Claims management: the role of analysis, research and recommendations

In this third of a three-part series on insurance claims, Col Fullagar rounds out the concept of claims management best practice by reviewing the role of analysis, research and a formal recommendation. 

Part one: It’s time for a holistic approach to risk insurance
Part two: Claims management and establishing effective fact finding processes

Within a claim environment, several key goals of analysis will emerge from a client’s claim fact find:  

• The client’s contractual position; 
• The likely claim requirements; and 
• How should the claim be lodged. 

Coming out of this analysis will be a better recognition of what can be done to ensure the claims management process is undertaken in a respectful and professional way, and what is the likely claim chronology. 

The client’s contractual position 

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A logical place to commence the analysis process is to consider the client’s contractual position. There is little point researching other aspects of the claim if no entitlements exist, unless of course there is the possibility of an entitlement outside the contractual terms. 

The previously obtained policy terms and conditions, including the policy schedule, will be the focus of the contractual review. The key things to consider and, if necessary, to physically extract from the policy, include: 

• Relevant definitions; 
• Criteria for benefit payment; 
• Offsets and exclusions; 
• Benefit and policy expiry dates;  
• Claim responsibilities and requirements; and, of course, 
• Potential benefit entitlements. 

The policy schedule plays an important role as it contains client-specific information relevant to the policy terms and conditions including, for example, details of cover provided under standard and optional policy benefits. 

The following are examples of the many issues that might potentially compromise a claim if proper analysis is not undertaken. 

If no entitlement is apparent in the current policy terms, it may be necessary to obtain and analyse previous policy terms that were subjected to a guaranteed upgrade. It is not unknown that this reveals policy conditions more favourable to a claim than the current ones. 

If ambiguity is found, any potential impact on the client’s position may need to be carefully considered prior to any action being taken. For example, with wording that refers to “working for profit” – is this referencing an outcome or an intent? 

Standard and any special exclusions should be reviewed.  

Recognising that a claim may fall foul of an exclusion clause provides an opportunity to thoroughly examine the position and better present it to the insurer: for example, the policy may contain an exclusion for “participating in dirt bike riding”, but what is the position if an injury arises whilst legally riding a registered dirt bike on a main highway. 

Also, the operation of an exclusion clause may not be as clear-cut as first thought. For example, a trauma event may arise within the 90 day exclusion period; however, policy completion may have been subsequent to an inordinate and unnecessary delay on the part of the insurer. 

If policy expiry is triggered by “the permanent retirement of the life insured”, is positioning necessary for a 56-year-old client who suffers an insured event whilst travelling around Australia during an open-ended absence from work? 

Not all clients recognise a possible claim entitlement – thus delayed claim lodgement is not uncommon. If delays are outside the policies claim conditions, would it assist if a reasonable explanation demonstrates the insurer has not been prejudiced by the delay. 

An important part of analysis is the identifying of potential benefit entitlements, which can then be discussed with the client in order to both position client expectations and also to better enable future planning. 

Prudent care must of course be taken to ensure the discussion of benefit entitlements is noted as subject to insurer assessment and acceptance of the claim. 

By undertaking a comprehensive and informed contractual analysis the adviser is better able to work with the insurer in part as a joint assessor and arbiter of the claim. 

Insurers may not initially embrace this shift into what some see as their “turf”, but it is clearly to their advantage as it reduces the chance of errors being made and entitlements being overlooked. After all, as Janus will tell you “two heads are better than one”. 

The likely claim requirements 

Best Practice seeks to move the client as much as possible from being an apparent onlooker in the claims management process to being an active participant, even if this is via the person of the adviser.  

Thus, rather than waiting for several weeks for requirements to be requested after a claim is lodged, as part of the analysis process an adviser might identify from previous experience and/or the experience of others, the more likely claim requirements. 

This not only positions the adviser as a key part of the claims management process but it can also mean information might be obtained ahead of claim lodgement such that the claim chronology is materially reduced. 

Candidates for the above action are the Medicare and Pharmaceutical Benefits Scheme (PBS )Authorities.  

These appear to have slipped under the radar as all but mandatory requirements for all but every claim. The current delay from date of lodgement of the authorities to date of receipt of the reports can be around six weeks, so the earlier they are lodged the better. 

Also, there is no reason why these reports cannot be directed to the adviser, an action that has the advantage of enabling the adviser and the client to review the reports, identify any possible areas of uncertainty and provide explanations and/or additional details when the reports are subsequently sent to the insurer. 

Another candidate is financial information: 

• Proofs in respect of pre-disability earnings for an income protection claim can not only be obtained but PDE itself might be calculated by the accountant; and 
• In addition to other relevant financial information being identified and obtained, if the current year’s accounts have not yet been finalised, it may assist claim assessment if their completion was expedited. 

If the client’s business structure is other than straightforward, the accountant may be able to assist by providing a simplified business structure diagram. 

In the area of medical requirements, reports held or that can be easily obtained by the client can be reviewed, and those material to the claim can again be provided when the claim is lodged.  

The above may be accompanied by an explanation of which doctors, hospitals or laboratories also hold information, and these would be the best to contact if this information is required. 

Depending on the policy duration, there may be a greater or lesser need to review the original application form for the insurance being claimed under. 

If this review identifies any “red flags”, an explanation is again best provided sooner rather than later. Examples might include: 

• A recent change in occupation;  
• The client being in a different occupation to that disclosed in the application; 
• A material change in earnings; and 
• A change in employments status. 

Other matters might include a claim event arising shortly after the policy started and it being associated with a matter that would have required disclosure – for example, the insured is hurt whist involved in a recognised hazardous pursuit.

Was this a matter of non-disclosure or a spur of the moment activity undertaken while on holidays? 

If the nature of the claim is such that “surveillance” may be deemed a prudent requirement by the insurer, the adviser might see merit in mentioning this to the client and positioning it appropriately. 

Also, if the reality is that there has been a mistake made during application completion, this should be identified and responded to prior to the claim being lodged rather than leaving it for the insurer to draw erroneous conclusions. 

For a TPD claim, a practical red flag may be the age of the client and the nature of the claimed condition. Younger clients and those suffering subjective claim conditions may find it more difficult to have the validity of their claim accepted.

Reasonable or not, this should be recognised and taken into consideration. 

A claim arising while the client is overseas may constitute a red flag in its own right, as well as being a practical red flag. Is the client intending to remain overseas or are they wishing to return to Australia?

Are there restrictions within the policy such that the insured will be required to return at some point? Again, these questions should be recognised and the restrictions acknowledged. 

Clearly, there is a wide range of potential issues, not all of which will be identified and addressed by the adviser. Prudent advice suggests that this fact should be acknowledged in writing within the advice provided.  

How should the claim be lodged? 

Recognition that one size does not fit all is fundamental to appropriate advice. This applies to claim lodgement as much as it does to other areas of advice. 

Relevant matters to be considered might include: 

• If a tele-claim facility is available, is this a reasonable and even expected way forward for clients who are no longer actively managed by the adviser’s business;  
• Should the claim be submitted via the standard claim lodgement mailing address or are the facts surrounding the claim or the client such that a formal approach to a senior manager is warranted; and 
• What information should be provided with the insurer’s claim form – for example, a formal written report and/or other collected information? 

Irrespective of how a claim is lodged, the adviser should bear in mind that claims staff represent – and are responsible and have a legal obligation to – the insurer.

This does not negate the operation of good faith but it requires situations of potential conflicts of interest to be recognised and responded to appropriately.   

Research

Claim research recognises that even though a fact find process has been undertaken, additional information may warrant consideration within the frame work of the claim advice process. Some examples follow. 

An adviser’s previous experience with the client’s insurer may be relevant; have these experiences been favourable or otherwise?

If the adviser has not had any previous, personal experience, what has been the experience of others known to the adviser or what is the insurer’s reputation? 

Is there any evidence or perception of insurer bias in particular areas of claims management practice or contract interpretation?  

How user-friendly is the insurer – for example, is there a willingness to conduct an open and inclusive claims management process or is their conduct more in line with that of Secret Squirrels?  

Is there a willingness to pro-actively explain the reason for requirements, or is there a tendency to simply dictate and expect compliance? 

What are the administrative practices of the insurer? For example: 

• In respect of premium waiver, do premiums need to be paid and subsequently refunded or can a full waiver apply; 
• At the adviser business level, what is the position regarding payment of commission during an ongoing claim process; and 
• Would it be a prudent safeguard to diary administrative matters such as benefit payment and PDE indexation? 

Research may also be necessary if there is any chance of legal exposure for the client and/or the adviser – for example, non-disclosure is revealed. Is the matter such that the client should be put on notice and the licensee and professional indemnity insurer notified? 

Would the position benefit from external expert input and, if so, should this be discussed with the client so the appropriate advice can be obtained? 

External input might extend to obtaining an independent, specialist medical opinion, with any subsequent report potentially being shared with the insurer. 

Recommendation

As with initial advice, the culmination of fact finding, analysis and research is a recommendation. 

Depending on the circumstances of the claim, for example, the benefit amount, the ‘importance’ or preference of the client or the complexities of the claim, a recommendation may simply be included in a relatively brief email or it may be appropriately contained in a comprehensive written report, or of course, anything in between. 

The recommendation might include details of each component of the claim advice process including responses to many of the matters mentioned within the analysis or research sections above. 

A formal recommendation might be made to proceed with the claim lodgement, with details provided as to how this would best be undertaken – or alternatively, the recommendation might note that no claim entitlement appears to exist. 

If a decision is taken to proceed with lodgement of the claim, documentation provided to the insurer within the lodgement package might include: 

• The insurer’s claim form; 
• An adviser report compiled in part from the fact find, analysis and research process; 
• Supporting medical and non-medical information; 
• Medicare/PBS authorities or reports, and if the latter, an analysis of the report; 
• Details of the contact person and an authority if necessary; and 
• Requests to be made of the insurer – for example, regular updates of assessment progress, the involvement of a particular assessor if previous experience indicates the adviser and that assessor have a good working relationship (noting of course that the opposite might apply). 

Conclusion

This three-part article opened with recognition that the responsibilities falling to those who provide risk insurance advice are considerable, and appropriately, so too are the rewards for those who take up and meet these responsibilities.  

Adviser involvement in claims management was cited as forming part of the holistic advice process and as such it warranted the same attention and disciplined approach as other components of the advice process. 

A flexible framework was suggested along similar lines to that which existed for initial advice (ie, fact finding, analysis and research followed by a recommendation). 

The suggested name for this process was Claims Management Best Practice; however, importantly it was noted that Best Practice will and should always remain a target aspired to rather than an outcome achieved. 

The target of Claims Management Best Practice should not be shaped by insurers or mandated by regulators. To the extent it has merit, advisers should embrace and develop it as yet another example of the value they add. 

P.S. For those who are not solid on mythology, Janus the Greek god of doors, crossroads, and choices, had two heads. 

Col Fullagar is the principal of Integrity Resolutions Pty Ltd.