Providing income protection can be a costly business. Extended claims on policies and a change in the types of illness people suffer from can make claims management a difficult task for insurers.
But insurance companies can manage the claims on income protection policies in a number of ways, which may improve their claims record, enhance their relationship with the claimant, save time or reduce costs.
Income protection provides up to 75% of salary to people who are unable to work after an accident or through sickness right up until retirement age, if necessary. The main providers, such as Zurich Life, UNUM, Royal & Sun Alliance and Norwich Union Healthcare, have their own claims management teams. But they may also use one or a number of third parties to save money on the management of claims and, so they say, enhance the service they can provide to clients in getting them back to work.
With 150,000 new policies sold in 1997 and potential claims per policy of over £1 million, insurers need to make sure that the attention they give to a claimant is aimed at getting them back on their feet, particularly as the market is growing. In 1996, the Association of British Insurers calculated that 145,000 new policies were taken out, up from 115,000 and 118,000 in the previous two years. Premiums earned from this also grew: from £47 million in 1994 to £54 million in 1996.
With so much business at stake, insurers need to be able to quickly assess whether a claim is genuine and then keep the processing time to a minimum because drawn-out cases can become very expensive.
“We live in a society where more people are working in mentally challenging jobs rather than manual work,” says Nick Lomas, marketing manager at UNUM, the UK’s largest disability insurer. “This has led to a rise in mental and psychological problems like depression and anxiety.
“Medical science is also a constantly changing thing. A lot of effort has been put into heart disease and so our claims for heart disease have dropped. Simultaneously, health and safety at work has also improved over the years, so injuries and accidents are falling,” he adds.
These changes to the patterns of ill health have had a dramatic and complicating affect on the income protection market, which is why good claims management has never been more important. In addition, if the insurers are to capitalise on the burgeoning market, claims need to be kept under control.
In the past, insurers usually managed claims by reading the reports of medical officers and then deciding whether the customer would receive a monthly payment. But relying on such individuals had its shortcomings.
“Anybody will tell you that income protection is one of the most complex areas of insurance, because medical opinions are subjective,” says Lomas. “This makes it an area that needs special knowledge and skills.”
Now insurers take a more active interest in the well-being of their claimants to ensure that they receive all of the help and counselling they need to recover.
Insurers often support sick clients through counselling, organising refresher courses, re-training them in new fields or helping them to return to work on a gradual basis. If there is a breakdown in communication between the claimant and the employer, it is now the insurer who will step in to rebuild the bridge.
Counselling services, which can either be provided or arranged by insurance companies, can support claimants and restore their confidence. They can also provide guidance when a sick or injured person cannot go back to the job they had previously.
While the counselling progresses, the customer will still receive benefits from the income protection policy. If they decide to retrain for a job that is within their newly defined capabilities, the insurer may even meet the expenses.
There are many tools available to help manage this process. Software packages, call centres, care management specialists, loss adjusters and others may all have a role to play in claims management.
Insurance companies can also use technology to support their wider strategy. For example, Norwich Union Healthcare has a system called Active Claims Management (ACM), which began in January 1997. By using call centres, clients’ claims are handled faster over the telephone.
“It’s all PC driven so you can be recording the information while you are on the phone,” says Rob Walker, provider contracts manager at Norwich Union Healthcare. “Then we use information from the medical directory and all the information that our claims consultant needs to make a decision about whether the caller is covered or not.”
Most decisions can be authorised over the phone, but the more complicated cases may need further information. Walker believes fast claims processing relieves some of the stress affecting clients who are ill. There is also less chance of the paperwork going astray because everything is recorded on the computer.
There are other benefits too. “It enables us to identify if we can arrange treatment and talk to the experts at an early stage, while the customer concentrates on getting well,” says Walker. “A management team then follows up cases, asking for information from specialists. But all this is invisible to the customer.”
Most insurance companies cannot do all the claims managing in-house because the skills of the medical profession are also called upon, either to assess or nurse a claimant. But most insurers manage the paperwork themselves and some even provide care management services using qualified medical staff in-house.
UNUM manages claims and arranges support for its customers itself. Its disability counselling service can play an important role in claimant rehabilitation. Trained specialists or disability counsellors work with the claimant to help them resume full and meaningful lives or come to terms with their ill health, and these services have helped people return to work in a number of ways.
Zurich Life has a similar system where it appoints a claims assessor to every claimant. This allows a personal relationship to develop. The company is also prepared to pay for private medical consultancy or treatment to secure care, which might not be offered under the NHS or is subject to along waiting list.
“People are waiting much longer for referrals or treatment in the NHS because of budget constrictions, so they are nor being referred or receiving specialist treatment quickly,” says Peter Jeffs, claims manager at Zurich Life. “This is having a knock on effect on our claims costs, so we are having to work harder to instigate and pay for referrals and investigations ourselves.”
Another route insurers can take is to outsource all the administration of claims to an outside company.
NLA Group, a subsidiary of financial services company Fishers International, designs creditor products and claims handling products for the use of a number of financial institutions. It can take over the administration of the claim and do it in the name of the insurance company.
“By outsourcing to specialists, companies can reduce their own in-house costs,” says Sean Benson, managing director of NLA Group. “We can get all the clients’ details and do all the claims administration, as well as design a product that suits our customer’s profile.”
The company also has back-to-work programmes. Advisors will assist individuals in producing CVs, collect job advertisements that may suit the individual or guide them in the right direction for training. Benson believes NLA has a level of understanding of the benefits process that insurers do not have, which can help claimants.
And he says his company can improve the claims record of insurance companies by dealing with queries to its call centre within a few minutes. It also posts any confirmation of a successful claim within no more than two days after the call.
Other companies, including loss adjusters like Crawford THG, may have healthcare divisions. These specialise in managing the level of care an incapacitated claimant receives in order to help them on the road to recovery.
“We utilise nurses for managed care, so we make sure the right treatment is given to the client,” said Deborah Edwards, head of Crawford THG’s healthcare division. The company also offers support to help people return to work.
Edwards believes the earlier the insurer gets involved, the less comfortable someone feels staying at home when they might be able to work – and the less litigious they get. She sees the effect on the claims record as twofold: “If you reduce the length of the disability then this reduces the length of the claim. In addition, income protection generally doesn’t kick in for about three months, so if the insurer speaks to the employer and demonstrates the benefits of helping the employee then they may avoid a claim – and make huge savings.”
Roger Parsons, income protection claims manager at Tunbridge Wells Equitable, believes using the experts, whether outsourced or in-house, can help insurers immensely. They can provide independent reports and are able to travel to meet the client for a review of their case.
“I would say as a result of better management and control of claims, the duration of claims has been reduced,” he says. And so too have the costs.