In the best dreams of claims managers, claims processing is a seamless, end-to-end activity from first notice of loss to final recovery. Consider a theft loss. A policyholder uses the carriers Web site to report, for instance, his new projection TV has been stolen. The Web-based first notice of loss system connects with the claims and policy administration system to populate all the data fields of a new claim. The claim is sent to a claims rules engine to confirm coverage and then to an ERP system to source a new set, which is delivered to the policyholders door. When the stolen set later is recovered by police (hey, it could happen), a salvage assignment automatically is sent to a vendor.

That automated straight-through pro- cess doesnt happen in claims, but it does in underwriting. Sticking with our P&C example, carriers have demonstrated the ability to perform successfully hands-off, end-to-end processing, particularly in highly homogeneous lines such as personal auto. Applications completed online are passed through underwriting rules engines, and policies automatically are generated.

So why not claims? First and foremost, claims systems arent designed to capture the amount of data needed to fully enable straight-through processing. You may look at 200 attributes just to handle a claim [vs.] 30 attributes to underwrite a policy, explains Michael Costonis, a partner in Accentures Insurance Solution Group.

Take our television example, for instance. A claims system doesnt capture make, model, and SKU information [using the types of theologies commonly utilized by retailers and manufacturers] to procure automatically an identical TV, Costonis says. Therefore, human intervention, decision-making, and negotiation are involved, and the end-to-end automation effort breaks down.

Another challenge is, unlike the underwriting process, where data requirements are established before the transaction takes place, in claims, insurers dont know exactly what theyre going to get until a claim occurs. Claims are more fluid, Costonis says. They change their profiles and patterns as they go along. So any technology needs to be smart enough to recognize when the pattern of the claims changes and then smart enough to change its own path that its going down.

Additionally, insurers arguably treat claims with a greater degree of suspicion than they do applications, which makes them reluctant to take a truly hands-off approach to claims, whether they be property, liability, or medical claims. Therefore, carriers tend to target automating specific segments of the end-to-end claims process, such as referrals to auto repair shops in property lines and medical bill review in health and casualty.

One of the key developments happening today is [carriers] are bringing in more external rules engines in claims, reports Bonny Eappen, practice director of insurance for Tata Consul-tancy Services. These systems, though not replacing the decision-making in claims as they have in underwriting certain lines, have begun to play a role in supporting the decision processfor example, helping insurers to better allocate claims based on skills and specialization, handle authority referrals and auditing, and identify fraud signals and patterns.

A companys ability to improve the cost efficiency of claims also is affected by line of business. Health insurerswhich have completed HIPAA-driven systems projects, use clearinghouses extensively, and have well-established EDI between payers and providersare further along in automating the processing and payment of claims than other verticals, Turocy maintains.

The beginning piece [of automation] is what causes the most grief, which is the capture of information, she says. In the health arena, insurers are more standardized in providing systems where claims information is input and getting that information in an electronic format earlier in the process.

Even so, she says, health insurers still are focused primarily on continuing to drive paper out of the claims process, including directing (or at least encouraging) care providers to use electronic forms for claims and providing more Web-based alternatives for claims and benefit inquiries from plan members and individuals.
In P&C, carriers potentially are hamstrung by the need to deliveror at least offerhigh-touch claims service. In P&C, [high touch] is a nemesis for carriers, because adjusters have to go out and get the information, Turocy explains. Distributed data capturethat is, relying on thousands of adjusters to collect information and transmit it rather than having centralized staff input itcan be a data-quality nightmare.

P&C carriers therefore tend to focus on getting assignments to the field more quickly, making information more available, and automating routine parts of the workflowsuch as report orderingto free up adjusters time for other claims tasks.

An analysis of several insurers success stories found differing strategies depending upon whether theyre starting from scratch (or are prepared to start over), are willing to renovate substantial segments of their claims system environment, or feel they already have a firm foundation on which to add end-to-end automation enhancements.

