The commoditisation of insurance and the economic climate is increasing the pressure on carriers to process claims cost-effectively. Larry Jacobson looks at how claims technology needs to be rethought to re-gain a lead in the market
The healthcare and protection insurance industry is operating in a challenging environment, with razor-thin margins and a constant struggle to generate consistent returns. The recession has stalled growth in the sector, while competition for market share becomes increasingly fierce. In response, insurers have three imperatives: trim their cost base, improve efficiency and grow by acquiring customers from competitors.
One fruitful place to look to achieve all three is in the modernisation of the claims process. More efficient claims management has become a key initiative for insurers - to control costs and to increase customer satisfaction. The claims process plays a crucial role in the overall success of a carrier and its long-term sustainability as claims spend is by far the largest component of a healthcare insurer's expenses accounting for up to 80% of the overall costs.
Claims equal only contact
Claims processing plays an equally important role in customer retention. In the insurance business, claims are typically the only, and therefore most significant, contact with the customer. The quality of the claims process heavily impacts on the overall customer experience and can be a major competitive advantage. This is especially true today, as wining dissatisfied customers from competitors is a main growth opportunity.
However, the claims process tends to be slow and labour-intensive and insurers still struggle with multiple systems, siloed business departments and outdated technology that is expensive to maintain. Where more automated systems are used, business rules tend to be embedded in the code, making it very difficult to make changes to reflect increasingly complex market needs. The results are inconsistent and slow processes which are proven roadblocks to demonstrating value to customers.
Following the rules
One method insurers are looking at to help to address these challenges is modern rules-based claims management systems.
A robust rules-based claims management system for providers enables automated management of the claims process, allowing for more control over high-volume operational decisions. Conceptually, this has five major benefits which, taken together, have a transformative effect on the performance and profitability of the claims process: faster claims handling; less inaccuracies; improved call-centre efficiency; increased responsiveness to market developments and reduced fraud.
Automating processes cuts turnaround times. New rules and analytics-based claims systems offer flexibility, speed and consistency and allow insurers to address customer expectations and cost pressure at the same time.
Insurers can employ business rules to their best advantage, adding quick ‘red flags' and applying them to in-coming claims or guiding claims assessors to collect only the relevant information at the First Notice of Loss (FNOL). These rules can be used to perform extra checks to detect fraud, as well as to reduce response time. Insurers can also leverage claim-level analytics with these rules to accurately and efficiently make claims reserving decisions.
Using rules, many claims can be automatically processed. For example, if a claimant has a reliable track record and is making a single claim for treatment of an accidental injury, their claim may need little human evaluation. This saves staff time and enables them to easily identify and focus on complex claims that may require more attention, such as high-risk sports accidents that might have been caused by gross negligence.
With new decisioning services, insurers are able to confirm 50% of private medical insurance claims without referral being necessary. This means faster claims processing, more transparency for customers and less manual intervention required from the provider.
Reducing error ratings
Automation also eliminates the manual data entry function. Therefore the error rate in inbound data can be reduced to an almost negligible level which has a significant effect on customer satisfaction, and on the quality of decisions taken.
A number of healthcare claims are denied due to innocuous errors at the beginning of the process - such as incorrect patient registrations and other administrative errors that can occur through manual data input. The results are unnecessary re-filing or chasing correct information, slower reimbursements, higher costs and ultimately unhappy customers.
Business rules management systems can maximise control over high-volume operational decisions, such as automating and appropriately routing claims cases. For example, if a healthcare insurer receives a call from a customer who wants to file a claim, the call will go through a pre-defined questionnaire to assess the claim.
The rule engine behind this form will validate the data and transfer the caller on to the relevant call handler who will have access to the patient's data and can in turn ask the questions that are relevant for the claim.
It can happen that claimants have to make dozens of calls until they speak to the appropriate contact to progress their claim. The benefit of a rules-based system is that unnecessary calls can be avoided and customers are directed to the right person to address their health issues immediately. As a result, treatment can be offered more quickly.
With automation the number of manually validated claims can be reduced significantly and insurers are able to validate thousands of claims in a few minutes.
Connecting the right healthcare provider to offer the relevant service to the patient is another aspect. Business rules management systems enable preferred healthcare provider routing which can impact heavily on the amount insurers can save.
This is a major advance. Current data models rarely produce a view beyond a single patient identity, making it difficult to get a full picture of a patient, claims and related entities. If a call handler has all the patient information on one screen provided through an integrated desktop environment rather than using 20 applications to retrieve the relevant information, this will heavily speed up the claims process. Having one central customer view with a central repository of information enables insurers to support the process and automate it through rules.
Flexibility
Insurers also need to be agile and change their rules and models to reflect quickly changing market trends and needs.
The same business rules management systems can, in theory, help insurers react quickly to market changes and new conditions through process configuration by the business user without involvement from the IT department.
Typically this can be done through changes in organisation, patterns, assignment rules and task parameters. The time required for a policy change, for instance, can be reduced to below two minutes.
Modernising the claims process also offers an additional value. If insurers get their claims management infrastructure right, they are also in a better position to put a stop to fraud and leakage. The right decision management tool allows for more control and transparency with a centralised repository of data that enables claims processors to detect fraudulent claims before they are paid.
That said, rules by themselves are an insufficient way to detect healthcare fraud from patients and providers. Analytics are a better way to identify claims fraud as they ‘learn' from each interaction compared to rules which must be based on past cases. Analytics are better at catching new fraud schemes and can also enable pre-pay fraud detection.
We have seen how through using rules and analytics, efficient claims management can save money, improve customer service and help the business respond to the market. As the market develops over the coming years, we may see the providers who embrace and understand the intelligent use of automation and analytics, grow market share at the expense of those who don't. That process has already started.
Larry Jacobson is an insurance consulting engineer at financial analytics company FICO
