Chapter 5: Claims Handling System - Insurance Claims Handling (non UK)

What relates to the storage, production (or processing) and communication of information and plays an important role in the insurance market place?

Information technology (IT)

How will IT's role in the insurance market place make a difference in the future?

It can make the difference between success and going out of business

What is true about a company's IT strategy?

It will encompass it's whole organization

How would a company's IT strategy encompass it's whole organization?

Underwriting information can and will be used in claims handling (and vice versa)

Why do insurance companies have digital strategies for underwriting, selling and marketing products?

To meet the ever changing needs of the customer

How can insurers benefit from the provision of better quality, faster and more relevant management information?

• In relation to claims

• To respond to and meet their customers' expectations

How does technology improve case management and reduce operational costs?

Through automated or online claims adjudication

What does effective control and planning depend on?

Information being processed in such a way as to have some meaning to its recipient

In IT, what is information known as?

Data, 'the raw material'

What will a manager use information to do?

Make informed decisions that are based on their experience and prior knowledge

How must an insurer's claims management system be designed?

With reference to a company's corporate claims philosophy and their claims management procedures

What should an insurer's claims management system be designed to do?

• Record appropriate information

• Process information in a way that is compatible with the company's overall objectives

What are insurers and other technology providers increasingly using online services through?

Electronic portals

Why do insurers use technology to share data and aid in decision making, especially in motor claims?

Electronic recoveries are possible using an online portal to share information about the claim

How is IT only one element of a much bigger network?

It controls the technical issues of the system that has been developed to meet an all-encompassing objective

What do you need to be aware of to understand the role of IT in claims handling?

The characteristics of insurance claims

What are the characteristics of insurance claims?

• Volume of claims

• Complexity of claims

What is the number of claims that an insurer has to deal with?

Volume

What are the types of claims transactions that need to be processed by insurance companies?

• Claims reserving and estimating

• Claims payments

• Recoveries (including reinsurance recoveries)

Why should an insurer have systems and controls for their volume of claims in place?

• To account for foreseeable peaks in demand

• To allow the insurer to continue to deal with claims promptly even in such circumstances

What should be considered in regard to the complexity of individual claims handling?

• The claims process requires communication between insurer and insured (and broker, if applicable) and could also involve loss adjusters, legal experts and witnesses

• The greater the number of co-insurers, the greater the complexity

• Are brokers involved? If so, they will often handle the flow and/or production of documentation.

• Insurers may require reinsurance to reduce their net commitment to an acceptable level

• Some claims may be fraudulent, repeated or exaggerated and may require more detailed investigation

What are the steps in the claims process?

• Notification

• Agreement

• Settlement

Why is it likely that a claim on a commercial risk will be very complex?

With commercial insurances, especially bigger risks, there may even be hundreds of insurers

Why would the fact that brokers are involved make the claims handling process more complex?

They will often handle the flow and/or production of documentation

Why would insurers requiring reinsurance make the claims handling process more complex?

Where a loss is reinsured, details of the claim will need to be passed to the reinsurer

What is true about the number of people that can be involved in a claim?

Many people can be involved, especially for larger, commercial claims

Why do complex claims systems need to be in place?

To ensure that the information is collated from all the potential sources and is analyzed and passed on as appropriate

What are the sources where information for a claim may be gathered from?

• Witnesses

• Brokers

• Other insurers

• Loss adjusters

Who would information about a claim be passed to after it has been analyzed?

• The reinsurer

• Specialist claims investigators

What does the claims handler need to be aware of at all times?

The status of the claim as it passes through the system

What does an insurer's claims system need to be capable of?

• Processing large amounts of data

• Processing it quickly

• Processing it accurately

• Delivering information in a meaningful manner

What must the application of IT into a claims system be accompanied by?

• A review of present claims procedures and practices

• The employment of new methods of operation, if appropriate

What is not a substitute for experienced people?

A powerful, flexible and adaptable claims system

What are IT systems only as good as?

The people who have programed them

What is true about IT claims systems in regard to their capabilities?

They can be designed to carry out complex and important tasks and decisions, but will have certain limitations

What makes an IT strategy effective?

It balances the efficacy of a comprehensive IT solution with the skills and talents of experienced claims staff

What can affect the choice on which claims management system an insurance company chooses to use?

• The structure of the company

• The type of business written

• Management decisions about the extent to which their computer systems should be developed

What information is typically recorded for all claims, regardless of the class of business?

• The name of the policyholder

• The policy number and claims reference

• Details of the claim, including dates

• Contacts

• Payments

• Reserves

What information used in the claims process would have been previously recorded at the underwriting stage?

