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By PETER ROUSMANIERE, an expert on the workers' compensation industry

These experts, in sum, attested to the persistence of IT as a key driver of change in the field of workers' compensation. Just about every aspect of managing work injury risk benefits from the largesse of advances in information technology, rendering work faster, easier and cheaper.

The emergence of dashboards into claims management should be viewed as the major improvement in recent years in workers' comp technology, according to Pat Funck, chief information office of Memphis, Tenn.-based Sedgwick Claims Management Services Inc.

Prior to dashboards, employers relied on reports with fixed designs and on ad hoc queries. They needed a means to track key trends, alerts and other very up-to-date information in a highly readable, compact and graphically rich format online.

Sedgwick has invested heavily in creating such a resource for its self-insured clients, Funck said. In preparing its home-grown system, he looked at several other dashboards being developed for the industry and compiled a short list of imperatives for his and other dashboard designers.

He said that the next generation of dashboard will need to be able to inform the user about all the risks that an employer may be managing, not only workers' compensation but also liability, disability, managed care and professional liability. The dashboard will also have to be seamlessly integrated with the underlying claims platforms to ensure integrity in the flow of data.

Some current-generation dashboards that Funck investigated needed to be stronger in allowing end users, ranging from experts to casual users, to construct graphical displays from data that may require deep drilling to get hold of.

SPREADSHEETS ON STEROIDS

The chief, and often severe, challenge today, according to Denning, is interpreting the data. He gave an example: analyzing how much workers' comp exposure an employer should retain.

"We can easily compute the number of claims historically that were under the candidate retention. Yet this answer has many deficiencies that can only be overcome by fitting a probability-severity distribution and using computer simulation methods to test the retention," he said.

Denning pointed to a family of low-cost software tools that is emerging to extend the scope and power of risk management information systems (RMIS). They are inexpensive and interface with Microsoft Excel or Access, yet they would be prohibitively expensive for a claims organization or claims vendor to try to develop internally.

"Excel on steroids," as Denning called one.

Sold by well-capitalized vendors with large customer bases, these tools can provide powerful visual analyses, help a nonstatistician forecast losses under varying scenarios, show interconnected data patterns and perform other tasks that in the past required expensive software, Denning said.

PREDICTING THE NEXT STEP IN MODELING

David Tweedy, RMIS practice leader with Needham, Massachusetts-based Albert Risk Management Consultants, thinks that the most exciting development in the workers compensation claims management arena has come from the application of predictive analytics and predictive modeling.

Predictive systems are in their infancy "particularly when you compare to how predictive modeling is being used in other fields such as financial services and medicine," he said. Predictive models are used extensively by banks and credit card companies to analyze credit risk, for instance.

"Employers need access to a broader dataset that crosses employers within the same jurisdictions and/or industry sectors. Key to making this happen is the adoption of data standards to allow information to be more easily aggregated and shared while protecting sensitive information," he explained.

Tweedy expects that in the future carriers might share desensitized information with each other, their insureds and their insureds' RMIS providers. Despite some initiatives in this area, he said, "the industry as a whole is still not there."

October 22, 2010

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