Most Disrupters aren’t all that disruptive anymore. Everyone, including our children, have become quite comfortable with Disrupters and the positive impact they have on business and our everyday lives. A true Disrupter turns a product or service upside-down and inside-out.
Consider one of the biggest Disrupters in recent history — the personal computer. Think of life without Google… More recently, consider smartphones, drones, smart watches, FitBit, Netflix, Nest, Uber, and Airbnb. Since their introduction, life has not been the same. Many of these companies have been incredibly successful. Today, we’re comfortably accepting these Disrupters with open arms and we’re hungry for more.
The Disrupter mentality and Silicon Valley.
Silicon Valley is home to some of the world’s most successful Disrupters. This continues to be true as many of the most visible Disrupters are technology-oriented.
In the first three months of 2015, venture capital (VC) funds invested $13.4 billion, much of it in the tech sector. Not since the dot-com era has there been such a run in VC funding and technology. Many young start-ups seeking funds are turning to crowdfunding and smaller investors, which is disrupting the very ground VC’s used to look to fund — Disrupters.
Two of the most successful Disrupters and their business strategy.
Sir Richard Branson, founder of Virgin Records, Virgin Airlines and Virgin Mobile, and Jeff Bezos, Amazon Founder and CEO, have a similar business philosophy: Constantly strive to improve the customer experience. In fact, they have structured their companies to encourage disruptive thinking and innovation. Bezos has upended the book and publishing industry and nearly displaced electronics retailers. He continues to disrupt and reinvent online shopping and delivery by responding to changing technology.
“We innovate by starting with the customers and working backwards,” says Bezos. “That becomes the touchstone for how we invent. For Amazon, customer focus is a cultural issue.”
The “improve the experience credo” has sparked a revolution in business thinking that fuels most new Disrupter companies.
One of the biggest Disrupters of today is the smartphone. By its very nature, its features are designed to disrupt whatever we’re doing. As a mobile device they are indispensable and frustrating because we can’t seem to put them down. They have changed the way we communicate, live and do business.
Smartphones are also having a dramatic impact on many other businesses, both positively and negatively. Yet smartphones have also created a dynamic new business category — app design. They help promote shopping, banking, health and fitness, news, entertainment, restaurants and better communication between businesses and consumers, just to name a few.
Understanding how Disrupters are affecting insurance and employee benefits begins with big data.
The biggest Disrupter to date is big data and most agree that big data benefits customers by offering them tailored insurance and employee benefits programs for their specific experience, location and risk profile. Collecting this information is no easy feat: it means gathering financial, claims, risk, customer preference and sales data from multiple sources, then scrubbing and analyzing it, all while complying with protective regulations designed to safeguard the data and data-driven decisions.
IBM’s Big Data @ Work survey reported that big data’s influence in the insurance realm is strong: some 47 percent of insurers want to use it to develop customer-centric programs and another 66 percent are conducting or planning big data activities.*
Today, the use of these devices is ubiquitous. We’ve become so accustomed to formerly “disruptive” technology that it doesn’t faze us anymore.
At the heart of the trend is effectively aggregating the data … and we are doing that at Hays.
We are on the edge of the big data trend, developing innovative programs and opportunities that will benefit our customers. At Hays, we have a proprietary technology platform that pulls together data. This allows us to audit the data, provide consistency of data extracts, show continuity of data across multiple vendors, simplify access to data through one portal, and reduce fees by eliminating ad hoc reports.
We help eliminate the “silos” that come from bucketing cost centers to give our customers a data-focused assessment of the true cost of employment.
The dark side of data.
When it comes to customer and employee privacy, however, we should never be complacent about the dark side of Disrupters.
Cyber terrorism and data breaches have shadowy technical roots in the so-called Deep Web and Dark Web, which most people don’t even know exist. Your company’s data is vulnerable through email links, apps, a compromised network, or a web download. But, the threats are not always through a coding attack. Hackers are increasingly using social engineering techniques to trick people into breaking normal security procedures because they think the phone or email contact is a trusted source.
That’s just the start. The rise of the Internet of Things (IoT) means personal data could be hacked or collected by cybercriminals in a way never before possible.
Does your wellness program encourage employees to use wearable fitness trackers or apps? Sure, they can improve employee health but there’s also a risk to private information: the FitBit cloud holding this personal health data has already been hacked, raising fears about their vulnerability. And that’s not even addressing their lack of Health Insurance Portability and Accountability Act (HIPAA) compliance.
