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  • June 25, 2018 9:49 AM | Vaughn Lawrence (Administrator)

    After the long process of creating a bill and working with legislators and staff, HB 1851 was been signed into law by Governor Wolf on June 22, 2018!

    PAMIC proposed numerous changes to the Insurance Department and General Assembly in Fall 2017 addressing long-simmering concerns over examinations costs and length. Working with our industry partners, PAMIC achieved a tangible success for our members. 

    This Law goes into effect on July 23, 2018, and affects any exam started after that date. However, the Department intends to follow the requirements in this new law to current exams as well.  

    Executive Summary: 

    House Bill 1851 amends the Insurance Department Act of 1921 (act) to require transparency, further establish procedural guidelines for Insurance Department (department) examinations, and to establish the Joint Underwriting Association (JUA) under the act. assign additional duties to the JUA, and statutorily create the JUA Board House

    This law amends Article IX(examinations) under the act to require the department to work with the insurance industry to utilize the most efficient means to conduct examinations, minimize costs, facilitate cooperation and communication between insurers and the department and increase transparency and efficiencies.

    • This law requires the department to hold a scheduling conference with an insurance company before commencing examination fieldwork. The scheduling conference shall include a discussion of the purpose and scope of the exam, the estimated costs for the exam, the types of information the company will be asked to produce, the most efficient means of conducting the exam, and any alternative approaches in performing the exam. The bill requires the department to provide a company with a detailed budget estimate no more than thirty days after the scheduling conference.
    • Within fifteen days of receipt of a budget estimate, the company and the department shall have an additional discussion regarding the most efficient means of conducting the exam and producing information. If necessary, revisions to the budget estimate shall be made the department, and the company may mutually agree to modify the time allotments. If the department determines that the cost will exceed the budget estimate by 10% or if there is a material change in staffing assignments, the department shall hold another scheduling conference.
    • This law establishes detailed requirements for billing invoices submitted to companies for examination work by contractors and the department.
    • This law requires the department to produce an annual examination and analysis report within thirty days of the end of each fiscal year. The report shall include the total amount of money billed to companies by the department and its contractors for financial conduct examinations, market conduct examinations, review of transactions required to be filed by regulated entities with the department, and solvency monitoring.
    The report shall also include:
    • the identity of each contractor retained by the department and the amount of money billed by the contractor to companies,
    • the total amount of deposits into the Insurance Regulation and Oversight Fund as a result of market regulation activities for which regulated entities are responsible for paying,
    • an analysis of the effectiveness of the procedures under this article and recommendations to further improve the efficiency and transparency of the examination.
    A last-minute amendment affects the Joint Underwriting Association (JUA) - the residual market provider of medical malpractice insurance in Pennsylvania.

    This law requires the JUA to complete the following additional duties: 

    • Submit monthly reports to the commissioner of premiums collected and claims paid during the immediately preceding month;

    • Provide to the commissioner additional documents and information regarding the association's operations as the commissioner may request;
    • Within sixty days following the effective date of this section,
    • prepare and submit a new plan of operation for approval by the commissioner;
    • Submit to examinations. The law statutorily the JUA board and clarifies that it shall operate under the department.

    This act shall take effect in 30 days. HB 1851 would not have been possible without the efforts of the PAMIC PAC. We hope that you will consider supporting our efforts to create legislation and regulations that will improve how insurance companies in Pennsylvania do business. Donate to the PAC today!

  • June 20, 2018 4:00 PM | Vaughn Lawrence (Administrator)

    By Victor T. Ehre, Jr.

    Ours is a competitive industry and in a changing world which has added online multi-carrier marketing, multi-distributional selling (including those who are competing directly with their own independent agents), and even direct writers with their own agencies selling non-direct writer policies, everyone is looking for the “secret sauce” which can create separation from their competitors and with it, success.

    Watch any football game and multiple times one announcer or another will reference the receiver’s attempt to create separation to improve the potential for a successful pass reception.  Seeking advantages in sports may take the form of enhanced equipment, all to gain that separation which hopefully results in success.  But, what about our industry?   Our technical enhancements may take the form of improved computer systems, unique product tweaks (Drone insurance, Cyber policies, etc.) not to mention new social media, apps, blogs and more.  Your competition, however, is often exploring similar paths, so any perceived advantages sought are usually short-lived.

    In the search for that elusive “secret sauce,” management may create internal task forces to develop new directions to pursue.  Consider the following “P’s” which are some of the first tossed out in those committees:  Product.  Management frequently looks at the products the company offers and considers one of two things.  First, they may look at ways to tweak an existing product’s coverages, scope, and market.  What frills or expanded coverages can they add to separate their product from others?

    Years ago, I was with a company which decided to enhance some BOP classes and presumably make them hot tickets for their agents.  When launched, I was sent out to do sales meeting to ramp up interest.  One of the classes was funeral parlors.  We bombed!  The brainchild of senior management, it had corporate underwriting research the rates for the top 20 commercial writers in the state without verifying that those carriers wrote any funeral parlors.  Done without any outside research by marketing, no one knew that those carriers, while having the class, were NOT active writers of the product.  A little research with funeral directors or even their agents would have uncovered the fact that a non-top 20 commercial carrier had the monopoly on a statewide program!

    Besides the tweaking of an existing product, there is the whole impetus to add a completely new product line to a portfolio.  The pressure may come from outside the company (the agency plant) and be pushed up the line by marketing, department management or others.  I have seen that all too often the necessary supporting infrastructure is forgotten.  How involved was underwriting?  Do they have underwriters with the expertise to assess the exposures of a new product line?  Were appropriate underwriting guidelines created, so all know what is acceptable?  Was the company’s claims department brought into the picture?  Will their Claims personnel have the necessary knowledge and training to be assured of the proper assessment of coverages to competently adjust a potentially unique set of exposures, unlike anything they have known and worked with before? 

