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Aon Hewitt Ward Group Proprietary and Confidential
Risk. Reinsurance. Human Resources.
Property-Casualty Insurance Anti-Fraud Benchmarking Study Study Results January 2016
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
2
Confidential Table of Contents
Study Overview x Introduction ................................................................................................................... 3 x Profile of Participants ................................................................................................... 3 x Executive Summary ..................................................................................................... 5 Key Findngs x Appendix
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
3
Study Overview
Introduction Insurance fraud is a major concern across the property-casualty insurance industry and can have a significantly adverse impact on company results, which in turn can negatively impact insurance rates.
To better identify industry trends and best practices, the Coalition Against Insurance Fraud approached Ward Group, a part of Aon Hewitt, a business unit of Aon plc. to conduct a survey of P&C carriers to understand how they are approaching fraud investigation and management, and what changes are taking place within Special Investigation Unit (SIU) operations. Key areas of focus include SIU organizational structures, budgets, and activities. The goal of this report is to provide meaningful data that will assist insurance carriers in managing their SIU departments and help generate ideas and initiatives to enhance anti-fraud operations and results.
Study Design This survey was designed with the assistance of SIU leaders of Coalition Against Insurance Fraud member property-casualty insurance carriers. In creating this survey, questions were designed to maximize participation and standardize benchmarking metrics for all participants. Definitions were provided where possible to create uniformity and consistency in responses. Diligence was taken to clarify and validate items with individual insurers during the analysis process. The results in this document should be used as a general comparison by insurance companies and their SIU departments.
Profile of Participants
A diverse group of 36 property-casualty insurance carriers participated in this survey. In order to maintain the confidentiality of the data, the names of the participants are not disclosed. Results are calculated using the total number of participant responses to each survey topic.
To further analyze the survey responses, participants were segmented into the following benchmark groups:
� Overall Benchmark. This benchmark consists of the aggregate findings of all 36 participants
� Premium Size. Companies were segmented based on the category of which they responded for direct written premium
– Small Carriers: Less than $1B Premium Written
– Mid-size Carriers: Between $1-5B Premium Written
– Large Carriers: Greater than $5B Premium Written
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
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� Geographic Footprint. Companies were segmented based on the number of states with written business
– Regional Carriers: 1-24 States
– National Carriers: 25-50 States
� Line of Business. Companies were segmented based on line of business focus.
– Personal Focused Carriers: These are companies with 70% or more in personal lines premium
– Multi-line Carriers: These are companies that do not have a premium type of over 70%
– Commercial Focused Carriers: These are companies with 70% or more in commercial lines premium
– Mono-line Workers Compensation Carriers: These are companies with 70% or more in workers compensation premium
Benchmark Group Number of Companies
Average DPW (in millions)
Overall Benchmark 36 $2,910 Small Carriers 15 $472 Mid-size Carriers 15 $2,306 Large Carriers 6 $10,514 Regional Carriers 19 $1,504 National Carriers 17 $4,481 Personal Focused Carriers 21 $3,541 Multi-line Carriers 7 $3,078 Commercial Focused Carriers 4 $1,815
Mono-line Workers Compensation Carriers 4 $398
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
5
Executive Summary With the lack of publicly available data in the marketplace specific to SIU operations, the Coalition Against Insurance Fraud retained Ward Group to offer their members and other carriers a survey to capture these valuable metrics and identify industry practices.
Ward Group conducted a survey of SIU departments to collect data on operations, structure, and activities. A diverse group of 36 companies participated in the survey. This document summarizes the findings of that survey.
Summary of Findings
� The organizational structure of SIU departments varied across the industry, with x% of carriers indicating a centralized approach, x% indicating a decentralized approach, and x% indicating a combination of both
� x% of SIU departments reported to the carrier’s claims organization and x% of SIU staff were located in carrier field offices
� SIU department budgets represented x% of premium written in 2014
� Salary expense represented x% of the SIU budget
� The average budget expense per investigation was $x with the SIU salary expense representing $x per internal investigation
� SIU full time equivalents (FTE’s) averaged x per $xxx of premium written and staffing increased x% from 2014 to 2015
� The ratio of staff to management in the SIU department was x with the ratio of field and desk investigator to management at x
� ….
The remainder of this report explores these findings in more detail.
