Revenue Recognition | 3. Revenue Recognition As of January 1, 2018, the Company adopted Accounting Standards Codification ("ASC") 606 using the modified retrospective method for those contracts which were not substantially completed as of the transition date. The reported results for the three and six months ended June 30, 2020 and 2019 reflect the application of ASC 606. Revenue from Contracts with Customers Revenues are recognized when control of the promised services is transferred to the Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are recognized net of any sales, use or value added taxes collected from customers, which are subsequently remitted to governmental authorities. As the Company completes its performance obligations which are identified below, it has an unconditional right to consideration as outlined in the Company's contracts. Generally, the Company's accounts receivable are expected to be collected in less than two months, in accordance with the underlying payment terms. The Company's Crawford Claims Solutions segment generates revenue for adjusting services provided to insurance companies and self-insured entities related to property, casualty and catastrophe losses caused by physical damage to commercial and residential real property and certain types of personal property. The Company charges on a fee-per-claim basis for each optional purchase of the claims management services exercised by its customer. Revenue is recognized over time as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document and report the claim and control of these services is transferred to the customer. Revenue is recognized based on historical claim closure rates and claim type for fixed fee claims applied utilizing a portfolio approach based on time elapsed for these claims. For claims billed on a time and expense incurred basis, which are considered variable consideration, the Company recognizes revenue at the amount in which it has the right to invoice for services performed. These methods of revenue recognition are the most accurate depiction of the transfer of the claims management services to the customer. The Company also generates revenue by providing on-demand inspection, verification and other task specific field services for businesses and consumers. Task assignment services are single optional purchase performance obligations which are generally satisfied at a point in time when the control of the service is transferred to the customer. Therefore, revenue is recognized when the customer receives the service requested. The following table presents Crawford Claims Solutions revenues before reimbursements disaggregated by geography for the three and six months ended June 30, 2020 and 2019: Three Months Ended Six Months Ended (in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 U.S. $ 34,344 $ 33,825 $ 65,772 $ 67,761 U.K. 16,294 15,831 31,639 32,202 Canada 7,971 12,147 18,110 24,268 Australia 12,200 12,815 22,145 23,334 Europe 7,236 7,371 14,197 13,836 Rest of World 3,406 4,014 7,175 7,921 Total Crawford Claims Solutions Revenues before Reimbursements $ 81,451 $ 86,003 $ 159,038 $ 169,322 The Crawford TPA Solutions segment is a third party administrator that generates revenue through its Claims Management and Medical Management service lines. The Claims Management service line includes Workers' Compensation, Liability, Property and Disability Claims Management. This service line also performs additional services such as Accident & Health claims programs, including Affinity type claims, and disability and leave management services. Each claim referred by the customer is considered an additional optional purchase of claims management services under the agreement with the customer. The transaction price is specified in the contract and is fixed for each service. Revenue is recognized over time as services are provided as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document, and report the claim and control of these services is transferred to the customer. Revenue is recognized based on historical claim closure rates and claim type applied utilizing a portfolio approach based on time elapsed for these claims as the Company believes this is the most accurate depiction of the transfer of the claims management services to its customer. This service line also provides Risk Management Information Services. For non-claim services, revenue is recognized over time as services are provided and control of these services is transferred to the customer. Revenue is recognized as time elapses as this is the most accurate depiction of the transfer of the service to the customer. The Company's obligation to manage claims under the Claims Management service line can range from less than one year, on a one- or two-year The Medical Management service line offers case managers who provide administration services by proactively managing medical treatment for claimants while facilitating an understanding of and participation in their rehabilitation process. Revenue for Medical Management services is recognized over time as the performance obligations are satisfied through the effort expended to manage the medical treatment for claimants and control of these services is transferred to the customer. Medical Management services are generally billed based on time incurred, are considered variable consideration, and revenue is recognized at the amount in which the Company has the right to invoice for