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Workers' Comp news and insights as well as columns and features from R&I.
Update on new scenarios as well as upcoming Risk Scenarios Live! events.

Risk Insider: Grace Crickette

The Art of War and ERM

By: | August 7, 2014 • 2 min read
Grace Crickette, senior vice president of risk services with AAA Northern California, Nevada and Utah, is writing a series on how to gracefully transform your risk management program through enterprise risk management and change management techniques. She can be reached at

Implementing an ERM program can at times feel like a battle. I have long been a fan of Sun Tzu* and his Art of War, and have used selected Sun Tzu phrases and tactics in workshops to help others develop strategies for implementing ERM programs. The first step in winning the battle is the laying of plans.

Now to be clear, I am a peaceful person …

             MAKE ERM, NOT WAR

Chapter I – Laying Plans (Estimates): What Is Our Value Message?

There are many important themes developed by Sun Tzu that can be applied to ERM challenges.

Strategic planning and rational analysis: Planning based on rational analysis of the best quality information available. Not the “perfect” data, not “all” the data, just the best data that you have. Rely on estimates in developing your plan as this allows you greater flexibility as to time, cost, impact, etc. How many times have we had a great idea, but did not execute because we felt we did not have all the information or support that we needed only to miss the window of opportunity. Perfection is the enemy of progress! Start simple: mission, tactics, and value statement.

  • Mission: Adoption of ERM throughout the organization
  • Tactics: Define, track and communicate the value of ERM
  • Value statement: Enterprise Risk Management allows us to protect our resources and reputation and focus on delivering on our promises

Change is accomplished through putting vision into action, which often starts as a project, and projects if successful become programs. There are five reasons to start a project:

  • Resolve an issue
  • Mitigate a risk
  • Improve a process
  • Change a relationship
  • Become something next

Most projects combine two or more of these reasons. Answer the question “why are we doing this?” will lead you to developing and refining your value statement.

Study the Past, Analysis, Develop and Maintain An “Edge”

This leads to knowledge, which, if properly focused, can lead to success. Strive to become the superior force in more than mere numbers. This is achieved through focused knowledge and experience, which, in turn, is gained by studying and observing situations, conditions, people, and events. So, let’s look at how others have expressed the value of ERM…

Common ERM Value Statements1ERM_sidebarCreate A Custom Value Statement To Fit Your Organization

  • Resolve an issue — We need to protect our assets
  • Mitigate a risk — We are having budget constraints and need to reduce our cost of risk
  • Improve a process — We want to be more efficient
  • Change a relationship — Departments are implementing shadow IT Systems we need to manage this across the enterprise
  • Become something next — We will be the first in our class to get an improved credit rating based on our ability to manage risk through our ERM program

Key Takeaway: Develop your plan based on the best information that you have, don’t wait for the perfect time to implement as it may never arrive.

ERM & laying of plans: Implementing ERM is a process and starts with developing: a mission, tactics, and a value statement

Remember — It’s not risk management, its change management!

* Sun Tzu was a Chinese military general, strategist and philosopher who lived in the Spring and Autumn Period of ancient China.

Read all of Grace Crickette’s Risk Insider contributions.

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Business Travel Risk

Injury, Illness and Uprisings

Business travel is increasingly becoming riskier for employers and employees.
By: | August 4, 2014 • 4 min read

Despite the proliferation of technology enabling communications today, face time — not Facebook — remains one of the most important tools for attracting and retaining both customers and employees.


This post-recession realization — that sitting across a table and looking someone in the eye is what drives business — has resulted in a steady increase in business travel over the past few years. U.S. business travel is expected to grow 6 percent in 2014, according to the Global Business Travel Association (GBTA).

In the past year, “75 percent of travelers encountered a mishap while traveling to their business destinations,” according to the GBTA.

As the number of executives traveling increases, there will be a parallel increase in a company’s risk exposure to on-the-road mishaps.

In the past year, “75 percent of travelers encountered a mishap while traveling to their business destinations,” according to the GBTA. About 40 percent require external assistance while traveling abroad. Yet, in a recent survey, 46 percent of business travelers said that their company does not provide travel insurance or assistance, such as medical or evacuation services.

Escalating Concerns

Recent developments around the world underscore how political unrest can suddenly and unexpectedly escalate.

