advisor Information for today’s claims professionals
Claims & Technology How are we doing? PLRB’s New Online Mapping
Is the Claims Technology Train Leaving the Station? Predictive Analytics
Five Lessons Since 2005 The Law & Technology
Data Recovery Solutions
24-Hour Multi-Line and Catastrophe Claim Service
800-354-5732 Corporate Office
8300 Pioneers Blvd, Suite 201 Lincoln, Nebraska 68506 Please fax or email new claims to: 800-255-9708 â€˘ firstname.lastname@example.org
in this issue spring 2008 38 26
Does Lightning Strike Twice?
Five Lessons Since 2005
Looking back on events never The PLRB’s new online mapping gives dreamed of before, what we can be unprecedented access to answers on proud of and what we can learn. By jim loveland threat activity. By Hugh O. Strawn
Property loss research bureau
Insurer Claims Systems Is the claims technology train leaving the station? By Mike mahoney
Predictive Analytics: It’s Everywhere By Donna J. Popow, JD, CPCU, AIC and Charles M. Nyce, PhD, CPCU, API American Institute for CPCU and the insurance institute of america
Xactware solutions, inc.
Neuropsychological Assessment: Flexible or Fixed? Discover your best option for the most valid results. By dr. Steven Carter, Psyd, LP Expert advantage
The Law & Technology With much of discovery now in electronic format and the law catching up, new rules apply.
Don’t Touch that Computer! Learn about data recovery following fire, flood or storm activity.
By Robert M. Kelso, J.D., CPCU and Eric D. Johnson, J.D.
By scott ellis
RGL - Forensic accountants & Consultants
kightlinger and gray, llp
CLAIMS ADVISOR | SPRING 2008
Contents in this issue, contâ€™d... spring 2008
See the Forest and the Trees
Donâ€™t Get Zapped!
RMIS and Claims Management Systems in Your Organization By Terry Preece
mountain view software
Bad Bugs on the Rise? Recent food recalls-and the likelihood of more to come-demand we know more to protect our clients. By Meg Weist, J.D.
EMC Insurance Companies
Mitigation and Risk Assessment Strategies for Reducing Lightning Losses By Kim Loehr LPI consultant
68 Keeping Clients Rolling In an emergency, accessible vehicle rentals can be tricky. Know the ins and outs to best serve clients and manage costs. By dale richardson wheelchair getaways
in every issue spring 2008
Edit: Letter from the Editor/Publisher
Advances in technology should serve to enhance customer service, not replace the human touch.
Pulse: Your Responses to Our Online Polls
Interview: What Makes You Tick?
Write: Tips for Better Writing
Event: Calendar of Industry Meetings
Source: Advertiser Directory
Story: Claims Adjuster Musings
By Thomas McCloskey, CPCU, LIC Risk Associates, Inc.
CLAIMS ADVISOR | SPRING 2008
Edit Technology: How are we doing? I recently purchased a home built in the late 1970s that had never been updated. Amid the Brady Bunch fireplace, linoleum, wood paneling and goldenrod bathroom fixtures, I had a nagging feeling that something was missing. As I looked around it dawned on me—no cable connections, no microwave and an analog telephone sat in one room. ~shudder~ After stepping out of the time machine and back into my wired world, I realized the incredible technological changes that have been made in the past 30 years alone; some for the better, some for the worse. Today, we are able to stay in touch with loved ones and friends across the nation, and globe, inexpensively and at lightning speed. Yet, we ignore the person next to us as soon as our cell phones ring. How do we manage One machine can today’s technology in such a way do the work of that it enhances our business and fifty ordinary personal lives, men. No machine while keeping the negative can do the side effects to a minimum? work of one While technological increases extraordinary seem to come at lightning speed, man. some contend that -Elbert Hubbard, The Roycroft Dictionary and Book of business producEpigrams, 1923 tivity has been on the decline since 2004. Positions that benefit from new and more efficient technologies have been cut in most cases. However, increased productivity for more complex positions—those requiring experience, interaction, and high touch—is more difficult to achieve since theses jobs cannot be automated. According to Basex, a research firm focusing on knowledge and collaboration, information is the new currency of our society, yet workers are drowning in it. In their report Information Overload: We Have Met the Enemy and He Is Us, they find that a typical worker “gets 200
e-mails, dozens of instant messages, multiple phone calls (office and mobile phone), and several text messages, not to mention the vast amount of content that he/she has to contend with. Information overload has become a significant problem for companies of all sizes, with some large organizations losing billions of dollars each year in lower productivity and hampered innovation. Interruptions alone cost companies in the U.S. $650 billion per year. It’s not just a case of too much e-mail, too many interruptions, too many projects, and too much content. It’s all these things clashing—sometimes like an orchestra without a conductor.” Basex chose information overload as its “problem of the year” for 2008. Their choice is no surprise. With the overwhelming influx of communication avenues—e-mail, instant messages, cell phone calls, text messages, blogs, wikis, etc.—overload is a serious concern. They offers tips to help manage information overload, including: • “I will not e-mail someone and then two seconds later follow up with an IM or phone call.” • “I will read my own e-mails before sending them to make sure they are comprehensible to others.” • “I will not overburden colleagues with unnecessary e-mail, especially one word replies such as “Thanks!” or “Great!” and will use “reply to all” only when absolutely necessary.” In this issue, we look at technology and how the Claims Industry is doing. One of the newest technological advances is the PLRB’s new online mapping. This new tool allows adjusters access to unprecedented answers to threat activity. We also look at claims systems, risk management information systems, predictive analytics, how the law is handling e-forms, and much more. Don’t miss a word! Until next time...
Information for today’s claims professionals
Spring 2008 VOLUME 2. NUMBER 2
Publisher & Editor Bevrlee J. Lipsemail@example.com Editorial Advisory Board Steven Carter Expert Advantage Glenn T. Gibson
Crawford & Company International
Hartford Steam Boiler Inspection and Insurance Company
James R. Jones
Katie School of Insurance and Financial Services, Illinois State University
Robert Kelso Thomas W. Mallin John McHale Donna J. Popow
Kightlinger and Gray Property Loss Research Bureau Erie Insurance American Institute for CPCU/ Insurance Institute of America
Claims Advisor Staff VP Finance/Michael Marsh VP Information Technology/Michael Kay Web Site Associate/Chris Walters Project Associate/Amanda Pierce Warren Editorial Assistant/Paige Kay Database Associate/Sheila Hoyer Design Assistant/Ashley Jones Design Assistant/Richard Shivers Human Resources/Shannon White Advertising Sales East Coast/Canada Douglas A. Jonesfirstname.lastname@example.org 203.259.1232 North Central Cathy A. Flowersemail@example.com 866.276.7970 x1355 South Central/West Coast James E. Ootfirstname.lastname@example.org 973.335.8902 Volume 2, Number 2, Claims Advisor (ISSN 1940-0993) is published four times a year in January, April, July and October by Claims Advisor, 537 Deltona Boulevard, Deltona, FL 32725. Printed in the U.S. Copyright © 2008 by Claims Advisor. All rights reserved. Reproduction in whole or in part without permission is strictly prohibited. No charge for subscriptions to qualified claims adjusters and managers. Annual rate for subscriptions to nonqualified individuals is $46 USD. Canadian $70 (in U.S. funds). For individual issues, $12 USD. For reprints, e-mail the editor at email@example.com POSTMASTER: Send address changes to Claims Advisor, 537 Deltona Blvd., Deltona, FL 32725.
