2015 NWCDC

Predicting Claims Severity

Models analyze variables at intake and afterward to identify claims that may become adverse.
By: | November 13, 2015 • 2 min read

Using predictive modeling in workers’ compensation cases isn’t a magic wand but it is a valuable tool.

“What models do is identify a claim before you may know it’s a bad claim,” said Frank Murray, senior vice president, claims, ESIS, at a November 12 session, “Optimizing Predictive Modeling: Georgia-Pacific’s Experience” at the National Workers’ Compensation and Disability Conference® and Expo.

“This is a powerful tool.” — Tim Starks, director of casualty, Georgia Pacific

Modeling, said Tim Starks, director of casualty, Georgia Pacific, “helps us put the blinders on and focus on the right cases where we can make the best impact.”

“This is a powerful tool,” he said, cautioning, however, that “it’s not a panacea. It’s not a magic tool.”

The data is important, he said, but the company must use the data to “get resources mobilized in the right way.”

Predictive modeling, Starks said, doesn’t necessarily change the claims process, but it accelerates it so outcomes are improved. It also doesn’t replace the knowledge of claims adjusters, he said, noting that his company relies on both the model and an adjusters’ experience.

Each claim receives a severity score for probability of cost. The model takes into account up to 20 variables related to the claim – such as age, body part injured, comorbid conditions and facility location, as well as text mining the intake notes — to determine the likelihood of an adverse development.

A model of claims open at three months forecasts the likelihood that the claims may breach $100,000; for claims open at 12 months, it focuses on the $250,000 level.

In the three years the 12-month model has been in effect, ESIS has seen $4.7 million in savings on open claims, and $3.56 million in savings on closed claims, Murray said.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]