Opening the Door to a Claims Portal

Effective claims management is critical to an insurer’s bottom line and to superior customer satisfaction and retention. Once again we appear to be heading down the ‘soft market’ road with claims frequency poised to climb upwards, pressure is mounting on insurers to further:

* Reduce the cost of claims.

* Improve the claims adjustment process.

* Reduce operating expenses.

* Increase adjuster effectiveness.

* Improve vendor efficiency.

Once it is understood that approximately $0.85 of every premium dollar is spent on claims payments and loss adjustment expenses, it is quickly appreciated where our attention should be focused.

PROPRIETARY TECHNOLOGY

Over the years, many initiatives have been undertaken to improve claims systems. In many cases, these initiatives are still manually intensive and occasionally confrontational; all too often they are slow and error-prone. From the perspective of both insurers and vendors, technology offers the greatest potential for improving the claims adjustment process and reducing claims costs and operating expenses.

After the first notice of loss is completed, the long and frequently frustrating process of assigning vendors and processing the claim begins. Automation that would allow electronic, real-time communication with all claim participants, as well as the automatic documentation of the claim file, would greatly enhance the process. Most insurers recognize the value of improving their claims communications systems and practices; some of them are doing exactly that through the development of their own proprietary solution. While this may ultimately improve the insurer’s efficiency to some degree, it comes at a high price: it does not deliver the maximum improvement in efficiency, nor does it minimize the risks. Proprietary solutions lead to:

* An inconsistent approach for vendors. Many vendors are on multiple “preferred” lists. How many different proprietary connectivity systems can a vendor use effectively? Their efficiency will necessarily suffer and drive up their cost of doing business. These costs are ultimately passed on to insurers.

* Significant development costs and risk for the insurer. IT resources are frequently expanded to deal with unforeseen developments and claims department “user committees” spend countless hours in meetings. This represents a significant investment of human resources and a real dollar cost.

* Lost opportunities due to development time. Many attempts at new technology have been misguided; frequently they result in complicating the claims process. All too often, there is minimal impact on the claims outcome. Not only are expenses being incurred, the opportunity to save significant dollars is lost.

To date, the use of technology to improve the claims process has had a marginal impact on customer service. In addition, it has not effectively addressed what drives the bottom line for insurers: the cost of claims and loss adjustment expense.

THE PORTAL SOLUTION

A better solution would be a multi-participant claims portal. Such a solution would maximize the impact on the overall claims process and efficiency, while at the same time minimizing the costs and risks associated with a proprietary solution.

Critics might argue that using portals would eliminate competitive advantage as anyone can be connected. Yet fewer companies are more competitive in this country than the banks.

Banks recognized the wisdom of participating in a single solution to provide access to retailers and customers when they introduced ATM’s and Interac. The banks did not see a competitive advantage based on a proprietary system. A claims portal should be viewed in the same light, as a tool similar to a telephone or e-mail. The portal will drive efficiencies through the claims process and ultimately translate into an improved bottom line for insurers. It can be defined as a Web-based, single point of contact for adjusters to communicate electronically in real-time with their partners, vendors and other participants throughout the claims handling process, while at the same time optimizing workflow. Online claims portals will facilitate various functions:

* Centralizing all claims data from the initial first notice of loss – whether through a broker, agent or direct writer – and throughout the adjustment process.

* Automating workflow by providing direct access not only to vendors, but to third-party, value-added suppliers such as auto and property appraisal estimating services, ordering source documents (police reports, credit reports, etc.), fraud analytics, etc.

* Introduction of rules-engines to automate workflow and help refer repairs to the right shop, facilitate the repair process, pay suppliers automatically, and involve adjusters only on files identified as exceptions.

* Maximize the use of preferred vendors – insurers’ preferred vendors would be pre-loaded and presented to the adjuster – as well as the preferred pricing and service that has been negotiated with them.

* Improve customer service and save time for the adjuster, by arranging and confirming appointments with the various vendors required during the initial contact with the insured.

* Date-stamping and time-stamping all claim activities, improving customer service and facilitating the audit process.

* Allowing vendors to communicate with each other, and capturing these ‘conversations’ in journal notes for the adjuster to view at any time.

