Trending | Technological Innovation Is Making Self-Insurance Easier. Here’s How

Positive safety trends and new technologies are driving a pull away from traditional risk transfer as carriers work to adapt.
By: | November 19, 2019

For more than half of employers, workers’ compensation risk transfer still happens in the “usual” way, via the purchase of private workers’ comp coverage, according to the most recent data available from the National Academy of Social Insurance.

Self-insurance, however, is becoming an increasingly attractive option for workers’ compensation, particularly for small and mid-sized employers that first adopted or explored self-insurance for their health care benefits.

According to the Self-Insurance Institute of America (SIIA), more than 6,000 corporations and their subsidiaries nationwide operate self-insured workers’ compensation programs, not including employers who join group self-insurance funds.

One reason for the growth in interest is that workplaces are becoming safer overall, bringing the level of risk into a financially manageable range for a growing number of employers.

Another reason is the level of technology available to make it easier than ever for self-insured employers to manage and administer their own claims. A growing number of Insurtech start-ups are setting their sights on the pain points of workers’ comp claims.

TPAs Should Take Notice

These trends should be on the radar of carriers and TPAs alike as technology enables more employers to take their workers’ comp claims management into their into hands and kiss the middle-men good-bye — particularly those that have been slow to invest in technology.

Ivania Konieczka, vice president for workers’ compensation claims products at Liberty Mutual, knows both TPAs and traditional carriers can suffer from this inertia.

“One of the pain points in terms of handling claims is getting the funding and resources to continue to develop your claims handling practices to be up-to-date with modern workflows and highlighting all the potential risk areas in a more automated way,” Konieczka explained.

As employers and claimants demand 24-hour instant access to information, claims handler workflow can influence all aspects of the claim as it matures, and good workflows can ensure that the injured worker has all of the information they need at the very beginning of a claim.

“We are investing heavily in our mobile communication touchpoints with our injured workers and I think a lot of people in the workers’ comp space are trying to understand the intersection of self-service and what that really means for workers’ comp,” Konieczka said.

“For us, it’s a marriage of the injured worker experience and those mobile touchpoints; we want to advance those touchpoints, not replace them.”

Liberty Mutual has implemented a model that they call “Cat Playbook” which detects upcoming weather events that could affect injured workers in the area.

The system can identify the subset of claimants in that area that might benefit from being relocated because of the nature of their injuries, and those that lack direct deposit and are dependent on paper checks that could be delayed because mail is disrupted.

Mobile Applications Are the Future of Workers’ Comp

The intersection of self-service in workers’ comp is also at issue on the macro scale in the use of data analytics.

Audrey Allsopp, claim consultant and workers’ compensation practice leader for Connor Strong & Buckelew noted that all of the carriers and TPAs she works with offer some kind of mobile application to improve communication, but there’s still more that can be done.

Martin Frappolli, senior director of knowledge resources, The Institutes

Regardless of the data sources, experts generally agree that carriers need different protocols for employing data sets over time. “You can look at leveraging data on two different levels,” Konieczka said.

“At the claims handler’s desk, it’s about driving insights and operational dashboards to the frontline managers. If you’re thinking about the wealth of data that you have, how do you really extract those components that you think they need to manage to be effective? At the larger scale, it’s employing that data to make connections that humans aren’t going to make easily through modeling techniques.”

For his part, Martin Frappolli, senior director of knowledge resources at The Institutes, sees the innovation push driving insurers to place more emphasis on risk management services and loss control in order to prove their value and prevent claims from occurring in the first place.

Frappolli sees wearable technology and other IoT devices as major factors in that effort. Just as job growth in the United States is moving in the direction of services rather than labor, insurers’ level of service must keep pace.

“It’s not so much about reclaiming or maintaining premium at this point because exposures are shrinking,” Frappolli said. “Of course, there will be a continuing fight for slices of an ever-shrinking pie, but the big idea that insurers need to embrace now more than ever is replacing the premiums that come with exposures with risk management services.”

“I don’t anticipate dramatic premium drops in three to five years, but in 20 to 30 years, unless there are new exposures, we’ll see a dramatic drop,” he added.

Data Analytics Will Drive Risk Management

Those risk management services will again depend on data analytics. Geraldine Henley, senior vice president and claim services director for Conner Strong & Buckelew, put this in terms of the strength traditional carriers can have for predictive analytics on both the underwriting and claims side.

“Analytics tells a story and it’s a historical story, but it’s useful to avoid claims from happening in the future in certain situations,” Henley said. “Carriers, on a much greater scale, have what they consider to be much greater predictive analytics and outcomes-based strategies. This is only the beginning of the use of technology in insurance because we were behind to begin with.”

As insurance catches up with the rest of American business services sectors, it appears that the workers’ comp line could face a continued squeeze. An S&P Global report issued late September indicated that 14 of the top 20 workers’ compensation underwriters reported first-half premium declines.

Among that group, premium declined 3.5 percent, while total workers’ comp market premium volume declined 2.82 percent. As Frappolli indicated, this is largely due to lower frequency contributing to declines in loss ratios.

Traditional carriers have significant advantages awaiting them as they continue to parse the value of vast troves of data, injured worker self-service, and modeling in claims, but only if they can prove their worth before an accident happens as well.

As Konieczka put it, some in the marketplace think that technology can “disengage or offset touchpoints and processing” in claims, but they do so at their own peril. Rather, it is enhancing the connection to the injured worker that maintains the insurer/customer relationship in workers’ comp. &

Nina Luckman is a business journalist based in New Orleans, focusing primarily on the workers' compensation industry. Her credentials include a B.A. and M.A. from Tulane University, both in the study of English Literature. Over the last several years, Nina has served as Editor of Louisiana Comp Blog, a news site she started in 2014 under the auspices of a group self-insurance fund. Louisiana Comp Blog won the WorkersCompensation.com Best Blogs award in 2016, 2017, and 2018. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]