1,340 Slip-and-Falls and a $400,000 Budget
A specialty retailer operates 214 stores with a $250,000 per-occurrence self-insured retention, a $4M aggregate SIR attachment, and excess coverage above it. FY just closed: 1,340 general liability claims, $9.8M incurred, and 62% of claims arising from 18 stores. Slip-and-fall frequency rose 22% after a new floor-cleaning contractor took over in March; average claim severity is $7,300. Litigation is only 6.1% of claim count but drives 71% of dollars. A nurse-triage pilot in 12 stores reduced medical costs 14%, but average report lag rose from 2 to 4 days at those stores. Risk management has $400,000 to spend and wants a decision by the next renewal, 90 days out.
1. Where should the $400,000 go? Build a prioritized plan and defend the trade-offs.
Read the worked answer
Start from the concentration, not from the total. 18 of 214 stores generate 62% of claims. That is a diagnosable problem, not background noise.
Priority 1 - the 18 stores (roughly $150k). Walk each one: floor finish and transition strips, entrance matting length, lighting levels, staffing during peak hours, and the cleaning contractor's schedule and chemical/finish protocol. The March contractor change is a natural experiment - compare frequency and severity pre/post March in those 18 stores versus the control group. If the correlation holds, the fix may be contractual (reversion to the prior finish, wet-floor protocol, documented inspection logs) and nearly free.
Priority 2 - the contractor's risk transfer (near zero cost). Verify the indemnity, additional-insured status, and certificate currency. A vendor with a change in method and no contractual accountability is the cheapest risk to close.
Priority 3 - litigation, which is where the dollars are (roughly $150k). 6.1% of claims, 71% of dollars. Fund early triage and a defense strategy review of open litigated files; a single case resolution often exceeds the entire program budget. Measure whether early contact and medical management reduce the conversion rate.
Priority 4 - expand triage cautiously (roughly $100k). The 14% medical saving is real but the report lag worsening from 2 to 4 days is a leading indicator of more litigation - late reporting is one of the strongest predictors of attorney involvement. Fix the reporting workflow before scaling; a program that saves medical dollars while adding attorney-represented claims is a net loss.
What not to fund: broad, untargeted safety training across all 214 stores. It cannot move a number that is concentrated in 18 locations.
2. The CFO says success is a lower loss ratio. What metrics would you propose instead, and how do you prevent gaming?
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Loss ratio is a lagging outcome that mixes underwriting, pricing, and claims performance - it can improve while the program gets worse. Propose a small scorecard with a defined owner for each:
- Total cost of risk - retained losses plus insurance premium plus administrative and risk-control spend, per store and per $1,000 of sales. This is the number the CFO actually cares about and it forces the SIR and the premium into one conversation.
- Claim frequency per 1,000 store-weeks, split by cause. Leading indicator.
- Report lag (median and 90th percentile). Directly tied to litigation conversion.
- Litigation conversion rate - the percentage of claims that become represented. Track the dollars too, not just the count.
- Closing ratio and cycle time at 90 and 180 days, with reopen rate as the guardrail.
- Severity distribution, not just average. An average can fall while the tail grows; watch the count of claims over $50,000, which is where the SIR bites.
Anti-gaming controls:
- Never pay bonuses on paid severity alone. Pair every cost metric with a quality guardrail - reopen rate, complaint rate, complaint-to-regulator rate, and a file-quality audit sample.
- Audit a random sample of closed files each quarter for payment accuracy and documentation.
- Publish the metrics by store; a metric nobody can see is a metric somebody will manage invisibly.
- Watch the substitution effect: pushing claims to a third-party administrator or denying aggressively can lower severity this year and raise it next year in bad faith and litigation cost.
3. What should you take to the renewal meeting with the broker and excess underwriter?
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Bring evidence of control, not a narrative of improvement.
- The concentration analysis with the 18 stores named, and the pre/post-March frequency comparison. Excess underwriters price the tail; showing that you can locate your tail in 18 buildings is a genuine underwriting credit.
- The contractor fix with the executed contract amendments and inspection logs. Documented risk transfer beats a promise to improve.
- The triage pilot results with the report-lag caveat stated plainly. Do not present the 14% medical saving without the lag problem - an underwriter who discovers it later discounts everything else you said.
- Litigation profile: count, dollars, venue, defense counsel performance, and the status of the largest open files. Excess carriers care most about the two or three files that could pierce the $4M aggregate.
- SIR funding adequacy. Show that the SIR is funded and that incurred-but-not-paid is tracked; an underfunded retention is a credit risk to the excess layer.
- A stated plan for the next 12 months with owners and dates, and a request: ask the excess underwriter what evidence would earn a better rate. That single question often reshapes the next year's program more than any single metric.
Coordinate the message with the broker in advance so underwriting, claims, and risk management tell the same story with the same numbers. Divergent numbers at renewal cost credibility that no loss run can buy back.