CAS Annual Meeting No-Fault: Then and Now

CAS Annual Meeting

No-Fault: Then and NowElizabeth A. Sprinkel

November 11, 2003 · New Orleans, Louisiana

Trends in Auto Injury Claims, Trends in Auto Injury Claims, 2002 Edition2002 Edition

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

1980 1985 1990 1995 2000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

PIP loss costs (left scale) PIP severity (right scale)

Annualized changes1980 - 2000

PIP loss costs

PIP severity

PIP severity: +6.41%PIP loss costs: +5.92%CPI-U, medical care +6.44%

Annualized changes1995-2000

PIP severity: +6.14%PIP loss costs: +3.95%CPI-U, medical care +3.41%

Growth in U.S. PIP Severity and Loss Costs

IRC, Trends in Auto Injury Claims, 2002 Edition.

126%

210%

217%

222%

273%

392%

446%

473%

528%

0% 100% 200% 300% 400% 500% 600%

North Dakota ($)

Utah ($)

Kansas ($)

Minnesota ($)

Michigan (V)

Massachusetts ($)

Florida (V)

Colorado ($)

New York (V)

Changes in PIP Loss Costs in No-Fault States1980 - 2000

($) Monetary threshold(V) Verbal threshold

IRC, Trends in Auto Injury Claims, 2002 Edition.

79%

33%21%

13% 11% 8% 8% 2%

-2% -2% -7% -13%

-56%

NY FL MI CO KS PA UT MN KY NJ ND MA HI

Source: Fast Track Monitoring System

Growth in PIP Average Loss Cost in No-Fault States 1995-2000

2.06 2.082.14

2.09 2.10

2.24

2.00

1.811.78

1.711.68

1.73

1995 1996 1997 1998 1999 2000

Number of PIP Claims Per 100 Insured Cars


New York

Other No-Fault States*

* Excluding Michigan

PIP Claim Frequency 1995-2000:New York vs. No-Fault States

$4,862 $4,969

$5,675

$6,064

$6,700

$8,335

$3,976$4,183

$4,352$4,699

$4,963

$4,523

1995 1996 1997 1998 1999 2000


New York

Other No-Fault States*

* Excluding Michigan

Average PIP Claim

PIP Claim Severity 1995-2000:New York vs. No-Fault States

Claiming Behavior in Claiming Behavior in New York’s No-Fault Auto Insurance New York’s No-Fault Auto Insurance

SystemSystem

• More than 2,800 PIP claims closed with

payment during 4th quarter of 2000

• Twelve participating insurers representing

about half of the private passenger no-fault

auto insurance market in New York

2000 Survey of Closed PIP Claims in New York

Sampling Scheme

Survey Instrument Detailed information was submitted for each

claimant on:

Nature of injuries

Medical treatment

Attorney involvement

Losses and payments

Suspicion of fraud and buildup

2000 Survey of Closed PIP Claims in New York

NYC Suburbs

23%

NY City30%

Other NY Metro18%

Rest of State29%

Medium cities 14%Small towns 12Rural areas 4

Manhattan 3%Brooklyn 9Queens 8The Bronx 5Staten Island 2Unknown 1

NYC MetropolitanArea and Suburbs = 52%

Distribution of Claimants by Accident Location

IRC, Claiming Behavior in New York’s No-Fault Auto Insurance System, 2001

Key Findings of 2000 Survey of PIP Claims in New York

Deterioration in claiming behavior

• Growth in number of injuries reported

• Increase in temporary disabilities

• Rise in use of certain medical professionals

• Rise in use of MRIs and EMGs

• Higher average losses and payments

Worsening trends more pronounced in the New York City metro area

Suspicion of fraud and buildup much more prevalent in the New York City metro area

Key Findings of 2000 Survey of PIP Claims in New York

34%

17%

23%

47%

20%23%

NYC Metro Other Metro Rest of State

1997 2000

NY PIP Claimants Reporting Three or More Injuries

1997 vs. 2000

Average # Injuries:

