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Claims Development for COVID (Part 1)

The latest Out Front Ideas With Kimberly and Mark webinar brought together a panel of industry experts to explore current trends being seen in COVID-19 claims, as well as long-term medical complications and what risk managers should be monitoring in the future. 

Our guests were:

  • Teresa Bartlett, MD – senior medical officer, Sedgwick
  • Max Koonce – chief claims officer, Sedgwick
  • Tim Stanger – vice president – partner relations, Safety National
  • Alex Swedlow – president, California Workers’ Compensation Institute

One of the most significant challenges in analyzing workers’ compensation data is that a single data source that collects and analyzes all the data does not exist. Data is currently provided through multiple sources such as the National Council on Compensation Insurance (NCCI), independent bureaus, monopolistic jurisdictions and self-insured employers. The California Workers’ Compensation Institute (CWCI) and the Workers’ Compensation Research Institute (WCRI) also provide analyses around workers’ compensation data.

To fill in some of the major gaps in data, panelists from CWCI, Sedgwick and Safety National break down their individual data sources to provide a clearer picture of COVID-19’s impact on workers’ compensation.

CWCI Claims’ Data Trends

In tracking the various components of COVID-19, CWCI has developed studies and on-demand webinars that cover the history of presumption laws, early adjudication decisions and how the industry leveraged telemedicine as a response to shelter-in-place initiatives. In addition, webinars are now available regarding legislation. When developing early COVID-19 models, essential elements were considered, including:

  • Infection rate
  • Symptomatic/asymptomatic rates
  • Hospital admissions
  • Intensive care admissions
  • Mortality rate
  • Cost per claim

Early projections related to COVID-19 claims were skewed based on a lack of stability in data modeling. The earliest data contained areas like China, Iceland and Greenland, with infection rates that were much different than other parts of the world. Once data became available regarding COVID-19 in the U.S., it was clear that the U.S. held a disproportionately large percentage of worldwide infection rates and deaths. 

California alone currently accounts for 13% of U.S. infections and 9.6% of U.S. deaths. When studying workers ages 18 to 65 in California, they account for 78% of the state’s infections and 26% of the deaths. However, when looking at the number of workers’ compensation claims in the state, only 4.7% of infections and 5.6% of deaths have an accompanying claim.

As of January 2021, there have been 123,674 COVID-19 workers’ compensation claims reported. Projections show about 143,432 claims expected through the end of January 2021. Reported claims from March 2020 to January 2021 show a 12% drop in all non-COVID-19-related claims. However, projections show that by the end of January the overall decrease in claims frequency will be around 4%, with almost 20% of all claims being COVID-19-related.

See also: 9 Months on: COVID and Workers’ Comp

The occupational characteristics of COVID-19 claims have changed with the fall wave of the virus. From October 2020 to January 2021, the healthcare industry share of claims dropped around 10%, accounting for around 29% of all COVID-19 claims. First responders have seen minimal change over the year in terms of their percentage of the total claims. Claims for the transportation sector doubled in the fall, now accounting for 8% of COVID-19 claims. Skilled nursing facilities still share a significantly higher percentage of COVID-19 claims in health care. 

Safety National Claims’ Data Trends

As a leading provider of excess workers’ compensation for self-insured entities, Safety National has seen that around 50% of its accounts consist of three industries: public entities, health care networks and education. Self-insured data is missing from bureau analysis, making Safety National’s data unique.

Consistent with CWCI’s data, overall workers compensation claims for Safety National clients dropped around 26% in 2020 compared with 2019, excluding COVID-19 claims. When including COVID-19 claims, the drop is around 10%. There were roughly three peaks throughout the waves of COVID-19, including early April, early July and early December, with the December peak being the highest number of claims seen all year. 

By age, the 20-55 bracket accounted for 84% of Safety National claims, with the average claim cost being $4,300. When looking at workers over age 55, the average claim cost was more than three times higher at just under $15,000. 

63% of death claims were age 56 or older, 43% were between the ages of 56 and 66. 61% of deaths were male. 51% of death claims were in healthcare, and 22% were from municipalities (mostly first responders).

Among the COVID-19 claims with an incurred cost of over $100,000, 15% have incurred more than $1 million. Some claims have over $2 million incurred, including organ transplants, long intensive care stays and even paraplegia caused by renal failure. 

