How Data and Analytics Are Shaping Risk Management

By: Joe Zinga Dan Link

Sep 23, 2024 — In an era where business landscapes are growing increasingly complex and the market faces a lot of uncertainty, risk management has taken center stage. The power to predict, adapt, and make informed decisions has become paramount. Enter data and predictive analytics — a duo that's revolutionizing the way organizations navigate risk. Gallagher Bassett's experts focused on the theme "Leveraging Data and Predictive Analytics to Make Informed Claim-Level Decisions and Demonstrate Program Performance," showcasing how data and analytics are driving a transformation.

Joe Zinga, EVP — Risk Management, and Dan Link, SVP — Consultative Analytics, sat down to explore the rising significance of data and analytics in shaping effective risk management strategies.

How does analytics play a pivotal role in risk management?

Dan Link (DL): This was a focal point for the event Q&A session and is a beneficial conversation to raise within your business. Analytics plays a pivotal role in risk management by addressing both micro and macro decisions that influence the trajectory of claims. At the micro level, analytics guides claim handlers through predictive models and decision support tools, leveraging extensive claims data and advanced machine learning. This empowers handlers to accurately set reserves, identify potential litigation cases, and optimize medical interventions, similar to driver assistance tools in vehicles. To evaluate outcomes of these claim-level decisions, a comprehensive RMIS offers customizable dashboards, reports, and interactive features for identifying opportunities and root causes. Additionally, analytics measures claim quality and client program outcomes against historical data and complexity-adjusted benchmarks, enabling informed decision-making at both levels and ultimately yielding optimal results.

How important is it to adopt a top-down perspective when analyzing data to effectively shape risk management strategies?

Joe Zinga (JZ): Taking a comprehensive top-down view during data analysis is crucial for crafting successful risk management strategies. This approach involves concentrating on the key elements that have the most substantial impact, leading to a better grasp of the factors at play. An example of this is the breakdown of costs into categories such as medical, indemnity, and expenses. This breakdown allows us to identify underlying opportunities for improvement. By adopting this perspective, we can uncover potential areas for enhancement, such as addressing higher medical costs in lost time claims. This can be achieved through a careful assessment of bill review procedures, medical providers, and how clinical resources are utilized. Implementing this top-down methodology universally enhances the effectiveness of analytics, resulting in a more practical and actionable risk management strategy.

In what ways does analytics help reinforce effective risk management through stewardship, and how do the insights gained lead to actionable recommendations and improved program performance?

DL: Stewardship, a cornerstone of effective risk management, finds new strength with analytics. The insights gained translate into actionable recommendations and objectives. Stewardship operates in a continual cycle, triggered by insights leading to actions and shaping annual objectives. Comprehensive reports and interactive dashboards track progress, with outcomes ranging from reducing frequency and consistent reserving to efficient recovery and cost control. This perpetual cycle of improvement ensures that decisions are aligned with objectives, resulting in optimized outcomes and enhanced program performance.

How does analytics practically apply to claim-level decisions, and what role do decision support tools play in enhancing claims handling?

DL: Analytics is integral to claim-level decisions, notably through decision support tools, such as reserve guidance and litigation avoidance models. These tools empower claims handlers with real-time insights, enhancing their choices for favorable outcomes. Leveraging the right data and historical claims records, our robust models aid claims handlers in determining appropriate reserves, clinical resource involvement, litigation potential, subrogation prospects, and optimal settlements based on unique claim intricacies. Reserve guidance forecasts claim reserves, notifying handlers of significant deviations from their assessments. This transparent breakdown of variance drivers aids informed decisions within acceptable limits. These tools function as safeguards, ensuring prudent claims handling and aligning actions with informed predictions.

What strategies should risk managers employ to effectively communicate data-driven outcomes to C-suite leadership and ensure a clear connection between analytics and program success?

JZ: Effectively translating data-driven outcomes to C-suite leadership is a skill every risk manager should master. By aligning outcomes with objectives, continuously monitoring, and transparently quantifying the impact of decisions, risk managers establish a clear link between analytic insights, the actions the Risk Team has taken based on those insights, and corresponding program success. This extends to monitoring performance guarantees, creating a cohesive narrative of informed decision-making.

Start by pinpointing crucial performance drivers and comparing historical trends to benchmarks, then dig deeper into areas of underperformance for key insights. Prioritize actions by quantifying potential corrective impacts via benchmarks, and transparently link outcomes to set objectives rooted in cause analysis. Highlight positive trends from executed strategies, factoring in costs for accurate ROI measurement. It's also important to maintain a cyclical process to tackle successive opportunities and monitor progress. This approach fosters alignment between data-driven insights and program success, bolstering communication and high-level decision-making.

In this new era of risk management, the fusion of data and analytics isn't just a strategy — it's pivotal to staying ahead. To find out how a strong partnership with Gallager Bassett can support your business, connect with our team today.