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Safety AnalyticsTM The business of prevention

Contents

Putting the enterprise at risk What is Safety Analytics? Safety Analytics offers a fresh, updated perspective Applications of Safety Analytics Business benefits

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Putting the enterprise at risk

Sending employees safely home to their families at night should be a top priority for any employer. Every business depends on the health and safety of its workers to operate, and many businesses make it a point of pride to care for their employees general well-being. The social imperative of employee safety and the sustainability of our workforce is well understood, but there is also a compelling economic one that businesses must consider. For example, workers compensation claims and other direct costs related to on-the-job injuries totaled $53.42 billion in the U.S. in 2008.1 Estimates of the associated indirect costs, such as expenses associated with rehiring and retraining and losses in productivity, run as high as 4.5 times the amount of the direct costs.2 It is estimated that for every $1 spent on safety programs, $3 or more is saved.3

Employee health and safety programs have long formed the cornerstone of employee safety and well-being efforts in the workplace. Historically, these programs focused on identifying risky situations (inherent hazards or challenging work situations) and prescribing steps to mitigate those risks (training in safety procedures and drills, mandatory use of protective equipment, and so on). While these measures are extremely important, it is equally important to have safety resources more effectively focused on the key issues and areas with the highest propensity for an accident or injury.

2010 Liberty Mutual Workplace Safety Index, Liberty Mutual Research Institute for Safety, 2010. Available online at http://www.libertymutualgroup.com/omapps/ContentServer?c=cms_document&pagename=LMGResearchInstitute%2Fcms_document%2FShowDoc&cid=1138365240689. Background of the cost estimates, United States Department of Labor, Occupational Safety and Health Administration (OSHA) Small Business Assistance: Safety Pays Program. Accessed April 13, 2011 at http://www.osha.gov/dcsp/smallbusiness/safetypays/background.html. 2010 Liberty Mutual Workplace Safety Index. Safety AnalyticsTM The business of prevention 1

We believe that anything less than a comprehensive effort can put an entire enterprise at risk and lead to significantly higher workers compensation and other direct and indirect costs. In an increasingly litigious and competitive business environment, it is essential that employers pull out all the stops to identify ways to decrease workplace and job-related risks; reduce costs associated with accidents, resulting injuries and replacement personnel; and identify all viable ways to maintain high quality and productivity.

Crucial help in this area has arrived with the advent of a powerful new tool that we call Safety AnalyticsTM. Safety Analytics gives companies the opportunity to better understand the drivers of workplace accidents at a level of detail previously impossible to determine. Having these insights and knowledge enables companies to devise strategies that can both help prevent accidents from occurring and more effectively address injuries and claims when they do occur.

What is Safety Analytics?

Safety Analytics is about applying two statistical techniquespredictive modeling and data mining (see sidebar, Powerful data exploration and modeling techniques drive new solutions)to workplace and workforce data in order to more thoroughly understand the dynamics of workplace accidents. In our experience, the greatest insights and predictive segmentation results are achieved when both traditional risk characteristics data, such as a claimants job responsibilities, are combined with non-traditional data, such as the distance between the claimants home and workplace.

Powerful data exploration and modeling techniques drive new solutions Modeling is about constructing a workplace situation where a certain outcome is known and then applying it in another potential workplace situation where the injury outcome is not yet known. Although model building in this sense has been around since early actuarial times, the rapid advancement of cost-efficient computing power now enables businesses to process enormous amounts of data in order to explore complicated patterns and ferret out relevant correlations. We offer these definitions of predictive modeling and data mining as they are associated with Safety Analytics: Predictive modeling: The application of mathematical and statistical techniques and algorithms to produce a mathematical model designed to predict and segment patterns, trends, and future events. Data mining: A statistical process that utilizes large quantities of internal and external data with the goal of identifying meaningful relationships among patterns and trends to unlock future correlations, probable behaviors, and solutions. One common example of predictive modeling is target marketing. The same methods used to build marketing campaigns can be used for many different business purposesfrom asset protection to fraud detection and pricing optimization.