Founder/D. Scott Plakon
537 Deltona Boulevard, Deltona, FL 32725 office 866.276.7970 | fax 866.276.7972
Bevrlee J. Lips Publisher/Editor
for the claims industry's largest educational gathering. From the 110 educational classes held over three days, covering a wide expanse of property and casualty claims issues, to the Insurance Services Expo with over 300 different providers, the Claims Conference provides learning and networking opportunities on an unparalleled scale. The PLRB/LIRB Claims Conference is the career boost you've been looking for!
Sharpen core skills. Acquire new capabilities. Engage in powerful give-and-take, inside and outside the classroom, with peers and industry leaders. KEYNOTE SPEAKER Doris Ke arn s Goodwi n
REGISTER Online Complimentary registration to staff of PLRB/LIRB member insurance companies. To register and for more information, visit WWW. CLAIMSCONF. ORG , OR CALL 630-724-2200.
CLAIMS ADVISOR | SPRING 2008
The PLRBâ€™s new online ma gives unprecedented acces answers on threat activity
The day after a massive severe storm outbreak occurred in the lower Mississippi River Valley and into the Tennessee River Valley, a tornado damage claim landed on Keith’s desk. Keith is an adjuster for one of the 900 property and casualty insurance companies that are members of the Property Loss Research Bureau. The claim is no surprise to Keith as he had seen the geocoded extreme tornado and wind risk areas the day of the storms [Figure 1]. A frequent reader of the PLRB Catastrophe Services’ daily Threats Assessment, he had reviewed the risk areas on the PLRB’s new Internet Mapping System (IMS). PLRB membership gives Keith, and all other company employees, access to the comprehensive PLRB database and use of their search engines to find coverage, weather/catastrophe, and educational data and information. Using the PLRB Mapper, he was able to compare his company’s geocoded policyholder database against the risk areas. As he suspected, there was considerable com-
wice? by Hugh O. Strawn
apping ss to
mercial and personal lines exposure in part of the risk areas in Tennessee. The storms hit as predicted. The following morning there were hundreds of reports of severe storm damage issued with the Severe Storm and Occurrence Summary. The written reports, along with the charts and maps, showed damage in the areas where the company had policyholders. Then Keith needed to know if a tornado or wind damage was reported by a storm spotter or detected by radar where a policyholder’s insured building was located. With his PLRB username and password, he quickly logs on to the PLRB Web site and navigates to the Weather/Catastrophe section. Entering his search dates, city, state and ZIP code, and selecting tornado and wind damage information, Keith instantly learns that tornadoes, hail, and high wind were reported [Figure 2]. “Well,” he wonders, “how close to the address were the tornado or damaging winds reported?” Using IMS, Keith
CLAIMS ADVISOR | SPRING 2008
Figure 2 - Reported Events
will be able to zero in on the location and determine if the area has been affected by the thunderstorm. The PLRB’s new Internet Mapping System will be officially introduced to insurer and affiliate members at the PLRB/LIRB 2008 Claims Conference, April 13-16, at the Hynes Convention Center in Boston, Massachusetts. It will allow Keith, and all PLRB members, to accurately geocode the address of a homeowner’s claim and then to pull all available data from the Catastrophe Services database for the date range being researched for that address. The data then will be displayed on a map and a spatial view of the information will be provided making it easier to analyze and interpret. Street Level Detail The IMS will allow users to begin with a map of the United States and navigate down to street level for precision analysis of the event [Figure 3]. As the research moves deeper into the map, landmark details such as bodies of water, railroads, airports and
parks will be displayed to help orient the user [Figure 4]. The Advantage of IMS The type of data and information needed by Keith has been available for years in the Catastrophe Services historical database, and can be researched online. But search answers previously were displayed in text format only, and typically got as close as the zip code. If Keith had geographic information system (GIS) software, such as the PLRB Mapper, ArcMap or MapInfo, he could go through the process of downloading the appropriFigure 3 - Base Map
Figure 4 - Street Level Detail
ate files, loading them into the GIS program, and comparing the data against his company’s geocoded policyholder database. But he has a lot of claims to adjust and needs to work quickly as well as accurately. The new PLRB IMS will help him meet those goals. When Keith goes to the PLRB Catastrophe Services search engine, he can enter the address of the property to be researched, the date or dates to be reviewed, and what data is to be researched. In Keith’s tornado and wind case, he will find files that place points on the latitude
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Figure 5 - NEXRAD Probability of Hail
and longitude of the damages reported by fire department storm spotters. He also will be able to pull in the appropriate National Weather Service NEXRAD radar image that has been geocoded by the PLRB. These two pieces of data are contained in Shapefiles (.shp)—the designation of files in which the geocoded data is stored. These files will be imported into a streetlevel map created by the IMS specifically for his search. The map, which also displays the geocoded location of the property being researched, will show him that a severe thunderstorm with a tornado and damaging wind occurred at the address in question. If no tornadoes or high winds are detected at the address being researched, Keith will be able to calculate how close to the address the nearest reported events occurred. Lightning Probability Searches While Keith is working on the tornado and wind damage claim, the claim files keep piling up in the office. On the other side of the room, Amy has received a personal lines claim for lightning damage to a digital flat screen television unit. The insureds told their
agent that lightning during a severe thunderstorm was “pretty dramatic.” Eventually, there was one strike that hit the utility pole directly behind their house with a blinding strobe light-like flash. The power went out immediately. After it was restored several hours later, the insureds discovered that the television no longer functioned. After verifying coverage, Amy needs to answer the question, “Was there a possibility of lightning in the vicinity of the house?” Since the company is a member of the PLRB, she can go to the Catastrophe Services Web site and research the probability of lightning at or near the address. Using the IMS, Amy will be able to enter the address of the property that was reportedly struck. It will geocode the address and locate the exact position of the building. As part of her research, she will also enter the date range to be searched. The PLRB’s Lightning Probability Chart Shapefiles will be one of the options she may select for her search. Amy’s company uses the Lightning Probability Chart section regularly to research so-called “routine”
lightning claims. Lightning Probability Charts are produced hourly by the National Oceanic and Atmospheric Administration (NOAA). The PLRB captures, geocodes and makes them available for research. Geocoded charts allow addressspecific probability research. A click of the mouse will place the outline of any lightning probability file on the map. This will allow Amy to see if the house in question was within, or near, an area where lightning was forecast to strike. The charts display the probability of two cloudto-ground strikes within a three-hour period—probability is displayed on a scale from 10% to 90%. Point Files The PLRB Catastrophe Services database contains geocoded data and information covering many of the events that cause property damage. The database includes reports by trained National Weather Service severe weather spotters, such as firefighters or police officers. These are displayed as points on the map to report locations of hail, wind, tornadoes, flash flooding, freezing rain and ice storms. This data is converted to GIS format and Figure 6 - NEXRAD Wind Barbs
saved as a point file, in which the data on a spreadsheet is converted to information that can be displayed on a map. In a PLRB Severe Storm and Occurrence Summary report, there will be a scattering of points that reflect actual observations. Clicking on a point displayed on the map will show the researcher all associated information. The typical PLRB point would include the type of event, such as wind, as well as information like the velocity and damage it might have caused. Shapefiles The database includes data geocoded into Shapefiles, which is a universally usable GIS format. The typical PLRB Shapefile contains hail and wind radar data, gathered every 15-minutes from the National Weather Service NEXRAD system. The Lightning Probability data, gathered every hour, also is packaged in this format. Additionally, any forecast data such as hurricane tracks, extremely severe weather forecasts and extremely critical wildland fire conditions are saved as Shapefiles. When a Shapefile is displayed on the IMS, or in a stand-alone GIS program, the
researcher typically will see a polygon that outlines an area. The hail and wind NEXRAD Shapefiles will display numerous information points that report the estimated size of the hail or the estimated velocity of the wind as measured by radar. Data from the NEXRAD files will fill in the information from areas where there was no actual observation and report.
Figure 7 - PLRB Web Site
Member Benefit The IMS is a no-fee member benefit for employees of member insurance companies. With insurance company
membership in the PLRB, all company employees have full access to the catastrophe/weather data, coverage information and educational materials produced by the PLRB. Affiliate membership provides unlimited no-fee access to PLRB weather/catastrophe data, as well as all cA educational materials. Hugh O. Strawn is vice president - Catastrophe Services with the Property Loss Research Bureau based in Downers Grove, Ill. He can be reached at firstname.lastname@example.org
CLAIMS ADVISOR | SPRING 2008
Insu Claim Syst Is the claims technology by Mike Mahoney
Railroads have been a vital part of America’s growth and a mainstay of its economic development, providing a means to transport goods and people and open up a
developing nation. Starting with steam locomotives in the mid-1800s, progress paralleled technology; innovations were few and far between. In order for steam locomotives to pull more or go faster, engine designs were simply enlarged. Heavier engines required
strong bridges and gentle curves, and inflicted more damage to tracks. Despite these limitations, steam locomotives remained functional so change wasn’t sought. What does all this have to do with property/casualty claims systems? The situations
are similar when you think of steam locomotives as the “legacy” workhorses of their day and liken them to the legacy claims systems found in the claims departments of many insurers—a bit of a leap admittedly, but not completely far-fetched. Both “systems”
urer ms tem train leaving the station? were revolutionary in their day and remained functional for years beyond their technological primes—and there was reluctance to change even in the face of necessity. Rising competition from auto and air travel, coupled with government restrictions
forbidding the abandonment of unprofitable businesses, drove railroads to pursue the one option left open to them to improve efficiency—technological innovation. Along came diesel engines, which offered a cleaner alternative to steam. They also reduced
the need for costly repairs and refueling intervals, and provided more pulling power than the legacy steam engines. All were significant cost savings and productivity gains for the railroads. Claims management has taken on a similar urgency for
P&C carriers in today’s soft market. With revenue growth flat or shrinking, investment returns uncertain, and a majority of an insurer’s expenditures flowing out of the claims area, carriers are very aware of the importance their claims departments have in deliver-
CLAIMS ADVISOR | SPRING 2008
ing operational profitability and impacting the carrier’s overall financial performance. Carriers also recognize that the area of claims may provide the only personal interaction with some policyholders. Delays and unsatisfactory claim settlements can quickly erode the relationship between the two parties. It is the all-important moment of truth, with poor performance very likely leading to policyholder dissatisfaction, defections, or even lawsuits. Steam locomotives were custom made for specific railway routes and lines, so economies of scale were difficult to achieve—similar to the majority of “home grown” and technologically out-of-date legacy P&C claims systems in use today. Many of these legacy systems were never intended to be claimsadjusting applications in the first place, and are not up to the most basic of tasks. Like their hard performing steam train counterparts from a bygone era, their days of efficient performance are behind them. Legacy systems are not only cumbersome, but may be impossible to modify to any great extent—thus limiting what a carrier can do as business requires newer, faster and more cost effective approaches to remain competitive. Instead of having claims technology flexible enough to support the way they want to do business, carriers find themselves adjusting their processes to accommodate the limitations of their legacy claims technology. New regulatory requirements, changing business needs and FNOL reporting are just a sampling of where legacy systems consistently come up short. Over the years carriers have added siloed third party applications or built their own
to fill specific functionality gaps, resulting in a patchwork of disjointed systems. The siloed applications typically offer limited integration and limited data exchange, adding to the administrative burden and chance for leakage. Reporting and operational visibility with such cobbled together systems provides at best a delayed glimpse into claim operations, and in many cases no insight at all. Claims representatives frequently find themselves bogged down in manual
activities to retrieve archived property and inspection information as well as insuranceto-value data. In addition, legacy systems often operate in batch mode, adding to the delay in acquiring the most recent claims information— assuming it’s even available in the system. Legacy systems are so limiting that some studies estimate at least 40 percent of an adjuster’s time is spent on activities that don’t bring claims to a quick and just settlement. Such outdated systems are not simply inconveniences or a
fact of life; they now threaten a carrier’s competitive position and financial health. What’s Holding up Progress? When it came to the railroads, even with the advent of newer diesel technology there was hesitancy by some locomotive manufacturers to change. Many thought the status quo was good enough, while others preferred to let the technology develop or let others take the risks associated with early adoption. Many locomotive manufacturers who took the wait-
and-see approach suffered competitively as a result, with some going out of business altogether. Carriers with outdated claims systems often find themselves in a situation similar to that of steam locomotive builders in the early1920s who saw the benefits of the more powerful, more efficient diesel locomotives, but couldn’t readily respond to the market shift. Encumbered by their massive investments in steam engine production, including previous investments in factories,
CLAIMS ADVISOR | SPRING 2008
manufacturers assumed they would slowly transition to diesel locomotives as that technology further developed. Unfortunately, many P&C insurers today remain content to luxuriate with the steam train equivalent of claims systems. They seem blissfully unaware that other options are available to them and are indeed being adopted. The Engine is Running Legacy systems—whether running on a mainframe or a client server environment—have rightfully earned the moniker of legacy. They have survived countless upgrades and upheavals over the years, and have been carefully maintained and fine-tuned by programmers and administrators. System workarounds are well known and understood by those who work with and maintain them. They may have ugly interfaces, but they continue to limp along to get the basic job done. The cost of maintaining legacy systems continues to grow, and these costs are increasingly at the expense of other critical and strategic IT investments. By one estimate, 80 percent of application-related IT costs are tied to legacy maintenance. Large investments to maintain the status quo flies in the face of investing in innovation and the future. Moreover, it’s getting harder to find the people skills to work on the antiquated systems. Many COBOL developers—the language of choice for mainframes—are now eyeing the golden years of retirement. This computer language has virtually disappeared from the curriculum of today’s universities, meaning there will be very few new candidates to replace the vanishing breed of COBOL programmers.
Further complicating matters is the daunting reality that up to 70 percent of current claims adjusters are also approaching retirement. With an acute need to bring more talent into the profession, fewer young people are coming aboard. Deloitte Consulting predicts a shortage of 84,000 adjusters by 2014. Unless carriers can put the technology in place to automate and support key claims functions as well as capture the operational knowledge of their retiring workforce, operations will slow to a crawl and progress and innovation will cease. The writing is on the wall. If carriers continue to drag their feet, they will soon be surpassed by competitors with advanced claims processes and systems. Adoption of modern, Web-based systems is already past the early adopter stage with insurers of all sizes jumping on board. Carriers that stay on their current platform and watch the technology train leave the station will eventually witness customer dissatisfaction turn into customer defections. Operational profitability will continue to decline—even as modern technology solutions are available, proven and affordable. All Aboard? Delivering operational profitability and increasing customer satisfaction simply cannot be accomplished with many of the claims infrastructures currently in use. Mainframe-based and other legacy systems have become far too expensive, inflexible and functionally limiting to adequately meet even the most basic demands of the new, and rapidly changing, insurance marketplace. Modern claims technolo-
gies, however, can make a difference in enabling the claims department to be a key driver of operational efficiency and business opportunity. Some industry experts estimate that the application of new, Webbased claims technologies can bring an improvement of four to five points to an insurer’s combined ratio, a key indicator of financial health. New technology systems have been designed to seamlessly manage the full claim lifecycle—not just one or two pieces of the process. Being Web-based, the system can be accessed from any browser, enabling adjusters to use the system remotely from a disaster scene or wherever their business takes them.
