Archive for January, 2012

Insurance Fraud 101: Sometimes a hunch is all it takes

There is no question that insurance fraud costs Americans billions of dollars annually.   According to the Coalition Against Insurance Fraud, this industry is an estimated $80 to $120 billion annually.  Of course, this translates into increased insurance premiums that has a negative impact on not only the consumer, but the economy in general.  

According to most sources, the problem is only getting worse.   For instance, the Insurance Information Institute studies show that “staged accidents” increased 52% in the state of Florida from 2009 to 2010.  CBS Evening News just ran a special report exposing not only the fraud, but just how easy it is to pull off.

During a recent presentation of non industry professionals, I shared some statistics related to fraud, such as Florida drivers paying $549 in additional premium specifically as the result of staged accidents.   As industry veteran’s, many of us have become attuned to the problem not recognizing that most outside the world of claims don’t know that it even exists.    My audience was shocked to hear that 32% of all billings for auto accident related injuries in the state of Florida are for services never even rendered!

Staged accidents, swoop and squats, run downs, cappers and pill mills are foreign to the average vernacular, but are a significant problem that must be dealt with. 

As discussed in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary, it is incumbent upon adjusters to not only dig, but dig deeper.   A large part of the solution to fraudsters is better trained, highly motivated staff with an insatiable curiosity for the truth. 

I began my adjusting career a number of years ago in South Central Los Angeles, which at the time, was the nation’s epicenter for insurance fraud and staged accident rings.   The  Los Angeles County District Attorney opined then that as many as 50% of local auto claims contained elements of fraud. 

The problem has only gotten worse, expanding to cities of all sizes from coast to coast.   To think that staged accidents are limited to Miami, L.A. or New York is simply not true.   While the propensity for fraud may be higher in some jurisdictions than others, the magnet of easy money is universal. 

Improving claims processes to proactively identify potential red flags is critical to reducing fraud.   At the highest level it takes insurers working with law enforcement and the courts to create effective deterrents.   The law enforcement community must have the teeth necessary to investigate, while insurers are held harmless from unscrupulous trial lawyers who use bad case law to force payments for claims that never even occurred. 

But this is all meaningless unless there is an acute focus to basic blocking and tackling by adjusters, who must have the fundamental knowledge and skills to identify, investigate and report fraud.   Far too often, these skills are missing as the cultural focus of some insurers has moved away from investigation to merely claims processing.  

You may recall the movie Double Indemnity, a 1944 thriller about Barton Keyes, a savvy, take no prisoners claims manager.    In the movie, Keyes becomes suspicious when a policyholder is killed and the wife seeks to collect on a double indemnity clause relating to an “accident death” when her husband allegedly fell off of a train.  

In the end it is the savvy of Keyes that unravels the caper with such quotes as, “Now look, Walter. A guy takes out an accident policy that’s worth $100,000 if he’s killed on the train. Then, two weeks later, he IS killed on the train. And, not from the train accident, mind you, but falling off some silly observation car. You know what the mathematical probability of that is? One out of, oh, I don’t know how many billions. And after that, the broken leg. No, it just, it just can’t be the way it looks. Something has been worked on us!”

By his own admission, Keyes was guided by his “little man” which was a reference to his heart.   This  gave him intuitive ideas, or hunches,  that helped him solve cases of insurance claims.   As discussed in Re-Adjusted, insurance claims is not a career for just anyone as it takes a unique set of skills, not the least of which is intuition, to effectively investigate and resolve claims.  

Hiring the right people is the foundation, training them how to properly investigation is a means to success, but at the end of the day it does come down to one’s ability to have the perception necessary to seek out the truth in an increasingly complex world.   

By re-emphasizing the investigative aspects of insurance claims investigations, carriers can go a long way towards not only attacking the growing problem of fraud, but towards gaining a competitive edge in the marketplace.   While once a mainstream approach to claims, this now seemingly outside the box paradigm is precisely what can take an organization from ordinary to extraordinary. 

 

Christopher Tidball is an executive claims consultant and the author of multiple books, including Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  He is an industry veteran who has held multiple jobs in claims, management and executive leadership for multiple Top 10 P&C carriers.  To learn more, please visit www.christidball.com or email chris@christidball.com

 

January 27, 2012 at 11:51 am Leave a comment

Stop chasing numbers, start getting results

At the end of the day, where the rubber meets the road, there is only one thing that really matters; results.  Far too often organizations spend too much time chasing numbers only to be muddled in mediocrity.   Call this person, close that file, inspect that vehicle, refer more to subrogation, move the salvage.  The list of metrics upon which adjusters are measured goes on and on.  

