Eric Martinez spent six years as executive vice president of claims and operations for AIG in New York. In the course of handling 30,000 workers compensation claims a month, he concluded that insurers were investing big bucks in medical management programs for injured workers but not addressing why the injuries were occurring in the first place.

FAST FOCUS

Wearable technology was all the rage a few years ago, but it has not taken off as quickly as anticipated.

Risk management experts believe wearables will ultimately have a significant impact on workers comp and other commercial lines.

The construction and manufacturing sectors and material-moving organizations have shown the greatest interest in wearable technology.

 

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A Light in the Tunnel

“They were treating the symptoms but not the root causes of the injuries,” Martinez says. “I decided there was a better way.”

Martinez left AIG in 2016 and headed to Clemson, South Carolina, to find that better way. Today as founder and CEO of Modjoul, he’s a pioneer in the field of wearable technology. His company is marketing a “smart belt” that can track everything from workplace falls, lifts and strains to the actions of forklift drivers or environmental conditions that pose safety threats.

Wearable technology encompasses a wide range of devices, clothing items, sensors, monitors and other equipment that can identify problem areas; collect environmental data; provide information on the location, physical condition and actions of individual workers; and sound alerts about dangerous developments or accidents. And that’s just a partial list.

A few years back, wearable technology was all the rage and was being widely characterized as a game changer in the world of workplace safety and workers compensation insurance. But it has not taken off as quickly as anticipated, prompting some skeptics to question whether wearable technology will be the transformative force in workplace safety that was once hoped.

“It is a lot of sizzle and not a lot of steak,” says Mark Walls, vice president of communications and strategic analysis at Safety National, which provides specialty insurance and reinsurance. “In my opinion, that is because the technology is just not there yet to make it make sense. A lot of what you hear is what it could be used for, but I don’t see its use being that widespread.”

“It hasn’t moved as quickly as I thought it would have three or four years ago when it was a hot topic,” agrees Thomas Ryan, senior principal in Willis Towers Watson’s national practice. “It seems as if some of the employers who have an interest realized that a lot of vendors didn’t have readily available tools and devices. They were still in the development stage—prototypes, basically—so there was a concern about being able to market and distribute quality devices to meet the needs.”

Christopher Hernandez, who works in risk engineering for Chubb, says several factors have led to the slow adoption of wearables. “Middle-market companies are facing numerous business challenges with financial pressures limiting the use of capital,” Hernandez says. “Commercial wearable products are not as mature as their consumer counterparts, and because of this, the technology is not widely understood and the benefits are largely unknown. Lastly, adoption of wearables can be cost prohibitive, considering price per unit and monthly or annual fees for access to the data and analytics.”

Pilot Potential

Nevertheless, despite the slow liftoff, most risk management experts are convinced that wearable technology will eventually have a significant impact on workers compensation and other commercial lines.

“Sometimes you hear about a technology that is promising, and two or three years will pass while it is trying to catch its toehold,” says James Lynch, chief actuary for the Insurance Information Institute. “It is rare that a revolution takes place overnight.”

Jim Smith, of Gallagher, concedes that wearables have not yet gained traction in the workplace, but he says they’re gaining in popularity. A regional leader for Gallagher’s risk control and safety services, Smith sees “great potential” for wearables to limit or minimize lifting injuries and to protect lone workers in isolated places, such as a water treatment plant.

“Wearable technology is critical if you look at some of the positions we have today. It used to be that some of these places had two or three people, but now there may be only one, and that lone worker is out there with only limited communication. These sensors can track them and make sure they’re OK,” he says.

Hernandez says Chubb recently partnered with The Ohio State University’s National Center for the Middle Market and found that 40% of the middle-market manufacturers surveyed either use or plan to use wearables to monitor employee movement and location. Also, 63% said they either already use the technology to measure environmental conditions or plan to use it in the next five years.

Wayne Maynard, a product director in Liberty Mutual’s risk control division, says he has been approached by a number of startup vendors anxious to get into the wearable space and is working with several to help improve the accuracy of sensors that collect work-related information.

“It seems like every day there is a new one,” Maynard says. “With over 500 vendors out there hyping their technology as the magic bullet, employers are faced with a plethora of options. Employers need to approach the issue of wearables as part of a broader program. They need to work with their insurer to see why they are having accidents, what they can do to prevent them, including wearables, evaluate the range of wearable options and see what likely will have an impact on their safety process.”

