Consultative Claims Auditing
Insurance and Reinsurance Key Points in a Claims Audit
Identification of Business/Program for Selection:
-Thorough review of open and closed Claims loss run inventories, actuarial loss runs
-Data mining for pre-selection: losses of adverse development
-Determination of risk selection for audit: trends, attachments points, venues etc.
-Identification of policy triggers, retention's, carve outs, expense treatment, reinsurance
programs placed etc.
-Excel spread-sheet of selected claims for review
-Review of claims procedural manual, dated diary runs, reserve development, operations
systems reports, supervisor over-diary reports, large loss reports, previous audit reports,
claims departments goals and training objectives etc.
-Thorough review of underwriting folder and loss control implementations
-Client's feedback intent and purpose for review, objectives for review, pre-meetings for
actual audit with claims, underwriting, reinsurance, internal compliance, SUI/Fraud
departments, loss control/risk management and actuarial departments
SAMPLE CLAIM REPORT AREAS OF REIVEW
Overview:
Identification of policies, coverage[s], and triggers [including expense provisions]. Specifics to broad coverage[s] etc. Insurance Program and placement reviewed for excess and umbrella structure
Description of various loss runs: i.e. incurred loss value greater than $250,000, dollar one etc. How many open claims on loss run etc., selection from loss run and reasoning for pick.
Personnel and Staffing:
The claims department senior management team, staffing model, office locations, authority levels, file counts versus open inventory and job responsibilities, percentage of travel, office stability, etc.
Operational Review and Technical Claim Performance:
Management report capabilities and compliance, bad faith claim filings or ECO/XPL filings etc., handling of catastrophic claims or very high profile claims etc., reserving and payment authorizations and authority levels, housing of files, electronic review, internal mechanisms for watch list coding for rating potential severity of a claim etc.
Coverage:
Review of policies and compliance of client in determining coverage i.e. is file initially set up with coverage check, timely preparation of ROR or denial letters. Check and balance management tiers in place for proper timeliness, declinations, ROR's and coverage problems.
Investigation:
Initial Contact by Insured, guidelines, and reporting trends, handling of late reports, follow up with policy risk actions either with denial of coverage or loss of full benefits. Types and quality of investigations with insureds launch investigation of a claim with preservation of evidence.
Claim Analysis:
Documentation of the analysis of a claim, file strategy employed, liability and damages, venue considered, case law researched, time on loss explored, triggers of coverage, excess/umbrella awareness and letters/notifications, etc.
Internal Claims Committee:
Process in place to roundtable/committee losses, participants, strategies for good faith settlements, handling of potentially volatile claims, thresholds for committee and frequency of such efforts? Sharing with other departments and management? Strategies as well as case evaluation discussed, is the meeting is memorialized and documented?
Alternative Dispute Resolutions:
ADR, structured settlements, mediations, mock trials, and MSJ consistently utilized? There is a monthly claims committee meeting. Are claims on a frequency, emerging or “watch list” and/or those going to trial, mediation or primed for settlement?
Litigation Management:
Does client utilize a select group of counsel, do firms have established expertise with legal issues, network of select counsel to include attorneys with backgrounds as in-house counsel at discipline underwritten? Are litigation budgets requested on all files in suit? Does the claims examiner review the budget for compliance/guidelines as to what will or will not be paid? Do files illustrate strict enforcement of the guidelines? Is there an established Legal Advisory Committee? Does the committee or in-house counsel meet to provide input on topical issues of importance to client's discipline in business underwriting? Is there additional support regarding insurance coverage and legal issues of important as an added risk management tool?
Automation:
To what degree and success is the IT infrastructure able to meet current claims needs? Management Reports/Tools [Data Mining-Analytics] , claim reports, large loss reporting, diary support, over diary, enhancements recommended? Type of tool utilized [Image Rite for imaging correspondence into an electronic paperless claim file, Infinity System for financial information, running pad notes, diary, policies etc.].
Case Reserving:
Analysis of reserves, trending, documentation in support of increases and decreases, reserving philosophy, trends, stair-stepping, [set accurate reserves as early as possible], timing target, adequacy of the reserves, timeframe for re-evaluation, does the chief actuary participate in and/or anticipate any changes in reserving philosophy, procedures etc.
Reserve analysis and commentary (untimely, stair-stepping, unsupported documentation, other trends, expense reserves) along with case examples regarding findings,
Insured:
Claimant:
DOL:
Claim #:
Policy limits:
Coverage Layers/Retention's:
Brief facts:
Injuries/Damages:
Liability:
Venue:
Reserves:
Recommendations for additional case reserves and ground-ups (ACR/GU’s)
Reinsurance Reporting:
Identification of reinsurance contracts, disputes, first reports and updates regarding reinsurance program, timely generated, with updates? Are claims examiners aware of reinsurance placement and reporting? Billings properly calculated and collected?
Client Feedback and Emerging Exposures/Trends:
New trends to report in underwriting discipline, case law changes, regulatory changes, any other potential changes impacting business, changes in risk management, cost handling, etc.?
Conclusion and Recommendations:
Wrap-Up, findings, discussions for implementations, cost containments and overall independent review of operation.
