Claims Automation Can Solve A Costly Frustration

Claims Automation Can Solve A Costly Frustration

The claims process is a source of both great frustration and great opportunity. For policyholders, no matter how quickly they are compensated and made whole for a loss, it is never fast enough. Likewise, insurers become frustrated because they must settle claims quickly and accurately, keep customers happy, and control costspriorities that are often in conflict.

Yet, by using technology to automate components of the claims process, insurers can drastically reduce costs and enhance customer service and loyalty through faster, more accurate and professional claims service. In fact, the property and casualty insurance industry could save up to $30 billion annually by aggressively transforming the way it processes insurance claims.

Still largely manual and paper-driven, the claims process is the single-largest cost driver for insurance companies. The process consumes nearly 80 percent of every premium dollar and typically accounts for 65 percent of an insurance companys total revenueinvestment income plus premiums.

The amount of claims activity in the property-casualty industry is staggering. With approximately 116 million new claims each year, representing almost $180 billion in payouts, the claims process requires 150,000 claims professionals and more than 300,000 support personnel. This activity level translates to nearly 750 claims per professional.

Given the antiquated claims systems at many companies, it is no wonder that the process has become a bottleneck for insurers and a frustration for policyholders.

Despite the enormity of the problem, there is hope. By aggressively transforming the claims process, insurers can generate cost efficiencies of 12-to-25 percent.

In addition, because more than 40 percent of time spent handling claims is consumed by routine overhead functions with little or no impact on the outcome of the claim, there is a lot of room for improvement. Thus, two seemingly competing prioritiescost management vs. quality claims handlingcan both be met.

Achieving lasting change is often predicated on the effective application of technology. This is particularly true in the areas of claims correspondence, workflow, and document storage and retrieval.

Quick and effective claims communications make a world of difference with policyholders. Customers who feel that an insurer is on top of a claim and working diligently on their behalf will be more favorably disposed come policy renewal time.

The key to effective customer communication, however, is providing claims representatives with systems that produce and deliver accurate, consistent and professional correspondence in whatever format the customer desires.

The proliferation of individual productivity tools, such as WordPerfect and MS Office, has enabled claims representatives to take more direct responsibility for producing claims letters and other customer communications.

The downside to such tools is that they do not provide representatives with predefined corporate templates from which to work and can create overhead and version control problems, thus impacting the quality of correspondence.

Multiple production tools also require multiple storage, retrieval and print technologies, and because these production tools are generally not tied into corporate applications, such as policy production and billing, representatives are unable to automatically capture and utilize existing information about their claimants.

Ultimately, these limitations increase the amount of time required to develop forms and letters, reduce sharing between company representatives, lower the quality of communications, and increase costs.

Today, to provide quick, efficient and professional claims correspondence, insurers can turn to online solutions that provide standard, professionally designed templates accessible over the Internet. These templates standardize letter production and help insurers project a more professional image.

In addition, these claims correspondence solutions can be integrated with other applications, such as policy production, so that customer service representatives can access policy data, verify coverage and utilize pre-existing information to populate their correspondence packages.

Internet-enabled correspondence solutions also provide insurers significant and flexible delivery capabilities. Unlike many legacy solutions that lock companies into one delivery method, new claims correspondence solutions enable the delivery of output by any method and in any format. Letters can be sent to high-speed printers for batch production, to desktop printers for manual inclusion of additional information, by fax or over the Internet.

With the added flexibility, claims representatives can satisfy the requirements of their customers and deliver correspondence in a more timely fashion.

Another major consideration during the claims process is automating and managing workflows. With so many cases, time and attention from claims handlers is limited, leading to mistakes and lost information. In addition, as a claim moves through processing, changes and updates to the file must be included and sequenced properly. It doesnt matter how quickly the claim is processed if old data replaces more recent information and incorrect correspondence is sent out.

Document automation and workflow management solutions are helping insurers overcome these problems. Such solutions enable representatives to monitor paperwork, determine the exact status of each case, and see who last worked on the file. Other supporting documents, such as claims manuals, processing guides, and medical and legal briefs, can also be attached, helping create a complete case history.

Automated workflow management and electronic document automation solutions can help insurers realize tremendous savings. Such systems generate substantial paper and postage cost savings, since hard copies of transactions need no longer be generated or mailed between employees working on a policy.

Online viewing, routing and editing of documents also generate substantial process improvements and enable claims handlers to do in hours what previously took days. The savings for a midsized-to-large insurer could easily reach $500,000 in just the first year after implementation, and going forward the labor savings will be many times greater.

Finally, such systems can enable significant improvements in customer service, since claims and other transactions are processed and paid much faster.

Efficiency and cost concerns dont end once a claim has been processed. All of the documentation produced during a case must be stored, and the cost of storage in a paper-based system is significant. For example, maintaining 500,000 pages of documents can cost up to $138,000 per year in employee time, file cabinets, office space and more.

A good-sized p-c company can generate 60 times that volume with policies alone, topping $8 million per year. This scenario does not even include the cost of recreating lost documents, photocopying information, mailing and lost productivity in dealing with paper sources. Finally, to meet legal and regulatory concerns, insurers must also address document accessibility and fidelity.

Many companies are turning to solutions that eliminate third-party storage providers while providing efficient and easily accessible electronic archives of policy documentation. Using technology that provides exact replications of documents accessible over the Internet, insurers can significantly reduce expenses for data file storage.

In addition, such systems reduce the amount of time it takes to respond to customer requests since, rather than having to pull a claim document out of a file cabinet, representatives can pull information up instantaneously from their workstations. Finally, such systems help limit risk because they reproduce exact, legally-binding copies of policies, claims and other related documents.

Aggressively transforming the claims process is a $30 billion opportunity for the p-c industry.

Insurers that adopt automated claims processing capabilities will not only take a significant step toward making their businesses more profitable, but will also reduce the greatest source of frustration and friction between themselves and their customers. Customer communication, workflow automation, and electronic document storage and retrieval are three functions that offer some of the greatest opportunities for improvement.

William D. Barry is senior vice president of sales and marketing for Dallas-based Docucorp International.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 12, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.