Category Archives: Insurance

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The 2023 Hurricane Season Outlook

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Atlantic hurricane season officially began recently, kicking off a disaster season that will run from June 1 through November 30. According to predictions from the National Oceanic and Atmospheric Administration (NOAA), the 2023 hurricane season will consist of 12 to 17 named storms, five to nine hurricanes and one to four major hurricanes. This falls into a fairly average range, but “average” is a bit unusual under the conditions currently emerging around the season.

“The upcoming Atlantic hurricane season is expected to be less active than recent years, due to competing factors—some that suppress storm development and some that fuel it—driving this year’s overall forecast for a near-normal season,” NOAA reported.

Hurricane researchers at Colorado State University notably marked the opening of the season with a revised forecast. After initially predicting slightly below-average hurricane activity in 2023, the researchers increased their estimates. Now, CSU is essentially predicting an average hurricane season, but one that is above-average for what is expected to be an El Niño year.

The last three hurricane seasons have been controlled by La Niña, which typically leads to more hurricane activity. While El Niño would typically help reduce such activity, current warmer water temperatures could ultimately cancel out most of that effect.

“While we anticipate a robust El Niño for the peak of the Atlantic hurricane season, the tropical and subtropical Atlantic have continued to anomalously warm to near-record levels,” CSU researchers explained. “El Niño increases vertical wind shear in the Caribbean and tropical Atlantic, but the anomalous warmth in the tropical and subtropical Atlantic may counteract some of the typical El Niño-driven increase in vertical wind shear.”

CSU anticipates 15 named storms, seven hurricanes and three major hurricanes, which is right in line with the NOAA forecasts. However, CSU forecasters noted that this year’s outlook includes particular uncertainty due to these conflicting factors.

As the hurricane season gets underway, the following tips can help businesses update and strengthen natural disaster recovery plans:

Review your business interruption insurance. Business interruption insurance coverage plays a critical role in helping ensure complete recovery from a storm. BI coverage relies on accurately reported business values, however, and recent changes in property values, replacement and repair costs, and inflation all impact those current values. To avoid the risk of being severely underinsured, make sure your coverage has up-to-date valuations so that claims payouts will be robust enough to rebuild your business. Check out the May/June issue of Risk Management for more information about the importance of accurate business interruption values and best practices for preparing a business interruption claim. 

Update your current disaster recovery plan. It is crucial to keep your natural disaster recovery plan updated. Organizations have gone through massive change over the past few years, including different work locations due to hybrid or remote work, staffing changes, and new technology that may aid in emergency response. Ensure your organization’s disaster recovery plan reflects your current personnel, equipment, insurance policies and contacts, and make sure to distribute it among all current members of any emergency response teams or other key stakeholders.

Do a dry run. The only real way to know if your disaster recovery plan works is to put it to use, and you do not want to wait until a natural disaster is at hand to find out if it works. Practice various scenarios and have key players act out their roles to gauge the effectiveness of the plan and make changes accordingly.

Take preventative measures. To weather disaster response well, disaster preparation is essential. Take steps now to ensure the organization will be able to operate as smoothly as possible during or in the immediate wake of a disaster. Back up data offsite or in the cloud, verify that multiple employees know how to handle certain tasks and ensure you have backup options to contact employees if primary communication channels are interrupted.

For more information on hurricane preparation and natural disaster recovery, check out these other pieces from Risk Management:

Unprecedented Wildfires Devastate Canada, Leave Eastern U.S. Blanketed in Smoke

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Wildfire season has started two months early in Canada, and the devastating scale of the blazes is already unprecedented. Over 400 fires have caused roughly 10 million acres of burn damage so far, and have blanketed a wide swath of North America in smoke, creating orange skies and toxic levels of air pollution for communities all the way from Canada to the Southeastern United States. During the first week of June, New York had the worst air quality on Earth, and the air quality reached hazardous levels in Philadelphia and Washington, D.C. While it has begun to clear in the Northeast, the fires are ongoing and the air quality may continue to change in the days and weeks to come.

Find more answers to common questions about the wildfires below:

Where is all the smoke coming from?

