A special joint supplement of Tech Decisions and Claimsmagazines

First-Aid Kit

By Michael P. Voelker

In managing claims, insurers are more likely to tap tacticaltechnologies to bandage specific pain points rather than take themmore invasive strategic approach of transplanting entireprocesses.

“A lot of claims projects we see deal with how [insurers] aregoing to improve existing claims processes” rather than reengineerthe entire claims process itself, says Kimberly Harris, researchdirector at Gartner. “We aren't seeing a lot of claims [technology]strategies today that are really 'strategic,' ” she asserts, addingthis is in part because claims departments have “ absolutely”struggled to get their piece of the budget pie in recent years.

But are tactical projects a good idea? They can be, as long asinsurers stay focused on the objective of improving, rather thanautomating, a process. “When you add technology, you should takeadvantage of [it] and enhance your process rather than just[ultimately] doing it the same way,” says Pat Turocy, principalanalyst at Doculabs.

While she encourages the insurers she works with to step backand reevaluate their overall claims processing, Turocy points outthe reality of limited resources and time comes into play in theproject decisions insurers make. Nevertheless, technology hasimproved points in the claims workflow, particularly by eliminatingpaper where it still exists.

The types of pain points can be as numerous and varied as thecarriers that deal with them. The following examples presentseveral insurers that tell how they successfully have eased theirpain with individual projects that fit well into their overallclaims strategy.

Ohio Casualty:

Maximizing Mobility

Like many insurers, Fairfield, Ohio-based Ohio Casualty Groupcontends with a mainframe legacy system for its claimsadministration, according to Russ Kelly, the insurer's vicepresident of property claims. This doesn't mean, however, OhioCasualty has been unable to offer effective technology solutions,including paperless and wireless capabilities, to its fieldadjusters.

Ohio Casualty, which writes personal and commercial P&C,provided the basis for wireless 18 months ago by outfitting the IBMThinkpads used by field adjusters with both Novatel wireless PCcards as well as Sierra wireless AirCards that operate over aSprint network. The first claims application deployment in thisenvironment was the auto-damage-focused eClaim Manager fromMitchell International.

Rather than having to retrieve and transmit assignments andestimates while wired in their home offices, Kelly explains todayfield appraisers can do these tasks from anywhere in the wide-areawireless network. This project garnered the carrier attention inthe industry press for such results as reducing claim cycle timefrom 14 to seven days and increasing field rep productivity by morethan 12 percent.

Similarly, the carrier enhanced its property estimatingcapabilities in late 2003, upgrading from stand-alone, fat-clientinstallations of IntegriClaim from Marshall & Swift/Boeckh(MSB) to a Web-enabled version that utilizes MSB's ComCentral tolink to Ohio Casualty's mainframe system and automate theestimating process. Property adjusters were outfitted with the samewireless mobility upgrades as their counterparts on the autoside.

“In the old world, an adjuster would retrieve a claim assignmentand rekey all the information into [IntegriClaim] we already hadentered when we processed the first notice of loss,” Kelly says.“In the new world, when the adjuster is connected, that informationcomes over automatically from the claims system and is mapped intoIntegriClaim.”

Integration issues with the new MSB solution, according toKelly, amounted to only “minor bumps in the road, mostly aroundmapping and feeding data to and from fields from our legacy systeminto [MSB] and then from [MSB] back into the legacy system.”

Eliminating the need to rekey claims information has been thebiggest time saver for staff, Kelly reports. “We know it tookbetween 10 and 14 minutes to input the relevant information before.Now that information is coming over prepopulated. Before, we wouldtake digital photos, put them on diskette, and stick them in thefile. Now we take a photo, attach it to the estimate, and it'suploaded to MSB's server.” MSB also checks uploaded estimate dataagainst its own database to flag potential inaccuracies.

