My belief in the subject matter of the last piece was further vindicated, thanks to what I found (and did not find) during recent explorations in and on China. The revival of Tort in India and its emergence in China will, together, create the largest playfield in the space of everything to do with health, in the times to come.
The new China tort law needs to be viewed in the sweeping social and legal changes since the great revolution that brought an end to the Maoist era and the slow evolution of a capitalist society, says Richard H. Murray (Chairman of the Geneva Association Liability Regimes Programme) in his paper “The Social and Insurance Implications of the New China Tort Law”.
Under Chairman Mao, there had been no concept of private property. Consequently there had been no need for property insurance. Similarly, there had been no recognition of private rights, and so no need for product liability. There was no property and casualty insurance industry. Much has changed in the succeeding decades, with the formalization of tort liability as the most recent development, he adds.
The China tort law is more focused on the injury and resulting loss than on causal event or behaviour. It blends the relative ease of recovery found in civil law with the unlimited potential for recovery found in common law. It is designed as a mechanism to combine broad protection of businesses and individuals with the capacity to act as a private sector regulator.
While use of the law is growing slowly, it is in place while the growth of a massive middle class with costlier claims is developing. It is an anticipatory provision to deal with emerging social conditions and the effects on Chinese society of an internet linked world in which compensation for injury is becoming universal expectation.
The relatively under-developed legal profession and untrained judiciary are consistent with the law’s objectives. Those conditions foster flexibility of outcomes, with Chinese judges functioning in a manner similar to US juries, says Richard Murray in his paper.
During a recent visit to attend the 2013 China International Conference on Insurance and Risk Management, I did take the opportunity to ask several academics present about this development. There was very little forthcoming. The concept of Tort still sounded alien. Interestingly, what came out quite vividly were some facets of the rapidly changing society. One look at the itinerary and you will find some presentations like:
- “Protect Institution” or “Protect Elderly”? A Discussion about the Choice of Risk Transfer Technology for Endowment Service Institution
- Welfare effects of compulsory liability insurance
- The Liability Risk Pressure on Pension Institutions and Release Route Analysis in the Population Aging context
- A Countermeasure Research on Doctor-Patient Disputes and Medical Malpractice Insurance – Aspects of Local Policies and Regulations
Liability seems to be getting into the consciousness and the context can often be potential liability arising from the needs of old and elderly. Healthcare cannot be too far apart.
Quite coincidentally on my way to the host city Kunming, I was reading this story on China’s drug pricing crackdown! The WSJ report said that China signaled a tough new stance on healthcare as it unveiled a litany of bribery and misconduct allegations against a leading multinational. A move, it said, that could presage a broader crackdown in a lucrative market for pharmaceutical and medical companies.
The report highlights that health care is a fast growing business in China, where increasingly affluent consumers demand better care and the government is under public pressure to widen a skimpy social safety net. China’s health-care spend is poised to triple to $ 1 trillion by 2020 according to McKinsey & Co. Sales of pharmaceuticals in China reached $82 billion in 2012, up 18.2% from a year earlier according to Business Monitor International.
Industry insiders say, according to WSJ, that China’s health-care sector is mired in systemic corruption. Many medical companies operate through intermediaries to reach more corners of a diffuse market, while doctors often look to buffer low salaries with perks. The seeds therefore seem to be already embedded in a fertile soil and the early triggers are visible, too!
Published in July 2013 issue of Asia Insurance Review
There is a plethora of diverse threads in the entire gamut of the ‘health space’ within India and China. They will continue to multiply, as these markets mature. The resulting fabric could well turn out to be a riotous chaos unless ‘tamed’ in good time. Together, these two could add up to a significant chunk of the global ‘health’ space. Many of the things unfolding and the scale, in these markets, may be a first time in the history of mankind. Yet, there is something they can learn say from the recent proactive measures in the tort space rearing in the US of A.
Sometimes you need to digress from the mainstream and then converge. In the process you achieve diversity. My suggested way forward does not tantamount to diversity for the sake for diversity. It is just that we are conditioned to see these disparate parts as silos.
