Auto Injury Claims:
The What, Why, and How of it All
CAS Spring Meeting – May 16, 2005 Phoenix, AZ
Adam Carmichael, IRC Senior Research Associate
What
IRC Study of Closed Auto Injury Claims
• History
• Methodology
• Sample
2002 Study of Closed Injury Claims
Are injuries becoming
more serious?
No.
• Injury types show little change.
• Claimants overall appear to be less
seriously injured than in the past.
2002 BI Injury Types Are Similar to Those in 1997
Percentage of BI claimants with each type of injury
66%
66%
Neck sprain/strain
56%
55%
Back sprain/strain
9%
10%
Other sprain/strain
Minor cuts/bruises
Headache*
Fractures
Disc injury
1997
11%
2002
2%
9%
10%
Shoulder injury
Knee injury
12%
11%
7%
8%
5%
6%
3%
4%
*Headache was a write-in category in 1997.
Little Change in Most Serious Injury Types
Percentage of claimants with neck/back sprain/strain as most serious injury
BI Claimants
65%
66%
PIP Claimants
66%
55%
1992
1997
2002
1992
59%
58%
1997
2002
Hospital Admissions Maintain Declining Trend
Percentage of claimants admitted to hospital for 1+ nights
50%
40%
30%
20%
10%
0%
1977
1987
BI Claimants
1992
1997
2002
PIP Claimants
Increase in Claimants With No Disability
Percentage of claimants with no disability
70%
40%
45%
1977
48%
52%
1987
72%
66%
68%
59% 56%
1992
BI Claimants
1997
PIP Claimants
2002
More Claimants Reporting No Restricted Activity
Percentage of claimants reporting no days of restricted activity
59%
54%
48%
41%
1987
44%
48%
1992
BI Claimants
49%
53%
1997
PIP Claimants
2002
Over Half of Claimants Lost Time From Work
Percentage of employed claimants who lost time from work
PIP Claimants
BI Claimants
62%
62%
63%
1997
2002
59%
1997
2002
7 days
5 days
8 days
Median number of lost work days
6 days
2002 Study of Closed Injury Claims
Trends in the medical treatment
of injuries
• Shift towards more expensive
alternatives
• Rise in per-visit costs
Steady Increase in Use of Some Medical Professionals
Percentage of BI claimants using each type of medical professional
32% 33%
27%
22%
20% 21%
20%
14%
n/a n/a
Chiropractors
1987
n/a: Data not available.
Physical
Therapists
1992
1997
2%
4%
Alternative
Professionals
2002
Average Charges Per Visit for Select Professionals
1997 versus 2002
PIP Claimants
BI Claimants
$191
$166
$134
$165
$167
$146
$130
$110
$121
$131
$102
+37%
General
Practitioner
Chiropractor
$118
Physical
Therapist
1997
Excludes permanent total disability and fatality claimants.
+64%
General
Chiropractor
Practitioner
2002
+62%
Physical
Therapist
Average Charges Per Visit for Select Professionals
BI versus PIP
2002
1997
$191
$165
$134 $131
$110
General
Practitioner
$130
$102
Physical
Therapist
BI Claimants
$166
$146
$121 $118
Chiropractor
$167
General
Chiropractor
Practitioner
PIP Claimants
Excludes permanent total disability and fatality claimants.
Physical
Therapist
Shift Towards More Expensive MRIs
Percentage of claimants receiving each procedure
BI Claimants
PIP Claimants
61%
56%
58%
53%
18%
15%
15%
12%
X-Ray
MRI
X-Ray
1997
2002
MRI
Average Charges Per Procedure for Select Diagnostics
1997 versus 2002
BI Claimants
PIP Claimants
$1,327
$1,133
$1,252
$1,207
$1,019
$753
$1,212
$957
$769
$649
$172
$598
$271
$251
$145
+60%
X-Ray
$1,220
MRI
CT
+87%
EMG
X-Ray
1997
Excludes permanent total disability and fatality claimants.
2002
MRI
+87%
+104%
CT
EMG
2002 Study of Closed Injury Claims
Reported economic losses
(special damages) have surged.
• Largely driven by growth in
medical expenses
• Growth in wage and other
losses more modest
Increase in Average Reported Economic Loss
Average amount of reported economic loss
$8,000
BI
PIP
MP
$6,000
$4,000
$2,000
$0
1977
1987 1992 1997 2002
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss.
Annualized Change in Average Economic Loss
1987
1992
11%
9%
9%
12% 13%
10%
9%
7%
7%
1997
3%
10%
2002
4%
4%
2%
1%
-1%
CPI - All
7%
-2%
CPI - Medical
BI
PIP
MP
3%
7%
Increase in Reported Medical Expenses
Average BI Claimed Losses
Average PIP Claimed Losses
$6,015
$4,662
$2,902
$3,645
$4,105
$2,815
$2,763
Medical
Up 28%
$2,548
Wage
Medical
Up 5%
1997
Standard exclusions apply.
Up 47%
2002
Wage
Up 10%
Medical Losses Are a Growing Component of Economic Loss
Medical loss as a percentage of total economic losses
88%
84%
75% 76%
68%
83%
79%
71%
1987
1992
BI Claimants
Standard exclusions apply.
1987
PIP Claimants
2002
2002 Study of Closed Injury Claims
Total Payments have not fully
reflected the surges in reported
economic losses (special damages)
Especially among BI claimants
with less serious injuries
Growth in Average Economic Losses and Payments
Percentage change from 1997 to 2002
40%
38%
25%
22%
16%
5%
BI
PIP
Growth in Special Damages
MP
Growth in Total Payments
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss.