    Then, of course, there is Price.  Talk about a topic to potentially divide the camps in a company!  Marketing, as a proxy for the agency plant, is promoting lowering prices, sending presumed solid marketing data showing what the competition is doing.  Meanwhile, underwriting is pulling company data defending the need for no change or, heaven forbid, a rate increase!  And frankly, pricing remains the two-edged sword: it may cut a temporary swath of increased writings, but it may equally cut one’s profitability if that pricing was poorly thought out.

    I believe that the most tried and true ways of creating separation and success lie in the Third “P,” our People.  Recently I was rereading a chapter I had contributed to a book entitled The Effective Manager, written by Karl F. Gretz and Steven R. Drozdeck.  The title of the chapter I contributed was Internal Branch Communications.  As I reread it, I was reminded of every company’s “not so secret” sauce for growth and success: its staff and the right types of communication within the company internally as well as externally with their agency plant.

    Regardless of a company’s size, our Front Line is not our systems, but our people and their understanding and embracing of their roles and the value they add to the company’s success.

    Systems and factors such as products and price may add temporary advantages over your competition.  One of the biggest “catch phrases” in our industry is the ease of doing business.  Rating systems, online applications, and other programs attempt to offer unique attractions to the customer.  As noted before, these are often short-lived advantages since these are the focus of so many other carriers.  But it is the very uniqueness of our people, which when properly cultivated, will lead to a truly positive experience for your customers AND ultimately to creating the separation which will lead to long-term success.

    If you have ever watched the reality TV show “The Profit,” you know the premise is for billionaire Markus Lemonis to look into businesses which might have the potential to be saved with changes in approach and operation (and yes, some additional capital).  In one of his episodes, he expounded on his 10 Rules for Success.  Rule #2:  Make your employees #1, not your customers!  Why?  Your employees are the ones who “touch” your customers.  To the extent your people see and understand how they fit into the business, they will understand their value in building the positive separation every company seeks.

    Most company Mission Statements I have read usually note the importance of their employees.   Sadly, all too often it is relegated to “lip service.”  While the right people are willing to work and dedicate themselves to your company, it will only become a reality with a true corporate commitment to the following two halves of the “communication” whole.

    Having worked in all sizes of companies, I observed early on the dozens of different positions companies may have.  Now assuming that every position has actual value to the success of the company:

    This is, unfortunately, not always the case.  I once sat in an agent’s office with one of the CSR’s.  When I asked what her job was, her response was “Oh, I’m just a CSR.”  That response told me all I needed to know about her feeling of worth to that agency.  Knowing how valuable a good CSR is, I responded: “Oh, so you’re about the most important person in the agency!”  After confirming that her role included being the first line of contact with the agency’s clients (at the counter or answering the phone), the quoting of business for producers, making changes to policies, and so much more, she began to see her true worth in the agency.  Her posture straightened and the smile that crossed her face was worth it.  She now saw the value of her role in that agency.

    Answer this: if your employee were at a family picnic and a relative asked him or her about their job, how would they begin their response?  If the response starts out, “Oh I’m just a …,” your company communication is falling short, and with it, the feeling of pride one seeks in their work.  Communication is not solely telling an individual the procedures associated with the job, but also adding an understanding of the position’s value and worth to the company. 

    The SILO effect

    If one looks at their organization with an eye toward how communication is disseminated, there may be a significant cause for alarm.  I have worked with many companies during my career.  In nearly all, I have observed and often been in the middle of what one might call the SILO effect.

    At the executive level, communication meetings among department heads either seldom move down the “silo” to department personnel, or are filtered so significantly that by the time the message reaches those on the “front line,” it is of little value.

    This communication, all too often, is vertical in nature, and sadly, often one way.  In addition, as communication is passed down the layers, the sanitized version may look like a redacted “top secret” communique leaving the staff feeling uninformed and unimportant.  Elon Musk once sent an email setting policy that any employee has not only the right, but the duty to reach out to any other department if that communication is critical to the tasks assigned to them.

    While silos on a farm are separated to avoid “cross-contamination,” departmental silos create barriers to “cross-communication” and, with it, departmental isolation.  Consider a pricing strategy proposed by Underwriting without communication to IT or Marketing.  It is the implementation and the sharing in advance of strategies that will help avoid serious problems internally and negative issues externally.

    In summary, products and pricing are superficial and short-lived attempts to separate oneself from the competition.  The competition all too easily and quickly duplicates them.  Your “secret sauce” to success lies in your employees understanding of their value in your organization and the willingness to permit cross communication.  Implementing these will create an atmosphere of inclusion and self-worth which will lead to the creation of separation and long-term success.

    The article was published in part in the PAMIC 360.

    Victor T. Ehre, Jr. is the General manager of Centre County Mutual Fire Insurance Co and a member of PAMIC.  He is the author of the motivational book The Three Legged Table, The three Principles of Life Living.  Vic holds a BS in Economics from the Wharton School of Business with a Major in Insurance as well as a Master of Insurance degree from Georgia State University.  In his 45 years in our, industry Vic has been an agent, a casualty facultative reinsurance underwriter, founder, and president of an Excess and Surplus Lines Agency, as well as holding senior management positions with both stock and mutual carriers.  Vic served in the United States Army as a Lieutenant and platoon leader and earned his Airborne Jump Wings.  Vic is a father of three and grandfather of five and shortly will celebrate his 45th wedding anniversary.

  • June 20, 2018 4:00 PM | Vaughn Lawrence (Administrator)

    By Mike Dubin, Baker Tilly

    During the recent National Association of Insurance Commissioners (NAIC) Spring Meeting, several working groups and committees discussed items of import for actuaries, including the Big Data (EX) Working Group, Casualty Actuarial and Statistical (C) Task Force, Health Risk-Based Capital (E) Working Group and International Insurance Relations (G) Committee.

    Big Data (EX) Working Group: Complex Model Review

    There was debate over a centralized or decentralized mechanism and structure for a mechanism to assist state regulatory review of complex models. Insurance organizations indicated they feel a centralized structure inappropriately delegates state responsibility, and prefer paying higher fees to individual insurance departments for a more complete review versus a centralized NAIC center for review. One state gave an example where it is currently receiving state filings based on predictive models that may be against state law, but they do not have the requisite expertise to approve or disapprove within their staff.

    In the best case, the Casualty Actuarial and Statistical Task Force should be asked to draft best practices, state guidance and to facilitate training. However, given the lack of consensus and multiple committees involved, it seems unlikely that a state assistance mechanism will be initiated soon.

    Casualty Actuarial and Statistical (C) Task Force: Appointed Actuary

    There was significant debate about the “Appointed Actuary Project.” This project aims to require actuaries to opine annually (on a company by company basis) on what is needed to be qualified, whether they are qualified and what they have done to be qualified. Significant opposition was expressed from the actuarial community. On the surface, this doesn’t seem extraordinary as examinations usually require that the examining actuary opine whether the appointed actuary is qualified to be the appointed actuary for the specific company. However, the draft “Attestation of the Appointed Actuary” form in the meeting materials had over 100 questions indicating many are concerned with a checklist approach to credentials. Some of the issue may be concern that years of experience will be discounted in favor of standard coursework.

    Health Risk-Based Capital (E) Working Group: Stop-loss Interrogatories and Expanding use of NAIC Designations

    There was healthy debate over two proposals. The first is regarding stop-loss interrogatories. The American Academy of Actuaries expressed concern that information collected for RBC purposes would be used for other purposes. The other side of the debate is that information on stop loss contracts is needed to appropriately reflect their risk in the RBC calculation.

    The second is regarding expanding the use of NAIC designations on Schedule BA from Life Insurers only to Health Insurers. The stated reason for proposing the change is to more accurately reflect investment risk and increase consistency between life and health insurers. One main objection was that it would be an additional cost to carriers without additional risk identification.

    International Insurance Relations (G) Committee: Foreign Reinsurer Approval Framework

    There was discussion about a common framework for states to approve reinsurers from outside the U.S. The purpose would be to allow reinsurance receivables to be an admitted asset without collateral. One point debated was whether states could require the other jurisdiction to accept the state’s solvency monitoring and regulations.

    This article was previously featured by Baker Tilly and was published in the PAMIC 360.

    Actuarial ChangeMichael Dubin joined Baker Tilly in 2017 as a member of the financial services practice group and the firm’s director of actuarial services. Mike delivers forward-thinking solutions to help clients drive growth, generate revenue, ensure regulatory compliance and achieve significant financial savings.

  • June 20, 2018 4:00 PM | Vaughn Lawrence (Administrator)

    By Ashley Popham, BriteCore 

    Emerging technologies dominate insurance headlines and conferences today, offering digital strategies to enhance multi-channel customer engagement, automation, and operational efficiency. The overwhelming buzz requires companies to distinguish practical, cutting-edge strategies from bleeding-edge red herrings.

    This two-part series overviews current technology trends and realistic use cases in insurance. In this edition, learn which technologies are improving customer experience and advancing digital data capabilities, and which are low-return distractors.

    Customer Experience

    Insurers are applying new technologies to enhance customer experience, focusing on connected, easy-to-use, self-service processes for insureds. Customer experience technologies revolutionizing insurance include direct distribution, chatbots, augmented and virtual reality, and gamification.

    1. Direct Distribution – Insurers use self-service technology to anticipate and meet digital consumer expectations. These initiatives build insurance products from the inside out, starting with customer experience and adapting products to fit ideal experiences. Examples include websites, portals, and apps from which insureds can purchase and maintain insurance products. Insurers are also launching agent and adjuster apps to expand self-service and multi-channel opportunities.
    2. Chatbots – Chatbots (through programmed rules or artificial intelligence) interact with users through chat messages. Insurers can use chatbots to automate customer service and enhance direct distribution processes. There are three major use cases for insurance chatbots:

      1. User-initiated processes, such as FNOL submission or policy application
      2. Information retrieval directly from your website, insured portals, or staff portals
      3. Product integrations with digital assistants, such as Alexa, Siri, and Google

    3. Augmented and Virtual Reality – In augmented reality, users superimpose digital elements onto the world around them, much like stickers on social media platforms allow you to add digital layers to pictures taken from your smartphone camera. In contrast, virtual reality refers to immersion into a virtual world. Insurance use cases are limited, generally focusing on interactive courses for staff and insureds
    4. Gamification – Gamification applies gaming qualities to everyday business processes. Fitbit’s downloadable app provides a prime example of gamification. From the app, users can view progress towards daily walking goals, log eating and exercise habits, and challenge friends. Insurers can offer similar social engagement opportunities and incentives for wearables, telematics, and Internet of Things (IoT) data, rewarding safe habits that lower risk. Insurers are also investigating gamification (sometimes in combination with augmented or virtual reality) to enhance insured and employee education.

    Digital Data

    Advances in data collection (drones, IoT, telematics) and data processing tools (big data, artificial intelligence, robotic process automation) create more comprehensive data than ever before, offering groundbreaking insights.

