Raising the Experience Bar
Commercial insurance has recently faced several major challenges. Economic distress has made it difficult to profit off of investments, thereby necessitating profitable underwriting to drive returns. In addition to soft rates, exposure bases (i.e., U.S. GDP) are flat, if not effectively down, and interest rates are at historic lows.
As a result of these and other pressures, the overall commercial lines market has shrunk since 2007 — from $241 billion in 2007 to $222 billion in 2012 — and has been recovering very slowly over the last five years. Difficult economic conditions and saturation of a highly fragmented market has increased competition, leading commercial carriers to improve their value proposition by offering a better customer experience for both the end insured and producers.
Commercial carriers have every incentive to invest in improving the customer experience.
In contrast with personal lines (e.g., private passenger auto insurance, for which most carriers struggle to promote a superior customer experience and divert consumers’ attention from price), ease of doing business and other value-added services — even as basic as advice — greatly influence placement.
From the lower end of small commercial to the largest commercial accounts, producer experience and, by extension, the experience of the insured has increasingly become a critical factor in a carrier’s ability to acquire and retain clients. An underwriter’s product expertise and local market knowledge often takes precedence over price.
In the meantime, shifts in customer expectations, access to information and diversifying needs are creating networks of increasingly self-directed, self-organizing and self-aware groups. This has broad implications for the design, manufacture, marketing, pricing and servicing of commercial insurance.
Small and medium enterprises increasingly interact and transact through a variety of channels. PwC’s recent Future of Insurance research shows that 49 percent of SMEs now use the Internet to supplement or replace agents and brokers in their search for commercial insurance.
As a result, investments in technology, customer data and analytics across the spectrum of carriers — from small to large commercial — are raising service expectations. Based on their business and operating models, carriers need to judiciously select and prioritize on which business and technical capabilities they should focus.
For instance, a niche market positioning that targets only a very narrow customer segment may require specific capabilities that are relevant to only that segment, such as specialized risk control services for medical facilities.
The distribution model also should greatly influence the types of customer experience-related capabilities in which to invest. For example, middle market carriers with numerous local offices will have to expend more effort, such as on guidelines and training, to promote a consistent customer experience.
Also, different sources of distribution will value different kinds of experience. While national brokers tend to be more transactional in nature and favor speed of processing and decision-making, small regional producers typically value coverage advice and are not as concerned about ease of doing business.
Regardless of a carrier’s business model, technology has been a consistent source of differentiation and an enabler of a superior customer experience, driving efficiencies throughout every stage of the sales funnel and customer life cycle.
New Customer Acquisition
The ability to collect and analyze customer data is the foundation of superior marketing capabilities. Better understanding of buyer behavior, demand for specific products or coverage, and pricing trends help carriers identify the most profitable market segments and growth opportunities.
Agents and brokers are increasingly leveraging new technologies such as social media to increase brand presence, generate leads and engage customers online. Underwriters at leading commercial carriers and MGUs likewise should promote their expertise in a given industry segment and/or line of business through “likes,” posts, retweets, blogs and articles on social media platforms.
Multiple social media outlets can help brand and disseminate thought leadership to engage both current and prospective producers.
Another key component of superior customer experience and producer productivity is ensuring that producers clearly understand a carrier’s risk appetite so they do not spend time on submissions that are likely to be rejected. This is an issue for many commercial carriers that struggle to effectively communicate their underwriting appetite, both internally and externally.
In fact, independent technology companies have emerged to address this problem by offering a new category of services to agents and brokers. For instance, there is now a search engine that gives agents and brokers a sense of insurance companies’ risk appetites, thereby allowing them to quickly find the right insurer for a particular risk.
This results in an improved quote ratio from carriers and provides more options to the prospective insured. It also saves time for everybody concerned.
The process of shopping and purchasing commercial insurance is still relatively complex. Future of Insurance research noted that nearly all non-insured small business owners cited the complexity of the process as one key reason for not getting coverage.
Ease of doing business is a key part of a superior customer experience and falls on the strategic agenda of most commercial line carriers, which are:
• Investing in streamlining and automating the underwriting process;
• Actively finding ways to simplify the data collection process by eliminating non-critical questions from their applications;
• Avoiding redundant information capture (i.e., re-keying); and
• Pre-populating submissions through third-party data services.
