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Lori Widmer
Lori Widmer
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Going With the Workflow

Thanks to Verity's Medi-Claim solution, workers' compensation insurer State Fund Mutual is able to dig out from under mounds of paper.

In a time when workers' compensation claims are rising, a workers' compensation insurer must have an automated claims process. But Bloomington, Minn.-based State Fund Mutual Companies ($98 million in premiums) found software costs to be too prohibitive to convert from a manual process to an automated, paperless workflow. As prices of software fell, however, and the amount of paper being generated by State Fund's manual claims process began to mount, it was time for a change.

State Fund Mutual's David Kaiser, VP of information services, and John Grams, project manager, examined available technologies. "There were two things we wanted to solve," says Kaiser. "We wanted to automate our processing of medical bills and get away from the manual data entry of them. We also wanted to eliminate paper from our claims operation."

The insurer suffered from a number of paper bottlenecks. Processes were slowed because paper files had to be manually located, and the arduous process slowed payments to providers, which increased paper coming into the company in the form of re-bills. Additionally, files were kept offsite, which made locating information even more time-consuming, and storage was being used up at a brisk rate. "We had more paper coming in, and we had more time and talent going into managing that paper," says Kaiser. "It was extremely ineffective."

Given the carrier's systems profile - a Unix-based database, a Windows client-server platform and business logic stored in an Oracle (Redwood Shores, Calif.) database - Kaiser and Grams sought a solution with a good optical character recognition (OCR) engine that could run multiple engines and handle a paperless process. After interviewing three vendors, they chose San Diego-based Verity's Medi-Claim paper-to-digital software. In the spring of 2003, Verity and Kaiser's group began what was to be a nine-month conversion process. The company went live with the system in February 2004.

It was a surprisingly smooth conversion, according to Kaiser. The Verity product integrated well with the company's exisitng systems. Training - which State Fund Mutual handled on its own - was minimal. But the change management challenge issues were considerable nonetheless. "People were managing paper before, and their jobs changed radically," Kaiser notes. "You have to expect that you're going to meet with resistance."

Despite the success of the conversion, Kaiser says that a mistake early on nearly doomed it to failure. State Fund Mutual purchased low-end scanners, but the results were "miserable," he says. To correct the problem, the carrier spent $15,000 on Bell & Howell scanners. According to Kaiser, "It saved the project."

The company has seen a decrease in the number of people needed in the claims department. According to Kaiser, State Fund Mutual now has more documents moving at a faster pace and bills are being processed at a much greater rate. Accuracy is at 95 percent or better.

In addition, as a result of the success of the paperless claims process, the carrier's underwriting department is planning its own conversion - and underwriters are excited about it. "That's when I knew it was a success," Kaiser says.


Case Study Profile


State Fund Mutual Companies (Bloomington, Minn.; $98 million in premiums).

Lines Of Business

Workers' compensation.


Verity's (San Diego) Medi-Claim paper-to-digital software.

The Challenge

Automate the processing of medical bills and eliminate paper from the claims operation.

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