Peris Maina

In a recent webinar, Ansel Parikh, Co-Founder and COO of Finch, demonstrated how a unified employment data API can unlock multiple advantages for insurance providers, including pay-as-you-go premium models, and increase overall operational efficiency.

According to a recent study by Corinium, 65% of insurance executives aren’t fully confident in the data that’s being used for quoting and claims validation. When insurance providers don’t have timely access to accurate data—especially employment data—millions of dollars are left on the table. The problem is, traditional processes to access employment data involve manual, time-consuming tasks and a heavy amount of resources.

That’s where Finch comes in.

On April 4, 2023, Ansel Parikh, co-founder and COO of Finch, led the webinar Insuring a Future: Keep Your Insurance Product Cutting Edge in 2023 to demonstrate how insurance providers can improve operational efficiency, benefits coverage, premium collections, and customer experience through the use of a unified employment data API.

He covered the following topics:

• The definition of employment data
• How employment data is applied to different types of insurance workflows
• How insurance providers access employment data today
• How to automate access to customers’ employment data, specifically the data locked in payroll systems

Below, we provide highlights from the webinar. You can also watch the complete recording by filling out the form below.

What is employment data?

Employment data is the entire scope of information that sits in different systems of record across the entire employee lifecycle.

Employment data includes:

• Employee directory information like name, contact information, date of birth, manager, salary, and start/end date
• Employee income information, including hours worked, salary, wages, deductions, and taxes

Finch focuses on the employment data that's housed in HR and payroll systems. And this information—particularly the granular information in payroll records around individual pay statements, specific deductions, past wages, and tips—has the power to streamline the process of insurance workflows and open up new customer segments for different types of insurance lines.

3 key use cases of employment data for insurance providers

There are three prevalent ways insurance providers can use employment data to innovate their processes:

1. Determining the risk profile of a company to streamline quoting
2. Using employee information, like employment start and end dates, to validate claims
3. Checking if the right premiums are being charged during the policy, based on actual employees and their pay, to unlock pay-as-you-go models

We go further into the details for each use case below.

1. Streamline quoting

The insurance industry is always looking to improve the quoting process for different lines of insurance such as worker’s compensation, commercial, group life, and group health.

Typically, quoting for these lines includes asking prospects to complete 10+ manual forms that require them to log into different systems or pull detailed information like an EIN to find gross wages per employee for the last month. In total, prospects have to input over 25 lines of data—including location details, company information, and employee salaries—just to generate a quote.

This manual labor slows down the quoting process and prohibits the likelihood of conversion.

“We've talked to many insurance providers who see a considerable drop off…when people have to continually fill out form after form after form. At Finch, our goal is to turn it into a 30-second process, where that prospect syncs their employment data instead, specifically the information needed for quoting, [by pulling] it straight from the source of truth,” said Ansel.

Access to this data allows insurance providers to pre-fill many form fields, so they can deliver quotes faster using real-time data from the prospect’s payroll system. Because employment data from payroll systems goes to the IRS every three months, the information has already been validated, helping to produce more accurate quotes in addition to streamlining their delivery.

2. Validate claims

Similar to the quoting process, data collection for submitting a claim is onerous for the policyholder. Claims forms require dozens of different lines of data that need to be self-reported by the employer and the employee, which then have to be individually verified by insurance providers’ claims processing teams. All of that time adds up.

Alternatively, insurance providers can pull this information directly from payroll systems via API, including fields like date of employment to confirm that a claim is being made by a current employee. Having programmatic access to this data helps insurance providers verify claims eligibility quickly, seamlessly, and accurately by pre-filing forms to save time and reduce self-reporting errors.

In other words, when employment data comes directly from the HR or payroll system—the source of truth—it helps insurance providers determine if the claim is valid right from the start. The insurance provider knows exactly who the person making a claim is, that the date of the claim aligns with their actual employment dates, and if they’re even eligible to file a claim, all within minutes.

3. Unlock pay-as-you-go premium payments

When it comes to workers compensation, insurance providers often leave premiums on the table—especially for highly seasonal businesses—by waiting until the end of a policy to reconcile payments. This also creates surprise bills for customers and reduces customer satisfaction.

Alternatively, when insurance providers check to ensure the right premiums are being charged throughout the course of the policy, as opposed to the year-end audit period, they have the ability to change their customers’ payment structures when appropriate.

For example, if a ski resort’s policy starts in the summer, underwriting is based on the number of employees they have during that time. It takes a full-year cycle and a premium audit to notice the number of employees increased three-fold during the winter months. As a result, risk is mispriced, the ski resort doesn’t pay an accurate premium for their policy, and they receive an unexpected bill after the audit to shore up costs.

When insurance providers have the ability to unlock a pay-as-you-go model, real-time employment data creates more accurate premiums and more efficient cash collection throughout the policy’s term without mispricing risks for a large chunk of the year. Premiums can be adjusted as the risk profile evolves, the policyholder doesn’t receive surprise bills, and customer satisfaction increases. This becomes especially important during the renewal cycle, when insurance providers are looking to retain customers.

A pay-as-you-go program that utilizes automated employment data feeds provides a more efficient, cost-effective, and accurate solution for insurance providers, agents, and policyholders.

