The “pièce de résistance” of an insurer’s compliance and risk management program is its claims handbook or manual. Without written claims-handling policies and procedures, companies are at risk for significant losses.
Defining the Palette
What should companies consider as they craft claim guidelines? As there are infinite ways to produce a painting, there is no one-size-fits-all approach to drafting compliant, effective claim policies and procedures. Each policy may be sketched out in light of:
- The specific law or regulation being addressed.
- An evaluation of resources available to implement and maintain the control.
- All risks of non-compliance (financial, as well as reputational).
- The company’s general philosophy and appetite for compliance.
- Any local business and market custom and practice distinctions.
Here are five steps to help make composing your claim compliance masterpiece easier.
To this end, consider technology that can help with regulatory change management, workflows, and communication. Technology is available today to build and store claim manuals in a central library and ensure accessibility to all who need the information. As an example, CUNA Mutual Group’s Claims Operations team recently updated its claim policies and procedures with the help of Wolters Kluwer Financial Services. Its new claim library is part of a larger enterprise risk management (ERM) system that links to a regulatory information system. This allowed CUNA Mutual Group to automate and simplify the process of assembling, distributing, and maintaining claims procedures throughout the company. It also links regulatory information right into the handbook to help ensure claim policies are based on the most current laws.
“Evaluating how we could maximize different technology tools was a valuable exercise,” said Mark Martin, vice president, Claims, at CUNA Mutual Group. “We are now able to create an accurate record of the policies and procedures relied upon by our claims adjusters while enhancing claims procedures with compliance information. We can also maintain an audit trail of the considerations that were made regarding each adjusted claim.”
When deciding if a new policy is needed, however, it is important to consider the following:
- Is there a National Association of Insurance Commissioners (NAIC) Model Law about the claims topic? If so, the subject will be of particular interest to state insurance regulators. Model laws can be solid starting points for developing the core of your compliance policies or parts of your risk management program.
- Do your claims procedures capture all the key points that auditors will review? Check the NAIC Market Conduct Examiner’s Handbook, which outlines issues and questions that state regulators will investigate as part of market conduct exams.
- What are other companies doing? While insurers have to be mindful of anti-trust laws, it may be acceptable to try to develop procedures to reflect general industry best practices through networking and social media sources like LinkedIn; through industry trade groups and publications; or with the assistance of specialized consultants and vendors.
Insurers should also consider the ramifications of not having a specific policy or procedure, as well as whether a policy will affect a large number of handlers or only a select few. Finally, a written guideline may be needed to explain an unclear law or offer a corporate position on an issue that cannot be gleaned by reading the statute, regulation, or bulletin on its own.
However, if you break down the law by its elements, then you can look at specific subtopics across jurisdictions. Write one procedure on “Acknowledgement,” a second on “Determining Claim Values,” and a third on “Noticing Mortgagees,” if all concepts are combined. Just because a state law has thrown apples and oranges into the same bowl doesn’t mean you need to force them together in one policy. Rather, you need to be able to have a discrete procedure that makes sense in your own claims workflow.
4) Choosing Colors: Blending the Law into a Coherent Picture
There are many approaches to drafting claim policies for a company operating in multiple states. You have state-specific laws, such as laws regarding sinkhole claims in Florida or ones related to snowmobiles in Maine. Additionally, there are issues that require attention from all states, like federal laws applying to the handling of Medicare claims. Somewhere in the middle are the laws that have common threads but require state-specific tweaks. A good example is a law that was developed out of an NAIC Model Law but has been amended by state legislatures to meet the needs of local consumers.
In the process, budgets, financial costs, and resources may impact such an approach. However, cost-benefit analysis shouldn’t be purely a dollar discussion. Reputational risk, while difficult to quantify, can be devastating to an organization. As Warren Buffett said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” When designing any claim compliance or risk management policies today, reputational risk must be part of the discussion palate.
5) See the Whole Picture: Making The Final Touches
Just like artwork can take infinite directions, there are endless ways to draft claim policies. Your work may involve writing very broad protocols to meet standards in all jurisdictions, or narrow state-specific policies, or something in between. But one common thread is the need for “final touches.”