Our 100th Issue!
Jan 9, 2020

Yes, this is the hundredth issue of the GB Journal. Our thanks to all of our loyal readers and correspondents (great comments and inquiries) and to all of those folks out there who continue to publish studies, run surveys, pore over stats, and analyze the onrushing tsunami of news about our never boring, never quiet world of risk management. OK, enough back patting - let's get on with what's new for 2020.

 

 

 

Many A Slip Twixt the Cup and the Lip

Ideas, even very good ideas, are cheap. Implementation is dear. My Swedish grandfather pounded that into my little blond head over half a century ago. Today's exhibit is a new report from Rising Medical Solutions, Workers' Compensation Benchmarking Study/ Claims Operations. The study reports on a series of interviews with 1282 frontline claim professionals, the people on the firing line every day. While a number of important issues surfaced (things like caseloads, growing compliance burdens, the complexities of dealing with the aging workforce) the big one that caught our attention was training.

Yeah, training, as illustrated in the following example: "Industry experts have been espousing the benefits of an advocacy-based claims model for several years. But it turns out..., 72 percent of frontline claims professionals report they do not know what an advocacy based claims model is...." Oops. Now couple this with the well-known fact that the most knowledgeable adjusters in most claim shops are Boomers and they are retiring in droves. And that's just the hors d'oeuvres.

The areas of training spiked out in the report include:

   •  

Using metrics. "Organizations could consider two primary conclusions: a need to ‘upskill' claims talent to better understand and leverage metrics, or that metrics need to be retooled to be more actionable/meaningful to claims operations."

   •  

Jurisdictional knowledge. More than 40 percent of claims professionals indicated they need more training on differences in laws and regulations among jurisdictions.

   •  

Soft skills. While more organizations are investing in soft skills training for their frontline claims professionals, only 25 percent provide training on empathy "a critical skill when dealing with people who are injured," according to the report.

   •  

Medical management. "On average, 30 percent of frontline participants do not receive adequate training in key areas of medical management, such as evaluating medical treatment, interpreting diagnostic tests, identifying co-morbidities, and understanding psychosocial risk factors and mental health issues," the study said.

 
In other words, the people who run claims shops have lots of ideas, but are they investing in the training to implement these ideas, make them part of how their adjusters think? Claims are not airy abstractions. A comp claim is a chunk of someone's life and it's on the adjuster's desk because that person needs help. Does the adjuster have the tools and training at hand to give that help? If not, all the great concepts we hear lofted about at RIMS and the NWC&D Conference and other venues aren't worth the little electronic dot at the end of this sentence.

Rising's new report provides a signal service to all of us in reminding us that Grandpa was right: it's all in the implementation. If it isn't every day, it isn't anywhere.

Ideas without implementation are just the onramp:

a sign on a road, with a fire icon saying welcome to hell

 

 

Inflation's Under Control - Really?

Our friends at the WSJ (the other journal) took a look last week at an aspect of inflation that most of us don't see coming - until it whaps us in the back of the head. If you haven't heard of "social inflation" before, don't feel left out. This is not your usual inflation, where the price of bread, eggs, etc. changes faster than the "sell by" dates.

Social inflation refers instead to our expectations about what events are worth in certain circumstances. In this case, we're talking about lawsuits and damage awards. In the words of the author of the article, Telis Demos, "In insurance-industry parlance it typically refers to an upward creep in perceptions by an injured party of what they are owed, their willingness to pursue that via the legal system, and what that means for insurance policies covering companies' liabilities." In other words, injured parties are demanding ever larger settlements and, in many cases, they are getting them.

While definitive stats are hard to find, the article puts some dimensions on the table for us to think about: "A review of U.S. cases reported to VerdictSearch shows a more than 300% rise in the frequency of verdicts $20 million or over in 2019 from the annual average from 2001 to 2010." Now according to the BLS, the overall rate of US inflation for the same period was 17.96%. Pretty little picture?

What does this mean for you? Well, in some liability lines traditional underwriting and reserving models may be seriously outdated. The near term risk is primarily born by the insurance companies*, but the wise risk manager may want to rethink those excess liability policies and get ready for some possibly awkward renewals in certain industries and lines of coverage that have been hammered recently by jury verdicts.

