Risk Report: Technology

Insuring Innovation

For a company that’s changing the way people drive, building the right insurance program was a collaborative accomplishment.
By: | April 9, 2018 • 6 min read

In 1999, Netflix launched not just a new way to rent movies but a new way to buy — pay one price and swap out titles as often as you please. In the two decades since, companies have applied the same model to high-end handbags and designer clothes, among other things.

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Clutch is one of a handful of companies that has taken that concept and kicked it up a notch.

This Atlanta-based startup partners with automakers and dealers to offer vehicles by subscription as an alternative to buying or leasing. The prospect is appealing: pay one monthly fee, flip vehicles as often as you like to suit your needs. Everything is included except gas.

But the model created a gray area as far as insurance was concerned. It’s a commercial venture, yes, but the vehicles aren’t driven for commercial use, nor are they being driven by employees. It required a commercial policy that responded like a personal policy — certainly not an off-the-rack program.

“Subscription is blurring this line between personal and commercial silos. What are we? Where do we fit?” said John Phelps, the company’s vice president of strategy and business development.

As other innovators have discovered, issues inevitably arise when you try to fit the company to the policy rather than the other way around.

“Where traditional carriers try to apply traditional products, it just doesn’t quite work,” said Iain Boyer, partner and head of product/underwriting management for Y-Risk, an underwriting management company.

“When you put a square peg in a round hole, sure, you can probably fit it in. But both the peg and the hole might be damaged a little bit. [With insurance] there’s a risk that if it doesn’t quite fit, there may be problems down the road.”

Building a Lasting Policy

Clutch experienced that early on with a traditional commercial fleet policy. Phelps characterized the policy as “very vanilla.”

“They looked at us like, ‘Well, if you were a plumbing company with X number of cars and eligible drivers, we would generally do pricing that looks like this.’ ”

It didn’t give them what they needed. It couldn’t accommodate the kind of features that Clutch wanted for its customers. It was also prohibitively expensive.

To get the coverage right, Clutch needed a broker committed to understanding their unique model. Phelps was introduced to Jillian Slyfield, managing director and U.S. sharing economy practice leader, Aon. Slyfield is a 2018 Power Broker®.

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Together, Clutch and Aon had to tackle a problem many new products or business models face: a dearth of data.

“It’s the early days of a new industry and so we didn’t have … 10 years of experience from 100,000 drivers. But the data we had started to grow and become more statistically relevant.”

With Slyfield on board, the team leveraged data to look like an approximated personal risk — something underwriters could wrap their heads around. Slyfield reached out to Y-Risk, which specializes in the sharing and on-demand economy. Y-Risk’s strong relationship with Hamilton Specialty gave the project the momentum it needed.

“Y-Risk was ultimately the one to say, ‘I get it, I like it, let’s do it this way,’ and Hamilton was the one who said, ‘I trust Y-Risk to do this.’ All of the entities came together to create something that has never existed,” Phelps said.

“I enjoy working with people like Jillian and John and their teams, because collectively, we’re trying to solve a problem and we’re trying to do it in a cost-effective manner,” said Y-Risk’s Boyer. “So it becomes a really collaborative thing.”

Thinking everything through in advance is critical. The teams carefully considered every possible scenario, mapping out every possible circumstance that could impact the platform, the vehicles or the subscribers.

That’s how you avoid surprises, said Slyfield: “I liken it to painting a room. If you just started with a paintbrush and a can of paint it would look like a disaster when you got done. You start with tape. And it takes twice as much time to tape off the room and make sure … everything’s ready. But then painting is really easy, and it looks nice when it’s done.”

John Phelps, vice president, strategy and business development, Clutch

Problems arise when covering something new, “and [the insurer] discovers six months down the line that they priced it wrong, the losses are worse than they thought, the losses are coming from places they didn’t anticipate, or the price was inadequate because they applied it to the wrong exposure base,” said Boyer.

“Things don’t work as they were intended. That’s bad for everybody.”

Another pain point: Unforeseen coverage problems could affect the claims experience, added Boyer. People engaging with a platform like Clutch are typically active social media users.

“They’re not just going to brood about it. They’re going to let people know that they weren’t happy. So it’s more important than ever that we’re certain the insurance will do what it’s intended to do.”

Supporting the Future

Said Phelps, “We can’t just show up to the table and say ‘Hey, we’re new and we’re technology driven, therefore you should understand us.’ We feel a burden and a responsibility on our side to be a good partner [and that means] us working really hard to help them understand exactly what the risk is.”

Jillian Slyfield, managing director and U.S. sharing economy practice leader, Aon

Boyer said he relishes the opportunity to face fresh underwriting challenges.

“As an underwriting management company, we get back to, ‘How do you underwrite this new and emerging space? How do you think about insurance that helps your clients grow and be successful?’

“That’s what makes it interesting and exciting. [It’s] an opportunity to do what you joined the industry to do, which is underwrite risks, and think about and [identify] the right coverage — not just apply traditional products and underwrite the product. You’re underwriting the company.”

“We can’t just show up to the table and say ‘Hey, we’re new and we’re technology driven, therefore you should understand us.’ ” —John Phelps, vice president, strategy and business development, Clutch

Slyfield and Boyer know that they’re in the unique position to enable and empower new companies and support their mission of changing the way business is done.

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“What I’m doing,” said Boyer, “is trying to develop the products, the structure, the methodologies and the mechanics of the insurance that enables them to grow and be successful.”

Moving forward, it will be progressive brokers, underwriters and carriers who have the clear path to run. Encouragingly, both Boyer and Phelps said insurers are very receptive to understanding new risk.

Despite the industry’s reputation as a plodding, cautious innovator, Phelps said some carriers “are moving more quickly and are more willing to entertain this conversation.”

Those carriers, he said, “have their lines in the water, so to speak. And that’s a great thing. Those are the people we end up setting our meeting with faster.” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]