By Patrick Vice, ©2001
The claims profession is the front line for insurers in
their effort to provide excellent service, while maintaining control over loss costs and expenses.
This has been difficult, for reasons beyond technology. For
example a recent Conning & Company report entitled, “Property-Casualty Claims
Management: Adjusting to New Realities,” noted that during much of the ’90s, many
insurers sought profitability by bringing in premiums to invest in the surging capital
markets, not through efficiencies in their core services. Thus, insurers considered their
claims departments an operational expense that took a backseat, in terms of attention, to
marketing, sales and asset management. However, this attitude has recently changed as a
weaker investment market has forced insurers to re-focus their attention on their core
operations, including claims management. But, prior cuts in recruiting and training of new
claims adjusters have left many claims departments severely weakened and overworked.
Conning attributes some of the fault for the claims labor shortage to the insurance
industry. The industry has not done enough to attract college graduates to a career in
claims. Insurers also need to be more proactive in making advanced training and
educational opportunities available for their claims staffs.
However, technology has, and is playing a role. Although
data is difficult to come by, it is common wisdom that claims receive a disproportionately
low share of attention when it comes to technology spending. One metric is the amount of
time, effort, and money that is spent on interfacing between insurers, brokers, suppliers, and customers.
This appears to be changing. We will look at examples of
internal and external claims technology developments.
Internal Challenge: Adjuster Decision Support
One example of an opportunity is decision support for
adjusters. In this case, we’ll look at Bodily Injury and Accident Benefit Claims.
The number of factors an adjuster uses in making a decision
are numerous. However, until recently, there have been few decision support tools which
aid the adjuster (and his manager) in making intelligent decisions about individual
settlements and portfolios of risk
Tools on the Market
There are an increasing number of tools becoming available
which can assist. One that is particularly interesting in the context of Automobile
insurance takes the view that an injured person can be described using a medical model and
a work model to arrive at either a return to work plan or an assessment of general damages.
This is referred to as a decision support tool as it does
not replace the adjuster, but rather provides guidelines based on accumulated knowledge.
External Challenge – Communication of Claims Information:
First Report, Medical and Treatment information, Loss Runs
Up until there is a claim, virtually everyone who needs to
know about policy information can get it � insured, broker, carrier, etc.
Once there is a claim, however, new information becomes
available immediately, and data increases as the claim progresses. This information, and
the people requiring the information, change rapidly during the history of the claim,
creating an n-dimensional environment.
Communication of the data, using traditional means, is
fraught with duplication, delays and errors, costing time and money.
Finally, in examining claims history, brokers, insureds,
and others must accept data from a number of dissimilar sources in order to make
comparisons for renewals, etc.
New Technologies – First and Subsequent Reports
There are a number of intersecting technologies to address
the need for effective and efficient, “once and done” communication of claims
information. The most significant is Peer to Peer (P2P) communication. P2P assumes that
there are computers that conform to open standards which are programmed to accept, relay,
and digest specific information.
In the case of an injury claim, for instance, the first
report could be an Internet based form which carries identifying information for the
insured and a summary of the event and all parties involved, broker, risk manager,
insurer, adjuster, and third parties.
This information could be routed automatically to a
clearing-house which, after inspecting the information electronically, routes it to an
adjuster, a case manager, and a third party examiner. As the case develops, the
information supplied by these, and additional parties, comes through the same
clearing-house and is routed to all others with a need to know�.
New Technologies – Loss Runs
The same sets of electronic standards can be applied to
dissemination of loss runs. Each insurer would send the portfolio of losses, in standard
format, to the broker and/or the insured, who could digest the information, using its own
in-house systems, for its own analysis.
Standards and Pilot Projects are Now Underway
The Insurance Bureau of Canada (IBC) has recently introduce
a Standardized Medical Invoice for use by medical and occupational suppliers in reporting
information on Accident Benefit Claims to insurers. The invoice makes use of standards for
coding both medical information on injuries and treatment procedures. The IBC is
discussing the feasibility of introducing a Central Data Agency which would accept the
information on the invoice electronically, validate the data for completeness and
correctness, and forward the information electronically to the insurer.
In another arena, ACORD (the world-wide standards body for
insurance transactions), in partnership with RIMS (the risk managers’ trade association),
are fast tracking the development of XML Standards to support First Notice and Loss run
data. Both organizations are actively soliciting participation from interested insurers,
brokers, risk managers, and vendors to conduct pilot projects. Results of selected pilots
are expected to be announced early in 2002 at theRIMS and ACORD conferences.
After a number of years of being the lowest priority for
insurance I/T expenditures, Claims is now getting a high degree of attention.
This attention is addressing three elements:
Claims knowledge workers – adjusters, examiners, etc. – are
being offered tools which will replace much of the mundane work of gathering data with
sophisticated methods of retrieving information enabling them to make better decisions.
Technology is providing a new mechanism which may shorten
the time in reporting claims to all those with a need to know in order to expedite claims
handling, and may reduce errors in dissemination of subsequent information.
Underlying all of this is a keen interest on the part of
industry associations, including ACORD and RIMS in developing standards to effect these
and other fundamental changes to claims processing.
Organizations interested in additional details on the
topics mentioned above are welcomed to contact the Author.