Black Swans

Matrix Rising

Should U.S. digital or electronic networks suffer an attack, the outcome could be as devastating as any natural catastrophe.
By: | July 27, 2017 • 2 min read

Interconnectivity, whether it be the grid, or the digital economy, is the hallmark of our new global marketplace, but as our 2017 Black Swan coverage will illustrate, it may also be our greatest weakness.

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The aggregation risks should the grid in the United States be knocked out — or our cloud services attacked — are concerns shared by underwriters and risk managers.

There is no off-the shelf product to counteract these risks. They could strike at any moment with catastrophic severity.

Counteracting them will require expert execution in the art of spreading risk, either through more astute contracts with vendors and customers, or much better communication, and of course policy writing, on the part of the carriers and their insureds.

Chaos From Above, a harrowing account of a terrorist EMP attack, is all the more chilling to consider as worldwide political tensions increase.

 

Breaking Clouds imagines a group of activists radicalized to the point of terrorism, bent on bringing corporate America to its knees.

This marks the fifth year that Risk & Insurance editors and writers outlined the risks of Black Swans. A look back at some of our previous Black Swan coverage is below.

A Look Back

Since August of 2013, Risk & Insurance writers and editors have interviewed academics, government officials, reinsurers and risk consultants to get their take on Black Swans, very rare events that could strike with catastrophic severity.

Here are a few examples of Black Swan events we’ve written about over the past five years. At the time we wrote about many of them, they seemed almost fantastical. Yet, with each passing year, the likelihood of them occurring seems to increase.

August 2014: Ice Storms Knock Out the Grid in the Northeast The increasingly glaring combination of extreme weather and vulnerable infrastructure give even more credence to a Black Swan scenario we constructed in 2014: that a series of ice storms (two major ones would suffice) could cripple the grid in the Northeast.  All it would take is two very heavy ice storms over three days to potentially knock out electrical service to millions.  Were that to occur, our sources at the time stipulated that insured losses could reach between $9.5 billion and $15.5 billion.

August 2015: Welcome to the ARkstorm The prospect of a superstorm buffeting California for more than 40 days isn’t a fantasy. Atmospheric rivers, or ARkstorms, struck California at least six times, according to studies by geologists. Our 2015 scenario, as dreadful as it may be to consider, projected $400 billion in property damage, only $20 billion to $30 billion of which would be recoverable, should torrential rains drench California for weeks and drown its infrastructure, its agriculture and many of its iconic landmarks. The most recent ARkstorm was 1861. Flooding closed the capital of Sacramento and the whole Central Valley became a lake.

August 2016: Political Black Swans In August of 2016 we wrote about populist swells, swept to a fever pitch by anger, alienation and the Internet that could cause major political disruption. In November of 2016, just such a disruption took place, as businessman and reality television star Donald Trump was elected as the 45th president of the United States. Now the compliance and agreement of the U.S. in everything from the Paris Climate Change accord, to the North American Free Trade Agreement, to our support for NATO is uncertain.

More from Risk & Insurance

More from Risk & Insurance

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]