Beyond the initial step of capturing customer and coverage information, workflow management solutions enable better up-front triage and orchestration of account clearing, rating and quoting activities.
In an increasingly large number of small commercial segments, complete systematization of product rules and automation of underwriting decisions enable straight through processing — a commercial carriers’ ultimate goal as they strive to reduce quote turnaround times.
Some commercial carriers may choose to implement tiered service models to facilitate a superior customer experience for their most valuable producers.
Customer Relationship Management
Once a deal closes, carriers continue to look for ways to improve the producer and policyholder experience. Some carriers increasingly handle several policy administration transactions (e.g., endorsements, bill payments) on behalf of producers.
Policy administration service provision is increasingly taking place online. Even for large, multinational accounts, carriers have rolled out and continue to invest in self-service platforms that allow brokers and customers to focus on risk management, loss control and other value-added activities instead of premium payment tracking, loss reconciliation and other administrative activities.
Many carriers also have started to effectively utilize mobile computing (e.g., smartphones, tablets) to empower agents, claim adjusters, risk inspectors and customers by providing them on-demand access to both existing and new information and services.
In addition, data analytics are playing an increasingly important role, and can enable innovative value-added services, some of which may be disruptive enough to be successfully monetized and re-position a carrier’s business and/or operating model.
For instance, sensor technology has already started to transform the crop insurance business by reducing the need for traditional insurance coverage (i.e., insuring farmers against the loss of a crop or reduced yield from a crop), thereby enabling carriers to focus instead on preventive loss control services.
Sensors embedded in a field can measure the level of moisture in real time, which can then help determine the necessary level of irrigation and drive optimal watering. Several manufacturers have equipped their machinery to communicate with sensors and help farmers determine when a field is ready for harvesting.
Sensor technology also can provide real-time feedback on large scale disasters. Photos facilitate estimating damage, and mapping tools allow carriers to dynamically and automatically assign adjusters, contact customers and estimate Cat losses.
Sensor data provides carriers with real-time information on what has been damaged — Has the boiler broken? Is the basement flooded? Is there smoke damage? Is there mildew, rot or termites? Likewise, sensors can trigger customer alerts when there is minor — not just major — damage.
This presents the opportunity to stave off greater subsequent damage, as well as create pre-populated claims forms and even fulfill a claim before a customer knows the extent of damage.
Innovation has raised the bar for the customer experience and service expectations in the commercial lines sector. Commercial carriers must continue to invest in technology and find ways to harness customer data to remain competitive in the short-term.
Coping with Cancellations
Airlines typically can offset revenue losses for cancellations due to bad weather either by saving on fuel and salary costs or rerouting passengers on other flights, but this year’s revenue losses from the worst winter storm season in years might be too much for traditional measures.
At least one broker said the time may be right for airlines to consider crafting custom insurance programs to account for such devastating seasons.
For a good part of the country, including many parts of the Southeast, snow and ice storms have wreaked havoc on flight cancellations, with a mid-February storm being the worst of all. On Feb. 13, a snowstorm from Virginia to Maine caused airlines to scrub 7,561 U.S. flights, more than the 7,400 cancelled flights due to Hurricane Sandy, according to MasFlight, industry data tracker based in Bethesda, Md.
Roughly 100,000 flights have been canceled since Dec. 1, MasFlight said.
Just United, alone, the world’s second-largest airline, reported that it had cancelled 22,500 flights in January and February, 2014, according to Bloomberg. The airline’s completed regional flights was 87.1 percent, which was “an extraordinarily low level,” and almost 9 percentage points below its mainline operations, it reported.
And another potentially heavy snowfall was forecast for last weekend, from California to New England.
The sheer amount of cancellations this winter are likely straining airlines’ bottom lines, said Katie Connell, a spokeswoman for Airlines for America, a trade group for major U.S. airline companies.
