It's no secret that average bodily injury (BI) payments and severity are on the rise. More people are claiming to be hurt in accidents. They are more likely to hire attorneys, and providers are performing more expensive procedures. What is an adjuster to do?
First, understand what is driving this phenomenon. While new cars are safer than ever, the reality is that the average age of the vehicle on the road in the U.S. is 11.4 years old.
We also have to be cognizant that claimants can be opportunistic. While many injury claims are legitimate, it is estimated that around 10 percent of all claims are an outright fraud. Beyond that, an estimated one-third of all auto-related medical bills have an element of fraud such as upcoding, unbundling or modifier abuse.
Cost shifting occurs
Second, one must understand the cost shifting that occurs. Since the passage of the Affordable Care Act or "Obamacare," we have seen a significant increase in certain higher cost procedures. While Obamacare has succeeded in reducing provider reimbursement, the unintended consequence has been increased utilization and more reliance on expensive diagnostic procedures by facilities to maintain profit margins. In essence, the emergency room as become a virtual profit center for hospitals.
Complicating matters are state laws such as no-fault reform in Florida, which require accident victims to go to the emergency room in order to receive personal injury protection (PIP) benefits. Not surprisingly, there has been a significant increase in medical billings in that jurisdiction.
According to the Insurance Research Council there is an "incentive for medical providers to shift costs to other revenue sources, including property-casualty insurance, to replace lost revenues from health insurance providers. Private passenger auto insurers are already prime targets for such cost-shifting behaviors, as reported in a 2010 IRC report examining hospital charges and diagnostic imaging costs for auto injury claims.
IRC estimated that hospital cost shifting for auto liability claims in states with tort-based auto injury insurance systems resulted in $1.2 billion of excess charges in 2007. The total of cost-shifting in all property-casualty claims with medical expense is likely much higher."
Steps adjusters should take
A thorough investigation of claims can help keep costs in line. Here are some steps adjusters should take while investigating BI claims:
Talking to witnesses and asking open-ended questions can provide critical information regarding the claim. (Photo: iStock)
1. Obtain witness statements.
At the outset of the claim it is critical to secure statements from the insured, any unrepped guest passengers, unrepped occupants of the other vehicle and all witnesses. Questions should be open-ended so the interviewer has a clear understanding and visualization of what happened.
Sample questions might include:
- Describe the other vehicle?
- Describe the accident?
- What did the other driver look like?
- Describe the clinic where you are seeking treatment?
- Describe the treating provider?
- What route do you take from home or work to get to the treating facility?
These questions are designed to get the claimant to provide vivid descriptions. If details are sketchy or inconsistent, then consulting with the Special Investigative Unit (SIU) should be a priority.
When it comes to a claim, a picture really is worth (or can save) thousands of dollars. (Photo: iStock)
2. Documentation.
Get good photographs of all vehicles involved in the accident. As an adjuster, I was shocked at the number of claims where the damage or paint transfers did not match. For example, a blue car isn't going to leave a red paint transfer on a white car.
In instances where the adjuster is personally taking the photos and writing the estimate, it is important to meet with the claimant and have him point out the damage, getting clear and crisp photos of the vehicle. In many carriers, adjusters use appraisers or independent adjusters, so they should provide very specific instructions as to the types of photographs needed for accurate visualization.
Carefully review invoices and SOAP notes to make sure they match and check coding for services provided. (Photo: iStock)
3. Determining liability.
When the attorney sends a letter of representation, the adjuster should contact the attorney and obtain any information possible. It is a good idea to provide a letter of acknowledgement to the attorney confirming policy limits (if required by law) and outlining precisely what is needed for a complete evaluation. These may include:
- Diagnosis codes.
- CPT codes (for medical procedures and services).
- All HCFA and UB (health insurance and hospital) claim forms.
- All SOAP notes (documentation and notes from the patient's file).
- A list of all medical professionals who have treated the claimant within a specified period of time, usually the past five years.
Since attorneys are often remiss at cooperating, include a medical authorization as well as an offer to obtain this information independently with any requests.
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Liability plays a major role in every investigation. Consider what the claimant will have to prove if the case goes to court. (Photo: iStock)
4. The demand.
Upon receipt of the demand, it is imperative to review the contents in their entirety. If items are missing, contact the attorney immediately in writing to acknowledge receipt of the demand and advise as to what is needed to conduct the investigation. If there is a time limit, follow company protocols and evaluate the claim based upon what has been provided.
