One strategy no longer serves all when it comes to defining successful claims processing. Insurers are finding business process management is an important tool in improving a personal line carriers relationship with its claimants, while commercial line carriers have business rules they need to live by to keep their claims under control.BY ROBERT REGIS HYLE

Pleasing the customer is a worldwide goal of insurers. Gurzada says customer service was one of the key factors in Uniteds implementing an enterprise system from ICICI Infotech that includes a claims module. Thats one of the key factors, he says. We focused on [customer service], and after implementing the solution, we have seen some tangible benefits. Customer service is one of them. Its not 100 percent complete. We still are evolving the process.

Spending Money
Harris says Gartner asked insurers earlier this year how they were investing their money to support business requirements in the claims process. Coming in first was workflow tools with 41 percent followed by Web tools with 18 percent. Twelve percent of respondents were buying an off-the-shelf claims management solution, and another 12 percent were upgrading their current system. Six percent were undergoing an outsourcing assessment or updating components.

The emphasis on workflow translates into a focus on business process management (BPM), according to Harris. To fulfill future next-generation claims processing and settlement requirements, insurers must look beyond mere technological augmentation to meet claims requirements [toward] improved customer satisfaction and seamless supplier interaction, says Harris. More is needed to correct issues in the claims process than simply speeding up the process.

She believes using BPM and other process-automation tools will enable insurers to transform central processes such as claims. BPM can be accomplished by the use of workflow solutions, by purchasing packaged claims management solutions, through the use of business rules engines, and through collaboration-based Web services approaches.

You hear so much in the industry about BPM, and claims management is definitely a best practice in BPM, says Harris. Ironically, if you look at where insurance companies are using BPM as workflow or business rules, some of their peers in other industries are quite ahead of them.

Long-Term Needs
For commercial insurers, the claims process is not exactly the same as it is for those in personal lines. Nationwide Indemnity administers what are known as long-tail claims on certain commercial policies issued by Wausau Insurance. Wausau and Nationwide Insurance were affiliated between 1985 and 1998. When the two mutual insurers ended that affiliation in 1998, Nationwide agreed to provide administrative claims services on commercial insurance policies issued by Wausau in 1985 and prior to then. The company doesnt underwrite new business, says Dave Haggerty, vice president finance and administration for Nationwide Indemnity, but it manages commercial liability claims of other books of business as well as from certain old Nationwide and Wausau policies.

The fact that the two companies de-affiliated five years ago and there are still claims being handled says something about commercial policies. The majority of claims being managed by Nationwide Indemnity involve asbestos, pollution, silicosisall the large commercial liability claims that have long-tail activity associated with them as well as multiple policy years of coverage, says Haggerty.

The nature of such claims is they are voluminous, according to Haggerty. It takes a lot of time and handling to determine whether the claimants involved in a suit against a policyholder, which could easily number in the thousands, are covered under the policies issued to the policyholder and, if so, for what years. Then you have to determine whether the policy years involved have sufficient coverage limits left to cover the potential payout, he says. Once you determine there is coverage, and in what years, you are able to input the information into the claims system and administer the suit through final payment or settlement.

While personal lines insurers are no strangers to lawsuits, almost all of these long-tail claims arise from a legal proceeding. With pollution and asbestos coverages, some court jurisdictions have created what is known as a continuous exposure concept. If a carrier provided coverage to an insured for 10 years and there are claimants allegedly exposed to a policyholders product over that 10-year period, all 10 years of policy limits are exposed, says Haggerty. You are not talking about an isolated incident where you can point to a specific time and place, such as an auto accident. You are talking about a claim being made against a policyholder by claimants who are saying the exposure took place over multiple years the claimants were exposed to a policyholders product.

