Helping Employers Navigate the Rise in High-Cost Medical Claims

A rapid rise in medical plan costs is being driven in part by high-cost claimants — a high-risk group that disproportionately accounts for a large amount of healthcare costs. Here are strategies for addressing this issue.
Key Takeaways
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Global medical trend rates are expected to rise in 2024, driven by high-cost claimants, chronic conditions, cancers, aging populations and expensive treatments. This is creating financial and health challenges for employers and employees.
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Mitigation strategies include predictive analytics, care management programs, prevention and screening, reinsurance, stop loss and more.
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Early prevention and detection of high-cost medical claims is crucial. Many conditions will worsen if they are not identified promptly, leading to higher treatment costs.
High-cost claimants are contributing to a rise in medical plan costs, putting employers under enormous financial pressure. This increase is driven by exorbitantly high-cost drugs, more complex therapies and a larger population with multiple chronic conditions.
“The number of million-dollar healthcare claimants in the United States has risen 45 percent in recent years, and I expect it will continue to go up,” says Charles Smith, Aon’s chief medical officer in North America. “This is creating a strain across the healthcare system.”
Across the globe, medical costs are also rising. The global average medical trend rate for 2024 is expected to be 10.1 percent, according to Aon’s 2024 Global Medical Trend Rates Report. That’s up from 9.2 percent in 2023, with every region showing an increase.
There are several strategies employers can use to mitigate rising costs. Some companies are using analytics to pre-emptively identify high-risk claimants and adverse population health trends. Leading employers are also implementing wellbeing initiatives, cost containment measures and plan design changes to help defray costs. Tools such as Aon’s Health Risk Analyzer can help employers take a proactive approach to managing their high-risk population by predicting high-cost claimants, optimizing care coordination and designing effective benefit programs. Flexible benefit plans are also an increasingly popular mitigation initiative. Around 60 percent of countries identified this as a top initiative to consider in 2024.1
Product / Service
Health Risk Analyzer
Navigating the Complex Landscape of High-Cost Medical Claims
Medical Trend Rates Across Regions
The impact of rising medical costs is being felt across the globe. With widely varied healthcare systems across countries and regions, the effects are felt differently among stakeholders. Here’s a closer look at the medical costs landscape across regions:
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United States
- The American Cancer Society reported a 5 percent increase in cancer each year, with a 12 percent increase in young people. This has resulted in a lower screening age for many cancers.
- Because of the pipeline of new therapies in development, Aon forecasts an 11 to 21 percent increase in the cost of cancer care every year.
- Many large employers have dropped reinsurance that would usually protect them from high-cost claims, making them vulnerable to significant risk from costly claims and new gene and cell therapies.
- Stop loss reinsurance is becoming more challenging for smaller and medium-sized employers, as many carriers are either refusing to offer quotes or excluding high-risk individuals from the policy.
- Drug treatments are often prioritized depending on which are the most effective and least toxic, which are generally the newer and more expensive options.
- Catastrophic claims are increasing to new levels, exceeding $4 million to $6 million for rare cancers and hemophilia.
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Mainland Europe
- According to projections, Europe’s medical trend rate is expected to reach 10.4 percent in 2024, up from 9.1 percent in 2023 and nearly double the 5.6 percent increase in 2022. Several European countries have even higher rates, including Turkey at a staggering 90 percent.
- France is expected to have a more moderate medical trend rate of 5 percent in 2024, lower than the European average of 10.4 percent and much lower than some of its neighbors. Luxembourg has the lowest rate in Europe at 2.5 percent.
- Employers are not obligated to give medical cover, but those who do offer private medical coverage are facing a similar effect of high-cost claims as in the U.S.
- Since the beginning of the COVID-19 pandemic, mental health has been reported in Europe as a leading condition driving claims. This is especially true in Germany and Scandinavia.
- Regulations like the Corporate Sustainability Reporting Directive2 are pushing for better employer-sponsored care. Combined with increasing medical costs, this will prove to be a large cost burden for organizations of all sizes.
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United Kingdom
- The cancer market is expected to undergo significant growth between now and 2027 due to increased cancer prevalence, increased technology and treatment options and an aging population. Each year in the UK, 367,000 new cancer cases are diagnosed.3
- The impact of cancer on the health system is exacerbated by differing standards of coverage by the National Health System (NHS) in the UK and private insurers.
