Minimize Your TCOR With Proactive Claims Management
OCTOBER 5, 2021
Claims are the single largest driver of an organization’s risk management program costs, accounting for approximately 60% of an organization’s total cost of risk (TCOR).
Increasing frequency and severity of claims continues to affect the insurance marketplace, as noted in USI’s 2021 Mid-Year Commercial Property & Casualty Market Outlook, resulting in increased premium and retention and less favorable terms and conditions, especially for organizations experiencing moderate to high claims and loss costs.
Naturally, a lot of effort goes into preventing and properly covering claims. And while claims prevention is an important piece of any risk management program, proactive claims management and mitigation can have a significant financial impact.
What Is Effective Claims Management, and Why Is It Important?
Many organizations submit claims and leave it to their insurance company to resolve. But without a proactive approach to claims monitoring, mitigation and resolution, claims can take much longer to close, resulting in higher costs from lost wages, medical treatment, open reserves, extent of liability and litigation. Higher claims costs increase TCOR with higher premium, experience mods and retained losses.
Proactive claims management helps ensure proper reserving and timely closure by using aggressive claims resolution strategies and establishing benchmarks and accountability with the insurance adjusters and claims administrators. Though claims management needs will vary depending on the organization and types of claims, effective claims management is generally composed of three key elements:
- Advocacy — a process to monitor and negotiate claims, helping to enforce accountability and progression of claims toward closure
- Review — regular claim reviews to ensure proper reserves, resolve issues and develop strategies to close claims
- Complex claims management — additional support for high-profile or high-exposure claims from experts well-versed in policy language and nuances
Assessing and Streamlining the Claims Process
Assessing claims administration performance is another way to reduce TCOR while streamlining the claims process. A claims administration performance audit can provide transparency into how claim decisions are made and affirm claim service expectations are being met, such as:
- Thorough investigation processes
- Transparency into compensability/liability decisions
- Appropriate reserves for the scope of the claim
- Timely claim settlements in accordance with coverages afforded by the policy
- Timely pursuit and resolution of subrogation
- Reduced likelihood of litigation, or favorable outcomes for litigating claims
All of these factors can affect the total cost of a claim.
Conducting a claims management assessment can also help decrease the overall cost of claims by identifying opportunities to reduce, control and mitigate exposures to risk, as well as to improve operational efficiencies. A thorough assessment reviews internal and external processes, such as claim reporting and intake, return-to-work processes, litigation guidelines/counsel selection and benchmarking of industry best practices, to identify program strengths and opportunities for improvement, and allows the client to prioritize the implementation of program enhancements to achieve measurable financial impact.
How USI Can Help
Reducing frequency and severity of incurred claims and cost drivers can lead to a reduction in premiums and/or actual claim dollars by up to 30%. USI Insurance Services helps clients achieve this with a holistic approach involving the collaborative efforts of our licensed, credentialed and experienced analytics, claims and risk control teams. Acting as an extension of our clients’ risk management teams, we work together to understand our clients’ operations, policies and procedures, to help them reduce claim frequency and severity, and cost of risk through customized, high-impact solutions and advocacy.
This comprehensive approach helps ensure claims are aggressively managed and resolved in a timely manner, and that clients receive the coverages afforded under their policies, as well as timely payment of claims. In one case, we were able to help a client lower the cost of claims by implementing a formal claim reporting and management process, as well as quarterly claim reviews. As a result, open reserves were reduced by $85,000, which saved the client $51,000 in premium on its next renewal.
To learn more about reducing your total cost of risk with a proactive claims management program, contact your USI consultant.
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