CLAIMS TECHNOLOGY

A special joint supplement of Tech Decisions and Claims magazines

First-Aid Kit

By Michael P. Voelker

In managing claims, insurers are more likely to tap tactical technologies to bandage specific pain points rather than take them more invasive strategic approach of transplanting entire processes.

“A lot of claims projects we see deal with how [insurers] are going to improve existing claims processes” rather than reengineer the entire claims process itself, says Kimberly Harris, research director at Gartner. “We aren't seeing a lot of claims [technology] strategies today that are really 'strategic,' ” she asserts, adding this is in part because claims departments have “ absolutely” struggled to get their piece of the budget pie in recent years.

But are tactical projects a good idea? They can be, as long as insurers stay focused on the objective of improving, rather than automating, a process. “When you add technology, you should take advantage of [it] and enhance your process rather than just [ultimately] doing it the same way,” says Pat Turocy, principal analyst at Doculabs.

While she encourages the insurers she works with to step back and reevaluate their overall claims processing, Turocy points out the reality of limited resources and time comes into play in the project decisions insurers make. Nevertheless, technology has improved points in the claims workflow, particularly by eliminating paper where it still exists.

The types of pain points can be as numerous and varied as the carriers that deal with them. The following examples present several insurers that tell how they successfully have eased their pain with individual projects that fit well into their overall claims strategy.

Ohio Casualty:

Maximizing Mobility

Like many insurers, Fairfield, Ohio-based Ohio Casualty Group contends with a mainframe legacy system for its claims administration, according to Russ Kelly, the insurer's vice president of property claims. This doesn't mean, however, Ohio Casualty has been unable to offer effective technology solutions, including paperless and wireless capabilities, to its field adjusters.

Ohio Casualty, which writes personal and commercial P&C, provided the basis for wireless 18 months ago by outfitting the IBM Thinkpads used by field adjusters with both Novatel wireless PC cards as well as Sierra wireless AirCards that operate over a Sprint network. The first claims application deployment in this environment was the auto-damage-focused eClaim Manager from Mitchell International.

Rather than having to retrieve and transmit assignments and estimates while wired in their home offices, Kelly explains today field appraisers can do these tasks from anywhere in the wide-area wireless network. This project garnered the carrier attention in the industry press for such results as reducing claim cycle time from 14 to seven days and increasing field rep productivity by more than 12 percent.

Similarly, the carrier enhanced its property estimating capabilities in late 2003, upgrading from stand-alone, fat-client installations of IntegriClaim from Marshall & Swift/Boeckh (MSB) to a Web-enabled version that utilizes MSB's ComCentral to link to Ohio Casualty's mainframe system and automate the estimating process. Property adjusters were outfitted with the same wireless mobility upgrades as their counterparts on the auto side.

“In the old world, an adjuster would retrieve a claim assignment and rekey all the information into [IntegriClaim] we already had entered when we processed the first notice of loss,” Kelly says. “In the new world, when the adjuster is connected, that information comes over automatically from the claims system and is mapped into IntegriClaim.”

Integration issues with the new MSB solution, according to Kelly, amounted to only “minor bumps in the road, mostly around mapping and feeding data to and from fields from our legacy system into [MSB] and then from [MSB] back into the legacy system.”

Eliminating the need to rekey claims information has been the biggest time saver for staff, Kelly reports. “We know it took between 10 and 14 minutes to input the relevant information before. Now that information is coming over prepopulated. Before, we would take digital photos, put them on diskette, and stick them in the file. Now we take a photo, attach it to the estimate, and it's uploaded to MSB's server.” MSB also checks uploaded estimate data against its own database to flag potential inaccuracies.

Additionally, the new system provides Ohio Casualty better management control. “Previously, all of this estimating data resided on 130 different laptop hard drives,” says Kelly. “Now, it all resides on a server we can data-mine and generate significant information in terms of our estimating behavior.” The insurer uses IntegriClaim Administrator for both recurring and ad-hoc management reports and can benchmark its estimating activity against the industry.

Ohio Casualty cannot reveal the cost of the MSB system due to contractual limitations, but Kelly projects a first-year return on investment of three to one. “By focusing on the best-practice estimating behaviors that drive the most severity and identifying where we fall relative to the industry, we expect the MSB product to improve estimating results and generate this return. We already see the benefits,” he says.

The carrier continues to target pain points in its claims process. It recently has begun using NetMap from the Insurance Services Office (ISO) to match claim information against the ISO ClaimSearch database for fraud detection. It also started using a litigation management application from TyMetrix in 2003 to replace its previous internal spreadsheet and bill-review service strategy. And lastly, it currently is developing a claims dashboard to replace the desktop-and-icon approach adjusters now have available.

