Claims officers, more than ever, face rising loss costs, increased levels of litigation and higher rates of fraudulent claims, according to results from Towers Watson’s fourth “Property & Casualty Insurance Claim Officer Survey, The Economic Landscape and Operational Performance Metrics.”
“The economy is indeed putting significant pressure across virtually all lines of business,” said Brian Stoll, Towers Watson senior consultant and co-author of the report. “The impact on loss costs is clearly more dramatic in personal lines, where frequency, severity, litigation and fraud are all potentially on the upswing.”
According to the survey, in which 52 claims officers from small, midsize and large companies participated, more personal lines carriers noted higher claim frequency than commercial insurers, including homeowners (52%) and auto (45%). Turning to commercial carriers, one in five general liability (20%) and commercial auto lines (18%) carriers saw increases in claim frequency.
“Interestingly, responses related to claim frequency and severity from the economy were relatively consistent, regardless of carrier size and market segment,” added Stoll. “Since prior surveys found notable dissimilarities based on company size and/or market segment to other issues, this is very surprising. Clearly, the economy is affecting everyone.”
Thirty percent of respondents said that general liability lines have been most affected by an increase in litigation, followed by personal auto (22%) and commercial packages (20%). On a regional basis, new litigation increases ranged from 7% of respondents reporting a rise in New England, to 50% in the Southeast and 32% in the West, with all other regions under 20%.
More than half of the survey respondents showed an increase in exaggerated or potentially fraudulent personal lines claims, with auto (62%) and homeowners (56%) leading the way. Thirty-three percent said they saw an upswing in fraudulent claim activity in workers’ compensation, and 20% of commercial lines carriers said they were affected by exaggerated claims in other lines.
Almost half of respondents are placing a greater emphasis on allocated or unallocated expense indicators, while 35% said loss cost indicators are receiving increased attention, and 33% noted an uptick in the number of key claim goals.
Among the initiatives insurers said they are implementing to tighten costs and increase productivity are acceleration of case closings (40%), adjustments in claims-handling guidelines (35%) and increasing actual caseloads (35%).
“Because of several factors, companies are diligently working to manage expenses,” said Kathleen Cullen, Towers Watson senior consultant and survey co-author. “They have been particularly prudent by not risking long-term performance for short-term gains. The claim performance scorecards of most companies are now more closely tied to expense controls.”
Among other survey highlights:
• Sixty-six percent said they use vendor data as a part of their overall performance management tools.
• More than three-quarters (77%) said they are going to be investing in claims analytics over the next 24 months
• Roughly half of carriers targeted and succeeded in reducing their open claims inventory as part of their cost-containment efforts.
“Despite pressures on costs, carriers have not slashed expenses or taken knee-jerk responses,” added Cullen. “Rather, they seem to be taking measured steps to control costs, and are moving toward using both lagging and leading indicators.”
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