It’s the stuff of futuristic daydreams. Implantable sensors that can detect signs of a potential health problem and send alerts to your smartphone, like a “check engine” light for your body. A straight-out-of-Star-Trek handheld medical scanner you can use to diagnose your own problems and alert your physician. A capsule-shaped sensor you can swallow so your doctor can perform your annual physical via phone or tablet, even while you’re at work or — better still — out on the links.
Only these aren’t daydreams at all. These are just a small sampling of the health care innovations that will be market-ready in the near future. Health-related mobile apps are booming as well, growing at a rate of 25 percent a year.
These technologies will become a part of the increasingly interconnected environment of health care devices, which already includes common technology such as radiology equipment, dialysis machines and the smartphone in the pocket of every practitioner.
The Looming Cloud
The Internet of (medical) Things is part of the push toward modern, patient-focused health care. It is at the core of the telemedicine movement and it is poised to expand access to care at a crucial point in the evolution of health care reform. But there is an ominous cloud hanging over all of this progress.
Health care systems are under siege like never before. Experts report a worsening trend in the frequency and complexity of cyber attacks on health care networks, with a sharp increase over the past year.
“The advanced persistent threats that we’ve been fighting on behalf of our clients in government and defense for the past five years have now shifted into the health care arena,” said Tom Patterson, director of global cybersecurity consulting with CSC.
“Companies are being targeted; adversaries are spending more than a year breaking in, escalating their privileges, looking around, customizing specific malware to defeat their specific defenses, and then either exfiltrating data or doing the damage they wanted to do. That type of attack is light years ahead of most health care companies’ defenses.”
A report published in February by the SANS Institute painted an overwhelmingly dire picture of cyber threats in health care. Between September 2012 and October 2013, researchers identified 375 U.S. health care organizations that were compromised — many of whom are still unaware that they’ve been compromised. HIPAA and the HITECH Act forced health care organizations to take comprehensive measures to protect patient data or face heavy fines. The trouble is that compliance doesn’t necessarily equal security, and systems unrelated to protected health information (PHI) are getting less attention.
The SANS study found that hackers were infiltrating devices such as radiology imaging software, conferencing systems, printers, Web cameras and mail servers. With each new device and application connected to health care networks, security experts warn, a new window opens for hackers to exploit, widening the available attack surface.
“There are two types of companies, those that have been hacked, and those that don’t know they’ve been hacked,” said Kurtis Suhs, vice president and national technology and privacy product manager for Ironshore.
Unfortunately, the ones that don’t know about it yet could be in deeper trouble than they could ever imagine.
While much ado is made of the cost of data breaches in the retail sector, the impact of a disruption to the health care delivery system could be far more chilling. Imagine hackers taking control of the life-support devices in every critical care unit of a 25-hospital health care system. Imagine if they could gain control of every medication-delivery pump in the network, delivering lethal doses to dozens of patients.
What if malware from a random smartphone could infect every diagnostic device across the network, scrambling readings and making it impossible for doctors to treat patients? These scenarios are already possible — more possible than most would care to think about.
“The health care ecosystem is one of the most critical infrastructures for any country,” said Andrea Fiumicelli, vice president and general manager of healthcare and life sciences for CSC. “Preventing health care delivery from working for even a few hours could have a massive impact on a national level.”
“Both terrorist groups and hacktivist groups spend a lot of time trying to disrupt other parts of critical infrastructure,” added CSC’s Patterson, “but the easier it becomes to disrupt the actual health of the target humans, the more we’re going to see them slipping into that arena as well.”
The ability to commandeer medical devices makes health care systems a prime target for extortionists as well, experts said.
Video: This Technology Outlook 2020 looks at global megatrends and technologies affecting the health care sector.
Beth Berger, national director of Arthur J. Gallagher’s health care practice, used the example of how equipment servicing can be done
remotely via Internet-based diagnostics.
“What if somebody hacked into that and recalibrated [equipment] … ? What if I told this hospital that unless you wire me X amount of dollars, I can shut down the life support on all the people in your hospital? And let me show you for two minutes.”
The prevailing opinion among experts is that the health care industry lags far behind most other industries in terms of making real improvements to cyber security. However, it’s fairly easy to understand why.
“You really have to have empathy for health care providers these days,” said Katherine Keefe, breach response services director for the Beazley Group.
“They’re facing so many changes and cyber is just one of them. They’ve got dwindling reimbursements, changing payment methodologies, increased regulation and heightened expectations about providing care to more people who [now] have insurance under the health reform act. … I feel like we just have to help them.”
Help is coming, albeit slowly. CSC’s Patterson said the FDA is moving toward classifying certain medical devices as industrial control (IC) devices, which will subject them to stringent security controls.
Meanwhile several web-based medical apps and programs are getting certified by Underwriters Laboratories, according to Dr. Bill Bithoney, senior adviser at BDO Consulting and a member of the health care practice.