Sedgwick Claims’ Data Trends 

Sedgwick also carries many self-insured accounts, with 24% of its business being in the retail sector. Like the rest of the industry, Sedgwick’s claims also saw high volume during the three peaks of infection rates. Although healthcare only represents 11% of all of the company’s accounts, most COVID-19 claims were reported from that sector, accounting for just over 50% of all reported COVID-19 claims. The retail industry and the public sector round out the top three industries reporting COVID-19 claims. The top five states reporting COVID-19 claims are California, Texas, Michigan, Florida and Illinois. 

When it comes to the severity of the claims, Sedgwick created a model to project where claims would fall, grouping claims into buckets, including:

  • Cases that only required quarantine 
  • Cases that required nominal medical treatment
  • Complex moderate cases 
  • Complex severe cases, requiring ICU
  • Fatalities

These severity groupings have closely trended with original predictions, with fatalities, for example, accounting for just over .5% of all claims. Approximately 1.5% are severe cases involving ICU stays, 8% are moderate cases involving several medical treatment visits and 90% are mild cases involving very little medical treatment. When reviewing these claims’ value, 73% are valued under $5,000, and 85% are valued under $10,000. 

See also: 20 Issues to Watch in 2021

There has been a fairly even distribution of claims among the age groups due to various industries’ claims. However, the more severe claims that include ICU stays are trending in the over-60 age group. The healthcare industry is accounting for a higher rate of hospitalizations than the other industries, trending 3% to 4% higher than the rest.

Overall, Sedgwick saw a decrease in workers’ compensation and liability claims across the country due to economic shutdowns and various employers not operating at full capacity. Even retail clients deemed essential saw a decrease in overall claims, which could be due to a lower customer count within the stores and an overall increase in safety measures. There has been a slight increase in work-from-home claims due to ergonomic-related issues.

To listen to the archive of our complete COVID Claims Development: Workers’ Compensation & Beyond webinar and view a full list of FAQs from this session, please visit https://www.outfrontideas.com/.Follow @outfrontideas on Twitter and Out Front Ideas With Kimberly and Mark on LinkedIn for more information about coming events and webinars.

7 Ways to Innovate With Purpose

President Kennedy is quoted as having said, “The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger, the other for opportunity. In a crisis, be aware of the danger — but recognize the opportunity.”

As I write this, the news coming out of Texas regarding the week’s extreme weather is today’s reminder that we face continued crises. (Hoping that everyone there reaches the end of this ordeal soon.)

Innovators can contribute to harnessing crises as opportunities, ensuring that collectively we focus beyond directing efforts to reverting to the way things were.

Now is the time to ask the basic question — “what is our purpose?” — because the answer will provide the means to align strategy, people, capital and other resources to innovate under remarkably different circumstances than most of us imagined a year ago.

Why should innovators focus on purpose?

Evidence suggests that purpose-led brands:

  • Always know where they are heading
  • Use their defined purpose to guide them through uncertainties
  • Sustain a workforce that brings their best selves to the organization
  • Increase their ability to overcome challenges and achieve results.

What more useful and practical tool could there be to drive innovation?

What is the path to create a purpose-driven organization?

  1. Believe it is possible to inspire a purpose-led workforce.
  2. Sponsor and empower a diverse team to lead a collaborative, iterative and disciplined process to define the business’ purpose.
  3. Commit to constant communication.
  4. Know that the organization must, to paraphrase the late author, futurist and businessman Alvin Toffler, “Learn, Unlearn and Relearn.” This is transformative.
  5. Avoid a top-down approach.
  6. Connect the organization’s purpose to execution — to individual actions and decisions.
  7. Identify and enlist change makers and influencers on the team and from outside who can be role models, helping peers build the confidence to embrace the change.

Two examples

Patagonia was well ahead of the times on being purpose-driven. The brand’s purpose: “To build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”

On Black Friday 2011, Patagonia ran this now famous ad in the New York Times.

This ad is one example of what being authentic to a purpose means. Business priorities are supported by Patagonia’s purpose: reinforcing brand values and product durability, justifying premium pricing and differentiating in a busy category.

Consider CVS’ commitment to purpose, beginning with its name change in 2014, from CVS Caremark to CVS Health. The change aligns with the company’s purpose: “Helping people on their path to better health. Whether in our pharmacies or through our health services and plans, we are pioneering a bold new approach to total health. Making quality care more affordable, accessible, simple and seamless.”

