Consequently, carriers are losing millions, even billions in monies paid for unneeded or inappropriate treatments, in claims that went on too long, or claims that a third party should have paid.

In response, new decision-management software has been developed with the intelligence to automatically identify these claims and route them to the appropriate specialist.

These new technologies add consistency throughout the review process, dramatically increase productivity, and incorporate the entire claims departments expertise and best practices into the review process.

This automated decision capability is based on technology widely in use in the banking and financial services sectors to process credit applications. Now, it is being deployed in workers comp to streamline and make cost-effective a paper-based, labor-intensive sector.

With intelligent decision-management software doing much of the identification, the energies of claims adjusters can continue to go toward processing claims productively. Further, the system frees claims professionals from routine tasks and enables them to focus on out-of-the-ordinary claims (and impact the 80 percent of costs these claims generate).

Types of exceptional claims that can be immediately identified by intelligent decision-management systems include those that should be paid by third parties, could be fraudulent, should be case managed, or are complex and need special management and reserving.

Many times a claim will be submitted that is not covered under a particular policy. Automated systems can determine whether a claim is covered, saving an adjuster from time spent on coverage questions and avoiding money wasted on accidental payment of such claims.

When an adjuster has to devote time to this sort of claim, legitimate customers are not serviced or given full attention. Using intelligent decision software systems, insurers can filter out uncovered claims and prevent unnecessary losses.

Systems can help determine if there is a benefit to assigning a nurse to a claim, thus helping to get the claimant back to work and reduce expenses. But case management is also very costly. The system weighs the factors and decides whether the ultimate cost benefit outweighs the expense.

Automation additionally can help determine third-party liability for a claim. Claims with a potential for subrogation represent only 1 percent of total claims volume, yet result in insurance carriers losing millions each year. Subrogation shifts the financial burden of a claim to the responsible party, but the initial challenge is detecting if another party is responsible for the injuries, sickness or damages sustained.

Whether a claim is a large loss item can be picked up by the system as well. Plus an automated system can help determine whether a claimant is exaggerating an injury.

An inexperienced adjuster may not know how to handle a large loss claim or recognize the urgency and protocol to deal with such a case. As a result, the claimant may not be serviced correctly, opening the carrier up to potential lawsuits. In addition, the appropriate reserves may not be set aside to cover the claims. Decision-management software tools provide a way to identify these cases and to set reserves accurately.

For some companies, fraud detection relies heavily on whistle-blowers calling fraud hotlines, or an adjusters know-how. Since adjusters face massive amounts of variables, fraud can slip by.

In workers comp, fraud is often opportunistic–the initial claim is legitimate, but in the course of treatment, claimants and/or providers find ways to “game” the system through fraudulent activities. Automated fraud detection can find these claims earlier in the claim life cycle.

Laki Balaji is vice president of property and casualty predictive software solutions at HNC Software in San Diego.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 27, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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