Recently, we read there is little guidance on how to conduct claim audits properly and there are no established industry best practices and guidelines. [1] As operations professionals with a combined  42 years' experience in insurance claims, that reality does not surprise us but it does highlight the importance of insurers choosing their claims audit partners carefully. Certainly, CEOs, COOs, and other senior leaders understand the importance of conducting thorough internal audits. However, when it comes to a business practice as crucial, specialized, and time-consuming as claim audits, a "one-size-fits-all" examination simply cannot address all the risks insurers face by failing to be targeted in their approach.

 

As we see it, the primary risks for insurers include:

1) not setting the audit parameters to target distinctive areas to properly identify inaccurate claim decisions and operational inefficiencies that can breed financial waste, and

2) leaving the door open for regulatory violations due to noncompliance that can damage reputation and erode policyholders' trust.

 

Customized, targeted claim audits are designed to focus on areas that carriers know are problems or to uncover areas that were not even known to be problematic. Here is what years of conducting claim audits have taught us:

 

The Problem: The U.S. Bureau of Labor Statistics suggests that the insurance industry could lose around 400,000 workers through attrition by 2026. [2] This loss of qualified staff to manage claims processes and make consistent, policy-based claims determinations is partially due to an aging workforce nearing retirement. However, it is magnified by experienced claims professionals finding new opportunities outside the insurance industry. To keep up with the need for proficient claims professionals, claims leaders will need to invest their valuable, and certainly limited, time and resources on internal training and quality review programs that are cost effective and scalable.

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The Solution: Enlisting the help of an audit team that is armed with the knowledge and expertise to conduct customized and targeted claim audits is key. Your chosen claim audit team should have best practices they have developed and tested over years of exposure to industry practices through involvement in claim audits for a variety of clients. 

 

The Problem: Insurers using internal claims auditors may overlook quality issues simply because they are too close to see them and knowledge gaps surrounding industry best practices could cause repeat errors to be made. As a result, auditors unfamiliar with best practices are unable to look deeply enough into the data to interpret all it could be telling them or their focus may be on aspects of the claim process that are irrelevant. When this occurs, it takes these precious resources away from other work that drives important business value. Lack of independent review can perpetuate processes that could be improved and cause opportunities for corrective actions going forward to be lost.

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The Solution: Audits should reveal where decision and process improvements can be made or are needed. A third-party objective review of an insurer's processes can reveal gaps and opportunities to improve the financial performance of a block and the client experience. With "fresh eyes", an external audit team has the ability to identify segments of the claim handling process to address the root cause of errors and suggest recommendations for remediation and prevention with the ultimate goal of preventing financial waste or regulatory noncompliance. Company leaders will feel confident that a skilled external audit team's time is focused on the right aspects of the company's claim administration and not on reviewing aspects of the claim process that are immaterial to the overall picture.

 

The Problem: Managing compliance risk is a significant concern for insurers, especially in light of rapidly evolving state regulatory compliance changes. These changes can make it difficult for insurers to keep up with the latest requirements. Regulatory pitfalls are plentiful and even the tiniest oversight due to an inaccurate claim decision can lead to hefty penalties and damaged reputations.

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The Solution: A targeted claim audit provides carriers with evidence of their due diligence with compliance, regulatory, and policyholder obligations. It also serves to help a company’s board and senior leaders have confidence in their operational results, with supporting data that tie to the financial wellness of the line.

 

Fuzion’s Claim Audit team consists of auditors with significant, in-depth experience in the long-term care insurance industry.  Our customizable Operational Support services help insurers identify and fill the gaps so they may reap the benefits of targeted claim audits, saving them time and money and safeguarding their reputations