Just when you thought risk managers
understood and had explored all the opportunities around optimizing the claims
management function, next-level opportunities emerge. The first is from a long
minimized and largely untapped synergy between casualty claims (risk
management) and the benefits world.
Some argue that these worlds are just too different and distinct to bring
together, whether through simple alignment or partial to full integration.
Managers are often more comfortable in their own line of business, and
sometimes crossing over can stretch expertise and focus. Fundamentally,
however, claims are claims though subject to the unique rules of processing and
resolution, many of which are dictated by third parties as well as statutes and
regulations. This may be one reason that workers compensation
"option" programs exist today in only a couple states—Texas (for more
than 100 years) and Oklahoma (since February 2014). For the record, Tennessee
and South Carolina have also introduced their versions of "option"
legislation, which could become law as early as 2016.
Shared Goals
On its face, the value of collaboration seems obvious. From both an employee
benefits and risk management perspective, providing care for the individual is
of the utmost importance. One of the main objectives is ensuring the right
outcome. Essentially, this opportunity can be defined as leveraging the basic
skill sets of investigation, verification, documentation, and equitable
resolution that are common between these two realms. The nuances and
distinctions that exist between them are not insignificant, but the key goals
are the same: caring for people under medically related distress (regardless of
source), minimizing disruptions to workforce productivity, and closing claims
efficiently and effectively with mutual fairness to all parties and their
respective goals and objectives. The key components of process effectiveness in
both worlds include:
- rapid, accurate reporting; timely, complete investigations;
- compassionate and equitable treatment of claimants;
- verification of facts;
- compliance with laws and statutes;
- efficient and effective resolutions; and
- robust cost control tactics.
Although these components have varying levels of impact in each field, they
are fundamental to process effectiveness in both. This is not to say that there
aren't peculiar and unique aspects of each that require certain expertise
and skills to achieve more specific end goals. However, while blending skill
requirements among a common group of claims professionals can be challenging,
it is not rocket science. Defining and filling positions to enable successful
claims handling in both worlds is imminently doable. The biggest hurdle may in
fact be the necessary extent of collaboration among and between these typically
distinct functional areas and their leaders to secure the best outcomes for
injured employees.
Motivations and Hurdles
So what should motivate the pursuit of such an opportunity? Well, make no
mistake that the cost of claims, especially when you combine casualty and
benefit claim expenses, can be the biggest portion of the budget in both risk
management and benefit departments. Clearly, companies can't afford to
ignore the size of these direct expenses, which often represent more than 2
percent of gross revenues.1
Arguably, depending on your industry and the size of your company, employee
injury and medical costs are the largest component of employee-related
expenses, with the obvious exception of compensation. Since most corporate
leaders consider claims expenses material and controllable, it seems logical to
look more closely at how they can be specifically controlled. An initial
question would be: how do we get key functional leaders to care more about the
truly significant leverage possible in managing employee injury and health
exposures more collaboratively? A core answer is: by working toward enterprise
priorities, not just personal or departmental priorities.
In addition to the medical expenses related to claims, there is the cost of
lost productivity from employees not available to perform their jobs, in whole
or in part. It's been noted that this "indirect" cost component
of injuries and disease represents, by some estimates, four times2 the "direct" costs that often get the most
attention. Translating that into more meaningful dollars, you get 8 cents per
revenue dollar on each claim dollar expensed. When you look closely at the
possible costs involved, a total absence management view seems as though it
should be a natural priority.
Many employers are already effectively managing employee injury and disease
exposures. There are discernable trends emerging toward fewer silos and more
performance-oriented measurement focused on short- and long-term strategies.
Those companies taking a more collaborative approach can benefit from key
elements such as:
- integrated reporting across departments,
- integrated measurement across departments,
- robust analytics that result in prescriptive actions with impact,
- innovative tools targeted to specific process opportunity areas,
- a more holistic focus on the care of affected employees, and
- the overarching goal of a healthy, productive workforce.