In short, these applications take the retrospective information in corporate data warehouses and turn it into valuable prospective or predictive information that can support proactive decision makingincluding suggestions that may lie outside managements normal realm of expectation.

Safety AnalyticsTM The business of prevention

Types of data fueling advanced analytical solutions A wide range of company-proprietary data can be combined with external data to develop a safer workplace and create cost-reduction opportunities. Possible data sources include: Operations data Incident frequency Inspection results Location specifics Years occupied Lease/contract terms Employment data Years in employment Type of work performed Job level Salary Wellness program participation Work performance data Evaluation results Days out of work Performance metrics Compensation Benefit options selected Externally available data Census characteristics of the work location Crime statistics of the work location Demographic information Education Employment history Distance between home and work Claim data Accident investigation report Type of injury Medical history Prior claim history Attorney involvement

Safety Analytics focuses on applying advanced mathematical techniques to data gathered from a variety of internal and external sources (see sidebar, Types of data fueling advanced analytical solutions). These include operations and employment data as well as employee work performance and demographic data. The combined analysis of this data yields predictions about where accidents are most likely to happen, under what circumstances, and to which segments of the workforceall before they actually happen. This information, in turn, can be used in workplace and workforce management in multiple ways, ranging from reducing the risk of accidents, to mitigating the impact of injuries, to improving the claims process and outcomes. So while improving safety is the overarching goal, many other benefits may also come with application of Safety Analytics approaches.

Safety Analytics offers a fresh, updated perspective

Three key components of Safety Analytics set it apart from traditional approaches to workplace safety. 1. The first major difference is that Safety Analytics can enable companies to explore the impact of employee characteristics as well as workplace characteristics in analyzing the frequency and severity of accidents. By combining proprietary employee data (such as an employees age, gender, full-time/part-time status, length of commute, performance ratings, and other information) with available public data (such as census and psycho-demographic information), Safety Analytics can help employers understand not just what situations are most risky, but which particular segments of the workforce are most likely to have accidents in those situations. This can help companies refine and focus their safety and accident prevention efforts to include considerations related to how they choose, train, and deploy their employees.

2. A second distinction is the sophistication of the analytic approach. Traditional analytic methods generally take an ad hoc approach to understanding accidents, working with a limited number of internal variables and relating each variable to accident outcomes independently of each other. For example, a traditional analysis might find a correlation between age and accident likelihood and a separate correlation between gender and accident likelihood, but fail to illuminate the combined effect of age and gender on accident likelihood. In contrast, a typical Safety Analytics model works with hundreds of workplace and workforce characteristics, and it uses a multivariate approach that can help companies understand the combined impact of these characteristics on accident outcomes. Because of this, Safety Analytics offers a much more nuanced and effective understanding of which employee groups are at greater risk of accidents and in which situations than a traditional approach. 3. A third characteristic of Safety Analytics is that the predictive modeling techniques it employs can help identify potential accident sites and victims before incidents occur, allowing companies to put strategies in place that focus on prevention. This enhanced understanding of when and to whom accidents are likely to happen can help companies take a more proactive approach to safety that would not be possible without such insights.

Safety AnalyticsTM The business of prevention

Applications of Safety Analytics

Risk characteristics found in both internal and external data have been demonstrated to be strong leading indicators of accident-related factors, such as incident frequency and claim severity. Multidimensional data analysis and predictive modeling can provide an opportunity for companies to advance their safety management efforts and further reduce workplace accidents. Like human behavior, insights involved in safety and injury issues are complex, but modeling techniques can combine characteristics and endeavor to predict propensities in ways that enlighten and inform both management perspectives and employee protections. Safety Analytics can be used both to guide accident prevention efforts and to more effectively manage workers compensation claims after accidents occur; we call the latter application the injury and claims management side of the issue. Both uses can help employers support their employees well-being as well as potentially avoid or reduce costs. With respect to accident avoidance: Safety Analytics can help companies in their efforts to improve workplace safety by isolating human and situational conditions where focused safety training and equipment can be beneficial in reducing accidents. It can also help companies identify targeted areas or employee populations for wellness programs and dedicate appropriate safety resources to high-risk areas. Regarding injury management: Safety Analytics can help companies in their efforts to more effectively manage claims by flagging which employee claims are more likely to be high-severity claims very early in the claim lifecycle. By understanding which injured employees are at greater risk of a high-severity claim, companies can make more effective choices about how to deploy its claim management resources to the various cases that arise. For example, if an employees injury type, demographic profile, and prior claim history make it likely he or she will have an extended absence, the company may wish to consider assigning a more senior claims handler and case manager to that incident.

Strategies to leverage Safety Analytics data One major U.S. retail chain used Safety Analytics to explore contributing factors to both accidents and the magnitude of post-accident claims. It was able to identify several workplace and workforce characteristics (e.g., overall store performance, location, incident frequency, and payroll hours) that were correlated with the likelihood of particular types of accidents. It was also able to zero in on particular workforce characteristics (e.g., length of commute, census, and employee survey results) that were correlated with the severity of post-accident claims. In another case, a self-insuring national waste management company improved its safety record and gained a deeper understanding of specific cost drivers behind work-related injuries after pulling together and analyzing years of data on employees, compensation claims, and risk characteristics for its industry. This company projected a 15 percent reduction in frequency for its top six causes of loss and an 8 percent reduction for all causes of loss. Following are a number of the strategies these companies considered and/or put into practice based on insights gained from their Safety Analytics efforts: Prevention Isolate situations where focused safety training and equipment can reduce accidents Target areas for wellness programs Prioritize delivery of safety training Improve safety compliance Enhance safety communications Link safety to enterprise sustainability efforts Assign safety buddies to high-risk situations Injury management Segment high-cost claims at intake Assign more experienced claims managers to injured employees with a higher likelihood of experiencing a lengthy absence from work Bring in investigators earlier if fraud is suspected

Business benefits

The use of Safety Analytics to help inform employee health and safety efforts, as well as to help guide employers management of injury claims, has been demonstrated to deliver multiple benefits. These include: Reduced frequency and severity of workplace accidents Workers compensation cost and duration reductions Increased impact of existing safety and wellness programs on accident prevention Increased productivity Healthier employees and reduced absenteeism Improved employee satisfaction and morale Increased compliance with safety regulations and potentially reduced fines Competitive advantage in recruiting and employee retention Enhanced employer brand and reputation for corporate social responsibility Implementation of Safety Analytics may help an organization in its efforts to advance its safety and loss prevention processes and/or programs, which, in turn, can drive down costs and improve the sustainability of the enterprise through enhanced workplace practices. The main tasks of a companys analytical advisors are to determine and/or confirm the quality and relevance of the data, determine and/or confirm what key business leaders are aiming to predict or affect, and choose predictors

Business user feedback Recent experience with companies applying Safety Analytics produced the following feedback about the value of the process: Insights gained really helped identify the targeted remediation effort needed. Outputs reinforce the thinking of a seasoned claims professional and give less experienced adjusters information to step back and think about. The model output gave us a quick indication at the beginning of the claim that there were many red flags. Getting the right resources for our workers and helping to keep them on the jobthats the right formula for a sustainable workforce.

using data analysis, experience, industry knowledge, and business understanding to identify results that help drive effective action. Business implementation is the desired outcome of effective analytics. That is, an effective Safety Analytics effort should take the results of all the formulas, data collection, and statistics involved; put them into the business environment; and enable the organization to use them in a productive, cost-effective way.

Safety AnalyticsTM The business of prevention

Contacts David Duden Director Deloitte Consulting LLP +1 860 725 3041 dduden@deloitte.com Frank Zizzamia Director Deloitte Consulting LLP +1 860 725 3076 fzizzamia@deloitte.com Jessica L. Bier Director Deloitte Consulting LLP +1 415 783 5863 jbier@deloitte.com The authors gratefully acknowledge the assistance of Kirsten Hernan, Kirsten Mecklenburg, Doug Richter, and Peter Wu, all of Deloitte Consulting LLP, in developing this paper.

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