Tag Archives: Expense Reduction

Everybody Wants to Make Improvements In Claims But No One Actually Makes It Happen

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It’s Like Selling World Peace. Everyone Is For It But No One Wants To Pay For It

There is so much that needs to be done in the world of claims. Operations need fixing, technology needs improving and a futures need to be defined.  For some reason however, we are all really good at talking about it and not so good about doing anything about it. The industry needs to take action.

We need leaders who will drive the initiatives needed to improve and modernize the claims industry. We are mired in an “it’s always been done that way” mentality and not doing anything about it.  I know the day-to-day is an ever growing series of issues. It is because we are forever being asked to do more with less that action is needed. Strategic planning is a necessary evil and a plan must be put into place to improve the whole or we will be destined to “always do it that way.”

Claims departments need to think creatively and “out-of-the-box” if we are going to attract new talent to the industry. This also means acting and not just talking about acting.

Take Action With These 3 Ideas

So how do you act?  check out these three suggestions for getting out from the wanting to improve to actually taking action:

  • Bring in a consultant for a fresh set of eyes… there is more there than you realize and having someone removed from the day-to-day operation will be like cleaning dirty windows. The clarity will allow you to see both good and bad and will give you the first steps to make improvement.
  • Buy one small application to help fix some aspect of the department. There are plenty of innovative technologies out there to help with everything from adjuster compliance (Xeneros) to claims auditing (the Audit Portal). Try one, they won’t cost too much but they will save you so much in time and expense.
  • Talk to your claims professionals.  Spend a day with a few of the people on the floor and listen to them. Unfortunately many continue to do tasks they know to add little value because they too fall into the “it’s always been that way” frame of mind. I promise you they know more and if given the chance will provide some fairly decent suggestions to improve the operation.  And guess what – this one won’t cost you anything.

How are you going to take action today?

 

 

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.

New Claims Technologies To Help Companies Drive Revenue And Differentiate Themselves

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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?

Cutting Costs Without Overloading The Claims Handler – Part 2 Of The Series

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Trying To Save Money But Can’t Figure Out Which Road To Take?

Last week I offered the first of two solutions to reduce costs in key claims cost cutting areas when hiring full time staff is not an option. As I noted in the post, 2 Cost-Cutting Solutions To Get Work Done Without Overloading Claims Handlers, overworking claims handlers with additional tasks not part of their core job function – to evaluate and settle claims – can result in some aspect of their job suffering. Key cost cutting initiatives, such as Anti-Fraud and subrogation recovery, get put aside by the handler and never get the fullest attention needed to be successful.

Having achieved improved results in my prior life, I suggested both outsourcing and hiring a dedicated part-time employee to handle certain tasks. The first example I presented centered on having an outsourced vendor put a resource “on-site” for improved results. In the context of an Anti-Fraud solution, having the vendor “on-site” resulted in more fraud reports to the states, improved claim handling through knowledge transfer, and lower costs. The program was a success.

This example tackles a similar problem of trying to improve results without the need to hire a full time employee in the area of litigation management bill review.

Claim Handlers Really Don’t Do A Good Job Of Cutting Legal Bills – A Part Time Hire Solves The Problem

Conventional wisdom has been that claim handlers are in the best position to review legal bills on the claim files they work on. The reality is legal bill review, for most claim handlers, is a dreaded task considered a necessary evil.  In addition, I find that some claim handlers rarely cut inappropriate charges because they develop a working relationship with the attorney and do not want to hamper that relationship for what are felt to be minor issues.  However, when the bill review process is separated from the claims handler, many of these concerns or conflicts go away. Handlers can focus on managing claims and developing open working relationships with counsel and billing issues can be addressed by others.

Possible Solutions

In looking for a proper solution I considered vendors that review legal bills as well as bill review software.  Legal billing vendors that provide the service usually get paid based upon the amount of money they save. This type of review can create problems and can sometimes be perceived as a conflict.  I was not trying to create an adversarial relationship with counsel, so this idea was put aside. Bill review software provides an excellent job of catching billing discrepancies that frankly can’t be caught manually. Unfortunately, billing software requires a larger capital investment, IT involvement, and time to implement. While the projects often pay for themselves through reduced legal fees, at the time, it was not a road that I was able to follow. What I needed was an attorney who understood the legal process and could work with, and speak with, counsel on billing issues. As I was working in a claims organization that hired many lawyer/claim handlers it seemed like a natural solution.

