly contributes to much of the economic impact. First, too many people (myself included) continue to live in coastal areas and mountain towns, regardless of the known dangers. Second, those of us living in these regions downplay the risks and do little to reduce their impact.

“Despite all we have learned about the impact of hurricanes, wildfires and other natural disasters and how to protect ourselves and our businesses from their impact, we’ve actually done very little to reduce the material losses from these events,” says Howard Kunreuther, a professor of decision sciences and public policy and co-director of the Center for Risk Management and Decision Processes at the University of Pennsylvania’s Wharton School.

In his book (written with Robert Meyer) The Ostrich Paradox, Kunreuther contrasts human behavior negatively with the behavior of an ostrich presumed to bury its head in the sand when danger approaches. “The reality is that ostriches stick only their beaks in the sand, but their eyes see everything around them,” Kunreuther says. “People have their entire heads in the sand. The uncertainty associated with future sea level rise and the nature of hurricanes often leads us to hope for the best rather than fear the worst.”

He attributes this reaction to myopia, amnesia, optimism and inertia, which combine to make us always expect the best, even when bad things are blatantly obvious. “People have a tendency to think when they move to coastal areas in a hurricane-prone region that the worst won’t happen to them, despite all evidence to the contrary,” Kunreuther says.

Muir-Wood expressed a similar sentiment. “In most cases, the risks of a hurricane or wildfire are greater than how people perceive them,” he says.

Given all we know, scientifically and economically, about natural catastrophes, the related costs continue to rise, in large part because of our collective tendency to downplay their significance. “Following a wildfire or a hurricane that interferes with people’s lives, little if anything is done to prepare for the possibility of it occurring again,” Kunreuther says. “The thinking is that we will be spared next time around. We have very short memories when bad stuff happens.”

By doing little if anything to reduce the potential impact of a natural disaster, when the next one arrives the aggregate damage losses are higher than they otherwise could have been. A study by insurer FM Global affirms this connection. The multinational property insurer/property loss prevention specialist company evaluated its losses from Hurricanes Irma and Maria, comparing the data of clients that had taken loss prevention actions based on its recommendations with those that hadn’t taken these actions.

“We were surprised to learn that the companies that took these actions experienced losses five times lower than those that didn’t,” says Katherine Klosowski, FM Global’s vice president of special projects. “We had expected a difference but not that magnitude.”

This is good news, indicating that losses can be contained. Such losses run a gamut wider than just property damage to homes and buildings. “There are arrows that go from climate change to things like food security, geopolitical stability and economic growth, all of which create risk management implications for companies,” Kunreuther says.

In fact, according to one study, as much as 95% of fresh produce is perceived to be at risk because of climate change. Livestock health is also at risk, as warming temperatures cause heat stress and increased demands for water that may not be as readily accessible.

“More needs to be done to assess these risk interdependencies,” Kunreuther says. “And insurers are in a prime position to undertake these assessments.”

Fortunately, there are many smart ideas circulating on how homeowners and businesses can reduce their risks of property damage, including water runoff systems like dikes to contain flooding, spraying homes with fire retardant prior to a wildfire and hurricane-resistant doors and windows. For more information, check out FEMA’s online hurricane preparedness and wildlife planning toolkits.

Government Action

Fewer people die worldwide from hurricanes and wildfires than in the past. But on the property and business interruption side of things, the record stinks.

Michael Oppenheimer, professor of geosciences, Princeton University.

When people fail to take actions to limit their exposure to property damage, governments generally don’t intervene on their behalf. “We’ve seen a perpetuation of poor public policy decisions, in which people and businesses are allowed to locate anywhere they want in structures that are inappropriate given the climate risks,” says Will Dove, CEO and chairman of new reinsurer Extraordinary Re. “This guarantees that catastrophe claims frequency and severity will only get worse.”

“We need the political will of the federal government to say that it will no longer encourage risky zoning and land-use rulemaking on the part of local governments, since it is local government that authorizes permits for construction activities in climate-vulnerable areas. Local building codes must reflect the actual risks, which are well understood.”