services performed. This method of revenue recognition is the most accurate depiction of the transfer of the Medical Management service to the customer. Medical bill review services provide an analysis of medical charges for clients’ claims to identify opportunities for savings. Medical bill review services revenues are recognized over time as control of the service is transferred to the customer. Revenue is recognized based upon the transfer of the results of the medical bill review service to the customer as this is the most accurate depiction of the transfer of the service to the customer. The following tables present Crawford TPA Solutions revenues before reimbursements disaggregated by service line and geography for the three and six months ended June 30, 2020 and 2019: Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 (in thousands) Claims Management Services Medical Management Services Total Claims Management Services Medical Management Services Total U.S. $ 34,598 $ 34,575 $ 69,173 $ 36,035 $ 43,784 $ 79,819 U.K. 2,763 — 2,763 2,983 — 2,983 Canada 6,047 — 6,047 7,884 — 7,884 Europe and Rest of World 8,742 — 8,742 8,832 — 8,832 Total Crawford TPA Solutions Revenues before Reimbursements $ 52,150 $ 34,575 $ 86,725 $ 55,734 $ 43,784 $ 99,518 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 (in thousands) Claims Management Services Medical Management Services Total Claims Management Services Medical Management Services Total U.S. $ 70,622 $ 76,644 $ 147,266 $ 72,348 $ 84,667 $ 157,015 U.K. 5,628 — 5,628 5,513 — 5,513 Canada 13,509 — 13,509 17,256 — 17,256 Europe and Rest of World 17,257 — 17,257 17,528 — 17,528 Total Crawford TPA Solutions Revenues before Reimbursements $ 107,016 $ 76,644 $ 183,660 $ 112,645 $ 84,667 $ 197,312 The Company's Crawford Specialty Solutions segment principally generates revenues through its Global Technical Services and Contractor Connection service lines. The Global Technical Services service line generates revenues for claims management services provided to insurance companies and self-insured entities related to large, complex losses with technical adjusting and industry experts servicing a broad range of industries. Revenue is recognized over time as the performance obligations are satisfied through the effort expended to research, investigate, evaluate, document and report the claim and control of these services is transferred to the customer. Revenue is recognized based on historical claim closure rates and claim type for fixed fee claims, applied utilizing a portfolio approach based on time elapsed for these claims. For claims billed on a time and expense incurred basis, which are considered variable consideration, the Company recognizes revenue at the amount in which it has the right to invoice for services performed. These methods of revenue recognition are the most accurate depiction of the transfer of the claims management services to the customer. The Contractor Connection service line generates revenue through its independently managed contractor network. Contractor Connection primarily generates revenue by receiving a fee for each project that is sold by its network of contractors. Revenue is recognized at a point in time once the consumer accepts the contractor's proposal as Contractor Connection’s performance obligation of referring projects to its contractors has been completed and the Company is entitled to consideration at that time. The contractor takes control of the service upon the consumer’s acceptance of the contractor’s proposal. The following table presents Crawford Specialty Solutions revenues before reimbursements disaggregated by service line and geography for the three and six months ended June 30, 2020 and 2019: Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 (in thousands) Global Technical Services Contractor Connection Total Global Technical Services Contractor Connection Total U.S. $ 10,502 $ 17,869 $ 28,371 $ 10,414 $ 22,467 $ 32,881 U.K. 12,016 1,488 13,504 11,561 1,159 12,720 Canada 5,619 1,216 6,835 6,517 2,255 8,772 Australia 5,742 188 5,930 5,802 213 6,015 Europe 5,112 9 5,121 4,893 1 4,894 Rest of World 6,479 — 6,479 6,078 — 6,078 Total Crawford Specialty Solutions Revenues before Reimbursements $ 45,470 $ 20,770 $ 66,240 $ 45,265 $ 26,095 $ 71,360 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 (in thousands) Global Technical Services Contractor Connection Total Global Technical Services Contractor Connection Total U.S. $ 20,101 $ 33,196 $ 53,297 $ 20,685 $ 40,654 $ 61,339 U.K. 24,033 3,645 27,678 22,718 2,690 25,408 Canada 11,756 2,697 14,453 13,228 3,935 17,163 Australia 10,590 318 10,908 10,945 387 11,332 Europe 10,264 15 10,279 9,652 1 9,653 Rest of World 12,634 — 12,634 12,410 — 12,410 Total Crawford Specialty Solutions Revenues before Reimbursements $ 89,378 $ 39,871 $ 129,249 $ 89,638 $ 47,667 $ 137,305 In the normal course of business, the Company's operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by its customers. The Company controls the promised good or service before it is transferred to its customer, therefore it is a principal in the transaction. These out-of-pocket expenses and associated reimbursements are reported on a gross basis within expenses and revenues, respectively, in the Company's unaudited Condensed Consolidated Statements of Operations. Arrangements with Multiple Performance Obligations For claims management services, the Company typically has one performance