As our research has consistently shown, value-added services are increasingly one of the top areas of interest among customers, and one area of growing interest is integrated absence management for disability insurance. (We discussed this growing trend in a webinar with the Standard, a leading insurer that has provided integrated disability and absence management to their customers for a long time. You can watch a replay of the webinar here.)
Because apps and interfaces are now designed through a customer-first approach, not a product-first approach, there is a profound shift in how disability claims can be filed and leaves of absence requested, making the process straightforward despite all the regulatory nuances.
Employers are looking to their insurance companies or third-party administrators (TPAs) who manage their disability programs to provide an intuitive, digital platform where they can easily submit a leave request, view their time remaining and upload or download any necessary documentation to have their leave or claim approved.
Insurance companies and TPAs with a digital solution that provides integrated disability and absence management are well-positioned to address this significant market need, while providing customers with a single point of contact for their benefits, avoiding duplication and simplifying the employee experience.
Simplifying the Increasing Complexity of the Leave Landscape
It’s hard to talk about the leave of absence landscape without using the word "complexity." It’s increasingly difficult to stay on top of federal and state paid and unpaid leave laws, and there’s no sign of the complexity diminishing, with new regulations in the works.
The transition to remote working is adding an additional layer of complexity, with employees scattered across the country working from home, expanding the number of state regulations that must be managed.
As Lincoln Dirks, a senior compliance analyst for absence management at the Standard, put it during the webinar, “You take the already complex aspect of dealing with federal, state and municipal leaves in a given state, and then you multiply that by 50. The issue becomes that no two of these states run their programs in even close to a similar manner. Rules, regulations, processes, procedures all vary by state.”
This complex landscape, though, has created a significant market demand for absence management – making it the big trend for 2021! Employer customers need it because spreadsheets and sticky notes aren’t getting it done. And, increasingly, insurance companies are expanding their offerings to include it as an integrated value-added service, differentiating them in the market.
The Value-Added Service Opportunity for Insurers
These trends offer a significant opportunity for insurers to expand their offerings with an integrated disability insurance and absence management solution that their customers are seeking.
Watch the entire webinar and hear from the Standard on how they’ve elevated corporate programs with their integrated disability and management offering on the Majesco website.
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Denise Garth is senior vice president, strategic marketing, responsible for leading marketing, industry relations and innovation in support of Majesco's client-centric strategy.
This article, the first in a series, looks at how regression to the mean is often misused to justify false claims about the success of wellness programs.
Inaccurate marketing claims and outcomes reports are proliferating. The Validation Institute has staked out a position as the leader in assisting/promoting vendors and consultants in the “Integrity Segment” of the healthcare services market.
How can you tell if your adviser is in the Integrity Segment? The easiest way: Did they send you to this series, or did you have to find it on your own?
Part One in this series will cover regression to the mean (RTM). That is the tendency of outliers on the high or low side, over time, to come closer to the average. For instance, every season several baseball teams will win or lose all of their first four or five games. Yet, over the course of a full season, no team has ever won more or lost more than 75% of its games. And, over the history of Major League Baseball, no team has won or lost more than 58% of its total lifetime games.
What makes employee healthcare services RTM different from that baseball example (besides being more interesting) is that, while it is very easy to identify and ”count” outliers on the high side who decline in risk or cost, only a handful of consultants and buyers consistently also measure outliers on the low side. As you will see at the end of this article, a small number of vendors will also measure this way. The Validation Institute welcomes vendors who are willing to do that. We also welcome vendors who genuinely believed they were measuring validly, but after reading this article realize that they are inadvertently overstating impact.
Without measuring outliers on the low side, a one-way regression to the mean creates a built-in bias toward showing savings where none exist. Let us first examine this in theory, and then we will present examples of vendors doing this in practice.
Suppose your company, Vandalay Industries, has two asthmatic employees, George and Jerry. A vendor/carrier proposes an asthma program. George has an asthma attack generating a $2,000 ER visit in the baseline year. Jerry doesn’t; he isn't known to be asthmatic. George qualifies for the program. During the contract year, Jerry has a $2,000 asthma attack. George doesn’t.
Obviously, no asthma attacks were avoided, and Vandalay Industries saved no money. But that’s not the way wellness/disease management math works.
Here’s why. The vendor doesn’t have to measure Jerry because Jerry didn’t have any asthma-related claims even though he has asthma. Non-validated vendors either don’t know -- or know but won’t admit -- that people like Jerry, who need help but don’t show up in most data extractions, even exist.
Therefore, the vendor only reports on the observed, high-cost George…and
inadvertently or deliberately fabricates improved outcomes and savings for the “population” as a whole -- meaning just George.
Now consider a similar chart, but over four years. Instead of asthma, this is smoking. Instead of disease management, this is a wellness vendor’s smoking cessation program. And instead of asthma attacks, George and Jerry routinely quit smoking and then start smoking again, like many smokers do. In this example, assume they quit/resume every other year. Also assume that, to qualify for a smoking cessation program, you have to be a current smoker, of course.
A vendor can keep reporting 100% reductions in smoking every year, even as the number of smokers remains unchanged!
Not just a curious anomaly, this statistical sleight-of-hand has helped to fuel the rise of the wellness, diabetes and other “point solutions” industry.
