2016 Most Dangerous Emerging Risks

Fragmented Voice of Authority: Experts Can Speak but Who’s Listening?

Myopic decision-making based on self-selected information sources results in broad-based societal and economic harm.
By: | April 4, 2016 • 6 min read

On Jan. 11, a German-Russian girl alleged she’d been assaulted by a Muslim mob. Her allegations fed into weeks of anti-immigrant hysteria in Germany and tension between Moscow and Berlin before her statements were unveiled as a hoax.

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Fears over Syrian immigrants and Ebola light up our mobile devices as the much broader dangers of E. coli in our food supply and hospital-acquired infections get lost in the digital noise.

Misinformation on the connection between vaccination and autism spreads globally, leading parents around the world to stop inoculating their children. As a result, the measles, thought to be contained, re-emerges as a health threat in California, Germany and elsewhere.

All of these are examples of the fragmentation of the voice of informed authority.  This emerging risk stems from our tendency to self-select information sources, choosing reports that conform with our pre-established notions, rather than trust official statements.

Helen Thompson, director of commercial marketing, Esri

Helen Thompson, director of commercial marketing, Esri

In essence, there are large segments of the population giving more credence to friends’ Facebook posts than to information from the government or some other informed source.

“Because of the way that information is curated and supplied to audiences, people are increasingly curating their own sources of facts, and this changes society’s ability to understand and respond to information. Consequently authoritative information is being distorted based on our own lens,” said Helen Thompson, the director of commercial marketing for Esri.

Thompson pointed to a February extreme weather event in Virginia in which four people were killed as a risk that most people ignore, either because the death toll was “low”, or the risk wasn’t sensational enough.

“Natural disasters slip off the agenda because unless you are directly impacted something you consider equally or more important comes down your curated channel and displaces it,” she said.

“We know that when people are seeking new information, when they perceive a risk of some sort, that they hold onto the first piece of information that makes common sense to them,” said Barbara Reynolds, a senior crisis and risk communications adviser with the Centers for Disease Control and Prevention.

“Unfortunately, sometimes that piece that they are exposed to and hold onto right away could be incorrect, making it more difficult to share correct information,” she said.

The risk is that stakeholders will underestimate grave threats, magnify less substantial ones, and fail to take appropriate action. And negative information, whether by street corner gossip, or through social media, spreads much faster than accurate information which might not be as dire.

“When we see something that affects us in a negative way, we are more inclined to retweet or rebroadcast that information without trying to understand whether this is an actual fact,” said Emilio Ferrara, a researcher with the Information Sciences Institute & Department of Computer Science at the University of Southern California.

“That is one of the most dangerous consequences,” Ferrara added.

“The fact that this conversation can foster the spread of panic, or even mass hysteria, whereas there is no practical risk involved.”

International Consequences

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Perhaps the most glaring example is the current presidential election cycle in the United States.

An executive with a European reinsurer said he and his colleagues see the tone of political dialogue in the United States as a threat. That the acrimony, extremism and misinformation being expressed in some corners could lead to grave international consequences.

Among members of the Democratic and Republican parties, what’s emerged is a widespread belief that substantial disruption is needed.  That there is something very “wrong,” and that a radical overhaul is in order.

“Our willingness to accept decentralized dissemination of knowledge and reject centralization of knowledge is what’s changed.” —Helen Thompson, director of commercial marketing, Esri

That’s leading to extreme ideas like building a wall between the United States and Mexico or free college student tuition — without calculating the financial cost or the societal impact.

This when the national unemployment rate is at 5 percent, violent crime is down and we have access to better health care than previous generations, said Thompson.

“Our willingness to accept decentralized dissemination of knowledge and reject centralization of knowledge is what’s changed,” she said.

“For whatever reason, there is widespread mistrust of government and the information it shares at the federal, state and local level.”