Maynard says employers considering wearables also need to be aware that there is a lack of scientific studies showing that either a certain type of device or wearables in general have actually had an impact on workplace safety.

“There is a place for wearables, for sure,” Maynard says. “This technology will continue to evolve and most definitely will benefit workplace safety, but it is early. The algorithms need work. Now a lot of work is in pilot, and there is no research whatsoever that this technology is preventative. If you have a vendor that knocks on your door and says this will prevent 80% of your back claims, just know they have no evidence to back this up. That is not to say companies can’t have great successes with their product. And going forward, I expect there will be good studies on the preventative capability of the products.”

Early-Stage Success

Some of the greatest interest in wearable startups is coming from the construction and manufacturing sectors and material-moving organizations, such as warehouses, that want to make their workplace safer.

The algorithms need work. Now a lot of work is in pilot, and there is no research whatsoever that this technology is preventative. If you have a vendor that knocks on your door and says this will prevent 80% of your back claims, just know they have no evidence to back this up. That is not to say companies can’t have great successes with their product. And going forward, I expect there will be good studies on the preventative capability of the products.

Wayne Maynard, product director, Liberty Mutual

According to the Bureau of Labor Statistics, there were 5,190 fatal occupational injuries in 2016, a 7% increase over 2015. Fatal work injuries from falls, slips or trips continued an upward trend that began in 2011.

A recent study by Nationwide Mutual found that more than 30% of the workers compensation claims in the construction industry come from falls from elevated surfaces. And according to The Construction Chart Book, published in February by the Center for Construction Research and Training, 3.6% of employer compensation costs in the construction industry was spent on workers compensation, 71% higher than the spending percentage for the entire sector of goods-producing industries.

These numbers are compelling and likely driving some employers to action. “Some clients are looking at workers comp losses and exposures and where they might introduce a wearable to pilot and reengineer to reduce workers comp claims,” Willis’s Ryan says. “The employers I have spoken to are in exploratory mode. There are a few that have engaged in pilots, but the vast majority of employers we are talking to are still trying to understand the pros and cons of wearables in the workplace.”

Gilbane Building Company, a large construction firm headquartered in Providence, Rhode Island, was an early user of wearable technology and sings its praises. Don Naber, senior vice president and director of risk management, says the company has been using the Spot-r line of wearable and sensor devices developed by Triax Technologies of Norwalk, Connecticut, for about 18 months.

“What drew us to it immediately was that, in the event of a fall at whatever level, this particular technology sends a notification to whomever we designate on our site as the person managing the first response to any type of fall,” Naber says. “This was unique in terms of other products. Also, we appreciated the vision of Triax in emergency evacuation capabilities, and we are beginning to deploy sensors to monitor what is happening on site from a temperature, moisture and dust standpoint. Those are all critical elements, not just in terms of safety of people on site. They also impact work in progress.”

Currently, Gilbane is using the Spot-r devices on eight projects and is looking to implement them at four more construction sites. Eventually, Naber says, the company hopes “to expand this across as much of our portfolio as we can and make it more a norm than an exception.”

Pete Schermerhorn, president and chief operating officer of Triax, said Gilbane and a number of other large general contractors across the country are using Spot-r and have been alerted to several falls, enabling them to get medical personnel to the scene of the accident quickly. In addition, management has received some push-button alerts from workers wearing the sensors who are concerned about a possible safety issue.

“We’re definitely seeing an enhanced safety culture on these sites,” Schermerhorn says. “In terms of a reduction in claims, we haven’t been in the market long enough to amass that data, but certainly that is where this is going.

“When you look at data in the insurance industry, there are falls from the same level that tend to come with frequency—tripping and falling over material on site because of housekeeping issues—or you have falls from heights,” Naber says. “You don’t have a lot of frequency with falls from heights, but they tend to be more severe in terms of overall injury. This was an opportunity for us to really identify what was going on around the fall and be able to get to the location where the fall happens so, if a person needs medical attention, we have the opportunity to get them all the services they need in a very quick fashion.”

In addition to location, the sensor lets the company know who fell, which subcontractor that individual works for, and which other workers were in the general vicinity of the incident. And Naber says the fall alert has provided another, unexpected benefit—the ability for both the workers and the company to change behavior.

“At one of the projects where we first used it, we were finding a lot of falls. We would go to the person involved, and that person would say, ‘I didn’t fall,’” Naber recalls. “When we looked at the data, we found these alerts were falls from two or three feet, when people actually were not falling but jumping down rather than using appropriate exits we had made available or jumping down from the back of a pickup truck rather than stepping down.

