Workers' compensation and innovation are not usually used in the same sentence.
But competition from outside the industry is forcing innovation, and the employer market - the people that actually pay for the insurance - is reaping the benefits.
Some time ago the big payroll service guys, ADP, PayChex, and others, started making partnership deals with insurance companies to provide workers' compensation coverage in conjunction with managing payroll.
The advantages are obvious if done successfully - since work comp is based on payroll, integrating the two should result in greater efficiency with tighter reporting, more accurate accounting and overall better service.
The insurance industry is notoriously slow, however, at adapting to change.
But change happens and in the case of the payroll/insurance hybrid, seems to be catching on quickly.
Carriers are now starting to offer payroll services to compete with the traditional payroll management companies. The fuse has been lit, and competition is heating up.
The big advantage to employers is that they get a pay-as-you-go (PAYG) service. Rather than getting one big insurance bill once a year (or maybe twice a year if the carrier permits bifurcating the bill), through carrier initiated PAYG payroll, the work comp premium is integrated into payroll, so the employer's cash flow is more smooth.
This also produces more smooth income for carriers.
The downside is that it may be more difficult for employers to monitor their premium because in most companies payroll is not static, and neither is workers' compensation - particularly if there's a claim or two.
The trend seems to be driven by demand from brokers and agents, who are losing business to the payroll services. Brokers and agents get their income from commissions, and if their customer buys insurance from another source the brokers and agents are more directly impacted.
Having an option to provide employers who like the idea of integrated payroll and work comp insurance provides brokers and agents a big competitive advantage in being able to retain their customers.
Banks are in on this too.
I recently was lunched by our banker, who represents Wells Fargo. Wells Fargo has an insurance division. I didn't know it also did payroll, but it does, and my banking representative is working hard to get me to switch, promising me savings for WorkCompCentral and better service.
We'll see about that - in the meantime it might make sense for me to look at PayChex' (our payroll service provider) work comp offering.
I think the PAYG model of payroll/work comp integration will continue to grow and bring new competitive advantages to employers.
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