INSIGHTS FROM THE 2020 LIABILITY BENCHMARK FOR …
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FINANCIAL SERVICES INSIGHTS FROM THE 2020 LIABILITY BENCHMARK FOR SENIOR CARE PROVIDERS March 18, 2021
Transcript of INSIGHTS FROM THE 2020 LIABILITY BENCHMARK FOR …
FINANCIAL SERVICES
INSIGHTS FROM THE 2020 LIABILITY BENCHMARK FOR SENIOR CARE PROVIDERSMarch 18, 2021
CONFIDENTIALITYOur clients’ industries are extremely competitive, and the maintenance of confidentiality with respect to our clients’ plans and data is critical. Oliver Wyman rigorously applies internal confidentiality practices to protect the confidentiality of all client information.
Similarly, our industry is very competitive. We view our approaches and insights as proprietary and therefore look to our clients to protect our interests in our proposals, presentations, methodologies, and analytical techniques. Under no circumstances should this material be shared with any third party without the prior written consent of Oliver Wyman.
© Oliver Wyman
3© Oliver Wyman
Scott TittleExecutive Director
National Center for Assisted Living (NCAL)
Patrick O’RourkeFCAS, MAAA
Rajesh SahasrabuddheFCAS, MAAA
Joanne WankmillerManaging Director, National Senior Care Practice Leader
WELCOME & INTRODUCTION TO TODAY’S PANELISTS
Questions can be directed to [email protected]
4© Oliver Wyman
AGENDA• Introductions
• Federal and State Liability Protections
• 2020 Long-Term Care Professional and General Liability Study
• Insights and Report Summary
• Q&A
FINANCIAL SERVICES
FEDERAL AND STATE LIABILITY PROTECTIONScott Tittle
Executive Director, National Center for Assisted Living (NCAL)
Federal and State Immunity Advocacy Effort
• July 2020 – Georgia Results =
Senator McConnell’s number one issue
• 2021 Congress = New Administration +
Majority
• PREP Act
• State Level Liability Protection
FINANCIAL SERVICES
2020 OLIVER WYMAN AND MARSH PROFESSIONAL AND GENERAL LIABILITY BENCHMARK FOR LONG-TERM CARE PROVIDERS
Actuarial AnalysisFebruary 2021
10© Oliver Wyman
PURPOSE OF OLIVER WYMAN’S INITIAL STUDY• Estimation of countrywide and state-specific trends separately for claim costs, severity, and frequency.
• Estimation of countrywide and state-specific claim costs.
• Examination of the relationship between indemnity costs compared to expense costs.
• Review of the accident year by report year relationship.
• Analysis of the cause of loss descriptions.
FUTURE ENHANCEMENTS• Analysis of the relationship of a 5-star CMS Rating and claim costs and trends.
• Examination of the effect of arbitration agreements on settlement values.
• Review of the effect of the COVID-19 pandemic.
Our analysis is based on data through December 31, 2019, andtherefore, does not consider the effect of the COVID-19 pandemic
11© Oliver Wyman
DATABASE AND COLLECTION METHODOLOGY
– Results found in this study are based on calculations of participant provided data.
– Claims with payments less than $500 were excluded to remove any bias from nuisance claims.
– Claims are limited to $1 million per occurrence to limit the impact of large claims on the results.
– Focus of this analysis was on closed claims data. By examining paid indemnity and expense we eliminated the need to develop open claims and eliminated the differences in reserving practices between participants.
32 $1.84B 11KLong-Term Care Providers Paid Indemnity and Expense Closed Claims
over the past 10 years over the past 10 years
COUNTRYWIDE FINDINGS
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2021 PROJECTIONS
Component 2021 ProjectionAssumed
Annual Trend
Frequency 0.76 0.4%
Severity $227,900 2.7%
Loss Rate $1,730 3.1%
Indemnity and Expense Limited to $1 Million per Occurrence
• Claim frequency is the number of claims estimated to close with payment per 100 occupied beds.
• Claim severity is the average ultimate size of a claim estimated to close with payment.
• Loss rate is the cost to pay indemnity or expense per occupied bed.
