Tag Archives: self-insurance

Big Changes Coming for Workers’ Comp

There is still much unknown about how deeply and pervasively the pandemic will affect the U.S. and global economies; however, a deep and long-lasting recession is now a foregone conclusion. The downstream effects of a recession will change the workers’ compensation market dramatically for years to come.  

Employers should anticipate a hardening workers’ compensation marketplace beginning soon.

Rate Increases:   

For the past decade, employers enjoyed the advantages of a soft market. Premium rates fell year over year; in 2019, the average workers’ compensation rate was at the lowest point in the 46 years since 1973 [California Workers’ Compensation Insurance Rating Bureau’s 2019 State of the System report]. 

Businesses in all industries should expect workers’ compensation rates to increase dramatically over the next few renewal cycles. Insurance carriers offering both guaranteed-cost and high-deductible policies maintained their market share in a competitive marketplace with enticingly low premiums. Carriers partially offset the cost of insurance with the burgeoning investment returns earned in the booming stock market. With stock market returns evaporated, carriers must now charge the actual full cost of the insurance plus overhead, operating costs and shareholder profits, which will result in dramatically higher premiums.

Reduced Availability of Coverage:

Over the past decade, carriers competed for the employer’s business by offering a plethora of competitive options.  

Welcome to the new reality of a hard market. In previous hard markets, carriers exited the workers’ compensation market altogether to focus on more profitable and predictable lines such as general liability, auto, directors and officers’ coverage and the like. With limited competition, the few remaining carriers will become more choosy. Even employers with long-term, loyal relationships to a carrier may be bewildered to be refused a renewal offer. New coverage pricing may be so costly as to require the employer to re-think its entire business and pricing strategy. 

This marketplace reversal presents distinct challenges to employers unable to absorb the higher cost of workers’ compensation insurance. Higher insurance rates will hammer companies that have long-term, fixed-price contracts or that operate in markets with cutthroat competitive pricing such as service-based businesses, construction and government contracting.

See also: COVID-19: Implications for Business Models  

A Safe Port in the Storm: Self-Insurance

However, all hope is not lost. A few alternatives to traditional workers’ compensation insurance have always existed. In California, there is a reliable and robust self-insurance option for employers. A recently conducted actuarial study found that self-insured employers lowered their workers’ compensation costs an average of 24% even when insurance rates are favorable. These savings are stable and likely would be even higher in the new hard market. Self-insurance is primarily available to medium-sized and large companies that meet specific financial criteria. Self-insured groups (SIGs) exist in many industries, making self-insurance accessible to smaller employers.

Self-insurance is a stable, predictable and lower-cost option to employers in boom times and recessions.

The employer pays only the direct cost to adjust the claims on an as-incurred basis. There is no carrier involved, so there is no risk of rate increases or lack of available coverage.

In any market, self-insurance offers employers four additional and significant benefits: greater control, increased savings, improved outcomes and peace-of-mind.

Greater Control: Self-insured employers can design their programs, so they exert greater control over how the program works. Employers can determine priorities based on the needs of their company and employees. Priorities may include such objectives as more robust claims processes, faster return-to-work cycles, white-glove treatment of their employees and telemedicine.

Increased Savings: Employers save money because they do not pay carrier overhead, marketing and shareholder profits, as demonstrated in head-to-head studies comparing traditional and high deductible policies with self-insurance. 

Better Outcomes: With the potential of greater control over the care and treatment of the employees and processes comes improved outcomes for injured workers. Employees of self-insured companies receive the care and treatment they need in a timely way, delivered by providers chosen by either themselves or their employers. Expedited medical treatment, caring claims administration and return-to-work programs can hasten healing and recovery of the injured workers. Greater control results in employees reclaiming their lives and returning to work sooner, equaling happier employees at a lower cost to the employer.

See also: COVID-19’s Impact on Workers’ Comp  

Peace of Mind: A stable and predictable workers’ compensation solution, together with improved outcomes all at a lower cost, contributes to peace of mind for the employer.

Are you interested in looking into self-insurance for your company? First, check with your agent or broker. Some brokers may be knowledgeable and willing to assist you in becoming self-insured, working for a flat fee instead of a commission paid by the carrier. If your agent is not able to assist you, contact the California Self-Insurer’s Security Fund or visit the website at www.securityfund.org. 

