leveraging data…

Leveraging Data…

To Manage Casualty Total Cost of Risk

2

Mike Douglas FCII, CPCU, ARe, ARM, APA, AIC, ARP, AIC Chartered Insurer Director of Business Development Aon Global Risk Consulting - Philadelphia

Introductions

3

Leveraging Data - The Opportunity

Loss Costs continue to be the primary driver of Total Cost of Risk (TCOR) in Casualty

Data is the key component in identifying cost drivers and creating more effective and sustainable loss prevention and claims management efforts

Data is more available and accessible than ever:– Increased Utilization and Improved

RMIS Systems– Emphasis on Better and More

Consistent Reporting

4

Traditional Approach – The very tired “Pie Chart”

The Traditional approach to Total Cost of Risk has been on how to “measure” the total costs instead of “managing” the cost drivers…

5

What Lies Beneath! – Typical costs for WC risk – Many are Hidden

6

Challenges of Traditional Benchmarking

Right data:– Valuation date– Jurisdiction

Right time– Age of benchmarking sources and data

Right Comparison– Are the companies you benchmark against really

comparable to your organization?

Using External Benchmarking Data

External Benchmarking May Not Paint an Accurate Picture

7

Re-thinking Benchmarking

Gaining an understanding of the cost drivers:• Identification of Cost-Driving Elements• Benchmarking (Internal and External)

Establishing baselines or KPIs for Processes using your own data

Creating a process of monitoring or Casualty Dashboarding

8

Managing Total Cost of Risk – Simplification

StatePass-

ThroughsPremiums

Coverage

Medical Strategy

ClaimsProcess

Actuarial

DisabilityManagement

LitigationManagement

InformationManagement

Prevention

Collateral

Program Structure

Consider the following 12 Cost Driving Elements

9

Leverage carriers, TPAs and brokers for information on each cost-driving element

Examples: Claims closure rates Medical-to-indemnity conversion rates Litigation rates Percent of medical to total cost Report lag time

Do an initial assessment of your program

The Next Step - Establishing KPIs

The Pieces of the TCOR Puzzle that Drive Your Costs

10

Sample Executive Summary Dashboard

An Initial Analysis will:

Establish your own KPIs

Identify areas of focus

Create foundation for dash boarding

11

The Next Step – Casualty Dashboarding

Identify KPIs for measuring ongoing program performance Measure on a monthly or quarterly basis More Advanced RMIS Systems can create dashboards with drilldown capabilities

12

Dashboards can Depict Information by Organizational Layer

13

When designed correctly, RMIS Systems can provide Dynamic Analysis of KPIs

14

In Summary

Data remains the key to managing Total Cost of Risk

Traditional outcome-based benchmarking has significant shortcomings

Process benchmarking and establishing KPIs will help direct resources to cost drivers

Leveraging RMIS Systems and dashboarding will result in focused and sustainable management of Total Cost of Risk

For Additional Information Please Contact

Mike Douglas, Aon Global Risk Consulting

Michael.douglas@aon.com

Tel: 215 255 1783

Cell: 267 401 0145