Workers comp reinsurer advances innovations for determining risks

Safety National finds tech solutions for workers comp coverage

October 24, 2022 6:30 AM

DI-SafetyNational_03062017 — Safety National Casualty Corp. headquarters at 1832 Schuetz Road in St. Louis, Missouri.

Digital Insurance spoke with Cyndee Morton, chief operating and innovation officer, Safety National Casualty Corporation. Safety National, owned by Tokio Marine Holdings, specializes in excess workers' compensation for self-insured employers and groups. In addition, it provides risk solutions for large commercial enterprises and public entities, reinsurance for workers compensation, and other lines of business including construction risk and cyber risk.

How does Safety National work with clients, especially for reinsurance, on risk management?

Cyndee_Morton_Safety National.jpg — Cyndee Morton, chief operating and innovation officer, Safety National Casualty Corporation

We work in partnership with the risk managers to help them solve, because they have a very hard job. Their job is so difficult. They're solving for us and putting out fires all over the place with a limited budget.

They have to decide what, as a risk manager, they're willing to take in the way of risk. Some of them are not risk tolerant at all and want to know they're 100% covered for any claim. Some of them want to keep their money in their pocket.

Every state is different, but regulators very much say if you're going to self-insure, you better have the capacity to pay all those claims, because if a self-insurer can't pay it, the state has to pay it. We're very tuned to all the state rules and all the different product rules.

So we try to solve and innovate with the customer in mind. It's all about that relationship with the broker and the customer at the end of the day. Innovation plays a huge part of that, whether it's in the technology space, through APIs, microservices, core policy admin systems or claims intake, all the way to a simple shift in a business process and taking out the cost of a process that doesn't make any sense.

How do you convince a client to apply the innovations Safety National can do?

It's difficult because our direct customers, our clients -- we have accounts, but we have to work through a broker community because of the licensing. So the brokers directly work with the client, the insured. In this large commercial space, the broker realizes that the risk manager is very knowledgeable. So they sometimes will allow us to partner with the broker and the insurer. But it's still the broker that we have to partner with. That's who we have to market to. We are working with four large brokers to get them to work with us on an API gateway so we can seamlessly transmit the submission data.

We're a small player, but we're also flat and nimble. All of our IT is on site. We work across our departments in a very flat type of environment. It's getting our broker community to understand that we are very technically advanced and very innovative. We just keep talking. We're building our gateway and we built our own in-house transformation layer tool. We can take any format of data and we can map it to our systems. We're not going to make you comply with our layout like some of the bigger carriers do. We know that being a small player, we have to be easy for doing business.

Where does innovation begin or get a foothold in workers compensation insurance and reinsurance?

Innovation starts with the submission process. Getting that data in a format that's already digital from the broker is ideal, but they're finding it's very complex to do that, because in this large account space, there are lots of losses, lots of entities, lots of exposures and lots of states. So the record layouts are very complex.

While they're figuring it out, we are working with Groundspeed, which uses robotic process automation to bring in our submission data. It puts the unstructured data into a structured format in our layout, and sends it back to us within an hour. We can upload that into our core admin systems.

Using DataRobot, R and Python, we built what we call a scoring model. That data goes into our core policy admin system. Our bot takes it through to a quote in scoring. The scoring labels these green, yellow, orange or red. The greens are accounts that the losses look good and there's nothing that appears out of line. The insured is controlling. They're below a threshold. Their hazard code is within our appetite. The green ones go to a junior underwriter. Our pricing model, a very complicated actuarial model, applies the loss ratios, the trending and, things like that, gets a price and pops it over to a quote and a junior underwriter. All of that used to take weeks.

The reds are where we want our seasoned underwriters to really focus. They look for a bespoke way to write this account, by increasing retention, lowering a limit or maybe excluding a coverage by endorsement. Before, we might not have looked at this account. Now we're broadening our horizons and really looking at things differently.

We're taking all the noise out and we're giving them the tools to really look at an account more holistically and compare them against other accounts in the industry, because we write a large majority or have written a lot of the workers compensation accounts. We have the data and we use predictive analytics to help the underwriter understand, if you write this account at this price and this retention and this limit, this is what you can expect. It gives them more confidence in what they're doing. More ability to focus on the art and science, because it truly is an art and science, and really a solution for the insurers.

On the back end, premium audit is always a pain point. We've developed a predictive model that says on these accounts that we've written for several years, we really have not seen a shift in their exposures. They've stayed pretty flat. We don't really need to do a physical audit. Let's just say congratulations, your audits have trended to be right here pretty flat. We're just going to waive the audit. That gives our premium audit staff the ability to focus on those gnarly, bad, really hard premium audits.

How does Safety National use blockchain technology to manage the data?

It secures the data and makes the insured feel more comfortable about their data. The insurance industry has just scratched the surface on blockchain. We're not a company that jumps in quickly. We don't chase the shiny things. We're a slow follower. We've been watching blockchain for a while and now it's gaining traction, so now we want to jump in.

We're insuring employees and employees are paid payroll. Their workers compensation policy is based on the total employee payroll, with some rules wrapped around it, like you can exclude certain overtime rules or you cap an officer's salary. There's a rate that's applied to your salary divided by a hundred. That becomes the premium that an employer has to pay and if they take a deductible, it goes down. If they have credits for certain things, it goes down. There's wiggle room to play with that.

Loss-sensitive accounts have even more opportunity to lower their risk because they can take even bigger deductibles in all states except Wisconsin. It becomes a sandbox for the risk manager, the broker and our underwriters to really look at where are we comfortable in pricing and retention and were they comfortable with the risk they're taking and the price they're paying to cover their employees. At the end of the policy term, you know what your employees have earned.

How does Safety National work with third-party administrators (TPAs)?

We work with TPAs so the insured can select a TPA that they're comfortable with, a third-party administrator to handle their claims. Then we integrate with the third party that they select and we do EDI transfer of the claims data into our claims center, Guidewire Claims Center. So we work very closely with the TPAs. We have great relationships with them. It's really beneficial because insurers get comfortable with their TPAs. The TPAs provide services to them.

It's great for us cause we don't have to have a huge claims staff. So when our claims team gets involved, it's because a claim is either getting close, it's predicted to get close to the deductible, and we start working with the insured to really look at the claim to mitigate the loss, because a claim is something you have to pay. That's what they're buying. Our duty is to pay that claim, but we want to work with them to make sure they're getting the best care for their employees. So we have programs like Best Doctors and we have medical case nurses that can refer them to experts and defense counsel and things like that.

Getting employees back to work is really an important thing for workers comp TPAs, for us and for the insured, because there's a value to working and there's an intrinsic value for the employee. We find that employees want to get back to work and continue their lives for the most part. In the worst cases, there are some who, understandably, say they can't return to work and need total disability. It's unfortunate, but it's serving a need. Otherwise those employees would have no voice to take care of them or their spouse and children or dependents. That's what I love about this.