Tag Archive | "Claims Adjudication"

How to Adjudicate Claims for High-Risk Clients


In the P&A segment, working with high-risk clients can lead to financial rewards, but runaway claims bear scrutiny. At last August’s P&A Leadership Summit, I had the honor of leading a panel of experts in a discussion about anticipating, identifying and properly managing such scenarios.

I was joined by Trish Myers, a senior financial analyst with EFG Companies; Matt Russell, risk manager for AUL Corp.; Jeff Robinson, Alpha Warranty’s vice president of risk and operations; and John Sopocy, vice president of claims and risk management for Vehicle Administrative Services.

Identify the Risk

The term “high-risk” can have a number of different meanings, Sopocy said, so the first step is to identify the type of risk at play. If a dealership has a core customer base that is outside of the usual ratio the company uses to determine risk, for example, that could be skewing the results.

Myers suggested the next step could be to look at how long the service contracts have been active when the claims are initiated, as well as the severity — are they within expectations for that dealership’s vehicle mix and market? If they are consistently steep, “That can be an indication of dealers not prepping the cars for sale,” Myers said, noting dealers can fall into the habit of using claims to pay for reconditioning. She also advises providers to look at earnings and loss ratios — some early warning signs might not be valid, she stressed, so it’s important to gather all the data and take the time to understand what they mean.

This can be a complex process, Russell said, but he agreed it is necessary. “We try to split the data between the statistical side and the behavioral side. It’s important to look at those earnings and loss ratios and other statistical models, but it’s just as critical to look at the behavioral data as well.” He said a review of service-drive records can help determine whether high-risk red flags are just a series of coincidences or a clear pattern.

But just identifying a potential risk isn’t enough. “The first move, after identifying a high-risk dealership, is to have a conversation with them,” said Robinson.

In many cases, the panel agreed, the dealer and their top management team is not aware of how the products are performing. Some are getting incomplete reports from their F&I or service directors; others simply aren’t interested. This can lead to awkward conversations with dealers and dealership personnel, but determining whether a client is “high-risk” is difficult without getting the big picture.

One way to approach the subject is to ask the client to “show the numbers, don’t explain the numbers,” said Russell. He noted that he’ll compartmentalize the data, setting aside, for example, vehicles with extremely high mileage. Then he’ll segment by make and model and even by engine type, if he’s able. “In essence, we’re just trying to show the ‘Why,’” he said, which in turn helps the conversation go more smoothly. The claims administrator then avoids the appearance of leveling accusations. They are simply bringing a business problem to the table and asking, “What can we do to fix this?”

Myers agreed and said this approach is typically well-received. “I’ve never had pushback from the service manager or general manager of the dealership.” She noted that, most of the time, the provider is viewed as a partner, and the dealer wants to get to the bottom of losses and increased claims just as much as the provider does.

Control the Costs

So how can providers keep the cost of high-risk dealerships from spinning out of control? To start, said Sopocy, it’s about stating upfront what is covered — and what isn’t — so everyone is on the same page. He noted that the two biggest cost generators tend to be pre-existing conditions and “upselling,” when the customer brings their vehicle in to address one problem and the service advisor convinces the customer to fix something else.

“On a claim-by-claim basis, it can be really hard to detect that,” Sopocy noted. An individual claim for an oil gasket replacement might appear to be valid on the surface. But if the customer just came in for a standard oil change, and they were then convinced to replace additional parts, it’s a problem.

To combat that, Sopocy advises providers and administrators to have the conversation about expectations as soon as possible. Making sure that the service advisors know that it’s OK if a part is a bit more worn on an older vehicle — that doesn’t mean it has failed or will fail. Replacing it just because they can is a waste of everyone’s time and money. One of the ways they train for this, he noted, is to ask service advisors a simple question: “If this was your car, would you take $500 out of your pocket to replace the part?” In most cases, they say they would not, and that establishes the correct mindset.

