The Impact of Late Incident Reporting on Insurance Claims

By Risk Data Analytics, Inc. Article 002

Executive Summary

Timely incident reporting is critical to controlling insurance claim costs and improving outcomes across various lines of business, including workers’ compensation, general liability, and auto liability. Data from leading industry sources, such as the National Council on Compensation Insurance (NCCI), The Hartford, Sedgwick Claims Management Services, and Zurich Insurance, consistently demonstrate that late reporting significantly increases claim costs, often by 18-50% depending on the delay and type of claim. These cost increases stem from medical complications, increased legal involvement, lost evidence, heightened fraud risk, and greater litigation potential. By implementing robust reporting policies, employee training, and technology driven solutions like mobile applications and online portals, organizations can facilitate immediate incident reporting, potentially saving insureds substantial amounts in claim costs and, consequently, insurance premiums. This white paper explores the financial impact of late reporting, the underlying causes of cost escalation, the transformative potential of technology in mitigating these costs and an example of a robust solution provided by Emery & Karrigan, for the Specialized Carriers, Riggers and Crane market.

1 Introduction

In the insurance industry, the timeliness of incident reporting is a pivotal factor in managing claim costs and outcomes. Delays in reporting incidents, whether related to workers’ compensation, general liability, or auto liability consistently lead to higher costs, prolonged claims processes, and increased complexity. Industry studies from trusted sources like NCCI, The Hartford, Sedgwick, and Zurich Insurance provide compelling evidence that prompt reporting, ideally within 24 hours, can significantly reduce financial burdens for insureds. This white paper synthesizes key data points, examines why late reporting drives up costs, and highlights how technology, particularly applications for immediate incident reporting, can unlock substantial savings for insureds by reducing claim costs and stabilizing premiums.

2 The Financial Impact of Late Reporting

Delayed incident reporting has a measurable and significant impact on claim costs across multiple insurance lines. The following data from industry studies underscore the financial consequences of late reporting:

_2.1 NCCI (National Council on Compensation Insurance)_

• Claims reported after 7 days cost 18% moreon average than those reported within 7 days.

• Claims reported after 14 days cost 30%more.

• Late reporting increases medical and indemnity paymentsdue to untreated injuries, worsening over time.

_2.2 The Hartford Study (2020)_

• General Liability Claims: Claims reported within 3 days are 37% less expensivethan those reported after 10 days.

• AutoLiabilityClaims: Claims reported after 10 days cost 40%more on average.

_2.3 Sedgwick Claims Management Services (2018)_

• Late reporting beyond 2 weeks increases claim costs by 35-50%, depending on the line of business.

• Delays result in higher legal expensesand claimcomplications.

_2.4 Zurich Insurance Analysis_

• Claims reported within 5 days are 17% less expensivethan those reported after 15 days.

• Late reporting heightens the risk of litigation andfraud.

These statistics highlight a clear correlation between reporting delays and escalating claim costs, with delays as short as a few days driving significant financial consequences.

3 Why Late Reporting Increases Costs

The increased costs associated with late reporting stem from several interconnected factors that complicate the claims process and exacerbate financial exposure:

• Medical Complications: Delayed reporting often results in untreated injuries worsening, requiring more extensive and costly medical interventions.

• Increased Legal Involvement: Delays prompt claimants to seek legal representation, leading to higher legal fees and settlement costs.

• Lost Evidence: Over time, witnesses may forget critical details, or physical evidence may be lost, weakening the insurer’s ability to investigate and defend claims.

• Fraud Risk: Longer delays provide opportunities for claim exaggeration or fraudulent activities, increasing scrutiny and costs.

• LitigationRisk: Delayed claims are more likely to result in disputes or lawsuits, further driving up expenses.

These factors not only inflate claim costs but also prolong the claims process, impacting the insureds financial stability and operational efficiency.

4 Risk Management Best Practices

To mitigate the financial and operational impacts of late reporting, organizations can adopt the following best practices:

• Prompt Reporting: Encourage reporting within 24 hoursto minimize cost escalations and streamline claims handling.

• Strong Policies and Training: Develop clear incident reporting policies and provide regular employee training to ensure compliance and awareness.

• Leverage Technology: Utilize mobile applications and online portals to facilitate rapid First Notice of Loss (FNOL), enabling prompt reporting and documentation.

By prioritizing these practices, organizations can reduce delays, control claim costs, and improve overall risk management outcomes.

5 The Role of Technology in Immediate Incident Reporting

Technology offers a transformative solution to the problem of late reporting. Mobile applications and online portals designed for immediate incident reporting stream- line the FNOLprocess, enabling employees, policyholders, and claimants to report incidents promptly. These tools typically include features such as:

• User-Friendly Interfaces: Simplified forms and guided workflows to capture critical incident details.

• Prompt Submission: Prompt transmission of incident reports to insurers, reducing delays.

• Evidence Collection: Capabilities to upload photos, videos, or documents to preserve evidence.

• Automated Notifications: Alerts to supervisors or claims managers for swift follow-up.

By integrating these technologies into their risk management strategies, organizations can ensure incidents are reported promptly, minimizing the financial impact of delays.

6 Technology Available Today

Technology that supports prompt incident notification is available today. Emery & Karrigan (emerykarrigan.com), a company specializing in insurance and risk management for the crane, rigging, and specialized transport sectors, offers risk-management tools for its clients that help crews report incidents quickly, preserve early scene documentation, and notify the right response partners. The aim is prompt First Notice of Loss so insurers and brokers can act before evidence is lost and claim costs escalate.

7 Conclusion

The evidence is clear: late incident reporting significantly increases claim costs, with studies showing cost escalations of 18-50% depending on the delay and type of claim. These increases stem from medical complications, legal involvement, lost evidence, fraud risks, and litigation. By adopting robust reporting policies, training programs, and technology-driven solutions, organizations can mitigate these costs. Specifically, the use of mobile applications and online portals for immediate incident reporting can streamline the FNOL process, ensuring claims are reported within 24 hours. Based on industry data, such as The Hartfords finding that claims reported within 3 days are 37% less expensive, an application enabling immediate reporting could save insureds significant amounts in claim costs, potentially reducing insurance premiums by thousands to millions of dollars annually, depending on the organization’s size and claim volume. By investing in technology to facilitate prompt reporting, insureds can achieve substantial cost savings, enhance claims outcomes, and strengthen their risk management framework. Emery & Karrigan provide the required technology as part of their risk management program.

8 About the Authors

Michael A. Hopwood, CEO/President of Risk Data Analytics, Inc., has focused on developing technology to automate data flow in the construction industry. He specializes in developing key technologies, including Artificial Intelligence, for identifying data that impacts accident causation and insurance claims in the Specialized Carrier & Rigging/Crane sector.

Joseph Doerr, Director of Risk Management, Emery & Karrigan, has 20 years of experience in the crane and rigging industry and led the Specialized Transportation Program for NBIS, bringing focused insight into the operational and risk complexities of that sector. www.emerykarrigan.com

Find out more about Risk Data Analytics, Inc. at www.riskdataanalytics.com