Emil Metropoulos, Workers Compensation and Terrorism Specialty Practice Leader
Traditionally, workers compensation insurers’ risk assessment was based on data collected at certain times of year, such as policy renewal. And parts of the data set may rely on qualitative metrics like standard loss survey questionnaires, which can omit pertinent questions. By using telematics, employers and insurers can collect real-time data and institute a continuous feedback loop to identify unsafe conditions, immediately warn a worker who may be at risk and monitor and reward those who take corrective action.
This will also generate a much larger and more granular data set from which to draw insights to apply to other similar insured risks who may not be as advanced in their collection of exposure information. By leveraging big data and predictive analytics, they can then develop more accurate premiums for these insureds, refine policy coverages and exclusions and recommend prescriptive safety measures.
Carriers can derive additional value by extending telematics to downstream processes like claims handling. For example, the median amount of time a worker with a lumbar strain misses work is 10 days, while a typical employee with depression with anxiety will miss work for 26 days. However when an employee suffers from both conditions, median return to work duration increases to 153 days. Biosensors, actuators and gyroscopes can capture lead indicators of such cognitive conditions, including heart rate, stress level and fatigue, helping insurers triage claims with the potential to become “jumper” claims that escalate quickly. Such devices can also send an alert to notify the wearer if they are practicing improper posture that could delay recovery. Additionally, telematics can keep the injured employee engaged in their rehabilitation by alerting them to missed medications or rewarding performance of physical therapy.
Workplace sensors can also automate and increase the speed of claims adjustment by quickly detecting damage or injury, initiating reserving processes and alerting insurers and safety managers. Real-time data will also improve employers’ and insurer’s ability to detect fraud. And by reducing the time and paperwork traditionally associated with claims resolution or litigation, these applications not only reduce the loss component of a carrier’s combined ratio, but the expense component as well.
At a time when top line growth is difficult to achieve, carriers must find ways to differentiate themselves. Implementation of advanced smart equipment and a robust wearables program offers insurers this opportunity. It is perhaps no coincidence that as the prevalence of these devices increase, the gap between the best performing workers compensation insurers and the worst is widening. In 2017 the difference between the initial estimated loss ratio of the 90th percentile carrier and the 10th percentile carrier increased to 27.2 percent, up from 26.2 percent in 2016.
This brave new world of telematics and connected devices has already impacted the auto insurance market in a positive way. Now it’s time for the workers compensation market to take notice and advance its investment in this exciting new space.
Link to Part I >>
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