In a previous article, we introduced 8 corporate claims management fundamentals, outlining the steps a companycan take in-house to foster more effective claims processes.

Now we continue a discussion started in that article regardingcommunication with claims administrators. It is important to notonly prepare but also manage expectations of a claims administratorin order to create a roadmap for better claims outcomes.

We have talked about identifying, developing, and clarifyingroles and responsibilities, both in your own company and in theclaims administrator’s organization. This is critical to ensurethat the relationship prospers and supports the program'ssuccess.

While some companies may just want to select a claimsadministrator that charges the lowest rates, most risk and claimsmanagers recognize that the best fit for the company’s needs maynot charge the lowest fees but provides the most cost-effectivesolution when administration fees are compared to the ultimateclaims costs. After all, claims administration fees may representabout 5 percent of your overall claims program costs.

The process of matching your company's program needs with theclaims administrator’s characteristics will help you during theselection process. Remember that the selected claims administrationwill use your checkbook, and can make many decisions andcommitments that can affect your company’s current expenses andlong-term liabilities.

Top 10 Desired Characteristics

To find the most cost-effective claims administrator for yourparticular needs, you must know what to expect from a claimsadministrator. First, let's examine the characteristics desired ina claims administrator, and then match the candidates with thoseattributes. Our "Top 10" list of ideal attributes in claimsadministrators appear on the next page. Keep reading to find outwhat claims administrators should prove before becoming yourservice provider.

Obviously there may other characteristics youmay want to consider. It is also important to consider puttingcontrols into place to confirm that a claims administrator isproviding the contracted services. One question that undoubtedlyarises is how to document these expectations. The followingparagraphs discuss steps a company can take to develop appropriateguidelines for its claims administrator.

Clarify Roles and Responsibilities

Sometimes companies and their claims administrators get off to abad start because of little or no initial discussions regardingservice expectations. Even if a relationship starts out well,sometimes uncertainties later arise about the level of servicebeing provided.

I have found in many cases that this uncertainty is based on alack of clear direction and misunderstandings about respectiveroles and responsibilities that have existed since the beginning ofthe relationship. These could be manifested in counterproductiveactions by the company and the claims administrator. For example, acompany may be dissatisfied with its workers’ compensation claimsadministrators’ inability to get injured employees back to regularor modified duty promptly, while the claims administrator may befrustrated with the channels it has to work through to getemployees back to work, or may encounter resistance fromsupervisors who do not want workers’ back to work until they are100 percent.

An automobile liability claims administrator may intend to getvehicles moved to preferred shops for appraisal and repair, whilecompany representatives may tell their drivers or claimants to getshop estimates. These are just two of the misunderstandingsor contradictory actions that can lead to poor outcomes andconcerns about the company/claims administrator relationship.

Clear roles and responsibilities should beclarified at the outset of the relationship, if possible, or assoon as possible if the relationship has been ongoing. Theseroles and responsibilities, as well as program requirements for theclaims administrator, should be set out in a document which we willrefer to as Special Account Instructions (SAI), although it can goby other names. The SAI should be as complete as possible tospell out the respective roles and responsibilities, specificactivities that each party should perform, reports that should becreated and distributed, and how the claims administrator’sperformance will be evaluated. The creation of detailed SAIsprovides a more stable foundation for the program which reducesmisunderstandings that might arise later.

If the company changes, whether in size, structure, orpersonnel, the SAI should be updated. The same holds true forthe claims administrator, since there may be procedural changes,office consolidations, or turnover among the staff due toresignations, retirements, and promotions. Each party shouldstrive to keep the other informed of any changes that will affectthe relationship, the contracted services, and the claimsoutcomes.

Your company should select a claims administrator that iswilling to work closely with you to tailor the program to yourneeds. This may include working with your Human ResourcesDepartment about modified duty issues for your workers’compensation program, working with your Public Works Department toaddress its liability exposures, or working with your attorneys ifyou use in-house counsel for all or part of your defense work.

The claims administrator should also have excellentcommunication and public relations skills for dealing with thegeneral public, employees, customers, and suppliers. Workingwell with all of these will not only reduce your overall claimscosts, but will also help in many aspects of your overallbusiness.

Claims Excellence

The selection of the appropriate claims administrator for yourcompany is critical for successful claims outcomes. Thecharacteristics described in this article will reveal thedifference between a claims administrator that will just meet yourexpectations and those that go the extra mile to achieve more thanyou anticipated.

Next month, we will focus on something that should be featuredprominently in your special account instructions: how to measureclaims excellence.