Farmers Insurance Group:

Raising Recoveries

Farmers Insurance Group is an insurer that recently completed a major overhaul of its claims administration system, which it began rolling out in 2001. Jim Sorrells, national manager for subrogation and salvage at Farmers, reports the paperless, electronic system is the result of a multiyear effort to integrate a multitude of technologies and applications, from imaging and workflow to call center and claims management.

When the deployment was completed in 2002, Farmers looked to address a remaining claims process where additional emphasis could be provided–subrogation. Sorrells explains the claims management system is customer-focused and designed for front-end claims management, whereas subrogation is managed on a file or claim basis. “We are dealing with attorneys and insurance companies and must have global claims information, not just the details pertaining to an individual. We were looking for a technology solution to bundle all of the information from the claims management system for use in our strategy for collections,” he says.

Farmers considered several subrogation systems and ultimately chose Sub-rosource from Windsor, Conn.-based Trumbull, deploying the system in Feb-ruary 2003. Currently, Trumbull hosts the system for Farmers, which uses Subrosource for all personal lines claims.

Farmers' previous process required either claims representatives or subrogation specialists identify possible subrogation files, Sorrells explains. Those specialists–numbering more than 400 individuals in six regional offices–would review the files, type notes outlining their rationale for recovery and course of action, and set diary reminders for follow-up activity.

Subrosource brought Farmers a rules engine that supports the process of identifying subrogation. Today, claims representatives continue to identify subrogation possibilities during the claims adjustment, but the rules engine also scores claims based upon Farmers' recovery strategy to assure the insurer has found all of the claims with subrogation potential.

Specialists log in to the Web-based Subrosource to receive assignments and manage their existing cases. Integration between Farmers' claims system and Subrosource means pertinent claims data now is populated automatically to the subrogation system, eliminating the need to rekey information. Finally, specialists can transfer electronically assignment of recovery attempts that have been unsuccessful to their collection partner, Credit Collection Services.

“It was a difficult but well-managed integration,” notes Sorrells. The difficulty was due to the number of underlying technologies in the environment, requiring both Web services and “hard line” EDI technology to complete the integration. Data is sent to Trumbull in a nightly upload/download. “We discussed real-time transactions, but that increases your cost exponentially,” Sorrells says. “Daily [upload] is appropriate to accomplish our objectives.”

He reports the system has proven to be an effective management tool for the subrogation staff. Once logged in to the Subrosource system, nearly all information, such as payment data, log notes, and file reviews, and task initiation, such as document generation and file referrals, are done within the system. The exception is check generation, such as the return of recovered deductibles to policyholders that are handled directly through the claims management system.

The biggest benefit of the system has been Farmers' ability to better identify recovery potential. “In the world of recovery, your opportunity exists where you make it. That opportunity is subject to an individual's perception of fault,” Sorrells says, adding the system's rules engine not only helps identify opportunities for subrogation but also prioritizes claims for the likelihood of recovery, enforcing standardization in the recovery process.

“It doesn't replace individual recovery effort; it provides additional support so that missed opportunities are nonexistent,” Sorrells maintains.

Grange Insurance:

Increased Intelligence

Grange Insurance has provided its property adjusters with estimating software for some time. But while the insurer believed the system it was using, installed on adjusters' laptops and PCs, allowed for more accurate and standardized appraisals, it didn't have an effective way to determine how performance of those adjusters compared region to region and how Grange itself compared with its competitors.

“[We wanted] to get quantitative measurements against not only ourselves but the industry as a whole. Are we paying a fair amount, or do we need to make adjustments?” explains Ken Tomaszewski, property claims manager at Grange Insurance. “We [also] were looking for immediate feedback. If we wanted to know how we were writing estimates on May 16, we wanted to be able to do that.”

To address these objectives, Grange needed not just complete and immediate access to its appraisal data — moving the data from distributed PCs to a centralized environment–but also comparative industry data, which the carrier had no easy way to attain independently. It looked to various vendors to solve this problem, including a potential upgrade to its SimSol (Orlando, Fla.) estimating system, but ultimately chose several products from Orem, Utah-based Xactware.

The core of the new estimating platform, deployed in March 2004, is Xactware's Xact Central, a Web-based integration system between the Xactimate software on adjusters' laptop PCs and Grange's claims administration system. When a claim is received and entered into the system at the insurer's centralized call center, data is forwarded automatically by Xact Central to the appropriate regional office and assigned to a local claims representative who downloads the claim into Xactimate. The rep uses Xactimate to complete the estimate and upload the estimate as a PDF. In the next project phase, estimate data will be mapped to the claims file.

