Justice Defended, Justice Denied
Council on Litigation Management
New Orleans, LA
March 24, 2011
Download at www.iii.org/presentations
Robert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute  110 William Street  New York, NY 10038
Tel: 212.346.5520  Cell: 917.453.1885  bobh@iii.org  www.iii.org
Presentation Outline
 Insurers Have Paid Trillions and Trillions on Millions and Millions
of Claims
 Inconsistent with Thesis of Delay, Deny, Defend
 The Dollars and Sense of Claim Payments
 Claims Operations as a Profit Center?
 Assertion is Unsupported by the Facts
 What is Really Happening to P/C Insurer Profitability?
 Insurance Ratemaking 101: The (Solved) Mystery of the Falling Loss Ratio
 Claims Management Software
 An absolute necessity in an era of rapidly rising medical costs and rampant
fraud and abuse
 No place for nostalgia
 A Case Study: Catastrophe Losses
 Insurance is the fastest, most reliable means of recovery after disasters,
large and small
 Fraud: It’s Real, It’s Expensive (i.e., It’s Really Expensive)
 DDD Asserts: Fraud = “Social Marketing” and is “Exaggerated”
2
The Central Thesis of “Delay,
Deny, Defend” Is Unsupported
by the Facts
THE FACTS: The P/C Insurance
Industry Pays Millions of Claims
Totaling $1 Trillion in Claims
Every 2-3 Years
3
With $12.6 Trillion of Paid Claims, Thesis
Of a Book Like This Has to Be Challenged
Delay, Deny, Defend makes broad
assertions based largely on
anecdote and dated information.
A more comprehensive and
analytical approach debunks the
book’s central thesis that insurers
seek to profit by squeezing
consumers out the claims dollars
that are due to them.
4
Dollar Value of Claims Paid by P/C
Insurers to Policyholders, 1925–2010E*
$ Billions
Claim payouts in recent
years are volatile but have
reached a jagged plateau
Since 1925, P/C insurers have
paid more than $7.2 trillion in
claims to policyholders ($12.6
trillion in 2010 dollars)
$400
$350
$300
$250
$200
Claim payouts
increased
exponentially
for decades
$150
$100
Catastrophe losses,
underwriting cycle
contribute to
volatility; Prolonged
soft market,
recession to plateau
$50
*1925 – 1934 stock companies only. Includes workers compensation state funds 1998-2006.
Note: Data are not adjusted for inflation.
Sources: Insurance Information Institute research and calculations from A.M. Best data.
2010E
*2005
*2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
1935
1930
1925
$0
5
Cumulative Value of Claims Paid by P/C
Insurers to Policyholders, 1925–2010E*
$ Billions
It took 60 years for
the industry to pay
its first $1 trillion in
claims in the years
since 1925. Today,
the industry pays
$1 trillion in claims
every 3 to 4 years.
$8,000
$7,000
$6,000
$5,000
4 years (2010)
3 years (2006)
3 years (2003)
5 years (2000)
$4,000
4 years (1995)
$3,000
7 years (1991)
$2,000
60 years (1925 – 1984)
$1,000
*1925 – 1934 stock companies only. Includes workers compensation state funds 1998-2006.
Note: Data are not adjusted for inflation.
Sources: Insurance Information Institute research and calculations from A.M. Best data.
2010E
*2005
*2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
1935
1930
1925
$0
6
Inflation-Adjusted Dollar Value of Claims
Paid by P/C Insurers, 1925–2010E*
$ Billions
$400
$350
$300
Since 1925, P/C insurers
have paid more than $12.6
trillion in claims to
policyholders on an
inflation-adjusted basis
$250
$200
Claim payouts
increased
exponentially for
decades, but
more erratically in
the post-1980 era
$150
$100
On an inflation-adjusted basis,
claims paid have fallen to 1990s
levels, reflecting improved
underwriting results, exposure
loss during the “Great Recession”
and leakage to alternative markets
$50
*1925 – 1934 stock companies only. Includes workers compensation state funds 1998-2006.
Sources: Insurance Information Institute research and calculations from A.M. Best data.
2010E
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
1935
1930
1925
$0
7
Cumulative Value of Inflation-Adjusted
Claims Paid by P/C Insurers, 1925–2010E*
Adjusted for inflation, it
took 36 years for the
industry to pay its first
$1 trillion in claims in
the years since 1925.
