Recent estimates peg losses for the workers compensation industry due to premium fraud and payroll errors at $22 billion. Despite its magnitude, small to midsized carriers can combat the problem with analytics and audit strategies.
Advances in analytics within workers’ comp now make it possible to detect patterns that could point to patterns of misclassification leading to fraud and errors in a portfolio, not only among large policy holders, but in the ranks of the smaller ones as well.
The goal of analytics should be the improvement of portfolio over time by documenting success targets and focusing on specific segments of policies. Carriers should avoid the mistake of trying to fix the whole portfolio all at once, but instead address problem areas in manageable phases.
Also, a sound audit strategy could help stem and prevent losses from fraud and compensation errors. Carriers should develop a strict codified strategy to avoid wasting resources and ruffling the feathers of valued clients. Specifically, there should be a review of the historical results of audits to determine the nominal efficiency of audits compared to exposure.
Such steps will help carriers realise early gains and find areas in which new data sources and advanced analytics can be applied to their operations as a whole to pre-empt problems.
Carriers are advised to adopt such initiatives as soon as possible to tighten underwriting and sustain profitability.
