5 Must Haves To Consider When Implementing a New Claims System

Technology is About the People Both Before and After Implementation

I have just returned from the Americas Claims Event held this year in New Orleans. This was a really great conferences that was well run and provided some great learning opportunities.  This year was an interesting mix of speakers and vendors discussing the latest trends.  It was a great place to hear some of the challenges facing the industry and how are those challenges being solved.

One of the most interesting speeches I heard was given by Paul Tuhy, Global Head of Claims for XL Insurance.  Paul spoke about building effective claims systems and processes and gave some valuable suggestions on how to implement claims projects successfully.  Paul began his speech by going through a bit of history surrounding claims technology from the punch card days to the paperless office. It was a great way to set up how to develop a platform that “flows” with the claims staff.

I believe strongly that claims systems should assist claim handlers in making better decisions and not necessarily be expected to make those decisions for them. In the end, the claims technology must serve claims professionals. This is what Paul Tuhy and XL have been trying to achieve with their technology offerings. Developing a new claims system can be fraught with many challenges, regardless, there are some great ways to make that process better (see Putting Puzzle Pieces Together and the Challenge of Creating a New Claims System and The Legacy Claims System Facelift – 5 Issues To Consider When Looking At New Systems).

5 Ways For a Successful Implementation

Paul Tuhy made the following suggestions to manage development:

  1. Use the best and the brightest on the project: A new IT project for claims cannot be a dumping ground to stick poor performers.  Paul suggests the process should hurt a little and that means taking some of your best claim handlers off their desks to act as the subject matter experts. These experts must be able to think strategically and have a broad perspective in order to assist in what will be a major change for much of the organization.
  2. Consult the business: Don’t build a claims system in a silo. This is a business system and not just a claims system.  Involving the underwriters and actuaries in the process will help to implement an enterprise wide solution to improve the overall business outcome and not just make claims handling easier.
  3. Dedicated executive sponsorship: A project this large and this important needs an executive champion. There must be the ability to help move the project forward and ensure deadlines are met at an executive level or the development may stall.  This will require a large time commitment, however, this commitment will be rewarded with a streamlined approach and the ability for decisions to be made effectively.
  4. Project management: The project team must have passion to move the project forward with a tireless dedication. The team must have the same vision as the leadership to maintain the focus through a long implementation.
  5. Scope creep: The system and suggested changes must have value. It is very easy to sit back and add a piece here and another there.  Prior to making a change to the project a cost benefit analysis must be done.  It is a difficult thing to measure, however, and sometimes system enhancements will begin slow and don’t show their value for several months or years.  Measure those changes after the fact and see if the perceived value actually came to be.

As companies continue to invest money in new technology it is important that those investments do not end up creating more problems.  Claims technology can be a great way to improve efficiencies and lower costs when done correctly.  Too many times projects fail because the up-front time and investments were not made.

How do you help your IT projects succeed?

6 Essential Elements To Explore When Choosing A Third Party Administrator

Don’t Roll The Dice To Choose A Good TPA Just Do A More Complete Due Diligence

A Third Party Administrator (TPA) is often the best way to handle claims for an organization. Many self-insured and captives choose to outsource their claims instead of creating their own internal operation (see my prior post of A checklist of the 8 critical issues to be concerned about when self-managing claims). Whether to get expertise in a particular areas, or not wanting to invest in the infrastructure to build a claims department, using a TPA can be a smart business decision. In fact, many insurance companies will outsource some, or all, of their claims for the same reason. Regardless of what type of company you are, choosing the right TPA is imperative. The TPA will become the face of your company for claims and, how well or poorly, they handle claims will be a reflection on your organization.

So what make a good TPA and what should you look for? In order to find out you must conduct a comprehensive due diligence of the TPA you are about to hire. This is especially the case when that TPA will be holding and managing your claim dollars. Besides understanding the financial strength and capabilities of the TPA, it is also important to know whether they will be able to meet your data needs, provide consistent claims handling, and work to lower costs where they can.

While not an exhaustive list by any means, below I address 6 essential elements, and questions, that should be explored as part of any due diligence when selecting a TPA:

