The first laptop computer - remember the Osborne? - was rude, crude and only marginally better than a glorified adding machine. In 1981 it cost $1,795 (real money) and weighed over 20 pounds. And it didn't have a battery. You had to plug it in. Now we have every size of portable computing power, from conventional laptops and tablets to our smartphones. Should we assume that blockchain will follow a similar curve of development as it finds serious use cases in risk management?
Bitcoin and other fairy money notwithstanding, blockchain itself is a serious technology and it directly addresses a key issue - trust and, downstream, fraud prevention. The whole idea behind distributed ledger technology is that update changes cannot be made to existing entries without permission of at least 50% of the participating systems and, even then, such an update will leave an audit trail in the underlying software and the original ledger will remain intact. All steps are recoverable and public to the participants. In short, blockchain makes it very hard to cheat by changing contract or policy terms, for one example. A blockchain based app shared by a group of carriers, in another case, can help spot and document common types of insurance fraud. A proof of concept (POC) exploration of this latter application is already underway.
Why don't we see blockchain based insurance and risk apps and systems coming on-line in serious numbers thus far? This is a new technology. The industry is rightly investing heavily in carefully defined POC projects at this stage. Plug and play blockchain software does not appear to be market ready quite yet. ITL recently published a thoughtful overview of how blockchain is developing in Q1 of 2018. Joe Paduda also has some interesting views on the topic in his always engaging Managed Care Matters blog.
What should the alert risk manager be doing right now? Taking one of the on-line courses explaining blockchain might be a good place to start. There are several. We like the "The Basics of Blockchain" at Udemy as a good general intro. The videos of Andreas Antonopoulos are another relatively painless way to learn more. Try his blockchain channel here. And don't miss his video Blockchain vs. Bull****: Thoughts on the Future of Money".
The book Blockchain for Dummies is another source. Like much of the material currently on-line, this course tends to focus on bitcoin, but the bitcoin case demonstrates the major components of the concept in an interesting and engaging way. You don't have to invest in bitcoins or other cryptos to get the hang of blockchain. It may help to think of crypto currency as the parallel of email. Remember? It was the utility of email that propelled the original development of the internet as a common business tool, then its uses exploded. Back in the days of the Osborne.
ACA vs WC, the Battle of the Century?
During the debates concerning the Affordable Care Act (aka "ObamaCare") and after its implementation, gallons of ink and billions of electrons were used theorizing about its impact on workers' comp. Would the availability of group health plans for the previously uninsured reduce the pressure on WC as the insurer of last resort - or vice-versa?
The California Workers' Compensation Insurance Research Bureau (WCIRB) has just released its report on the interactions of the ACA and comp in the Golden State . While this study may or may not accurately define the impacts in the other 49 states, it is suggestive of what is actually happening on the ground. The short answer to the question, does the ACA change WC experience in any material way, seems to be - No.
The California WCIRB looked at the numbers several ways and found no material changes in either frequency or costs that appeared to be related to the ACA. Overall claim frequency declined during the study period, but that was in line with the long term falling claim experience documented by NCCI and others during the same interval. The report did find a few nuances in injury types which might be related to the ACA, but this impact was muted and speculative. For example, the number of claims with chronic co-morbidities, such as obesity, hypertension, and diabetes, seemed to decline a bit, but the numbers were too thin to be definitive.
While the WCIRB study has important limitations, it is one of the few objective looks we have into the potential interactions of WC and changes in health insurance regimes. With health insurance likely to be on the national and local political agendas for some time to come, this is very useful work.
A Sip of Alphabet Soup
ADA, ADAAA, EEOC, IDM - the list goes on and on lining up all those laws, regs, and programs concerning disabled and aging employees. Historically, risk managers have largely left these concerns to the people across the hall in HR, barring an occasional complex RTW issue in a comp claim.
A new commentary in IRMI points out a few salient facts about the US workforce in 2018. We have over 8 million disabled fellow citizens. That's the population of Virginia. Another 1.4 million applied for disability benefits in 2017 alone. The average age of the US workforce (actively employed people, not including the retired) has gone from 38 to 42 in the years since 1996. Meanwhile, the unemployment rate is now 3.9%. The point: understanding and accommodating the needs of older and disabled employees has become part and parcel of the risk management portfolio. The excellent IRMI commentary by Joe Galusa offers several suggestions for integrating corporate policies and practices to better deal with these new workforce realities. As the author points out:
Integration is really not that difficult; at the core of a successful absence management program are policies that incorporate the needs of both occupational as well as non-occupational return-to-work issues and well-constructed physical demands assessments (PDAs).
The commentary goes on to offer point by point ideas about how to pull HR and comp into operating alignment. The ideas proposed are neither expensive nor complex. Integration, at bottom, is the rigorous application of good sense and strong logic while setting aside the usual silos and petty turf wars between and inside HR and risk management.
Failure to drive towards better integration may well result in costly fines and other regulatory penalties and it will almost certainly perpetuate inefficiencies in productivity management which may prove a material disadvantage in our hyper competitive economy. Disability and aging are unlikely to melt away if you ignore them long enough. You may also be pleasantly surprised by how much those folks in HR know that can help you retain skilled employees who need a few minor accommodations to be fully productive.
Want Cyber with That?
The good folks at Fitch Ratings have just published a report on the growth of cyber insurance in the US market and the numbers are eye-popping. For example, stand alone and package cyber based premiums combined grew 54% last year. Allianz expects the entire US cyber market to hit $20BB in total premium volume by 2025.
Presumably, the risk managers buying these cyber covers have serious risks in sight. But there is one possible red flag: over 75 different insurance companies each wrote over $1MM last year in new cyber premiums alone. To a veteran observer, this suggests naïve capacity chasing a new risk, especially when cyber risks are bundled into existing policies that include newly written cyber coverage and endorsements but may lack well developed (and tested) policy terms.
Having adequate cyber coverage is vital in 2018, but be certain that you are buying this insurance from an underwriter which understands the real risks and isn't simply jumping into a hot new market to scoop up some easy premium dollars. If something goes seriously haywire, you don't want to find out your lead underwriter thought "cyber" was a type of hard cider.