Tag Archives: verification

May the Forms Be With You!

“Star Wars” first appeared in theaters on May 25, 1977, unleashing one of the great, galactic pop culture tsunamis ever seen. And while there has been an explosion of technology and innovation since that time (one that would rival the explosion of the Death Star), virtually nothing has been done regarding the way insurance information is shared via forms, certificates of insurance, driver ID cards and the like.

Workers’ compensation may be leading this backward trend.

It’s no wonder that workers’ comp insurance draws a lot of attention. Covering more than 90% of the workforce, with more than $45.5 billion in total premiums from both private carriers and state funds and a combined ratio of 94%, workers’ comp is one of the few bright spots within the commercial lines market.

With payrolls rising $316.5 billion by year-end 2016, not to mention $1.16 trillion in construction projects, there will be billions of dollars in new premiums for workers’ comp coverage. If economic growth and hiring continue as projected, workers’ comp exposure is likely to remain among the faster-growing major commercial P/C lines of insurance in 2017 and beyond. And this positive outlook takes into account that workers’ comp fraud is 25% of the P&C industry-wide annual fraud problem of $34 billion.

Many are investing heavily in new systems and technology to reach this rich marketplace. Carriers, brokers, agents and third-party service providers are all positioning themselves for a larger slice of the workers’ comp pie through innovative and forward-thinking technology.

However, with all the technology available within the workers’ comp ecosystem, it consistently takes a giant leap backward when it comes to requesting, generating and delivering proof of insurance. Form-based certificates of insurance are universally produced and passed like a hot potato between different stakeholders, yet they provide no real proof of insurance. As one industry pundit put it, “At best, it’s just a piece of paper that shows proof of coverage at the time it was issued. At worst, it’s fraud.”

Some are touting the ability to request proof of workers’ comp coverage from a mobile device. Yes, through an app, you can request a workers’ comp QR code that can be used to request a certificate PDF. But this PDF has all the usual limitations: no updates, no notice of cancellation, no ability to compare data with coverage needs, no exception processing.

See also: How Should Workers’ Compensation Evolve?  

Because the form-based certificate of insurance has been the forum for exchanging dead data, people have been attempting all sorts of subterfuge to require wording on the certificate in a vain attempt to make it say something that is not in the workers’ comp policy. It’s important to realize, from a business and insurance standpoint, that a certificate has many inherent limitations and weaknesses. For example, a certificate CANNOT:

  • Extend or modify policy conditions or rights to the certificate holder. The insurance policy is a contract, and changes to those terms can only be accomplished by following proper procedure as outlined by the insuring company. Extending policy rights, such as additional insured status, can only be accomplished by properly endorsing the insurance policy in question.
  • Guarantee a policy will not be canceled in accordance with the conditions of the insurance policy. Cancellation of a workers’ comp policy is controlled by state statute and cannot be modified by a certificate.
  • Provide insurance coverage to the certificate holder. The insurance certificate only indicates coverage found in place on the policies in force at the time the certificate is issued. A certificate of insurance coveys no insurance coverage to the certificate holder; only proper endorsements to the insurance policy can achieve that.

There are many large industries that are totally dependent on workers’ comp coverage and proof of insurance — construction, transportation and agriculture, to name a few. Roads, bridges and buildings don’t get built or repaired without workers’ comp insurance. Nothing moves across our highways without workers’ comp insurance. Crops, fruit, cattle and food do not get produced, harvested or delivered without workers’ comp insurance.

As we move forward into a 21st century economy, more companies and workers are shifting into the gig economy where workers’ comp is either not there at all or has substantial holes. Under current definitions, gig economy workers, sometimes called on-demand workers, are neither employees nor independent contractors. If a rideshare driver is attacked by a passenger, sustains severe injuries and cannot work for a long period, how is his or her income replaced? For that matter, if any on-demand worker is injured on the job (accident, repetitive motion injury, etc.) how is his or her income replaced? And with the current state of health insurance, or the lack thereof, how are his or her health bills paid?

While there are a number of instances where coverage verification is needed for workers’ comp alone, many times other lines of business need to be verified simultaneously. General liability, commercial auto, commercial property and other types of insurance also require verification at the same time with workers’ comp, by the same stakeholders. These coverages may be within a single business owners policy (BOP), or they can be spread across multiple policies, written by multiple carriers, with different effective/expiration dates.

See also: Five Workers’ Compensation Myths  

Rather than pushing around forms filled with dead data, workers’ comp deserves a digital ecosystem where all stakeholders can securely connect and share coverage information. Online and continuing coverage verification automatically validates that insurance in force. Additionally, the needs of each stakeholder are evaluated, alerting stakeholders on an exception basis.

