Category Archives: My History

Putting Puzzle Pieces Together and the Challenge of Creating a New Claims System

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Creating a new claims system should be easy with no legacy, right? Not so fast!

One of the great things about going to work for a start-up insurance company with a lot of venture money is the idea that you can build everything from scratch. No legacy of losses, a clean balance sheet, and no system constraints. The problem was the company did so well right from the start that policies were being written as fast as they could print the paper. The company had made the initial decision to buy an old established (green screen) application to handle back office processing. The thought was it was the most robust system on the market and as such should be able to handle multiple lines of business. Nice thought but we were a specialty lines operation and the thing just couldn’t do everything that it needed to do. Individual departments knew this and started to build their own mini-systems to get the work done. Suddenly the clean legacy free environment developed a legacy problem.

So where did this leave us in claims?

Unlike underwriting or finance, we did not have to worry about a huge influx of claims from the start so time was on our side. Despite the time we had, we were not involved in the underwriting system initiative early on. We would later learn what impact this would have on everyone. There is more to this story, but needless to say involving all key stakeholders potentially impacted by a system implementation is critical early in the design process. Nonetheless, we had a handful of claims and time to decide what type of claims system we were going to use.

Option 1 – License a System From Our Vendors – Sounds like a good idea?

The first suggested claims system solution was that building a system would be too costly and we should just “rent” a system from one of our Third Party Administrators. Another nice idea in principal that proved to be a not so nice in practice. While everything seemed usable during the demo and initial discussion phases, it was not until we started to actually get down to trying to integrate the application that problems arose. The system was really designed for a TPA and not for a carrier. The meant it did not handle policy data well and in turn would be difficult to adopt. At every turn the so called “customizable” options were leading us to create work-around after work-around. Unless we wanted to pay for fields to be customized, this option was not going to work.

Option 1 – Scrapped.

Option 2 – Buy a Comprehensive System – Another nice idea that was not going to happen

Simply put, this option was way to expensive, and with no true policy system in place, an implementation was going to be even more difficult than “renting” a system. Additionally, at the time, robust claims systems did not exist on the market as much as they do now and the ones that did were an all or nothing approach. We had a half a dozen claims and buying a system that could handle more than we would could have needed for lines of business we were never going to write didn’t make any sense either. So, needless to say –

Option 2 – Scrapped.

Option 3 – Build Your Own – more a decision by accident than by design

Now time was not longer on our side. Claims were coming in and we needed to do something. Ah the wonders of excel. With a spreadsheet all we could do was keep a record of claims and money spent, but in no way provide a claims management system. The controls, and making sure various required financial reports could be provided, was a continual problem that got worse the more claims and transactions we had. Like other departments in the organization I decided to build my own system out of necessity. This began with my limited skills in MS Access and then continued with the hiring of a an actual Access developer.  I was off to the races now and the claims department could build something it could actually use.

Option 3 – I think we’re on to something…

So now let’s build – It’s time for reality, a plan and a process

Developing is very simple when you have no rules, no team and no plan. It was me and a developer. I told him what I wanted to see and he built it. Life was good.  Now claims were coming in faster and we had more users on the system and people now wanted my data. Developing this way was not going to work and I was in for a rude awakening with the assignment of a business analyst. This was all new to me at the time and my days of walking over to the developer’s cubical and telling him to stop what he was doing to add a new feature were over.  In walked much needed process and structure. The reality was I did not really think we were going to build a system from scratch – I thought I was building a stop-gap measure. The stop-gap was over and the system was now going to have to go to an entirely new level.

With structure came direction and a strategic plan was developed. We had to get the basics taken care of which included a more stable database that could handle multiple users, and a new front end that would allow us to make changes quickly as well create new features and connections to various parts of the organization. A development plan emerged and a procedure for enhancements, development, testing, and implementation took shape. The system was no longer a department database, but a corporate application.

I had to come up with a name for our new application and so the Claims Processing Administrations System, cPAS, was born. The puzzle pieces were beginning to fit.

