In the insurance industry, change is constant. The need for change can be driven by advancing technology, shifting needs of the consumer, and broader macro trends all at once. Today, the intention is to focus on a specific macro trend which has a growing impact on U.S. auto casualty claims now and in the future: our aging population.
We’re currently in a notable period of transition within our population. According to U.S. Census data, as of 2010 only 13% of the population was aged 65 or older. As the entirety of the Baby Boomer generation transitions into retirement age and beyond, that percentage is growing rapidly. (Figure 1)
It's now roughly 17%, and by the early 2030s, that same age segment will make up roughly 21% of the population. That's more than a 60% increase in a little over 20 years.
The question is: how will a much larger segment of the population at retiree age or older impact insurers who indemnify injury claims? Let's take a deeper look at some of the effects we're already seeing in the casualty medical billing data we collect from our customers. For starters, we have observed a growing percentage of injured parties aged 65 or older within our casualty data over the last 4 years alone. (Figure 2)
This is significant because the average billing severity, meaning the amount of dollars billed per injured party, increases along with age. So too does the average length and complexity of treatment. (Figure 3)
There is a notable difference in the distribution of primary diagnoses, with a larger percentage of fracture, co-morbidity, and non-auto-related diagnoses for older injured parties. (Figure 4)
The most frequent co-morbidity and non-auto-related diagnoses are common maladies such as arthritis, type 2 diabetes, and hypertension. The types of procedures also change with advancing age, with a larger percentage of the billing coming from hospital facilities (outpatient “revenue” codes and inpatient charges), which carry a significantly higher average charge compared to other procedure types. (Figure 5)
One of the reasons this trend is challenging from an auto casualty indemnity perspective is that as our bodies advance in age, so too does the prevalence of pre-existing conditions and unrelated prior injuries. Many of these pre-existing injuries to areas of the body such as the spine, shoulders, and knees are caused by repetitive motion, poor posture, lifestyle factors, degeneration, and typical wear and tear. For example, a well-known study by the Journal of Bone and Joint Surgery found the prevalence of bulging lumbar discs in asymptomatic adults aged 40-59 to be 50%, with the same prevalence increasing to 80% for ages 60-80. (Figure 6)
With such a high prevalence, it becomes increasingly difficult for insurers to differentiate medical treatment related to acute trauma such as an auto accident from treatment for unrelated or pre-existing conditions. Often, they are bundled together on a single auto injury claim.
With this age-related increase in depth and complexity of injury claims expected to continue over the next decade and beyond, it becomes increasingly critical to utilize tools such as predictive analytics, sophisticated medical bill review rules engines, and manual review from a trained medical professional to objectively evaluate each claim from a causation and medical necessity perspective. In that way, insurers can best identify and indemnify loss-related versus unrelated treatment and injury claims.