* Monitoring and measuring adjuster and vendor performance.

* Access to claims information 24/7, 365 days of the year, thereby greatly enhancing adjuster efficiency and customer service.

Perhaps most importantly, everyone benefits from the economies of scale made possible by a multi-participant claims portal. There is generally no capital investment required, since users share development costs through variable transaction fees.

KEY BENEFITS

Many significant, additional benefits would arise from insurers applying the portal concept to the technology of electronic claims:

* Claim-handling time would be reduced in all phases, including investigation, processing and settlement. This would result in better customer service and time savings for adjusters.

* Paper trails would become electronic trails.

* Document management would be greatly enhanced by the electronic capture of documents from any claim participant.

* Document acquisition cost would be all but eliminated: the originators would attach them directly to the electronic file.

* The loss of documents would be minimized and retrieval would be greatly simplified.

* Communication with all claim participants would be more accurate and timely. Inefficient or poor communications – such as voice messaging, faxes going awry, etc. – would all be significantly reduced, as would the associated expenses.

* Reduction in errors. Information is keyed only once, and many of the routine messages would be system-generated. The portal solution would be interfaced with the legacy claims system, thus accessing policy, policyholder and coverage information and populating the pertinent sections of the first notice of loss.

* Fraud would be more easily detected and prevented.

* Performance measurement capabilities would be built within the system, as would connectivity to information databases and automated questionnaires.

Introducing wireless capability to the portal concept further increases the valu
e proposition. How much more effective would adjusters be if they were notified of a claim, had access to the information required and processed the claim using wireless technology? Technology currently exists to receive claim assignments through a ‘Smart phone’ with a link to a claims portal. Through the same link, you can gain access to all your claim information and perform real work. With the ‘Smart phone,’ pictures and statements can be taken and uploaded through the portal directly into the claim file. Imagine the benefits that would result if an adjuster at the scene of a major loss could send photographs through a portal directly to a claim file – a file that could be reviewed by experts located hundreds of kilometers away from the scene of the loss.

The cumulative value of these various benefits would result in significant gains in the areas of efficiency and severity reduction. While it is up for debate what the real dollar savings would be, some believe portal technology could produce as much as a 3% savings in the claims-expense ratio. Additional savings in loss payments of even 1%, which is very attainable, would represent a very substantial improvement in the bottom line of any insurer.

Customers would also experience significant benefits if insurers used a claims portal. In addition to dealing with an adjuster who will be much more efficient and available to receive customer calls, customers would be able to report claims and check their claims status online; receive immediate confirmation of developments on their claim; or perhaps even receive claim payments electronically. Customer satisfaction will be greatly enhanced; this will ultimately lead to greater customer retention.

PORTAL CAPABILITIES

While no one, single technology ensures the success of a portal, a portal must have a number of capabilities in order to be effective.

* Ability to integrate with other systems. This avoids the need to re-key information and minimizes errors and inefficiencies throughout the claims supply chain.

* Established standards for sending and receiving data from other systems. A typical way to do this is through Web services and XML datagrams.

* Security. Multiple insurance companies will be using the same portal, so it is essential that data from one company is completely inaccessible by another company. This is dictated by both good business practice and PIPEDA (Personal Information Protection and Electronic Documents Act). Similarly, vendor accessibility must be limited to information they require to do their job effectively.

* Scalability. This describes how quickly and easily a portal can handle increased business volume. Web sites built with a three-tier architecture – encompassing three distinct sets of code for (1) displaying data on your Web browser, (2) executing business logic-like edits, and (3) storing and retrieving information from the database – tend to be the most scalable.

* Financial stability. The acceptance and growth of portals is unpredictable. Even the most well known portal, eBay, took seven years to reach US$1 billion in sales. It is therefore important to choose a portal vendor that has the financial stability to stay in the business for the long run.

Insurers that embrace the multi-participant portal concept of claims adjustment will not only avoid the pitfalls of a proprietary system, but they will benefit from reduced loss payments and claims expenses, improved efficiency, enhanced customer service and customer loyalty. Most importantly, insurers will see a significant improvement to their bottom line.