3 Types Of Claims Metrics Every Department Should Be Looking At

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There is gold at the end of the rainbow!

Good news! – claims departments are now flooded with great data.

Seems like great news doesn’t it. It is great news, or can be, if you’re using the data to help improve the operations, lower cost or predict the future. However, many firms aren’t using the data they have to provide valuable information for the operation.

With the advent of more modern claim technology there has been a push to input more and more information about claims. Claims professionals are being asked to capture very specific fields of information presumably to be used by others within the organization.  In addition, more sophisticated data models are combining claims data with underwriting and financial data that when used correctly can be a treasure trove of information.

With all that information available what is the best way to use the information?

At the very least data should be used to manage the operation, reveal trends, or be predictive.

Metrics to Manage the Operations

At the core, information coming out of the claims system should be used to manage the people handling files. Daily, weekly, monthly quarterly and yearly metrics around performance issues should be used to ensure claims professionals and support staff are performing at their best, responding to claims promptly and managing workloads and staffing levels.  Typical metrics to manage the operation would center on matters coming and going out (i.e., open, closed, closing ratios); aging reports (i.e., throughput, time from receipt to setup, open to close); workloads (i.e., caseloads and closing ratios by adjuster); or financial in nature (i.e. reserve changes from one period over another, average reserves, total paid).

Metrics to Reveal Trends

There are trends in your data if you know where to look. Trends in loss frequency and severity, which may be caused by external factors, such as legislative, environmental and economic forces, are all developed from claims data. Trending claims data will help underwriters ensure pricing and terms are appropriate and allow problems to be addressed before they become disasters. There are numerous examples of companies that succeeded because they were able to review claims trends and adjust their business before it was too late. There are conversely many companies that failed because they did not have or use their claims data to spot deteriorating books of business in enough time to address it. Information from claims is the lifeblood of the organization and should be identified and regularly shared to help the organization make better decisions about loss reserves, risks, investments, and resources.

Captives and self-insured can benefit even more on using data to trend losses and lower costs to the bottom line. In an article in Business Insurance about how Captive Insurers Provide Owners With Key Risk Management Tools, the authors discuss how Direct TV used claims data to trend key issues that allowed them to significantly improve results in their Workers’ Comp program:

DirecTV Inc. used claims data from the past several years …to help it manage claims more aggressively for its installation crews…DirecTV used the claims data identified to implement changes to its safety programs, its training programs and its return-to-work strategy…. The claims data also showed opportunities to improve fleet risks. Over a three-year period, the safety changes resulted in a 43% reduction in calls on the Driver Alert phone line. The data also found delays in reporting claims and lengthy lost time due to worker injuries. As a result, the company implemented a formal return-to-work program, which resulted in a significant decrease in lost time, and used additional training on claims reporting to reach the point where 91% of claims now are reported within three days of an incident.

Metrics to Be Predictive

Using data is not just about spotting trends but predicating outcomes. Using predictive analytics is not about deciding claim outcomes without the involvement of skilled claims professional, but rather it is about providing a tool to assist in the process. Predictive analytics can correlate multiple aspects of data and draw conclusions in an instant that claims professionals would not be able to do without hours of analysis. Predictive analytics tools are being successfully implemented to combat fraud and streamline the claims intake process as Gen Re noted in Predictive Modeling – An Overview of Analytics in Claims Management, some other uses of  uses of predictive analytics include determining:

  • Outlier Claims
  • Reserve and Settlement Values
  • Defense Strategy
  • Litigation Expense Management
  • Subrogation Potential

The benefits, if used correctly, are limitless when robust data sets now common in the claims world are used. More and more companies are using analytics to improve operations. In fact, according to a Towers Watson study in 2012, 63% of Chief Claims Officer’s surveyed stated they were starting to use predictive analytics in in their claim’s operations (see study).