CVS decided to halt selling any tobacco products as part of a deliberate realignment, including establishing new health partnerships and in-store services and merging with Aetna. CVS gave up a reported $2 billion in annual tobacco sales and then saw overall growth. A further stakeholder impact has been that the move out of tobacco created public health benefits as studies have linked overall declines in tobacco purchasing with CVS’ decision — and the decline also includes other tobacco sellers.

Ways to test the strength of purpose

Look to these execution indicators as a starting point:

  • Is the purpose evident in the organization’s daily behaviors, or is it stuck inside presentation decks?
  • Is the purpose equally relevant to internal and external stakeholders?
  • Does the purpose inspire employees, vendors and partners and guide their daily actions with respect to the brand?

See also: Pressure to Innovate Shifts Priorities

Three Ways to Learn More and Take Action

  1. In The Change Maker’s Playbook: How to Seek, Seed and Scale Innovation In Any Company, the Seek phase of the methodology is packed with practical stories and advice on how to embed purpose in the innovation effort, and why it matters to create business results from these investments.
  2. I’ve also launched a prototype of a workshop engaging leadership teams to experience the Playbook in a compact, action-oriented session.  Reach out if you would like to learn more; you can shape the content and make it your own. 
  3. In the current issue of Carrier Management ,you can find an expanded version of this letter, specific to the insurance sector. 

How Giving Back Pays Dividends

In business, change is constant. After spending years (or even decades) building your company, common sense tells you that future success relies on change as new organizations enter the market. For an industry to grow, expand and move forward, companies that have already achieved success should look for ways to give back to the industry that helped them flourish.

When leaders view their industry counterparts as collaborators, this attitude has a way of infiltrating the entire organization. Employees within a company can begin to take on a mentality where success and opportunities are unlimited, affecting everything from teamwork to innovation. Over time, employees feel even more confident about sharing ideas, making mistakes and taking chances.

Not investing in your counterparts only squelches the potential of innovation in your industry. Besides, industry dedication can inspire others in your company to do the same — creating a work environment of collaboration, self-development and creative thought. It’s like reinvesting in your business.

Take Doug Conant. The former CEO of Campbell Soup did many things to improve the business, but one of his most significant moves was weaving “abundance” into its DNA. While this abundance took the form of corporate social responsibility by focusing on sustainability in the agricultural supply chain, the notion that people want to work for aspirational organizations is universal.

Giving back to the business community provides a similar effect. People become more engaged, creating a better workplace and positioning their businesses to succeed in the marketplace. Even in the more competitive “niches” of the insurance industry, there is room for more than a handful of players.

Investing in the Community Is an Investment in Yourself

Engaging with industry colleagues builds connections that create more promising opportunities for success for everyone involved. This is certainly true in insurance and financial services.

“The rising tide of a strong marketplace with continuing growth lifts all boats,” said Scott Berlin, senior vice president at New York Life and a member of the board at PIMA, a trade association that brings companies throughout the insurance and financial services ecosystem together to learn from each other and improve the industry.

Instead of competing for a larger share of the same pie, Berlin said companies are better off working together to grow the size of that pie. These partnerships also provide insights into shared industry challenges, offering an opportunity to develop new approaches. These actions don’t just ensure a healthier marketplace — they also deliver new perspectives to all participants.

“Working together within one’s business community provides the opportunity to grow personally as a leader,” Berlin said. “Sometimes, the best lessons are learned when not doing your day job.”

See also: Navigating Confusing Insurance Regulations

Aside from obtaining growth or insights, sharing expertise can differentiate an individual as an industry thought leader while also inspiring others — cementing your reputation as a leader. This does more than give you added clout. It provides an opportunity to enact real change, helping your industry raise awareness and better serve consumers.

All it takes is for you to raise your hand and share the wins, challenges and insights you’ve gained through years of experience. This level of collaboration can help the entire industry grow.

“In the insurance industry, we have an opportunity to better position ourselves with consumers,” Berlin explains. “We sell valuable products and services, yet we’re hindered by a general lack of awareness. Working together, we can better educate consumers on potential solutions to their needs and highlight the benefits and guarantees we provide.”

One way to start is with “co-opetition.” Partnering with a competitor ends up benefiting both parties and providing stronger value to consumers. For example, Australian-based financial services company Suncorp often partners with innovative, tech-focused startups to offer on-demand services to its customers.