Unfortunately, there is not just one answer for that, as there are multiple regional fires breaking out seemingly all over Canada and even the United States. However, the current air quality issues are coming from out-of-control wildfires in Quebec and Ottawa, Canada. There are also wildfires breaking out in at least six U.S. states, including Missouri, Kansas and New Mexico, but these do not appear to be involved in the air quality crisis.

According to the Associated Press and Canadian officials, the fires in Canada mark the start of what is expected to be Canada’s worst wildfire season ever due to drier ground than usual, which led the fires to accelerate very quickly.

“Right now, with the manpower we have, we can fight about 40 fires at the same time,” said Francois Legault, premier of Quebec, in an interview with Reuters. “But we have 150 fires, so we have to make sure that we focus where the problems are more urgent.”

In total, there are 425 active fires throughout Canada, according to Canadian Interagency Forest Fire Centre, and 232 are considered out of control. About 120,000 Canadians have been displaced from their homes due to emergency evacuations, with the most recent being from remote parts of Northern Quebec, according to Reuters. There are fires in nearly all of Canada’s provinces. The current wildfires in the U.S. have led to no evacuations thus far.

Why is the U.S. experiencing poor air quality?

To put it simply, the Northeastern region of the U.S. and the rest of the Eastern seaboard as far down as South Carolina are stuck in a slow-moving weather pattern that is carrying the smoke and smell from the Canadian fires southward. According to Politico, 13 U.S. states are under air quality alerts, impacting over 55 million people.

The AP noted that smoke from various Canadian fires has actually been showing up in parts of the U.S. since May, but with new fires recently breaking out in Quebec, the air quality has increasingly gotten worse in both Canada and the U.S. The hazy, orange-tinted skies and smoke smell along the eastern U.S. are expected to dissipate soon but may still be present through the weekend.

How do the fires impact businesses?

The fires affect certain industries more than others. Outdoor work like construction, sporting events, primary schools, park services and zoos are continuing to pay close attention to the air quality and have suspended outdoor operations accordingly while air quality is at such dangerous levels. Many professional sporting events have been cancelled. The New York Yankees, Chicago White Sox, Philadelphia Phillies and Detroit Tigers have postponed baseball games throughout the week, with minor league baseball teams, soccer teams and WNBA teams following their lead.

During the course of the week, airports have been taking various precautions, with JFK, LaGuardia and Newark Liberty International Airport grounding flights, shutting down inbound flights and changing flight schedules. Similar precautions were taken at Philadelphia International Airport. Because this is an ongoing situation, these measures and flight operations remain in flux.

How do we manage the risk?

In terms of immediate action, experts recommend staying indoors, wearing a mask if going outside and keeping windows and doors closed until the air quality alerts are lifted. By the end of the week, New York City’s air quality is expected to be upgraded from “unhealthy” to “unhealthy for sensitive groups.” To find out about your specific area, visit AirNow.gov.

Looking longer-term, the current fires are a good reminder that natural disasters stretch far beyond hurricanes, flooding and tornadoes, especially as the climate continues to change. A recent study found that increases in burned forest area across the western U.S. and southwestern Canada over the last several decades can be linked to significant human-caused climate change.

For businesses, take this as a reminder to examine how your organization will handle fallout from wildfires, for example, reviewing your property insurance, business interruption coverage, disaster recovery plans or emergency communications procedures. The following resources from Risk Management can help organizations consider the many risks wildfires and other climate change-related extreme weather events pose to businesses and communities, and can help boost disaster preparedness for these devastating events.

More resources:

New NAAIA Report Focuses on Next Steps for DEI in the Insurance Industry

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As Black History Month kicks off, February presents a great opportunity to not only celebrate the history and accomplishments of African Americans, but also to meaningfully assess and advance diversity, equity and inclusion measures with the goal of ensuring lasting change rather than lip service. To that end, the National African American Insurance Association (NAAIA) recently updated its research on its members’ experiences and challenges in the insurance industry, releasing the new study The Next Steps on the Journey: Has Anything Changed? The new research updates NAAIA’s 2018 report The Journey of African American Insurance Professionals, evaluating what progress has or has not been made over the past five years, particularly given the increasing focus on DEI programs and, specifically, many companies’ discussions of DEI efforts after the murder of George Floyd brought the Black Lives Matter movement to the fore.

