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By Kendra DePaul, WPC, Other States Coverage Manager, Ohio BWC

We continue to hear about the coming disruptions in workers’ compensation. Buzzwords like “artificial intelligence” and “big data” are in every article predicting future industry trends. And most of us are looking for ways to incorporate new technology into our businesses.

Pinnacol Assurance, Colorado’s largest workers’ compensation insurer, has embraced the disruption and recently launched an innovative new digital startup called Cake.

Cake is a digital platform that is radically changing how small businesses purchase and manage their workers’ comp insurance. Cake allows small businesses that come directly to Pinnacol (i.e., not through an agent) to apply for coverage, get a quote, and purchase coverage quickly (in just five minutes) with no human interaction required. The Cake experience is designed for mobile devices, and Cake customers can also manage policy documents and payments anywhere, generate and share certificates of insurance via email or text, and get on-demand customer support. Because of its digital-first design, virtually all paperwork and physical signatures are history.

To learn about Cake, I interviewed Pinnacol CEO Phil Kalin.

Kendra: Phil, it seems that things have been going well in Colorado in recent years, with Pinnacol writing about 59 percent of the state market. Given this success, what made you want to create this new option for small businesses?

Phil: 2017 was a wakeup call for our industry. As “insurtech” rapidly shifted from buzzword to reality, many carriers have raced to figure out how to bring the creativity and agility of these new startups to their mature businesses. And Pinnacol is no exception.  As a 100-year-old carrier, we’ve definitely leaned in to this digital revolution.

For years, we’ve been tracking the evolving needs of certain customer segments, who increasingly demand a more modern, “Amazon-like” approach to their purchases—insurance included. To harness the opportunity to keep and expand our market share, we had to change our business model and deliver a product in line with the needs and expectations of small businesses.

Kendra: You have mentioned that one of the reasons for the innovation is the predicted uptick in millennial business owners. What makes this group of policyholders unique in their insurance needs?

Phil: In general, millennials demand services that are quick and convenient. They are comfortable, and frequently prefer, purchasing insurance and other products strictly self-service without the need to pick up the phone.

Millennials also represent an increasing share of small business owners, especially in Colorado. Industry experts agree that by 2020, 60 percent of small businesses will be owned by millennials and Gen Xers, and that an increasing share of commercial insurance will be purchased through digital channels. In a 2017 survey of small businesses that expect to switch insurance providers in the next five years, 48 percent say they’d prefer to buy online, and 65 percent say they are quite, or very likely, to do so in the future.

Kendra: There is so much digital information available today. How was information used in creating Cake?

Phil: We live in a world of endless data, and for most employers, demographic and exposure information can be verified through third-party data and artificial intelligence. This eliminates the need to ask employers endless questions during the application process. Cake asks employers just 12 or 13 questions and then can provide a quote and issue a policy within three to five minutes. This can be done because Pinnacol developed a way to gather information about companies from the web and use external data to evaluate potential risk for workplace injuries.

Kendra: It seems that many carriers are looking to use artificial intelligence to assist with underwriting and reduce costs. Has Pinnacol seen any positive results in this area since the introduction of Cake?

Phil: Given that workers’ compensation tends to have a long tail, it will be several years before we can evaluate underwriting results. But the great thing about data is that as more employers use Cake, we will have more information to verify that our model for predicting future cost is working as intended. As we get better at using the data, we believe we will be able to reduce our loss ratio.

Kendra: Cake officially launched in October 2017. What has been policyholder feedback to date?

Phil: We have seen immediate positive feedback from our customers, and new customer acquisition has exceeded our expectations. Cake currently has hundreds of customers and is exceeding revenue projections by 140 percent. We’ve collected a trove of positive comments and testimonials from Cake’s new customers, and, suffice it to say, there are lots of exclamation points. We’re really looking forward to seeing Cake take off in 2018.

Watch a new video about Cake.