Keeping track of such claims when they involve hundreds or thousands of claimants requires special needs. For Nationwide Indemnity, its claims management system has approximately 130 business requirements that the system had to be able to execute, according to Haggerty. [The requirements] were based on knowledge we needed to have, he says, the capability to do things that would address this huge volume of claims yet not require us to set up individually all these claims, one at a time, as you would a [personal] automobile claim. If the claimants are involved in multiple policy years, we have the ability to copy the claimant information from one year to the next, and from one claim to another.

Another valuable tool is the ability to apportion losses and expenses properly among policy years. We have to have the ability to make sure that loss payments and expenses are apportioned back to the proper years of coverage, while at the same time automatically issuing only one check in response to an overall settlement or a single invoice for services covering many claims and policy years, says Haggerty. The insureds want to make sure they maximize coverage, because if they run out of policy coverage, they dont run out of liability. They have to continue on without the benefit of the insurance policy. Thats why it is important that all these payments and expenses be allocated to the proper year.

Commercial insurers need a system that is capable of performing this allocation in a consistent manner. When we worked with the software vendor, we tried to address the issue dealing with claims that will be exposing multiple policy years with many claimants in each year and how to handle that with the least amount of manual intervention and on the most automated basis possible, says Haggerty. The other side of the coin is once you have this mass of information, [you require] the ability to produce reports that tell you the variety of things you need from a managerial, statistical, or analytical standpoint.

The First Notice
The first notice of loss, Gurzada says, still is a manual process for United and many insurers. Policyholders may like to research a claims status online, but most prefer to speak with someone at a call center or their agent when reporting a personal lines claim. Still, Gurzada and others hold out hope this function will be done electronically more and more in the future. We are looking for an electronic claims filing systema Web services modelwhich we will be implementing in a years time, he says. Thats what we have in the pipelineWeb services and personalized service for the customer.

Harris says many insurers have tried this but not necessarily with much success. Clearly you can say, as many companies did, were going to put out a customer service Web site and make the insureds do it themselves, she says. What weve found is that really hasnt worked. Having consumers do the data entry certainly would save the insurers time and money, but Harris adds, We havent seen consumers flocking to Internet sites.

She says some carriers have found success in certain personal line areas, particularly when they have a value-added service that would allow policyholders to search for, say, a replacement TV if a lightning strike ruined their current set.

Customers find it awkward to go to a site and fill out an automobile repair form, Harris believes. Its a lot easier for consumers to pick up a phone after the damage occurs, she says. Thats more of a natural response.

Making a Call
Many carriers are finding they need to upgrade the technology in the call center if the first notice of loss is going to come in by phone. You need better tools and technology in the call center or wherever that first notice of loss is occurring, says Harris.
United staffs its call center with claims department personnel. They are connected electronically to the body shops so they know exactly how long it will take to get a car repaired. Based on the traffic in the body shop, we place a claim in a shop that has less traffic at that point and see that [the automobile] is repaired as soon as possible so the customer doesnt have to wait a long time, says Gurzada.

Smart insurers are investing in process changes to connect with business partners and improve the claims management, Harris says. If you take a look at whos doing it right, they are the ones who are combining the process as well as the technology in an effort actually to change the process, provide better customer service, reduce claims processing time, and ultimately reduce the cost of claims, says Harris.

Wireless claims technology is being discussed by a number of carriers, but Harris says she doesnt see a great deal of activity. She believes economics is the biggest factor right now, a combination of the insurance market and the cost of wireless hardware and software. Im anticipating wireless will take on more of a role, particularly when the price of hardware [goes down], says Harris. The hardware itself really is the challenge. [Claims people] all love these new tablets. I think the economy has more of a relationship with [wireless succeeding] than anything else.

Insurers are finding success in the claims management area in several ways, according to Harris, and that will continue as carriers explore all their options. For some that will mean new technology, for others it means changes in the process in which claims are handled.

Insurers must extend beyond seeking technology augmentation for the claims process, she says. Claims processes must be re-engineered using business process management tools and claims management solutions to find optimal business impact.