BI Payment Per Dollar of Claimed Economic Loss
$2.11
$1.87
$1.65
$1.49
1987
1992
1997
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss.
2002
BI Payment Per Dollar of Economic Loss – Neck/Back Sprains
Loss = $1,975
Loss = $2,118
Loss = $2,600
BI Paid = $4,265
BI Paid = $3,738
BI Paid = $4,103
$2.16
$1.76
$1.58
Only claimants with no days of restricted activity.
BI Payment Per Dollar of Economic Loss – Brain Injury
Loss = $48,418
Loss = $51,274
Loss = $56,173
BI Paid = $46,744
BI Paid = $50,380
BI Paid = $65,675
$0.97
$0.98
Excludes permanent total disabilities.
More than ½ had more than 60 days of restricted activity.
$1.17
Growth in Economic Losses and BI Payments by Restricted Activity
Percentage change from 1997 to 2002
25%
22%
16%
7%
Fewer than 10 days
Growth in Special Damages
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss.
10 or more days
Growth in BI Payments
BI Payment Per Dollar of Economic Loss by Restricted Activity
$1.91
$1.64
$1.50
Percentage
of claimants
76%
79%
Fewer than 10 days
1997
24%
$1.43
21%
10 or more days
2002
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss or missing days of restricted activity.
2002 Study of Closed Injury Claims
Claim Handling Techniques
Help ensure that claimants with
legitimate injuries are fairly
compensated
Claim Handling Techniques
Percentage of claimants subject to each technique
73%
56% 57%
21%
10%
Index Bureau
Check
11%
4%
Medical Audit
BI
PIP
10%
2%
IME
MP
2% 1% 1%
Special
Investigation
Claim Handling Outcomes
Percentage with mitigating outcomes
among claimants subject to each technique
84%
67%
57%
58%
65%
72%
47%
27%
13%
17% 14%
Index Check: Prior Audit: Damages
Claim Found
Reduced
BI
PIP
IME: Damages
Reduced
MP
19%
Special
Investigation:
Claim
Compromised
2002 Study of Closed Injury Claims
Attorney
Involvement
• Fewer claimants are hiring attorneys
• Claimants without attorneys receive higher
net payment and experience faster
settlement
Decrease in Percentage of Claimants Represented by Attorneys
Percentage hiring attorneys
55%
57%
52%
47%
31%
31%
32%
32%
1987
1992
30%
28%
25%
23%
1997
2002
BI
PIP
MP
Percentage of Payments to Represented Claimants
79%
49%
47%
35%
28%
BI
Percentage With Attorney
PIP
23%
MP
Percentage of Dollars Paid
Disability Measures by Attorney Involvement
Percentage of BI claimants
83%
60%
47%
52%
37%
No Days of Restricted
Activity
38%
No Lost Time From Work
Attorney
No Attorney
No Disability
Treatment Differentials by Attorney Involvement
Employed claimants with no lost time from work
and neck/back sprain/strain as most serious injury
BI Claimants
64%
PIP Claimants
62%
43% 42%
42%
37%
30%
19%
19%
13%
4%
Chiro
Physical
Therapist
MRI
5%
9%
2%
1%
EMG
Attorney
13%
Chiro
Physical
Therapist
No Attorney
MRI
EMG
Average Net Payment to BI Claimants by Attorney Representation
Average Economic Loss
$12,993
Legal Expense
Average Net to Claimant
$8,828
$3,490
$4,158
$1,309 Difference
$7
Represented Claimants
$2,174
$1,316
Non-Represented Claimants
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss.
Net Reimbursement by Attorney Involvement Over Time
Difference between average net BI payment
to represented claimants and nonrepresented claimants
$862
$101
-$741
-$1,309
1987
1992
1997
Net payment=Total payment minus economic loss and any
applicable legal fees.
Excludes permanent total disability and fatality claimants and
claimants with zero or missing economic loss.
2002
BI Claimants Without Attorneys Received Faster Settlements
Days between injury report and final payment
48%
31%
26%
24%
21%
16%
18%
11%
1%
0 to 30
4%
31 to 90
91 to 180
Attorney
181 to 365
No Attorney
Over 1 year
2002 Study of Closed Injury Claims
Fraud and Buildup
• Suspicion in 15 to 30 percent of claims
• Medical expenses most common source of buildup
• More chiropractor, physical therapists, alternative
care, and pain clinics
• More MRI and EMG
• Higher average losses in fraud & buildup claims
• Higher attorney involvement
Appearance of Fraud & Buildup by Coverage
Percentage with Appearance of Fraud and of Buildup
18%
16%
14%
12%
9%
9%
5%
BI
8%
7%
4%
PIP
MP
Fraud
Buildup
UM
UIM
Claim Handling Techniques Used to Detect Fraud & Buildup
Percentage of PIP Claims
No Fraud or Buildup
Fraud and/or Buildup
68%
54%
37%
31%
18%
6%
Index Bureau
Check
Medical Audit
Performed
IME Requested
0%
8%
Special
Investigation
Summary of Key IRC Closed Claim Findings
Injury patterns show little change

But claimants appear to be less seriously
injured
Modest increases in several areas of medical
treatment
 Shift towards more expensive treatment
 Higher per-visit costs
Summary of Key IRC Closed Claim Findings
Significant growth in reported economic losses
 Largely driven by growth in medical expenses
 More pronounced in first-party claims
 Not fully translated into total payments
especially for BI claimants with less serious
injuries
Attorney involvement
 Shows declines for all coverages
 Magnifies many adverse trends in claiming
behavior
 Associated with higher reported losses and
significantly lower net BI payment to claimant