Princeton’s Oppenheimer also took local municipalities to task for not upgrading their building codes. “They need to get them up to modern standards that reflect reality and then enforce them stringently,” he says. “And the federal government flood insurance program must follow through with rates that are sound but also sensitive to the investments that people make to protect their property.”

If this were the case, more homeowners might buy flood insurance. Only two in 10 homeowners had either private or federally provided flood insurance to absorb losses from Hurricane Harvey, according to an estimate by the Consumer Federation of America. “People without insurance expect the government to bail them out, which is often the case,” Dove says. “In effect, the government bailout takes away the financial responsibility from the individuals affected. When this occurs, the taxpayer ends up footing part of the bill.”

Part of the problem is the National Flood Insurance Program, which is deeply in debt and nearly insolvent, in part due to repetitive claims for property damage by the same homeowners. “NFIP is in need of reforms,” Dove says.

“FEMA flood maps are outdated and don’t reflect current reality. There are no incentives to rebuild structures to accommodate the actual risks, resulting in repetitive loss properties. Coverage limits are stripped down in many cases, with no business interruption insurance for small businesses out of commission for longer than a month.”

Congress is now studying common-sense reforms to NFIP, like improved flood mapping and the identification of properties filing repetitive damage claims. But even with such enhancements, unless flood insurance is mandatory in vulnerable regions, not everyone will buy the insurance. Kunreuther proposed the idea of offering all homeowners and businesses financial incentives, like lower premiums and affordable loans, for structural improvements they undertake to reduce storm-related damage risks.

“A reason why people don’t invest in mitigation measures is because they perceive the cost as too high relative to the benefit,” he explains. “But if the government offers them long-term loans at affordable rates, there’s a better chance they’ll see value in making needed improvements. And if their insurance carrier simultaneously reduces its premiums for taking out the loan, the incentive for the business or the individual is even greater.”

Private Market

It’s not just a government problem, though, and there is a lot the private insurance market and other businesses can do to help encourage mitigation. And the private insurance market is growing for flood. Several reinsurers like Swiss Re are partnering with primary carriers to offer the coverage. Altogether, carriers wrote more than $623 million in business in 2017, a 51.2% increase in premiums over the previous year. Nevertheless, this is a pittance compared to the NFIP’s $3.5 billion in 2017 premiums.

As far as encouraging mitigation goes, Oppenheimer has some ideas. “Frankly, the U.S. insurance industry could do a lot more to fulfill its social responsibility by making sure people properly manage the risks to their properties,” he says. “A rate structure that gives people credit for building and maintaining resilient homes and premium rebates when someone does something good to make the property more resistant to damage are big steps in the right direction.”

Lenders also can do their part. “Banks can require businesses and homeowners in vulnerable areas to buy flood insurance as a condition of loans and mortgages,” Dove, of Extraordinary Re, says. “Many lenders already do this if the region is in a one-in-100-year flood zone. But the flood maps that define many areas are very dated and have not been updated to reflect current climate conditions. Certainly, no one expected that Hurricane Harvey could produce 60 inches of rain in a matter of days. Some regions that were not perceived as a one-in-100-year flood zones in the past may very well fall into this category now.”

Insurance brokers also can help tip the scales. “Too many policyholders are confused about what is and isn’t covered when a natural disaster strikes and are surprised when something they thought was covered wasn’t,” says atmospheric scientist Marla Schwartz, from reinsurer Swiss Re.

An example is mudslide damage and destruction. A few months after the Thomas fire was finally contained, heavy rainfall in the affected region resulted in massive and deadly mudslides that destroyed multiple homes. Although property insurance policyholders did not have mudslide insurance, which is unavailable in California, the state’s insurance commissioner instructed insurers to honor claims for mudslide damage, commenting that the fire was the “proximate cause.”

The decision was contentious, but Schwartz says, “It’s a good sign that regulators are up to date on links between fires and mudslides. But it would be better for insurers to recognize this link in their policies and reflect the risks accordingly in their premiums.”

