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Insurtech advances in the workers compensation industry have spread beyond the claims arena to being more proactively utilized to create safer workplaces by predicting potential injuries and mitigating the risks before they occur.
But the use of tools ranging from big data to artificial intelligence is still somewhat limited because of employee concerns about the privacy of their personal information and legacy systems that frustrate their full implementation.
“It’s in the workers comp insurers’ interest to make sure these technologies are deployed and used effectively, because it affects their bottom line,” said Sam Friedman, insurance research leader for the Center for Financial Services with Deloitte Services LP in New York. “They’ve always been very proactive and this is a great toy store for people in the workers comp industry.”
Workers compensation insurers are increasingly focusing on the challenges that innovation can help them overcome, with these insurers citing system/process inefficiencies as the top challenge at nearly 83%, according to a September 2018 report by Oldwick, New Jersey-based ratings firm A.M. Best Co. Inc.
“There are a lot of efficiencies being created” by the use of technology and analytics “to reduce loss costs and keep people out of accidents and/or get them back to work,” said Jim DiVirgilio, Hartford, Connecticut-based chief regional claims officer for the Americas and head of U.S. claims for XL Insurance America Inc., a unit of Axa XL, a division of Axa SA. It is “a burgeoning area, but certainly not a fully developed area.”
Insurers are investing in various technologies, with 25% investing in big data, 25% in cloud computing, and 21% in artificial intelligence, according to the Best survey.
“Workers comp is definitely showing a little more diversification in terms of different ways innovation is being utilized and having an impact when you compare it to some of the other lines on the commercial side,” said David Blades, associate director in the industry research and analytics department of Best.
In terms of “claims targeting over the years, we’ve been doing a lot of predictive modeling and that’s been evolving with more data,” said Chris Knight, vice president of analytics and innovation for EPIC Risk Consulting in Atlanta. “Now we’re using that more to drive specific actions based on the outcomes, and (third-party administrators) are starting to integrate more into claim delegation and understanding what outcome is likely and what should change to impact the claims.”
Such tools are being increasingly utilized in risk mitigation efforts as well, experts say. For example, wearable technology is being deployed to track employees and notify employers that an employee may be missing or in distress. Technology is also being utilized to improve hazard communication with employees and demonstrate more ergonomically sound work practices, which have the multiple benefits of being safer for employees as well as faster and more efficient, experts say.
“It’s really giving us the opportunity to take that data and get far upstream to understand where the risk factors are for employees, whether that be chemical exposures, falls from heights, ergonomic risk factors (or) stress factors, to allow us to see trends … all the way down to the individual to then be able to tailor interventions, whether they be companywide interventions or specifically targeted at a particular high-risk individual to prevent a workers comp claim from ever becoming a claim,” said Stephen Craig, San Francisco-based senior vice president with Chubb Global Risk Advisors.
But there are discussions on the claims side about how far to take technology in terms of interacting with injured employees and how much to automate tasks around payments and directing medical care because “we risk taking that too far,” Mr. Knight said.
Meanwhile, underwriting risk is a challenge that 39.1% of workers compensation insurers say innovation can help them overcome, according to the Best survey.
“The shift that we’re seeing is much more reliance on data-driven underwriting rather than an individual underwriter’s personal experience,” said Karlyn Carnahan, San Francisco-based head of the Americas for the property/casualty practice of Celent LLC.
But with the insurtech evolution come challenges, and data privacy tops the list of concerns, experts say.
“Employees are concerned about this new technology as an invasion of their privacy, and that will be a significant challenge that will have to be overcome,” said Joe Galusha, group managing director and U.S. leader of Aon Global Risk Consulting in Southfield, Michigan. “We have to be really clear and communicate well the intent of what we’re doing. When an employee understands that the reason we want them to use these wearables is to make that job safer for them and that’s the sole intention of it, we’ll have better success in executing.”
The rules and behaviors around workers allowing their companies or their companies’ insurers to access wearables data is going to hold back widespread adoption to a certain extent, and it will be key to watch how regulations evolve when companies require workers to wear clothing with embedded sensors so they can monitor the data in the hopes of preventing accidents, said Mark Purowitz, global insurtech leader for Deloitte.
While there are innovative players in the market, some insurers and TPAs have not been successful in adopting technology because their systems date back to the 1990s, and the complexity of how they operate is very high, said Dr. Joe Rubinsztain, CEO of Fort Lauderdale, Florida-based ChronWell Inc., which utilizes artificial intelligence in providing coordinated care solutions to commercial workers comp insurers and self-insured clients.
In addition, their internal teams may be “very resistant to change” and more focused on streamlining their systems and preserving the old way of doing business rather than disrupting the system, he said.
“Comp probably needs a redesign from the ground up,” he said. “A silver bullet is highly unlikely to change the injured worker experience.”
“I hope that insurance companies are beginning to move past using technology to manage their internal processes and begin using technology to deliver better customer experience,” Ms. Carnahan said.
The actual collection, integration and analysis of data itself is also a challenge, experts say.
“The first challenge is if you’ve been around a long time, then I guarantee your data is dirty,” Ms. Carnahan said. “If you are a carrier that has grown through acquisitions and has multiple systems, I guarantee your data is hard to get to. If you’re a small workers comp carrier, it’s hard to have enough data to be statistically credible.”
Much of the effort to date has focused on structured data when unstructured data from different sources such as doctors notes could lead to fresh insights that could keep workers safe, Mr. Knight said.
The ability to format such data “has opened up a whole new world of analytics and predictions that haven’t been available,” he said.
And “the goal of all this monitoring is to actually do something with” the data, Mr. Friedman said. “You can hook up the whole world and generate incredible amounts of data, but the key is to make sure someone is actually looking at it and analyzing it through some algorithm and figuring out where the red flags are so that we can flag a situation in real time.”
The mere speed of the insurtech evolution may continue to be a challenge for the insurance industry, experts say.
“This is what scares me right now — the unknown,” Mr. Galusha said. “I wake up every morning worried that there will be some new development in insurtech that could help us do our job that I don’t know about. The challenge for safety professionals and work comp managers is how do you stay on top of what’s out there?”
Finding and hiring qualified data scientists may be a challenge for the workers compensation sector as it moves to continue incorporating innovative technology into its operations, experts say.