Insurers Should Monitor the Pulse of These 4 Emerging Regulatory Trends

The regulatory landscape is changing. Insurance companies need to be on top of these key trends if they want to continue to build successful risk strategies.
By: | January 24, 2019 • 4 min read

The legal/regulatory landscape is ever changing, and with a new year already underway, insurance companies need to be on top of key regulations if they want to continue to build successful risk and compliance strategies.

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To do just that, Deloitte released a report on key areas within the regulatory landscape where they expect change and other possible growing trends. The report, “Leading in Times of Change: Insurance Regulatory Outlook 2019,” highlights several places in which regulators are giving their attention this year. And at the forefront is cyber security.

1) Cyber Security and Data Privacy

Now that hacking and data breaches have fallen into the category of the inevitable, cyber security and data privacy dominate the regulatory agenda.

In just 2018, the EU General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA) and the New York Department of Financial Services Cybersecurity Regulation all came into effect.

Each had an impact on how businesses collect and use consumer data, reinventing the way the risk is looked at as a whole. GDPR regulates personal data pertaining to any person or company within the European Union; the CCPA expanded the rights for consumers to know how a company uses their information; and the N.Y. regulation requires financial services companies to establish and maintain a cyber security program.

Moving forward, the report said several more countries are looking to implement or enhance already-existing regulatory requirements, from Brazil and the UK, to the U.S. and Australia.

“For insurers to remain competitive,” said the report, “they need the ability to acquire and manage vast quantities of data to provide more relevant coverage for consumers.” This is particularly true in cases where businesses outsource data-collection activities and it becomes third-party risk.

2) Analytics and Modeling

“The year 2018 appears to have been the turning point for insurers embracing the use of analytics and modeling to help manage their operational risk and regulatory compliance exposures,” noted the report.

There has been a trend of firms adding data scientists to their risk teams, enabling many to start the conversation on improving data analytics and what that will do to and for the industry. But while innovation has its upsides, data analytics is also proving an emerging risk. Some regulators have begun questioning why firms have not proactively identified certain risks given the amount of information they already have at their finger tips.

Additionally, other high-priority areas are being identified, including emerging risks related to the regulatory market conduct exams, policy rate accuracy and related laws and regulations, and sales practice misconduct.

So how can insurance keep on top of analytics in 2019? “Firms should strive for meaningful progress in the year ahead, using periodic checkpoints to refine their goals; demonstrate progress, value, and ROI; manage internal expectations; and adjust course as needed.”

3) Fraud as an Epidemic

According to Deloitte, insurance fraud is a major issue for the industry, estimated as an $80 billion-a-year problem. Both hard fraud — perpetuated by criminal organizations intent on committing fraud — and soft fraud — committed by individuals through benign acts like exaggeration, embellishment or misrepresentation — have each taken a toll.

An estimated 3 to 5 percent of every claim dollar is lost to hard fraud, while 5 to 25 percent of every claim dollar is lost to soft fraud.

U.S. states are cracking down the best way that they can — through regulatory action. In 2018, Michigan became the 42nd state to form a fraud bureau. Additionally, 43 states have mandatory fraud reporting statutes, 22 require companies to have anti-fraud plans, and 15 require companies to utilize special investigative units. For 2018, 30 anti-fraud bills were enacted, with 26 bills still pending.

An estimated 3 to 5 percent of every claim dollar is lost to hard fraud, while 5 to 25 percent of every claim dollar is lost to soft fraud.

State legislatures across the country are continuing along this path, and insurance companies would fair best to review what’s in motion per state and how each might impact their business.

A Coalition Against Insurance Fraud study has found companies to be embracing new and innovative technologies to combat fraud as well. Others have implemented the following analytics techniques to the mix:

  • Data exploration: Identifying trends, outliers and circumstantial anomalies through exploratory data analysis.
  • Geospatial analysis: Using geographic coordinates to identify spatial patterns and anomalies.
  • Social networking: Visualizing and analyzing relationships to identify key players and uncover hidden patterns.
  • Machine learning: Leveraging advanced modeling techniques such as neural networks, random forests and regression to uncover subtle fraud patterns.

4) Insurtech

Some of the latest innovations in technology include artificial intelligence, algorithms and robo-advice, smart contracts, the Internet of Things, wearables, blockchain and more.

“All of these technology innovations have significant potential benefits for consumers; however, they also pose challenges that may trigger regulatory scrutiny,” said the report.

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Regulators have found that while Insurtech has primarily supported the insurance industry, it has been challenging to monitor and assess its effect.

Robo-advice, according to the report, is a good example. While this technology can enable consumers to receive advice at a lower price point, its uncertain whether the tool is providing accurate advice compliant with the parameters set up for human advisers.

To stay ahead of a changing tech environment, the report suggests that insurers inform and involve regulators early in the Insurtech adoption process, both emphasizing the need to work together and bringing relevant, innovative products to market more quickly, “which is something all stakeholders should find appealing.” &

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]