Start-up – Lets get down and dirty and pitch in on everything

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On day one as Vice President of Claims for Arch Insurance Company I found myself working in cramped space in Lower Manhattan where the CEO shared an office with others and the head of Professional Liability Underwriting found a happy home in an electrical closet. Arch was rapidly growing its underwriting and was binding new policies at a breakneck pace. After getting my credenza in the hall (with a shared phone as there were no more phone lines) I was handed the entire company’s log of claim files to get to work. This consisted of one property loss, and one notification of a casualty incident. It was easy to think that claim counts would be low for a while but that would change quickly. I was hired to manage and concentrate on the administrative operation, which would free the technical claims staff to focus on strong claims handling from the inception.

We needed everything including a claims system, best practices, litigation management, a way to manage and store claim files and methods for making claim payments. Given that we were a public company, all had to be done with strong controls in mind as well. It was a different challenge every day. We concentrated on things at first that would have little impact later. It was easy to go down paths that later became muddied or ones that should never have been followed. It was not known how quickly claims would grow and what types of policies were going to be written. At first we affiliated with Third Party Administrators to handle our intakes and possibly handle claims if needed over time they handled little direct matters and even less as it relates to intakes (they did handle claims our program business which were a whole other set of problems). In some ways we were driving blind as everything changed so quickly all the time. A decision was made that we needed to outsource a call center so off I went to research and meet with various providers. I never believed we would be the type of operation that needed to handle that many calls and over time my belief proved true and that project correctly fell by the wayside. This was common in claims as well as other departments. Decisions were made, paths were followed, change happened, and the path changed.

Trying to connect all the moving parts in the early days was difficult. Each group needed to accomplish tasks quickly and there was no time to stop and connect with everyone. Underwriting needed a clearance and binding system, finance needed a system to bill and account, actuarial needed a way to manage IBNR and rate new clients and we needed all of those things to happen to manage claims. Our path to a claims system also stopped and started. At first we were going to “rent” a system from one of our TPA partners. Then we were going to use a legacy system that had been adopted by underwriting and actuarial as a stopgap (we were a start up with legacy problems already). The path to what would become a home grown state of the art system will be the subject of another posting, but needless to say, like many, we started with a spreadsheet.

Change happened daily but we needed to be ready to handle the technical aspects of running claims. We began to hire heads of claim departments – one for Healthcare – one for Property and one for Directors & Officers. Of course there was no place for them to sit. You knew someone was being hired when someone walked in with a tape measure trying to figure a way to squeeze a new desk in. It was a fun and interesting time for everyone and those who thrived checked their egos at the door and rolled up their sleeves and pitched in where needed. Despite a rich investment, we might as well have been working out of someone’s garage. As they say – it was the best of times.

Change comes quickly when you least expect it

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9/11 changed everything for a lot of people. I was at my desk at One Liberty Plaza across the street from the World Trade Center when the attacks occurred. I was literally shaken from my desk and the world would never be the same. There were significant emotional and physical issues to deal with. I will not get into those here, but they were as expected and significant. We were lucky in our department and lost no one to the horrible events of that day – other colleagues were not so fortunate. It was amazing to see those within the company and those outside rise to assist where they could. As low as humanity reached that day, evidence of the wonder of the human spirit revealed themselves in the days and weeks that followed.

By the end of the day I was on a conference call with others from the senior staff trying to figure out our next steps. The company had set up an employee assistance program, which was used by many to deal with the emotional aspects of the tragedy. As a management team we had to deal with the business aspect of getting claims up and running.  In the short term we were able to re-route claims issues to other regional offices around the country. Regardless, we had over 75 claims professionals that needed to get back to work. Unlike other firms, we were mostly paperless making recovery significantly easier. There were a few snafus such as when the back up tapes had not been taken offsite, leaving claims data delayed for a short time. As part of the recovery team I helped to establish a remote office of Specialty Claims staff in one of the Zurich field offices outside the city. For over a year claims professionals worked in cramped and close temporary space designed for a quarter of the people that we had. It was a challenge to get everyone up and running and I am proud to say we were able to get almost the entire staff up and running within one week. It was truly an extraordinary achievement at the time.

Challenges of an office fragmented

After a few months of settling in and dealing with physical and emotional issues, the business of running a claims office continued. We would not move back to the lower Manhattan for nearly a year. In that time, we had to make due with the fragmented nature of our division. Our claims department had been moved to more locations and faced more challenges during the immediate post 9/11 period than I thought could have been possible. The management, underwriting, claims, actuarial and other key departments previously located in one building in New York was now spread across the tri-state area in 4 locations.  Having a paperless claim environment made it much easier to move claim files and documents between offices. Over time the business developed a rhythm that enabled the department to succeed. Once the temporary offices were up and running, I shared a long desk with the Chief Claims Officer for Specialty Claims where we were able to handle the day-to-day operational concerns as they developed.  I increased visibility with my underwriting counterparts and worked with IT to create new reports to assist them in understanding claim trends.