“When you jump down from two or three feet, you are putting yourself at risk of hurting your knees or spraining your ankle. So we talked to people and asked why they were jumping down, and the answer was, ‘You didn’t have a ladder for me to use,’ or, ‘The exit stairs were too far away to use in getting materials down.’ So this gives us the opportunity to better manage around the project site and help change behaviors on these sites to avoid repetitive-type injuries.”

Spot-r devices also provide an alert when the construction site needs to be evacuated in an emergency.

“We tested that evacuation piece a number of times,” Naber says, “and we found when we evacuate the site without the emergency notification product, it takes roughly five or six minutes longer than when we use the product. Plus, now we know if John Smith is off the project, because we know from the clip where he is or if he is still somewhere in the project area. In an emergency situation, we would know where to send emergency responders based on where the clip says he is.”

Naber says it is still too early to see an overall impact on the company’s safety record. “But based on the behavior change that we have seen on a couple of projects because of this, we firmly believe that, in time, we will see a reduction in terms of our overall loss experience as well as loss from a questionable claim or fraud situation,” Naber says.

Another company, Eby-Brown in Naperville, Illinois, is just beginning a trial of Modjoul’s SmartBelt in hopes it will help cut down on muscular and skeletal injuries. Eby-Brown is a distribution company that stores, supplies and distributes virtually every product found in convenience stores except for alcohol and gas. The company has warehouses in eight states and employs about 2,500 people.

“Our warehouses are not an ergonomically friendly environment,” says Paul Brandel, the company’s risk and claims manager. “Some people are 6’5” and some are 5’2”, but the racks don’t change size, so there is a lot of twisting, reaching and bending to load trucks so the drivers can distribute the products.

“Most of our injuries are sprains and strains from pushing and reaching. So we are looking for wearables to show us those motions; then, we will bring in a physical therapy company to see how we could do it better. Our goal is to cut down on workers comp costs.”

Modjoul is the first wearable product Brandel is testing. He also plans to test four other wearable products, some of which clip on to a belt and others that clip on to a shirt pocket or shirt.

“This is new to me in our space, and I don’t know what the right one is right now,” Brandel says. “It is something I have been thinking about for a while. I looked at some high-tech suits that help with posture, but they are too bulky for us. The wearables would be friendlier to the worker. You definitely need buy-in from employees. You want them to wear it and forget about it.”

When we looked at the data, we found these alerts were falls from two or three feet, when people actually were not falling but jumping down rather than using appropriate exits we had made available or jumping down from the back of a pickup truck rather than stepping down.

Don Naber, SVP and director of risk management, Gilbane Building Company

Martinez says the SmartBelt can measure worker location and motion as well as environmental factors such as ambient temperature and humidity outside and around the worker. The belt vibrates if a worker bends more than 60 degrees, and it also tracks walking, standing, twisting, squatting, and outdoor and indoor driving.

Using statistics from some sensor devices placed in automobiles, Modjoul’s Martinez projects the SmartBelt can reduce workplace injuries by 30% to 40%, though he acknowledges there’s no concrete evidence to support those numbers.

Brandel is not troubled by a lack of hard data for that projection. “Whenever I meet with any provider in my business, they all have their claims,” he says. “They all have their sales pitch. I will take their claim as what they said it will do and then see our own data. I will pilot it myself and see if it works for me.”

Brandel’s biggest concern is finding the right device before making a big investment in wearable technology. “Wearable technology is definitely the right move for the industry,” he says, “and it is very exciting. I have shown some colleagues what we are doing, and they are all waiting to see my data and possibly try it out if it works well. Risk management is not a revenue generating department, so I try to do everything I can with our safety manager to cut costs by having fewer claims.”

Martinez also thinks the time is right for wearables.

“We are really on the cusp of the pioneer curve,” he says. “We’ve gone from zero to 21 customers in four months, so it is happening.”

The Trust Issue

Naber says his company has overcome resistance from employees and subcontractors skeptical about wearing the sensors by assuring workers the monitoring starts and stops at the job site.

“I think with any type of technology, the biggest pushback is ‘Big Brother is watching and you can track where we are,’” Naber says. “What we have impressed upon our subcontractors and unions where we are using this product is that, once you leave the job site, this product can’t track you. It is not a GPS.”

