Monthly Archives: November 2010

Time to Get Creative – Reducing Claim Costs without Sacrificing Quality (or your sanity)

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Bright ideas will help reduce legal costs while still getting great service

Even as the country continues its difficult economic recovery, Moody’s recently concluded that P&C personal lines insurers remain financially sound. While such a report is good news, Moody’s also noted that challenges such as rising claim severity trends and significant property catastrophe risk remain. All this leads to an increased pressure to reduce costs and close claims.

The reality that claim and litigation departments are cost centers as opposed to income generators increases these pressures. Claim and litigation departments are also asked to do more with less resources and are under increasing pressure to close claims and litigated files faster than ever, while still maintaining claim handling and litigation management best practices. With all these challenges, how do claims professionals succeed? They get creative.

What You Know and More Importantly, What You Don’t Know

Before you can make changes and employ new processes, you have to know what you know and what you don’t know.  Obtain as much information as you can regarding the following:

  • Number of current litigated and non-litigated claims, broken down by type and severity
  • Average length of pending litigated and non-litigated claims
  • Average cost per closed litigated and non-litigated claim file
  • Average number of days necessary to close litigated and non-litigated claims
  • Average amount paid (indemnity) per closed litigated and non-litigated claim

These are just the basics.  If you have more information available, get it.If you don’t have this information, you have gained some valuable knowledge as well, namely, that you will need to develop or implement ways of tracking such information as part of your plan.

Who Is Doing the Work?

Next, you have to evaluate the strengths and weaknesses of your claim handlers, claim managers, outside counsel, and any other vendors you employ to handle claims and litigation.  If you haven’t formally evaluated these folks in a while, now would be a good time to do so.

Find out what they do, how they do it, and ask them for feedback regarding how they think that they can do their jobs better.  One of the biggest problems I’ve seen are companies that get in the way of their employees being successful often through employing processes and procedures that look good on paper, but don’t make sense in practice.  The only way to know if this is occurring in your organization is to spend some quality time with the people who are doing the work.

And don’t leave out the lawyers!  Although some may believe that panel counsel are only interested in billing you as much as they can, the good ones are also in an excellent position to know if your litigation procedures are costing the carrier money.  They can also provide procedural and process changes that may result in moving litigation to conclusion more quickly.

Know Thy Carrier

While all carriers want to decrease costs, decrease claims, and decrease litigation,  there are different philosophies as to how to accomplish these goals.  Some carriers may want to avoid litigation at all costs because they don’t want to pay legal fees and thus, they may be willing to pay more on questionable claims in order to avoid litigation.  Some carriers may want to take a hard-line approach with all claims and litigation (i.e. if they can’t prove it, we’re not paying it).  Some carriers take a more practical, business approach and want to do a cost-benefit analysis regarding the payment of claims and litigation.

You must know your carrier’s philosophy before you can make changes that count.  Moreover, the philosophy you choose is the one that is going to be the face of your claim and litigation department for the world to see, so make sure it’s the face you want to display consistently.  Companies that do not have, or do not know, what their claim and litigation philosophy is will not be successful at consistently reducing costs and closing claims and litigation.

In order to develop your philosophy, you will need to work with the balance of senior management and other relevant stakeholders to discuss the options and arrive at a conclusion that everyone is comfortable with promoting throughout the organization. Depending upon the size of your carrier, the number of people involved, and the difficulty you have obtaining information, going through steps one through three may take approximately two to six months.  However, once you complete these steps, you will be armed with everything you need to sit down and draft your new claim and litigation management plan.

Check back in December for part two of my blog that will discuss initial steps in your new claim and litigation management plan and provide an example of a plan that was successful for me.

Claims And The Investigative Journalist And Learning From All The President’s Men

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Digging for the accurate story is a claims person’s goal

The other day I was watching All The President’s Men, the story of Bob Woodward and Carl Bernstein, The Washington Post reporters who broke the Watergate scandal wide open.  If you have not seen the film then please accept this as my “two thumbs up.”

What does this have to do with claims you may ask? Keep reading and you will see.

Woodward and Bernstein were investigative journalists. Their job was to uncover facts that would lead to other facts that would lead to a supported conclusion. There was a lot at stake for the Washington Post if the story was wrong, and even more at stake for the country if the story was right. The process was well laid out in the movie with the two journalists following one lead to another and researching and following up to support their eventual conclusion.  Given what was at stake, the Publisher made it clear to the two reporters that there was no story if it was only supported by innuendos and accusations and no proof. Once the support was there, the story ran and the rest is history.

Sounds a lot like a claim file to me.

It is the claims professionals responsibility to figure out what happened and then come to a supported conclusion when evaluating and settling a claim. As there was for the Washington Post, there is a lot at stake for an insured, a claimant and a company if decisions are made in haste. Getting the conclusion right or wrong can have significant financial consequences for all parties involved. Prior to spending money on claims, good claims practices dictate that there is support for the decisions to settle and pay claims. Being a claim professional is a lot like being an investigative journalist. Figuring out what happened and why is critical to making the appropriate assessment.

Technology has really helped those investigations

Unlike Woodward and Bernstein back in the early 1970’s, claims professionals have a tremendous amount of technology available to them to help figure out claims problems.  There are two great scenes in the movie that truly reflect how times have changed when it comes to conducting even basic investigations. Back in the day, even simple tasks, that we all take for granted today,  would have taken hours and multiple resources to complete.

In the movies, the reporters found a name on a check and had no idea who the person was or how to contact them. Imagine that issue today – no big deal – go online, plug in the name to Google, and presto a list of information including addresses, phone numbers, job descriptions and maybe even photographs appears in seconds.  Not back in 1973 where Bob Woodward (played by Robert Redford) is seen sitting in a room with phone books from all over the country looking for a name. Another staff person comes into the room and was able to find a photograph in what was called the “clip file.”  I can only imagine how long that took and how many resources were needed to find the photograph alone.

In another iconic scene from the film, the two reporters needed to find out what books had been taken out by a White House staff member from the Library of Congress. The two were handed boxes and boxes of slips of paper used to document the check out of books from the library. In a great piece of film making, there is an overhead camera angle of the two reporters going through every slip of paper in what would have taken hours if not days. Of course, they never found what they were looking for. Today the same task would have taken seconds.

Think about the tasks you do as a claims professional and try and imagine not being able to use even basic technology to find a name or locate a witness.

Just remember, technology isn’t everything in claims

I have always been a big proponent of good systems to enhance a claims professional’s ability to get their job done. Regardless,  claims technology should allow the claim handler to be a claim handler and free them to be more analytical and less ministerial. Unfortunately, technology has often brought more work with little relief. As more claims can be processed faster, there has been a greater emphasis on dotting I’s and crossing T’s and less on outcomes.  While it is important to accept tremendous efficiencies technology has brought to the claims process, do not forget that the true art and skill of claims is in the ability of a claims professional to analyze the information and make an appropriate decision.

Tell us your investigative journalist claims story