5 Complex Issues Facing Regulators

The 2014 International Association of Industrial Accident Boards and Commissioners (IAIABC) Annual Conference in Austin offered a forum for regulators from around the country to discuss common issues and potential solutions. At this year’s conference, held Sept. 29  to Oct. 2, regulators highlighted a variety of complex issues that they are currently facing. Top issues include:

1. Hospital-Fee Schedules

In states that do not have hospital-fee schedules, the standard for payment is usually “reasonable and customary” charges. The question becomes, how do you determine what is reasonable? Healthcare providers push for billed charges to be the standard, but payers feel that this is an unfair standard because the charges are significantly higher than what providers ultimately accept as payment. Payers are pushing for paid charges to be the standard, but providers argue that preferred provider organization (PPO) contracts heavily influence average charges and that those contracts are based on volume. Providers do not believe that those without contracts should get the benefit of that volume discount.

2. Benefits for Illegal Aliens

Nearly all states extend benefits in some form to illegal alien workers. In some states, benefits are limited to medical benefits, while other states limit benefits to medical and total disability. In most states, there are no limitations to what benefits these workers can receive.

The concern is that some states are awarding these injured workers permanent total disability benefits because their status as illegal aliens means they cannot be put through vocational rehabilitation and returned to work. Attorneys argue that total disability benefits should continue when a light-duty release is obtained because that person cannot legally return to work. States are trying to find a balance that protects the illegal alien workers but doesn’t award them additional benefits simply because of their inability to legally work in the U.S.

3. Ride-Sharing Services

The explosion of ride-sharing services such as Uber is causing concern with regulators around the nation. The big concern from a workers’ compensation standpoint is whether these drivers should be classified as employees of Uber or whether they are independent contractors. Owners of taxi companies argue that allowing these drivers to be classified as independent contractors creates an unfair competitive advantage. States are challenged with whether they can classify these drivers by statute or whether this should be done by courts interpreting current statutes.

4. Treatment Guidelines

Several states, including Washington, Texas and Colorado, have pushed out treatment guidelines for issues such as opioids and lower back injuries. These guidelines have resulted in significantly lower medical costs on claims. The medical community tends to resist implementation of such guidelines as they feel this impedes their ability to render appropriate medical care based on the specifics of the patient. Those that argue for treatment guidelines point to significant research on the effectiveness of certain treatment methods and the dangers associated with opioids above certain dosage levels.

5. Large-Deductible Policies

Regulators feel that there is confusion on the differences between large-deductible policies and self-insurance, with many employers assuming that the two are interchangeable. In some states, courts have ruled that employers under a large-deductible policy cannot have influence over the claims-handling process, so they cannot access items like adjuster files.

The carrier is ultimately responsible for payment of the claims and compliance with the statutes. If the carrier is unable to collect the deductible from the employer, the regulators do not have jurisdiction over the issue. The deductible agreement is outside the parameters of the insurance policy.

Six Things to Look for in a Workers’ Comp Counsel

When I started defending workers’ comp claims 25 years ago, I learned very quickly what carriers and employers wanted from me—because adjusters would tell me every day about what they DIDN’T like about other defense attorneys. Seeing an opportunity, I made sure I did the OPPOSITE of the complaints.

To paraphrase Rod Serling, I am submitting for your approval six things I learned during those formative years that I believe insurance carriers and self-insured employers are looking for in defense counsel.

Independent thought

Workers’ compensation defense attorneys often simply inform clients that the going rate for a standard-type of injury is this or that. While the client certainly needs to know the going rate, that cannot be where the analysis ends. When I represented TWA years ago, the claims manager told me: “Brad, I can hire trained monkeys to tell me to pay the going rate for standard types of injuries. I pay you to do better than that.”

I define independent thought to be analysis on not only whether a claim is compensable but also on strategies to resolve the claim more favorably than simply paying the going rate. This means laying out a game plan that includes all necessary steps. It doesn't always work, but I know clients appreciate this analysis on the front end of a claim.

Zealous advocacy

When the vast majority of claims are compensable, defense attorneys (like insurance adjusters) can easily develop the “process and pay” mentality. I define this as simply looking at what it will cost to pay the claim and taking the fastest steps necessary to close the file and move on.

Even on compensable claims, I have found that clients are always happy to also receive (and even expect) a game plan for asserting possible defenses. To promote its $1 Dollar Menu a few years ago, McDonald's had a billboard that said: “$1 Legal Advice — Plead Guilty.” When I hear of a defense attorney simply saying: “Claim is compensable, pay this amount,” I always think this is the workers’ comp equivalent of “Plead Guilty.” Even if the employer should pay, the client wants zealous advocacy from the defense attorney on how to best reach the goal.

