The Disability Insurance “trust gap” Part 2: Actions

 [This is the second part of  a discussion on the Disability Insurance “trust gap”.  It is based on notes and discussions points for sessions in a 4th year Disability Management course on Workplace Insurance and Benefits.  Part 1 explored the reasons for the lack of trust in disability insurance.  Part 2 provides three general suggestions for organization and five practice priorities individual case managers and disability management professionals can use to narrow the trust gap they face in their day-to-day work. ]

In the last post I highlighted the trust gap in the insurance sector and some of its causes in the disability insurance sector.  That sector includes workers’ compensation, group Long Term Disability (LTD), transport accident compensation and rehabilitation among others. This post focuses on what individual case managers, vocational rehabilitation consultants, return-to-work coordinators, and other disability management professionals can to do narrow that gap.  The goal of doing so is to achieve better outcomes for the disabled individuals we serve. 

Minding and mending the insurance trust gap

That trust gap doesn’t make your job as a case manager working in any disability insurance system any easier. Coupled with the complexities of systems, workload demands, and resource issues all knowledge workers face, case managers you must find a way meet the expectations of your own organization and the needs of those you are trying to serve. You may get a lot of advice on how best to do that.  Despite your efforts and the best intentions of insurers, that gap is not going to magically disappear. 

For Organizations:

Ultimately, every disability insurance insurer needs a strategy to narrow the insurance trust gap.  Unfortunately, few organizations bother to measure trust at all. 

Every organization should measure the level of trust stakeholders, claimants, and others have in their organization.  This is particularly important among those seeking benefits.  It is possible for someone who has an accepted claim to still assess their level of trust as low.  It is also likely that those with denied claims will have lower trust, but it is also possible for a denied applicant for benefits to have trust in the processes and reasons for the denial.

It is particularly important to identify and track applications that are driven by other insurers.  It is possible that the efforts of other insurers to leave no other avenue of coverage unexplored may be detrimental to your levels of trust and overall reputation.  Understanding this dynamic is critical to anyt strategy for narrowing the trust gap. 

Compare your organization to others.  This may mean agreeing with competitors, parallel organizations, or industry associations to measure trust in similar ways and with similar regularity.  We know the financial services has a trust deficit;  pinpointing your organization’s particular trust status is essential to developing and implementing a strategy to improve it. 

Narrowing the Disability Insurance “Trust Gap”  for DM professional, Case Managers

Knowing that gap exists means you can do something about it.  How you interact with those you serve can narrow that gap and improve both service and outcomes.  Here are five things you can do every day.  This guidance comes through my interactions with injured workers and disabled clients over the last four decades.  Focusing on these priorities won’t eliminate the trust gap but can help you narrow it on a case-by-case basis. 

Attend

Believe

Communicate Clearly, Concisely

Act with Dispatch, a sense of Urgency

Develop genuine Empathy

Follow through

I’ll expand on each of these ideas but realize these are independent of any corporate initiative.  These priorities are within the power of every case manager, vocational rehab consultant and DM professional in the disability insurance field. 

Attend. 

Attending means more than just showing up to a client meeting, passively listening to them on the phone or skimming the latest medical report.  Yes, your job is complex but just about every job today is complex. The circumstances giving rise to injuries are almost always complicated. 

What injured and disabled clients want is more than a series of random contacts repeatedly asking to be told the same story or continually explain the details that gave rise to the injury.  It is not only frustrating, but it can also be harmful. It may be easier for a new case manager taking over a case to ask the beneficiary to re-tell their story, but this is often just a shortcut to avoid reading the detailed information already on file.

Some insurance organizations have increased caseloads of case managers or transitioned from early and direct service by specialist professionals  to highly systematized, volume-focused, script-driven, front-end generalist  at distant call centers.  Reaching and maintaining contact with a knowledgeable specialist case manager or DM professional is often difficult.  Where part of a segmentation strategy to stream cases to a specialist professional, the upside benefits for the client may be positive.  Unfortunately, these models are sometimes introduced as corporately necessary to address cost or staffing needs and may come at a significant cost to the injured individual seeking help.  Continuity of contact over longer duration disability cases can reduce gaps in understanding and build trust.

Actively listen to your clients.  Wherever possible, reduce handoffs to others.  It you must hand off to someone else, be sure to reflect the client’s situation and concerns fully, preferably personally.  When with a client, that person should be the only person that matters (phones and email alerts should not distract from your attention). 

 

Believe.  

The clients you encounter are overwhelmingly sincere.  Believe them. 

Start with a mindset that people seeking benefits from a social or personal injury insurance plan are sincere and not trying to “rip off” the system.

The incidence of claims fraud across all property and casualty insurance lines in the Americas is estimated at about 1.38%.  [see Reinsurance Group of America, RGA 2017 Global Claims Fraud Survey available at https://www.rgare.com/docs/default-source/knowledge-center-articles/rga-2017-global-claims-fraud-survey-white-paper---final.pdf ]. 

Personal injury insurance and disability plans are not rife with fraud.  A favorite target of the rampant-disability-benefit-fraud myth is the US Social Security Disability Insurance system (SSDI).  Despite spectacular rhetoric about fraud, repeated internal and independent reviews have shown “the level of fraud in the disability program is  less than one percent…”  [see Statement of Carolyn Colvin, Acting Commissioner, Social Security Administration, Hearing Before the Subcommittee on Social Security  of the  Committee on Ways and Means U.S. House of Representative  JANUARY 16, 2014, Serial No. 113-SS09].   

Adjudicating and administering personal insurance cases is not easy. It requires expertise, judicious weighing of evidence and experience and adherence to complex law, policy, jurisprudence, and procedure.  Asking for information is diligence; repeated requests for previously provided information infers disbelief.