Certainly, there are tasks that have to be completed.   Good adjusters, managers and executives know this and don’t need to be asked twice.   Herein lies the problem; are the myriad of metrics designed to get results or simply prod marginal staff along?   

As discussed in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary, not everyone is meant for a career in claims.  Yet, many organizations ignore this in their hiring practices.   The reality is that organizations are comprised of A, B and C players.   The key to success is to acquire as many A’s as possible, motivate the B’s and remove the C’s.  

Companies become great because of their people and their culture.   Companies also fail for the same reason.   As a frequent flier, I typically travel on the one airline that has redefined that industry.    The reason they have succeeded is because their people do things right, in a consistent manner with processes and procedures designed to get results, not the least of which is the hiring of the right personnel. 

Whether it is an airline, a manufacturer, a professional service provider or a claims organization success occurs when there is basic execution of the fundamentals.  It is important to not forget that claims is a skill, not a job.   It takes a certain personality to effectively handle the tasks required for thorough investigations, negotiations and settlement.  

In reviewing processes throughout the industry, both here and abroad, it never ceases to amaze me how many opportunities exist.   Liability is often assessed at zero or one hundred percent despite a significant percentage of claims involving shared liability.   Injury investigations often overlook pre-existing conditions or intervening circumstances.   Scene investigations are rarely completed and witnesses often aren’t questioned.   Clinics go uninspected, patient sign in logs aren’t obtained, red flags for fraud are routinely ignored.  

It is this basic blocking and tackling that separates not only A,B and C players but entire organizations who can gain a significant competitive advantage with simple process improvement.    Fortunately, none of this is overly complex.   To the contrary, it simply involves hiring the right people, training the right knowledge, implementing the right processes and leveraging the right technology.  

By following this model, the results will come.   During my tenure overseeing claims operations we found success by transforming from the status quo.   While measuring mountains of metrics had historically given us data, it wasn’t giving us the results we sought.   By moving to one simple metric and calibrating the organization, the focus moved from chasing numbers to getting results.

In this particular case the simple metric was an all encompassing quality assurance score.   A good claim file will meet every metric that had been previously measured individually.   This focus enabled the organization to improve accuracies, reduce expenses, decrease cycle time and increase retention.   It also provided the data needed to ensure the appropriate people were in the appropriate job function.  

With a simple re-adjustment designed to leverage people, processes and technology, it is possible for any organization to go from ordinary to extraordinary.    Those who are overly ambitious will not only redefine their own organization but have the potential to redefine their industry.  

“The vision must be followed by the venture.   It is not enough to stare up the steps, we must step up the stairs.” – Vance Havne

Christopher Tidball is an executive claims consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  He is a twenty plus year industry veteran with wide ranging claims, management and executive experience at multiple Top 10 insurance carriers.   To learn more, please visit www.christidball.com or email chris@christidball.com.

January 20, 2012 at 7:43 am Leave a comment

Overcoming the challenges of adverse subrogation

The demand for payment arrives and where does it go?  If you are like a lot of insurers, it makes its way to the handling adjuster and takes a backseat to other more pressing priorities.   During my tenure as Recovery Process Leader for a large multi-national insurer, that is precisely what hamstrung our ability to effectively respond to subrogation demands. 

To effectively address such process opportunities, there are a number of steps that can be taken to ensure that:

1)      Demands are reviewed promptly

2)      Estimates are reviewed for accuracy

3)      Historical alternative used parts availability has been verified

4)      Effective negotiations are utilized to compress cycle time and limit arbitration filings. 

In reviewing some common practices, there are two that stand out as being commonly applied.    In the first, the handling adjuster is tasked with responding to inbound subrogation demands.   In this situation the following questions should be asked to ensure that this is this process is maximizing returns:

1)      Is the adjuster sufficient trained in material damage to review the estimate for accuracy and estimatics compliance?

2)      Does the adjuster have the ability to access historical alternative parts availability?

3)      When shared fault applies, is the adjuster effectively identifying duties owed and breached so as to formulate a viable comparative negligence scenario?

4)      Does the adjuster have sufficient time to ensure that subrogation demands are reviewed and evaluated within 48 hours of receipt? 

Another common iteration of this inbound process entails utilizing a material damage team to assist in the evaluation process.  While this can be effective in estimate compliance, some critical questions are:

1)      Does the reviewer have access to historical alternative parts availability? 

2)      Could the time spent reviewing, or in some cases, rekeying an estimate be more effectively spent in other capacities?

3)      If the reviewer is not negotiating the settlement, does the handling adjuster have enough knowledge of material damage to effectively apply the reductions during negotiations? 

4)     What is the actual paid amount compared to the reviewed and reduced amount?  

The challenges of any subrogation response process arise across the P&C industry, where other priorities such as contacts, inspections and disposition often take precedence.    To determine the right solution for any organization takes a critical review of the entire end to end claims process.  

By looking for organizational workflow and process gaps, the solutions often become evident.   It is also critical to consider unintended consequences, such as increased arbitration filings, rising expenses or cycle time delays.   When these arise there is often a correlating deterioration in average severity and comparative negligence assessment. 

Often the most effective solution involves leveraging claims technology to assist in the process, freeing up internal resources for more productive redeployment while increasing accuracy in ultimate settlements.  

Christopher Tidball is a claims consultant, specializing in process,  workflow and is the author of Re-Adjusted: 20 Essential Rules To Take Your Organization From Ordinary To Extraordinary.   To learn more, please visit www.christidball.com or e-mail chris@christidball.com

January 16, 2012 at 8:01 am Leave a comment

The time has arrived for tort reform in the Sunshine State

As the New Year gets underway, so too does the annual Florida legislative session.   A topic that can’t be discussed soon enough is tort reform in Florida, which has become a hotbed of insurance fraud, particularly as it relates to automobile no fault coverage.   

To better understand the dynamics of the problems facing Floridians, it is important to recognize that Florida is just one of thirteen states to mandate no fault coverage.   In fact, since the advent of no fault in the early 1970’s, multiple states including Georgia, Connecticut and Colorado have abolished this costly mandate.   Another state, Pennsylvania, gives customers the choice of purchasing auto no fault or having the right to sue.  

Conceptually, no fault looked good on paper.   When a party is hurt in an accident they go after their own coverage instead of fighting with the tortfeasor’s insurance company.   The underlying premise was that costs would go down as the result of decreased litigation.  Sadly, this is not the case in Florida where frivolous litigation abounds as the result of “soft tissue” injuries. 

In the United States there is only one no fault state that remotely resembles the founding premise of this first party coverage. Michigan provides unlimited benefits to injured parties while limiting the right to sue to only the most serious cases, such as death, and only after getting approval from a judge rather than a much less informed jury.   Of course, Michiganders pay dearly for their no fault with some of the highest premiums in the nation. 

The problem in Florida is substantial.   First, the threshold for determining whether a party may sue has been watered down by the courts over the years meaning that virtually any injury, irrespective of how minor it actually is, can be adjudicated.   While this is appropriate in states without a no fault statute, it is inappropriate in Florida where such determinations should be made by judges rather than juries.   This should be done with a strict interpretation of the statutory language that allows for pain and suffering only the event of death, permanent disfigurement or permanent impairment of a body function.  

Secondly, Florida is considerate a pure comparative negligence state.   This means that a person is able to sue for any percentage of damage for which they were not at fault.   Even if a person is 99.9% at fault, they are able to sue for damages.  A more sensible approach, such as the one Michigan adopted during their tort reform, would be the modified comparative negligence law followed by the majority of states which bars a person from suing if they are more than 50% at fault.  

Next, there is the element of fraud that is costing Florida policy holders billions of dollars annually.   According to the Insurance Information Institute, the “fraud tax” levied on Florida drivers was $549 million dollars in 2010 was expected to double in 2011.   This fraud comes in all shapes and sizes from staged accidents to burying deductibles to claiming injuries that are nothing more than pre-existing conditions.   

Florida has become a national hotbed for staged accidents. PIP costs associated with staged accidents increased 77 percent from 2009 to 2010, while billings for services not rendered increased 32 percent, according to Insurance Information Institute estimates.

In a purely staged accident, a “capper” will organize the scenario and give each of the “victims” a “script” of what to say to the insurance company. The “case” is then sold to an attorney who works in conjunction with a doctor to create falsified bills that are submitted to an insurance carrier.  

Florida is also one of a just handful of states that doesn’t require bodily injury liability coverage which pays for the personal injury caused to others.   This is nonsensical in a state that defines an automobile as a dangerous instrumentality.   As a result, responsible Floridians pay a significant amount for uninsured motorist coverage to cover them in the event of an accident with drivers who carry no liability coverage, or  worse yet no coverage at all.

