In a previous article, we introduced 8 corporate claims management fundamentals, outlining the steps a company can take in-house to foster more effective claims processes.
Now we continue a discussion started in that article regarding communication with claims administrators. It is important to not only prepare but also manage expectations of a claims administrator in order to create a roadmap for better claims outcomes.
We have talked about identifying, developing, and clarifying roles and responsibilities, both in your own company and in the claims administrator’s organization. This is critical to ensure that the relationship prospers and supports the program's success.
While some companies may just want to select a claims administrator that charges the lowest rates, most risk and claims managers recognize that the best fit for the company’s needs may not charge the lowest fees but provides the most cost-effective solution when administration fees are compared to the ultimate claims costs. After all, claims administration fees may represent about 5 percent of your overall claims program costs.
The process of matching your company's program needs with the claims administrator’s characteristics will help you during the selection process. Remember that the selected claims administration will use your checkbook, and can make many decisions and commitments that can affect your company’s current expenses and long-term liabilities.
Top 10 Desired Characteristics
To find the most cost-effective claims administrator for your particular needs, you must know what to expect from a claims administrator. First, let's examine the characteristics desired in a claims administrator, and then match the candidates with those attributes. Our "Top 10" list of ideal attributes in claims administrators appear on the next page. Keep reading to find out what claims administrators should prove before becoming your service provider.
| TOP TEN DESIRED CLAIMS ADMINISTRATOR CHARACTERISTICS | ||
| No. | Desired Characteristics | Components |
| 1 | Expertise in the types of claims that you need managed | · The expertise and the capacity to manage liability, workers’ compensation, property, or other specialty claims, depending on your risks, exposures, and needs |
| 2 | Manages claims efficiently and assertively | · Uses an efficient claims system and has efficient processes that help to reach resolution promptly · Provides claims management, not just claims processing, to achieve better outcomes · Manages your claims with a sense of urgency to take them to cost-effective resolution as soon as practicable |
| 3 | Has locations that match your geographic footprint to the extent needed | · Has regional offices to optimize workers’ compensation management if that is your need · Has central or regional offices for liability claims as you need · Is flexible to meet your company’s needs |
| 4 | Wants to develop a long-term relationship | · Wants to be a partner with your company for many years · Grows to the role of trusted advisor through demonstrated expertise, integrity, and emphasis on exceeding your expectations |
| 5 | Works well with your company representatives and employees | · Works hard to get to know your company, its people, and its exposures · Responds quickly when needed and often anticipates your company’s needs relative to claims administration · Coordinates activities with your personnel to meet agreed-upon goals · Treats all your employees with respect, including injured employees, if the claims administrator is managing your workers’ compensation claims |
| 6 | Provides advice and counsel on industry, legislative, statutory , and claims program needs | · Keeps abreast of important issues and decisions that can affect the outcome of your claims · Provides recommendations to enhance your company’s program when opportunities are identified · Offers additional services when they would benefit your program, including the services that can be provided by vendors |
| 7 | Has a strong Quality Assurance program | · Maintains a regular QA program that includes: o Ongoing claims audits (random selection) of all insurance lines o Reasonableness tests of financial transactions o Separation of duties to discourage or eliminate defalcation o Focused claims audits on claims offices, positions, and/or personnel, to ensure compliance with required standards o Development of corrective action plans to remedy any issues identified in audits, including issues identified by any vendors used by the claims administrator o Development and review of exception reports to identify transactions outside the norm or that may indicate non-compliance |
| 8 | Provides meaningful information/reports that keep you informed and help you better manage your company’s claims | · Provides information in the formats that you have requested (e.g., reserves advisories, large losses, settlement authority requests) · Provides standard loss reports and is willing to customize them to meet your needs · Creates ad hoc reports and/or provides a user-friendly report production method · Leads and participates in periodic meetings on specific claims and procedural improvements, and provides an annual stewardship report to measure accomplishments against stated goals |
| 9 | Uses credentialed partners if needed to augment their services | · Transparency of the vendor services it uses · Confirms the credentials of the vendors in the services they are intended to provide, and updates the credentials at reasonable intervals · Monitors the vendors’ performance, ensures open communication, and develops correction action plans if the vendor(s) slip in the quality and/or delivery of their services · Removes vendors if the vendors provide service that does not meet agreed-upon standards |
| 10 | Charges reasonable fees for the agreed-upon services it provides | · Transparency regarding the services and fees that it and its vendors charge to provide your company with the contracted services o The claims administrator and its vendors partners provide services at fees that are open for your company’s inspection o Provides auditable fee reports, invoices, and/or payment records that can be clearly confirmed by your company representatives · Monitors expenses closely, and spends expense dollars like they were their own |
Obviously there may other characteristics you may want to consider. It is also important to consider putting controls into place to confirm that a claims administrator is providing the contracted services. One question that undoubtedly arises is how to document these expectations. The following paragraphs discuss steps a company can take to develop appropriate guidelines for its claims administrator.
Clarify Roles and Responsibilities
Sometimes companies and their claims administrators get off to a bad start because of little or no initial discussions regarding service expectations. Even if a relationship starts out well, sometimes uncertainties later arise about the level of service being provided.
I have found in many cases that this uncertainty is based on a lack of clear direction and misunderstandings about respective roles and responsibilities that have existed since the beginning of the relationship. These could be manifested in counterproductive actions by the company and the claims administrator. For example, a company may be dissatisfied with its workers’ compensation claims administrators’ inability to get injured employees back to regular or modified duty promptly, while the claims administrator may be frustrated with the channels it has to work through to get employees back to work, or may encounter resistance from supervisors who do not want workers’ back to work until they are 100 percent.
An automobile liability claims administrator may intend to get vehicles moved to preferred shops for appraisal and repair, while company representatives may tell their drivers or claimants to get shop estimates. These are just two of the misunderstandings or contradictory actions that can lead to poor outcomes and concerns about the company/claims administrator relationship.
Clear roles and responsibilities should be clarified at the outset of the relationship, if possible, or as soon as possible if the relationship has been ongoing. These roles and responsibilities, as well as program requirements for the claims administrator, should be set out in a document which we will refer to as Special Account Instructions (SAI), although it can go by other names. The SAI should be as complete as possible to spell out the respective roles and responsibilities, specific activities that each party should perform, reports that should be created and distributed, and how the claims administrator’s performance will be evaluated. The creation of detailed SAIs provides a more stable foundation for the program which reduces misunderstandings that might arise later.
If the company changes, whether in size, structure, or personnel, the SAI should be updated. The same holds true for the claims administrator, since there may be procedural changes, office consolidations, or turnover among the staff due to resignations, retirements, and promotions. Each party should strive to keep the other informed of any changes that will affect the relationship, the contracted services, and the claims outcomes.
Your company should select a claims administrator that is willing to work closely with you to tailor the program to your needs. This may include working with your Human Resources Department about modified duty issues for your workers’ compensation program, working with your Public Works Department to address its liability exposures, or working with your attorneys if you use in-house counsel for all or part of your defense work.
The claims administrator should also have excellent communication and public relations skills for dealing with the general public, employees, customers, and suppliers. Working well with all of these will not only reduce your overall claims costs, but will also help in many aspects of your overall business.
Claims Excellence
The selection of the appropriate claims administrator for your company is critical for successful claims outcomes. The characteristics described in this article will reveal the difference between a claims administrator that will just meet your expectations and those that go the extra mile to achieve more than you anticipated.
Next month, we will focus on something that should be featured prominently in your special account instructions: how to measure claims excellence.
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