The Feed

Dyea (pronounced "dieee") went from a couple hundred residents to about 10,000 in a year as it was the entrance to the Yukon Gold Rush. Everyone that wanted to get to Whitehorse had to come through Dyea because it was the head of the Chilkoot Trail, the only passage through the mountains to gold country.

But the Yukon Gold Rush didn't last long - about a year - and when the gold dried up, so did the "stampeders" and Dyea was abandoned.

Years later the neighboring city of Skagway, which has a natural deep water port, grew from a hunting and fishing town to support a seasonal tourist industry.


Each town experienced (and still does) major disruptive forces, huge changes in lifestyles. Fortunes were made, fortunes were lost, most people were lucky just to survive. The disruptions were quick and radical, and largely unforeseen but by a few.

Now Dyea is mostly a memory, a few cemeteries, remnant pilings from a dock, and some false store fronts.

Skagway on the other hand bustles during the tourist season with jewelry stores, souvenir shops and restaurants. The town swells by 10,000 when a couple ships tie up for the night, employing a couple thousand seasonal workers.

The world of workers' compensation has for some time been experiencing the disruption that is challenging a lot of other industries. Every state "reform" is disruptive. New trends and unforeseen, unintended results, is disruptive. Old vendors succumb or adapt, new vendors sprout up and some don't flower.

And like other industries, technology is poised to alter in ways we can't imagine, the insurance market place, particularly in workers' compensation.

CitiBank isn't in the business of insurance directly, but I'm sure they are lenders and investors in the market. That gives their team of analysts on the insurance industry a little bit of credibility - it's in their interests to understand what might go on with the market because they make money financing and supporting insurance.

Todd Bault, James Naklicki, and Alex Gifford at Citi recently opined that the Internet of Things, which they have renamed for their purposes, "The Feed," is not only going to disrupt the insurance market in huge ways, but is also going to disrupt the public's interaction with insurance, and I see this especially applicable to workers' compensation.

There's big debate about the shared, or "gig" economy and the tests it is putting on the standard duopoly relationship between worker and employer, independent contract0r versus employee.

Academics and others are starting to argue that there should be a third category, the Dependent Contractor, that blends the stability of the employee relationship with the freedoms of independent contractor status.

In order for that to work there has to be viable insurance alternatives, and what is really keeping the insurance industry from endorsing this sort of change is the ability to know when someone is working as a DC, or as an employee or IC.

In reality, this concern has always been present, and has always been a challenge, except that the option was limited to black and while, on and off, either or.

There has never been a maybe. Technological advances, the IoT, the Feed, will increase the possibility of a "maybe" category.

Technology, as argued by Bault, Naklicki and Gifford, will enable the insurance industry to determine, in real time, what relationships exists and when (among other important risk factors), and consequently coverage can be tailored to the exact moment in time something bad might happen.

"But the potential here seems higher for commercial lines: with fewer or no privacy issues, and existing pervasive automation, it seems like a smaller step to embed IoT into industrial (manufacturing) and service (venues) processes, not to mention commercial auto activities like trucking and livery," said the analysts. "Employees in certain high hazard occupations could even be wired and monitored, though there could be resistance here."

This isn't going to happen overnight - but a multistage revolution in the insurance industry is, in my mind, certain to happen.

First, since data can be compiled by the insurance providers themselves, they can use that to make a quote and receive a claim, possibly cutting insurance brokers out of the process.

Next, the analysts envision that insurance companies could adjust their prices based on the level of risk being undertaken by the company at different points in the work process and time of day.

"With continuous monitoring of the Feed, we could learn when companies present exposures or not (e.g., the plant is closed, the venue is empty) and with what intensity (e.g., the plant is running hot, the venue is only at half capacity)," wrote Bault, Naklicki, and Gifford. "This could allow insurance to be metered like a utility, and at different rates depending upon exposures and intensity."

Further developments — like tailored risk-management training and the ability for companies to shop individual elements of their business to different insurance firms — could also follow.

This would be a multistep process, because laws need to change to allow insurance to exist in this manner. Insurance, in the workers' compensation field, needs to be able to rate individuals, not companies. Individual risks will be more granularly assessed, and actuarial models will be created on the personal level.

There doesn't need to be confining job descriptions along with their respective class codes and risk ratings - the actual work that truly does pose a risk can be singled out rather than rating at the highest level of risk an employee might engage in, even if they don't do that activity but 10% of their work exposure.

Professional Employer Organizations and other temporary employment systems will benefit immensely, as will their insurance companies. Opt out may not be relevant any longer.

Oh, and uninsured employers would no longer be able to hide so long as a worker is "wired" to the Feed.

Sports wear vendors are already embracing embedded technology and building it into their clothing.

Privacy? pffft - I think darn near any employer will accept a lower price for engaging in the system more efficiently, and workers will just have to accept that as a part of their employment, or work elsewhere.

In fact, such IoT implementation may actually work to engage and retain employees, something the learning community calls "gamification."

The Feed portends disruption to the insurance market, and work comp is a natural fit. This isn't the Yukon Gold Rush. It's more like Skagway's tourist rush.

