“Star Wars” first appeared in theaters on May 25, 1977, unleashing one of the great, galactic pop culture tsunamis ever seen. And while there has been an explosion of technology and innovation since that time (one that would rival the explosion of the Death Star), virtually nothing has been done regarding the way insurance information is shared via forms, certificates of insurance, driver ID cards and the like.
Workers' compensation may be leading this backward trend.
It’s no wonder that workers' comp insurance draws a lot of attention. Covering more than 90% of the workforce, with more than $45.5 billion in total premiums from both private carriers and state funds and a combined ratio of 94%, workers' comp is one of the few bright spots within the commercial lines market.
With payrolls rising $316.5 billion by year-end 2016, not to mention $1.16 trillion in construction projects, there will be billions of dollars in new premiums for workers' comp coverage. If economic growth and hiring continue as projected, workers' comp exposure is likely to remain among the faster-growing major commercial P/C lines of insurance in 2017 and beyond. And this positive outlook takes into account that workers' comp fraud is 25% of the P&C industry-wide annual fraud problem of $34 billion.
Many are investing heavily in new systems and technology to reach this rich marketplace. Carriers, brokers, agents and third-party service providers are all positioning themselves for a larger slice of the workers' comp pie through innovative and forward-thinking technology.
However, with all the technology available within the workers' comp ecosystem, it consistently takes a giant leap backward when it comes to requesting, generating and delivering proof of insurance. Form-based certificates of insurance are universally produced and passed like a hot potato between different stakeholders, yet they provide no real proof of insurance. As one industry pundit put it, “At best, it’s just a piece of paper that shows proof of coverage at the time it was issued. At worst, it’s fraud.”
Some are touting the ability to request proof of workers' comp coverage from a mobile device. Yes, through an app, you can request a workers' comp QR code that can be used to request a certificate PDF. But this PDF has all the usual limitations: no updates, no notice of cancellation, no ability to compare data with coverage needs, no exception processing.
See also: How Should Workers’ Compensation Evolve?
Because the form-based certificate of insurance has been the forum for exchanging dead data, people have been attempting all sorts of subterfuge to require wording on the certificate in a vain attempt to make it say something that is not in the workers' comp policy. It’s important to realize, from a business and insurance standpoint, that a certificate has many inherent limitations and weaknesses. For example, a certificate CANNOT:
- Extend or modify policy conditions or rights to the certificate holder. The insurance policy is a contract, and changes to those terms can only be accomplished by following proper procedure as outlined by the insuring company. Extending policy rights, such as additional insured status, can only be accomplished by properly endorsing the insurance policy in question.
- Guarantee a policy will not be canceled in accordance with the conditions of the insurance policy. Cancellation of a workers' comp policy is controlled by state statute and cannot be modified by a certificate.
- Provide insurance coverage to the certificate holder. The insurance certificate only indicates coverage found in place on the policies in force at the time the certificate is issued. A certificate of insurance coveys no insurance coverage to the certificate holder; only proper endorsements to the insurance policy can achieve that.
