Finding something to give insurance carriers a competitive edge in today's economy might be difficult, but for claims professionals, the choices are both varied and enabling.
The market is spurring vendors to sink some money into creating significant upgrades, observes Celent senior analyst Donald Light. "Vendors see a good deal of sales activity of insurance companies licensing and implementing claims systems," he says. "One other factor is good, old-fashioned competition. What may have been middle-of-the-pack functionality along various dimensions three years ago is falling toward the rear of the pack today without a significant investment in upgrading. It's a bit of a self-reinforcing phenomenon, which works as long as insurance companies keep buying."
Along with the evolution of claims systems, Jim Kinzie, senior manager and co-leader of Deloitte's claims practice, believes there are tactical niche solutions available to insurers that are unlikely to be bundled into their claims solutions.
Never say never, Kinzie warns. "Four or five years ago, having consistency around integrated workflow management, task management, and document management and having an ability through a claims system to do business rules configuration were not [a given]," he says. "These days, looking at any of the leading solutions, all those capabilities are there."
Most of the leading vendors in the claims market have moved toward a more robust reporting capability, points out Kinzie. Some have done it through partnering in the marketplace, but others have added tools such as adjuster portals and adjuster dashboards as a way to bring escalation points or key metrics to a more visible form than in the past.
"In the old systems, it would have been a process of reaction or running critical reports," says Kinzie. "Today, those are part of the core claims solutions and front and center to the claims management team. Using the best and latest architecture is allowing a lot more capability in design."
Sedgwick Claims Management Services has seen an increase in functionality among claims systems and followed the example of many other insurers and third-party administrators by raising its investment. "We've increased our [spending] every year in technology, not only from an overall technology standpoint but also for what we call strategic projects--large new functionality," says Patrick L. Funck, Sedgwick's executive vice president and CIO.
Sedgwick has expanded into different services areas over the years, such as disability coverage, family medical leave, and most recently, managed care--areas it used to outsource. "As we expanded into those service areas, we had to build a technology platform to support them," Funck says.
Kinzie sees movement among insurers to improve both the quality and speed of their claims at three important points in the claims process.
In the front end, when insurers are capturing and triaging the claims, Kinzie reports there is a movement among insurers toward interactive voice response where the customer service process can be scripted without human intervention. Many companies have a phone infrastructure but have not leveraged its capability, he adds. "Basically, [the system is] tailoring and scripting the data capture so as the claim comes in via a first notice of loss component, there is an ability in the new solutions to script the call center rep with what questions to ask, when to ask, and why to ask," he says. "That's much more advanced."
The middle process--what Kinzie describes as the investigation and evaluation of the claim--sees carriers using a multimedia approach as they move toward a paperless file. Tools such as digital photos, imbedded voice files, and actual video in some files can reduce paper and cycle-time costs. Carriers also are using telematics to manage logistics on a claim.
The final phase of the claims process is what Kinzie describes as settle and recover. "There is movement toward e-signature to get straight-through processing, EDI, and e-settlement as companies move to either online or self-service to settle claims and issue payments," he says.
THE LIFE SIDE
The number and complexity of claims for life insurers is different than for property/casualty carriers, but when a death comes, so does the time when life insurers need to deliver on their promise. "It's important we be able to pay that death benefit accurately and quickly," says Laura Prieskorn, vice president of operations, customer service, for Jackson National Life.
From a financial standpoint, with the volume of claims coming through, Jackson has to make sure the liability is properly managed, explains Prieskorn. Typically there is a pending period after the insurer has been notified of the death and has determined in which manner the beneficiary would like to receive payment. Such distributions could include a lump sum payment, placing the funds in a beneficiary access account at a bank, and on the annuity side, the beneficiary could have the payment deferred, relates Prieskorn. "Those different claims options all have to be managed, and from a financial standpoint, the liability in general for any pending claims has to be managed," she says.
"We are dealing with our customers at a very trying part of their life because someone in their life has died," says Mark Clark, vice president of policy admin systems for Jackson. "The better we have information available to answer their questions, the better we can service them."
Jackson has been able to reduce processing time with its new claims management system, Prieskorn reports, which results in the carrier paying claims quicker. The management and the financial reporting that are available from the system also have helped tremendously, she adds.
Historically, life insurance claims departments have not been very automated, notes Clark. "With all the consolidation going on in the industry, I think the need for automation is now surfacing," he says. "This would be a benefit to anybody servicing a large number of claims."
