Extend the Life of Your Claims Management System

Despite the massive expenditure of money, time and resources to implement and maintain a claims management system (CMS), many claims professionals are not satisfied with the capabilities provided. In fact, a recent report by Accenture states that 78 percent of claims executives surveyed are upgrading their claims management systems.

Moreover, 66 percent of survey respondents believe their claims management systems are not optimized to collect and analyze the growing volume of data to improve overall claims management.

Given the challenging economic environment, most insurers do not have the money or the people-resources to "rip and replace" their CMS. The good news, however, is that insurance organizations do have options to extend the life of their CMS by improving the quality and breadth of data flowing into it and by adding more comprehensive capabilities for data analysis.

Analyze The "Other 50 Percent" of Data

Over the past 20 years, claims departments have seen the volume of data that they collect increase exponentially. While much of this information is electronic data stored in technology applications, the fact is that a majority of claims communications, including letters from attorneys, documentation of damages and investigative evidence are still communicated via paper.

As a result, systems are loaded with a confusing mix of data collected from drop down menus, unclear category codes, data in free form text fields such as claims adjuster notes, and documents in electronic formats such as PDFs. While today's CMS houses all of this information, it can fall short of the most important part, namely enabling claims professionals to systematically access and analyze this content which accounts for 50 percent or more of the information relevant to making a prudent claims decision.

Why is this information so important? Following are three examples that illustrate how a new approach can help solve some of the most complex claims challenges.

Cycle Times and Customer Relationships

Think of how many times each day your customers are wooed by the competition with low rates and other promotions when they are online, watching TV or listening to the radio.

With such high stakes, each interaction, each time the policyholder is contacted by your company can either make or break that next renewal. Most P&C insurers measure their cycle time around claims with an eye towards shortening it—speeding resolution—whenever possible.

While this is a start, measuring the quality of customer touch points within the life of the claims cycle, as well as their time frames is equally important.

Some claims management systems are able to provide a certain level of insight but cannot analyze the entire universe of information in your claims file. Acting on this information will enable an insurance organization to not only increase customer retention and profitability but also reduce loss payouts and improve the quality of claims investigations.

For example, while most systems can provide information as to how quickly an organization attempts to contact a policyholder, they typically are unable to measure the success rate or the effectiveness of the contact. Were multiple messages left? Was the correct information gathered? Did the person representing the insurer explain the claim process thoroughly to the claimant or policyholder? These are all critical questions that must be answered. When not addressed properly, such interactions can leave a sour taste with your customers.

Of course, most insurance professionals know that the information needed to measure these activities is available, but it is often hidden away in files or adjuster notes. If claims executives had access to one dashboard of information that broke down the cycle time of every claims activity by every line of business, office, team, and adjuster across the company, then they could quickly reduce cycle times. This, by extension, would result in more satisfied customers and a higher level of customer retention.

This approach also provides crucial information to help control spending, providing full transparency into where money is being spent wisely (and where it is wasted), based on objective information. Consider it a "premium protection plan" and a quality assurance test on all of your claims files, not just a manual review of a few random ones.

Some of our insurance customers have found that increasing customer retention rates by just 1 percent can equate to millions of dollars directed at the bottom line when considering increased direct written premiums and lower acquisition costs. By analyzing all claims data that is not easily accessible from your CMS and taking action based on this information, insurers can guarantee that interactions with policyholders foster long-term, profitable relationships instead of causing customer defection to a competitor.

Speeding Claims Segmentation

The faster an insurer is able to get the claim in the hands of the appropriate adjuster, the more time it will have to take the necessary steps to manage the claim to an appropriate outcome.

While automated claims segmentations may exist in some claims management systems, they often miss critical data elements in adjuster notes and other unstructured data fields that can provide essential clues to help route the claim to the right adjuster at the right time. As a result, even newer systems are vulnerable to mistakes and are thus unable to provide claims professionals with a holistic view of data for any given claim.