Let’s consider several examples of vendors and carriers doing this in practice.
So far in this article, we have been careful to acknowledge that some genuinely honest vendors, consultants and actuaries simply don’t understand this fallacy, not having taken our course. The vendors cited below, on the other hand, are quite aware of what they are doing, as is obvious from their own displays, data and statements.
Here is an example of a vendor that “guarantees” a reduction in high-risk members. They don’t say anything about low-risk members increasing in risk.
Oversight? We think not.
If you examine their “bar chart” carefully, you’ll see that they’ve deliberately put the two-thirds of employees who are low-risk into the lowest one-third of the graph, to not draw attention to the fact that the large majority of employees are low-risk. In case you are wondering how they justify this sleight-of-hand arithmetically, count the bubbles. Each bubble represents 10 people.
This is exactly the same fallacy as above, with more realistic assumptions. Just like smokers quit and resume, people gain and lose weight. Blood pressure can go up or down. Bottom line: People change risk levels naturally, wellness program or not.
Take a few minutes (and it will take a few minutes) to digest this “natural flow of risk” chart, developed by Dee Edington. (Scroll to Slide #4.) As you can see, absent any intervention, people do fairly predictably change.
Here is how Interactive Health presented this fallacy before the company went bankrupt. The company divided the population into four risk categories and showed how people migrated between the two periods from one risk category to another.
Green improved between the two periods, yellow stayed the same and red got worse. The change between the two periods was mostly regression to the mean, according to their own chart.
You might say: “Well, at least they were being honest.” Haha, good one. Obviously, you are new to the industry. No, here’s what they claimed this chart showed. They said 49% of high-risk members improved, while only 8.8% of low-risk members got worse. True enough. Of the 10% high-risk to begin with, 4.9% improved, and only 5.1% stayed the same. Likewise, their percentages are correct for low-risk members getting worse.
But now consider what really matters—the number of employees, not the percentage. Because very few were high-risk to begin with, that 49% who improved constituted 259 employees. On the other hand, so many employees -- 3,007 -- were low-risk to begin with that the 8.8% who got worse equaled 264 employees. That’s five more than the number who
improved. You would never guess it from those percentages presented.
The Ultimate Perp…Apprehended!
One vendor, Wellsteps, actually admitted to milking regression to the mean, to fabricate savings. As a result, the company and a customer, Boise Schools, won the wellness industry’s highest honor, the C. Everett Koop Award. This was predictable because the award is generally given to people connected to the awards committee. (Boise Schools' CEO had been on it.)
Their many fabricated claims included this one:
In other words, they cherry-picked the worst employees and showed an improvement in them. Along with the unaddressed curiosity factor of how they conclude that chain-smokers only smoke four or five days a week, this is as pure a regression-to-the-mean play as exists anywhere. Their CEO, Steve Aldana, did admit that, to STATNews, as part of an exposé on their program:
“In just one year, many employees will move from one [risk] group to the other,”[Mr. Aldana] explained,“even though they did not participate in any wellness programs or any intervention whatsoever.”
That movement, he continued,“reflects changes in health risks that occur naturally,” making it possible that some high-risk people become low-risk “even though your program didn’t do anything.”
This program may have fooled the Koop Award committee, but it didn’t fool STATNews. Nor did it fool the Boston Globe, which devoted a full-page spread to Wellsteps actually making Boise School employees worse while pretending to improve them:
Lessons from this first installment include the following:
First, any vendor whose pitch includes: “We manage your highest…” should immediately be told to go get validated by the Validation Institute (VI) for that claim and then come back later. The honest ones will follow up. The others? This will be the last you hear of them. If a vendor includes anything like this pitch in their outcomes report, demand a refund. Those vendors are fully aware of the fallacy.
Second, dismiss any claim that compares percentage of improvers to percentages who get worse. It’s all about the absolute numbers.
Third, every VI-validated vendor offers a metric that controls for regression to the mean. (This isn’t to say this control is required as part of validation. It is merely required to be offered. You may not have the data to take the vendor up on the offer.)
For instance, U.S. Preventive Medicine specifically measures its risk reduction against that which would happen naturally. Cecelia and Virta are the only diabetes vendors that will allow you to contract for a simple comparison of the number of uncontrolled diabetics year over year across your population. These vendors avoid both regression bias and participation bias. The latter is another huge fallacy to be covered in our next installment.
Finally, please enroll in both our Critical Outcomes Report Analysis (CORA and CORA Pro) courses, which cover these and other fallacies. It is especially important to urge your consultants and brokers to enroll, as you are paying them to protect your interests, but the proliferation – even the continued existence -- of these fallacies strongly suggests they aren’t.
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Al Lewis, widely credited with having invented disease management, is co-founder and CEO of Quizzify, the leading employee health literacy vendor. He was founding president of the Care Continuum Alliance and is president of the Disease Management Purchasing Consortium.
There’s never been a better time for the finance function to transform and become an active leader and value creator for the entire business.
Advances in technology and data have redefined what’s possible for finance – comprehensive data makes it easier to connect performance across the business.
The goal is not simply to automate for efficiency but also to rethink the services that finance offers and how it can add value to the business.
