DCC expenses include defense, litigation and medical cost containment—essentially, the cost of settling a claim. The Best’s Special Report, “Defense-Related Loss Costs Rising for Lines Most Susceptible to Heavy Litigation,” notes that as insurance claims become increasingly severe and more complex, insurers have put more focus on working with risk professionals and other stakeholders to limit defense costs.
According to the report, the higher DCC expenses attributable to medical professional liability policies have been associated with expert witness fees, costs to secure medical records and other allocated costs involved in defending physicians. A drop in the medical professional liability segment’s DCC ratio in 2020 likely reflected a benefit from court closures due to the pandemic. In the product liability line, some of the costlier cases have involved protracted litigation typically stemming from product and food recalls. “A number of factors have led to a higher amount of recalls, including enhanced regulatory scrutiny and improved technology,” said Christopher Graham, senior industry analyst, industry research and analytics, AM Best. “These are positive developments for some industries but a negative for insurers given the heightened potential for lawsuits.”
According to the report, the ratio of net DCC expenses to annual incurred losses overall has dropped in the last decade, even on the lines most prone to high-profile lawsuits, which in addition to product liability and medical professional liability, can include worker’s compensation and auto liability. “Predictive analytics for claims handling has helped speed up the claims process and, in turn, has limited claim expenses,” said David Blades, director, industry research and analytics.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=311432 .
A video with Blades and Graham discussing the report is available at http://www.ambest.com/v.asp?v=ambdcccexpenses821 .