CURRENT TRENDS
Decreasing Frequency since 2002
Increasing Severity since 2002 driven by:
•
Environmental Factors
•
Joint & Several Liability
•
Increase volume and dollars of Mega Verdicts
– Judicial Hell Holes
•
No Fault Thresholds
– Outright Fraud and Excessive Treatment
•
New and different tort allegations
1
Reported Frequency-Bodily Injury
Countrywide Voluntary
Private Passenger Auto Bodily Injury Liability
2.3000
2.2500
(12MMReportedClaimsper 100Policies)
Frequency
2.2000
2.1500
2.1000
2.0500
2.0000
Re-Scale
1.9500
1.9000
1.8500
Source: ISO
Transaction Month
20
04
2
20
03
8
20
03
2
20
02
8
20
02
2
20
01
8
20
01
2
20
00
8
20
00
2
19
99
8
19
99
2
19
98
8
1.8000
2
Changes in Severity of BI1997-2002
Changes in Severity of BI
1987
1992
1997
2002
80%
70%
60%
50%
40%
30%
20%
10%
0%
No lost w orkdays
Source: IRC
No days of restricted activity
No disability
3
Paid Severity-Bodily Injury
Countrywide Voluntary
Private Passenger Auto Bodily Injury Liability
9,000
8,500
(12MMPaid $ per Claim)
Severity
8,000
7,500
Re-Scale
7,000
6,500
Source: ISO
20
04
2
20
03
8
20
03
2
20
02
8
20
02
2
20
01
8
20
01
2
20
00
8
20
00
2
19
99
8
19
99
2
19
98
8
6,000
Transaction Month
4
Urban vs. Rural
•
•
•
•
•
Auto accidents with damages alleged are more likely to occur in Urban areas,
while fatalities are more likely in Rural Areas.
80% of the crashes occurred in urban areas.
Injury claim frequencies were 29% higher in urban areas than in the rest of the
country.
Collision claim frequencies were 33% higher in urban areas than in the rest of
the country.
70% of pedestrian deaths occur in the urban settings.
Source: IRC and the Highway Data Institute
5
Age Related/Traffic Fatalities
•
•
•
•
In 2002, drivers older than 65 made up 12% of all traffic
fatalities.
Of these fatalities, 81% occurred during the day, and 75%
involved other vehicles.
In 2002, drivers older than 80 made up 50% of all traffic
fatalities at intersections.
By 2030, driver 70 and older are projected to make up
25% of traffic fatalities.
Traffic Fatalities (65 and Older)
30%
25%
20%
15%
10%
5%
0%
2002
2010
2015
Source: National Highway Traffic Safety Administration-Feb 2004
2020
2025
2030
6
Lawsuit Status of Claimants
Law suit Settlement Trend
Law suit Filed-Settled before Trial
Law suit Filed-Settled during Trial
Law suit Filed-Tried to Verdict
30%
25%
20%
15%
10%
5%
0%
BI
UM
Lawsuit Status
No Lawsuit Filed
Lawsuit Filed-Settled before Trial
Lawsuit Filed-Settled during Trial
Lawsuit Filed-Tried to Verdict
Total
UIM
BI
UM
87%
12%
0%
1%
100%
UIM
93%
6%
0%
1%
100%
76%
23%
0%
1%
100%
* Settled during Trail > 1%
Source: IRC: Auto Injury Insurance Claims-2002
7
Results of Verdicts for Claimants
Tried to Verdict
Outcome of Verdict
Less than last offer
Equal to last offer
Larger than last offer and less than
last demand
Equal to last demand
Larger than last demand
BI
UM
UIM
23%
4%
13%
6%
14%
0%
57%
3%
12%
53%
6%
22%
43%
21%
21%
Results of Verdicts for Claimants Tried to Verdict
BI
UM
UIM
60%
50%
40%
30%
20%
10%
0%
Less than last
offer
Source: IRC: Auto Injury Insurance Claims-2002
Equal to last
offer
Larger than last
offer and less
than last demand
Equal to last
demand
Larger than last
demand
8
Mega Awards – Jury Desensitization
TABLE 1. Mega Awards In States Without Caps
State
Jury Award
Year
$3,000,000
1998
$13,000,000
1998
$100,000,000
2002
$6,000,000
2001
5,400,000
2001
4,600,000
2001
$23,500,000
1997
North Carolina
4,500,000
2001
8,100,000
2001
$100,000,000
1999
Pennsylvania
$3,790,000
1998
Washington
Source: ASPE Review of Media Reports from The Advocate, Las Vegas
Review, North Carolina Lawyers Weekly, and other select sources.
