Expert Commentary

Insurance Claim Resolution and Settlement

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.


Claims Management
March 2018

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.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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