State governments emerged from the pandemic-driven surge in unemployment insurance (UI) claims with plenty of battle scars. From delays in processing claims to an unprecedented level of fraud, waste, and abuse, the COVID-19 pandemic revealed the ways in which legacy systems struggled to deliver on the mission for either citizens or government agencies. But these shortcomings aren’t just obstacles, they’re also drivers for unemployment insurance reform and technology transformation. Equipped with a modern IT infrastructure, states can improve the performance and security of their UI programs, deliver exceptional customer service, prevent fraud, and prepare for the next major impact event.
National usage of unemployment benefits skyrocketed during the COVID-19 lockdowns, with demand in some areas increasing as much as 3,500 percent. UI programs were overwhelmed by the volume of claims, resulting in delayed payments, website outages, and an unprecedented surge in fraudulent UI claims. These challenges strained state agencies’ already limited resources and put additional pressure on claimants during an already vulnerable time.
The volume of applications has returned to a more normal pace, but the weaknesses revealed by the pandemic are clear. However, the top challenges facing state UI programs have a common solution: IT modernization.
Why Modernize Now?
While it may seem counterintuitive, the current low unemployment rates mean that now is an attractive time to begin a UI program modernization. Quoting John F. Kennedy, Dale Smith, Director, Workforce and Unemployment Insurance Programs at TCS – Tata Consultancy Services said, “‘The time to repair the roof is when the sun is shining.’ Unemployment is currently low, so the system is surviving as-is. But modernizing now means you will have the new system when unemployment rises again.”
State workforce agencies’ IT systems are fundamental to successful UI program operations such as benefit eligibility determinations, but many states continue to rely on legacy systems running on outdated hardware and software. These systems, some of which may be more than 50 years old, are slow, expensive to maintain, use older programming languages that few current employees are proficient in, and are more vulnerable to cyber threats than modern systems. Many states operating on aging technology lacked the infrastructure to support digital identity validation, faster claim processing, and even some provisions of the CARES Act.
A modern, cloud-based IT infrastructure helps agencies solve their current problems and also prepare for future challenges. A core tenet of modern infrastructure is adaptability, meaning that agencies can easily reconfigure their systems to comply with changes in law, regulations, and constituent needs. They are also less vulnerable to knowledge loss as tech workers retire—one of the top drivers of modernization across industries.
Timely Service Delivery Improves Customer Experience
Complaints of service delays by UI claimants predate the COVID-19 pandemic, according to a 2016 GAO report. In addition to creating a frustrating customer experience, lengthy waits for payments caused financial and other hardships for some workers, who had to defer bills or negotiate rent payment deferments because of the extensive claim backlogs. These delays were often a result of legacy systems’ reliance on manual labor to complete updates, which is unable to quickly scale in response to higher demand. For example, New York, which requires applicants to verify their details over the phone, saw a 16,000 percent increase in call volume during the early months of the pandemic, which had to be handled by the same number of staff.
Modernizing IT infrastructure empowers agencies to deliver outstanding customer experience without adding to staff workloads. Harnessing automation to handle routine, repetitive tasks helps constituents get the answers they need in a timely manner and frees up staff to attend to higher value work. “In a workplace where automation takes care of the simple actions, you create more meaningful roles where workers are able to bring value by delivering exceptional customer experiences,” said Smith. “Automation can help to improve timeliness of service, refine and streamline operations, help to clear backlogs, and allow government workers to ‘get their heads above water,’ when many people feel overwhelmed by repetitive administrative tasks and bureaucratic processes.”
Pair Fraud Detection and Prevention in a Multi-Pronged Strategy
For decades, UI programs have tried to address benefit fraud through detection and recovery, a strategy driven by the primary vehicle for UI fraud: individuals falsifying documents “proving” their eligibility. However, modern fraudsters prefer to use stolen identities, which makes it more difficult to identify fraudulent activity and recapture stolen funds. False claims with stolen identities are also much easier to submit, leading not only to larger volumes of fraudulent claims but increases in claim backlogs and wait times for legitimate applicants as well.
These stolen identities are harder to detect, meaning that states must include prevention in their fraud protection strategy as well. Smith recommends a multi-pronged approach, with various tools defending different vulnerabilities in the system. Combining deep data analysis, which uses artificial intelligence (AI) and machine learning (ML) to investigate data and detect patterns, along with other security tools like identity validation and various state databases such as birth and death records and driver’s licenses can help states verify legitimate claims at speed and scale. A fraud protection strategy that combines multiple modern prevention tools with established detection solutions will enable states to focus attention and effort on improving constituents’ lives and supporting them in times of need.
Upgrade Legacy IT Infrastructure to Deliver Modern Service
The intersection of low demand, increased funding, and a wide variety of available technology makes now an ideal time for UI programs to begin modernizing. By preparing their systems in advance to handle increased capacity, rapid changes, and evolving threats, states will be well equipped to meet demand during the next crisis.