Today, the industry
pays $1 trillion in claims
every 2 to 3 years after
adjusting for inflation.
$ Billions
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
3 years (2008)
3 years (2005)
2 years (2002)
4 years (2000)
3 years (1996)
3 years (1993)
4 years (1990)
4 years (1986)
5 years (1982)
7 years (1977)
9 years (1970)
*1925 – 1934 stock companies only. Includes workers compensation state funds 1998-2006.
Sources: Insurance Information Institute research and calculations from A.M. Best data.
2010E
*2005
*2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
1935
1930
1925
36 years (1925 – 1961)
8
P/C Insurance Loss & LAE Ratio,
1920–2010E*
Loss Ratio (%)
Loss ratios were much lower
prior to the early 1980s—even
lower than today. DDD’s
central thesis would seem to
suggest that management in
the pre-1992 (pre-McKinsey
era) also viewed claims as a
profit center (even more so)…
100
90
80
70
Prof. Feinman uses the late 1980s as a
starting point for his data, causing a
statistical bias used to corroborate his
thesis. Including a longer time series
would disprove DDD’s thesis.
DDD asserts that the drop in loss
ratios since the mid-1980s is
proof that insurers are
squeezing claimants in their
effort turn their claims
operations into profits centers
60
50
*1920 – 1934 stock companies only. Includes workers compensation state funds 1998-2006.
Sources: Insurance Information Institute research and calculations from A.M. Best data.
2010E
*2005
*2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
1935
1930
1925
1920
40
9
Loss and LAE Ratio: 1920s – 2000s
Loss + LAE Ratio
85
80
75
70
Loss + LAE ratios are actually
quite high today compared to
the 90-year average of 66.9
between 1920-2010.
65
60
79.8
75.8
71.8
67.4
60.2
57.8
52.8
55
81.0
The Loss + LAE ratio is actually
higher today than it was when
interest rates were at similar
levels in the 1960s
54.7
50
45
40
1920s
1930s
1940s
1950s
1960s
1970s
1980s
1990s
2000s
There is a Clear, Consistent Relationship Between Loss Ratios and
Investment Yield Over the Span of Decades. Lower Loss Ratios in the 2000s
Relative to the 1980s and 1990s Reflect the Reality of Investment Yields
Sources: A.M. Best, Board of Governors of the Federal Reserve; Insurance Information Institute.
Loss and LAE Ratio vs. 10-Year
Treasury Yield, 1962-2010
As yields have trended
downward, so too have loss
ratios, since a smaller proportion
of losses can be covered by
investment earnings
(%)
95
Loss and LAE Ratio
90
(%)
14
10-Year Treasury Yield
12
80
10
75
8
70
6
65
4
60
Higher yields support higher loss ratios,
since a higher proportion of losses can be
covered by investment earnings
55
10-Year Treasury Yield
85
Loss & LAE Ratio
16
2
50
0
62
65
68
71
74
77
80
83
86
89
92
95
98
01
Sources: A.M. Best, Board of Governors of the Federal Reserve; Insurance Information Institute.
04
07 10E
11
Loss and LAE Ratio vs. 10-Year Treasury
Yield, by Decade: 1960s – 2000s
Loss + LAE Ratio
85
81.0
The Loss + LAE ratio is actually 10-Yr.
higher today than it was when Treasury
Yield
interest rates were at similar
18%
levels in the 1960s
79.8
15%
80
75.8
75
70
65
71.8
67.4
12%
9%
10.6%
6%
7.5%
6.7%
4.8%
4.6%
60
3%
0%
1960s
1970s
1980s
Loss & LAE Ratio
1990s
2000s*
10-Year Treasury Yield
There is a Clear, Consistent Relationship Between Loss Ratios and
Investment Yield Over the Span of Decades. Lower Loss Ratios in the 2000s
Relative to the 1980s and 1990s Reflect the Reality of Investment Yields
Sources: A.M. Best, Board of Governors of the Federal Reserve; Insurance Information Institute.
