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A checklist of the 8 critical issues to be concerned about when self-managing claims

You self-insure, but how well do you manage claims?

Companies make decisions to self-insure their risks for a variety of reasons from financing to claims control. Regardless of the reason, when handling claims in-house it is important to manage those claims in an organized manner to protect company assets. Insurance and reinsurance companies use loss experience to determine what to charge for coverage as well as how much coverage is needed. If claims data is not easily obtainable, or there is limited or no process for managing claims, you cannot get an accurate view of your losses or financials. Failing to manage claims correctly will increase your insurance costs and create a significant risk for being dangerously under-insured.

Act like an insurance company claims department

If you are going to handle your own claims then make sure you address the following issues:

  1. Set up an organized file system and process for managing claim files, from first notices to check payments. A claim file is a shared resource. Know exactly where it goes, and how to find it when you need it.
  2. Claim reporting is a required tool and a claims system is needed to track everything.  Monthly, quarterly and annual snapshot reports of essential claims data are fundamental to an efficient self-managed claims operation.
  3. Reserve files and be consistent about it. Under or over-reserving a file can result in poor financial reporting and more costly insurance. A consistent reserving practice can be used to predict current and future loss exposure. Adequate reserves will will more appropriately inform your reinsurance and excess insurance providers, and make your CFO happy.
  4. Actively manage claim vendors such as attorneys and investigators. Put guidelines in place with vendors to establish a clear understanding of your specific claim handling expectations. The squeaky wheel gets the grease, so check in with them frequently to ensure your files are not ignored.
  5. Review your vendor bills regularly. Mistakes are made and the only way to check for them is through regular reviews of invoices. Set a fee arrangement and make sure they stick with it. Unilateral rate increases, double billing, and someone else’s work that inadvertently ended up on a bill are common errors that can increase costs as much as 10%.
  6. Using a Third Party Administrator? Set up handling guidelines and audit the TPA regularly. Take a cue from insurance companies who review their TPAs for compliance, minimally once a year and as often as quarterly. You went self-insured for a reason so make sure the TPA is protecting your company assets as you would.
  7. Look for fraud. Insurance companies have in-house Special Investigation Units (SIU) and regularly look for fraudulent claims. While you may not need to create your own SIU, don’t overlook the risk for potential fraud and train your staff to identify red flags. When needed, you can hire a reputable firm to investigate suspicious claims.
  8. Don’t forget to self-audit your group to make sure files are being managed correctly. Claim files need to be investigated, reserved and resolved. It is important to make certain that claim files are properly worked up to prevent potentially expensive slip-ups.

Underwriters of reinsurance, and excess carriers, will find value in an organized in-house claims department. If you are self-insured, a structured and consistent approach to self managing your claims is imperative. Following this checklist will decrease your financial risk and notably improve your claim results, regardless of your organization’s size or how many claims you process.

Have I missed any critical issues to be concerned about? Please subscribe and post any comments or suggestions.

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