The next step is to teach service advisors how to document correctly. Rather than just submitting a claim for an oil gasket, they should note in the paperwork that the customer came in for an oil change and it was noticed that the gasket showed signs of wear.

Russell agreed that getting everyone on the same page is a good first step to controlling costs. With buy-in across the board, a process that will work for everyone can be developed. “It’s about getting everyone on the same page so they know what to expect,” he said.

Robinson agreed, noting, “The dealer needs to understand that it’s a partnership, and that our goals are aligned. … When it’s a healthy book of business, the customer is happy, the service center is happy, the dealership is happy, the administrator is happy — everybody is happy.”

Redemption: Turn High-Risk Clients Into Low-Risk Clients

The panel agreed that, just because you have identified a dealership as high-risk, that doesn’t mean they have to stay that way.

Redemption is possible, Russell said, and it comes in many forms. For new clients, it may just be a matter of patience: It is not uncommon to see a high rate of claims for the first wave of service contracts that flattens out over time. He also noted that, for administrators, it is always worth checking the notes of the claims adjusters. They are on the front lines, and have a much better idea of what is actually going on. Reporting is key, because you have to understand where the problem is if there is any hope of fixing it.

In some cases, Russell pointed out, one make or model can cause the bulk of the issues. At the end of the day, the dealership has to be willing to trust and buy into the administrator’s recommendations. “It’s about trusting us, working with us,” he said.

To get there, said Sopocy, it really is critical to approach them with the numbers — show them their losses today and demonstrate what the projections will be with a different process in place. “If you lay it out, here’s where we are, and, if nothing is done, it stays the same. Here’s where we’re going to be a year or two from now, and it’s normally not a very pretty picture. And then you model it by ‘If we reduce claims, this is what can happen; if we add additional sales, this is what could happen.’ You can show them a couple different ways to get it to a better space.”

If they are a good client, Sopocy added, and they are committed to making it work, the administrator can lay out different strategies — including at least one that doesn’t necessarily include a rate increase — to improve performance across the board and reduce the client’s risk factor.

Russell agreed, adding that it’s important to understand that, in some cases, risk and redemption can’t be had by simply increasing rates. An increase for a given dealership — or even for a given geographic area — can’t be helped because the risk factors just can’t be mitigated any other way. But he stressed that the other solutions should be tried first. If the first time a dealer hears about a problem is when their rate is going up, that doesn’t make for a very profitable partnership on any level.

The agent is another important factor, Russell added. Having a solid relationship with them, and making sure they have all the tools and information they need is important. They can be the provider or administrator’s “boots on the ground,” ready and available to talk to the dealer when a problem first surfaces. “Getting the agent involved is key,” he said. “They’re the ones who hold the relationship.”

Robinson noted that the agent is the first person some dealers call when they have an issue with a claim or anything else. The agent can therefore be helpful in determining whether there is an issue that needs to be solved, with or without the administrator’s help, or whether it’s an isolated incident, a coincidence, or a spike that will level off in time.

Just because a dealership is high-risk, doesn’t mean the provider shouldn’t take a chance — and high-risk today doesn’t necessarily mean high-risk tomorrow. Many dealers will welcome the chance to work with administrators to improve programs and profits, and can end up being some of the most loyal and reliable customers the provider has on the books. It’s all about managing the risk appropriately, setting expectations, and offering the right training to the right people.

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The Heartbeat of Claims Adjudication: Measurements, Attributes and Efficiencies


The majority of vehicle service contract claims are processed in a claims call center (CCC) by adjusters of varied background and experience. The CCC usually represents the second-highest operating cost next to the claims themselves. When evaluating the cost effectiveness of a CCC, it’s important to start with claims and customer-service processes. Well-defined processes produce numerous areas of measurement, giving management team members an inside look at how their customers’ needs are being met.

