How Insurtech Is Becoming an Industry-Wide Solution to Some of the Toughest Risks

From construction to cargo to cyber, an array of Insurtech technology solutions is beginning to bring real improvement to risk management safety strategies.
By: | October 25, 2018 • 6 min read

Finding affordable — if any — general liability coverage as a construction firm operating in the State of New York has become increasingly difficult in recent years.

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Labor Law section 240/241, better known as the “Scaffold Law,” enacted in the late 19th century, imposes strict liability upon contractors and property owners for “gravity-related” injuries, presuming them to be at fault even if the worker’s negligence contributed to the accident.

In recent years, courts have extended their interpretation of a gravity-related accident, resulting in large settlements. And added to that, injured workers can circumvent the workers’ compensation exclusive remedy doctrine.

The law has also increased moral hazard, raising the likelihood of more injuries and related litigation. That means the cost of insuring a construction project in New York is as much as 10 times higher than in other states, forcing many insurers to scale back their offerings or pull out altogether.

“The law in New York is very much in favor of the worker,” said Adam Schnell, executive vice president, Ethos Specialty Insurance Services, which provides general liability insurance for New York construction. “Essentially it is a workers’ compensation exposure; if you have an accident onsite, such as falling from a height or an object falling from a height injuring a worker, then it is the property owner and/or general contractor who will be held ‘strictly’ liable, often resulting in a multimillion-dollar claim.”

However, help is at hand with a host of new tech tools to help underwriters get a better understanding of worker safety risks and drive more favorable loss ratios.

Data Is King

Data is key when it comes to assessing the risk and providing the appropriate cover, according to Schnell. Thanks to advancements in technology there is now more access to information than before, he said.

“In particular, the NYC Department of Buildings has records on safety violations on worksites and related fines and closures,” he said. “In that respect, you can quickly see patterns emerge with companies that try and cut corners to finish the job quicker and at a lower cost and increased margin by flouting safety rules.

“Then there are public information and proprietary sources, which provide data on site inspections and court documents on legal action that has been taken against companies to help you measure the risk. That way you can quickly determine if it’s a risk that you want to insure.”

Schnell said, in theory, this data also helps construction firms with better safety records to get more competitive quotes. Without it, he added, insurers can be pricing themselves out or worse still, leaving themselves exposed to unforeseen claims running to millions of dollars.

“Drones can be used to monitor construction sites and to access difficult to reach areas or to evaluate roofs or other elevated structures without the need for physical access.”  — Ann Myhr, senior director of Knowledge Resources, The Institutes

Underwriters are also increasingly employing cutting-edge technology to identify and mitigate against the risk, said Martha Notaras, a partner at XL Innovate. At the forefront of this is the use of wearables, which track and provide data on a worker’s movements, including everything from wristbands to environmental sensors for temperature, pollution and even noise, she said.

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“These devices can come in many forms; there are wristbands that warn workers if they are near a live electrical wire,” she said. “Then there is a company called GuardHat, which has a device that collects data on activities a worker is doing but, more importantly, ensures they’re wearing a hard hat.”

Other leading technologies, Notaras said, include sensors that monitor particulate levels on worksites and 360-degree cameras that can survey a project’s progress as well as worker safety. All of that information gathered is then stored in a database and can be analyzed by companies, she said.

“All of these technologies can help companies to see where their exposures are, keep track of and improve on them,” she said. “OSHA is particularly hot on how long it takes companies to rectify a situation once a problem has occurred, so they can help greatly in that respect.”

And companies are already seeing the results, according to Notaras. One worker wearing a Triax tracking device who had an accident was able to receive treatment 90 percent quicker than if he had not been wearing it, she said.

Making Our Roads Safer

Another area where Insurtech is making big strides is in commercial auto, where frequency of accidents has been on the rise year-on-year over the last decade according to the U.S. Transportation Department, as have the severity and size of payouts. As a result, rates have spiked, some as much as 30 percent, and some of the biggest players have pulled out.

But Notaras said that commercial fleet operators have been quick to adopt devices such as telematics in a bid to improve driver safety. By using the data captured by these devices, underwriters can then benchmark driver performance against the industry average and other drivers, and be able to better assess the risk, she said.

Ann Myhr, senior director of Knowledge Resources, The Institutes

Then there are semi-autonomous features such as forward collision warning, automatic emergency braking and lane departure warning, which can promote driver safety and reduce accidents, said Ann Myhr, senior director of Knowledge Resources for the Institutes. They are also being used in contractor’s equipment including backhoes, forklifts and cranes to improve safety, as are drones, she added.

“Drones/unmanned aircraft are increasingly being used by risk managers, underwriters and claims professionals,” she said. “Drones can be used to monitor construction sites and to access difficult-to-reach areas or to evaluate roofs or other elevated structures without the need for physical access.”

From Cargo Spoilage to Cyber Security

Phil Edmundson, founder and CEO of Corvus Insurance, said that among the latest Insurtech products offered by his company are those that use data captured by sensors monitoring the temperature of goods carried in cargo shipments to detect where spoilages occur. Another application is in cyber insurance where web traffic data is screened for IT security vulnerabilities, he said.

“This data has been around for a long time; we are simply accessing and using it to help improve loss control.

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“With our cargo product from our data analysis, if a perspective policyholder is deemed a good risk, then we offer them a broader coverage.”

Other areas where Insurtech has helped improve underwriters’ understanding of risk is in homeowners’ insurance, where the Internet of Things has given greater insight into how people manage their homes, said Notaras.

This includes, for example, having alarm systems enabled so that they know every precaution was taken in the event of a break-in, she said.

“A number of vendors have brought these new technologies to the table, which are now being piloted by companies to help them measure their exposures and make safety improvements,” said Marsh’s U.S. construction leader, David Marino. “But they are also using this big data to help provide additional benefits including better productivity and billing and to address HR issues.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him 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]