Predictive modeling has been limited in the past because systems were not as robust and the amount of data available to run data models was limited. Times, however, have changed and most carriers should have more than their share of data that could prove invaluable. Of course data integrity must be as clean and accurate as possible for these new models to be effective. Regardless, the possibility for significantly improving claims outcomes is compelling.

 How are you using data and analytics?

How Would Albert Einstein Approach Claims

Albert Einstein must have been a claims manager!

As we begin the New Year it is always a time to reflect and look forward to new beginnings.  Recently an executive in my company sent along some words of wisdom from Albert Einstein. Einstein was an interesting character known not only for his scientific brilliance but also for his quick wit. He produced some wonderful quotes which I believe were directed to the claims industry.

OK maybe they weren’t written with the world of claims in mind, they are nonetheless applicable.

 “Setting an example is not the main means of influencing others, it is the only means.”

Claims departments should be leading companies in how they run their business. Claims departments are the fruits of the product being sold and when an insured buys a policy it is claims that serves up the services paid for. One of the best ways to retain and grow new customers is by “setting an example” in claims. Ensuring customer service metrics are met and exceeded and developing new ways to assist the customer is not the “main means of influencing others, it’s the only means.”

“Any intelligent fool can make things bigger and more complex…it takes a touch of genius—and a lot of courage to move in the opposite direction.”

There is a trend for more systems, more technology and better information in claims departments. I am a big supporter and believe it’s about time the industry wakes up to the power more claims data can have in making departments more efficient and providing robust information to improve the business. Regardless, providing more complexity and bigger technology solutions is not the only answer. Be a “genius” and go smaller and less complex in building and implementing claims software.  We have the technology it just needs to be used correctly.

“Not everything that can be counted counts and not everything that counts can be counted.”

This is one of the biggest claims dilemmas. We are being overwhelmed with data and that can be a good thing. Regardless, the fact that it can be measured doesn’t mean it is actually adding value to the process. Take a look at your metrics and really explore if what is being counted “counts.”  On the other side, there are things in claims that unfortunately can’t be counted perfectly. Given how climate, legal issues and other external factors change rapidly, comparing claim metrics from period to period is sometimes a difficult exercise. Regardless, striving to “count” what “counts” is what the industry needs to continue to do.

“If you can’t explain it to a six-year old, you didn’t understand it yourself.”

Wouldn’t it be great if we could all work like this? Let’s be realistic, if you can’t explain your claim to management, opposing counsel, the claimant, in an easy simplified way then you probably don’t understand it yourself and will never get to the desired outcome.  Like his quote on being a genius by making things smaller and less complex I say get to the point. It is still important to get all the facts and make sure all the “i’s” are dotted and the “t’s” are crossed, but do it in a way that will allow you to truly understand the claim and be able to explain it.

“Nothing happens until someone does something.” So go make it happen!

Commentary: Claims Departments Are Facing A Crisis And Have To Learn To Encourage Innovation

So Much Work And No Help In Sight

I hear it time and time again from colleagues all over the industry. With cutbacks many are being asked to do more with less.

This trend began several years ago as more technology was implemented into insurance companies. Gone were the support staff; why were they needed when the claims professional could do it all on their own lap-top. Gone were supporting groups like subrogation departments and litigation management assistance; why were they needed when new systems could manage it all.

More efficiency meant more time to do more work. Certainly this will translate to better results…I mean it’s supposed to right?  But has it really?

I’m Not Going To Take It Anymore

The claims industry is at a crossroads and needs to change. I know you have heard this one before, but when speaking with people in the business I was reminded me of the famous scene from the movie Network where the anchorman screams out “I’m mad as hell and I’m not going to take it any more”.  Check out the clip below to be reminded.