    1. Internet of Things (IoT) – More than 20.35 billion connected IoT devices are installed today worldwide, and the number is projected to grow to more than 30.73 billion connected devices by 2020. IoT devices, such as smart thermostats and smart locks, enable constant monitoring and remote access for everyday processes. These devices can provide carriers with detailed data about property safety and insured lifestyle. IoT data has potential to boost claim processing and risk analysis efficiency.
    2. Automobile Telematics – Automobile telematics offers new data sources to insurers. Through device installation in policyholder vehicles, insurers track detailed vehicle data, such as speed, location, and sudden stops. Insurers can process data to enhance risk assessment precision. Many carriers (including Allstate, Progressive, and State Farm) offer premium discounts for telematic installation and safe driving habits, improving customer experience.
    3. Big Data – Big data is infrastructure that stores carrier data and tools used to query and build visualizations on top of the data. Big data also relates to predictive analytics. By inputting IoT, social media, demographic, and website analytics, carriers can create customer profiles. Through profile comparison, carriers can predict behaviors such as cancellation and renewal likelihood. Carriers can even use big data for fraud detection, comparing a claim submission with an insured’s previous claims to check for similar language.
    4. Artificial Intelligence (AI) – AI uses computers to learn and make decisions. AI has a variety of insurance use cases, including data processing, driverless cars, and advanced image, voice, and text recognition for chatbots. Most promising of these use cases involve data processing. Carriers implement AI to search extensive databases for patterns, leading to new insights. AI works hand-in-hand with big data, IoT, and telematics: IoT and telematics provide vast data sets, big data provides an interface for manipulating data, and AI analyzes data to draw new insights.
    5. Robotic Process Automation (RPA) – RPA and AI both use computers to process vast stores of data. While AI uses machine learning to learn and improve decisions over time, RPA machines can only process and make decisions through defined algorithms. RPAs automate repetitive processes, such as time-consuming duplicate entry. Carriers investigated RPA to improve malfunctioning core systems, but attempts were found unfavorable.
    6. Drones – Drone and satellite use are rapidly expanding among insurers. Adjusters and inspectors use drones to automate site inspection processes further. Through visual and thermal imaging, drones provide precise data allowing carriers to assess risk and damage more accurately. Drone usage can increase underwriting and claim information efficiency by as much as 40%.
    7. Blockchain – Insurers use blockchain to manage policies and payments. Created to eliminate unnecessary third-parties in transactions, blockchain offers secure digital record management. Using cryptocurrencies, like Bitcoin, carriers automatically create contracts to process transactions when publicly recorded events occur (such as flight cancellation for travel insurance). Records cannot be changed, providing reliable records. However, difficulties arise if an error occurred in the original transaction but cannot be undone. Blockchain also gives everyone complete access to read and write transactions, increasing transparency but decreasing privacy.

    Innovative technologies are beginning to mature, creating perfect opportunities to implement new use cases into your product offerings. Consider your business strategies today and how you can enhance your customer experience and digital data offerings. In the next edition, we will discuss how to create a holistic digital strategy that can truly modernize your company.

    This article was originally published in the Spring edition of the PAMIC Pulse.

    References: 

    1. Internet of Things (IoT) connected devices installed base worldwide from 2015 to 2025 (in billions),” Statista, 2018, https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/
    2. EY Digital Transformation in Insurance,” EY, 2017, http://www.ey.com/Publication/vwLUAssets/ey-digital-transformation-in-insurance/$FILE/ey-digital-transformation-in-insurance.pdf

    Ashley Popham is a Communications Specialist at BriteCore with 5 years of combined experience in research and technical communication. Ashley holds a B.S. in Professional Writing from Missouri State University and a certificate for Inbound Marketing. Since joining BriteCore, Ashley has created numerous custom training videos, articles, and instruction guides for insurers aimed at helping them better engage staff, agents, and customers. If you’re curious about digitalization strategies or want to learn more about BriteCore, email Ashley at ashley@britecore.com.

  • June 06, 2018 4:30 PM | Vaughn Lawrence (Administrator)

    By Brian Schrift, The Carlisle Group

    In today’s work environment – specifically, the Mutual Insurance company space – there seems to be some frustration when it comes to hiring the ‘next generation.’ As I have spoken with several of my clients over the years, the sentiment seems to be the same – How do I attract new talent that can eventually become my successor? What is the correct methodology to hire the next generation? Is it attending every college’s job fair within a 100 mile radius to try and recruit new graduates? Is it posting your entry-level positions on every possible media outlet that you can think of? I know there are a lot of questions we can ask ourselves – I have heard many of them.

    As we try to find the answers to these questions, let’s start by looking at the practical principles – starting within your organization first. I heard Joe Montana (Hall of Fame quarterback for the San Francisco 49rs) speak a few years ago. Two words he mentioned that stuck out to me were trust and fundamentals. He was referring to the trust he had in his lineman to protect him and how the team would go over the fundamentals every day in order to be successful. These two words can, and should, be applied to every business model.

    So how does this apply to the hiring process?

    First, let’s talk about trust.

    Trust must exist between the hiring authorities within the organization and the Human Resources Department. More often than not, there seems to be a disconnect between what the HR professional and the hiring authority is looking for. There also seems to be a breakdown in the recruiting and vetting processes. In other words, the hiring authority needs to be able to articulate exactly what he/she is looking for and allow HR to do his/her job – bringing in the talent that he/she was tasked to find.

    This is where it all starts. There can be arguments on both sides – a VP of Claims (hiring authority for the sake of this conversation) can make the argument that HR doesn’t handle claims, so they don’t really know what I need in the person we are looking for. HR can make the argument that the VP of Claims doesn’t recruit talent, so he/she doesn’t really know the process. This, my friends, is a failure to communicate and is the number one frustration within a lot of organizations. If this is the first line of trust within your organization, take steps to repair it.

