Opportunity Knocks

In the area of claims systems, as elsewhere in the industry, a combination of straitened economic circumstances and a history of questionable returns oninvestment has made technology investors cautious. Nevertheless, technology offers great opportunities for automating business processes and connecting far-flung partners in the claims life cycle. Property and casualty carriers can achieve gains through improved efficiency, both in companies' internal workflow and in their interaction with external partners. In health insurance, HIPAA-driven standardization is opening up Web-based efficiencies across claims processing.

Still, it's a complicated environment, and in the event they feel bold enough (and have the resources), insurers do have claims-related opportunities to pursue. "There's no question that the insurance industry, or at least the property and casualty industry, needs to replace a great many of its core transaction processing systems," says Vic Guyan, a partner at Chicago-based Accenture. "Many of the applications being used are very large-scale, custom-built or highly modified packages that are reaching the end of their life cycle, so there's a constant demand for replacement applications to meet that need."

Carriers have been actively exploring their possibilities, but RFPs and RFIs have been more numerous than the decisions vendors might hope would issue from them. "We've seen companies do analysis and conclude that solutions in the marketplace are not yet ready, so they wait," says Paul McDonnell, managing director and insurance segment leader, BearingPoint (formerly KPMG Consulting, New York). Companies are no longer in a position to implement technology for technology's sake but rather face a daunting challenge of self-examination. Solutions, McDonnell says, "must be driven by a fundamental analysis of your business operations and a determination of how you will actually change the way you operate your claims organization."

Focus On Workflow Automation

Among the solutions gaining traction in the market are those that work "to put structure around the workflow that claims handlers internally, or adjusters externally, are using to process claims," according to Todd Eyler, a senior analyst at Forrester Research (Cambridge, MA). Some very large industry carriers are using solutions such as Accenture's Claim Components and SAP's enterprise claims applications "for not only providing structure around internal activities, but also extending out into the supply chain of services providers, such as auto repair shops, to be able to more tightly integrate them" into a carrier's processes, Eyler says.

Accenture's solution offers companies components "they can assemble into a large-scale and complex claims application in a way that they can achieve with much lower risk and cost, and in a much shorter time frame," says Guyan. Given the history of big-project failure, "components are the most rational way to create a large-scale, complex business application."

The challenge is "to integrate the transactions that take place, to deal with how you set up and pay claims, and how you move them around the organization," Guyan asserts. For example, there are many good point solutions on the market, but they can still leave the claim handler having to act as an integrator. "If you supply me with a solution, whether for fraud detection, bodily injury evaluation or ticket dispatching, and you're deploying it to my browser, that's good," Guyan says. "But if the claim handler has to pop up that browser and retype a lot of data in order to invoke the service, that's only marginally better than my sending you a fax." Integrating those solutions and other elements essential to the claims process is "the hardest part of the problem," Guyan says, "That's what Claim Components targets."

While affirming the value of Accenture's "internally focused," solution, an equally compelling business case can be made for externally oriented solutions, according to Forrester's Eyler. "There's very little ability to have visibility into a claim as it's taking place, particularly externally," he says. "SAP is doing a good job in attacking internal and external bottlenecks in the claims process."

The Newtown, PA-based firm offers core applications, e.g., HR, CRM, and Financials, as well as vertical industry solutions, such as claims, collections and disbursements and reinsurance, according to Brian Madocks, SAP's senior vice president and general manager, services sector. "Each of these solutions can be implemented as a wall-to-wall SAP solution, or as a component integrated with non-SAP solutions, whether legacy, PeopleSoft (Pleasanton, CA) or anything that might be out there," he says.

Madocks says insurance companies are increasingly evaluating what he calls their "entire customer engagement life cycle," with claims service being a crucial part. He asserts that SAP has been able to demonstrate "end-to-end business scenarios from when the policy is first opened, to when a claim is first filed and then ultimately fulfilled."

Technology has reached a "third generation" in addressing external obstacles to efficient claims processing, according to Eric Seidel, president and CEO of Oldsmar, FL-based eAutoClaims, which provides insurance companies with an ASP and outsourcing solutions services, integrating carriers, body shops and industry vendors onto a single network. However, given the state of the industry, many firms can still gain from first-wave Web-based functionality that streamline supply chain processes that allow "entering one set of data, and now you're able to make assignments to multiple vendors using that one application," Seidel says.

While 1G functionality was capable of producing valuable reports, second-generation transforms culled information beyond reports into "metadata," with which a carrier can evaluate performance. "You not only have the data, but you have the data that enables you to identify on the fly who's the most efficient appraisal provider in that market," Seidel says. "You start to be able to make decisions on the fly about who is your best source to make an assignment to in a given market."

The third generation is what eAutoClaims calls proactive reporting or "PAR." In the past, if an independent appraiser failed to deliver an assessment to a claims rep within an agreed 48-hour time period, the rep would have to follow-up with a phone call or e-mail. PAR, Seidel claims, "is preprogrammed, so that if there's not an upload within that 48 hours, programmatically the follow-up is done by the system, by sending an e-mail with that claim number requesting status and auto-noting it in the claims rep's system," Seidel adds.

HIPAA Windfall

External connections are vital in taking medical claims processing to its new frontier, says Don Hunt, Antares Management Solutions (Westlake, OH), which provides software, ASP and outsourced solutions to health carriers. Acceptance of the Internet channel is increasing among treatment providers and plan members, and HIPAA (Health Insurance Portability and Accountability Act) compliance is set to bring about standardization of claims processes, with the extended deadline of October 2003. Once that happens, carriers will no longer have to support a variety of means of interacting with process partners to determine approval or denial of services-opening the door to automatic adjudication of claims at the time of visit, on the spot, according to Hunt. Real-time payment to providers will also be fostered (with the arrival of HIPAA payment transaction standards), further eliminating paper-dependent processes.

Carriers are able to prepare for these possibilities because "many vendors are making EDI and Internet connectivity standard offerings with their core products," Hunt says. "Some also offer these services on a stand-alone basis to interface with existing systems, and will host the solution as well."

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CLAIM SYSTEMS:

KEY TRENDS & CHALLENGES

- Insurance companies acknowledge a need to replace core transaction processing systems.

- Carriers are actively examining IT investment options, but remain cautious when it comes to spending.

- Workflow solutions aimed at both internal operations and external vendors/partners promise payback.

- Companies seek efficiencies through outsourced solutions for services such as medical claims processing and fraud detection.

- Health insurance claims processes move steadily online as HIPAA deadlines loom. As electronic claims processes are increasingly online and real-time, paper-related technologies will slowly wane.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio