report lag and claim severity - national council on ... lag and claim severity barry lipton, fcas,...

2015 Annual Issues Symposium

Report Lag and Claim Severity

Barry Lipton, FCAS, MAAAPractice Leader and Senior Actuary, NCCIMay 14, 2015

© Copyright 2015 NCCI Holdings, Inc. All Rights Reserved.

© Copyright 2015 NCCI Holdings, Inc. All Rights Reserved. 2

Introduction

Effective claim management can only begin when a claim is reported

We reviewed whether a delay in claim reporting corresponds to higher claim cost


The Hartford Study

Earlier study by The Hartford*

After the day of the accident, average claim cost rose as the delay in reporting increased

Based on Hartford data

Published in 2000

NCCI’s recent study gives similar but slightly different results

*Glen-Roberts Pitruzzello, “The High Cost of Delays—Findings on a Lag-Time Study”, Issues Report, NCCI, 2000


Findings From NCCI’s New Study

Median cost of claims is lowest for claims reported after the day of the accident, and within two weeks after an accident

There is variation in this pattern by nature of injury

Claims appear to be more complex and difficult to settle as the delay in reporting increases

Source: NCCI’s Detailed Claim Information Data for Report Years 2010 and 2011 case incurred losses valued as of 18 months after report date; not developed to ultimate


Data for This Study

Detailed Claim Information (DCI)Sample of lost-time claimsIndustrywide data from 44 states*

Fatal and Permanent Total excluded

Occupational disease and cumulative injury excluded

Report Years 2010 and 2011

Valued as of 18 months after report date

*AL, AK, AZ, AR, CO, CT, DC, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, OK, OR, PA, RI, SC, SD, TN, UT, VT, VA, WV, and WI


Claim Cost

In this presentation, claim cost is case incurred loss valued 18 months after report date

Case incurred loss includes all claim payments and the case reserve

Loss adjustment expense is not included

Development factors are not applied to the reported claim costs; in particular, claim costs shown are not estimates of ultimate claim costs

Results of these analyses are similar if case incurred losses valued as of 30 months after the report date are used


Report Date—Accident Date

Category Beginning Ending

No Lag --- 0 days

Week 1 1 day 7 days

Week 2 8 days 14 days



After Week 4 29 days ---

7

Report Lag Categories

An accident that occurs on May 15 and is reported on May 23 is assigned to the “Week 2” category since 5/23 – 5/15 = 8 days

A claim reported the day of the accident is a “No Lag” claim


Overall Claim Costs

Median cost per claim for claims reported on the day of injury is 25% more than the median cost for claims reported in Week 1

Lowest median cost per claim is for claims reported in Weeks 1 and 2

Median cost rises for claims reported in Weeks 3 and 4

Source: NCCI’s Detailed Claim Information Data for Report Years 2010 and 2011 case incurred losses valued as of 18 months after report date; not developed to ultimate


17.3

13.8 13.2

17.8 19.9 19.3

0

5

10

15

20

25

No Lag Week 1 Week 2 Week 3 Week 4 After Week 4

Med

ian

Case

Incu

rred

Cos

t per

Cla

im

Report Lag

9

Lowest Median Cost Is for Claims Reported During the Two Weeks Following

the Day of the Accident

Source: NCCI’s Detailed Claim Information data for Report Years 2010 and 2011 case incurred losses valued as of 18 months after report date; not developed to ultimate

$ Thousands


Report Lag Distribution

More than 70% of lost-time claims are reported in the first week Almost 20% of lost-time claims are reported the day of the accident



19.7%

52.2%

10.5%

4.4% 2.4%

10.8%

0%

10%

20%

30%

40%

50%

60%


Perc

enta

ge o

f All

Clai

ms

Report Lag

11

More Than 80% of Lost-Time Claims Are Reported Within Two Weeks



Nature of Injury

Some of the most common workplace injuries

Sprains and Strains (46%)

Fractures (11%)

Contusions (9%)

Lacerations (5%)

