Canadian Institute of Actuaries L'Institut canadien des actuaires

Canadian Institute of Actuaries L'Institut canadien des actuaires

Canadian Institute of Actuaries LInstitut canadien des actuaires 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Legal Challenges and Automobile Update September 18, 2009 PD-12 Presenter: Christopher Cooney, FCAS, FCIA Vice President, Pricing RBC General Insurance Company 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Regulatory Reforms and Recent Loss Trends Alberta / Nova Scotia / New Brunswick Auto - BI Introduction of Bodily Injury non-pecuniary loss caps post 2003 Generally, despite the uncertainty created by the legal challenges, the results appear to be stable and beneficial to consumer rate levels

Ontario Auto - BI and AB Bill 198 amended accident benefit regulations impacting claims occurring October 1, 2003 and later Bodily Injury threshold strengthened Regulation of paralegals Restriction on cash settlements prior to 12 months Dispute resolution costs for arbitration dependent upon arbitration outcome and participant conduct Alberta Private Passenger Auto Loss Cost Industry Data 450.00 400.00 350.00 300.00 250.00 200.00 Past Trend Rate: -7.2% (annualized) Bill 53 Estimated Impact: -37% 150.00 Trend estimated from 2005-1 onward. 100.00 50.00 Adjusted Ultimate Loss Cost Fitted

Ultimate Loss Cost Bill 53 capped BI claims at $4,000 for non-pecuniary loss effective for claims Oct 1, 2004 and after Cap adjusted for inflation thereafter Selected trends may depend highly upon experience period utilized 20082 20081 20072 20071 20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011

20002 20001 19992 19991 19982 19981 19972 19971 19962 19961 19952 19951 19942 0.00 19941 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Alberta BI Loss Cost Trend Alberta Private Passenger Auto Frequencies (per 1000 vehicles)

Industry Data 14.00 12.00 10.00 8.00 Past Trend Rate: -9.9% (annualized) 6.00 Trend estimated from 2005-1 onward. 4.00 2.00 Ultimate Frequency Fitted Ultimate Frequency Bill 53 capped BI claims at $4,000 for non-pecuniary loss effective for claims Oct 1, 2004 and after Cap adjusted for inflation thereafter 20082 20081 20072 20071 20062 20061

20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 20001 19992 19991 19982 19981 19972 19971

19962 19961 19952 19951 19942 0.00 19941 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Alberta BI Frequency Trend 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Market Response Facility Association Facility Association RSP Balances have traditionally been a good indicator of rising market pressures Alberta RSP is showing no substantial changes in utilization New Brunswick Private Passenger Auto Bodily Injury Loss Cost Industry Data (excl Health Levy) 500.00 450.00 400.00 350.00

300.00 250.00 200.00 150.00 Past Trend Rate: -4.8% (annualized) Bill 1 Estimated Impact: -59% 100.00 50.00 Adjusted Ultimate Loss Cost Fitted Ultimate Loss Cost Bill 1 capped BI claims at $2,500 for non-pecuniary loss effective for claims Jul 1, 2003 and after Cap adjusted for inflation thereafter Selected trends may depend highly upon experience period utilized 20082 20081 20072 20071 20062 20061

20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 20001 19992 - 19991 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 New Bruns BI Loss Cost Trend New Brunswick Private Passenger Auto Frequency Industry Data

1.20% 1.00% 0.80% 0.60% 0.40% Past Trend Rate: -5.6% (annualized) 0.20% Ultimate Frequency Fitted Ultimate Frequency Bill 1 capped BI claims at $2,500 for non-pecuniary loss effective for claims Jul 1, 2003 and after Cap adjusted for inflation thereafter Selected trends may depend highly upon experience period utilized 20082 20081 20072 20071 20062 20061 20052 20051

