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Lockton Companies |
AGC Risk Management Conference
Data Analytics and Workers’ Compensation
Presenters:
Kristen Weber - BE&K Building Group
Mark Moitoso – Lockton Companies
Paul Primavera – Lockton Companies
Lockton Companies |
NCCI’s 2018 State of the Line guide shows a seven-year trend of improving workers’ compensation underwriting results for private carriers.
The 2017 ratio of 89 is lower than prior low of 93 in 2006.
https://www.ncci.com/Articles/Documents/AIS2018-SOTL-Guide.pdf
Workers Compensation Performance - Combined Ratio
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80
85
90
95
100
105
110
115
120
125
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Com
bine
d ra
tio
Workers' compensation
Lockton Companies |
Smaller companies (with less than $1 billion of revenue) spend more per $1,000 of revenue on TCoR than larger companies.
Industrial companies* spend more on TCoR than the all-industry benchmark. Workers’ compensation costs (premiums and retained loss) represent about 27 percent of
TCoR for smaller industrials and 25 percent for larger industrials.
*The RIMS survey places construction in the industrials category, which also includes manufacturers and service providers in aerospace and defense, building products, engineering, machinery, airlines, marine transportation, and more.**Other includes management liability, cyber, fidelity, surety and crime, medical malpractice, kidnap, ransom and extortion premiums and financial and political risk.
Total cost of risk (TCoR) per $1,000 of revenue
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$5.01
$3.32
$1.80$1.22
$18.45
$14.91
$7.15
$4.68
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
$18.00
$20.00
Industrials Average All Industry Average Industrials Average All Industry Average
< $1B in Revenue > $1B in Revenue
2017 TCoR per $1,000 of Revenue
Other**
Marine & Aviation
Professional Liability
Total Administrative Costs
Property
Workers' Compensation
Liability
Lockton Companies |
Supply/Demand Labor Imbalance
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Unemployment rates in construction industry are the lowest they have been since 2000.
6Source on this page is https://www.bls.gov/iag/tgs/iag23.htm.
10.6
19.020.6
16.4
13.9
11.3
8.97.3
6.3 6.0
0.0
5.0
10.0
15.0
20.0
25.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Yearly Average
Lockton Companies |
Wages are Increasing
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Source on this page is https://www.bls.gov/iag/tgs/iag23.htm.
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Estim
ate
valu
e
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Lockton Companies |
How would you describe your current situation in filling salaried and hourly craft positions? (No. 2 from source.)
If your firm is experiencing staffing challenges, how would you describe the impact on your projects? (Totals may add to more or less than 100 percent, as respondents could mark more than one answer.) (No. 12 from source.)
War for Talent
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8Source: https://www.agc.org/sites/default/files/Files/Communications/2018_Workforce_Survey_National.pdf)
Lockton Companies |
How you approach workers’ compensation claims can differentiate you as an employer: Safety strategies. Claims process. Denial approach. Litigation rate. Lag time. Closure process.
And with wages increasing, a good WC strategy can directly impact the bottom line: Less time away from work. Retention (lower training costs for new
hires). Timely return to work. Decreased litigation.
Workers’ compensation strategy can help
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Lockton Companies |
Severity Frequency
Report lag
Traditional Analytics are Effective
s:\filepath
11
Lockton Companies |
Claim Denials 69 percent of construction denials pay out by 12 months, which is slightly
higher than the all-industry average of 67 percent. Initial denials increasing over the past 5 years.
What if we went further into the data?
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Lockton Companies |
Reasons for the construction denials are similar in nature to the all-industry benchmarks shown below.
Denied claims are litigated 11.8 percent of the time. When denied and also litigated, 93 percent convert to a paid claim by 12 months.