- Several promising but expensive treatments like gene and cell therapies are now accessible in the UK, driving up costs.
- The main system-wide challenges right now are an overstretched, underfunded and inefficient NHS with long waiting times.
- Employers are grappling with certain expensive treatment options that are inaccessible through the NHS. As a result, employees are turning to private schemes.
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The Middle East and Africa
- In the Middle East and Africa, the medical trend rate for 2024 is expected to be 15.1 percent, up from 14.5 percent in 2023. However, it is lower in the United Arab Emirates (UAE) at 10 percent and Saudi Arabia at 14.0 percent.
- The top medical condition driving plan costs in the region is high blood pressure/hypertension.
- The UAE government is requiring all private companies to provide employees' health insurance starting in 2025.4 Other countries in the region already require this, meaning high costs will be a greater burden and concern for employers.
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Asia Pacific
- While the medical trend rate at 9.7 percent in Asia Pacific remains the lowest, costs of medical care in the region have been on the rise, driven by increased consumption of healthcare services since COVID-19 restrictions were lifted and the rising cost of medical supplies, medication and labor shortages in some markets.
- Many organizations enhanced their employee benefit offerings during the pandemic, taking advantage of lower-than-expected claims performance. Common enhancements focused on increased coverage for catastrophic conditions (e.g., cancer, kidney failure), mental health and maternity.
- The World Health Organization and Global Cancer Observatory report that cancer rates in Asia Pacific make up 49 percent of the worldwide cancer burden. While fewer people are dying from cancer, more people are getting diagnosed with it, especially women and young people.5
- To curb escalating treatment costs for major conditions, both local governments and private sponsors have increased investments in educational, preventive and screening programs in the last five years.
- Some markets like Singapore, Hong Kong and Australia are also taking proactive steps in making medical care costs more transparent by publishing average and recommended professional fees for typical cases and introducing pre-approved, cost-effective drug lists.
35M
Global cancer cases are projected to rise 77 percent to more than 35 million in 2050, driven by an aging and growing population and more health risk factors.
Source: World Health Organization
The Risk of Doing Nothing
It is important to note that as different countries have different levels of risk, so may the consequences of inaction. Screening and interventions can vary due to differences in healthcare systems, cultural attitudes toward health and the prevalence of certain diseases.
While innovations in cancer treatments and gene and cell therapies give patients the potential for life-changing results, the high costs can be unsustainable for employers, employees, insurers and governments. Average healthcare costs are outpacing wage increases in most regions, creating affordability issues around the world.
Even in countries with government-funded healthcare, there remains a risk of not acting. For example, as some individuals report higher wait times to seek treatment and more restrictive coverage in the UK, the number of adults using private health insurance has increased from around 12 percent in 2019 to 22 percent at the end of 2022, according to Statistica Consumer Insights.
There are a number of things employers can do to help drive down some of these costs and improve employee health. For starters, the positive impacts of preventative and lifestyle changes can be very effective. Implementing a wellbeing strategy, cost containment measures and plan design changes are excellent mitigation strategies.
22%
Between 2019 and 2022, the share of UK adults with private health insurance rose from about 12 percent to 22 percent.
Source: Statistica Consumer Insights
Despite the lack of any legal obligation for employers in the UK to offer any cover, more companies are providing private medical. And for those who do offer this coverage, high claims are having a financial impact.
Mitigation Strategies for Rising Healthcare Costs
The issue of high-cost claimants is multi-dimensional, with clear challenges that can’t be ignored:
- Medical data can be complicated and difficult to analyze, making it challenging to find useful insights.
- There are also strict regulations around how medical data can be used and shared, which can reduce the availability of data for analysis.
- Future cost estimates and risk evaluations are uncertain and complex.
- Stop loss carriers are raising premiums and creating exclusions and limits, requiring insured options for high-cost treatment.
However, there are numerous mitigation strategies that employers can implement now to stay ahead of these challenges.
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Prevention and early detection are essential
Many conditions will worsen the longer detection is delayed. For example, patients in high-income countries whose cancer is usually detected early have treatment that is two to four times less expensive than treatment for patients whose cancer is detected later, according to the World Health Organization.
