Loss adjusters have moved into a number of new areas in recent years, not least into the role of TPA. Jonathan Clark assesses this new position for loss adjusters
DESCRIBED BY some risk managers as a career defining decision, the selection of a TPA service provider is a vital element of an integrated approach to reducing the cost of risk within any orgainsation. The TPA will be the provider to the organisation of risk and claims-related resource.
This resource can be a simple claims management programme operated across the desktop, but may extend to include pre-loss work, either survey or incident management design, medical management and total incident resolution across the whole portfolio of risk. The options are entirely the clients to select and build the programme required by them.
TPA is said to have originated in the US against the backdrop of health benefit administration. There it has been described as moving the adjusting process from being the arms and legs of a client to becoming the whole body.
The dominant driver for selection of a TPA has tended to be direct cost reduction of the claims handling service itself, such as claims handlers’ own expenses. But now a more sophisticated market is emerging in which the aim is to reduce total cost of risk by working to reduce the average cost of claims both insured and uninsured elements. The uninsured element of management time, factory or store time lost in dealing with even a simple slip and trip may exceed the insured element 10-fold and this can be reduced by a skilled TPA. Prompt investigation from a desktop team supported by adjusters in the field can ensure time is not wasted in down time attending investigations established late in the day.
On a fully outsourced programme in Canada, a dedicated TPA account team have been able to reduce from 3.7% to 2% the percentage of opened files referred to counsel by the simple expedient of being on the scene quickly and being knowledgeable about the account. The savings both above and below the line will be immediately apparent.
The benefits of moving to a TPA supplier are many and can include smoothing of claims handling costs from good years to bad by purchasing a fixed-fee arrangement with a swing pricing structure. You, need, if preferred, only pay for what is used and many companies purchase TPA on a claim-by-claim basis. Inevitably there will be considerations as to whether claims handling is core business and outsourcing is a highly attractive option to buy from a loss adjuster the services of skilled and specifically trained staff whose business is claims and risk handling.
Gaining ideas
By outsourcing it is also possible to tap into another’s ideas and experience, this will be more effectively seen if the chosen TPA already has good specific industry or local authority experience. In this way as a purchaser you should be buying an awareness of the claims issues that are relevant to an industry group such as hotels or health trusts. Creative solutions to claims problems can be more rapidly developed, an example may be to develop a programme for a store chain of settling claims to a certain level with the use of store vouchers.
For loss adjusting practices, visited claims are the core business and desktop claims management a more recent introduction. TPA is an extension of both aspects of the business, but requires different service attributes. The key requirement is an attention to detail in putting the service together. Agreed customers rules are a vital element of the programme and what the customer is seeking is a combination of adherence and advice. The service has to be flexible to embrace a wide variety of risk from liability through motor to property and customer satisfaction programmes.
Research in the US, which has a more mature TPA market than the UK, suggests the following key attributes of a TRA service:
• consistent adherence to customer instructions;
• reduction of total claims spend (10% will be considered significant);
• specific skills applied to particular customer accounts;
• reduction of frequency of claims.
Taking the latter as an example, it is too easy to analyse claims solely by class of business, for instance employers’ liability, and fail to realise an underlying trend of poor management at a location that could impact to other areas of the account
It is the role of the TPA to provide information to the client on matters of risk, but this service is useless unless the information is converted to genuine knowledge of, for example, prevention measures and any dangerous conditions noted on inspection which were not specific to a claim. For TPA providers this means having dedicated account handlers who can understand how to work with the client to assist in their understanding of the context for claims and losses and therefore can develop an empirical basis for making informed decisions on risk improvement.
Customer instructions
Consistent adherence to customer instructions requires a complete re-evaluation for many loss adjusters of their way of working, when the instructions embrace all aspects of a client’s business from the smallest claim to the very largest. The account management team at the desktop in the service gateway will be the kings (and queens) of the service and not necessarily the loss adjuster dealing with the latest major loss.
The account management team can operate in many different ways, but will generally focus around a dedicated team who are wholly familiar with the account and all its nuances. They may work at the client premises, be part of a dedicated unit established specifically for the client or be based at the TPA core premises.
For smaller accounts a designated team will offer a broader skill base, but work for say three to five key clients. This team must then work with their field force as required to ensure that a positive image of the customer is given at all times. Use of designated members of a field force will allow access to a yet broader base of skills when needed such as specific accountancy or major loss management or specialist investigation of that difficult claim.
Since consistent file management and decision making is a vital element of the service, customers not unreasonably resent having to monitor to ensure the quality of claims adjustment and its compliance with agreed standards. Most loss adjusting practices evolved in the 1980s to offer their service to the insurance market in vertical product silos, for example, property, liability, CMS and corporate among others.
Identifying skills
As already suggested this view of the world is not likely to be viable for true TPA provision. Specific skill sets will be needed, but the critical needs are to get the basics right and to be able to customise the service to offer a consistent view of the clients world across your own business.
Service standard establishment will be one element of designing the service and these need to be measured and reported upon internally to ensure compliance. The issues will not just be about time-based measurement, but rather about a style of dealing with claimants, consistent correspondence and other communication will be part of the mix. For a loss adjuster entering the world of TPA they may well become part of the overall client brand protection team. Therefore, there will be a need to take on board the client house style and put that into practice. Anyone who has participated in designing customer complaint processes will see the obvious link for the TPA here.
Management of other vendors (suppliers) will be required, and this process of management, whether involving legal advisers or cleaning contractors, falls to the TPA who must develop the relevant total reporting and management skills. Back to work programmes may require the loss adjuster to incorporate the latest in healthcare management to their TPA provision and all the suppliers in the risk management programme may be offered by the TPA or be the client choice.
Customer service considerations mean answering questions and resolving problems, and where needed, high level management should be drawn upon. The skilled TPA will be looking to pre-empt and the team will totally understand the client business and be interested in the industry sector in which it falls.
Only if this high level of industry knowledge is apparent can the TPA service be truly customised and those involved take the initiative to provide those vital extra touches that ensure that the TPA can clearly demonstrate the full value of the collaborative venture that is Third Party Administration. UK loss adjusters have the skill base for successful TPA – what is required is the business management to make the customer process work across the whole business.