There is no dispute that average BI severities continue, and will continue, to rise at a rate far greater than inflation. There are many reasons why, but the bigger question is what can be done to curb this phenomenon?
Solutions that I have implemented in the past focus on a multi-pronged approach to investigation, damages, recovery and negotiations.

In order for a claim to be valid, two things must be present; liability and damages. The first challenge for insurers is to improve liability investigations. As an industry, comparative negligence is assessed on less than five percent of all claims, yet juries apportion liability in more than fifty percent of verdicts? Why the vast disparity? There are a number of reasons, not the least of which is adjusters are busy and carriers are focused on a myriad of metrics that often exacerbate the problem.

That said, liability investigations are one of the most crucial functions of the claims adjuster. It is incumbent upon adjusters to ask the critical questions of duties owed and duties breached. If duties were breached, to what degree?
Some will say that liability concessions are a must in order to control claims, and potentially avoid attorney involvement. While these situations can occur, it is not on most claims. Certainly, it is easier to pay 100% than to negotiate an 80/20 settlement, but is that the right thing to do?

Making more accurate decisions has a quantifiable impact on the bottom line, while enabling carriers to be more competitive and improve policyholder retention.
There are other aspects of investigations that are equally as critical, such as ensuring coverage is in place and seeking out any viable contribution. But even when coverage is in place, there are times when other aspects of the investigation are incomplete. When reviewing claim files, the things that I most frequently notice are that statements are very cursory. Here is a snippet from a recent one.

Adjuster: “Tell me what happened in the accident?”

Insured: “The other car hit me in the passenger side. When the police came, they arrested the person for a DUI and not having a valid driver’s license.”

Adjuster: “What was the weather like?”

While statement guides can be good, there needs to be critical thinking going on that drives follow up questions. This adjuster ended up paying the claim at 100%. Clearly an inappropriate outcome for Florida, a pure comparative state.

In this particular case, a BI claim was presented. The person who was arrested for the DUI and an invalid driver license also had neck and back pain, yet they were never indexed. A simple investigation would have yielded three prior auto accidents and a workers’ compensation claim.
In this particular case a medical authorization would have been useful, but was never requested. A scene investigation was never completed. The traffic signal was inoperable at the time of the loss and should have been considered a four way stop. The list of items that should have been addressed goes on, but suffice it to say that this is not an isolated instance. The key to a good investigation is to be curious. The key to a great investigation is to have an insatiable curiosity.

Beyond the basics, look to see if liability can be imputed on others. Sometimes it takes a bit of digging, but often there may be someone else partially to blame. Dig for prior medical records, claims histories, obtain HCFA’s and UB’s with diagnosis and CPT codes and SOAP notes. This is all discoverable in litigation, so request the attorney to include all of this in their demand.

Running background checks can yield invaluable information such as marriages, known associates, criminal history, professional licensure and assets. Beyond doing due diligence on the claimant, check state licensure databases to look for current status and any disciplinary action of either the attorney or the medical providers.

These are just a few basic items that should be considered on every BI claim. Far too often the adjuster will take a reactive approach, simply waiting for a demand to arrive. By being proactive, the adjuster gains the upper hand with written documentation as to what he or she must have to evaluate the claim. If the attorney does not comply, the adjuster can then justify a lower evaluation than what the attorney is demanding. Being proactive and citing exactly what will be needed to evaluate a claim is arguably the best hedge against bad faith allegations.

When the demand does arrive, evaluating the damages is critical to the ultimate outcome. Medical bills need to be evaluated for reasonableness. It is not uncommon for providers to “run up” bills or engage in deceptive billing practices. In fact, nearly one-third of all casualty-related fraud is the result of medical buildup.

Billings need to be checked against benchmark or fee schedule pricing. Some aggressive carriers are going so far as to evaluate bills based upon Medicare fee schedules.
Procedure codes need to be checked against diagnosis codes. It is not uncommon for there to be a diagnosis of lumbar sprain and subsequent treatment to some other part of the body. Deceptive practices include upcoding, unbundling and modifier abuse.

Consider a basic lumber MRI with and without contrast. A provider may bill for CPT codes 72148 and 72149, which would be appropriate for these as individual diagnostic tests. However, when they are conducted together, the appropriate code should be 72158, which is the bundled code, with a cost that is a fraction of unbundled amount.
Negotiations are another aspect where carriers often struggle. It is important to remember that negotiation is a skill that improves with time. There are born negotiators and others who really struggle with the process.

This is arguably one of the most critical aspects of the claim as it defines what will ultimately be paid. An adjuster can conduct an amazing investigation but if they can’t negotiate the close, they will end up overpaying the claim, resulting in leakage. In other instances, the adjuster may not be able to effectively articulate the weaknesses of the plaintiff case, resulting in unnecessary and costly litigation.

The single biggest mistake made during the negotiation process is the focus on numbers. That is exactly what the attorney wants. Focus on the number and you will pay more than you should pay. Adjusters need to focus on the facts. Let the attorney try to leverage the numbers. But adjusters need to focus on the comparative negligence and why the claimant bears some percentage of fault for the accident. Focus on the priors and criminal history to impeach the credibility of both the claim and claimant. The goal is to pay what is right for the claim, not what the attorney wants.
Attorneys are in business to make money. Litigation is an uncertain and costly process. No attorney wants to waste time on a case that isn’t a homerun. Educating and enlightening the attorney is the key to driving the right claim outcome.

Lastly, don’t overlook any potential recovery opportunities. It is estimated that 15% of all claims are closed with a missed subrogation opportunity. The earlier claim scenario is a perfect example. There was clearly liability on the other party. The accident happened in a pure comparative state. The other party had insurance. Not only did the adjuster overpay the BI, but completely missed a potential for recovery on the collision, which is also a disservice to the insured who is out their entire deductible.

In our firm, we routinely conduct close file audits in search of missed subrogation and always find money left on the table, many times to the tune of millions of dollars!
By focusing on the fundamental execution of these key aspects of claims, insurers can improve quality, consistency, and accuracy. Giving adjusters the tools, the training and the time to get the job done thoroughly and accurately is critical to outcomes that will give carriers a competitive advantage in an increasingly difficult marketplace.

Christopher Tidball is an Executive Claims Consultant with SecondLook, Inc., a leading provider of subrogation solutions. He is the author of multiple books including Re-Adjusted: 20 Essential Rules to Take Your Claims Organization From Ordinary to Extraordinary! He spent more than 25 years as an adjuster, manager and business leader with multiple top tier insurance companies. To learn more,

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