In addition, CCC attributes — such as training initiatives — contribute to agent satisfaction, which in turn is directly related to customer satisfaction. When combined, sound processes, attentive measurement and positive attributes lead to an efficient and profitable call center operation.

Measurements, Their Definitions and Importance

Service contract claims administration is classified as a knowledge-intensive business service (KIBS). Our Industry heavily relies on professional knowledge to determine eligibility and apply benefits in accordance with the terms and conditions of the contract. In our KIBS environment, we see and use two distinct types of processes: information system business processes (ISBPs) within the technology platforms and human intensive business processes (HIBPs) governing the decisions based on professional knowledge. Each of these processes will produce different sets of measurements which should be analyzed together to obtain the highest efficiency.

The ISBPs are maintained in the ACD/IVR (automatic call directory/integrated voice response unit), claims management and database systems. In most cases, the processes interlink between the different systems and provide a large amount of measurable data that is monitored hourly, daily, weekly and monthly. The metrics are usually grouped together as inbound metrics, during-call metrics and staffing metrics.

The most common data examined for inbound metrics includes:

  1. Inbound Interactions by Time Period: Measuring the inbound interactions by time period allows call centers to be properly staffed for call volumes. Being understaffed will, of course, cause a spike in average hold time, abandoned interactions and an increased volume of repeat calls.

For example, an abandoned call by a repair facility adds two additional inbound calls: the contract holder and the shop calling again. This cycle compounds the issue of the CCC when understaffed. Measuring by both short and long time periods allows call centers to prepare for periods of increased call volume, based on different variables, such as seasonality and holidays.

  1. Staffing Metrics: In conjunction with measuring call volume, it’s also important to measure staff efficiency. The staffing metrics that should be monitored are schedule adherence, agent occupancy and agent utilization rate.

Schedule adherence measures the agent’s adherence to the published work schedule. Agent occupancy is the percentage of time that the agent is connected and ready to answer a call compared to the number of hours at work. Agent utilization measures the percentage of time the agent is available to take a call in relation to their occupancy.

The CCC goal should be no less than 90% in each of these measurements. Continual measurement of the staffing metrics daily, weekly and monthly will help to identify the proper staffing levels needed to meet your service levels and avoid the unnecessary expense of overstaffing.

  1. The Average Speed to Answer (ASA): The ASA, which measures the average time for an agent to answer a call once the call has entered the ACD/IVR system. The ASA will also vary depending on the call flow and the peak call volumes by time period. This is the most common metric required in contractual service levels and is quoted in a percentage by time period, for example 80% of calls answered in 60 seconds.
  2. The Average Time in Queue (AQT): AQT measures the time a caller spends in a particular queue. This is an important measurement when using self-service menus to understand how much time customers are willing to spend using the feature.
  3. The Average Abandonment Rate (AAT): The count of abandoned interactions when divided by the total number of inbound interactions gives you the abandon rate. This is reported in a percentage and may also be included with contractual service levels. The most common goal is less than 5% of all calls abandoned. Remember, a high abandon rate will drive additional inbound interactions for the same claim/customer.
  4. Call Metrics: Two of the call metrics most commonly monitored include average handle time (AHT) and average talk time (ATT). These similar metrics are many times used interchangeably, but are in fact very different.

The AHT measure the talk time and the after-call wrap-up time. The ATT measures only the time the agent is engaged in talking with the customer. Different types of callers will dictate the length of the call. For example, a client calling to update the address on the file will take a shorter time period than a repair facility calling in a multiple-line claim. It is important that you measure the different types of interactions and report on them accordingly.

  1. Claims Processes Dictate Performance: The basic call and claims processes govern the actions of the adjusters, customer service representatives and payables personnel. Effective claims process detail the steps needed to onboard, process and finalize a claim. Other process will govern the customer service and escalation process.

These processes are measured with daily, weekly and monthly scorecards for individual agents and different teams. These scorecards will typically measure the number of interactions, completed claims, schedule adherence and other standard call metrics. Processes should be documented and communicated to each agent for consistent claims adjudication and customer service results. And there are additional measurements in the claims process that are independent of the actual phone call or cost of the claim, such as a vehicle inspection.

