Analytics: Understanding & Benchmarking Workers' Comp Loss Data to Guide the Safety Process

Transcription

1 Analytics: Understanding & Benchmarking Workers' Comp Loss Data to Guide the Safety Process Jay R. Gnadt, MS, CSP, CRM Senior Vice President Data Analytics & Risk Control Lockton Companies of Texas, LLC Dallas, Texas April 26, 2018

2 About Lockton

3 What does a Safety Professional do? Source: American Society of Safety Engineers, Management and the Responsibilities of the Safety Professional, accessed 4/7/17.

4 Safety Professionals in the 21 st Century Data driven Speak business Understand workers compensation loss data

5 Objectives How to apply a data-driven safety management approach to optimize workers compensation program results. Discuss several metrics that should be tracked to measure and target workers compensation pre-loss (safety) and post-loss (case management) actions. Review benchmarking techniques to compare processes and outcomes with other organizations, industries, and geographic areas.

6 Why Use a Data-Driven Approach? Demonstrate to executives that resources should be allocated to improve safety & health Quantify financial impact of pre- and post-loss efforts Measure results Source: Weigand, D., & Bennett, S. (2015). There's Gold in Workers Compensation Data. Safety 2015 Conference Proceedings.

7 What Data is Out There? Insurance Carrier Internal Risk Management Information System Third Party Administrator Broker/Agent Others?

8 Why Don t These Numbers Match? Workers Comp Data Analytics

9 Loss Development Valuation Date: The cut-off date for adjustments made to paid claims and reserve estimates in a loss report. For example, a workers compensation loss report for the 2013 policy year that has a 2015 valuation date includes all claim payments and changes in loss reserves made prior to the 2015 valuation date. Loss Development Factor : A general upward trend in... workers compensation after the initial reporting period called loss development. A loss development factor is applied to losses before they are fully matured to account for loss development and incurred but not reported (IBNR) claims. 2013: $1, : $1, : $2,063 Closed 2012: $1,000 Source: International Risk Management Institute, accessed April 13, 2017.

10 Loss Development Factor Example Policy Year Incurred Loss Development Factor Developed Incurred Number of Claims 2013 $486, $544, $336, $391, $2,921, $3,660, $664, $1,055, Annual Average $1,102,074 $1,413, Losses from older years tend to have more closed claims, and are more mature. Thus, the LDF is lower than newer years. Losses in more recent years have more unknowns about the claims, thus have a higher LDF than older years.

11 Why Is Valuation Important? Current Valuation, policy effective dates 2/1 to 1/31, Valued 3/31/17 Valued as of 3/31/17 Green-to-Green Valuation, policy effective dates 2/1 to 1/31, Valued as of 2/1 at end of year policy year Policy Term Claim Count Total Incurred Costs Policy Term Claim Count Total Incurred Costs $136, $37, $77,268 Grand Total 45 $250,948 Single Point In Time $29, $32, $98,712 Grand Total 45 $160,529 G2G

12 Which Story Is Right? Current Valuation, policy effective dates 2/1 to 1/31 Valued as of 3/31/17 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20, G2G Valuation, policy effective dates 2/1 to 1/31 Valued as of 2/1 at end of year policy year $120,000 $100,000 $80,000 $60,000 $40,000 $20, $ $ Total Incurred Costs $136,452 $37,228 $77,268 Total Incurred Costs $29,696 $32,122 $98,712 Claim Count Claim Count

13 Which Should Set Safety Strategy? $300,000 $250,000 $200,000 Older, more developed losses may make severe injuries (i.e. knees, shoulders, backs) a higher priority for control. $150,000 $100,000 $50,000 Fresh, green losses may overemphasize the frequency of minor incidents that don t drive longer term WC costs. $ Grand Total Valued 3/31/17 $136,452 $37,228 $77,268 $250,948 Valued "Green-to- Green", 2/1 each year $29,696 $32,122 $98,712 $160,530

14 Top 5 Accident Types Green-to-Green Valued 2/1 Each Year Current Valuation Valued 3/31/17 $140, $140, $120,000 $100,000 $80, $120,000 $100,000 $80, $60,000 $40,000 $20,000 $0 Slip/Trip/ Fall Struck By/Again st Manual Material Handling Contact with Object Powered Industrial Truck Unknown Total Incurred Cost $92,517 $37,631 $25,682 $2,607 $428 $13 Claim Count $60,000 $40,000 $20,000 $0 Manual Material Handlin g Slip/Tri p/fall Struck By/Agai nst Forklift Contact with Object Total Incurred Cost $129,955 $70,705 $34,895 $12,790 $2,290 Claim Count Safety strategy may be different based on the valuation choice.

