Litigation Claims Management, Medical Claims Management and Independent Adjuster Management programs are programs designed to promote exceptional service with maximum expense containment —but are they really? Insurance companies all have Claims Vendor Management programs in place, yet average claims costs and expense ratios continue to rise.
Strategic sourcing, procurement and vendor management are interchangeable terms used to select and manage external vendors. In its simplest form, utilizes the following rules:
1. Vendor selection
2. Rate negotiation
3. Invoice audit and compliance tracking
The methodology is a fairly uniform “one size fits all” solution that encompasses all industries and product lines including insurance claims -or does it? The ultimate goal of strategic sourcing is to improve the value-to-price relationship ((i.e. achieve cost reductions while maintaining or improving quality/service). Claims vendor management is an anomaly that does not fall into the global framework, because it does not take into account expense ratios (cost of expense against payout).
It has repeatedly been proven that the longer a claims file remains open, the greater the ultimate settlement amount. For example, the longer a vehicle remains in the body shop, the greater the car rental bill; the longer a file remains in the hands of an independent adjuster, the greater the expense fee. The longer an independent adjuster-handled flood claim takes to resolve, the greater the resulting damage, repair cost and I.A. expense.
This reality is most observable in litigation claims management, where negotiated hourly rates mean very little. A senior lawyer experienced in a specific line of business may charge $500/hour. A junior lawyer with general claims experience may charge $200/hour. The senior lawyer is able to resolve the files in six months, while the junior lawyer may take two years utilizing a host of “research hours” and collaboration with senior partners (at the insurer’s expense) along the way, to achieve the same result. In this instance, the higher prices lawyer is the most economical choice. Using the same selection methodology, an insurer would certainly not want a senior partner on a subrogation or collection file.
The most important metric in claims handling is not the actual expense, but the expense ratio. The key to effective Claims Vendor Management encompasses a unique blend of specific claims objectives:
1. Identify and document clear goals and objectives.
2. Directing the right file, to the right vendor, with full document tracking and management.
3. Monitoring compliance and performance results on every file.
4. Identify and respond to trends, logjams and adverse file development in Real Time.
5. Invoice review and management against stated rules.
6. Tracking expense by phase and actual final settlement.
A portal is common platform for claims departments to communicate with their vendors. The problem is that every vendor has a specific portal designed to meet their own needs.
- Vendor-sponsored portals are designed to “hook” insurers into using only one vendor.
- Competitors will not each use other’s portal —unfair advantage.
- Staffs have to learn multiple systems for each vendor and each vertical/claims specialty.
- No uniform metrics or Executive Management reporting across all claims verticals (Litigation, medical, I.A. investigation etc.).
The solution to the problem is single, customized, Insurer-controlled portal that will:
- Allow all claims vendors to communicate on a secure, insurer-customized platform.
- Operate in multiple languages and include subscription partners, reinsurers and brokers.
- Permits role-based view, action and report generation access.
- Monitors performance and compliance against actual results.
All claims management programs but especially litigation and medical claims management programs need to do much more than monitor expenses. Without a comprehensive solution that ties all aspects of claims handling together, claim indemnity and expense ratios costs will continue to rise uncontrollably.
For Media Contact:
FileIns Systems Inc.
Judith R. Kay (President)