Regular, substantive communication

This may be the most important piece. It can be broken down into two parts – – regular communication and substantive communication.

I've had a plethora of adjusters over the years tell me war stories about their prior counsel, who would never….ever…do anything on claims. One adjuster told me: “All I ever heard from that attorney was the sound of crickets.” The defense attorney who does this not only violates the ethical duty to keep his or her client properly informed, but is also an attorney who is dealing with a future ex-client.

Employers and carriers also want substantive updates that demonstrate how the attorney is best representing the employer. Communications, whether by letters or through now-common emails, should always encapsulate where the parties are on a claim and where the defense attorney intends to take it. Letters or emails from the defense attorney that say nothing more than “Look at all of the creative ways I have billed your file this month” is NOT what employers and carriers want.

Understanding what constitutes a win

One common complaint about workers’ comp defense is, “The employer almost always loses.” That raises the question: Just what is a win, and what is a loss?

I try to resist watching legal shows on television because, even when such shows are deliciously complex, the outcome of almost every legal proceeding is either guilty or innocent. If a civil court is involved, almost every verdict is for millions of dollars or nothing even though, in reality, almost everything is resolved within the nebulous middle ground. I guess that’s why it’s called fiction.

In workers’ compensation claims, the vast majority are going to be found compensable by the state division of workers' compensation. But, to borrow some analysis from Monopoly, we’re not faced with a choice between Baltic Avenue or Boardwalk with hotels. Rather, we are more often than not fighting over whether we can buy Pacific Avenue for the price of St. Charles Place.

Because the vast majority of claims are settled, I often wonder if the client views the settlement as a win or a loss. Over the years, I have seen carriers and employers examine the relative value of a settlement by looking through the lens of the following criteria:

  • Is the settlement fair in light of the evidence available and the applicable jurisdiction?  (e.g., Illinois claims settle for far more than Missouri claims even if the injuries are identical.)
  • Was the claim resolved within the established reserves?
  • Were the defenses that were raised truly sufficient to obtain a non-compensable award or were they only good enough to use for settlement negotiations?

Creative attempts at problem-solving

All carriers and employers know that most claims are compensable. Rarely have I had clients who expected an award of “not compensable” on every claim or even on most claims.

But most clients expect the defense attorney to at least examine all potential defenses to evaluate how the assertion of such defenses might affect the value of the claim. 

Despite the lofty views that most attorneys have of our profession, most of our jobs can often be distilled down to this concept: We help our clients avoid obstacles. While this is self-evident in criminal law (obstacle — the state wants to put client in prison), such analysis is rarely applied to workers’ comp. 

For example, if a claimant states, “My injury occurred on the job,” this may or may not actually be the case. My job as a defense attorney is to identify factual, medical and legal evidence that might persuade the judge that the “work-related” component of the employee’s injury is not as clear-cut as the employee may believe.

I had one case years ago where the employee claimed he was injured on the job. In his deposition, he admitted that he liked to ride the bull in rodeos. It occurred to me that there must be some association that keeps track of who rides in professional rodeos, and I contacted the Missouri Rodeo Association. I was “shocked” (insert mock assertion of surprise here) that the claimant’s medical care ALWAYS seemed to occur exactly one day after he competed in professional rodeos. After I provided this information to opposing counsel, the claim was quickly dismissed.

My point — the employee’s assertion that he was hurt on the job would normally be sufficient to prove compensability in the absence of other evidence, but my job was to find that other evidence. Carriers and employers want their counsel to explore all possible defenses, even if the probability of success is low, because occasionally (like in my rodeo case) the defenses actually work.

Sticking to your guns

If you ask an adjuster about her greatest pet peeve when it comes to dealing with defense attorneys, one example is most often cited: “I hate it when my defense attorney tells me at the beginning of the case that the claim is only worth $500, and then, on the day of trial, he tries to convince me to pay $20,000 to settle it.”

Years ago, I had a client who pulled files from another attorney and sent them to me. As I reviewed them, I saw a theme. The attorney would often say: “This claim is a fraud, and I wouldn't pay anything more than $500 to settle.” But I didn’t see ANY evidence of fraud in many of the files. I was in the unenviable position of having to tell the client that I thought these claims were not fraudulent, and I provided exposure estimates that were far higher than $500.

