In the second article published recently in WorkCompWire’s Leaders Speak series, Jack Bailey, Bailey Southwell’s Co-Founder and Managing Director, continues the conversation on Workers’ Compensation Services M&A by discussing the importance of technology for industry business owners. In the piece, Jack highlights ways industry businesses can master their internal technology/processes while also using a technology-led strategy to drive customer value.
Workers’ Compensation Services M&A – The Importance of Technology
As business activity begins to normalize, companies are again turning to acquisitions as a key growth initiative. Last week’s Leaders Speak highlighted factors driving acquisition interest and provided an overview of the characteristics that have driven valuations for attractive businesses back to pre-COVID levels.
Looking ahead, we believe technology should be a primary focus for any industry business owner. There are two main paths by which the right technology can strengthen the value of a business:
- Streamline internal operations, improving financial metrics and freeing up resources for other priorities;
- Add value for customers, either by helping build stronger relationships or by opening the door to new opportunities.
Focusing on technology creates a scalable business with sticky customer relationships – this attracts a high level of investor interest.
Leveraging Technology to Improve Internal Operations
Efficiency: Industry businesses considering opportunities for efficiency through technology should start with a broader evaluation of internal processes. What processes are especially manual? Are competitors using technology to improve these processes? Critically evaluate manual processes and consider what solutions might reduce the number of steps involved.
Is there a ready-made solution that can be purchased to address the process, or does it make sense to hire a development firm that can build a solution integrated into other existing workflows?
Evaluating opportunities for process improvement should be an ongoing initiative — continuous process improvement is essential to competitiveness.
Leveraging technology to improve processes has many benefits — reduced costs, improved speed, and higher accuracy.
Data Security: While this was already an area of interest for customers given the high-profile incidents over the past couple years, its urgency has shot up in a world with increasingly remote workforces. Nearly all vendors regularly work with personally identifiable information of injured workers. Ensure simple steps — implementing multi-factor authentication, enabling automatic software updating, and maintaining backups of all important information — have been taken. HITRUST CSF certification and SOC 2 attestation can ensure proper processes/safeguards are in place. Investments in data security protect the reputation and value of a business. Additionally, these investments can be key differentiators when responding to RFPs.
Investments in efficiency and data security help create businesses that are more attractive to investors due to:
- Improved scalability
- Better financial metrics
- Secure infrastructure
But technology doesn’t just offer a path to greater internal efficiency; it’s also a way of delivering a more holistic solution to customers that augments your value and enhances your relationship.
Technology-Added Value for Customers
AI & Analytics: By necessity, the workers’ compensation industry has long maintained one of the most robust data sets of any industry — but often has lacked the resources and capacity to do a lot with all that information. We’re now entering an era where technology offers a way to effectively harness big data and extract customer-benefiting insights that answer critical questions:
- What characteristics are associated with high-cost claims?
- What characteristics lead to longer claim durations?
- What cost containment actions are most appropriate for a specific claim?
- Which physicians match up best with which types of injured workers?
Critically, delivering these insights to the claims professional early in the life of a claim and accompanied with a recommended action will result in consistently better outcomes.
Vendors that augment their capabilities to work with data will be considered key partners for customer programs. Additionally, businesses that can demonstrate added value to customers via actionable insights will achieve accelerated growth and attract premium valuations from investors.
Telehealth: While many believe the insurance industry traditionally has been slow to embrace technological advancements, the pandemic has pushed the industry to embrace key new technologies and more aggressively seek technology-led solutions. The proliferation of telehealth in workers’ compensation is a perfect example.
Before the pandemic, telehealth was an afterthought in the industry. Since March and the first lockdowns, there has been a significant uptake in telehealth solutions such as tele-triage, tele-rehab, and tele-behavioral, with clear payoffs in convenience and cost-effectiveness.
While telehealth will never replace all in-person care, it certainly is here to stay as an important claims management tool. If possible, vendors should offer a telehealth option; any vendor that does not may be at risk of being unable to comprehensively serve customer needs in the present environment. And naturally, investors are especially focused on those vendors best positioned to serve the trend toward telehealth.
We’re hesitant to make detailed forecasts about where the industry is headed in 2021 — if 2020 has taught us anything, we can’t predict the future!
That being said, technology continues to stand out as the essential driver of internal and customer-facing innovation in the workers’ compensation industry. Those businesses that are able to master their internal technology/processes while also using a technology-led strategy to drive customer value will continue to rise above the pack even as the industry navigates a somewhat uncertain future.