Workers’ Compensation: Technology Drives Ease of Doing Business and Loss Mitigation


Workers' Compensation: Technology Drives Ease of Doing Business and Loss MitigationWorkers’ compensation insurers are delivering innovative solutions despite the highly regulated nature of the business line. They are investing in capabilities to improve the ease of doing business for insureds, agents, and brokers as well as to mitigate loss costs. Core systems transformation; agent and customer access; and the expansion of AI, data, machine learning, and predictive analytics are key to both goals.

Premiums are up slightly overall. COVID-19 claims saw a return to a greater percentage of indemnity vs. medical losses. Other trends and priorities for carriers in this space include the following:


For insureds, the widespread adoption of payroll integration, especially for small-to-midsize businesses, has simplified the process of monthly reporting and pay-as-you-go insurance. Most businesses already manage much of their finances through their payroll provider, so pay-as-you-go combined with payroll integration is now a matter of convenience and less about the cost benefits of monthly adjustment.

Numerous pay-as-you-go solution providers offer integration with core billing and policy administration solutions to calculate premiums based on insurers’ current rates, invoice policyholders, and collect premiums.

Telehealth and Workplace Clinics

Easy access to medical care is vital to improve return-to-work outcomes and manage loss costs. Telehealth adoption has expanded significantly, thanks in part to states improving access and ensuring provider reimbursement. Almost every state now allows payment for telehealth services in workers’ compensation.

Benefits from telehealth include reductions in average claim costs, litigation frequency, and average days open for cases. Telehealth has also lowered treatment costs and reduced time away from the job. Workers’ compensation uses telehealth mainly for point-of-injury care and triage.

Changing Regulations

As of June 2022, four states had enacted or pending legislation addressing the classification of workers as independent contractors. The Massachusetts Supreme Judicial Court rejected a ballot measure that would have classified gig drivers as independent contractors and specified gig driver benefits because it violated state law, which requires all elements of ballot measures to be related, instead offering multiple policy decisions.

Four states—California, Kansas, New York, and Rhode Island—introduced single-payer healthcare legislation requiring proposals that address workers’ compensation, with California’s legislation not called to the assembly floor.

States continue to legalize the use of marijuana for recreational purposes, medical purposes, or both. States remain divided as to whether they allow, prohibit, or require reimbursement for medical marijuana.

Impact of COVID-19

COVID-19-related claims declined in 2021, with more than half being indemnity-only claims. Most COVID-19-related claims are small, with relatively few high-dollar claims accounting for the majority of incurred losses. Severity decreased for indemnity-only claims in 2021, while medical-only severity increased slightly and severity for claims with both indemnity and medical components grew significantly, possibly due to evolution of medical treatments. To date, there has not been evidence of increased ergonomic-related claims due to remote work, but as cumulative trauma, ergonomic-related claims have a longer reporting time frame.

Employees may or may not qualify for workers’ compensation benefits when commuting between their home and the workplace, depending on whether the home qualifies as a second workplace. They may also qualify under the personal comfort doctrine. Employers must also consider mental health and stress, whether it stems from COVID-19, isolation from not being in the workplace, or concerns about going back to work in the office.

Recent Financial Trends

State fund premiums grew slightly faster than private insurer premiums, at 0.9% year-over-year compared to 0.7% for private insurers. Residual market share and premium continued to decline, a trend that started in 2015.

Loss costs declined for the ninth straight year, offset by payroll increases that were largely wage-driven. Private insurers reported the fifth year of loss ratios in the 40s, driven by reserve releases.

In 2021, lost-time claim frequency increased, but the long-term trend is for continued decline. 2021 medical and indemnity claims severity was moderate, though in 2022, medical costs could experience inflationary pressures.

Growing Importance of AI/Machine Learning

Insurers are increasingly using AI, machine learning, and analytics to identify claims that might be expensive without proactive intervention, to triage complex claims, and to identify fraud proactively. Several startups are leveraging AI for claims analytics, incident and loss reporting, loss control, and more accurate and granular underwriting.

Insuretech and Workers’ Compensation

The Internet of Things, combined with drones, GPS, RFID badges, telematics, and video surveillance, means most companies will soon have “smart offices” or “smart worksites.”

Workers’ compensation insuretech firms include:

  • EvolutionIQ, which applies deep learning and alerts adjusters and insurer management to open claims needing action or additional attention
  • InsurePay, which offers pay-as-you-go billing
  • Voxel, which applies AI and computer vision technology to security camera imagery and alerts on-site personnel to ergonomics issues, hazards, and other risks

Several insurers have partnered with startups to distribute workers’ compensation online:

  • Herald is offering EMPLOYERS-appointed brokers and agents access to its API for quoting and binding products, including workers’ compensation. These front-end-based approaches to partnership enable incumbent insurers to achieve faster speed to market.
  • Kinetic is offering workers’ compensation insurance along with its wearable safety technology (at no cost), acting as program manager for Nationwide’s E&S/Specialty division. Policyholders are required to use the technology, with an opt-in dividend program for policyholders attaining the minimum device usage.

Several MGAs are leveraging data and analytics to lower the cost of workers’ compensation, including futureWork Insurance Solutions and Insurate.

Technology Priorities

Workers’ compensation insurers are increasingly adopting predictive analytics solutions. Small insurers are working with organizations that can provide pooled data and insights. Insurers that haven’t already upgraded their claims and policy administration systems are doing so now to gain competitive advantages via improved efficiencies in claims handling, better outcome management from improved data, and the flexibility to incorporate third-party data sources for underwriting scoring. AI and analytics solutions for severity scoring, claim triage, and medical management are enabling leading-edge insurers to improve return-to-work outcomes.

On the digital front, workers’ compensation insurers are assessing agent and customer needs and extending capabilities to them, building functionality with an eye toward reuse. They are streamlining the rate/quote/bind process with straight-through processing, particularly for the small end of the market. Insurers with loss control organizations that bring a competitive advantage to the marketplace are exploring digital service delivery. They are using business rules to manage workflow and predictive analytics to build pricing models—improving risk selection and risk pricing while reducing operating expenses.

If you’d like to discuss our key findings in the workers’ compensation space, please read our new report Business and Technology Trends, 2022: Workers’ Compensation or contact Carey Geaglone ([email protected]), Deb Zawisza ([email protected]), or me ([email protected]) to continue the conversation.