I was concerned that the client would say: “Gee, Brad, I liked the advice from the prior guy a lot better.” However, this did not happen. Instead, I heard this: “I thought the prior attorney was simply telling me what I wanted to hear. That's why I pulled the files and sent them to you.”

The lesson I learned here: Clients want the attorney’s honest assessment of the claim, and they don't want the defense attorney to simply tell them what the attorney thinks the client wants to hear. If the client can't rely on my analysis, then I'm not doing my job correctly. If the case is worth $20,000, I must tell this to the client as soon as it becomes possible to arrive at such a valuation. If I wait until the day of trial to disclose the true value of the claim, the client will think that I am simply afraid to take the case to trial.

Conclusion              

One could easily distill all these comments into a single concept: There must be a good working relationship between the defense attorney and the carrier/employer, one that is based on shared values, frequent communication and deliberative communication (meaning the attorney and the client jointly develop the goal for a particular claim and then both take the steps necessary to reach that goal). If reality matches this ideal, the defense attorney and the carrier/employer will probably be working together for a long time.

Settlement of High-Exposure Workers’ Comp Claims, Part Two

(Part I of this series focused on how to identify high-exposure claims and on the factors that drive cost and duration. Part II focuses on approaches to establish the value of a case, to determine if it is a good candidate to settle.)

Three numbers are critical in the valuation and determination of whether a case is a good candidate for settlement: future value, present value and settlement value.

Future value

The analysis of future valuation provides, by reserve category, a value for the indemnity, medical and expenses projected for the future of the case. 

The indemnity exposure is driven by statutory requirements for both permanent partial and permanent total disability. Typically, permanent partial disability is a fixed number of weeks multiplied by a weekly benefit. Likewise, permanent total disability benefits are calculated at a fixed rate; however, in most instances the benefit is payable for the life of the injured worker. A complication is that each jurisdiction views permanent partial and permanent total disability differently.

Determining the future medical exposure can be even more complicated. In many instances, a calculation will be made based on the average spending on the case over the past three years, but a more thoughtful analysis is necessary to determine the true future value. The analysis should be calculated based on the normal, expected treatment that an injured worker will need over the course of the claim but also consider the irregular treatment modalities necessary or requested by the physician. These may be surgeries, replacement of motorized wheelchairs, conversion vans, etc., which occur on an irregular basis; for example, a replacement van would be required every eight to 10 years, or a motorized wheelchair may need to be replaced every five to seven years. By parsing out these items, a much more accurate and appropriate analysis will be developed. 

Even once you understand the future exposure and the present value of a case, you still should consider other factors, such as co-morbidity and the reduction in the life expectancy of an injured worker because of both industrial and non-industrial conditions (factors discussed in Part I: Settlement of High-Exposure Claims Part I). 

Co-morbidity factors can indicate whether an injured worker’s life expectancy suggests there will be a need for, perhaps, a second knee surgery (at the 30-year mark). Will the injured worker’s condition deteriorate to either create a need or expand the existing exposure for home/attendant care? 

The most significant costs in high-exposure claims typically are medical, and a calculation of settlement value should also take into account that great savings can be achieved. In many instances, savings can be realized through turning the Medicare Set Aside, presuming one is necessary, into an annuity. Assessing non-Medicare type items such as home/attendant care and “off label” medications can also produce savings.

Expenses are also sometimes difficult to quantify. Allocated expenses such as legal fees and record subpoena services may diminish over time as issues begin to resolve. Depending on the jurisdiction, continuing litigation costs may be incurred if a defendant denies a treatment modality or procedure. In addition, consideration should be given to “other” medical expenses such as bill review, utilization review and nurse case management services. These typically continue through the life of the claim and may cost thousands, if not tens of thousands, of dollars. 

Present value

When analyzing the present value (also referred to as a discounted value) of benefits, it is important to understand the time value of money and current internal rates of returns on investments. The typical internal rate of return for annuities is currently approximately 4%. This rate varies, primarily based on interest rates. Carriers and self-insured employers have greater buying power, so they might expect a return of 6% to 7%.  

Determining present value is a straightforward calculation based on whatever the right discount rate is but requires a detailed understanding of likely expenses. Is the injured worker only entitled to benefits for a specific number of remaining weeks? Or, is the benefit payable for life? Determining the present value of the consistent medical generally is a matter of calculating the average annual cost and applying the appropriate discount rate. With irregular costs, it is necessary to understand the specific items in question and the estimated frequency of each. If an injured worker needs knee replacements and will require two over her lifetime, an estimate is needed as to when those will occur (for example, in 15 years and again in 30 years) and the anticipated cost of the surgery. The present value of the surgeries can be calculated based on how many years off they are. 

