Automation, systems integration and industry standardization can deliver great efficiencies, service improvements and cost reductions in the claims adjudication arena of the service contract industry.

In an age where technology is making business in every industry more efficient, the claims process is no exception. However, there is much that can still be done. Challenges to delivering a more efficient and automated process are not all due to technology.

A lack of industry standards in database structures, naming conventions and price codes as well as the lack of established industry standards themselves stand in the way of delivering on the promises that technology holds. Everything from filing the claim to getting it paid can be optimized further by establishing standards and more fully utilizing and developing available technologies.

Parts Pricing Automation

Many systems are integrated with a parts MSRP database. However, getting the recommended manufacturer price is only the first step. There are numerous suppliers of used and refurbished parts, and especially with the repair of older vehicles, these products/prices need to be considered when approving a claim.

Few, if any, of these product supplier databases are connected to claims systems with the result that claims agents have to spend considerable time searching for parts and prices online or have to make long and inefficient phone calls to obtain the information.

The part needed is already in the claim system, so why not link directly into the refurbished parts database and automatically get the pricing? Well, it’s not so easy. Many, but not all, of the suppliers of these parts have adequately sophisticated systems but most importantly, the product coding in use tends to be unique to each supplier so that cross referencing of parts is actually one of the most significant stumbling blocks.

Labor Guide Automation

Along with integrating parts pricing, claims agents would gain significant time savings from integration with published labor guides. Having standard labor times for standard operation codes at the push of a button would avoid the current process of manual and online lookups. Today, labor guides are all electronic, but there are very few, if any, claims adjudication systems with integrated labor guides that provide standard labor times for common repairs.

Automation in this area is an important but challenging task. Automating the labor guide lookups would require either integrating with multiple labor guide sources (which is expensive) or an industry standard for labor times and costs for common repairs.

As with the refurbished parts industry, data from different service centers is generally organized differently, with unique codes for repairs. Standardization would help considerably to make it possible for this to become a more automated process.

Automating Inspection Requests

An inspection is required in 10 percent to 20 percent of claims. Today, most inspection companies can take the inspection request online, but in most instances, it requires the details to be entered into a separate inspection website.

Again, all the details required for the inspection are in the claims system. It should be possible to order the inspection request with the touch of a button within the claims system. This process could be further automated by the claims software automatically requesting the inspection with certain claims – based on cost and/or claim code.

Of course, the report of the inspection should also be automatically linked to the claims system so that it can be viewed from within the claim itself.

Online Claim Submission

Having a repair facility submit claims online with the details of parts and labor into a website that is directly linked into a claims system adds further to claims process efficiencies. The challenge here would be to make the process as efficient and smooth as possible so the service centers have an incentive to do it online.

Although it is not necessarily required to enable first notice of loss capability, the integration of parts and labor rates would certainly add some smoothness to the process. Claims adjusters would need to monitor a first notice queue and would make faster progress on approving a claim if the repair facility had already entered the complaint, cause and correction as well as the details of the parts and labor required before making any calls required to give final approval.

This process must have service metrics defined that set expectations for the service centers leading to predictable times of adjudication of claims just as with phoned-in claims. In addition, web-based communication tools such as online chat for help while entering a claim, and e-mail/online alerts for when a claim is updated or paid would prevent further phone calls.

Add to this an automated inspection order for certain jobs and the claims each agent could manage each day would increase significantly.

Automatic Delivery of Repair Order

Along with the automation of inspection reports, repair orders can be automatically delivered through integration with the dealer’s DMS. Currently, repair orders are completed by the service center and faxed or mailed to the claims center. Someone then reviews the repair order to ensure that the service center has done what was agreed upon before the payment is processed.

By integrating with a dealer’s DMS, a claims adjuster can access all information related to that repair order, peruse that information, confirm that the repair was performed as authorized and pay for the repair. In fact, with sufficient standardization, it might even be possible to translate the repair order information from the DMS directly into an online ‘first notice of loss,’ saving further keystrokes and phone calls from the service center.

Integrated Credit Card Payment

Credit card payments are often the preferred method of payment for repairs. Today, many providers give the credit card number over the phone once the repair has been approved.

Often a provider will be operating with between one to five credit cards and the reconciliation of payments made with the credit card statements at month end are time consuming and often very challenging.

Credit card payments can be automated through integration with credit card providers. This accepted process takes advantage of a card provider’s ability to issue a unique credit card number with every payment using an electronic interface with the claim adjudication system. In addition, the card is only approved for a set amount and to a certain category of vendor.

Once the card payments have been made, the reconciliation is automated within the claims system. Automating this process has proved to save the work of two people in a medium-sized provider.