One easy way to practice coopetition is through peer groups. PIMA members, for instance, can join peer advisory forums, interest groups and a private online community. We’ve also formed an agency CEO forum that enables CEOs to meet with competitors throughout the year, to learn from one another and share insights on ways to improve the industry. It can be difficult to start conversations with people we perceive as competitors, but peer groups make it simple. And don’t be afraid to include new entrants or people outside the industry in your peer groups — inspiration can come from anywhere.

New York Life, for example, has its own venture capital arm that has tapped into startups that address the challenges experienced by many life insurance companies. The startups receive the invaluable backing of an established organization, and New York Life gains important insight into the future of life insurance.

To elevate the industry as a whole, be open to collaborating with industry peers while creating opportunities for mutually beneficial connections. You have the power, the capacity and the resources to support collective industry success.

Are you interested in sharing your perspectives with industry peers? Learn more about the PIMA community at www.pimainsights.org.

How AI Will Define Insurance Workforce

Prior to COVID-19, the U.S. boasted historically low unemployment and a roaring economy. Nearly every industry was expected to face a severe talent shortage within the next 10 to 20 years. But then March hit, and the world turned upside-down.

Since then, the pendulum has swung in the other direction. The current unemployment figures are reporting as many as 10.7 million people are out of work, and, despite this sudden abundance of available workers, staffing issues remain — they’ve just become more complex.

To navigate this wildly fluctuating environment, companies will rely on data for decision-making about hiring, training and countless other matters that affect the bottom line. This will require tools, like artificial intelligence (AI), to make sense of data and to adjust quickly amid uncertainty.

The best way to examine AI’s value in today’s uncertain world is to look at how it can work within a specific industry. Doing so makes it possible to show practical applications from which lessons can then be applied to other industries.

Commercial Insurance: A Case Study

Like other industries, commercial insurance faced a significant hiring crisis pre-COVID-19. The average claims adjuster remained in the industry for just four years — about the time it takes to gain full expertise — and those workers who stuck with claims have inched closer to retirement. So, this multibillion-dollar market is at risk of losing much of the human brain trust that enables current systems to run, as new workers cannot be hired, trained and retained fast enough to balance the scales.

Fast forward to today. Commercial insurance looks markedly different. The types and volumes of claims are changing. For example, claims related to COVID-19 contact or work-from-home circumstances are rising quickly, as are post-termination claims, while traditional claims have dropped.

At the same time, access to traditional healthcare has been in flux. To combat the limitations on available providers, telehealth solutions have exploded, opening up a whole new set of providers that claims reps need to become somewhat familiar with to facilitate claims accordingly — claims that bear a greater potential for fraud and litigation, which cost companies millions of dollars each year.

In short, almost everything about claims operations has changed — and, like many other industries that have been traditionally slow to adapt to new challenges, commercial insurance faces real hurdles.

The Importance of Data and Intelligence

Data is the key to overcoming dramatic changes within a relatively static industry. Maintaining a pulse on what’s happening across a business, or with a specific claim, and how it relates to things experienced previously is important; spotting trends early is vital. Organizations require data to determine if their plans and practices are working — and, if they are not, data should be used to drive intervention and adaptation.

But thousands to millions of data points alone won’t save the day if an organization doesn’t have the capability to understand what the data is telling them. What is the context? How are points connected? If a trend continues, what will be the effects six months or two years from now?

AI systems unlock the meaning of data to make it useful, pinpointing where organizations need to make adjustments. In commercial insurance, AI could allow for expanding provider networks to offer better, faster access to care. To actually expand networks using quality providers, systems need to tap into more data to learn which providers have achieved the best outcomes on which types of cases.

What is particularly exciting about implementing AI in this rapidly changing environment is that interpretations of data are not fixed. Machine learning capabilities are constantly refining and updating insights so that organizations — and their people — can respond accordingly.

See also: How AI Transforms Risk Engineering

Designing the Future Workforce

So, if data analytics and AI become staples in modern business, how do they solve the human resource problem? What do they mean for the future workforce? The answer is threefold.

Data determines what your hiring needs actually are: In a world that is changing so quickly, your business might not need as many people specialized in a certain area, whereas new opportunities or divisions may emerge. Your business may be forced to alter its offerings to match customer needs. Data is the guide; it lets you home in on exactly what skills are required.