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Encourage on-site screenings and interventions
Employers have a role to play in motivating employees to have regular medical exams. These should be paid for by insurance through their main doctor or free screening events hosted onsite by the company. For example, offering cancer and blood pressure screenings in the workplace is an effective way to determine who needs more help — with high blood pressure one of the main conditions for claims and a risk factor for other conditions. Employers can also encourage and help facilitate at-home screening kits and provide education around the process.
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Use data to inform strategies
Collect and analyze data to plan a good benefit program. Use health data from sources like screening, wellness programs and absence data to identify and address health risks among your employees. For example, Aon’s Health Risk Analyzer uses machine learning to help companies improve their care management and budget planning by more accurate forecasting, finding risk early and monitoring it regularly, and providing integrated wellbeing care. This helps companies prepare for risk, save money for healthcare costs and handle claims effectively.
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Explore alternative funding options
There are several additional risk controls that companies can use to mitigate the rising costs of healthcare, including stop loss, captives, hybrid financing approaches and redirecting investment into areas that pose high risk to employees. Setting up a health captive is a strategy used by about 17 percent of companies globally, according to Aon’s research. These measures can help companies manage their healthcare costs and mitigate the risks associated with rising medical trend rates.
45%
Increase in million-dollar healthcare claims in the U.S. from 2018 to 2022.
Source: Sun Life 2023 Stop Loss Trend Report
While not always possible, prevention is an important mitigation strategy that is often underutilized. Employers should create care management programs that encourage employees to undergo health screenings and follow healthier lifestyles.
1 Aon’s 2024 Global Medical Trend Rates Report
2 Corporate sustainability reporting - European Commission (europa.eu)
3 Cancer Statistics for the UK (cancerresearchuk.org)
4 Long-awaited nationwide health insurance mandate to come into force in January (thenationalnews.com)
5 Global cancer burden growing, amidst mounting need for services (who.int)
General Disclaimer
This material has been prepared for informational purposes only and should not be relied on for any other purpose. You should consult with your own professional advisors before implementing any recommendation or following the guidance provided herein. Further, the information provided, and the statements expressed are not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information and use sources that we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.
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Companies Need a Global Benefits Identity in an Era of Cost Containment
More global benefits professionals are aligning benefit strategy to an employer’s identity and values.
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Alert 10 mins
Responding to the CrowdStrike Outage: Implications for Cyber (Re)Insurance
CrowdStrike, a global cybersecurity firm, released an update for its Falcon sensor, which caused system crashes on Microsoft Windows systems globally.
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Article 8 mins
Responding to Cyber Attacks: How Directors and Officers and Cyber Policies Differ
Cyber incidents continue to grow in frequency and severity, especially as new technology emerges. While D&O and cyber liability policies offer distinct coverage differences, terms need to be carefully structured to avoid potential gaps.
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Article 6 mins
Insurance and the Metaverse: Safeguarding Virtual Assets
Insurers are venturing into the thriving digital landscape of the Metaverse, covering virtual assets, safeguarding intellectual property, and protecting the wellbeing of users and avatars. With this evolution, comes new challenges and the unique opportunity to shape the future of insurance.
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Article 10 mins
Build Resilience for an Extremely Active Atlantic Hurricane Season
Record-warm Atlantic Ocean temperatures and a shift to La Niña conditions have led forecasters to predict an extremely active Atlantic hurricane season in 2024. Learn how to build business resilience to mitigate risk for hurricane-prone properties.
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Alert 7 mins
Workforce Implications of U.S. Supreme Court Ruling on ‘Chevron Deference’
The U.S. Supreme Court has changed the way laws are interpreted in the development of regulations. This change has the potential for far-reaching consequences for both regulatory agencies and employers.
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Article 18 mins
The Optimal Outsourced Chief Investment Officer
For institutional investors, engaging an outsourced chief investment officer, or OCIO, is one of the most critical decisions an organization can make. Choosing the right partner can lead to achieving the desired results or unexpected consequences.
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Article 4 mins
Credit Solutions Market Overview
Overview of the current trade credit insurance market and outlook on trend developments.
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Article 11 mins
Building a Future-Ready Workforce for the Professional Services Industry
The need to attract and retain high-quality talent in an environment of intense competition is at the forefront of professional services leaders’ minds.
