The National Council on Compensation Insurance (NCCI) recently published its commanding two part overview of the impact of current trends in automation on employment in the US and, of course, its corresponding impact on workers' compensation. First, the bad news. Robots, using that term in its broadest sense, will continue to replace human workers across a consistently widening front of industries and occupation types. And they won't be paying into Social Security either - double whammy.
The NCCI report, using in depth research from McKinsey & Co. and the now famous Oxford Report, provides some intriguing granularity, looking at both the considerable differences in projected replacement rates by type of work as well as by type of industry. In general, predictable physical work, in one example, will see an "automation potential" of 81% while physical work in "unpredictable circumstances" has a potential of only 26%. Automation likelihood varies considerably across the nineteen industry categories, from 73% in accommodation/food services to 27% in educational services. (MOOCs apparently don't count as automation.)
Automation will also vary within a given job category, as the study explains: "While fewer than 5% of all occupations might be fully automated, about 60% of occupations could have at least 30% of their activities automated." In other words, a splash this big will get everyone at least a little wet.
This ongoing wave of automation, swapping robots and intelligent systems for people, will have a profound impact on risk management. The NCCI is concerned, of course, because workers' comp will be affected, often dramatically. Robots don't have industrial injuries or get carpal tunnel syndrome and when they break down, RTW is just a new circuit board or a couple of spare parts away. As a line of coverage, workers' comp is a shrinking pond. We've already seen that the first jobs to be automated are usually the dirty and dangerous ones that generate a disproportionate number of claims.
The other side of the equation is less obvious. What new risk dimensions lurk in a room full of machines, humming happily as they turn out widget after widget or provide high value information services? Here are a few hints:
- Property exposures grow as new systems with embedded AI move in. A self-driving truck, for example, will cost a good deal more to fix or replace than we're used to paying for "dumb" trucks.
- Cyber dangers grow with every new system and embedded computer chip. People are hard to hack en masse, not so much highly nested systems in complex arrays. Every vendor of every robot now represents a potential point of penetration to your primary data banks and business controls.
- Supplier interruption used to revolve primarily around materials. Now it takes on a whole new dimension. Who keeps the robots humming? Remember that RTW circuit board mentioned earlier? What if that supplier is shut down?
- Who's responsible - you or your contract robot wrangler - when a service is not performed correctly or a good is defective? What happens when a chatbot goes off the rails?
The NCCI analysis focuses on the labor-workers' comp nexus but what we see developing is a radical redefinition of operational risk and exposures across industry after industry. Exposures aren't going away. They are mutating and migrating from one line of coverage to another. Understanding these new challenges will require as much imagination as technical depth while new damage scenarios and liabilities emerge from the turmoil. Are you and your TPA talking about how the landscape is changing under your feet?
The good news in all this? It will be a long time before AI replaces an alert, forward thinking risk manager. Beeeep.
A Lovely Gift in Ridiculous Packaging
A report from the Bureau of Labor Statistics is not something you expect to find under your holiday tree or tucked in your stocking. This one, on the other hand, makes a really great gift for any risk manager with workers' comp exposures in Ohio. No wrapping required.
Most of those who track workers' comp know that the rate of new claim submissions has been drifting down for years. Nationally, there were approximately 2.9 million nonfatal workplace injuries reported by private industry employers last year, nearly 48,500 fewer cases than in 2015, according to the BLS's Survey of Occupational Injuries and Illnesses. The decline conforms with a continuing pattern of falling total recordable cases, started in 2004, with a small exception in 2012.
But in recent years it's Ohio that has hit the jackpot in terms of declining claims. Private employers in Ohio had a 2.7 injury rate per 100 workers, compared to the national average of 2.9. The rate showed a 6.1 percent decline in total private sector injuries since 2015, meaning, officials with the Bureau of Workers' Compensation (BWC) said, 17 fewer Ohio workers were injured each day in 2016 than in the previous year. Meanwhile, in the public sector, 3.1 injuries per 100 workers were reported, compared to the national average of 4.7 injuries per 100 employees.
The reduction in new claim rates in Ohio is material and worth studying. What are they doing in Ohio that can be exported or emulated? According to Tony Gottschlich of the BWC, "We work hard to spread the word around Ohio that we're here to partner with businesses to help them succeed, and creating safe workplaces is a big part of that. When companies invest in safety equipment or work with our safety experts, they have fewer injuries, fewer medical and claims costs, and a stable workforce."
Hmmmm. Maybe it is just that simple. No secret sauce in Ohio, just working the basics and letting nothing slide, never accepting excuses like "that's good enough" or "it's always been like that." If dumping the old, tired excuses and making everyone find better ways to manage safety reduced your claims frequency by 6.1%, would you do it?
Suggestion - benchmark the hell out of your numbers. Can you match Ohio's improvements? Don't use your loss engineering reports to press flowers. Use them to challenge your safety people and your partners in ops. The results could look mighty nice under your tree next holiday season.
A Pain in the Brain?
Important news from Japan: a report from Hiroshima University (summarized in a recent Workerscompensation.com article) discusses a whole new way to address a problem that bedevils workers' comp - chronic pain. The title of the report, "Changes in resting-state brain networks after cognitive - behavioral therapy for chronic pain," downplays the potential impact of the findings in typical academic fashion, but the possibilities are explosive.
While the actual neuroscience involved is complex, the concept is straightforward. Pain - the pain from a lower back strain or a minor shoulder sprain, for example - is a mental construct. Pain has no external physical reality. The brain interprets certain nerve signals and construes them as what we call pain. When an injury causes these same nerves to be stimulated repeatedly over a period of time, injured workers then repeatedly focus attention on pain and/or anticipation of pain associated with certain movements, and thus unwittingly create a re-wiring/reinforcement scenario and a conditioned pain response.
That means pain goes from an unconditioned stimulus and response (a natural, short term behavior) to a conditioned stimulus and response (a learned, chronic behavior), even in the absence of continued strong inputs from those same nerves. Chronic pain creates a pain pattern in the brain that continues even as the original injury heals. Why is this news for comp? What can be learned (pain) can be unlearned.
The researchers at Hiroshima University used Cognitive Behavioral Therapy (CBT) over a twelve week period in this study to re-wire the brains of chronic pain patients. Amazingly (but not surprisingly) the imaging of their brains started to look (in fMRIs) more like the healthy control patients by eliminating or weakening the "learned" pathways via CBT. In other words, CBT, which is finding more and more applications in comp clinical management, may offer a new way to address pain and avoid the opioid trap.
This science is still young, but the latest research holds out the hope that we will soon be able to provide injured workers with serious chronic pain relief, and thus re-entry to work and normal life, without the use of pills and the potential for addiction. This is tremendous news and just one more reason to hope for a Happy New Year in 2018.
Auld Lang Syne
A holiday thought for our readers. In the words of Ecclesiastes (9,7), eat thy bread with joy and drink thy wine with a merry heart, for this is the word of the Lord. Lest auld acquaintance be forgot, the Journal will return the second week of January.