Managing Claims Analysis

Managing Claims Analysis

Structures claims data analysis with severity/frequency trending, case reserve monitoring, and litigation management.

When To Use

• Periodic review of open claims inventory (monthly, quarterly, annual)
• Analyzing shifts in claim frequency or severity by line of business, geography, or policy year
• Monitoring case reserves against incurred-but-not-reported (IBNR) expectations
• Preparing loss development triangles or actuarial exhibits for management or reinsurers
• Tracking litigated claims through disposition and evaluating defense counsel performance
• Identifying emerging loss trends (e.g., new peril types, social inflation effects, legislative changes)

Inputs To Gather

• Claims register / loss run: Open, closed, and reopened claims with key fields — claim number, date of loss, report date, line of business, claimant, status, paid-to-date, case reserve, total incurred
• Policy data: Attachment points, limits, deductibles, policy period, coverage type
• Prior period comparisons: Previous loss runs or triangles for same evaluation dates
• Reinsurance structure: Treaty and facultative layers, retention levels, cession percentages
• Litigation log: Claims in suit with assigned counsel, jurisdiction, litigation phase, and next key date
• Scope parameters: Accident year vs. policy year, gross vs. net of reinsurance, confidence level for IBNR loads

Workflow

1. Validate data completeness

   • Reconcile claim counts and total incurred against the source system
   • Confirm no duplicate claim entries or missing report-date fields
   • Flag any claims with zero reserves but open status — mark with [VERIFY] for adjuster confirmation

2. Segment claims

   • Group by line of business, accident year/quarter, and geography
   • Separate large losses (above a stated threshold, e.g., $250K or per-program excess point) from attritional claims
   • Isolate litigated vs. non-litigated claims for separate trending

3. Build frequency and severity metrics

   • Calculate claim frequency: reported claim count per earned exposure unit (policies in force, premium volume, or payroll as appropriate)
   • Calculate average severity: total incurred / closed claim count (exclude large losses for attritional severity)
   • Compute loss development factors from paid and incurred triangles; note any tail factor assumptions [VERIFY]
   • Compare current period metrics to prior periods and to industry benchmarks where available

4. Analyze reserve adequacy

   • Review case reserves on the top 10–25 claims by incurred value — note any that appear stale (no reserve change in 90+ days)
   • Compare aggregate case reserves to actuarial indicated IBNR by segment
   • Identify reserve strengthening or takedowns exceeding a materiality threshold
   • Flag any claims where paid amounts exceed prior case reserve (reserve "busts") for root-cause commentary

5. Assess litigation exposure

   • Summarize litigated claim inventory by jurisdiction, coverage line, and litigation stage
   • Track average duration from suit filing to resolution
   • Calculate litigation rate (litigated claims / total claims) and compare to prior periods
   • Note any claims with trial dates within 90 days or pending dispositive motions
   • Evaluate defense counsel billing against budgets and fee guidelines [VERIFY if fee guidelines are current]

6. Identify trends and outliers

   • Surface any acceleration in frequency or severity beyond two standard deviations from historical mean
   • Note geographic or product-line concentrations
   • Flag potential catastrophe or mass-tort aggregation issues
   • Highlight regulatory or legislative developments that may impact future loss costs [VERIFY jurisdiction-specific statutory changes]

7. Compile management report

   • Structure output with executive summary, detailed exhibits, and appendix
   • Include key metrics dashboard: frequency, severity, loss ratio, reserve development, litigation rate
   • Provide narrative commentary on material movements and recommended actions

Output

• Executive summary: One-page overview of portfolio performance — claim counts, total incurred, loss ratio, and material changes from prior period
• Frequency/severity exhibits: Tables and trend lines by segment, with large-loss and attritional breakouts
• Loss development triangles: Paid and incurred triangles by accident year with selected development factors
• Reserve adequacy section: Top claims inventory, stale reserve flags, IBNR comparison, and reserve bust analysis
• Litigation dashboard: Claim counts in suit, litigation rate trend, average duration, defense spend summary
• Trend alerts: Flagged emerging issues with supporting data points and recommended next steps
• Appendix: Data sources, methodology notes, and glossary of terms

Quality Checks

• Confirm all incurred totals foot to the underlying claims register — no rounding discrepancies
• Verify that large-loss thresholds are applied consistently across all segments
• Ensure loss development factors are sourced from current actuarial study or industry data [VERIFY vintage of development factors]
• Check that prior-period comparisons use the same valuation date and methodology
• Validate that litigation metrics exclude subrogation-only or recovery-only files unless explicitly in scope
• Confirm reinsurance cessions are correctly applied when reporting net figures
• Review narrative for unsupported conclusions — every material assertion should tie to a data exhibit