Carriers are seeing many of their policyholders converting more of their traditional insurance coverage to SIRs with the excess carriers attaching at higher levels of coverage. Excess carriers who do not regularly use claims auditing services to monitor the process may be leaving themselves open to additional and unnecessary expenses or liability.
SIRs And Claims Auditing Services
Policyholders use SIRs to reduce insurance costs. Some policyholders create internal claim departments to manage the claims, although many employ TPA services to do the job. In either case, the excess carrier has less control over how the policyholder's claims are being handled than they would with a more traditional "dollar one" insurance program.
With more people involved in the claims process than with traditional programs, there is a greater chance for error. The TPA services provider and the policyholder are protected from large claims by the excess policy, but this can leave the excess carrier shouldering the burden if claims are being paid improperly. A firm that provides claims auditing services examines the entire TPA operation and systems to verify that everyone involved understands the claim servicing agreement and is administering it properly.
Preparing For The Audit
The frequency and need for claims auditing services will depend on the situation. Newly formed SIRs should be audited more frequently than established ones to make sure the process gets started correctly. If past audits have shown a large number of concerns, audit frequency should be increased. As the system becomes stabilized and reliable, audits can be performed less often.
Many carriers utilize pre-binding audits – that is, sending an auditing firm in to audit the TPA services provider before they bind coverage, rather than finding out the bad news after coverage has been placed.
An audit begins long before the auditors show up on site.
What Claims Auditing Services Providers Look For
Claims auditing services should be performed onsite to give auditors a chance to meet and interact with claims staff and make it easier to judge if the skill level is appropriate to the number and types of claims handled.
The audit should focus on the speed and accuracy of all aspects of claims handling, including initial introduction of a claim into the system, investigation, litigation management, processing, payment, and recoveries. Although many claims are routine, claims adjusters should be able to recognize and handle issues like secondary insurance, third-party liability and fraud when confronted with these in the daily workflow. The audit of the TPA services provider should be focused on ensuring that the firm is in full compliance with the claims service agreement and is conducting the business of claims management in accordance with recognized industry standards and procedures.
Claims auditing services can benefit everyone: the carrier, the policyholder and the TPA services provider. The audits keep the system running efficiently and affordably, and minimize the chance of errors and unnecessary liability.