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Insurance Intelligence - Analyze This!

Integrate your company’s inner self to achieve deep claims analysis.

July 27, 2009 Photo
It’s the 21st Century, the Age of Information, in which everything you ever wanted to know about anyone or anything is available at a keystroke. So why is it so hard to integrate companywide and industry-wide data to identify patterns of and precursors to fraud? A couple of key words come to mind: silos, reactive, incommunicative. What is a smart insurer to do?

As they say: Knowledge is power. Knowing where and how to access information is the backbone of intelligence analysis and a vital part of a successful special claims investigation unit. Additionally, analyzing the information internally can provide cost savings and a real return on investment to insurance companies. Instead of paring SIU operating budgets and staff or outsourcing special investigations, companies can leverage their existing investigation units or build intelligence programs to become integrated, proactive and communicative.

An effective intelligence analysis operation can make sense of disparate data and turn it into actionable information. Being proactive is the first step. Proactively generating field referrals can be a challenge given the cost of data-mining tools and training, but it’s a step that yields results—hard results—such as a return on investment of beyond 9:1. Proactive SIUs can generate in excess of 20% in total field referrals. The key is to find actionable intelligence and avoid “holy grail” searching.

Finding actionable intelligence requires access to multiple data sources: claims, underwriting, point of sale, and vendor data, such as medical bill review and auto parts suppliers. The great challenge, however, is overcoming the “stovepipe” or “silo” business unit mentality present in almost every company. Combine that with multiple and incompatible data management systems and substandard reporting capabilities, and you have a chronic anemia that afflicts claims investigation.

Companies must learn to think and act “globally,” at least within the company itself. The SIU operation need no longer be limited to operating reactively to field requests for assistance. It can be the bridge linking company business units into a strong business partnership unified in combating/deterring insurance fraud. To motivate management to support this new, proactive, integrated approach, take a deep dive into the numbers and identify the bleeding that results from not beefing up the SIU. Speak the corporate language of profit and loss. Communication on such issues is usually best done in person, but at the very least it should be done via WebEx (real time) so the correct interpretations and recommendations can be made and answers can be supplied immediately. Just forwarding a report full of numbers could result in unwanted, undesired and even incorrect interpretations of the data and breakdowns.

A Practical Matter
How would an SIU operation transition from reactive to proactive? For example, a suspicious claim referral is generated to the SIU field operation, and a successful resolution is realized. Rather than shelving the investigation as a closed file, an intelligence analysis could review the attributes unique to that case with an eye to its evolution and its application to other cases. New information flows into investigative units periodically but somewhat irregularly, so proactive efforts are best when they are automated. Any program that is utilized should have the ability to comb through new incoming data on a daily basis and notify the analyst automatically when predetermined information has been identified. If this capability is not available, utilizing a canned but manual report on a weekly or biweekly basis is your best shot. Running reports with a lag time of five to 10 business days is a problem stemming from a claims department’s cycle time in turning over claims.

By analyzing the data in depth and in an ongoing fashion as more data become available—yes, even after a case is “closed” —the SIU can make a clearer assessment of where the systemic problems are and what corrections and improvements need to be made. It can determine what breakdowns occurred that should have been identified at the point of sale, underwriting level, and claim level. Furthermore, the analysis could clearly articulate what those breakdowns cost the insurance company in losses. Recommendations would be made to each of those departments to correct the breakdowns. The recommendations and subsequent corrections should be completed in the form of an official project with formal proposals, timelines and compliance action reports. These are best conducted by a project manager and pushed downstream rather than upstream.

Analytic conclusions from one case can be applied in an intelligence model for future use, but each case has to be redefined or calibrated to some degree because each claim is unique. True unit-wide intelligence analysis must be a company policy. Quality results are possible only with full access to all data sources traditionally held solely by one business unit or another. SIU intelligence analysis must compile data from all internal unit resources in order to generate an operational overview beneficial to all business partners.

By interacting “globally” and identifying shortfalls from broker through adjuster, the intelligence unit and the entire SIU program will prove itself cost effective and provide a measurable return on investment. Good old-fashioned number crunching will help quantify success. Declines in a department’s true expenses or better savings or improved loss costs can all be measured. Benchmarking improvements year over year will also show the sustained value of the proactive approach. A lower overall loss ratio for the company should result from an invigorated SIU, and that can be illustrated as data are quantified.

The key is getting management buy-in and support to knock down those barriers to data access and integrated communication. Then the SIU itself has to make in-depth, quality hindsight and analysis a living practice and quantify the results to prove its worth and benchmark its own progress over time.
Adam Featherling, CFE, CIFI, SCLA, is the national SIU director for Safe Auto Insurance, and Nick Bogdan, CIFI, is the major case director for Nationwide.

About The Authors
Adam Featherling, CFE, CIFI, SCLA

Adam Featherling, CFE, CIFI, SCLA, is the national SIU director for Safe Auto Insurance. 

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