How To Make It Work

While I did not want to hire a full time attorney, I was approached by someone who knew a stay-at-home attorney looking to work 20 hours a week in a flexible environment. Being able to provide that kind of work load is sometimes not possible for many companies, however, given what I was looking for, the solution to my problem seemed to have found me. At the time, the company I worked for had an excellent claims system (since I helped design it I was always going to say this) which made it easy to set up a part time employee remotely. A new process was designed to allow claim handlers to send our litigation bill reviewer invoices for compliance analysis and review.  At first it was decided to limit reviews to invoices with known issues and ones over a certain dollar amount. Bills could be forwarded electronically, reviewed, analyzed and returned to the handler with suggested changes. A form letter was instituted where disputed charges were listed and explained. The new program was in place and it worked.

In the first year the program reviewed over $15 million of legal invoices. On average, legals bills were reduced by 10% with most of the reductions due to billing errors, duplications and failing to comply with agreed upon rates. The most fascinating findings came when we opened the services to Third Party Administrators doing work on the company’s behalf. It turns out that bill review reductions were 2-3% higher for work being done for the TPA than for work being done for in-house claim handlers. No matter what the reason, the bottom line was over $1.4 million dollars saved in the first year alone.

Lessons Learned

  • Claim handlers, despite being close to the claims process, were not in the best position to review legal bills
  • Attorney’s seem to be a little more cautious reviewing their billing submitted to the company directly than when submitted to the TPA
  • A small amount of diligence can result in huge savings – these savings add up and were clearly worth the small investment to retain a part-time employee

The solutions I offer here, and the prior post, are not limited to world of SIU and litigation bill review. Hiring a part-time employee, or “on-site” vendor,  to manage any initiative is a great idea when specialized knowledge is an appropriate way to get better results and the need for a full time employee is not needed. As noted, subrogation and salvage recovery are great areas that can also benefit from these types of programs.

I have just offered up two solutions to the age-old problem of trying to do less with more. While the solutions are not new, sometimes to become more effective you need proper execution and new ways to look at old problems.

2 Cost-Cutting Solutions To Get Work Done Without Overloading Claims Handlers

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Too Many Tasks, And Hiring New Staff Is Not An Option? (Part One of Two)

Not every company can afford to hire dedicated teams to focus on cost-saving initiatives such as subrogation or Anti-Fraud. Sometimes there is simply not enough work to justify a full-time position internally. Regardless, failing to focus on cost-saving programs can increase loss and expense payments.

So how do most companies handle the situation? By adding those tasks to a claims handler’s already overloaded job function. The problem is, the more tasks they are asked to do, the less they can focus on being a good claims handler.  The usual result of overloading the claims handler is that they not only can’t focus on the core aspects of their job – to evaluate and settle claims – but they also can’t properly attend to the additional work. Both jobs end up suffering.

Tasks such as subrogation and legal bill review are the last things claims handlers want to do. Furthermore, these tasks are better performed by dedicated staff. Take a look at any department with dedicated subrogation specialists and you will see higher rates of recovery than those without. This is also true in the areas of Anti-Fraud and litigation review. So how can a claim department maximize results and lower costs, while also ensuring claim handlers can continue to focus on their core job functions? From my own experience, two recommended practical solutions to consider are outsourcing with on-site vendors, and hiring part-time employees.

Taking a page from my past, this post presents the first of two solutions that I implemented to secure successful results.

Outsourcing As A Solution – An Anti-Fraud SIU Example

Outsourcing certain aspects of the claims department can make good economic sense.  However, not every company needs a 30-person call center, nor do they need to invest the resources to build one. In those instances, partnering with a vendor can be an ideal way to provide the best of the best. One of the potential problems, however, is if your company has only a limited need, the vendor may not always give you the most attention. Additionally, completely outsourcing the task means that claims handlers lose the benefits of the expertise that the vendor provides, and often may not even be aware of the available services offered. I was faced with this very issue when dealing with managing an Anti-Fraud unit. My solution was to require the vendor to have their employee “on-site” in our office.

What Did Not Work

Looking for fraud is a key part of a claims handler’s job, and many states require fraud reporting to state investigators. The company I was working for had a substantial commercial casualty book, as well as other specialty lines of coverage. There was not quite enough work to justify a dedicated Special Investigation Unit, but still the work needed to be done. I decided to outsource the process to a Third Party Administrator who had an active SIU unit. The vendor was contracted to handle all the company’s SIU state reporting requirements as well provide any investigation services that our internal claim handlers needed. In addition they were to provide required Anti-Fraud training to our team, and perform audits of our claim handling TPA’s for compliance with Anti-Fraud reporting requirements.

The vendor provided Anti-Fraud training to the team at the onset of the relationship, and then visited the office from time to time to provide updated training and answer questions. After a year of working with this vendor, we discovered that fraud referrals to the state were no different than before the vendor was hired. In discussing the issue with the claims handlers I learned that, despite initial training, the interaction with the vendor was typically reactive, and there was minimal regular contact with investigators. As a result handlers were not aware of the vendor’s range of services, nor did they even know how to properly identify Anti-Fraud red flags. The process and the program weren’t working and I had to make a change.

