Change is a recurring theme in this issue of Verisk Review. Claims processing and investigations in the insurance industry are constantly changing — perhaps now more than ever before. Recent developments, including economic belt-tightening and new regulations, have challenged insurers' responsiveness.
Verisk Analytics and ISO maintain the industry's ISO ClaimSearch® all-claims system — the first line of defense against insurance fraud. Verisk Review spoke with a few of the company's experts in claims operations to discuss system milestones and services, issues and trends in claims adjusting and investigations, and what they see ahead.
Claims Reporting and Match Reports:
Value beyond Fraud
John Giknis, Assistant Vice President,
ISO ClaimSearch Operations
Since its inception, the ISO ClaimSearch database has grown continually and today contains nearly 780 million records. In 2011, ISO ClaimSearch participating companies — representing 93 percent of the property/casualty industry in direct written premium — reported more than 61 million claims. Most insurance professionals think of ISO ClaimSearch as the first line of defense against fraud, and they examine the system's match reports with an eye toward identifying fraud indicators. Estimates of the extent of fraudulent claim activity vary, but fraud is generally thought to be evident in 10 to 15 percent of submitted claims.
At ISO, we always emphasize that there is much to be gleaned from the other 85 to 90 percent of claims. While hard fraud may not exist, claims personnel often discover facts through ISO ClaimSearch information that can assist with claims mitigation and settlement negotiations. For example, a claimant may exaggerate a preexisting condition to (falsely) substantiate an auto injury claim. Or a recent hailstorm may have damaged a roof already damaged — and left unrepaired — a few years ago. As part of the claims adjustment process, ISO ClaimSearch can also uncover other responsible parties involved in claims for possible recovery activity.
Along with ever-increasing volumes of claims data, ISO is now seeing improvements in data quality. With the industrywide switch from legacy reporting formats to Universal Format, ISO is able to collect more valuable details, and the system can provide more actionable information for claims adjusting and fraud detection.
The End of Legacy Claims Reporting
Lynn Roberts, Manager,
ISO ClaimSearch Operations Support
Over the past years, insurers have faced a major change in the way their companies submit claims to ISO ClaimSearch. Legacy reporting has been gradually phased out. Beginning this year, participants are required to report all new claims in Universal Format, either through the web or by system-to-system transmission. ISO worked closely with companies to assist in the process and provided extensive technical support. So far, the conversion of companies to Universal Format has been successful: As of December 2011, 88 percent of new claims were reported in Universal Format.
Legacy reporting will end completely by December 31, 2012, when ISO also discontinues acceptance of updates and supplements to legacy claims in the database.
With this change come advantages in terms of collecting more comprehensive data. Universal Format reporting allows for more data fields at the accident level, and more data captured means more information for investigations. Individual companies and their claims processors are responsible for collecting this additional information. However, companies that increase their data collection definitely help improve the quality of the data available to the entire industry for claims evaluation and fraud detection.
In addition to increasing data quality, Universal Format is now the platform for ISO's delivery of enhanced services, such as claim scoring, appending missing data, and the inclusion of fraud indicators and flags.
Look Smarter, Not Harder
Tom Mulvey, National Director,
SIU and Claim Services, ISO
The charter for the SIU function is to protect the assets of the carrier and its honest policyholders. That being said, today's SIUs are facing the same pressure to do more with less that is evident in other departments of insurance operations — necessitating creative and innovative solutions.
Because the ISO ClaimSearch database continues to grow and the system gains additional detection functionality, more claim information is available today than ever before. Investigators are taking advantage of this extensive database every day. Last year, the database received 26 million investigative inquiries, a 12 percent increase over 2010.
With access to comprehensive industry data, investigators are uncovering patterns and associations of involved entities more quickly and thoroughly. Large case volumes and associated complexities are driving factors in seeking better ways to analyze 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. In today's environment, that degree of thoroughness is a challenge.
That challenge leads to the use of new data sets and sophisticated tools that are helping to narrow down and prioritize which cases to initiate. Assignment loads dictate that SIUs can't conduct in-depth investigations of every claim that may appear somewhat questionable. The initial review and triage are more important than ever.
In addition, SIU leaders are employing technological solutions to determine which leads to investigate first to conduct their inquiries more efficiently. The key now is to become more productive in sequencing the steps of an investigation.
The industry faces an environment in which fraudsters are continually hatching new fraud schemes and scams. The commitment to continued improvement in technology is vitally necessary to keep pace with the onslaught and ultimately reduce risk and improve results.
Increased Compliance Requirements
Bryan Berkowitz, Compliance Manager,
For many years, ISO ClaimSearch has provided compliance reporting support to participating insurers by automatically reporting fires and auto theft and salvage to the appropriate state agencies (state fire marshals and fraud bureaus).
In recent years, increased reporting requirements have challenged insurers by adding considerable pressure to their day-to-day claims operations. Since 2009, auto insurers and others have had to provide details about total-loss vehicles to the National Motor Vehicle Title Information System (NMVTIS). Such efforts help to prevent the introduction or reintroduction of stolen motor vehicles into interstate commerce, protect states and consumers from fraud, and provide protection from unsafe vehicles.
In an effort to increase collections of delinquent child support, some states now require claim departments to attempt to identify claimants who are delinquent obligors by reporting bodily injury claims to the federal Office of Child Support Enforcement (OCSE) and/or the multistate Child Support Lien Network (CSLN). Most recently, new requirements for reporting bodily injury claims filed by Medicare recipients to the Centers for Medicare and Medicaid Services (CMS) are intended to help recover Medicare payments that are properly the responsibility of other entities.
The good news is that participating insurers can choose to have ISO handle reporting requirements for them. In some cases, states have named ISO ClaimSearch as a designated reporting service for certain types of claims. ISO and ISO ClaimSearch constantly seek to support participating companies in satisfying regulatory requirements. ISO will continue to keep up with new regulations and provide compliance support services on behalf of participating companies.
Rich Della Rocca, Vice President,
ISO Claims Solutions
In the future, advanced analytics and predictive modeling will become increasingly automated and draw upon sources of industrywide data to provide highly selective information for claims evaluation and investigation. These evaluative tools will speed investigations, reduce false leads, and, most significantly, enable better visualization of connections among individuals, businesses, and properties linked to organized fraud activity.
Similar tools will also be available to insurers at the point of purchase to detect possible misrepresentation in the insurance application process and to identify applicants most likely to submit suspicious claims in the future. Using predictive models in both claims analysis and at the point of sale, insurers can build an effective perimeter defense. New data sets will soon be available to investigators researching cases and to underwriters screening applicants. The new information sources include property data to identify foreclosure activity for claims analysis, license plate reader information showing the locations of vehicles, more detailed weather reports, and services that scan the vast amounts information available through the burgeoning arena of social media.
In addition to the automation of analytics and new data sets, insurers will see shifts in how information is delivered and made available to claims and investigations personnel. Property and auto adjusting data sources are already available through mobile devices. The same convenience will apply to claims history and fraud analytics data as it becomes accessible through smartphones and tablets.
In summary, insurers will use streamlined data paths and integrated tools to detect fraud throughout the enterprise at every point in the policy life cycle. Harnessing the power of advanced analytics and predictive modeling, drawing upon new data sources, and including more information delivery systems for mobile devices will make it possible. And as the insurance industry and technology evolve, ISO ClaimSearch will continue to grow and adapt to serve the more than 100,000 claims and SIU professionals who use the system.