The first question that must be asked is, “Should an inspection be requested?” At EFG Companies, the inspection is used to assist in documenting the reason for a large or delve into why a claim with a questionable failure is being approved. The vehicle inspection should never be used as a tool to try and deny a claim.

The next questions asked is, “Does the vehicle need to be inspected?” This varies on the coverage in the service contract, length of time the contract has been active, and the reported cause of failure by the repair facility. In some cases, the additional downtime and expense associated with the inspection may be substituted with clear photos provided by the repair facility. Instances for shop-supplied photos may be used to rule out a suspension lift or collision damage contributing to the cause of failure.

To measure inspection success, look at the number if inspections ordered by an agent. Depending on the skill level, some agents may be looking for additional documentation when they are not familiar with a certain failure or repair. We use a team method to transfer inspection claims to expedite the process.

Controlling Costs While Maintaining Service Levels

When looking at the expense of a mechanical claim, the parts and labor expense are usually about equal with both costs rising each year. One way to control costs while still maintaining the highest level of service is to use parts from alternate sources. These like-kind-and-quality (LKQ) parts often offer an average savings of over 25% from the OEM supplied parts. They also often carry the same, and in some cases longer warranty periods.

At EFG, we have several products that allow for this substitution. Because of buying power, the parts suppliers provide us a longer part and labor warranty than the OEM or repair shop usually offers. Even with an additional expense of shipping and a rental car (if applicable), we have managed to lower our parts cost, maintain high customer satisfaction, and transfer future risk at no additional overall cost to the programs.

Labor cost per hour is also rising year over year. To assist in maintaining the acceptable level of expense, adjusters should verify the diagnostic and repair time with the times listed in the national standard labor time guides. When the repair facility asks for additional diagnostic time, the adjuster will assess the validity by looking at the total lines per repair order, and the complexity of the repair. If the mechanic has spent time running numerous diagnostic tests and measurements, the claims process should allow for the claims adjuster to approve the diagnostic time without escalating the call to a supervisor.

Although there are some programs that define a stated maximum cost per labor hour paid, the majority of the programs allow for the market or door rate of the repair facility. An observed best practice is to review the rates using a labor rate survey by geographic region and type of repair facility annually and adjust rates if requested by the repair facility.

Beyond the measurable call and claim metrics, dashboards and reports, the attributes of the call are also very important to monitor. Agent satisfaction is as important, if not more so, than customer satisfaction. The caller will have a preconceived set of expectations, which will vary by the type of the caller. Although our industry requires the CCC staff to have a technical background for the claims adjudication, the expected soft skills of the call handling are still required.

While it is a common practice for companies to measure employee satisfaction, the most commonly measurement method is to distribute an annual employee survey. However, there are many different avenues available for companies to encourage employee feedback on how the company is doing, such as with informal meeting and through training.

In addition to employee feedback, it’s also vital to provide positive outlets for agents working with mostly upset customers. The typical agent will reside in cubicle within a call center. They have a sedentary job dealing with customers who are upset or stressed because their vehicle is not working properly. These upset customers want their vehicle fixed immediately if not sooner. This stress, even from the most polite customer, can be draining on the agent.

To combat this, it is the responsibility of the call center leadership and the company to provide avenues of positive energy to the agent. That positive energy will then be transferred to the customer and reduce the stress of the situation. This is the link between the agent’s satisfaction and the customer’s satisfaction.

So how does the company foster high agent satisfaction? Environment is a key. Is the agent in a shared workspace with a different shift, or a dedicated space? Can the agent have personal items at their workstation such as family photo or favorite sports team schedule? These types of personal items make the agent feel relaxed.

