1. Auto Injury Claims: The What, Why, and How of it All CAS Spring Meeting – May 16, 2005 Phoenix, AZ Adam Carmichael, IRC Senior Research Associate

2. Methodology What Sample History IRC Study of Closed Auto Injury Claims

3. Are injuries becoming more serious? No. Injury types show little change. Claimants overall appear to be less seriously injured than in the past. 2002 Study of Closed Injury Claims

4. 2002 BI Injury Types Are Similar to Those in 1997 *Headache was a write-in category in 1997. Percentage of BI claimants with each type of injury

5. Little Change in Most Serious Injury Types BI ClaimantsPIP Claimants Percentage of claimants with neck/back sprain/strain as most serious injury

6. Hospital Admissions Maintain Declining Trend Percentage of claimants admitted to hospital for 1+ nights

7. Increase in Claimants With No Disability Percentage of claimants with no disability

8. More Claimants Reporting No Restricted Activity Percentage of claimants reporting no days of restricted activity

9. Over Half of Claimants Lost Time From Work Percentage of employed claimants who lost time from work 7 days 5 days 8 days 6 days BI Claimants PIP Claimants Median number of lost work days

10. Trends in the medical treatment of injuries Shift towards more expensive alternatives Rise in per-visit costs 2002 Study of Closed Injury Claims

11. Steady Increase in Use of Some Medical Professionals Percentage of BI claimants using each type of medical professional n/a n/a: Data not available.

12. Chiropractor General Practitioner Chiropractor Physical Therapist BI Claimants Average Charges Per Visit for Select Professionals General Practitioner Physical Therapist PIP Claimants Excludes permanent total disability and fatality claimants. +37% +64%+62% 1997 versus 2002

13. Chiropractor General Practitioner Chiropractor Physical Therapist 1997 Average Charges Per Visit for Select Professionals General Practitioner Physical Therapist 2002 Excludes permanent total disability and fatality claimants. BI versus PIP

14. Shift Towards More Expensive MRIs 1997 2002 Percentage of claimants receiving each procedure BI ClaimantsPIP Claimants

15. BI Claimants Average Charges Per Procedure for Select Diagnostics PIP Claimants X-Ray MRI CT EMG Excludes permanent total disability and fatality claimants. +60% +87% +104% 1997 versus 2002

16. 2002 Study of Closed Injury Claims Reported economic losses (special damages) have surged. Largely driven by growth in medical expenses Growth in wage and other losses more modest

17. Increase in Average Reported Economic Loss Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss. Average amount of reported economic loss

18. Annualized Change in Average Economic Loss 198719921997 2002 BIPIP MP CPI - AllCPI - Medical

19. Increase in Reported Medical Expenses Up 28% Up 5% Average BI Claimed Losses Up 47% Up 10% 19972002 Standard exclusions apply. Average PIP Claimed Losses

20. Medical Losses Are a Growing Component of Economic Loss Medical loss as a percentage of total economic losses Standard exclusions apply.

21. 2002 Study of Closed Injury Claims Total Payments have not fully reflected the surges in reported economic losses (special damages) Especially among BI claimants with less serious injuries

22. Growth in Average Economic Losses and Payments Percentage change from 1997 to 2002 Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss.

23. BI Payment Per Dollar of Claimed Economic Loss Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss.

24. Loss = $1,975 BI Paid = $4,265 Loss = $2,118 BI Paid = $3,738 Loss = $2,600 BI Paid = $4,103 BI Payment Per Dollar of Economic Loss – Neck/Back Sprains Only claimants with no days of restricted activity. $2.16 $1.76 $1.58

25. Loss = $48,418 BI Paid = $46,744 Loss = $51,274 BI Paid = $50,380 Loss = $56,173 BI Paid = $65,675 BI Payment Per Dollar of Economic Loss – Brain Injury $0.97 $0.98 $1.17 Excludes permanent total disabilities. More than ½ had more than 60 days of restricted activity.

26. Growth in Economic Losses and BI Payments by Restricted Activity Percentage change from 1997 to 2002 Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss.

27. BI Payment Per Dollar of Economic Loss by Restricted Activity Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss or missing days of restricted activity. Percentage of claimants 76%79% 21%24%

28. Claim Handling Techniques 2002 Study of Closed Injury Claims Help ensure that claimants with legitimate injuries are fairly compensated

29. Claim Handling Techniques Percentage of claimants subject to each technique

30. Claim Handling Outcomes Percentage with mitigating outcomes among claimants subject to each technique

31. Attorney Involvement Fewer claimants are hiring attorneys Claimants without attorneys receive higher net payment and experience faster settlement 2002 Study of Closed Injury Claims

32. Decrease in Percentage of Claimants Represented by Attorneys Percentage hiring attorneys

33. Percentage of Payments to Represented Claimants

34. Disability Measures by Attorney Involvement Attorney No Attorney Percentage of BI claimants

35. Treatment Differentials by Attorney Involvement Employed claimants with no lost time from work and neck/back sprain/strain as most serious injury BI Claimants PIP Claimants Attorney No Attorney

36. Average Net Payment to BI Claimants by Attorney Representation $1,309 Difference $12,993 $3,490 Average Economic Loss Legal Expense Average Net to Claimant Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss.

37. Net Reimbursement by Attorney Involvement Over Time Difference between average net BI payment to represented claimants and nonrepresented claimants Net payment=Total payment minus economic loss and any applicable legal fees. Excludes permanent total disability and fatality claimants and claimants with zero or missing economic loss.

38. BI Claimants Without Attorneys Received Faster Settlements Days between injury report and final payment

39. Fraud and Buildup 2002 Study of Closed Injury Claims Suspicion in 15 to 30 percent of claims Medical expenses most common source of buildup More chiropractor, physical therapists, alternative care, and pain clinics More MRI and EMG Higher average losses in fraud & buildup claims Higher attorney involvement

40. Appearance of Fraud & Buildup by Coverage Percentage with Appearance of Fraud and of Buildup

41. Claim Handling Techniques Used to Detect Fraud & Buildup Percentage of PIP Claims

42. Summary of Key IRC Closed Claim Findings Injury patterns show little change  But claimants appear to be less seriously injured Modest increases in several areas of medical treatment  Shift towards more expensive treatment  Higher per-visit costs

43. Summary of Key IRC Closed Claim Findings Significant growth in reported economic losses  Largely driven by growth in medical expenses  More pronounced in first-party claims  Not fully translated into total payments especially for BI claimants with less serious injuries Attorney involvement  Shows declines for all coverages  Magnifies many adverse trends in claiming behavior  Associated with higher reported losses and significantly lower net BI payment to claimant