As insurance buyers and their brokers strive to better manage the total cost of risk, looking beyond the traditional focus on premiums plus policy terms and conditions to the technology used by insurers can offer financial advantages when managing claims.
After all, technology drives an insurer's ability to lower a policyholder's total cost of risk by delivering better claim results more efficiently. This benefits policyholders in the short run by lowering claim costs. It helps over the long term, as more efficient carriers can offer greater pricing flexibility.
In fact, controlling claims costs has never been more important. Despite falling frequency across almost every commercial insurance line, severity is rising. Today, most policyholders face fewer but more expensive claims. This may be starting to harden prices in some lines, such as workers' compensation.
So how does a buyer determine how effectively an insurer is using technology to control total cost of risk? By looking at how each potential carrier applies technology to three critical tasks:
ANALYZING DATA
Data can uncover ways to do things better, faster and more efficiently–but only if an insurer can use technology to transform the mountains of raw data into actionable information that helps better manage individual claims.
And technology drives this process. Take, for example, finding legal counsel for a general liability claim.
Not all counsel is the same. We found it helpful to build a proprietary database to analyze potential law firms in each jurisdiction for different case types. That database sorts through hundreds of variables for each potential provider–from outcomes, to cost metrics, to the number of hours billed. This system helps in selecting the legal provider most likely to deliver the best outcome for each general liability claim.
Another example comes from workers' comp. Only about 10 percent of a workers' comp policyholder's claims drive almost 80 percent of that company's total claims costs. Therefore it is essential to understand if the technology used by potential insurers can quickly spot these claims.
For example, does the insurer rely on the "gut" judgment of its claims staff, or does it use a sophisticated predictive model to uncover those potentially high-cost claims?
BENCHMARKING
Similarly, look closely at how insurers use technology to measure and improve the performance of each policyholder. All insurers can compare a policyholder's claims performance over time, noting trends in the number and cost of claims.
But find out if the insurer can benchmark a policyholder's claims performance against their peers and competitors within the same industry. This will help buyers identify ways to make their workplace safer while reducing costs, and it will help them gain the competitive advantage of lower operating costs.
STREAMLINING WORK
Speed is everything in claims. Take claims reporting. The faster a claim is reported, the more quickly the insurer can take steps to manage that claim's total cost.
That's why all carriers give policyholders a dedicated toll-free number for reporting claims. But look deeper and explore the other ways an insurer lets you file claims, and whether these tools will work for you.
For example, an insurer may trumpet its Internet claims filing system. Such systems help to quickly get accurate information into the hands of those who can bring about the best outcome for a claim.
But since many policyholders do not give employees Internet access, a foreman in a Chicago factory or a manager in a San Diego chain store may not be able to use this tool to report a claim. Make sure your insurer offers other tools, such as an automated e-mail claim reporting form–pre-populated with company and employee information–that lets individuals at remote locations report claims through their company's e-mail system.
Technology also plays a role in managing claims. Faster access to all of the information on a claim brings about better outcomes. So find out if an insurer has paper or electronic claim files. Electronic claim files let all of the internal and external resources involved with a claim share information, such as photos of damages, detailed notes from treating physicians and sworn legal depositions.
But just as electronic claim files are more effective at managing the total cost of a claim, they require more technology than paper files.
Vendors must be able to electronically submit information to the insurer. The carrier also needs a system for quickly digitizing and including in the electronic claims file any information from vendors that still submit paper documents.
Technology plays a key role in selecting the insurer that can best manage your company's total risk costs. Rising claims severity across all commercial insurance lines makes managing costs more important than ever.
So add technology to your traditional focus on premium, terms and conditions. To do this, look for the insurer that best uses technology to analyze data, streamline operations and share information.
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