It’s time to move forward from, “May the forms be with you” to “Let the data be with you.”

This is GAPro’s vision and mission.

We’re Being Luddites About Verification

There are several seminal moments when I first experienced something that forever changed the trajectory of my life:

–While senior director of research and development at ACORD in 1992, I worked with New Science, a research firm. The insurance industry was heavily investing in the development of AL3 batch data standards via point-to-point dial-up connections. New Science, however, was looking way down the path toward global, online, real-time transactions through a single network connection. Working with New Science was the first time I heard the word “internet.”

–I distinctly remember walking through the Indianapolis airport and seeing someone holding a “brick” next to his head. It was the first time I saw a mobile phone in operation, a Motorola Dynatic 8000X. Priced at $3,995 and weighing in at 28 ounces, the phone took roughly 10 hours to take on a full charge and offered only about 30 minutes of talk time on a highly limited analog network. Some of us remember running off airplanes to banks of payphones to check voice mail and to make calls between connections. Now it’s almost impossible even to find a pay phone.

–My first date with Mary Ann Hildebrand was Oct. 9, 1971. Game 1 of the 1971 World Series featured the Pittsburgh Pirates against our hometown favorites, the Baltimore Orioles. A week later, I held her hand and kissed her for the first time. And, after 41 years of marriage, the rest is history, as they say.

I also clearly remember listening to and meeting Thornton May in 1992 after his scathing commentary, “Luddism Looms Large,” appeared in ComputerWorld. It was the first time I heard the term “Luddite.” The term goes back to followers of Ned Ludd, the late 18th century British antitechnology leader who protested the replacement of human labor and skill with machines. Ludd energized a movement throughout the textile industry as his followers protested by destroying machines and property. Luddism today is a more general term for those who are opposed to technology change.

See also: Key to Digitizing Customer Experience  

When it comes to online verification, the insurance industry is filled with Luddites, compared with other industries. Every time an insurance policy or business relationships changes anywhere in the world, verification of insurance and compliance checking is required. This should happen digitally, right? In this day and age…. Instead, verification is delivered via a form, whether paper, fax or PDF.

All have the same problem: The information in them is as of a point in time. The information is locked, and the receiver can’t do anything with it.

Compare that with these industries:

  • To verify stock price information, you don’t have someone send you a form saying what it was last week or last month. You don’t even have to log onto the individual company websites, or have to go to the NYSE or NASDAQ. You just search for the company, and you see today’s price as it dynamically changes, in addition to historical pricing and a raft of other information.
  • To verify the status of a flight, you don’t have to log onto the individual airline websites. You just search for the airline and flight number and you see the schedule, if it’s on time in addition to city and gate information.
  • To verify my ability to pay, no one takes impressions of credit cards anymore. I do not show paper or PDF versions of my three-month-old credit card or bank statements to prove that I can pay. Nor does anyone take a picture of a check, my face and driver’s license. Someone I’m paying reads my card or check electronically, automatically verifying that funds are available.

I was reminded of this on my most recent speaking engagement. At 4 a.m., I arrived at my destination city. I stepped into a cab and was efficiently whisked away to my meeting location. Cabs no longer take a physical impression of my credit card. Instead, my card with an onboard chip was inserted, read and charged. Boom! Verified.

Unlike other industries that have online verification available, today’s convoluted and wildly expensive verification of insurance is a vortex of manual effort, paper, email, faxes and procedures. Data is both late and locked in certificate forms (paper or PDF). To begin getting our arms around the size of this opportunity, here are three sets of statistics to reflect on:

  • $1 trillion-plus of vehicle loans in the U.S. require verification at least once a year — twice a year if the policy is six months, and perhaps 12 times a year if the insured is paying monthly.
  • 1.2 million companies with 28.8 million commercial trucks and 3 million drivers provide forms as proof of insurance. How many do you think are out of date? Fraudulent?
  • 42.6 million independent contractors provide form-driven proof of insurance when they bid on a job.

Companies that receive data on forms have no assurance that the information is real or accurate or complies with their needs. Even with extensive and expensive manual checking, no one really knows if the data on the form is valid.

We have an expensive, lose-lose proposition.

Trying to fix the problem by addressing the form is like trying to fix cigarettes with a new type of cigarette. Problems with the underlying technology preclude a solution.

See also: Secret to Finding Top Technology Talent  

When a form-based proof/certificate of insurance is shared today, no one asks for a non-disclosure. There is also no password or encryption beyond the PDF format. Insurance rates, rules and forms are filed and approved by state agencies, which by nature make them available to the public. You can also go to web sites to search and view insurance carrier forms.

Insurance verification is not just at origination or signing of a contract. Insurance verification is continuous.

Once it goes on, it goes on and on.