Changing customer expectations, continuous technological advances and the explosion in the availability of data present compelling performance improvement and growth opportunities for insurers that can transform key parts of their operations, including finance. A fundamental new accounting framework will shift how the industry measures performance – another prompt for significant change.
Against this backdrop, we believe now is absolutely the right time for insurers to rethink, redefine and – yes – transform the broader finance function. Everything should be under consideration – from the purpose of finance and the services it provides to operating models and integration with the business, to the necessary tools and talent. Finance leaders must take a broader – and bolder – view and to assume a more active and strategic role in advising the business.
Thinking bigger and bolder about finance means integrating the multiple groups and functions involved in calculating, projecting and managing financials. Beyond the traditional finance unit, actuarial, investment teams and certain risk disciplines need to work together to provide accurate information and clear insight. EY’s vision for the future of finance includes all of these groups collaborating seamlessly and accessing the same timely data sets. Tax and treasury teams must also be more closely linked to the broader finance ecosystem than in the past.
Key drivers of change
Our report covers five critical drivers of change:
Shifting business needs: Changes in customer expectations, the competitive landscape, regulatory requirements, underwriting, technology and data have led insurers to make significant investments in new digital platforms, process automation and improved customer service capabilities. However, if decision support, insight generation, capital planning and enterprise protection capabilities – key roles for finance functions – can’t keep up, half of the value from initial investments will remain on the table. As the business evolves its operations, the broader finance organization must evolve how it evaluates investments, allocates resources, measures returns and reports on performance.
Technology tipping points: Technology has redefined the art of the possible for finance, actuarial and risk management. Advancements that seemed “just too hard” are now within reach, including the re-platforming and rebuilding of actuarial models, the migration of core ERP and enterprise performance management (EPM) solutions to the cloud and the implementation of data-as-a-service solutions that allow for huge scale, capability, speed and operational cost savings. The opportunities range from more straight-through processing to easier access to consistent data (which is critical for integrating with risk and actuarial), to enhanced scenario modeling and insight generation.
Increasing regulatory demands and the shift to long-term value: New accounting standards – including IFRS 17, IFRS 9 and Long Duration Targeted Improvements (LDTI) – are having a major impact. Regulatory requirements for data availability and transparency are increasing, especially relative to ESG. New metrics will fundamentally shift how both life and P&C insurers measure and report earnings. In some cases, finance leaders will need to help senior management (as well as financial markets) understand and interpret these new numbers. Insurance accounting has always been complex, and these new regulations will make it seem more so, at least in the near term.
An intensifying battle for talent: As cloud capabilities, artificial intelligence, machine learning and hyper-scale computing transform accounting, tax and actuarial processes, people will provide differentiation and competitive advantage through more informed decision-making and increased risk intelligence. Finance will need more analytical, tech-savvy workers, meaning that insurers must become better at attracting and retaining scarce talent. The next generation of talent is looking for meaningful workplace experiences, too, including access to advanced technology and careers that represent more than a paycheck.
The huge potential upside: The final – and perhaps most compelling – reason for reimagining the finance function is the upside potential it offers the business. First movers and early adopters will realize not just near-term value but a sustainable competitive advantage. Insurers that move quickly and boldly to digitize, integrate and transform their finance, actuarial, risk and tax functions will see the value in the form of increased operational efficiency and a strategically oriented function that adds value to the business.
Beyond these five drivers of change, the report highlights four key strategies to build the finance function of the future:
1. Set a vision, define the services that finance offers and integrate with the business
High-performing finance functions have clearly defined visions to guide everything they do, from process design and service portfolios to tech selection and organizational models. Developing such a vision requires asking potentially difficult questions, such as:
What value do we really offer?
Which capabilities are truly core?
Can others provide services more effectively than we can?
Finding the right answers is critical to defining the mission and purpose of the finance function. It is also important to define what finance does not do.
2. Strengthen the data management foundation to generate value
Strengthening data management capabilities is arguably the most important investment for creating the finance function of the future. That’s true because many firms struggle to manage enormous quantities of data residing in legacy systems – a problem that will only get worse as volumes continue to expand dramatically.
Finance organizations can – and should – serve as the gateway to deep insight into business performance. It’s not just about having clearer insight into current performance and efficiently reporting results; rather, finance must excel in data management so that it can provide the business with forward-looking views for better decision making.
3. Innovate, automate and optimize with enabling tech and the cloud
Those finance teams that have transformed automate end-to-end business processes to achieve excellence in service delivery. Straight-through processing across end-to-end processes is essential to achieving high degrees of efficiency and effectiveness. Indeed, widespread process automation enables a shift from transaction processing and data manipulation to more strategic, analytical and value-adding capabilities. The benefits of a strong technology strategy include:
More scalable applications and wider adoption across the business
Simpler integration across the application landscape
More flexible, on-demand access to computing power and capacity
Lower total cost of IT ownership
4. Get the right people and teams working in the right way
The right people, culture and organizational design are necessary for insurers to execute their service, data and technology strategies. Further, they are necessary to unleash innovation and maintain high-performance levels as finance functions become truly data-driven and tech-enabled. Not only must finance work more collaboratively with the business, but groups within the broader finance function must do the same.
Design principles for change
Driving transformation at this scale requires blending revolutionary thinking with an evolutionary approach to change, with a focus on cultural change and capacity expansion, and new sourcing and vendor management strategies.
