Champion Customer Service A Model for Casualty Claims Management

and Expense Control

Concurrent Session July 22, 2015

Introductions

Steve Beussink AutoZone, Inc.

Greg McKenna Gallagher Bassett

Rising Litigation Exposures

1

Multi-Disciplined Solutions

1 ½

Measured Cost Containment

2

Rising Expense Costs on Casualty Claims

General Litigation Trends

Copyright 2014, AutoZone, Inc., All Rights Reserved 5

Lawsuit Filings steady, but severe. Litigation in the US remained steady in 2013, with nearly 16 million suits filed. Commentators suggest this is 1 lawsuit for every 12 US citizens, or roughly one suit filed every 2 seconds of business hours in 2013. http://communities.washingtontimes.com/neighborhood/leading-edge-legal-advice-everyday-matters/2012/oct/31/16-million-lawsuits/.

The National Center for State Court publishes data of civil filings from around the county. We note the relatively steady rate of filings over the last decade.

http://www.courtstatistics.org/Civil/20121Civil.aspx.

Cost Per Phase of the Case National

Center for State Courts data show varying costs per phase of the case, dependent on type of loss.

http://www.courtstatistics.org/~/media/Microsites/Files/CSP/DATA%20PDF/CSPH_online2.ashx

OSHA Report The Cost of Failing to Protect Injured Workers on the Job.

• OSHA demonstrates cost to taxpayer when worker fails to return to work.

• Alleges improper shifting of loss from insured employer to social security and disability

• Calls for a potential P&C reporting system to Social Security Administration to avoid double recovery.

Why do WC claimants obtain attorneys? 1. Employees feel threatened

– Fear of being fired or laid off – Fear of employer perceiving claims as being

illegitimate

2. Communication or information is lacking – Non-Responsiveness

• Felt claim had been denied but in reality, just had not been through the process or communicated timely

• No return phone calls – Conflicts between adjuster, physician, internal

personnel and claimant – Don’t understand workers compensation process

3. Unpaid medical bills 4. Injury was severe 5. Claim was formally denied or dissatisfaction with offer

8

http://www.wcrinet.org/studies/public/books/WCRI_2012_Annual_Report.pdf

Do employee demographics matter when determining whether WC claimants obtain attorneys?

According to a study performed by the Workers Compensation Research Institute (WRCI) http://www.wcrinet.org/studies/public/books/WCRI_2012_Annual_Report.pdf • Attorney involvement tends to increase as workers age: 20% of workers age 55 or

older hired attorneys. About 17% of those between the ages of 25 – 54 hired attorneys, and 9% of 15-24 years olds did so.

• Job tenure also impacts the likelihood of workers hiring attorneys. Employees who had less than one year on the job when they were injured were more likely to hire attorneys. Those with more than 10 years with the same employer were less likely to hire attorneys

• Those interviewed in Spanish hired attorneys twice as often as those who were interviewed in English

• The less educated workers were more likely to hire an attorney because they were more likely to be intimidated by the claims process. High school graduates were six

percentage points more likely to hire attorneys than college graduates.

9

Inter-Disciplinary Approach to Litigation

Avoidance

Fact Finding 1

Litigation Avoidance 1 ½

Litigation Processes 2

Litigation KPIs

3

Claim Concierge Customer Service does not end

when the claim begins. AutoZone has launched a pilot

program to evaluate the effectiveness of a dedicated “concierge” who is charged with the task of directing the claimant through the claims process in a non-adversarial way.

Many first party carriers have seen

success in this model.

Litigation Avoidance

Workers’ Comp Brochure

Copyright 2014, AutoZone, Inc., All Rights Reserved 13

Setting Expectations, Easing the Stress of the Claim • Brochure has a number

of benefits

• Information, guidance, and orientation to the system

• Reduce the Adversarial nature of the situation

• Convey the Assistance Necessary

Litigation Avoidance

AutoZoner Get Well Card

Copyright 2014, AutoZone, Inc., All Rights Reserved 14

Front:

Inside:

Greeting Cards • Get well cards

are currently utilized on the WC program

• Cards are sent to the AutoZoner’s home at initial notification of injury

Litigation Avoidance

Decision Support Tools Decision support tool that combines machine learning, advanced modeling and text analytics: • Reserve advice • “Claim Severity” • “Glide path” – analytics working in parallel

with early detection • Text and data analytics expand to detect:

• Litigation prediction

Fraud detection and SIU recommendations Subrogation investigation recommendations

Litigation Processes

Redefined Roles and Responsibilities in Litigation Process

Copyright 2014, AutoZone, Inc., All Rights Reserved 16

Litigated Non Litigated

Internal Legal

R.M & TPA

Evaluation of the roles each of the internal stakeholders shall play, going forward, in terms of authority, scope of work, and expectations. The exercise included litigated and non-litigated claims across the P&C lines.