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Article 11 mins
Enhancing Cyber Resilience in the Renewables Sector
Renewable energy is critical to meet net-zero targets, but as the industry grows, so do cyber attack surfaces. Learn how to prepare for emerging threats and support long-term ambitions.
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Article 7 mins
Connected Perspectives: Better Decisions on Interconnected Risks for FAB Organizations
As the scale and speed of interconnected risks escalate, innovative risk management strategies help FAB businesses build the resilience and agility needed to thrive.
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Article 10 mins
Driving a Future-Proof, Skills Based Approach for the Renewable Energy Sector
The renewable energy sector is undergoing a sweeping transformation, as it plays a pivotal role in the challenge to achieve global net-zero goals. Attracting, upskilling and retaining talent is critical for sustainability.
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Article 7 mins
How to Navigate Evolving Construction Contractor Risks in EMEA
Contractors in EMEA face an array of risks they must mitigate or transfer while managing the complexities inherent in major construction projects.
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Article 12 mins
8 Focus Areas for the Renewable Energy Sector
As more companies seek to reduce their carbon footprint, the renewable energy sector continues to grow, presenting both opportunities and red flags for organizations with renewable energy growth plans.
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Article 6 mins
Reshoring: Managing Risks and Building Resilience Closer to Home
Proactive risk management and data-driven reshoring strategies can empower risk managers in logistics companies to navigate supply chain complexities with confidence.
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Article 5 mins
Captive Insurance: Uptick in Use Reflects Market Realities
As more companies become comfortable using captives and understanding the value they add, captives are likely to become further embedded into corporate risk strategies, regardless of market conditions.
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Article 6 mins
Building Strategies for Sustainable Growth as a Mid-Sized Organization
Helping midsize organizations leverage key partnerships to address challenges around talent, market, regulatory compliance, and leveraging capital.
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Article 9 mins
Four Steps to Implementing an Effective Online Benefits Platform
Online benefits platforms are a key component of the overall employee value proposition. As employers maximize the ROI of their people spend, here are four tips which may assist with implementing a successful online benefits platform.
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Article 8 mins
Pay Transparency Can Lead to Better Equity Across Benefits
Efforts to bring more transparency to pay practices shine a light on benefits equity — and it’s not only about wages and salary.
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Article 3 mins
Building Resilience Against the Constant Cyber Threat
The rapid pace of digitalisation means that organisations in the UK are constantly struggling with the ever-present threat of cyber attacks.
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Article 2 mins
Creating a Fair and Equitable Workforce for Everyone
Equity has an important part to play in a balanced strategy to improve the attraction and retention of key employees.
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Article 2 mins
How to Balance the Conflicting Forces of Efficiency, Performance and Wellbeing
How are business leaders adapting to a generational change in how work gets done?
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Article 2 mins
Introduction: Clarity and Confidence to Make Better Decisions
Lori Goltermann, CEO of Regions and Enterprise Clients, Aon examines the main issues discussed at the event.
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Article 2 mins
Making Better Decisions – A Treasurer’s Perspective
Our panel discussion looked at the issues facing corporate treasurers and how they have become more complex and interconnected.
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Article 3 mins
Seizing the Opportunity: Building a Comprehensive Approach to Risk Transfer
Businesses are still in search of competition, alternatives and innovation in their insurance programmes.
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Article 2 mins
Tapping New Markets to Unlock Deal Value
Companies and financial sponsors are constantly seeking innovative and capital-efficient ways to facilitate M&A deals.
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Article 2 mins
The Age of Rising Resilience – An Economic Outlook
Professor Trevor Williams analyses the latest indicators and what they mean for the UK — and global — economy.
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Article 2 mins
The Aon Difference
How Aon is moving further, faster to bring new, innovative solutions that address companies’ risk and people challenges.
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Article 5 mins
The Rise of the Skills-Based Organisation
Today's employers need to continually learn and adapt to emerging technologies and skills if they are to thrive in the talent landscape.
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Article 3 mins
The Year of the Vote: How Geopolitical Volatility Will Impact Businesses
Companies that operate around the world need to have a global appreciation of the heightening geopolitical risk.
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Article 6 mins
Three Ways Collective Retirement Plans Support HR Priorities
Collective retirement plans are growing in popularity and improving employees’ financial wellbeing in the process. Other advantages that haven’t been as widely explored include how these retirement structures allow HR to shift its focus to strategy.
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Article 8 mins
How North American Construction Contractors Can Mitigate Emerging Risks
Getting ahead of risk is vital for North American construction contractors, as they aim to manage evolving issues, while delivering job safety, solving workforce shortages and containing project costs.
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Alert 6 mins
U.S. Department of Labor Restores and Extends Overtime Protections
The Department of Labor released a final rule increasing overtime protections for the standard salary level threshold for the “white collar" exemptions and the threshold for employees classified as Highly Compensated Employees. Employers need to prepare for these significant changes.
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Article 10 mins
How Insurers Can Capture Climate Opportunities
Climate change adaptation and the transition to net zero present huge premium growth opportunities for insurers. The key question is how to get started.
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Article 7 mins
How to Navigate the EMEA Cyber Risk Insurance Market
As the cyber insurance landscape continues to evolve in EMEA, companies need actionable insights and solutions to strengthen their cyber risk strategies.
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Article 9 mins
Insurers Seek Risk Transfer Solutions to Offset Higher Retentions and Resume Growth
The challenges of 2023 eroded the buffers that many insurers had previously enjoyed, bringing an increased focus on capital management and a variety of capital sources according to Aon’s capital poll.
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Report 18 mins
Evolving Technologies Are Driving Firms to Harness Opportunities and Defend Against Threats
While advancements in AI, cyber and data technology are helping companies operating in an increasingly digital world gain a significant competitive edge, they also introduce new and evolving risks.
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Article 6 mins
How to Make the Most of Voluntary Benefit Plans in the U.S.
As healthcare costs rise, voluntary benefits are a critical component of engaging employees, while also helping to manage direct and indirect medical expenses. Here are three strategies for employers to make the most of their voluntary benefits.
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Article 8 mins
NIS2 Compliance Readiness for Organizations across the European Union
The expansive scope, stringent sanctions and pivotal role of management related to the new NIS2 Directive provide a strong foundation to protect against evolving cyber risks.
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Article 8 mins
London Insurance Market: Unveiling Demands for New Skills in 2024
The London insurance market seeks a generation of game-changers who can navigate uncertainties and drive innovation to ensure the industry’s future success in a digitalised world.
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Article 3 mins
Better Decisions in Trade, Technology, Weather and Workforce
From global supply chain risks to climate insecurity, organizations face challenges and complexities on a scale rarely seen before.
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Article 15 mins
How Artificial Intelligence is Transforming Human Resources and the Workforce
Artificial intelligence is having a measurable impact across all aspects of HR — from talent management to compensation, health and benefits, and retirement planning. To effectively harness the technology, HR leaders must ensure both their own teams and the wider workforce are prepared.
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Article 3 mins
Risk Capital and Human Capital Perspectives
Risk Capital CEO Andy Marcell and Human Capital CEO Lambros Lambrou discuss how innovations in Risk Capital and Human Capital can help organizations boost resilience and navigate volatility.
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Report 15 mins
Wide-Ranging Trade Issues Confront Global Businesses on Multiple Fronts
Global business leaders highlight risks linked to trade as some of their top concerns — both physical and financial. While the topic is complex and broad, there are opportunities that business leaders can pursue to stay ahead of emerging trade dynamics.
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Report 16 mins
Climate Analytics Unlock Capital to Protect People and Property
Extreme weather and a changing climate are impacting many of the risks businesses face today. To address future exposures, organizations will need advanced climate and natural catastrophe models and expertise that can assess chronic and acute risks.
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Report 14 mins
A Workforce in Transition Prepares to Meet a Host of Challenges
Engaging a changing workforce requires data and innovation. Workers increasingly expect more than just a paycheck. In response, organizations are balancing costs with the ability to provide a compelling employee experience.
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Case Study 3 mins
How Aon Helped M&G Wealth Develop New Advisor Skills
Aon partnered with UK financial advice firm M&G Wealth to help the firm better understand the make-up of a highly successful advisor of the future, including the skills needed given shifts in societal needs, technology and regulation.
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Article 8 mins
Energy Transition Investments: How Advanced Analytics Can Empower Organizations