Technology Holds the Answer

But just as technology, in the form of social media and the internet, are the vehicles for the spread of misinformation and mistrust, experts agree that technology holds the hope of mitigating, not only internet-spread rumors, but real threats such as food supply chain dangers or internet propaganda campaigns of terror organizations.

Barbara Reynolds, senior crisis and risk communications adviser, Centers for Disease Control and Prevention

Barbara Reynolds, senior crisis and risk communications adviser, Centers for Disease Control and Prevention

“Yes, we have the fragmentation that you are talking about, that is true,” said Barbara Reynolds, the CDC risk and communications adviser who spent her career at the nexus of communications and social psychology.

“But when I put those parts of my knowledge together, I find that for every negative there is a positive,” she added.

In Reynolds’ view, these online postings, Tweets and “shares” mean that government agencies become less paternalistic.

“For someone in the business of trying to help people make good health decisions, this is an invaluable feedback mechanism for me,” she said.

Whereas before it might take her days or weeks to filter through reactions to CDC statements, now she gets that feedback almost immediately.

“You can’t just put out a recommendation, you have to be able to withstand attacks,” she said. “What’s really important is to be out there first. It has to be repeated and it has to come from more than one source.”

That means dropping the notion that you are the only authority and seeking strength in numbers. Reynolds said her organization now knows to communicate in concert with other health care organizations.

“It’s important for us to work with other authorities who are trusted and bring them into the conversation,” Reynolds said.

USC’s Ferrara said he and his co-researchers are creating algorithms that are capable of learning the characteristics of misinformation campaigns.

“We are seeing promising advances into the realm of detecting — and even predicting when it’s possible — forms of artificial orchestrated campaigns.

And a campaign can be defined as sustained efforts from some party or entity or a group of people to push some information out.”

Ferrara is collaborating with a company in Washington, D.C. on a system to be used by the U.S. Department of Defense to identify and mitigate terroristic propaganda campaigns. He is also working on frameworks for the CDC and other health care authorities.

“Yes, we have the fragmentation that you are talking about, that is true. But when I put those parts of my knowledge together, I find that for every negative there is a positive.” —Barbara Reynolds, senior crisis and risk communication adviser, Centers for Disease Control and Prevention

Even though the general population might not be focused on food supply chain risks, Thompson’s Esri is working on solutions.

She said her company is working with international organizations to create a unique way to link every farm in the food supply chain to the produce they grow.

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“Now when you say, where did this apple come from and where did this prawn come from, you know its exact origin,” Thompson said.

It’s not only food supply chain risk that can be mitigated in this manner.

Labor law compliance, supply chain concerns over conflict diamonds or “gray market” gold could also be tracked through advanced technology.

“It’s going to require us to exchange information, transfer liability and quantify risk in a different way that’s happened before,” she added.

She said technology improvements and the Internet of Things will also allow for the tracking of every single unit a factory, farm or mine produces. That should provide much greater clarity for companies mitigating or facing a product recall.

“The IOT is going to fundamentally transform the way we monitor compliance and mitigate these classes of major risks,” she said. &

BlackBar

2016’s Most Dangerous Emerging Risks

brokenbridgeThe Fractured Future Infrastructure in disrepair, power grids at risk, rampant misinformation and genetic tinkering — is our world coming apart at the seams?

01b_cover_story_crackCrumbling Infrastructure: Day of Reckoning Our health and economy are increasingly exposed to a long-documented but ignored risk.

01c_cover_story_leadCyber Grid Attack: A Cascading Impact The aggregated impact of a cyber attack on the U.S. power grid causes huge economic losses and upheaval.

01e_cover_story_dnaGene Editing: The Devil’s in the DNA Biotechnology breakthroughs can provide great benefits to society, but the risks can’t be ignored.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Lead Story

Improving the Claims Experience

Insureds and carriers agree that more communication can address common claims complaints.
By: | January 10, 2018 • 7 min read

Carriers today often argue that buying their insurance product is about much more than financial indemnity and peace of mind.