Additionally, the new system provides Ohio Casualty bettermanagement control. “Previously, all of this estimating dataresided on 130 different laptop hard drives,” says Kelly. “Now, itall resides on a server we can data-mine and generate significantinformation in terms of our estimating behavior.” The insurer usesIntegriClaim Administrator for both recurring and ad-hoc managementreports and can benchmark its estimating activity against theindustry.

Ohio Casualty cannot reveal the cost of the MSB system due tocontractual limitations, but Kelly projects a first-year return oninvestment of three to one. “By focusing on the best-practiceestimating behaviors that drive the most severity and identifyingwhere we fall relative to the industry, we expect the MSB productto improve estimating results and generate this return. We alreadysee the benefits,” he says.

The carrier continues to target pain points in its claimsprocess. It recently has begun using NetMap from the InsuranceServices Office (ISO) to match claim information against the ISOClaimSearch database for fraud detection. It also started using alitigation management application from TyMetrix in 2003 to replaceits previous internal spreadsheet and bill-review service strategy.And lastly, it currently is developing a claims dashboard toreplace the desktop-and-icon approach adjusters now haveavailable.

Farmers Insurance Group:

Raising Recoveries

Farmers Insurance Group is an insurer that recently completed amajor overhaul of its claims administration system, which it beganrolling out in 2001. Jim Sorrells, national manager for subrogationand salvage at Farmers, reports the paperless, electronic system isthe result of a multiyear effort to integrate a multitude oftechnologies and applications, from imaging and workflow to callcenter and claims management.

When the deployment was completed in 2002, Farmers looked toaddress a remaining claims process where additional emphasis couldbe provided–subrogation. Sorrells explains the claims managementsystem is customer-focused and designed for front-end claimsmanagement, whereas subrogation is managed on a file or claimbasis. “We are dealing with attorneys and insurance companies andmust have global claims information, not just the detailspertaining to an individual. We were looking for a technologysolution to bundle all of the information from the claimsmanagement system for use in our strategy for collections,” hesays.

Farmers considered several subrogation systems and ultimatelychose Sub-rosource from Windsor, Conn.-based Trumbull, deployingthe system in Feb-ruary 2003. Currently, Trumbull hosts the systemfor Farmers, which uses Subrosource for all personal linesclaims.

Farmers' previous process required either claims representativesor subrogation specialists identify possible subrogation files,Sorrells explains. Those specialists–numbering more than 400individuals in six regional offices–would review the files, typenotes outlining their rationale for recovery and course of action,and set diary reminders for follow-up activity.

Subrosource brought Farmers a rules engine that supports theprocess of identifying subrogation. Today, claims representativescontinue to identify subrogation possibilities during the claimsadjustment, but the rules engine also scores claims based uponFarmers' recovery strategy to assure the insurer has found all ofthe claims with subrogation potential.

Specialists log in to the Web-based Subrosource to receiveassignments and manage their existing cases. Integration betweenFarmers' claims system and Subrosource means pertinent claims datanow is populated automatically to the subrogation system,eliminating the need to rekey information. Finally, specialists cantransfer electronically assignment of recovery attempts that havebeen unsuccessful to their collection partner, Credit CollectionServices.

“It was a difficult but well-managed integration,” notesSorrells. The difficulty was due to the number of underlyingtechnologies in the environment, requiring both Web services and“hard line” EDI technology to complete the integration. Data issent to Trumbull in a nightly upload/download. “We discussedreal-time transactions, but that increases your costexponentially,” Sorrells says. “Daily [upload] is appropriate toaccomplish our objectives.”

He reports the system has proven to be an effective managementtool for the subrogation staff. Once logged in to the Subrosourcesystem, nearly all information, such as payment data, log notes,and file reviews, and task initiation, such as document generationand file referrals, are done within the system. The exception ischeck generation, such as the return of recovered deductibles topolicyholders that are handled directly through the claimsmanagement system.

