As insurance companies finalize their budgets for 2013, there are a number of products, services, and initiatives that might make terrific stocking stuffers during the holiday season to support and reward a carrier’s hardworking claims management team while improving their efficiency and effectiveness.
Although these suggestions might require some additional upfront investments in the short term, they could pay substantial dividends down the road in the form of reduced frequency, lower severity, and better combined ratios. Indeed, while investors are usually told they need to spend money to make money, when it comes to claims management, insurers often need to spend money to save money—with the savings going straight to the bottom line.
The following are just a few “gift” ideas insurers (as well as third-party administrators and those who are self-insured) might consider giving their claims managers, adjusters, and fraud investigators. These suggestions are likely to bolster the ability of claims handlers to validate legitimate losses in a more timely manner, speed up claims payments, and stymie more potential frauds, all while enhancing the customer experience.
Launch a claims transformation project. Carriers can address a range of challenges—from accommodating growth in claims volume to integrating disparate systems following a merger or acquisition to improving basic performance—by comprehensively transforming rather than selectively tweaking their legacy claims operation.
Half of the transformation involves a change in the technology platform used to manage claims, but the other half means retraining and upgrading the skills of those dealing with claimants. If done correctly, this could be a win-win for claims managers and policyholders alike, boosting the carrier’s profits as well as customer satisfaction.
Upgrade analytic capabilities. Just as underwriters perform better in assessing risk when they have more facts at their disposal, so do claims management teams when investigating losses. Training, experience, and human intuition are critical components to a claims operation, but artificial intelligence can complement and enhance a carrier’s people power.
Besides pouring through disparate data to red-flag anomalies and possible frauds, predictive analytics can help carriers identify claims more likely to be litigated or subrogated, as well as assist in assigning the proper resources to probe and resolve a particular loss.
There is also more work to be done around defining and managing data to refine key performance indicators so claims departments can manage to best-practice metrics and promote those who consistently surpass those benchmarks.
Jump on the telematics bandwagon. More and more carriers are offering drivers the option to install a device in their cars that provides data on where, when, and how policyholders operate their vehicles. This could revolutionize claims management by helping insurers sort out liability (in terms of comparative or contributory negligence, for example), as well as facilitate subrogation efforts. Such data could allow adjusters to reconstruct more effectively a loss incident and fact-check the testimony of those involved.
Telematic systems might also help prevent accidents by serving as virtual back-seat drivers, coaching insureds to operate their vehicles more carefully while raising alarms about hazardous conditions. Just the fact that drivers know they are being observed might prompt safer driving habits.
Provide additional training. Insurance is a knowledge business, and the more claims managers and their teams know about how to effectively investigate a loss, the better.
Training should be ongoing and come from a variety of sources—including traditional classroom instruction, virtual education over the Web, and mentoring by more experienced colleagues. Training should also include regular reminders about proper “bedside manners” so that customer relationships are maintained even when a suspicious claim is called into question.
Simplify policy language whenever possible. In a recent pair of focus groups conducted on behalf of Deloitte’s Center for Financial Services, small-business insurance consumers complained that they couldn’t make heads or tails of their policies. A common complaint was that coverage documents are “written by lawyers, for lawyers,” prompting a number of the participants to suggest that carriers purposely make policy language incomprehensible to give them wiggle room to deny claims.
This puts the claims management team in a tough spot, tarnishes the reputation of the industry, and undermines policyholder trust and satisfaction. Clearer policy terms and conditions might help avoid many coverage disputes and litigation, while improving retention rates of good customers.
Do everything possible to support the “troops” in catastrophe zones. Weather-related disasters are increasingly frequent and ever more severe, straining the claims management resources of carriers and challenging the resilience of those who often work in conditions resembling a war zone as they help policyholders recover. CAT response plans should be continually updated to adapt procedures and policies based on experience.
At a minimum, insurers should regularly check on the physical condition and state of mind of their CAT adjusters, while reexamining how to mitigate the physical and mental stress they face. Attention should be paid to make sure frontline troops are properly rested and rotated to avoid combat fatigue and keep them at the top of their game.
Expand and enhance the use of mobile technology. While many of those in claims management work behind a desk and deal with people over the phone or via email and snail-mail, those in the field are constantly on the go. Making sure these road warriors have the latest mobile tech tools and applications at their disposal should, therefore, be a top priority.
At the same time, security precautions and training are also essential, since laptops, tablets, and smartphones often carry very sensitive, personally identifiable customer information. The rewards of mobile technology outweigh the risks, but carriers should be diligent to protect the privacy of policyholders and their own reputations, while preventing the costly litigation a breach might prompt.
Meanwhile, mobile tech initiatives should extend to the policyholder to make them part of the service-delivery model, thereby reducing costs, accelerating claim resolution, and enhancing the customer experience.
Commit to maintaining a capable staff. The difficulty in achieving profitability during a slowly recovering economy and in a challenging investment environment might prompt carriers to consider cutting back on staff through force reductions, outsourcing, or hiring far less experienced (and lower-paid) personnel. Carriers contemplating such moves, however, may be doing more harm than good when it comes to claims management if they are not careful.
Downsizing reduces expenses in the short term, but by increasing the workload on those remaining, it could end up hiking loss costs if more frauds slip through the resulting cracks. Hiring less experienced, lower-paid personnel also cuts manpower costs, but, again, the result could be higher underwriting losses and additional bad-faith lawsuits if claims end up being mishandled.
Outsourcing can be a viable option but only if the proper quality control is in place to make sure the personnel vendor meets and maintains the carrier’s standards for investigative skill and customer interaction.
Attack fraud more comprehensively. Too many people outside the industry—both policyholders and prosecutors—are complacent about fraud, leaving carriers with too few allies in the battle against falsified claims. If the public thinks that the cost of fraud comes out of insurers’ pockets only (in the form of lower profits) rather than their own (in the form of higher premiums), this attitude isn’t likely to change anytime soon.
Insurers would therefore be doing their claims departments a huge favor by hammering home the message in mainstream and social media that, when others defraud insurers, in reality, policyholders are the victims—as well as the ones literally paying the price.
There should also be more coordination among insurers. Presenting a united front to fraudsters and law enforcement officials might lower the success ratio of frauds in the short term, while in the long term discouraging more people from trying to defraud carriers in the first place.
I’ve suggested in the past that the industry could benefit by sponsoring a TV reality show or dramatic series showing frauds of various stripes being brought to justice. If possible, such programs could spotlight cases where “civilians” (those outside the insurance business) help expose and apprehend frauds. That could make for “must-see TV” in my book.
Unfortunately, claims management is often a thankless job. The vast majority of those in the business operate anonymously, at least when it comes to awareness among the media and general public about how important their work really is.
But if “gifted” with some of these additional tools, services, and broader support initiatives, claims teams could find their work a whole lot easier, and insurers could boost their net income in the process.
A happy, healthy, and successful new year to you all!
Sam Friedman is insurance research leader with Deloitte’s Center for Financial Services in New York. He has been a CLM Fellow since 2011 and can be reached at samfriedman@deloitte.com.