Unitrin Direct: Starting From Scratch

When Unitrin formed its direct-marketing automobile insurance subsidiary, Unitrin Direct, in 2000, it was literally a pen-and-paper process to settle claims, with manual entry into a stand-alone reserving and payment system, explains Brian Crumbaker, senior vice president of Unitrin Direct.

However, this was by design. Having personally gone through other startup insurance ventures in the past, Crumbaker recommended Unitrin Direct process claims manually from end to end at the outset to better evaluate its needs before making a system commitment. Armed with knowledge of these needs, Unitrin narrowed vendors to Netrex, PDA Software Services, and Covansys, ultimately choosing Covansys ClaimConnect, which was deployed in 2001.

Today, all losses are reported to Unitrin Direct using a 1-800 number. An Avaya telephony system routes the call to the appropriate remote servicing office based on the calls origination. Using selections the caller made in the IVR system, the system further distributes the call to either an adjuster (for new claims) or to the service queue (for existing claims).

Adjusters key claims information into the Covansys front end, which integrates with Unitrin Directs policy processing system from Decision Research Corporation to populate policyholder information and with its reserving system to set statistical reserves automatically. Claims are sent electronically in batches overnight to ISO for matching against ISOs ClaimSearch database. The system also links with CCC Information Services Web-based Autoverse system for transmission of claims details to independent and staff appraisers and repair shops.

ClaimConnect currently also provides rules-based workflow for both fraud and authority referrals. There is a long list of alerts we established, such as thefts and fires, reserves over a certain amount, and other scenarios where we determine referral to SIU or management is required, Crumbaker explains. Authority templates that detail the authority level of new adjusters also help Unitrin Direct add newly hired staff to the system quickly.

After claims are paid, the system automatically opens a salvage and subrogation reserve. The subrogation process is automated via an interface Unitrin Direct built with subrogation specialist Trumbull, which sweeps the insurers claims system nightly and determines claims that have subrogation potential. Weve taken potential adjuster error out of the mix, Crumbaker explains. Unitrin also is working on a system with CoPart Salvage Auto Auctions to handle a similar process for salvage.

Future enhancements in-clude integrating the carriers imaging system with ClaimConnect. Because all loss notices currently are captured electronically, and since the majority of images received are digital, the need to link any ancillary scanned documents is not crucial, Crumbaker explains. In the interim, log notes in ClaimConnect identify images that exist, which can be retrieved from a central image server if needed.

Although Unitrin Direct itself started from scratch, it did have to contend with integration issues when it acquired Kemper Direct in 2002. Unitrin Direct built an integration component between the Kemper policy administration system and ClaimConnect but currently is handling existing claims on Kempers system. However, Crumbaker reports, remaining runoff claims from Kemper Direct will be converted to ClaimConnect at the end of 2004.

Unitrin Directs claims strategy has had a marked impact on its business, according to Crumbaker. When we started with paper files, our ratio of claims adjuster to clerical staff was 4 to 1. Now its 15 to 1, he says. We grew from zero to $165 million in premium in three years, yet our claims closing ratio is 90 percent. The system also has allowed us to grow at a reasonable loss adjustment expense.

NASCO and California Casualty: Leveraging Existing Investments
The National Account Service Company (NASCO) is an outsource provider of health insurance claims processing for Blue Cross Blue Shield plans, with 27 Blues currently using NASCOs processing services in some form. In business since 1987, NASCOs mainframe-based claims system has evolved over time and represents both a significant investment and a powerful workhorse, processing more than 100 million claims annually, about 70 percent of which with no human intervention.

According to Mark Barnard, NASCOs vice president of operations and CIO, the company looked for ways to improve the efficiency of claims service provided by its own staff and by the 12,000 clerical personnel across the network of Blues who access the system. It also looked to provide real-time claims information, such as claims status, deductible balances, or remaining benefit amounts to employers and plan members.

Having chosen IBM as the outsourcer for its data center support and most of its application development, NASCO teamed with IBM again to develop a Web-based application that would connect with its processing system and give plan members more control over both their claims information and enrollment.

