This is the fifth and final article in a five-part series examining the key
components of claim management from a best practice perspective. We wrap up
this series by focusing on the importance of claim closure, the ultimate goal
for every claim and the claim professionals who shepherd them along their
journey.
The claims journey is often protracted. It is well known that
"long-tail" claims, which are typically claims such as professional
liability where the legal issues can be quite complex, are naturally long in
duration.
Workers compensation (WC) tends to be a long-tail line even though the vast
majority of claims resolve relatively quickly; some may never close due to the
permanent total disability of perhaps some disease-based claims, such as from
silicosis or job-induced cancer. The average open time for a WC claim can
exceed 5 or even 7 years.
Regardless of the claim type, the journey to closure is varied and quite
different from line to line. The challenge for the claim professional is to
move the claim to closure as quickly as possible at the least cost while
fulfilling all contractual, statutory, and other legal obligations that apply.
Sometimes, this is a tall order indeed.
Claim Stages
The life of a claim is heavily influenced by the first four components I
covered in this series. As a reminder, those components include the
following.
Getting to a timely and equitable resolution assumes that these four
components are executed thoroughly and sufficiently. The essence of each
component is information accuracy and reliability, without which, achieving the
resolution goal decreases substantially. This is true because the basis of a
good resolution is reliable information that answers the following key
questions that can impede the efforts to close claims at the natural end of
their life.
- Was the claim reported accurately, and was that report consistent with
what the investigation revealed?
- Was the claim investigated sufficiently enough to develop the essential
information necessary to reach conclusions about the facts that can be
mutually agreed upon by the parties?
- Was the claim evaluation sufficient enough to reach reasonable
conclusions about fault, liability, possible apportionment, and other legal
determinations germane to the obligations under the contract or law?
- Were the preceding components sufficient enough to accurately set and
adjust reserves on the claim and to ultimately calculate a supportable value
that would represent the full fair cost of the claim at closure?
Factors Influencing Insurance Claim Closure
The "natural" end of the life of a claim is highly variable by
type. Beyond the well-known group of long-tail claim types, there are numerous
variables that affect the settlement process and its efficiency. The real
talent of claim professionals is managing all of these potential hurdles to a
good, efficient claim resolution.
Among these variables are the following.
- A lack of quality, reliable investigative information that can exist if
only because a claim wasn't reported timely and an investigative
opportunity was lost.
- Recalcitrant claimants who either aren't motivated to a timely
closure process or worse, who are engaged in behaviors ranging from
malingering to outright fraud.
- Bureaucratic jurisdictional or venue issues that enable delays, slow
processes, and sometimes senseless, even intentional procrastination.
- Differences of opinion about what most would call the "facts"
where interpretation is often the lifeblood and job security of the lawyers
representing claimants.
- Injury recovery times that, in extreme cases, leave claimants in
indefinite, nearly continuous medical care with no prognosis of even maximum
medical improvement.
- Claimant-based fear of closure prematurely ending their access to a
source of funding that, while the case remains open, is perceived as
indefinitely available.
- The complexity of fact patterns, such as from legal issues, injury type,
familial effects, employment status, etc. that each in their own way
represents hurdles to closure.
- Ineffective, poorly trained, uninformed, or uneducated stakeholders
(e.g., adjuster, lawyers, claimants, etc.) whose ignorance adds complexity
through misunderstanding and disagreements.
- The priorities of the stakeholders may also impede an efficient process
as even disabled claimants have other matters of life to attend to.
- The natural friction that exists among people of varying personality
types, mindsets, and priorities can increase the difficulty of communicating
and, therefore, understanding respective interests, goals, and priorities
among the parties to the claim transaction.
Suffice it to say, these are just some of the factors that can impede or
slow claim resolution. In many instances, these factors are out of the control
of the claim professional.
Conclusion
The best tools of the trade are communication and influencing skills that
can often remove or reduce the impact of these hurdles and facilitate the
endgame. While these are generic skills that unarguably enable better business
and interactions across all functions, they are especially useful and important
to the claim resolution process where so many headwinds serve to upend a
process that, when functioning well, can serve all parties' interests in
what they want out of the claim.
Thankfully, insurers, third-party
administrators, and other providers of claim management services recognize the
value of these skills and invest reasonably well in those that make claim
management their profession. Applied consistently, these skills enable a
smoother, quicker, and more equitable and efficient claim resolution, as well
as more satisfied players on all sides of the claim transaction.