Taking the Lead

Some believe the global property and casualty insurance industry can play a more influential role in understanding, managing and insuring future natural disasters. “There is no single set of people other than the actuaries at insurers and reinsurers who are better at understanding these risks and calculating their frequency and severity,” Black, of the Energy and Climate Intelligence Unit, says. “Companies like Swiss Re and Munich Re are just brilliant at this for obvious reasons—they’re bearing a good part of the cost. They and others should have louder voices in informing the public and policymakers of what is really going on and what needs to be done as a result.”

An unambiguous “voice” may well be needed. Every time the United States suffers a shocking disaster like Hurricane Katrina, Superstorm Sandy or the California wildfires, the inevitable hue and cry that follows eventually subsides—until the next big disaster arrives.

“The challenge in the future will not be lack of risk-bearing capital to absorb catastrophic losses,” Muir-Wood says, “but whether insurers are allowed to charge for the underlying cost of risk based on their technical arguments.” If they can’t charge for the actual cost of risk, he says, insurers might need to pull back coverage or pull out of markets entirely.

“Certainly, the world is not helped by a U.S. administration that doesn’t accept climate change as a reality, making the chances of support for infrastructure and building adaptions at the federal level currently nonexistent,” Black says.

“But insurers and reinsurers accept reality. They can be expected to tell it like it is.”

Oppenheimer contends time is of the essence. “Human beings have done a pretty good job saving more lives from natural disasters,” he says. “Fewer people die worldwide from hurricanes and wildfires than in the past. But on the property and business interruption side of things, the record stinks.”

Banham is a Pulitzer Prize-nominated financial journalist and author. russ@russbanham.com.

Our industry has always recognized the need to continually create value for customers. As the needs and risks of individuals and businesses have changed over time, we have continued to evolve and provide innovative solutions focused on protecting their reputations and assets.

The drivers of more recent transformation include alternative reinsurance capital, low interest rates, advancements in technology and analytics, continued consolidation, the growing emergence of managing general agents and the vital quest to attract and retain the best talent so we can solve the industry’s need to fill nearly 400,000 positions by 2020—our “workforce gap.”

Astute leaders agree the pace of change will continue to accelerate and offer great opportunity for the innovators.

Talent Drives Opportunities

Our industry’s strength is its people; they are the key to unlocking opportunities. In the coming years, the most innovative agents, brokers, carriers and service firms will thrive as they focus on profitable growth through expansion and efficiency.

Expansion requires expertise and access to new sectors and specializations. We must also think differently about the usual questions we ask ourselves. How are customer needs and buying habits changing? What risks are emerging—what is the next “cyber liability”? What markets are growing? What external influences will affect risk: economic, regulatory, legislative?

Clearly, untapped markets test our ability to generate innovative answers and solutions, but we cannot enter them blindly. Success in this type of innovation demands diversity of thought, experiences and backgrounds. New markets often require investment in local talent, market intelligence and distribution channels and may require tailored products, which alter the traditional approach to underwriting and pricing.

For example, a significant market for consideration would be catastrophe-prone exposures that have not traditionally been covered by insurance-based solutions. The fact that almost 60% of 2017 catastrophe losses were not covered is a significant indicator of how our industry can add greater value and find purpose for capital.

We cannot develop these new markets and products without skilled people who can create and deliver innovative solutions that handle our customers’ complex risk challenges and who understand successful companies must be committed to long-term returns on investment.

How do we find them? We must rethink the following: hiring practices; sourcing talent from other industries; proactive college recruiting; and implementing (or expanding) intern programs and internal training in the underwriting, risk control, claim and actuarial disciplines. It also demands partnership, collaboration, continuous learning, self-awareness and market awareness. We must capitalize on our spirit of innovation and embrace advancing technology and analytics, as the industry still has a way to go to overcome the image of being behind the times. Finally, we must market our evolving story much more progressively.

Tech Partners

A commitment to profitability is essential, and creating greater efficiency is required for all players to survive in the decades ahead. For years, agents, brokers and carriers have been keenly focused on understanding and addressing expense. In terms of the premium dollar, the expense charge is high and unsustainable over time. The industry has made good strides, but much more is required from all parties in driving down the expense ratio, including underwriting expense, loss adjustment expense and overhead. Distribution and carriers need to develop an operating model that carries less expense, offers the same or better returns on equity, and provides solution-oriented products and support for their customers.

Innovative technology companies, previously considered to be disrupters, have become strong, strategic allies in this endeavor. Sophisticated analytics have become crucial to further refining the underwriting, pricing and claims processes. In addition, efficiency driven by advanced technology and analytics indirectly frees up people to focus on increased profit and growth.

Innovative technology and analytics will lessen the impact of natural catastrophes on individuals and businesses. Improvements in prediction, safety and relief are already resulting from significant advancements in artificial intelligence, machine learning algorithms, satellite imagery, drones and earthquake vibrating barriers. The improvements are creating opportunity, which will drive our industry to develop the next generation of creative insurance solutions.

Worman is executive vice president and chief underwriting officer at CNA.

You are on the board of Peninsula Family Service, a Bay Area nonprofit that serves vulnerable populations. What is it about PFS that appeals to you?
It’s the opportunity to serve the neediest in our own community, where households making $117,000 qualify to live in low-income housing projects. The breadth of PFS is very appealing. We operate nine child-development centers in San Mateo County. We run financial empowerment programs, including financial workshops and credit- and asset-building tools. And we provide older adult services, including senior peer counseling and transition care services.

You’ve had an entrepreneurial streak throughout your business career. What was your ambition when forming the new ABD?
To build a values-based firm with a world-class culture and a fierce commitment to long-term independent ownership. When I told my friends in the investment community that my vision was to build a firm whose core differentiator is culture, they looked at me cross-eyed. Today, we have 280 stakeholders and continue to invest with the next generation in mind. “Forward Looking” is one of our five core values.

Why were you so committed to independent ownership?
When you have non-employee owners, you have two core purposes—drive shareholder value and drive client value—and sometimes those purposes are at odds with each other. When you’re closely held, it is easier to invest for the long term and to put people before profits.

You went to college at UCLA but moved back to the Bay Area after graduating. How come?
I wanted to be close to family. This is where my roots are and where I wanted to start my career. L.A.’s fine. It’s got warm beaches and Hollywood, but we’ve got culture up here in NorCal!

You and your wife are avid hikers. What are your favorite spots in the Bay Area?
We have the coastal mountains with tons of trails. We love the Marin Headlands. We also do a lot of hiking at Lake Tahoe. We did some amazing hiking several years ago at Lake Louise, up near Banff, Canada.

Your official company bio says you enjoy “good Vitis vinifera with friends.” What’s your favorite California wine these days?
One of my all-time favorites is Ridge, specifically Monte Bello, their estate reserve Cabernet. It’s interesting because Ridge is from the Santa Cruz Mountains appellation, which is not as well known as Napa or Sonoma. But wine connoisseurs know that Ridge Monte Bello is considered a California “first growth.”

Who has been your most influential mentor?
Definitely my father, Fred. His enthusiasm toward the business is incredible. He received so much pleasure and satisfaction from building a respected company that did exceptional client work and that employed and supported so many colleagues and their families. I would be remiss if I didn’t also mention Bruce Basso. Bruce and my father were partners. When I was putting the new company together, I leaned heavily on Bruce for his wisdom and guidance. He is extremely generous with his time and gracious, wanting nothing more than to see me and my partners succeed.

Is there a leader in the business world whom you’ve most admired?
Marvin Bower, the late co-founder of McKinsey & Co. He invented management consulting and had a very progressive view on what it means to be a leader.

If you had five minutes with Donald Trump, what would you tell him?
That’s a little above my pay grade. It’s too easy to say something negative, and it’s not popular to say something positive, especially being from California.

What three words best describe ABD?
Work, love, play. That’s ABD’s ethos. We work hard. We play hard. We celebrate the things and people we love.

How would your co-workers describe your management style?
Definitely not micromanaging. I’d say encouraging, empowering, leading by example.