In a recent discussion that I posted on LinkedIn, I asked the question, How do you keep the claims department from become stale? (see prior posting Is your claims department becoming a bus company?). For some reason after seven months of posting I received a flurry of comments on how the industry is facing a crisis of staffing and turnover. Quoting one post on LinkedIn from John M. Beringer:

“A sad fact is the majority of adjusters rarely last for five years. That is not due to a lack of skill or commitment; it has to do with how their pending is counted, the layered management reporting; unrealistic expectations of claims management and management by edict rather than training and critical reasoning.”

While there were many wonderful responses to my question, the general feeling was that case loads have crept too high and there is a lack of emphasis on training and development. We as claims people have a knack for complaining about caseloads, however, this one is truly one that needs to be addressed. With more technology came more expectations for claims professionals to take on more administrative tasks. Departments contracted, and claim counts rose. In my opinion this resulted in an increase in indemnity and expenses (I wish I had the data to support this, but can only i have seen it the file reviews i have conducted over the past year).

In order to excel in this marketplace, claims departments will need to innovate and attract, and maintain, new talent. Unfortunately, we are not an industry that accepts change easily, and for the most part innovation, is slow and not encouraged.

Change Requires Innovation To Be Encouraged

I have quoted Serth Godin before and will continue to do so especially with pearls of wisdom like this:

“That’s not the way we do things around here

Please don’t underestimate how powerful this sentence is. When you say this to a colleague, a new hire, a student or a freelancer, you’ve established a powerful norm, one that they will be hesitant to challenge. This might be exactly what you were hoping for, but if your goal is to encourage innovation, you blew it.”

In my consulting practice (Lanzko Consulting) I am often confronted with clients that say something like “That’s not the way we do thing around here” or, more likely, “that’s how we have always done it.” Change in claims cannot happen unless the organization looks at, and breaks, the old habit of accepting the status quo. Challenging the norm has to become the new norm. Industry executives have known for years about the declining talent pool and that need for changes, yet they have taken few steps to modernize the technology, as well as the process.

Technology is a great tool, but it will never substitute the skills of a talented claims professional. Technology must be implemented into the process to assist, not hinder, claims professionals.  We need to move back to a time when claims professionals can be claims professionals.  We need to make the job as interesting as it can be, and not purely about automation. Without this, the profession will struggle to attract talented people to its ranks and will certainly cost companies far more in the future.

Let 2011 be the year to take the industry forward.  How do you think we can innovate the claims industry?

AMA Study Finds Almost 1 Malpractice Claim Is Filed For Every Physician – Not Really Shocking

No surprise I guess – Doctors remain targets of malpractice

Despite being in this business for 20 years, even this report left me in a momentary state of shock. A study from the American Medical Association (AMA) reports that an average of 95 medical liability claims are filed for every 100 physicians, almost one per physician. The AMA study looked at 42 specialties and was from a sample size of over 5,800 physicians.

The report reminded me of the question my now Ob/Gyn brother asked me as he was graduating medical school. “Who gets sued more? Regular obstetricians, high risk obstetricians, or ones that specialize in fertility?” My answer to him at the time was “they all get sued.” I did not truly realize how true that statement was until I read this report (for my brother and anyone else that may be interested, the AMA says 69.2%  Ob/Gyn doctors have been sued with Ob/Gyn physicians averaging 215 claims per 100 hundred physicians).

The AMA report also found:

  1. Nearly 61 percent of physicians age 55 and over have been sued.
  2. There is wide variation in the impact of liability claims between specialties. The number of claims per 100 physicians was more than five times greater for general surgeons and obstetricians/gynecologists than it was for pediatricians and psychiatrists.
  3. Before they reach the age of 40, more than 50 percent of obstetricians/gynecologists have already been sued.
  4. Ninety percent of general surgeons age 55 and over have been sued.

Med-Mal claims are not an indication of frequency of medical errors yet the cost to defend them is high

As the AMA reported in New AMA Report Finds 95 Medical Liability Claims Filed for Every 100 Physicians:

The number of medical liability claims is not an indication of the frequency of medical error, as the physician prevails 90 percent of the time in cases that go to trial.  While 65 percent of claims are dropped or dismissed, they are not cost-free.  Average defense costs per claim range from a low of over $22,000 among claims that are dropped or dismissed to a high of over $100,000 for cases that go to trial. This leads to increased costs for physicians and patients.

