By Carlos Martins
In attempting to uncover and mitigate fraud in today’s claims process, access to more comprehensive industry data means investigators are uncovering patterns and associations of potentially fraudulent entities more quickly and thoroughly. Large case volumes and associated complexities are driving factors in seeking better ways to analyze fraud in claim scenarios and develop accurate conclusions to reduce investigative cycle time. In past years, investigators would explore every avenue looking for pertinent information to resolve an assignment. Now, that degree of thoroughness and the time it requires is a challenge.
That challenge leads to the use of new data sets, advanced technology, and sophisticated tools that are helping to narrow down and prioritize which cases to initiate. Assignment loads often dictate that special investigative units (SIUs) can't conduct in-depth investigations of every claim that may appear somewhat questionable. That makes the initial review and triage more important than ever.
Today, SIU leaders are employing technology more prominently to determine which leads to investigate first to conduct their inquiries more efficiently. The key now is to become even more productive in sequencing the steps of an investigation in an effort to reduce and remove fraud from the claims process.
As industry experience has shown, what happens at first notice of loss (FNOL) sets the tone for how a claim is handled throughout its life cycle. Early decisions can ultimately define the customer experience and the cost required to resolve a claim, whether meritorious or suspicious. For commercial claims — where complexity, claim value, and loss adjustment expense can accumulate quickly — the FNOL becomes particularly important, as early intervention can prevent unnecessary costs for both suspicious and meritorious claims.
The principal challenge in the FNOL community today is a technological gap that exists in most operations and the systems that support them. The thin amount of real-time information available when a claim is filed provides adjusters with limited external insight and little to use in making important routing decisions that can later influence the identification of fraud or the delivery of a fast resolution to meritorious customers. However, real-time alerts would improve tools for early detection. They could harness a wide range of third-party data sources to provide an integrated notification platform at FNOL. The return of alerts almost immediately upon claim submission could provide adjusters the intelligence they need to make prudent decisions faster.
Indicators of prior SIU involvement or a significant prior loss history, for example, might accelerate routing to specialists and reduce the risk that a suspicious claim falls through the cracks. When no alerts are returned, a claim can be fast-tracked (when used in conjunction with other parameters). Further, such alerts could inform the business processing rules engines and predictive models increasingly used to route claims. The results would enhance the customer experience and cut cycle time and claims department overhead to support profitable growth in today’s hypercompetitive market.
FNOL adjusters for commercial lines face a significant challenge. Aside from policy details and some circumstances surrounding the loss, the FNOL desk has little real-time actionable information at its disposal.
Third-party data targeting a specific point in time could be a game changer, of course, but such data is rarely integrated into FNOL operations. Rather, adjusters tend to gain access to that information later in the life cycle — to facilitate the investigation of claims already routed for special handling. Even though manually searching for such data while the FNOL is being reported could help, the value of the searches must be considered against the time and cost associated with all those extra mouse clicks. For third-party data to become a truly useful part of FNOL operations, it must be built into the technology underlying the process, bringing the benefit of information without a corresponding loss of speed.
Whether the claim is on a workers' compensation, general liability, or any other policy, the data typically missing at FNOL can profoundly affect how a claim gets routed — and ultimately handled and resolved. Information gaps can include:
Those indicators, among others, could help an FNOL adjuster cut cycle time significantly, highlight fraud risk, and affect the ultimate resolution of the claim.
Integrating such alerts into the FNOL infrastructure could also help commercial lines insurers use rules engines and predictive analytics more effectively to route claims. Taken in conjunction with historical claim data and other internal and external databases, claim alerts could round out the context of a claim, increasing routing accuracy. The tool would match a claim with the most appropriate adjuster — with the best skills and lowest workload — to provide the customer with an exceptional claim experience. From fast-tracking to fraud detection, the benefits of the approach would affect the entire claims department — and an insurer's expense and loss control results.
The challenge at FNOL is not data availability — insurers have access to plenty. Rather, it’s timely data integration, that is, when the information is needed the most. Claims departments need a better way to make the third-party data that resides in disparate systems accessible to adjusters in an easily digestible format. Harnessing third-party data into real-time FNOL alerts makes the process seamless.
Such a tool should sit between FNOL and routing. At that point, a claim system must dynamically interact with relevant third-party databases to augment the claim record with the alerts an adjuster — or rules engine or predictive model — needs to make an effective routing decision.
Upon FNOL, a claim system should push the appropriate data to a platform that would match the details of the claim to databases of relevant predictive conditions. When a match occurs, that platform would return a series of pertinent real-time alerts — only a few bytes — to prompt subsequent claim handling and routing.
A few bytes can make a big difference. And if those bytes arrive quickly, they can become a game changer.
For technologically advanced insurers, those flags could become part of the claim record, feeding predictive analytics and rules engines and enhancing the capabilities of models already in use. The result would be improved routing accuracy to facilitate shorter life cycles and optimized claim outcomes. Where claim routing occurs in a more manual environment, the flags could be returned to the claim system, where an adjuster can use the information in making routing decisions. The time savings in that case could still be considerable.
Further, the flags become part of the claim record, benefiting downstream adjusters as they decide whom to interview and whether to conduct site visits. When managers audit claim files, they can use the presence of such flags to evaluate the investigations their adjusters have conducted. Therefore, the value first evident at FNOL can persist long after the case has closed.
The gap in FNOL alert technology is narrowing. Using such tools, adjusters will be able to gain more insight into the circumstances surrounding a claim. A general liability claimant with a history of financial stress, for example, may warrant an adjuster’s extra look. Weather-related claims on a commercial auto policy can be examined more closely through integrated weather forensic alerts — built right into the FNOL process.
A claims department’s mission is to honor a promise made to customers and to protect them from the impropriety of fraudsters. Integrating enhanced claim alert capability will help FNOL adjusters triage commercial claims more effectively, boosting their ability to handle claims quickly and fairly while identifying sooner suspicious claims that warrant investigation.
Carlos Martins, SCLA, is vice president, ISO ClaimSearch Solutions, where he leads the daily operations of ISO ClaimSearch® and the ISO ClaimAlert™ suite.
The article first appeared in a Business Insurance Special Advertising Section, publication date: March 31, 2014.