Utilizing a bill review tool can assist in determining what is owed, as well as identify deceptive billing practices such as upcoding, unbundling and modifier abuse, which are increasingly occurring.
No liability, no claim
Evaluations should focus on what the claimant will have to prove if the matter is adjudicated: liability and damages. If there is no liability on the part of the insured, there is no claim.
While carriers have to make business decisions, it is important that liability be at the forefront of every investigation. It is often one of the most overlooked aspects of claims investigations, with less than five percent of claims having any assessment of comparative negligence. There are tools that can help insurers assess comparative negligence.
Check for pre-existing conditions and actual injuries when determining damages from an incident. (Photo: iStock)
5. Determining damages.
Damages are broken into two components: specials (actual economic) and generals (non-economic, e.g., pain and suffering, mental anguish). Frequently, adjusters will negotiate dollar figures, which can be to the attorney's benefit. In the most extreme cases, evaluations use a multiplier of medical bills which is an extremely ineffective way to negotiate claims since it provides an incentive to run up specials in order to get more generals.
Key questions to consider are: Were there truly damages? There may be damages claimed, but are they owed? Are they related to the accident? Was there a mechanism for injury?
For example, consider the sideswipe accident whereby the restrained claimant alleges a low back disk herniation. What would a biomechanical engineer say in this situation? Could this injury possibly be pre-existing? According to the American Association of Neurological Surgeons, up to 85 percent of Americans will suffer lower back pain in their lives.
Odds are the claimant had this condition prior to the accident. This is precisely why a claimant medical history should be requested at the outset of the claim. The attorney will likely balk at this, but should be reminded that this information is all discoverable and will play directly into the veracity of the claimant and the claim.
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Social network analysis allows adjusters to see the relationships between a claimant and close contacts, and in some cases can help in verifying or disqualifying an individual as a witness. (Photo: Shutterstock)
6. Background check.
It is important to do a search of specific claimant details. Social media is a great place to start as claimants have been known to make statements that can be used to impeach their credibility. As soon as the claim is presented, do a quick search of social media.
While some accounts are locked, it is estimated that 67 percent of Facebook accounts have no privacy settings. If there is some important information, make sure to get screen shots, since once a claimant obtains an attorney, these postings have a tendency to disappear.
In addition to social media, look into the background of the claimant for things such as professional licensing, prior criminal history and known associates. While many searches turn up little of value, there have been many times where significant information is obtained that can be used to effectively impeach credibility. Keep in mind that the plaintiff attorney is likely doing the same thing on your insured.
When determining damages, look at the hard costs to identify what is actually owed and then factor in any non-economic factors. (Photo: iStock)
7. Negotiating the claim.
When it comes to negotiation, an important strategy is to put issues first. Recognize your strengths and weaknesses and those of the other party. It is imperative to understand what the plaintiff's strengths will be and then prepare effective rebuttals in advance of negotiations. Focusing on the elements of the claim, liability and damages will always yield a more accurate outcome.
Initially focus on the specials and what was billed and what is actually owed. If there are issues such as upcoding or excessive injections, cite sources to prove your point. Beyond specials, factor in generals. If specials are owed at a fraction of what was charged, then it makes sense that pain and suffering will be fractional as well. Once an agreed upon amount for damages is achieved, focus on liability and the probable reduction the plaintiff will see if a matter is adjudicated.
Claimants have several options before a case gets to a jury including dispute resolution and settling with the insurer. (Photo: iStock)
In more than half of the cases that get in front of juries, comparative negligence situations are in play. Plaintiff attorneys know this and must make lowest ultimate cost decisions. If an impasse is reached, try utilizing some form of alternative dispute resolution. Pre-suit mediation can be very effective, particularly when the client believes a claim is worth more than its true value.
For any effective outcome a prompt investigation must be conducted, focusing on both the physical damage and the personal injury. While these tips and techniques have worked for many claims organizations, it important for adjusters to follow their company procedures and policies.
Chris Tidball is a casualty solutions consultant with Mitchell International and the author of several insurance based books including Re-Adjusted, Blocking & Tackling and the recently released thriller Swoop & Squat. To learn more visit www.christidball.com.
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