Reimagining residual insurance market operations

The residual insurance market caters to small businesses for their worker compensation needs or during situations in which the business has endured significant financial hardship or losses that deem it either too expensive to insure or uninsurable on the voluntary market.

Where this is the case, state insurance bodies step in at the request of the insurance applicant. If the state is part of the market governed by the National Council on Compensation Insurance (NCCI) or Joint Underwriting Associations (JUA), the NCCI/JUA will review the application and assign the risk in proportion to all the players selling workers' compensation in that state's voluntary market. It is an essential service.

Tough market

But because the residual market insures risks that the free market won't, it's a market with very narrow profit margins. It's also a small-scale market with a written premium of $790 million and a policy count of just over 250,000. And because it's a mandatory market for those companies that participates in that state on the voluntary side, it's governed by rules and regulations laid down by the state insurance body that makes servicing customers expensive and time-consuming.

Because it's also a complex market, mainly onshore employees do the work. Firms, put off by the market's already high costs, have been reluctant to invest in automation solutions to handle the extensive prescribed guidelines for reporting, tracking, reviewing, and auditing. Maybe the reasons to automate haven't been compelling enough – until now.

Genpact's tech-agnostic, plug-and-play system

Genpact's solution for the residual insurance market leverages digital technologies and analytics to reduce the need for capital-intensive review and audit. It's an almost touchless, plug-and-play solution that can be leveraged for segments of the process or end to end.

The technology-agnostic solution operates as an overlay on top of the current policy processing mainframe and radically reduces the need for manual effort across the process.

How it works

1. The data engine ingests the incoming feed from the NCCI and JUAs updates the required data fields. This means that the fields are always correct. No mistakes here means no problem come review time. Any exceptions are handled by back-office employees prior to directing to the onshore team
2. Application programming interfaces (APIs) attached to the insurer's mainframe perform digital risk clearance, risk data ingestion, and issuance
3. This accurate information is then sent onto the exception handling support group to interrogate any outliers
4. Then, once the customer has their policy, the system's digitally-enabled billing and finance services processes payments and all associated records
5. Then comes the post-issuance initial risk review - this time, conducted using artificial intelligence to assess the risk each customer poses. It creates a predictive model for which policies potentially need to be audited
6. A case file is created for underwriting review, with threshold-based prioritization, meaning underwriters know the risk score.
7. Using a suite of technology tools, the front and back office then go through the underwriting review and customer contact process. Because the information they have is more accurate and detailed, they're better able to locate missing documentation and recommend or execute changes to the policy

Auditing risks is one of the most onerous tasks in residual insurance, but the automated initial file preparation and record reviews make it much simpler, and the accounts that qualify for virtual audit require no human involvement. Those files are 100% executed by a combination of digital and back-office solution. When an auditor does have to be involved in the audit, their caseload is already prioritized and scheduled on the system and all their post-audit documentation is AI-enabled. And underpinning this blend of domain expertise, digital technologies, and automated analytics, is an overarching set of operational analytics that deliver transparency and governance for insurers by tracking what happens, how, and where.

Fault-free service and peace of mind

The primary benefit of our system is reduced costs for the carrier. This means it can make lower bids to the NCCI, and a competitive advantage during the carrier selection process. The cost reductions achieved through digitally augmenting an estimated 55% of the workforce also mean the carrier can potentially take on 20-25% more policies.

Augmenting the workforce has other benefits too. Talent can be deployed elsewhere in the reinsurance process, or even elsewhere in the business, where employees can add more value and enjoy their work more.

The system runs on NCCI's and JUAs defined requirements, which means it ingests, records, orders, and uses the data in the correct way. This means peace of mind when it comes to review and audit – an extensive and expensive part of the business.

Perhaps best of all, the system can be replicated and used elsewhere across the business, delivering a blend of human and artificial intelligence, automated digital processes, and fault-free service that insurance carriers want, regulators love, and customers need.