During the past 20 years, insurance companies and third-party administrators (TPAs) have dramatically changed and minimized their claim management processes.
Considering the current economic conditions in the United States, expect further reduction of claims staff as a cost-saving effort on the part of insurance companies. With these changes, many processes performed on behalf of the insured (you) have been reduced or eliminated. If your current insurance broker does not have a claim professional acting on your behalf, you may be surprised at the results of a claim audit.
Consider an Audit
Depending on the pricing mechanisms for your insurance policies, previous claims either affect your total premium, based on prior losses, or your bottom line due to the deductibles for which your business is eligible. There are many reasons to consider allowing a claims advocate to audit your open claims.
During an audit, claims advocates focus on several aspects of your open claims. An investigation determines whether claim reserves, amounts set aside for unsettled claims, are adequate, especially whether the reserve amounts are set too high. A reserve that is set too high negatively affects future premium pricing, as companies with high reserves are often viewed as less desirable by insurance companies. Claim advocates also review the claim handling processes by your insurance company to make sure that proper care was taken and no steps were missed while managing your claims. Finally, for audited open claims, advocates set appropriate and aggressive action plans for claim resolution.
Missing Pieces
Recently, insurance carriers, TPAs and outsourced claims managers have cut costs by rationalizing the reorganization and consolidation of their operations. This often means the loss of more experienced, senior claims professionals. With these changes, details of your claims could remain unmanaged, costing your company money in terms of premium pricing and lengthy claim processes.
The use of claim management technology by insurance carriers is expanding. Many carriers currently utilize databases for handling and reserving claim files. While technology is efficient and constantly advancing, it is impossible to incorporate the human element into a computer program. There are several individuals involved in most claims, including the plaintiff, the plaintiff’s attorney, physicians and more. Each individual drives the direction of the claim differently. The idea that a claim professional can rely on a computer-generated projected claim outcome, established at the onset of a claim, is not realistic.
The outsourcing of claims and unbundled claims services by insurance carriers and TPAs has led to a rise in the overall cost of claims. While insurance carriers audit the big picture performance of their services, they do not address how individual accounts are managed. Only claims advocates acting on your behalf zone in on the details of your specific claim management. While State agencies perform audits of insurance carrier processes, they generally have objectives unfocused on individual clients.
An Insurance Carrier’s Perspective
Most insurance carriers do not object to claims audits when they are approached properly by claims advocates. A discussion of potential audits is better received when a claims advocate meets with the insurance carrier at the carrier’s location. Clear communication regarding the objectives of an audit should be shared with the insurance carrier or TPA.
As a best practice, risk managers should consider the benefits of having a claim audit performed on their organization’s insurance program. An audit provides an overall analysis of the financial impact of claims on your company. Allowing a claim advocate to audit your claims could potentially save your company thousands of dollars, as well as a great deal of time.