Discounting expenses associated with a case is typically handled much like the medical discounting. For the regular, consistent costs, an annual amount can be calculated and discounted for present value. If intermittent litigation and other expenses may occur, estimates are created and discounted for present value.

It is safe to say there is some art associated with determining present value. Variances in the discount rate used, the manner in which exposure is calculated and other factors can greatly affect the calculation. Understanding these variables and analyzing them correctly is imperative to reaching a solid present value calculation.

Settlement value

The nature and type of insurance program (primary vs. self-insured) as well as the manner in which the defendant has analyzed his exposure will greatly affect the settlement value of a case.  Understanding the differences between the future exposure and present value calculations aid in determining the amount of money that a party is willing to spend to bring closure to a file. 

Lacking a crystal ball, reserving practices have always had an aspect of “art” to them; thus the future value will have some variation over time based on changes in treatment course, deterioration in condition and other factors.  Present value calculations are estimations or approximations based upon the changes in value of money over time.

Likewise, the settlement value of a case is the best estimate of where the future needs of the injured worker will be, with consideration of the time value of money and degree of desire to extinguish the exposure now—before there is any further potential for expansion or deterioration in the condition, creating a greater degree of expense and exposure in the future. 

A discussion of settlement value should consider that a settlement of the case-in-chief not only ends direct expenses such as litigation, utilization review and nurse case management but also brings to an end the time and energy expended to adjust the claim. Time and energy are usually disproportionately great in high-exposure cases because of the complexities.

A settlement also helps the carrier/self-insured employer by possibly allowing it to recover reserves set aside for a case and by reducing exposure to any expansion of the claim as the years go by.

Conclusion

Ultimately, the objective is to bring these high-exposure cases to resolution as promptly and cost-effectively as possible because, for carriers and self-insured employers, this small percentage of cases drive the majority of costs associated with a workers’ compensation program.

Part III of this series will cover Negotiation and Resolution.

Predictive Analytics for Self-Insureds

Predictive analytics is widely used in the insurance industry. Is it time for self-insureds to reap the benefits of predictive analytics and realize significant bottom-line improvements as well?

Self-insureds can use predictive analytics for employee cost benchmarking, early identification of late-developing claims, and budget and allocation decision-making tools. Currently, the key area of focus for self-insured risk managers is claim prevention. But even the best claim prevention methods are not enough to avoid all claims. Claims occur despite a company’s and risk manager’s best efforts. If traditional claim prevention is the only defense against losses, these companies will lag behind their contemporaries who, to keep claim costs down, are already using predictive analytics.
Primer on Predictive Analytics
Whether we know it or not, we have all encountered predictive analytics in our personal lives by simply browsing the Internet. Companies like Amazon leverage their immense amount of data to predict customers’ shopping preferences to drive additional sales. Likewise, the insurance industry, with its substantial volume of data, views predictive analytics as an essential capability. Forward-thinking self-insureds see the benefits of these tools and realize that they should be used to better understand their exposure and better control their losses.

Predictive analytics can improve both customer satisfaction and company profits. Last week, I bought a webcam from Amazon. The product page displays the specific details on the webcam and shows an assortment of additional items frequently bought by other customers who purchased this webcam. Amazon uses its customer purchase data to predict that webcam purchasers also routinely buy extension cables, microphones, and speakers along with their webcam. Thus, Amazon has effectively applied predictive analytics to identify cross-sell opportunities that benefit its customers (I was glad to be reminded that I would, in fact, need an extension cable) and increase its revenue (I spent an additional $5.99).

Amazon’s product pages are an easily visible example of predictive analytics. Similar to Amazon, the insurance industry has adapted predictive analytics to not only increase premiums but also to improve risk selection. Risk selection—being able to identify the good/profitable risks and the bad/unprofitable risks—is so important for insurance companies that the popularity of predictive analytics comes as no surprise. The range of ways insurance companies are using these tools includes evaluating the profitability of their accounts, assisting in effective underwriting and proper pricing, marketing to the appropriate client base, retaining their customers, and estimating the lifetime value of each customer.

