understanding mira ii, bwc’s enhanced claims reserving system

Understanding MIRA II

Understanding MIRA II, BWC’s Enhanced Claims Reserving System

Shane Blair


– A historical overview of the BWC reserving system

– The purpose of claim reserves and their use in setting rates

– A preview of the new reserving system, and why it’s better

– Why we need to implement the reserving system developed by Fair Isaac

Overview of Discussion


Claim Reserve

Estimate of the future cost of a claim at a specific point in time


BWC’s Reserving Systems• Tabular reserves until 2002

– Average cost of a claim in fitted category– Based primarily on last compensation paid

• MIRA I – 2002 to 2007– Automated reserving system that uses

advanced statistical analysis to predict future cost/liability of a claim


Why did we change to an automated reserving system?

• The need for more accurate estimates of future value

• The need for more equitable distribution of costs to employers


MIRA I:

• Uses individual claim characteristics with associated cost patterns;

• Uses reserving patterns based on BWC specific claim data;

• Allows for more accurate premium rates;• Brings stability to premium rates;• Improves claim management by recognizing

severity of claims early.


Why MIRA II?• Uses recent claim history and regularly updates it

• Modeling can react to changes to payments and cost patterns

• Modeling distinguishes between inconsequential claim data and true cost driver

• Modeling learns complex relationships in the claim data

• No special logic on new claims as used in MIRA I

• Reserves on individual claim


• More historical claim data

• Uses financial/transactional claim payment data

• Emphasis on more recent historical claim data

• More accurate claim data

Why MIRA II?


• Focus on transparency

• Established mapping and logic more closely related to BWC specific claims, rules, statutes and processes

• Provide customers with weekly reserves

Why MIRA II?


It’s the initial process for setting a reserve on a claim based on a set of claim data and conditions that identifies the claim severity or exposure. The mapping determines the ultimate benefit status the claim will reach as of that prediction date.

The injury types are:

Type 1 – Death; Type 2 - Permanent total disability (PTD); Type 5 - Temporary total disability (TTD); Type 6 - Medical only; Type 9 - Permanent partial.

Injury Type Mapping


A set of rules, conditions or criteria that determines when the system sets a reserve for a claim or stops setting a reserve

Prediction Control (start-stop) Logic


Reflects the historical costs of similar claims filed in Ohio

Modeling Process


How MIRA II Sets A Reserve

30 days since C-92 indicator

status is “A” and no %PP payment is made, and no subsequent %PP payment is made

Type 1 Death

MIRA II severity

classification

MIRA IIsub

models

MIRA II controls(stop logic)

• TTD reserve• Living maintenance• PPD reserve• TPD / Wage loss• Medical

Total comp paid = 0, and more than 180 days since the

filing date have elapsed

CLAIM

30 days have passed since last comp paid date

(V3 to date)


Claim-level Accuracy

$100

$1,000

$10,000

$100,000

$1,000,000

MIRA I prediction$100 $1,000 $10,000 $100,000 $1,000,000

Fin

al t

otal

pai

d

$100

$1,000

$10,000

$100,000

$1,000,000

MIRA II prediction$100 $1,000 $10,000 $100,000 $1,000,000

Fin

al t

otal

pai

d


Aggregate Accuracy

Days openNumber of

claimsAverage

paid

MIRA II averageincurred

Adjuster averageincurred

MIRA II% ultimate

Adjuster% ultimate

60 46,085 $19,360 $18,773 $10,190 96.96 % 52.64%

90 43,142 $20,548 $19,929 $11,829 96.99% 57.57%

180 35,540 $24,150 $23,671 $16,192 98.02% 67.05%

365 25,070 $30,721 $30,387 $23,901 98.91% 77.80%

540 18,244 $36,608 $36,386 $30,587 99.39% 83.55%

730 12,932 $42,661 $42,460 $37,362 99.53% 87.58%


MIRA II Web Service Offerings• Individual claim costs (Existing)• Claim costs by policy (Existing)• Claim data information (New)• Claim reserve history report (New)• Claim payment transaction report (New)• Claim reserve change report (New)• Claim demographic screen (New)

• MIRA II annual statistics (New)


Individual Claim Costs


Claim Costs


Claim Data Information


Claim Reserve History


Claim Inquiry Report

Report data (sections):

• Claim info

• Policy info

• Payment info

• Injury info

• Dependent info

• Medical payments• Indemnity payments• Medical payment

Trends• Reserve adjustment

(suppression)• Total cost of claim -

paid = reserve


Claim Payment Transaction Report


Claim Payment Transaction Report

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX

XX-XXXXXX


Claim Payment Transaction Report s –

policy –pg2


Claim Reserve Change Report


Claim Reserve History Report

Still under construction


Claim Demographic


MIRA II Annual Statistics


Summary• Accuracy

– Use new historical claim data that is regularly updated

• Clarity– Statistical Data on Average Claim Reserve

• Transparency– Listing of Claim Data used in reserve prediction


Question-Answer

understanding mira ii, bwc’s enhanced claims reserving system

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