Improving workers’ compensation loss experience using wearable technology
As a runner, I am inseparable from my fitness device. I only take it off to charge it, and even then, I’m eager to put it back on. I use my watch to analyze my runs, record my step count, and measure my calories burned, but it also gives me a stress score, my respiration rate, and a sleep assessment. It will even track my “body battery” throughout the day, letting me know when I’m drained and need to recharge. Each new model adds additional features.
There have been studies to determine if fitness devices, such as Garmin watches, can help with early detection of illness, such as the cold, flu, or coronavirus.1 Apple Health, the application that accompanies the company’s watch, allows users to set medication reminders, track menstrual cycles, and estimate how frequently the user’s heart is in atrial fibrillation, sending notifications to their watch.2
Long gone are the days of rudimentary pedometers. As of 2020, personal fitness devices are a $36 billion industry, and this is expected to exceed $100 billion by 2028.3
Recently, wearable technology has expanded beyond personal use and has started entering the workplace to monitor employee health and safety. In 2019, the market for industrial wearables was $3.8 billion and is expected to reach $8.4 billion by 2027.4
Over 100 companies are developing wearable technology for the workplace, providing a variety of ways to help employers ensure safe worksite practices. This article discusses examples of wearable technology, the impact on workers’ compensation loss experience, how insurance carriers are reacting, and how your actuary can help determine whether wearables are appropriate for your business.
Head-to-toe examples of workplace safety wearables
The products that these companies have developed run the gamut from helmets warning of fatigue, to monitors detecting gas leaks, to sensors aiding in ergonomic corrections. This article focuses on wearable technology that addresses the reduction or mitigation of musculoskeletal disorders (MSD). The Centers for Disease Control and Prevention (CDC) defines MSD as “injuries or disorders of the muscles, nerves, tendons, joints, cartilage, and spinal discs,” which includes injuries such as sprains, tears, back pain, hernias, or carpel tunnel syndrome. Work-related MSDs are determined when the work environment and performance contribute to the condition.5
Direct costs of work-related MSDs are $20 billion a year. MSDs account for almost 400,000 injuries each year and require 38% more lost time days than the average injury or illness.6 This can create a financial burden and workplace absenteeism for an organization. With the availability of wearable technology to monitor and reduce the risk of MSDs, there is a sizeable potential for cost-savings and increased productivity. StrongArm Technologies and Kinetic are two companies that claim success in helping their clients, including Fortune 500 companies, make appreciable impacts on their workers’ compensation costs.
Both StrongArm Technologies and Kinetic provide devices equipped with sensors that alert employees if they are performing an unsafe action, such as bending or overreaching. This data is collected and uploaded to a dashboard to help management identify actionable opportunities for improvement.
Impact on workers’ compensation loss experience
Before the use of wearable technology, an ergonomic assessment consisted of collecting a combination of objective measures (such as the National Institute of Occupational Safety and Health lifting equation) and subjective data to determine worksite safety. This information was compiled by safety and loss control professionals, but it was sometimes difficult to draw meaningful insights from the results.
With the advent of wearable technology, employers are given real-time feedback on their employees. Both companies have posted actuarially supported statistics demonstrating how they have helped their clients improve workers’ compensation loss experience.
Kinetic’s website touts a 50% to 60% reduction in injury frequency, a 72% decrease in lost workdays, and a 5% increase in productivity.7 A case study on its client Frito-Lay discusses a decrease of injury rates of 19% at nine manufacturing sites within the first two quarters of implementation.8
StrongArm Technologies notes a 250% return on investment (ROI) as a result of prevented injuries and reduced incidence rates.9 Wal-Mart, a client of StrongArm Technologies, has an article on its website discussing the benefits of wearables on its employees’ safety. Within the first year, ergonomic-related injuries decreased by 65% for the locations that rolled out the program. There were additional year-over-year decreases of 27% in year 2 and 16% in year 3.10
Lineage Logistics, another client of StrongArm Technologies, has also detailed the benefits they have experienced from wearable technology. The locations that piloted the program in the fourth quarter of 2021 have experienced sizeable decreases in OSHA recordable incidents. They recognize that the technology is only one piece of the puzzle; the way that the collected data is analyzed and acted upon has been instrumental in their success.11
These examples demonstrate that there may be potential for workers’ compensation cost savings, at least in the losses retained by the organization, but there could also be an opportunity for premium savings as a result of implementing the technology.