Litigation Processes

Litigation KPI and Metrics The goal is to identify meaningful metrics that will help create accountability and drive the behaviors needed to successfully resolve a claim

• Median outcome by firm (WC = $ & Liability = $ ) • Median # of days open (WC = days & Liability = days) • Expense as a % of outcome (WC = % & Liability = %)

These metrics are intended to be a tool to assist in the evaluation of the firm’s performance towards reaching favorable outcomes

• jurisdiction, claim complexity, timely or reliable responses, and overall knowledge

• Also, current open claims are viewed the same way to ensure they are in line with historical performance and if need be address the reasons why not

Rank order to quickly evaluate the top and bottom tier firms for further examination as well as evaluate which firms are improving or digressing over time.

Key Performance Indicators & Metrics

Litigation Management Systems Matter management reduces paper processes and creates consistency:

• Assignment of cases • Submission of budgets • Submission of invoices • Conduit to Legal Bill Review

Law firm panel management and control Law firm performance analytics and comparisons

Budget versus actual Case duration versus spend

E-billing capabilities Enforcement of the clients Litigation Management Guidelines

KPI and Metrics

Measure Success

Case Study: Claims Concierge

Claim Concierge – Test Summary

Data presented reflects FY15 PD04 (September 1, 2014 – January 31, 2015) • Of the 237 calls that were made, 91 of them have become a claim and 5 are attorney represented as of

3/17/15 • The majority of calls that were made resulted in leaving a voice mail (47% of calls made) and also

resulted in a higher conversion ratio of attorney representation at 6.5% – Over the same time period for the chain the conversion ratio is 6.3% – The 3 attorney represented claims consist of 2 WC claims both involving falling off a ladder and 1

was a GL claim that involved a claimant tripping over a curb • Of the calls where contact was made (36% of calls made) the attorney representation conversion is

lower at 5.9% • 17% of the calls resulted in no contact made at all and curiously this has resulted in fewer claims and no

attorney represented claims at this time. These are the claims that we will need to monitor for further development

Copyright 2014, AutoZone, Inc., All Rights Reserved 20

Calls Made Claims Atty Rep Calls Made Claims Atty RepCalls converted to

Claims %Atty Rep %

of CallsAtty Rep % of

ClaimsContact Made 85 34 2 Contact Made 36% 37% 40% Contact Made 40% 2% 5.9%Voice Mail 112 46 3 Voice Mail 47% 51% 60% Voice Mail 41% 3% 6.5%No Contact 40 11 0 No Contact 17% 12% 0% No Contact 28% 0% 0.0%Total 237 91 5 Total 100% 100% 100% Total 38% 2% 5.5%

¹Time frame for incidents that occurred between 9/1/14 and 1/31/15²These claims are over a short period of time and largely undeveloped as of 3/17/15³Other incidents came in over this time period but were not called because they didn't meet criteria, no contact information was provided, or it was late report

Breakdown by the # of Concierge Calls Made Breakdown by the % of Totals Conversion %

Overall • Need to continue monitoring to measure the longer term impact this test can have on reducing

attorney representation and claims that ultimately go into litigation • Initial results look promising as making contact seems to have a more positive effect and reduces

the likelihood that an attorney is retained – Find additional ways to make contact (i.e. multiple attempts for calls that couldn’t leave

voicemail) – Continue to tweak the call script to provide clear contact information, set reasonable

expectations, and provide WOW customer service – Roughly 3 to 1 callers contacted were appreciative that we called as opposed to being upset

• With the right customer service mind set we have an opportunity to defuse the upset callers and point them in the direction of helpful information that will solve their problem

Head count • If expanded to all states, it is estimated this would take about 50% of someone’s time and would

require additional responsibilities such as mailing Get Well cards, Work Comp brochures, or administering other avoidance tactics

– Approximately 2% of claimants or employees reached didn’t speak English. It would be beneficial to hire someone that speaks Spanish

Recommendation • Monitor impact of new WC brochure being sent with Get Well card and emails to AutoZoners

(Stores) to see if those have an impact on litigation rates. The brochure and emails may be enough

• Continue to track litigation rates of Auto claimants actually contacted versus those with no contact

Copyright 2014, AutoZone, Inc., All Rights Reserved 21

Claim Concierge – Conclusions

Takeaways

1. 2. 3. 4.

Play Like Champion… 1. Consider an Interdisciplinary Approach Among Counsel (internal and

external), Risk Management, TPA and Broker to identify a critical expense factor and establish a baseline performance.

2. Employ a 4 prong-approach to generate strategies for Litigation Avoidance, Litigation Processes, Litigation Management and Key Performance Indicators, which are mutually exclusive, exhaustively complete (MECE).

3. Litigation Expense Optimization is an Intentional Expense Plan to Invest Capital Into localities and types of losses to affect total cost of risk.

4. Without measurement, it will not be possible to test and record success.