We're just scratching the surface. This industry is going to look a lot different in 20 years, or sooner.

Share This!

Here's the broken record: nobody likes or wants workers' compensation insurance until something bad happens and there's no alternative to incurring the liabilities or damages by one's self.

Two cases in California (one in LA and one in SF) involve Uber employees explicitly and exclusively seeking workers' compensation coverage because they sustained injuries from passenger violence and lack any other means to have their injuries or disabilities taken care of other than out of their own pockets.

Uber driver Omar Zine filed a complaint in Los Angeles County Superior Court Friday, Zine v. Uber Technologies, for injuries sustained Dec. 14, 2014, when he picked up two female passengers and a fight broke out. The women punched and hit Zine in the head, knocking out teeth and fracturing his jaw.

Zine's medical care, performed at Cedars-Sinai Medical Center in Los Angeles, allegedly cost more than $100,000, including dental work and cosmetic surgery. His attorneys say there is permanent disability because his jaw "is not properly aligned."

Zine’s attorneys have noted that a similar case, Abdo Ghazi v. Uber Technologies, has been filed in the San Francisco Superior Court and requested class certification.

Because Uber treats its drivers as independent contractors, it doesn’t carry workers’ compensation insurance for them, nor does its automobile insurance cover the drivers.

Being an Uber driver (or any public transportation driver) carries a relatively high occupational risk.

According to a fact sheet the U.S. Occupational Safety and Health Administration published in 2010, taxi drivers are 20 times more likely than other workers to be murdered on the job. From 1998 to 2007, OSHA found that the homicide rate among cabbies ranged from nine per 100,000 drivers to 19. For all workers, the average homicide rate during that time period was 0.5 per 100,000.

Certainly there are issues beyond workers' compensation that impact a business' decision to classify workers either independent contractor or employee - these issues model overall labor law classifications of exempt (those not subject to overtime and other wage laws) versus non-exempt (hourly workers typically covered by rigid work rules).

And perhaps the true remedy for the new economy is to create a third classification, the Dependent Contractor, blending the two models where there is shared risk between the worker and the company, but increased freedoms to both.

There is no reason why the insurance industry could not come up with products that meet the needs of both the company and the worker for a shared economy business, but that's not going to happen until the risks are more well defined and that takes a change in the law.

As we know, the law moves slowly and in the case of creating a Dependent Contractor status, time will be needed to think through the ramifications, from liability for certain expenses or risks, to taxes and how to collect them.

The vast majority of working people (and frankly business people) have no appreciation for, understanding of, or demand for, workers' compensation insurance until an injury occurs, and the responsibility for paying can't be transferred to somebody else.

Then, all of a sudden, the despicable and horrible workers' compensation system is desired.

Share that!

Worse Than Fraud

Unless one lives in Bangladesh, going to jail for killing a worker is rare.

Very rare.

But when an employer is so egregious with work safety and shows an overall disdain for the law, let alone worker safety, then sending them to jail is the least society should do.

The California Division of Occupational Safety and Health pursued criminal charges, and succeeded, against Richard Liu, the owner of U.S.-Sino Investment, and Project Manager Dan Luo to two years in prison for involuntary manslaughter for the death of Raul Zapata Mercado.

According to a press release from the California Department of Industrial Relations, Mercado was crushed to death after a retaining wall collapsed on him at a worksite U.S.-Sino Investment was running in Milpitas.

A Milpitas city building inspector had issued a stop-work order on the project, but the contractor didn't stop work. Mercado was installing the foundation for a retaining wall on Jan. 28, 2012. The 12-foot-high wall collapsed on him, killing him before responders had a chance to dig him out.

In addition the scofflaws didn't have workers' compensation insurance, and safety inspectors found that neither Mercado nor any of the other employees were wearing head protection, had failed to shore up the wall to prevent it from collapsing and didn't have a competent supervisor to ensure that the wall was being installed according to safety regulations.

The company did not have an excavation permit as required for any work performed in a trench that is 5 feet or deeper, according to the District Attorney’s Office.

The company was also fined $168,175 - a mere pittance in my opinion compared to the harm caused by their criminal behavior to the Mercado family. The case was originally handed to the District Attorney's office after a grand jury indictment in 2014.

Sometimes it's not the act that caused the death that results in employer jail time.

In June a Meadowbrook, Pennsylvania, roofing contractor was charged with lying to OSHA inspectors who came to one of his work sites following the death of a worker in 2013. The worker died after falling 45 feet from a bracket scaffold at a church, and the resulting inspection led to penalties for failing to provide fall protection.

James McCullagh allegedly attempted to cover up the lack of fall protection at the work site by falsely telling OSHA inspectors that he had provided harnesses and other safety devices for the crew. The U.S. attorney is also alleging that McCullagh directed his employees to back his story up when speaking with the inspectors.

The case is pending. McCullagh faces up to 25 years in prison and $1.5 million in fines.

In my mind, if lying about a work injury deserves jail time, then people that knowingly, and intentionally, put their workers at risk, and then lie about it, should have the proverbial book thrown at them.

Because that conduct is worse than fraud.