obligation; however, it also provides the customer with an option to acquire additional services. The Company sells multiple lines of claims processing and different levels of processing depending on the complexity of the claims. The Company typically provides a menu of offerings from which the customer chooses to purchase at its option. The price of each service is separate and distinct and provides a separate and distinct value to the customer. Pricing is consistent for each service irrespective of the other services or quantities requested by the customer. For example, if the Company provides claims processing for both auto and general liability, those services are priced and delivered independently. Contract Balances The timing of revenue recognition, billings and cash collections result in billed accounts receivables, contract assets (reported as "Unbilled revenues at estimated billable amounts") and contract liabilities (reported as "Deferred revenues") on the Company’s unaudited Condensed Consolidated Balance Sheets. Unbilled revenues is a contract asset for revenue that has been recognized in advance of billing the customer, resulting from professional services delivered that the Company expects and is entitled to receive as consideration under certain contracts. Billing requirements vary by contract but substantially all unbilled revenues are billed within one year. When the Company receives consideration from a customer prior to transferring services to the customer under the terms of certain claims management agreements, it records deferred revenues on the Company’s unaudited Condensed Consolidated Balance Sheets, which represents a contract liability. These fixed-fee service agreements typically result from the Crawford TPA Solutions segment and require the Company to handle claims on either a one- or two-year The Company's deferred revenues for claims handled for one or two years are not as sensitive to changes in claim closing rates since the performance obligations are satisfied within a fixed length of time. Deferred revenues for lifetime claim handling are more sensitive to changes in claim closing rates since the Company is obligated to handle these claims to conclusion with no additional fees received for long-lived claims. For all fixed fee service agreements, revenues are recognized over the expected service periods by type of claim. Based upon its historical averages, the Company closes approximately 98% of all cases referred to it under lifetime claim service agreements within five years from the date of referral. Also, within that five-year period, the percentage of cases remaining open in any one particular year has remained relatively consistent from period to period. Each quarter the Company evaluates its historical case closing rates by type of claim utilizing a portfolio approach and makes adjustments to deferred revenues as necessary. As a portfolio approach is utilized to recognize deferred revenues, any changes in estimates will impact the timing of revenue recognition and any changes in estimates are recognized in the period in which they are determined. The table below presents the deferred revenues balance as of January 1, 2020 and the significant activity affecting deferred revenues during the six months ended June 30, 2020: (In Thousands) Customer Contract Liabilities Deferred Revenue Balance at January 1, 2020 $ 52,368 Quarterly additions 22,226 Revenue recognized from the prior periods (14,293 ) Revenue recognized from current quarter additions (4,994 ) Balance as of March 31, 2020 $ 55,307 Quarterly additions 15,389 Revenue recognized from the prior periods (15,407 ) Revenue recognized from current quarter additions (3,568 ) Balance as of June 30, 2020 $ 51,721 Remaining Performance Obligations As of June 30, 2020, the Company had $87,413,000 of remaining performance obligations related to claims and non-claims services in which the price is fixed. Remaining performance obligations consist of deferred revenues as well as certain unbilled receivables that are considered contract assets. The Company expects to recognize approximately 70% of our remaining performance obligations as revenues within one year and the remaining balance thereafter. Costs to Obtain a Contract The Company has a sales incentive compensation program where remuneration is based on the revenues recognized in the period and does not represent an incremental cost to the Company which provides a future benefit expected to be longer than one year and would meet the criteria to be capitalized and presented as a contract asset on the Company's unaudited Condensed Consolidated Balance Sheets. Practical Expedients Elected As a practical expedient, the Company does not adjust the consideration in a contract for the effects of a significant financing component it expects, at contract inception, when the period between a customer’s payment of consideration and the transfer of promised services to the customer will be one year or less. For claims management services that are billed on a time and expense incurred or per unit basis and revenue is recognized over time, the Company recognizes revenue at the amount to which it has the right to invoice for services performed. The Company does not disclose the value of remaining performance obligations for (i) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed, and (ii) contracts with variable consideration allocated entirely to a single performance obligation. |