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
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Sample Key Findings
Budgeting and Expense Management
Analysis and Commentary � Companies reported an average budget
increase of x% from 2014 to 2015 with a median increase of $xxx,xxx
� The two areas with greatest budget increases were x staff and x
� Increases in analytics’ budget were primarily driven by companies that were more x focused than x and x
� Salary represented x% of the reported SIU budget in 2014 and x% of the adjusted* budget
� The three areas most likely to not be included in the SIU budget were:
– x – xx – xxx
Overall Small Mid-size Large
SIU Budget Expense as a % of DPW
Reported
Adjusted*
Overall Small Mid-size Large
Salary Expense as a % of Budget
*Adjusted budget includes expert and vendor investigation expense if not included in budget total reported by companies
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
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Sample Key Findings
Budgeting and Expense Management (continued)
Benchmark Group Overall Small Medium Large
SIU Salary Expense Per Internal Investigation $x $x $x $x Desk Salary Expense per Accepted Desk Investigation $x $x $x $x Field Salary Expense per Accepted Field Investigation $x $x $x $x
Analysis and Commentary � The average expense per investigation
was $x of the reported budget and $x of the adjusted* budget
� The SIU salary expense per internal investigation was $x
� Field salary expense per accepted field investigation increased with premium size
� While large companies had the x field salary expense per accepted field investigation they also were operating with the x accepted referrals per field investigator
$0
$500
$1,000
Overall Small Mid-size Large
Budget Expense per Investigation
Reported
Adjusted*
*Adjusted budget includes expert and vendor investigation expense if not included in budget total reported by companies
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
8
Sample Key Findings
Staffing
Analysis and Commentary � Salary amounts represent base salary only and do not include bonus, overtime, benefits, or other personnel costs
� The average SIU salary expense of $x was driven by x% of SIU staff being desk and field investigators
� Large carriers and national carriers reported x average salary expenses per FTE for nearly all job roles
� Decentralized companies reported a x salary expense in every FTE role type compared to centralized companies
Support Staff
Intake Operator - Gatekeeper
Desk Investigators
Field Investigators
Analysts
Other
Supervisors - Team Leaders
Managers
Total SIU FTE
Salary Expense per SIU FTE by Job Role
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
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Sample Key Findings
Workflow and Productivity
Analysis and Commentary � x% of all referrals to SIU were accepted
for investigation
� Adjuster referrals had a x% acceptance ratio compared to x% for referrals by automated fraud detection tools
� ….
Accepted Referrals by Source
Adjusters
Automated fraud detection tools
All other sources
0%
10%
20%
30%
40%
50%
60%
Adjusters Automated frauddetection tools
All other sources Total
Referral Acceptance Ratio* by Source
*Referral Acceptance Ratio is defined as the number of accepted referrals as a percentage of total referrals to SIU
Aon Hewitt Ward Group Proprietary and Confidential
Property-Casualty Insurance Anti-Fraud Benchmarking Study
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Sample Appendix
Detailed Study Results
Number of Companies x x x x x x x x x x
Direct Premium WrittenAverage DPW (in millions) x x x x x x x x x xPersonal Lines Auto x x x x x x x x x xPersonal Lines Property x x x x x x x x x xPersonal Lines Other x x x x x x x x x xCommercial Lines Auto x x x x x x x x x xCommercial Lines Property x x x x x x x x x xCommercial Lines Other (ex Workers Comp) x x x x x x x x x xWorkers Compensation x x x x x x x x x x
Number of States x x x x x x x x x x
SIU FTE's per $100M of DPW x x x x x x x x x x
Performance Measurement
Property-Casualty Insurance Anti-Fraud Benchmarking Study 2015Profile
OverallBenchmark
Small<$1B DPWBenchmark
Mid-size$1 - 5B DPW Benchmark
Regional1-24
States
National25-50 States
CommercialLines
>70% DPW
Multi-Line
Personal Lines
>70% DPW
Large >$5B DPW Benchmark
Workers Comp>70% DPW
Ward Group - Cincinnati, OH Page 1 Copyright© Ward Group (R) - Confidential and Proprietary
Title Whom Head of SIU ReportsCEO x x x x x x x x x xPresident x x x x x x x x x xExecutive Vice President x x x x x x x x x xSenior Vice President x x x x x x x x x xVice President x x x x x x x x x xAssistant Vice President x x x x x x x x x xDirector x x x x x x x x x xManager x x x x x x x x x xConsultant x x x x x x x x x xOther x x x x x x x x x x
Reporting Levels Between SIU Head and CEO1 level x x x x x x x x x x2 levels x x x x x x x x x x3 levels x x x x x x x x x x4 levels x x x x x x x x x x5 levels x x x x x x x x x x
SIU Areas of ResponsibilityInvestigating claims fraud x x x x x x x x x xRecommending claims settlements x x x x x x x x x xInvestigating underwriting fraud x x x x x x x x x xInternal security, inc. employee actions & agency force x x x x x x x x x xAnti-fraud compliance x x x x x x x x x xSubrogation/recovery x x x x x x x x x xComplex claims investigation not involving fraud x x x x x x x x x xAnti-fraud training of SIU personnel x x x x x x x x x xFraud awareness training internal x x x x x x x x x xFraud awareness training external x x x x x x x x x xVendor management x x x x x x x x x xOther x x x x x x x x x x
Property-Casualty Insurance Anti-Fraud Benchmarking Study 2015Organization/Responsibilities (cont.)
