Although a great deal of attention is paid to cost control initiatives in the workers’ compensation and healthcare arenas, liability costs are escalating for many organizations. This session at the RIMS 2017 Annual Conference and Exhibition discussed the factors driving increasing claims and litigation costs.
- Alan Gier, Global Director, Corporate Risk Management & Insurance, General Motors Company
- Anthony DeFelice, Casualty Practice Leader, Aon Corporation
- Andrew Barberis, Global Claims Officer for Excess Casualty & Healthcare Professional Liability, AIG
- Morgan O’Rourke, Director of Publications and Editor-in-Chief, RIMS
The casualty market has been challenging for a long time. The industry hasn’t experienced a hard market since the 1980’s. There is a large frequency of severity and the biggest cases are getting more expensive. In fact, some of the largest cases in 2017 were over $700 million.
In addition, juries seem to be desensitized to the large amounts that they are awarding in lawsuits. From an auto liability standpoint, factors like inexperienced drivers and distracted driving are leading to an increase in accidents and juries are awarding large amounts in these cases. Underwriters are taking note and pricing accordingly. Many cases are long tail, taking 5-8 years for resolution. From a carrier standpoint, insureds need to look for providers who will have the ability to pay years down the line.
Cyber risk is also evolving to the point where losses are occurring. It crosses so many lines of insurance that buyers are starting to looking for a total cyber solution that includes all the types of risks built into one policy. The market is trying to respond to this demand. It takes a coordinated approach between all the stakeholders to make it as seamless as possible.
Organizations are looking for cyber policies that cover corporate infrastructure, business interruption and data privacy. That solution doesn’t seem to be available yet. The area is evolving, but the panel is optimistic that it is a problem that will be solved soon. Insurers are starting to comprehend that property damage as a result of cyber attacks also needs to be included. Getting real-world data on these issues should help drive the evolution to an insurance solution.
Finally, medical costs are also a large driver of rising casualty costs. One of the largest components is the bodily injury aspect. With medical advancements, we are keeping people alive much longer, which transfers to larger settlements. For instance, brain injuries used to result in an average of $10 million settlements. These cases are currently being awarded settlements up to $50 million.