InsurTech's Threat To Workers Comp Insurers

The rapid growth of InsurTech business innovations cannot be denied. Many workers compensation executives note that the regulatory forest created by the 50 independent

state-based workers’ compensation systems, as well as the market share held by the incumbent insurers, all serve to create barriers to InsurTech upstarts. But those barriers cannot prevent the inevitable.

InsurTech poses three key threats to incumbent insurers that deserve immediate attention:

  1. InsurTech innovations are helping businesses to reduce risks rather than needing to insure against them, which is putting pressure on traditional markets.

  2. InsurTech innovators are learning how to slice and dice market segments and deliver services in more customer centric approaches. A process that is furthering the pressure on traditional markets.

  3. Hundreds of InsurTech apps are coming into the market. Even though they tend to be just faster caterpillars in search for a platform, they are adding noise in the market. Noise, that adds distraction and confusion to the market.

The McKinsey Report Digital disruption in insurance: Cutting through the noise noted that larger payers with hearty reserves and the revenues to underwrite large pools, will be able to muscle through this process for several years; some, like EHS’ early adopters, may even take leadership roles in shaping the InsurTech market. But other payers, need to take heed today because the digital movement is growing, and it will only gain momentum as it rolls through this market.

InsurTech will be instrumental in breaking the existing business models that exist today. It is projected that a tipping point is rapidly approaching. Those organizations that have prepared will likely survive and some will prosper. But the laggards will likely disappear.

Consider for a moment… How will you compete when something like an Amazon, with its massive market clout, decides to offer one-click insurance, or if CVS decides to offer automated claim management services driven by chatbots, supported by their extensive medical provider networks and managed by live nurse support services available through their local pharmacy outlets? That sounds strange today. But, consider how many companies that were rock solid just a couple years ago that have been swept away the more digitally savvy startup companies.

The lesson claim executives need to keep in mind when considering digital strategies is that digital change is unlike anything they have ever experienced. It is change that will seem to happen overnight, even though it took a decade to develop. A McKinsey survey of 2,000 executives in industries affected by digital technology found that those that looked for opportunities across their business model and took definite action to get ahead of the wave, were the companies that had the highest earnings and revenue growth. Those that consider it just a passing fad or limited in scope, will surely lose market share and possibly disappear.

Another McKinsey survey based on an interview with 30 executives reported that the common message was the need to commit to speed. Unfortunately, many payers maintain release cycles that stretch over multiple months, with sprints planned out for 3 years in advance. There are payers today that plan to reconstruct their existing systems over next 3-5 years. In the first place, that 3-5 years will likely be 5-7 years. In the second place, in today's rapidly evolving technology world, 3-5 years is a lifetime. Those developments will likely be outdated before they launch.

Ten-years ago, you could take 3-5 years to think, plan and perfect your strategies. However, those days are simply over. Today, you need to get to a minimum viable product in place and operational within 120 days and begin evolving.

"In insurance, as in other industries, it takes a while for customers and companies to embrace digital technology, but as the pace of change accelerates incumbents’ scope to adapt diminishes. There comes a tipping point where those that have not adapted their strategies fade away—as in traditional print media, for example."

The article also noted that the claims organizations should not be satisfied with just basic workflow automation tools. Today, automation tools should be a staple in the modern claim organization. Focus should be shifting towards innovative products, services and business models. That is the direction we are pushing BaseLine’s evolution.

We have created dozens of great automation & augmentation applications. These are applications that are relatively easy to implement and can instantly process the routine and generally predictable tasks and decisions. They also assist in the decision-making process to make the claims professional a more effective manager of a claim. However, there’s a wealth of innovations being created every day by brilliant people with specialized experience.

The emerging InsurTech apps today are beginning to respond to virtually every aspect of modern claims management. At EHS we identify them as fast caterpillars looking for a platform on which they can flourish. Thus, we are working with creative thought leaders to make their specialized applications relevant to the broader claim management world by incorporating them within the BaseLine Platform.

In our vision, BaseLine has become less of a product and more of a bridge that can enable claims organizations to easily integrate innovations into the claim workflows and test their value with minimal risk or resource commitment. BaseLine offers both the claim organization and the InsurTech provider a resource to test and prove emerging technologies in a safe, effective and efficient manner. The alternatives are not positive. Potentially valuable Insurtech resources may fail simply for lack of a viable stage on which it can be proved.

When we launched our initial application ten years ago, it was a remarkable innovation in its day. However, looking at it from where we are now, we realize it was just a faster caterpillar. Today we are creating BaseLine platform as a learning and evolving platform which can transform the way claims are managed in the future.

We are increasing our focus on modularizing BaseLine to enhance its ability to integrate and activate new technologies into our client's workflow pattern as the client sees fit. As new technologies emerge, we will incorporate them seamlessly into the workflows of our clients. Once they have been incorporated and proven, the new technology can be effortlessly rolled out to any claim organization according to the client's rules and expectations. Ramp-up times will be days instead of weeks and months.

Transformational change is on the horizon for claims management. BaseLine is a significant resource available to payers looking to get engaged and prosper from the coming InsurTech wave.

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