It is important to note that predictive analytics is not just a data summary. Predictive analytics sorts through vast amounts of data to find relationships among variables to predict future outcomes. This data can often be seemingly disparate, or even appear to be unrelated; it also often combines the use of both internal company and data from outside the organization. For example, a commonly cited and successful example of such a relationship involved insurers finding a direct correlation between two variables: credit scores and auto claims. Also, the more data fed into an analysis, the more robust it will be. Self-insureds have quite a bit of employee data that greatly aids analyses’ predictive abilities. In addition to loss-specific data, payroll, human resources information, and other available third-party data should be utilized to its fullest extent for optimal results.

Applications for Self-Insureds
Self-insureds have numerous opportunities to benefit from predictive analytics. Three large workers’ compensation areas on which predictive analytics sheds light are: 1) identifying which employees cost more than industry and company averages, 2) predicting early on which claims are the most likely to have late-developing costs, and 3) constructing qualitative cost/benefit scenarios to help risk managers allocate their budgets effectively.

Self-insureds applying predictive analytics to their workers’ compensation claims, for example, have a number of employee variables to work with such as: employee age, length of employment, state of residence, employment type (full time/part time), salary type (hourly/salary, low wage/high wage), and claim type (indemnity/medical only). Predictive analytics can find relationships that will affect future claim activity on current and future employees.

The real goal of predictive analytics for self-insureds is to help guide and support risk managers’ decisions. Predictive analytics can be applied to both ‘pre-claim’ and ‘post-claim’ loss prevention methods. To aid in claim prevention, pre-claim-focused analyses are used to highlight high-risk (high-cost) employees. The loss costs of various groups are compared to each other, a company average, and to average industry loss costs provided by the National Council on Compensation Insurance (NCCI). Loss categories higher than company or NCCI averages get closer examinations for loss drivers and mitigation strategies. A higher-than-average cost for newly hired employees may signal a need for more training. A higher-than-industry cost for claims in certain states may be noted. A particular type of injury may emerge as the most costly. The potential savings can be estimated as the difference between the current loss costs and the benchmark loss costs, times the percentage of employees or expected claims involved.

For example, a self-insured entity may know that its newly hired employees experience a larger proportion of losses than employees with longer tenure. If it conducts an analysis and discovers that low-wage employees working in Illinois with less than six months of experience have substantially higher costs than the average employee, claim prevention resources could be specifically aimed at that employee demographic to control costs.

Savings Opportunities
A notable benefit of predictive analytics is that it provides quantitative cost-saving information to risk managers. Continuing with the prior example, assume 2,500 employees are newly hired, low-wage employees in Illinois and their average costs have been shown to be three times higher than the company average of USD $1.50/$100 of payroll. We can estimate that a reduction from $4.50 to $1.50 could create $2.25 million in savings. Asking senior management for $100,000 for more new hire training in Illinois facilities will be much easier with the quantitative support provided by predictive analytics.

(2,500 employees with an average payroll of $30,000 save $3 = 2,500 x 30,000/100 x 3 = $2.25M)

Not only can predictive analytics assist with reducing cost ‘pre-claim’ by focusing on exposure, it can also reduce costs once a claim has occurred. Knowing the easy-to-identify large claims will be second nature to risk managers, however, ‘post-claim’ predictive analytics can look into claim development details to find characteristics that late-developing, problematic claims (and often not the obvious large ones) have in common. After a loss has occurred, one of the most effective ways to manage costs is to involve a very experienced claims handler as soon as possible. The results of effective ‘post-claim’ predictive analyses will assist in implementing cost-saving claims triage. Because the best resource post-claim is good claim management, predictive analytics can get late-developing, problematic claims the timely attention they need to contain the ultimate costs or even settle the claim.

Loss savings based on predictive analyses extend beyond claim cost reduction. Being able to quantitatively show potential savings and concrete mitigation plans will make a positive impression on senior company management and excess insurance carriers. Demonstrating shrewd knowledge of the loss drivers and material plans to reduce the losses can aid in premium negotiations with excess carriers for all future policy years. And if the insurer or state is holding any collateral, the predictive analytics’ results can be used by the self-insured in negotiating.

The key to unlocking further potential cost savings in your self-insured plan is readily available in your own data. Predictive analytics is the tool that will help risk managers make better claim reduction decisions and produce actionable items with real cost savings now and in the future. Risk managers and self-insured companies can look forward to possible benefits such as loss cost reductions along with reductions in excess premium and collateral, and quantitative information to help them with budgeting and allocation. As more self-insureds begin applying predictive analytics to control costs, companies that are not using these tools will be at a competitive disadvantage.

For more information on predictive analytics, watch this video of a Google hangout with Michael Paczolt and Terry Wade of Milliman, Inc.: