Although it seems like a simple question, this is perhaps the hardest thing to decide when exploring predictive modeling for your claims operation. The main thing to keep in mind is that you want to generate insights that cause someone to take action. Here are a few things that might be worth predicting and examples of the resulting actions they might prompt.
Basic Risk Level
Basic workers’ compensation claim risk could be described as a function of ultimate incurred. A nice way of assigning risk is to consider high risk claims as the top 10%-15% that generate between 75% to 90% of of your total incurred costs. This kind of prediction requires that it be performed early in the life of a claim so that adjusters and managers alike can focus on all the possible actions that could prevent predicted high risk claims from becoming actual high risk claims.
Claim Reserves
A cousin of predicting claim risk would be trying to identify how reserves should be set or adjusted for a given claim. Actions taken from this prediction are fairly self evident in that reserves can be adjusted according to a blend of adjuster experience and model guidance.
Potential For Return to Work
Failed Return to Work (RTW) is a killer for workers’ comp. claims. Being able to identify a potentially challenging return to work case prompts early intervention with injured workers and employers alike. Alternatively, this data in the hands of good nurse case management can help mitigate the instance of lost work days which often lead to complex return to work cases.
Of course, there are many other things worth predicting with respect to workers’ comp. claims. The keys are to be clear in what you want to predict and to try and predict it as early as you can.