The changing claims environment - changing claims environment. ... Used machine learning to find claim ... Realistic Disaster Scenario (Major data security beach)

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  • The changing claims

    environment

    Tim AndrewsFinity Consulting

    18-20 May 2016

  • General Insurance margin subdued in 2015 (+ likely 2016)

    2

    -10%

    0%

    10%

    20%

    30%

    1979 1985 1991 1997 2003 2009 2015

    Source: Pendulum, APRA

  • Claims with potential to impact insurers

    ClimateChange

    Child Abuse

    Mental Health

    CTP

    Cyber

    Currently impacting

    Future impact

  • Claims with potential to impact insurers

    Natural Perils

    Child Abuse

    Mental Health

    CTP

    Cyber

    Currently impacting

    Future impact

  • CTP

  • 0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    01/0

    2

    02/0

    3

    03/0

    4

    04/0

    5

    05/0

    6

    06/0

    7

    07/0

    8

    08/0

    9

    09/1

    0

    10/1

    1

    11/1

    2

    12/1

    3

    13/1

    4

    14/1

    5*

    Utili

    satio

    n: %

    of c

    asua

    lties

    per 1

    ,000

    veh

    icle

    s

    MACA Accident YearCasualties per 1,000 veh (LHS) Claim+ANF Freq (LHS) Utilisation (RHS)

    MACA07

    * nine months only

    Casualties continue to

    reduce

    Claims increasing

    Claim utilisation is up

    6 Source: Finity analysis of SIRA's Personal Injury Register

  • Increase driven by low severity claims

    7

    Number doubled in

    3 years

    0

    2,000

    4,000

    6,000

    8,000

    10,000

    12,000

    14,000

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    Num

    ber o

    f Cla

    ims

    Report Year (ending 31 Dec)

    Number of New ClaimsLR Sev3+ LR Sev2 LR Sev0&1 s151Z Direct

    Source: Finity analysis of SIRA's Personal Injury Register

  • Increases mainly from claimants living in SW Sydney

    8

    0

    500

    1,000

    1,500

    2,000

    2,500

    Driver Passenger Pedestrian Other

    No. o

    f Cla

    ims

    Role of Claimant

    Rest of NSW

    2011/12 2012/13

    0

    500

    1,000

    1,500

    2,000

    2,500

    Driver Passenger Pedestrian Other

    No. o

    f Cla

    ims

    Role of Claimant

    SW Sydney

    2011/12 2012/13 2013/14

    * severity 0&1 represented claims only

    Drivers and passengers

    Drivers and passengers

    Source: Finity analysis of SIRA's Personal Injury Register

  • Analysis of Increases in NSW CTP

    9

    ProblemMAA (now SIRA) wanted to investigate elevated claims frequency identify any common characteristics and/or providers associated with these claims.

    Used machine learning to find claim types with the largest increase in volume

    Conducted network analysis on these segments to uncover suspicious common providers

    Approach

    Identified suspicious providers

    Identified suspicious providers and mapped where the claims are

    located

  • 10

    Climate Change

  • What chance?

    http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiPkbyM-t3MAhWGmJQKHdJPBeUQjRwIBw&url=http://www.colorado.edu/news/features/lives-007-offered-first-time-maymester&psig=AFQjCNE4ueUHUn60ug1QEoci85zkViRfIA&ust=1463466041118881http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiPkbyM-t3MAhWGmJQKHdJPBeUQjRwIBw&url=http://www.colorado.edu/news/features/lives-007-offered-first-time-maymester&psig=AFQjCNE4ueUHUn60ug1QEoci85zkViRfIA&ust=1463466041118881

  • Climate Change

  • Climate Change

  • ICA Catastrophe Claim Costs by Financial YearEvents with >$50m inflated cost

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    1967

    1968

    1969

    1970

    1971

    1972

    1973

    1974

    1975

    1976

    1977

    1978

    1979

    1980

    1981

    1982

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    1984

    1985

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    Infla

    ted

    Cost

    ($b)