The biggest benefit of the system has been Farmers' ability tobetter identify recovery potential. “In the world of recovery, youropportunity exists where you make it. That opportunity is subjectto an individual's perception of fault,” Sorrells says, adding thesystem's rules engine not only helps identify opportunities forsubrogation but also prioritizes claims for the likelihood ofrecovery, enforcing standardization in the recovery process.

“It doesn't replace individual recovery effort; it providesadditional support so that missed opportunities are nonexistent,”Sorrells maintains.

Grange Insurance:

Increased Intelligence

Grange Insurance has provided its property adjusters withestimating software for some time. But while the insurer believedthe system it was using, installed on adjusters' laptops and PCs,allowed for more accurate and standardized appraisals, it didn'thave an effective way to determine how performance of thoseadjusters compared region to region and how Grange itself comparedwith its competitors.

“[We wanted] to get quantitative measurements against not onlyourselves but the industry as a whole. Are we paying a fair amount,or do we need to make adjustments?” explains Ken Tomaszewski,property claims manager at Grange Insurance. “We [also] werelooking for immediate feedback. If we wanted to know how we werewriting estimates on May 16, we wanted to be able to do that.”

To address these objectives, Grange needed not just complete andimmediate access to its appraisal data — moving the data fromdistributed PCs to a centralized environment–but also comparativeindustry data, which the carrier had no easy way to attainindependently. It looked to various vendors to solve this problem,including a potential upgrade to its SimSol (Orlando, Fla.)estimating system, but ultimately chose several products from Orem,Utah-based Xactware.

The core of the new estimating platform, deployed in March 2004,is Xactware's Xact Central, a Web-based integration system betweenthe Xactimate software on adjusters' laptop PCs and Grange's claimsadministration system. When a claim is received and entered intothe system at the insurer's centralized call center, data isforwarded automatically by Xact Central to the appropriate regionaloffice and assigned to a local claims representative who downloadsthe claim into Xactimate. The rep uses Xactimate to complete theestimate and upload the estimate as a PDF. In the next projectphase, estimate data will be mapped to the claims file.

While the system has been in place for only a few months, thebiggest impact on the intelligence front has been the ability tobetter monitor and audit estimates. “The system gives supervisorsand managers the ability to go into the file and review estimatesimmediately once they are uploaded,” states Tomaszewski. “It'sgiven us some feedback on how individuals are writingestimates.”

However, it will take until the estimate-data-capture project iscompleted before Grange can begin to realize its larger objectiveof comparative business intelligence. “The auto side of theestimating world has had these capabilities for years, but it'srelatively new in the property field,” Tomaszewski says.

CNA:

Counsel Collaboration

Litigation expense can be one of the greatest costs ofadjudicating a claim, and several vendors have created solutionsdesigned to help insurers manage that expense. But when CNA lookedto systems it might use to manage its 30,000 open claims inlitigation, the objective was not simply to perform billreview.

“We were not looking for a system to cut bills,” explains ThomasDunlop, CNA's assistant vice president of legal service. “We werelooking for a system to manage litigation.” That is, a bill reviewsystem might be sufficient to flag invoices that were more thanbudgeted costs or negotiated rates, but it would not address morefar-reaching issues such as the need to better collaborate amongthe parties involved in these claims or to make better decisionsabout what courses of action to pursue.

“Litigation management has been a core value of ours buttraditionally has been done manually by a combination of inside andfield staff and the legal team,” Dunlop explains. “We needed asystem that would help us manage our panel firms, manage thelitigation process to give us an idea of how much a case would costus, control budgets, and also review bills from law firms for 'ratecreep'” as well as overbilling, he says.

CNA selected Visibillity's Web-based litigation managementapplication, which the carrier began using in 2002. Currently, whenCNA initiates legal action on a claim or a lawsuit is received froma claimant or third party, the adjuster flags the claim aslitigated within the CNA claims administration system. Thead-juster then enters the Visibillity system to key data into anassignment sheet. CNA now is developing an interface between theclaims and Visibillity systems to auto-complete thisinformation.