To transcend the common pitfalls of failed transformation initiatives, finance leaders must combine bold, creative ideas with proven tactics that build momentum through incremental gains. Taking a long-term view will help shape viable plans that address the most pressing “fix-now” issues and create capacity for change without losing sight of the need for continuous innovation.
Cultural shifts are necessary to operationalize vision and purpose and, most importantly, sustain change. Achieving ambitious goals requires defining what you want to achieve, crafting the plan to achieve it and committing the necessary resources. Communication is important because more engaged teams lead to more effective change programs.
Beyond integrated data, advanced technology and empowered teams, tomorrow’s top-performing finance functions will also excel at building mutually beneficial relationships with key vendors and partners. Leaders must think through the various attributes they are looking for in their partners and how to optimally structure the relationships. Compatibility of expertise and cultural fit are important criteria.
The path to the future
Those finance groups expand their capabilities, streamline and link their processes and enhance their technology and data to help the business take advantage of market opportunities in a strategic, safe and informed way. They will enable the business to compete more effectively and therefore contribute more meaningfully to bottom-line performance.
As the central point for all performance data, finance is uniquely positioned to accurately measure performance, identify opportunities across the business and predictively model what’s to come. With such a perspective, it can provide strategic advisory services that help promote innovation and growth, even during a time of great uncertainty and rapid evolution.
While industry veterans understand the risks of overly ambitious transformation programs, we believe that the future upside is so compelling that finance leaders must act – and the sooner the better – if they are to create the value that’s within reach.
Thank you to Steve Capps, EY Global Insurance Finance Transformation Leader, for his contributions to this article.
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Yolaine Kermarrec is a partner, CFO Consulting Services, at Ernst & Young.. She advises insurers on finance transformation and has extensive international experience in the U.K., France and Australia.
Life and health insurance carriers place a high priority on innovation. In the International Insurance Society’s 2020 Global Concerns Survey, innovation was ranked as even more important than any other issue, including the implications of COVID-19 and cybersecurity. This was true across Asia–Pacific, EMEA (Europe, the Middle East, and Africa) and North America.
Unfortunately, only 35% of respondents said they had an actual plan for innovation. Perhaps that’s unsurprising given the nature of the business we’re in – risk averse and methodical – as we carefully plan for long-term, large commitments. But a lack of planning for innovation is an unhealthy habit that life and health insurers must break if they hope to survive the next decade and beyond.
The Life and Health Insurance Innovation Challenge
As an industry veteran, I’ve been working with life and health insurance carriers for the greater part of my career. There’s no getting around the fact that it’s difficult for traditional carriers to innovate. Many are large, structured organizations that have been doing business fundamentally the same way for decades. This consistency helps ensure they are around to pay when benefits are due.
A decade or so ago, many carriers purposefully avoided focusing too much time and energy on innovation. Their reasoning seemed sound: Insurance is a serious business; carriers are legally bound to pay high dollar benefits, so mistakes can be costly; the planning horizon can be 50 years or longer; and innovation in life and health insurance can be a risky bet that runs counter to tolerance levels.
Besides, if no one else in your industry is innovating, do you really need to push the envelope? Carriers were comfortable in their belief that the insurance industry and the market were slow to change. But times have changed.
I probably don’t need to dive deeply into the disruptors we now see in the life and health insurance industry. We read the news every day and hear stories about insurance start-ups, large and small, that showcase new ways of doing business. Most of the carriers I work with are aware that we should address processes up and down the value chain to find ways to compete and operate more efficiently. These processes include everything from marketing to sales, underwriting, policy issue and in-force management. The bottom line is that insurance carriers went from competing for every sale with a handful of known names to competing with potentially dozens of companies, from the tech giants to the small point-of-use insurance solutions, including some they had never heard of and some that were brand new to insurance.
I don’t want our founders, our legacy companies, to see core business slip away. The industry may have to take bigger, faster steps to innovate along the value chain and, in some cases, fundamentally restructure to survive.
Partnering for Innovation in Life and Health Insurance
In my experience, those who welcome outsider participation in innovation can unlock new ideas and solutions without the need to radically reinvent their current businesses. In fact, RGAX, subsidiary of global reinsurer and lifelong innovator RGA, was created to help traditional carriers do just that. But what works for one company doesn’t work for others. While many factors can affect a carrier’s ability to innovate, it is size, talent and timing that can determine when to jump forward with innovation activities and when to slow down.
Large, established players: In some ways, it’s hardest for large carriers to innovate. One might argue that they have the most to lose. On the other hand, they may have the most resources to dedicate to innovation.
While a partnering strategy in the past was often met with great hesitation, it’s becoming far more acceptable in large insurance organizations. As noted in NMG Consulting's 2020 U.S. Individual Mortality Reinsurance Study, 40% of large carriers said they had launched a partnership in the last twelve months. That’s a significantly higher percentage than the 13% who had indicated so in the 2019 U.S. Individual Mortality Reinsurance Study. In the wake of COVID-19, insurance executives seized the opportunity to advance timelines and progress initiatives currently underway or planned, resulting in a sharp lift in partnerships over the prior year.