With so many ways to hack into your company and your employees’ lives, it’s a top priority to have the best cyber security as well as the best insurance and employee benefits programs that protect your company’s people, property, data, reputation, and — ultimately — your bottom line, no matter what new Disrupter comes down the pike.
Technology is expanding at an unprecedented rate; there are new Disrupters in development that offer improvements and increased risks. Hays is at the forefront, watching the development and the impact on your business. We’ve always believed in providing the best resources available for our clients, so our representatives are prepared to provide guidance in managing the evolving risks. We hope you call on us if you have any questions.
This issue is an excerpt from our quarterly FOCUS publication. If you would like to read more, you can request the full issue below.
Recently, updated guidance has been received from the Federal Government with respect to the ACA, including release of updated health plan “Benefit and Payment Parameters” for 2017. For your information, we have summarized these updates below.
2017 Benefit and Payment Parameters:
On February 29, 2016, the US Health and Human Services (HHS), Treasury and Labor Departments finalized rules addressing 2017 Benefit and Payment Parameters for essential health benefits. The guidance issued is summarized in the linked “Fact Sheet”. Highlights of the changes affecting health plans under the proposed rule include:
Annual out-of-pocket maximums for health plans (other than HDHPs with HSAs) will be indexed in 2017, to $7,150 for individual coverage and $14,300 for family coverage.
HHS proposes to “codify statutory language” defining whether a new entity that was not in existence throughout the preceding year is a “large employer” subject to the play-or-pay mandate. The statutory language, when finalized, will reflect that the determine will be based on the number of employees it expects to employ on business days in the current calendar year.
The individual cost exemption for 2017 from the individual shared responsibility requirement will index to 8.16% of adjusted gross household income.
The Exchange open enrollment period for coverage beginning in 2017 and 2018 will begin November 1 and end the following January 31. For coverage beginning in 2019 and subsequent years, Exchange open enrollment will be from November 1 through December 15.
Click here to find an ACA Compliance Bulletin that contains further details, for your reference. If you have any questions, please contact your local Hays Consultant.
The art of risk assessment requires more than just knowledge — it also requires creativity and imagination to successfully anticipate, recognize, assess and treat potential risks.
Organizations that harness these skills can develop more effective risk management strategies to bolster their strategic goals, says Bruce Lyon, Hays Companies Director of Risk Control, in the cover story for the March 2016 edition of Professional Safety magazine.
The article dives deeper by presenting the sequence of assessing risk and the tools and methodologies used in the Risk Identification, Risk Analytics and Risk Evaluation process. To read more about the financial and non-financial benefits of risk reduction measures, click here.
Professional Safety magazine is published by the American Society of Safety Engineers, a global association of safety professionals founded in 1911. The professional safety society sets the occupational safety, health and environmental community’s standards for excellence and ethics.
The end of 2015 brought more Affordable Care Act (ACA) guidance. On December 16, 2015, the IRS issued IRS Notice 2015-87, providing further guidance on the application of certain ACA group health market reforms. Many of the changes are applicable to plan years beginning on or after December 16, 2015, however, some of these changes are retroactive. Some of the key areas addressed in the Notice include:
The 4980H(a) employer penalty for failure to offer minimum essential health coverage to substantially all full-time employees will be adjusted for inflation, from $2,000 to the following levels:
$2,080 for 2015 and
$2,160 for 2016
The 4980H(B) penalty (the penalty that applies if coverage offered is unaffordable, or does not meet minimum value) will be indexed as well, from $3,000 to $3,120 for 2015 and $3,240 for 2016.
The affordability safe harbor percentages for employer-sponsored health coverage will be increased, from 9.5% for purposes of the W-2, Federal Poverty Line or Rate of Pay safe harbor. The adjusted percentages will be 9.56% for 2015 and 9.66% for 2016, to mirror the individual shared responsibility affordable coverage threshold.
Notice 2015-87 supplements previous guidance addressing health reimbursement arrangements (HRAs) and employer payment plans (group health plans under which an employer pays for an employee’s individual health insurance premiums).
