Product Update

Claims Cost, Using Data To Drive Results, and Market Corner Updates in Risk Financing


This Risk Financing release includes several Risk Financing Perspectives articles including a summary of the most recent updates to the Willis Towers Watson Claims Cost Indexes (also known as US claims cost indexes). These are the same family of price indexes for major lines of insurance written by property and casualty insurers originally referred to as the "Masterson Indexes," named after the consulting actuary who developed them in the 1960s, Norton E. "Doc" Masterson. The indexes provide a measurement of inflation specific to the risks contemplated by individual lines of insurance such as workers compensation or automobile liability. They allow users to make adjustments to historical loss data in order to account for inflation. The recent updates indicate that the general inflation rate outpaced composite insurance inflation for the first time since 2012. They were published in Willis Towers Watson Insights (October 2019) in a discussion by Jeremy Pecora and Emily Thompson, consulting actuaries with Willis Towers Watson.

This release also includes a discussion titled "Using Data To Drive Results" by George Furlong of Sedgwick. The discussion addresses the limiting aspects of relying on purely quantitative results of data analysis. Current technology enhances an organization's ability to capture and integrate data from multiple sources, but relying solely on data to develop predictive models can be misleading. The discussion points out the necessity of combining data analytics and other business resources to create models that provide greater insight.

"Market Corner" provides quarterly updates on current property and casualty insurance market conditions. Other than for workers compensation, market conditions tightened broadly in 2019. Significant changes in pricing and terms were especially prevalent in excess liability insurance and in directors and officers liability insurance. Automobile liability rates also continued their steady increase as underwriters seek premium levels adequate to support losses. The overall market continues to offer adequate capacity, but insurers are trying to exercise more stringent underwriting practices.

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