In both Ukraine and Thailand, manageable risk quickly gave way to civil unrest and conflict. Similarly, in December 2013, more than 700 people were evacuated from South Sudan due to a significant conflict escalation, while in May 2014 at least 400 people were evacuated from Kenya due to concerns over the security situation in Mombasa.

These events demonstrate that whether traveling in traditional “hot spots,” or in historically stable regions, business travelers may suddenly be in need of evacuation, before chaos hits the ports or airports.

Travelers in high risk areas may become stranded until the country’s airports or border crossings are re-opened, or until transport to a safe location can be arranged.

This can be dangerous to employees as well as expensive for companies in terms of paying for additional accommodation, living expenses and rearranged transportation, stretching into thousands of dollars.


Global crisis management companies — either by direct contract or via a travel accident insurance policy— can give employees 24/7 access to crisis support specialists who can quickly mobilize and assist clients in high-risk situations
This type of service is becoming a necessity for companies conducting business outside the United States.

International Medical Systems

Political unrest is not the sole concern for employees traveling abroad. Medical crises are also an important consideration.

Obtaining medical care outside of the country can be tricky because many overseas hospitals require a “guarantee of funds” before administering treatment.
An employee may be asked to bring a personal credit card to pay for care, but may not have an adequate available balance.

Other issues may arise when an employee is in a remote location that is far from a hospital, or if he or she does not know the language or is unfamiliar with how health care is delivered in that country.

Crisis management service providers can bring in a doctor to care for an employee or arrange an ambulance to a local medical facility. If necessary, a service provider can also arrange to have an employee evacuated to a different facility.

Such services are provided 24/7 to employees traveling on business. Call center personnel gather details about the incident and provide employees with the resources such as the names of vetted doctors and area hospitals.

If an employee is too injured to travel, call center personnel will work with local medical service providers to get help to the employee.

For employees who are incapacitated and taken directly to emergency care, call center on-staff doctors will contact the local physician treating the employee to determine whether the care being administered is of the appropriate level and quality.

As business travel continues to grow, and as the rise in political unrest around the globe continues, there are more and more chances that an employee will need emergency assistance during the course of a business trip.

If the call center doctor determines that the care is not adequate, he or she will work to move the employee to an approved facility or have an approved local physician treat the employee.


Historically, businesses in Europe have been the largest purchasers of travel accident insurance in order to meet “duty of care” legislation, which levies significant penalties for companies that do not take adequate steps to protect employees who are traveling for business.

This type of legislation is gaining interest in the United States, potentially exposing companies to a new set of risks.

As business travel continues to grow, and as the rise in political unrest around the globe continues, there are more and more chances that an employee will need emergency assistance during the course of a business trip.

Shawn Austin is senior vice president, strategic marketing officer, Liberty Mutual Accident & Health. He can be reached at
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Sponsored: Rising Medical Solutions

Beware of Medical Hyper-Inflation!

Workers’ comp medical costs are spiking in hidden pockets across the country.
By: | August 4, 2014 • 5 min read

Historically, medical inflation rates nationwide have been fairly consistent. However, data is now showing that medical inflation is not a “one size fits all” phenomenon, with hyperinflation spikes occurring in some locations…but not others.

This geographical conundrum means hyperinflation can occur as narrowly as two hospitals having dramatically different charges on the same street in Anytown, USA. So, uncovering these anomalies is akin to finding the proverbial needle in a haystack.

“In recent years, workers’ compensation saw claim frequency decline, while severity rates went up. This basically means that increased job safety has offset increased medical costs,” explained Jason Beans, CEO of Rising Medical Solutions, a national medical cost management firm. “So, whenever a client’s average cost-per-claim went up, it was almost always caused by catastrophic, outlier-type claims.”

But beginning in 2013 and extending into 2014, Beans said, things changed. “I’ve never seen anything like it in my 20-plus years in this industry.”

SponsoredContent_Rising“Our analytics made it very clear that small pockets around the country are experiencing what could only be described as medical cost hyperinflation. The big spikes in some clients’ claim costs were driven by a broader rise in medical costs, rather than catastrophic claims or severity issues.”
– Jason Beans, CEO, Rising Medical Solutions

Data dive uncovers surprising findings

On a national level, most experts describe medical costs increasing at a moderate annual rate. But, as often is the case, sometimes a macro perspective glosses over a very different situation at a more micro level.

