Read the article written by PYMNTS.com here
Leasing, real estate, credit cards and many other expenses are done on a monthly basis in terms of payments, but workers’ compensation has been quite different.
Workers’ comp has historically been a market in which either the entire payment or a big portion of it was made upfront.
With today’s technology, integrations and ability to share data, though, there’s an alternative: pay as you go. With this process, it’s paid coincident with payroll.
“I look at it as practically everything else is in a monthly period in terms of payments, so why isn’t this one?” Michael Carus, chief operating officer and chief financial officer at InsurePay, told PYMNTS.
Moving Toward Pay as You Go
In the traditional process of handling workers’ comp policies, the risk was assessed upfront, and a big payment was made upfront. Then, at the end of the year, there would be a review to see what actually happened because the risk had likely been changing throughout the year.
Workers’ comp is based on payroll information and job classification codes, and both payrolls and people’s roles may have changed during the period. As a result, either another payment or a refund would be required.
InsurePay offers a solution that correlates risk with invoices at each pay period. The company has a connection to payroll providers that enables it to see the payroll and roles each pay period and correlate them to the risk.
This enables InsurePay to invoice for the real risk during that period rather than requiring an upfront payment and not knowing what’s going to change during the year. It also reduces the friction of adjusting at the end of the period.
Looking for Efficiency Gains Throughout the Process
There are also frictions in the traditional payment process. Brokers receive payments and must move them from themselves to the carrier, while at the same time having their commission or split. That requires reconciliations.
This is often done with the agent stapling a check to a printout of an Excel spreadsheet and policy documents and sending them to the carrier, where someone must undo those papers and reconcile everything.
“That whole process was ripe for reconciliation and automation, so we looked at that as well,” Carus said.
The industry needs to move to different forms of payment, too, because checks cost a lot of money, Carus added. Currently there’s often a check from an insured to a broker, and then another check from the broker to the carrier.
“Think about all that money and process that has to happen versus trying to create different forms of payment that are electronic-based,” Carus said. “And then underneath that, you have sort of the metadata of what they’re for. We’re looking for efficiency gains throughout that entire process as well.”
Considering Other Lines of Business
Looking ahead, Carus said InsurePay is looking for other lines of business in which risk is always changing and payments can be aligned with a pay-as-you-go plan.
“We’re looking at all of those lines of items where there are the core data points that are necessary, and if you have that information in real time, you can ultimately streamline in moving from upfront payments with changing risk that have to be fixed in the future to real-time payments, real-time analysis of their risk and removing the unpredictability of that,” Carus said.