Feeble information technology systems simply won't meet the Herculean challenges faced by workers' compensation insurance carriers. It's a lesson executives learned the hard way at Crawford & Co., an Atlanta-based third-party administrator (TPA) that handles workers' compensation claims.After identifying the need for software to help with regulatory compliance, Bob Stevens, Crawford assistant vice president of operational compliance, recruited a purchasing team. The team embarked upon the typical purchasing path-searching the Internet for software systems, gathering software information at trade shows and listening to vendor demos.

In the end, the team based their decision on what seemed like the overriding factor: Cost. Soon, however, they found the system fell woefully short. "We used the software for about six months-and realized that it really was not doing much," Stevens says.

First, the system was not user friendly. "It basically just would give users the raw regulations or statutes-and then you would have to sift through it to pull the meat out of it," Stevens says. "I am not an attorney, and my staff members are not attorneys. So, it really was not providing us with any useful information."

Even when the staff managed to find the information they needed, much of it was outdated. That could cause Crawford to base decisions on expired regulations.

Indeed, the system simply couldn't meet the compliance needs of a workers' compensation insurance carrier-needs that sometimes stretch far beyond the ordinary.

"Not all insurance claims are created equally," Stevens says. "Workers compensation insurance claims are the most complex in the industry and therefore require powerful information systems."

That's why carriers need to make sure systems meet compliance, anti-fraud, processing and efficiency goals, industry observers say. Crawford executives had those requirements in mind when they started over in their search for workers' comp software after the first system had failed.


In the second attempt to find the right software, the purchasing team compared each system's capabilities to the company's workers' compensation compliance challenges. Their evaluations resulted in the purchase of AuthenticWeb for Claims, a database of claims-specific regulatory information developed by Wolters Kluwer Financial Services, Minneapolis.

The database breaks down content by line of business, topic or sub-topic, the vendor says. Expert summaries help users understand regulatory requirements and determine their ramifications. E-mail alerts inform users of regulatory changes by subject matter, jurisdiction and line of business. The system also provides forms for completing transactions.

Although the AuthenticWeb system cost more than the company's original compliance system, the investment has proven worthwhile, according to Stevens.

"We are confident that we are no longer running into the risk of not being in compliance with workers' compensation regulations-which can be financially disastrous," Stevens says.

The system helps the staff pay claims within established time and cost parameters. The company no longer overpays claims simply because the staff didn't have access to current regulations.

Crawford's success in making workers' comp software work is shared by Kaiser Permanente, an Oakland, Calif.-based self-insured, integrated health care organization that administers its own workers' compensation program.

Kaiser Permanente recognizes the necessity of big technology to support workers' compensation efforts, says Jim Zelko, Kaiser Permanente's director of workers' compensation.

"There is a great need for data when trying to manage workers compensation claims," Zelko says. "Data is used for a number of different reasons and it's important to have quick access to reliable information."

Kaiser relies on a database from Computer Sciences Corp. (CSC), an El Segundo, Calif.-based information technology company, to identify and then respond to potential causes of injuries by improving working conditions and thus reducing injury rates.

"Let's say we have a hospital in Los Angeles that has had a rash of injuries from slips and falls in the cafeteria," says Zelko. "We would see the volume of the injuries rising in our database and then have loss prevention people go to the site in Los Angeles. They would look at what kind of corrections and preventions could be implemented."

After making the changes, staff members monitor data to make sure the interventions are effective. Such analysis has helped the self-insured healthcare company reduce workers' compensation claims by about 1,000 annually, Zelko says.


The right software and systems also improve customer service, says Jay Smith, CFO of Diamond Insurance, a workers' compensation insurance company based in Schaumburg, Ill.

"We were using a third-party administrator to administer our claims and we decided that we really needed to bring claims in-house to do a better job servicing our clients," says Smith.

To bring the operation in house, the insurer chose ClaimZone Enterprise Editor from Mountain View Software, Kaysville, Utah. The Web-based system enables Diamond to image the entire claims process-from initial report to resolution.

In just one year, the insurer has reduced the number of open claims it is handling by about 50%, Smith says.

Although it's important to have powerful information systems to deal with the complexities of workers compensation claims, it's also vital to work with the right vendor, carriers say.

That's what prompted Michael DePaul, CFO at Louisiana United Business Association (LUBA) Workers' Compensation, Baton Rouge, La., to seek an IT vendor that would form a strong partnership and customize software to meet LUBA's needs.

"Workers' compensation can be a strange and difficult line to write, DePaul says. "Workers' compensation is very data intensive-more so than other insurance lines."

In workers' comp cases, victims sometimes file claims years after the accident occurred, says DePaul. "You might break your arm-and then three years later have to have the arm amputated because of complications. As a carrier, we might not even be writing your policy but we would still have to pay the claim."

LUBA is using a system from Fiserv Insurance Solutions, Cedar Rapids, Iowa. The system processes "reams and reams and volumes and volumes" of data, DePaul says.

Perhaps more important, is the vendor's willingness to work closely with LUBA to meet the carrier's needs.

"I am not a number with Fiserv," DePaul says. "Multiple people there know my name. Their customer service is really good, and they work with us to tailor the program to specifically meet our needs."


Nobody really knows how much fraud riddles the workers' compensation system, but it's a safe bet that the costs are staggering.

Somewhere between 5% and 20% of the workers' comp claims insurers pay are fraudulent, bilking the industry out of something like $5 billion annually, according to the National Insurance Crime Bureau, Palos Hills, Ill.

No wonder workers' comp companies feel like they need help. Assistance is on the way from Boston-based Celent LLC in the form of a report called Insurance Fraud Mitigation Technology: Beyond Red Flags.

In the report Celent urges carriers to use fraud mitigation technology to reduce the dollar value of losses paid and shrink loss adjustment expenses. Look for information systems, Celent advises, with the following features:

* Predictive modeling, which can establish the probability a claim is fraudulent.

* Neural networks, which use nodes working in parallel to develop a fraud score.

* Profiling, in which neural network analysis can identify potential fraud.

* Identity matching, which monitors changes in a person's identity and can thus pinpoint fraudulent activity.

* Link analysis, which examines connections among people, places and things. involved in multiple claims to discover patterns of organized fraud.

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