Editor’s Note: In the second of our three-part series, weexamine the review and processing phase of a vehicle accident claimand explore best-practice patterns. To access the first part, whichfocuses on the initiation phase, visitPropertyCasualty360.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 repairestimate to ensure compliance with all of the business rules inplace. If the DR finds any discrepancies (or if the carrier isrequired to do so) regarding direct repair shops, then are-inspection may be ordered. This can set in motion severaladditional processes involving more people and more reports, forexample:

1. A claims manager may need to report the results of there-inspection to various state agencies.

2. Results may also be used to confirm compliance and to ensurethat the body shop has adhered to the carrier’s direct repairprogram guidelines, as well as repair industry standards.

Medical Claims

Concurrently, if the accident resulted in bodily injury, then anadjuster will review the corresponding medical claim to make certain that it complies withstate-specific requirements regarding the path of treatment.

After the bills have been paid, however, there is always thepossibility that an attorney will file a third-party claim to seekadditional compensation. This, of course, will necessitateadditional steps. An adjuster will need to investigate the claim byinterviewing all parties involved, collecting the official policereport and possibly other related data to accurately determine liability and negotiate a settlement.

Far from being a simple end-to-end procedure, the review andprocessing phase often involves multiple steps, where input isprovided from a variety of disparate perspectives. Like theproverbial blindfolded man trying to describe an elephant from hislimited experience of a trunk, tail, or leg, the big picture canbecome obscured. That, in turn, can lead to time-consuming,resource-wasting misinterpretations, ultimately delayingsettlements and resulting in some very unhappy customers.

What Can Go Wrong Often Does

Murphy’s Law is may well have been invented for the claimsreview and processing phase. Here is merely a short list of themany things that can—and often do—go wrong, along with thepotential impact on the property and casualty (p&c)carrier:

1. The carrier’s business guidelines regarding parts specified forcollision repair are not followed by claims staff and repair shoppartners for a variety of reasons. With no way to monitor whetherthe appraiser is making the most cost-effective choice based onavailable options, the carrier can’t defend inconsistencies.

2. Inaccuracies in medical bills, such as duplicate billing andcoding errors, can result in additional work for adjusters andoverpayment by the carrier, which in turn may cause policyholdersto reach their limits sooner than was otherwise necessary.

3. Desk reviewers may waste time reviewing every claim instead of the estimated 20 percent that actuallyrequire their specific attention, resulting a significant costimpact to those problematic claims, and unnecessary delays to thestraightforward and simple claims.

4. If the re-inspection system is not integrated with other coresystems, then the claims staff may spend additional time rekeyingthe same data. This time wasted could have been used facilitatingthe actual re-inspection.

5. In the case of liability assessment, inconsistent evaluation canlead to overpayment, while failure to conduct any assessment is amissed opportunity to save money. Yet statistics show that mostcarriers assess liability on fewer than 5 percent of claims. Inaddition, adjusters who are not properly trained in negotiationslack the skills needed to reach a satisfactory solution.

6. A carrier may not be immediately alerted to potential fraud andmay pay on a fraudulent claim or overpay for over-use of medicaltreatment. The impact is huge, as evidenced by a 2012 FICO surveyof U.S. insurers. FICO found that 45 percent of respondentsestimated that insurance fraud costs were 5 to 10 percent of theirclaims volume, while 32 percent said the ratio was as high as 20percent. 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 andprocessing is inestimable. It factors intangibles, such as lostproductivity, overpayment, liability, fraud and the intangibleprice of unsatisfied customers and negative word-of-mouth.Fortunately, the application of best practices in compliance, rulesengines, and targeted interventions provide cost-effective, easilyimplemented solutions. Armed with these solutions, insurers canachieve a desirable level of verifiable consistency and measurablecost-savings and customer satisfaction ratings.

Best-Practice Compliance Solutions

Applying auto-generated rules to manage compliance with businessguidelines and state regulation can help drive efficiency in bothbodily injury and physical damage claims processing.

Products such as Compliance Manager from Mitchell Internationalallow the insurer to consistently and automatically dictatebusiness rules to staff and industry partners. The program alertsthe appraiser to potential issues before an estimate is submittedto the insurer.

At the audit level, it ensures the reviewer can see what partswere available at the time of the estimate—useful information formanaging partners, training appraisers, and handling subrogation.Closed-file software enables multiple types of reviews includingpartial loss, process, rentals and special investigations unit.

For bodily injury (BI) claims, solutions like Decision Point gobeyond basic bill review practices. Such a product featureshundreds of built-in medical edits that look for specific issuesrelated to bodily injury and physical damage. This level ofcomplexity means insurers can drive close analysis of a bill andautomatically invoke rules based on different states andjurisdiction within the specific time frame.

Moreover, solutions should systematically review claims forduplicate billing, fee schedule compliance and benchmarking, aswell as reasonableness of charges. When the adjuster saves time,the insurer saves money, which can be extended to the customer inthe form of rate breaks.

In addition, built-in expertise saves insurers the time andexpense of bringing in an outside specialist for review. It affordsinsurers the ability to drill down beyond duplicate billing andcompliance regulations and see multiple and obsoleteprocedures.

Best-Practice Solutions for LiabilityAssessment

With a systematic, focused liability assessment process, claimsadjusters can identify comparative negligence situations with greater precision. Theideal solution allows adjusters to accomplish the following:

1. Review applicable tort duties owed or breached.

2. Cross-reference investigation facts.

3. Quickly access rules of the road, vehicle codes, historicalweather, and other data relative to a specific claim incident.

Offerings such as Mitchell’s Decision Point and ClaimIQ used incombination can help with all that and more. For example, allmedical reviews can be run through Decision Point for medical editsspecific to the state. Therefore ClaimIQ can provide clear,consistent, step-by-step negotiation points for that particulararea to allow for more confident, informed negotiations.

Best-Practice Fraud Detection and ManagementSolutions

As we have already noted, insurance fraud has an enormousfinancial impact on the insurance industry. An optimum solutionhelps insurance companies effectively manage claim fraud shouldinclude these components:

1. Fraud alerts that indicate a claim should be furtherinvestigated.

2. Access to different pricing schedules and benchmarking data fromindustry partners such as Redbook.

3. Built-in claimant and provider dashboards to provide insightsinto outlier treatment behaviors.

4. Close-file review to ensure adherence to SIU processes.

Employing and adhering to best practices in the claims reviewand processing phase can help insurers control cycle time and costsin auto physical damage and bodily injury claims. This, in turn,will enable p&c insurers to not only limit liability but alsooffer policyholders and claims a better, more satisfyingexperience.