Let us take a stock of some very well known facts relating to the two of the world’s largest healthcare markets in making:
- More than half the world population lives in Asia
- More than half of that resides in China and India
- Both practice very diverse forms of health-care and often lack thereof
- Larger numbers are outside modern practices than in
- Millions will move from outside in
- Millions too will move from alternate practices to western/ allopathic medicine
- There is a big divide between healthcare and insurance
- Healthcare insurance is still largely around hospitalization
- Insurers are struggling to balance challenges of coping with volumes and pricing
- Regulators are dealing with ensuing challenges and trying to lift the game
- Rising numbers of ageing population and nuclear families pose further challenges
- Raging health inflation
- Not only local population to be addressed, emerging health tourism too
- More and more childless seeking surrogate mothers in here
- Growing bio-pharma industry and emergence of local brands
- Significant M&A in the space
- Increasing clinical trials activity
- Spurt to medical education. Evils of supply demand mismatch. Long way to professionalism
- Consumerism on rise
- Social media; nothing to hide
- Governance; fervent call
- Litigious societies, in making
- Urbanization
- Quackery aplenty
- Money-lending menace
- Ageing population
- Life style diseases due to excesses
- Diseases due to deficiency and starvation
- Wellness emerging
Writing on another wall:
With so many threads, not all though, to weave into a meaningful form; here is a recipe for a potential chaos if not disaster. Take for instance the rapid migration of populations from rural to urban areas; demise of public healthcare and joint families into nuclear and rising lifestyle conditions there will be a huge mismatch between supply and demand of health care services. On the supply side, some of the providers may have questionable standards and experience. There will be lots of positive and negative energy flying out of these developments.
At this point, I am tempted to digress from the current stereotypic approach and dip into some ongoing debates in the US. Not that India and China are headed the American way. But the only way wherever these two countries are headed for, in their unique ways, they can future proof themselves is learning from the USA today. Thanks to some eye-opening debates at the American College of Surgeons:
New approaches to liability reform: The current medical liability system in the US is broken. It is costly, draining health care system of approximately USD 55.6 billion per year and accounting for 2.4 percent of annual health care spending. An estimated USD 45.6 billion is spent on defensive medicine. Of the money spent within the medical liability system itself (excluding defensive medicine), administrative costs comprise 54 to 60 percent of total costs, including attorney’s fees and other overhead.
Furthermore, fewer than 3 percent of patients who are injured as a result of medical errors ever seek compensation for their injuries. Additionally, nearly 25 percent of awards are not factually supported by the merits of the case. Fear of litigation leads practitioners to modify their practices to focus on specialties with lower risk and avoid procedures and patients perceived as higher risk.
At the heart of the very costly and inefficient liability system and the inaccurate process of compensating injuries related to medical errors is tort law. Again, something that differs from state to state. The American College of Surgeons has a vision to ensure that the ultimate goal of physicians and hospitals is to deliver safe high quality patient care. That requires a liability system integrated with health care infrastructure to promote those ends. A system that manages risk through the creation of a just culture of safety and quality improvement. A system that provides just compensation when patients are injured as a result of medical errors, and movement away from the “lawsuit lottery”. A system that is efficient in which the majority of money is spent compensating the injured patient, and frivolous claims are dismissed early to avoid wasting resources. Injured patients should not have to wait an average of five years to receive compensation. This would require more than tort reform.
- AHRQ program promotes patient safety and liability reform: The Agency for Healthcare Research and Quality is a USD 25 million initiative which provides grants to health care organizations that have agreed to develop systems that promote patient safety and medical liability reform. Their goals also include reducing preventable injuries; foster better doctor-patient communications; ensure fair and timely compensation for injured patients; reduce number of frivolous lawsuits and reduce liability premiums.
- Medical mediation: bringing everyone to the table. Growing focus on mediation as a viable form of alternative disputes resolution (ADR) in medical liability cases.