15 Benchmarking and Trending Workers Comp Data Analytics

16 Incurred Loss Trends Incurred Losses per $100 Payroll Incurred losses per $100 of payroll have increased 17% from 2015 to 2016 and 18% from Frequency per $1 Million Payroll Severity (Average Cost per Claim) $2,146 $3,665 $2,788 $2,652 $3,446 Section 4. Report Criteria Actual Benchmark Policy Year Total Claim Total Incurred Avg. Incurred/ Count Amount Claim Payroll PY $568,780 $2,146 $77,157,693 PY $1,114,044 $3,665 $89,562,417 PY $833,759 $2,788 $104,590,876 PY $774,459 $2,652 $103,713,603 PY $1,095,811 $3,446 $125,678,963 TOTAL 1,478 $4,386,854 $2,968 Notes Policy Year based on 01/01 inception date. The carrier/tpa source of this data is Gallagher Bassett. G2's full NAICS code is Lockton , Companies "Other Airport Operations."

17 Lockton s Infolock P&C Claims Database Industry research is powered by Lockton s proprietary Infolock P&C database. One of the largest in the industry, this tool highlights our ability to perform research and advanced analytics. In addition to containing a vast inventory of claims and incurred losses, Infolock goes beyond traditional loss-run data by also offering payment data, reserve history, work-status history, and adjuster notes. Infolock P&C Database 60M TRANSACTIONS $ 16B INCURRED LOSSES Automated Monthly Data Feeds From Lockton Partners Custom Research and Custom Benchmarking k k k k k k By industry By geography By NCCI/occupation codes By type of injury (part/nature/cause) By date (accident/report/valuation/closure) By type of claim (medical-only/lost-time/litigated) and many more...

18 Benchmarking Techniques Possible Sources of Data BLS Third Party Administrator/Carrier data bases Industry Geographic Broker/Agent Other Tips for Effective Benchmarking Get a complete data dump Decide what metrics are most important (don t overwhelm) Pick vital few vs. trivial many Be able to explain the metrics and why each is indicative of WC performance

19 Frequency Drivers Workers Comp Data Analytics

20 %Δ Freq. Rate Claim Stratification WORKERS' COMPENSATION - FREQUENCY TREND BY CLAIM INCURRED AMOUNTS Section 1. Incurred Amount Stratification: Year-over-Year Counts Stratification Level Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim $0 to $1, % $429,358 10% $461 $1,500 to $9, % $1,819,131 41% $3,946 $10,000 to $24, % $839,227 19% $16,455 $25,000 to $49, % $1,024,407 23% $35,324 $50, % $274,730 6% $54,946 Section 2. Percent Change in Frequency Rate from PY % 40% -10% -60% $0 to $1,499 ($429.4 K) $1,500 to $9,999 ($1,819.1 K) $10,000 to $24,999 ($839.2 K) $25,000 to $49,999 ($1,024.4 K) $50,000+ ($274.7 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) G2 is higher than the industry benchmarks on % incurred costs in all claim layers except claims costing $50,000 or more. The frequency rate of cases costing between $25,000 and $49,000 are increasing, even as G2's overall frequency rate is decreasing. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

21 %Δ Freq. Rate Frequency Drivers WORKERS' COMPENSATION - FREQUENCY DRIVERS: CAUSE OF INJURY Section 1. Top 5 Causes of Injury by Claim Count Cause of Injury Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Strain % $1,924,254 44% $3,284 Struck By % $812,719 19% $2,580 Slip/Trip/Fall % $1,061,659 24% $3,674 Miscellaneous % $202,644 5% $1,501 Cut/Puncture % $32,637 1% $725 All Others % $352,941 8% $3,268 Section 2. Percent Change in Frequency Rate from PY % -50% -100% Strain ($1,924.3 K) Struck By ($812.7 K) Slip/Trip/Fall ($1,061.7 K) Miscellaneous ($202.6 K) Cut/Puncture ($32.6 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) Strain, Struck By, & Slip/Trip/Fall are the top three causes of injury by claim count. They account for 81% of claims and 87% of incurred amounts. Section 3a. Top Types of Strain by % of Claims Section 3b. Types of Struck By by % of Claims Strain-Lifting 37% Struck By-Stationary Object 30% Strain-Pushing/Pulling 25% Struck By-Object Handling 30% Strain-Repetitive Motion 13% Struck By-Falling/Flying Object 19% Strain-Twisting 10% Struck By-Struck By Misc. 5% Strain-Holding/Carrying 10% Struck By-Object Handled By 4% Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

