Putting the Pieces In Place

When customers purchase an insurance policy they are seeking some form of security from their insurance carrier. They are not purchasing a piece of paper; they are purchasing a promise from the insurer that if something happens, the insurer will do what it can to make things right. "[Customers] want to be returned to whole as quickly as possible, they want to understand the claims process, and they want to be taken care of throughout the process," says Peter McMurtrie, chief claims officer for Grange Insurance.

Do those needs match those of the insurer? McMurtrie believes they do. He claims Grange is focused on early intervention and timely resolution, which he feels are the same things sought by customers. "What we've done is look at ways to do both equally," he says. "[The goal is] to benefit both our overall claim accuracy in paying the right amount owed while at the same time getting the customer to whole as quickly as possible."

Settlement time is a major issue for claims managers because, as McMurtrie explains, the least amount the carrier is going to pay on a claim occurs at the moment the loss happens. "Through the passage of time the value of that claim goes up," he says. That increase usually is caused by external factors, he adds, such as continuation of damages or influences such as attorneys or public adjusters. "Those things can adversely affect the value of the claim," he says. "Our focus is to intervene in the process as quickly as possible and [keep] our customer informed throughout the claims process."

Whenever an insurer deals with a property/casualty claim, there usually is a wronged or injured party, explains Kevin Turner, executive vice president of business development with Cambridge Integrated Services, a claims management firm. In order to deal effectively with those claimants, a company has to have top-notch customer service skills, he adds.

From a customer service standpoint, technology has been effective in improving Cambridge's intake model, where workers' compensation claimants go through an online routing system and fill out a customized script. "When losses occur, people log in and fill out the scripts and answer questions that are germane to that particular policy or that particular employer," says Turner. "That helps in the adjusting process. Once you receive the report, you can assign an adjuster to verify the report and develop further information."

Steve Discher, senior vice president of Robert E. Nolan Co., classifies today's major claims initiatives under three umbrellas. "The first is speed, the second is customer empathy, and the third is customer convenience," he says.

Carriers are working with speed initiatives in the assignment of adjusters to a claim with little to no human intervention. "You no longer have managers or supervisors going through the morning roster of [adjusters]," Discher says. Instead, claims managers are making assignments based on the seniority of the adjusters, the severity of the claim, and allowing the technology to make those decisions.

A key issue for insurers is to bring the right claim to the right resource, believes Jim Paugh, a Deloitte manager. "It's all about finding the optimal case mix to get to the adjusters," he says. "With predictive modeling, you can adjust so the most severe cases at the time of first notice of loss (FNOL) can be applied to the most senior adjusters, whereas the more basic cases can go to an entry-level adjuster." Paugh asserts this creates a better response rate from adjusters and also addresses some of the burn-out issues with adjusters, "so they are not so focused on a workload but on the quality of the work."

The key change in claims management in the last five years is the focus on speed, in McMurtrie's view. "There's a discipline around how we handle claims and how we evaluate claims," he says. "What has changed is taking that disciplined approach and accelerating where it occurs in the claims process. It's recognition that the earlier we get involved, make decisions, and resolve claims, the better the outcomes we're going to get from a customer perspective as well as a company perspective."

Empathy has increased in importance, according to Discher, because insurers can interject technology and use scripting at the front end of first notice of loss. "You really need to train your FNOL personnel as well as your claims adjudicators to understand the things customers are looking for," he says. "Do they have kids? Are we adequately taking care of them and their family needs to make them feel better about the whole process? In the midst of all that is going on around technology investments, you have investments in making the field and home office personnel more empathetic to the claimant and customer. That's helping people differentiate insurers."

Many carriers advertise the convenience factor in their claims service, such as being able to drive your car to a claims center and pick up a rental car, points out Discher. "They are advertising that as convenient, but if you stop and think about it, it's probably the most inconvenient thing for a customer," he says. "I wouldn't call it false advertising, but there is a lot of promotion of advertising that says they are convenient, but actually they aren't."

Discher contends one differentiator in handling claims relates to stock companies vs. mutual carriers. "Stock companies have more pressure," he says, adding mutual carriers have an advantage in dealing with claims from a service point of view. "If you look at the list of strongest P&C companies, many of the mutual companies have incredible financial strength," he says. The idea of doing the right thing for the mutual holder pervades the culture of mutual companies from top to bottom, he notes. "I don't think there is the pressure to push off paying the claim or spending the extra time servicing the claim," he says.