- The University of Michigan’s Early Disclosure and Offer Program (D&O). Instituted 10 years ago, this has served to increase accountability, improve the physician patient relationship, reduce cost litigation, and improve patient safety.
- Health courts: With a broken medical liability system, two schools of thought emerge. Whether to have health courts or strengthen existing systems?
- New directions in liability reform: It calls for reforms that can transform the current medical liability system into a system that is patient focused. In which safety, quality, accountability, and equity are paramount. It recognizes this will require a sustained commitment and iterative efforts from the health care community. The first step is setting up experiments with innovative reforms that are focused on the appropriate goals. The regulatory system must begin to support notions of just culture as well as mechanisms for early dispute resolution.
Furthermore, providers and insurers must publicly demonstrate a commitment to vigorous self-regulation; if liability is no longer the main mechanism of enforcing quality standards, the medical community must assure the public that it can assume greater responsibility for that task. Encouraging this paradigm shift and looking toward reforms that solve shortcomings in the liability system beyond cost containment are paramount to developing a system that truly drives quality and safety improvements.
- Safe harbors: These are designed to protect physicians from liability risk if they provide care that follows approved clinical practice standards. The creation of safe harbors may improve both patient safety and medical liability system performance. Safe harbors have many potential benefits, which include discouraging non-meritorious liability claims, mitigating the unpredictability of settlements and verdicts, reducing defensive practices and bolstering the integration of evidence based care into clinical practice to improve patient safety.
- CRICO way: The largest medical liability insurer in Massachusetts and an internationally known leader in evidence-based risk management. CRICO’s mission is to provide superior medical liability insurance to its members and to assist them in delivering the safest healthcare in the world. To achieve this CRICO is committed to defending good medical practice, offering compensation for substandard medical care, and contesting at trial non-meritorious cases in which no medical fault is apparent.
- Connecticut Center for Patient Safety (CTCPS): The US health care system boasts some of the world’s most sophisticated medical treatment, superior medical education and training, and hundreds of thousands of conscientious and committed health care professionals. Nonetheless, patient safety in the US has been the source of concern for many years now. Patient injury is widespread, and there is little evidence of consistent improvement. The Centres for Disease Control and Prevention (CDC) estimates that up to 10 percent of hospitalized patients develop a hospital-acquired infection (HAI), and that 1.6 to 3.8 million infections occur annually in long-term care facilities. The annual direct costs of these infections may be as great as USD 45 billion.
The CTCPS looks forward to working with and not against the health care sector. By collaborating to improve patient safety, patient advocates and providers can honor the needs and rights of patients, acknowledge the harm that has been previously done, and help ensure that such harm does not occur in future.
In conclusion
Leafing through a recent issue of the Bulletin of American College of Surgeons, I thought the writing on the wall could not be clearer. It is a special issue on new approaches to liability reform. Very inspiring to see a section of the medical profession determined to address consequences of their own malpractice. Still early days of tort action in India and China, it will neither be forever quiet on the liability front nor will liability related issues be the only ones heating up the health space.
Harmonization of the various under-currents unleashed by the forces of rapid change and coping with consequences of fast growth is what this feature is about. Neither is this an attempt at pushing the realm of insurance beyond known boundaries nor transgressing into others. This is an attempt to take a holistic view and address a not too distant future, far more complex than the current paradigm allows us to believe, that stares us in our face. The big question, therefore, how must we re-visit the architecture for everything to do with health? Should not anything and everything to do with it all be under one roof to ensure a seamlessly coordinated approach?
Note: The author is grateful to the American College of Surgeons’ March 2013 Bulletin; a special issue on “New approaches to liability reform”. He has generously quoted from thought provoking works appearing in this issue.
Treating customers fairly (TCF) reinforces the belief and reality in the fact that our industry is service intense. It is all about delivery and not just distribution. Stephen Rosling, Co-founder & Director of UK based TCF Matters candidly answers some very critical questions:
Q: Is TCF indeed about MOT (moment of truth)?