Are you shocked by this report or is it just par for the course?

Social Media And Claims Investigation: Do You Know About Foursquare?

It’s amazing what you can learn online to help your claim

Undoubtedly, you’ve read plenty of articles or have been to numerous presentations regarding the use of social media to investigate claimants.  At this point, the novelty of Facebook and MySpace has worn off.  The same can be said about Twitter.  Everyone knows at this point to take a look at those platforms when searching a claimant’s background.  Enough said.  However, seemingly with every new day comes a new social media application.  One relatively new application that you should also take a look at during your claims investigation is Foursquare.

What is Foursquare?

Foursquare is a web and mobile application that allows users to connect with friends and update their location. To use the application, a user must register at foursquare.com and create an account.  This account records the users’ activities from there on.

Foursquare started out in 2009 with limited availability in only 100 worldwide metro areas.  In January 2010, Foursquare changed their location model to allow check-ins from any location worldwide.  As of March 2010, the service had 500,000 users. As June 2010, Foursquare has closed in on 1.3 million users in June 2010.  Thus, this is an application that is quickly picking up adopters.

Foursquare is part game, part micro blog, part status-update tool, and part vehicle for sellers of goods and services to award customer loyalty.  “Checking in” via Foursquare at venues can lead to special offers and deals from a participating venue.  “Checking in” can also lead to “badges” for users, which are displayed on the user’s Foursquare profile.  An example of a Foursquare badge includes the “Crunked” badge, which is awarded for checking into four bars/clubs in a given night.

Users can choose to have their Twitter and/or their Facebook accounts updated when they “check in.” Alternatively, users can opt not to publish their “check ins.”  Nevertheless, all activity – whether published or not – is recorded on the users’ Foursquare account.

How looking to Foursquare can help investigate your claim

Accordingly, in the course of claims investigation, an enterprising analyst can search a user’s Facebook account, Twitter account, or Foursquare account to investigate the users’ Foursquare activity.  To so, the attorney would either need access to an open Facebook and Twitter profile, or alternatively, have access to the users’ login and password information for each of these accounts.  Getting access to login and password information may likely only come once a claim enters litigation.  At that point, defense counsel can either issue a subpoena to Foursquare or attempt to secure the data via interrogatory.

A real life claim example

The value of Foursquare can be realized in a very tangible way when investigating a user and his or her activities. For example, here is a recent Twitter feed of someone in Columbia, South Carolina on a recent Friday night using Foursquare:

I’m at Salty Nut (2000 Greene St, Columbia). https://4sq.com/5qUeGw about 7 hours ago via foursquare from Five Points, Columbia

I just unlocked the “Crunked” badge on @foursquare https://4sq.com/c93hnL about 7 hours ago via foursquare

I’m at Pavlovs (2000B Greene Street, Columbia). https://4sq.com/aLjSsL about 7 hours ago via foursquare from Five Points, Columbia

I’m at Dr. Rocco’s (801 Harden St, at Greene St, Columbia). https://4sq.com/bzIMAA about 8 hours ago via foursquare from Five Points, Columbia

I hate stupid mofos downtown who try and fight. I’m not as drunk as you, and therefore I will beat your about 8 hours ago via UberTwitter

Greene and Harden Streets are in Columbia’s “Five Points” area, which is home to many bars and nightclubs frequented by students at the nearby University of South Carolina.  The locations where this user stated he was “checking in” on Foursquare are all college bars.

In this feed, we know this: the user visited numerous bars in Columbia’s Five Point areas and stated he is “drunk.”  Imagine if this user later was involved in an incident where injuries occurred, which later becomes a claim to the carrier.  If he were the prospective defendant involved in an automobile accident (and an insured of the carrier), we’d know we have the makings of a tough claim.  If he were the prospective plaintiff alleging a claim against the carrier (e.g., he got into a fight with an insured later that night), we’d likely have the beginnings of a compelling comparative negligence defense.

Other things that can be learned by Foursquare

An additional use for Foursquare is finding out what a claimant has been up to since an incident giving rise to a claim.  Imagine this claimant gave a recorded statement or testified in deposition that he or she had been devastated by his or her accident and couldn’t go out and enjoy life.  What do you think the value of the claim would be when his or her Foursquare profile revealed routine “check ins” to Starbucks, the local mall, and other places that demonstrated that perhaps life wasn’t so bad for the claimant?  Every little bit helps when investigating a claim such as this.  The chance exists that Foursquare can help you find out more about a claimant’s post-accident lifestyle.

Bottom line: Don’t forget Foursquare when investigating a claimant’s social media activities.


You Can’t Wait Till The Last Minute To Improve You Operation – Planning Starts Now!

Don’t let the lily pads take over the pond.  The time to deal with the problem is now.

I had the pleasure of recently attending an executive summit presented by ACS A Xerox Company in Hartford Connecticut. The conference theme was centered on insurance issues and looking forward to 2015.  It was a great meeting with executives from a variety of insurance companies and industries.

Looking to the future is a difficult task, especially when day-to-day issues make it hard to stop and be strategic. Unfortunately, trying to plan for the future takes time, and thinking it can be put off will only create larger problems.

Before you know it that little issue will grow into a big one – the lily pad problem

James Hatherly, one of the guest speakers at the conference, gave a great analogy about putting off minor issues. James is the author of Daring to Be Different, A Manager’s Ascent To Leadership and he discussed the importance of having to think about problems sooner rather than later with the following story:

One morning a farmer observed that a lily pad had sprung up on his pond. The following day there were two lily pads, and on the third day there were four. Since they did not seem to be doing any harm he took no action. However, the number of lily pads continued to double every day until the pond was completely covered on the thirtieth day.

James questioned the audience as to how long did it take for the pond to be covered 50%? Or even 25%? The answer was that the pond was 50% covered on the 29th day and 25% covered on the 28th day.

His point? Managers and executives can’t wait until the 29th day to solve problems.

With time slipping away, what should claims departments be thinking about in the next 5 years? That question, of course,  will be answered differently from company to company. Regardless, there have been certain trends that exist today, being addressed by other industries, which should be looked at in today’s modern claims department.

Two suggestions for beating the lily pads to the pond

There is nothing too forward thinking about the concepts I address here. There are plenty of cases in the insurance industry where solutions have been adopted successfully. Nonetheless, if you have not addressed either of these because you felt it was not appropriate for your organization it may be time to reconsider and see how they may apply in the future.

  • Social Media – I know it’s the buzzword in business wherever you go. You are probably aware of the powers of social media or you would likely not be reading this blog. Twitter, LinkedIn, Facebook and a variety of other services are being incorporated into businesses more and more each day. How will the insurance industry, and more specifically claims, adopt these outlets? Will you use Twitter to tweet claims alerts to customers? Are you creating a Facebook fan page to learn more about, and solve customer problems?  How about an internal social network to share claims information amongst departments and partner organizations. How can these applications make your claims department more efficient?
  • Mobile Technology – Everyone has a phone that can handle such an array of tasks that it’s amazing we ever functioned without them. Better bandwidth, and more coverage, allows access to an amazing amount of information from the palm of your hand. What is your company doing to adopt this technology? Are your claims adjusters able to assess claims on the road and instantly pass the information into systems for analysis? Are customers able to file a claim from their phone attaching photographs and other information like GPS locations?  Will new devices, such as an iPad be used in the future claims organization? How will your organization respond to these devices? Lead or follow?