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Many insurers include a variety of risk management services and resources in their packages to position themselves as true risk partners who help clients build resiliency and prevent losses in the first place.

That’s all well and good. No company wants to experience a loss, after all. But even with the added value of all those services, the core purpose of insurance is to reimburse loss, and policyholders pay premiums because they expect delivery on that promise.

At the end of the day, nothing else matters if your insurer can’t or won’t pay your claim, and the quality of the claims experience is ultimately the barometer by which insureds will judge their insurer.

Why, then, is the process not smoother? Insureds want more transparency and faster claims payment, but claims examiners are often overburdened and disconnected from the original policy. Where does the disconnect come from, and how can it be bridged?

Both sides of the insurer-insured equation may be responsible.

Susan Hiteshew, senior manager of global insurance and risk management, Under Armor Inc.

“One of the difficult things in our industry is that oftentimes insureds don’t call their insurer until they have a claim,” said Susan Hiteshew, senior manager of global insurance and risk management for Under Armour Inc.

“It’s important to leverage all of the other value that insurers offer through mid-term touchpoints and open communication. This can help build the insurer-insured partnership so that when a claim materializes, the relationships are already established and the claim can be resolved quickly and fairly.”

“My experience has been that claims executives are often in the background until there is an issue that needs addressing with the policyholder,” said Dan Holden, manager of corporate risk and insurance for Daimler Trucks North America.

“This is unfortunate because the claims department essentially writes the checks and they should certainly be involved in the day to day operations of the policyholders in designing polices that mitigate claims.

“By being in the shadows they often miss the opportunity to strengthen the relationship with policyholders.”

Communication Breakdown

Communication barriers may stem from internal separation between claims and underwriting teams. Prior to signing a contract and throughout a policy cycle, underwriters are often in contact with insureds to keep tabs on any changes in their risk profile and to help connect clients with risk engineering resources. Claims professionals are often left out of the loop, as if they have no proactive role to play in the insured-insurer relationship.

“Claims operates on their side of the house, ready to jump in, assist and manage when the loss occurs, and underwriting operates in their silo assessing the risk story,” Hiteshew said.
“Claims and underwriting need to be in lock-step to collectively provide maximum value to insureds, whether or not losses occur.”

Both insureds and claims professionals agree that most disputes could be solved faster or avoided completely if claims decision-makers interacted with policyholders early and often — not just when a loss occurs.

“Claims and underwriting need to be in lock-step to collectively provide maximum value to insureds, whether or not losses occur.” – Susan Hiteshew, senior manager of global insurance and risk management for Under Armour Inc.

“Communication is critically important and in my opinion, should take place prior to binding business and well before a claim comes in the door,” said David Crowe, senior vice president, claims, Berkshire Hathaway Specialty Insurance.

“In my experience, the vast majority of disputes boil down to lack of communication and most disputes ultimately are resolved when the claim decision-maker gets involved directly.”

Talent and Resource Shortage

Another contributing factor to fractured communication could be claims adjuster workload and turnover. Claims adjusting is stressful work to begin with.

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Adjusters normally deal with a high volume of cases, and each case can be emotionally draining. The customer on the other side is, after all, dealing with a loss and struggling to return to business as usual. At some TPAs, adjuster turnover can exceed 25 percent.

“This is a difficult time for claims organizations to find talent who want to be in this business long-term, and claims organizations need to invest in their employees if they’re going to have any success in retaining them,” said Patrick Walsh, executive vice president of York Risk Services Group.

The claims field — like the insurance industry as a whole — is also strained by a talent crunch. There may not be enough qualified candidates to take the place of examiners looking to retire in the next ten years.

“One of the biggest challenges facing the claims industry is a growing shortage of talent,” said Scott Rogers, president, National Accounts, Sedgwick. “This shortage is due to a combination of the number of claims professionals expected to retire in the coming years and an underdeveloped pipeline of talent in our marketplace.

