Auto Injury Claims: The What, Why, and How of it All CAS Spring Meeting – May 16, 2005 Phoenix, AZ Adam Carmichael, IRC Senior Research Associate

Auto Injury Claims:The What, Why, and How of it All

CAS Spring Meeting – May 16, 2005 Phoenix, AZ

Adam Carmichael, IRC Senior Research Associate

• Methodology

What

• Sample

• History

IRC Study of Closed Auto Injury Claims

Are injuries becoming more serious?

No.

• Injury types show little change.

• Claimants overall appear to be less seriously injured than in the past.

2002 Study of Closed Injury Claims

2002 BI Injury Types Are Similar to Those in 1997

4%

6%

8%

10%

11%

11%

10%

55%

66%

3%

5%

7%

9%

2%

12%

9%

56%

66%

Disc injury

Fractures

Knee injury

Shoulder injury

Headache*

Minor cuts/bruises

Other sprain/strain

Back sprain/strain

Neck sprain/strain

1997

2002

*Headache was a write-in category in 1997.

Percentage of BI claimants with each type of injury

Little Change in Most Serious Injury Types

65% 66% 66%

1992 1997 2002

BI Claimants PIP Claimants

55%59% 58%

1992 1997 2002

Percentage of claimants with neck/back sprain/strain as most serious injury

Hospital Admissions Maintain Declining Trend

0%

10%

20%

30%

40%

50%

1977 1987 1992 1997 2002


Percentage of claimants admitted to hospital for 1+ nights

Increase in Claimants With No Disability

59%

70% 72%

45%52%

48%40%

68%66%

56%

1977 1987 1992 1997 2002


Percentage of claimants with no disability

More Claimants Reporting No Restricted Activity

41%44%

49%53%

48% 48%54%

59%

1987 1992 1997 2002


Percentage of claimants reporting no days of restricted activity

Over Half of Claimants Lost Time From Work

62%

59%

62% 63%

1997 2002 1997 2002

Percentage of employed claimants who lost time from work

7 days 5 days 8 days 6 days


Median number of lost work days

Trends in the medical treatment of injuries

• Shift towards more expensive alternatives

• Rise in per-visit costs


Steady Increase in Use of Some Medical Professionals

32%

21%

2%4%

14%

20% 20%

27%

33%

22%

Chiropractors PhysicalTherapists

AlternativeProfessionals

1987 1992 1997 2002

Percentage of BI claimants using each type of medical professional

n/a n/a

n/a: Data not available.

$134

$110$121

$146$130

$166

1997 2002

ChiropractorGeneral Practitioner

Chiropractor Physical Therapist

BI Claimants

Average Charges Per Visit for Select Professionals

$131

$102$118

$165 $167

$191

General Practitioner

Physical Therapist

PIP Claimants

Excludes permanent total disability and fatality claimants.

+37% +64% +62%

1997 versus 2002

$134

$110$121

$131

$102

$118


ChiropractorGeneral Practitioner

Chiropractor Physical Therapist

1997

Average Charges Per Visit for Select Professionals

$146$130

$166$165 $167

$191

General Practitioner

Physical Therapist

2002


BI versus PIP

Shift Towards More Expensive MRIs

56%

12%15%

53%

X-Ray MRI

61%

15%18%

58%

X-Ray MRI

1997 2002

Percentage of claimants receiving each procedure


$1,252 $1,212 $1,220

$145

$598$649

$957

$271

$1,327$1,207

$1,019

$172

$769$753

$1,133

$251

1997 2002

BI Claimants

Average Charges Per Procedure for Select Diagnostics

PIP Claimants

X-Ray X-RayMRI MRICT CTEMG EMG


+60% +87% +87% +104%

1997 versus 2002


Reported economic losses (special damages) have

surged.• Largely driven by growth in medical expenses

• Growth in wage and other losses more modest

Increase in Average Reported Economic Loss

$0

$2,000

$4,000

$6,000

$8,000

1977 1987 1992 1997 2002

BI

PIP

MP

Excludes permanent total disability and fatality claimants andclaimants with zero or missing economic loss.

Average amount of reported economic loss

Annualized Change in Average Economic Loss

9% 9%11%

10%

7%

1987

7%9% 10%

12% 13%1992

4%

1%

-1%-2%

3%

1997

2%4%

3%

7% 7%2002

BI PIP MPCPI - All CPI - Medical

Increase in Reported Medical Expenses

$3,645

$2,763

$4,662

$2,902

Medical Wage

Up 28% Up 5%

Average BI Claimed Losses

Up 47% Up 10%

1997 2002

Standard exclusions apply.

$4,105

$2,548

$6,015

$2,815

Medical Wage

Average PIP Claimed Losses

Medical Losses Are a Growing Component of Economic Loss

68%

75%79%

83%

71%

76%

84% 88%

1987 1992 1987 2002


Medical loss as a percentage of total economic losses

Standard exclusions apply.


Total Payments have not fully reflected the surges in reported

economic losses (special damages)

Especially among BI claimants with less serious injuries

Growth in Average Economic Losses and Payments

16%

40% 38%

5%

25%22%

BI PIP MP

Growth in Special Damages Growth in Total Payments

Percentage change from 1997 to 2002Percentage change from 1997 to 2002


$1.87

$1.65$1.49

$2.11

1987 1992 1997 2002

BI Payment Per Dollar of Claimed Economic Loss


Loss = $1,975

BI Paid = $4,265

Loss = $2,118

BI Paid = $3,738

Loss = $2,600

BI Paid = $4,103

BI Payment Per Dollar of Economic Loss – Neck/Back Sprains

Only claimants with no days of restricted activity.