20042 20041 20032 20031 20022 20021 20012 20011 20002 20001 19992 0.00% 19991 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 New Bruns BI Frequency Trend 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Market Response Facility Association Facility Association FARM balances have traditionally been a good indicator of rising market

pressures New Brunswick FARM volumes continuing to decline Nova Scotia Private Passenger Auto Bodily Injury Loss Cost Industry Data 450.00 400.00 350.00 300.00 250.00 200.00 150.00 100.00 Past Trend Rate: -7.1% (annualized) Bill 1 Estimated Impact: -23.4% 50.00 Fitted Ultimate Loss Cost Bill 1 (+ regulations) capped BI claims at $2,500 for non-pecuniary loss effective for claims Nov 1, 2003 and after Cap adjusted for inflation thereafter Selected trends may depend highly upon experience period utilized 20082 20081

20072 20071 20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 20001 19992 0.00

19991 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Nova Scotia BI Loss Cost Trend 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Market Response Facility Association Facility Association FARM balances have traditionally been a good indicator of rising market pressures Nova Scotia FARM balance is partly the result of a lack of inexperienced operator surcharges post-elimination of age / gender from rating Ontario Private Passenger Auto Bodily Injury Loss Cost Industry Data 300.00 250.00 200.00 150.00 100.00 Past Trend Rate: 2.9% (annualized) Bill 198 Estimated Impact: not estimated 50.00 Fitted Ultimate Loss Cost

Bill 198 reinforced the threshold and increased deductibles for Family Law Act (FLA) claims Took effect Oct 1, 2003 20082 20081 20072 20071 20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 0.00

20002 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Ontario BI Loss Cost Trend Ontario Private Passenger Auto Bodily Injury Frequency Industry Data 0.250% 0.200% 0.150% 0.100% Past Trend Rate: -0.5% (annualized) 0.050% Ultimate Frequency Fitted Ultimate Frequency Bill 198 reinforced the threshold and increased deductibles for Family Law Act (FLA) claims Took effect Oct 1, 2003 20082 20081 20072 20071

20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 0.000% 20002 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Ontario BI Frequency Trend 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Bodily Injury coverage appears to be performing well everywhere

so theres really nothing to be concerned about, right? Ontario Private Passenger Auto Med/Rehab Loss Cost Industry Data 400.00 350.00 300.00 250.00 200.00 150.00 100.00 Past Trend Rate: 13.9% (annualized) 50.00 Fitted Ultimate Loss Cost Bill 198 changes removed some cost from the system, but the trend remains unabated Bill 198 regime is a Vogons dream (think Hitchhikers Guide to the Galaxy) OCFs 1, 3, 5, 18, 19, 21, 22, 25, 26, etc. 20082 20081 20072 20071

20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 0.00 20001 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Ontario Med/Rehab Loss Cost Trend Ontario Private Passenger Auto Med/Rehab Severity

Industry Data 50,000 45,000 40,000 35,000 30,000 25,000 20,000 Past Trend Rate: 14.4% (annualized) 15,000 10,000 5,000 Severity Fitted Sev Frequency trend is negative, but costs per claim rising at a substantial pace (estimated here at 14.4%) Pay-as-you-go combined with administrative burden serves as a tool to continue eligibility for benefits 20082 20081 20072 20071

20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 0 20001 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Ontario Med/Rehab Severity Trend 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009

Market Response Facility Association Ontario Facility Association Residual Market (FARM) is not showing obvious deterioration The latest monthly premium total available has cross the 12 month moving average 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Market Response Facility Association Ontario Risk Sharing Pool may be showing early warning signals of increasing market pressure RBC quotes have climbed since June despite little change in marketing activity (direct writers = canary in the coal mine) Ontario Private Passenger Auto Cost of Examination Loss Cost Industry Data 120.00 100.00 80.00 60.00 40.00 Past Trend Rate: 23.0% (annualized) 20.00 Fitted Ultimate Loss Cost Cost of Examination costs are rising substantially (23% pa) Payments are an administrative burden to the system for filing of health plans, evaluation of claimant needs, and dispute resolution regarding same

Do not contribute directly to claimant recovery 20082 20081 20072 20071 20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 0.00

