FIAR – International Insurance-Reinsurance Forum 2012 Ulrich Werwigk, Swiss Re Europe S.A. German Branch; Munich Components of Bodily Injury Claims – A.

FIAR – International Insurance-Reinsurance Forum 2012

Ulrich Werwigk, Swiss Re Europe S.A. German Branch; Munich

Components of Bodily Injury Claims – A European Perspective –

FIAR - Insurance-Reinsurance Forum 2012 | Ulrich Werwigk | 22. May 2012 2

Bodily Injury Claims in Europe

Bodily Injury Scenarios in Europe – Sample of Typical Cases

Swiss Re Bodily Injury Landscape – Benchmark Case and Trends

Key Drivers of Bodily Injury Claims

Components of Bodily Injury Claims – Overview

Exemplary Reserve Calculation

Conclusions: "… what is important?"

Agenda and Topics

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Bodily Injury Claims in Europe– Facts and Developments*) According to last CEA statistics, published in

2010, Europe is with 315m vehicles the largest motor market of the world.

Comparing with the increase of vehicles of 1,9% each year, the growth of bodily injury claims of 2,3% per year is slightly higher.

Total expenditure of bodily injury claims is quoted with 50% of all MTPL claims expenditure, even though the share of counted claims is only 14% (Italy 22% , France, Germany, Austria 10%, Hungary 2,4% of counted claims).

The share of large personal injury claims (>€ 100.000) counts only 1,1% of all personal injury claims, however they represent 37% of all personal injury claims expenditure MTPL (roughly € 10bn).

Statistics show a large spread between European States and an West-East divide.

*) Source of data and graphs: CEA Statistics No. 38 – European Motor Insurance Market, publ. February 2010

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Bodily Injury Scenarios in Europe – Sample of Typical Cases

Accident Loss Amount*)

Macedonia (Austria)

British passenger severely injured (quadriplegia)

€ 17m (€ 8m)

Austria British tourist bus, 48 passengers, hereof 35 injured, 5 fatalities

€ 14m (€ 9m)

Ireland Latvian lady as passenger severely injured (quadriplegia)

€ 5,4m

Austria / Germany

One person injured, quadriplegiaMultiple injured, one severe (paraplegia)

Up to € 8m

€ 4 – 5m

Poland Injured (paraplegic) € 0,5 – 0,8m

Czech Republic Injured (paraplegia) € 0,8 – 1,2m

Romania Various losses of injured (severe bodily injuries) and fatality

€ 125.000 – 750.000

Romania Pain & Suffering of injured and of relative

€ 850.000€ 1,2m

*) amount in brackets (€ 8m) reflects final settlement by insurer

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Hypothetical victim – Tetraplegic

30-year-old man

Wife without own income

2 children (aged 2 and 5)

Average income from dependent employment

Severe spinal or head injury; no ventilation necessary; remains 100% disabled; cannot return to work

Highest assistance level

Cost components: loss of earnings, assistance, pain & suffering, remainder

Slide 5

Swiss Re Bodily Injury Claims Landscape- Benchmark Case -

FIAR - Insurance-Reinsurance Forum 2012 | Ulrich Werwigk | 22. May 2012

Poland

Slovakia

Hungary

Spain

Italy

Czech Republic

Finland

Belgium

Switzerland

Austria

Germany

France

United Kingdom

0 1 2 3 4 5 6 7 8 9 10

loss of earnings assistancepain and suffering remainder

Slide 6

Swiss Re Bodily Injury Claims Landscape European Comparison 2010

in mn €

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Swiss Re Bodily Injury Claims Landscape European Trends 2012

199019952000200520082010201220150

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

LOE ASS PS REM

Poland (EUR)

1990

1995

2000

2005

2008

2010

2012

2015

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

LOE ASS PS REM

Czech Republic (EUR)

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Key Drivers in Increase of Severe BI Claims

Capitalization tables

Increasing welfare Higher living

standards Increasing wages Changes in society /

social relationship Increasing mobility

Increasing claims awareness Life Expectancy

Superimposed inflation in medical and care sector

Trend to third party assistance in welfare states

Exploding Medical and Care Costs / Healthcare costs

Discount rates Changes in financial

markets

From whom can I get compensation? Stronger public awareness Contingency fees/victim

associations/TV

People live longer

Legal Changes

Enforcement of victim protection (EU)

Increasing compensation of non-material losses

Role of courts – victim friendly / but also restrictive re claims

Legal Systems

Different Settlement Methods

Annuities vs. Lump Sum (capitalization) Settlement periods

Non-material losses; Pain & Suffering vs. Harm of Social Status Recourse of social security system

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Medical costs (medical treatment in hospital and ambulant, rehabilitation, medical follow-up treatment)

Loss of Earnings during medical treatment and later

Care costs and assistance (monthly period, calculated on hourly or daily rates)

Pain & suffering of the injured (respectively additional disfigurement)

Non-material compensation for relatives

Additional needs (prosthesis, wheelchair, conversion of flat, additional medical expenses, housekeeping loss)

Funeral costs

Alimony to family members (spouse, children)

Lawyers- and court costs

Components of Bodily Injury Claims - Overview

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Reserve Calculation - Bodily Injury Claim Motor Accident (Austria) - 2010

potential wage increase?

carrier opportunities?

GenderDate / Year of BirthAge at DoLMortality Table / Life Expectancy Profession /Current J ob:

Injuries/ DisabilityKind of Care

cookparaplegia /100%

disability / wheelchairfamily + resid. home

Injured

male1988

22 years

50,4

Claims Positions

Medical Costs: 180.000Pain & Suffering: 150.000Disfigurement 20.000P & S of Relatives 0Care Costs:Family + Residential Home 5.000 3.267.600Months / Year 12Life Expectancy 54,46./. reduced LE*) 0 0Loss of Earnings: 2.000 1.032.000Months / Year 12Retirement Age (65) 43Legal Costs: 150.000Others:Sub-Total: 4.799.600./. reduced LE (20%)**) -821.600Public Social Security and Pension Funds 800.000Add. Injured 230.000Sub-Total: 5.008.000Claim Notification: 5.000.000

Calculation of CedentEUR

discount rate?

why here and not at care costs?

potential future

increase of costs?

what is this amount in 54 years?

Life expectancy / mortality tables / retirement age?

Loss of Earnings / carrier opportunities?

Alimony of wife and children?

Home care or residential care?

Potential for lump-sum agreement?

Key Topics

justification for

reduction of LE and

proportion?

FIAR - Insurance-Reinsurance Forum 2012 | Ulrich Werwigk | 22. May 2012 11

… one of the most complex topics in claims handling

…consistent strategy and philosophy – what are the key topics for Romanian insurance industry?

… consider the individual elements of bodily injury claims, the requested medical treatment, rehabilitation or assistance

… clear principles enable pro-active claims management and reduction costs

Therefore bear in mind

– be prepared for special requirements and individual claims settlement as a part of a consistent claims strategy

Swiss Re is ready to assist and support developing a strategy for bodily injury claims and to provide an appropriate forum with experts for the discussion.

"… what is important for Severe Bodily Injury Claims?"

Thank youUlrich Werwigk, Attorney at LawSwiss Re Europe S.A., German Branch

Email: [email protected]

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