Consider the actual necessity of what you are asking and how your request may be received.  Even if your requests are procedurally required, the client’s reaction to yet another request for more medical evidence or medical examinations may be quite different. Your request for more (or, worse, already provided) information may communicate something between skepticism and outright an outright accusation of malingering.  Not a great way to build trust.

Start from a position of belief.  If circumstances or evidence on a particular case lead you away from that position, of course you must act accordingly; know, however, that such cases are rare. 

Communicate clearly, concisely.

We all have insurance policies of one sort of another, but few of us have read the fine print… or, having tried, are often left confused by the nuances of restrictions, exceptions, and exclusions common in almost all insurance plans.

The technical nature of personal injury insurance creates ambiguities and information asymmetries. For someone with a new disabling condition, injury or disease, the whole insurance experience is new and layered on the pain, suffering, and fear that typically come with disability, For the case manager, every new application for benefits is another of many in a very technical, policy and procedure driven system.

The very nature of insurance—the transference of specified risk of loss from the policyholder to the insurer— makes these complexities inevitable. What is not inevitable is the confusion from the way policies and decisions are communicated. It is easy to rely on the direct wording of the law or policy; it is much harder to communicate clearly without excessive reliance on legalese.

Strive for clarity in all your communications—verbal and written. Canned paragraphs and templates are necessarily vague. Be certain your communications apply exactly to your purpose.  If a standard letter does not work well, modify or abandon it in favour of something that better communicates your purpose, decision or needs.

Work with Dispatch.

“The waiting is killing me!” “What’s taking so long?” I’ve heard these exact words countless times. In an age when you can get an insurance quote with a click or keystroke, it is more than ironic that getting a decision on a benefit request can routinely take three to six weeks.

According to one source,

“…these [are the] ideal response times in the insurance industry:

Emails: within an hour

Chat: 5 minutes or less

Live chat: less than a minute

Phone calls: less than 30 seconds”

 

[See The importance of response times in the Insurance Sector (2023 Guide) - timetoreply available at https://timetoreply.com/blog/the-importance-of-response-times-in-the-insurance-sector/ ]

 

There are legitimate reasons for delays in all disability insurance administration; medical and incident reports are not filed on time, critical staff are on vacation or in training, medical diagnostics are hard to access.  The automated mantra of “We are experiencing higher than expected call volumes” is often used to hide staffing issues, system deficiencies, and intentional but undeclared decisions to simply live with delays and subsequent frustrations as the status quo.

Transparency of standards and constant public updating of performance may increase accountability and reduce wait times for decisions and payments.  Few organizations publish this sort of data on a routine and timely basis.

Recently, a disabled employee recovering from a surgery applied for benefits form her private insurer.  After weeks of delay, she received an email request for additional information, which she provided the same day only to receive a response that the adjuster was going away on vacation and would make a decision upon her return. Don’t do that. 

Regardless of the system constraints, you have the power to do your job.  If there is something that needs to be done, do it!  Do it now! 

Empathize

You know authentic empathy when you experience it.  An empathetic person has emotional intelligence—knowing and understanding another person’s perspective.  Fully attending to another is one thing; being able to see the world from their perspective is something else, something every case manager and DM professional should strive to do.

Develop genuine empathy.  I don’t mean sympathy and definitely not pity.  Repeating platitudes like “I hear you” or “I’m sorry” is not what I am talking about.  Empathy is deeply understanding and identifying with the context, emotions, frustrations, and aspirations of another. 

Follow through. 

If you say you will send out a decision letter today, then do so.  Remember, even a negative decision is often essential to access another benefit.  Saying you have made a decision and even telling someone is not enough in most cases.

If you work in DM, HR, or CM for an insurer, you will have to follow the rules of your own organization. Those rules are unlikely to conflict with acting to reduce the frustrations of those seeking their benefit entitlements.  Never be the reason for delay.  If delays are becoming systemic elsewhere in the process, seize the initiative to expedite or resolve the issue.  At a minimum, raise the issue with those who can fix it.

Where there are follow-up or review points in a return-to-work plan, for example, make them explicit, and actively monitor those review points with direct contact with the client. 

Final thoughts

The insurance “trust gap” will be a continuing factor in your work.  The best a professional Case Manager, Disability Management Professional, Adjudicator or Return-to-Work Coordinator can do is to narrow that gap with each new case, each client you encounter.  Focusing on these five themes will help you do just that.   

The Disability Insurance “trust gap” Part 1: Causes

[The following notes background and discussion points from a series of sessions Disability Management undergraduates completing a 4^th year course on Workplace Insurance and Benefits.  Part 1 explores the reasons for the lack of trust in disability insurance.  Part 2 provides five practice priorities individual case managers and disability management professionals can use to narrow the trust gap they face in their day-to-day work. ]

Many of you are currently working or will go on to work  as Disability Management professionals for a workplace insurance organization.  Whether you work as a Case Manager for  workers’ compensation system, a client services representative for a transport-accident personal-injury insurance, a claims administrator for a non-occupational disability insurance plan, or a return-to-work specialist for a third-party administrator, you will face the disability insurance “trust gap”. 

You know the primary concerns of your clients; after health and care needs, “How will I support myself (and my family)?” is the priority.  

Injury, illness, and disability have significant costs and impacts on earnings.   According to recent media report, "More than half of Canadians $200 away or less from not being able to pay all of their bills" [see CTV News, More than half of Canadians $200 away or less from not being able to pay all of their bills, at  https://www.ctvnews.ca/business/more-than-half-of-canadians-200-away-or-less-from-not-being-able-to-pay-all-of-their-bills-1.6473939 ] .  Without the financial protections of work-related, group, and non-occupational disability insurance, many would quickly reach insolvency.