How To Make It Work

I began to look for a new vendor who would provide a solution that would produce better results.  I determined that the only way I was going to get more fraud referrals was to have someone sitting in the office on the front lines with the claims handler. For the new contract, I found a vendor that would assign a dedicated SIU investigator to sit in our office several days a week. With the investigator on-site, I was able to produce a more proactive approach to looking for potential fraud. Because they were on-site, the vendor was able to use our claims system to review files and actively monitor claims for potential fraud. This was not possible with our previous vendor in an an off-site reactive model.

Once the new program started the difference was almost instantaneous. Claim handlers sought out advice about claims with possible fraud. Investigations increased and claim handlers became more proficient at identifying industry red flags. SIU state referrals increased over 200%, and due to new investigations, several files were able to have indemnity reductions. Handlers learned that sometimes something may not be an outright fraud but instead were exaggerated claims. With the assistance of the “on-site” investigator, handlers learned new ways to analyze damages and reduce loss costs. The program was a success.

Lessons Learned

Changing the way a vendor works with your company can have dramatic results. In this particular initiative I was able to learn:

  • If it’s broken, then fix it. Don’t worry about changing your approach; it’s sometimes the best thing. Too often, leaving a merely adequate solution in place is worse than starting over to make improvements.
  • Be persistent in thinking outside the box in an effort to find new ways to approach basic solutions.
  • Having your vendors work on-site with your team can have many advantages, including the “absorption” effect. Your vendors’ expertise, knowledge, and skills are transferred to your internal staff.

In Part 2, I will give an example of using a part-time attorney to review legal bills as a way to lower your legal expense dollars.

The 5 Essential Components of Defense Attorney Reports That Can Improve Claims Costs and Outcomes

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Why Are Attorney Evaluation Reports Sometimes So Light?

I was recently conducting an audit of claim files and had the opportunity to review a significant number of Attorney Evaluation reports from a variety of law firms. Like many other things in life, some were better than others.  What seemed to be most glaringly consistent was the inability of counsel to truly provide an assessment of exposure and what the case is worth.

When asked to assess exposure, the typical response was to state that the insured had a 50% chance of winning the case. While I would agree that there are instances when this may actually be the case, often times it’s not. One report I read stated that the attorney felt the case was probably defensible, but with additional information they may not be able to defend the case. Why is it so difficult for some attorneys to give a comprehensive assessment? Is there a fear that if an attorney says one thing, they can’t change their mind later? When circumstances change, new information is developed, or issues are uncovered, it is perfectly reasonable that evaluations need to be adjusted accordingly.

I would submit that an experienced defense attorney, that has seen hundreds of similar cases, has a pretty good idea of what the issues are in a case. Claim handlers can, and should, expect their defense counsel to clearly evaluate liability and damages and express those evaluations coherently in their reports. Counsel should be providing full evaluations at least every six months or after significant changes in discovery.

At the very least, attorney evaluations need to provide the following 5 components in their reports:

  • Introduction – All reports should start with a few sentences outlining the facts of the claim, and should not require reading though 8 pages to find out what the case is about. An example of a concise introduction would be “This case is about the alleged wrongful death of a 29 year old stockbroker, father of three children, after he was struck by our insured’s vehicle being driven by an intoxicated driver.” In fact, that type of introduction can be used in every letter sent by defense counsel regarding the case.
  • Factual Summary – A summary is a summary (I know – never define a word with the same word – but it seems appropriate here). When line-by-line details are relevant, then they should be spelled out. Otherwise, a concise assessment of important facts, and how they impact the case, is all that is needed to explain all aspects of the file. Counsel should also describe pertinent testimony, how it impacts liability or damages, and state how the witness would present to a jury at trial.
  • Liability Assessment – An evaluation of liability needs to address all the parties in the case and not just the insured. Each of the plaintiff’s allegations should be discussed, and how the defense will be able to respond. Sometimes a defense would not serve to completely negate liability, but only serve as a way to reduce liability or damages. If this is the case it should be clearly stated so a proper assessment can be made.  An example of a concise statement on liability would be “I believe the insured has problems with liability as they were aware the driver sometimes drank at lunch to “calm his nerves.” While the 29 year old decedent was speeding, and may have ran a stop sign, it may only serve to mitigate a small apportionment of liability.” Another valuable tool is to list out all the defendants and show each of their percentages of fault.
  • Damages – This really should be the easiest section of the report to write up. A simple list of all the economic damages followed by ranges for potential non-economic recovery would clearly spell out the total extent of possible exposure. Additional information that could affect the outcome can also be clearly stated like this example: “Despite being unemployed, the decedent taught Sunday school and took care of his sick wife while raising his two small children on his own.” A great suggestion from a colleague is for counsel to base their report on the particular jury charge that would apply in the case. Verdict research is also helpful and readily available. In the end, counsel should come up with a damage assessment of the full value of the case and then factor in the liability apportionment.
  • Conclusions and Recommendations – Attorneys are being paid for their opinions and expertise, and they should be providing that experience in their reports. A clear statement should sum up counsel’s position on the case, and the relevant next steps.  Upcoming discovery expenses, as well as any out-of-the-ordinary expenses that may be incurred (i.e. investigators, experts, trial exhibits, etc.) should be listed to allow the claim handler to manage expense budgets better.

