Personal injury has been widely studied and reported on, and another study is underway. But, Marie-Louise Rossi asks, why there are no comparable data on other types of claim
A surprising aspect of the UK insurance industry and the London Market is the shortage of reliable market-wide information about claims.
Some companies, I know, have sophisticated mechanisms for storing, retrieving and analysing their own data, but there is nowhere they can go for a reliable picture of the market as a whole. It is an area where we lag behind the US and many European countries.
And it is the main reason why the International Underwriters Association (IUA), with the support of the Association of British Insurers (ABI), commissioned the third UK bodily injury awards study at the start of this year.
The study's two predecessors, published in 1997 and 1999, have established these reports as credible sources of information on industry trends in the claim frequency and severity of personal injury.
The 1999 study was truly ground-breaking for two reasons. First, it introduced the rehabilitation code of best practice, which continues to be highly influential in the way the industry handles injury claims.
Second, it was much the largest and most sophisticated actuarial exercise of its kind ever conducted in the UK, involving analysis of about 700,000 claims going back more than a decade. The results were revealing.
We concluded that claims escalation had been running at around 13% for at least a decade, confirming the results of the first study, and that the trend was being driven to a significant degree by an increased willingness on the part of accident victims to litigate.
We were able to measure for the first time the effects of the so-called claims culture. Although the number of motor accidents had fallen slightly, bodily injury claims had increased in number, and this factor alone was responsible for claims escalation of nearly 6% per annum.
This time we hope to do much more than merely bring up to date the first two studies. We plan to investigate bodily injury claims trends in more depth.
The report will provide, for example, a detailed analysis of inflationary trends by size of claim, uncertainty margins in run-off, the impact of escalating legal costs, settlement patterns and a range of other matters.
Apart from the obvious benefits for underwriters, claims managers, senior insurance executives and reinsurers, this kind of information is invaluable to the industry in its dealings with government and other outside bodies. It is very difficult to influence public policy unless you know what is happening within your own industry, and can back your case with reliable quantitative information.
There have been many developments since the last study, especially legal changes that may have pushed up costs still further. These include conditional fee arrangements, a reduced Ogden discount rate, increases in NHS costs and greater use of legal expense insurance.
It will be very interesting to see what influence these changes have had.
As well as measuring the cost of claims, the report will explain the legal, medical and social trends behind them.
It will also provide updated information about the use of rehabilitation and case management by the insurance industry in the bodily injury claims process.
The third UK bodily injury awards study is due to be published in the first quarter of 2003.
Marie-Louise Rossi is chief executive at the International Underwriting Association
