InsureTech is a lie

Clickbait title, but accurate. #SorryNotSorry

We’ve all seen the press releases from SugaryFruitDrink Co. and the like heralding the “InsureTech” revolution – how they will completely change how we all interact with insurance. So how is that revolution going?

I recently experienced the InsureTech ecosystem as a consumer seeking alternatives for a fairly routine type of business – one of the key use cases. The process was completing a very short pre-qual application and entering my contact info. After that I was told I’d get a call – which I did within about a minute after submitting. The call went over more questions and I was told they had an option for me – great! I was then cold (luke-warm?) transferred to one of the big name companies where I was asked more questions and, ultimately, found out I wasn’t qualified.

The result was not problematic and actually expected. However, it laid bare the gulf between the promise of InsureTech and its reality. For all its pomp and circumstance what InsureTech delivered, at least in this specific instance, was little more than a referral. Said experience wasn’t even as advanced as that of a comparative rater; a tool existent since the early 90s. I’ll also note that after I wen through this process I was hounded by follow-ups, a disincentive to use said system entirely.

I am being harsh but I don’t think unfair. On the harsh side, InsureTech means a lot more than just consumer experiences, and my experience could be unique. But as to being fair, InsureTech is the one promising revolution and delivering a re-packaged (and strictly worse version) of what already exists.

Maybe these products and services will, ultimately, be revolutionary. But at least for commercial insurance consumers, if this is our Bastille moment I’d suggest stocking up on cake.

“Expected & Intended Injury” – But Not Damage!

This one comes from personal experience (and you know who you are if you’re reading this!).

General Liability is, obviously, not intended to cover incidents that are intentionally done with knowledge they will cause harm. But there is an exception to this: coverage applies if you knowingly cause injury in effort to otherwise preserve persons or property. Here is the (very brief) exclusion and exception from the 2013 CGL:

a. Expected Or Intended Injury “Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.

The real-world example I was provided for something of this nature is a crane operator who has to drop a load to prevent a catastrophic failure. If they intentionally drop a load, and that injures someone, the CGL will provide coverage if that action was taken to prevent a larger event occurring.

As a side note, there is a bevy of case law regarding this “expected or intended” exclusion and how it applies, whether the language is ambiguous, and whether coverage hinges on the intention of the act or the intention of the damage. It’s definitely worth looking into.

However, for our purposes, what I wanted to discuss is what is not in the exclusion: specifically you will note the exception provides coverage only for “Bodily Injury”, which is only 1/2 of the CGL’s BI & PD coverage. I.e., the unendorsed CGL does not cover expected or intended¬†Property Damage; only BI.

In the example of a crane operator dropping a load you can see how this could be incredibly problematic: you are almost assured to cause property damage in such a case. But, going by the strict “4 corners” of the policy, you’re not going to be covered for such even if your intent was to prevent a much large instance of property damage.

Thankfully, some carriers do offer proprietary wording to add this back, and such is even included on “enhancement” endorsements among even the smaller/mutual carriers of the world. However, even some national carrier brands don’t address this in their policy and, when I brought this to them, they were flummoxed how to respond. My key partners asked for language I could provide them (and this particular one eventually manuscripted!), while others essentially shrugged.

In the end this is an incredibly easy fix for a carrier – it literally takes adding only three words to the exception (“or Property Damage”). The fact that it does need to be manually added can be troublesome – it’s going to need approval. While troublesome, and likely frustrating to carrier personnel, it’s precisely these type of esoteric situations by which brokers live and die. A client can go to nearly any broker/carrier and get an unendorsed ISO policy; if you’re not giving them a reason not to then that’s precisely what’s going to happen.

CAT Express v. Muriel (previously Hammer) – Employee/Independent Contractor Status and the Limit of IL DOI to Adjudicate

This is a piece of case law that has me pretty confused. If anyone has any insight please contact me!

The IL First District Appellate Court recently issued a ruling in CAT Express v. Mureil. The ‘overview’ of this is:

CAT Express is a trucking company that purchased an IL Workers Compensation Assigned Risk “Pool” policy. They declared 6 clerical employees and paid about $1200 in premium. Upon audit the carrier (Liberty) categorized CAT Express’s [no idea how a possessive apostrophe works there to be honest –ed] independent contractor truckers as “employees”. This boosted premium to over $350K.

