Electronic and interactive oversight over the claims handling function can reap considerable rewards for captives. Gary R Markham of LSG talked us through the benefits.
“The claims handling function has a fair amount of mystique surrounding it,” says Gary R Markham, CEO of business support specialist LSG. By implementing a web-based, interactive claims handling system such as LSG’s Advocator System, captives can create greater clarity around the process. With many depending on often complex paper trails, and with the cost of litigation and the time taken to pursue contested claims significant and increasing, there is considerable scope to improve the claims process, said Markham.
The lead process behind systems such as LSG’s Advocator System is the ability to benchmark claims handling performance, he explained. The approach enables the captive to measure performance against key parameters such as budgets and a timescale for claims.
“If a captive is fed up with budgets being eroded and limits constantly broken, it can monitor the cost and duration of claims litigation more closely.”
This is done through a web-based system accessible through the browser, which enables a captive to monitor in real time the performance of the claims handling function. This oversight helps to provide invaluable insights into the performance of the claims team, while helping to shape and drive behaviour, said Markham.
“We come at the issue from a data and metric-driven perspective,” said Markham. Such an approach means that captives can recognise, understand and respond to issues in the claims handling process, many of which they have been dealing with for years, but haven’t had the capability to pinpoint and resolve.
“Using the Advocator System captives can expect to achieve considerable cost savings associated with the claims function,” said Markham. One of the major drivers of this is a reduction in the average number of days spent in litigation, he explained. Oversight enables captives to set up what Markham calls “electronic mousetraps” that help to flag up issues in the claims handling process and help to alter the behaviour of those involved.
“Such an approach is helping to reduce the average indemnity cost—a bold statement to make in the claims space,” said Markham. The system also helps to reduce the number of days a case is open, driving down the money spent on it. With many captives currently lacking sufficient oversight of their claims function, they face extended days in court and insureds aren’t being paid as quickly as they would like, explained Markham. Interactive claims handling systems “enable the captive to make settlement offers more proactively”, he said.
Interactive online systems also allow captives to move away from a paper-based office, where it is often difficult to achieve a firm handle on budgets or expenditure and to determine how functions are performing against plan. “A captive may want to take certain steps, within a particular time frame and budget, but with all that paper, it can be difficult to track.” Applications such as the Advocator System can help a captive overcome these challenges.
“Electronic tracking can help to flag up cost over-runs, and you can tweak the system so that budgets cannot be burst”—as is all too often the case in a paper-based and less accountable setting. The system sends out alerts and flags to claims adjusters as events unfold during the lifetime of each case, helping to instil a more proactive approach to the claims process.
Markham said that implementing such changes is likely to be easiest among single parent captives that tend to have sophisticated risk management departments, but it is evident that the benefits of oversight are equally invaluable to group captives. The challenge is in winning support from multiple stakeholders, said Markham.
“The leadership function tends to be diluted in group entities, so securing buy-in can be a challenge,” said Markham. “It is about finding a champion for what we are doing”, but in a complex system with multiple moving parts the value of oversight is all the more pressing.
The Advocator System is applicable to any line that faces claims dispute, said Markham, with the system helping to drive best practice and reduce cost. For captives that are facing costly litigation and that are looking to streamline their operations, it could be a welcome addition to their toolkit.
LSG, captive insurance, claims handling