While the system has been in place for only a few months, the biggest impact on the intelligence front has been the ability to better monitor and audit estimates. “The system gives supervisors and managers the ability to go into the file and review estimates immediately once they are uploaded,” states Tomaszewski. “It's given us some feedback on how individuals are writing estimates.”

However, it will take until the estimate-data-capture project is completed before Grange can begin to realize its larger objective of comparative business intelligence. “The auto side of the estimating world has had these capabilities for years, but it's relatively new in the property field,” Tomaszewski says.

CNA:

Counsel Collaboration

Litigation expense can be one of the greatest costs of adjudicating a claim, and several vendors have created solutions designed to help insurers manage that expense. But when CNA looked to systems it might use to manage its 30,000 open claims in litigation, the objective was not simply to perform bill review.

“We were not looking for a system to cut bills,” explains Thomas Dunlop, CNA's assistant vice president of legal service. “We were looking for a system to manage litigation.” That is, a bill review system might be sufficient to flag invoices that were more than budgeted costs or negotiated rates, but it would not address more far-reaching issues such as the need to better collaborate among the parties involved in these claims or to make better decisions about what courses of action to pursue.

“Litigation management has been a core value of ours but traditionally has been done manually by a combination of inside and field staff and the legal team,” Dunlop explains. “We needed a system that would help us manage our panel firms, manage the litigation process to give us an idea of how much a case would cost us, control budgets, and also review bills from law firms for 'rate creep'” as well as overbilling, he says.

CNA selected Visibillity's Web-based litigation management application, which the carrier began using in 2002. Currently, when CNA initiates legal action on a claim or a lawsuit is received from a claimant or third party, the adjuster flags the claim as litigated within the CNA claims administration system. The ad-juster then enters the Visibillity system to key data into an assignment sheet. CNA now is developing an interface between the claims and Visibillity systems to auto-complete this information.

Within the collaborative environment, adjusters and attorneys can communicate and share file details and documentation, Dunlop says, noting a trial calendaring feature CNA had the vendor design for the system has proven particularly useful. “This allows us to establish and manage touchpoints throughout the life of the claim where the adjuster and attorney can get together,” he says. “The attorney and adjuster can send what amounts to an e-mail but right within the file as opposed to a third system.”

Improved communication helps CNA better assess overall litigation costs and set a course of action that is in the best interest of the insured and the company. “Tightening up the time line of communication and monitoring the budget changes let us determine if a course of action is 'worth it,'” Dunlop says.

Management reports as well as scorecards completed by CNA staff help the company monitor and evaluate attorneys and compare costs and performance with other firms, Dunlop explains. “If there is a particular attorney who does a better job, we can use that attorney more than others. We can assess that by both case and venue. The system also allows us to compare our staff counsel with outside counsel, which we never could do before, to let us see who is handling the files for us more efficiently and with better results.”

The system now is used for CNA's two major lines of business, commercial lines and specialty coverages. The insurer plans to continue expanding the system into remaining lines of business.

The cost of the Visibillity system is based on a flat fee per case, which CNA could not reveal. While better management of the litigation process has been the company's overall objective, there have been some financial benefits, Dunlop reports, with bill review savings running at about one to two percent of the total costs invoiced.

A Claims-IT Pocket Dictionary

Even though claims and IT use the same words, they aren't always speaking the same language. Translation can spell the difference between project success and failure.

George Bernard Shaw once described the United States and the United Kingdom as “two great peoples divided by a common language.” To a certain degree, we similarly could describe communications gaps often present between information technology folks and claims professionals.

IT people speak of bits and bytes. Claims people talk of reserves and incurred, IBNR and RTW. IT folks work with networks. To adjusters, “network” is a verb, something they do at monthly claims association meetings.

Given differences in nomenclature, training, and background, how can IT professionals and claims people bridge the communications gap?

Adjusters and information technology professionals can collaborate better if they share a mutual appreciation and understanding of their respective disciplines.

Let's start by examining common misperceptions about the insurance claims function and explain how correcting them can benefit IT's ability to communicate:

1. Paying claims is a bad thing. This is a common misconception. Some folks chide the claims department, saying, “All you guys ever do is pay claims.” Duh! Here is a secret that claims people understand: Paying claims is precisely the role of a claims department.

Let's be clear. You pay legitimate claims. You do not overpay claims. If you consistently evade claims or underpay any legitimate claims, then you may have a little market conduct and PR problem.