CAT engaged NCCI, who handles IL Work Comp rating disputes, and NCCI declined to hear stating they cannot determine whether someone is an employee but can only interpret NCCI Work Comp rating and rules. NCCI advised CAT of their right to appeal to the Director of Insurance (at the time Jennifer Hammer but the pleading was updated to reflect the current Director, Robert Muriel). The DOI investigated and said that these independent contractor truck drivers were employees for purposes of Work Comp premium and that the audit of $350K was appropriate.

CAT Express appealed. The subject of the appeal was actually never heard as the First District IL Appellate court asked the parties to submit supplemental briefs to explain why the Director of Insurance even had the authority to determine employee status in the first place. Both parties did, and they concurred that the Director did have that authority.

Long story short – the court found these briefs uncompelling and rules the Director of Insurance *did not* have authority to determine employment status for purposes of premium calculation. I would suggest reading the opinion, but they make a handful of specific notes:

    1. The Director/Department has only the authority vested to it by legislation, and that authority is [that which] “may be necessary and proper for the efficient administration of the insurance laws of this State‚ÄĚ [such as enforcing rules].
    2. The Director/Department does have the authority to hear appeals for the application of rating systems/rules, such as hearing appeals from NCCI’s rulings.
    3. The Director/Department erred in taking up this matter after NCCI declined. In short, the determination made – that these independent contractor truckers were employees – is outside the “necessary and proper” administration of insurance law and is instead a legal determination that should be made by courts. The Director had no jurisdiction over this particular dispute.

The reason I find this puzzling is that I’ve been through NCCI dispute processes, up to presenting in front of the board for my district, and determining employees *for the purposes of premium only* is absolutely a function of the rules and ratings of NCCI. For coverage disputes absolutely not, but who is and is not an employee (or more specifically what payroll should and should not be captured) is in their manual.

So I’m not sure why NCCI declined or if such was appropriate – perhaps it was the way the grievance was worded. I no longer have access to NCCI online so I can’t review the specific parts of the manual that apply.

Secondly, and more broadly, the classification of a party for the purposes of premium calculation seems exactly within the “necessary and proper” purview of the Director. I am emphasizing “for the purposes of premium calculation” as that is from the ruling itself – the court uses that specific phrase.

To clarify: The determination of “employee” is only for purposes of generating premium. The Department classification is not, to my knowledge, relevant in any other capacity. For example, being an “employee” for purposes of Work Comp premium doesn’t mean you’re also an “employee” for, say, benefits eligibility.

That said I am out of my comfort zone; I suppose there could be some legal ramification of which I am unaware. Perhaps there is precedent that a determination of employee status on WC is a de facto determination elsewhere under law. If that is the case I would follow the theory, but no such information was provided in the opinion.

As a rhetorical tool – assuming the classification of “employee” for Work Comp rating is inconsequential elsewhere, review the situation while changing the term. For example, instead of using “employee status” use “chargeable exposure”. Is it proper for a Director of Insurance to determine the chargeable exposure for Work Comp policies? Perhaps I’m being a tad disingenuous but I do think doing such can be clarifying.

This is especially true because there are situations where those whose payroll is captured (for premium purposes) on a policy may not be eligible for benefits. Or, more often, those whose payroll isn’t captured are ultimately eligible for benefits. In fact this happens quite a lot and is why I suggest having work comp even if you have no employees; because the legal determination of an employee is separate and distinct from the premium determination of an employee (though it is true they try to be aligned as much as possible).

I found Davis v. Ed Hickman, P.A., March 2020 (editorial here; full opinion here) which is an Arkansas Appeals Court decision that found a worker was not entitled to benefits even though his payroll was captured for purposes of Work Comp premium and explicitly states that payroll being captured for purposes of work comp premium is simply a factor in determining employee/independent contractor status and not a determinant by itself. Granted AR DOI legislative authority may be broader, and I’m not sure how a “Work Comp Commission” ruling compares to a DOI appeal, but it’s still another piece that adds confusion.