Within the collaborative environment, adjusters and attorneyscan communicate and share file details and documentation, Dunlopsays, noting a trial calendaring feature CNA had the vendor designfor the system has proven particularly useful. “This allows us toestablish and manage touchpoints throughout the life of the claimwhere the adjuster and attorney can get together,” he says. “Theattorney and adjuster can send what amounts to an e-mail but rightwithin the file as opposed to a third system.”

Improved communication helps CNA better assess overalllitigation costs and set a course of action that is in the bestinterest of the insured and the company. “Tightening up the timeline of communication and monitoring the budget changes let usdetermine if a course of action is 'worth it,'” Dunlop says.

Management reports as well as scorecards completed by CNA staffhelp the company monitor and evaluate attorneys and compare costsand performance with other firms, Dunlop explains. “If there is aparticular attorney who does a better job, we can use that attorneymore than others. We can assess that by both case and venue. Thesystem also allows us to compare our staff counsel with outsidecounsel, which we never could do before, to let us see who ishandling the files for us more efficiently and with betterresults.”

The system now is used for CNA's two major lines of business,commercial lines and specialty coverages. The insurer plans tocontinue expanding the system into remaining lines of business.

The cost of the Visibillity system is based on a flat fee percase, which CNA could not reveal. While better management of thelitigation process has been the company's overall objective, therehave been some financial benefits, Dunlop reports, with bill reviewsavings running at about one to two percent of the total costsinvoiced.

A Claims-IT Pocket Dictionary

Even though claims and IT use the same words, they aren't alwaysspeaking the same language. Translation can spell the differencebetween project success and failure.

George Bernard Shaw once described the United States and theUnited Kingdom as “two great peoples divided by a common language.”To a certain degree, we similarly could describe communicationsgaps often present between information technology folks and claimsprofessionals.

IT people speak of bits and bytes. Claims people talk ofreserves and incurred, IBNR and RTW. IT folks work with networks.To adjusters, “network” is a verb, something they do at monthlyclaims association meetings.

Given differences in nomenclature, training, and background, howcan IT professionals and claims people bridge the communicationsgap?

Adjusters and information technology professionals cancollaborate better if they share a mutual appreciation andunderstanding of their respective disciplines.

Let's start by examining common misperceptions about theinsurance claims function and explain how correcting them canbenefit IT's ability to communicate:

1. Paying claims is a bad thing. This is a common misconception.Some folks chide the claims department, saying, “All you guys everdo is pay claims.” Duh! Here is a secret that claims peopleunderstand: Paying claims is precisely the role of a claimsdepartment.

Let's be clear. You pay legitimate claims. You do not overpayclaims. If you consistently evade claims or underpay any legitimateclaims, then you may have a little market conduct and PRproblem.

The claims adjuster's role is to pay claims–no more and no less.The claims department must execute on promises made by sales andmarketing. Without a claims department ready to pay claims, aninsurance policy would simply be a worthless piece of paper.

Take-away for IT folks: Show how IT tools and initiatives willhelp adjusters pay claims quicker and/or cheaper or help adjustersspot new ways to pay claims more inexpensively.

2. Adjusters are fascinated by technology. Some are and some arenot. Most are so busy they just want you to help them be moreproductive. If you can do that, great. Adjusters are lessinterested in knowing the “whys and wherefores” of every newtechnology advance. They often complain, “When I ask IT people whattime it is, they tell me how to assemble a watch.”

3. Claims people love to meet. Not! Nothing personal. It comes,in part, due to the difference between line and staff roles.Adjusting claims is a line function. It is a fundamental role (and,hopefully, a core competency) of an insurance company. If aninsurer doesn't “get it right” in claims handling and management,the insurance company is likely sunk.