Supporting the Web application with the mainframe required some work on NASCOs part. It already had created an integration hub, which it named InterAct, to the mainframe, helping enable a Web front end. It also changed its mainframe processing strategy, moving batch processing back several hours to expand system availability during peak demand hours, and interfaced the mainframe with several midrange platforms to deliver real-time information, essential for a 24/7 Web site. We essentially developed a hybrid approach, says Barnard.

NASCO measures the success of its system both financially and operationally. First, Barnard reports, optimizing the mainframe has enabled it to cut a full day off claims processing. Deploying NASCOs midrange platform in 2001 has been essential to support the Web application, which has grown both in functionality and user base. When first deployed, the Web tool provided members with claims eligibility and provider information. Today, it also provides coordination of benefits details, handles ID card requests, and gives employers the ability to make plan changes directly.

Additionally, according to Craig Fagin, NASCOs director of customer relations, The user base of the system has grown from 150 to more than 2.5 million. He adds by leveraging its InterAct integration platform, NASCO also ensures internal claims service applications, such as its call center system, have access to real-time plan information that reflects current claims activities regardless of their point of origination.

Like NASCO, insurer California Casual- ty Management Company looked for a way to improve the efficiency of its claims processing without replacing existing systems. A longtime customer of CSC, California Casualty already had created modules that interfaced with its CSC claims administration system to deliver greater value. For instance, it wrote a first notice of loss front-end application in J2EE, de-ployed last year, which cut the time needed to input notices from 17 to 8 minutes, according to Beau Brown, California Casualtys executive vice president of products and technology. Therefore, the company looked to continue to bolt on more modules to deliver additional benefits.

For California Casualty, Brown explains, a component approach to its claims processing systems makes sense. When you look at end-to-end claims systems, there are some companies with some smart people trying to develop a claims system that will do everything. However, another approach is to look for best-of-breed components that generally can be integrated quickly using the latest technologies, he says.

A recent deployment in this strategy was a business process management application from ProcessClaims, which hosts the application on an ASP basis for California Casualty. Currently, the system is used solely for automobile physical damage claims, according to Michael Lloyd, assistant vice president, material damage manager at California Casualty.

When a damage claim is received in the California Casualty claims call center, report-takers key the claim into the first notice system, which pulls data from the CSC system to prepopulate policy information. Currently, claims dispatchers then must invoke the ProcessClaims system to make an assignment of the claim either to a staff appraiser, independent appraiser, or preapproved repair shop. However, Brown reports, California Casualty plans to have this process automated, as well, by press time.

ProcessClaims sends new- claims alerts by e-mail or fax, and the recipient of the alert logs on to ProcessClaims using a standard Web browser to retrieve the assignment. The system interfaces directly with estimating applications from ADP, CCC, and Mitchell International for assignment transmission. Brown says since these three vendors represent the bulk of systems used by repair shops California Casualty deals with, this interface allows the insurer to establish relationships quickly with additional shops without customizing EDI connections.

Furthermore, being Web based, it gives us the ability to use and add independent appraisers to the system and for multiple users to view claims details simultaneously, which is important for claims referrals, says Lloyd.

The system allows California Casualty to monitor workloads, he explains, and provides rules-based workflow the insurer currently uses for audit referrals to claims specialists. This improves the productivity of our specialists because they can hone in on exceptions rather than hunt for cases, he says. According to Lloyd, ProcessClaims has delivered substantial savings in claims processing. It has definitely paid for itself, he says.

California Casualty plans to integrate ProcessClaims fully with its first notice system to eliminate the need to toggle between systems, says Brown. It also is considering several other modules to bolt on to its administration and processing systems, including a fraud detection system and a data-mining component.

Penn National Insurance: Willing to Start Over

At Penn National, the desire to automate the workflow of claims processing coincided with a major overhaul of its claims administration and support systems.