The claims adjuster's role is to pay claims–no more and no less. The claims department must execute on promises made by sales and marketing. Without a claims department ready to pay claims, an insurance policy would simply be a worthless piece of paper.

Take-away for IT folks: Show how IT tools and initiatives will help adjusters pay claims quicker and/or cheaper or help adjusters spot new ways to pay claims more inexpensively.

2. Adjusters are fascinated by technology. Some are and some are not. Most are so busy they just want you to help them be more productive. If you can do that, great. Adjusters are less interested in knowing the “whys and wherefores” of every new technology advance. They often complain, “When I ask IT people what time it is, they tell me how to assemble a watch.”

3. Claims people love to meet. Not! Nothing personal. It comes, in part, due to the difference between line and staff roles. Adjusting claims is a line function. It is a fundamental role (and, hopefully, a core competency) of an insurance company. If an insurer doesn't “get it right” in claims handling and management, the insurance company is likely sunk.

In a perfect world, claims professionals seek the latest claims technologies that can help them boost productivity and quality. In the real world–the one adjusters inhabit–they are too bogged down with crushing caseloads to welcome interruptions.

Information technology is a staff role. Right or wrong, adjusters often see the well-meaning intervention of the IT staff as a distraction. Adjusters entombed in meetings for hours fret about the work piling up at their desks, the phone calls and e-mail to return, and how they'll have to log extra evening hours to get their “real” work done because of all the time spent noodling in meetings.

4. Claims people understand IT's role within the insurance company organizational structure. Many claims people still may cling to a Revenge of the Nerds stereotype of someone walking around with a pocket protector and Coke-bottle glasses. Claims people may not understand what projects the IT folks are working on; nor might they care unless the IT folks explain how these projects will help claims people adjust claims better or faster.

Moral: Avoid speaking computer-ese and translate into English to pique the interest of the claims staff. With any IT project or initiative, ask yourself, “Why would–or should–a claims adjuster be interested in this?” If you can't answer that question in 20 words or less, reassess the project or try justifying it to some other internal constituency.

Getting beyond these common myths will help the communication between IT and claims departments. Organizational approaches also can enhance collaboration, though.

Collaboration Strategies

One solution some companies have found successful lies in creating cross-functional teams comprised of claims and IT employees, especially for special projects.

Donna Popow is director of claims curriculum and intellectual property at the Insurance Institute of America. In a past life, she was a claims liaison on several joint IT-claims projects that highlight the communication challenges between these disciplines.

A common trouble spot, Popow observes, arises when IT folks purchase off-the-shelf software that does not fit the claims department's needs. For example: no data field for the insured's address, or showing reserves as negative numbers. IT folks might think this is a small matter, but it may be a big deal for the adjuster and the policyholder.

“Generally, in speaking with IT people,” Popow says, “it helps to have a translator.” She adds, “There is claims logic, and then there is IT logic.”

To bridge the communication challenges, Popow suggests the insurer find a claims person who happens to be a computer geek at home. She advises, “Look for the guy who's constantly talking about how you need to improve your claims workflow. How you need to do this or that–that's your candidate to act as the go-between.”

Popow concedes another challenge is the time demands on claims people to get involved in IT-related projects that may have distant payoff but represent a short-term “bleed” of time away from handling claims. “You may need to tell the claims people,” Popow says, “'I need an hour a day of your time.'”

Get them away from their desks to minimize distractions. Or you may need to dedicate a claims person to the proj-ect. To ensure claims still get handled well, she points out, an organization may need to bring on additional temporary claims staff and consider this as a part of the project's expense.

Another problem Popow observes is rolling out a claims/IT project before it's finished. “Upper management has a tendency to do this,” she notes, “because it has long since committed to a deadline that was not necessarily realistic.” Claims people must have buy-in as to the project and its completion date.

Claims adjusters and IT professionals do not need to exchange fashion tips, learn how to accessorize each other, or swap decorating ideas. They need not reach consensus on the finest wine to order with dinner.

These weighty decisions we can leave to prime-time TV. They do, however, occasionally need to learn to walk a mile in each other's shoes.

Pruning jargon, collaborating on ways to improve claims processes, and respecting each other's time is a recipe for building bridges between these two key functional areas. Islands cannot be forced together, but bridges can improve the flow of information and ideas that benefit an insurance company overall.

Kevin M. Quinley, CPCU, is senior vice president, risk services, at Medmarc Insurance Group, Chantilly, Va. He can be reached at kquinley@medmarc.com or his Web site, www.kevinquinley.com His latest book, Adjusting Adversity: How Claims Pros Handle Worst-Case Scenarios, is published by The National Underwriter Company, www.nuco.com.