Leveraging Data… To Manage Casualty Total Cost of Risk

1 Mike Douglas FCII, CPCU, ARe, ARM, APA, AIC, ARP, AIC Chartered Insurer Director of Business Development Aon Global Risk Consulting - Philadelphia Introductions

2 Leveraging Data - The Opportunity  Loss Costs continue to be the primary driver of Total Cost of Risk (TCOR) in Casualty  Data is the key component in identifying cost drivers and creating more effective and sustainable loss prevention and claims management efforts  Data is more available and accessible than ever: –Increased Utilization and Improved RMIS Systems –Emphasis on Better and More Consistent Reporting

3 Traditional Approach – The very tired “Pie Chart” The Traditional approach to Total Cost of Risk has been on how to “measure” the total costs instead of “managing” the cost drivers…

4 What Lies Beneath! – Typical costs for WC risk – Many are Hidden

5 Challenges of Traditional Benchmarking  Right data: –Valuation date –Jurisdiction  Right time –Age of benchmarking sources and data  Right Comparison –Are the companies you benchmark against really comparable to your organization? Using External Benchmarking Data External Benchmarking May Not Paint an Accurate Picture

6 Re-thinking Benchmarking  Gaining an understanding of the cost drivers: Identification of Cost-Driving Elements Benchmarking (Internal and External)  Establishing baselines or KPIs for Processes using your own data  Creating a process of monitoring or Casualty Dashboarding

7 Managing Total Cost of Risk – Simplification State Pass- Throughs Premiums Coverage Medical Strategy Claims Process Actuarial Disability Management Litigation Management Information Management Prevention Collateral Program Structure Consider the following 12 Cost Driving Elements

8  Leverage carriers, TPAs and brokers for information on each cost-driving element Examples:  Claims closure rates  Medical-to-indemnity conversion rates  Litigation rates  Percent of medical to total cost  Report lag time  Do an initial assessment of your program The Next Step - Establishing KPIs The Pieces of the TCOR Puzzle that Drive Your Costs

9 Sample Executive Summary Dashboard  An Initial Analysis will: Establish your own KPIs Identify areas of focus Create foundation for dash boarding

10 The Next Step – Casualty Dashboarding  Identify KPIs for measuring ongoing program performance  Measure on a monthly or quarterly basis  More Advanced RMIS Systems can create dashboards with drilldown capabilities

11 Dashboards can Depict Information by Organizational Layer

12 When designed correctly, RMIS Systems can provide Dynamic Analysis of KPIs

13 In Summary  Data remains the key to managing Total Cost of Risk  Traditional outcome-based benchmarking has significant shortcomings  Process benchmarking and establishing KPIs will help direct resources to cost drivers  Leveraging RMIS Systems and dashboarding will result in focused and sustainable management of Total Cost of Risk

For Additional Information Please Contact Mike Douglas, Aon Global Risk Consulting Tel: Cell: