Do data errors sabotage your claims efforts?
Inadvertent data errors run the risk of damaging claims teams’ ability to reduce costs and deliver exceptional customer service.
Over the past decade, technology’s impact on the claims side of the P&C industry has been extraordinary. Today, insureds submit high-definition video and audio files and images to support their claims. In theory, this creates more accurate and faster claims processing, all of which should be good news to insurers, who face increased cost pressures due to the abundance of claims filed in the wake of multiple large-scale weather events and COVID-19.
Yet there’s a potential dark side to technology. Inadvertent data errors run the risk of sabotaging a claims teams’ ability to reduce costs and deliver exceptional customer service. Each claim processed with inaccurate data creates numerous expenses, including overpayments that erode profits, lost staff time that destroys employee morale and legal fees that may escalate quickly. These costs are in addition to the exacerbation claims professionals hear in the voices of the insured when they have to explain what happened.
While most claims professionals know data errors exist, they may not understand why they keep happening or how to fix them. Let’s take a look at three of the most common types of data errors and potential ways to minimize them.
Inadvertent policy errors
These occur when an insurers’ legacy systems aren’t properly integrated. For example, let’s say an insurer uses both policy administration software and insurance rating software. If the two systems miscommunicate, the rating system might pull erroneous data into the policy system.
Sometimes, claims professionals notice these errors. They may even report them to their IT department and request a fix. Unfortunately, because IT professionals face hundreds of inquiries a day, these types of bug fixes often take lower priority and may never get resolved.
When errors are not caught, the costs may be extreme. Take, for example, the case of an insured taking out a homeowners’ policy. She requests an increase in her contents coverage that’s above the norm. But a software bug records the wrong rating. Nobody realizes it until the homeowner submits a claim. When that claim isn’t covered, she might file suit. In addition, the claim will take longer to close. Claims and underwriting staff will touch it multiple times, and days or months of headaches will ensue.
Your best defense against these types of errors is to thoroughly test your software to make sure it can deliver 100% accuracy for all claims data across all systems and integrations.
Manual data entry errors
These errors can happen anywhere, but they’re more likely to occur following catastrophic events. That’s when insurers face an enormous volume of calls and claims. As a result, they use every available resource to answer the phones and enter claims data into their systems as fast as possible.
Let’s see what mistakes can happen in a split second amid all that chaos. Say Hurricane Sally recently tore through a coverage area. The ISO classifies the storm as having occurred from Sept. 14 to 18. A homeowner calls on Sept. 19 to report a roof damage claim. The homeowner doesn’t mention that the hurricane caused the damage. The claims professional taking the call didn’t connect that the claim was caused by the storm. So he enters it as a standard claim.
Here’s the problem. Carriers process catastrophes against their reinsured program, not against their direct reserve. So, when the claim doesn’t get processed as a CAT claim, the carrier pays it out of pocket. Multiply that error times hundreds of claims, and the costs begin to snowball.
The more insurers remove manual data entry from the claims process, the better they’ll mitigate the risk for errors. One potential fix: automated processes that can, for example, compare policy location ZIP codes with historic weather information from the Farmer’s Almanac. This double-check will provide the type of accuracy not possible when hand-keying hundreds of claims following a CAT event.
‘Garbage in, garbage out’ errors
Many insurers send claims history to a company that scrubs the data to identify insureds with multiple claims. The problem arises when the data an insurer sends to the “claims pot” is inaccurate.
When that happens, it creates bad judgment calls. For example, insurers may mistakenly deny a policy or a claim to a property owner based on an erroneous claims history record for either the insured or the property.
Thorough software testing will help remedy this type of data error. Testing interactions between your claims administration software and other systems helps ensure items like coverages and cause-of-lost get recorded properly.
In addition to solving data errors, software testing also helps to confirm systems can process all of the high-resolution audio and video files insureds provide with their claims. This will be another satisfier to customers who expect a seamless transaction from start to finish.
Customers seldom discuss how easy it was to take out an insurance policy. But they all know how easy — or difficult — it was to submit a claim and get it processed. Minimizing the risk for data errors allows companies to protect their reputation, ease frustrations, cut costs and earn those five-star reviews we all crave.
Kari Schori (karis@westpointuw.com) is the chief information officer at West Point Insurance Services. Her career reflects more than 20 years of software development experience with a data-centric background, including 15 years in the P&C and claims IT space.
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