Internet Claims: Separating The Hype From TheReality

By Randy Wheeler

In these uncertain times, many companies are facing more risksand potential losses from a variety of factors. Premiums areincreasing across the board, and companies are under intensepressure to reduce operational costs and improve profitability inthis volatile economy.

To improve performance, all companiesmanaging claimswhether self-insured employers, public entities,insurance carriers or third-party administratorsmust increaseefficiency, identify and reduce their risks, and improvecommunication and the sharing of vital information among allentities involved in the claims process.

Over the last three years, there has been a lot of hype abouthow the Internet can transform claims administration. With thecontinued hard market, this is a critical time to distinguishbetween Internet hype and actual Internet benefits. By outliningthe current offering of Internet claims technology, this articlewill discuss just how close we are to a completely Internet-basedclaims process.

Many claims administration systems today promise automation,real-time information, and the type of connectivity that wouldallow companies to access claims and risk information anytime, fromanywhere. But just how much can Internet systems deliver, and whathave been the barriers to implementation? First, its important tounderstand the various types of Internet systems that are currentlyavailable:

Internet-enabled. The insurance industry hastraditionally lagged behind other industries in implementing thetechnology that would allow it to significantly automate claimsprocessing, increase productivity and reduce overhead costs. Manyclaims systems are just now becoming available on the Internet, butthey are Window-based or mainframe-based applications that use theInternet for remote access. For many of these systems, only one ortwo functions can be driven over the Internet. For instance, asystem may allow a first report of injury or a form to be submittedvia the Internet, but it does not take complete advantage of theInternets connectivity or real-time capabilities for all claimsprocessing functions.

Application Service Providers (ASPs). An ASPmodel allows companies to access sophisticated claims systems viathe Internet, while also lowering their costs in software, hardwareand IT personnel. The company essentially outsources theinstallation, housing, maintenance and upgrades of the system tothe ASP. The typical barrier to implementation has been that ASPsystems are client-server or mainframe applications modified to runover the Internet, and therefore require middleware technologyinstalled on individual workstations or special servers in order torun. These middleware systems create an additional expense and cansometimes increase the vulnerability in a companys firewall.

Truly Internet-based/Browser-based. Being trulyInternet-based means that the system is specifically designed for,or is native to, the Internet. As a result, all claimsfunctionality, not just limited tasks, is available. In addition,the system does not require middleware systems to operate. This newgeneration of claims technology is commonly referred to as“browser-based,” since the only thing an end-user needs to run theclaims system is a browserwhich today is a standard pre-packagedfeature on most PCs. But since browser-based systems do not requiremiddleware, they are more cost-effective, secure, and offer animproved Internet application model. As a result, more companiesare looking to browser-based technology for their claimssolutions.

Inefficiency has been a major source of loss and waste forcompanies managing claims. One bad claim can result in thousands,even millions of dollars in losses. In addition, billions ofdollars are lost due to antiquated paper-based methods that requiresignificant human resources to manage. The traditional way ofincreasing throughput of claims has often been to add more peopleto the review process, which does not result in long-termoperational efficiency or the implementation of technological bestpractices.

By automating the claims process via browser-based systems,“paper-pushing” endemic to the insurance industry can besignificantly reduced, routine transactions can be automated, andinformation can be shared for effective decision-making. Thebrowser-based applications provide: connectivity (the system isavailable from any PC that has Internet access, and it does notrequire middleware software); transparency (information from avariety of sources can be consolidated in real-time and presentedto adjusters and other parties without system interfaces anddownloads), and real-time notification (a claims manager or riskmanager can be automatically informed of an urgent claim orinsurance activity through native Internet tools like e-mail.

The major impact of the Internet has been to provide a powerfulweapon to dramatically increase productivity and share informationamong employers, insureds, adjusters, supervisors and riskmanagers. If all of these parties have timely information, theadjusters can properly manage claims in the first place, and theycan help control costs and improve outcomes. The quality of theclaims process depends almost entirely on individual reviewershaving the right information to do their jobs effectively, so theycan operate as “knowledge” workers, not mere administrativestaff.

Document or image processing can also increase the volume ofclaims handled without increasing overhead. In addition,straight-through processing significantly cuts the time spent onindividual claims, helping to control costs.

“Paperless” claims management is moving closer to reality withmany companies utilizing scanning, browser-based claims systems,and sophisticated online reporting and real-time notification tonot only increase efficiency, but also to hone in on specificrisks.

Traditionally, there has been no effective way to share vitalclaims and risk information. Since companies lacked the technologyto track, report and access business intelligence, top-levelexecutives were not always aware of problem areas. Vital pieces ofrisk information went unnoticed, and many executives were forced toessentially “fly blind” when managing future risks.

Claims and risk professionals today are demanding timely andaccurate information to facilitate improved outcomes, such as earlyreturn-to-work or injury prevention programs. With access tospecific details, they can pinpoint where losses occur and what canbe done to remedy high loss areas.

Browser-based systems are a far-reaching solution, serving as areal-time connection between critical information silos,consolidating multiple data sources, and providing exactly the typeof access to information that executive decision-makers need toprotect their assets and improve future performance.

With browser-based technology, a broad array of risk managementnotifications and reports are being made available todecision-makers with the ability to improve performance inhigh-cost, high-risk areas.

Browser-based claims administration and risk management systemscan improve the claims process for the benefit of all stakeholders.Companies that use browser-based technology achieve greatersavings, decrease losses, lower administrative overhead, and reduceoverall claims costs by making the claims process faster, cheaperand more accurate.

Randy Wheeler is the founder and CEO of Valley Oak SystemsInc., a provider of claims administration and risk managementsystems, headquartered in Alamo, Calif. He can be reached at[email protected].

Reproduced from National Underwriter Edition, March 31, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.