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.
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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
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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
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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
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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
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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
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Report Date—Accident Date
Category Beginning Ending
No Lag --- 0 days
Week 1 1 day 7 days
Week 2 8 days 14 days
Week 3 15 days 21 days
Week 4 22 days 28 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
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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
© Copyright 2015 NCCI Holdings, Inc. All Rights Reserved.
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
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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
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
© Copyright 2015 NCCI Holdings, Inc. All Rights Reserved.
19.7%
52.2%
10.5%
4.4% 2.4%
10.8%
0%
10%
20%
30%
40%
50%
60%
No Lag Week 1 Week 2 Week 3 Week 4 After Week 4
Perc
enta
ge o
f All
Clai
ms
Report Lag
11
More Than 80% of Lost-Time Claims Are Reported Within Two Weeks
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
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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
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
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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
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
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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
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
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15.4
11.7 13.0
19.5 19.9 20.9
0
5
10
15
20
25
30
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
15
For Sprains and Strains the Lowest Median Cost Is for Claims Reported in Week 1
$ Thousands
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
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12.9
9.3 11.1
14.5
18.1 18.9
0
5
10
15
20
25
30
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
16
For Contusions the Lowest Median Cost Is for Claims Reported in Week 1
$ Thousands
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
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8.3 6.4
5.9
10.0
12.9 11.1
0
5
10
15
20
25
30
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
17
For Lacerations the Lowest Median Cost Is for Claims Reported in Week 2
$ Thousands
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
© Copyright 2015 NCCI Holdings, Inc. All Rights Reserved.
28.1
21.0
12.8 13.1
16.5 17.4
0
5
10
15
20
25
30
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
18
For Fractures the Lowest Median Cost Is for Claims Reported in Week 2
$ Thousands
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
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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
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
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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
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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
No Lag Week 1 Week 2 Week 3 Week 4 After Week 4
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
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
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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
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
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12.8% 15.7%
17.8% 19.9%
23.9%
31.7%
0%
10%
20%
30%
40%
No Lag Week 1 Week 2 Week 3 Week 4 After Week 4
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
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
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14.7% 13.5% 15.1% 16.3% 17.6%
24.7%
0%
10%
20%
30%
40%
No Lag Week 1 Week 2 Week 3 Week 4 After Week 4
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
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
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30.7% 30.8% 36.2%
39.2% 39.2%
58.7%
0%
20%
40%
60%
80%
No Lag Week 1 Week 2 Week 3 Week 4 After Week 4
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
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
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53.9% 55.2% 52.9% 49.2% 48.0%
29.4%
0%
20%
40%
60%
80%
No Lag Week 1 Week 2 Week 3 Week 4 After Week 4
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
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
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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