A: This is a complex area Praveen and one that provokes a lot of debate and confusion. My understanding of this term is that it represents those key moments, (can also be known as “voting points”) in the customer journey when the customer expects the provider to keep their service and/or product promises. For example:
When the policy documents arrive, do they represent the product that was sold to me?
When I make a claim, does the product perform as I expect it to?
As such, they clearly affect the customer experience and their level of satisfaction. One thing is clear however, treating customers fairly is not about creating a great customer experiences or creating satisfied customers. (Rejecting an invalid claim is perfectly acceptable, but will clearly have a negative effect on customer satisfaction).
In my experience, the topics of TCF, MOT’s, Customer Experience and Customer Satisfaction can be easily confused and, unfortunately, many organisations have focused on customer satisfaction at the expense of treating them fairly – particularly in the sales processes.
Q: How does one ensure TCF is embedded uniformly across the entire delivery continuum?
A: TCF needs to be applied across all these continuums: product value chain, customer journey(s), and the employee journey. These clearly overlap in some areas and collectively come under the umbrella heading of organisational culture.
As such, you need to look at the following cultural elements: leadership, strategy, decision-making, controls, recruitment, training, and reward.
I’m not sure I can answer the more practical elements of “how” in a few words – as TCF affects the “DNA” of every part of the organisation, it would be very difficult to distil this beyond the process and governance areas I referred to in my presentation.
Q: How much is TCF qualitative and how much is it quantitative in terms of implementation?
A: Another great question Praveen! You need to get this balance right and only you will know what this look like. If we assume that qualitative and quantitative relates to being able to measure the fair treatment of customers, then you certainly need “words” to bring the “numbers” to life. You also need a mix of internal and external data – it would be unwise to rely purely on internal data.
As a principle, you certainly need to be wary of TCF becoming a “tick box” exercise, or being managed as simply another project. I believe this is where some UK and US organisations went wrong.
Q: How does one reinforce it top-down (role-modeled rather than imposed)? Is it about walking the talk?
A: This is about identifying the right sort to TCF behaviours/competencies and then encouraging all staff to act in a way that’s consistent with these behaviours. Organisational leaders can set the cultural tone by visibly demonstrating these behaviours and rewarding those around them who also demonstrate the right behaviours. What you need here is a combination of objectives, job descriptions, competencies, and reward mechanisms that are all aligned to TCF. Depending on the current culture of the organisation, there may need to an element of imposition.
Q: How do you bring consistency between various entities that create a uniquely individual experience for each/ every stakeholder?
A: Another great question Praveen and one where I don’t think there is a simple answer. I think I would start with an organisational vision that everyone can buy into, support and see how they can contribute to the vision – a “line of sight” between what an individual does on a day-to-day basis and the vision of the organisation. Regular reinforcement of progress towards the vision should also keep people on track. I think there’s also something here about having the right people in the organisation, (whatever they do), who have an absolute clear standalone top priority on the customer – with everything else secondary.
(This is a big question Praveen and I’m not sure I’ve done it justice!)
Q: How important is an employee of a practising organisation? Is he or she a customer too?
A: Collectively, the employees and their behaviours toward internal and external customers, make up the culture of the organisation. So whilst the TCF principles very clearly state the customer is the person who buys the product, employees must also treat other in a manner that’s consistent with TCF. Getting teams to create their own TCF Charter is an effective way of achieving this.
Q: Can there be shades of fairness, thereby issues relating to consistency/ inconsistency?
A: Fairness by its very nature is not black or white, but this does not mean it will result in inconsistencies. There are 2 key principles to ensuring consistency when it comes to issues of fairness – get as many perspectives as possible and make sure you identify all customers in the same situation.
Q: How do you bring a balance between subjectivity and objectivity in this space?
A: This is all about getting as many perspectives as possible on a given situation – externally this might include the shareholder view and would definitely include the customer. Internally, this might include sales, marketing, operations, risk etc.
