Looking at insurance loss trends can be quite baffling at times. Perhaps no more so than when trying to figure out why bodily injury severities continue to rise despite frequency declining at a time when the safest cars ever produced are on the nation’s highways.
According to a recent study by the Insurance Research Council, the costs associated with bodily injury claims has exceeded the rate of inflation during the period of 2007-2012. While this is an interesting statistic, perhaps it would behoove us to take a deeper dive into this trend to try and shed some light on what insurers can do to improve outcomes.
When I began my claims career a number of years ago, we faced similar challenges. BI’s were adversely trending and fraud was becoming rampant. Certainly fraud remains a culprit, for not only BI’s, but all line coverages. It is estimated that roughly 10 percent of all claims are out and out fraud. From staged accidents to paper cars, there is no shortage of work for SIU departments from coast to coast. But beyond this are exaggerated claims, which comprise as much as one third of BI claims, arguably one of the biggest drivers of BI severity.
To properly combat these types of claims, insurers need to take bold and aggressive steps, focusing on the three pronged approach laid out in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization from Ordinary to Extraordinary! While simplistic in nature, the trinity of people, processes and technology, takes on a variety of different meanings and applications. Let’s look at all three.
People – Not everyone is cut out to be an adjuster, especially when dealing with savvy attorneys on the other side. The best adjusters that I have ever worked with or managed had a shared trait of being insatiably curious. BI adjusters need to always be asking questions! Let’s face it, in a society where the AMA estimates that 86 percent of Americans are afflicted by back pain during the course of their life, it is fair to question whether or not such injuries were caused by a particular claim being presented.
Processes – What steps are being taken to get the right claim to the right adjuster? There are often protocols in place to move claims to the appropriate queue, such as towing, glass, salvage or thefts. But what about BI claims? Part of the challenge is that BI’s don’t always emerge at first notice of loss. Rather, claims are routinely sent to liability adjusters to sort out the physical damage components. But what happens when the claimant, perhaps not happy with the PD settlement, runs out and retains an attorney with a sudden onset of subjective injury complaints? There are certain steps that can be proactively taken to isolate the potential emergence of BI claims.
Technology– While this crucial element won’t stand on its own without effective people and processes, the lack of technology can be a critical downfall. Simply looking at medical bills and records can be a time consuming and often misunderstood process. Doing this manually takes an inordinate amount of time, and often the benefits are negligible because of the inherent lack of understanding of proper coding, edits, modifiers and billing. Fortunately, there is bill repricing software that provide adjusters with ease of use and management with robust, granular reporting capabilities.
So the big question is where do we start? My suggestion would be at the outset of every claim, leveraging available internal and industry data in an attempt to isolate claims that have a high probability of emergent BI’s.
As is the case in real estate, three key words apply to high BI severities; location, location, location. In a recent study, the highest and lowest cost cities to insure automobiles were highlighted. Of little surprise was the 30 most expensive insurance rates occurred in no-fault states and in major metropolitan areas with notoriously liberal juries.
Of the ten cheapest cities to insure a vehicle, six were in North Carolina. Interestingly, this state is one of just a handful in the nation with a contributory negligence law, meaning that if a person is even 1 percent at fault for an accident, they are barred from suing. Perhaps there is something to holding people accountable for accidents, as 12 of the 30 cheapest cities, or 40 percent, were located in contributory states.
Does this mean that everyone in New York City, Miami, LA or Chicago is going to be injured? Of course not. Just as low rates in states like North Carolina and Alabama are no guarantee that you won’t face BI claims in comparative situations. But, it is a starting point and rural versus urban and no-fault versus tort can be two predictors of many. In the former, it is important to remember that while rural BI frequency will be lower, there is the propensity for higher damages because of the nature of higher speeds on rural highways. In the latter, consider that while BI’s may be limited, at least in theory, by no fault thresholds, there may be a run up of medical bills due to the nature of this first party entitlement.
The next critical component is the validation of known relationships between involved parties including the insured, claimant, alleged witnesses, attorney and medical providers and known associates of any of the aforementioned. Leveraging demographic studies and link analysis tools to accomplish this can provide an intricate pattern that can often yield fruitful outcomes when it comes to scoring the probability of an emergent BI.
Most importantly, there is the investigation that is critical to quality. As a rule of thumb, there are 12 critical rocks that must never be left unturned.
- The police report. Was there any mention of any injury at the scene? Was the injured party transported to a medical facility? Was there any mention of contributing factors against the claimant? Were any witnesses identified? Did the police respond, or was a counter report filed after the fact?
- Liability – Who is at fault for the accident? Insurance adjusters assess comparative negligence on just 3 percent of all claims, a vast understatement of what should truly be assessed. Leveraging tools such as ClaimIQ can provide adjusters with the critical elements needed to properly identify duties owed and breached.
- Vehicle photographs (auto claims). Does the damage match? Are there paint transfers? What is the directional force of impact? Is the damage such that the injury being claimed may be related? In addition, point of impact plays a significant role in the assessment of comparative fault.
- The accident scene. Are there any other potential tortfeasors? Overgrown bushes, signal outages, missing or blocked signage, absentee third parties, and similar factors should always be investigated. Does the movement, as stated by the parties, correspond to what is being visualized?
- Emergency room records. What was said to the EMT’s at the scene and during transport? What does the ER admission statement say? What type of pain was related to the treating physician? Was there a mention of symptoms other than what may be related to the accident? Is there any indication of drug or alcohol usage that may have contributed to the loss?
- Medical treatment patterns. How soon did treatment begin? Were there gaps in treatment? Was treatment provided on evenings and/or weekends? Were you able to verify treating physician office hours?
- Provider type. Was the claimant seen by a chiropractor or medical doctor? If the latter, then what was his or her specialty, such as neurology, orthopedics, and so on? What are the medical professional’s credentials? Is his or her license current? Are there any prior or pending disciplinary actions with the current state, or in prior states? Can the claimant describe the doctor, medical facility, staff and provide directions from their home to the facility?
- The duration and frequency. When did treatment start? How long did it last? Was it active or passive? Was it longer than an anticipated expected recovery date among the general population for a similar complaint?
- Objectivity. Where there objective findings, such as those from an x-ray, MRI or CT scan? Were the records and films obtained and reviewed by an independent medical expert?
- Pain management. Did the doctor prescribe medication to ease the complaints of pain? If so, then what type (analgesics, prescriptions, injections)?
- SOAP notes. Does the treatment being provided and billed match the medical providers SOAP (subjective, objective, assessment, plan) notes which can be a great indicator of not only what treatment really occurred, but also a red flag for CPT coding and modifier abuse.
- Index and Priors – Did the claimant have prior claims or injuries? Let’s face it, there is a percentage of the population that will use claims in an attempt to get compensated for the every malady. Adjusters need to do a detailed investigation, including seeking out prior providers, reviewing prior indexes, requesting medical authorization and reviewing old claims. This can be time consuming, but then again so is panning for gold. Digging deep during investigations is not only a requirement of the job, but it is part of the duty of being a fiduciary for the insured, in order to pay only what is owed.
While there may be many additional steps, depending on the type and complexity of the investigation, these are designed to provide a roadmap for success. By focusing on the basic fundamentals, leveraging the triad of people, processes and the right technology, insurers will find that they can effectively combat the rise in BI severities.
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