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The BI Settlement Process and Structure of Negotiated Payments - PowerPoint PPT Presentation


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BI Settlement Issues I. IRC Studies (1977+, latest 2002 CY) AIB Studies (1986+, latest 1996 AY) Medicals Dominate Injury Types General Damages. BI Settlement Issues II. Investigation Suspicion of Fraud and Build-up Settlement Negotiation Low Impact Collision Passengers Bad Faith

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bi settlement issues i
BI Settlement Issues I
  • IRC Studies (1977+, latest 2002 CY)
  • AIB Studies (1986+, latest 1996 AY)
  • Medicals Dominate
  • Injury Types
  • General Damages
bi settlement issues ii
BI Settlement Issues II
  • Investigation
  • Suspicion of Fraud and Build-up
  • Settlement Negotiation
  • Low Impact Collision
  • Passengers
  • Bad Faith
  • Evolution Over Time
general damages
General Damages
  • Special Damages are Claimant Economic Losses
    • Medical Bills
    • Wage Loss
    • Other Economic
  • General Damages are Residual of Negotiated Settlement Less Specials
    • “Three Times Specials” is a Myth
negotiated settlements
Negotiated Settlements
  • Specials may be Discounted or Ignored
  • Medicals: Real or Built-up?
  • Information from Investigation
  • Independent Medical Exams (IMEs)
  • Special Investigation
  • Suspicion of Fraud or Build-up
settlement modeling
Settlement Modeling
  • Major Claim Characteristics
  • Tobit Regression for Censored Data

(right censored for policy limits)

  • Evaluation Model for Objective “Facts”
  • Negotiation Model for all Other “Facts”, including suspicion of fraud or build-up
evaluation variables
Evaluation Variables

Prior Tobit Model (1993AY)

  • Claimed Medicals (+)
  • Claimed Wages (+)
  • Fault (+)
  • Attorney (+18%)
  • Fracture (+82%)
  • Serious Visible Injury at Scene (+36%)
  • Disability Weeks (+10% @ 3 weeks)

New Model Additions (1996AY)

  • Non-Emergency CT/MRI (+31%)
  • Low Impact Collision (-14%)
  • Three Claimants in Vehicle (-12%)
  • Same BI + PIP Co. (-10%) [Passengers -22%]
negotiation variables
Negotiation Variables

New Model Additions (1996AY)

  • Atty (1st) Demand Ratio to Specials (+8% @ 6 X Specials)
  • BI IME No Show (-30%)
  • BI IME Positive Outcome (-15%)
  • BI IME Not Requested (-14%)
  • BI Ten Point Suspicion Score (-12% @ 5.0 Average)
  • [1993 Build-up Variable (-10%)]
  • Unknown Disability (+53%)
  • [93A (Bad Faith) Letter Not Significant]
  • [In Suit Not Significant]
  • [SIU Referral (-6%) but Not Significant]
  • [EUO Not Significant]

Note: PIP IME No Show also significantly reduces BI + PIP by

discouraging BI claim altogether (-3%).

slide17
Actual parameters for negotiation and evaluation models, with and without suspicion variable, are shown in the hard copy handout
references
References
  • Derrig, R.A. and H.I. Weisberg [2003], Auto Bodily Injury Claim Settlement in Massachusetts, Final Results of the Claim Screen Experiment, Massachusetts DOI 2003-15.
  • Derrig, R.A. and H.I. Weisberg, [2003], Determinants of Total Compensation for Auto Bodily Injury Liability Under No-Fault: Investigation, Negotiation and the Suspicion of Fraud, Working paper, Automobile Insurers Bureau of MA.
  • Derrig, R.A., H.I. Weisberg and Xiu Chen, [1994], Behavioral Factors and Lotteries Under No-Fault with a Monetary Threshold: A Study of Massachusetts Automobile Claims, Journal of Risk and Insurance, 61:2, 245-275.
  • Ross, Lawrence H. [1980], Settled out of Court, (Chicago, III: Aldine).
  • Insurance Research Council [1999], Injuries in Auto Accidents, An Analysis of Auto Insurance Claims. Malvern, PA
  • Insurance Research Council [ 2003], Auto Injury Insurance Claims. Countrywide Patterns in Treatment, Cost, and Compensation, Malvern PA
  • Abrahamse, A. and Stephen J. Carroll [1999], The Frequency of Excess Claims for Automobile Personal Injuries, Automobile Insurance: Road Safety, New Drivers, Risks, Insurance Fraud and Regulation, Claire Laberge-Nadeau, and Georges Dionne, Eds., Kluwer Academic Publishers, 131-151.
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