By Subhasis Bandyopadhyay, VP- DBS Domain and IG Head -BFSI, Happiest Minds Technologies
Post-pandemic, the insurance industry, undergoing a rapid transformation of its business model — customers are demanding speed, innovative and customised products, and efficient services in an ever-shifting consumer demographics.
Especially, the underwriting component in Insurance is undergoing massive transformation by leveraging a convergence of data, technology, and human capital. The market is demanding efficiency and due to evolving customer expectations, most Insurers are accelerating their underwriting transformation to remain competitive by upgrading their underwriting capabilities with more advanced technology and expanded data sources.
Currently, the talk of the town in this space is the “rise of the exponential underwriter” and the Insurers need to look for automating routine tasks and augmenting teams with emerging technologies and alternative data sources to empower underwriting professionals to become “exponential”—more valuable than ever. In the digitisation area, where the availability of alternative and predictive data is increasing and to make risk selection competitive, the underwriters should look for rapid adjustments to underwriting strategies by upgrading their tools and acumen sets to remain relevant in the market.
One of the interesting areas where I am witnessing a sea change and where Happiest Minds are working with the customers is the Workers’ compensation. Now that millions are working from home, generating huge volumes of new, real-time data to digest and monetise, the Insurance ecosystem is leveraging next-generation disruptive technologies for risk transfer to risk mitigation and broader financial management. For example, Insurers are working with auto manufacturers to encourage safer driving using factory-installed telematic sensors and working with cyber risk management companies to provide comprehensive solutions beyond risk transfer.
Now let me cite our practical use cases where we are working with the customer in Insurance Policy premium audit space in Workers’ compensation. Let me start with what Insurance Premium Audit means: An insurance premium audit is a process of reviewing and examining an organisation’s insurance policy to assess if the premium charged is accurate and based on the actual risk exposure of the business. The audit helps to ensure that the policyholder is paying the appropriate premium for the type of coverage and level of risk they represent; Compliant with insurance regulations and identifying
potential inaccuracies such as errors, omissions, or fraudulent activity.
Now let me touch base also which types of Insurance require a premium audit? In general, the premium audit is required in policies where the premium charged is based on a variable factor, such as payroll, sales, etc. where there is potential for the exposure to change during the policy period. The two most common lines of Insurance that require premium audit are Workers ‘compensation- A form of insurance coverage that pays benefits to workers who suffer from work-related injuries or disabilities and the other one General liability insurance, also known as business liability insurance, is a type of insurance policy that helps protect businesses from claims that happen because of normal operations.
Now let me deep dive into the worker’s compensation Premium audit. The insurance premiums paid by employers for worker’s compensation coverage are typically based on estimated payroll and job classifications. So, a worker’s compensation premium audit is conducted to determine the actual payroll and job classifications for the previous policy term.
But in practical there are challenges and opportunities that exist while undergoing this process which I like to highlight in my narration. The challenges the insurers face is Complex large data set; Changing regulations; Fraud Detection and Integration & Validation with legacy system and side by side the opportunities for gate open-ups wherein we see the adoption
of new and disruptive technologies. To get a flavor of it, here you go:
Intelligent Document Processing – Worker’s compensation premium audits require a significant amount of data, including employee classification, payroll records, and insurance policy information. Automating this process requires a system that can process and analyze this data, which can be challenging. Usage of IDP to classify, and extract payroll documents to validate against policy system of records.
Intelligent Automation- Regulations related to workers; compensation can change frequently, involves multiple evaluation criteria like job classes and often regulations vary from state to state. When done manually the process is tedious, cumbersome, and error-prone. The usage of autonomous bots can eliminate manual processing challenges. Even better after performing the audit, bots can even calculate the premium differences, prepare audit reports, and even can trigger premium adjustments workflow.
Data Analytics to improve audit accuracy and efficiency- Predictive analytics can help identify policyholders who may pose a higher risk or require additional underwriting. Data visualisation can help to produce visual summaries and reports that are easy to read and understand. Fraud detection can help identify anomalies and outliers in the data, allowing for the detection of potentially fraudulent activity.
Data integration even with legacy systems- Implementing Open API-based data exchange between the insurance carrier and the policyholder & payroll and accounting systems can streamline the data collection and analysis process. In the case of legacy systems where data migration and API integration is NOT a possibility, power automated desktop bots can do screen scrapping to extract data and perform validation.
This apart, we are all discussing various use cases of ChatGPT a buzzword in IT industry. I feel this can also be applicable to Workers’ compensation as it has a good number of coverages for injuries, and disabilities. In the event of permanent disability, ChatGPT could be that system that provides empathy and guide them to get the most out of their workers’ compensation insurance. IoT is also another disruptive technology that can help worker’s compensation insurance transform from review and reimbursement to prediction and prevention. IoT devices can be used to track the health and safety of workers, detect and report when safety equipment is damaged, track speed, location, and other safety-related data, and monitor environmental conditions to help employers identify potential risks and take action to minimise or eliminate them.