More than 70% of lost-time claims are for these injuries



1% 2%

1% 9%

1% 3%

11% 0%

2% 3%

5% 2%

11% 0%

1% 2%

46%

0% 10% 20% 30% 40% 50%

AmputationBurn

ConcussionContusion

CrushingDislocation

FractureHeart

HerniaInfect/Inflam

LacerationMulti Inj

Other TraumaOthers

PunctureRupture

Sprain/Strain

Share of All Claims

Nat

ure

of In

jury

13

Sprains and Strains Are AlmostHalf of Lost-Time Claims



Distribution of Natures of InjuryDoes Not Vary Much by Report Lag

0% 10% 20% 30% 40% 50% 60%

AmputationBurn

ConcussionContusion

CrushingDislocation

FractureHeart

HerniaInfect/Inflam

LacerationMulti Inj

Other TraumaOthers

PunctureRupture

Sprain/Strain

Share of All Claims

Nat

ure

of In

jury

After Week 4

Week 4

Week 3

Week 2

Week 1

No Lag



15.4

11.7 13.0

19.5 19.9 20.9

0

5

10

15

20

25

30


Med

ian

Case

Incu

rred

Cos

t per

Cla

im

Report Lag

15

For Sprains and Strains the Lowest Median Cost Is for Claims Reported in Week 1

$ Thousands



12.9

9.3 11.1

14.5

18.1 18.9

0

5

10

15

20

25

30


Med

ian

Case

Incu

rred

Cos

t per

Cla

im

Report Lag

16

For Contusions the Lowest Median Cost Is for Claims Reported in Week 1

$ Thousands



8.3 6.4

5.9

10.0

12.9 11.1

0

5

10

15

20

25

30


Med

ian

Case

Incu

rred

Cos

t per

Cla

im

Report Lag

17

For Lacerations the Lowest Median Cost Is for Claims Reported in Week 2

$ Thousands



28.1

21.0

12.8 13.1

16.5 17.4

0

5

10

15

20

25

30


Med

ian

Case

Incu

rred

Cos

t per

Cla

im

Report Lag

18

For Fractures the Lowest Median Cost Is for Claims Reported in Week 2

$ Thousands



Nature of Injury

For most Natures of Injury reviewed, claims reported in Weeks 1 and 2 have lower median costs than claims reported in other periods

Fractures are an exception—Weeks 2 and 3 have the lowest median costs



Impact of Waiting Period

A waiting period is the time between the accident date and when indemnity benefits beginMost of the 44 states included in this study use a 3-or 7-day waiting period

3-day—18 states7-day—19 statesOther—7 states

We looked at whether the length of the waiting period correlated with report lag


Waiting Period Does Not Appearto Affect Report Lag

49

147

29

11 6

29

72

170

33

15 7

36

0

50

100

150

200


Num

ber o

f Cla

ims

Report Lag

3-Day: AL, AK, CO, CT, DC, HI, IL, IA, MD, MN,MO, NH, OK, RI, UT, VT, WV, WI

7-Day: AZ, FL, GA, IN, KS, KY, LA, ME, MI, NE,NJ, NM, NY, NC, PA, SC, SD, TN, VA

Thousands



Claims Reported After Week 2 Appear to Be More Complicated to Settle

Claims reported after Week 2Involve claimant attorneys more often Are more likely to include lump-sum amountsAre less likely to be closed within 18 months of the report date



12.8% 15.7%

17.8% 19.9%

23.9%

31.7%

0%

10%

20%

30%

40%


Perc

enta

ge o

f Cla

ims

With

Att

orne

y In

volv

emen

t

Report Lag

23

Claimant Attorney Involvement Increasesas Reporting Lag Increases



14.7% 13.5% 15.1% 16.3% 17.6%

24.7%

0%

10%

20%

30%

40%


Shar

e of

Cla

ims W

ith a

t Lea

st O

ne

Lum

p-Su

m P

aym

ent

Report Lag

24

Use of Lump-Sum Payments Increases as Reporting Lag Increases



30.7% 30.8% 36.2%

39.2% 39.2%

58.7%

0%

20%

40%

60%

80%


Shar

e of

Cas

e In

curr

ed L

osse

s Du

e to

Lum

p-Su

m P

aym

ents

Report Lag

25

Lump-Sum Payment Share Increases as Reporting Lag Increases



53.9% 55.2% 52.9% 49.2% 48.0%

29.4%

0%

20%

40%

60%

80%


Shar

e of

Cla

ims T

hat A

re C

lose

d W

ithin

18

Mon

ths A

fter

Rep

ort D

ate

Report Lag

26

Claims Are Less Likely to Be Closed Within18 Months When There Is a Delay in

Reporting the Accident



Summary

Median cost of claims is lowest for claims reported after the date of injury—either in Week 1 or Week 2, depending on the nature of injury

Claims appear to be more complex and difficult to settle as the delay in reporting increases

The full research paper is on ncci.com, and a shorter version is in the 2015 NCCIIssues Report

report lag and claim severity - national council on ... lag and claim severity barry lipton, fcas,...

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