Another major difference is derived from carriers that use independent adjusting firms vs. those that use their own employee adjusters. "There is nothing wrong with independent adjusters," says Discher. "But a lot of times issues are tied to cost, and that pushes carriers to use someone to handle claims who is not a part of the company. There is more pressure on the claims operation to figure out how to get more productivity out of its claims operations yet still have the benefit of company-employed adjusters talking to customers."

Mennonite Mutual IT manager Jennings Carpenter states one reason for his carrier's success in dealing with claimants is because the independent agents who sell Mennonite's policies are directly involved in working the claims. Carpenter concedes the carrier is in a daily competition for business with other insurance companies that have similar contracts to sell products through the same independent agents. "Our philosophy is the easier we make it on those independent agents, the more likely they are to choose us to sell our products to their clients," he says. "We're not only servicing the insured, we're servicing the independent agent, as well."

Mennonite Mutual is more than halfway through the process of setting up the agencies with a connection to the carrier's OnBase software from Hyland Software. "[The agents] have access to claims and underwriting documents in our system, so if a client contacts them, they can see the same documents and information concerning a claim or a policy we are seeing here," says Carpenter. "It allows [the agents] to service the insured with accurate and up-to-date information." Recalling the axiom "the check is in the mail," Carpenter points out as soon as Mennonite Mutual cuts a claims check, a copy of the check goes into OnBase and the agents can see that. "It adds to their ability to service the insureds," he says.

Cambridge has been working with Deloitte on predictive modeling. Deloitte has developed a process of scoring claims to aid the claims administrator or the insurance company in administering those claims more effectively for both the insured or the injured party, such as with workers' comp claims, according to Turner. Cambridge is in a proof of concept mode right now after providing Deloitte with 50,000 claims records. "Those records have told us so far we can project with a certain degree of accuracy when a claim comes into our environment, with the right questions asked at intake, and matching those claims against information available in the public domain," says Turner. "By looking at the results of the claims we've provided, we can tell where there is going to be a problem."

The models are used specifically for workers' comp claims, according to Frank Zizzamia, a Deloitte director. The outcomes of claims, such as a broken arm or a sprained lower back, vary dramatically from claimant to claimant, he explains. "The goal at the end of the day is to help the injured workers to get the appropriate resources they need as early as possible because you want to help them get better as quickly as possible," he says.

Early on in the life cycle of the claim, the insurer has to determine the severity of the injury, which Zizzamia indicates has been a challenge for claims adjusters. Predictive modeling leverages the risk characteristics of the claim to identify things such as the severity of the injury. With this information, the insurer can determine the proper resources are available so the injured party can get better as quickly as possible, according to Zizzamia.

"Predictive modeling allows you to determine those triggering events upfront as opposed to waiting," Turner says. "That aids both the injured worker in the situation of a WC claim as well as those folks paying the premiums."

Discher points out predictive analytics can look at the causes of claims, disease potential, and bodily injury, which require insurers to be proactive in helping people get better. Analytics also help carriers address a claim in a speedier fashion. "Starting with the first notice of loss, the Q and A that occurs with [FNOL] sets off a set of analytics that focuses on the assignment of adjusters, being able to tell the customer when the adjuster will be calling and even whom the adjuster might be, and making the service to the claimant that much more predictive," he says.

A lot of predictive analytics are based on managing a loss cost, but Discher contends more companies are using them to improve activities such as a streamlined process of assigning a claim to an adjuster or even adjudicating a claim while the customer is online, especially if it is a simple claim such as glass repair.

Analytics are being enabled by investments companies are making in the mobile claims arena, according to Discher. "Being able to take claims personnel out of the office and make them field personnel with all the tools is another part of the tool set being deployed," he says.

Carriers strive to create a balance between customer service and the expense management and indemnity component, states McMurtrie. "If you look at the customer satisfaction ratings produced by companies such as J.D. Power and cross reference them to A.M. Best's growth and profitability index, you find the carriers with the highest service levels struggle with being able to grow profitably," he says. "The companies that end up at the low end of the service index actually tend to be more profitable and are able to drive growth. It creates a perception in the industry that nice guys finish last, so to speak, that you can't do both effectively."

Grange is not trying to create a balance between the two sides, asserts McMurtrie, but rather a duality. "You have to do both," he says.

