One wouldn’t normally associate blockchain with workers’ compensation, two completely different industries that seem worlds apart.
But as it turns out, the technology is of value to at least one very important entity in the space.
The Workers’ Compensation Insurance Rating Bureau in California is looking into using blockchain technology as a better, safer, way to get workers’ comp carriers and agents and brokers access to the massive amount of data the WCIRB collects.
The organization isn’t stopping there. It’s funding efforts to look into using behavioral science, machine learning and other digital and technological innovations under an ongoing modernization effort.
Bill Mudge, president and CEO of the WCIRB, the provider of actuarial-based information and research and advisory rates for a state that comprises roughly one-fifth of all the nation’s workers’ comp premiums, talked about these changes with Insurance Journal.
This has been edited for brevity and clarity.
Insurance Journal: We’ve been hearing the WCIRB has been in the midst of some technological/digital changes. Can you talk about what’s been going on and why?
Mudge: Tech enablement for us over these past six years as a company is really core to our transformation as an organization to a much more customer-focused company, with a broader perspective really across the entire California workers’ compensation community.
For insurers, but for also employers, and agents and brokers. This industry, technology and data have really shifted the landscape of our business to provide really greater meaning about workers’ comp system dynamics and much more granular analyses than we ever have.
Let me give you an example, our recent insights and heat maps that we have out about geographical cost differences across California, you know California geographic cost differences are really dramatic now that we’ve teased them out and understanding those cost drivers is critical for buyers and for sellers. The investment we’ve made in these modern technologies, and tools, and quite frankly talent that thinks differently about the business, to expand our horizons, insights, as well as greater access to data for our customers and their ability to self-service has really been, I think, sort of core to what we have evolved to in the last several years as a company.
Now, I’ll give you a little perspective on that. Today through our various mediums, right, WCIRB.com, it’s open to the entire public, it’s our public-facing website, WBIRB Connect is for insurers and agents and brokers to do business that they need to do in transacting insurance, and our analytics portal, WCIRB Inquiry, for insurers, there’s just a wealth of capabilities available today that didn’t exist just a few years ago. I’ll give you context to that, we’re on pace this year to reach more than 2.5 million customer interactions through those various channels.
IJ: Specifically, what are carriers getting from all this change?
Mudge: For carriers the business is really shifted in my three decades doing this and much more so in the last several years where workers’ comp today for us and for carriers is really much more of a data-driven business, from the macro view of systemic cost drivers to the ability to benchmark outcomes and book a business performance across a variety of variables. We’re integral to all of that, as we have the entire insurance industry and dataset sitting here electronically within the WCIRB and spanning across decades and data about every insured risk.
We started to provide that data in an appropriate, authorized, authenticated way to carriers. It’s really critical to their decision making and, in a broader sense, I think also the stability of a healthy competitive market. I mentioned WCIRB Inquiry and it really provides insurers the ability to have data access at their fingertips and benchmarking capabilities that doesn’t exist with any other bureau.
We also provide carriers now, we got into the web services business, something we call X-Mods and More as a product that can deliver machine-to-machine data that’s accurate at the point of need in a just-in-time way to really facilitate more efficient insurance transactions.
For carriers it’s greater insight about this long-tail line of business and the system changes that are going on underlying California comp, and then their ability to have access and know where they are in their own books of business and then also be able to get data in a just-in-time way to make the transaction of insurance a lot more efficient than it’s ever been.
IJ: What about agents and brokers, what changes are you making that will affect them and what should they take away from all of this?
Mudge: There’s a lot of real positive changes for agents and brokers. We started embracing them as a customer group in a much broader way several years ago. They’ve been big fans of our call center. We take about 80,000 calls a year at the WCIRB believe it or not, and the largest user population is agents and brokers.
Let me start briefly with WCIRB.com, that front door, if you will, electronically to our company. We revamped it last year and one of the key landing pages we put up there is for agents and brokers. We launched something earlier this year called the agent broker toolkit. It’s on their landing page. It’s organized in icons around kind of the typical sequence and conversation that an agent would have with a client about the key topics in workers’ comp, from where the business is located, as I said geography matters a lot in California as a cost driver, to classifying their business. How do 500,000 businesses in the state of California get fit into about 500 industry classifications?