“On one hand, there is a prevailing sense from Blacks/African Americans in the sector that companies are seeking to find credible and practical ways to solve longstanding inequities,” said Omari Jahi Aarons, executive director and chief operating officer at NAAIA. “However, the report highlights that many of these actions are falling short because they are not addressing inequities at the foundational level.”

For example, most survey respondents agreed that their organizations were committed to diversity (60%) and inclusion (61%), and nearly half felt that their organizations were committed to advancing equity (43%) and equality (48%). Nevertheless, 84% of respondents said they continue to encounter obstacles in their career progress compared to other under-represented groups because of either conscious or unconscious racial bias.

Respondents shared several key changes that risk and insurance organizations can make to “more fully achieve and prioritize diversity, equity and inclusion,” such as enhancing recruitment and talent identification initiatives and placing greater focus on recruiting from HBCUs and institutions with substantially diverse student populations, promoting African Americans to officer-level roles, increasing board diversity across racial and gender identities, addressing compensation and pay inequities, increasing pay transparency, offering more mentorship opportunities and extending support through executive coaches.

To support the advancement, networking and development of African American risk practitioners, the report offers a number of recommendations “to catalyze conversation and action” for risk and insurance professionals, including:

Recommendations for Black/African-American risk and insurance professionals:

  • Demonstrate success: Attracting talent to the risk and insurance industry will depend upon the full engagement of Black/African-American insurance professionals who can illuminate under-informed or unaware communities and constituencies about the opportunities in the industry.
  • Seek and offer mentoring: Throughout the research, mentoring was mentioned as a critical factor for career success and satisfaction. Individual professionals can articulate their respective needs for mentoring and can provide mentoring to, and with, each other.
  • Get and provide exposure: Getting exposure and gathering knowledge about the industry can be a powerful, effective remedy to longstanding barriers for underrepresented groups. Individuals can consider their own social networks to foster partnerships to strengthen industry exposure, increase validity of career opportunities and encourage young people to view risk and insurance as a viable and rewarding career path.
  • Advocate for self and for others: Individual professionals must find ways to take charge of their careers, connect and exchange ideas with other professionals. The research revealed that most participants did not belong to any industry-related associations, which could hinder career progress and success. Expanding networks and deepening ties to the industry should be a top priority for every individual, and membership costs should be viewed as an investment in personal professional development. Facilitated introductions for employers and NAAIA to Black/African-American organizations can also foster engagement and collaboration.

While many organizations have introduced DEI programs and proclaimed support for African American employees since the Black Lives Matter movement took root, the survey found many of these moves lacking in actual impact thus far. “Respondents identified the tragic murder of George Floyd and many other Blacks/African Americans and People of Color as the catalyst for centering conversations on race and the risk and insurance industry has responded with a host of new initiatives to address disparities,” NAAIA noted. “Respondents reported increased exposure from initiatives specifically DEI-related training (57%), support for employee resource groups (35%) and mentorship programs (21%). However, these initiatives have not translated to career advancement.”

To help employers improve their DEI efforts, the report also offered the following recommendations:

Recommendations for employers:

  • Avoid performative actions: DEI-driven activities and training notably emerged in response to the events of the last few years. However, many organizations are “checking the box” by undertaking noticeable, but not meaningful, initiatives. A thoughtful and careful review of DEI initiatives is an important first step to ensuring that they are not merely performative, requiring courageous conversations by several stakeholders about the purpose and intent of each activity or program.
  • Turn barriers into gateways: With intention, employers should ensure that there are measurable DEI goals and outcomes visible at all levels of the organization. Measurements can include internal or third-party pay equity and workload balance analyses or tying compensation to the successful implementation of DEI initiatives, especially at middle managerial levels.
  • Use leverage: More employers could leverage the vast networks of employees and employee resource group participants for recruitment and to influence internal mobility, as well as to increase levels of employee engagement. Often, employers underestimate the power of personal connections and references within minority communities, foregoing opportunities to build awareness and enhance their brands both internally within their organizations and externally.
  • Provide meaningful, substantial support: Supporting NAAIA local chapters through sponsorship, mentoring and partnerships and cultivating multiyear partnerships with Black/African-American community professional, civic and youth organizations can lift a company’s profile. More importantly, these types of partnerships also allow for employers to create greater access to internal subject matter experts to communities that are underserved on relevant macro business and professional development topics (e.g., financial literacy, wealth creation or cybersecurity).
  • Connect human resources, senior executives and ERG leaders: Several respondents noted that beyond nominally sponsoring an ERG, many executives were not directly involved in planning or activities. Most of the ERGs are organized and driven by employee volunteers, which often renders them less effective because of time and work constraints. If human resources, senior executives and ERG leaders can convene to discuss mission, alignment with company goals and resource allocations, there is a greater likelihood of continuous progress.