“When [employment] data is accessible, and the process is streamlined, it reduces friction for the policyholders’ renewal. The data also is processed in a much more standardized, ingestible format. But what’s most exciting about this pay-as-you-go model is that policyholders love it. It allows them to have more working capital, and that’s incredibly valuable,” said Ansel.

However, as valuable as employment data can be across the policy lifecycle, it’s a major problem to access this information even today.

What is the main challenge of accessing employment data?

The main challenge of accessing employment data is market fragmentation. There are over 5,700 HR and payroll systems being used by U.S. businesses today, and the top 10 payroll systems only account for about 55% of the market.

So, even if an insurance provider integrates with all 10 of these systems, the employment data of almost half of businesses in the U.S. would remain inaccessible. Ensuring proper coverage of an insurance provider’s target market means integrating with hundreds of HR and payroll systems. That’s no small feat.

3 ways insurance providers try to access employment data

There are three different ways insurance providers try to gather information from HR and payroll systems:

Build individual integrations one by one

The problem is, individual builds take up a lot of engineering resources, costing hundreds of thousands and even millions of dollars over the life of the integration.

“We've seen teams spend over a year just to build one integration, but then you still have to maintain that integration for the future. That’s a consistent resource drain,” said Ansel.

Set up a secure file transfer protocol (SFTP)

Other times, insurance providers will get customers’ IT teams involved to set up an SFTP. This means that the systems involved need to exchange flash files, which usually leads to a configuration problem, because every system has a different format.

“You're introducing a ton of friction for every single customer in order for them to share the key information you need to streamline these workflows,” said Ansel.

Manually upload different data sets

Asking customers to manually upload employment data from their HR and payroll systems isn’t just labor intensive. Manual uploads introduce more risk because there’s a chance that the data isn’t up to date. It also increases the chances of people misreporting data, not out of malice, but because the process itself lends itself to human error.

None of these options create seamless experiences for insurance providers or their customers, who expect systems to be able to talk to one another.

The top benefits of an employment data API

APIs allow secure data transfers between two or more systems to happen in real time, and different kinds of APIs exist to serve different datasets. An employment data API provides secure access to sources of employment data: HRIS and payroll systems. And they do it with a single integration, so it’s as easy for customers to transfer data as it is for them to sign into their payroll accounts.

Utilizing an employment data API like Finch for integrations leads to substantial material benefits that can boost return on equity (ROE).

Improve efficiency and reduce operational costs

Integrating with Finch’s standardized API schema unlocks programmatic access to hundreds of HR and payroll systems. Compared to building one-off integrations in-house, the time and cost savings are tremendous.

One Finch client, for example, now has direct employment data connections with more than 3,000 of their customers, and they were able to reduce their development costs by 75% by aggregating that access through Finch instead of building those integrations one by one.

Save on support resources

Without an API, accurately syncing data between systems via SFTP or manual uploads often requires an investment of at least 1.5 hours in support calls and dedicated support team resources to walk customers through the specific syncing instructions for different payroll providers. These approaches don't scale well, and they divert insurance providers’ resources away from core objectives like driving ROE and renewal rates.

In contrast, setting up API-enabled employment data feeds is quick and easy, reducing the number of support inquiries that policyholders make and requiring less support resources.

Unlock new customer segments

By allowing insurance providers to offer more customers seamless quoting, onboarding, and claims experiences, universal employment data APIs like Finch increase insurance providers’ potential to unlock new customer segments.

“There's a halo effect of saying, ‘I'm compatible with your payroll system,’ because customers trust that payroll system for very core pieces of information and operations. Your association and compatibility with that system extends that credibility to your product. Potential customers are more likely to trust your product because it talks to systems they already trust,” said Ansel.

Improved accuracy, transparency, and risk management

Unlike manual data entry, which is prone to human error, automated employment data feeds via API allow for improved data accuracy and visibility, both of which are crucial to the calculation of workers’ compensation premiums and claims payments. In turn, insurance providers can better manage risk and make more informed decisions.

A working example: Finch and InsurePay

InsurePay is a technology company that offers a cloud-based payment platform for workers' compensation insurance premiums. Their platform integrates with insurance providers, payroll providers, and brokers to automate and simplify the premium calculation and payment process.

Finch’s API ensures data is flowing compliantly and securely from the policyholder's payroll system of record to InsurePay as well as the insurance provider.

“We enjoy partnering with InsurePay, because they understand all the different pieces of the policy lifecycle and where improvements can come from. InsurePay wanted to partner with Finch, because we understand the value of automating payroll connectivity and unlocking a pay-as-you-go model,” said Ansel.

How Finch serves insurance providers

Our goal at Finch is to simplify access to HR and payroll systems with one simple, streamlined integration.

With Finch, insurance providers can map to one unified data structure, capture more edge cases, and expand their integration network anytime we add a new system. We’re singularly positioned to provide insurance providers with mission-critical infrastructure for employment data across a wide range of verticals, including read-and-write compatibility with 200+ HR and payroll systems used by more than 88% of U.S. businesses.

To learn how Finch can serve your insurance product, reach out to our team or have your developers sign up for a free account to begin building Finch today.

To learn more, visit tryfinch.com.

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