SMU Insurance Council

Defending Cyberspace: A National Priority with Business Implications

Cyber risk is fundamental to national security and economic security, and its particular effects are a major concern for organizations. Cyber risk appears boundless, difficult to value and difficult to manage; a dynamic risk ready to be better understood. On November 8, 2017, the SMU Insurance Council will give risk managers, brokers and their insurers the opportunity for an exchange with Dr. Frederick Chang, Lyle Chair in Cyber Security at SMU and former director of research at the National Security Agency. Dr. Chang will speak on cyber risk and describe the current and evolving nature of the threat by a wide range of potential adversaries. The talk will address the interdisciplinary nature of the problem and will discuss a number of critical technical, social, policy and privacy issues associated with the challenge of cyber security.

Dr. Chang was elected as a member of the United States National Academy of Engineering in 2016. He is currently a member of the Intelligence Community Studies Board of the National Academies of Sciences, Engineering and Medicine and he has served as a member of the Computer Science and Telecommunications Board of the National Academies. Dr. Chang received his B.A. degree from the University of California, San Diego and his M.A. and Ph.D. degrees from the University of Oregon. He has been awarded the National Security Agency Director’s Distinguished Service Medal.

Council members will meet at 5:30 p.m. in the Ernst and Young Gallery of the Cox School of Business. Dr. Chang’s talk will begin at 6:00 p.m. We hope you will join us in early November. Registration is required. The deadline date for registration is November 1, 2017.

Register Now

---

Health Care Costs and Employee Benefits

Allowing numbers to speak for themselves, Senior Vice President of Holmes-Murphy, Wally Gomaa addressed the SMU Insurance Council on the ever-complex topic of health care. Although the Global Brand Simplicity Index ranks health insurance as the least simple industry that consumers understand, the reality is that health care costs have tripled in the past 10 years, and the costs are trickling down to consumers. In efforts to regulate the cost of health care, the federal government passed the Affordable Care Act (ACA) in 2010, however since the reform only 3% of Americans actually believe health care is more affordable. This current system operates under inefficient spending and is not sustainable unless the problem is realized and the focus of reform is shifted.
The ACA introduced increased regulation for Medicare, which led to higher Medicare participation rates but a decrease in the number of people paying for participation. Additionally, Medicare reimbursements to hospitals are at an all-time low, making it difficult to understand how hospitals are realizing record profits. However, it is the employers who are footing the excess expenses and passing along these new costs to their employees. Research shows that there are even greater costs passed down to obese individuals (relative to their non-obese counterparts) who participate in an employer sponsored health care plans, which makes these rising costs especially worry some.[1] The average employee used to pay 20% of his/her medical expenses, with the employer picking up the remaining 80%; however, the split today is closer to 50-50%. A typical family of four averages annual health care costs of $26,000, while the median household income is only $52,000. Employees facing these heightened costs are contributing to the downward trending medical utilization, including preventative care, which is concerning if the national focus does not change.

The current health care system is not only financially unsustainable, but lacks time for any legislation reform leaving Gomaa’s idea that perhaps the only way to fix our health care problem is to fix diseases. Focusing on diabetes, a disease known for its co-morbid medical impacts, Gomaa stated that 50% of Americans are either pre-diabetic or living with type II diabetes. However, the more concerning statistic is that 42% of those with diabetes are not aware they have the disease. Fortunately, the risks of diabetes can be completely reversed. This leaves employers with an opportunity to incentivize health through new insurance programs that help employees get healthy. By forming healthy insurance pools, insurers are able to offer more affordable health care options and address the problem at its core. Without drastic reform such as a change in focus, the cost of health insurance will continue to increase and drain federal funds by 2025.

(By Parker Conway)

 [1] Bhattacharya, Jay, and M. Kate Bundorf. "The Incidence of the Healthcare Costs of Obesity." Journal of Health Economics 28.3 (2009): 649-58. Web.

Evolution of Enterprise Risk Management at Parkland

The landscape of risk management has changed completely in the last decade. Members of the SMU Insurance Council along with SMU Cox students learned about enterprise risk management implementation in the health care setting from Mr. Jai Sharma who presented a detailed a view how enterprise risk management has been implemented at Dallas’s Parkland Hospital.

Parkland is one of the area largest and busiest hospitals ranking 57th in the country, serving as a level 1 trauma center, regional burn center and teaching hospital for the University of Texas Southwestern. Given the high volume of patients, doctors and staff it is easy to understand the wide range of risks that Parkland faces on a daily basis. Upon Mr. Sharma’s arrival to the Dallas County Hospital District he began a process to reform Parkland’s risk management system toward an enterprise risk management program. Enterprise risk management is becoming more common at leading hospitals such as Emory, Stanford, Vanderbilt and Duke. Mr. Sharma’s belief that ERM is a hallmark trait for a well-run organization proved to be his driving factor as he began the transformative process at Parkland.

Mr. Sharma’s goal to have a streamline implementation of the ERM system could be seen as a lofting goal. However armed with vision and a clear understanding of the current risk culture, Mr. Sharma and his team came up with the four I’s concept: Identification, Investigation, Intervention, and Improvement. Unique to Mr. Sharma’s approach to ERM is an insistence on finding internal solutions to arising issues rather than bringing in outside specialists.

Another component to the ERM program has been the creation of Risk Response Teams, who serve as Parkland’s own internal focus group tasked with identifying potential risks. Their objective is to help Parkland become preemptive in its risk management efforts. This has offered staff a voice in helping Parkland identify potential hazards before they become significant problems. Mr. Sharma, though the process of implementing Parkland’s ERM program, has learned that ERM is a system that takes continuous improvement. At the moment, Mr. Sharma feels Parkland is has successful transitioned top management and is working on widespread implementation throughout its doctors and staff.

As Mr. Sharma began to summarize his presentation he emphasized the importance of keeping the process simple and user friendly. ERM is best utilized when the system is “customized to your organization and uses your organization’s existing resources.”

(By Emily Grabarkewitz)

A Brief Look Back

This year marks the 8th academic year of the SMU Insurance Council in the Cox School of Business. The Council was fundamental in helping promote the establishment of the new risk management and insurance major and continues to be critical in helping us build our scholarship pool and encouraging Cox students to consider the new major. The Council exists primarily for its members and the biannual events that bring key risk managers, insurance executives and regulators to Cox for a timely and stimulating discussion.

Here is the array of speakers who have contributed to our knowledge and practice over the past few years:

Speaker	Position held at time of talk
Arthur Lowry	President of ExxonMobil Global Risk Management and Insurance
Bob Hammann	President, SCA Promotions
Howard Mills	Chief Advisor to Insurance Group, Deloitte
Loriann Lowery	President, Lloyds North America
Ramani Ayer	Chairman and CEO, The Hartford
Ravin Jesuthasan	Managing Principal, Towers Perrin
Arthur Kirchoffer	Executive Director of Risk Management, AT&T
Raymond Alletto	Vice-President of Risk Management, United Rentals
Bates Richmond	Director of Risk Management, Texas Instruments
Jim Gavin	Director of Education, Independent Insurance Agents of Texas
Thomas Tucker	Executive Senior Vice-President, Chartis
Robert P. Restrepo, Jr.	Chairman & CEO, State Auto Insurance Group
Marc Dominus	Managing Director, Channel-1 Consulting
Anita Ingram	Chief Risk Officer, Southern Methodist University
Barbara Bufkin	COO Global Strategic Advisory, Guy Carpenter
Julia Rathgeber	Texas Insurance Commissioner
David Langman	Senior Vice-President for Corporate Solutions, Swiss Re
John Ravenna	Property Products Underwriting, Swiss Re