Good Reports Are Cost Effective and Allow Handlers to Make Informed Decisions

When reports include all of the potentially relevant and appropriate information, a claim handler can make a more informed decision. Reserves can be assessed and changed when needed, and expenses can be managed more effectively. I was able to see this in practice at another client I recently worked with. This client worked proactively and diligently with counsel to get them to follow the structure I outline above. The client’s Director of Claims told me that they “are paying for [counsel’s] evaluation, and wanted them to put their neck out.” He went on to say that they truly partner with their attorneys and acknowledge that they “win together and lose together.”  It was clear from reading these reports that counsel enjoyed writing them, and according to the client, also enjoyed the challenge of providing a complete evaluation.

A good report will tell the story of the entire case in a concise and comprehensive manner. Defense counsel and claims professionals need to work together to help resolve the claim using the most expeditious and appropriate approach. Good reporting will help the process. Sit down with counsel and come up with a format that works for everyone. Don’t be afraid to send a report back to counsel and ask them to state their position so a proper evaluation can be made.

What are your experiences with counsel reporting? How do you think the evaluation process can be improved?

5 expense reduction opportunities insurance CEOs should not overlook

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Increase your profits with efficient claims operations

Take a look at the annual reports of top performing insurance companies and you will see a similar message from their CEO’s. Expense management and efficiency is a principal driver of profitability. As the Ward Group noted in the Ward’s 50 2009 Property-Casualty Benchmark Report “‘Top performers understand that efficient operations result in pricing advantages passed on to the consumer and keep the customer at the center of the business decision.’ In 2008, expenses relative to revenue were 5.5% lower for the Ward’s 50 property casualty group of companies.” According to the Ward Group, net premiums grew 10.1% for top performing companies compared to 1.8% for the industry as a whole.

In a tight market, doing less with more without sacrificing quality or customer service is the edge needed to be a top performer. The claims department is the perfect place to lower costs and improve the customer experience at the same time. Here are 5 key areas that should be looked at for cost savings:

  1. Control what you can control: You can’t control the types of losses that can come in, but you can control allocated loss costs with effective oversight programs. Establishing litigation management guidelines can easily save 10% as well as improve outcomes through better communication. Control non-legal vendors with a program to “vet” providers and subsequently rate their performance. Audit your Third Party Administrators to catch harmless, but costly, errors.
  2. Utilize your technology to its full capabilities: Do you have the right technology and has it been implemented correctly? Failing to incorporate technology appropriately can increase costs. Procedures must be coordinated with new or existing technology so claim adjuster’s jobs are easier and the customer, not repetitive tasks, are the focus (also see our post on implementing claims technology and processes).
  3. Create strong reporting tools and use them: Comprehensive reports and analysis are essential to profitable business. You can’t manage growth without accurate benchmark reports and a good reporting tool will allow your claims department to look for trends. Using these reports to work closely with actuaries and underwriters will help ensure pricing is accurate. Good trending will also improve underwriting decisions around expanding or contracting in specific lines of business.
  4. Review your current operational procedures: Old process can equal costly operations, but change for the sake of change is not always a good thing. If you are performing tasks because you have “always done them that way” it’s probably a good time for a check-up. A regular assessment will almost always find cost savings and improve efficiencies (for an example see, Case Study: Improving file set-ups).
  5. At the very least meet minimum expectations: Customers will complain about problems when they arise, but will rarely complain when basic needs are not met. Before you can dazzle your customers with new services make sure you are first providing the basics. Regular communications and flexible reporting capabilities are minimum standards that must fulfilled or you will lose in the renewal process. You are in a competitive environment and providing mediocre performance is a non-starter.

Follow the example of the top performers, and don’t just talk about cutting costs. Take affirmative steps to reduce spending and improve your customer experience. There is no better place to do this than in the claims organization.

Don’t wait for your competitors to be a step ahead of you.