In this article, we will present claims management fundamentals focusing on corporate claims that require the input and contributions of numerous people and departments. However, it should be noted that many of the same fundamentals apply to public entities, risk pools, insurers, and third-party administrators (TPAs).
Ideally, each company should address these fundamentals before claims started coming in, but since that is not possible, these should be developed as soon as practicable. Some of the people and departments that should lead or be involved in this charge include, but are not limited to: senior management, operations managers and supervisors, human resources, occupational health & safety, legal and all company employees.
The extent to which a company wishes to improve upon its claims program will depend on many factors, some of which may be based on the following questions:
Do we need to take better care of our employees who are injured on the job?
What liability exposures—for example, trucks, cars, products—are present, and how can we mitigate them?
What reputational risk do we face if claims are not handled properly?
How much are claims costs affecting the bottom line?
To what extent are claims costs material to the overall financial picture?
Obviously avoidance and mitigation are the best ways to avoid these exposures, so a strong safety and loss control program is vital. This article, however, focuses on claims management after a loss, regardless of the actions taken to avoid or mitigate the loss.
There are eight fundamentals that must be present in corporate claims programs. I do not use the term program as a “once and done” project, but rather as an ongoing force to control and limit claims costs and expenses to the greatest extent possible.
Now let’s discuss each of these fundamentals and delve more deeply into their importance, beginning with the first.
Urgent. A strong claims program must be viewed as vital and urgent by the company and its senior leadership. Its importance must be maintained at a high level for the long-haul. That is, it cannot be viewed as a specific project with a planned beginning and end. It is a corporate emphasis that must maintain traction through corporate and business cycles, or it will lose effectiveness and revert to a “middling” program that will neither control and reduce claims costs nor create the positive returns on investment that were sought by the company.
This attitude of urgency must be pervasive. This obviously must include the claims staff, whether they are internal in a self-administered program or from an insurer or TPA. The claims management work performed must be timely and prompt, and it must be understood that failure to manage claims assertively, whether it is by people in the claims organization/risk management department or other supporting departments, will not be accepted.
Planned. Some companies have good intentions regarding claims administration but fail to sufficiently plan, schedule, and document their programs. If a program is not sufficiently planned and documented, then the requirements may be inconsistently applied or forgotten over a period of time. Therefore, expectations, procedures, roles and responsibilities, and metrics should be clearly defined to clarify or update the procedures, and to keep the program “front and center.” The plans and documents should include details for the various roles and responsibilities. These may pertain to internal “partners,” such as human resources, occupational health & safety, or legal. They may also be for external parties, including program partners such as TPAs, defense counsel, case management firms, appraisers, and other claims-related vendors.
Instructions should clearly indicate the importance of the procedures, the extent to which the procedures should be followed so that parties working from the procedures are going into sufficient depth for the action to be meaningful, rather than just “checking the box”, and how compliance will be measured. All documentation created should be dated so the effective date of the implementation is evident to anyone who must adhere to the requirements.
Accountable. One of the most important steps in creating a successful program of any type is setting goals that are clear, objective, and attainable. This goal-setting must be paired with direction and instruction about how to achieve the items that have been set. The company must also confirm that results will be measured, and the parties involved, as defined by their roles and responsibilities, will be held accountable for the outcomes. Ideally, responsibility for attainment of goals should not be presented as a punitive step, but rather as a method for ensuring success. The company must uphold its view of the criticality of the program, and should provide the employees with direction and support to reach the goals.
Accountability for success of the claims management program will be spread throughout the organization, including senior management, supervisors, and all employees. Roles and responsibilities will be identified and assigned to clarify what actions should be taken, when each step should occur, and the person or position with the primary responsibility. The company should convey that financial outcomes will be used in allocating costs to the responsible units, and that metrics will reveal outcomes versus expectations. It should also be clear that results, both positive and negative, will be distributed throughout all levels of the corporation, so that successful team members as well as those requiring help will be properly identified.
Consistent. We have already mentioned that there must be an ongoing sense of urgency. There must also be a plan to create an environment that is consistent and fair within all claims types. For example, all workers’ compensation lost time claims must initially be managed in the same fashion, with timely investigations and decision-making, without regard for the “likes” and “dislikes” supervisor may have for their employees. Automobile liability claims must be handled consistently, so that each driver, whether s/he is a driver of an 18-wheeler or a personal vehicle while performing work duties, knows the specific steps to take following a motor vehicle accident that creates exposure for the company. The company’s claims staff must have clear and consistent procedures for reporting and managing all claims.