Insurance carrier buy-in
When vehicle telematics was first developed, it took some time for insurance companies to recognize the benefits and reflect them in their rates. These days, it’s common for auto insurers to provide discounts to enroll in a telematics program, such as Progressive Snapshot, State Farm Drive Safe & Save, and Allstate DriveWise.
Some health insurance companies incentivize the use of personal fitness devices by offering discounts on activity trackers, subsidized gym memberships, and gift cards. There are also life insurance companies offering discounts on premiums or free increased death benefits for members who achieve a specified activity level, typically measured through a personal fitness device or a phone. Based on engagement in John Hancock’s Vitality program, which records workouts and other healthy behaviors, customers may receive up to 25% discounts on premium. HealthIQ offers a similar discount for customers who demonstrate health knowledge and fitness activity.12
Is this also the future for workplace wearable technology? Early indications point to yes. Kinetic has formed a partnership with Nationwide’s E&S/Specialty Division, forming Kinetic Insurance. Policyholders are provided the technology at no cost and, in return, they commit to using it for the opportunity for reductions in premium.13
In April 2022, StrongArm Technologies hired Charlie Acosta, a 20-year AIG veteran, as Senior Executive Director of Insurance. Mr. Acosta is quoted as saying, “Insurance is not a test you can cram for and get it right overnight. StrongArm has been studying for seven years and has amassed 35 million hours of highly relevant workers’ comp data, two independent actuarial studies, patented technology and data analytics, and an impressive roster of brand-name clients.”14 They currently have buy-in from multiple large global carriers, and they have plans to develop additional relationships.
As these relationships evolve, we may see wearable technology take a route similar to vehicle telematics and personal fitness devices, providing discounts on premium. Not only that, but retained losses, which comprise approximately 65% to 80% of a company’s total cost of workers’ compensation risk, will experience the benefits of reduced frequency of incidents.
How your actuary can help
If you’re exploring wearable technology for your business, you may be interested in the impact that it will have on your workers’ compensation experience. Additionally, you may want support for discussions with your insurance carrier. Your actuary can help with both.
With this type of technology, there are typically staggered rollouts at implementation. This allows for a test group and a control group to help measure the impact with and without the devices. Your actuary can analyze the bifurcated data and determine any divergence in trends.
They can also help you calculate potential savings as a result of implementing the technology, using severity (average cost per claim) and frequency (claim count normalized by payroll).
Figure 1: Sample savings calculation
| Avg. severity of MSD claims | $20,000 |
| Frequency of MSD claims, per $1 million payroll | |
| Sites with wearable technology | 5.00 |
| Sites without wearable technology | 10.00 |
| Savings $100,000 per $1 million payroll | |
Figure 1 is a simple illustration of how the impact of wearable technology can be quantified. Additionally, your loss data can be segmented to identify the largest areas of opportunity, including age and tenure, geographical location, and job code.
Your actuary can support you in conversations with your insurance carrier. Providing documentation of how wearable technology has helped to reduce your frequency of workplace injury will allow your carrier to recognize that these improvements aren’t just a fluke. This may aid in premium discussions, but it will also help with collateral negotiations.
Carrier actuaries value qualitative information when performing their analyses because it helps to explain shifts in the data. In the absence of this information, they might view a decrease in frequency as a suppression of reporting as opposed to an implementation of safety or loss control measures. Many times, actuaries are slow to react to improvements in loss experience. Providing details and analytics that directly explain these improvements will give the carrier actuary comfort that these reductions aren’t artificial.
Summary
Will workplace safety wearables become as commonplace as our personal fitness devices? With the results described above, there is evidence that this technology can help lower workers’ compensation costs. It’s possible we may see a day where wearable technology and the data it provides will be become as prevalent as other preventive safety equipment, such as hard hats and eye protection.
As more studies are completed, additional insurance carriers will buy in to the results, allowing for more widely available savings on premium for users. Not only that, but employees will feel safer at the worksite and be more productive in the process, providing additional intangible benefits to employers.
As you explore the use of wearable technology for your company, involve your actuary in the discussions to help quantify the impact it will have on your business.
1 Garmin (April 21, 2020). Can Your Garmin Detect Coronavirus? Retrieved July 13, 2022, from https://www.garmin.com/en-US/blog/general/can-your-garmin-detect-coronavirus/.
2 For more information about Apple Health, see https://www.apple.com/ios/health.
3 Fortune Business Insights. Fitness Tracker Market Size, Share, and COVID-19 Impact Analysis, by Device Type (Smart Watches, Fitness Bands, Smart Glasses, Smart Clothing, and Others), by Application (Heart Rate Tracking, Sleep Measurement, Glucose Measurement, Sports, Running, Cycling Tracking), by Distribution Channel (Online, Retail, and Others), and Regional Forecast, 2021-2028. Retrieved July 13, 2022, from https://www.fortunebusinessinsights.com/fitness-tracker-market-103358.
4 Allied Market Research (January 2021). Industrial Wearables Market by Device Type (Smart Watches, Glasses, Headsets, and Smart Bands), Component (Sensors, Displays, Connectivity, Processors, and Others), and Industry Vertical (Manufacturing, Automotive, Aerospace and Defense, Oil and Gas, Power and Energy, and Others): Global Opportunity Analysis and Industry Forecast, 2020–2027. Retrieved July 13, 2022, from https://www.alliedmarketresearch.com/industrial-wearables-market-A06872.
5 CDC. Work-Related Musculoskeletal Disorders and Ergonomics. Retrieved July 13, 2022, from https://www.cdc.gov/workplacehealthpromotion/health-strategies/musculoskeletal-disorders.
6 Middlesworth, M. Infographic: The Cost of Musculoskeletal Disorders (MSDs). ErgoPlus. Retrieved July 13, 2022, from https://ergo-plus.com/cost-of-musculoskeletal-disorders-infographic.
7 Kinetic. Keep Workers Working. Retrieved July 13, 2022, from https://www.wearkinetic.com/injury-reduction/.
8 Kinetic. Case Studies: Frito-Lay Uses Wearables to Drive Culture Change. Retrieved July 13, 2022, from https://www.wearkinetic.com/case-studies/.
9 More information about StrongArm Technologies is available at https://www.strongarmtech.com/.
10 Johnson, W. (May 4, 2021). Safety Wearables Help Keep Associates Safe at Work. Walmart. Retrieved July 13, 2022, from https://corporate.walmart.com/newsroom/2021/05/04/safety-wearables-help-keep-associates-safe-at-work.
11 Lineage Logistic. SAFE: More Than Just a Word on a Wall. Retrieved July 21, 2022, from https://www.lineagelogistics.com/news-stories/safe-more-than-just-word-on-wall.
12 Reynolds, Paul. Life Insurers Are Promising Discounts if You Let Them Track How You Exercise and Eat. Money. Retrieved on July 22, 2022, from https://money.com/life-insurance-fitness-rewards/.
13 Insurance Journal (November 16, 2021). Want Wearable Tech With That Workers’ Comp Policy? Kinetic Teams With Nationwide. Retrieved July 14, 2022, from https://www.insurancejournal.com/news/national/2021/11/16/642468.htm#.
14 StrongArm Technologies. Workers’ Comp. Redefined. Retrieved July 14, 2022, from https://www.strongarmtech.com/solutions#insurance.
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Improving workers’ compensation loss experience using wearable technology
We discuss examples of wearable technology, the impact on workers’ compensation loss experience, how insurance carriers are reacting, and how your actuary can help determine whether wearables are appropriate for your business.