More Opportunities
Looking more broadly at the evolving strategies around new and best
practices in claims handling, other opportunities are emerging that are worthy
of further investigation and understanding, including the following.
- Compassionate care: While the traditional casualty
claims handling process has been focused on timely reporting, cost control,
and closure time, an important part of the next-level paradigm emphasizes
compassionate care at the forefront for people who are injured and ill,
without losing sight of the more traditional goals. This new focus makes
sense when you consider the potential benefits of improved communication and
understanding of the individual's needs, which can reduce the possibility
of litigation.
- Enhanced communications: This includes changing the way
that claimant communication is delivered and ensuring this happens in a
consistent, meaningful way. This begins with the insurer/employer and the
claims service provider/mechanism used at the center of the resolution
process. Critical to this paradigm shift is the adoption of a clear and
unambiguous understanding of and communication around the strategies and
priorities that would underpin a claimant-focused approach. Once the
strategies and priorities are set, however, success is entirely in the
execution—in other words, the players doing what they say they will with a
dedicated focus on established goals.
- Proactive approach: With the emergence of enterprise and
strategic risk management strategies, we are seeing significant benefits from
an integrated claims management approach. As documented in the 2014 RIMS
executive report, Claims Reporting and Management Practices,
"[w]ell-run claims programs contribute to decisions that influence
whether: 1) the entity is in compliance with regulatory and insurance program
coverage mandates, 2) injured parties are treated respectfully and responded
to in a timely fashion, (3) property will be restored as quickly as possible,
and 4) the entity's reputation can be damaged or improved through its
loss responses."3 I think this list captures
the key outcomes to which many aspire.
Actionable Data
Finally, the last and perhaps most significant emerging opportunity for
next-level claims management is leveraging the potential for using the often
huge volumes of claim- and risk-related data to dive deep into a robust,
analytical capability that was once descriptive and provided facts that were
informational but typically not action or decision oriented.
Descriptive analytics evolved into predictive analytics but often provided
only more information perhaps a little "nicer to know" than the
descriptive approach. This output was more useful to risk managers and other
claim stakeholders, but its ability to help entities with forward-focused
decision-making was still limited. Now, however, predictive analytics are
evolving further toward prescriptive analytics, laser-focused on informing
decision-making with the most robust and actionable data. This new realm is a
goldmine of opportunity and capability that can have a significant impact on
short- and long-term success. This data-reporting evolution feeds directly into
a more enterprise or strategic risk management approach that insists on optimal
outcomes and ultimately helps enable successful mission delivery.
Key Strategies
To recap, consider deploying these strategies in a form that fits best into
your culture and will gain the most support from corporate leadership and
employees in the risk management and employee benefit departments. They include
the following.
- Drive robust collaboration among and between risk and benefit
professionals and their respective functions.
- Recruit claims professionals who have the experience and skills necessary
to understand and administer claims-related activities in both realms.
- Support the collaborative opportunity not by simply highlighting
cost-reduction opportunities but with a priority emphasis on optimal care for
injured and ill employees.
- Clearly articulate the bigger cost impacts of considering both direct and
indirect expenses associated with injuries and illnesses in the workplace,
including productivity impacts.
- Enhance all claim responses with the recognition that inadequate
responses threaten organizational reputation, which is an invaluable
asset.
- Elevate and enhance communications among and between all stakeholders in
the injury and illness realms.
- Move data analytics to a new level that enables clear identification of
significant trends and effectively informs leaders to make the best decisions
that underpin organizational strategy and mission.
On the whole, all these elements of next-level claim strategies can provide
a clear advantage over traditional approaches and offer a competitive advantage
for organizations that effectively deploy them.
1RIMS
Benchmark Survey, 2015 ed. (RIMS: New York, conducted annually).
2Herbert W. Heinrich, Industrial
accident prevention: a scientific approach, 4th ed. (New York:
McGraw-Hill, 1959).
3RIMS Executive Report: Claims
Reporting and Management Practices (RIMS: New York, Oct. 14, 2014).