In addition to ACA guidance, we received further guidance regarding mass transit limits. Following an increase in the mass transit limit provided in the federal budget bill signed into law on December 18, 2015, the IRS issued Notice 2016-6 on Jan. 11, 2016 providing guidance on how the tax limit increase for mass transit applies for 2015. In summary:
The tax limit for transit benefits is now permanently equal to the limit for parking benefits; the monthly tax exclusion for transit benefits was previously $130, while the exclusion for parking benefits was $250;
Employers are not required to provide additional transit benefits to their employees for 2015 due to the retroactively increased limit;
Employees may not retroactively increase their compensation reduction for 2015 to take advantage of the increase in the excludable amount for transit benefits; and
Employees may not reduce their compensation by more than $255 per month in 2016 in order to receive any permissible reimbursement for transit expenses incurred in 2015.
Today the Internal Revenue Service presented employers with an early holiday gift.
The IRS released Notice 2016-4 to delay the due dates for the 2015 information reporting required by the Affordable Care Act (ACA). Specifically the notice extends the due dates for:
Furnishing the 2015 Forms 1095-B and 1095-C to individuals, from Feb. 1, 2016, to March 31, 2016; and
Filing the 2015 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS, from Feb. 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016, if filing electronically.
Filers are not required to submit any request or other documentation to the IRS to take advantage of the extended due dates provided by Notice 2016-4.
Despite the delay, employers and other coverage providers are encouraged to furnish statements and file information returns as soon as they are ready.
For more information on Section 6055 and 6056 reporting, penalties for reporting failures and impact on individuals, you may download our comprehensive compliance report here.
Hays Companies recently welcomed Dain Jorgenson as Vice President of Business Development in the Hays Power & Utility practice. He has over 14 years of experience in conventional utilities, merchant power, upstream energy and the renewable energy industries.
Dain has recently been elected President of the Iowa Wind Energy Association. Prior to being elected President of the Association, Dain served on the finance committee and in the role of Treasurer.
The Iowa Wind Energy Association is comprised of utilities, wind project owners, developers and suppliers supporting wind energy and its development and expansion. Current membership stands at over 150 members representing all aspects of the wind industry.
Hays Power & Utility is our national specialty practice devoted to serving the focused needs of electric, gas & water utilities, wholesale electric power generators, coal mining/fuel supply providers and other diversified energy companies.
US-based companies expanding abroad are facing a diverse number of challenges right now, including new global economic pressure on state-run systems to shift the burden of health and welfare benefits costs to employers.
Here are three ways for employers to reduce the risks associated with international benefits and global compliance.
Manage Trends In Global Compliance
Similar to defined-benefit employee pension plans in the US, which have migrated to defined contribution 401(k) plans where employees bear most of the risk, many European countries are pulling the reigns in on social and benefits programs once thought to be an entitlement among workforce nationals.
What’s more, Obamacare has introduced a number of new compliance stipulations that impact US expats and in-pats (multinational company employees from a foreign country who take assignments in the US), says Hays Companies Vice President of International Benefits, Anne Terry.
The UK pension reform movement is an example of the way foreign governments have signaled a shift in the way retirement benefits will be accumulated and administered, because the state can no longer afford to fund retirement programs. Employers operating in the UK are now expected to share a significant part of the burden and employees are expected to participate and help fund private 401(k)-type defined contribution plans.
“Historically, US-based companies growing through acquisition have pretty much left the HR and benefits functions of acquired companies to run autonomously. It was thought to be a lot easier, logistically and administratively, to leave things in place, especially where the cost of health care and other benefits was perceived to be lower in the foreign countries concerned. Now, CEOs are more concerned with a global bottom line—they want to know their true exposure from benefits costs everywhere and how to minimize compliance risks abroad,” Terry adds.
Leverage In-Country Expertise
When US companies set up business internationally, HR and benefits administration responsibilities are usually delegated to the HR teams of US-based companies, including talent acquisition and recruiting new hires. Often, these HR teams don’t know where to go to become educated on how to approach each country from a hiring and benefits perspective.
Terry and her Hays Companies associates act as consultant-educators for clients in such cases, offering in-country assistance through a global network of broker-partners with special benefits and compliance subject matter expertise for that particular nation or territory. The brokers, who focus exclusively on US-based companies expanding abroad, work strategically and collaboratively with Terry and her team to close the accountability loop on plan renewals and global compliance.
Solve International Talent Acquisition/New Hire Concerns
Companies who are growing through international expansion don’t hire or add HR people at the same rate they’re building out operations abroad, says Terry, and this is another reason why clients find Hays’ international benefits services to be a good fit.
