Predictive analytics and predictive
modeling have slowly crept into the
world of workers’ compensation
and as its value has been demonstrated, Matt Crum, president of
the family-owned Frank Winston
Crum Insurance Company, felt
the time was right for the workers’
comp and general liability carrier to
make the investment.
“I wouldn’t say we had chal-
lenges,” says Matt Crum of the
company’s decision. “We identified
a problem and we needed a solution
for it. We focus on the idea ‘if you stop getting better you stop
being good.’ We constantly look at ways to improve ourselves.”
Having heard plenty about the value analytics can bring,
Crum Insurance went shopping to check the validity of such
claims. The result was a deal with Valen Analytics. The carrier
currently is using Valen’s tool for underwriting.
“The suite of products that Valen offers made the difference,”
says Crum. “It was a lot of work to develop a model to get the
data and ensure the model was accurate, but they have a great
tool that our underwriters looked at and liked. It produces a
quantifiable result. That’s why we decided to go forward with it.”
Frank Winston Crum Insurance initially looked at internal
options, but then decided to reach out to some of their existing
relationships. One such relationship was with Willis Re, the
carrier’s reinsurance broker.
“They bring a lot of resources to the table,” says Crum.
“They’ve helped us throughout the years and recommended
Valen. We did further due diligence and it took off from there.
We were sold quickly once we looked at the product and talked
Implementing predictive analytics and modeling into an
underwriting system that isn’t broken is no easy task, according
to Crum, particularly with a system the underwriting staff is
already comfortable using.
“You really have to convince the underwriters they are not
being replaced by a computer program or a model,” he says.
“There was some hesitation from the underwriting team when
we brought up this idea, but it is a great partnership with Valen
A Valen actuary visited the Crum office and sat with the
underwriting staff for a day, urging them to shoot holes in the
“If they got a score they disagreed with, they were told to ask
Valen for an explanation,” says Crum. “Once we were done with
the training all the underwriters were on board with it, which
I’m pleased with. We knew that would be the biggest hurdle. If
the underwriters didn’t buy in, this wasn’t going to work.”
There were no such worries with the insurers IT department,
which Crum explains was on board with the project right away.
“We’re a pretty analytical company,” he says. “We have
business analysts on staff and are analytical when it comes to
decision making as an organization. This was the first time to
use analytics in underwriting, but it wasn’t much of a culture
shock. We got our data to Valen in a way they could develop an
accurate and relevant model.”
Crum points out margins are thin in workers’ compensation, so the analytics tool is just part of the puzzle. The model
only knows what the staff put into it.
“You have qualitative and quantitative analysis on each risk,”
he says. “Our underwriters are not completely dependent on
the model. It helps them confidently price risks. On a good risk,
where it looks like there is a lot of competition, they might cred-
it the account more than they would without the model.”
The models have changed the way the carrier examines risk,
but Crum points out there haven’t been many process changes.
“When we get a risk we put a score on it and, depending on
the score, we have pricing guidelines,” he says. “We have a good
team and we trust their judgment. We are fine if they deviate,
but they need to put it in the file and explain their recommendation for pricing.”
Implementation was completed in April, so it’s too early to
tell what the overall effect of the Valen tool has been, but thus
far the insurer is happy. ITA
The Time Was Right
Workers’ comp carrier analyzed the market and determined an analytics tool
would allow them to keep getting better.
“We knew that would be
the biggest hurdle. If the
underwriters didn’t buy in,
this wasn’t going to work.”
Frank Winston Crum Insurance