Analytics is increasingly becoming one of the most important tools in an organization’s arsenal. It can be used to appraise and control risk in underwriting, pricing, rating, claims, and reserving. Predictive analytics can be used to help determine pricing models as well as risk rating by using statistics and probability to determine a client’s risk level. Predictive modeling also helps adjusters identify problematic claims for early intervention as well as determine appropriate reserve levels by forecasting future losses based on past ones.
Johns Eastern primarily uses predictive analytics in conjunction with our Workers’ Compensation team.
Workers’ Compensation Analytics
Since 2009 prices in medical care have steadily risen at a greater rate than prices in the general economy and prices for private insurance in particular have significantly outpaced those in Medicare/Medicaid. An increase in fraud, concerns about economic factors, and growing dependency on prescription drugs have complicated the workers’ compensation industry and caused these increases in cost. Litigation on the part of the injured worker also serves to drive claims costs up.
One main strategy in keeping costs down is by using analytics to identify claims that have a high risk of exploding into expensive and drawn out affairs.
Johns Eastern utilizes ODG’s Risk Assessment Scoring mechanism to help adjusters identify warning signs of potentially problematic claims. By gathering information from a variety of medical codes and claim demographics, ODG can predict claim risk, disability duration, and total medical/indemnity costs by generating a Risk Assessment score. This is determined by magnitude, which is based on potential claim duration and cost relative to other claims, and volatility of the claim, which measures the difference between a good outcome and a bad outcome. Catastrophic claims have high magnitude and lower volatility; and creeper claims, which start out unassuming, but develop into high-cost claims, have high magnitude and high volatility. Both of these claims will score high on ODG’s scale which warns adjusters to quickly assign resources to prevent them from spiraling out of control.
The benefits of adopting a predictive analytics program speak for themselves:
- Medical cost-savings of 25%-60% (by state and payer)
- Average disability duration down 34%-66%, median duration down 30%
- Treatment delay (from date of injury to initial treatment) down 77%
- Access to care up 42% (more treating providers accepting patients under ODG)
- Improved health outcomes
Besides this, predictive modeling gives you the most options to handle a developing claim with objective fact-based reasoning. The goal is to remove as much human error as possible, by reducing the strain of large amounts of data and information on the adjuster, using data forms to avoid the need for manual entry of information, and provide simple, easy to enact solutions.
Going Forward
The future of utilizing data in insurance seems to be in real-time analytics. By developing a system to collect and analyze large amounts of data while prioritizing speed and quick insights, you can react to new information as soon as it becomes available, allowing you to be on the cutting-edge. It improves pricing and underwriting policies as well, allowing you to offer a more desirable product.
Obtaining data in real-time or close to it, also provides the distinct advantage of sustained access. The longer you are able to use a dataset, the more information that can be gleaned, especially with access to machine learning algorithms and artificial intelligence. It’s essential that the data gathered can be used in creative ways to drive efficiencies and improve future outcomes.
Johns Eastern plans to continue sustained growth by utilizing prescriptive and predictive analytics in more sectors to help drive our current business practices and help identify our path forward.
For more information on our Analytics partnership you can visit https://www.mcg.com/odg/