    Inflated Cost Average

    Source: ICA Disaster List

  • 0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    1.2

    1.4

    1.6

    1.8

    1967

    1968

    1969

    1970

    1971

    1972

    1973

    1974

    1975

    1976

    1977

    1978

    1979

    1980

    1981

    1982

    1983

    1984

    1985

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    Infla

    ted

    Cost

    ($b)

    Capped Incurred Average

    ICA Catastrophe Claim Costs by Financial YearEvents with >$50m inflated cost, capped at $300m per event

    Source: ICA Disaster List

  • ENSO vs Events by Type

    Bushfire Cyclone

    Flood Storm / Hail

    Average Number of Events per Year by ENSO Status

    0.00

    0.20

    0.40

    0.60

    0.80

    1.00

    La Nina Neutral El Nino0.00

    0.20

    0.40

    0.60

    0.80

    1.00

    1.20

    La Nina Neutral El Nino

    0.00

    0.50

    1.00

    1.50

    2.00

    2.50

    3.00

    La Nina Neutral El Nino0.00

    0.50

    1.00

    1.50

    2.00

    2.50

    La Nina Neutral El Nino

    ENSO Outlook for next Summer:

  • Impacts by peril

    Vary by region More bushfires More intense rainfall Fewer cyclones, but more intense Wind / Hail not clear

  • Impacts by peril

    Vary by region, emerge over a long period More bushfires More intense rainfall Fewer cyclones, but more intense Wind / Hail not clear

    More actions of the sea

  • Mental Health

    http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjntKuW19_MAhVCE6YKHfkcDMQQjRwIBw&url=http://www.reilycenter.com/index.php/mental-health-awareness/&psig=AFQjCNFaHQmR936DNCsLIpYW2yvJTOMFdQ&ust=1463525385943566http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjntKuW19_MAhVCE6YKHfkcDMQQjRwIBw&url=http://www.reilycenter.com/index.php/mental-health-awareness/&psig=AFQjCNFaHQmR936DNCsLIpYW2yvJTOMFdQ&ust=1463525385943566

  • Identical twins

  • 0

    10

    20

    30

    40

    50

    60

    70

    80

    0

    500

    1,000

    1,500

    2,000

    2,500

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    Ment

    al S

    tress

    Cla

    im Fr

    eque

    ncy

    All C

    laim

    Freq

    uenc

    y

    Financial YearAll claims (LHS) Mental Stress (RHS)

    Mental Stress Claim Frequency among Workers (accepted claims per 100 million hours worked)

    Source: safe work australia

  • Mental Injuries in CTP a small example

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    2003

    /04

    2004

    /05

    2005

    /06

    2006

    /07

    2007

    /08

    2008

    /09

    2009

    /10

    2010

    /11

    2011

    /12

    2012

    /13

    Prop

    ortio

    n wi

    th P

    sych

    Decision Year

    Severity 2Sev1 involving cervical whiplashAll Decisions

    Source: safe work australia

  • 0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    7.0

    8.0

    2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

    Med

    ian

    Tim

    e Lo

    st (w

    eeks

    )

    Financial YearMental stress All accepted claims

    Median Lost Time vs All Worker Claims Over Time

    Source: safe work australia

  • Ella Ingram vs QBE Insurance

    Hospitalised with depression, cancelled overseas trip Travel insurance claim denied on basis of mental health exclusion Ingram claimed unlawfully discriminated against under Equal

    Opportunities Act and Disability Discrimination Act Acts allow insurers to discriminate on basis of statistical data

    Decided by Victorian Civil and Administrative Tribunal (VCAT)

  • Ella Ingram vs QBE Insurance

    Hospitalised with depression, cancelled overseas trip Travel insurance claim denied on basis of mental health exclusion Ingram claimed unlawfully discriminated against under Equal

    Opportunities Act and Disability Discrimination Act Acts allow insurers to discriminate on basis of statistical data

    Decided by Victorian Civil and Administrative Tribunal (VCAT) Decision against QBE failed to show that relied on statistical data

    when denied indemnity. Hence not allowed to discriminate

  • Ella Ingram vs QBE Insurance

  • Environment

    Senate enquiry into financial advice Separate investigation by ASIC Labour suggest consideration of a Royal Commission into life