All was on the right track and I was assigned to work with the Home Office IT department to help rebuild the legacy claims system that had been in place for over a decade. Just as this was taking place, my immediate boss was hired as the head of claims for a start up insurance company. The thought of working in a fresh environment in an entrepreneurial setting was very appealing to me as well. Within three weeks of his departure I got the call and he wanted me to come in and help him build the new operation. There was little for me to consider and within two weeks I was part of a new start up insurance operation responsible for building a claims department.

I found my insurance calling – Making operations better and the job easier!

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Working at Zurich was a great growing and learning experience. One thing about an insurance company is the need to document and follow procedures. Whether as a defense to a potential bad faith action, or in order to continually justify your actions, there are steps that need to be followed. Managing claims is a very paper intensive operation. Documents come and need to be processed. Payments need to be made and supporting documentation needs to be provided. Authorities need to be given, presentations need to be made, and signatures need to be secured. From the beginning I worked to streamline my process and make the job easier and more efficient. Early on I used my own spreadsheets to manage my desk of claims or PowerPoint to help present a claim to secure authority. I quickly studied the claims “system” and learned to use powerful reporting tools to understand how my desk, and I, was performing. I ran my own metrics on new claims and closing ratios. I looked at my reserve actions to see if there were any anomalies or trends to be concerned with. And with this information I began to help others in the department get better reporting on their desks as well.

I was soon put on projects to look at efficiencies within claims and look for ways to improve the process of how things were done. I experimented with different ways of looking at claim files and tried to use macros (pre-written note prompts) to assist claim handlers in making sure they hit all the required steps needed to set up a claims file. Some of my suggestions worked and others didn’t, but I continued to look to improve the process. After managing the Northeast Claim Office for Healthcare, I was promoted to the position of Director of Operational Innovation. Not the best title but was necessary because of various corporate constraints on titles at the time. Nonetheless, I liked it because title itself was a continual call to action – my job was to innovate how we did things. I was responsible for ensuring operational efficiency for the Specialty Claims department, which consisted of over 125 claims professionals.

It was at this point that I had found my calling in the Insurance industry. I loved looking for new ways to make my fellow claims professional’s job better. I helped implement a new paperless environment, I trained fellow senior staff on using reports to manage their individual operations, and I tried to ensure the internal audit process was an educational not punitive experience. I spent time using and developing technology to help the claim professional and worked with the larger home office claims technology unit as the specialty lines subject matter expert for the development of new systems. We were moving and changing and it was great to help people do their jobs better.

So this is claims – hey this job is pretty interesting!

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Welcome to the world of property and casualty claims management. I learned quickly to sit down and avoid the speakerphone. I also learned how to reserve files and negotiate settlements. I managed defense counsel and working with senior management to ensure underwriters, actuarial and finance, were aware of the impact of my work on the business. I found everyday to be a new opportunity to help protect the assets of the company while fairly resolving claims to a prompt evaluation, reserve, and resolution. Along the way I watched Juries defy logic and award verdicts beyond belief. I saw sadness in the faces of family members trying to understand what happened to their loved one and desperately looking to my clients to “pay” for the outcome. I met plaintiff’s attorneys who truly believed in what they were doing and stood up for their clients, but also saw fraudulent claims and plaintiff’s counsel who truly cared little about their clients.

One became slightly detached from the claims themselves and the losses suffered. Brain damaged infants, a parent having to bury a child killed because of a worksite accident, a grandfather and his grandchildren struck by a train at a rail crossing, it was my job to value lives that clearly could not be valued by all the money in the world. I used to tell claimants that unfortunately I had to put a dollar value on the life of their son, daughter, mother or father. That was the nature of claims and it was hard with a desk of 150 matters to always keep that in perspective.

My first insurance job – So this is insurance

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Amazingly, it did not take time to find a position (the economy was a tad better back in 1998). I answered a New York Time classified advertisement, interviewed with several staff members (welcome to the corporate world) and was offered a position as a claims supervisor at Zurich Insurance Company. While many of my colleagues in the claims department were attorneys, the staff also consisted of traditional career claim handlers. It was my first non-law job and my first experience in a truly multi-national corporation.

The indoctrination into the world of claims came quickly with the help of my new colleagues. I was immediately reminded that I did not have an office and standing and talking on the speakerphone was an unacceptable faux pas in the world of the corporate cubical. Then came the unknown world of evaluating and reserving claims files. I was not in Kansas anymore and more specifically was not in New York alone. My “desk” of claims consisted of matters from across the country. I could no longer worry about the value and laws from one county over another, but had to be concerned with legal issues and valuations from across all 50 states. Suddenly the broken hip of an 80 year old man that I my experience had taught me was worth no more than $100,000 New York could have been valued at ten times that in Florida. I had a lot to learn and learn I did.

Evaluate, reserve, resolve, and then move on. This was claims.

I get that’s a broad oversimplification of claims, but truly at its core, this was my job as a claim professional. The implications, for sure, were larger than that and when one truly understood the meaning of what effect reserves had on the overall organization, those implications were weighty. The fine art of reserving a file can and does affect pricing, performance, the past the future and the very well being of the company. A file reserved too high means the company may not be able to write as many policies (surplus issues). A file reserved to low means the company may not have sufficient funds to pay the loss when it actually gets paid. Additionally, when the insured goes to market to buy new insurance it may appear that the loss is not as significant (or too significant) affecting the pricing. The claims department was more in the middle of underwriting process than many claim professionals realize. To add to all of this, the potential act of bad faith resulting in the dreaded extra contractual payment (paying more than the limits on the policy because of bad claim handling) hung over your head.

Bad faith is committing malpractice as a claim professional. It is taking steps to unfairly deny a claim or expose an insured to personal liability by failing to act in good faith (I know defining a word using the word isn’t the best, but it makes sense here). Part of the claim professional’s job is to ensure that the claimant (who may be your client if it’s a first party claim) is given what is due. Insurance is bought specifically to pay for losses when they occur. As a claim professional, once a determination of fault and has taken place, the claim must be paid in accordance with the terms of the policy. As a litigator I got to argue and keep defending my client until someone else told me to stop. As a claim professional there was more to worry about – from bad faith to reserves to the next claim, defense counsel, the insured, or the claimant. Don’t forget there had to be a clear documentation of everything you did. This job moved at a very quick pace.

No I was not in Kansas and no this was not OZ either.

In the begining I was a Lawyer

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My initial path took me to law school where I learned the fine art of arguing for a living. I spent 8 years as a litigator defending doctors against allegations of malpractice. Its seemed like a logical progression given the fact I come from a family of 7 all whom, except for myself, are in the medical field (5 doctors, one social worker). Defending doctors was great training. For one, every case required you to learn just enough medicine to get into trouble as a patient. After spending days trying to first learn how to say, and then to understand, Glomerulonephritis, it was clear this was no ordinary law job.  It was hard not to immediately feel a bit of injustice being done to the medical community given what seemed to be a perpetual attack on the core of their existence to help people. Having experienced 4 brothers and sisters go through pre-med, medical school and training, let me be clear doctors enter the profession because they inherently want to help heal. Unfortunately, medical malpractice in this country has turned the famous Hippocratic oath of “first, do no harm” into “first make sure you don’t get sued”.

Part of the problem of practicing law in the manner that I did is the complete lack of control over the process as well as the waste that accompanied it. Litigation is a costly and at time ineffective solutions to disputes. I watched as cases would be settled that deserved to be defended and ones be defended that should have been settled. The insurance company and a claim representative made that decision far from the courthouse steps. After 8, years defending claims I was sitting waiting for a jury to return a verdict and realized that if I never tried another case that would be just fine. This is not a way to defend your clients. I wanted to be involved in the decisions and so the logical place to be was in an insurance company.

Day 1 – Blog 1

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So here it is, day 1 of the blog to end all blogs. Or not. Insurance usually has the effect of exciting people to extol negativity rather than something positive so as I sit here about to justify my chosen profession I will start with a little history.

No I did not wake up one day as a child and say “gee I want to be an insurance claims executive”.  Like many others I had dreams of rock stardom that did not exactly pan out.  Regardless, for reasons that will become clear in this and upcoming posts, I very much enjoy what I do.