Monday, August 17, 2015


Some time ago I expressed that Google's foray into automobile insurance was the start of a new trend of disruption - the automation of insurance.

Insurance is highly data driven. The insurance industry was one of the first business lines to hugely embrace computing. The investments at the early onset of the Information Age were huge, and the technology that was bought back then paled in comparison to what a dollar can buy now, which of course will pale compared to what a dollar can buy tomorrow.

The Information Age impact on insurance is going to be even more broad than just a technology company jumping into the space, or an insurance company upgrading its information systems.

This is evident by the strategy outlined in Patriot National's last investor conference call, where the company said it is more of a technology company than an insurance company, and wants to be an employer's one stop shop for risk management and cost control.

“When you look at the services we offer to employers, from workers' compensation to self-funded health plans to background checks and drug testing, what's important is that they all are mandatory or becoming mandatory for employers,” Patriot National CEO Steve Mariano told investors during the call.

Two years ago Patriot National was a subsidiary of a larger insurance company and had become entangled in efforts to chase down unpaid workers’ compensation premiums from professional employer organizations.

Since then, the company became a separate public entity, and went on an acquisition spree, buying 14 companies that it felt would assist in building this dream company - more than insurance; a company that uses data and big computing to deliver information resources to the customer as a primary source of risk management.

Oh, and there's some claims assistance provided too just in case risk management didn't quite work for a particular instance.

The data drive is key and I think the strategy that Patriot National is undertaking is the future of workers' compensation.

We're already heavily invested in data - data has been driving workers' compensation from the beginning: payroll, loss experience, billing codes, etc.

What is different is that data is now being used much more proactively. In the past, data drove retroactive decisions. An accident occurred, and decisions were made based on what should happen given any particular set of data.

For instance, Mariano pointed out during the conference call that one of its acquisitions, InsureLinx, allows workers’ compensation policyholders to pay premiums based on real-time information instead of projected payroll.

In addition, insurance decisions are much more holistic, involving facts, circumstances and attributes that aren't necessarily workers' compensation. Patriot National seems to recognize this, going from zero non-workers' compensation premiums 2 years ago to an anticipated $750 million.

This could be a harbinger to the overall workers' compensation context: not only is there overlap with other lines of risk and insurance management, but a likely consolidation of systems, at least at the employer level.

Yes, I'm talking about systems that blur the lines between general health and workers' compensation medical treatment, between non-occupational disability coverage and work comp disability.

“I think the (property and casualty) sector in general is a laggard when it comes to the integration of technology, at least relative to financial services,” Charles Sebaski, a financial analyst for BMO Capital, told WorkCompCentral in an interview. “And I think Patriot National ... identified a niche, which is work comp, which is a very large, very fragmented market, but it's also ... very latent with paperwork and (regulation) to a greater degree than other lines of business. I think those elements — the greater regulatory burden, because of its medical insurance or medical case element to it — to a greater degree is in more need of technology to help take care of some of that administrative side of the business.”

The Information Age is really the Disruption Age. We have seen many industries succumb to big changes. Those that ignore the warnings suffer consequences that sometimes can not be overcome. Those who are paying attention, though, profit immensely.

Patriot National is a story that is going to be repeated over and over as the industry responds; and it's my prediction that this will drive legislation in favor of integrated services. Yes, there are differences between workers' compensation and general health.

Nothing, in my mind, that can't be engineered out.

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