“The lack of investment in ensuring a positive work environment, training, and technology for claims professionals is finally catching up to the industry.”

The pool of adjusters gets stretched even thinner in the aftermath of catastrophes — especially when a string of catastrophes occurs, as they did in the U.S in the third quarter of 2017.

“From an industry perspective, Harvey, Irma and Maria reminded us of the limitations on resources available when multiple catastrophes occur in close succession,” said Crowe.

“From independent and/or CAT adjusters to building consultants, restoration companies and contractors, resources became thin once Irma made landfall.”

Is Tech the Solution?

This is where Insurtech may help things. Automation of some processes could free up time for claims professionals, resulting in faster deployment of adjusters where they’re needed most and, ultimately, speedier claims payment.

“There is some really exciting work being done with artificial intelligence and blockchain technologies that could yield a meaningful ROI to both insureds and insurers,” Hiteshew said.

“The claim set-up process and coverage validation on some claims could be automated, which could allow adjusters to focus their work on more complex losses, expedite claim resolution and payment as well.”

Dan Holden, manager, Corporate Risk & Insurance, Daimler Trucks North America

Predictive modeling and analytics can also help claims examiners prioritize tasks and maximize productivity by flagging high-risk claims.

“We use our data to identify claims with the possibility of exceeding a specified high dollar amount in total incurred costs,” Rogers said. “If the model predicts that a claim will become a large loss, the claim is redirected to our complex claims unit. This allows us to focus appropriate resources that impact key areas like return to work.”

“York has implemented a number of models that are focused on helping the claims professional take action when it’s really required and that will have a positive impact on the claim experience,” Walsh said.

“We’ve implemented centers of excellence where our experts provide additional support and direction so claim professionals aren’t getting deluged with a bunch of predictive model alerts that they don’t understand.”

“Technology can certainly expedite the claims process, but that could also lead to even more cases being heaped on examiners.” — Dan Holden, manager, Corporate Risk & Insurance, Daimler Trucks North America

Many technology platforms focused on claims management include client portals meant to improve the customer experience by facilitating claim submission and communication with examiners.

“With convenient, easy-to-use applications, claimants can send important documents and photos to their claims professionals, thereby accelerating the claims process. They can designate their communication preferences, whether it’s email, text message, etc.,” Sedgwick’s Rogers said. “Additionally, rules can be established that direct workflow and send real time notifications when triggered by specific claim events.”

However, many in the industry don’t expect technology to revolutionize claims management any time soon, and are quick to point out its downsides. Those include even less personal interaction and deteriorating customer service.

While they acknowledge that Insurtech has the potential to simplify and speed up the claims workflow, they emphasize that insurance is a “people business” and the key to improving the claims process lies in better, more proactive communication and strengthening of the insurer-insured relationship.

Additionally, automation is often a double-edged sword in terms of making work easier for the claims examiner.

“Technology can certainly expedite the claims process, but that could also lead to even more cases being heaped on examiners,” Holden said.

“So while the intent is to make things more streamlined for claims staff, the byproduct is that management assumes that examiners can now handle more files. If management carries that assumption too far, you risk diminishing returns and examiner burnout.”

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By further taking real people out of the equation and reducing personal interaction, Holden says technology also contributes to deteriorating customer service.

“When I started more than 30 years ago as a claims examiner, I asked a few of the seasoned examiners what they felt had changed since they began their own careers 30 year earlier. Their answer was unanimous: a decline in customer service,” Holden said.

“It fell to the wayside to be replaced by faster, more impersonal methodologies.”

Insurtech may improve customer satisfaction for simpler claims, allowing policyholders to upload images with the click of a button, automating claim valuation and fast-tracking payment. But for complex claims, where the value of an insurance policy really comes into play, tech may do more harm than good.

“Technology is an important tool and allows for more timely payment and processing of claims, but it is not THE answer,” BHSI’s Crowe said. “Behind all of the technology is people.” &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]