NU Online News Service, Feb. 19, 10:15 a.m.EST

Property and casualty insurers are seeing rising loss costs,increased levels of litigation and higher rates of fraudulentclaims because of the struggling economy, a survey has found.

Towers Watson's fourth Property & Casualty Insurance ClaimOfficer Survey showed that personal lines carriers are experiencinghigher claim frequency than commercial insurers, with 52 percent ofhomeowners insurers and 45 percent of auto insurers indicating asmuch.

For commercial insurers, 20 percent of general liabilitycarriers and 18 percent of commercial auto carriers reported asimilar trend, according to the survey.

But, the survey found, while claim frequency and severity werereported either as unchanged or on the rise for most p&c lines,workers' compensation was more uncertain. The survey showed that 52percent cited a drop in claim frequency, but half noted an increasein severity, "creating uncertainty in the overall loss costoutlook."

Brian Stoll, Towers Watson senior consultant and co-author ofthe survey, said, "Interestingly, responses related to claimfrequency and severity from the economy were relatively consistent,regardless of carrier size and market segment. Since prior surveysfound notable dissimilarities based on company size and/or marketsegment...this is very surprising. Clearly the economy is affectingeveryone."

With respect to rising litigation trends, 30 percent ofrespondents said general liability has been the most heavilyaffected area, followed by personal auto (22 percent) andcommercial packages (20 percent).

Regionally, increases in litigation are most acute in theSoutheast, according to the survey, with 50 percent of respondentsreporting a rise. In the West, 32 percent reported a rise, and allother regions were under 20 percent, with New England the lowest at7 percent.

Auto (62 percent) and homeowners (56 percent) insurers led theway in reporting a rise in fraudulent claims, noted the survey. Forworkers' compensation, 33 percent of insurers reported a rise infraudulent claim activity, as did 20 percent of commercial linescarriers.

To combat these trends, Towers Watson said almost half ofrespondents are placing a greater emphasis on allocated orunallocated expense indicators, and 35 percent are focusing more onloss cost indicators.

To tighten costs and increase productivity, Towers Watson said40 percent of respondents are accelerating case closings, 35percent are adjusting claims handling guidelines, and 30 percentare increasing actual caseloads. Additionally, 77 percent ofrespondents said they are going to invest in claims analytics overthe next two years.

Kathleen Cullen, Towers Watson senior consultant and co-authorof the survey, said, "Despite pressures on costs, carriers have notslashed expenses or taken knee-jerk responses. Rather, they seem tobe taking measured steps to control costs, and are moving towardusing both lagging and leading indicators."

The Towers Watson survey polled 52 claim officers in October2009. Respondents "included a broad mix of claim officers fromsmall firms, midsize companies and large companies," Towers Watsonsaid.