  1. Claims Systems – A strong claims system is an essential tool for any claims organization. Take time to understand the capabilities and limitations of a TPA claims system. Can they provide remote access so you can review your claims online? Do they have a paperless file system? Can they capture information that would be critical to your organization such as specialized loss codes or basic policy information? Do they use any other systems to help lower costs such as litigation management billing software or some unique estimating program?
  2. Reporting Capabilities – With a good system loss reporting should be easy. Regardless, it is important to understand the types of loss runs and reports that can be provided. How frequent can they be provided? What format will they be provided in? Can you easily request specialized reports, or do they have a system that you can customize reports on your own?
  3. Litigation Management Program – Litigation management is one of those things that seem to be less emphasized in a lot of organizations. Nonetheless, this is an area that if ignored could result in higher legal costs. Ask if the TPA trains their staff on litigation management cost reduction techniques. How are legal bills reviewed and what kind of program is in place to review counsel performance? Do they have a panel of law firms, and if so how are those firms selected?
  4. Quality Control and Internal Audit – Consistent handling across multiple claim offices is difficult to accomplish without clear handling best practices and internal controls. Does the TPA internally review their claim handler’s performance? How often are claim files reviewed for good practice compliance internally? What kind of metrics do they use to ensure files are proactively managed and consistent across the board? If they produce an annual internal audit report, ask if you can review it and see how they deal with deficiencies. No operation is perfect, but how well they recognize and address problems can be very telling.
  5. Subrogation/Salvage Capabilities – Many claims organizations fail to actively push subrogation and salvage opportunities. These areas, when done correctly, can lower claim loss dollars and return money to the coffers. How aggressive is the TPA in driving these key cost savings initiatives? Do they have a separate unit, or are the handlers expected to manage subrogation and salvage? How are they tracking returns? Are their results within industry expectations for a particular line of business?
  6. Special Investigation Unit and Anti Fraud Initiatives – All TPA’s will tell you they train their staff and actively pursue fraud when identified. This information should be readily available and reviewable. Ask the TPA how many fraud referrals they made to the states for a given line of business. Is the number consistent with the industry expectations on fraud reports? Do they have an SIU onsite or do they use and outside vendor to manage fraud? Have the TPA’s claim handlers received their annual fraud training as required by certain states?

A few other items worth considering would also include:

  • Management structure
  • Reserve philosophy
  • File loads per adjuster
  • Turnover
  • Financial stability
  • Banking arrangements

Hiring a TPA is a critical process that must be reviewed carefully. Take the time to perform a thorough due diligence, or hire an expert to do it for you. Getting a comprehensive analysis will ensure you are choosing the best TPA for your organization.

A little extra effort in the selection process will pay dividends in the future with a better customer experience and lower costs.

New Claims Technologies To Help Companies Drive Revenue And Differentiate Themselves

Still Working With Files? Time To Reevaluate Your Technology

New Study By The Gartner Group Shows 10 Technologies With The Greatest Impact For The Property/ Casualty Industry To Drive Revenue

The Gartner Group, Inc., in a new report, has identified 10 technologies that they feel will have the greatest impact for the Property and Casualty industry to help differentiate themselves and drive new revenue.

“There is a long list of technologies that P&C insurers can use to improve their processes — from product development through customer service. Many of these technologies, however, provide only incremental or minor improvements, have limited or no return on investment (ROI), or do not promise to help P&C insurers radically change their business models, reduce operational costs or generate revenue,” said Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. “With budgets challenged and with limited funding for discretionary spending, it is imperative that organizations prioritize their investments favoring those that will generate the greatest ROI and drive the most value.”

Many of the technologies suggested by Gartner can have a significant claims impact. Below I comment on 4 that I feel can have the greatest impact on claims:

  1. Modern Policy and Claims Management Systems – Companies with modern systems, that integrate well with the rest of the organization, have enhanced workflow and business process management (BPM) capabilities. Such systems are easily adoptable as business changes occur and give the company a clear competitive advantage. As Gartner points out, “the adoption of these systems by personal and commercial P&C insurers can provide significant value, including reducing the total cost of ownership, when legacy systems are decommissioned.
  2. Business Intelligence and Analytics – Data and analytics are a logical extension following the adoption of updated systems. Customers are demanding more information and can easily be provided what they need with newer analytic tools. Having better information will also lead to better risk decisions and pricing. In addition, as more states require specialized claim reports, these types of analytics are required to ensure compliance with ever changing data requests.
  3. Advanced Fraud Detection Solutions – Gartner put it best on this one by saying “it is key that insurers reduce losses and leakage to retain profitability. Better control of fraud is essential in accomplishing these goals. Advanced tools analyze data (structured and unstructured) to identify fraudulent claims in real time at point of data entry. This will assist P&C insurers in reducing losses that result in driving up operational costs and may result in companies having to increase insurance premiums based on these losses”
  4. Mobile Devices/Technologies – Any way a consumer can submit a claim promptly and easily will be an invaluable tool. The buzz word in business is mobility and it is no different with claims. With most mobile devices now containing cameras, documenting losses early in the process is easier and can assist in preventing fraud. From the adjuster side, stronger, integrated, mobile technology will greatly speed up claims processing significantly reducing costs.

Failing to adopt new technology will put companies at a competitive disadvantage. Every company should look to evaluate their current systems and offerings and create a strategic plan to keep up-to-date with software and solutions. Staying ahead of the curve is a sure way to help drive costs down and stand out from those who don’t.

Prior to going down a new technology road, I would again encourage an assessment of your claims operations. For further comments on how to manage new technology, please see my prior posts of Putting Puzzle Pieces Together and the Challenge of Creating a New Claims System, as well as With old claims systems come old claims processes – You can’t change one without the other!

What trends are you seeing in claims technology that will be essential for companies in the coming years?