Underwriting Gain (Loss)
1975–2010:Q3*
($ Billions)
$35
$25
$15
After interest rates began to rise
in the late 1970s, insurers began
to run large underwriting losses
(implying a high loss ratio),
offsetting those losses with
investment earnings
$5
-$5
-$15
-$25
In an era of low
interest rates, insurers
need to operate with
lower underwriting
losses or with an
underwriting profit
-$35
-$45
-$55
75
77
79
81
83
85
87
89
91
93
95
97
99
01
03
Large Underwriting Losses Are NOT Sustainable
in Current Investment Environment
* Includes mortgage and financial guarantee insurers.
Sources: A.M. Best, ISO; Insurance Information Institute.
05
07
09
Number of Years with Underwriting
Profits by Decade, 1920s–2000s
Number of Years with Underwriting Profits
Insurers ran underwriting
profits consistently prior to
the 1980s. Therefore, loss
ratios then were, on
average, lower than today.
12
10
10
8
8
7
6
6
5
4
4
3
2
0
0
1980s
1990s
0
1920s
1930s
1940s
1950s
1960s
1970s
2000s*
Underwriting Profits Were Common Before the 1980s
(40 of the 60 Years Before 1980 Had Combined Ratios Below 100) –
But Then They Vanished. Not a Single Underwriting Profit Was
Recorded in the 25 Years from 1979 Through 2003
* 2000 through 2009. 2009 combined ratio excluding mortgage and financial guaranty insurers was 99.3, which
would bring the 2000s total to 4 years with an underwriting profit.
Note: Data for 1920–1934 based on stock companies only.
Sources: Insurance Information Institute research from A.M. Best Data.
14
Empirical Evidence that the
Central Thesis of “Delay, Deny,
Defend” Is Wrong
No Evidence that Claims
Practices Are Anything Other
Than Fair; Certainly Not Used
as a Profit Center
15
P/C Pure Loss Ratios, 1989-2008
P/C industry, pure loss ratio, 1989-2008
DDD’s thesis would
suggest that falling loss
ratios support the
assertion of insurers
squeezing claimants to
raise profits
80
70
60
50
1985
If the thesis is true,
then ROEs should be
steadily increasing.
What does the
evidence say?
1990
1995
2000
2005
2010
Data source: Best’s Aggregates & Averages – Property/Casualty
16
Source: Council on Litigation Management presentation by Jay Feinman, March 24, 2011, from A.M. Best data.
16
ROE: Property/Casualty Insurance,
1987–2010E*
(Percent)
P/C Profitability Is Both by
Cyclicality and Ordinary Volatile
20%
Katrina,
Rita, Wilma
15%
10%
Sept. 11
Hugo
5%
Andrew
0%
4 Hurricanes
Lowest CAT
Losses in
15 Years
Northridge
Financial
Crisis*
-5%
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
* Excludes Mortgage & Financial Guarantee in 2008 - 2010.
Sources: ISO, Fortune; Insurance Information Institute figure for 2010 is actual through 2010:Q3.
04
05
06
07
08
09 10E
17
ROE vs. Equity Cost of Capital:
U.S. P/C Insurance:1991-2010:9-Months*
(Percent)
18%
16%
6%
4%
2%
0%
-9.0 pts
-13.2 pts
8%
+1.7 pts
10%
-3.2 pts
12%
-6.4 pts
+2.3 pts
14%
-2.7 pts
The P/C Insurance Industry Fell Well
Short of Its Cost of Capital in 2008 but
Narrowed the Gap in 2009 and 2010
The Cost of Capital is
the Rate of Return
Insurers Need to
Attract and Retain
Capital to the Business
US P/C Insurers Missed Their Cost of
Capital by an Average 6.7 Points from 1991
to 2002, but on Target or Better 2003-07,
Fell Short in 2008-2010
-2%
91
92
93
94
95
96
97
98
99
ROE
00
01
02
03
04
05
06
07 08* 09* 10*
Cost of Capital
* Return on average surplus in 2008-2010 excluding mortgage and financial guaranty insurers.
Source: The Geneva Association, Insurance Information Institute
18
A 100 Combined Ratio Isn’t What It
Once Was: Investment Impact on ROEs
A combined ratio of about 100
generated ~7.5% ROE in 2009/10,
10% in 2005 and 16% in 1979
Combined Ratio / ROE
110
105
15.9%
14.3%
100.6
100
100.1
97.5
100.7
12.7%
15%
101.0
99.5
99.7
7.3%
7.7%
9.6%
95
18%
92.6
12%
9%
8.9%
6%
90
4.4%
85
3%
0%
80
1978
1979
2003
2005
Combined Ratio
2006
2008*
2009*
2010:Q3*
ROE*
Combined Ratios Must Be Lower in Today’s Depressed
Investment Environment to Generate Risk Appropriate ROEs
* 2009 and 2010:Q3 figures are return on average statutory surplus. 2008, 2009 and 2010:H1figures exclude mortgage and financial
guaranty insurers
Source: Insurance Information Institute from A.M. Best and ISO data.
