Insurers Raising Risk

Insurance companies routinely gamble on the future, particularly when they decide how much money they need to cover expected claims. It’s an expensive and potentially dangerous betting game, as those who underestimate can face serious penalties from the state.

Risk Data Corp. in Irvine provides a computerized edge for firms seeking more accuracy in their guesswork.

Risk’s system, called MIRA, tracks filing trends within an insurance company and estimates how much each new complaint will cost. To do this, Risk Data gathers information on all the client’s previous cases. Once completed, the program creates a huge database to chart each new claim against hundreds of similar cases.

The larger the company, the more accurate the model. Risk has contracts with about 62 companies in the U.S., including CNA Financial Corp. in Chicago.

“We mostly deal with big organizations because you need to have a significant amount of data to have statistical accuracy,” said Risk spokesman Michael Regan. “In this business, you can’t afford to be wrong very often.”

Regan points to the troubles at Golden Eagle Insurance, formerly California’s third-largest workers’ compensation carrier. In January, the state Department of Insurance took control of Golden Eagle and ousted its owner, thoroughbred racehorse breeder John Mabee, after regulators discovered a $138-million shortfall in the company’s cash reserves.

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P.J. Huffstutter covers high technology for The Times. She can be reached at (714) 966-7830.