$2.16

$1.76$1.58

Loss = $48,418

BI Paid = $46,744

Loss = $51,274

BI Paid = $50,380

Loss = $56,173

BI Paid = $65,675

BI Payment Per Dollar of Economic Loss – Brain Injury

$0.97 $0.98$1.17

Excludes permanent total disabilities.More than ½ had more than 60 days of restricted activity.

Growth in Economic Losses and BI Payments by Restricted Activity

25%22%

7%

16%

Fewer than 10 days 10 or more days

Growth in Special Damages Growth in BI Payments

Percentage change from 1997 to 2002Percentage change from 1997 to 2002


BI Payment Per Dollar of Economic Loss by Restricted Activity

$1.91

$1.50

$1.64

$1.43

Fewer than 10 days 10 or more days

1997 2002

Excludes permanent total disability and fatality claimants andclaimants with zero or missing economic loss or missing days of restricted activity.

Percentage of claimants

76% 79% 21%24%

Claim Handling Techniques


Help ensure that claimants with legitimate injuries are fairly

compensated

Claim Handling Techniques

10%4% 2%

56%

21%

10%1%

57%

11%2% 1%

73%

Index BureauCheck

Medical Audit IME SpecialInvestigation

BI PIP MP

Percentage of claimants subject to each techniquePercentage of claimants subject to each technique

Claim Handling Outcomes

13%

57%65%

47%

17%

67%

84%

27%

14%

58%

72%

19%

Index Check: PriorClaim Found

Audit: DamagesReduced

IME: DamagesReduced

SpecialInvestigation:

ClaimCompromised

BI PIP MP

Percentage with mitigating outcomesPercentage with mitigating outcomes

among claimants subject to each techniqueamong claimants subject to each technique

AttorneyInvolvement

• Fewer claimants are hiring attorneys • Claimants without attorneys receive higher

net payment and experience faster settlement


Decrease in Percentage of Claimants Represented by Attorneys

55% 52%47%

31% 31% 30% 28%32% 32%

25% 23%

57%

1987 1992 1997 2002

BIPIPMP

Percentage hiring attorneysPercentage hiring attorneys

Percentage of Payments to Represented Claimants

47%

28%23%

79%

49%

35%

BI PIP MP

Percentage With Attorney Percentage of Dollars Paid

Disability Measures by Attorney Involvement

Attorney No Attorney

Percentage of BI claimants

47%

37%

60%52%

38%

83%

No Days of RestrictedActivity

No Lost Time From Work No Disability

64%

30%

19%

5%4%1%

13%

37%

Chiro PhysicalTherapist

MRI EMG

Treatment Differentials by Attorney Involvement

62%

42% 42%

13%9%

2%

19%

43%

Chiro PhysicalTherapist

MRI EMG

Employed claimants with no lost time from workand neck/back sprain/strain as most serious injury



Average Net Payment to BI Claimants by Attorney Representation

$1,316

$4,158

$8,828

$2,174$7

Represented Claimants Non-Represented Claimants

$1,309 Difference

$12,993

$3,490

Average Economic LossLegal Expense

Average Net to Claimant


Net Reimbursement by Attorney Involvement Over Time

$862

$101

-$741

-$1,3091987 1992 1997 2002

Difference between average net BI payment Difference between average net BI payment to represented claimants and nonrepresented claimantsto represented claimants and nonrepresented claimants

Net payment=Total payment minus economic loss and any applicable legal fees.Excludes permanent total disability and fatality claimants andclaimants with zero or missing economic loss.

BI Claimants Without Attorneys Received Faster Settlements

1%4%

31%

48%

26% 24%21%

16%11%

18%

0 to 30 31 to 90 91 to 180 181 to 365 Over 1 year


Days between injury report and final payment

Fraud and BuildupFraud and Buildup


• Suspicion in 15 to 30 percent of claims

• Medical expenses most common source of buildup

• More chiropractor, physical therapists, alternative care, and pain clinics

• More MRI and EMG

• Higher average losses in fraud & buildup claims

• Higher attorney involvement

Appearance of Fraud & Buildup by Coverage

9%

5% 4%

8%7%

18%

12%

9%

14%16%

BI PIP MP UM UIM

Fraud Buildup

Percentage with Appearance of Fraud and of Buildup

Claim Handling Techniques Used to Detect Fraud & Buildup

54%

18%

6%0%

68%

31%37%

8%

Index BureauCheck

Medical AuditPerformed

IME Requested SpecialInvestigation

No Fraud or Buildup

Fraud and/or Buildup

Percentage of PIP Claims

Summary of Key IRC Closed Claim Findings

Injury patterns show little changeInjury patterns show little change But claimants appear to be less seriously

injured

Modest increases in several areas of medical Modest increases in several areas of medical treatmenttreatment Shift towards more expensive treatment Higher per-visit costs

Summary of Key IRC Closed Claim Findings

Significant growth in reported economic lossesSignificant growth in reported economic losses Largely driven by growth in medical expenses More pronounced in first-party claims Not fully translated into total payments

especially for BI claimants with less serious injuries

Attorney involvementAttorney involvement Shows declines for all coverages Magnifies many adverse trends in claiming

behavior Associated with higher reported losses and

significantly lower net BI payment to claimant

Documents

Auto Injury Claims: The What, Why, and How of it All CAS Spring Meeting – May 16, 2005 Phoenix, AZ Adam Carmichael, IRC Senior Research Associate