claims analysis from a financial perspective - cajpa · claims analysis from a financial...

Claims Analysis From a Financial

Perspective

Presented by

Herb McDuffee

Marianne Stuart CPA

James Marta CPA, ARPM

James Marta & Company

Certified Public Accountants

Accounting, Auditing, Consulting and Tax


www.jpmcpa.com 2

Why is this important?

Critical internal control

Knowing your claims

Identify what is changing or not (no

surprises)


www.jpmcpa.com 3

Critical internal control component

This is the largest expense you’ve got.

Reconciliation

change in claims database to the claims detail

change in claims detail to the checkbook

Identifies the pooled component of the claims

Claims expense can be a dumping ground for

adjustments or expenses.

Why – What is the Data For

Actuary

Safety Study (Loss Control)

Audits – Claims or Financial

Financial

Budgeting

What data

Open/Closed?

Limited

Agreeing the cash to the claim reports

Special Considerations

Section 4850 benefits


www.jpmcpa.com 5

What – What Fields are needed

Detail or Summary Data

List of required fields

Dates

Data format

When

Yesterday

Reoccurring or One Time Request


www.jpmcpa.com 8

Knowing your claims

By going through this process you can better

understand

Payout patterns

Reserving

Timing

Special Program Treatment


www.jpmcpa.com 9

Analysis of Claim Layers

Excess or

Reinsurance

Layer

Pooled Layer

to reconcile to Retention Layer

financial statements

Subrogation

Deductible

Analysis of claim layers

Receivables Issues

Where do I send the

bill?

CIGA vs. Other Carrier CT Claims

Receivables Issues

Contribution

from other

carriers

Allocation

issues

Receivables Issues

Receivables Issues

Follow Form

Specific Coveragevs.

Reserve Issues

Open pool reserves or excess

reserves on closed claims

Reserve Issues

Non Covered

Issues:

Unverified

Expenses

County

Counsel

Reserve Issues

Subro or Contribution Issues


www.jpmcpa.com 17

Using the reconciliation for

analysisWorkers Compensation

(250,000)

-

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

Paid Reserved IBNR


www.jpmcpa.com 18

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Lo

ss

es

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03

Policy Year

Property/Liability Claims

Paid Reserved IBNR


www.jpmcpa.com 19

What do the triangles tell you

Accounting loss development triangles:

Summarize how paid and incurred has

developed over time as compared to the

original expectation.

What should you be asking?


www.jpmcpa.com 20


www.jpmcpa.com 21

What does this information tell you? What questions should you ask?


www.jpmcpa.com 22

What you should ask?

Are there changes in the:

Program

Members

Are the claim reserves sufficient?

Do these development patterns tell us to

change our estimation assumptions?


www.jpmcpa.com 23

Advanced Issues

Which number do you take off of the actuary?

Sufficiency

Trends

Discounting

Effect of your special programs

Communication with other departments Risk management

Program design

Risk financing decisions

Payment and Other Issues

Governance Issues:

Claims Staff vis a vis Committees


www.jpmcpa.com 25

Questions and Considerations

when reviewing your actuary report

Can you agree to the data used?

For development of claims

Does the actuary use your claims history

Other’s, Industry

What are the development factors used?

Other significant assumptions

Discount rates

Affect of changing; Laws, court rulings, costs


www.jpmcpa.com 26

What claims analysis helps you do

Understand where you have been

Understand where you are

Is it right?

Understand where you are going


www.jpmcpa.com 27

Intera-period analysis

What do you do if your claims are progressing

faster than expected

Property

Liability

Workers compensation

Call the Actuary

Use projected outstanding to bridge difference

Provide for a sufficient IBNR

Least squares method


www.jpmcpa.com 28

Why is advanced claims analysis

and accounting important?

Accountability over what is administered

Identification of critical claim financial issues

Indication of where you are going

Influence rate setting

Equity and dividend considerations

Project where the actuary estimates may be

coming in


www.jpmcpa.com 29

What advanced claims analysis

and accounting provides

Internal control

Accounting

Decision making

Credibility


www.jpmcpa.com 30

What value do you get

“gets us to where we want to go without

surprises along the way”

Instead of waiting for the actuary to tell us

where we were; now we can assess were

we are and use it to confirm to the actuary.


www.jpmcpa.com 31

Questions?

claims analysis from a financial perspective - cajpa · claims analysis from a financial...

Documents