may 2007 performance audit: loss control efforts related to state insurance claims may 2007...

May 2007 Performance Audit: May 2007 Performance Audit: Loss Control Efforts Related to Loss Control Efforts Related to State Insurance ClaimsState Insurance Claims

2009 NSAAExcellence in Accountability AwardSmall Projects

Performance Audit Operations DivisionGeorgia Department of Audits and Accounts

Risk Management in Georgia

At the time of our review (May 2007), Georgia self-insured for: Liability (including medical malpractice and automobile liability)

Property

Workers’ Compensation

Indemnification

Based on information from its insurance brokers, RMS estimated $75 million savings per year by self-insuring.

Costs: RMS FY 2005 administrative expense: $10 million.

FY 2005 total claims expense: $108 million. (Including unemployment compensation and indemnification.)

2www.audits.state.ga.us/pao

Finding #1 – Significant savings are possible if the state establishes an effective loss control program.


No comprehensive system for controlling costs in Georgia.

Other states have demonstrated savings.

Room for improvement in Georgia.

Finding #1 – Significant savings are possible if the state establishes an effective loss control program.


Summary Recommendation:

• Give RMS authority to manage loss control efforts.

• Hold agencies accountable for claims costs.

• Develop a comprehensive approach to loss control.

• Improve the premium billing process.

Finding #2 – Risk Management Services can improve its effectiveness if its responsibilities are clearly defined and if it is given the authority and resources needed to manage a loss control program at the state level.


RMS lacks authority and resources.

Recommendations:

• The General Assembly should consider defining the loss control responsibilities of the Risk Management Services Division and providing the Division with sufficient authority to manage a state-wide loss control program.

• RMS should identify current resource needs and project future staffing needs.

• RMS should use ROI analysis techniques to justify additional staff.

Finding #3 – State agencies should be held formally accountable for taking steps to reduce their insurance losses.


Georgia’s state agencies are not held accountable for the dollar amount of their insurance losses.

Recommendations:

•The General Assembly should consider taking steps to hold state agencies accountable for their insurance losses.

•RMS should be required to submit detailed information regarding each agency’s losses as well as comparative statistics for identifying those agencies whose losses exceed the state’s average.

•Provide adequate agency resources to implement loss control efforts.

Finding #4 – Risk Management Services should develop a comprehensive approach for managing the state’s loss control efforts.


We found no overall strategy for implementing a truly comprehensive and effective loss control program.

Recommendations:

•To ensure an effective loss control program, RMS should prioritize its efforts based on evaluation of risk vs. reward, while considering available resources.

•Use statewide perspective vs. single insurance “line”.

•Establish basic programs and build on them.

Workplace safety, drivers education-> all state employees

•Improve claims data to identify patterns of loss.

Document incident causes-> target problems

Identify claimant entity-> target agencies

Finding #5 – The Department of Administrative Services needs to improve the billing process used to charge insurance premiums to agencies.


Rate/premium formulas put no emphasis on claims history.

Insurance charges not adequately communicated.

Recent premiums do not reflect claims costs.

Recommendation:

• DOAS should take steps to address the problems identified when billing formulas are revised for FY 2009.

• Can build on premium process to create incentives:

•Discounts

•Surcharges

What Happened Next?

May 2007: Favorably received by Division and Commissioner

July 2007: Final report from Governor’s Task Force

o Complementary and Complimentary

August 2008: Request from House Special Subcommittee

o What’s been done?

September 2008: Testimony to Subcommittee in tandem with Agency presentation

October 2008: Accelerated follow-up process

November 2008: Follow-up report published

December 2008: Subcommittee final report

January 2009: NSAA solicitation for Accountability award


Scope and Potential for Impact

Review current status of loss control efforts developed by the Risk Management Services (RMS) Division of the Department of Administrative Services (DOAS).

Evaluate current and planned RMS loss control efforts to identify potential barriers to success.

>$100 million annual expenditures

Minimal loss control activities in place

Potential to impact costs to all state agencies


Persuasiveness of Conclusions:

Legislative changes enacted in first session following report.

All recommendations implemented within 18 months.

Legislative subcommittee formed to evaluate impact.

Report published May 2007

Senate Bill 425 approved by General Assembly April 2008

Signed by Governor May 2008

House subcommittee formed September 2008

Comprehensive Loss Control Program launched October 2008


Effective and Efficient Government:

Effectiveness:

o Clarify Division’s legal authority and purpose.

o Provide Division with adequate resources.

o Distribute responsibility and accountability among state agencies.

Efficiency:

o Target loss control measures by identifying high-cost and high-frequency claims.

o Reduce cost of doing business statewide by moving responsibility to agency level.


Clarity and Conciseness:

Three-paragraph summary on cover page.

Four pages of background material:

o Loss control theory for state government;

o Agency history;

o Activity and financial data; and

o Current loss control efforts.

Five “findings and recommendations”, less than two pages each.

Appendix with best practices/ideas from other states’ loss control programs.

Legislative subcommittee report described it as “a thorough evaluation of the DOAS Risk Management Services Division.” 13www.audits.state.ga.us/pao

Innovation:

Deliberately targeted report.

Collaborative relationship with agency.

Coordination with Governor’s Task Force.

Assistance to legislative subcommittee.


Usefulness/ Action Produced:

Legislation addressing recommended changes:

o RMS authorized to establish loss control incentive programs, including differential premium rates, deductibles, and penalties.

o Based on agency performance and participation in loss control activities.

o Specific penalties (loss of FTE) if no participation in Return-To-Work program.

Legislative oversight committee continues.


Usefulness/ Action Produced:

Agency actions:

o Hired two loss-control officers.

o Improved reliability and accuracy of claims data.

o Improved statistics on covered employees per agency.

o Improved premium calculations

o Improved loss information to agencies

o Comprehensive Loss Control Program developed (next slide)


Action Produced: Comprehensive Loss Control Program(Implemented October 2008)

1. Employee Education and Training

2. Employee Accident Prevention Plan

3. Fidelity Losses (Employee Theft)

4. General Liability

5. Workers’ Compensation – Return to Work

6. Property

7. Auto Liability and Physical Damage

8. Fleet Management


Action Produced: Comprehensive Loss Control Program

Program Goals by June 2011:

Workers’ CompensationDecrease frequency in workers’ compensation claims 18%Decrease loss payments 12%

PropertyReduce water damage losses 65% Reduce burglary losses 33% Reduce employee theft claims 51%

Auto Liability and Physical DamageReduce at fault accidents 30% Reduce rear-end at fault accidents 30%

General LiabilityReduce harassment and discrimination claims 50% Reduce third party damages from premises and operations exposures 25%

Projected savings: $12 million FY 2010, $8-10 million FY 2011.


For More Information:


For copies of the 2007 report and 2008 follow-up review: https://www.audits.state.ga.us/searchRpts.html

(Search for reports 06-24 and 09-04)

Questions:

Paul Hollis, Audit Manager [email protected] 651-8858

JoAnn Paxson, Team [email protected]

404 651-8880

may 2007 performance audit: loss control efforts related to state insurance claims may 2007...

Documents

loss control responsibilities

states loss control

effective loss control

patterns of loss

state insurance claims

state agencies accountable

rms authority

insurance losses