Benchmarking Study Group LTD Claims Recovery Experience March 5, 2009

1. Benchmarking StudyGroup LTD ClaimsRecovery ExperienceMarch 5, 2009 Claim Analytics Inc. Barry Senensky FSA FCIA MAAA Jonathan Polon FSA www.claimanalytics.com

2. Agenda • Overview • Methodology • Definitions • Key Findings • Report Content • Benchmarking Online • Feedback

3. Benchmarking Overview

4. Objective Compare LTD claimant recovery experience between companies Provide insight to help each company understand where their claim experience has been good there are opportunities for improvement

5. Participating Companies

6. Methodology

7. Challenge There are underlying differences that exist in the business written by the companies Comparing actual recovery rates between companies may provide misleading results EG, a company with a large proportion of 180-day business is expected to have lower recovery rates than a company with a large proportion of 90-day business

8. Solution Apply predictive modeling technologies to normalize for differences in business mix Create a standardized universe of claims For each company, predict outcomes for each claim in the standardized universe Predictions for each company are based on a predictive model, built from their own historic recovery experience

9. Result Companies are benchmarked on a comparable basis Performance can be measured as the expected recovery rate for each company Analysis provides insights into areas of strengths and weaknesses for each company

10. Attributes Modeled The decision to include or exclude attributes from the analysis was driven by the data that was provided by the participating companies

11. Definitions

12. “Recovery” Termination of an approved claim for a reason consistent with return to work, ability to return to work or failure to provide evidence of continued inability to work Examples: return to work, advance pay and close, not totally disabled for any occ, failure to provide medical evidence Focus on 24-month recovery, measured from benefit date

13. “Expected Recovery Rate” Likelihood of 24-month recovery for a claim as estimated by a predictive model built from a company’s own historic claim data The expected recovery rate for a claim will be different for each company, based on their own unique claim experience

14. “Performance” Performance is measured as the difference between: the expected recovery rate for a given company and the average of the expected recovery rates for all companies

15. “Standardized Portfolio of Claims” A portfolio of claims constructed by aggregating all claims from the eight participating companies Used to measure performance of the companies on a like basis

16. Key Findings

17. Three Key Findings Wide Range of Performance Diagnostic Category Monthly Benefit

18. Wide Range of Performance Difference of 11% between best and worst performers

19. Diagnostic Category Wide differences in performance by company for some diagnostic categories Claims management practices can have a significant impact on outcomes for these claims Small differences in performance by company for other diagnostic categories Claims management practices have less impact on outcomes for these claims EG: Consider the two most prevalent diagnostic categories, musculoskeletal and cancer

20. Musculoskeletal Claims Range of expected outcomes is much greater than overall Claims management practices matter

21. Cancer Claims Little variance in expected outcomes between companies May be less opportunities to influence recovery

22. Monthly Benefit Most of the differences in performance are attributable to claimants with monthly benefits of less than $2,500 Very little difference in performance between companies for claimants with monthly benefits of $2,500 - $7,499 1% of claimants have benefits of $7,500 or more. Performance for these claims varies greatly from overall performance

23. Monthly Benefit: $0 - $2,499 Performance by company very similar to overall performance This is where claims management differences are showing

24. Monthly Benefit: $2,500 - $7,499 Little variance in expected outcomes, except for Company A Much different than experience for lower benefit amounts

25. Monthly Benefit: $7,500+ Wide range in expected outcomes Performance by company much different than overall

26. Report Content

27. Three Main Sections Study Results Historical Experience Expected Recovery Rates for Specific Claimants

28. Study Results Compares expected recovery rates by company across the modeled attributes Objective is to provide companies with insight into their claim management performance

29. Benchmarking Example: Age Aggregate expected recovery rates by age band

30. Benchmarking Example: Age Companies specific performance by age band

31. Historical Experience Each company’s actual recovery rates for their own block of claims Comparisons less meaningful because of differences in mix of business Provided for reference

32. Historical Experience Ex: Age Aggregate historical recovery rates by age band

33. Historical Experience Ex: Age Company specific historical recovery rates by age band

34. Expected Recovery Rates for Specific Claims Expected recovery rates by company for specific claim types Based on: age, gender, ep, diagnosis, region, industry, benefit and benefit % Note: Company H is excluded from this section because their data didn’t include specific diagnoses (only categories)

35. Expected Claimant Outcome Ex Companies can compare expected recovery rates for specific claim types

36. Benchmarking Resources Online

37. Available Online Benchmarking Report Online Calculator Benchmarking Webcast claimanalytics.com/benchmarking.html

38. Benchmarking Homepage

39. Benchmarking Report Generic report is available online for viewing or downloading

40. Online Calculator Expected recovery rates by company for a large sample of specific claimant types will soon be available online Includes 30 common diagnoses from a variety of diagnostic categories

41. Online Calculator Registration is open to everyone

42. Online Calculator

43. Webcast of Results A recording of the initial webcast of results to the participating companies is available for playback Very similar to this presentation

44. Feedback

45. Feedback Industry feedback is critical – especially since this is an initial study For example: Would you like to be a part of future studies? Would you like this to be a regular study? What do you like/dislike about the study? How could the study be improved?

46. User Group Are companies interested in a user group, to share their strategies in areas where they are strong and to learn from other companies in areas where they are weak?

47. Contact Us

48. Questions