Editor’s Note: In the second of our three-part series, we examine the review and processing phase of a vehicle accident claim and explore best-practice patterns. To access the first part, which focuses on the initiation phase, visit PropertyCasualty360.com/claims.
Once a claim has gone through the initial FNOL process, it moves on to the review and processing phase. Typically, the desk reviewer (DR) examines the damage repair estimate to ensure compliance with all of the business rules in place. If the DR finds any discrepancies (or if the carrier is required to do so) regarding direct repair shops, then a re-inspection may be ordered. This can set in motion several additional processes involving more people and more reports, for example:
A claims manager may need to report the results of the re-inspection to various state agencies.
Results may also be used to confirm compliance and to ensure that the body shop has adhered to the carrier’s direct repair program guidelines, as well as repair industry standards.
Concurrently, if the accident resulted in bodily injury, then an adjuster will review the corresponding medical claim to make certain that it complies with state-specific requirements regarding the path of treatment.
After the bills have been paid, however, there is always the possibility that an attorney will file a third-party claim to seek additional compensation. This, of course, will necessitate additional steps. An adjuster will need to investigate the claim by interviewing all parties involved, collecting the official police report and possibly other related data to accurately determine liability and negotiate a settlement.
Far from being a simple end-to-end procedure, the review and processing phase often involves multiple steps, where input is provided from a variety of disparate perspectives. Like the proverbial blindfolded man trying to describe an elephant from his limited experience of a trunk, tail, or leg, the big picture can become obscured. That, in turn, can lead to time-consuming, resource-wasting misinterpretations, ultimately delaying settlements and resulting in some very unhappy customers.
What Can Go Wrong Often Does
Murphy’s Law is may well have been invented for the claims review and processing phase. Here is merely a short list of the many things that can—and often do—go wrong, along with the potential impact on the property and casualty (p&c) carrier:
The carrier’s business guidelines regarding parts specified for collision repair are not followed by claims staff and repair shop partners for a variety of reasons. With no way to monitor whether the appraiser is making the most cost-effective choice based on available options, the carrier can’t defend inconsistencies.
Inaccuracies in medical bills, such as duplicate billing and coding errors, can result in additional work for adjusters and overpayment by the carrier, which in turn may cause policyholders to reach their limits sooner than was otherwise necessary.
Desk reviewers may waste time reviewing every claim instead of the estimated 20 percent that actually require their specific attention, resulting a significant cost impact to those problematic claims, and unnecessary delays to the straightforward and simple claims.
If the re-inspection system is not integrated with other core systems, then the claims staff may spend additional time rekeying the same data. This time wasted could have been used facilitating the actual re-inspection.
In the case of liability assessment, inconsistent evaluation can lead to overpayment, while failure to conduct any assessment is a missed opportunity to save money. Yet statistics show that most carriers assess liability on fewer than 5 percent of claims. In addition, adjusters who are not properly trained in negotiations lack the skills needed to reach a satisfactory solution.
A carrier may not be immediately alerted to potential fraud and may pay on a fraudulent claim or overpay for over-use of medical treatment. The impact is huge, as evidenced by a 2012 FICO survey of U.S. insurers. FICO found that 45 percent of respondents estimated that insurance fraud costs were 5 to 10 percent of their claims volume, while 32 percent said the ratio was as high as 20 percent. The FBI estimates the total cost of insurance fraud (non-health insurance) exceeds $40 billion per year.
Best Practices and Better Solutions
The cost of inconsistent, inaccurate claims review and processing is inestimable. It factors intangibles, such as lost productivity, overpayment, liability, fraud and the intangible price of unsatisfied customers and negative word-of-mouth. Fortunately, the application of best practices in compliance, rules engines, and targeted interventions provide cost-effective, easily implemented solutions. Armed with these solutions, insurers can achieve a desirable level of verifiable consistency and measurable cost-savings and customer satisfaction ratings.
Best-Practice Compliance Solutions
Applying auto-generated rules to manage compliance with business guidelines and state regulation can help drive efficiency in both bodily injury and physical damage claims processing.
Products such as Compliance Manager from Mitchell International allow the insurer to consistently and automatically dictate business rules to staff and industry partners. The program alerts the appraiser to potential issues before an estimate is submitted to the insurer.
At the audit level, it ensures the reviewer can see what parts were available at the time of the estimate—useful information for managing partners, training appraisers, and handling subrogation. Closed-file software enables multiple types of reviews including partial loss, process, rentals and special investigations unit.
For bodily injury (BI) claims, solutions like Decision Point go beyond basic bill review practices. Such a product features hundreds of built-in medical edits that look for specific issues related to bodily injury and physical damage. This level of complexity means insurers can drive close analysis of a bill and automatically invoke rules based on different states and jurisdiction within the specific time frame.
Moreover, solutions should systematically review claims for duplicate billing, fee schedule compliance and benchmarking, as well as reasonableness of charges. When the adjuster saves time, the insurer saves money, which can be extended to the customer in the form of rate breaks.
In addition, built-in expertise saves insurers the time and expense of bringing in an outside specialist for review. It affords insurers the ability to drill down beyond duplicate billing and compliance regulations and see multiple and obsolete procedures.
Best-Practice Solutions for Liability Assessment
With a systematic, focused liability assessment process, claims adjusters can identify comparative negligence situations with greater precision. The ideal solution allows adjusters to accomplish the following:
Review applicable tort duties owed or breached.
Cross-reference investigation facts.
Quickly access rules of the road, vehicle codes, historical weather, and other data relative to a specific claim incident.
Offerings such as Mitchell’s Decision Point and ClaimIQ used in combination can help with all that and more. For example, all medical reviews can be run through Decision Point for medical edits specific to the state. Therefore ClaimIQ can provide clear, consistent, step-by-step negotiation points for that particular area to allow for more confident, informed negotiations.
Best-Practice Fraud Detection and Management Solutions
As we have already noted, insurance fraud has an enormous financial impact on the insurance industry. An optimum solution helps insurance companies effectively manage claim fraud should include these components:
Fraud alerts that indicate a claim should be further investigated.
Access to different pricing schedules and benchmarking data from industry partners such as Redbook.
Built-in claimant and provider dashboards to provide insights into outlier treatment behaviors.
Close-file review to ensure adherence to SIU processes.
Employing and adhering to best practices in the claims review and processing phase can help insurers control cycle time and costs in auto physical damage and bodily injury claims. This, in turn, will enable p&c insurers to not only limit liability but also offer policyholders and claims a better, more satisfying experience.