P/C Profitability Components Are Highly
Variable But ROE Is Not Trending Upward
Smaller
Underwriting
Losses
Falling
Investment
Yield
All of the components of
P/C insurer profits are
highly volatile, but net
investment yield shows a
steady downward trend.
The ONLY way to counter
this is to reduce
underwriting losses, the
magnitude of which has
been shrinking in recent
years. Delay, Deny, Deny
inappropriately and
inaccurately ascribes this
as evidence of an effort
deprive policyholders out
of what is due them.
20
US Policyholder Surplus:
1975–2010*
($ Billions)
Surplus as of 6/30/10 was a near-record $530.5B,
up from $437.1B at the crisis trough at 3/31/09.
Prior peak was $521.8 as of 9/30/07. Surplus as of
6/30/10 is now 1.7% above 2007 peak; Crisis trough
was as of 3/31/0916.2% below 2007 peak.
$600
$550
$500
$450
$400
$350
$300
$250
“Surplus” is a measure of
underwriting capacity. It is
analogous to “Owners
Equity” or “Net Worth” in
non-insurance
organizations
$200
$150
$100
$50
$0
75
77
79
81
83
85
87
89
91
93
95
97
* As of 6/30/10; **Calculated using annualized net premiums written based on H1 2010 data.
Source: A.M. Best, ISO, Insurance Information Institute.
99
01
03
05
07
09
Claims Management Software
Assertion that Use of Software
Results in a Systematic Bias
Against Claimants is False
22
Claims Management Software
 Claims Management Software (such as Colossus) is Used to
Increase Consistency and Reduce Subjectivity in the Claims
Evaluation Process (CSC)
 Sophisticated processes are necessary to ensure consistent and fair
payments to millions of claims involving tens of billions in cost each year
 The use of computer software is necessary to achieve this goal
 NY Insurance Department (Oct. 2010):
 “It is important to note that we found no systemic underpayment of bodily
injury claims.”
– Comments of NY Superintendent Wrynn following a recent carrier examination
 There is Nothing Nostalgic About the Era of 100% Manual Claims
Adjusting in an Era of Rapid Medical Cost Inflation and Rampant
Fraud and Abuse
 Without claims management software, overall system costs would be higher
 Incidence rate of fraud and abuse would be higher
 The Role of Technology in Claims Adjusting Will Evolve and Grow
 This transformational role of information is not unique to insurance
23
P/C Insurance Claim Cost Drivers Grow
Faster than even the Medical CPI Suggests
Price Changes
in 2010
9%
8.8%
6%
Excludes
Food and
Energy
6.1%
4.3%
3%
3.4%
3.3%
3.1%
1.6%
1.0%
0%
Overall CPI
"Core" CPI
Medical CPI
Inpatient
Hospital
Services
Outpatient
Hospital
Services
Physicians' Prescription Medical Care
Services
Drugs
Commodities
Keeping tabs on medical costs is an absolute imperative. Failure to do so
would radically increase systems costs and premiums and reduce availability
Source: Bureau of Labor Statistics; Insurance Information Institute.
24
Case Study: Catastrophe
Losses Are Increasing in
Number and Cost
THE FACTS: The P/C Insurance
Industry Pays Millions of Claims
Totaling $1 Trillion in Claims
Every 2-3 Years
25
US Insured Catastrophe Losses
$9.2
$27.1
$27.5
$12.9
$5.9
$26.5
$4.6
$8.3
$10.1
$2.6
$7.4
$8.3
$16.9
$4.7
$2.7
$20
$7.5
$40
$5.5
$22.9
$60
$13.6
$80
First Half
2010 CAT
Losses Were
Down 19% or
$1.4B from
first half 2009
$61.9
2000s: A Decade of Disaster
2000s: $193B (up 117%)
1990s: $89B
$10.6
$100
$6.7
$120
$100.0
$100 Billion CAT Year is
Coming Eventually
($ Billions)
$0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10*20??