14© Oliver Wyman
THE ESTIMATED ULTIMATE FREQUENCY HAS REMAINED RELATIVELY FLAT OVER THE PAST FEW YEARS
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Occurrence Year
0.00
0.20
0.40
0.60
0.80
0.64
0.72
0.65
0.73
0.80
0.77
0.71
0.750.76 0.76 0.76 Indicated
Annual Frequency
Trend
+0.4%
Occurrence Year
Countrywide Frequency
15© Oliver Wyman
THE ESTIMATED 2020 SEVERITY LIMITED TO $1 MILLION PER OCCURRENCE IS $221,915
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Occurrence Year
$0
$50,000
$100,000
$150,000
$200,000
$222,367 $218,307$212,322
$204,848$198,050
$178,926
$219,489
$206,069 $208,638
$218,224 $221,915
Indicated Annual SeverityTrend
+2.7%
Occurrence Year
Countrywide $1 Million Severity
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THE ESTIMATED 2020 LOSS RATE LIMITED TO $1 MILLION PER OCCURRENCE IS $1,681 PER OCCUPIED BED
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Occurrence Year
$0
$500
$1,000
$1,500 $1,415
$1,567
$1,382
$1,495
$1,588
$1,371
$1,559 $1,537$1,588
$1,652 $1,681
Indicated Annual
Loss Rate Trend
+3.1%
Occurrence Year
Countrywide $1 Million Loss Rate
INDEMNITY AND EXPENSE STATISTICS
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THE PORTION OF CLAIMS INVOLVING INDEMNITY PAYMENTS IS 63% IN 2019, THE LOWEST OBSERVED RATIO IN THE PAST 10 YEARS
Indemnity and Expense Only Claim Counts
Closed Year
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
250
500
750
1,000
1,250
1,500
1,750
2,000
570613
815895
824
966
1,082998
1,109
884
205204
224225
258
386
432
407
474
529
Indemnity Claims
Expense Only Claims
Indemnity Rate
Cla
im C
ou
nt
74% 75% 78% 80% 76% 71% 71% 71% 70% 63%
Claim Counts by Closed Year
19© Oliver Wyman
THE AVERAGE PAID INDEMNITY AND PAID EXPENSE AMOUNTS IN 2019 CONTINUE THE OBSERVED DOWNWARD TREND
Claims Closed with Indemnity: Average Size - Unlimited
Closed Year
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$50
$100
$150
$200
$250
$300
201,087208,196
218,335205,681
232,474
213,551
187,068197,336
177,662
161,941
70,425 60,62560,150
60,756
60,723
62,395
51,100
58,206
57,187
49,868
Avg. Paid Indemnity
Avg. Paid Expense
Ave
rag
e C
laim
Siz
e o
n I
nd
em
nit
y C
laim
s (0
00
s)
Claims with Indemnity – Distribution of Indemnity and Expense
20© Oliver Wyman
AVERAGE PAID AMOUNTS IN 2019 ARE THE LOWEST OBSERVED IN THE PAST 10 YEARS AND CONTINUE THE OBSERVED DOWNWARD TREND
Claims Closed without Indemnity: Average Expense - Unlimited
Closed Year
Ave
rag
e C
laim
Siz
e f
or
Exp
en
se
On
ly C
laim
s (
00
0s)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$5
$10
$15
$20
$25
$30
15,754
24,235
26,280
22,574
16,042
19,757
15,332
20,350
16,162
10,372
Average Severity – Expense Only Claims
CLAIM COSTS BY CLOSE LAG
22© Oliver Wyman
SERIOUS CLAIMS THAT INVOLVE POTENTIAL LITIGATION REMAIN OPEN LONGER AND TEND TO SETTLE FOR HIGHER VALUES
Close Lag (Years) Claim CountDistribution
of Claim CountPaid Indemnity
and ExpenseDistribution of Payments
Closed Claim Severity
1 2,063 12% 155,474,780 5% 75,363
2 5,628 33% 697,217,017 24% 123,884
3 4,733 28% 838,468,925 29% 177,154
4 2,604 15% 591,499,591 20% 227,150
5+ 2,132 12% 619,334,019 21% 290,494
Total 17,160 100% 2,901,994,332 100% 169,114
Indemnity and Expense Severity by Closing Lag
Close lag is defined as the lag from report year to close year
CAUSES OF LOSS
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DEATH IS THE LEADING CAUSE OF LOSS FOR CLAIMS WITH THE HIGHEST LOSS AND EXPENSE CLAIM AMOUNTS
Frequency
amputation
infectionulceralleges
floorhearing
slipped
hip
sexual
records
negligencefalls
uti
medication
physicalerrorfellresident
hematoma
unexpected
was
losspneum
onia
skin
dentures
attorney
malnutrition
f ractured
treatment
during
allegations
delay
date
medical
deathfall
injuries
injury
laceration
typew
rongfu
l
w eight
wound
pressure
quality
ch
an
ge
woundscondition
ulcers
staf f care
description
aid
stage
fracture
abuse
alleged
rep
air
occurrence
failu
re
f acility
knee
resulting
decubitus
denture
incident
other
explainvisitor
transfer reimburse
dehydra
tion
decubitis
request
sepsis
Severity
w eightincident
wounds
visitor
fell
was
sta
ge
pneumonia
se
psis
mchugh
malnut
wilkes
floor
f ractured
skin
allegations
quality
sexual
iii
resu
ltin
g
ulcers
treatment
choking
hematoma
fall
wound
care
during
exp
lain
failure
decubs
malnutritionw rongful
staf f
breakdown
resident
alleged
pressureother
decub
elopement
decubitisinfection
death
loss
medication
injury
phy sicalmedical
decubitu
s
hip
alle
ges
sores
records
ulceroccurrence
error
laceration
type
abuse
dehydration
fracture
transf er
request
falls
attorney
case
mu
ltip
le
description
am
puta
tion
unexpected
date
negligenceaspiration
uti
The larger and bolder words appear more often in the various data sets.
