Risk Management Conference and Exhibition - Chargeback … · 2016-10-27 · Helmsman Management...
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WWW.CHICAGOLANDRISKFORUM.ORG Chargeback Program Design The Carrot or the Stick
Transcript of Risk Management Conference and Exhibition - Chargeback … · 2016-10-27 · Helmsman Management...
W W W . C H I C A G O L A N D R I S K F O R U M . O R G
Chargeback Program Design
The Carrot or the Stick
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Chargeback Program Design
MELISSA DUNN VP & Managing Director
Helmsman Management Services
RICHARD FRESE Principal and Consulting Actuary
Milliman
TOM FULLER Manager, Risk Management Consulting
Liberty Mutual Insurance
Objective
Issues to consider when designing/revising a cost
allocation system
Case Studies
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Current System
• What are currently doing to allocate costs?
• What’s working well? • What’s not working well? • Desired improvements?
Cost Allocation Goals
Accounting accuracy
Motivate behavior
Motivate positive behavior
! Reduce accidents
! Minimize costs after accidents
(to reduce cost)
EQUITABLE
SIMPLE
TIMELY
COST ALLOCATION
ATTRIBUTES
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Perfect System?
False
Always tradeoffs
Can I design the perfect
chargeback system for my
company?
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Initial Decisions
• Who should be involved? • Competing interests? • Stakeholder concerns/priorities/
perspectives?
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Initial Decisions
• What cost components? • How often to allocate? • To what level will allocate? • Prospective or retrospective?
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Initial Decisions
• Need to completely allocate costs?
• Need to smooth results? • Reward productive behavior?
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EXPOSURE
CLAIM COUNTS
INCURRED LOSS
PAID LOSS
ULTIMATE LOSS
COST ALLOCATION STRUCTURE
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Cost Allocation Structure
• Mix of claims and loss? • Target specific behavior? – Prompt claim reporting credit? – Charge per TTD day?
• Target specific injuries?
TTD = Temporary Total Disability
EXPOSURE
CLAIM COUNTS
INCURRED LOSS
PAID LOSS
ULTIMATE LOSS
COST ALLOCATION STRUCTURE
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Cost Allocation Issues
Motivates desired
behavior?
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• Divesting/acquiring business units • Lack of historical experience • Change in risk profile • New Management
Unique Situations & Challenges
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Advanced Considerations
• More complex designs • Predictive analytics
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COST ALLOCATION
PROCESS
MONITOR • Continue to assess needs
and objectives • Revise system as necessary • Produce management /
allocation reports • Continue to obtain
feedback and “buy-in”
SET OBJECTIVES • Identify needs and
objectives • Evaluate current allocation
system • Obtain “buy-in” from
corporate stakeholders
IMPLEMENT • Test system • Provide any necessary
training • Develop management
information reports • Design allocation reports
DESIGN • Identify potential
constraints • Develop alternative designs • Evaluate alternatives • Select “best” system • Obtain “buy-in” from
corporate stakeholders
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Case Studies
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Q A &
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Contact Information
MELISSA DUNN
VP & Managing Director [email protected] 630-791-6189 Helmsman Management Services
RICHARD FRESE
Principal and Consulting Actuary [email protected] 312-499-5648 Milliman
TOM FULLER
Manager, Risk Management Consulting [email protected] 314-205-7525 Liberty Mutual Insurance