In Florida, the latter comprise 23% of all drivers on the road.  Despite their breaking the law, these people are still allowed to sue in the event of an accident.  A common sense approach taken by a number of states is to bar the uninsured from having the right to sue.   It is important to remember that driving is not a right, it is a privilege. 

It is time for the legislature to enact meaningful tort form, including capping attorney fees and damages.   There should also be careful deliberation to abolishing no fault, as was done in Colorado or making the coverage optional, as was done in Pennsylvania.  

Another option is to keep no fault but strictly enforce the law so that only those who are truly killed or maimed in accidents have the right to sue for pain and suffering.    Consideration to having caps, such as those associated with Medicare and worker’s compensation, on treatment for soft tissue injuries which comprise the vast majority of cases clogging our courts.

Finally, law enforcement needs to have the teeth necessary to take a bite out of crime, insurers need to be held harmless while investigating these crimes and the criminals need to spend time in jail, a rare occurrence today.

The Florida legislature has spent years trying to fix these problems, to no avail.   It is time to look at steps being taken by other states where successful reform has mean a corresponding reduction in premiums, litigation and fraud.     

Christopher Tidball is an executive claims consultant and author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!   He is a twenty plus year industry veteran and a contributing writer for Claims Magazine.  To learn more please visit www.christidball.com or e-mail chris@christidball.com.

January 9, 2012 at 7:54 am Leave a comment

Business resolutions that can have a significant impact in 2012

With the arrival of  2012, many of us will be making resolutions for the New Year.   Most certainly there will be the typical; losing weight, finding a mate or balancing that budget.  But what about business resolutions?  What steps can organizational leaders take to improve productivity, retain talented employees and achieve financial gains during these difficult economic times?

Better yet, what about picking resolutions that are guaranteed to make money without costing you any new money?   While this may sound too good to be true, the reality is that these simple resolutions are guaranteed to have a BIG impact on your bottom line. 

With 2011 behind us, both businesses and individuals will be busy closing out their books only to find that they are owed money.  According to government records, there is $35 BILLION in unclaimed funds owed to individuals.   You can search for your own personal goldmine at www.unclaimed.org.   Even more telling is the estimated $200 billion owed to businesses and if unpaid judgments are factored in this figure rises to nearly $300 billion!

A significant percentage of these funds are owed to insurers who have tasked their claims departments with recovery.  As they have come to find out, collecting this money can be a challenge in a nation where 82% of all judgments go unpaid.   Simply stated, getting judgments is easy but collection is the true test of ability.  Don’t let that money lie around; make a resolution to work with an expert to track it down who won’t charge a fee unless there is a recovery. 

In addition to improving receivables and outbound subrogation, many carriers overlook a significant opportunity when it comes to adverse or inbound subrogation demands.   Given the industry leakage rate on estimatics, loss of use and diminished value a great resolution would be the implementation of a proven method for reviewing inbound subrogation that can reduce amounts owed by five to fifteen percent. 

While inbound and outbound subrogation is a great place to start, the reality is that potential resolutions to improve blocking and tackling in the claims process abound.   From first notice of loss and investigation to negotiation and settlement, there is plenty of room for improvement with solutions proven to give carriers a competitive edge in the marketplace.  Most importantly, many of these resolutions can be done with little to no financial commitment!

By taking simple steps to change an organizational paradigm from “what we do right” to “where can we improve” it is possible to quickly gain a competitive edge in the marketplace.  By simply benchmarking existing results against both internal and external measures, an organization can identify weaknesses.   Whether it is fraud recognition, subrogation, salvage, liability assessment or BI negotiations, significant lost economic opportunities are sure to exist.  Identifying them is critical, but it is taking the steps towards improvement that will separate the ordinary from the extraordinary

Whatever your business resolution, 2012 is shaping up to be a great year to improve quality, accuracy, cost containment and retention of both staff and policyholders.  As Vince Lombardi once said, “perfection is not attainable, but if we chase perfection we catch excellence.”

*****

Chris Tidball is the author of  Re-Adjusted: 20 Essential Rules to Take Your Claims Organization From Ordinary to Extraordinary, as well as Kicked to the Curb, which combines the spiritual journey of The Secret and The Power of Positive Thinking with the insight gained during his twenty years on the inside of multiple Fortune 100 companies.  He has been featured in a variety of media, including MSNBC and CBS Market Watch with innovative solutions to assist businesses in finding new revenue streams in today’s difficult economic times.  For more information please visit www.christidball.com or email at chris@christidball.com.

 

January 3, 2012 at 8:04 am Leave a comment


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Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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