2.21 2.64 1.76 1.87 1.941.84


37% 38%34%

48%

37%40%


1997 2000

Increase in Temporary Disability Among Metro NYC PIP Claimants

1997 vs. 2000


31%

15%19%

17%13%

46%


1997 2000

Use of Chiropractors Among NY PIP Claimants

1997 vs. 2000


28%

16% 17%14%

20%

43%


1997 2000

Use of Physical Therapists

1997 vs. 2000


5%3% 2%2% 2%

26%


1997 2000

Use of Alternative Treatment Professionals

1997 vs. 2000


16%

51% 53%

46%

33%

4%

37%33%

4%

More than 10 visitsto general practitioner

More than 25 visitsto chiropractor

More than 25 visitsto physical therapist


More Visits to Providers Among NYC PIP Claimants


38%

14% 16%

49%

13% 13%


1997 2000

Increased Use of MRI in Metro NYC


38%34%

50%

9%12%

28%

14% 12%

24%

X-Ray MRI EMG


More Intensive Use of Diagnostics

Among NYC PIP Claimants Percentage of Claimants

Receiving Each Procedure 3 or More Times


Sharp Increase in Average Loss in NYC Metro Area

$5,140$5,782

$8,841

$4,685

$3,450$4,298

1992 1997 2000

NYC Metro Outside NYC Metro

Average Total LossPer PIP Claimant


Average Payment Also Increased in NYC Metro Area

$4,803$4,342

$6,878

$4,393

$2,806$3,295

1992 1997 2000

NYC Metro Outside NYC Metro

Average Total PaymentPer PIP Claimant


$3,576

$9,248

$12,557

$16,996

$2,856

$6,943

$9,840

$12,916

None Low Moderate High

Average loss Average payment

Average Total Loss and Payment by Degree of Fraud


66%

14%

11%

9%

None

Low (1 to 3)

Moderate (4 to 6)

High (7 to 10)

Distribution of Claims by Degree of Suspicion of Fraud or Abuse

Rating on scale of ‘0’ (no fraud present) to ‘10’ (very high suspicion)


9%

18%

40%

NY State NYC Metro Brooklyn

High Suspicion of Fraud or Abuse Among NY PIP Claimants

Percentage of claimants with suspicion ratings

between 7 and 10


Insurance Fraud: A Public View

Intentionally deceiving an insurance company or agent for financial gain.

Planned Fraud• Intentional accidents• Property damage or injury claim fraud• Application fraud

Opportunistic Fraud• Claim padding or buildup

Insurance Fraud:

Attitudes Toward Insurance Buildup:

1989 Through 2002

31%

23% 22%

28%

40%

35%

25%

21%19%

24%

36%

24%

33%

22%

0%

10%

20%

30%

40%

1989 1991 1993 1995 1997 2000 2002

OK to increase claim amount to make up for deductibleOK to increase claim amount to make up for premium

IRC, Insurance Fraud: A Public View, 2003

Acceptance of Claim Padding and Buildup –National vs. New York State Sample

% Who Agree It is All Right To...

Increase amount of claim to make up for insurance premiums

Increase amount of claim to make up for

deductible

20%

29%

25%

32%

National (n=1,008)

New York (n=501)

= Significant difference at 95% confidence level.


Personal Acceptance of Application Fraud National vs. New York State

15%

21%

21%

25%

13%

15%

15%

18%

National (n=505)

New York (n=275)

% Acceptable to ‘You Personally’

Listing older driver on vehicle that primarily driven

by driver < 21

Deliberately underestimating number

of miles driven

Saying car kept in area with lower rates than where

actually garaged

Stating vehicle driven for pleasure when really for

business purposes

= Significant difference at 95% confidence level.


10%

10%

16%

13%

7%

8%

9%

10%

National (n=505)

New York (n=275)

Preliminary data.

Personal Acceptance of Application Fraud National vs. New York State


Failing to list certain drivers on application

Failing to list teen driver as member of household

Deliberately overstating years of driving experience

Failing to list prior accidents, tickets, or

claims

= Significant difference at 95% confidence level.IRC, Insurance Fraud: A Public View, 2003

3%

3%

7%

6%

9%

1%

2%

4%

4%

5%

National (n=505)

New York (n=275)

Personal Acceptance of P.D. Claim Fraud National vs. New York State

Adding old damage to new accident claim

Describing accident differently to reduce fault

Pretending hit and run occurred to submit claim

Describing stolen car with higher value than had

Abandoning car and reporting it stolen



3%

4%

4%

6%

11%

2%

3%

3%

4%

5%

National (n=505)

New York (n=275)

Submitting medical bills for treatment never received

Staying out of work longer than medically necessary

Filing claim for person not involved in accident

Continuing treatment after injury has healed for higher

settlement

Being involved in organized ring that files fake claims

Personal Acceptance of Injury Claim Fraud National vs. New York State



Insurance fraud leads to higher rates for everyone

People who commit fraud should be

prosecuted to the fullest extent of law

Insurers are sometimes forced to stop offering coverage due to fraud

Insurers should take steps to stop fraud even

if it means charging slightly higher premiums

to cover costs53%

53%

90%

91%

51%

56%

92%

92%

National (n=1,008)

New York (n=501)

% Strongly Agree/Agree/Probably Agree

Perceptions About Insurance FraudNational vs. New York State


Insurance fraud doesn’t hurt anyone

Inaccurate applications are the result of honest

mistakes, not deliberate attempts to obtain lower

rate

When making claim, it is acceptable to change details of accident to

ensure payment

8%

14%

51%

9%

9%

54%

National (n=1,008)

New York (n=501)

% Strongly Agree/Agree/Probably Agree

Perceptions About Insurance Fraud (cont’d)National vs. New York State


718 Providence Road · P.O. Box 3025 · Malvern, PA 19355-0725Phone 610.644.2212 · Fax 610.640.5388

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CAS Annual Meeting No-Fault: Then and Now