“The airline industry’s fixed costs are high, therefore the majority of operating costs will still be incurred by airlines, even for canceled flights,” Connell wrote in an email. “If a flight is canceled due to weather, the only significant cost that the airline avoids is fuel; otherwise, it must still pay ownership costs for aircraft and ground equipment, maintenance costs and overhead and most crew costs. Extended storms and other sources of irregular operations are clear reminders of the industry’s operational and financial vulnerability to factors outside its control.”
Bob Mann, an independent airline analyst and consultant who is principal of R.W. Mann & Co. Inc. in Port Washington, N.Y., said that two-thirds of costs — fuel and labor — are short-term variable costs, but that fixed charges are “unfortunately incurred.” Airlines just typically absorb those costs.
“I am not aware of any airline that has considered taking out business interruption insurance for weather-related disruptions; it is simply a part of the business,” Mann said.
Chuck Cederroth, managing director at Aon Risk Solutions’ aviation practice, said carriers would probably not want to insure airlines against cancellations because airlines have control over whether a flight will be canceled, particularly if they don’t want to risk being fined up to $27,500 for each passenger by the Federal Aviation Administration when passengers are stuck on a tarmac for hours.
“How could an insurance product work when the insured is the one who controls the trigger?” Cederroth asked. “I think it would be a product that insurance companies would probably have a hard time providing.”
But Brad Meinhardt, U.S. aviation practice leader, for Arthur J. Gallagher & Co., said now may be the best time for airlines — and insurance carriers — to think about crafting a specialized insurance program to cover fluke years like this one.
“I would be stunned if this subject hasn’t made its way up into the C-suites of major and mid-sized airlines,” Meinhardt said. “When these events happen, people tend to look over their shoulder and ask if there is a solution for such events.”
Airlines often hedge losses from unknown variables such as varying fuel costs or interest rate fluctuations using derivatives, but those tools may not be enough for severe winters such as this year’s, he said. While products like business interruption insurance may not be used for airlines, they could look at weather-related insurance products that have very specific triggers.
For example, airlines could designate a period of time for such a “tough winter policy,” say from the period of November to March, in which they can manage cancellations due to 10 days of heavy snowfall, Meinhardt said. That amount could be designated their retention in such a policy, and anything in excess of the designated snowfall days could be a defined benefit that a carrier could pay if the policy is triggered. Possibly, the trigger would be inches of snowfall. “Custom solutions are the idea,” he said.
“Airlines are not likely buying any of these types of products now, but I think there’s probably some thinking along those lines right now as many might have to take losses as write-downs on their quarterly earnings and hope this doesn’t happen again,” he said. “There probably needs to be one airline making a trailblazing action on an insurance or derivative product — something that gets people talking about how to hedge against those losses in the future.”
Managing Chronic Pain Requires a Holistic Strategy
Chronic, intractable pain within workers’ compensation is a serious problem.
The National Center for Biotechnology Information, part of the National Institutes of Health, reports that when chronic pain occurs in the context of workers’ comp, greater clinical complexity is almost sure to follow.
At the same time, Workers’ Compensation Research Institute (WCRI) studies show that 75 percent of injured workers get opioids, but don’t get opioid management services. The result is an epidemic of debilitating addiction within the workers’ compensation landscape.
As CEO and founder of Integrated Prescription Solutions Inc. (IPS), Greg Todd understands how pain is a serious challenge for workers’ compensation-related medical care. Todd sees a related, and alarming, trend as well – the incidence rate for injured workers seeking permanent or partial disability because of chronic pain continues to rise.
Challenges aside, managing chronic pain so both the payer and the injured worker can get the best possible outcomes is doable, Todd said, but it requires a holistic, start-to-finish process.
Todd explained that there are several critical components to managing chronic pain, involving both prospective and retrospective solutions.
Prospective View: Fast, Early Action
“Having the wrong treatment protocol on day one can contribute significantly to bad outcomes with injured workers,” Todd said. “Referred to as outliers, many of these ’red flag’ cases never return to work.”
