1 CURRENT TRENDS Decreasing Frequency since 2002 Increasing Severity since 2002 driven by: Environmental Factors Joint & Several Liability Increase volume and dollars of Mega Verdicts – Judicial Hell Holes No Fault Thresholds – Outright Fraud and Excessive Treatment New and different tort allegations

2 Reported Frequency-Bodily Injury Source: ISO

3 Changes in Severity of BI Source: IRC

4 Paid Severity-Bodily Injury Source: ISO

5 Urban vs. Rural Auto accidents with damages alleged are more likely to occur in Urban areas, while fatalities are more likely in Rural Areas. 80% of the crashes occurred in urban areas. Injury claim frequencies were 29% higher in urban areas than in the rest of the country. Collision claim frequencies were 33% higher in urban areas than in the rest of the country. 70% of pedestrian deaths occur in the urban settings. Source: IRC and the Highway Data Institute

6 Age Related/Traffic Fatalities In 2002, drivers older than 65 made up 12% of all traffic fatalities. Of these fatalities, 81% occurred during the day, and 75% involved other vehicles. In 2002, drivers older than 80 made up 50% of all traffic fatalities at intersections. By 2030, driver 70 and older are projected to make up 25% of traffic fatalities. Source: National Highway Traffic Safety Administration-Feb 2004

7 Lawsuit Status of Claimants Source: IRC: Auto Injury Insurance Claims-2002 * Settled during Trail > 1%

8 Results of Verdicts for Claimants Tried to Verdict Source: IRC: Auto Injury Insurance Claims-2002

9 Mega Awards – Jury Desensitization

10 Judicial Hellholes Madison County, Illinois Jefferson County (Beaumont), TX 22 nd Judicial circuit, MS Hildalgo County, TX Orleans Parish, LA Kanawha County, WV Nueces County, TX Los Angeles County, CA Philadelphia, PA Miami-Dade County, FL City of St. Louis, MO Holmes and Hinds Counties, MS Green indicates county has been on the top list for 2 straight years.

11 Excessive Treatment Fraud One third of all bodily injury claims for automobile accidents contain some element of fraud The majority of the auto fraud is related to padding, build – up or exaggeration of claims 33% of survey respondents said it was acceptable to exaggerate an insurance claim Source: IRC, NYS Court of Appeals 12 states and Puerto Rico have no-fault auto insurance laws: Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kansas, Kentucky, Massachesetts, Minnesota, North Dakota and Utah. New York between 1995 to 2000, the average paid per PIP claim rose 65% compared to 25% in other no-fault states. (Between 1992 and 2001, reports of suspected fraud soared 275%, mostly in no-fault. NYS, Ct of Appeals.) “ Limited Tort Option” or Threshold No-Fault Thresholds

12 Combating the Trends: Claims Representative - Claimant Relationship Issues Communication is the number one concern for both Insurance and Corporate Litigation: – Direct Communication with Claimants Timely initial contacts – Expectations set and met – Pro-active, early investigation – Follow up contacts Early Resolution Opportunities Better communication between Claims Adjusters and Claimants has lead to a decrease in Attorney Representation. Source: Insurance Risk Management Institute, IRC, Fulbright & Jaworski

13 Attorney Penetration by Coverage Source: IRC: Auto Injury Insurance Claims-2002

14 Combating the Trends: Claims Representative - Attorney Relationship Issues Goals: – Expectations set by Insurers made clear to Defense Counsel. – Insurers want to reward early resolution, lowest overall claims cost, price certainty, and negotiated settlements, but rarely measure due to lack of reporting tools. – Insurers want quality, but mostly do not measure it or reward it. Communication: – Audits performed by independent attorneys on Defense Counsels indicate that current procedures were put into place by Insurers due to prior exploitations by defense firms, not best practices. – Defense Counsel has issues dealing with claims adjusters with little experience controlling the outcome of cases. Avg. Age of a Caims Adjuster is 23 years old. – Defense Firms claim that Insurers are placing increasingly complex and onerous requirements on them. Choice of Counsel: – Insurer’s Approved Panel Counsel List need to reflect experience and results and not focus primarily on cost. – Emphasis on greater utilization of Quality In-House Counsel Source: Insurance Risk Management Institute, Fulbright & Jawarski