According to Ken Garcia, the companys vice president of claims, in 2001 Penn National Insurance embarked on a project dubbed e-Claims, beginning with installing a centralized imaging system from ImageRight in its Harrisburg headquarters. In late 2003, it deployed Claims Workstation from Fiserv to manage its claims process and workflow. Currently, it is converting its legacy claims administration from CSC to Allenbrooks Phoenix system, a project that is scheduled for completion in commercial lines later this year and for personal lines in 2005.

While after-hours emergent claims are handled by a call center, the majority of claims come to Penn National Insurance via fax. Our agent population is most accustomed to that way of doing business, explains Garcia. All faxes are received by the central ImageRight system, which integrates with Claims Workstation. Based on the geography of the loss, an operator electronically transmits the fax to the appropriate customer service office using Claims Workstation.

At that office, a team leader receives the fax and assigns it using the Fiserv system, which sends to the queue of each adjuster an electronic notification of assignment. Adjusters then begin investigations on property and liability losses, while they refer auto damage losses to independent appraisers, Garcia says.
Claims rules in the system provide additional routing and automation. In property losses, dollar thresholds and loss typesidentified by claims codestransfer claims from field adjusters to general adjusters at headquarters at any point in the life of the claim that those rules are matched. Casualty claims currently are reviewed manually.

Perhaps not surprisingly, the number and scope of claims technology initiatives under way at Penn National Insurance have stretched its IT resources, Garcia admits. Additionally, the insurer unexpectedly became a beta customer in the Claims Workstation project when another Fiserv customer changed the scheduling of its installation, a situation the vendor confirms. The difficulty increased exponentially, and the amount of resources that had to be dedicated to it were pretty well tested, Garcia says.

Nevertheless, the Fiserv installation and the total project have shown positive results thus far at Penn National Insurance. From a pure day-to-day technical management perspective, its been very productive, Garcia explains. The ability to answer questions, interact with home-office examiners who have the same accessibility to the claims, and allow for decision-making to be made instantaneously are important. It also provides direct information to our agents when they inquire about single or multiple losses, he says.

From a hard-numbers perspective, we will look at [the project] and evaluate it by the end of the year to determine the ROI and any cost savings aside from that which would be meaningful to report.
Although each of these companies has taken a different approach to making end-to-end claims processes more efficient and effective, all ensured their infrastructures were in order before trying to add workflow technologies, rules engines, or pro-cess management applications.

You cant reap any big rewards until you tackle the systems that keep people in a state of gridlock, says Accentures Costonis, who reports failures often happened when claims staff members were forced to be the integrators between different solutions because the legacy systems couldnt handle the transactions.

Its still a question of biting the bullet on the legacy system, he adds, putting in the right technology with the right kind of data, details, and access to data to make [other] systems work.
(For Tech Guide, see p. 24)

Tech Guide: Claims and Fraud

Accenture
Murray Hill, N.J., 267-216-1049
www.accenture.com

Adjustable Software
Markham, Ont., Canada, 905-415-0664
www.adjustablesoftware.com

ADP Claims Services Group
Elk Grove Village, Ill., 847-718-3381
www.adpclaims.com

