Safety Standards in the Middle Market

Your interest in workplace safety grew out of personal experience. Can you tell us about it?

I and my co-founder had a college friend we’d grown up with who was killed in a workplace accident. He was in the hospitality industry. Being killed on the job, in the workplace tragically, it was quite a shock. It made us two young entrepreneurs question how this could happen in the modern age, with the technology that’s on hand. It left us questioning, is there something more that we could be doing, that businesses could be doing, to create a better environment for workers to prevent tragedies like this from happening.

That’s really what gave us the spark to do what we’re doing now, really looking to incentivize businesses to improve their risk management, improve safety levels and improve the workplace environment for workers, especially in industries where it’s more challenging.

What are the challenging industries?

Any industries that are inherently more dynamic in their environment and more physical. When you are dealing with more physical tasks and when you’re in an environment that’s constantly changing, that can create new risks. A good example is construction. You have a very dynamic environment where things are constantly changing. You might be on a project or a construction site that’s evolving day to day. Every evolution opens up new risk factors, and if you combine that with an inherently physical job, where you’re using your body as part of your job, that recipe can lead to a workplace environment where you need to pay more attention to risk management, safety and compliance. It means that those factors become more important.

The small business workers comp market has attracted a lot of attention from insurtechs, but Foresight focuses on the middle market. Why is that?

The middle market is really interesting because this has to do with people management. When you’re dealing with a smaller workforce, it can be a lot easier to be more coordinated in your efforts because you’ve got a smaller team. When you start working with larger teams and larger workforces, it’s inherently more complex to keep everything organized, to keep everybody at the same standard, to enforce compliance, enforce safety standards. It becomes a bigger task. The technology that we’ve developed really helps these businesses get organized and makes it a lot easier for these larger teams to coordinate and to really improve risk management and really drive safety engagement, OSHA compliance. Companies of these sizes get a lot more value out of our technology simply because they have more people to organize and more compliance expectations.

Why is it hard for these middle-market companies to get affordable workers compensation coverage?

This has to do with size. The larger the business, the more complex they are to underwrite. When you’re a small company that has less variables, there are more markets. There are more insurance carriers that will underwrite small business because they’re simpler from an underwriting perspective. When you have a larger company, the underwriting complexity grows with the size, which means that there are less and less markets that look at these companies. They may be in the safety-critical industries like construction, manufacturing or agriculture, where often there is a story with every account. Every one of these businesses has a story, and that just lends to the complexity of the underwriting, which means that there are less markets for these businesses. Where other insurers maybe deem it too hard and say, “Let’s just concentrate on the simpler exposures,” we take the opposite approach. We love the complexity. We love these businesses that have stories, because it means we can really work with them. Smaller businesses can quite often just be looking for an insurance certificate. Our technology and the value proposition that we bring to market doesn’t land as well with them as it does with the middle-market companies.

Are there certain issues that turn up a lot?

Every company is different. If I’m painting broad strokes here, I would say, in general, a lot of companies that we see, most of them have a desire to improve safety and compliance and a desire to do what’s right but quite often they can be sort of confused. It can be a bit daunting or unclear about what they need to be doing…. There’s generally a big desire to lower insurance costs. Insurance costs are quite high for these industries that we target. After payroll, workers compensation can be one of the largest business expenses for companies in these industries. There’s a desire to improve their risk profile and lower their insurance costs, and that’s where we really help them.

Foresight works exclusively through brokers. What advantages does the broker channel offer?

The way we see it at Foresight is that brokers form a critical part of the insurance ecosystem, especially in the middle market. When you’re looking at these more complex risks that have limited carriers that will underwrite them, that’s where brokers really shine. Brokers can help these businesses understand what options they have and translate what the business is experiencing to the insurance company and really work with an insurance provider to better present these businesses and work with us in helping the business improve their risk profile, improve their level of performance.

Tell us about Foresight’s approach.

We’re a technology-driven workers compensation provider. We have a proprietary risk management technology called Safesite. What Safesite is designed to do is basically improve risk management and facilitate compliance for businesses in these safety-critical industries. It’s purpose-built for construction, manufacturing, agriculture—any one of these industries where there is a high safety and compliance burden and where a critical part of their business is maintaining safety and compliance.

We’re able to coach the business and collect data on their daily, weekly, monthly levels of compliance, levels of safety engagement, how they are handling things on the ground level, how we can help improve the workplace environment for the workers and increase things like safety training, safety awareness, and ensure compliance is met. We collect all these data points through our systems and our service, and we feed that into a machine learning score, which we call a safety score. This score is basically a grade from a D level to an A level, with the D level representing low levels of safety and compliance and safety engagement and an A level representing high levels of compliance and safety engagement. Using that score, our underwriting team is able to provide incentives to the business owner in terms of improving the pricing on their workers compensation insurance a lot faster than if they were just relying on their ex mod dropping, which is the industry standard that other incumbent carriers look to use.

We’re an MGU, and we’ve been underwriting now for just over a year. In that time, we’ve been able to demonstrate a 31% reduction in incident frequency across all our policyholders. Given the average workers compensation claim of $42,000 per claim nationally, that translates roughly into $6.5 million in claims saved in just one year.