Improving consistency, accuracy & transparency of settlements
Mark Strang
ACII, Chartered Insurance Practitioner
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Agenda
• Personal Injury Claims Background
• Applicable lines of business
• ‘Compensation Culture’ – something new?
• Why improve consistency, accuracy and transparency?
• Improving consistency, accuracy and transparency
• How technology can help
• The future
ISO Background
• Provider of data, analytics and decision-support products designed to help
customers measure, manage and reduce risk
• Run the anti-fraud database in USA (250,000 new claims per day)
• Catastrophe modelling (AIR Worldwide)
• Telematics analytics (Driving DNA)
• Leading personal injury evaluation tool in UK (Claims Outcome Advisor) – used
by more than 20 UK insurers (also used in USA, Ireland and Israel)
• ISO established 1971
• 6,500 employees
• HQ in USA, offices in Europe, Beijing, Hyderabad, Kathmandu, Singapore & Tokyo
• $1.5bn turnover
Personal Injury Claims
• Motor Third Party Liability
• Employees’ Compensation (EC)
– Also known as Employers’ Liability, Workers’
Compensation, Work Injury Compensation
• Public Liability
• Product Liability
• Household Liability
‘Compensation Culture’
• China 3000 BCE – first risk management by merchants splitting
cargo
• Kent, England 600 CE – Æthelberht's law - oldest surviving
English law code and oldest Anglo-Saxon text of any kind in
existence
• 2000 CE – Court Settlement Guidelines
England & Wales
‘Compensation Culture’
(A) Neck Injuries
There is a very wide range of neck injuries. Many are found in conjunction with back and shoulder problems.
(a) Severe
(i) Neck injury associated with incomplete paraplegia or resulting in permanent spastic
quadriparesis or where the injured person, despite wearing a collar 24 hours a day for a period of years, still has little or no movement in the neck and suffers severe headaches which have proved intractable. In the region of £97,500
(ii) Injuries which give rise to disabilities which fall short of those in (a)(i) above but which are of considerable severity; for example, permanent damage to the brachial plexus. £43,000 to £86,000
(iii) Injuries causing severe damage to soft tissues and/or ruptured tendons. They result in significant disability of a permanent nature. The precise award depends on the length of time during which the most serious symptoms are ameliorated, and on the prognosis. In the region of £36,000
(iv) Injuries such as fractures or dislocations which cause severe immediate symptoms and which may necessitate spinal fusion. They leave markedly impaired function or vulnerability to further trauma, and some limitation of activities. £16,400 to £21,600
(b) Moderate
(i) Cases involving whiplash or wrenching-type injury and disc lesion of the more severe type resulting in cervical spondylosis, serious limitation of movement, permanent or recurring pain, stiffness or discomfort and the possible need for further surgery or increased vulnerability to further trauma. £9,000 to £16,400
(ii) Injuries which may have exacerbated or accelerated some pre-existing unrelated condition. There will have been a complete recovery or recovery to 'nuisance' level from the effects of the accident within a few years. This bracket will also apply to moderate whiplash injuries where the period of recovery has been fairly protracted and where there remains an increased vulnerability to further trauma. £5,150 to £9,000
(c) Minor
Minor soft tissue and whiplash injuries and the like where symptoms are moderate: (i) and a full recovery takes place within about two years; £2,850 to £5,150 (ii) with a full recovery between a few weeks and a year. £875 to £2,850
Why improve consistency and accuracy?
• Guidelines are useful, butJJ.
– Based on court awards
– Provide ranges, some of which are quite wide
– Difficult to use for multiple injuries, e.g. neck
and
lumbar sprain, chest wall contusion, left
knee laceration
– Still doesn’t control what a handler actually
puts forward as an offer
Why improve consistency and accuracy?
• To avoid ‘overpayment’ (leakage)
• To avoid ‘under valuation’ – more likely to
litigate and attract court costs
• To prove treating customers fairly and
consistently
• To provide earlier identification of severe
GDs V COA High, Closed Claim data
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Why improve transparency?
• Management Information (MI) to objectively and
accurately monitor
– Claims handler performance
– Claimant lawyer behaviour
– Medical expert (defendant and plaintiff) prognoses
• Severity of claims matching claims handler’s
experience
• To identify changes in injury / complication frequency
• To identify mismatches of:
– treatments to injuries
How to improve accuracy and consistency
• Utilising a quantum evaluation tool
– Claims handler enters pertinent information into
system
• Injuries, treatments, complications, pre-existing conditions
• Prognosis: recovery progress, permanent conditions
– Based on object model of human body, system
derives combined severity (index)
– Converts severity to HK$, S$, A$ etc amount
based on individual companies previous settlement
patterns
Medical ICD-9
18,000 available codes
Injuries
Treatments
Complications
Pre-Existing Conditions
Prognosis
Medical
Recovery
Future Treatments
Permanent Conditions
Disability Ratings
Loss Of Use Of
Occupational
Activity Restrictions
Occupational Capacity
Assessment Report
• General Damages
• Special Damages
• Claimant Impact
• Rehabilitation
• Inconsistencies
• Negotiation advice
How technology can help
• Structure - provides for consistent, objective
consideration of medical evidence
• Confidence - provides assessment based on other
cases of the same severity. Faster settlements and
best practice across organisation
• Back-up - provides reasons for
assessment
• To smooth staff turnover and
How technology can help
System ranks all injuries in order of relative severity and understands the
relationship of one injury (or combinations of injuries) to the others
Increasing Severity
System is calibrated by assigning a value (HK$, S$, A$, €, £, US$ etc) to severity;
not necessary to have an example of each type of injury and can be easily
How technology can help
100%
100%
89
120
70
1
0
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Expresses the disability % to a body part as a function of the
number of days since the injury
Can be extended or contracted based on additional information
(e.g. claimant age, gender and prognoses)
Impairment
How technology can help
• Web-based application running in Internet
Explorer
• .Net
• Most customers have it running ‘stand-alone’,
although some have interfaced via XML web
services to avoid re-keying some data items
• SQL server
• Hosted by ISO, or iinstalled within customer’s
infrastructure
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How technology can help: Other components
• Case In Point
– Comparable cases and lawyer-specific litigation risk analytics
• Liability Advisor
– Consistently evaluates contributory negligence (comparative
liability)
• Subrogation Advisor
– Maximises recovery opportunities using advanced qualifying
methods and text mining
• Return to Work Module
– Claimant Return to Work plans specific to an individual’s
occupation
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The future
• Immediate (as reported by the HKFI)
– Increases in common law claims
– Higher levels of damages
– More claims involving psychiatric complications
– Increasing number of fraudulent claims
• Automated, electronic settlement of straightforward claims
• Merging of data and predictive analytics
– Telematics data + camera data + injury data
– Research-based ‘injury likelihood’ predictive tools e.g.
WitKit from Thatcham (used by Korean insurers)
• Further into the future
– Underwriting changes as autonomous vehicles introduced
– Far fewer personal injury claims with the widespread use of
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