Some of these needed procedures may be included in corporate safety programs, while others are included in the claims industry’s “best practices,” which is a compilation of practices the industry has identified as imperative in attaining successful outcomes. These procedures must be documented, which we’ll discuss next, so that all corporate employees can be informed and trained on these practices. Further, enhancements and revisions can be made when warranted. The company must also emphasize consistency with its claims management partners, including TPAs, medical management vendors, defense attorneys, and others. If these parties fail to consistently perform their duties, then handling of an entire claim will be thrown off, resulting in a less-than-desirable outcome.
Communicated. Once the roles, responsibilities, and procedures are created and documented, they must be communicated to those involved. The communication should certainly include:
The company’s goals relative to claims management.
Its importance to the company, including any explanations that relate to profitability and/or the amount of work or revenue required to cover these losses.
The metrics that will be used to gauge success.
The responsibilities of all parties to create success.
For internal participants, communication should not only include correspondence from senior management, but should also include notification of the importance of training that may be required of some parties. The reports that will be distributed to measure outcomes versus goals should be provided in draft format to illustrate the information that will be tracked.
For external parties, including vendors, corporate representatives must meet with them to present and confirm their responsibilities.
Corporate reps should meet with the insurer and/or TPA to confirm the insurer/TPA will adhere to the requirements. The outcome of that meeting should include the requirements in a service level agreement or special account instructions that provide this information to all claims handlers. Ideally, this step should occur when the company initially selects the insurer/TPA, to avoid misunderstandings as to the level of services to be provided. This can be negotiated at any point so the insurer/TPA is aware of the company’s expectations and how to coordinate with company representatives.
Defense counsel must be made aware of its responsibilities under the litigation management plan that is part of the corporate claims procedures. The defense firms must agree to adhere to the litigation management plan, as well as provide their rate structure for work to be performed. The firms must also recognize that fees for legal work that was not directed or authorized by the company and/or its TPA will not be paid.
If the company selects new firms for its defense, then these new firms must be aware of and agree to comply with the procedures. Also, any new attorneys joining the approved firms must confirm they have been informed of these policies and procedures.
If the company uses in-house counsel for defense work, these internal parties must also agree to adhere to the documented procedures. Otherwise, the company may lose some of the benefits (besides reduced legal expenses) associated with using in-house counsel.
Clear channels should be established for ongoing communication. Specific reps should be designated to respond to certain concerns.
Implemented. This may seem obvious, but some organizations create and document procedures, only to then fail to formally roll them out. This roll-out failure, like poor communication, results in a lack of knowledge that processes have in fact moved from the planning-and-documents phase to real-world application.
The roll-out should include development of:
A baseline to determine the program’s current state, including financial measurements.
A timetable for completion, with mileposts for key integral phases.
An implementation schedule for various parts of the program as they are completed.
Tests (as needed) to ensure that the proper activities are in place.
Methods for capturing information and distributing measurements that report results in comparison to the baseline and established goals.
An easily understood allocation method that will be used to charge claims costs and expenses back to the responsible units.
Channels of communication for general questions, training, and enhancements.
This implementation should include a kick-off meeting between the major participants—senior management, the risk/claims management organization, human resources, legal, occupational safety & health, and other internal organizations, as well as the insurer or TPA, and other external vendors, including key defense firm representatives. It should also include regularly (for example, quarterly) update meetings to track results, amend procedures as needed, enhance reports, determine needed training, and keep the program running smoothly.
Monitored. Earlier in this article, we talked about accountability. Accountability is what drives compliance with procedures.. As someone once said, “That which gets measured gets done.” The metrics associated with the claims programs should be as objective as possible, should be regularly reported, and should be distributed throughout the organization to ensure that all interested and responsible parties are kept informed of the progress (or lack of same).
Some of the reports should include those created by the insurer or TPA that measure its compliance with the requirements agreed upon earlier.These may be measures of their compliance with “best practices” or leading industry practices that became part of the service level agreement/special account instructions, as well as their compliance with reporting requirements, outcomes, and other measures. We will talk about some of the important metrics in an upcoming issue of Claims magazine.
Continuously Improved. As procedures are rolled out, it is usually found that some were unclear, incomplete, or missing altogether, or that some goals were unreasonable. Those responsible for this plan must continually identify these issues, and they must clarify and update the goals and procedures as needed. They may also observe when additional training or updates are required in order to meet the desired guidelines. The company should revise its requirements when appropriate, and should be sure to date revisions so any corporate or insurer/TPA representative can refer back to see when a change went into effect.
As noted previously, these claims management fundamentals are simple, but not easy. There will be a considerable investment in time and money to reach the desired claims management state. However, these costs should be more than recovered if the proper discipline is maintained and the company and its internal and external partners urgently comply with the requirements. These core values or fundamental elements will go a long way toward creating a positive environment for a strong claims program.
We will present future articles to provide more details on some of these fundamentals. Next month’s focus will be “What to Expect from Your Claims Administrator,” and in February we will cover “How to Measure Claims Excellence."