Q: How do you audit & ascertain the degree to which an organisation treats its customers fairly?
A: This is what I do Praveen! If you need a regulatory and cultural assessment of the organisation. I’d be happy to discuss this if you’re interested in exploring this further.
Q: How important is TCF for the emerging markets? Can they avoid some of the pit-falls in development of financial services architecture by learning from mature markets?
A: I think TCF regulations are becoming increasingly prevalent and important in all markets – not just in emerging markets. There were a couple of slides in my presentation that focused on this and certainly recent reports by some of the big auditing firms support this view.
The IMF recently recommended to the Malaysian regulators that their effectiveness could be enhanced with strengthened enforcement tools and the development of a supervisory framework specific to market conduct activities. In developed markets such as the UK, we now have a new regulatory authority, which is expected to be far more visible and rigorous in its investigation and enforcement of TCF principles.
As far as lessons are concerned, I think there are plenty to be learned and I touch on these in my article published in the January issue of Asia Insurance Review.
Published in April 2013 issue of Asia Insurance Review
Article in Company Director Magazine (membership required): http://www.companydirectors.com.au/Director-Resource-Centre/Publications/Company-Director-magazine/2013/March/Opinion-Indian-company-law-gets-a-revamp
Published in Insurance Insight, January 31 2013
The biggest enemy of diversity is ‘anti-diversity’ – anything that stomps over things diverse and intending to homogenize them or conversely anything coming in the way of something attempting to diversify. Over the last couple of weeks, I picked two stories both defying this hypothesis. One in a heroic sense and the other in a mysterious way!
The glass ceiling game:
The heroic one comes from the HBR Blog Network, titled “How Female Leaders Should Handle Double Standards”. It is about how women are perceived – how they dress, talk, their “executive presence,” capacity to “fill a room,” leadership style and public image – has been the object of vast, well-intentioned efforts to get more women to the top. Voice coaches, image consultants, public speaking instructors and branding experts have filled the growing demand for these services.
The premise, goes on the blog, is that women have not been socialized to compete successfully in the world of men, and so they must be taught the skills of their male counterparts have acquired naturally. But, at the same time, they must “tone it down” or risk being labeled as having sharp elbows. The crux of the matter is that women are evaluated against a “masculine” standard of leadership that leave them limited options and distracts attention from the task at hand.
While women are likely no more susceptible than men to such diversions, subtle (and not so subtle) cultural biases can easily turn women’s attention inward as they try to reconcile conflicting messages about how to behave as leaders. What to do then, in a world when image and perceptions matter, and gender stereotypes remain firmly entrenched? Three prescriptions, in the blog, from three women leaders (http://blogs.hbr.org/cs/2013/02/how_female_leaders_should_handle_double_standards.html):
- “We should just focus on what we have to do” says Lubna Olyan, the Saudi CEO of Olyan Financing. She believes, “women shouldn’t be distracted by things that take away from what we are trying to accomplish.”
- “The story is never what she says, as much as we want it to be. The story is always how she looked when she said it”, say the members of Hillary Clinton’s press corps. What does Clinton have to say? She does not fight it anymore; she focuses on getting the job done.
- IMF Chief, Christine Lagarde says be yourself. “Dare the difference”. But do so skillfully. Don’t just let it hang out; and never confuse “being authentic” with “fatal flaws” such as treating people poorly.
So while you work towards breaking the glass ceiling do not give up your originality. Being yourself is diversity too.
The Most Misunderstood Industry (TMMI):
Why is insurance TMMI, consistently across the world? That there is little room for diversity, in the ways it is perceived, remains a mystery. Two professors at Wharton, Howard Kunreuther and Mark Pauly together with Urban Institute researcher Stacey McMorrow, analyze the theme in Knowledge@Wharton Today. The focus of their study is USA, world’s most developed and penetrated insurance market. Yet their findings do not seem to be any different for the rest of the world. It makes an interesting read (http://knowledgetoday.wharton.upenn.edu/2013/02/insurance-the-most-misunderstood-industry/).