Shift scheduling is also important, even though not everyone will have their ideal shift 100% of the time. Shift bids, ability to swap schedules to accommodate an outside activity, are very important. A new trend with scheduling is the ability to work from home part or all of the work week. This works well with certain personalities and the experience at EFG is that the individual agents’ metrics meet or exceed the metrics when located in the call center. For large operations, this also saves on the amount of workstations needed.

Managing Customer Expectations

Before contact is made, the customer already has set expectations. The ability to meet these is what determines the length of the customer life cycle. The basic expectations when calling include:

  • Not getting a busy signal,
  • Ability to speak with someone without navigating through layers of self-service menus,
  • Low hold time,
  • Not being transferred from agent to agent,
  • Not being rushed and
  • Correct answers.

For the last several years, the traditional call center has been transformed into a “contact center” to meet the desires of the customer to contact companies through Internet chat or email. Even though the method of contact has changed, the expectations remain the same: quick response, clear and concise language and links for additional helpful sources of information.

To meet the standards of a world-class contact center, the customer expects the following at each time of contact:

  • The company to be accessible when the customer calls,
  • To be treated with respect and courtesy,
  • To find a solution for their need,
  • For their time to be respected,
  • To be well-informed about the product,
  • For everything to be done right the first time,
  • To be told what to expect,
  • For follow-up as promised and
  • For the company to be honest and ethical.

Although these expectations seem fairly simple, without the proper agent training and claims process to follow, the customers’ expectations will not be met. These expectations are grouped into a larger category referred to as “soft skills.” Soft skills are critical for agents who are in regular contact with your external clients, and they are commonly overlooked in the interview, selection, and training processes for new agents.

There are also important external metrics that rely solely on the perception of the customer calling in. Some management teams refer to these measurements as the “moment of truth.” Was the caller completely satisfied? Was this a first-call resolution? Only the customer can answer these questions.

So how is this measured? In 2015, several new technologies became available for call centers to measure voice inflection. The software performs live analysis of the changes in the caller and agent’s voice and can give a visual alert to the agent and a notification to the call monitor that there is an upset caller. The technology is also advanced enough to listen for required disclosures and notify the agent if they have not informed the customer. Other monitoring systems can identify if a caller has asked to speak to a supervisor, or suggested other escalation key indicators.

Post-call surveys are a critical asset in determining satisfaction and efficiency. If all of the customer’s needs are met, then it eliminates the need for them to call back. If we do not measure this, and only look at the inbound call volumes, we could misread the need for additional staffing. This increases costs and reduces profits.

Post-call surveys are delivered in a variety of methods. IVRs can give the customer the ability to opt in for a short survey following the call. Other call centers will send an email or paper survey to the customer. Whichever method you use, the survey results should be included in your overall metrics reporting.

Benchmarking Success

We have discussed the many measurements needed for an efficient and profitable operation, however, how do you know if you are doing a good job? Benchmarking your operation against other similar operations is critical to understanding what you are measuring. There are both formal and informal methods to benchmarking.

At EFG, we invested the time and effort for formal benchmarking annually. This provides the operations leadership the ability to measure our performance within the claims industry and maintain world class levels. This also allows the leadership team to learn new methods, industry trends and best practices from the experts in the field. The following metrics are part the standards for EFG Call Center Performance:

  • Our average speed to answer claims calls is :22 seconds.
  • Our average claims call handle time benchmarks at 3:50 minutes.
  • 67% of our total claims are one-call claims.
  • 96% of all claims are paid by corporate credit card within one hour of receipt of invoice.
  • Our claims adjusters average 15 years of experience and are themselves ASE-Certified.

Some of these values exceed industry standards, but all our achievable with the right training and enforcement. Although measurement takes time of the leadership staff, the rewards of efficiency and effectiveness are overwhelming.

Agent satisfaction increases customer satisfaction. Customer satisfaction reduces contract cancellations and increases future sales on their next vehicle. All of these factors lead to increased revenue and return on investment from a world-class claims and contact center.

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