In a perfect world, claims professionals seek the latest claimstechnologies that can help them boost productivity and quality. Inthe real world–the one adjusters inhabit–they are too bogged downwith crushing caseloads to welcome interruptions.

Information technology is a staff role. Right or wrong,adjusters often see the well-meaning intervention of the IT staffas a distraction. Adjusters entombed in meetings for hours fretabout the work piling up at their desks, the phone calls and e-mailto return, and how they'll have to log extra evening hours to gettheir “real” work done because of all the time spent noodling inmeetings.

4. Claims people understand IT's role within the insurancecompany organizational structure. Many claims people still maycling to a Revenge of the Nerds stereotype of someone walkingaround with a pocket protector and Coke-bottle glasses. Claimspeople may not understand what projects the IT folks are workingon; nor might they care unless the IT folks explain how theseprojects will help claims people adjust claims better orfaster.

Moral: Avoid speaking computer-ese and translate into English topique the interest of the claims staff. With any IT project orinitiative, ask yourself, “Why would–or should–a claims adjuster beinterested in this?” If you can't answer that question in 20 wordsor less, reassess the project or try justifying it to some otherinternal constituency.

Getting beyond these common myths will help the communicationbetween IT and claims departments. Organizational approaches alsocan enhance collaboration, though.

Collaboration Strategies

One solution some companies have found successful lies increating cross-functional teams comprised of claims and ITemployees, especially for special projects.

Donna Popow is director of claims curriculum and intellectualproperty at the Insurance Institute of America. In a past life, shewas a claims liaison on several joint IT-claims projects thathighlight the communication challenges between thesedisciplines.

A common trouble spot, Popow observes, arises when IT folkspurchase off-the-shelf software that does not fit the claimsdepartment's needs. For example: no data field for the insured'saddress, or showing reserves as negative numbers. IT folks mightthink this is a small matter, but it may be a big deal for theadjuster and the policyholder.

“Generally, in speaking with IT people,” Popow says, “it helpsto have a translator.” She adds, “There is claims logic, and thenthere is IT logic.”

To bridge the communication challenges, Popow suggests theinsurer find a claims person who happens to be a computer geek athome. She advises, “Look for the guy who's constantly talking abouthow you need to improve your claims workflow. How you need to dothis or that–that's your candidate to act as the go-between.”

Popow concedes another challenge is the time demands on claimspeople to get involved in IT-related projects that may have distantpayoff but represent a short-term “bleed” of time away fromhandling claims. “You may need to tell the claims people,” Popowsays, “'I need an hour a day of your time.'”

Get them away from their desks to minimize distractions. Or youmay need to dedicate a claims person to the proj-ect. To ensureclaims still get handled well, she points out, an organization mayneed to bring on additional temporary claims staff and considerthis as a part of the project's expense.

Another problem Popow observes is rolling out a claims/ITproject before it's finished. “Upper management has a tendency todo this,” she notes, “because it has long since committed to adeadline that was not necessarily realistic.” Claims people musthave buy-in as to the project and its completion date.

Claims adjusters and IT professionals do not need to exchangefashion tips, learn how to accessorize each other, or swapdecorating ideas. They need not reach consensus on the finest wineto order with dinner.

These weighty decisions we can leave to prime-time TV. They do,however, occasionally need to learn to walk a mile in each other'sshoes.

Pruning jargon, collaborating on ways to improve claimsprocesses, and respecting each other's time is a recipe forbuilding bridges between these two key functional areas. Islandscannot be forced together, but bridges can improve the flow ofinformation and ideas that benefit an insurance companyoverall.

Kevin M. Quinley, CPCU, is senior vice president, risk services,at Medmarc Insurance Group, Chantilly, Va. He can be reached [email protected] or his Web site, www.kevinquinley.com Hislatest book, Adjusting Adversity: How Claims Pros Handle Worst-CaseScenarios, is published by The National Underwriter Company,www.nuco.com.