Reasons given for denying claims
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10 most common initial reasons given for denying claim(Rates shown valued at 12 months)
Reason given for denial
Percent of denials that
convert
Percent of denials that
litigate
Conversion rate for denied and litigated
claims1 No medical evidence of injury 69.2% 24.6% 95.6%2 No injury per statutory definition 71.6% 17.7% 89.0%3 Reservation of rights 87.5% 3.6% 100.0%4 Pre-existing condition 68.9% 12.5% 93.0%5 Idiopathic condition 65.5% 11.5% 91.4%6 Intoxication or drug related violation 76.9% 19.7% 100.0%7 Stress non-work related 63.5% 12.3% 100.0%8 Failure to report accident timely 66.9% 29.6% 86.2%9 Doesn't meet statutory definition of employee 65.5% 29.0% 61.1%
10 Misrepresentation 90.3% 33.3% 93.8%Average denial conversion rate at 12 mos 67.0% 11.8% 93.1%
Lockton Companies |
All industry benchmark denied claim is 55 percent higher than non-denied.
Construction denied claim is 122 percent higher than construction non-denied.
Construction claims are more costly than the all-industry benchmark
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$10,103
$15,694 $14,897
$30,944
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
All industry:Non-denied
claim
All industry:Denied claim
Construction:Non-denied
claim
Construction:Denied claim
Average net incurred
12 month average Increase from 12 to 60 months
Lockton Companies |
Across all payment buckets for construction, denied claims were more costly than non-denied.
Construction averages by bucket are uniformly higher than for theall-industry average.
Construction Cost Buckets
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$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Non-denied Denied Non-denied Denied Non-denied Denied
Indemnity Medical Expense
Construction: Average net incurred
12 month average Change from 12 to 60 months
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Non-denied Denied Non-denied Denied Non-denied Denied
Indemnity Medical Expense
All industry: Average net incurred
12 month average Change from 12 to 60 months
Lockton Companies |
Litigation rates on denied lost-time claims are 2.5 times higher than on non-denied lost-time claims
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27.5%
70.6%
21.8%
55.0%
All industry: Non-denied
All industry: Denied Construction: Non-denied
Construction:Denied
Average litigation rates on lost-time claims
12 month average Change from 12 to 60 months
This multiple is similar to the all-industry average of 2.6 times.
Lockton Companies |
Slip/trip/fall is the top cause for total net incurred loss. Hypothesis that construction has more “falls from height” than other industries, that would
drive costs higher. If that holds true, can you improve your worksites to mitigate risk?
Digging Deeper into the Data
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29.6%
23.0%
19.8%
8.3%
6.9%5.2% 5.1%
1.9% 0.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Avg
Net
Incu
rred
Average net incurred by cause description(lost-time claims at 12 mos)
All Industries Construction % Net Total Incurred, Construction
Lockton Companies |
Look into other causes to identify targeted safety opportunities. Vehicle losses: 7 percent of total incurred, but highest avg claim cost. Exposure: 5 percent of total incurred, and third highest avg claim cost.
Digging Deeper into the Data
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29.6%
23.0%
19.8%
8.3%
6.9%5.2% 5.1%
1.9% 0.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Avg
Net
Incu
rred
Average net incurred by cause description(lost-time claims at 12 mos)
All Industries Construction % Net Total Incurred, Construction
Lockton Companies |
Average net incurred for construction segment versus all industries. Material differences in key part of body severity
Part of Body
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Lockton Companies |
Predictive modeling tools. Further explain the value of identifying root causes and consistent injured worker communication.
Targeted perception surveys (related to the workers’ compensation process).
Detailed analysis of each unique “disputed” claim, creating an informed decision-making process.
Creating successful claim resolution plans.
Tools and approaches that can help
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RISK MANAGEMENT • EMPLOYEE BENEFITS • RETIREMENT SERVICES
Our Mission | To be the worldwide value and service leader in insurance brokerage, risk management, employee benefits and retirement services
Our Goal | To be the best place to do business and to work© 2019 Lockton, Inc. All rights reserved.
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