For as long as property and casualty insurance has existed, there’s been a need for workers’ compensation coverage. This product has hard-earned roots, beginning in the 1900s when employees injured on the job had to fight for compensation for lost wages, medical expenses and other recompenses. Over the next 100 years, workers’ compensation insurance became a mainstay of the risk management practices of a business, as legislation required business owners to provide coverage in specific amounts.
One might argue that because of its necessity, workers’ compensation coverage has not needed any product development over the years. While the product has had some small changes due to legislative reforms, the services that accompany the product have been constantly evolving due to the changing hazard environment and the fast pace of technological change that has been introduced in the past few years. This is where Insurtech plays a starring role.
What is Insurtech?
Insurtech is a broad umbrella of technology solutions that help solve inefficiencies that exist in the insurance value chain and improve the customer experience. A large number of nimble startups are at the helm of these Insurtech solutions, which are rapidly becoming mainstream as customer expectations drive the desire for high quality, low price, and minimal inconvenience. As the insurance industry adopts these solutions at a brisk pace, businesses and injured workers are seeing significant benefits. Insurtech solutions straddle the entire insurance value chain and come in many forms. According to a recent report by McKinsey, Commercial Lines insurtechs are focused more on digital distribution and core insurance capabilities like underwriting, pricing, product development, and claims. Regardless of its specific niche, Insurtech solutions allow for enhanced resolution of customer needs, which enriches the value chain.
The buying process is an area that has received a lot of attention from Insurtech startups. The process of purchasing a workers’ compensation insurance policy is complex and time consuming for an employer.
As the insurance industry adopts these solutions at a brisk pace, businesses and injured workers are seeing significant benefits. Insurtech solutions straddle the entire insurance value chain and come in many forms
Insurtech solutions perform a wide range of purchasing tasks, such as helping businesses compare offerings, or providing a quote and binding coverage with just a few clicks and pieces of data. These solutions are powered by strong analytics backed by big data. In some cases, it’s possible to complete the entire transaction of purchasing a worker’s compensation policy in a matter of minutes. A policy is even emailed to you at the conclusion of the transaction. Insurers also have the ability to pick their customers. Their choices are based on propensity and retention models that predict the ability to win an account, the probability of losses that an account might sustain and the probability that the business would stay loyal to the same insurer for a long term.
Underwriting and Pricing
Use of predictive models for pricing is very common in workers’ compensation. Insurers have the ability to analyze hazards inherent to the client, loss patterns and a myriad other details before writing a piece of business. Artificial intelligence, machine learning, and predictive models help drive more accurate pricing, and an improved prediction of services the business would most benefit from.
An organization’s ability to protect the safety of its employees, and rapidly bring them back to work after an accident, is key to running a successful business. Insurtech solutions have had a tremendous impact in this area of workers’ compensation insurance. Artificial intelligence solutions for personality assessment can hire the right employees for the job. Moreover, job sites can be monitored to reduce worker injuries and lower workers’ compensation claims. Solutions include aerial surveys by drones; wearables that detect improper lifting; smart helmets that identify unsafe environmental conditions; sensors that track the movement of people near hazardous sites; dash cams that alert a driver when distracted or drowsy; and telematics devices that help improve driving behavior. There are infinite possibilities, including artificial/virtual reality solutions that reinforce just-in-time training.
Claims is another function that has been significantly altered by Insurtech solutions. Big data, artificial intelligence, and machine learning are used to detect fraud; triage claims to ensure those likely to become complex are escalated to experts earlier in the process and to guide workers to facilities that will provide the best medical outcomes. Automated claims adjusting also eliminates delays when claims are routine in their exposure or severity. Finally, data from the job site can provide guidance for return-to-work solutions, guaranteeing the most positive impact for the injured worker and their business.
In conclusion, actively partnering with insurtechs can help commercial carriers grow their customer base, improve their cost structure and expand their services. Carefully constructed proofs of concept, pilots, and the appropriate partnership models allow a carrier to reap benefits with the right Insurtech partners. Insurtech creates a powerful partnership between the technology supplier, carriers, agencies, and policyholders enabling each of them to benefit from the implementation of these technologies.