AGO Insurance Software, Inc.
Mt. Arlington, N.J., 973-770-3200
www.agois.com

Allegient Systems
Wilton, Conn., 203-761-1289
www.allegientsystems.com

Allegis Communications, Inc.
Seattle, Wash., 800-566-6112
www.allegisteam.com

American Management Systems
Fairfax, Va., 800-255-8888
www.ams.com

Apex Data Systems.com
Tucson, Ariz., 520-298-1991
www.apexdatasystems.com

Attus Technologies, Inc.
Charlotte, N.C., 704-752-6249
www.attustech.com

The Bluebook International
Lake Forest, Calif., 888-425-8326
www.bluebook.net

Bramerhill Technology Group
Norcross, Ga., 770-368-3255
www.bramerhill.com

Bridium
Atlanta, Ga., 920-451-9777
www.bridium.com

Business Software Solutions
Mt. Laurel, N.J., 856-866-5601
www.bssnj.com

Burkitt Computer Corp.
North York, Ont., Canada, 416-642-6159
www.bccorp.com

Cardiff Software
Vista, Calif., 760-936-4500
www.cardiff.com

Castek
Toronto, Ont., Canada, 416-777-2550
www.castek.com

CCC Information Services
Chicago, Ill., 800-621-8070
www.cccis.com

CGI
Montreal, Quebec, Canada, 514-841-3200
www.cgi.com

ChoicePoint
Alpharetta, Ga., 800-342-5339
www.choicepoint.net

Clear Technology, Inc.
Westminster, Colo., 303-583-4150
www.clear-technology.com

Corporate Systems
Amarillo, Tex., 800-858-4351
www.csedge.com

Covansys
Farmington Hills, Mich., 913-469-8700
www.covansys.com

CSC Financial Services Group
Austin, Tex., 512-275-5000
www.csc-fs.com

Cunningham Lindsey
Lewisville, Tex., 214-488-5139
www.cunninghamlindsey.com

Decision Research, Corp.
Honolulu, Hawaii, 808-949-8316
www.decisionresearch.com

Delphi Technology
New Brunswick, N.J., 732-418-0008
www.delphi-tech.com

Docucorp International
Dallas, Tex., 800-735-6620
www.docucorp.com

DWL
Toronto, Ont., Canada, 416-364-2045
www.dwl.com

E-Claim.com
Gretna, La., 504-433-9599
www.e-claim.com

EigenSoft
Portsmouth, N.H., 603-430-8032
www.eigensoft.com

Fair Isaac & Co.
Irvine, Calif., 949-655-3300
www.fairisaac.com

FARA
Mandeville, La., 800-259-8388
www.fara.com

FileNet
Costa Mesa, Calif., 714-327-3400
www.filenet.com

FINEOS
South Portland, Maine, 207-879-0400
www.fineos.com

First Notice Systems
Boston, Mass., 617-886-2000
www.firstnotice.com

Fiserv
Brookfield, Wis., 900-322-4220
www.fiserv.com

GAB Robins
Parsippany, N.J., 973-993-3400
www.gabrobinsna.com

Genelco Software Solutions
St. Louis, Mo., 800-983-8114
www.genelco.com

GenSource Corporation
Valencia, Calif., 661-294-1300
www.gensourcecorp.com

Guidewire Software
Menlo Park, Calif., 650-233-1700
www.guidewire.com

Hawkins Research
Murray, Ky., 800-736-1246
www.powerclaim.com

Hyland Software, Inc.
Westlake, Ohio, 919-462-8505
www.onbase.com

IDMI
Altamonte Springs, Fla., 407-389-0963
www.idmi.com

ILOG, Inc.Mountain View, Calif., 650-567-8000
www.ilog.com

Infinity Systems Consulting, Inc.
New York, N.Y., 212-541-7602
www.infinity-consulting.com

Injury Sciences
San Antonio, Tex., 877-979-7378
www.injurysciences.com

INFOEL USA, Inc.
Aubrey, Tex., 940-300-4623
www.infoelusa.com

Infoglide Software
Austin, Tex., 214-357-4636
www.infoglide.com

Information Builders
New York, N.Y., 212-736-4433
www.informationbuilders.com

The Innovation Group
Danbury, Conn., 203-743-6000
www.tigplc.com

Insurance Data Processing
Wyncote, Pa., 800-523-6745
www.idpnet.com

Insurance Services Office
Jersey City, N.J., 800-888-4476
www.iso.com

Insurance Solutions & Technology Inc.
Cayce, S.C., 803-796-1112
www.the-ist.com

ISCS
San Jose, Calif., 888-901-4727
www.iscs.com

JCRS Inland Marine Solutions
Oakland, Calif., 510-444-4811
www.jcrs.com

Jury Verdict Research
Horsham, Pa., 215-784-0860
www.juryverdictresearch.com

JW Software, Inc.
St. Louis, Mo., 314-843-5950
www.jwsoftware.com

Magnify
Chicago, Ill., 312-214-1420
www.magnify.com

Management Data, Inc.
Birmingham, Ala., 205-991-7511
www.mgtdata.com

Marshall & Swift/Boeckh
New Berlin, Wis., 800-285-1288
www.msbinfo.com

Metropolitan Reporting Bureau
Philadelphia, Pa., 800-245-6686
www.metroreporting.com

