Benchmarking is critical to diagnosing the health of your claims program, but the approach carriers and the insurance industry has taken over the years has varied in effectiveness and relevance.

Ten or even five years ago, the industry used to look at an entire book of business and compare it to a single insured, which was like comparing apples with oranges. This meant results failed to consider the complex environment in which an individual insured was operating.

For example, this method meant that a retail client might have perceived their program as performing well without understanding whether they were being compared against retailers or other insured types operating in different states with different regulations.  

This example retailer might then be very surprised when their operating and claim costs continue to rise and injuries go beyond the trending data. This lack of insight into the individual factors influencing an insured meant that many opportunities to improve and refine programs were likely missed. 

Here at Gallagher Bassett, we could see how this was impacting the carriers we worked with, and we developed a predictive analytics algorithm to slice and dice data to provide meaningful insights to improve claim programs. 

I worked with our team to develop SMART Benchmarking, which stands for Severity Mix Adjusted Rating Technique. This algorithm allows us to access the full spectrum of data available to our clients and compare and analyze it to understand exactly how they can compete in such a challenging market.  

SMART allows our claims professionals and carrier clients to compare a file in a truly apples-to-apples manner. We can help you understand the severity, costs, treatment recommendations, and other factors that will help you resolve a claim and move on to the next file.  

While many carriers are using predictive analytics algorithms, these can have varying effectiveness, so we always encourage carriers to ask themselves these three questions: 

1. Do we know the complexity of our own claims and how that’s trending over time? 

2. Do we know the complexity of the benchmark set we’re using to compare ourselves against? 

3. Do we understand the expected result the product or service can offer us? And, is that result truly meaningful for our business goals? 

I’ve included more information about our recommended approach in the short video below, but if you have any questions about benchmarking in your organization – please don’t hesitate to reach out. 

Blog Author

Joe Powell

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