AI guides training: Because AI is able to analyze so much data so quickly, new hires are able to access the information and prompts they need to do their jobs well as soon as they need it. There is not as much feeling around or dependency on senior colleagues. This is not to discount the value of experience, but it means that workers can reach a competent level much faster; what they lack in experience and intuition is replaced by data-driven insights and standardized practices.

AI augments jobs: AI solutions take care of many of the rote tasks workers are routinely bogged down with today. As a result, employees can focus on making more efficient, informed decisions; they can actually use their brains more. AI flags potential errors or problems so that they can be addressed before they escalate. Reps can focus on delivering compassion at a time when people need it most.

While COVID-19 has fundamentally altered the future workforce, tools like AI help get it back on track. In leveraging it effectively, organizations will become nimbler and more responsive to conditions while employees are more knowledgeable and effective.

What the Recent Deep Freeze Portends

I guess you could say growing up in Minnesota and spending most of my life in a climate that is exposed to winter weather almost half of the year has made me an expert in how winter weather can affect the insurance industry.

There is no denying that the recent Arctic outbreak was severe and historic meteorologically. The list of records and stats is very impressive and too long to list here, so I’ll just reference a good tweet thread by Alex Lamers, who is a meteorologist at NOAA weather prediction center.

The main point the insurance industry needs to understand with this extreme cold is that it occurred in the middle of February, which makes it climatologically that much more impressive, because the cold was topping records and stats that usually occur in late December or early January. The other impressive nature of this Arctic outbreak is the duration, which when combined with the time of year makes it that much more important an event.

We know the Deep South can get severe cold, but the prolonged nature of the cold this late into the winter season is a tail event meteorologically.

You might have seen several different sources of winter storm loss trends shared across different insurance publications, but one needs to use caution in truly understanding winter storm losses. The best example I like to use is the superstorm of 1993, which lasted from March 11 to 14 and which is often used as a benchmark winter storm loss event for the insurance industry.

It is classified as a winter storm due to its large impacts on the Northeast states with winter weather as the storm developed into a powerful nor’easter. However, over 40% of the loss came from severe weather that occurred in Southern states from a very strong cold front. The largest event loss (35%) impacts occurred across the state of Florida from numerous tornadoes. Although many in the insurance industry reference the inflation-adjusted loss of over $3 billion for the 1993 superstorm, social economics mean the loss was much larger.

BMS RE view of Winter Storm seasonal losses that exclude events with severe weather. You can easily see the current deep freeze will clearly be in a league of its own in terms of true winter weather losses

BMS has taken steps to truly understand trends in winter weather events that only look at flooding, freezing temperatures, ice, snow and wind as possible causes of loss, as shown above.

Only two recent periods meteorologically would be comparable cold weather-related loss events, Dec. 17-31, 1983 and Dec. 21- 26, 1989. Today, these events would have resulted in $2 billion and $1 billion in insured losses, respectively, after adjusting for inflation, with no way really to understand how social-economic factors might have played a role if that type of cold occurred today. The current loss development with the 2021 Arctic blast seems to be several times the magnitude of any cold-weather loss the insurance industry has ever experienced.

See also: Increasing Regulation on Climate Change

This is largely a result of the insurance industry taking the brunt of a compounding event, which will be one of the topics at this year’s Virtual Reinsurance Association Cat Risk Management Conference. This winter storm is the latest example of a compounding event to affect the insurance industry, resulting in much higher losses than what should likely be expected from an event.

The cold was historic. It was also the trigger for power outages that resulted in the inability to heat and move water, which resulted in water outage. This compounded into many other impacts, like internet outages and even trash collection delays, making the already miserable situation even worse, and likely a worse insurance industry loss.

If the power had stayed on and the demand could have been met, the losses would not be nearly this bad. Time and time again, we see the long-term lack of electricity compounds the overall insured loss. Hurricane Maria’s impact on Puerto Rico or the compounding impacts of the Tohoku Earthquake in 2011 come to mind as recent examples where the lack of power for a prolonged period had very large compounding impacts on insurance industry loss.

Therefore, is it time for the insurance industry to take a much larger role in the vested interest in helping ensure power grids around the world are reliable during times of disasters? Some might say the opposite is happening due to environmental, social governance impacts. The American Society of Civil Engineers rated U.S. infrastructure a D+.

Maybe in the future, the insurance industry can be at the table during discussions around critical infrastructure, which seems to have a clear impact on insured losses.