Like most industries, adopting and changing with the times can be a difficult proposition. It takes time to think of issues, come up with solutions and implement the changes. Insurance companies have added legal, compliance and regulatory concerns, to say nothing of complex, and sometimes outdated, information technology systems.  Regardless, it’s not too late to address issues to create a social media or mobile strategy.

Think back five years and ask yourself how many lily pads would be on the pond had you stopped to deal with the first one on day one. The trends we see in technology, and in how people work around the world, are changing rapidly. To stay ahead of the curve, and take advantage of solutions that can help your organization, start thinking out-of-the-box now. Take a lesson from an article I wrote a few posts ago about changing hats outside your industry and see how others are adopting their operations to the changing times.

Now is the time to consider change. Before the pond gets too filled with lily pads attack the problem and look for solutions. Five years from now – you won’t be wondering what could have been.

What kind of lily pad can you see on the pond that can be dealt with today?

Is Your Caims Department Becoming A Bus Company?

Are you going through the motions and can’t seem to get out of the traffic circle?

Seth Godin, author of well known business books such as the Purple Cow and Linchpin, recently wrote in his blog about companies Becoming a Bus Company. As he noted, “We all have a vision of the typical bus company, slowly moving people from place to place, going through the motions and showing a lot of fatigue.” Seth points out that companies fall into a place where they start acting like bus companies which becomes evident when the some of the following begins to happen:

  • Aging equipment in need of a functional and design refresh
  • Tired staff, punching the time clock
  • By the book mentality, with no room for humanity or initiative
  • Treating all customers the same (poorly) and knowing (and caring) little or nothing about them
  • Attitude that tomorrow will be just like today

Recognize any of the above? Claims departments can, and do, fall into the same traps where it feels like they can’t get out of the same old routine.

Here are three suggestions to break up the bus company mentality and help make the organization stronger:

  1. Closing Day – Spend a day dedicated to closing files or looking for closing opportunities. The idea here is not to work the files, but to glance through them quickly and see if there are any files that can be closed. Even with the best diary systems in place, there are always files that some how didn’t get closed. Whether it’s a file that had a statute of limitation expire, or one that had been denied with no appeal, dedicating time to focus on closings only will pay dividends. Not only does this type of day break up the normal routine, it can result in a reduced pending, the lowering of reserves and feelings of accomplishment.
  2. Take a poll to find the roadblocks– Ask your claims staff for the top 5 issues that they feel make their jobs difficult. Is it a system problem? Is it an inability to get information from other departments? Or maybe there is a process that is not adding any value, but is taking up much of a handler’s time. You will of course receive the standard complaints, but if you dig into those complaints you might find a common theme that could be correctable. If you have never asked you may be surprised to learn of a roadblock that can easily be removed to make the handler’s jobs easier. You will also benefit from learning more from your claims professionals and giving them the opportunity to be part of a solution.
  3. War Story Lunch – Claim handlers love to tell war stories so why not give them a forum to let loose and share the information. The experience and teachings learned from war stories can be used as a training tool to make the department stronger. Invite claims handlers to lunch and have each claims professional bring a story of success or failure from their past. Claim handlers can use that information to promote out-of-the-box thinking and learn new ways of handling future problems. Want to get even more from the process? Invite underwriters to come and listen – maybe they will learn a thing or two about the risks they are writing.

Changing the way things are looked at and done in a given day will promote new ways of looking at old problems, and will keep your department fresh. Tired staff, punching the time clock attitudes, or by the book mentality, with no room for initiative is a sure way to become a bus company.

How do you stay off the bus and stay out of the traffic circle?

3 Essential Report Types That Insurance Executives Should Use To Analyze Their Claims

Metrics, Numbers, Charts, Graphs, Reports – Where do you start?

Today’s modern claims systems have a wealth of knowledge about every aspect of claims operations. With the right reports it should be easy to get a basic snapshot of how effective your claims are being managed, and how well your business is doing. With all that information where is one to start?  What are the key metrics that should be reviewed by claims and business executives to better understand their operations?