From experience rating to ownership changes and how those effect experience modifications, to preparing for final audits, all that stuff and knowledge is now at the fingertips of the agent and it’s mobile enabled.
Also, I’ll tell you, agents can find on WCIRB.com a class search tool to enable them to help in the classification of their client’s business and x-mod estimators for the company that produces the x-mods, the WCIRB, to assist their clients as well in doing sort of what if or risk management scenarios if certain types of claims are able to be eliminated from the workplace.
We built something a few years ago called WCIRB Connect, and I mentioned that, it’s really the work horse system for insurers and for agents and brokers. It logs over a million customer sessions now annually. On Connect, agents and brokers can do a lot of their business right there.
IJ: The board approved some R&D funding recently to take a look at some technological innovation, specifically in areas of data and behavioral science. What’s going on with this and why is behavioral science pertinent to workers’ comp?
Mudge: In California, we’re the single largest workers’ compensation market in the country, not surprisingly given one of the largest economies in the world. We comprise about 20 percent of all the nationwide workers’ comp premiums. We’re a little over $17 billion dollars on a first dollar premium basis and it’s a dynamic system and an innovative business climate in California. We have to continue to innovate as well to remain relevant to the communities we serve, and our board gets that.
We went to the board and said, boy, we’d like to explore some future-thinking things like machine learning, like web scraping, like insurtech, like behavioral science you’re asking me about, to see how new tech can enhance our value proposition.
Here’s the thing on behavioral science, it’s really particularly intriguing to me. I think one of the reasons I’ve stayed in workers’ comp for so many years is because workers’ comp’s all about human beings and how do human beings react in this system.
What we’re thinking is we could blend our actuarial or data science with the humanistic side of science. We can sometimes get caught up in the data or [what] people call it big data, and yet workers’ comp it’s more about how people relate to or react to the system that I’d suggest portends future trends that we’ll later see in the data.
Rather than look in the rearview mirror, if you will at our actuaries, and we kind of get a confused, some might say, “Well that was great, you told us what happened, right?” We want to start looking out the windshield with the assistance of behavioral scientists, not people from the workers’ comp arena. We’ll bring that side of the equation, but people who study human behavior at places like UC Berkeley and we’re looking to partner our actuaries and medical researchers with their behaviorists to study the workers’ comp system from a humanistic and sort of data-istic, if you will, way. Now, that’s a mouthful, right? It’s a big undertaking.
IJ: Blockchain is something you wouldn’t relate to workers’ comp, so can you tell us a little bit about what WCIRB is doing with this technology?
Mudge: We haven’t done anything with it yet. I guess you could say we’re going to school on the possibilities of it and particularly as we learn about blockchain, as we watch others, whether it be in the banking or financial services world, or the retail world, and their business, we’re really interested in this area of blockchain called smart contracts.
We collect a lot of data at the WCIRB. In fact, we collect tens of millions of records annually. In that collection of the data, there’s just a lot of process and movement of data through various secure channels and human involvement. It’s not an inexpensive proposition.
Blockchain maybe offers the opportunity to say, well, what if the data never moved, right? What if it stayed at its home, its source of truth? What if through a smart contract those that are authorized to access certain data for specific purposes could do so through the blockchain.
Let me give you an example, all insurance policies that are written by insurers in California, those all sit in their systems with those insurers who wrote those policies. Today, they pretty much all sit in digital form. As the designated statistical agent for workers’ comp, that’s us the WCIRB, those policies and all the data surrounding them is to be reported to us, so the data moves.
What if we, the insurers, were all parties to a private digital ecosystem, a blockchain, for policy and statistical purposes with rules and governance and of that that’s built right within the chain, this so-called smart contract, right?
It’s really intriguing to us. We’re exploring the development of a business case or two and thinking about a proof of concept to see maybe the art of the possible on this. It’s not going to happen overnight, but, boy, I can envision if this could work out it could be a real game changer.
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