Editor's Note: This article originally appeared in National Underwriter, P&C.
Property and casualty insurers are seeing rising loss costs, increased levels of litigation, and higher rates of fraudulent claims because of the struggling economy, a recent survey revealed.
Towers Watson's fourth Property & Casualty Insurance Claim Officer Survey showed that personal lines carriers are experiencing higher claim frequency than commercial insurers, with 52 percent of homeowners insurers and 45 percent of auto insurers indicating as much.
For commercial insurers, 20 percent of general liability carriers and 18 percent of commercial auto carriers reported a similar trend, according to the survey.
But, the survey said, while claim frequency and severity were reported either as unchanged or on the rise for most p&c lines, workers' compensation was more uncertain. The survey showed that 52 percent cited a drop in claim frequency, but half noted an increase in severity, "creating uncertainty in the overall loss cost outlook."
Brian Stoll, Towers Watson senior consultant and co-author of the survey said, "Interestingly, responses related to claim frequency and severity from the economy were relatively consistent, regardless of carrier size and market segment. Since prior surveys found notable dissimilarities based on company size and/or market segment…this is very surprising. Clearly the economy is affecting everyone."
With respect to rising litigation trends, 30 percent of respondents said general liability has been the most heavily affected area, followed by personal auto (22 percent) and commercial packages (20 percent). Regionally, increases in litigation are most acute in the Southeast, according to the survey, with 50 percent of respondents reporting a rise. In the West, 32 percent reported a rise, and all other regions were under 20 percent, with New England the lowest at 7 percent.
Auto (62 percent) and homeowners (56 percent) insurers led the way in reporting a rise in fraudulent claims, noted the survey. For workers' compensation, 33 percent of insurers reported a rise in fraudulent claim activity, as did 20 percent of commercial lines carriers.
To combat these trends, Towers Watson said almost half of respondents are placing a greater emphasis on allocated or unallocated expense indicators, and 35 percent are focusing more on loss cost indicators.
To tighten costs and increase productivity, Towers Watson said 40 percent of respondents are accelerating case closings, 35 percent are adjusting claims handling guidelines, and 30 percent are increasing actual caseloads. Additionally, 77 percent of respondents said they are going to invest in claims analytics over the next two years.
Kathleen Cullen, Towers Watson senior consultant and co-author of the survey, said, "Despite pressures on costs, carriers have not slashed expenses or taken knee-jerk responses. Rather, they seem to be taking measured steps to control costs, and are moving toward using both lagging and leading indicators."
The Towers Watson survey polled 52 claim officers in October 2009. Respondents "included a broad mix of claim officers from small firms, midsize companies, and large companies," Towers Watson said.
Phil Gusman is associate editor of National Underwriter, part of Summit Business Media's P&C Magazine Group, which includes Claims.
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