Complicating interactions are pervasive attitudes and beliefs about insurance.  Whether it’s property, casualty, disability, motor vehicle or workers’ compensation, trust in insurance is low.  Skepticism and misconceptions about insurance are pervasive.  Getting beyond this starting point will always be a challenge for those who play a role in the process.  We’ll get to what you can do later.  For now, let’s examine why the disability insurance trust gap exists in the first place. 

Lack of Trust in Insurance

Most people participating in the workforce have some sense that disability insurance plans are necessary and valuable.  Most understand the basic idea of insurance; in exchange for a specified premium, the insurer assumes the financial risk associated with certain (rare but costly) defined events.  Most working people trust in the premise of disability insurance, but doubt the promise that insurers actually pay in the event of a qualifying loss. 

The trust gap is not unique to the disability insurance sector.  According to one recent report,   less than 30% of people surveyed had a positive opinion of the insurance industry, with 53% having had a negative experience. [See Peter Littlejohns,   New survey from The Geneva Association shows underinsurance is fuelled by mistrust, NS Insurance, 26 June 2019 available at https://www.nsinsurance.com/analysis/the-geneva-association-survey/  ]

This level of trust in insurance is reflective of the broader financial services sector.  The percent trust in the financial services sectors (57) has repeatedly trailed the trust index listing of fifteen industries, well behind other sectors including healthcare (67),  education (70), and technology (78). [See  2019 EDELMAN TRUST BAROMETER Global Report available at https://www.edelman.com/sites/g/files/aatuss191/files/2019-02/2019_Edelman_Trust_Barometer_Global_Report.pdf ]

The challenge of insuring disability

Disability insurance plans are big—an attribute rarely associated with trust.    “Big tobacco”, “big government”, and “big oil” are almost pejorative terms echoing generalized distrust of big institutions. 

Disability insurance plans must be big, at least big enough to accurately assess the risk of and actuarily determine the costs of covering rare, costly events.  Each of us faces the risk of a disabling injury, condition, or disease; quantifying and insuring risk is only possible when those individual risks are pooled across larger groups or population.  That ability to quantify risk and price the cost of coverage is the important “value add” of all disability insurance.

Being big does carry real challenges.   Monopolistic disability insurance providers (particularly national, jurisdictional, and state social insurance plans) lack competitive pressures of free market models.  Even where the provision of disability insurance is competitive, the market is dominated by a few, very large insurers.  The economies of scale and efficiency of being big do not eliminate the risk of market failures; without objective, transparent disclosure and oversight, the perception of distance and unresponsiveness tends to accumulate over time.

A “Big” institution of any sort is often painted as uncaring, impersonal, and even dehumanizing.  Public social insurance plans like US Social Security Disability Insurance (SSDI) and Canada Pension Plan Disability (CPP-D) are often singled out in this regard [For example, see American Progress, How Dehumanizing Administrative Burdens Harm Disabled People, 5 December 2022 available at https://www.americanprogress.org/article/how-dehumanizing-administrative-burdens-harm-disabled-people/ ]. 

As noted, disability insurance plans and programs must be large to be actuarially viable. When disability insurance plans are working as designed, funds to cover losses and administration will be there when they are needed. And that’s exactly what happens, most of the time.  Disability insurers collect a lot of money and earn a lot of return on investments, but nearly all those funds collected and gains earned are  paid out in entitlements, benefits, and administration.

Those big dollar amounts often make headlines.  Unfunded liabilities or surpluses attract public scrutiny and media criticism. Outrage at necessary increases in premiums or demands for refunds to insurance payers or increased to beneficiaries often dominate the public discourse.  Current and future beneficiaries worry about sustainability of the disability payments on which they depend.  Some of this lack of trust is rooted in a lack of understanding of disability insurance financing. 

Big public and private disability insurers tend to be financially stable over time.  Periods of excess claim costs, lower premium income, and inadequate investment revenue can result in occasional imbalances—where the funds on hand are not sufficient to meet needs.  Unfunded liability and surplus positions may persist for some time but tend to return to a balanced, sustainable level over the long run.

As an industry, property and casualty insurance is profitable for shareholders (private insurance) or financially balanced for stakeholders (public, mutual, state funds).  The disability insurance line of workers’ compensation insurance in the US, for example, has had eight years of underwriting profitability. [see Donna Glenn (chief actuary), State of the Line Report,  NCCI Insights, 18 May 2023 available at https://www.ncci.com/Articles/Pages/Insights-AIS2023-SOTL.aspx ]

Denial rates in  Disability Insurance reinforce low trust perception

Apprehensions about disability insurance are often reinforced by press reports accentuating insurer errors, social media stories amplifying egregious cases, and disability lawyers asserting disability insurers deny benefits just to maximize profits.

Behind the hyperbole and exaggeration, legitimate concerns underpin insurance apprehensions. Initial applications for disability are not always accepted.  The “acceptance” and “denial” rates vary with the disability insurance type; however, criticisms tend to be categorical, citing or implying high denial rates across all disability insurance plans (including workers’ compensation, social insurance, group and individual plans, and transportation accident disability insurance).

