Canadian Underwriter

Claims Convergence: A New Model for Healthcare

January 1, 2005   by Sam Malatesta

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Recall the collision “claims fulfillment model” article first published in CU’s January 2000 issue. Now, see this article as “version two” but in the sense that it has been modified for the healthcare sector of the same claims economy (see figure 1). The red and black arrows represent the flow of value. The green lines represent the flow of communication. This healthcare claims fulfillment model demonstrates how companies strive with their business partners to understand the exchange of value, how these exchanges occur, and how they more frequently benefit all parties involved. It is essential to understand the specific needs of each of the stakeholders, otherwise the transaction will fail for everyone, as it currently appears to be doing.

In Canada, between 1994 and 2002, the average cost of an auto injury claim in the private insurance markets rose from under $20,000 to almost $30,000, while the average vehicle damage claim remained relatively stagnant at well under $5,000 (see figure 2). With the significant growth in the size of injury claims, insurers now employ approximately three times as many bodily injury (BI) and accident benefits (AB) adjusters combined as they did prior to the introduction of no-fault auto insurance in Ontario in 1990. Clearly, this is a system that is not working and is not sustainable for insurers.


In a “free market economy” the best and most sustainable solutions are those that put the customer first. This is paramount in the claims economy. Numerous studies conducted in the past decade prove that if the consumer has an excellent claims experience, they will be a loyal policyholder. This provides great financial benefits to the insurer. According to a Conning study conducted in 2004, entitled “Expense Revolution”, it costs less to renew an existing client than to acquire a new one – there is more opportunity to reduce renewal expenses than opportunity to reduce operating/business expenses, and loss ratios are often better on renewal business than on new business.

An auto accident that involves injury is a tragic experience for consumers. Filing the insurance claim and dealing with the multitude of vendors that are positioned to helping the consumer return to pre-accident condition can be characterized as a series of “grudge purchases”. It is not a pleasant experience. Notwithstanding the existence of some element of fraud in the system, the majority of consumers simply want to recover from the injury and receive the entitled benefits that the insurer promised they would deliver in the event of such an accident (income replacement, housekeeping, etc.).

First of all, the insurer wants to fulfill its obligation to the policyholder and see a full recovery from any injury. The insurer is also interested in predictability of outcome. They have an obligation to their shareholders and to the general public to control costs by managing their files diligently through focusing on key performance indicators. Throughout the claims process the insurer requires an easy and standardized flow of communication with each stakeholder in order to manage the information efficiently and effectively. Once the file is closed and the claim is settled, the insurer wants the policyholder to renew.

The question, however, is the current system of “fixing people” – while there is little in the way of statistics on outcomes (something currently being addressed by the Insurance Bureau of Canada (IBC) via the standard invoice system in Ontario), the growing cost of auto injury claims suggests the system is not becoming more efficient, and may in fact be less so.


For most people, at the center of their healthcare management is their family doctor. The family doctor has earned the trust of the patient and has the greatest influence over patient wellness and patient behavior. The family doctor is most concerned with the patient’s recovery and the highest standard of care using “evidence-based” treatment. The family doctor is required to manage vast amounts of information and needs a simple and reliable communication platform. In addition, the family doctor requires a referral system that he or she can trust, so that they can ensure their patients receive the most appropriate treatment. The family doctor also sees great value in having happy patients that are loyal to his or her practice.

The treatment providers (physiotherapists, chiropractors, etc.) first and foremost want to treat people and help them to recover from their injuries. These healthcare professionals want to be able to communicate easily with insurers in order to clearly understand the insurer’s needs and requirements. They need a consistent and predictable flow of referrals to keep their business viable and staff occupied.


The focus must be on the treatment rather than the assessment. In Ontario, the designated assessment center (DAC) system was set up to manage disputes, but with the imminent elimination of DACs, the insurance industry and the consumer now require a common understanding of an operational model that is focused on managing injuries and getting people feeling better, quicker.

There is a great deal of data, international and domestic, that can predict outcomes in injury cases. There are evidence-based guidelines to model the recovery path for minor injuries to the neck and back, just as an example. These models need to be further investigated with the goals of establishing a guideline that both insurers and treatment providers can trust, cooperate within, and be held accountable to. The objective of a new model must be to always move forward and help patients recover quickly.


The insurer’s role is to apply entitlement of benefits as regulated. Understanding that there are other parties who stand to profit from the insurer-client relationship, the insurer’s position must align with the client, family doctor (in charge of the patient’s health) and the treatment supplier.

Insurers do not want to spend money on disputes and they do not want to always be in the position of questioning medical practitioners and treatment plans. Insurers need accurate information, quickly. They require the information to have a standardized format and to be easily accessed. The bottom-line is that insurers want their clients to recover and renew their insurance policies.

The family doctor must see the insurer as their partner. It is critical that the family doctor have the conviction that the referral they give their patient/client is to the highest standard of care in treatment facilities. Woven into the fabric of the new operational model is a focus on scientific, evidence-based, quality healthcare. This means access to immediate assessment – for treatment reasons and not dispute resolution – by medical specialists under the guidance of the family doctor.

Up until now, no stakeholder has set out to organize the business of healthcare in the auto claims economy – in fact, those involved have yet to treat it as a “business” at all. Too often, it has become a battle ground for competing interests, rather than a meeting place for pursuing the common goal of all stakeholders – to make people whole again.

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