While collaborating with an external partner can help large carriers break through many of the obstacles to innovation, they can also consider separating large innovation initiatives from the day-to-day operation of the business. A dedicated innovation team can function like a start-up within the business. They have access to funding and strategic resource support (think “parental support”) and also have existing markets available to test their ideas. The setup can help the carrier be more agile and, thus, able to act on immediate market feedback. Innovation teams are a great way for incumbent life insurers to ignite big, bold, new ways of doing business.
Mid-sized carriers: Mid-sized insurers and some larger carriers may elect to focus on a single part of the value chain or one small part, such as market acquisition, underwriting, policy issuance or claims adjudication. Instead of creating their own division or subsidiary, they can partner with an existing start-up to innovate the existing ways of performing that function.
This approach can be a win/win for both parties. The established carrier can generate and test ideas faster because it doesn’t have to create its own infrastructure and process to execute on them. The start-up has access to a market to test different solutions. Both sides bring knowledge to the table: The carrier knows the market; the start-up can challenge the carrier’s assumptions about what will and will not work. Then, together, they can set up trials, which can lead to prototypes and minimal viable products (MVPs). If prototypes and MVPs are deemed successful and positioned as ready for scale-up, the carrier may invest more time or resources into the start-up or even choose to acquire it.
Small carriers: Small carriers often don’t have the budgets to invest in innovation, so partnerships become even more important. They may look for more established (lower-risk) insurtech providers to help them test new ideas. Agility is their advantage, as it is often easier to get approval for new projects at small carriers. Also, markets are smaller but often more homogenous, making it easier to pilot initiatives in a direct, targeted way.
Looking Outside the Industry for Life and Health Insurance Innovation
Finding the innovators in your organization and teaming them up with innovators at partner organizations is a great start. But there are other ways to formalize innovation that are truly outside the box, and these can be doable for the traditional carrier.
Some of the best examples of truly innovative thinking have happened when a carrier invites product, technology and marketing associates from outside the industry to the table, for example, astronauts, scientists, academics and manufacturing experts. The carrier provides a “moonshot” idea, such as, “What if we offered free insurance? What would that look like?” and then let the group generate ideas.
An even broader approach is to crowdsource innovation. For example, RGAX holds a Big Ideas Contest (most recently in 2019), inviting innovators from outside the insurance industry to compete for a 10,000€ prize for the most promising ideas.
No matter how you structure your innovation initiative, it’s important to remember that companies don’t innovate. People do. Even if you partner with a start-up, you need someone inside your organization to manage the relationship without stifling creativity. The individual(s) will need to be focused on your objectives and priorities, but they should also place a high value on the relationship with the partner, allow some freedom of expression in how they work together and be willing to have fun.
Finally, a partner’s urgency may sometimes be stronger than the carrier’s, especially if it’s a young start-up without inherent risk aversion or the need to adhere to set processes. A relationship manager must have a proper sense of pacing to keep the creativity flowing without overwhelming the core business.
If nothing else, 2020 has shown us to expect the unexpected. The insurance industry is rapidly evolving, and, to keep pace, your organization will either innovate or be left behind. Choosing an innovation path can be intimidating. We invite you to dip your toe in the water by thinking about how your team can incrementally invite innovation and new concepts into your more traditional business opportunities.
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Denise Olivares is an accomplished product and marketing executive with global experience and proven results working for healthcare, insurance and data organizations including CIGNA and LexisNexis. She is currently consulting with Windy Hill Group.
One year after the start of the COVID-19 pandemic, Mitchell International conducted its annual survey of about 100 workers’ compensation professionals to determine how technology use changed in the industry during the pandemic and how those changes will continue. The survey found:
Technology use is increasing in the workers’ compensation industry
Predictive analytics and telemedicine stood out, showing that the industry rapidly increased the pace of adoption - or the desire to adopt - those technologies during the pandemic.
More than half of organizations report implementing telemedicine since the pandemic began, and respondents ranked telemedicine (35%) and predictive analytics (35%) as the technologies that will have the largest influence on the industry in the next five to 10 years.
Claims providers are facing pandemic-related challenges and are using technology to help overcome them. Almost one-quarter (22%) of respondents ranked adapting to pandemic-related challenges as the top obstacle their organization faces today, and 40% said they believe the pandemic is the leading driver of technology adoption.
Despite the technology changes in 2020, the workers’ compensation industry still has an opportunity to introduce automation into the claims process. Only 23% of respondents said that their organization uses straight-through processing for 50% or more of the medical bills they manage.
Telemedicine had the most substantial impact (35%) of all technologies implemented in 2020
As expected, most respondents reported that telemedicine had the most substantial impact (35%) of the technologies they implemented in 2020.
Survey respondents also indicated that they believe both telemedicine (35%) and predictive analytics (35%) are the technologies that will have the most significant influence in the workers’ compensation industry in the next five to 10 years, compared with other listed technologies.
The majority of respondents said the best application of telemedicine is or will be for provider visits (54%), followed by nurse case management (26%) and triage (21%)
Mobile placed at a distant third (8.5%).
These findings aren’t too surprising, as telemedicine, predictive analytics and mobile technologies have been key focus areas in workers’ compensation for years. Prior to the pandemic, 32% of people who responded to a similar survey in February 2020 said they thought telemedicine would have the biggest impact on the industry in the future and ranked artificial intelligence and predictive analytics as the next most potentially effective technologies.