MFX
Toronto, Ont., Canada, 416-385-4800
www.mfxfairfax.com

Mitchell International
San Diego, Calif., 800-854-7030
www.mitchell.com

MountainView Software
Layton, Utah, 888-533-1122
www.claimzone.com

Neap Analytics
Westerville, Ohio, 614-523-1067
www.neapanalytics.com

nsite solutions
Urbandale, Iowa, 888-282-6596
www.nsitesolutions.net

onClick Corp.
Houston, Tex., 713-784-7600
www.onclickbiometrics.com

OpenFlex
Los Angeles, Calif., 213-252-2360
www.openflex.com

PDA Software Services
Overland Park, Kan., 913-469-8700
www.pdainc.com

ProcessClaims
Manhattan Beach, Calif., 310-937-4040
www.processclaims.com

QualCorp
Valencia, Calif., 888-367-6775
www.qualcorp.com

Quest Claims Services
St. Johns, Mich., 800-541-2593
www.questsoftware.com

Rebus Systems
Secaucus, N.J., 401-247-4925
www.rebusgroup.com

ReClaim Technologies
Newark, Ohio, 740-344-6956
www.reclaimtech.com

Recognition Research
Blacksburg, Va., 540-961-6500
www.rrinc.com

Results International Systems
Dublin, Ohio, 800-875-2126
www.resultscorp.com

RGL
Englewood, Colo., 303-721-8898
www.rgl.com

Riskclick
New York, N.Y., 877-747-5254
www.riskclick.com

Risk Sciences Group, Inc.
Schaumburg, Ill., 800-619-0224
www.risksciencesgroup.com

SAP America
Newtown Square, Pa., 888-727-8591
www.sap.com

SceneAccess
Pittsford, N.Y., 585-387-9883
www.sceneaccess.com

SeaTech Consulting Group, Inc.
Torrance, Calif., 310-328-8119
www.seatech.com

Sherwood International
Armonk, N.Y., 905-275-2299
www.sherwoodinternational.com

Simsol Software
Orlando, Fla., 800-447-4676
www.simsol.com

Sirius Financial Systems, Inc.
Englewood, Colo., 303-209-5914
www.sirius-inc.com

Stargate Solutions Group
Indianapolis, Ind., 317-469-7512
www.stargatesolutions.com

StarTech Software Systems
Novi, Mich., 248-344-2266
www.startechsoftware.com

Synergy 2000
Pasadena, Calif., 626-792-8600
www.synergy2000.com

Taliant Software Solutions
Denver, Colo., 303-209-4601
www.taliantsoftware.com

TEKclaims
Cincinnati, Ohio, 513-821-7844
www.tekclaims.com

Teradata
Dayton, Ohio, 860-537-9055
www.teradata.com

Tropics Software Technologies, Inc.
Sarasota, Fla., 941-955-1234
www.gotropics.com

Trumbull
Windsor, Conn., 877-285-2174
www.trumbull-services.com

Valley Oak Systems
Alamo, Calif., 925-552-1650
www.valleyoak.com

Visibillity, Inc.
Chicago, Ill., 888-484-7424
www.visibillity.com

VS Visual Statement Inc.
Kamloops, B.C., Canada, 888-828-0383
www.visualstatement.com

WildCard Systems
Sunrise, Fla., 954-851-0700
www.wildcardsystems.com

World Group
Emeryville, Calif., 800-785-4526
www.wgcusa.com

Worldwide Testing and Security Services
Clifton Park, N.Y., 518-371-8327
www.worldwidetest.com

Xactware
Orem, Utah, 800-424-9228
www.xactware.com