OverallBenchmark
Small<$1B DPWBenchmark
Mid-size$1 - 5B DPW Benchmark
Regional1-24
States
National25-50 States
Workers Comp>70% DPW
CommercialLines
>70% DPW
Multi-Line
Personal Lines
>70% DPW
Large >$5B DPW BenchmarkPerformance Measurement
Ward Group - Cincinnati, OH Page 2 Copyright© Ward Group (R) - Confidential and Proprietary
Total Annual Budget for SIU2014 (000) x x x x x x x x x x2015 (000) x x x x x x x x x xChange from '14 to '15 x x x x x x x x x x
Items Not Included in SIU BudgetSalaries x x x x x x x x x xBenefits x x x x x x x x x xAllocation of office rent x x x x x x x x x xVendor expenses x x x x x x x x x xData acquisition, such as ISO Claim Search x x x x x x x x x xNICB dues x x x x x x x x x xDues for the Coalition Against Insurance Fraud x x x x x x x x x xAnti-fraud assessments levied by state government x x x x x x x x x xAnti-fraud training costs x x x x x x x x x x
Areas with Greatest Budget Incr. from '14 to '15Investigative staff x x x x x x x x x xAnalytical staff x x x x x x x x x xCompliance x x x x x x x x x xTechnology x x x x x x x x x xLegal x x x x x x x x x xTraining x x x x x x x x x xOther x x x x x x x x x x
SIU Personnel Costs Allocated to Other Deptsthat use SIU Services x x x x x x x x x x
Method Used to Allocate SIU Personnel CostsTime Capture x x x x x x x x x xReferrals by LOB and Time Period x x x x x x x x x x
Other x x x x x x x x x x
Property-Casualty Insurance Anti-Fraud Benchmarking Study 2015Budget
OverallBenchmark
Small<$1B DPWBenchmark
Mid-size$1 - 5B DPW Benchmark
Regional1-24
States
National25-50 States
Workers Comp>70% DPW
CommercialLines
>70% DPW
Multi-Line
Personal Lines
>70% DPW
Large >$5B DPW BenchmarkPerformance Measurement
Ward Group - Cincinnati, OH Page 3 Copyright© Ward Group (R) - Confidential and Proprietary
Average Days from Claim Date of Notice to Referral to SIU by LOB
Personal Lines Auto x x x x x x x x x xPersonal Lines Property x x x x x x x x x xPersonal Lines Other x x x x x x x x x xCommercial Lines Auto x x x x x x x x x xCommercial Lines Property x x x x x x x x x xCommercial Lines Other (excluding Workers Comp) x x x x x x x x x xWorkers Compensation x x x x x x x x x x
Average Cycle Time of Cases Handled by LOB (in Days)Personal Lines Auto x x x x x x x x x xPersonal Lines Property x x x x x x x x x xPersonal Lines Other x x x x x x x x x xCommercial Lines Auto x x x x x x x x x xCommercial Lines Property x x x x x x x x x xCommercial Lines Other (excluding Workers Comp) x x x x x x x x x xWorkers Compensation x x x x x x x x x x
*Cycle time is calculated as the number of days from the date of referral to SIU until the investigation is concluded.
