A.M. Best and Accenture Sponsor Webinar on ‘Cutting Edge Claims Management’

A.M. Best, in conjunction with management and consulting company Accenture, hosted a Webinar entitled “Cutting-Edge Claims Management” on July 15, 2009.

The Webinar explored how, with the current negative trend in underwriting results for the United States property and casualty industry, insurers are focusing on ways to manage claims more effectively.  The editors of A.M. Best’s Review and a panel of experts discussed how insurers are using new information, technology and strategies to control claims costs, speed claims resolution, reduce fraudulent claims and remain compliant with claims regulations.

Speakers participating in the Webinar were:

• Michael A. Costonis, Executive Director, North American Insurance Practice at Accenture
• Dorothy Muir, Senior Vice President of Claims, Maiden Re (formerly GMAC Re)
• Peter J. Crosa, of Peter J. Crosa & Co., an insurance adjusting firm and active claims writer

The panel was asked a series of questions regarding claims issues in the insurance industry and answered as follows.

Are there savings and efficiencies to be had in claims, and how much?

• Mr. Costonis:  The trend to restore profitability within insurance operations is not new, but now the traditional “escape valves” are no longer available, such as ratings, investment income and price increases. Thus, the insurance industry is turning to claims.  There is a five-  to 10-percent improvement in the expense ratio of claims operations, but establishing a new “playbook” is  necessary.  There are two universal truths regarding claims:  It is difficult to get both consistency of execution and efficiency.  The adjuster is, to a large degree, consumed by activities that do not affect the outcome of the claim.

• Ms. Muir:  The claims operation is an essential component overall in managing and improving a company’s bottom line.  Insurers must take care in how they reserve, handle and recover claims.

 

How far along the road to automation is the insurance industry, particularly claims?

• Mr. Costonis:  There is not a high degree of claims automation, as evidenced in the areas of analytics and reporting.

• Ms. Muir:  A majority of insurance industry companies are significantly automated, particularly in claims reports, and almost all have a paperless system of some form.

• Mr. Crosa:  All the claims of the 200-plus companies Peter J. Crosa & Co. deals with are automated.  Reports are no longer submitted on paper.

 

Where would additional training yield the best results?

• Mr. Costonis:  The claims workforce is typically the largest in an insurance organization and is not attracting much new talent, so the question is how to extract the knowledge available from professionals currently working in claims and disseminate it.  There is an effort to move away from the “art” of adjudication and move toward the “science,” with claims training done in a more systematic manner.  Methods are focused less on person-to-person and more on electronic delivery, such as webcasts, podcasts and simulation-based training that presents specific circumstances based on the experience of adjusters.

• Ms. Muir:  From a customer service perspective, training in how to take claims is critical.  Fairness toward both the client and employer must be considered.  It is necessary to show empathy to the client while also handling the claim efficiently, so training cannot be done from one perspective.  It should combine technology with adjuster knowledge, including technical issues such as building construction.

• Mr. Crosa:  There is a lack of experience and training in the field.  Data needs to be improved and humanized to make claims adjusting a more attractive and interesting career choice.

 

What are your thoughts on subrogating claims?

Note: subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured.  After paying a claim, the insurer is “subrogated” to the rights of the insured’s policy and can pursue the negligent party on the insured’s behalf.

• Mr. Costonis:  It is important to develop appropriate expertise regarding subrogation.  Work should be divided and done in parallel by an adjuster and investigator who work closely together.  Regarding technology, there should be reliance on analytics in early identification of subrogation opportunities.

• Ms. Muir:  Claims adjusters are often expected to handle both the claim and the subrogation.  However, because the claim requires so much time and attention, opportunities for recovery and subrogation are frequently missed.  Companies should consider subrogation from the first notice of claim.  Ms. Muir said she is generally not in favor of outsourcing, but it has a value here in dedicating a person to investigating the claim.

• Mr. Crosa:  Adjusters should learn to multi-task.  Subrogation efforts are often doomed by the initial failure to investigate potential third-party involvement and gather evidence. 

 

What does claims volume say about insurance operations?  Can companies rely too much on automation and lose touch with claims?

• Mr. Costonis:  The primary role of automation is to remove “non-value-added” activities from the process as opposed to replacing a person.  Redefining the role of the claims professional is key.  Take out tasks that do not contribute to making pertinent decisions regarding claims in order that adjusters can focus on making better decisions and giving attention to the customer.

• Mr. Crosa:  Human interaction is not interchangeable with automation, but both are necessary in a well-functioning insurance operation.

