Jonathan Clark and Norman Mitchell say the future of claims processing lies in combining the benefits of a variety of information technology tools, old and new.
It was recently said: "Technology provides a long-term positive impact for society but creates short-term instabilities". While that view was expressed in mid-2002, it could readily have been offered over 150 years ago when the first steam engines were seen to change society forever.
Research by numerous global management consultancies has suggested that the use of technology can help the insurance and risk transfer markets to achieve positive, dramatic and sustainable results in the handling of claims, by speeding up the claims process. The question that arises is: do we need to accelerate the claims process or do we need to improve our ability to make decisions by better analysing the information that claims generate?
Three principal areas need to be considered: the challenges of technology, including the use of the web to create business links; information management; and the changing nature of claims in today's technological environment.
The challenges of technology
While the vogue is to describe claims systems as `web-enabled', few would describe their systems as `phone-enabled' or `fax-enabled'. Yet these technologies continue to assist in accelerating the claims process. Mobile phones allow easy contact from an adjuster on a remote site to a claims team, wherever they are in the world, 24 hours a day, seven days a week. A globally enabled mobile phone is a simple tool, but it can be used to transmit data as well as voice. When a mobile phone is linked to a mobile fax machine, a very powerful data transmission set-up can be established.
However, this technology is not usually considered when thoughts turn to accelerating the claims process. Generally, people think of the internet and specifically developed claims handling systems. So, an adjuster in the field could use a mobile phone and a simple personal digital assistant to access a web-based claims system, update information and then transfer it rapidly to an insurer, a broker or a corporate client.
The desktop that contains a claims folder, claims contacts and policy information allows the adjuster to validate the policy, clarify any outstanding policy issues and update reserves remotely. An example of this type of system, currently in use within Crawford Latin America, is GRA eClaims. This is a global web-based claims handling system. It is aimed at multinational accounts with high volume claims and it works in synergy with other systems owned by Crawford & Company. All claims information around the world can be stored on, and accessed from, a single database. This means that GRA eClaims allows for the development of a uniform and consistent claims handling process.
Customers' worldwide claims are registered on the database and driven by proactive, centralised claims handling by means of diary systems within the database. In this way, bespoke service level agreements, which have been developed with individual customers, can underpin the claims handling response to ensure that agreed guidelines and defined standards are met.
Similar approaches exist within Crawford Latin America's dedicated web-based claims handling system, Hispano Americano. The software centralises all information on each loss - including adjusters' reports, photographs and video footage - in a single database which is updated on a continuous basis. The system automatically generates correspondence to comply with local regulations, highlights applicable policy terms and conditions, records claim documentation and logs adjusters' time and expenses. It also incorporates a proactive diary facility to expedite handling, and automatic email alerts can be incorporated so that key players in the risk transfer mechanism can be notified of progress.
Hispano Americano is transparent and enables Crawford clients with appropriate security privilege to review all aspects of the claims handling procedure at any stage, from start to finish. The system is already installed and running within our Chilean, Brazilian and Mexican operations, and is currently being installed in Venezuela and Colombia. Peru and Argentina will follow soon.
The level of security required in such claims systems must be at a level consistent with online banks but, at the same time, it must be flexible enough to allow privileges to be set on a per user, per claim or per column heading basis.
One note of caution needs to be offered: seeking to manage both fraud detection and legitimate customer expectations through an internet site, at claims intake, is not necessarily straightforward. Claims intake, when claims are first notified, should involve live interaction with an experienced case handler. This is a critical success factor in both triaging effectively and managing the final cost outcome of any claim. The telephone is an excellent medium for this interaction, if an on-site branch is not readily available when, for example, a major storm or flood strikes.
First contact needs to be made with a knowledgeable and experienced person. This is no longer an arena for `dumbing down', despite industry assertions to the contrary. There is clearly a role for business-to-consumer internet interactions once the claim is established. It is possible to share information rapidly through a single electronic file or through email updates. The style of approach that can be implemented follows the CCF (contact, click, face) model.
Systems such as GRA eClaims have been operating for the last five years and are consistently enhanced and improved to allow 24-hour working to exist alongside enhanced contact with operatives in the field. The critical dimension in this programme is the ability to share information.
Much of the thought behind accelerating the claims process is based around linking systems together using the web and this is an established approach within Crawford. However, the future lies in the use of a variety of information technology tools.