As far as Mennonite Mutual's policy-holder retention rate goes, Carpenter claims it's in the mid-90 percentile. "We think that is a great number, especially in the soft market we are seeing," he says. "A lot of companies we communicate with are just trying to hold on to what they've got."

Mennonite Mutual doesn't want to eliminate the agent in the claims process, Carpenter explains, because the carrier looks at agents as their representative in the field. "That's always been our first line of contact," he says. "They are our sales force and represent us."

Retaining customers also is important for Grange, and McMurtrie believes what usually drives customers away from a carrier is a bad claims experience. That is why Grange is proud of its 95 percent satisfaction rate from customers after going through a claims experience with Grange. "We feel there is a direct connection between their claims experience and their desire to continue with Grange," McMurtrie says. "We've also found that same experience can drive new business production." When claimants find the experience they received from an insurer is better than what they received from their own carrier, they often turn to the one that provided better service when it comes time for renewal, he adds.

In addition, Grange's handling of catastrophes has attracted new business. "By leveraging our use of technology, which allows us to be on the scene ahead of other carriers and to resolve our claims faster, we have received feedback from our agents that people are coming to them to find out how they can get insured by Grange so they can receive that same type of service," says McMurtrie. "So [customer service] is not just a retention ploy, it's actually a new-business generator for us."

The role technology plays in claims handling allows Grange to make faster decisions, according to McMurtrie. He cites the claims knowledge and retention of that knowledge in the form of data along with the technology to aggregate that data as reasons for the carrier's success in claims handling. "Over time we have learned from that history so we can better predict what's going to happen on an individual claim and better determine what needs to happen on that claim," he says.

That analysis can take the form of using fraud-scoring models to identify claims with a higher potential to be fraudulent or utilizing mapping technology to understand where a storm impacted and what is the carrier's real-time exposure from a street level to declare a cat response, according to McMurtrie.

Grange uses the Colossus software from CSC to examine its claims results, understand how adjusters are settling claims, and identify training opportunities for the claims staff. "It's really an aggregation of knowledge and the ability to make fast and informed decisions," says McMurtrie. "Based on that, we have claims going down the appropriate paths."

Analytics are part of every aspect of the claims process, according to McMurtrie. "Knowledge is power," he says. "Carriers that are able to leverage those analytics, not just from a results-reporting basis but from a real-time operational aspect, know how the claim is being handled during the process. It's an intervention tool, not just a results tool."

To get the most from the data, McMurtrie notes a disciplined process is necessary to dissect a claim. "The ability to have a consistent, detailed, and disciplined process in dissecting files allows us to get to an appropriate outcome," he says. "Having those data analytics to tell us what we've done historically helps us better understand how claims have been settled and helps the adjusters in their decision process in coming up with an appropriate value for the claim. The key is the consistency and the retention of our historical knowledge."

The workers' comp industry has been slow to develop new technology, according to Turner. "We've been doing the same intake process as an industry--with periodic tweaks--for the last 20 or so years," he says. "Predictive modeling is a new concept, and we believe it will be embraced by the insurance community and our clients because we are able to prove the results. So often it's difficult to introduce new technology because it's an unknown. But the process we've gone through in looking at our own data and seeing what those outcomes were and what the triggers were at the beginning is proof enough for our clients to embrace this."

Steve Laudermilch, a senior manager with Deloitte, believes there is a new way of thinking about claims. The old way of doing things would be for the claim to come in and the insurer would rely on the human interpretation of an incomplete set of data. "You would look at FNOL and try to take a couple of indicators of what the exposure might be," he says. "It might be the age of the person or the type of injury sustained."

The new way of doing things, suggests Laudermilch, involves taking a large set of data that previously was not accessible to the people trying to make the decisions and give them an indication of the likely severity and the types of resources that [injured] person might require to get better faster. "It allows a supervisor to make decisions on which adjuster is better suited for a claim and to better understand the characteristics of the claim--what will make the claim more difficult and what resources should be attached to it--and bring the best resolution to the situation," says Laudermilch.

There has been a great deal of investment in claims technology over the last decade, remarks Discher, in areas such as first notice of loss and imaging and workflow for claims administration, and even greater benefits can be derived from that spending. "Those that have made the investment are looking at leveraging other technology such as mobile computing or special niche tools such as legal bill review, or they are investing in predictive analytics to utilize the data," he says. "Those that have made investments--and I'd say that's a large predominance of our clients--are looking to take [claims] to the next level of sophistication."