Analyze This: Why workers’ comp data gives insurers a strategic advantageBy Alfred Faber, Adam Wesson | June 19, 2018
Data analytics has become a key driver in the development of business strategy for leading corporations, and workers’ compensation insurers are uniquely positioned to take advantage of this trend.
The workers’ comp industry is known for collecting and reporting vast amounts data. It’s time for insurers to make use of that data for broader business values beyond compliance.
The hidden treasures within compliance data
Workers’ compensation is a highly regulated industry. Insurers are responsible for collecting, organizing, and tracking data, and then reporting that data to regulatory organizations in detail. While that task can seem like a necessary evil to meet compliance measures, it’s actually an untapped treasure of actionable insights for insurers.
Insurers can use the information they are required to collect and report as the foundation for a strong data analytics program. The insights derived from the information can lead to better decision-making, improved efficiencies, and reduced losses and expenses.
Surprising potential for high-quality analytics
Data analytics is built off statistical probability and data modeling. The quality of the analytics is based on the quality of the data used to create the models. What is quality data? There are a few criteria: it should be large in quantity, accurate, and standardized
When you examine the data workers’ comp insurers collect and report, it meets those criteria. The uniformity of the data allows analysts to create accurate models with predictive capabilities.
This is significant because many other industries struggle to organize high quality data to analyze. According to the Harvard Business Review, only 3 percent of companies’ data meets basic quality standards.
While not all organizations are equipped to launch an effective data analytics program for workers’ compensation, there is good news. Technology and modeling are getting better in workers’ comp and solutions are available to help insurers stay ahead in the competitive industry.
The value of predictive insights for claims
Over the last several years, workers’ compensation insurers have increasingly incorporated data analytics into their business practices. While it was already common among underwriters, claims professionals began to realize the value of analyzing their own data.
In particular, predictive analytics can help with containing the cost of complex workers’ comp claims. According to the American College of Occupational and Environmental Medicine, 5 percent of injured workers drive about 80 percent of medical and time-lost costs on claims. Analytics helps identify those potentially volatile claims early, which allows for quick intervention instead of letting a claim spiral out of control.
Analytics also helps with claim triage and manager review. When an adjuster is assigned hundreds of claims, how do they know which one focus closely on? Predictive analytics provides insights on which claims to prioritize. It also helps managers identify difficult claims, assign them to appropriately experience adjusters and provide guidance to optimize claim outcomes.
Beyond workflow improvements, analytics also can help with pending staff challenges created by the rapid onset of retirement age for experienced Claims professionals.” This year, 25 percent of the industry’s workforce is eligible for or near retirement. Analytics creates consistency and objectivity in decision-making, which eases the learning curve for less experienced claims professionals filling these roles.
Challenges of analyzing data
Despite being uniquely fit to take advantage of data analytics, workers’ comp insurers still face some hurdles to implementing a program. Creating, updating, and continuously modifying an analytics program requires significant IT resources that not all companies are able to commit. Secondly, though companies have data that meets rigorous standards, they are limited to only their internal data sets.
Overcoming data limitations
Fortunately, there are alternatives to building a predictive analytics system internally. Solutions with advanced technology and industrywide data can help carriers save time and resources while delivering robust analytics.
ISO Claims Partners has a suite of products that uses predictive analytics based on broad industry data to help insurers improve their workers’ comp claims process. For more information, ISO Claims Partners via phone at 1-866-630-2772 or via e-mail at CPinfo@verisk.com.
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