It’s clear that telemedicine has been crucial in helping to deliver care to injured employees during the pandemic. With innovation and the addition of other technologies, such as wearables, telemedicine has the potential for broader uses in the industry and could serve a more vital purpose in helping improve claim outcomes for injured employees.
The workers’ compensation industry will see increased demand for predictive analytics
Respondents list claim triage as the most popular future application of predictive analytics (35%,) followed by severity or reserving (35%), intelligent decisioning and adjuster guidance (24%) and claim automation (22%)
Indeed, these applications of predictive analytics and more will be vital for efficient and effective workers’ compensation claims processing in the years to come. From triage to automation, predictive analytics can help claims organizations get the right information at the right time to make informed and intelligent claim decisions.
Changes and pressures from the COVID-19 pandemic are the primary driver of new technology adoption
While 40% of respondents noted the pandemic as the top driver for change, claims organizations are still looking to solve challenges that existed before the pandemic began
Respondents rated efficiency (22%) as the second top driver of technology adoption, followed closely by cost containment (20%)
The workers’ compensation industry still has a significant opportunity for automation
Despite the rapid rate of technology adoption in the past year, less than a quarter of respondents (23%) said they automate 50% or more of workers’ compensation medical bills using straight-through processing.
22% of respondents said they process 25% or fewer of their bills automatically.
Even fewer respondents said their organization processes workers’ compensation claims automatically, with only 16% saying they use straight-through process automation for 10% or more of their claims, and about a quarter (24%) said they only automatically process 0-5% of claims.
Typically, an efficient workflow passes 60% to 70% of medical bills through without human intervention, and it is clear the industry still has much opportunity to reach this level of automation. Straight-through processing offers many benefits, including removing repeatable tasks from adjusters’ workloads, boosting consistency and freeing employees up to have more time to focus on complex claims that need extra scrutiny and care to help achieve better outcomes.
While we may never achieve full automation of all workers’ compensation claims—unlike other lines of insurance, some workers’ compensation claims will always require a level of human touch. There are plenty of opportunities to boost automation now and in the future using rules engines, artificial intelligence like predictive analytics and more. As technologies become more advanced in the years to come, claims organizations will need to think about how they can strike the right balance and implement the appropriate level of automation that allows them to spend their time focusing on the claims that need special attention.
Mitchell surveyed nearly 100 workers’ compensation professionals at a range of companies, including insurance carriers, third-party administrators, public entities, managed care and risk management organizations, and brokers. The majority of respondents (75%) had 10 or more years of experience in the workers’ compensation industry.
You can find the full report based on Mitchell’s 2021 survey here.
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Rebecca Morgan is vice president of product management for Mitchell’s Workers’ Compensation Solutions. Her extensive experience in software engineering and creating advanced claims processing solutions are a reflection of her broader passion for continuous improvement, leading teams to high performance and forming strong partnerships with customers.
If insurance is a matter of predictive analysis, the most accurate prediction requires no analysis. The prediction is a sentence of pith and precision, economizing words while encompassing phenomena throughout the world. The prediction is a law, Stein’s law, whose namesake, Herbert Stein, was an adviser to presidents and the father of a speechwriter, Ben Stein, to a succession of presidents. The prediction says, “If something cannot go on forever, it will stop.”
What will stop is the obvious: a runaway stock market in which distance is infinite, speed limitless, direction ascendant and principal impenetrable. That people believe this trajectory is not only real but sustainable, that they believe this trajectory transcends Stein’s law as well as the laws of economics and common sense is reason for insurers to act.
What insurers must do is save the many, so people may protect their savings. Failure to act will result in a stoppage of incalculable stress and immeasurable loss, where tomorrow’s retirees have no way to retire save expiring en masse, save death in lieu of destitution.
Without life insurance, those who need a safe and tax-free source of retirement income will not have one. Without life insurance, those unable to work will be unable to live. Not without assistance from the government. Not without a concomitant rise in prices and collapse in dignity. Not without a recession in the economy and a sense of fear among the people.
Avoiding this scenario starts with alerting the public to the imminence of this threat.
The alert must be clear, thanks to the simplicity of the message and the frequency by which it repeats itself. The writing and delivery of the message is a charge the insurance industry must assume and a role it must accept. The costs are minimal, in comparison to the consequences of inaction.
To sound the alarm is to admonish the public, telling the many what to do and where to go.
To sound the alarm is not to sound like an alarmist, because the crisis we face is too extreme to exaggerate.
If the crisis is hard to understand, we must make it easy to comprehend. If the crisis is hard to define, we must make it easy to describe. If the crisis is hard to divert, we must make it easier to diminish.
The insurance industry must lead us through this crisis.
Steadfast in its dedication, the industry can secure its place in history; strong in its devotion, the industry can make history.
Saving a generation from financial ruin is a moral duty. The duty insures lives, providing for the defense of liberty and the pursuit of happiness. The duty demands exemplary counsel, by people of excellent character, for people in exigent circumstances.
The duty belongs to the insurance industry, allowing it to earn what no amount of advertising can buy: trust.
Honoring this trust enriches the lives of millions, exceeding the combined wealth of a thousand billionaires, because safety is a treasure of inestimable worth.
