Insurance claims management Featured

7:00pm EDT January 31, 2007

In reducing overall insurance costs, aggressive claims management can be just as important as the rate a company pays for its insurance policies. Getting the commitment of its higher-level executives to effectively manage claims is just the beginning.

“Just getting high-level commitment from top managers within an organization is critical,” says Michelle Leighton, vice president-claims for The Graham Company in Philadelphia. “It’s important in defining the corporate culture with respect to losses.” Smart Business spoke to Leighton about the importance of a good claims management team and what companies can do to keep costs low by managing the claims process.

How do losses control insurance costs over the long term?

Insurance premiums are ultimately based upon the average amount of losses, or claims, a company experiences in a given year. Insurance companies want to charge enough premium so that they will have the money to pay for the company’s insurance claims throughout the year. Insurance underwriters usually charge a premium so that 60 percent of it can be used to pay for losses. For example, if a company’s average losses were $60,000, its insurance company would want to charge a premium of approximately $100,000.

If insurance premiums are ultimately based on losses, then what are some of the steps a company can take to reduce losses?

There are two main things you can do to reduce losses. The first is to prevent the losses from occurring in the first place, and the second is to manage the claims that do occur so that the claims are paid as inexpensively as possible. If you do these two things consistently, over the long run a company’s insurance costs will go down.

What impact can a safety program have on preventing losses?

A good safety program, combined with an effective safety coordinator and management commitment, can have a significant impact on preventing losses. The safety coordinator is responsible for developing and implementing the policies and procedures so that every employee can work safely and every product or service is delivered safely. Lots of resources are available to help companies create and maintain the right safety policies. Asking your insurance broker for help is a good place to start.

What are some of the other things a company can do to prevent losses, especially workers’ compensation claims?

Hiring the right person for the job is important. Implementing the right procedures such as pre-employment physicals, substance abuse testing and ensuring the right benefits and compensation package for the positions are critical to attracting and retaining the very best employees. For example, an employer that hires a lot of seasonal employees will want to manage that hiring practice closely to ensure that at the end of the season, they don’t have significant increase in workers’ compensation claims once the season is over.

Once accidents have already occurred, what can a company do to aggressively manage those claims?

One of the key initiatives a company can implement to reduce losses is to have an internal point person for all claims issues. This person works closely with the insurance broker and the insurance company to regularly review the details of the company’s claims, especially the potentially costly cases. This team works together to ensure that claims are reported promptly, designated medical facilities are in place, claims are thoroughly investigated, and employees are promptly returned to work. An aggressive action plan is a must to bring a claim to a prompt and cost-effective conclusion.

How is management and leadership commitment important in this process?

Safety and claims performance are directly affected by whether they receive top commitment from managers and leaders in their organizations. Some examples of a strong commitment include the implementation of accountability programs, publication of safety expectations, hiring top physicians to be on hand to medically manage claims, implementing return-to-work programs and allocating the necessary resources to ensure that the job fits the worker from an ergonomic perspective. Most importantly, top management and leadership commitment will define a culture that encourages strong safety and claims management practices that will lead to good results.

MICHELLE LEIGHTON is vice president-claims for The Graham Company in Philadelphia. Reach her at (215) 701-5232 or mleighton@grahamco.com.