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Insurance: next-generation claims processing

This article appears in the issue October 2005 [Volume 14, Issue 9]


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The insurance industry made great strides more than a decade ago when it began using imaging rather than paper for its claims processing. However, as the digital age advanced and information accompanying claims became more complex, some of the early systems were no longer up to the task.

That was the situation faced by RLI, an insurance company that began with a unique mission of providing insurance coverage for contact lens owners. RLI later expanded into other specialty areas of property and casualty insurance where the risks are not covered by standard policies.

"Our original claim system worked well for its time," says Piyush Singh, CIO of RLI, "but it did not scale up effectively as we expanded, and lacked functionality for the Web." Digital photos, video clips and audio were not supported, and those were becoming increasingly important as documentation for claims.

RLI began to search for a new claims processing solution, investigating 10 different software packages. The search encompassed a variety of options from high-end, horizontal applications to vertical solutions focused on insurance. After narrowing the search to two options, RLI selected software from Tower Technology, which was purchased in March 2004 by Vignette.

"We selected this product partly because of its security features," notes Don Almario, assistant VP for systems development. "It doesn't allow a user to go into the folders ‘through the back door.' The only access is through the application." In addition, the product provided good integration of e-mail and fax channels into the application, as well as integrated support for other formats such as images.

Implementation of the new system began in June 2004, phasing in each insurance product and division sequentially. Deployment was completed by the fall. Contrary to the resistance often expressed by employees when a new system is imminent, RLI's groups were eager for their transition to the new software, which has been renamed Vignette Records and Documents (VRD).

"Our claims examiners knew their existing application was inadequate," says Almario, "and they wanted the greater speed and ease of use of the new system."

One of the features that appeals most to the examiners is the user interface, which is designed with tabs resembling those on manila folders. That aspect of the software has two major benefits. It allows the examiners to go quickly to the contents they need, rather than scrolling through pages of images for a case, and it also has the familiar look and feel of file folders.

"For us, this is a second-generation imaging product," Almario points out. "The fact that it's electronic instead of paper is not enough to impress our users. They want ease of access, quick searching and quick display of the information they need."

Now that the claims processing function is rolled out, RLI has begun to deploy Vignette's software to other departments, including reinsurance procurement and the law department. That will be followed by deployments on the policy side. The goal is to bring the same efficiency to other corporate operations that the system has provided for claims.

One of the recurring information management issues in insurance is that claims and supporting information come in through many channels, and need to be linked together for a particular case. "Our software creates a case file that connects all the different islands of functionality," says Bruce Milne, VP and general manager of Vignette's insurance and healthcare division.

Those connections are important because in many cases, the insurance industry must deal with legacy data on different mainframes. "In some cases, companies may have four or more different applications that don't share data," continues Milne. "Products such as whole life, term life and universal life insurance are administered on mainframe applications that are different for each product." That isolation becomes critical in activities that extend beyond claims processing--for example, when an insurance company wants to get a total view of a customer for marketing purposes.

Software vendors that market horizontal products used across many industries are recognizing the value of "verticalizing" or tailoring their products to specialized markets. By incorporating the expertise of subject matter experts in their business development, the software producers are offering products that are quicker and easier to deploy, and therefore more accessible to smaller companies.

Mid-tier insurance companies are now able to benefit from the lessons learned in developing process and content management for larger companies. Claims processing entails a finite number of actions, which are scripted into reusable code. For example, a common action in claims processing is to hold a case pending supporting evidence, such as a photo or a referral from a doctor. That usually involves generating a letter and a need to place the response into the case file. The user interface can easily be designed to include options for those steps. Therefore, smaller companies do not have to contend with the time and expense of programming in order to customize their applications.

A common misconception, according to Milne, is that once a process is re-engineered to improve workflow and then coded into an old system, efficiencies will be ongoing. "You really need continuous improvement," Milne maintains. "The work needs to be monitored and then the process readjusted." In addition, he believes that insurance companies are not adopting Web self-service as aggressively as they should, given the widespread access to the Internet in general and to broadband in particular. Self-service is a way to dramatically decrease the cost of customer interactions, and is likely to see major expansion in coming years.

Faster and more convenient
John Barton, owner of Slawsby Insurance--an insurance agency in the Minuteman Group, strongly believed that to operate at its highest possible level, the company would have to go paperless. Documents came in to Slawsby through multiple channels, including fax, mail and e-mail, with no central means of consolidating the information. Slawsby became an early adopter of technology to integrate its information and is a good example of how such technology can benefit small organizations as well as large ones.

In 2001, Slawsby deployed eCopy, which is designed to integrate paper with an organization's existing applications. Slawsby uses software from AMS Services, which specializes in management software for insurance companies. eCopy was set up to convert every paper document into digital form.

"In less than two hours per day, we now scan in all of the paper that comes into the company to a central server," says Karen Hanks, customer service manager at Slawsby. "I then route the materials to the appropriate worker." The result has been an improvement in the speed of processing information and greater convenience to the workers.

"At first the employees were skeptical," Hanks says, "and afraid they would not be able to locate what they needed. But now they really have been won over." The scanned documents, which are in PDF format, become a part of each case file in the AMS system. They can be annotated, highlighted and signed electronically, which expedites the processing for such actions as responding to requests for bids. In addition, employees can work remotely, since all the information is available centrally. Slawsby is now testing eCopy's most recent software version, which will become available later this year.



Judith Lamont is a research analyst with Zentek Corp., e-mail jlamont@sprintmail.com.


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