20001 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Ontario Cost of Examination Loss Cost Trend Ontario Private Passenger Auto Housekeeping Loss Cost Industry Data 40.00 35.00 30.00 25.00 20.00 15.00 10.00 Past Trend Rate: 28.6% (annualized) 5.00 Fitted Ultimate Loss Cost Payments often made to a member of the family $100 per week for a maximum of 104 weeks 20082 20081

20072 20071 20062 20061 20052 20051 20042 20041 20032 20031 20022 20021 20012 20011 20002 0.00 20001 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009

Ontario Housekeeping Loss Cost Trend 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Examples Cost of Examination Claims Lets play Name that Claim! Guess the amount of the claim based upon the picture below (accident benefit costs only yes I am showing you the part of the vehicle that was impacted!) Total Cost: $99,747.56 3 claimants COE = $60,335.02 Housekeeping = $2,542.86 Attendant care = $5,671.22 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Examples Cost of Examination Claims Lets play Name that Claim! Guess the amount of the claim based upon the picture below (accident benefit costs only yes I am showing you the part of the vehicle that was impacted!) Total Cost: $108,165.65 paid; $189,388.32 incurred

4 claimants COE = $56,009.97 Housekeeping = $7,142.86 Attendant care / caregiver benefit = $13,256.20 It is possible to predict higher probability of accident benefit conflict (defined by use of defensive COE): 25.00% 100.00% 22.50% 90.00% 20.00% 80.00% 17.50% 70.00% 15.00% 60.00% 12.50% 50.00% 10.00% 40.00% 7.50%

30.00% 5.00% 20.00% 2.50% 10.00% 0.00% Total COE Payout (CUM.%) COE Payout Model Performance % of Total COE Payouts 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Cost of Examination Predictive Modeling 0.00% The challenge is, after identifying the clients most likely to abuse the system, what are our options? 5 10 15 20 25

30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Decile COE Payouts % COE Payouts CUM. %

Cede to RSP (limited to 5%) Mediation ineffective; Arbitration costly Clearly some correlation with prohibited rating variables pressures to apply this knowledge are substantial unfair subsidies are rampant! 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Quote of the Year Award Tie going to Barb Addie and Joel Baker: Its a disaster. (..said in reference to Ontario no-fault) - Joel Baker (MSA) Tweaking a few accident benefits rules and regulations will not bring the system under control. Increasing tort costs with such rich first party benefits makes no sense. Weve tried controlling Ontario auto, weve also tried altering it to little avail, maybe its time to go ahead and delete it. - Barb Addie (Baron Insurance Services Inc.) 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 What Are Ontarios Options? Continue to evolve the existing no-fault system Cap claimant awards at $25,000 instead of $100,000 Examination fee schedules, or limits on assessments Return to a tort system with a cap on non-pecuniary losses Implement a form of Alberta or New Brunswicks legislation Will need to proceed in the face of strong resistance from the medical lobby Could be considered contrary to the goal of providing timely access to rehabilitation Innovate

Reconfigure the system to indemnify clients affordably Can the Canadian Institute of Actuaries play a role? 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Arguments against Evolution New York State Facing an auto insurance rate crisis, Governor Pataki introduces new rules for accident claims effective Sept 1, 2001 Rules decrease to 30 days from 90 the period an injured party has to report an accident to the proper insurer Reduce to 45 days from 180 the period for doctors to submit compensation claims Fraud laws were subsequently strengthened to help fight organized fraud Allstate Blames High Fraud For 10.5% Auto Rate Rise New York Times, Jan 2002 Nowhere in the country is auto insurance fraud more severe, Mr. Hartwig said. ''New York has become the auto insurance fraud capital of the United States,'' he said. ''It is worst in New York City. But Buffalo, Rochester, Syracuse and Albany are manifesting the same problem.' Mr. Hartwig said that costs to insurers in New York as a result of fraud rose 28.5 percent last year compared with an average of 3.8 percent across the country. Colorado, with an 18 percent increase in claims costs, is one of a handful of other states, including Florida, that are staggering under heavy fraudulent claims. 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Arguments against Evolution New York State From Long Island Business News, August 2003: Lastly, provisions of the no-fault law itself are contributing to the medical fraud problem. The law currently can be manipulated to effect excessive medical utilization, expensive testing, along with other

