Brokers Bankrolling Adventures
When it comes to great adventures, youth will be served by large insurance brokerages.
On June 26, weather permitting, 31-year-old aviatrix Amelia Rose Earhart will embark on an around-the-world flight retracing the route of her famous namesake. If successful, Earhart will become the youngest woman to circumnavigate the globe in a single-engine aircraft.
Earhart and her aircraft will be insured on a pro bono basis through policies structured and secured by Kansas City, Mo.-based Lockton Cos., the world’s largest privately held insurance broker.
“Lockton is thrilled to be a part of this legendary journey,” said Ty Carter, aviation producer at Lockton and the liaison coordinating the insurance protection for Earhart and for the Pilatus aircraft that she will be flying.
“We are passionate about aviation and appreciate Amelia’s efforts to raise awareness of the opportunities and experiences she provides. Her tenacity and spirit are truly inspiring.”
Though she is not a blood relative of the late Amelia Earhart, Amelia Rose Earhart has had a love of flying from an early age.
“I started dreaming of flying when I was 18 years old, and I’ve been flying for 10 years,” said Earhart, who planned the entire 17-stop route of her flight, which originates in Oakland, Calif.
Journey to the South Pole
This venture was preceded by another headline-making adventure that teamed Willis Group Holdings plc with Parker Liautaud, a 19-year-old sophomore at Yale University who on Christmas Eve became the youngest man to ski to the South Pole.
Liautaud and companion Doug Stoup set a new speed record for the fastest-ever unsupported walk from the edge of Antarctica to the South Pole in 18 days, four hours and 43 minutes.
Known as the Willis Resilience Expedition, the venture was jointly sponsored by Willis and EMC, a large global technology company.
On their expedition, Liautaud and Stoup were tracked by sophisticated communications housed in Ice Broker, a custom-built Toyota Hilux six-wheel truck that broadcast live around the world and on the expedition’s website. The truck was created by a team assembled by Willis and tested in Iceland.
“It was Parker who first approached Willis,” said Nathan Hambrook-Skinner, London-based director of communications for Willis Global. “He came to us early in 2013 with the idea that he wanted to ski to the South Pole.”
For Liautaud, it was the end of a long journey.
Until he connected with Willis, Liautaud spent 8 p.m. to 1:45 a.m. “every night without fail in the basement of the nearest library sending out emails seeking support for the venture,” he said.
As part of Willis’ aid for Liautaud’s adventure, the global insurer handled all insurance aspects.
“Risk management was a key focus for us.” — Nathan Hambrook-Skinner, Willis global director of communications
“Risk management was a key focus for us,” said Hambrook-Skinner. “You can’t really go to Antarctica without full evacuation insurance, which you’ll need to cover you if there’s any accident. Obviously we had that fully covered.”
Willis, a leading global risk adviser and insurance and reinsurance broker operating on every continent, also handled the insurance for the Ice Broker. And of course Liautaud and four other expedition members, including Hambrook-Skinner, were covered by insurance.
“We had a crisis risk management consulting team in London that was constantly monitoring our progress,” said Hambrook-Skinner. “If anything had gone wrong, they would have covered the expedition.”
Along with the snow-skiing record, major accomplishments of the venture included:
• Liautaud took snow samples along the journey that formed a valuable contribution to current studies on climate change.
“Overall, we were able to do much more in terms of data gathering and scientific exploration in previously unexplored and untouched part of Antarctica,” said Hambrook-Skinner.
• The expedition partnered with EMC to create data visualizations to engage the public in a better understanding of the science behind climate change and the importance to society.
• A lightweight weather station was tested for the first time in Antarctica.
“The objective of the venture for us as a global risk adviser and insurance broker at the forefront of supporting businesses and individuals all around the world was to help build resilience to extreme events and natural disasters, this being one of those events,” said Hammond-Skinner.
“So it was very natural for us to help support an expedition like this which was seeking to enhance understanding of how the world is changing and how climate matters might be changing over time and help shed some light on that,” Hammond-Skinner said.
For “The Amelia Project,” Earhart and her aircraft are structured and secured by Lockton through Global Aerospace. The policy provides a combined single limit for property damage and bodily injury, as well as physical damage to the aircraft.
“One of the key parameters essential to the primary policy was the inclusion of ‘worldwide territory.’ ” — Ty Carter, aviation producer, Lockton
“One of the key parameters essential to the primary policy was the inclusion of ‘worldwide territory’ ” said Lockton’s Carter. “Due to the nature of this trip, which will occur over approximately 19 days and include 28,000 miles, having a policy that allowed for flexibility in routing was critical to the program’s success.”
Lockton was chosen to handle all aspects of the expedition’s insurance because of Carter’s long-standing and close relationship with Pilatus aviation.