CAT Losses in the Future are Guaranteed to Rise
*Estimate from Munich Re.
Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal
property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.
Sources: Property Claims Service/ISO; Munich Re; Insurance Information Institute.
26
Combined Ratio Points Associated with
Catastrophe Losses: 1960 – 2010E
Combined Ratio Points
8.1
8.8
2.6
3.3
2010E
1.6
2.7
2008
2002
2006
1.6
2004
1.6
2000
3.3
3.3
3.6
2.9
1.0
1998
1996
1994
5.0
5.4
5.9
3.3
2.8
2.3
2.1
1990
1992
1.2
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1.2
0.4
0.8
1.3
0.3
0.4
0.7
1.5
1.0
0.4
0.4
0.7
1.8
1.1
0.6
1.4
2.0
1.3
2.0
0.5
0.5
0.7
1968
0.4
1966
1962
1964
3.0
3.6
1960s: 1.04
1970s: 0.85
1980s: 1.31
1990s: 3.39
2000s: 3.52
0.8
1.1
1.1
0.1
0.9
1960
10
9
8
7
6
5
4
3
2
1
0
Avg. CAT Loss
Component of the
Combined Ratio
by Decade
The Catastrophe Loss Component of Private Insurer Losses Has
Increased Sharply in Recent Decades
Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted
for losses ultimately paid by foreign insurers and reinsurers.
Source: ISO; Insurance Information Institute estimate for 2010.
27
Natural Disasters in the United States,
1980 – 2010
Number of Events (Annual Totals 1980 – 2010)
Number
There were a record 247
natural disaster events in
the US in 2010
Geophysical
(earthquake, tsunami,
volcanic activity)
Source: MR NatCatSERVICE
Meteorological (storm)
Hydrological
(flood, mass movement)
Climatological
(temperature extremes,
drought, wildfire)
28
Recent Major Global Catastrophe
Losses
(Insured Losses, $US Billions)
$30
$25
$20
The March 2011 earthquake in Japan will
become among the most expensive in world
history in terms of insured losses (current
leader is the 1994 Northridge earthquake with
$22.5B in insured losses in 2010 dollars)
$25.0
$15
$8.0
$10
$10.0
$5.0
$5
$0.5
$2.0
$0
Cyclone Yasi
(Australia) Feb
2011
Australia Floods
New Zealand
Chile Earthquake
New Zealand
Japan Earthquake
(Dec - Feb 2011) Quake (Sep 2010)
(Feb 2010)
Quake (Feb 2011)
(Mar 2011)*
Insured Losses from Recent Major Catastrophe Events Exceed
$50 Billion, an Estimated $48 Billion of that from Earthquakes
*Midpoint of AIR Worldwide estimated insured loss range of $15 billion to $35 billion as of March 13, 2011. Does not
include tsunami losses.
Sources: Insurance Council of Australia, Munich Re, AIR Worldwide; Insurance Information Institute.
29
Top 12 Most Costly Disasters
in US History
(Insured Losses, 2009, $ Billions)
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Hurricane Katrina Remains, By Far, the
Most Expensive Insurance Event in US
and World History
$45.1
$22.2
$22.7
$11.3
$12.6
Wilma
(2005)
Ike
Northridge Andrew
(2008)
(1994) (1992)
9/11
Attacks
(2001)
$17.2
$4.2
$5.2
Jeanne Frances
(2004) (2004)
$6.2
$6.6
$8.1
$8.5
Rita
(2005)
Hugo
(1989)
Ivan
(2004)
Charley
(2004)
Katrina
(2005)
8 of the 12 Most Expensive Disasters in US History
Have Occurred Since 2004;
8 of the Top 12 Disasters Affected FL
Sources: PCS; Insurance Information Institute inflation adjustments.