22 %Δ Freq. Rate Frequency Drivers WORKERS' COMPENSATION - FREQUENCY DRIVERS: PART OF BODY Section 1. Top 5 Part of Body by Claim Count Part of Body Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Multiple % $836,724 19% $3,374 Back % $693,634 16% $2,831 Foot/Ankle % $429,112 10% $2,682 Knee % $612,833 14% $3,979 Wrist/Hand % $308,640 7% $2,616 All Others % $1,505,910 34% $2,723 Section 2. Percent Change in Frequency Rate from PY % 20% -30% -80% Multiple ($836.7 K) Back ($693.6 K) Foot/Ankle ($429.1 K) Knee ($612.8 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) Wrist/Hand ($308.6 K) Multiple, Back, & Foot/Ankle are the top three parts of body by claim count. They account for 44% of claims and 45% of incurred amounts. Section 3. Top 5 Combinations of Part of Body and Nature of Injury by Claim Count Back-Strain/Tear Multiple-Strain/Tear Knee-Strain/Tear Multiple-Multiple Physical Shoulder-Strain/Tear 5% 5% 4% 4% 14% The top five combinations of part and nature account for 33.0% of claims. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

23 %Δ Freq. Rate Frequency Drivers WORKERS' COMPENSATION - FREQUENCY DRIVERS: NATURE OF INJURY Section 1. Top 5 Natures of Injury by Claim Count Nature of Injury Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Strain/Tear % $2,190,317 50% $3,433 Contusion % $740,948 17% $2,883 Laceration % $115,132 3% $1,187 Sprain/Tear % $325,280 7% $3,424 Specific Other % $120,152 3% $1,320 All Others % $895,025 20% $2,983 Section 2. Percent Change in Frequency Rate from PY % 100% 50% 0% -50% -100% Strain/Tear Contusion Laceration Sprain/Tear ($2,190.3 K) ($740.9 K) ($115.1 K) ($325.3 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) Specific Other ($120.2 K) Strain/Tear, Contusion, & Laceration are the top three natures of injury by claim count. They account for 67% of claims and 69% of incurred amounts. Section 3. Top 5 Combinations of Part and Nature by Claim Count Back-Strain/Tear Multiple-Strain/Tear Knee-Strain/Tear Multiple-Multiple Physical Shoulder-Strain/Tear 5% 5% 4% 4% 14% The top five combinations of part and nature account for 33.0% of claims. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

24 %Δ Freq. Rate Frequency Drivers WORKERS' COMPENSATION - FREQUENCY DRIVERS: CLAIMANT OCCUPATION Section 1. Top Claimant Occupations by Claim Count Claimant Occupation Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Cabin Service % $772,109 18% $2,483 Customer Service % $523,751 12% $3,273 Ramp Service % $367,951 8% $2,767 All Other % $122,625 3% $1,348 Wheelchair Service % $256,231 6% $2,847 Runner % $220,308 5% $2,592 Baggage Service % $197,039 4% $2,374 Sorter % $142,478 3% $2,065 Sky Cap % $135,091 3% $3,377 Supervisor % $140,480 3% $3,697 All Others % $1,508,793 34% $3,992 Section 2. Percent Change in Frequency Rate from PY % 320% 120% -80% Cabin Service ($772.1 K) Customer Service ($523.8 K) Ramp Service ($368.0 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) All Other ($122.6 K) Wheelchair Service ($256.2 K) Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