“Our analytics made it very clear that small pockets around the country are experiencing what could only be described as medical cost hyperinflation,” explained Beans. “The big spikes in some clients’ claim costs were driven by a broader rise in medical costs, rather than catastrophic claims or severity issues.”

This conclusion is supported by several key data patterns:

  • Geographic dependency: While many payers operate at the national level, only relatively small, geographically clustered claims showed steep cost increases.
  • Median cost per claim: The median cost per claim, not just the average, increased greatly within these geographic clusters.
  • Hospital associated care: Some clusters saw a large increase in the rates and/or the number of services provided by hospital systems, including their broad array of affiliate locations.
  • Provider rates: Other clusters saw the same hospital/non-hospital based treatment ratios as prior years, but there was a material rate increase for all provider types across the board.
  • Utilization increases: Some clusters also experienced a larger number of services being performed per claim.

One of the most severe examples of hyperinflation came from a large Florida metropolitan area which experienced a combined 47 percent workers’ compensation healthcare inflation rate. Not only was there a dramatic increase in the charge per hospital bill, but utilization was also way up and there was a shift to more services being performed in a costlier hospital system setting.

“The growth of costs in this Florida market stood in stark contrast to neighboring areas where most of our clients’ claim costs were coming down or at least had flat-lined,” Beans said.

An Arizona metropolitan area, on the other hand, experienced a different root cause for their hyperinflation. Regardless of provider type, rates have significantly increased over the past year. For example, one hospital system showed dramatic increases in both charge master rates and utilization. “Even with aggressive discounting, the projected customer impact in 2014 will be an increase of $773,850 from this provider alone,” said Beans.

ACA: Unintended consequences?

So what is going on? According to Beans, a potential driver of these cost spikes could be unintended consequences of the Affordable Care Act (ACA).

First, the ACA may be a contributing factor in recent provider consolidation. While healthcare industry consolidation is not new, the ACA can prompt increased merger and acquisition efforts as hospitals seek to improve financials and healthcare delivery by forming Accountable Care Organizations (ACO). ACOs, the theory goes, can take better advantage of value-based fee arrangements in existing and new markets.

“As hospital systems grow by acquisition, more patients are being brought under hospital pricing structures – which are significantly more expensive than similar services at smaller facilities such as independent ambulatory surgery centers and doctors’ offices,” Beans said.

Unfortunately, there is little evidence that post-consolidation healthcare systems have become more efficient, only more expensive. For example, a recent PwC study reported that hospital IT infrastructure consolidation alone is projected to add 2 percent to hospital costs in 2015.

Another potential ACA consequence is group health insurers may have less incentive to keep medical costs down. An ACA provision requires that 85% of premium in the large group market must be spent on medical care and provider incentive programs, leaving 15% of premium to be allocated towards administration, sales and subsequent profits. “Fifteen percent of $5000 in medical charges is a lot less than 15% of $10,000,” said Beans. “This really limits a group health carrier’s incentive to lower medical costs.”

How do increased group health rates relate to workers’ comp? In some markets, a group health carrier may use its group health rates for their work comp network so any rate increase impacts both business types.

In the end, medical inflation is inconsistent at best, with varying levels driven by differing factors in different locations – a true “needle in the haystack” challenge.

What to do?

Managing these emerging cost threats, whether you have the capabilities internally or utilize a partner, means having the tools to pinpoint hyperinflation and make adjustments. Beans said potential solutions for payers include:

  • Using data analytics: Data availability is at an all-time high. Utilizing analytical tools to spot problem areas is critical for executing cost saving strategies quickly.
  • Moving services out of hospital systems: Programs that direct care away from the hospital setting can substantially reduce costs. For example, Rising’s surgical care program utilizes ambulatory service centers to provide predictable, bundled case rates to payers.
  • Negotiating with providers: Working directly with providers to negotiate bill reductions and prompt payment arrangements is effective in some markets.
  • Underwriting with a micro-focus: For carriers, it is vital that underwriters identify where these pockets of hyperinflation are so they can adjust rates to keep pace with inflation.

“This trend needs to be closely watched,” Beans said. “In the meantime, we will continue to use data to help payers of medical services be smarter shoppers.”

Contact Rising Medical Solutions: |

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Rising Medical Solutions. The editorial staff of Risk & Insurance had no role in its preparation.

Rising Medical Solutions provides medical cost containment, care management and financial management services to the workers’ compensation, auto, liability and group health markets.
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