Get Up to Speed

"Producers also get jacked up about claims problems–they eat up an agents' time," Pauli adds. "If they have to spend a lot of time with one carrier's claims problems, they will stop giving that carrier business. And with the consolidation in the agency ranks, agents have greater economic clout with insurers."

Given that insurers understand the need for speed in claims, slowdowns in the claims process today arise not from an unwillingness to be faster but from an inability to move claims along because of inefficient processes and systems. Targeting these two problems has been a motivator behind implementing new claims systems in recent years, as claims departments finally saw IT budgets freed for major system implementations, upgrades, and replacements.

"Carriers have spent the last three to four years getting new claims admin systems," Pauli reports. "We saw carriers putting in new systems because they had paper-based processes before, and we saw carriers target replacement of older legacy systems that had not been getting the attention of IT."

Cincinnati Insurance is a textbook example of this development. Gary Givler, the insurer's vice president of claims, stresses recruiting and retaining quality claims staff always has been the foundation of the carrier's claims service. However, Cincinnati needed to reevaluate and automate its claims processes to enable its staff to perform most effectively.

"We wanted to address problems before they occurred, and if you are going to manage processes efficiently, you need to be ruthless. If it wasn't efficient, it needed to be modified or it had to go," he explains. "Then, we needed to find a system that would automate as many of those processes as we could and enable the business to perform most effectively."

Cincinnati's previous claims process incorporated disparate systems, resulting in duplicate data entry and the potential for process slowdowns. "Our goal was to have our adjusters not need to work with three of four different systems," says John L. Crow, manager of claims technology.

"A lot of activities adjusters had to do were just to get financial data into back-end systems. We wanted to get rid of that administrative activity and let them truly work on claims," Givler adds. Additionally, paper-based claims files made it difficult for staff to collaborate on claims due to the existence of multiple files on individual claims and numerous file locations.

Cincinnati deployed SAP's Claims Management system in 2004. The initial implementation was "out of the box," encompassing core claims processes such as capturing notes, assigning tasks, making workflow approvals, setting reserves, and processing payments.

The SAP system replaced Cincinnati's manual, paper-based file management processes with a single, unified platform. The system integrates with the carrier's imaging and content management system from EMC Documentum, allowing claims documents to be routed electronically and virtual claims files to be created, eliminating manual processing and routing required to assign and distribute claims information. It also interfaces with Cincinnati's financial systems, automating the reporting process.

The insurer has continued to build on those core capabilities and upgraded to the latest version of the SAP platform in late 2007. The major system project also served as a launching point for other initiatives.

"Shortly after we went live, we instituted our 'digital media interface' project," Crow explains. As a result, "we purchased digital cameras and recorders for our field staff and created an application to load those pictures and recordings remotely [into Documentum] and attach those to the [particular] claims file."

Although Cincinnati Insurance would not reveal specific figures, Givler asserts the impact of its claims administration overhaul and related projects has been significant. "I can tell you an investment such as this pays for itself numerous times over," he affirms. "Actually, it is a cost-cutting exercise. When we think of what we used to pay for things such as voice recording tapes, film, film processing, mailing, and downtime to handle those physical items, our current process is much cheaper."

One speed-enabling benefit sought by insurers in modern claims administration systems is the incorporation of rules engines that enable the business side to make process changes quickly in response to new claims procedures and insurance products without requiring IT to write code.

But if a core system replacement isn't planned, carriers have added rules-based systems to the existing environment to connect systems and orchestrate the workflow. "We have seen pronounced investments in BPM and workflow technology by insurers over the past three to four years in addition to those types of capabilities being built into claims management solutions as that market matures," says Cournoyer.

AEGON wanted to shorten the three-week cycle time on property claims. The Netherlands-based insurer looked to Corticon's business rules management system (BRMS). The SOA-ready BRMS integrates with AEGON's middleware layer that exposes functionality of its back-end claims administration environment. It also incorporates a spreadsheet-like environment that enables business users to manage business rules, a capability that was important to the insurer.

"We didn't want IT to have to make changes because it would take a lot of time," indicates Jan Veldhuizen, manager of vehicle claims and expertise at AEGON. "If a storm is coming over Holland, we need to make changes fast. If we create a new product or need to make other changes, we now can do it almost overnight."

However, AEGON realized early in the project it needed a better way to capture information at the outset of a claim that would enable it to optimize the new rules-based workflow. "The two major obstacles for STP [straight-through processing] in claims are to get the information right and to get the information in time," Veldhuizen says.

Therefore, the insurer implemented a new portal for its agent intermediaries to use when reporting new claims. "That gives us structured information we can use in the rules engine," Veldhuizen explains. The portal was deployed to a test group of agents in December 2007 and rolled out to all intermediaries in April.

Currently, the carrier achieves a 10 percent pass-through rate on claims, reducing the cycle time on those claims from weeks to hours. AEGON's goal is to have a 50 percent automatic pass-through rate for property claims and to extend the Corticon system to other lines, such as liability, auto, and travel claims.

"It will take fine-tuning [of rules] and getting more confident with the system," Veldhuizen says. "However, the system already has improved the speed [of claims processing] enormously."

With the soft market putting increased pressure on carriers to reduce expenses, insurers have been searching for any slow points in the claims process that are driving up loss adjustment costs. "In the past, if there was a need to cut costs in claims, carriers would just get rid of claims people. But now, organizations really are down to bare bones, so that's not an option for most carriers. They have to find another way, and that's through technology," Pauli says.

Plymouth Rock Assurance Corporation recently focused on a specific pain point in its auto claims handling. The carrier already had a fast claims process for partial auto losses: Damage appraisers assessed vehicles using the Web-based eMitchell estimating and data exchange platform from Mitchell International to settle claims and issue checks on the spot in nearly 70 percent of partial losses.

But Plymouth Rock wanted to speed the total loss process, which couldn't be handled on site by damage appraisers because it involves negotiation of vehicle value and transfer of vehicle ownership. Previously, field appraisers used market guidebooks and other valuation resources and then forwarded this information to in-house total loss adjusters, who reviewed the information and made settlement offers to policyholders. The process wasn't efficient and, more important, led to disputes because the valuation resources either were regional and not reflective of local vehicle values or weren't updated frequently enough.

"The issue for the average person today is there are so many sources of information about vehicle values on the Internet it leads to confusion," says Bill Kelleher, claims manager at Plymouth Rock.

In late 2007, the carrier deployed Mitchell's Total Loss Valuation (TLV) solution. TLV creates a vehicle valuation based on continuously updated market research. Plymouth Rock's field appraisers use eMitchell to upload total loss information to the carrier's ImageRight imaging and workflow system, and in-house total loss adjusters use that information to propose settlement.

"Producing a realistic valuation for the customer of the vehicle that is based primarily on vehicles sold or for sale in a geographical region enables us to make more one-call settlements. Using TLV also allowed us to create a more efficient, electronic workflow because of its integration with eMitchell," Kelleher attests.

Pauli observes carriers also have been targeting improved and expanded electronic data interchange (EDI) with third parties, enabled by foundational claims technology initiatives by insurers. "The key is having an automated process between the insurer and the third-party provider so that the provider can communicate directly with the carrier and the carrier can monitor what the provider is doing, rather than mailing stacks of paper bills and other information back and forth," she says.

Michigan Millers Mutual Insurance leveraged EDI to cut its medical bill review process from 30 days to three.The project stemmed from a deployment of the DocFinity electronic document management solution from Optical Image Technology. The insurer's medical bill review vendor logs into a separate queue within Michigan Millers' secure system, processes bills, and returns explanation of benefit (EOB) documents to Michigan Millers as PDFs, a process that now happens overnight rather than over days.

Greg Cook, imaging support technician, indicates Michigan Millers continues to look for ways to extend the document management system in order to speed claims service. One example of this was to provide agents with access to adjusters' claim log notes so they could answer policyholders' questions about claims status.

However, adjusters can be creative in their abbreviations and shorthand in their effort to get as much information into logs as quickly as possible, which made it difficult for agents to interpret what adjusters had written. The insurer wanted to enforce standardization of log note format but needed to do so without putting an additional burden on time-strapped adjusters. "To ask people to spell everything out when they type takes an enormous amount of time," Cook says.

Michigan Millers was approached by Nuance, which encouraged the insurer to consider its Dragon NaturallySpeaking voice recognition software to solve the problem. However, Cook relates the company initially was skeptical of voice recognition due to concerns it would have low accuracy and require extensive user training. After testing convinced Michigan Millers the system was a viable solution, the insurer deployed the software to home office and field staff in 2007.

Although Nuance does support a Citrix-based, thin-client installation, Michigan Millers chose to install the system on adjusters' desktops. The insurer also upgraded stock headsets to dual-mode headsets that can handle both dictation and telephony. The application integrates with any text-entry system, Cook reports. "If you can type into a window, you can use Dragon to enter text into it," he says.

Out of the box, Michigan Millers achieved 95 percent accuracy with the voice recognition software. "We feel we're still in a fledgling state with the product," Cook says. "Some people are at 99 percent accuracy. What's important is the focus has changed from typing notes to simply speaking naturally and making small corrections."

Although quality of notes was the primary goal, Cook remarks speeding the claims process has been an important secondary benefit. "We felt if we could get better notes with no additional time expense, it would be a win, but we found we're actually saving time," he explains. "People can speak 160 words per minute, but the average person can type only about 50. That difference has a particular impact on workers' compensation and medical claims that tend to have more notes per claim. People tell us they are getting more done today than they did before."

The next frontier of voice recognition that would speed the claims process further is using the technology to transcribe the recorded statements that are an essential part of many claims investigations. However, according to Peter Mahoney, general manager of Dragon products at Nuance, while the Dragon system doesn't require an "enrollment" process for users, it does develop different acoustic models for each speaker, which makes it difficult for the system to understand accurately rapid-fire, two-person conversations.

Despite the speed and efficiency gains companies have achieved, there still are more to be made, particularly in mobile and wireless technology.

"Every adjuster on this planet has some sort of tablet for estimating, they all have mobile phones, and many of them have mobile check-printing capabilities. But mobile has reached a plateau where everyone thinks it's OK where it is," Pauli observes.

The status quo isn't good enough, according to Pauli. "For instance, there is more 'pushing' data out to the mobile device that needs to happen," she adds.

At the end of the day, Givler stresses having a quality claims staff still is the most important investment carriers can make in handling claims quickly and effectively. "You can benefit by focusing on solutions that leverage your expertise," he says, "but if you're not good at what you do, a new tool is not going to help you."