25 %Δ Freq. Rate Frequency Drivers WORKERS' COMPENSATION - FREQUENCY DRIVERS: CLAIMANT TENURE Section 1. Claim Count by Claimant Tenure Groups Claimant Tenure Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Under 1 Year % $2,151,347 49% $3, Years % $690,383 16% $3, Years % $284,733 6% $2, Years % $162,421 4% $2, Years % $232,255 5% $5, Years % $860,717 20% $2,532 Unknown % $4,998 0% $2,499 Section 2. Percent Change in Frequency Rate from PY % -50% -100% Under 1 Year ($2,151.3 K) Years ($690.4 K) Years ($284.7 K) Years ($162.4 K) Years ($232.3 K) 5+ Years ($860.7 K) Unknown ($5.0 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) The frequency rate of claims from employees with 5+ years tenure is increasing, as G2's overall frequency declines. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

26 %Δ Freq. Rate Frequency Drivers WORKERS' COMPENSATION - FREQUENCY DRIVERS: CLAIMANT TENURE Section 1. Claim Count by Claimant Tenure Groups Claimant Tenure Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Under 2 Months $625,842 $3, Months $446,737 $2, Months $426,745 $3, Months $328,145 $3, Months $164,360 $2, Months $159,518 $2, Months $2,230,509 $2,908 Unknown $4,998 $2,499 Section 2. Percent Change in Frequency Rate from PY % 40% -10% -60% Under 2 Months ($625.8 K) Months ($446.7 K) Months ($426.7 K) Months ($328.1 K) Months ($164.4 K) Months ($159.5 K) Chart Note: Dark grey line represents G2 SECURE STAFF's own baseline (%Δ in overall frequency rate from PY 2012) 12+ Months ($2,230.5 K) Unknown ($5.0 K) Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

27 Claim Cost Drivers Workers Comp Data Analytics

28 % of Claims Claim Cost Drivers WORKERS' COMPENSATION - CLAIMS PROCESS: REPORT LAG Section 1. Report Lag: Accident Date to Carrier/TPA Accident to Avg. Incurred/ Total Claims % Claims Total Incurred % Incurred Carrier/TPA Claim 0-3 Days % $2,720,496 62% $2, Days % $474,930 11% $2, Days % $295,560 7% $3, Days % $895,868 20% $4,128 Section 2. Percent of Claims Year-over-Year 80% 60% 40% 20% 0% 0-3 Days ($2,720.5 K) Chart Note: Grey shaded area represents benchmark 4-6 Days ($474.9 K) 7-10 Days ($295.6 K) 11+ Days ($895.9 K) 67% of claims are reported in 0-3 days. On average, claims reported 7+ days cost 40% more than claims reported within 3 days. Section 3a. Accident to Employer 88% Section 3b. Employer to Carrier/TPA 79% 4% 2% 6% 0-3 Days 4-6 Days 7-10 Days 11+ Days 8% 4% 9% 0-3 Days 4-6 Days 7-10 Days 11+ Days Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

29 % of Med Only Claims Claim Cost Drivers WORKERS' COMPENSATION - CLAIMS PROCESS: MEDICAL ONLY CLAIM CLOSURE Section 1. Medical Only Claim Counts by Closure Group Closure Group Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Open % $1,262,572 69% $3, Days % $8,809 0% $ Days % $84,402 5% $ Days % $81,901 4% $ Days % $245,976 13% $1, Days % $156,630 9% $1,615 Section 2. Percent of Claims Year-over-Year 60% 40% 20% 0% Open ($1,262.6 K) Chart Note: Grey shaded area represents benchmark 0-30 Days ($8.8 K) Days ($84.4 K) Days ($81.9 K) Days ($246.0 K) The number and cost of open medical only claims exceed industry benchmarks Days ($156.6 K) Section 3. Medical Only Claims % Closed and Average Days to Close Metric % Closed 68% 55% 65% 52% 69% Avg Days to Close Please note that these metrics are valued on a Green-to-Green basis, thus only reflect the claims closed at 12 months of development (12/31). This will not match a currently valued closure analysis. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

