Risk Insider: Ernie Feirer

Solving Commercial Auto’s Loss Problem

By: | January 9, 2017 • 2 min read
Ernie Feirer, CPCU, is Vice President and General Manager, Commercial Insurance, at LexisNexis Risk Solutions, where he is responsible for developing a suite of solutions for the commercial insurance market. He can be reached at [email protected]

Commercial auto has a problem. The combined loss ratio for commercial auto has increased 17 percent over the past 10 years, and more than 10 percent in four of the past five years.[1]

Yet these chronic underwriting losses are taking place in an insurance market that has experienced very strong growth for five years in a row, including $31 billion in direct written premium in 2015 (a 7.35 percent increase).[2] Clearly, rate increases are being offset by losses.

Why? A combination of factors, but the common denominator is the driver. The good news is, by understanding data around how drivers and their past behavior correlates with future losses, carriers can decrease loss frequency profitability.

Carriers have traditionally utilized motor vehicle records (MVRs) to understand specific driver behavior, focusing on violations and driving eligibility. While those records are helpful, they don’t tell the whole story. Not everything on the MVR translates to losses, and there are losses that are not visible in MVRs.

The unsustainable pattern of year after year loss ratios can be reversed with simply the right investment in data analytics.

Luckily, there are solutions that carriers can leverage that go well beyond the MVR and can help gain a better understanding of commercial drivers and, in turn, help close the gap in risk assessment.

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For example, contributory databases that provide automated loss runs based on searches not only by business but also by specific drivers can provide exactly the kind of deeper insight carriers need to underwrite more precisely. These contributory databases can help carriers research prior loss histories, identify claim patterns, identify carrier information and improve claim outcomes.

There are also driver-specific commercial driver models that use alternative data sources as a surrogate for consumer credit, giving carriers information about a commercial driver that has never before been available. These models provide a score for each driver on a policy/quote that allows the carrier to rank order individual drivers in terms of loss propensity. It opens up multiple options for incorporating the score into the carrier’s own proprietary model and rating plan.

These tools can provide insights on loss propensity by driver, enabling carriers to better understand your driving population and better segment your risk. This understanding enhances a carrier’s tiering factors, or at the very least provides more rigor around discretionary pricing.

Both approaches can complement the use of traditional MVRs to help carriers gain deeper insights and better evaluate risk. The unsustainable pattern of year after year loss ratios can be reversed with simply the right investment in data analytics.

[1] Source: Insurance Information Institute, based off of A.M. Best Data

[2] Source: Auto Insurance Report, June 2016

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]