Arizona
Kentucky
Mississippi
Nevada
TABLE 1.1 Mega Awards In States Without Caps Between
2001-2003
County/State
Madison County, IL
New Orleans, LA
$
$
$
$
LA County, Central Civil West, CA
$
$
St. Louis, MO
$
Philadelphia, PA
$
$
$
Miami-Dade, FL
$
Source: American Tort Reform Association
Jury Award
10,100,000,000
2,500,000,000
51,400,000
28,000,000,000
4,900,000,000
2,200,000,000
100,000,000
145,000,000,000
1,000,000
21,000,000
5,000,000
9
Judicial Hellholes
•
•
•
•
•
•
•
•
•
•
•
•
Madison County, Illinois
Jefferson County (Beaumont), TX
22nd Judicial circuit, MS
Hildalgo County, TX
Orleans Parish, LA
Kanawha County, WV
Nueces County, TX
Los Angeles County, CA
Philadelphia, PA
Miami-Dade County, FL
City of St. Louis, MO
Holmes and Hinds Counties, MS
Green indicates county has been on the top list for 2 straight years.
10
Excessive Treatment Fraud
•
•
•
One third of all bodily injury claims for automobile
accidents contain some element of fraud
The majority of the auto fraud is related to padding, build –
up or exaggeration of claims
33% of survey respondents said it was acceptable to
exaggerate an insurance claim
No-Fault Thresholds
•
•
•
12 states and Puerto Rico have no-fault auto insurance
laws: Florida, Michigan, New Jersey, New York,
Pennsylvania, Hawaii, Kansas, Kentucky, Massachesetts,
Minnesota, North Dakota and Utah.
New York between 1995 to 2000, the average paid per
PIP claim rose 65% compared to 25% in other no-fault
states. (Between 1992 and 2001, reports of suspected
fraud soared 275%, mostly in no-fault. NYS, Ct of
Appeals.)
“ Limited Tort Option” or Threshold
Source: IRC, NYS Court of Appeals
11
Combating the Trends:
Claims Representative - Claimant Relationship
Issues
•
Communication is the number one concern for both Insurance and
Corporate Litigation:
– Direct Communication with Claimants
• Timely initial contacts
– Expectations set and met
– Pro-active, early investigation
– Follow up contacts
• Early Resolution Opportunities
•
Better communication between Claims Adjusters and Claimants has
lead to a decrease in Attorney Representation.
Source: Insurance Risk Management Institute, IRC, Fulbright & Jaworski
12
Attorney Penetration by Coverage
Coverage
BI
UM
UIM
PIP
MP
1987
55%
57%
87%
31%
32%
1992
57%
59%
89%
31%
32%
1997
52%
51%
87%
30%
25%
2002
47%
42%
83%
28%
23%
Attorney Penetration by Coverage
1987
1992
1997
2002
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
BI
Source: IRC: Auto Injury Insurance Claims-2002
UM
UIM
PIP
MP
13
Combating the Trends:
Claims Representative - Attorney Relationship
Issues
•
Goals:
– Expectations set by Insurers made clear to Defense Counsel.
– Insurers want to reward early resolution, lowest overall claims cost, price
certainty, and negotiated settlements, but rarely measure due to lack of reporting
tools.
– Insurers want quality, but mostly do not measure it or reward it.
•
Communication:
– Audits performed by independent attorneys on Defense Counsels indicate that
current procedures were put into place by Insurers due to prior exploitations by
defense firms, not best practices.
– Defense Counsel has issues dealing with claims adjusters with little experience
controlling the outcome of cases. Avg. Age of a Caims Adjuster is 23 years old.
– Defense Firms claim that Insurers are placing increasingly complex and onerous
requirements on them.
•
Choice of Counsel:
– Insurer’s Approved Panel Counsel List need to reflect experience and results and
not focus primarily on cost.
– Emphasis on greater utilization of Quality In-House Counsel
Source: Insurance Risk Management Institute, Fulbright & Jawarski
14