WHERE TO TURN?
Jackson had been using a home-grown system until 2005. The insurer was able to customize the system, but over time with Jackson's claims volume increasing, it became more difficult to manage. "We had an acquisition in 2005 that increased the number of claims we were paying out," says Prieskorn. "We had to look at our system to determine whether it was going to be able to handle the claims process efficiently."
Jackson decided a new claims management system from CSC would put the carrier in a much better position. "It's a solid system that integrated well with our other systems and allows us to manage the claims workflow much more efficiently than we were able to do before," says Prieskorn.
For life insurers, there didn't seem to be a lot of options in the market when Jackson began looking for help, recalls Clark. "Because of the acquisition, our claims volume spiked, and we needed a more robust system," he says.
When Jackson learned CSC had a new product, there was some initial concern because it was the vendor's first release and the carrier knew CSC didn't have any other clients on the system. But after looking it over, Jackson decided even if some modifications had to be made, the new system would be better than starting from scratch. "We were happy with the claims functionality that was already there," says Clark.
Jackson did ask CSC to make some modifications, and the two sides collaborated on changes. "Since we were the first customer, CSC was more than willing to come in, help us, and provide a lot of support to get it up to our standards," says Clark. "We were looking for things such as automated workflow, image processing, and connectivity to our back-end administrative systems. It came with all that built in."
WHY THE CHANGE?
The previous claims system used by the Montana State Fund (MSF) had been in place since the mid-'90s, and virtually every line of code had been rewritten a couple of times, according to Al Parisian, CIO for MSF, which insures the bulk of the workers' compensation market in Montana. "We had a classic legacy system situation," he says.
The data file the company was using to support the legacy application dated back to mainframe days. The data had been repurposed with what Parisian called "a bunch of fudge values" to support the first transition. Then the company went through a second transition when it went to a client/server application level and moved to Oracle from DB2. Again, a number of fields were "fudged" to make them work, he continues.
Then the company went through an organizational change. "We had been organized by functional silos and went to full-service teams," says Parisian. "When we did that, there was a bunch of rewriting of code to support the new concept. Each one of those transitions took six months of production to show you how much trouble it was."
MSF split its evaluation process into a point system to judge six major categories--architectural, insurance business process, business rules, external interfaces, business partnership, and cost. "We had more than 600 major business functions we identified by virtue of the process modeling we went through before looking at any vendor," says Parisian. The vendors were scored across the six different areas, but at various weights, he explains. "The insurance business processes were weighted at 38 percent of the total points, the single largest category we scored," he says. In the end, Guidewire came out on top.
SPEED THE PLOW
There is increased granularity and a more systemized approach to setting up a new workers' comp claim, believes Dick Root, vice president of operations for MSF. "In actuality, it takes longer to set up [a claim] because you enter more data, but where it is quicker is in searching for documents," he says. "Notepads also are faster and easier to use in search and review."
Workers' comp claims have the longest tail of any in the claims world, points out Root. "When you are searching through medical records over a 10- to 15-year period, the ability to look through as many as 1,000 documents or medical records is where the speed really comes," he says. "You can get at the data faster because it is systemized and you know where to find it."
"The speed of access and the ability to get in and get all you need quickly is far more important than the initial setup," adds Parisian. "We don't get one-touch claims."
No matter what the line of business, speed always is an important factor in what a claims organization does, asserts Funck. Industry studies have shown the speed with which a claim is worked directly affects the average cost of a claim.
"The faster you can get a client to notify you [is the first step], and once you get that notification, how fast can you process that internally to get the adjudication process started?" he asks. "When that process is started, what activities you get going will significantly affect the total cost of the claim and how long that claim will last."
The longer a claim gets dragged out, the higher the percentage of litigation opportunities, indicates Funck. "From our standpoint, the speed with which we can take a claim and route it to the right parties, that's always been important for us," he says.
The speed of the transactions is important, but so is the speed in which the claims system can transmit the transaction from one system to another. "At the end of the day, we are trying to restore claimants and repay vendors," says Funck. "The faster we can do that, the better everybody's outcome is."
Kinzie has noticed more movement by insurers to engage their business partners that provide claims services. "The way those partners are being engaged by technology has advanced considerably," he says. "Insurance companies are putting these foundations in place with Web-based systems and service-oriented architecture. The architecture is more conducive to engaging business partners, communicating assignments, and receiving work back."
