Many insurers have indicated that reining in claims handling costs is a priority this year and beyond. After examining the root cause of inefficient claims management, insurers have concurred that the onus is on the absence of historical databases.In a customer poll conducted by Jersey City, N.J.-based Insurance Services Office Inc. (ISO), 46% of U.S. insurance organizations identified the lack of historical databases as a major cause of poor claims management.
The survey follows an earlier poll conducted by ISO, a provider of data, analytics and decision-support services for insurers, which revealed that reducing the rising cost of claims handling is the single-most important goal for 2004 to 78% of insurance companies that responded.
The poll asked insurers to identify the most likely reason for paying injury claims incorrectly. Of the five options, just under half (46%) identified lack of historical databases as a major cause, and 20% cited lack of medical knowledge as the second most probable reason. Sixteen percent identified inadequate negotiation skills, while 13% cited claims adjusters' inexperience.
An important step
"Empowering claims handlers with more information about similar claims and injuries is the most important step insurers can take to achieve accurate claims assessments," says Lee Fogle, vice president, claims services, at ISO.
A robust relational database that incorporates a medical encyclopedia, based on the International Classification of Diseases (ICD), can provide claims handlers and managers "a complete claims history audit trail at their fingertips," Fogle adds.
Such a tool also provides more efficient management reporting practices, improves claims handlers' medical knowledge and increases their negotiation skills, he says.
Best practices
Combining best practices with professional knowledge is critical to establishing high claims-handling standards, Fogle explains.
For example, when one international client implemented ISO's Claims Outcome Advisor (COA), the company reduced its personal injury claims costs by 14% within the first six months of deployment.
Fogle says carriers need a higher granular level of detail in their medical bill review systems.
For instance, when determining claim settlement amounts, it would helpful if insurers could determine that they had paid out claims settlements in 2003 for 37 broken right ankles for individuals 40 years and older.
Rather than having this rich level of detail reside in a historical database, these details are only retained on an individual basis by claims adjusters, according to Fogle.
The lack of historical databases, he adds, is causing poor claims settlement trends because insurers may pay too much for an injury settlement in one instance while paying less than they should in another case for the exact same injury.
One individual may receive $10,000 while another receives $20,000 for the identical injury because the latter may have had a better attorney, says Fogle.
Having a robust historical database in place would enable insurers to place a great deal more structure in their settlements-capping them and making them more consistent, he adds.
