Claims Management: The Need for Data Integrity

When you consider that one company’s claims data can be spread among insurers, brokers and third party administrators (TPAs), it is clear that data integrity is everybody’s business.

Why is data important? “Data on its own is worthless. It’s being able to extract the right information at the right time for the right question that’s critical,” says Garry McDonell, senior vice president, responsible for sales and service at Aon’s Toronto office. He adds, “Clients are always asking how they can better manage their self insured retention and how they can get the maximum benefit from assuming greater risk, but often they don’t have accurate claims data to analyze. Unless I have a degree of comfort with the integrity of data I receive, I can’t make recommendations to a risk manager.”

Accurate and timely data is vital when making insurance decisions. Poor data results in decisions that can have a negative impact on the bottom-line for both insurer and insured. From a loss control standpoint, risk managers need to identify developing trends so that they can make improvements to reduce their exposures.

AIG Risk Management’s claims department depends on national adjusting firms to provide full service TPA administration. It uses the TPA’s data to fulfill reporting requirements to provincial and federal regulators, reinsurers, actuaries, and underwriters, as well as brokers and the client. As a purchaser of TPA information, Lynda Cunningham, assistant vice president of claims (Canada) for AIG Risk Management, makes data accuracy a priority. “Data integrity is number one on our top ten list of requirements. Since TPA loss data is our single source of data, it is imperative that the information is accurate.”

Data source

With today’s high cost of keeping up with cutting edge technology, an increasing percentage of the responsibility for providing accurate data is being shouldered by TPAs and adjusting firms. Many are investing time and money into systems with the hope that their technology will not only improve the quality of data, but make their operations run more efficiently. Relying on TPAs and adjusters to provide the data makes sense because they are on the frontline of claims handling and therefore develop the majority of data base information.

Some of these systems are brand new, some are updated versions of existing systems. While there are pros and cons to each approach, Cunningham is a proponent of building on existing technology. “In my past experiences, poorly executed data conversions have resulted in receipt of corrupt data. This resulted in delays in client and reinsurer billing, regulatory reporting and reimbursement back to the TPA. When a TPA wants to upgrade its systems, it should solicit feedback from brokers, clients and insurance carriers to ensure collective data specifications are addressed, rather than just saying ‘it’s our system, live with it’.”

Data integrity obstacles

The leading cause of inaccurate data is human error. Improper coding of coverages and locations, inaccurate posting of payments, missing links between statistical trust accounts and banking statements, date interpretation, and numerical errors during data entry all result in corrupt data.

Other causes of inaccurate data can occur during transfer between two incompatible systems, or when a carrier has different reserves established on a file than the TPA. This can happen when a claim reaches a specific retention and the carrier assumes control of the file. A problem is presented when insurers have not provided timely updates to the TPA, thus creating gaps in information given to the risk manager who is relying on the management system of the TPA.

Ownership issues

Ownership over claims information is a common problem. According to Catherine Dowdall, risk manager for the Ontario Lottery and Gaming Corporation, carriers are often unwilling to share data.

Insurance buyers with lower SIRs often find themselves beholden to insurance companies for claims information. Dowdall believes carriers should provide web-based access to their insureds so risk managers can securely access claims data on a real time basis. McDonell also takes issue with restricting client access to information. “Just as medical reports belong to individual patients, claims data is owned by the client, not the insurers,” he adds.

While insurers had formerly been reluctant to share data, today, an increasing number are allowing their clients direct access to claims information. AIG Risk Management is using the Internet to eliminate data discrepancies with its clients. By outsourcing its claims management and data tracking responsibilities to a technology savvy TPA, the company is now able to provide clients with immediate access to the same data it receives.

Complete solution?

There has been talk in industry circles of establishing an industry web site for claims data with controlled access though a network of firewalls. This has great potential, but would require a significant commitment by the insurance industry. Even with the industry on side, resistance would likely come from companies that have made significant investments in technology to stay on the cutting edge. Collaboration could find these companies losing an important market “differentiating factor” and selling tool. While an inclusive solution has not yet been developed, a number of items have been identified as critical to ensuring data integrity across the industry:

At the inception of any program there needs to be communication, including a listing of expectations from all parties. Combined stewardship between, client, broker, carrier and TPA is essential.

For risk managers with exposures outside Canada, it is critical they do what they can to insure that their data is maintained on one central platform. The system must allow them to manipulate and extract data from a global perspective rather than having to use multiple systems then cut and paste data.

Claims management systems that restrict errors during the basic entry of information.

When selecting carriers, risk managers need to identify what their level of access will be to their information and through what medium.

Internet availability must be established on a real time basis.

It is essential that quality control methods be in place to ensure data accuracy.

All staff entering data into the systems must be educated on the importance of quality control and be accountable for errors.