    Human Resource professionals: the VP of Claims has a wealth of knowledge that makes him/her successful. Their experience helps greatly in identifying the subject matter expertise and demonstrated experience that the claims professional you are hiring will need to help the organization and to plan for the next generation (career-pathing and succession planning).

    VP of Claims professionals: your HR professionals have a wealth of knowledge that makes them successful in recruiting talent for your organization, and their experience in the process of identifying talent and attracting them to your team is invaluable. They can also help you implement plans to identify top talent, career-pathing, succession planning and put numerous tools into effect when identifying characteristics and profiles that will benefit the organization. This will also benefit you because it can help match the right candidate with your leadership and managerial style promoting career health and retention.

    Everyone has an opinion on what the procurement process looks like. The key is open communication which creates trust.

    Second, let’s talk about fundamentals.

    Fundamentals are not what everyone is “talking about doing” to better their procurement process for the next generation of employees; they are what the organization is actually doing.

    Talking about Succession Planning is easy, but actually implementing it can be a daunting task for an organization that has relied on the same core group of employees for the last, 20, 30 or even 40 years. We are in a fast-paced world that is difficult to keep up with, and sometimes it seems things are changing on a daily basis.

    So, how do we attract the talent of this fast-paced world; namely college graduates or the Millennial generation? Not to say that we don’t have to take a different approach. Our culture is changing the thought process of younger generations, and it is different from past generations, but here it comes… wait for it…they are still human and desire the same things you did when you started within your organization 20, 30, or even 40 years ago.

    Raise your hand if you went out looking for your first insurance job. It may have been that way for some of you, but oftentimes, the insurance industry finds us, and what finds us are the fundamentals: the lifestyle, financial stability, and the opportunity to learn something new. The Millennial generation wants to be part of something bigger than themselves, so attracting them to your organization may be easier and closer than you think.

    We spend so much time busily trying to find the “new” best way to attract the next generation to secure our legacy that we tend to forget that insurance is a relationship business. It all starts with great communication, collaboration and an efficient process between your human resource professionals and hiring authorities to take care of your first customer and future leadership: the new employee.

    This article was previously published in the Pulse

    Brian SchriftWith just under 20 years of combined experience in the insurance and recruitment industries and over $4 million in sales during his career at TCG, Brian understands market changes and the factors that drive them. In 2014 and 2015, Brian's team was recognized as #2 in the Eastern Region, and in 2016, Brian was named #3 in the Eastern Region and #10 globally. Brian has been invited as a speaker for several Mutual Insurance Company Associations' regional conferences and has been an integral contributor at President/CEO and HR Roundtables. He is currently on the PAMIC HR Committee, as well as the VAMIC Advisory Committee and regularly consults with clients to advise them on succession planning, automation integration, and forecasting.

  • June 06, 2018 4:30 PM | Vaughn Lawrence (Administrator)

    By Abhijeet Jhaveri, ValueMomentum

    During times of change, many organizations feel pressure to adapt and perhaps even discard old ways of doing business. For mutual insurance companies, a rapidly-evolving marketplace offers a dilemma: should they keep following the path that has brought mutual companies a long history of success, or blaze new ones to keep up with competitors?

    Mutual insurers are among the oldest insurance entities and longest-running businesses of any kind. For example, The Philadelphia Contributionship, founded in Philadelphia in 1752 by Benjamin Franklin, is still writing risks for members today. According to the National Association of Mutual Insurance Companies, less than 1% of businesses survive more than 100 years, yet a majority of mutual insurers have existed that long or even longer. In addition, some of the largest U.S. insurance organizations are mutual companies. A key to mutual insurers’ success is the reason they exist – to serve their policyholders.

    Mutual companies have a long history of surviving big shifts in the nature of risks, risk exposures and risk assessment - the advent of the automobile, the industrial and technology revolutions, and many others. Mutual companies do not need to change their core values or mission, but they may need to change their tactics to adapt and meet the needs of their customers while fending off new competitive forces. Especially, with the powerful digital forces such as mobility, IoT, demographic data, analytics and social nets, they do need to develop a digital strategy to continue to provide policyholder service, retain members and grow. Essential to all three goals is creating a positive member experience.

    Competition in the Digital Era

    The mutual model has proven successful in most lines of insurance. According to the Insurance Information Institute (III), five of the ten largest writers of homeowners insurance in 2016 were mutual companies. Another two of the ten were reciprocal exchanges, which have a different structure but function much like mutual companies. III’s list of the largest private-passenger automobile insurers has a comparable number of mutual companies. In 2016, according to the American Council of Life Insurers, one in seven life insurance companies was a mutual. And many mutual companies are building on their deep roots in the communities they serve to address Main Street and local business insurance. Many of the largest life companies, whether measured by assets or premiums, are mutual companies. A commercial line where mutual companies have a similarly significant market share is workers compensation.

    Although their historical context is of great significance, mutual companies operate in a highly competitive marketplace. Stock insurance companies are aggressively seeking growth in the same lines of business and geographies where mutual companies write. In addition, personal auto and homeowners insurance, in particular, are experiencing significant digital disruption. For example, insurtech startups in “peer-to-peer” (P2P) insurance are growing quickly, yet their business model is largely inspired by mutual insurers.

    Challenge: Policyholder retention

    All insurers face the challenge of acquiring and retaining customers. For mutual companies, harnessing digital innovation is a key step to improve their competitiveness. Mutual companies’ focus on policyholder service offers a strong foundation on which to build an enhanced experience for members by using digital technologies.

    Forgoing the opportunity to innovate can lead customers to conclude that mutual companies are archaic and less relevant today. Mutual companies’ elevated rankings among insurance companies show that is not true, but perceptions and customer experiences matter in a market with many choices.