• A description of the risk

• A description of the cover provided

• Supporting risk information

• Whether there is more than one insurer and if so, the name of insurer, its share of the risk and respective references

What is true about the information gathered at the underwriting stage and when a claim is made?

They are used in conjunction with each other during the claims process

What needs to be considered before considering the benefits and difficulties of using IT in the claims handling process?

The main aims of using IT

What are the main aims of using IT in the claims handling process?

• Reduce the cost of claims administration

• Improve the service provided to the insured

What are the main benefits of using IT in the claims handling process?

• Single data entry

• Reduced use of paper files

• Quicker claims settlement

• Electronic authorization of claims payments

• Increase in communication channels

• Portals and extranet services

What benefit of using IT in the claims handling process eliminates the duplication of effort and data?

Single data entry

How is single data entry a benefit of using IT in the claims handling process?

• This eliminates the duplication of effort and data

• Less people involved in the data entry process should mean fewer errors in data inputting

What benefit of using IT in the claims handling process has the associated benefit of quicker distribution of claims details, especially if there is more than one insurer?

Reduced use of paper files

What is an example of how the reduced use of paper files benefits the claims handling process?

Lloyd's files are often shared among managing agents electronically and in many general insurance claims departments there is no longer any reliance on paper files at all

What benefit of using IT in the claims handling process is able to happen because information is distributed faster?

Quicker claims settlement

What benefit of using IT in the claims handling process speeds up the claims settlement process?

Electronic authorization of claims payments

How is the electronic authorization of claims payments a benefit of using IT in the claims handling process?

• Speeds up the claims settlement process

• It also results in a reduction of paperwork

• Minimizes bank charges and prevents unnecessary re-entry of data

• Automatically generating checks or automatic transfers of money, thereby ensuring that money is paid quickly and in the most efficient manner

What benefit of using IT in the claims handling process allows for greater customer service, quicker communication and more efficient claims handling?

Increase in communication channels

What are the communication channels enabled by IT that have benefited the claims handling process?

• Email

• Social media

• Live chat

What benefit of using IT in the claims handling process allows customers to self-serve and obtain real time updates on the progress of their claim

Portals and extranet services

What are the less tangible or associated benefits of insurers using IT in hopes of gaining a competitive advantage?

• The improved service should mean that more customers are retained

• Technical assistance and/or advice can be given to the claims handler via the IT systems

• Streamlined administration

• The allocation of appointments by the computer system based on priority and/or the date of loss notification (e.g. loss adjusters, customers etc.)

• Automatic checking for fraudulent, exaggerated or repeat claims

• Automated payment of loss adjusters' fees

How can the technical assistance and/or advice provided by the claims handler via the IT systems provide a competitive advantage?

The handler could be prompted to ask certain questions or adopt certain tactics for a given scenario

What is an example of how streamlined administration via IT systems provide a competitive advantage?

The use of online databases for replacement goods

What are the basic benefits of using IT in claims handling?

• Administration is streamlined with a reduction in the duplication of effort and an increase in processing speed

• Information can be stored, collated and communicated efficiently, resulting in claims being met promptly and customers retained

In China, what do some insurers use to handle medicare claims?

Mobile APP

How does the use of mobile APP help Chinese insurers handle medicare claims?

A claimant/insured can upload photographs of their diagnosis report, doctor's notes, medical invoice, ID of the claimant and fill the claims form to complete the claims process

What are the difficulties associated with the use of IT in the claims handling process?

• If the emphasis is placed on IT as the only solution to claims handling, there may be an increase in claims costs

• Non-standard, large or more complex claims may not fit within the framework of the IT system

• The system may be more difficult to operate, less flexible and more expensive than initially considered

• There may be a possible adverse cashflow effect

• The delivery of a claims service arising from a centralized, electronic function

• Productivity may increase, but this may result in contained, rather than reduced, costs

• The system will need to be maintained and updated, which can be expensive

How do non-standard, large or more complex claims create difficulties with the use of IT in claims handling?

They may not fit within the framework of the IT systems, meaning it has to be incredibly flexible to cover all eventualities

What is the possible adverse cashflow effect of using IT in the claims handling process?

Claims payments are speeded up, but premium payment and reinsurance recoveries may not be

How can the delivery of a claims service arising from a centralized, electronic function be a difficulty of using IT in the claims handling process?

• It may result in claims being dealt with by process rather than observation

• Personal service may be reduced, removing flexibility and initiative

What needs to be considered when choosing or developing a claims system?

Customer expectations

Who are the types of 'customers' that need to be considered when choosing or developing a claims system?

