An ‘Arms Race’ to Provide Data Analytics

While an exploding availability of data analytics can help workers’ compensation payers focus claims mitigation efforts, there is potential for misapplication, observers said.

The mushrooming growth of data analytic tools was evident at the Risk and Insurance Management Society Inc.’s annual conference being held April 27-30 in Denver, where insurers, brokers, third party administrators, medical management companies and other workers’ comp service providers were all touting their recently developed or refined analytics capabilities.

“It’s an arms race” as companies market their ability to wield data analytics systems, said Ron Skrocki, VP of product management and development for managed care service provider, GENEX Services Inc. in Wayne, Pa. “Everyone wants to leverage the technology.”

Indeed, many workers’ compensation company marketing efforts now appear centered on how their data analytics systems can help payers determine the specific loss prevention or medical management services they would most benefit from.

Proponents said that using data analytics to evaluate claims factors — such as injury types by employee tenure or age, accident frequency, and medical treatments utilized — can help an employer identify the cost drivers specific to their employee population. That allows them to focus spending on services most likely to mitigate those issues.

“It’s a window for risk managers to know what is going on in their [workers’ comp] programs,” said Danielle Lisenbey, president of Broadspire, a third party administrator in Atlanta.

But data analytic offerings can also amount to “smoke and mirrors” — becoming self-serving marketing tools that direct payers to products and services vendor companies are most eager to provide, rather than steering clients to services that will benefit them most, Lisenbey and others said.

She said entities providing valuable analytics services evaluate an employer’s total loss costs, “whether it’s from the claim side and what is going in their demographics, what is going on from a geographic perspective, all the way through medical management and what is driving their results.”

Others said that offering data analytic evaluation services does not automatically generate revenue for them.

“We have come out of meetings where we tell [clients] to use [our services] less,” when GENEX’s analytics showed the client would benefit, Skrocki said.

Insurers, third party administrators and other workers’ comp companies have amassed employer claims data and analyzed it for years, said Elizabeth Carabas, managing principal in Portland, Ore., for broker Integro.

But now, as the economy improves, more employers are hiring, which increases their workers’ comp exposures. At the same time, they are more willing to spend on loss prevention efforts, she added.

That and other factors, such as the continuing rise in medical expenses and an aging workforce, are fueling interest in data analytics and propelling efforts to market applications, Carabas said.

There are still many employers who have not yet taken full advantage of the cost-reduction benefits that analysis of claims data potentially provides, experts at the conference said. That, too, means there is substantial room for the increased application of data analytics services to help worker’s comp payers, they added.

So more companies are developing and applying them.

Insurance broker Crystal & Company, for instance, is now helping clients analyze post-loss data to focus their pre-loss safety efforts, said Executive VP James F. Crystal.

“You can take the information and turn it into actionable knowledge,” he said.

That can further help an insured negotiate for better pricing and collateral requirements when purchasing insurance, he added.

Several companies marketing data analytics capabilities at the RIMS conference said they provide the service to customers free of charge, but some added that their expenses are built into the cost of other services the companies sell.

Some insurers already provide valuable loss control and data analytics services that can be “built into your program if you negotiate right,” Carabas said. “That is a huge benefit” for employers.

Overall, observers expect an increased use of analytics will reshape workers’ comp practices.

As employers more closely evaluate their claims activity, for example, they are more likely to take measures such as combining risk management and human resource efforts to implement wellness programs that address aging workforce cost drivers, said Paul Braun, managing director of casualty claims for Aon Global Risk Consulting in Los Angeles.