Self-Authorized Claims

While the idea is somewhat controversial for many claims managers, it is quite possible to enable a repair facility to self-authorize claims with the right integration and controls when claims are well defined. Of course, such repair facilities would have to be carefully chosen, but in this day of reinsurance treaties in which the dealer stands to gain significantly from the success of a service contract program, self-authorized claims are within the bounds of sensible business practices.

General Motors is one company that has a process in place that would allow for self-authorized claims for repairs covered by its manufacturer’s warranty. Each repair has its unique code which, when entered by the claims adjuster, automatically shows the part number, the number of parts, the price of the part and the labor associated with replacing that part, and there is an agreed-upon reimbursement rate for that repair. With this system, a large proportion of claims can be self-authorized.

Outside of the OEM world, the first step in self-authorization and one that has been used to great success is for prepaid maintenance programs. The nature of the product is such that the parameters for claims are clearly set and the participation of a claims adjuster is both unnecessary and too expensive. With the same level of controls in place, certain service contract claims could be authorized in a similar fashion. In fact, that is exactly what GM is doing.

Every service contract provider has developed and deployed at least some of these strategies to various degrees. We don’t know of anyone who has done all of the above. The claims process remains an area that has much opportunity for building efficiencies through the combination of industry standardization and technological development.

A fully automated administrative system is becoming essential for product providers to conduct business efficiently. One example is Xzilon, Inc.’s latest product, the X4.

Appearance protection products have been bundled to create the X4 package. It was launched at the National Automobile Dealers Association conference in February and is supported by F&I Administration Solutions’ SCS Auto platform.

Dan Jones, regional sales manager at Xzilon, says a significant benefit of the electronic solution is its ability to provide a real-time look at the company’s business transactions. A snapshot of sales is available at any time throughout the month. Agents are able to go online, log into their own agent report and view their customers only. These reports are provided in real time and show exactly how many units have been sold per dealership.

Paper warranties sold by dealers are usually held and only sent to product providers at the end of the month. Because everything must be manually entered into the system, opportunities for errors as well as service delays increase.

“When there’s a claim in the first 45 days [with a paper-based system], we often have no record they are even a customer,” Jones says.
Another advantage is that providers know what to expect from their dealers and know if dealers sell more contracts than they have submitted.

In addition to the administrative system, Xzilon’s X4 product is supported by a state-of-the-art claims site. The system is user friendly – and not only for dealers, but for customers as well.

Customers can log in to the claims site, enter information about themselves and file the claim all in about five minutes. Enabling customers to file their own claims is beneficial for all parties involved because (a) the dealer representative does not get involved, which not only keeps him or her available for productive work at the dealership, but keeps the “middle man” out of the claims process, and (b) the customer can at any point check on the status of the claim without waiting for a “third party” to become available.

To get started, customers only have to enter their name or VIN. Once their information appears on screen, customers have the opportunity to update the address or contact information should something have changed (be it a temporary or permanent change). The ability to change the location, regardless of the customer’s main address, makes is possible to have the vehicle repaired in the customer’s current location.

After customers have reviewed their personal information, a picture of their vehicle is shown. Users can click on the areas of the vehicle involved in the current claim. The system will prompt with questions about the size and number of dents, whether multiple locations are affected and in what manner.

Customers can also make additional notes for the claims department/processor to review. A prime example is when customers take their vehicle to the dealership for an oil change. It is possible to schedule the repair and the oil change at the same time.

Once the claim is submitted, an e-mail and text message go to a pre-selected service provider from a network of dealerships and auto repair shops in a particular location. The selected service provider then has 48 hours to contact the customer. If the service provider has not gotten in touch with the customer within 36 hours, Xzilon contacts the provider to see if they are still available to do the work. If they are unable, Xzilon identifies another provider in its local network to complete the repair.

“The service behind it is what really makes our program work,” Jones says.

Xzilon has set up a network of service providers around the country to handle claims. Its network of providers covers three areas: dent, windshield and wheel. This network is pre-selected, pre-approved and rates are pre-determined.

In addition to the existing network, Xzilon can also add a provider should a customer desire a particular repair shop. Of course, the provider must go through the same selection and qualification process that all other “approved” providers go through, but the goal is to have a qualified network of providers so that the customer is satisfied.

Jones says Xzilon’s claims process has been well-received by dealers because customers can file and monitor claims themselves, and by customers because they retain control of the filing process. Furthermore, multiple quotes for repairs are no longer needed. Service providers have responded positively because Xzilon increases their business and reimburses for services based on short turnaround.

Xzilon’s warranty programs will soon be offered in an online capacity.