An extraordinarily useful tool to manage risk:
- Yet broadly misunderstood by consumers, insurance executives and regulators
- Many do not voluntarily buy coverage against potentially risky & serious losses
- Insurance firms also behave strangely after they suffer a severe loss
- State regulators often constrain insurance premiums because they are concerned that insurance will not be affordable
- Affordable Care Act (ACA) health reform legislation requires sellers of individual and small group insurance to sell coverage to all comers at premiums that do not take into account the buyer’s medical risk
Why do consumers, insurance firms and regulators behave as they do?
- Tendency for those at risk to assume that disaster losses or major health related expenses will not happen to them. Given this view, they feel no need to purchase insurance protection. Only after suffering a loss will consumers voluntarily buy insurance. After a disaster, insurers may decide to restrict coverage, and state regulators are likely to prevent private insurers from charging premiums that reflect the actual risk
- Behaviour of this kind defeats the three principal purposes of insurance: to provide information via premiums as to how serious your risk is; to provide motivation for undertaking financial protection against an event that could produce a significant loss but has a low probability of occurrence; and to offer incentives in the form of premium reductions to reward people who invest in risk-reducing measures
- Incentives, rules and institutions that encourage a constructive role for insurance will ultimately improve individual and social welfare. Several recent pieces of legislation have set the tone for appropriately dealing with risk. Dealing with Terrorism via the Terrorism Risk Insurance Act (TRIA); Biggert-Waters Act proposes major reforms to the National Flood Insurance Program (NFIP). The ACA requires insurers to offer insurance to all US residents who do not currently have coverage through either their job or a public plan.
What can be done to make insurance a better policy tool and to avoid adverse side effects of the well-intentioned programs already in place?
- One way to convince people, prescribe the authors, of the long-term benefits of insurance is to stretch the time horizon over which the event can occur. Studies have shown that people are much more likely to buy insurance or invest in protective measures if an event, such as a hurricane, that has a one in 100 chance of occurring next year is presented as having a greater than one in five chance of happening at least once in next 25 years. And if the disaster does not happen – well, the truth is that the best return on an insurance policy is no return at all. One should celebrate not having a major loss!
- Insurers should construct worst-case scenarios for rare events. They can then determine a premium that reflects their best estimate of their expected future risks factoring in the uncertainty of the events happening. Insurers could also consider offering multi-year policies if state regulators allow them price coverage that reflects risk over that period. A multi-year insurance policy with risk-based premiums coupled with a multi-year home-improvement loan to pay for risk reducing measure may enable policy holders to reduce their overall costs.
Having diagnosed what keeps us into being the most misunderstood industry, the authors demystify our current state and also suggest prescriptions for overcoming this woe. Maybe anti-diverse at the outset but if each market and geography could discover its own remedies; we may soon be a reinvented entity.
My comment on “Still a man’s world” by Sara Mosavi:
Hi! We need to go beyond a pure statistical analysis or judgement on the state of diversity to some softer sides as well.
The stories ought to also cover:
What made the successful women leaders get where they are? Family support, culture, environment, challenges et al. Each one could be an amazingly insightful story, rather than just a statistic.
Likewise, those who really deserved it and never made it – was it the glass ceiling or their choices or a combination of both? Life again need not be judged on a pure SUCCESS = POSITION but success at what price?
There will be several exceptional stories of bright and talented women who chose successful work life balance over a successful career and not so successful personal life. Equally applies to men.
It will be fascinating to hear the life story of Ms Nooyi. To what extent did her living in the US rather than the native country facilitate realisation of fuller potential? The positive roles of husbands/ partners in ensuring that the wives/ partners realise their full potential would be great too. Perhaps this could also become a role model for many a men.
So let us get over a pure left brain approach to a more balanced one, thereby engaging the right side of the brain as well. And look for ways to make it all happen. Not just a statistical reality but a functional metamorphosis of our society.