The `laptop' was often seen as the ideal tool for the field adjuster, but this is a cumbersome device and, while it offers many positive facilities, it is not as easy to use as, for example, a PDA.
Using specifically designed PDAs linked to the GRA eClaims facility, it has been possible for field adjusters, using a bar-coding system on a specifically designed estimating software package, to develop comprehensive estimates of exposure, within very tight timeframes.
A similar approach, using web-enabled estimating software, allows detailed plans of damaged properties to be drawn, estimates to be produced and contractors to be instructed, all through one integrated package and all with a seamless approach. This inevitably leads to a more rapid claims outcome.
But this is not the only area where technology can assist in accelerating claims. Predictive models that are designed to support the claims handling process are now becoming a key element of the claims handler's desktop. Natural disasters pose one of the biggest threats to insurers' bottom lines. While the insurance industry cannot prevent natural disasters, it can certainly start planning for them, in terms of mitigating loss, as well as ensuring a well-rehearsed response when disaster strikes.
There are several agencies that look at predictive models. One of them is Tropical Storm Risk, which is based at the Benfield Greig Hazard Research Unit at University College London. They provide predictive models of storm activities in the Atlantic and Pacific basins. These models look at tropical storms and, of particular interest to the insurance industry, their likely landfalls.
The web site, www.tropicalstormrisk.com, provides the front end for this research activity, which is funded by a consortium that consists of a broker, a major global insurer, a global claims adjusting firm and the UK Met Office. This website is recommended as a useful planning tool to those insurers who wish to review the predictive models that are being developed in this industry. The predictive models are supported by accurate one-month forecasts from the UK Met Office, and other agencies.
With personal lines, databases allow personal injury claims settlements to be monitored and calculated. This provides the claims handler with a more rapid method of resolving what can be complex claims issues. The consistency that these databases provide allows the claims handler to negotiate with confidence.
While it is a simple tool, a spreadsheet which considers the impact of, for example, a multi-claimant product liability claim, allows the claim handler to identify the hot spots in any claims handling programme and to home in on the areas of quantum which may need most attention.
The transparency of the information provided allows all involved in the claims process, whether claims handler, insurer or reinsurer, to understand both the way in which a reserve has been established and the potential basis for the settlement of the claim.
A single, common view of claims, shared through the web, ensures that the information available is of the highest quality. It also enables reports to be streamlined and to address specific policy or tactical issues.
On the subject of information management, data mining approaches are increasingly being used on large scale TPA programmes to establish underlying causes of loss. We might, for example, find that in one subsidiary of a major corporation there have been a number of minor property losses, various employers' liability claims and one or two small product liability claims. A detailed review of the underlying causes might show that poor engineering standards are the cause. A more detailed examination might shows that these poor engineering standards are specifically related to a cost cutting programme that has seen maintenance schedules minimised. The corporation is now in a position to address this issue before a major claim ensues.
New risks and claims
The pace of change in technology has seen a need for adjusters handling claims to understand the individual technologies and their specific risks. As corporations transform into a system of globally integrated networks, we are seeing the rise of the `digital production line'. This line automatically draws supply to a manufacturing location and links them to a distribution network taking goods to the end user. Inevitably, this sees an aggregation of risk, and the technology that sits at the heart of this must be secure with good back-up facilities. The organisational risks that arise include delivery logistics and the blurring of organisational and jurisdictional boundaries. For the claims handler, the issues that will arise relate to understanding a global market and understanding who are the competitors, if any satisfactory loss mitigation activities are to be carried out.
It has been said that technology provides a long-term positive impact. We have already witnessed that impact and there is no doubt that we shall continue to do so. The short-term instabilities that arise almost certainly occur as we try to understand how best to harness the technologies to provide better services. Someone with an email box full of incoming mail may not be so sure that the technology now available is accelerating claims. However, web-based systems, combined with the ability to work together and to access information rapidly and effectively, provide the means by which accelerating claims with technology can be achieved.
We live in a world where the telephone continues to provide a means of accelerating claims using well-established technology, the long term positive impact of which is still felt. The web and other, richer information technology-based elements can also be of long-term benefit to the industry, and claims handling in particular.
By Jonathan Clark and Norman Mitchell
Jonathan Clark is the managing director of International Business Solutions Group, a division of Crawford & Company. Norman Mitchell is the regional managing director for Latin America at Crawford & Company.