Applying Analytics for More Actionable Claims Information
By Michael Rivers
More and more insurers are recognizing the benefits of using
business intelligence and analytics to improve claims decision
making — and with good reason. These tools help people do
their jobs more efficiently and more effectively, resulting in a
positive impact on the bottom line. With recent staff reductions,
an aging workforce, office centralization, and increasing claim
severity, the claims department has an ever-increasing need for
such solutions.
Business intelligence and analytics offer insights into claims data
that adjusters and claims management might not otherwise discover
because of time or experienced-based constraints or a lack
of comprehensive analysis. These tools can help determine which
claims are straightforward and can be closed quickly and which
claims are more complex or contain questionable elements that
require further investigation and information.
When claims professionals act on intuition alone, they are "following
a notion." Their preconceived ideas about a situation may
or may not be supported when scrutinized by business intelligence
tools. In many situations, analytics will augment claims professionals'
background and experience to provide more actionable
information and better claims outcomes.
For example, some claims managers may believe that the number
of strains in soft-tissue spine strain cases (whiplash) is not positively
correlated to claim payment. Some believe the payment to
be the same regardless of having injuries to multiple spine body
parts. However, a review of the data reveals that this belief is false.
The dashboard example in Figure 1 below provides a simple focus
on bodily injury (BI) claim closures, revealing that double and
triple strains can be 40 percent and 80 percent higher than single-strain
claim payments, respectively. This example offers accurate
information, but it may not be directly actionable because a more
serious injury should have a higher payment. By applying analytics,
however, the claims manager may answer a related question that
is actionable.
What if further analysis revealed that BI closures consisted of
more double and triple strains during one year than the year
before? The dashboard in Figure 2 includes
a "settled date" trend showing an increase in 2007 compared
with 2006. What conclusions would an insurer reach based
only on preconceived ideas? If the claimant demographic has
remained the same (for example, no marked increase in the age
of claimants due to population shift), it would be impossible to guess the reason for the upswing. However, if a focused audit were
applied to the claims, results might reveal that recently hired staff
members require additional training. Here is a case where analysis
of information creates a call for action: Management knows
what the problem is and has a strategy to solve it and, ultimately,
improve operations.
Figure 1
COA Dashboard: Bodily Injury Claim Closures
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The examples in this article support the idea that if you can't measure
it, you can't fix it. They illustrate the importance of focusing on
analytics as well as on information collection.
Analytics tools also offer the ability to discover actionable insights
in the form of key performance indicators (KPI). KPIs are the
principal measures of business performance. Changes in cycle
time or medical severity are possible KPIs for a claims department.
If these indicators change over time, preconfigured flags can
notify management immediately. Applying analytics to KPIs is a
much more efficient and reliable way to determine when something
important has changed when compared with depending on
a busy manager to realize there is cause for concern. KPI flags can
function as e-mail alerts, social media posts, or special graphics
on system displays.
When claims managers rely on intuition, they depend on their
own past experiences and knowledge. For example, few claims
professionals would be surprised to find that claim payment trends
in Cook County, Illinois — the Chicago metropolitan area —
differ from the rest of the state. The trends follow standard geographic
boundaries. However, business intelligence and analytics
offer greater insight and can show that trends in Cook County,
Illinois, are similar to those in Richmond, Virginia, and
Philadelphia, Pennsylvania.
Figure 2
COA Dashboard: Settled Date Trend
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When insurers decide to consolidate or centralize offices, this
actionable information can be used to identify a better staffing
model that matches adjuster experience to the venues supported
by the remaining offices. Variables that could be used to compare
one office to another, in addition to the venue itself, may include
the injury descriptions of claims (soft-tissue back strains combined
with other demonstrable injuries such as a fracture or
hernia), the underlying medical severity, and the accepted form
of treatment for the injuries within the same venue.
There is no doubt that experience counts. Claims adjusters
will always be needed for investigations and negotiations. When
managers build on that personal experience by supporting the
data with analytics, they can move beyond hunches and discover
more actionable information. From individual claim payments
to enterprisewide initiatives, the application of analytics helps
insurers develop strategies, improve performance, and achieve
their goals. 
Michael Rivers is manager, claims analytics and consulting
services, ISO Claims Services.
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