He also sees movement toward tactical solutions. Damage estimates have been an electronic process for quite some time, but Kinzie observes changes in the way those estimates are checked and reviewed. "Creative tools on the back end are being put in to enable the decision support," he says.
As an estimate comes to the insurer, rather than it being a stopping point while the adjuster receives an assignment, today's tools allow for an electronic assessment based on the carrier's business rules. "The estimates are checked for compliance and other business criteria and are either passed straight through or sent back based on some kind of rule set," says Kinzie. "Technology is being put in at discreet points in the process, normally around business decisions and being performed through business rules rather than by humans."
WHAT'S NEW IN SYSTEMS?
One of the most dramatic changes in claims systems is usability, contends Light, primarily for the day-to-day users such as the adjuster. Usability improvements have been achieved by having easily navigable screens; providing screens that are designed to put the most useful pages within easy eyesight and cursor reach of the user; building in easy-to-find contextual help; and building in wizards to open a new claim.
"These changes are important because the claims system is the total work environment where carriers want their adjusters spending 80 percent to 90 percent of their workday," says Light.
A business rules engine is an important part of Sedgwick's claims system. The logic within the claims system is parameterized to allow for different types of rule processing, explains Funck. "We also have a new initiative we started last year called Smart Work management, the next evolution of managing activity via rules," he says.
There always has been a good opportunity within the claims administration space to build things around rules processing, notes Funck. Claims systems normally focus on the rules processing of some type of business event that requires users to perform a certain activity, which he explains, is viewed as a micro workflow. "Usually we don't have a lot of macro workflows," he says. "At claim intake, you can control the specific order and build a macro workflow around claim intake. That's a specific process within the life of a claim."
Different things can happen to a claim at different times and in different orders. "In the overall aspect of a claim, you drive into the micro flows, and you end up building work rules within that," says Funck. "There's always been a heavier investment on the claims administration side of rules processing because it applies at both the micro and macro level."
The quality of claims processing at MSF, in Parisian's view, comes from the fact the claims management system contains more than 700 business rules. "Rather than hit or miss, it systemizes things such as escalation," he says. "In managing a claim, if the claim reaches a certain trigger, somebody is looking at it. So, every claim is getting the same kind of look and feel depending on what the business rules are."
Some business rules are very simple, according to Parisian, but in other situations, there are layers of rules depending on what currently is going on from a legislative or a judicial perspective. "That's all on top of trying to come up with best practices, the emerging medical treatments, and other things we're trying to do to contain losses and appropriately care for injured workers," says Parisian.
Another major area of investment for claims system vendors involves business intelligence and analytics. "Your ability to customize reports is enhanced with a better toolset," says Light. The increasing analytic capability often is a partnership with other firms in terms of bringing in associated kinds of software that will enable a carrier's quantitatively oriented actuaries to dig much deeper and use more sophisticated kinds of analysis.
Sedgwick typically doesn't look at unstructured data, but Funck asserts structured data is a completely different story. "We are in our third generation of data warehouse technology," he says. "To be able to perform integrated reporting, we needed to aggregate all our data into one place where you can do analytics."
Sedgwick has invested a lot in data alerts, Funck reports. The company has built dashboards so clients can view what's going on with their accounts at a high level. "From an integration standpoint, we build the functionality so you can go to a dashboard, drill down into the data, click on a particular claim, and get right into the viewing of that claim," he says. "The integration of the different types of data we manage and the functionality within the system are what a lot of our focus has been on."
Kinzie sees movement to use data more intelligently in claims management. "There's been a lot of activity to better understand what claims data is telling people," he says. "There is an integrated effort to take the information and make better assignments at the outset of the claim."
Tools such as predictive models, business rules engines, and integrated task and workflow management mean there are more cohesive solutions in the market today, but beneath all the tools lies the claims data.
To run an effective claims operation, insurers must have an effective notification system for the first notice of loss, suggests Kinzie. "The way companies capture [the first notice] and use it is much more sophisticated today," he says. "The new systems allow for you to design and capture the information more intelligently and easier than in the past."
The thrust of how claims technology has been developing, especially in terms of rules, workflow, process management, and real-time insight, has given carriers and their claims departments a set of tools that allow them to do good things for claimants, according to Light. Such benefits include faster cycle times, more accurate offers of settlements, and improved service levels. "Having a set of tools that brings relevant information available quickly and in an accurate manner makes the claims service experience much better," he concludes. TD