 

Discuss the issue of claims-handling volume.

• Ms. Muir:  The number of claims an adjuster can handle efficiently varies according to lines of business and how much is automated.  It is important that reserves are posted in a timely manner.

 

Are companies integrating claims data, such as how the product is performing, into their underwriting, pricing and product enhancements?

• Mr. Costonis:  Yes.  Companies are closing the loop between claims and underwriting, since the two work hand-in-hand.  Many are investing in operating systems that capture detailed information about claims, including the claimants, and identifying meaningful trends that the claims show in order to match their product to specific client needs and tailor it further as the process continues.

• Ms. Muir:  The process of integrating claims data is also taking place in mid-size and smaller companies.  Forms frequently go from claims to the underwriter in order to get feedback and capture information.

 

How does claims handling effect current marketplace expectations?

• Mr. Costonis:  Regarding personal lines, research shows one out of six policyholders is shopping for a new carrier, an alarming statistic that is mainly due to price.  Consumer expectation is driven less by the insurance industry than by other industries, such as banks and computer companies, that offer instant, continuous access online or by phone.  Insurance industries are struggling to catch up.  The insurance industry has maintained a false standard that “good enough is OK,” while a new generation of consumers has higher expectations of the level of service it will receive.

• Ms. Muir:  The claims area is currently meeting or exceeding customer expectations, both in terms of time and attention to customer needs.  There are few complaints.

• Mr. Crosa:  Current marketplace expectations are that the consumer will be indemnified as stipulated by the insurance contract, and it will be resolved quickly.  Adjusters have to be educated in how to be good “brand ambassadors” in the way they deliver what is potentially bad news to policyholders.  The adjuster often must explain how he or she is limited by the policy’s constraints.

 

What about the issue of ‘brain drain,’ or loss of talent, in the claims industry?

• Mr. Costonis:  There is a classic supply-and-demand problem in attracting claims adjusters.  The job is not particularly attractive in terms of entry-level salary, career progression, tools and perks.  Redefine the job by letting claims professionals focus less on processing details and more on specific aspects such as adjudicating claims and talking to customers, thus removing some of the monotony.  The job will attract more of the incoming workforce if it provides technology tools that are equal to other industries.

• Ms. Muir:  Companies are recognizing that they need to upgrade the job and do more recruiting, educating and providing career paths, as well as offering competitive salaries.  More on-the-job training is needed to attract entry-level people.  Even those to whom the claims job has been outsourced are showing disinterest in doing the job long-term.

• Mr. Crosa:  It is not hard to sell the job.  The key is describe the adjuster’s role a combination of detective, police officer, engineer and psychologist.  How the job is presented affects perception.  It helps to hire people with risk-management degrees from school and then offer on-the-job training.

 

How are the better claims operations set up to work wth adjusters?

• Mr.  Crosa:  The emphasis should be on using experienced adjusters, communicating with them, and proper distribution of the work load.

• Ms. Muir:  The assignment should be presented so the independent adjusters understand what is expected of them in terms of the depth of their work on the claim and communication between the independent and assigning adjusters.

 

In what way can a company be good at setting reserves?

• Mr. Costonis:  The issue is with the case reserve, an estimate of the amount for which a particular claim will ultimately be settled or adjudicated.  Companies are putting great consideration into how and why they are setting a particular reserve, and often getting resistance from adjusters who feel they know instinctively what the claim is worth.  It is important to focus systematically on the thought process in how to set the reserve as opposed to justifying it.

• Ms. Muir:  Reserves should be timely and adequate.  It is critical that adjusters evaluate the case reserves.

• Mr. Crosa:  Reserves, which can often be more complicated than one would expect, should be set primarily by the carrier, with some input from the field adjuster. 

 

Five to 10 years from now, what will the best claims operations look like?

• Mr. Costonis:  The best-run claims operations will have to be essentially “broken apart” and re-established with a fundamental change in distribution of adjucation and processing duties.  They must work in concert and share information, with an underlying infrastructure that supports those efforts.  There will be a change in the way claims are measured, with a better quality of decision-making that focuses on creating an advantage in the marketplace.

• Ms. Muir:  There will be more of an emphasis on the use of technology, more training and more recognition of the critical function of claims to the operation as a whole, thus giving it more support.

• Mr. Crosa:  There will be a large measure of consumer self-service in claims processing with appropriate guidance, especially online.  However, it will still be necessary to continue having full field investigations of serious losses.

 

To view the archived Webcast, click here.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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