Loss Ratio Improvement

	“In aggregate and by line of business, Innovation First Notice customers outpace their peers in lowering losses.” Kelley Analytics

A recent study by Kelley Analytics of insurance industry financial performance has shown that clients of Innovation First Notice improve their loss ratios by 5% relative to industry peers within three years of beginning to use our claim reporting services. For an average-sized property & casualty carrier with $500M in net written premiums, this translates into annual savings of $25M.

How do Innovation First Notice’s direct loss reporting services lead to such a large reduction in loss costs? The answer is multi-faceted, yet straightforward. Carriers that utilize First Notice are notified of losses sooner, receive complete loss data, take advantage of automated, integrated services further upstream, can intervene immediately, and settle claims more quickly. All this translates into lower loss costs. In fact, a claim lag-time study conducted by The Hartford Financial Services Group supports the importance of reporting claims quickly. In an update to previous findings, their 2004 study found that a one-week delay in reporting a workers’ compensation claim can increase claim costs by 10%.

Innovation First Notice recognizes there are many factors that influence loss ratios, including changes to a carrier’s internal claims settlement processes, its effectiveness in litigating contested claims, the risk nature of its book of business, etc. However, the critical common denominator across all of our clients is their “forward thinking” mindset regarding innovation and its role in streamlining operations and lowering claim costs. These carriers are aggressively executing new strategies to more efficiently process their claims, and using Innovation First Notice for their direct loss reporting is an integral part.

The analysis clearly demonstrates that carriers who use Innovation First Notice see their loss ratios fall—both in aggregate and by line of business—in the years immediately following their use of our services. Please contact us to find out how we can help your company achieve similar results.

Methodology:

The above results were derived by comparing the change in the loss ratios of Innovation First Notice clients vs. the change in industry loss ratios during the corresponding periods. The First Notice client portfolio is composed of all current P&C carrier clients that have been customers since at least 1999 (18 carriers ranging from $50mm to $7bn in NWP; all clients in this date range are included to avoid self-selection bias). Loss ratio improvements are calculated by comparing each client’s average loss ratio during the two years prior to becoming an Innovation First Notice client (i.e., “before” period) vs. each client’s average loss ratio during the year it joined First Notice and the two following years (i.e., “after” period). The industry benchmark data reflects industry loss ratios during "before" and "after" periods for lines of business (e.g., auto, workers’ comp) serviced by Innovation First Notice, weighted by client premiums within each line of business. Click here for a detailed example of how the industry benchmark was derived. All premium and loss data is from A.M. Best.