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AGENDA

AGENDA. WHAT : The characteristics of current day Auto Injury Coverges,1 st and 3 rd Party Why : The Determinants of a Total Compensation Settlement How : The Negotiation System to Settle 3 rd Party Injury Claims. Auto Injury Issues.

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AGENDA

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  1. AGENDA WHAT: The characteristics of current day Auto Injury Coverges,1st and 3rd Party Why: The Determinants of a Total Compensation Settlement How: The Negotiation System to Settle 3rd Party Injury Claims

  2. Auto Injury Issues • IRC Studies (1977+, latest 2002 CY) • AIB Studies (1986+, latest 1996 AY) • Medicals Dominate • Injury & Treatment Types • General Damages (Pain & Suffering) • Claim Investigation • Suspicion of Fraud and Build-Up

  3. WHY • Special (Claimed) and General Damages • Economic and Non-Economic Damages • Circumstances of The Claim • Attorneys • Fraud and Build-Up

  4. BI Settlement Issues • Investigation • Suspicion of Fraud and Build-up • Settlement Negotiation • Low Impact Collision • Passengers • Bad Faith • Evolution Over Time

  5. Injury Type Changes

  6. Total Claimed Medical Charges by Type of Service

  7. 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

  8. 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

  9. 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%]

  10. 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%).

  11. Total Value of Negotiation Variables

  12. HOW • Negotiation is the Principal Method of Settling Liability Claims • No Real Studies of How the Process Works • Bargaining Models (Nash) may be too Complex for Simple Case – One issue $$.

  13. Table 1

  14. Table 2

  15. Negotiated Settlements • Specials may be Discounted or Ignored • Medicals: Real or Built-up? • Information from Investigation • Independent Medical Exams (IMEs) • Special Investigation (SIU) • Suspicion of Fraud or Build-up

  16. HELP • Anyone willing to study negotiation cooperatively can contribute confidential access to BI claim files. • Text miners are standing by willing to extract non-identified data relevant to negotiations • Experts are standing by to analyze the patterns in the data.

  17. References • Derrig, R.A. [2004],The Settlement Negotiation Process for Automobile Bodily Injury Liability Claims in the Presence of Suspicion of Fraud and Build-Up, Risk Theory Society, NY. • Derrig, R.A. and H.I. Weisberg, [2004], Determinants of Total Compensation for Auto Bodily Injury Liability Under No-Fault: Investigation, Negotiation and the Suspicion of Fraud, Insurance and Risk Management, v 71 (4), pp.663-662. • 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 [2004], Fraud and Build-Up in Auto Injury 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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