If some of your major liability lines are self-insured, you might also want to think hard about working with your claims function to identify claimants who are likely to litigate and ramp up early settlement offers. One by-product of social inflation is that the value of litigation avoidance is rising rapidly. You may be well advised to temper your urge to fight claimants. Instead, you might want to try the KTWK approach (kill them with kindness). Any jury can go rogue - with your money. Best to avoid them.

Another term to watch for: "nuclear verdicts" is the new phrase for judgments of $10M and over. We are seeing more nukes out there. Is your bomb shelter in shape?

*Which is why the stocks of Travelers and many other P/C carriers have been sinking lately.

 

Quick Take 1:
A New Wrinkle in Ransomware

We're all familiar with the figure of the mob enforcer - the guy who breaks your knuckles, knees, or other body parts if you don't pay your extortion bill. Well, the folks behind some of the most advanced ransomware organizations (yes, they are organizations, not pale, misfit kids huddled in mom's basement) now have a new enforcer of their own - Uncle Sam. Just before Christmas, the Wall Street Journal published a report on the ultimate ransom sanction. From the Journal: "Attackers behind the ransomware strain known as Maze recently published on a website the names of alleged victim companies in the U.S. and other countries that refused to pay, stating that their data would soon be made public."

The point, of course, is that the victims of the data theft will be subject to whopping government fines as well as other possible sanctions if the stolen information is exposed. Any number of US or EU laws and regulations may come into play, thus entangling the victim of the crime in a lengthy process of public investigation amounting to ritual humiliation as well as the myriad costs involved. Meanwhile, the ransom demands are going up and up. "We're seeing the increase in demands because they literally are choking the life out of companies," said Raj Samani, chief scientist at McAfee Inc.

Hackers are not stupid. They have figured out how to co-opt major government machinery to enforce their extortion. Hackers who used Sodinokibi (a new and especially insidious form of ransomware) demanded an average ransom of about $157,000 in the third quarter of 2019. Your alternative - explain your pain to Uncle Sam.

illustration of uncle sam pointing at you

 
You can pay them or you can pay me - take your pick!

 

Quick Take 2:
Managed Care and Outcomes

We hear about managed care in comp so often in so many different contexts that it's easy to forget what it's actually about. In a recent essay in Workerscompensation.com, Brian Allen provided a very good overview of how managed care saves money and drives better outcomes and superior return to work results. Of special note is the section on the use of managed pharmacy to:

   •  

Help drive generic utilization;

   •  

Check for potentially dangerous drug interactions;

   •  

Identify potential doctor-shopping issues; and

   •  

Help identify whether the medication being dispensed is related to and appropriate for the workplace injury.

 
That's a pretty impressive bang for the buck, considering the recent headlines involving opioids that we are all familiar with.

The concept that pulls all of these goals together is outcomes. Not shaving a few points off the cost. No. Outcomes. All the items on that list are really just features. Never forget that the real goal is an employee made whole after an injury, a colleague back on the job, a fellow citizen back in the swing of normal life - that's the outcome and any managed care that doesn't have that goal may not belong in your program.

Let me pause to ask, gentle reader - do you and your claims people talk about outcomes. Not just "savings" but real outcomes, the ones that matter? If not, try it. You may find that your whole comp program comes into a sharper focus.

 

Words to Remember

We try to avoid inflicting poetry on our readers unless we have good reasons, but here's a verse that we should all heed with every new year. Thomas Hardy wrote this for December 31, 1900, looking at a new century. He describes the winter landscape as evening falls - frozen, barren, bleak - but then he hears the trilling, liquid song of a thrush, one of the most beautiful of all bird songs, and the poem ends with -

At once a voice arose among
        The bleak twigs overhead
In a full-hearted evensong
        Of joy illimited;
An aged thrush, frail, gaunt, and small,
        In blast-beruffled plume,
Had chosen thus to fling his soul
        Upon the growing gloom.

So little cause for carolings
        Of such ecstatic sound
Was written on terrestrial things
        Afar or nigh around,
That I could think there trembled through
        His happy good-night air
Some blessed Hope, whereof he knew
        And I was unaware.

(In case you don't get out much, you can listen to a real thrush in somewhat blast-beruffled plume right here on YouTube: https://www.youtube.com/watch?v=lsT5dwgr090)

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