Our own survey in late 2012 found that 55.6 percent of claims professionals believe that disagreements about insurance claims decisions is a key customer issue, many of which result from issues within the claims process, along with less-than-optimal data utilization. For example, many claims departments have dedicated total loss units that specialize in handling, settling, and concluding auto claims in which the vehicle has been deemed a total loss.

Total Loss Claims

There are many specialized tasks when handling a total loss claim, such as getting the vehicle out of storage, determining the actual cash value, and completing the state-specific paperwork in order to settle and pay the claim.

As these decisions and tasks are best suited for the total loss unit, segmenting these claims at the time of report is critical. While it is not always immediately evident that the car is a total loss, there are clear indicators if the insurer can analyze all of the information in a claims file, especially the adjuster notes. For instance, did the airbag deploy? Is there heavy front end damage? How old is the vehicle? Is it drivable?

It is critical to uncover these indicators and route that file to the proper unit and individual to handle that file from day one. In addition to this example for total loss auto claims, comprehensive data analysis can also support other types of claims that require immediate segmentation, including bodily injury (BI), special investigative unit (SIU) referrals, and homeowners' claims that involve fire, water infiltration, or mold specifically.

By adding better capabilities for data analysis to your current CMS, you can ensure that that your adjusters receive the right claims at the right time, thereby resulting in better quality investigations and speeding settlement for claimants.

Automate Document Analysis

Claims departments receive a massive amount of mail on a daily basis, despite efforts in recent years to go "paperless." While insurers have streamlined and improved the scanning of these documents over the years, managing the volume of correspondence and having an efficient process for analyzing all of their information remains one of the biggest challenges for insurers.

Many insurers attach these scanned documents to the appropriate claims file in a CMS, and then rely on individual adjusters to keep track of deadlines of when each item needs to be acted upon. The truth is, most of the CMS in use today provide little-to-no automated capabilities for analyzing this information in an efficient and precise manner.

The most critical items that insurers must track, analyze and act upon are time-sensitive documents such as time limit demands and letters than allege bad-faith handling. Ineffective approaches over the years have caused deadlines for responses to be missed time and time again. The problem is that just one missed time limit demand or bad faith allegation can result in a nightmare claim or expensive litigation that costs an insurer millions in damages and can destroy its reputation.

By transforming the contents of the scanned document into textual data that can be logged, analyzed, recorded and reported on, insurers can create a detailed look into what correspondence they receive on a daily basis. This timely, accurate analysis of data will include the type of document, the date it was received, the correct corresponding claim number, the claims handler, and a deadline for response.

This process can be set up based on type of correspondence, such as time limit demand, bad faith letter, or even new suits that are received and need to be answered. Venue specific time frames can be built into the solution to generate accurate due dates as well. Ignored time limit demands and unanswered suits resulting in potential defaults will be a thing of the past.

In addition to using this information for tracking, an insurer can also identify trends within a department for training initiatives and performance management issues. For example, is one specific unit experiencing issues in identifying bad faith letters, or is one individual driving your default situations? These instances can be identified by drilling down into the data helping insurers can avoid these situations through early detection and identifying core problems to be corrected. By proactively managing this process, the number of claims that are placed in an adverse position due to an untimely response can be minimized and the performance of your claims personnel can be maximized.

The amount of information contained in scanned documents is staggering when you consider how much mail is received by insurance companies on a daily basis. By enhancing your CMS to automate the analysis of this information, you can gain unprecedented insight while helping your company avoid situations that damage their bottom line and reputation.

Regardless of size or available resources, there is no need for claims departments to work with a less-than-optimal CMS. In fact, adding capabilities to an existing system can deliver greater value—often in 90 days or less—without the expense and disruption of implementing an entirely new system. By enabling insurers to leverage all the data at their fingertips, solutions for data quality and analysis can help extend the life of a claims management system, eliminate the need for a multi-million dollar replacement, and improve the overall claims process—driving results directly to the bottom line.