For more of the report’s findings and recommendations, click here to read NAAIA’s The Next Steps of the Journey: Has Anything Changed?

Identifying and Preventing Provider Fraud in Workers Comp Cases

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Claimant fraud and premium fraud are two of the most well-known types of workers compensation fraud. In these cases, a worker may intentionally fake an injury (claimant fraud) or a business owner may misrepresent their employee headcount or incorrectly classify employees to obtain lower insurance premiums. Now, a lesser-known type is occurring with greater frequency: provider fraud.

Provider fraud occurs when a professional other than the injured worker or employer accepts a bribe or illegal kick-back in exchange for patient or client referrals. The circle of potential culprits includes lawyers, translators, doctors, chiropractors, nurses, and telehealth professionals. Opportunity, incentive and rationalization—the “fraud triangle”—are key factors that go into a person’s decision to commit insurance fraud. These factors have been exacerbated in recent years, due in large part to the pressures presented by the global pandemic and the growing reliance upon remote services.

Most schemes involve knowingly billing for medical goods and medical and legal services that are unnecessary or not provided at all. A chiropractor, for example, conducted illegal medical evaluations and billed these evaluations, claiming that he was approved as a medical legal evaluator. In another example, an attorney named his daughter as the owner of a translation services company, while in reality he maintained ownership of the business. Each time the attorney was hired, the translation business was also engaged and billed its services. Provider fraud is increasingly prevalent in California and Florida due to each state’s workers comp rules. For instance, in California, a provider can file their own lien with the Workers’ Compensation Appeals Board, even if the bill was denied. California is the only state that allows providers to file their own adjudication. At a higher rate than in other states, healthcare providers in California and Florida are sometimes found billing for services that were never rendered, billing for more expensive services than were actually provided, ordering unnecessary tests or procedures, and providing kickbacks to referring physicians.

So, how can we pin down provider fraud?

  • Review Provider Invoices and Reports: Risk professionals can spot potential fraud cases and fraud trends by closely reviewing provider invoices and reports and scrutinizing those invoices that are close to, but not at the top of, typical billing charges. In the workers compensation system, there are typically five levels of a doctor evaluation: Level 1 is the cheapest while Level 5 is the most expensive. Fraud often occurs in Level 4 billings since Level 5 would be too obvious. Providers who consistently bill at Level 4 could be a red flag for fraud.
  • Shine a Spotlight on Supplementary Services: Insurers sometimes overlook that provider fraud can occur with supplementary services such as translation and transportation companies, copy services, medical equipment suppliers and pharmacies. It is not uncommon for insurers to discover that these schemes may involve a criminal enterprise (possibly a referral network) orchestrated by individuals who are not medical or legal professionals. While claimants can be complicit, often they are unwittingly involved and potentially subject to treatment that is unnecessary or even harmful. 
  • Consider Emerging Tech to Pinpoint Provider Fraud: Artificial intelligence and machine learning are game-changers for fraud investigations. Through the analysis of historical claims data and insurance adjuster notes, some technologies can help professionals discover fraudulent claims faster. For instance, AI can be particularly effective at the entity level when a doctor or hospital that is identified as fraudulent can be added to a “bad actors” list for review in future claims. If you do not have a fraud feedback loop, start gathering information now. As risk and insurance professionals, we rely on business rules and claims adjusters to catch all the details of a claim and then form a cohesive narrative to investigate. While business rules work, the fraud feedback loop is necessary to effectively train machine learning models to detect patterns and flag anomalies.

Workers compensation insurance provider fraud has become a multi-billion-dollar industry that is bad for business. It is costly for insurance companies to identify and prosecute, it inflates costs for goods and services that honest business owners rely on, and it stokes consumer apathy and distrust in the insurance system. Risk and insurance professionals need to be aware of the warning signs so they can work diligently to detect and prevent it.