Predictive Analytics Replaces Opioid Buzzword
Predictive Analytics for workers compensation claims adjusting still has not proven itself as a cost saver. Please note that I am referring to workers compensation only.
Predictive analytics for other lines of casualty insurance such as auto and property damage has shown some promise over the years. However, workers compensation adjusting and reserve analytics have not reached the point as a viable option.
One of my longtime workers comp compatriots – Mark Walls of Safety National went as far as calling analytics a myth. That is very strong language, but I cannot find one analytics package, app, program, or cloud-based analytics that would allow me to challenge Mr. Walls’s assessment.
Mark and I agree down the line on many facets of workers compensation. With my actuarial background, I often give any type of statistics a wide berth to enhance the accuracy of workers compensation benefit management.
The bottom line is that I am still waiting for a great analytics package outside of an Excel(r) spreadsheet that would make me feel very comfortable with professing that “workers compensation claim and reserving analytics have arrived.” I still cannot even begin to utter that phrase. Why?
Two different random variables enter into the equation. Every injured employee has a different “healing window” of time to physically and mentally recover from an injury and return to the workplace. The other variable is the mental healing capacity of the injured worker. No two people look at a fractured arm in a cast with the same outlook.
So let us look at what I am talking about in a formula for the number geeks such as myself:
Known and predictable statistic (1) * known and predictable statistic (2) * known and predictable statistic (3) = accurate predictive analytic
but
Known and predictable statistic (1) * known and predictable statistic (2) * known and predictable statistic (3) * physical healing random variable * mental healing random variable = shot in the dark at best
As I have said, and Mark Walls says in his article – Show me the analytic. I will do an article at length on any software, etc. if I can be presented with one package that can predict claim outcomes.
That is why Reserving is an Art, not just a formulaic contrivance of a few numbers on a spreadsheet. As Mark mentioned in his article, good experienced adjusters still survive as the best analytic tool for foretelling how a claim will turn out. Hold on, though, please see the word good in the prior sentence.
Unfortunately, not all experienced adjusters are great at reserving. Then again, they can be the best claims handlers on earth using one technique. It is called The Golden Rule.
As with my search for a decent Workers Compensation app, I invite any person or company to see me a claims predictive analytics package that can predict workers compensation claims outcomes.
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2 Responses
So interesting because a reasonable number of companies claim they effectively do this. I’ve had my doubts as well, and feel that eyeballing a claim, assessing the type of injury sustained, and knowing a little bit about the claimant (how far is the claimant from work; does this claimant have multiple claims; is the claimant nearing retirement) is about as effective as any program could ever be.
Pamela, I agree that many companies claim they can do very accurate predictive analytics. A few markers exist that can point to possible outcomes. However, the randomness of injury healing cannot be placed into a formula. Thanks for responding.
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