“I’ve owned two Pilatus planes and I’ve also been the former president of the Pilatus Owners and Pilots Association,” said Carter. “I’ve had thousands of hours flying Pilatus aircraft.”
In financing the project, Earhart was greatly aided by Pilatus, which donated a Pilatus PC-12 NG single-engine aircraft for the flight.
In addition, with some help from Lockton, Earhart was able to sell 20 sponsorships to help pay for the flight.
“We were able to put their logos on the outside of the aircraft and also on my flight jacket as well as that of my co-pilot Shane Jordan,” said Earhart.
“I took it upon myself to bring in the sponsorships. I had never done any selling prior to that. I really knew nothing about the process getting started but I learned along the way.”
Lockton is dedicating a team of aviation experts to assist Earhart 24/7 during her flight, with regard to any insurance issue, “or for that matter any question to support her while she is making this journey,” Carter said.
“Our group internally is a mix of pilots, people who have been involved in the maintenance side and former underwriters,” he said. “We have a couple of people on our team who are fully dedicated to the project, literally from the time Amelia leaves until she returns.”
Prior to launching her flying career, Earhart was a helicopter traffic co-anchor for NBC affiliate KUSA in Denver, where she also is president of the Fly With Amelia Foundation, which grants flight scholarships to girls between the ages of 16 and 18 and supports the advancement of general aviation opportunities.
Round Two for Solar Impulse
In another aviation promotional undertaking, Swiss Re Corporate Solutions will join Solar Impulse in a joint venture to launch the Solar Impulse 2 airplane in 2015, in an effort to fly around the world using only solar power.
It took 12 years of calculations, simulations, construction and testing to arrive at the launch of Solar Impulse 2, one of the most technologically advanced aircraft of our time, company officials said.
In 2012, Swiss Re became the sole insurer of Solar Impulse 2. The plane was considered uninsurable by others and yet made the first coast-to-coast crossing of the United States by a solar plane. See R&I’s story on that journey here.
“Insurance plays an important role in supporting pioneering projects in the renewable energy sector,” said Agostino Galvagni, CEO of Swiss Re Corporate Solutions.
“We believe that advancing renewable energy and clean technologies, and establishing them as integral components of the global energy mix, is crucial to ensuring a sustainable future.
“The intent of the Solar Impulse-Swiss Re Corporate Solutions partnership is to endorse and promote this message,” he said.
FATCA Adds to Brokers’ Compliance Burden
Brokers are working to comply with the requirements of the Foreign Account Tax Compliance Act that tookk effect July 1. At the same time, however, industry lobbyists are asking Congress and the Internal Revenue Service to exempt non-cash value premiums from the new tax evasion law.
“The compliance burden of this law is significant and there are some reports saying it could cost in the tens of millions of dollars,” said Joel Kopperud, director of governmental relations for the Council of Insurance Agents & Brokers (CIAB).
Starting in July, brokers that collect premiums from their clients on behalf of foreign carriers must obtain certain IRS-generated forms from the carriers that they are FATCA-compliant or FATCA-exempt. In addition, the brokers must report each carrier’s status under that law to the IRS.
If an agency determines a carrier is not compliant or exempt, then a percentage of the premiums paid to them by their U.S. clients that have coverage with the foreign carrier will be withheld as taxes. (This part of the law was deferred and will apply to premiums paid on insurance and reinsurance policies with effective or renewal dates of Jan. 1, 2015 or later.)
Forcing brokers to withhold a percentage of an insurance premium “would cause major business disruptions to insurance customers including the potential for lapses in coverage,” said Steve Chapman, partner with PwC’s financial services tax practice in New York City.
J. Scott Tofil, senior vice president and chief financial officer of Beecher Carlson Holdings, Inc. in Atlanta, said his firm will collect the required forms from all of the foreign carriers that it works with, and they will be kept in an internal database shared with its parent company, Brown & Brown.
“If [the foreign carriers] cannot provide these forms, we cannot do business with them,” Tofil said.
“As a fiduciary, the money we collect from our clients and put in trusts to pay premiums to carriers is never technically our money. So if we were forced to withhold 30 percent as this new law requires, we would not be able to submit full payment, and the carrier might cancel their insurance, which is why we will not place insurance with a carrier that cannot provide the correct paperwork.”
While that likely won’t happen for most of the foreign insurers, this new law places all brokers and agents in “an uncomfortable position,” he said.
“When the government added these requirements into the law, I really don’t think they paid attention to how brokers acting in a fiduciary capacity would be impacted,” Tofil said.
Many states require brokers and agents to put the money for premiums into a trust and hold in a fiduciary capacity, he said. “Now you have the federal government telling you to take 30 percent from money and hold it, when the money isn’t yours to begin with.”