    Consider the following real-life examples of what can happen when an insurer fails to meet customers’ changing expectations:

    • A policyholder of an insurance company that did not offer a mobile application for billing and policy services decided to switch because he found it inconvenient to log in to the company’s desktop site.
    • A consumer who invested in making their home, a “smart” home, inquired with his incumbent insurer about obtaining a premium deduction. The company did not offer any deductions for connected homes, so he changed insurers.

    It is worth noting that the above examples do not relate to price increases or claims. Adverse experiences such as steep rate hikes or disappointing claim outcomes are intuitive reasons for leaving an incumbent insurer. But that is not what led the above consumers to switch. They simply asked their insurers to deliver experiences similar to those available from other service providers.

    Mutual insurers that embrace a digital strategy can offer additional value and service to their policyholder members. Examples of this include greater convenience in quoting, policy services and claim handling. In fact, all insurers have an opportunity to switch from being “rarely engaged claims payers” to “daily engaged risk advisors” by leveraging powerful digital forces! Competing insurers, especially large stock companies, are making investments to improve their customers’ digital experience. Mutual companies should do likewise.

    Advantages of long-term thinking

    One of the advantages that a mutual insurance company has over a stock company is freedom from reporting quarterly earnings. This affords mutual insurers an opportunity to take a long-term view, facilitating planning and strategic decision making that is in the best interest of their policyholders -- without worrying about attaining short-term financial targets.

    Digital strategies similarly benefit from long-term thinking. Mutual companies can benefit from an omni-channel approach that seeks to achieve a cohesive agent and customer experience across many touchpoints. The omni-channel approach also offers technological agility, to incorporate new and emerging engagement channels such as personal digital assistants (e.g. Alexa by Amazon, Apple’s Siri, Microsoft’s Cortana, Google Now).

    When building an omni-channel approach, mutual insurers need to consider four key goals:

    • Reach. This means the insurer is accessible from any device and from anywhere. This can be accomplished by providing apps and sites for agents, customers, and employees replete with capabilities that can enable them to self-service.
    • Engage. To truly connect with customers, insurers must create memorable, immersive experiences. This is achieved by providing personal and contextual content, guides, dashboards, alerts, and insights. For instance, enabling an agent to select a pre-bundled set of coverages targeted at let’s say, restaurant owners, with rich content to guide the agent as to how best to advise the customer, and sharing trending data that will inform the end customer.
    • Transact. Customers, especially in personal lines, have learned to expect instant gratification during requests for coverage and service. They have become accustomed to fulfilling their intentions in real time. Insurers can deliver this through workflows that marshal core functions and data toward specific transactional purposes, such as quoting, policy service and first notice of loss.
    • Interact. Insurers can drive meaningful interactions from any channel. This is achievable by providing bots to converse with customers, for example, through email, SMS, chat, and voice.  

    Insurers with a digital strategy realize that part of the solution to enhancing customers’ experiences is to embrace the fact that the industry is going through yet another tectonic change (driverless cars and P2P insurance, anyone?) precipitated by powerful digital forces. This means initiating a boardroom level long-term action plan to chart how the company will invest in digital strategies. And finally, this means creating a mindset of “failing fast” by executing on a variety of tactics that converge to a broader strategy. This also means being open to new types of partners and new types of competitors. For example, several insurers including Liberty Mutual reach small-commercial customers through new digital distributors that provide quotes and advice in a manner that digital natives are now accustomed to. Mutual companies already are built to serve each policyholder. Their opportunity now is to leverage digital technologies and data insights to meet customers’ evolving expectations and make the experience even better.

    In a future article, we will define the characteristics of a digital mutual insurer and discuss how it can deliver greater value, differentiate itself in a crowded marketplace and retain its policyholders.

    This article was previously published in the Pulse

    References:

    1. “Mutual Insurance Background,” National Association of Mutual Insurance Companies, https://www.namic.org/about/mutualins
    2. “Facts + Statistics: Homeowners and Renters Insurance,” Insurance Information Institute, https://www.iii.org/fact-statistic/facts-statistics-homeowners-and-renters-insurance#Top%2010%20Writers%20Of%20Homeowners%20Insurance%20By%20Direct%20Premiums%20Written,%202016
    3. “Life Insurers Fact Book,” American Council of Life Insurers, October 2016, https://www.acli.com/-/media/ACLI/Files/Fact-Books-Public/2016LIFactBook.ashx?la=en

    Abhijeet JhaveriAbhijeet Jhaveri is Chief Marketing Officer at ValueMomentum and leads ValueMomentum’s software-as-a-service business targeted at the Mutual markets. Abhijeet and his team work with Mutuals to deploy ValueMomentum’s iFoundry rating software with support for ISO, NCCI, AAIS and proprietary rate plans and extend these to agents, customers and employees with ValueMomentum’s BizDynamics Digital Experience Solution and App2Data ACORD forms processing Solution.

  • June 06, 2018 4:00 PM | Vaughn Lawrence (Administrator)
    By Kathleen Smith and Donna Geraghty, Spartan Recoveries

    Most claims professionals will tell you they are very experienced in recognizing and pursuing subrogation, or at least in recognizing it and referring it to their Subrogation department.  Routine automobile claims involving vehicle damage may have obvious recovery potential providing the accidents occurred in jurisdictions where comparative negligence rules apply.  Some homeowner losses involving a faulty product, improper installation or vehicle damage to a building/structure may also have easily identifiable recovery opportunities.  The majority of property losses, as well as workers compensation cases, are more complicated, have less obvious recovery potential, and the opportunity may not be apparent to the claims handler.   Before subrogation can be successfully pursued, the outcome often relies on the last person reviewing the claim file before closure, recognizing recovery and referring the claim to the person or department responsible for pursuing.  The person responsible for such a referral must be adept at identifying recovery potential.