30
Total Value of Insured Coastal Exposure
(2007, $ Billions)
Florida
$2,458.6
New York
$2,378.9
$895.1
Texas
Massachusetts
$772.8
New Jersey
$635.5
Connecticut
$479.9
Louisiana
$224.4
S. Carolina
$191.9
Virginia
$158.8
Maine
$146.9
In 2007, Florida Still Ranked as the #1 Most
North Carolina
$132.8
Exposed State to Hurricane Loss, with
$92.5
Alabama
$2.459 Trillion Exposure, but Texas is very exposed
Georgia
$85.6
too, and ranked #3 with $895B
Delaware
$60.6
in insured coastal exposure
New Hampshire $55.7
Mississippi $51.8
The Insured Value of All Coastal Property Was $8.9
Rhode Island $54.1
Trillion in 2007, Up 24% from $7.2 Trillion in 2004
Maryland $14.9
$0
Source: AIR Worldwide
$500
$1,000
$1,500
$2,000
$2,500
$3,000
31
Global Catastrophe Loss Trends
Claims Paying Capacity Will Need to
Increase in the Future if Current
Disaster Trends Continue
32
Natural Catastrophes Worldwide,
1980 – 2010 (Number of events with trend)
Number
Increased claims paying
capacity will be required on
a global scale if current
trends continue (as is
expected)
1 200
1 000
800
600
400
200
1980
1982
1984
1986
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
Source: Geo Risks Research, NatCatSERVICE
1988
1990
1992
Meteorological events
(Storm)
1994
1996
1998
2000
Hydrological events
(Flood, mass movement)
© 2011 Munich Re
2002
2004
2006
2008
2010
Climatological events
(Extreme temperature,
drought, forest fire)
33
Fraud Is a Serious Problem
Delay, Deny, Defend: Fraud = “Social
Marketing” and Is “Exaggerated”
34
Florida’s No-Fault Fraud Tax: Estimated
Aggregate Annual Cost, 2009-2011F ($ Millions)
If nothing is done to
address Florida’s runaway
no-fault fraud problem, the
aggregate fraud tax on
Florida vehicle owners
could rise to $946 in 2011
Fraud Tax ($ Millions)
$1,000
$900
$800
$700
$600
$500
$400
The total fraud tax
levied on Florida
vehicle owners was
and estimated $549
million in 2010.
+72.3%
$945.8
+80.7%
$548.9
$303.8
$300
$200
$100
$0
2009
2010E
2011F
Unscrupulous Medical Providers and Attorneys Are Costing
Honest Florida Drivers Hundreds of Millions of Dollars
*2010 estimate is based on data through Q3:2010. 2011 forecast is based on an assumed increase in pure premium of 25% (pure premium
increased 27% in the 4 quarters ending with 2010:Q3). Estimates assume 11.288 million insured vehicles in FL in 2009-2011 (11.288 million
is 2008 actual figure from AIPSO).
Source: Insurance Information Institute calculations and research from ISO/PCI and AIPSO data.
35
New York State No-Fault Claim Severity,
1997–2010:Q3
2.2%
2.0%
1.6%
1.4%
1.2%
10:03
1.0%
10:01
9:03
9:01
8:03
8:01
5:03
5:01
4:03
4:01
3:03
3:01
2:03
2:01
1:03
1:01
1999
1997
$5,000
7:03
$5,500
2.4%
1.8%
Claim Severity reached
a record high in
2010:Q2: $8,990
7:01
$6,000
6:03
$6,500
Avg. Claim
Severity Rose
63% in 5 years
after 1997
Presbyterian
Decision
6:01
$7,000
$6,156
$6,052
$5,820
$5,991
$5,615
$6,094
$5,914
$6,250
$6,269
$6,530
$6,606
$7,063
$7,323
$7,378
$7,297
$7,670
$7,740
$6,699
$7,500
$7,773
$7,311
$6,958
$6,870
$8,347
$8,327
$7,888
$7,507
$8,234
$8,000
$5,675
$6,063
No-Fault Claim Severity
$8,500
Avg. Claim Severity
Frequency
No-Fault Claim Frequency
$9,000
$9,235
$8,727
$8,577
$9,500
$8,443
$8,177
$8,507
$8,025
$8,563
$8,726
$8,646
$8,830
$8,646
$8,990
$8,647
Avg. Claim Severity is
up 54% since 2004:Q4
No-Fault Claim Severity
About 20% of No-Fault Claim Costs Are Attributable to Fraud and Abuse
Sources: ISO/PCI Fast Track data; Insurance Information Institute.
36
Insurance Information Institute Online:
www.iii.org
Thank you for your time
and your attention!
Download at www.iii.org/presentations
Twitter: twitter.com/bob_hartwig