In addition to international benefit plan changes and global compliance, it can be very difficult for US-based companies to keep with up with emerging markets, changing economies, and unprecedented job growth in the foreign countries where they have operations. For example, Terry references a technology company operating in Singapore, where her client needed to attract new hires in an economy with a 2% unemployment rate among technology workers. She leveraged targeted benchmarking data and in-country expertise to the client’s satisfaction.
Terry concludes: “We view international benefits as an extension of the overall services we provide to our Hays Companies clients based in the US, and this consistently works in our clients’ favor from a cost perspective, as compared to reaching out to another independent international consultant.”
Thanks to Anne Terry & Ross Krasnow for their contributions to this piece.
Authored by Brandon Schuh, VP and Product Liability Professional at Hays Companies
Product liability is an area that can rapidly change from the period of time when a company first launches to when they’ve truly penetrated the marketplace. With consumer products, the reach is to a very large audience. When the masses begin using a product, especially products that have more inherent risk, claims and litigation follow quickly regardless of how well the product is manufactured.
This scenario creates problems for manufacturers and importers of consumer products because they are not ready for the influx of claims. Claims are the biggest driver of premium costs. If your claims are low or non-existent, your premium will likely be small or inconsequential. If you have an inherently more dangerous product: ladders, power tools, trampolines, sporting goods, outdoor equipment or even office furniture, claims will occur and your premium increases as a result.
This is an unwelcome surprise, suddenly claims are an everyday event and there is a new expense item on the budget. Many companies, when they first start their business, buy very basic insurance policies with very small deductibles. Small deductibles are attractive because of the limited financial risk for the manufacturer. They simply transfer their risk to the insurance company. The problem with small deductibles in a high frequency claims environment is that insurance becomes something that you use every day instead of something for a worse case scenario. This is accentuated by the rapid growth of the organization; the more products in the hands of consumers, the more potential for accidents. When a policy is used frequently, the premium increase year over year become dramatic. The premium increase is further inflated by high allocated expenses driven by the carrier hiring counsel that are not experts in defending consumer product litigation. Thereby settling claims rather than denying or defending. This has a downward spiraling effect if not properly contained.
Total Cost of Risk (TCOR) is a term that’s overused in the insurance industry, however, consumer goods product liability is one area it is truly necessary. Your risk cannot be summarized in one line item on your P&L. The cost of insurance is not your only cost of risk. A manufacturer of inherently dangerous consumer products should always take retained risk (i.e. they should always have skin in the game). You know your product better than anyone, therefore you should have more control over the defense of those products with experts that specialize in this area. This is accomplished by maintaining a larger deductible or Self Insured Retention (SIR) where you, as the owner of the company, take a part in the cost of defense. This creates another line item (defense costs) and should be added to your calculation of TCOR.
The benefit to doing it this way is eliminating some of the carrier losses and doing your part to keep loss runs clean of nuisance claims and litigation. Again, claims drive the premium; if you positively influence claims by disposing of some yourself, you are in a far better position to keep your premium costs down.
Naturally, this process requires a strong team of legal practitioners, insurance and supporting players. Defense strategies, policies and procedures are also crucial to effectively producing good results. However, the end result is dramatically more economical than continuing to pay the premium for a low deductible/high claim frequency fueled by growing sales. With control over the process, you are in a far better position to affect positive cost savings.
In the most recent issue of FOCUS, Hays Companies concentrated on Cyber liability and the ever increasing attention it is receiving in the media. This caught the eye of Risk & Insurance magazine, requesting an expert opinion from our Dave Wasson, Cyber Liability Practice Leader with Hays Companies.
In discussing a recent New York Times article, detailing the prevalence of troll attacks from Russia, Risk & Insurance noted that our FOCUS issue spoke to how “brand terrorism” is becoming a new trend in cyber attacks. Troll attacks are “organized disinformation campaigns augmented by social media posts, [that] create an atmosphere of chaos and economic disruption”.
Dave Wasson provided further detail on this phenomenon, stating “The Internet has provided incredible transparency for sharing information on an anonymous basis that can often be viewed as one of the best attributes of the Internet. But that transparency cuts both ways in that the Internet provides an equal transparency for sharing misinformation.”
As our world is increasingly becoming more mobile and connected, the chances of a company experiencing some form of a cyber attack increases as well. Hays Companies has been a leader in the Cyber liability realm and is proud to participate in this piece.
For more information and the entire article, please click here.