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Jason G. Mandel has spent over 25 years at the intersection of Wall Street and the insurance industry. Mandel founded ESG Insurance Solutions (www.esginsurancesolutions.com) in 2020 to help better integrate these two, often conflicting worlds Having a strong belief in ESG concepts (Environmental, Social and Governance), Mandel found a way of incorporating his beliefs in his business.
Representing only insurance carriers and products that he believes offer compelling risk management solutions and maintaining business practices that he can support, Mandel has led the industry in this ESG initiative. ESG Insurance Solutions serves some of the wealthiest families internationally, and their business entities, by providing asset protection, advanced tax minimization vehicles, principal protected tax-free income structures, employee retention strategies, key person coverage and tax-free enhanced retirement plans for their essential employees.
The COVID-19 pandemic has uncovered latent demand for insurance protection of all kinds as people grapple with how to protect their families from unexpected shocks. LIMRA's research shows strong direct-to-consumer growth over the past year for certain types of life insurance, for example. This surge in interest comes even though life insurance ownership rates have fallen nine points over the last decade to 54%.
Consumers have always understood the importance of insurance coverage. Financial Health Network's research found, for instance, that over 50% of people without life insurance knew they needed it. (Cost was the main barrier.) It appears that a global pandemic has forced even more urgency for protection and that people are finding a way to make it a priority. As consumers begin to seek more coverage, the industry needs to step up to meet their evolving needs.
Here are four ways that insurtechs have begun to do that.
1. Diversifying distribution channels.
There is a lot of chatter about how the traditional insurance agent is disappearing. But, at least in the medium term, agents aren't going anywhere. 89% of individual life insurance products were distributed by independent and affiliated agents in 2019. P&C numbers are similar, although auto insurance relies heavily on direct outreach. A more helpful perspective is to think about how to diversify the distribution channels to meet and serve a larger swath of consumers in many different ways. For example, group insurance distributed largely through employers represented 43% of all life insurance policies in 2018. As I've written elsewhere, there are limitations to employment-linked insurance, but it is still an important tool for distribution. How else can the industry diversify? Agents, employers, banks, and direct-to-consumer channels all have a role to play in getting insurance into the hands of the consumers who need it most.
We see insurtechs stepping out in new ways to reach customers. Some are going direct-to-consumer through AI-enabled chatbots that replace agents, like life insurers Bestow, Ladder and Ethos, and disability insurer Breeze. Other insurtechs are leveraging partnerships with financial institutions, like life insurer Everyday Life and disability insurer Simple Disability. Some of these companies have dual strategies relying on agents in certain cases and going direct-to-consumer in others.
People's protection needs change over time, but pricing and policy terms are often static. More insurtechs are introducing flexibility into how they price and provide coverage. Metromile and Hugo were innovators in offering pay-as-you-go auto insurance, adjusting coverage to people's driving habits and resulting in reduced costs. Everyday Life and Ladder allow customers to adjust their life insurance coverage, which can make policies more affordable for those with limited incomes.
3. Rewarding good behavior.
Behavioral incentives are getting increased traction with carriers of all kinds. Life insurers like Haven Life reward policyholders for healthy lifestyles. Lots of auto insurers are relying on telematic apps to reward good driving behavior. The auto insurtech Sigo has developed the first Spanish-language telematics app for the Latinx market. And startup Marble is building the industry's only rewards program, increasing engagement and loyalty between policyholders and their carriers.
4. Reaching the mass market.
Because insurance companies are in the financial resilience business, they can offer struggling customers the peace of mind and protection that only insurance products can provide. People themselves understand better than anyone else the risks in their lives, and they're looking for protection now more than ever. Sigo is reaching the Latinx mass market with affordable car insurance based on a fully digital experience and fairer underwriting. Harmonic is helping people build their financial safety net starting with a free $10,000 accidental death policy. Now is the time to embrace the mass market, listen to what they're telling us about their risks, and provide them with the protection and resilience they deserve.
This is a unique moment that presents a huge opportunity for the insurance industry. Consumers recognize now more than ever the importance of adequate insurance coverage to protect their families. They are looking for flexible, responsive, and personalized policies to fit their needs, their risks, and their budgets. Now is the time to seize on this opportunity to strengthen the financial well-being of all consumers.
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In this week's Six Things, Paul Carroll fears another rough summer ahead. Plus, gateway to claims transformation; the transformation of the risk landscape; way beyond comparative raters; and more.
In this week's Six Things, Paul Carroll fears another rough summer ahead. Plus, gateway to claims transformation; the transformation of the risk landscape; way beyond comparative raters; and more.
When I checked the weather for my town in Northern California over the weekend, I saw a “red alert.” What? Sure, it was windy and a bit warm, but a red alert? For what? It turns out that we’re already in fire season: Low humidity, high temperatures and strong winds meant severe danger for wildfires. At the beginning of May.
At the same time, all forecasts seem to be for an unusually active hurricane season in the Atlantic this summer. So, buckle up. As bad as the past few years have been, there’s no reason to think this summer will bring any relief from natural disasters in the U.S... continue reading >
In high school, a friend of mine had a poster on his wall that read, “Just because you’re paranoid doesn’t mean they aren’t out to get you.”