palliatives to build up a pain and suffering claim to meet the definition of serious injury. Medical treatment authorized under the present law includes aromatherapy, biofeedback, massage, acupuncture, thermography and psychotherapy sessions for post-traumatic stress. Over utilization of these non-primary treatments allows claimants to build up medical expenses in order to satisfy the no-fault verbal definition for lawsuit eligibility. 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Arguments against Evolution New York State From the New York Times, Aug 2008: `On average, they have been asking for a 7 percent increase in New York, said Michael Moriarty, the states deputy insurance superintendent for property and capital markets. (regulators subsequently required companies to take gas price increases into consideration in their trends leading to withdrawal of some filings) From the New York Daily News, Jul 2009: Levy allegedly recruited a lawyer, who bribed workers at Lincoln Hospital and other facilities to funnel him names of people who suffered minor injuries in car crashes and were eligible for no-fault insurance. The lawyer turned over the information to two Levy cronies, who then steered the patients to the clinics, Bronx Sheridan Medical and New Lite Bronx Medical, officials said. The patients exaggerated their injuries so they could file lawsuits and give Levy license to order tons of unnecessary treatment - everything from acupuncture and counseling to neurological tests, the indictment charges. 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Evolution of the Existing Ontario AB System New York provides a living example of the flaws of trying to reform our current system Despite amendments to the system intended to reduce nofault abuse, loss cost inflation continues to run substantially

above CPI Even if claims are limited to $25,000 per claimant, this is still potentially $100,000 per vehicle (or more) Fraud mechanisms are unlikely to remain stagnant The ability of bad actors to adapt to changes intended to thwart no-fault insurance abuse has been proven through prior legislative changes Many of the fraud techniques reported in the New York article are not yet widespread here 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Innovation Ontarios insurance system should meet the following objectives: Indemnify policyholders Mitigate the impact of loss or injury due to unforeseen events Provide indemnification in a time efficient manner Provide incentive to avoid and / or mitigate loss Fund the system with rates that are proportional to the risk posed by individuals Prevent further loss and / or limit losses once loss occurs Prevent fraud High proportion of benefits directed towards those requiring indemnification Prevent diversion of funds from system through material misstatement of facts Efficient system Low transaction cost 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009

Innovation Borrowing Ideas Workers Compensation: Ontario WSIB incorporated in 1914 Is the original no-fault system in Ontario to restore workers to health after industrial accidents Workers compensation bargain: Guarantee access to prompt payment of medical, rehabilitation and wage loss replacements in exchange for the right to sue Per the 2008 WSIB Annual Report, health care cost inflation is estimated at 6.5% What can we learn by comparing the differences between the Workers Compensation system and SABS? 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Innovation WSIB Comparison Per the WSIB website: Who decides what may be paid by the WSIB? We determine what health care is necessary, appropriate, and sufficient, and the fee payable. Is there a specific time frame for billing? All billings and reports should be sent to the WSIB as soon as possible, since late billings may be reduced. Service delivery model Case manager concentrates on the opportunities and obstacles to return to work Nurse consultant coordinates specific medical interventions and what health care benefits are allowable Return to work specialist

2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Innovation WSIB Comparison The WSIB approach contrasts with the Ontario SABS approach in a number of key areas: WSIB has substantially greater control over medical approvals and treatment protocols actively employ medical professionals well established fee schedules benefit from association with government (trust) WSIB plays an active role in managing a claimant back to health that goes beyond writing cheques do disability insurers rely upon health care providers to make the ultimate decision regarding wellness and return to work? 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Questions to Explore Can the Canadian Institute of Actuaries play a more active role in this debate? At the FSCO 5 Year Review webpage, the lack of a CIA submission appears to be a missed opportunity Could we be helpful in the discussion to provide an unbiased opinion in the debate? Select commercial lines actuaries, retired actuaries, consultants, disability insurance actuaries Could there be value in exploring a WSIB approach? Have WSIB administer accident benefit case management Align the WSIB and SABS benefit programs in terms of fee schedules and benefit levels, and approvals As Barb Addie alluded to, claimants injured in car accidents should be treated consistent with workers injured in their employment