While every company will want to look at specific claims metrics around their lines of business, there are three essential report types that executives should be looking at. These include:

Claims counts

Change reports

Claims summaries

Let’s break these down further:

1. Claims Counts

Counts are simple monthly  (or weekly, depending on volume) reports showing the current state of claims in the organization. It will include claim volumes as well as financial numbers. With these reports you will have a basic snapshot of the state of your claims operation as a whole.

Examples of clams count reports:

New claims for the month

Total open claims

Closed claims for the month

Averages

Reserves on all open matters (Indemnity, expenses, medical etc.)

Total paid on all open and closed matters (Indemnity, expenses, medical etc.)

2. Change Reports

Net changes from one period to another are critical reports in any claims organization. They are essential planning tools that can help understand what areas of the organization are doing well and which areas are problematic. Spikes in a particular area could mean a shift in trends that if caught early enough could assist in making better underwriting choices. These types of numbers can also be used to ensure staffing is appropriate and identify areas for improvement.

Examples of delta reports include:

Reserve changes

Claims count changes

Total paid difference

3. Claims Summaries

Claims summaries are a more detailed report of specific losses. They include basic claims information as well as summaries of facts, damages and assessments. Knowing the specifics of a loss can help underwriters and executives truly understand the business they have written. Whether information on a coverage concern, an extreme loss, a pattern of losses, the information is critical to educating others beyond the numbers to actual losses. With this information better strategic decisions can be made regarding future underwriting.

Examples of two summary reports are:

Top 5-10 paid claims for month

Top 5-10 reserve changes for month

Bottom Line:

Check to see if these reports can be produced and if they can’t, ask why. Claims systems should be able to produce these types of reports. If they can’t then maybe it’s time to take a look at your systems again.

Regular reviews of basic claims metrics will give you a competitive advantage and allow you make informed strategic decisions. You can stay ahead of the curve, be nimble, react to changing conditions, and stand out in the marketplace.

Med Mal Update: Reasons for decrease in frequency and recent Illinois court decision to strike down damage caps

In response to my post, medical malpractice report shows increased severity despite lower frequency, I received a number of LinkedIn comments that I felt offered an interesting perspective on this topic. I have included some of that discussion below.

Additionally below, I review the news that the Illinois Supreme Court has struck down that state’s damage caps. The overturning of limits on non-economic loss will most certainly have repercussions for anyone involved in malpractice claims.

Tort reform and high cost to bring medical malpractice actions are seen as main reasons for lower frequency

An interesting discussion on the LinkedIn Medical Professional Group discussion board developed in response to my post on the increase in severity, but decrease in frequency, in medical malpractice suits. Generally, many in the industry commented that the high cost to bring a medical malpractice actions has swayed the plaintiff’s bar to file fewer claims. With other types of cases easier to prosecute, and cheaper to file, plaintiff’s attorneys can get a higher return on their investment by taking on other types of claims. Michael Snyder, a medical malpractice defense attorney in California, noted that “the cap on general damages has not increased [in California] since MICRA was enacted in the seventies. At the same time the cost for both prosecuting and defending these cases increased, so that most plaintiff’s attorney  “will only take cases where there are substantial special damage.”

Pat Tazzara, Litigation Attorney in Washington D.C., has seen a shift in jury attitudes against plaintiff’s attorneys bringing actions. “Once the prevailing theme was hostility [and] skepticism towards health care providers generally. Now, the focus is much more on skepticism towards plaintiffs bringing a law suit [or] suing their doctor.” Pat also feels that there there is a “shift in societal attitudes about those who sue.” This statement was also echoed by malpractice insurance expert, Peter Reilly, who added that “the plaintiff’s bar is wiser about what action it will bring against a medical provider.”