    The best subrogation results rely on early identification of a recovery opportunity followed by a subrogation investigation to achieve the desired outcome.  Jurisdictional negligence rules and recovery rights may vary, but without the identification and investigation of a recovery opportunity, no recovery can be made.

    Successful outcomes in the process don’t come easy, and there are numerous scenarios in Property and Workers’ Compensation claims with countless recovery opportunities that are often overlooked. We offer five scenarios which are often missed as a result of failure to identify a recovery opportunity.

    Acts of God and Weather-Related Claims - We are all familiar with runaway shopping carts on windy days and leaky roofs during heavy rain. To identify recovery potential, it is critical to delve deeper into the facts surrounding a claim. On particularly windy days it may be prudent for store owners to collect those moving carts more frequently than normal.  A properly constructed chimney should not topple over during wind storm unless there is an underlying cause such as poor construction.  Inspecting weather reports to determine if the wind alone was strong enough to cause damage, while simultaneously investigating the age of the failed structure is critical.  This same premise applies to roofing claims where water has penetrated areas which should have been sealed.  Determining the age of the roof can lead to a recovery for faulty workmanship or defective materials. Not every snowstorm causes structures to collapse, yet many do.  The cause of the collapse should be investigated early on when the adjuster is on premises to establish age, wear and tear versus poor construction. 

    While some snow and ice related losses may result in roof collapses the majority of them contribute to a variety of water damage claims to the dwelling or building.   Many water damage claims are a result of ice dams which develop when a ridge of ice forms at the edge of a roof and prevents melting snow from draining, allowing the backed-up water to leak into the structure. An obvious remedy is to remove the snow or ice, but often the removal process results in further damage and consequently additional dollars paid. 

    Claims like these are often written off as weather-related with no subrogation opportunity when in fact there is potential, even if negotiated and compromised. 

    Burglaries - In many jurisdictions, crime victims are defined to include indirect victims such as insurers.  If the courts include restitution as part of the sentencing for the apprehended culprit instead of time served the insurer may have a right of recovery.  Pursuing a subrogation claim against a criminal has challenges due to the unlikelihood of the financial means to make restitution. However, if restitution is established by the court, the tortfeasor will make payments to avoid incarceration. The local District Attorney or law enforcement agency should be alerted to the loss paid by the carrier thereby placing the judicial system on notice for potential recovery.

    State Specific Statutes & Regulations – Frequently the claim handler may not be familiar with the nuances of negligence rules and rights of recovery in jurisdictions infrequently handled.  PIP and Loss Transfer Claims have specific rules governing how and when recovery can be pursued.  Given the potential high dollar value of these cases, it is imperative for the claim handler to know the state statutes and regulations when considering PIP claims for potential recovery.

    Parental lack of or Negligent Supervision – Depending on the policy language neglectful parents may be responsible for claims arising out of the misdeeds of their children residing in their household.  The age and intelligence of the child will play a role in whether or not parents can be held with negligent supervision if it can be shown the child had dangerous tendencies of which the parents were aware.  Given the potential claim cost resulting from a fire to a structure, it is worth the effort to determine if there is a responsible party to pursue.

    Workers’ Compensation Direct Action Claims- Definitely an area often missed by over-burdened claim handlers trying to make sure the adjusted amount of medical bills and indemnity are paid timely.  One of their main objectives is to assess the injury, reserve the claim properly and get the injured worker back to work. That claim handler may not be asking if they’re someone who may have been responsible for the injuries.  If the comp carrier is placed on notice by a third-party attorney they will be aware of their right to assert a lien, but what of the claims where the non-litigious employee does not retain counsel?  These claims are often closed without pursuing the at-fault party directly.  How often does a WC adjuster mark the file as having a lien and do no more until a statute of limitations has expired, only to discover the attorney is no longer representing the claimant, and it’s too late for the employer to initiate a Direct Action!

    High performing subrogation programs can contribute significantly to a company’s financial health. It’s easy for recoveries to slip through the cracks and disappear if the recovery potential is not properly identified. External resources should be utilized to conduct closed file reviews to capture claims that may not have made it to the subrogation team.  It is wise to get subrogation involved early in high-dollar claims to be certain the investigation is conducted with subrogation recovery in mind.  Whether your subrogation program is 100% in-house or supplemented by external sources, a lot of a little can add up to a lot!  No potential recovery should go unrecognized.

    This article was previously published in the Pulse

    Kathleen SmithKathleen Smith CSRP, the Managing Director of Spartan Recoveries LLC has 40+ years of experience in P&C Claims including senior management roles at Cigna and Interboro Mutual.  She formed Spartan recoveries in 2010 to support the financial stability of insurance carriers and self-insurers through the recovery of paid claims dollars.  She earned her CSRP designation from the National Association of Subrogation Professionals.

    Donna GeraghtyDonna Geraghty joined Spartan Recoveries in 2014 as VP Sales & Client Services. She has over 15 years of P&C Claims experience including leadership roles at Cigna and Northbrook P&C.

  • May 22, 2018 4:00 PM | Vaughn Lawrence (Administrator)

    Mutual Inspection Bureau - Underwriting Seminar

    Date:  May 22, 2018
    Topic:  The ABC's of Home Owner Non-Renewals/Cancellations

    View the presentation given by Ron Gallagher, PAMIC President, at the Mutual Inspection Bureau Underwriting Webinar by clicking on the image below. 

  • May 09, 2018 4:00 PM | Vaughn Lawrence (Administrator)

    By Dr. Joshua Woodbury, Swiss Re

    Technological advances are changing the game in almost every facet of our lives, and insurance is no different. When we think of technology and insurance, blockchain, self-driving cars and monitoring devices often take center stage, but behind the scenes, advances in flood modeling are changing our view of flood insurance. While the vast majority of residential and small commercial flood insurance is still written through the National Flood Insurance Program (NFIP), many private insurance companies, equipped with the latest flood modeling tools, are starting to challenge the status quo.