Introduce private insurer case management Play a more substantial role in directing the rehabilitation of clients Enable transparent measurement of recovery success 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 Final thoughts to consider Democracy is a device that ensures we shall be governed no better than we deserve. George Bernard Shaw The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds. John Maynard Keynes Thank You! 2009 Seminar for the Appointed Actuary Colloque pour lactuaire dsign 2009 References WSIB Health Practitioners' Guidelines http://www.wsib.on.ca/wsib/wsibsite.nsf/public/HealthWorkingWSIB Facility Association Premium Volumes http://www.facilityassociation.com/provprofilesOntario.asp Insurance Information Institute New York Fraud http://server.iii.org/yy_obj_data/binary/715262_1_0/ nynofaultauto2.ppt?bcsi_scan_AFAF00FB46ADDC72=1 Toronto Star Article regarding Accident Benefits http://www.thestar.com/comment/columnists/article/607098

Recently Viewed Presentations

  • ANCIENT GREECE ANCIENT GREECE: GODS, HEROS, AND ATHLETES

    ANCIENT GREECE ANCIENT GREECE: GODS, HEROS, AND ATHLETES

    The Archaic Period Ancient Greece Exekias, Achilles and Ajax playing a dice game. Vulci, Italy ca. 540 -530 BC Detail from an Athenian black-figure amphora created by Exekias ( painter and potter) Exekias was considered by the Greeks to have...
  • Name: _______________________________ Date: _______________ NAPLAN Test Skills Grade

    Name: _______________________________ Date: _______________ NAPLAN Test Skills Grade

    Year 5 NAPLAN Test Skills . 3. Analyse the text. Number the paragraphs for easy reference later. Underline key words and jot summarising notes next to the text. ... Study each answer to see if it answers the question. (fill...
  • Forensic Anthropology - Morgan Park High School

    Forensic Anthropology - Morgan Park High School

    White, Asian, African Features of the Skull Used in Race Determination Nasal index: The ratio of the width to the height of the nose, multiplied by 100 Nasal Spine Feel the base of the nasal cavity, on either side of...
  • Introduction to Academic Writing Lawrence Cleary , Co-director

    Introduction to Academic Writing Lawrence Cleary , Co-director

    Writing Prompt. How will you address your thesis? If a question, how will you establish that the question is important enough to try to answer? How do you know that this question hasn't been already answered a million times?
  • DEAFBlindness - Dpi

    DEAFBlindness - Dpi

    Tangible symbols are permanent. Can be held in the hand or physically transferred from one place to another. Range in their level of abstraction. Tangible Symbol Cards. Perkinslearning.org Closingthegap.com. Tangible Symbol Cards. ... Utah State University.
  • SAFETY TIP FQ18086 RHODE ISLAND AVENUE METRO STATION

    SAFETY TIP FQ18086 RHODE ISLAND AVENUE METRO STATION

    Technical Presentation. Access to the work area during the shutdown period (from July 21 to Sep. 2, 2018). WMATA's Department of Track and Structures (TRST) will be performing rail re-profiling of the IB and OB tracks at Rhode Island Avenue...
  • Nerve activates contraction

    Nerve activates contraction

    a. Multiple copies of alleles or genes (gene duplication) may provide new phenotypes. 1. 1. A heterozygote may be a more advantageous genotype than a homozygote under particular conditions, since with two different alleles, the organism has two forms of...
  • M o c A Can Humans Live Forever?

    M o c A Can Humans Live Forever?

    Amit Anand, Antony Holmes, Michael Li Introduction Telomeres Telomeres are the ends of the chromosome. Can Humans Live Forever? Human beings do not live forever because the human body cannot maintain itself indefinitely. We either grow old or we get...