Consulting Actuary, Christopher Tait, points to Tort Reform in Pennsylvania as a main reason for lower frequency and severity. Pennsylvania adopted a Certificate of Merit procedure requiring plaintiff’s attorneys to secure a written statement of malpractice from a qualified expert prior to bringing suit. In addition, the state eliminated “venue shopping” which decreased the number of claims being brought in “bad” forums such a Philadelphia. Again, this created a value proposition for the plaintiff who had to ask themselves if it is worth having to spend money to bring an action where verdicts could be lower.

The costs to defend these claims is also rising as was again made clear in the Ohio Insurance Department’s annual report Medical Professional Liability Closed Claim Report. In this study it was shown that the average defense costs almost doubled from 2005 to 2008 from $24,443 to $42,249. Bottom line: These are expensive cases for everyone and costs for bringing or defending these claims continue to rise. Clearly, this is having some impact on the plaintiff’s bar.

Illinois strikes down damage caps on Medical Malpractice claims

In upholding a Cook County decision from 2007, the Illinois high court ruled that limits on pain and suffering and non-economic damages are unconstitutional. Based upon the State Constitution’s separation of powers clause, the judges struck the caps by holding that lawmakers were interfering the rights of juries to determine damages. (see ruling in Lebron, a Minor v. Gottlieb Memorial Hospital)

The Illinois Hospital Association said it best in their statement:

The hospital community is deeply concerned that this decision will renew the malpractice lawsuit crisis and make it more difficult for Illinoisans to access or afford health care as liability costs for physicians and hospitals are driven to unsustainable levels. Hospitals across the state will again face even greater challenges recruiting and retaining physicians, especially specialists such as neurosurgeons and obstetricians, who were leaving Illinois during the height of the crisis.

The Illinois Supreme Court has faced this decision before and has struck down similar laws in both 1976 and 1997.  Whether the legislature will try again is unknown at this time.

What do you think? Join in the conversation. Post your comments, questions, observations, thoughts, suggestions, musings, ideas for future topics, or other feedback. Or email me directly.

Better claim reports can help improve producer/carrier communications (take our poll)

Why do producers feel it’s like talking through tin cans when communicating with carriers?

Sam Friedman, National Underwriter Editor-in-Chief, recently wrote in his blog (A View From the Press Box) about the need for carriers to improve communications with Producers. Mr. Friedman was discussing the Producer Satisfaction Survey of 1,596 qualified agents and brokers by Deloitte’s Insurance Industry Group—conducted in partnership with National Underwriter (read more at Producers Seek More Input).  Improved producer carrier relationships can be a competitive advantage to help increase profitability in tough economic times. According to the survey, a key differentiator for carriers to attract more business from their producers is in the areas of claims handling and technology.

I believe that there are two areas in claims that add to communication breakdowns:

  • Poor technology creating limitations
  • Failing to use existing technology

Most modern claims systems can create automated customized reports. Producers should be able to ask for specific reports and have them electronically scheduled for delivery. If a carrier cannot provide this service it is because their technology is not up to speed or is not being used correctly. The reality is most claims departments fail to use their existing claims systems to their fullest capabilities. At the very least automated reporting should be available to include regular loss runs and trending reports, as well as notification of significant claim events. Often all you need to do is just ask for what you want.

There are of course many steps that can enhance producer/carrier relationship as it relates to claims. From the carrier side, producers assisting in getting information from insureds, promptly reporting losses and helping with deductible issues are just a few. Carriers can work with producers to provide prompt detailed reports which will benefit both parties through improved risk selections and better underwriting.

Suggested steps:

  • Agree on a suite of basic reports to provide producers monthly including loss runs and overall summary metrics that can show loss trends
  • Establish an agreed upon significant claim event report (reserve change, trial date, discovery deadlines, etc.) for prompt notifications
  • Automate reports to run and send on regular intervals

Better reporting will go a long way to improving relationships, and can only help increase profitability and enhance service to the policy holders.

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