The economic conditions these past few years have compounded the pressure for companies and public entities to identify every way possible to reduce costs. While there are some signs that the economy may be improving, companies recognize that cost control is here to stay and is extremely vital to successful ongoing operations.

Many p&c carriers may not have yet examined ways in-depth to enhance their claims operations to reduce claims costs, likely because of more pressing financial issues. Still more companies erroneously think certain claims costs simply fall into the “cost of doing business,” thereby assuming little can be done to curb expenses. However, claims programs can be improved in many ways, the first step being conducting audits.

Claims audits are an efficient and cost-effective method for evaluating how well a program has been structured, developed, and maintained in this difficult environment. Claims audits, which can be performed for any insurance line, may sometimes be necessary to document whether an insurer's or a TPA's performance has fallen short of its duties (and possibly resulted in significant financial loss to the client). In the majority of cases, however, claims audits should not be viewed as a “gotcha,” but rather as a method for improving the full suite of claims management activities to achieve better outcomes.