But health care organizations need to look inward and start changing the way they think about cyber security, beginning with the way they think about the growing network of peer-to-peer devices.
“Everything is going to be connected in the health care space very quickly and it’s going to come from multiple different vendors,” said Patterson. “It’s all going to start talking to each other on its own. … The health providers aren’t necessarily going to have a single point of control for all these devices. So if you don’t have a security scheme that takes that into account, you’re at real risk.”
“Years ago, it was all about perimeter security,” said Ironshore’s Suhs. “It was, ‘You’ve got to buy our firewall and antivirus to prevent the bad things from happening.’
“The security paradigm has changed today. I don’t think there’s a way you can prevent a data breach.
“It’s a matter of how do you detect it. Those that can quickly detect are those that can probably cost contain the breach in an effective way. … From an underwriting standpoint, that’s the paradigm I have.”
Kevin Kalinich, cyberrisk global practice leader for Aon Risk Solutions, warned against trying to solve the problem by throwing more money at IT.
Before deciding on a strategy, health care entities would be well served to take an enterprise risk management approach to protecting their systems, he said.
Organizations must ask themselves, “How do we check in the patient? How do we collect their information? How do we decide who has access to patient information?” Armed with a better understanding of how the system works together as a whole, then they can begin to identify their vulnerabilities.
“It’s crucial to balance IT security with appropriate policies and procedures,” said Kalinich. “It’s about knowing what you should be doing and what you should not be doing with Internet-connected medical devices. Each department needs to be on the same page about what they should be doing and that includes their third-party providers. It’s a culture issue.
“Insurance and cyber security go hand in hand,” he added. “The underwriters will give you more comprehensive coverage for a cheaper price if you have good ERM.”
Patterson added that insurance companies also need to look inward, and think about creating cyber products that deliver real value to insureds.
“Cyber insurance hasn’t been tied to real security — it’s always been actuarially based.
“What I want to see the industry evolve to is, ‘Here’s the probability of this happening. So if you take these tangible steps, it will make you more secure, so the probability goes down, so your risk goes down, your insurance [premium] goes down.’ It becomes much more of a useful policy,” he said.
“That makes all the sense in the world and I think that’s what companies would love to buy today if they believed in it,” Patterson said.
Beazley’s Keefe agreed.
“The folks in the markets who can deliver solutions that make sense and add value and really make a difference are the ones that will be the leaders.”
Complete coverage on the inevitable cyber threat:
Risk managers are waking up to the reality that the cyber risk landscape has changed.
Cyber: The New CAT. It’s not a matter of if, but when. Cyber risk is a foundation-level exposure that must be viewed with the same gravity as a company’s property, liability or workers’ comp risks.
Disabled Autos. It’s alarmingly easy for a hacker to take control of a driverless vehicle, tampering with braking systems or scrambling the GPS.
Unmanned Risk. The dark side of remote-controlled drones, which have already been hacked — by students.
An Electrifying Threat. There is a very real possibility hackers could devastate the nation’s power grids — for a potentially extended period of time.
Risk Technology: Risk Managers Lead from Within
This year marks my twentieth in the risk management field. Now I would never call myself a risk manager. Far from it: I’m a computer geek, and proud of it. Today we refer to the Internet, Cloud, Mobile and Big Data, but I’ve been working with technology my entire life. So much has changed in those twenty years. Networking computers together was rudimentary and extremely limited when I started. Now everything, and everyone, is interconnected, and that has changed everything.
That interconnectivity has allowed organizations to move away from the isolated, siloed processes of the past, and produced dramatic changes in the way we conduct our business and our lives. I’ve watched risk management evolve from a department called upon primarily when things go wrong, to a pervasive philosophy for running a successful business. Fewer and fewer risk managers I speak to work in isolation, reacting to claims as they come in. Rather they are a collaborative lynchpin to manage risk. They don’t wait for bad things to happen. They proactively put safety programs in place, analyze loss data and make their organizations more risk-aware. They know an enormous amount about the inner workings of their organization, its suppliers, distributors, vendors and team members. This is a fundamental transition from a middle management, administrative function, to an executive level function that is key to the organization’s success.
But risk managers are increasingly finding that email and spreadsheets are clumsy, inefficient, and ultimately create obstacles to managing risk throughout their company. With the speed and global reach of business, when even ‘local’ businesses rely on a far-flung supply chain, yesterday’s technology introduces risk, inefficiencies and increased levels of error. Today’s business demands technology that facilitates decisions for tomorrow’s business challenges. Organizations need a platform – a platform that provides secure, efficient and consistent methods of communicating risk-related events and data. Fortunately this need comes at a time when we have a convergence of technologies that can make this vision a reality.
This is a fundamental transition from a middle management, administrative function, to an executive level function that is key to the organization’s success.
Just imagine running your business on technology of twenty years ago. Sending paper memos (when CC referred to a literal ‘carbon copy’), using a phone tethered to your desk, taking delivery of policy documents in hard copy – oh wait, they still do that. Would that put your business at a competitive disadvantage? Of course it would – and risk management would suffer too.
