1 January 1970Bermuda analysis

Claims handling: wising up

Change can be a daunting prospect for companies. Many fear the unknown and its potential pitfalls. But as Gary Markham, chief executive of LSG, explains, positive change—such as updating business practices, centralising information and educating the workforce—can have lasting benefits for any firm. And the same is also true for the claims process.

How important is education in strengthening the claims process?

There is a fallacy that claims are the butt-end of the insurance industry because of premium income which has been the driving force of insurance growth. But I think because of the economy and what has happened in recent years there has been a refocus upon claims and, with that, the education of the claims handler—the person truly at the coal face—has become all the more pressing. The education of these people—and I mean that in the broadest terms—and the tools they are given to be more effective in their jobs are essential components of this.

"The claims handler is required to fill out a report card that is made up of a quantitative and qualitative assessment of the service provided by the outside expert."

Due to the economic circumstances the number of files the claims handlers are dealing with each day has increased, so the time available per settlement is less. This means that they end up rubber-stamping claims which can result in less than the best settlement outcomes. Educating staff as to what tools are available to help them manage their time better therefore becomes an important part of strengthening their capabilities. And that is where we come in. Litigation or vendor management is really the space in which we sit, enabling your people to be more empowered in the work that they do. We help them to make the most effective use of their time when dealing with claims and highlight the tools available to them.

How can claims best practice be implemented within a captive?

With sizable international organisations it is essential to establish centralisation. One of the most effective drivers which deliver the best net results in claims outcomes is the centralisation of control over the selection of professional service providers: lawyers, expert witnesses and loss adjusters. Most firms allow their claims handlers to assign cases to any law firm they care to, and on a case-by-case basis. The vetting process from a vendor management and procurement process really isn’t coming into play. Centralisation brings that knowledge and the buying power of the company to the fore. Having an objectively measured panel of experts at the right rates, in the right places and with the right skill sets, requires centralising.

However, centralising can be sensitive and on the consulting side this is where we come in. Can the various teams prove that they are getting the best results and the best price from the experts they bring in? The answer to that, too often, is ‘no’. Centralisation of expert information helps to deliver the best results. Such an approach needs to be led by senior executives, with their support certainly helping to carry the day. Executive buy-in is key to bringing about this sort of behaviour modification.

What savings do such initiatives bring to a captive?

Hard cash savings arise from the process with the introduction of work practices such as the paperless office. Savings from using no paper are massive and also support your corporate social responsibility. Moving up the chain there are tangible savings associated with budget control. Nowadays, it is possible to track and format budget control systems and centralise systems and information. If the budgets are not met the reserves are also going to be out of balance, and then the actuaries start getting all twitchy—and that’s not good either.

It’s all inextricably linked. Centralisation can also reduce the time spent in litigation and the associated costs, and enable you to deploy best in class experts to settle your claims and have a closer relationship with your experts, rather than simply dumping the case on outside service providers. These tools enable you to build up closer relationships with those pursuing your claims.

What part does education play in the litigation process?

We have clients that operate across 76 countries, so trying to have a consistent platform for litigation management across many jurisdictions can be very difficult. Again, I’ll bring it back to the centre. If there is an internal programme that has been established to apply consistency around the use of a single workflow that is being managed by everyone, it enables a level of transparency that helps you make decisions. It enables you to have the data and the conversations with outside experts that help the claims handlers be more effective in their role.

On the litigation side you are employing outside experts because they are the people you employ at the pointy, nasty end of your risk business— that’s what they are good at. How you manage them, however, is as important as the work they do for you. Centralising information on outside experts enables your entire global organisation to tap into information regarding the performance of our international litigation experts.

How do you assess the quality of outside experts?

At LSG we use report and score cards to assess the quality of the service provided by outside experts. In every case the claims handler is required to fill out a report card that is made up of a quantitative and qualitative assessment of the service provided by the outside expert. This then rolls up to a score card at the expert firm level, which can then be utilised by the senior management to assess the performance of the firm or its performance as an insurance carrier. At the end of the year you are able to compare competitor experts’ score cards and raise questions regarding how they have performed vis-à-vis the competition. Sharing best practiceis something that can come out of this process and we certainly don’t want to be only about the stick, it is also about the carrot.

Such systems also enable you to see how your claims staff are managing their outside experts—a sort of inward look at your performance. Again, this is about management. Do you let them run over budget, do you always respond to requests for information? It is very much a twoway street. For the claims handlers themselves we are able to monitor their workflow and examine exactly where particular tasks are sitting in that workflow. If tasks are being put on hold, we can flag that up. This fosters a change in behaviour as the transparency of the workflow means everyone within the organisation knows exactly what needs to be done, and by whom, in the claims process. If a claims handler has been irresponsible in his or her duties and failed to fulfil invoices in a timely fashion so that the company benefits from discounts that are raised centrally—well, that’s lost money. We produce reports that show ageing; you are then able to use this information to show how much particular claims handlers are losing the company. If you have that level of centralised control, you can avoid such issues.

How significant an issue is privacy and confidentiality in the claims process?

We are obliged to ensure that we comply with all the regulatory andstatutory requirements concerning the protection of information. Part of that is hosting—how is it protected from a security point of view, is it prone to attack? It is essential to maintain this integrity. We take the issue of security extremely seriously: one slip-up and you’re in trouble. People are very worried about privacy and they should be—there is litigation and claims data that all need to be maintained securely.

Any final thoughts on the benefits of centralisation?

The simplification of claims systems is something that could really help in the daily life of claims handlers. At present, many claims handlers are dealing with 10 to 15 separate systems and that is counterproductive and time-consuming. We try to lift a lot of that load from their shoulders by putting everything in one place in a way that enables them to manage all aspects of the claims process, and we generate data that will help educate them about future claims handling. That function can be handled much more seamlessly. Our role is to help our clients get their claims adjusters be the most powerful and empowered individuals they can be, to get the most effective use out of those experts, and to all do that consistently and demonstrably.

Gary R. Markham is chief executive at LSG. He can be contacted at: grm@lsg.com