That pretty well summarizes how the world of cybersecurity and insurance works. Companies may feel paranoid for looking over their shoulder all the time, expecting something bad to happen, but we all know that there are plenty of bad guys out to find all the victims they can.
Join Michael Palotay, Chief Underwriting Officer for Tokio Marine HCC - Cyber & Professional Lines, and Paul Carroll as they continue their discussion on ransomware, cyber attacks, and how businesses can protect themselves.
Insurance Thought Leadership (ITL) delivers engaging, informative articles from our global network of thought leaders and decision makers. Their insights are transforming the insurance and risk management marketplace through knowledge sharing, big ideas on a wide variety of topics, and lessons learned through real-life applications of innovative technology.
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Another Rough Summer Ahead?
Buckle up. As bad as the past few years have been, there's no reason to think this summer will bring any relief from natural disasters in the U.S.
When I checked the weather for my town in Northern California over the weekend, I saw a "red alert." What? Sure, it was windy and a bit warm, but a red alert? For what? It turns out that we're already in fire season: Low humidity, high temperatures and strong winds meant severe danger for wildfires. At the beginning of May.
At the same time, all forecasts seem to be for an unusually active hurricane season in the Atlantic this summer. So, buckle up. As bad as the past few years have been, there's no reason to think this summer will bring any relief from natural disasters in the U.S.
This forecast on hurricanes calls for not only the sixth consecutive year of more hurricanes than average -- following a year when there were so many tropical storms that they ran through the entire alphabet of designated names and made it deep into the Greek alphabet -- but also for more that will make landfall in the Caribbean and along the U.S. coast. The reasons for concern are that the La Nina weather pattern is expected to last into the early summer and that sea temperatures are well above average in the Caribbean and Gulf of Mexico.
While wildfires are harder to predict, this Washington Post article reports that structural changes in the weather are making California more vulnerable. The big issue is that the dry season, which lasts roughly from late spring to late fall, is expanding, according to analysis from weather stations around the state from the past 60 years. For instance, Sacramento, near where I live, has seen the onset of its rainy season delayed by three weeks just since 1979. San Francisco has had its dry season expand by 14 days.
About 4.2 million acres burned in the state last year, an area larger than Connecticut and twice as extensive as the previous worst season on record. (In a bizarre story, authorities allege that one of the major fires was set by someone who had killed a woman and wanted to hide the evidence of how she died; the fire killed two men whose homes lay in its path.)
It's been a dry winter, so who knows how bad this year will be?
Technology is finally being deployed that uses sensors to track the progress of fires and help with deployment of resources -- firefighting has been described as "100 years of tradition, unimpeded by progress" -- but that seems to be a few years away from making a major difference.
For now, we seem to need to brace for a wet, stormy summer in the Caribbean and along the Atlantic coast and a long, hot summer in my neck of the woods.
Keep your fingers crossed.
Cheers,
Paul
P.S. Here are the six articles I'd like to highlight from the past week:
Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.
How well have insurance-industry sales teams coped with Covid-19? In a complex industry, where brokers and carriers each have client relationships, have sales and service teams been able to maintain and expand relationships? We set out to explore those questions with a focused survey of brokers and carriers, conducted in March 2021. The full report, Insurance Relationships: Obstacles and Action Areas, written by AchieveNEXT’s Ed Wallace and Jennifer DeMello-Johnson, VP of agency services at Amerisure Insurance, can be downloaded here.
Some headlines:
Both brokers and carriers give themselves high marks for the ability to retain and service existing policyholders, despite the disruptions of the pandemic year.
A third say they are fully confident in this area, and a negligible 2.5% say they lack confidence.
Writing new business has not been as easy. One in 10 lack confidence, and just over a quarter describe themselves as fully confident of their capabilities.
What accounts for the difference? Processes play a role. Much of the business of servicing existing clients is organized, automated and buttoned down. Selling is more often ad hoc and individualized and, respondents say, often inconsistently handled — a problem when work moves online. Technology also matters, especially when brokers and carriers use different systems that do not communicate with each other. Incentives are a problem. Nearly one in five -- 17.5% -- believe that sales compensation plans are actually misaligned with company goals, and there can be clear tensions between brokers and carriers.
Compounding these challenges is the difficulty of establishing new relationships in a hybrid environment. That hypothesis resonates with what we have seen at AchieveNEXT, where we offer sales and business relationship training as part of a suite of human-capital services. My colleague Ed Wallace, co-author of the study and author of The Relationship Engine, says, “Across industries — and insurance is no exception — we see people who are superb at one-on-one selling or at working the room but are fish out of water when it comes to hybrid selling. At the same time, a lot of people who are great at selling online and on the phone need help turning transactions into relationships.”
In fact, according to Jennifer DeMello-Johnson, “We are recommending that our agency partners adopt a 50/50 balance between one-on-one and virtual for the balance of 2021.”
One thing for sure is that legacy sales models will need to evolve in a way that works on technology, processes, and skills together, and that crosses broker-carrier borderlines.
Click here for a copy of Insurance Relationships: Obstacles and Action Areas
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Thomas A. Stewart is the chief knowledge officer of AchieveNEXT, which helps individuals, teams and enterprises reach the next level of performance through a combination of peer-to-peer networks, research and human capital solutions.