Risk management no longer has to take a back seat to other parts of the organization. Quite the opposite. By leveraging commercial cloud platforms, the pervasiveness of the Internet and the interconnectivity of everyone and everything, the risk management team can be the most modern, forward-looking part of the company. Risk management has become the bellwether of change – actually bearing the standard for technology-enabled collaboration and productivity across the organization. Imagine that.
Global Program Premium Allocation: Why It Matters More Than You Think
Ten years after starting her medium-sized Greek yogurt manufacturing and distribution business in Chicago, Nancy is looking to open new facilities in Frankfurt, Germany and Seoul, South Korea. She has determined the company needs to have separate insurance policies for each location. Enter “premium allocation,” the process through which insurance premiums, fees and other charges are properly allocated among participants and geographies.
Experts say that the ideal premium allocation strategy is about balance. On one hand, it needs to appropriately reflect the risk being insured. On the other, it must satisfy the client’s objectives, as well as those of regulators, local subsidiaries, insurers and brokers., Ensuring that premium allocation is done appropriately and on a timely basis can make a multinational program run much smoother for everyone.
At first blush, premium allocation for a global insurance program is hardly buzzworthy. But as with our expanding hypothetical company, accurate, equitable premium allocation is a critical starting point. All parties have a vested interest in seeing that the allocation is done correctly and efficiently.
“This rather prosaic topic affects everyone … brokers, clients and carriers. Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”
– Marty Scherzer, President of Global Risk Solutions, AIG
Basic goals of key players include:
- Buyer – corporate office: Wants to ensure that the organization is adequately covered while engineering an optimal financial structure. The optimized structure is dependent on balancing local regulatory, tax and market conditions while providing for the appropriate premium to cover the risk.
- Buyer – local offices: Needs to have justification that the internal allocations of the premium expense fairly represent the local office’s risk exposure.
- Broker: The resources that are assigned to manage the program in a local country need to be appropriately compensated. Their compensation is often determined by the premium allocated to their country. A premium allocation that does not effectively correlate to the needs of the local office has the potential to under- or over-compensate these resources.
- Insurer: Needs to satisfy regulators that oversee the insurer’s local insurance operations that the premiums are fair, reasonable and commensurate with the risks being covered.
According to Marty Scherzer, President of Global Risk Solutions at AIG, as globalization continues to drive U.S. companies of varying sizes to expand their markets beyond domestic borders, premium allocation “needs to be done appropriately and timely; delay or get it wrong and it could prove costly.”
“This rather prosaic topic affects everyone … brokers, clients and carriers,” Scherzer says. “Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”
There are four critical challenges that need to be balanced if an allocation is to satisfy all parties, he says:
Across the globe, tax rates for insurance premiums vary widely. While a company will want to structure allocations to attain its financial objectives, the methodology employed needs to be reasonable and appropriate in the eyes of the carrier, broker, insured and regulator. Similarly, and in conjunction with tax and transfer pricing considerations, companies need to make sure that their premiums properly reflect the risk in each country. Even companies with the best intentions to allocate premiums appropriately are facing greater scrutiny. To properly address this issue, Scherzer recommends that companies maintain a well documented and justifiable rationale for their premium allocation in the event of a regulatory inquiry.
Insurance regulators worldwide seek to ensure that the carriers in their countries have both the capital and the ability to pay losses. Accordingly, they don’t want a premium being allocated to their country to be too low relative to the corresponding level of risk.
Without accurate data, premium allocation can be difficult, at best. Choosing to allocate premium based on sales in a given country or in a given time period, for example, can work. But if you don’t have that data for every subsidiary in a given country, the allocation will not be accurate. The key to appropriately allocating premium is to gather the required data well in advance of the program’s inception and scrub it for accuracy.
When creating an optimal multinational insurance program, premium allocation needs to be done quickly, but accurately. Without careful attention and planning, the process can easily become derailed.
Scherzer compares it to getting a little bit off course at the beginning of a long journey. A small deviation at the outset will have a magnified effect later on, landing you even farther away from your intended destination.
Figuring it all out
AIG has created the award-winning Multinational Program Design Tool to help companies decide whether (and where) to place local policies. The tool uses information that covers more than 200 countries, and provides results after answers to a few basic questions.
This interactive tool — iPad and PC-ready — requires just 10-15 minutes to complete in one of four languages (English, Spanish, Chinese and Japanese). The tool evaluates user feedback on exposures, geographies, risk sensitivities, preferences and needs against AIG’s knowledge of local regulatory, business and market factors and trends to produce a detailed report that can be used in the next level of discussion with brokers and AIG on a global insurance strategy, including premium allocation.
“The hope is that decision-makers partner with their broker and carrier to get premium allocation done early, accurately and right the first time,” Scherzer says.
For more information about AIG and its award-winning application, visit aig.com/multinational.