30 % of Indemnity Claims Claim Cost Drivers WORKERS' COMPENSATION - CLAIMS PROCESS: LOST TIME CLAIM CLOSURE Section 1. Lost Time Claim Counts by Closure Group Closure Group Total Claims % Claims Total Incurred % Incurred Avg. Incurred/ Claim Open % $2,370,364 93% $14, Days % $10,305 0% $2, Days % $38,773 2% $2, Days % $44,413 2% $6, Days % $80,896 3% $16,179 Section 2. Percent of Claims Year-over-Year 100% 80% 60% 40% 20% 0% Open ($2,370.4 K) Chart Note: Grey shaded area represents benchmark 0-90 Days ($10.3 K) Days ($38.8 K) Days ($44.4 K) 271+ Days ($80.9 K) Section 3. Lost Time Claims % Closed and Average Days to Close Metric % Closed 19% 7% 30% 8% 25% Avg Days to Close Please note that these metrics are valued on a Green-to-Green basis, thus only reflect the claims closed at 12 months of development (12/31). This will not match a currently valued closure analysis. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

31 Claim Cost Drivers WORKERS' COMPENSATION - SEVERITY DRIVERS Section 1. Incurred Amounts by Claim Type Policy Year Total Incurred PY 2012 $568,780 PY 2013 $1,114,044 PY 2014 $833,759 PY 2015 $774,459 PY 2016 $1,095,811 TOTAL $4,386,854 Section 2. Frequency by Claim Type Policy Year Total Claims Medical Only Claims Incurred Lost Time Claims Incurred $236,329 $332,451 $417,806 $696,238 $378,585 $455,174 $326,758 $447,702 $482,625 $613,186 $1,842,103 $2,544,751 Report Only Claims Medical Only Claims Lost Time Claims PY PY PY PY PY TOTAL 1, , % 80% 60% 40% 20% 0% 100% 80% 60% 40% 20% 0% Lost Time Medical Only Benchmark 42% 38% 45% 42% 44% 58% 62% 55% 58% 56% Lost Time Medical Only Report Only Benchmark 68% 72% 76% 74% 79% 10% 18% 14% 12% 13% Indemnity claims account for 13.5% of total claim count and 58.0% of total incurred amounts. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

32 Claim Cost Drivers WORKERS' COMPENSATION - SEVERITY DRIVERS Section 1a. Lost Time Claim Severity (Avg. Incurred/Claim) $40,000 Section 2a. Medical Only Claim Severity (Avg. Incurred/Claim) $40,000 $20,000 $0 $12,787 $12,893 $10,585 $12,436 Section 1b. Lost Time Claim Avg. Incurred by Cost Buckets $15,330 Actual Benchmark $20,000 $20,000 $0 $1,317 $1,906 $1,674 $1,518 $1,922 Actual Benchmark Section 2b. Medical Only Claim Avg. Incurred by Cost Buckets $20,000 $10,000 $10,000 $0 Medical Indemnity Expense $0 Medical Expense Chart Note: Grey shaded area represents benchmark Chart Note: Grey shaded area represents benchmark Severity of indemnity claims has increased by an average of 6% per year and severity of medical only claims has increased by an average of 12% per year. Green-to-Green analysis valued at 12 months of development (12/31). NAICS 48 - Transportation and Warehousing benchmark data powered by Lockton's InfoLock P&C Database

33 Claim Cost Drivers WORKERS' COMPENSATION - HIGH COST CLAIMS Section 1. High Cost Claims Policy Year Count Avg. Incurred/ Claim Incurred % of Total Incurred PY $92,589 $1,388,840 54% PY $84,576 $507,454 36% PY $59,328 $177,984 23% PY $63,197 $315,986 36% *PY $99,185 $198,369 38% TOTAL 31 $83,504 $2,588,634 42% Section 2. How are high cost claims impacting the overall incurred loss trend? Section 3. Common Characteristics of High Cost Claims A high cost claim is defined by having total incurred amount of $50,000 or more. PY PY 2013 PY PY 2014 PY PY 2015 Change in total incurred amount -$1,201,218 -$616,010 $111,737 Change in high cost claim incurred amount -$881,386 -$329,470 $138,002 73% 53% 124% Green-to-Green analysis valued at 12 months of development (06/30). NAICS 33 - Manufacturing benchmark data powered by Lockton's InfoLock P&C Database

34 Summary Application of a data driven approach to safety management. Reviewed metrics that can impact pre- and post-loss safety strategies. Discussed benchmarking techniques.

35 Q&A

36 For more information: Jay Gnadt, MS, CSP, CRM SVP/Data Analytics & Risk Control Lockton Companies LLC