To be clear, the denial rates for initial applications for many disability insurance types are high.    US Social Security Disability Insurance (SSDI) applications from workers are often denied.  The final award rate for SSDI averaged just 31% (2010-2019) [See Social Security Administration,  Annual Statistical Report on the Social Security Disability Insurance Program, 2020, Chart 11 at https://www.ssa.gov/policy/docs/statcomps/di_asr/2020/ ] 

Canada Pension Plan Disability (CPP-D) has a similarly low acceptance rate with the national average was 43 percent for the 2014–15 fiscal year. [See Auditor General for Canada, Report 6—Canada Pension Plan Disability Program, 2015, available at https://www.oag-bvg.gc.ca/internet/English/parl_oag_201602_06_e_41063.html]   

Workers’ compensation denial rates are not consistently defined, similarly calculated, or widely reported.  Oregon reports its jurisdiction’s workers' compensation “Disabling Claim Denial Rate” at 10% (2022), down steadily from a high of 18.8% (1992). [See Oregon Department of Consumer and Business Services, Workers’ Compensation System, Workers’ Compensation Claims Administration table available at https://www.oregon.gov/dcbs/reports/compensation/pages/wc-claims.aspx]

WorkSafeBC reports a different but related statistic based on claims “Disallowed” as a proportion of claims reported.  At 6.3%(2022) this measure sits near the low end of a ten-year range that has been as high as 8.7%(2015). [See WorkSafeBC, 2022 Ten-year summary of consolidated financial statements — Smoothed or funding basis, available at https://www.worksafebc.com/en/resources/about-us/annual-report-statistics/2022-annual-report/2022-ten-year-summary-consolidated-financial-statements ]

Research has shown a relationship between denial rates and claims-filing behavior in workers’ compensation cases. Higher denial rates were found to be associated with lower claim-filing rates for some injuries. This was particularly true for back injuries where the relationship was statistically strong and significant.  [see Jeff Biddle, Do High Claim-Denial Rates Discourage Claiming? Evidence from Workers Compensation Insurance, The Journal of Risk and Insurance, Vol. 68, No. 4 (Dec., 2001), pp. 631-658]

Reasons for denials

Insurers must make certain they live up to their specific side of the insurance promise.  Coverage is for specified perils only.  Disability Insurers must be certain every applicant meets qualifying and coverage criteria before determining entitlement.  In the case of workers’ compensation, for example, the applicant must be an insured worker within the definition of the law or policy in force; because workers’ compensation insurance covers work-related injury and disease, the nexus between work and the harm leading to disability must be established.  If these criteria are met, the workers’ compensation insurer can then assess the extent of the loss, if any, and compensate the loss accordingly. 

It would be incorrect to simply view denied claims as either a reflection of heartless bureaucracies or a reasonable outcome of attempts by social insurance or workers’ compensation to guard against fraud, abuse or misuse.  The most common reasons for claims being rejected, denied or disallowed relate to issues of coverage, qualification and eligibility. 

Insurers do deny some claims wrongly.  Errors are made; we know that cases are overturned on appeal due to errors in law or judgement.  We also know that decisions take time; we also know that long delays are harmful.  Headlines about disability insurance denials are often sensational but the reasons are not always clearly explained; media reports often omit key facts or over-simplify the issues while privacy rules prevent full-throated clarification by insurers explaining their actions. 

The language of insurance

The trust gap is even reinforced by insurance terminology.  The technical language of disability insurance itself perpetuates negative perceptions. While “claimant” is a neutral term to insurers, in common parlance it has a negative connotation. “Claimant” implies a person has a contestable position and an onus to substantiate their “claim”.  It’s not just cynicism.  In everyday interactions, we learn to treat those “making a claim”  with caution and their “claim” with skepticism. 

In everyday conversations,  we typically ask a person making a claim to provide some evidence.  In disability terms, that ask is really an onus—typically placed on the disabled applicant.  That legal-sounding language is inherent in all disability insurance types.

All disability insurance demand evidence to consider in any application for benefits.  For insurance where causation is important, the  standard of proof may be as low.  For many workers’ compensation systems, the “work-relatedness”  need only meet the “balance of probabilities” standard; others require a higher standard such as work having been the “predominant cause”. 

For most group-LTD and social insurance, the question is less focused on  “causation” and more on  “disability”.  The onus for providing proof of disability typically rests with the applicant but is often mediated by the healthcare profession.  Questions of access to healthcare and the challenges of timely diagnosis and treatment are major barriers that can impede access to disability benefits.  Failure to provide required evidence may result in applications for benefits being suspended or denied. 

Why do disability insurers insist on applications to other disability insurers?

“Why bother claiming benefits from X when they will just reduce what I get from Y?”  Many disabled employees face this question.  The existence of multiple and sometimes overlapping disability insurance types drives the apparent high denial rates in social insurance and likely in some workers’ compensation systems as well.

The largest group LTD insurer in the US is Cigna.    The Group Long Term Disability application form [500469 Rev. 11/14 available at  https://www.cigna.com/static/www-cigna-com/docs/individuals-families/5004692.pdf ] for benefits includes the following:

Have you applied for Social Security Benefits?  Yes   No

If yes, please attach a copy of your Social Security notice for you and your dependents or a copy of your Social Security Denial.  If you have not applied, please do so as soon as possible.

Cigna also asks if the applicant is receiving or eligible for workers’ compensation, veterans’ benefits, no fault auto and other benefit plans.  In many cases, an affirmative response may reduce the amount payable under the group LTD coverage.

Where the benefits from a social insurance plan or workers’ compensation payment “offset” group LTD benefits, there is no advantage to the worker to claim both and no incentive to appeal a negative decision.  There is, however, a very clear advantage to the insurer if some other insurer is the “first payer”.  Where there is some stacking (partial integration or offsetting) of benefits, there is a clear financial incentive for disability insurance to press applicants to pursue coverage from all possible insurers.  Insurance principles generally preclude a person from being better off financially on disability insurance benefits than if working.

What can be done about this trust gap?

The reality of the disability insurance trust gap makes the job of case managers and other disability management professionals more difficult.  The attitudes and beliefs applicants bring with them may not be easily ameliorated; how benefit and rehabilitation people interact on an individual basis can overcome the trust deficit.  That’s the focus of Part 2.

10 ways AI will impact workers’ compensation and personal injury insurance

The mainstream advent of Artificial Intelligence (AI) and Artificial General Intelligence (AGI or AutoAI such as AutoGPT) dominates on-line and traditional news feeds with examples and extrapolations of impacts both positive and negative.  

Capabilities and Cautions

Educational institutions are struggling with what to do about the sudden availability of this technology in academic settings. I tell participants in the university and professional courses I instruct that AI chatbots such as Google Bard, ChatGPT, and Microsoft Bing Chat are not prohibited within my courses; these tools are helpful in exploring new ideas in prevention, analyzing claim decisions, and generating return-to-work strategies or vocational alternatives for disabled workers.  Learning to use them appropriately is an important real-world skill.  Simply banning their use in academics makes little sense.  

Informal discussions with executives and professional working in workers’ compensation, prevention, and personal injury insurance, reveal widespread if informal use of these tools along with anecdotal accounts of both positive and cautionary experiences.  From my own testing and published reports, AI chatbots may make up data, cite non-existent sources, and even attribute direct quotes that were never authored by the attributed source.  I asked several chatbots to create a table comparing specific legislated provisions of state and provincial workers’ compensation laws.  None provided correct data.  When corrected, the chatbots politely apologized and made the necessary corrections in an amended table.  When queried in another session, the original errors and omissions returned.  

AI applications in sectors and industries

The public-facing chatbots available today are illustrative of AI capabilities (despite current limitations).  AI applications just entering public awareness include text-to-image and text-to-video representations that are difficult to differentiate from images captured by any digital or analogue camera.  Specialized AI applications are already being marketed to many professional fields including medicine, manufacturing, finance, and legal services. Those AI applications are about to impact many industries and occupations.  [For example, see Arianna Johnson, “Which Jobs Will AI Replace? These 4 Industries Will Be Heavily Impacted”, Forbes, Mar 30, 2023 and “16 Industries And Functions That Will Benefit From AI In 2022 And Beyond”, Forbes, Jan 13, 2022].  

Workers’ compensation, personal injury insurance and AI

In workers’ compensation and other personal injury insurance organizations, AI-assisted tools are the next generation of resources to facilitate diagnosis, treatment and early, safe return-to-work outcomes.  AI’s impacts in these fields are going to be fundamental and disruptive.  Here’s what to expect in the near to medium term: 

1. Most claims will be automatically adjudicated--quickly, accurately, consistently, efficiently.

AI is already being applied in personal injury insurance and will be the dominant adjudicative and processing modality for claims.  Pareto optimization and segmentation will allow fewer but more highly trained, specialized resources to be focused on more complex cases to achieve better outcomes while providing rapid, accurate, consistent service for most other cases [ see Clara Analytics, “Six ways to reduce workers’ compensation costs using AI” at https://claraanalytics.com/blog/six-ways-to-reduce-workers-comp-costs-using-ai] / The human resource challenge of competing for, developing and retaining those resources will be significant.

2. Medical cost-containment will be AI driven. 

Ai works well with large data sources and will more effectively track patterns, spot anomalies, and detect issues once the purview of manual audit and review processes. Machine learning and advanced analytics will eliminate the need for manual processes (such as medical bill reviews) and allow for highly focused, real-time control by fewer but more highly trained human agents.  AutoAI will handle most but not all results.  For the (fewer) cost-containment specialists, the intensity of work will actually increase as a consequence of AI managing much of the routine, lower complexity issues.  This “adverse selection” will intensify the complexity of the residual cases.

3. Organizational structures will change significantly 

Smaller organizational establishments and facilities for the human resources will be required to support the AI driven systems and highly specialized human adjudicative/claims, prevention, rehabilitation, and administrative processes.  In terms of Henry Mintzberg’s organizational structure theory, AI implementations will reduce establishment size (number of staff) of the operating core and middle line components of an organization.  Many (but not all) support and oversight functions will be absorbed by AI systems.  This does not eliminate the need for all support functions; AI will change the scope of a smaller cohort with additional skills and responsibilities beyond traditional support functions.  This will be particularly true in line and technical support areas where knowledge requirements at what was considered support or assistant levels will increase.  Professionalization and upskilling in both the use of AI technologies and extra-organizational human interactions that facilitate line functions will be essential for professional and executive assistant roles. While more routine work will flow through AI systems, higher functions including many “middle management” functions such as monitoring, budgeting, contract administration, and deployment tasks will cascade directly from executive levels to AI and human executive assistant and analyst levels.  Governance will need to expand or create roles for Chief Technology, Chief Data, and Chief Risk Officers. 

4. Policy development and legal analysis cycles will shorten.

As noted in the introduction, AI tools are already preparing legal documents, synthesizing decisions, analyzing rulings, and drafting policies.  For workers’ compensation and other insurance, AI will facilitate more rapid development and allow greater attention to communication.  AI will also facilitate the “use case” analysis and financial impact modeling needed for legislative and policy consultations.  I recently took the proposed WorkSafeBC guideline for G7.19(5) Exposure to non-ionizing radiation – Ultraviolet radiation [see https://www.worksafebc.com/en/resources/law-policy/discussion-papers/guidelines-preliminary-posting/g7-19-5-exposure-to-non-ionizing-radiation-ultraviolet-radiation] and asked a chatbot for a review including strengths and weaknesses.  The response lauded its structure, informative nature, and up-to-date information but suggested several possible improvements in the form of expansions, using UV germicidal lights that have become more widely used for disinfection purposes in hospitals and hotels.  

5. AI will detect risk and injury patterns creating opportunities for injury and disability prevention.

AI works with data.  Workers’ compensation and personal injury insurance work with people, specifically their hearts, minds, attitudes, and beliefs. While AI can detect patterns of cause and suggest opportunities for better prevention of injury and disability, interventions in populations will require emotional intelligence, operational agility, and creativity mediated by capable human agents.  AI will help prevention (loss prevention departments) more effectively target their primary prevention activities and initiatives.  For inspectorates (regulatory agencies), AI will allow for faster action and more effective targeted compliance interventions.  Disability management (DM) and vocational rehabilitation (VR) specialists will be aided by AI in their secondary and tertiary prevention roles.  Upskilling prevention staff, workplace inspectors and DM/VR professionals to use AI effectively will be a challenge.

6. Appeals against decisions will become fewer but more complex.

Better initial decision-making by AI or AI-assisted adjudication will result in fewer errors in law or application of policy.  This will adversely select for more complex cases involving the weighing of evidence and the exercise of discretion.  I recently took the summary of a publicly available noteworthy decision from the Workers’ Compensation Appeal Tribunal of British Columbia (WCAT) and asked an AI chatbot to determine weaknesses in the decision.  The analysis was instant and provided several weaknesses.  While this test was based on an appellate level decision, it illustrates how AI allows initial, review, and appeal decisions to be examined to find weaknesses and facilitate grounds for further appellate action.  It also suggests how AI may be applied in the decision drafting stage to identify weaknesses that may be addressed before the final decision is released (weaknesses addressed or decision reconsidered).  If this improves decision making, the result will be improved reasoning in the ultimate decision and potentially fewer appeals. 

7. AI supported fraud and cyber attacks will increase and become more difficult to detect.

AI can craft stories that are pure fiction from a few facts and suggestions.  It can model scenarios that are indistinguishable from those insurers receive to insure and compensate employers, workers, and others.  With graphical AI applications, even photographic and video evidence may be misleading.  AI can find vulnerabilities in systems and codes and create scenarios that may open workers’ compensation and personal injury insurers to fraud.  This issue is not limited to claims or supplier attempts to exploit systems.  This threat includes internal fraud and external exploits on financial and other systems.  

8. AI will be visible… until it is not

At the moment, the public awareness of AI and its potentials is heightened.  Insurers in workers’ comp and personal injury will be under scrutiny for how they implement AI technology.  Public filings and disclosure rules may even be imposed.  This demand for transparency will be significant, persistent, but will fade over time.    Just as the public-facing ChatBots will fade away as a novelty and  “AI enhanced search” functions will simply be considered integral to the “search” function, AI will be seamless incorporated across all components of the insurance value chain.  No one will demand transparency over the AI that controls the traffic flow on our streets or optimizes the energy use in our homes;  the same will be true for most personal injury and workers’ compensation claims decisions, it will become just part of environment in which we live and operate. 

9. AI will become trusted despite making (a few) spectacular errors

AI is improving at astounding rates.  Already, AI has reportedly passed business, law and medical exams.  That does not mean to say I’m ready to trust my medical care or the drafting of my contracts to a chatbot.  On the other hand, I am reaching the point where I may be less assured by a physician or lawyer who refuses to use AI in their work.  AI will increasingly be trusted despite errors.  As those errors decline, that trust will become implicit… mostly.  Widely reported errors in any AI application in any industry will impact trust in all sectors using the technology. 

10. AI will not eliminate bias

AI works from existing data.  Most language-based AI systems will reflect the bias inherent the language and data they access.  There is a risk that AI implementations will be bias towards the weight of data available historically, making it more difficult for newer, more accurate data to be reported and presented in AI enabled systems with the appropriate weight or prominence.  For example, AI can’t correct the inherent lack of female representation in past medical studies or correct gender bias that may lead to underestimation of impacts on women.  I warn my students to not consider AI chatbot outputs as authorities or their responses as definitive.  While the AI chatbots I’ve tested will admit errors, omissions, they only do so when challenged.  While factual errors may be reduced, AI will continue to reflect bias—and that will be hard to identify.

Closing thoughts

AI has changed the operating and threat environment for workers’ compensation and personal injury insurance.  Its impacts can be perilous for the sector.  Workers’ compensation and personal injury insurance organizations need explicit and comprehensive strategies in place now to manage the threats and capitalize on the opportunities created by the present and rapidly evolving AI technology landscape. Yes, the impacts will be disruptive and varied.  Failing to act now may hurt jeopardize those these systems were designed to protect. 

An Environmental Scan for Workers’ Compensation - 2023

Environmental Scanning is a critical exercise for workers’ compensation and other personal injury insurers.  Identifying developments, trends and projections in the operating environment help policy makers prepare for and adapt to the threats and opportunities.  Here is a thumbnail environmental scan to stimulate thinking about the emerging challenges for workers’ compensation (and personal injury insurers) from five perspectives.

Social/Societal Challenges:

Workers’ compensation is a form of social insurance; changes in society from its structure to its norms create challenges.  I’ve noted many societal changes in past blogs but here are four challenges that should be in every scan:

1.        Demographic change.  The structure of our national populations is changing.  The causes are diverse:  refugee population displacements caused by civil conflict, natural disaster, climate change and economic crisis; the decline in the proportion of labour-forced age population in Canada, the US and Australia; and the rise in the number of older workers.  Workers’ compensation organizations (WCOs) can’t alter these impacts but have to adapt to the consequences of these changes: Older workers getting injured, greater co-morbidities, increases in complication and recover times, poor health, limited personal resources, language and culture differences among those new to the jurisdiction, etc. 
2.        Mental Health.  Greater recognition and acceptance of mental health is both a challenge and an opportunity for WCOs.  On the challenge side is finally accepting that mental injuries can arise directly from work or can be exacerbated by work.  Adjusting policies to reflect this recognition is not trivial.  On the policy side, there is wide variation in the standard of proof and onus of proof required to establish a mental injury.   Costs that flow from treatment and compensation can be huge.  The opportunity for prevention, fostering acceptance, building resilience, and supporting return-to-work/ stay-at-work strategies must be developed.  That takes commitments in terms of time and resources outside the typically meager research investments and general prevention awareness campaigns.
3.        The changing nature of work itself.  The Gig economy, remote work, and hybrid employment are among the challenges that change our concept of employment.  Are gig workers employees or contractors? What workplace protections and compensation ought they be entitled to? Where is the workplace for a remote worker (and is their payroll assessable out of jurisdiction)? What rules apply to multi-job holders or extra-national employees?  Are the wages of workers living just across the jurisdictional boundary to be included in payroll estimates?  Are workers in the course of employment when travelling from their home office where they work remotely to the corporate workplace or in-person meeting?  These are not just questions for each jurisdiction to decide; interjurisdictional agreement and consistency may be required to minimize gaps and overlaps in coverage.
4.        Amplification in social media/Rising distrust:  I’ve often said one bad workers’ compensation story (true or not) repeated a hundred times creates as many bad impressions as a hundred individual stories, each reported once.  Social media allows and even rewards negative stories that create outrage and can rapidly erode the social capital of WCOs and personal injury insurers more broadly.  Arguably, this phenomenon is not limited to workers’ compensation.  Trust in government has declined in many jurisdiction [see OECD, “Building Trust to Reinforce Democracy: Key Findings from the 2021 OECD Survey on Drivers of Trust in Public Institutions”,   https://www.oecd.org/governance/trust-in-government/ ],amplification has eroded trust in authorities, politicians, and insurers generally.  Countering this trend isn’t easy particularly because of privacy and confidentiality rules that create an asymmetry between what can be said in social media and released corporately.

Environmental Challenges:

WCOs and occupational safety and health professionals often ignore climate change and its consequences as a risk to their own operations.  Weather extremes such as prolonged winter storms, lengthy heat domes, and persistent atmospheric rivers are becoming more frequent and linked to climate change and are increasing [see .US EPA, “Climate Change Indicators: Weather and Climate”  https://www.epa.gov/climate-indicators/weather-climate for examples]. Often ignored are the follow-on impacts including changes in the distribution and risk of viral and bacterial diseases, changes in intensity and duration of fire seasons, and degradation of air quality.   Some things to focus planning on include:

1.         Hardening infrastructure:  you can’t operate if your systems are vulnerable to environmental issues.  The once in a hundred-year flood, power outages that last a week and heat events that overwhelm data centres can crash all an organization’s ability to serve its customers and protect its resources and reputation.
2.        Preparing workers and employers:  It is fine to say you have to have a plan but few organizations actually prepare for and test plans for events and conditions in this domain.  As the Covid-19 pandemic revealed, acquiring protective gear and educating populations at the last minute is not a plan.
3.           Changes in the frequency and severity of resulting claims:  Just-in-time information does have a place.  Warnings about shade and hydration in advance of a heat event can limit work injuries and disabilities.  Anticipating the changing road conditions in advance of floods or fires is an opportunity to mitigate claims risk. When surges in claim activity occur, the ubiquitous “We are expecting higher than anticipated volume…” will not only further harm the victims but also diminish any reservoir of social capital built through other actions.
4.       New jobs, new risks: Changing sector size:  Environmental change has consequences for the types of businesses requiring workers’ compensation coverage, regulation and prevention initiatives. Wind generation towers off shore, increased solar installations and unique conservation methods involve new jobs and innovative technologies with different risks than the traditional job set.  Regulation of materials and mandated recycling can add to the challenges and change the safety and health risks of existing jobs.  Whole sectors may fade  or expand due to climate change (hard to have a ski season if there is no snow). Impacts are not only on policy holders and those injured but also on the organizations that service them.  Changes to rate groups and risk categories can disrupt funding models.   

 Political/Regulatory Challenges

Workers’ compensation (and other personal injury insurers) are subject to regulation.  The degree of regulation and the extent of its swings is a political matter.  The level of regulation, prescribed coverage mandates, and levels of benefit may all become the subject of political debate or regulatory reform.  Often driven by public sentiment around the need for change, several trends are emerging.

1. Increased cost containment initiatives:  Fee schedules are being mandated and adjusted in several jurisdictions.  Drug formulary introduction and expansion is another emerging trend.  These generally favourable to cost control but can increase friction and monitoring costs, particularly in a time of high medical cost inflation and rapid change in pharmacological science.  Conflicts are likely at the margins, and this can quickly escalate and result in poorer outcomes and degradation of public confidence in the system.
2. Mental health:  The growing acceptance of mental injury as note above is making it into legislation with amendments to health and safety laws, expansion of coverage for PTSD and other mental injuries for certain classes of workers (often, first responders).
3. Presumptions:  Faced with the difficulty of proving causation to the legislative requirement, the use of presumptions is becoming more common.  We see Covid-19 being added to the list of presumptions for workers’ compensation in some jurisdiction for certain front-line workers.  While often rebuttable (or inoperative once community spread exceeds a certain level in the case of Covid-19), the pressure to expand presumptions is evident.  
4. Changes in Eligibility Requirements/ Expansion of coverage:  Generally, the long-term trend to increasing the scope of who is covered in workers’ compensation and what is covered (nature of injury or disease, treatments accepted, reduction or elimination of waiting periods, and level of benefits) have been on the rise.  Even where there is no change, the actions in other jurisdictions are often widely reported and frequently raised for consideration in other jurisdictions.  Monitoring, tracking, and developing positions need to be an expanded part of ongoing corporate planning for WCOs and personal injury insurers.

 

Economic Challenges:

 The Great Financial Crisis, Covid-19, the war in Ukraine… it seems the interconnected economic life of the planet is suffering a new calamity every few years.  For insurers in the work disability space where claim liabilities are incurred then paid out over what can be extended times, these cyclical hits to the economy can upend assumptions.  Reserve policies, asset allocation and growth assumptions may all need revisiting.  Here are some economic perspectives deserving particular attention. 

1.  Medical cost inflation:  According to recent Milliman study (https://www.milliman.com/en/insight/medical-inflation-drivers-and-patterns), medical inflation tends to outpace general inflation over time.  To the extent that medical costs are part of the cost of work and personal injury claims, this pattern can have a big impact on overall claim costs.  The most recent NASI study pegs medical costs at about 47% of workers’ compensation benefit costs based on 2020 claim data.  That’s down from its pea at over 50% in 2014 (see https://www.nasi.org/research/workers-compensation/workers-compensation-benefits-costs-and-coverage/). With aging populations, healthcare professional shortages and increasing drug costs, this perspective deserves attention.
2. Inflation, investment, and interest rate volatility:  WCOs face administration cost increases due to inflation including the upward pressure on wages, facilities and energy.  Not all systems offer cost-of-living protection for beneficiaries but those that do are facing significantly larger increases than the 2%-3% assumptions that may have been in place.   Where such protection is not in place, the political pressure to increase benefits will be significant.  The cost and return assumptions to cover the  “long tail” of claims costs in personal injury claims are highly susceptible to economic assumptions.  Serious and continuous monitoring of assumed inflation costs, discount rates and reserve levels are critical.
3. Policy-holder disruptions:  The book of policy holders remains relatively constant from year to year, at least that was true in the past.  Economic pressures including supply chain issues, inflationary pressure, and labour shortages are causing more business to shutter.  Bankruptcies and insolvency rates are rising.  Other disruptions (including technological innovations) are drastically altering the business landscape.  The resulting shifts can upset risk models and the credibility of rate groups, the basis for rate setting. 
4. Stakeholder financial education:  Insurance financing is a mystery to most people.  Personal injury insurance including workers’ compensation requires complex financial considerations.  Overcoming the “math is hard” mindset is a necessary if difficult task.  Insurers must be transparent about their financial position but have a responsibility to communicate that simply and effectively to wider audiences.  Beyond timely annual financial statements, employers need to understand how their premiums are established and the consequences of their performance.  Unfunded liabilities, unjustified reserve levels or over-funded positions need to be explained and understood if systems are to be sustainable.

 

 

Technological Challenges:

 

WCOs are big users of technology.  Increasingly, automation is taking over the routine claims administration.  Actuarial, finance and statistics roles are all heavily reliant on technology.  The benefits and vulnerabilities of that reliance are changing at an accelerating rate with big implications for WCOs.  Advances in medical technology that may impact the cost of claim, telemedicine can speed access to care, wearable technologies can improve protection for individual workers, and artificial intelligence can assume a greater role in claims processing, freeing resources for more direct care and attention.  On the prevention front, new tech will better protect workers, although the potential for over-reliance on systems and latent errors will undoubtedly occur. Those are all positives to be included in any environmental scan, but there are potential negatives to be considered. 

1. Cybercrime/Security:  Denial of service attacks may have declined but ransomware and data breaches have exploded.  Securing personal data, health records and financial transactions is critical.  Testing and probing exercises have to be stepped up and active monitoring of breaches elsewhere is critical.  What lessons are we learning from the Chubb, Axa and CNA Financial attacks?  
2. Artificial Intelligence:  As these tools emerge and are integrated into claims processes, they will also be used to design new ways to exploit weaknesses in security, claims processes and even appeal processes.  Already Zurich insurance is using an AI robot to process claims in seconds [ See Jacob Maslow,  “How Automation Will Change the Business of Personal Injury”, LegalScoops.com, 21 Feb 2021, https://www.legalscoops.com/how-automation-will-change-the-business-of-personal-injury/ ].  Many aspects of insurance from underwriting, to adjudication, claims management, and even appeals are already benefiting from machine learning. [See Eray Eliaçık,  “The insurance of insurers”, Dataconomy.com, 22 September 2022 https://dataconomy.com/2022/09/artificial-intelligence-in-insurance]. One additional note under this heading.  Public facing AI programs are fledgling and sometimes very inaccurate or misleading on specifics in workers’ compensation law, policy and benefit parameters.  This can contribute to inappropriate conclusions causing some to question decisions or avoid filing claims that would otherwise be advisable. 
3. Quantum computing:  The promise of quantum computing includes security but getting there will take time and a lot of resources.  My fear is that many will put off recognizing this until it is too late. All that security and protective procedures you have in place may become vulnerable soon than later.  A recent SwissRe report identifies this emerging risk with examples that could include internal failures and delays, external direct threats to security and indirect threats such as supplier, partner or infrastructure failures that could arise because of the threat.  [See  Maren Bodenschatz et al, SONAR 2022: New emerging risk insights – 10th anniversary edition, 16 June 2022, https://www.swissre.com/institute/research/sonar/sonar2022.html] 
4. Medical diagnosis and treatment:  Advances here hold great promise.  We will be able to link more cancers to their work or environmental causes; new treatment will emerge to battle the multitude of disease; Immunological and genetic treatments will extend life and health.  For insurers, these will add significant costs, at least initially.  As new treatment modalities arise for physical injury and disability, demand for access to them will accelerate.  Exoskeletons for paraplegia, neuron transplants to reverse paralysis and restore degrees of function, implants that replace organs, regulate body systems, and even enhance functionality will become standard treatment, potentially contributing to increased medical costs. 

Environmental scans are starting points for discussion and consideration.  Your list of examples will likely differ from mine but there will likely be common themes.  It is too easy to put off discussion of issues from these perspectives.   Doing so only increases the potential risks and diminishes potential opportunities to preserve and improve workers’ compensation protections for workers, employers and all of us who benefit from well run systems that are as prepared as they can be for what is coming next.