To aid broker compliance with FATCA, the CIAB will go live with an online portal on July 1 that will provide access to the forms required by the IRS for each foreign insurer, Kopperud said.
“This way, brokers don’t have to reach out individually for the certifications from all of the foreign insurers they work with — we will have done that for them,” he said. “This will be a one-stop shop for these certificates.”
The withholding requirements will likely not affect most brokers, as most will simply not conduct business with a foreign insurer that is not FATCA compliant, said Vladimir Gololobov, CIAB’s director, international.
“But the reporting piece has a cost consideration that really comes into play, which will divert more brokers’ resources,” Gololobov said.
Tax Evasion Schemes
The reason insurance brokers were included in FATCA was that some foreign insurance products have an investment component, such as an annuity, that “unscrupulous” U.S. taxpayers could use to funnel money and evade paying taxes, said Dean Paik, a director at Rogers Joseph O’Donnell law offices in San Francisco.
Paik previously served as special counsel to the assistant attorney general in the tax division at the U.S. Department of Justice between 2010 and 2013. His work there included foreign account tax compliance, including the investigation and prosecution of U.S. taxpayers holding undeclared foreign accounts, and the banks and bankers that assisted them.
FATCA was intended to stamp out tax evasion schemes started by financial institutions such as Credit Suisse, Paik said. In the past, U.S. taxpayers who wanted to evade paying taxes would set up investment accounts at foreign institutions. The IRS wants to ensure U.S. taxpayers can’t use insurance products with investment components to evade taxes, he said.
“The risk for brokers is dealing with the insurers who are not on the up and up; if they go outside of the world of participating with a legitimate insurer,” Paik said.
“They run the risk that these companies are noncompliant, and if something happens and there is a problem, brokers will be liable for penalties and fall out of favor with the IRS, which will then look at them more skeptically,” he said.
When the law was passed in 2010, the brokers’ group believed that non-cash value insurance was not intended to be part of the law, but the IRS included non-cash value premiums when they released final regulations implementing FATCA, Kopperud said.
CIAB is working with the IRS and Congress to clarify the situation, he said.
Non-cash value insurance is “simply irrelevant to FATCA’s goal of combating tax evasion, as property casualty insurance and reinsurance simply cannot be used as a vehicle to evade taxes,” Kopperud said.
Indeed, a bipartisan group of 17 members of the House Ways and Means Committee (the committee that authored the law) agree with the brokers’ group and sent a letter to the IRS supporting the request to exclude non-cash value insurance, Kopperud said.
“This law just creates more work for brokers and agents as the intermediary in placing insurance for their clients,” Tofil said. “Most of the large foreign carriers will be exempt from this tax withholding as they will have these forms ready, so I’m not sure what this law accomplishes as related to insurance, it really just creates more paperwork.”
Marsh told clients it will “only use FATCA-compliant companies for in-scope business,” will collect forms from insurers, and will provide online access to them, according to the company. It also will help its U.S. direct bill clients obtain the appropriate documentation from the foreign insurers they use.
Phasing In Compliance
PwC’s Chapman said that brokers have had to phase in compliance, as they wait for guidance from the IRS. As of now, the IRS has yet to publish instructions on completing the required forms.
“Brokers are looking to comply with the rules in the most practical way possible,” Chapman said. “Since insurance premiums have not previously been in scope for information reporting purposes, brokers are working to get up to speed quickly with a set of requirements that are new to their core business and are working to shape the legislation in a way that makes sense for the insurance industry.”
Timing is the biggest concern — particularly the IRS has yet to release the necessary instructions to complete and return the required forms, he said.
Andy Jenn, a national practice leader at Aon, said the brokerage firm’s preparation for FACTA compliance has included a “very broad carrier outreach” that started last October to make sure their legal structures were “aligned with Aon’s” and they were “up to speed” on the requirements.
“We’ve been really pleased with the responsiveness of the carriers, and we’re all just in a waiting period right now until the FACTA forms become available,” Jenn said.
Achieving More Fluid Case Management
Risk management practitioners point to a number of factors that influence the outcome of workers’ compensation claims. But readily identifiable factors shouldn’t necessarily be managed in a box.
To identify and discuss the changing issues influencing workers’ compensation claim outcomes, Risk & Insurance®, in partnership with Duluth, Ga.-based Healthcare Solutions, convened an April roundtable discussion in Philadelphia.
The discussion, moderated by Dan Reynolds, editor-in-chief of Risk & Insurance®, featured participation from four tenured claims management professionals.
This roundtable was ruled by a pragmatic tone, characterized by declarations on solutions that are finding traction on many current workers’ compensation challenges.
The advantages of face-to-face case management visits with injured workers got some of the strongest support at the roundtable.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” participant Barb Ritz said, a workers’ compensation manager in the office of risk services at the Temple University Health System in Philadelphia.
