Claims Management: The Largest Component of Total Cost of Risk
Total cost of risk (TCOR) is a term that represents the sum of all aspects of an organization’s operations that relate to risk. Unlike insurance premiums, which you may not have much control over, the indirect costs related to claims is an area where you can influence cost minimizing. This session at the RIMS 2019 Annual Conference & Exhibition illustrated how to manage an efficient and effective claims process to improve key outcomes.
- Julie Pemberton, Director, Risk Audit & Compliance, Columbus Regional Airport Authority
- Chris Mandel, Senior Vice President & Director, Sedgwick Institute
Claim excellence includes the following attributes: equity, fairness, cost, efficiency, effectiveness and closure. There has been an evolution over the years. For instance, the “claimant” has now become the “customer” treated with empathy and compassion. “Speed of response” has become “customer service” focused on satisfaction levels and “rapid closure” has been replaced with the goal of achieving optimal “outcomes.”
Key components of claims process effectiveness include:
- Rapid, accurate reporting
- Timely, complete investigations
- Compassionate and equitable treatment of claimants
- Confirmation of facts (trust, but verify)
- Compliance with laws and statues
- Efficient, fair and effective resolutions
- Robust cost control tactics
New technology is being applied to help achieve claim effectiveness. Advanced analytics are helping predict trends, chat bots are helping achieve efficient communication for routine information, drones are the new insurance inspector, and telematics and self-serve technology are improving engagement.
To design an effective claims management program, there are several elements to define:
- What level of involvement and interactions are expected of your claims partners?
- What are the communication methods to be used?
- What is the frequency and timeframe of those communications?
- What is the agreed-upon claims philosophy? Is it understood and do your partners understand it?
- What types of financial and claims reporting that is required and when?
- What is the scope of claims audits and who is involved?
The risk manager’s role includes knowing the organization’s exposures and vulnerabilities in addition to understanding the corporate attitude toward risk and philosophy toward claims management. It is important to review and evaluate programs to make potential improvements along the way. Develop benchmarks and measure to achieve goals.