Best practice care begins with the use of evidence-based UR recommendations such as ODG. Using a proven pharmacological safety and monitoring opioid management program is a top priority, but needs to be combined with an evidence-based medical treatment and rehabilitative process-focused plan. That means coordinating every aspect of care, including programs such as quality network diagnostics, in-network physical therapy, appropriate durable medical equipment (DME) and in more severe cases work hardening, which uses work (real or simulated) as a treatment modality.
Todd emphasized working closely with the primary treating physician, getting the doctor on board as soon as possible with plans for proven programs such as opioid Safety and Monitoring, EB PT facilities, patient progress monitoring and return-to-work or modified work duty recommendations.
“It comes down to doing the right thing for the right reasons for the right injury at the right time. To manage chronic pain successfully – mitigating disability and maximizing return-to-work – you have to offer a comprehensive approach.”
— Greg Todd, CEO and founder, Integrated Prescription Solutions Inc. (IPS)
Alternative Pain Management Strategies
Unfortunately, pain management today is practically an automatic move to a narcotic approach, versus a non-invasive, non-narcotic option. To manage that scenario, IPS’ pain management is in line with ODG as the most effective, polymodal approach to treatment. That includes N-drug formularies, adherence to therapy regiment guidelines and inclusive of appropriate alternative physical modalities (electrotherapy, hot/cold therapy, massage, exercise and acupuncture) that may help the claimant mitigate the pain while maximizing their ongoing overall recovery plan.
IPS encourages physicians to consider the least narcotic and non-invasive approach to treatment first and then work up the ladder in strength – versus the other way around.
“You can’t expect that you can give someone Percocet or Oxycontin for two months and then tell them to try Tramadol with NSAIDS or a TENS unit to see which one worked better; it makes no sense,” Todd explained.
He added that in many cases, using a “bottom up” treatment strategy alone can help injured workers return to work in accordance with best practice guidelines. They won’t need to be weaned off a long-acting opioid, which many times they’re prohibited to use while on the job anyway.
Chronic Pain: An Elusive Condition
Soft tissue injuries – whether a tear, sprain or strain – end up with some level of chronic pain. Often, it turns out that it’s due to a vascular component to the pain – not the original cause of the pain resulting from the injury. For example, it can be due to collagen (scar tissue) build up and improper blood flow in the area, particularly in post-surgical cases.
“Pain exists even though the surgery was successful,” Todd said.
The challenge here is simply managing the pain while helping the claimant get back to work. Sometimes the systemic effect of oral opioid-based drugs prohibits the person from going to work by its highly addictive nature. In a 2014 report, “A Nation in Pain,” St. Louis-based Express Scripts found that nearly half of those who took opioid medications for more than a month in their first year of treatment then refilled their prescriptions for three years or longer. Many studies confirm that chronic opioid use has led to declining functionality with reduced ability to recover.
This can be challenging if certain pain killers are being used to manage the pain but are prohibitive in performing work duties. This is where topical compound prescriptions – controversial due to high cost and a lack of control – may be used. IPS works with a reputable, highly cost-effective network of compound prescription providers, with costs about 30-50 percent less than the traditional compound prescription
In particular compounded Non-Systemic Transdermal (NST) pain creams are proving to be an effective treatment for chronic pain syndromes. There is much that is poorly understood about this treatment modality with the science and outcomes now emerging.
Retrospective Strategies: Staying on Top of the Claim
IPS’ retrospective approach includes components such as periodic letters of medical necessity sent to the physician, peer-to-peer and pharmacological reviews when necessary, toxicology monitoring and reporting, and even addiction rehab programs specifically tailored toward injured workers.
Todd said that the most effective WC pharmacy benefit manager (PBM) provides much more than just drug benefits, but rather combines pharmacy benefits with a comprehensive ancillary suite of services in a single portal assisting all medical care from onset of injury to RTW. IPS puts the tools at the adjustor fingertips and automates initial recommendations as soon as the claim in entered into its system through dashboard alerts. Claimant scheduling and progress reporting is made available to clients 24/7/365.
“It comes down to doing the right thing for the right reasons for the right injury at the right time,” Todd said, “To manage chronic pain successfully – mitigating disability and maximizing return-to-work – you have to offer a comprehensive approach,” he said.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with IPS. The editorial staff of Risk & Insurance had no role in its preparation.