Telephonic case management gradually replaced face-to-face visits in many organizations, but participants said the pendulum has swung back and face-to-face visits are again more widely valued.
In person visits are beneficial not only in assessing the claimant’s condition and attitude, but also in providing an objective ear to annotate the dialogue between doctors and patients.
“Oftentimes, injured workers who go to physician appointments only retain about 20 percent of what the doctor is telling them,” said Jean Chambers, a Lakeland, Fla.-based vice president of clinical services for Bunch CareSolutions. “When you have a nurse accompanying the claimant, the nurse can help educate the injured worker following the appointment and also provide an objective update to the employer on the injured worker’s condition related to the claim.”
“The relationship that the nurse develops with the claimant is very important,” added Christine Curtis, a manager of medical services in the workers’ compensation division of New Cumberland, Pa.-based School Claims Services.
“It’s also great for fraud detection. During a visit the nurse can see symptoms that don’t necessarily match actions, and oftentimes claimants will tell nurses things they shouldn’t if they want their claim to be accepted,” Curtis said.
For these reasons and others, Curtis said that she uses onsite nursing.
Roundtable participant Susan LaBar, a Yardley, Pa.-based risk manager for transportation company Coach USA, said when she first started her job there, she insisted that nurses be placed on all lost-time cases. But that didn’t happen until she convinced management that it would work.
“We did it and the indemnity dollars went down and it more than paid for the nurses,” she said. “That became our model. You have to prove that it works and that takes time, but it does come out at the end of the day,” she said.
The ultimate outcome
Reducing costs is reason enough for implementing nurse case management, but many say safe return-to-work is the ultimate measure of a good outcome. An aging, heavier worker population plagued by diabetes, hypertension, and orthopedic problems and, in many cases, painkiller abuse is changing the very definition of safe return-to-work.
Roundtable members were unanimous in their belief that offering even the most undemanding forms of modified duty is preferable to having workers at home for extended periods of time.
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Unhealthy households, family cultures in which workers’ compensation fraud can be a way of life and physical and mental atrophy are just some of the pitfalls that modified duty and return-to-work in general can help stave off.
“I take employees back in any capacity. So long as they can stand or sit or do something,” Ritz said. “The longer you’re sitting at home, the longer you’re disconnected. The next thing you know you’re isolated and angry with your employer.”
“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.
Whose story is it?
Managing return-to-work and nurse supervision of workers’ compensation cases also play important roles in controlling communication around the case. Return-to-work and modified duty can more quickly break that negative communication chain, roundtable participants said.
There was some disagreement among participants in the area of fraud. Some felt that workers’ compensation fraud is not as prevalent as commonly believed.
On the other hand, Coach USA’s Susan LaBar said that many cases start out with a legitimate injury but become fraudulent through extension.
“I’m talking about a process where claimants drag out the claim, treatment continues and they never come back to work,” she said.
Social media, as in all aspects of insurance fraud, is also playing an important role. Roundtable participants said Facebook is the first place they visit when they get a claim. Unbridled posts of personal information have become a rich library for case managers looking for indications of fraud.
“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” said participant Barb Ritz.
As daunting as co-morbidities have become, roundtable participants said that data has become a useful tool. Information about tobacco use, weight, diabetes and other complicating factors is now being used by physicians and managed care vendors to educate patients and better manage treatment.
“Education is important after an injury occurs,” said Rich Leonardo, chief sales officer for Healthcare Solutions, who also sat in on the roundtable. “The nurse is not always delivering news the patient wants to hear, so providing education on how the process is going to work is helpful.”
“We’re trying to get people to ‘Know your number’, such as to know what your blood pressure and glucose levels are,” said SCS’s Christine Curtis. “If you have somebody who’s diabetic, hypertensive and overweight, that nurse can talk directly to the injured worker and say, ‘Look, I know this is a sensitive issue, but we want you to get better and we’ll work with you because improving your overall health is important to helping you recover.”
The costs of co-morbidities are pushing case managers to be more frank in patient dialogue. Information about smoking cessation programs and weight loss approaches is now more freely offered.
Managing constant change
Anyone responsible for workers’ compensation knows that medical costs have been rising for years. But medical cost is not the only factor in the case management equation that is in motion.
The pendulum swing between technology and the human touch in treating injured workers is ever in flux. Even within a single program, the decision on when it is best to apply nurse case management varies.
“It used to be that every claim went to a nurse and now the industry is more selective,” said Bunch CareSolutions’ Jean Chambers. “However, you have to be careful because sometimes it’s the ones that seem to be a simple injury that can end up being a million dollar claim.”
“Predictive analytics can be used to help organizations flag claims for case management, but the human element will never be replaced,” Leonardo concluded.