For what it’s worth I don’t have a horse in this race – I don’t particularly care where a matter is adjudicated as long as it’s transparent and fair. I do admit to incredible frustration as a broker when dealing with Workers Compensation; it is by far the most troublesome policy to administrate and inquiries are often met with conflicting responses. So if you’re reading any level of annoyance in this post, that’s probably why.

Big Results From Small Teams: Organizational Education

This will be a bit more abstract of a topic than usual, but it is no less important.

One of the greatest challenges of broker-dom is knowledge. Being an insurance broker is, after all, a professional service. Certainly we have physical “products” in the form of policies but mostly what we are selling is ourselves, our knowledge, and our service.

Because there is so much that goes into writing insurance coverage it is absolutely vital that every organization have an information sharing procedure. But I hesitate to use that word – procedure – because I often find the process is over formalized. Straight truth time: how many formal “monthly meetings” have you been in – not that you’ve lead – where you’ve felt engaged, where you’ve wanted to participate, and where the meeting went over because everyone was so invested in the topic? I’m guessing very few (and if not please let me know your secrets!).

But because education is not just an organization disseminating information from point A to point B, excitement and participation are crucial to your organization’s learning ability. A traditional “meeting” format is perfect for disseminating information but it’s very poor for creating new information. And new information – about what needs to be addressed, how current obstacles already are addressed, about what client requests are coming in – is exactly what you need to foster an organic, positive learning environment.

I suggest every organization encourage staff to create their own learning sessions among themselves. This allows them to choose times that are convenient, topics that are relevant, and participants that are engaged. Some of the best knowledge I have gained is through simple 4 person meetings where we were all excited to bring some new quirk of our job to show everyone.

It’s also through this “ground-up” method that you’ll find out individuals predilections – who is excited about what aspects of problem solving? Who is good at finding relevant information to a question that was posed? Who is adept at creating deliverables to enhance this new-found knowledge? You will get drastically more input from a handful of engaged people than you will with an entire team, even if you mandate “everyone bring one topic of discussion”. That’s old thinking – get that out of here!

Once these “mini-sessions” take off you’ll find them an incredible resource for more traditional organization-wide needs. After all, if there’s a hot topic among the mini teams there’s a good chance it’ll be important elsewhere. I can’t tell you the number of topics that have arisen in one of these small “learning sessions” that showed a need for organization-wide education.

One of the coolest aspects of these sessions is getting to know everyone’s passion. Everything in your organization – absolutely everything – is complex when you look at the details. There is no small job – just big people who think jobs are small. So when you start running learning sessions like this you’ll get a massive amount of insight and expertise you never knew you needed. Everything from how to save a few computer clicks for a task that’s performed 2,000 times a day, to better ways to send information between teams, to how to make invoices look cleaner, to… all sorts of topics you never knew you needed because the “top down” approach simply doesn’t allow it.

In short, every single person in your organization is a thought leader and it takes creativity to tap that. These individuals are mired in day to day work and often don’t have the opportunity to voice their opinion in an appropriate setting – and a “team wide meeting” is not an appropriate setting. People need to be able to be open and honest, and be able to talk to their peers rather than someone who controls their vacation days. It’s only through empowerment of the individual, organically, can you start to see what needs there are to address.

Finally, it is incredibly important to memorialize all of this. Having a good info-sharing plan in your organization isn’t enough because once those people leave, their info is gone as well. This is where the more traditional process takes place – have your learning session teams write down notes and topics of discussion. It doesn’t need to be anything serious – really just what people brought up and how it was addressed; think of it like meeting “minutes”. These can then be reviewed for commonality.

If you want to take it a step further, there are so many technology tools to help you. Everything from message boards, to knowledge bases, to Wikis. Heck, if someone wants to let them send out a newsletter to team members with topics or circumstances they find particularly interesting.

Many organizations tend to look at “education” and internal info as a very straightforward process. But brokers deal in ambiguity every day. And even when we’re dealing with literal policy contract language, every exception has a caveat has a circumstance where it doesn’t apply. A good broker is good because of how they deal with that complexity and ambiguity. If you’re not innovating your education methods you’re doing yourselves, and your clients, a disservice.