    For most of the last 40 years, flood risk in the U.S. has fallen within the scope of the Federal Emergency Management Agency (FEMA), which oversees the development of flood risk maps across the country. These maps, which cover more than 98% of the US population, are used for disaster preparedness, zoning practices, and flood insurance rates. For most consumers purchasing flood insurance, these maps are key to determining their risk and ultimately their flood insurance premiums. While significant resources have been put into developing these maps, the low risk granularity (i.e. 100 year zones, 500 year zones, and outside), frequent flooding outside of designated flood zones, a lack of any risk accumulation metric, and no information on NFIP loss experience, have made private insurers reluctant to rely on these maps.

    The difficulty in understanding flood risk is due to its high resolution, localized nature. More than hurricane or earthquake risk, flood risk can change from one house to the next, or even within a few feet, as it depends on topography, land use, soil type, flood protection and other local features. These dependencies have traditionally made FEMA mapping resource intensive and probabilistic flood catastrophe models mostly infeasible.

    So what has changed? Basically, three things: better understanding of the physics behind flooding, the availability of high resolution data and increasingly more powerful computing resources.

    While many of the critical concepts of flood modeling have been understood for quite some time, improved understanding of how water flows over floodplains has opened the door for more realistic flood modeling. For example, when water stays within the river banks, we can generally assume it flows in one direction (1-dimensional flow), i.e. downstream, which is relatively simple to model. However, this assumption breaks down once the river banks have been overtopped and water is allowed to flow in multiple directions. Laboratory experiments and improved modeling techniques have advanced our understanding of this type of multidimensional water flow, which in turn has improved our ability to develop realistic flood maps and models.

    In addition, the availability of key input data at high resolution and high quality has allowed model developers to more accurately understand flood risk. For example, topography information is, in many places, available at resolutions of 10 meters or higher, thanks to advancements in satellite imaging and remote sensing capabilities. Land use information is also improving, giving us a more realistic view of how much flooding can occur and where. Simply put, better data is allowing us to understand better the small-scale characteristics that change flood risk.

    Finally, combining multidimensional flow modeling with high resolution data requires powerful computing techniques. The availability of relatively inexpensive processing power and improvements in efficiencies have made large scale, high resolution modeling possible. Not only do we have the data, we now have the computing power to crunch the numbers on a much larger scale. We can now physically model flood waters throughout the Mississippi basin at resolutions that were unthinkable not too long ago.

    Although these advancements are exciting on their own, the models that come with these advancements are changing our thinking on flood insurance for several key reasons. Firstly, rather than just 100 or 500-year zones, the models delineate flood risk at a much higher resolution. This is important because the potential loss per insured value for a location in a 40-year flood zone is significantly higher than a location that is just within the 100-year zone. Secondly, many of the models are accounting for more than just river flooding. This allows insurers to rate for high rainfall-induced flooding, which often occurs outside FEMA designated flood zones. Finally, the fully probabilistic models are more than just flood zones. Most include the full four box modeling approach used in the more mature earthquake and wind models, providing event sets, vulnerability components and financial models. These models provide users with expected annual losses as well as loss frequency curves for single risk and treaty, allowing insurers to control their flood risk. Essentially, these models enable us to understand and thus underwrite flood risk.

    While the models are relatively new, many in the private market see them as an opportunity to provide their current customers with a better service and as a way to differentiate themselves from their competitors. They are finding out that in many cases, flood insurance can be provided for significantly lower costs and at better terms than an NFIP policy. A better product at a lower cost is hard to beat, and insurers are taking notice. The door to the private flood market is now open.

    This article was previously published in the Pulse


    Josh Woodbury is currently a flood specialist in the natural catastrophe modeling team at Swiss Re. He has been involved in model and product development for flood in the US and Canada. He joined Swiss Re in 2013.

    Prior to Swiss Re, Josh completed his master's and PhD at Cornell University in Water Resource Systems Engineering. Before entering Cornell, he completed a bachelor's degree in civil and environmental engineering at Clarkson University.

  • May 09, 2018 3:30 PM | Vaughn Lawrence (Administrator)
    By Curt Schroder, Executive Director, PCCJR

    After months of intense debate and a significant victory in the state Senate and state House, Governor Wolf vetoed SB 936, legislation that would have improved health outcomes for injured workers, curtail the dangerous practice of profiting off medically unproven compound creams, and help prevent opioid addiction.

    The legislation’s trip to the governor’s desk had many twists and turns including an initial tie vote in the House on February 6, 2018. After that vote, the PCCJR activated a campaign aimed at switching “no” votes to “yes” and making sure those who voted “yes” heard the support and appreciation of their constituents. The trial bar spent several hundred thousand dollars on targeted mailings, flyers, and paid advertising into legislative districts attempting to intimidate legislators who voted “yes” into switching their vote. Even though we were vastly outspent, we achieved a stunning victory on April 16 when the common-sense legislation was reconsidered by the House and passed by a vote of 101 to 92.

    Before the veto, the Governor said he would take “executive action” to address some of the bills concerns. Those actions and details remain to be seen.

    Editorial note:  Sen Don White (R), Indiana, PA  issued a Senate Co-sponsorship memo on May 2, 2018 to place the Governor’s Executive Action into law.  

    This article was previously published in the PAMIC 360.

    Written by Curt Schroder, Executive Director of PCCJR, a coalition dedicated to bringing fairness to Pennsylvania’s courts by elevating awareness of civil justice issues and advocating for legal reform. More information at www.paforciviljusticereform.com.

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