• The insurance company itself, as a customer of the supplier of the system (whether the IT department is internal or not)

• The general public and the businesses/organizations who are customers of the insurance company

How may the use of IT in the claims handling process attract insurds?

Through the use of state-of-the-art claims services

While the insured may be attracted to the insurance company because of their state-of-the-art claims services, what else must be analyzed?

The business needs and associated expectations of the insurer itself

Why must the business needs and associated expectations of the insurer itself be analyzed when choosing or developing a claims system?

To ensure that the information recorded and collated is of a nature and quality to match the needs and expectations of all customers

What should an insurer expect from a claims management system?

• The ability to process large amounts of data

• The ability to process data quickly and accurately

• The delivery of information in a meaningful manner

What should a claims management system be flexible enough to deal with?

• Claims notifications

• The involvement of loss adjusters and other experts as appropriate

• The correct amount of claims details appropriate for the class of business written (and the likely types of claim expected)

• The authority levels given to different staff grades, both in terms of reserving and the making of payments

What may have a large influence on the design of the claims management system?

The expectations of the ultimate customer, the policyholder

How can policyholder expectations have a large influence on the design of a claims management system?

Customers' expectations will be surveyed before the design process begins, establishing the basic quality threshold

What can be assumed in regard to customers expectations of the claims management system?

General expectations, like quick responses and quick settlements

What in regard to customer expectations needs more consideration when designing a claims management system?

Specific customer expectations

When are many insurance companies reluctant to introduce new, innovative procedures?

Until they are accepted by the public at large

Why are many insurance companies reluctant to introduce new, innovative procedures until they are accepted by the public at large?

New ideas are difficult to evaluate in terms of expectations

When choosing an insurer, what may customers, both personal and commercial, have?

Some sophisticated knowledge of what they want and what is available

What do customers expect from their insurance company?

Innovative, reliable and cost-effective solutions

Why do insurance companies often have complex structures?

Due to their size and involvement in a varied number of activities

What are the activities that an insurance company is involved in that makes it complex?

• Underwriting

• Claims investigation and payment

• Marketing

• Investment

• Policy issuance

• Product development

• Policy administration

• Grievance redressal

What enables a company to meet its stated business objectives in an efficient manner?

It's organizational structure

What are the ways that an insurance company can structure it's departments?

• Function

• Division

• A blend of both

What are examples of insurance companies structuring its departments by function?

• Claims

• Underwriting

What are examples of insurance companies structuring its departments by division?

• Product

• Geographical area

What structure of an insurance company is the traditional form of insurance company organization?

Function structure

What is a structure based on the function of an insurance company best suited for?

Smaller companies with a limited range of products

What would the structure of an insurance company based on function look like?

CEO

---> Board of Directors

------>Operational Head of Department

---------> Human Resources

---------> Finance

---------> IT

---------> Marketing

---------> Underwriting

---------> Claims

What are the advantages of structuring an insurance company based on function?

• Employees can specialize in their type of work because all those involved in the same or a related activity are in the same department

• Larger units may be more cost effective due to the uniformity of the procedures used

What are the disadvantages of structuring an insurance company based on function?

• Inflexibility, for example, claims personnel tend to see their role as purely claims handling and may not recognize the need for them to give feedback and communicate with their underwriting and marketing colleagues

• It is difficult to co-ordinate the different functions, e.g. there may be a lack of common interest between the different functions

What structure of an insurance company is adopted by most large multi-product companies?

Divisional structure

What is true about insurance companies that use the divisional organizational structure?

Each division is partially autonomous to the extent of designing, producing and marketing its own products

What is an example of a divisional organizational structure?

• Home Country Commercial Division

• Home Country Personal Division

• International Division

What does the degree of autonomy that each division is given depend on?

• If operations are centralized

• If operations are decentralized

What type of divisional organizations retain authority at the top with little delegation?

Centralized organizations

What type of divisional organization allows for more delegation with divisional managers making more decisions?

Decentralized organizations

What is true about the claims settlement policy an insurer may have when it comes to the relationship between its head office and its office branches?

It may be centralized or decentralized

What does the choice on whether a company's claims process is centralized or decentralized depend on?

• The size of the company

• The type of business being written

When would claims settlements usually be advised to the head office, even within a decentralized structure?

When the claims settlement is very large

Why would very large claims settlements will usually be advised to the head office, even within a decentralized structure?

There are usually limits to the authority delegated to the branches

What are the advantages of using centralized claims settlement methods?

• The required level of expertise is available (which would not always be the case at every office location)

• Accessing records (electronic and paper) and underwriting staff is easier