© Oliver Wyman
25© Oliver Wyman
SPECIFIC STATE STATISTICS ARE PROVIDED FOR THE FOLLOWING 19 STATES
26© Oliver Wyman
PARTICIPATION IN 2021 ANALYSIS
Please contact [email protected] for more information
• Our focus for the 2020 study was to build-out our model. In 2021 we will focus on increasing the participant base.
• A primary goal of the upcoming study is to understand the initial impact of the COVID-19 pandemic (data will include losses through 12/31/2020).
• We are willing to work with TPA’s and insurance carriers to help obtain the data.
• Upon data submission we will provide each participant diagnostic information:
– Frequency and Severity Claim Statistics by Closing Year, Report Year, Accident Year Statistics.
– Open and Closed Claim Statistics.
– Exposure Analysis.
• As with the 2020 report, there is no cost to participate. Please email [email protected] if you are interested in participating.
27© Oliver Wyman
28© Oliver Wyman
QUALIFICATIONS, ASSUMPTIONS, AND LIMITING CONDITIONSThis report is for the exclusive use of the Oliver Wyman client named herein. This report is not intended for general circulation or publication, nor is it to be reproduced, quoted, or distributed for any purpose without the prior written permission of Oliver Wyman. There are no third-party beneficiaries with respect to this report, and Oliver Wyman does not accept any liability to any third party.
Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Oliver Wyman accepts no responsibility for actual results or future events.
The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation is assumed to revise this report to reflect changes, events, or conditions, which occur subsequent to the date hereof.
All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole responsibility of the client. This report does not represent investment advice nor does it provide an opinion regarding the fairness of any transaction to any and all parties. In addition, this report does not represent legal, medical, accounting, safety, or other specialized advice. For any such advice, Oliver Wyman recommends seeking and obtaining advice from a qualified professional.
FINANCIAL SERVICES
PANDEMIC RISK INSURANCE PROGRAMJoanne Wankmiller
Managing Director, National Senior Care Practice Leader, Marsh
MARSH
Pandemic Risk Insurance ProgramMarsh is Leading Efforts for Governmental Protection Against Future Pandemics
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• MMC continues to lead discussion within the insurance industry and continues to develop consensus around a path forward and a defined role for insurance in a pandemic risk solution. Carriers such as Zurich, Farmers and Chubb have been public about supporting a solution that includes a role for private market capital.
• There is a burgeoning policyholder coalition called the Business Continuity Coalition, that has become increasingly vocal about the need for a forward looking pandemic solution. They are engaging with policymakers on Capitol Hill, and providing feedback on the Pandemic Risk Insurance Act, which will likely be introduced during the first half of the year. The coalition represents a broad range of business insurance policyholders – large and small – from across the American economy, employing millions of people. They sent a letter to Senate leadership earlier this year urging them to act on a pandemic solution.
• Renewed momentum on a pandemic solution is also supported by the new Chairman of Insurance Subcommittee Congressman Emmanuel Cleaver (Democrat- Missouri) - Cleaver notes that a pandemic risk solution is a top priority for his Committee.
• MMC has led the industry discussions on this issue since last March, and we’ve engaged the carrier trades throughout this process. Our ultimate goal is to advance a solution that aligns the needs of policyholders with our carrier partners. We are open to a number of solutions, including a tiered approach that envisions a fully government role for lower limits with a layered private capital solution for larger and more complicated risks.
H.R. 7011, the Pandemic Risk Insurance Act of 2020 (PRIA)
We believe that a pandemic risk insurance program is essential for our clients to:
Q&A
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SURVEY REQUEST
We are very interested in your opinion!
We will be circulating a replay link and copies of the slides.
Please remember to take our survey when you receive the follow-up email.
FINANCIAL SERVICES
Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman.
This document and any recommendations, analysis, or advice provided by Marsh (collectively, the “Marsh Analysis”) are not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update the Marsh Analysis and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, tax, accounting, or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. Marsh makes no representation or warranty concerning the application of policy wording or the financial condition or solvency of insurers or reinsurers. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage. Although Marsh may provide advice and recommendations, all decisions regarding the
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