Schermerhorn says the Spot-r sensor is small—“literally the size of an old pager.” On some sites, workers receive the sensor at the beginning of the job and take it home at the end of the shift. On other sites, they return the sensors at the end of each workday. Either way—and this has proven critical to worker buy-in—the employee is monitored only when on the job site.

“The trust element is one of the biggest challenges,” Safety National’s Conference Chronicles reported following a 2016 industry discussion on wearables. “You need to gain employee trust in why you are using the wearable technology and how it benefits them. You need to be clear who has access to the information and what it will be used for. There is a cultural change associated with this, and there will be a long learning curve to make this change.”

Another potential issue involves the use of information gathered by the wearable sensors for purposes other than the stated intent.

“You don’t want to appear to be doing this to make everybody safe when in reality you are using it as a time and attendance tracker,” says Miki Kolton, an attorney with Greenberg Traurig in Washington, D.C. “Then your credibility is shot.”

If workplace sensors are used to monitor time and attendance and an employee is fired as a result, Kolton says, the employer could be subject to a wrongful termination claim.

A blog on ethical issues involving wearables on the website of the National Institute of Occupational Safety and Health poses a series of questions that any employee-monitoring program should address: “What are the goals of the monitoring program? How will the results be communicated? How will the data be used? Will informed consent be sought?”

“I think the potential is unlimited if we use it properly,” Gallagher’s Jim Smith says. “From the workers’ perspective, we don’t want to watch them 24/7. So privacy protection is one reason you need to be sure it is used for the right things for the right reasons.”

Fred Smith, head of U.S. mining and metals at Willis Towers Watson in Knoxville, Tennessee, says he isn’t aware of any resistance to wearables from the union representing miners. (See sidebar: “A Light in the Tunnel.”) But the technology also may be too new to have captured much union attention. The AFL-CIO did not respond to several phone calls and emails seeking information on union concerns over wearables in the workplace, and a spokesman for the International Brotherhood of Teamsters said the union was not aware of wearables being an issue for any of its members. But that could change fast if companies seek to monitor their employees after they leave the job site.

For example, airline pilots do not wear any sort of monitoring devices now, but they are subject to frequent blood tests and physicals to ensure they are healthy and not drinking alcohol before they fly a plane. Similarly, a wearable device might alert a trucking company if a driver was overtired or had been indulging in performance-impairing substances such as alcohol, marijuana or other drugs. But would that be considered an invasion of privacy?

Monitoring workplace activity has historically been permitted by the courts, but the courts and regulators have stopped short of setting legally permissible limits to that monitoring. Issues of privacy on what can be reported to whom may also arise as issues that need guidance or that spur court actions. In addition, if the information being gathered falls into the area of health data or other sensitive areas, there is the issue of data security to consider—no small feat in the current cyber environment.

“There is a lot of personal data floating out there and, with that, a lot of risk,” Walls, of Safety National, says. “Cyber security being what it is, whenever you’ve got something capturing somebody’s data, security is an issue. Who else can get that data, and what are they going to do with it?”

We’ve had over 5,000 deaths in 2016, and we are spending $59.6 billion a year in workers compensation medical costs, expenses and wage replacement. That is just unacceptable. We’ve got to do a better job.

Jim Smith, regional leader, Gallagher

If wearable technology does become a significant force in improving workplace safety, its impact on workers compensation costs will probably not be felt in overall workers comp premiums for at least three years, says Lynch, the I.I.I.’s chief actuary. But an individual company’s rates may go down if their safety initiatives—whether wearables or not—result in fewer accidents and claims and a better experience history with their insurer.

“With workers comp,” Lynch says, “the rates a company pays are very heavily based on the experience rate. You probably need a couple of years of experience for the workers comp policies to be impacted. If your experience improves, your rate would go down, but the full impact would take three to five years.”

Martinez says the impact of wearables on safety and workers comp rates could be felt sooner for large companies that self-insure. “Insurance companies are going to be slower to react because they need years of data to react to a trend,” he says, “but a risk manager for a large company and captive will be able to react faster.”

Jim Smith is less concerned about wearables’ impact on workers comp premiums than he is about the potential reduction in workplace injuries and deaths.

“We’ve had over 5,000 deaths in 2016, and we are spending $59.6 billion a year in workers compensation medical costs, expenses and wage replacement. That is just unacceptable,” Smith says. “We’ve got to do a better job.”

Arvidson is a contributing writer. cheryl@carvidson.com