Property-Casualty Insurance Anti-Fraud Benchmarking Study 2015Metrics - Timing
OverallBenchmark
Small<$1B DPWBenchmark
Mid-size$1 - 5B DPW Benchmark
Regional1-24
States
National25-50 States
Workers Comp>70% DPW
CommercialLines
>70% DPW
Multi-Line
Personal Lines
>70% DPW
Large >$5B DPW BenchmarkPerformance Measurement
Ward Group - Cincinnati, OH Page 4 Copyright© Ward Group (R) - Confidential and Proprietary
SIU Investigative Referrals (Accepted and Rejected) by Referral Type during 2014
Adjusters x x x x x x x x x xAutomated fraud detection tools x x x x x x x x x xAll other sources x x x x x x x x x x
SIU Investigative Referrals Accepted for Investigation by Referral Type during 2014
Adjusters x x x x x x x x x xAutomated fraud detection tools x x x x x x x x x xAll other sources x x x x x x x x x x
Referral Acceptance Ratio by Referral TypeAdjusters x x x x x x x x x xAutomated fraud detection tools x x x x x x x x x xAll other sources x x x x x x x x x xTotal x x x x x x x x x x
% of Accepted Investigative Referrals Managed by the Following Groups
Desk investigators x x x x x x x x x xField Iivestigators x x x x x x x x x xVendor assigned investigations (entire investigation) x x x x x x x x x xOther x x x x x x x x x x
% of Accepted Investigative Referrals with External Expert Costs
Desk investigators x x x x x x x x x xField investigators x x x x x x x x x x
Monthly Average Accepted Referrals x x x x x x x x x x
Accepted SIU Investigative Referrals per Total SIU FTE's x x x x x x x x x xAccepted SIU Investigative Referrals per Desk Investigator x x x x x x x x x xAccepted SIU Investigative Referrals per Field Investigator x x x x x x x x x xAccepted SIU Investigave Referrals per Desk/Field Inv. x x x x x x x x x x
Monthly Average Accepted Referrals per Field Investigator x x x x x x x x x x
Monthly Average Accepted Referrals per Desk Investigator x x x x x x x x x x
Property-Casualty Insurance Anti-Fraud Benchmarking Study 2015Metrics - Referrals
OverallBenchmark
Small<$1B DPWBenchmark
Mid-size$1 - 5B DPW Benchmark
Regional1-24
States
National25-50 States
Workers Comp>70% DPW
CommercialLines
>70% DPW
Multi-Line
Personal Lines
>70% DPW
Large >$5B DPW BenchmarkPerformance Measurement
Ward Group - Cincinnati, OH Page 5 Copyright© Ward Group (R) - Confidential and Proprietary
Fraud Mitigation $'s Tracked by CompanyYes x x x x x x x x x xNo x x x x x x x x x x
Factors used in Mitigation Measurement SystemHighest reserve x x x x x x x x x xTotal incurred (paid+ expenses+outstanding reserve) x x x x x x x x x xAverage paid by line of business x x x x x x x x x xClaim reserves x x x x x x x x x xClaim value estimates x x x x x x x x x xAmount paid x x x x x x x x x xAmount denied x x x x x x x x x xExpenses paid x x x x x x x x x xOther x x x x x x x x x x
Reason Fraud Mitigation Dollars not TrackedDiscovery or evidentiary concerns x x x x x x x x x xLiability or bad faith claim concerns x x x x x x x x x xCompany brand or image x x x x x x x x x xLeadership doesn’t require it x x x x x x x x x xNot needed for a business case x x x x x x x x x xNot required by regulation or law x x x x x x x x x xOther x x x x x x x x x x
Property-Casualty Insurance Anti-Fraud Benchmarking Study 2015Fraud Mitigation
OverallBenchmark
Small<$1B DPWBenchmark
Mid-size$1 - 5B DPW Benchmark
Regional1-24
States
National25-50 States
Workers Comp>70% DPW
CommercialLines
>70% DPW
Multi-Line
Personal Lines
>70% DPW
Large >$5B DPW BenchmarkPerformance Measurement
Ward Group - Cincinnati, OH Page 6 Copyright© Ward Group (R) - Confidential and Proprietary