If you could change one thing about the insurance industry, what would it be?
The industry would embrace change and innovate more quickly.

Last question: What gives you your leader’s edge?
I don’t think I have many insurance brokerage peers that started and built an insurance software business. The BenefitPoint experience taught me a lot about building and running a company, including mistakes not to repeat. It gave me a close-up look at hundreds of insurance brokerages and their operations. I learned the importance of operational best practices and the value of a world-class operating team.


The de Grosz File
Favorite vacation spot: Lake Tahoe

Favorite movie: Shawshank Redemption

Favorite actor: “I watched a documentary on Robin Williams that reinforced what an amazing talent he was.”

Favorite book: “I just finished Season of the Witch: Enchantment, Terror, and Deliverance in the City of Love, by David Talbot. I wouldn’t say it’s my favorite book, but it’s a favorite. It’s about the cultural transformation of San Francisco in the ’60s, ’70s and ’80s. It really is an eye-opening book that highlights the intersection of culture and politics and brings clarity to who and what and why San Francisco is what it is today.”

Wheels: Audi A6. (“It’s a 2009, and I’ll probably drive it until it dies. I’m not a car guy.”)

Tell us about DIG.
DIG is a next-generation technology company that enables insurers, banks and brokerages to roll out new digital tools and innovative products at record speed. Our solutions include tools to sell commercial insurance products, either directly online or via partners such as banks. The sales tools can include risk analysis, comparison and transaction tools. Our customer relationship management tool can support the interaction with commercial clients. For agencies, we develop customer portals—web and mobile apps, transaction and comparison tools, CRM solutions and [application programming interface] platforms—to connect to back-end systems of insurers and brokerages.

How did you venture into insurtech. 
I really am very passionate about insurance. I was driven by the fact that I want to change insurance. The first part of my career I worked with corporates on the insurance side. I was leading business development in Asia and Europe for GE Insurance, and then I was leading global M&A and strategic equity investing for Swiss Re. I started my career as an insurance broker because I had to earn some money to finance my university education.

Digital Insurance Group is now my third private-equity backed technology company. Before I started this journey, we launched a private equity firm called LeapFrog. We founded the world’s first microinsurance fund, backed by Bill Clinton in 2007. We raised $130 million for the first fund and now over $1 billion to invest in insurance companies and brokerages in the emerging markets with a profit-with-a-purpose lens.

Before setting up DIG, I was the managing director and executive board member of Germany’s second-largest online price-comparison business, Verivox. We successfully sold the company to Germany’s largest media company.

Then, I was working with the investors of Knip, and we were kind of brainstorming and thinking, “What can we do with Knip to really scale the business model?” In the spring of last year, we founded the Digital Insurance Group. We merged two businesses together to create it—Knip on the one side, which was Europe’s first digital brokerage, and Komparu, a software and service company focused on insurance and brokers. And we’ve come a long way since.

Established companies don’t see us as a threat anymore; they want to collaborate. Just recently we have signed a multiyear collaboration agreement with Zurich Insurance, and we also work with other insurers and support banks with bancassurance products. There are a lot of lessons learned that we apply in our current business.

What was the rationale behind the merger of Knip and Komparu to form DIG?
First, we had a vision. We thought insurance was too complicated. We wanted to make insurance easy and accessible for everybody, for the right price at the right time. We knew that with our combined experience and joined tech knowledge we could help big incumbents roll out truly digital and easy-to-use solutions to improve their customers’ insurance experience.

The two businesses were highly synergistic. We used the technology of both companies to build a new tech stack. Knip was really disrupting the market. It was Europe’s first digital broker and had a fantastic mobile app. It had developed its own CRM system, not using Salesforce like others do. It was very strong in terms of customer engagement, using a recommendation engine to really interact with the customer, giving advice and doing upsell and cross-sell.

Komparu started seven years back in the Netherlands and set up the largest car insurance comparison portal. And then it used that technology to develop a software-as-a-service model, selling comparison tools and other technologies to brokerages, insurers and distributors. Komparu was very strong on the web side and the portal but also, more importantly, on leveraging its API knowledge and how to in