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A new way to calculate workers' comp reserves.

At a time when so much of risk managers' attention is spent figuring ways to reduce the runaway costs associated with their workers' compensation programs, Irvine, CA-based Risk Data Corp. has designed a system to provide more accurate predictions of workers' compensation loss reserves and reduce the time needed to estimate claims costs.

In automating the tasks that have traditionally been performed manually by claims examiners, the Micro Insurance Reserve Analysis (MIRA) system offsets the erosion of reserve accuracy that has taken place in a rapidly changing workers' compensation cost environment and counterbalances the problems having to do with the high job turnover and inexperienced examiners.

According to Mark Hammond, founder and president of Risk Data, the problems most risk managers face in managing these costs have been compounded by state workers' compensation reform, inflation and ever-changing benefit laws.

The system estimates the costs and duration of a company's workers' compensation claims and calculates loss reserves based on the individual characteristics of a claim.

"MIRA is knowledge-based; it uses historical information and has the advantage of accessing years of statistical data as a basis for cost estimates," explains Mr. Hammond.

MIRA determines whether loss reserves are overstated or understated by analyzing up to 66 individual claim characteristics, including jurisdiction, class code, age, body part, nature of injury, litigation, vocational rehabilitation and disability factors. Based on these factors, the system calculates per claim estimates for medical, indemnity, vocational rehabilitation and allocated reserves as well as the duration of the claim.

To create MIRA, Mr. Hammond says Risk Data first analyzed more than 3 million closed claims over 10 years. The system, he explains, was built around the data of 14 workers' compensation insurers, which represent 27 percent of the workers' compensation market.

In addition, Risk Data customizes MIRA to reflect legislative differences for the benefits and workers' compensation laws of each state, Mr. Hammond says. Therefore, depending on where a company's exposures are located, MIRA will contain the correct information according to state law. Risk Data also updates MIRA each year to keep data current with inflation as well as legislative changes in the workers' compensation environment.

The service, which runs on an IBM-PC or compatible computer, also comes with statistical model development and updates, system planning and integration, training and support, system-generated management reports, technical research and accuracy reports.

Risk Data claims that its system has a 98.5 percent accuracy rate. The cost for the service is determined on a per-claim-review basis; the greater the number of claims processed, the lower the per-claim cost.

Service Taps NY Legislature

In this era of sudden regulatory and legal changes, timely access to new information is more crucial for business than ever. How can risk managers cut through the bureaucratic red tape and get to the rules affecting their companies and the insurance industry at large?

The answer lies waiting to be tapped in one of the many electronic retrieval systems available through information companies, associations and other media outlets. One such service, created by the Albanybased Legislative Retrieval System, provides on-line access to the codes, rules and regulations for every New York state agency.

Using an IBM-PC or compatible computer, regulations can be accessed by performing title, topic or key word searches in the system's data base, which is maintained and operated by the New York State Legislative Bill Drafting Commission.

The system also allows users to access bill status and summary, the complete text of New York state bills and laws, including aid to localities and capital projects, Assembly and Senate committee agendas, floor calendars, membership and committee information, New York City laws, its charter and administrative code as well as Court of Appeals memoranda and opinions.
COPYRIGHT 1991 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Computer Development
Author:Oshins, Alice H.
Publication:Risk Management
Date:Sep 1, 1991
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