A P&C insurer’s financial performance depends heavily on its claims organization. Combined losses paid and loss adjustment expense routinely account for sixty-five to seventy-five percent of the money flowing out of an insurer. Key areas for claim improvement include: • Claims Indemnity Leakage—Estimated at an annual rate between 6 to 10 percent of net written premium (NWP) (Sources: Accenture, McKinsey & Co., and PriceWaterhouseCoopers)
• Loss Adjustment Expense Leakage—Inefficient
processes, inappropriate use of claims adjusting resources and excessive legal bills, etc. add another 1 to 4 percent of NWP leakage each year. (Source: ibid) • Claims Adjusting Efficiency—Well above 40 percent of a claims adjuster’s time is spent on activities that do not actively assist in bringing the claim to a prompt and reasonable settlement. (Sources: Accenture, Tata, and Celent) • Customer Retention—Satisfaction with claim handling drives 44% of the overall insurer impression by customers who filed a recent auto claim. (Source: J.D. Power and Associates, 2006 National Auto Insurance Study) • 4% to 6% reduction in pure losses and 10% to 12% reduction in loss adjustment expense are feasible through the appropriate selection and application of modern claims technologies. This estimate represents a 4 to 5 point improvement in the carrier’s combined ratio. (Source: Celent, “Technology Enabled Claims Performance Improvement”, September 6, 2006)
The claim file moves from a paper file that can only be accessed by one user at a time, to a virtual file that can be shared with multiple parties simultaneously, e.g. adjusters, supervisors, and litigation and subrogation specialists. Analyst firm Gartner contends that “aggressive insurers” have already begun to invest in advanced solutions that provide “end-to-end claims management.” They are reducing claims leakage and providing superior customer service by “paying claims quickly, accurately and cost-effectively.” The Train is Leaving the Station Is your claims operation feeling the strain of antiquated claims technologies, high IT maintenance costs and shrinking pools of both legacy system skills and claims adjusting talent? Are you wanting on the train to enjoy a smoother ride? Consider the fate of the steam locomotive before you decide there’s no urgency to climb onboard with the new generation of claims management solutions. Carriers that have taken the leap are already enjoying a strengthened competitive position through increased customer satisfaction, improved operational expenses, and maximum adjuster and IT staff value. Modern claims technology is also proving to be a recruiting aid—attracting a generation of employees accustomed to a browser-based world for whom green-screen legacy systems would simply be intolerable. Those that invest in the ticket for a journey on the train of change can face the insurance industry future with a highly efficient claims organization—one in which adjusters are freed from unproductive tasks and enabled to invest their time and know-how on ensuring the highest quality customer service and the most appropriate claims outcomes. That is a winning value proposition for the carrier and the insured alike. cA Mike Mahoney is product marketing manager at San Mateo, Californiabased Guidewire Software, a provider of core solutions to the property/casualty insurance and workers’ compensation market. Mahoney, a 21-year insurance-industry veteran, can be reached at email@example.com.
You Can’t Afford to Ignore These Warning Signs Nearly 10,000 baby boomers are filing for Social Security benefits every day. That adds up to 73,000,000 people getting ready to leave the workforce—your workforce. When the retirement parties start, it’ll be too late. Log on to www.aicpcu.org/2plan.htm and download our free brochure. We’ll help you rethink professional development and get a jump on this phenomenon that’s going to reshape our industry. The American Institute for CPCU and the Insurance Institute of America have a wide variety of professional development solutions to help you prepare, so you can relax and have some cake instead of worrying about how the work will get done.
Heed the warning. Visit www.aicpcu.org today.
© 2008 AICPCU/IIA
CLAIMS ADVISOR | SPRING 2008
Predictive Ana Itâ€™s
Predictive analytics describes a variety of statistical and analytical techniques used to develop models that predict future events or behaviors.
Data mining is the process of analyzing all available data to determine possible relationships between the variables.
PA helps to detect fraud, allocate resources, predict the likelihood of successful subrogation, and set case reserves.
PA techniques allow better understanding of data and how to use it to predict future events.
A model’s potential for inaccuracy is an important consideration.
by Donna J. Popow, JD, CPCU, AIC and Charles M. Nyce, PhD, CPCU, API
When it comes to effectively forecasting future trends and outcomes, claims professionals are beginning to put aside their crystal balls in favor of predictive analytics, a tool being heralded by vendors and upper management as powerful and a new best practice. With a tremendous amount of raw data on the characteristics and preferences of their customers already collected and warehoused, insurers believe that predictive analytics, which uses this warehoused data to predict future claims trends, will contain claims costs, improve claims efficiency and help detect fraud. Factors such as the quality of the data used, cost of the effort to obtain quality data, and implementation of predictive analytics as a resource for adjusters, however, will affect the success of this tool in reshaping claims management. What Is Predictive Analytics? Predictive analytics is a broad term describing a variety of statistical and analytical techniques used to develop models that predict
future events or behaviors. Data mining, a component of predictive analytics, is the process of analyzing all available data to determine if there are any relationships between the variables. This information can then be used to develop a predictive model. In looking at a large number of workers’ compensation claims, for example, data mining may determine that the frequency is higher when the economy takes a downturn. This relationship can then be used to predict trends in workers’ compensation claims when economic indicators predict an economic downturn. Data mining has no predefined relationships. The objective is to sift through the data to uncover any trends or relationships that may be present and identify
them as predictors. When joined with other predictive analytic techniques, organizations are better able to discover trends and relationships that may not be readily apparent but may forecast future events or behaviors. The form taken by predictive models varies, and depends on the behavior or event being predicted. Most predictive models generate a score (a credit score, for example) with a higher score indicating a higher likelihood of the given behavior or event occurring. The Predictive Analytic Process When using predictive analytics, an insurer, for example, starts by aggregating and “cleansing” its data for use in analytics software. Cleansing refers to examining the data
Predictive Models: Credit Score The most prevalent examples of predictive models are those used by credit reporting agencies (CRAs), commonly known as credit bureaus. Experian, Equifax, and TransUnion are three of the largest. To develop credit scores for individuals, each credit bureau uses a variety of information about an individual—income, credit history, outstanding loan balances, and so forth—to develop a credit score that predicts the likelihood that he or she will repay current and future debts. The higher the credit score, the more likely the individual is to pay his/her debt.
CLAIMS ADVISOR | SPRING 2008
and correcting errors, completing or removing incomplete records, and ensuring all data is in a readable format. Next, data mining is conducted to determine if any underlying trends, patterns or relationships can be found in the data. This is a necessary first step in predictive analytics because the data this mining process identifies as relevant can then be used to develop the predictive model. Think of data mining as gathering knowledge about relationships with the resulting predictive analytics model as applying that knowledge. To ensure that a predictive model is as accurate as possible, it must be validated through out-of-sample testing. For example, suppose an insurer has twenty-four months’ worth of data on the frequency of homeowners’ claims. To properly construct
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and validate a predictive model using the data, the modeler may choose to use the first eighteen months’ worth of data. Once the model has been developed, data from the final six months could then be used for validation. Why is Predictive Analytics the hot topic now? With advances in technology, the use of predictive analytics has become more widespread. Because the statistical techniques used in predictive analytics are computationally intensive—some require performing thousands or millions of calculations—advances in computer hardware and software design have yielded software packages that quickly perform such calculations, allowing insurers to efficiently analyze the data that produce and validate their predictive models. Highly developed technology also permits capturing additional data. For years, adjusters have complained that they are required to enter more and more data into the claims processing system but get nothing in return for their efforts. Today, that data can be used to help adjust a claim. The validity of any predictive model depends on the quality and quantity of data available to develop it. While most insurers today have a sufficient amount of data (quantity) to develop their predictive models, many store archived claim and policyholder information on legacy systems that may not be compatible with systems running predictive analytics software. Converting data on these legacy systems to a usable format can be time consuming and costly. Factor in the cost of an adjuster’s time to enter
all the data, and it becomes reasonable to question the cost effectiveness of this effort. Insurers’ Use of Predictive Analytics In the insurance industry, predictive analytics is largely used in the three core insurer functions—marketing, underwriting and claims. Marketing and underwriting have successfully used predictive analytics for some time, however in claims it has been used to a lesser, but growing, extent. Property-casualty insurers can use predictive analytics in a number of ways, from analyzing the purchasing patterns of insurance customers (marketing) to filtering out applicants who do not meet a pre-determined model score in the risk-selection process (underwriting). In claims handling, predictive analytics is a more revolutionary concept. Insurers primarily have been using predictive analytics to help identify (and prevent) potentially fraudulent claims. Now, some insurers are using predictive analytics to score claims based on the likely size of the settlement, enabling an insurer to more efficiently allocate resources to larger claims. The Proverbial Needle in the Haystack Failing to identify fraudulent claims results in higher claims costs and, therefore, higher premiums for all insureds. Property-casualty insurers traditionally have had difficulty detecting the relatively small number of fraudulent claims (the needle) among the millions of claims filed every year (the haystack). Predictive
analytics first helps insurers with early identification of the potential fraudulent claim, and, second, with classification of those claims in need of a detailed review. One of the issues associated with fraud detection is that insurers have not been able to capture data on fraud that escaped being identified, which has always skewed the data. But data mining does not rely on already identified fraud. Data mining looks for relationships in claims files that individuals may overlook. As an example: John Smith, an adjuster, might easily realize that the same attorney is representing all the claimants from a single accident, but John could not possibly know that this attorney has been referring hundreds of clients to the same doctor over a period of years. Any tools that can help adjusters and other claims professionals recognize patterns such as this will aid in the accurate identification of fraudulent claims and improve the claims process. After analyzing the totality of circumstances, what data mining and predictive analytics cannot do after is identify whether or not there are legitimate explanations for one or more fraud indicators in a particular claim or group of claims. Consequently, an insurer’s identifying legitimate claims as fraudulent may anger policyholders and result in litigation or accusations of bad faith in claims practices. A second use of predictive analytics in the claims process is prioritization of claims for handling. By looking for relationships between the present claim and past claims (for example, type of medical treatment recommended or law firm involved in litigation), predictive analytics can help identify at an early stage claims that are likely to be settled for higher values. These higher-value claims can therefore be classified as claims requiring a specific level of expertise in order to be adjusted effectively. Accurately identifying these claims helps the claims department operate more efficiently and improve customer service. Other possible uses of predictive analytics include scoring claims based on the probability of successful subrogation, and more accurate case reserving.
The Advantages of Using Predictive Analytics in Insurance If knowledge is power, then the advantages of predictive analytics are clear. Predictive analytic techniques allow insurers to better understand their data and how to use it to predict future events. Proper implementation of predictive analytic techniques can improve an insurer’s consistency and efficiency in marketing, underwriting, and claims services by helping to define target markets, increasing the number of policy
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CLAIMS ADVISOR | SPRING 2008
Predictive Analytic Techniques—The Advantages for Insurers • • • • •
Helps marketing more precisely identify potential policy sales through analysis of customer purchasing patterns Reduces the employee hours underwriters may spend researching and analyzing an applicant who ultimately is not a desired insured Provides predictive modeling scores for applicants that can be used as a rating mechanism for determining a variety of policy price/product points Helps identify potentially fraudulent claims Scores claims based on the likely size of the settlement, enabling an insurer to more efficiently allocate resources to higher priority claims
price points, and detecting and reducing claims fraud. The Disadvantage of Predictive Analytics in Insurance While nearly all insurers find that the benefits of predictive analytics outweigh its costs, the techniques of modeling result in inherent disadvantages. A model’s potential for inaccuracy is an important consideration for insurers relying on predictive modeling. Just like a credit score,
a model indicates what is likely to occur, not certain to occur. Just because a predictive model indicates that a claim may be fraudulent does not mean it is fraudulent; it just means that the claim displayed some of the characteristics of similar claims in the past that have proven to be fraudulent. In addition to a predictive model’s possible inaccuracy, an insurer’s use of predictive analytics may result in additional disadvantages, many of which are associated with the
implantation of operational changes that using predictive analysis techniques require. An insurer may find that implementing predictive analytic techniques, including an investment in the hardware and software necessary to facilitate predictive modeling, is too costly an investment. Also, poor record keeping and multiple legacy systems often indicate that the insurer does not have the clean, accurate data necessary to support a successful predictive modeling platform, which creates the need for further financial outlay. Finally, as with any substantial change in operations, an insurer may encounter resistance from within to the incorporation of predictive analytic techniques that streamline operations and reduce the
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Donna J. Popow, JD, CPCU, AIC and Charles M. Nyce, PhD, CPCU, ARM serve Inherent inaccuracy of the predictive model as senior directors of Knowledge Resources Cost of implementing predictive analytic techniques, including an investment in new at the American Institute for CPCU and software and hardware Insurance Institute of America (the InstiResistance to change within the organization tutes) in Malvern, Pennsylvania. Popow Need for clean, accurate data has responsibility for all aspects of claims education including the Associate in Claims demand for human resources, particu- dler more efficient and effective. Keeping designation program and the Introduction the disadvantages in mind, when used larly from employees who may feel to Claims certificate program. Nyce is the properly, predictive modeling can be their jobs are being marginalized. primary author of CPCU 510 – Foundaa legitimate claims tool to increase eftions of Risk Management and Insurance ficiency, effectiveness, competitiveness, Social or Regulatory Implications of and a coordinating author on ARM 54 Munters Ads-ClaimsAdvisor:DRScA Ads_half island 2/22/08 3:05 PM Page and profitability. Predictive Analytics – Risk Assessment. One of the advantages of predictive modeling is that it may detect relationships among the data, or predictors/ indicators, of potential losses/claims that may not be readily apparent to insurers or that may not be readily explainable. However, an insurer must be able to justify charging differential premiums to customers based on a predictive model output. Some consumer organizations and regulators, for example, have resisted insurers’ use of an insurance score, or credit score, as a pricing factor for policies. Insurers initially could not explain why the relationship between credit scores and loss ratios existed, thus making it difficult to justify using the relationship to price policies. While such use of an insurance score is becoming more widely accepted, this type of resistance may become more We understand that the damage caused by a likely if the predictive model factors used natural disaster, leaking roof, burst pipe, or faulty to justify pricing are not intuitive. What if electrical wiring is not only disruptive, but can a predictor of losses is not just the educaalso be costly due to business interruption. tion level a potential insured attained but the high school he or she attended, or the If you are faced with a disaster restoration project, we’d like to hospital where he or she was born? How help. We’ll listen, respond immediately and handle your project— insurers justify the factors a predictive from start to finish—the right way. Munters’ services include, but are not limited to: water extraction, clean up and debris model uses may be just as important as removal, structure and content drying, mold remediation, discovering the relationships.
Predictive Analytic Techniques—The Disadvantages for Insurers • • • •
Whatever the damage, rest assured.
and document recovery.
Where Do Insurers Go From Here? According to Alan Kay, a renowned computer scientist who worked for companies such as Xerox, Apple, and Disney, “The best way to predict the future is to invent it.” This is the opportunity predictive analytics can provide claims—draw on the past to better forecast and create the future. Insurers should take advantage of every tool that can make a claims han-
To find out more about our Disaster Restoration Services, please contact: 1-800-MUNTERS, firstname.lastname@example.org 79 Monroe Street, PO Box 640, Amesbury, MA 01913-0640 Munters is an ISO 9000 Registered Company.
CLAIMS ADVISOR | SPRING 2008
Five Lesson Since 2005 by Jim Loveland
Looking back on what we can be p
Few in the property insurance industry need to be reminded that between August 2004 and October 2005 the United States was hit by seven of the ten most devastating hurricanes in recorded history. The total insured losses from the seven storms was $79.1 billion, according to the Insurance Information Institute (I.I.I.). Many experts who have analyzed insured coastal exposure in the United States believe a single future hurricane could cost $100 billion. After two years of lighterthan-expected storm activity, itâ€™s worth taking a look at the
long-term impact the seven 2004-2005 storms continue to have on the property insurance industry, and lessons that can be applied should similar damage happen again. Lesson 1: Get Claims Professionals to Work as Quickly as Possible The team of claims representatives and insurance professionals that flowed into hurricane-damaged areas was a large-scale mobilization that has been matched in the American experience only by military movements. Despite the challenging logistics involved, most professionals were able to immediately move into effective claims handling. Thatâ€™s because many professionals arrived on site with claim assignments already in their claims systems.
Those assignments may have included directions, up-todate contact information and current pricing research. Many carriers were able to seamlessly add independent adjusters and other claims professionals to their teams, and claims managers were able to track and monitor performance for those professionals just as they would for direct staff. Using the same tools, prequalified reputable repair professionals were also mobilized to secure sites, provide moisture protection and extraction, and other critical services that helped to mitigate continuing damage. One lesson learned from all catastrophes, including the 2004-2005 storms, is that multiple adjusters will work on the same loss more commonly than they
events never dreamed of before, proud of and what we can learn
CLAIMS ADVISOR | SPRING 2008
would in non-catastrophic situations. It’s not unusual for claims professionals to work on catastrophe claims where they are the fourth or fifth person involved. In the past, merging the efforts of everyone involved on a claim was sometimes difficult and required redundant work. Since 2005, many carriers have added new capabilities that make it easier for more than one person to work on the same claim. Estimates can be merged, sub-assignments for work can be sent and tracked, and electronic inspections of estimates help find potential errors. To help mitigate continuing damage, new features are now available that allow claims professionals to remotely monitor some types of water mitigation equipment. From anywhere
in the world, claims professionals with Internet access and appropriate security clearance can see in real time exactly how moisture mitigation work is progressing in a specific structure. Lesson 2: Quickly Find the Loss and the Homeowner After a major storm devastates a large area, just finding the loss can be an adventure. People who have spent their lives in a neighborhood can hardly recognize it, and directions based on landmarks are no longer helpful. Street signs are often gone, damaged or misleading. The time lost by claims professionals just looking for sites is often staggering. It can be equally hard to find the homeowner who is sometimes living somewhere else and may move several times in the days and first weeks after a disaster.
Claims professionals understand that the seemingly simple task of finding each loss and policyholder can be one of the key factors that determine the productivity of a claims handling team. For many who worked the 2004-2005 storms, claims assignment networks were a key tool. Assignments from the network might include a map or directions to the site. The network could also contain real-time updates from all those working on the claim so that new contact addresses, phone numbers and other critical information was instantly communicated. Since 2005, new GPS options have emerged and claims handling networks can include real-time information about closed roads, safety hazards and other important issues.
Lesson 3: Maintain Quality Standards It’s one thing to provide superior customer service in a normal claims environment, but providing a consistent level of service when thousands or tens of thousands of customers need help tests the abilities and commitment of an insurance provider to the limit. To make sure no customer was overlooked, many insurers relied on reporting tools that alerted staff and managers when customer-service standards were not being met. For example, if a customer did not receive a visit during an allotted period of time, managers were notified and in some cases claims were automatically reassigned. The next time many insurance companies face a major catastrophe, a variety
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of enhanced or new tools will be available. Advanced reporting features flag potential areas of concern, and new reinspection systems flag potential issues to help reinspection teams quickly address possible quality concerns without slowing down the normal claims process. Real-time reporting features help make sure no customer is falling through the cracks and that all quality standards are being met. Lesson 4: Help Customers Avoid Price Gouging and Unethical Contractors Up-to-date and continuous pricing research helped keep claims professionals abreast of conditions on the ground. The 2004-2005 hurricanes damaged refineries and oilshipping facilities that led to rising fuel prices and fears of
shortages. Petroleum-based products such as composition shingles began to rise in price. Media focus on the most extreme examples and on the actions of a few price gougers often fed the perception that prices were spiraling out of control. Homeowners’ fear of rising prices and fear that they would not be able to find anyone else willing to do the work in a timely manner led to problems such as unfortunate repair deals for prices that were too high and contractors who offered little experience or were flatly unethical. Many companies were able to help protect their customers from falling victim to these types of problems by using up-to-date pricing information based on reporting from experienced
local repair professionals, and by analyzing actual repair estimates. In addition, direct-repair programs helped homeowners work with ethical service providers who had proven credentials, experience and training. These efforts, plus those of many material providers, helped to prevent price gouging and helped to minimize the actions of unethical individuals. Lesson 5: Work to Increase Policyholder Involvement Many insurers are moving to increase the involvement of policyholders in the process long before a loss, and to provide homeowners with additional tools. This begins when the home is insured with underwriting valuations that are based on the latest real-world claims pricing
research instead of on tables of factors. Policyholders can be invited to review the valuations and offer feedback. When policies are renewed, structures can automatically be revaluated with current pricing. In turn, homeowners can point out any remodeling or other work that may have changed the value of the home. Other tools allow homeowners to enter an inventory of items found in their homes or even to draw floor plans. These tools give homeowners more peace of mind and consistent coverage, and can often help claims professionals more accurately assess damages should a loss occur. It’s also clear that many homeowners were woefully uninformed on the differences between flood insurance and private property
CLAIMS ADVISOR | SPRING 2008
insurance. Others had not updated their coverage to take into account new additions or major remodels. At the time Hurricane Katrina struck New Orleans, Louisiana’s insurance commissioner told the Chicago Tribune, “I’m the
insurance commissioner and I’m underinsured.” He added that his own home did not have flood insurance even though it would be in the area flooded should the Mississippi levee break. “People got lulled into a false sense of
security,” he said. “It’s just human nature.” Battling complacency has long been a challenge for the insurance industry. Although no one can change human nature, the new tools for homeowners are making it easier for policyholders to be involved without taking much of their time. Homeowners can get quick access to information via the Internet, through email, or even through their mobile phones or PDAs. In addition, these tools provide valuable resources that can help homeowners manage what is usually their most important asset. Overall, the performance of the property insurance industry and insurance-repair service providers in the aftermath of seven severe hurricanes should be a source of considerable pride. Unfortunately, good news for the property insurance industry is often measured by silence. Immediately after the storms, the media was filled with stories about local and federal agencies and their problems; there were far fewer stories about insurance companies and repair issues. Some media attention was focused on lawsuits filed after the storms, but the number of claims litigated was small compared to the number of claims filed. The I.I.I. estimates that less than two percent of all claims filed in Louisiana and Mississippi were disputed through litigation or mediation. Considering the scope of damage and the wide variety of complexities involved— from coverage issues to simply finding a place to live—it would not be surprising to see a high level of customer dissatisfaction emerge about
a year after the storms. But a poll conducted in 2006 by IPSOS Public Affairs, a leading research company, found different results. When asked if they were satisfied with their insurance company, 89 percent of the surveyed homeowners in Louisiana answered yes, as did 93 percent of the homeowners surveyed in Mississippi. According to the I.I.I, of the more than 1.1 million claims filed in Louisiana and Mississippi, more than 95 percent were settled within a year of the storms. In its 2005 Property Report, Xactware reported that by November 2005 the level of storm-related claims reported to them had already peaked just three months after Katrina and one month after Wilma. Their 2006 Property Report showed that increased claims volume from the storms had largely
dissipated by April 2006. Claims from the seven storms during 2004 and 2005 were handled with an efficiency and accuracy that would have been unimaginable roughly 15 years earlier when Hurricane Hugo made landfall in South Carolina. Although this extraordinary success passed largely unnoticed, the property insurance industry clearly exceeded expectations when nearly everyone else was overwhelmed by the magnitude of the work. The many new tools and procedures that have been implemented since 2005 are a good indicator that most claims professional are determined to do even better the next time a major catastrophe occurs. cA
There are two sides to every storyâ€Ś
Helping you find the right answer is all in a dayâ€™s work at RGL. We specialize in business interruption, product liability, loss of earnings, personal injury, fraud, financial investigations and reinsurance disputes to establish the financial basis of claims.
Jim Loveland is the president and CEO of Xactware Solutions, Inc.
RGL is an international firm of Forensic Financial Experts working with adjusters for over 35 years. 21 offices worldwide 1.888.RGL.4CPA rgl.com
CLAIMS ADVISOR | SPRING 2008
ble or Fixed?
by Dr. Steven Carter, PsyD, LP
Discover your best option for the most valid results Evidence from neuropsychological assessments is commonly offered as proof of damage in insurance claims, yet many claims professionals have little or no understanding of neuropsychology and are left at a disadvantage when attempting to negotiate an equitable settlement. Here we’ll take a look at a basic overview of neuropsychology, review the shortcomings of the most commonly used neuropsychological assess-
ment approach, and review new means of assessment that overcome most of those weaknesses. What is neuropsychology assessment? A neuropsychological assessment is the systematic administration of clearly defined procedures (i.e., “tests”) to a claimant suspected of functional impairments due to brain injury or disease. The specific tests
are chosen because research has shown that a person’s performance on them is associated with a particular brain structure or pathway. Statistically comparing the claimant’s scores with those of healthy persons and those known to have specific brain injuries and diseases allows the neuropsychologist to determine the likelihood that the claimant is exhibiting signs of a specific brain injury or disease. What do neuropsychological tests measure? The most commonly assessed brain-behavior functions are attention, language, memory, spatial perceptual reasoning and executive functioning. The idea that these specific domains are dependant upon one another is known as the hierarchical model of neuropsychological functions. It recognizes attention as a basic function
CLAIMS ADVISOR | SPRING 2008
Hierarchical Model of Neuropsychological Functions Executive FunctionS memory
that underlies nearly all other domains of neuropsychological functioning. Attention refers to the claimant’s attentional capacity, working memory, selective attention, divided attention and mental speed. If these fundamental abilities are impaired, then the claimant usually will have limited functional abilities at the higher levels in the model. Language refers to receptive and expressive skills for oral and written information and word finding. Spatial functioning refers to the skills necessary for a claimant to remain orientated geographically, judge angles and distances, attend to visual details, assemble pieces into a whole object and draw. Memory refers to a claimant’s ability to remember things heard and seen both immediately after presentation and after a delay. A claimant with memory impairment can often perform attention, language, and spatial tasks well, but the converse is not true. In order to remember something, a claimant must first attend to it and then have adequate
language skills to encode verbal information and adequate spatial skills for visual learning tasks. Executive functioning refers to the skills of selfmonitoring, self-correcting, planning, sequencing, prioritizing, judging, inhibiting and initiating one’s activities. These skills are necessary for success in a complex social environment. Flexible approach, flexible results In a clinical setting, a flexible battery of neuropsychological tests is often used. A flexible battery involves the selection and administration of an array of tests (i.e., the “battery”) that are based on the neuropsychologist’s perception of the patient’s presenting complaints. There is no one flexible battery shared by all neuropsychologists. The same neuropsychologist may use different combinations of tests with different patients, or even a different combination of tests with the same patient at different assessments when repeated assessments are performed. These neuropsychologists are essentially inventing their own idiosyncratic test batteries with each administration, and are hop-
ing that the fact that each of the individual tests, which are valid to some degree, will somehow make the entire set of tests sensitive to brain damage and specific for the kind of brain damage that is allegedly present. Problems with a flexible battery in forensic context 1. Different assessment procedures for nearly every patient. 2. Different assessment procedures across different examiners. 3. Nearly impossible to scientifically validate for sensitivity and specificity. 4. Extremely limited scientific evidence for its use. 5. Open to examiner bias in method selection rather than demonstrated accuracy. 6. Test selection is made based on subjective complaints that may arise from reasons other than brain injury. 7. The value of the neuropsychological examination depends on the validity of the patient complaints. 8. The meaning of differences and patterns of differences between tests cannot be known because the combination of tests administered is changed with each administration. 9. The breadth of the examination is limited to suspicions about problem areas rather than a comprehensive assessment of the patient’s brain-behavior abilities. 10. Scores between tests are not directly comparable because norms were taken from a wide variety of samples, situations and dates. Differ-
ences found may simply represent differences in the normative samples. 11. No overall impairment index or rating is available for the battery tests used. 12. The range of scores seen for normal or intact patients is unknown for the battery of tests used. There is little data available to guide the clinician’s choice of tests when assembling a flexible battery. Personal preference, economic factors, availability of certain tests in the clinic, marketing by the testing companies and other unscientific sources of examiner bias often dictate test selection. The combination of tests selected may overemphasize areas of impairment and underemphasize areas of strength, leading to an unbalanced representation of the claimant’s actual abilities. A Comprehensive Approach Extensive research has shown that in a forensic setting, like an insurance claim, a comprehensive and fixed set of tests, all of which were standardized on the same group of people, is the most valid approach. This approach is called a fixed comprehensive standardized test battery. The most commonly used test following this approach is called the Halstead-Reitan Neuropsychological Test Battery. The individual tests comprising the battery are selected for their accuracy in measuring the functional domain they address and the extent to which each test contributed to the accuracy of the entire battery in diagnosing individual patients. The neuropsychologist employing a fixed battery does not need to employ
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guesswork to select tests. The same tests are given to every patient regardless of the presenting complaints or the reason for referral. This ensures that all areas are adequately assessed. One major disadvantage of this approach is time. Since every claimant gets every item, healthy claimants waste hours of expensive time completing tests that assess functional domains in which they obviously have no impairments. The lengthy administration time makes it impractical to re-assess the claimant for improvement and parallel forms of the tests, which are necessary to eliminate practice effects, are not available. There is also one seldom discussed “secret” about neuropsychological tests that is as much of a problem for this comprehensive approach as it is for the flexible approach. There is little or no evidence linking performance on most neuropsychological tests to real world functional behaviors (e.g., typing, driving,
years old who have known or suspected disorders of the central nervous system. The individual tests are grouped into six modules: Attention, Language, Memory, Spatial, Executive Functions, and Screening, and correspond to the hierarchical model discussed above. Each module includes a Daily Living Test that relates skills in that domain to real-world tasks of everyday living, overcoming the lack of ecological validity common to other approaches. The screening module allows the neuropsychologist to provide a comprehensive assessment, and saves time and money by thoroughly assessing only those domains the screening has identified as likely aberrant. This allows administration of the NAB in as little as 4 hours compared to 12 hours for the Halstead-Reitan. The NAB allows for seven different combinations of screening tests, module administration and specific test administration. That allows neuropsycholo-
shopping, taking medications as prescribed, etc.). This is known as a lack of ecological validity. A new solution The Neuropsychological Assessment Battery (NAB) published by PAR (parinc. com) is a new fixed comprehensive standardized neuropsychological test battery that addresses the problems noted above. The NAB was created and developed over a 7-year period and was funded, in part, through grants from the National Institute of Mental Health. Decisions pertaining to the content and format of the NAB were guided by the results of the publisher’s national survey of neuropsychological assessment practices and needs, as well as by the feedback and guidance of members of the NAB Advisory Council (a group of experts recognized nationally in the field of clinical neuropsychology) and numerous other consultants and contributors. The NAB can be administered to adults ages 18-97
Innovative Features of the NAB • • • • • • • •
Screening for both normal and impaired performance Comprehensive coverage of functional domains Combined strengths of the flexible and fixed battery approaches Avoidance of floor and ceiling effects Reduced administration time Entire battery normed on a single standardization group Provision of an equivalent parallel form Focus on ecological validity
gists accustomed to the flexible approach to benefit from using a comprehensive standardized battery while still exercising their professional preference for a flexible assessment approach in which they choose specific tests. Two equivalent forms facilitate reevaluation without any concerns about practice effects. Extensive validation evidence for the NAB exists from clinical studies of patients with dementia, aphasia, traumatic brain injury, attention-deficit/hyperactivity disorder, multiple sclerosis and HIV/AIDS. Other validity studies focused on function independence in an inpatient rehabilitation hospital and a group of simulated malingerers. Studies of these patients has resulted in a large range of test item difficulty so that the results for an individual claimant
are not limited by a lack of easy enough items for impaired claimants (aka â€œfloor effectâ€?) or a lack of difficult items for intact claimants (aka â€œceiling effect). The NAB was released in 2001 and revised in 2003, but it still is not commonly seen in independent neuropsychological examinations done for insurance claims. That is a shame. Claims adjusters are well advised to request it by name because it offers the most modern and valid approach to neuropsychological assessment in a forensic context. cA Dr. Steven Carter, PsyD, LP is CEO of Expert AdvantageÂŽ (www.Expertâ€”Advantage. com), which provides medical evidence analysis, independent examinations, and testimony nationwide. He can be reached at 218.749.3107 or firstname.lastname@example.org.
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CLAIMS ADVISOR | SPRING 2008
The Law & Technol
With much and the law
Quick Look C
New court rules address the preservation, discovery and disclosure of electronic information
The rules, and current business practices, require thatÂ claims management address electronic information
Proper handling of electronic information adds value to the claims function
h of discovery now in electronic format w catching up, new rules apply by Robert M. Kelso, J.D., CPCU and Eric D. Johnson, J.D.
In the past, the discovery process in the federal court system focused largely on tangible objects such as documents. This system worked well before the dawn of the computer age. Now, however, much if not all discoverable information might exist only in electronic format. Furthermore, due to the memory capabilities of modern computers, the amount of potentially relevant information has mushroomed. Recognizing this reality, the federal court system recently revised the discovery process to create procedures to enhance and simplify discovery of electronic information. These revisions are designed to reduce costs, set out the courtâ€™s expectations with respect to the parties during the discovery process, enhance cooperation between parties and, if necessary, to
punish parties for violations of the federal rules and/or court orders. Furthermore, even though the federal rules are not binding in state courts, there is a trend among the states to adopt or follow portions of the federal rules with respect to discovery of electronic information. Consequently, state courts offer no refuge from the long arm of the federal discovery process. While this discussion may seem academic, amendments to the federal discovery process have tremendous ramifications for any business. In the event of a lawsuit, the opposing attorney will likely seek a wide range of electronic information. The failure or inability to locate such information and provide it to the other side, or the accidental destruction
CLAIMS ADVISOR | SPRING 2008
timeline of a civil lawsuit Events Relevant to Incident
Incident Leading to Lawsuit
Pleadings Stage; Initial Pre-trial Activity
of electronic information, can have catastrophic results. Some courts have instructed juries that they should conclude that the missing information was harmful to the defendant; other courts have imposed monetary sanctions running into the millions. The chart above represents a simplified timeline for a civil lawsuit. This chart is useful for purposes of understanding the application of the new discovery process. Timeline of a Civil Lawsuit Obviously there are many actions which take place during the course of a lawsuit. Discovery is one activity, but it typically occurs well after suit is filed. Paradoxically, however, activities relevant to the discovery of electronic information occur very early in the litigation process—often well before litigation occurs. For purposes of claims management, there are many issues to be considered. The following examples represent some of the considerations which must be taken into account in the age of electronic discovery: • At what point is it necessary to begin preserving electronic information? • In what format must information be retained? • What information must be retained? • What steps should be
Discovery; Final Pre-trial Motions Activity
Post-trial Activity; Motions; Judgments; Appeals; Collection Activities
• • •
taken to insure that appropriate information is retained? Are there proactive measures that can be taken to reduce risk? Is it permissible to have a document destruction policy? What happens if documents are destroyed, lost or not produced?
Foremost, at what point is it necessary to begin preserving electronic information? With respect to litigation, it is obvious that events will occur that may be relevant but which occur so long before the litigation that it was unforeseeable that the information should be retained.
There comes a point in time in any dispute, however, where it becomes reasonably foreseeable that litigation is going to ensue. It is at this point that a duty attaches to preserve potentially relevant electronic information. In other words, if you think you are going to be sued, you should begin preserving information. A second issue is what must be retained in terms of computer hardware. It is obvious that mail servers and other main computer components should be preserved. Electronic information, however, is defined very broadly under the federal procedures, and the list of potential devices which must be preserved is growing longer every day. Thus, in addition to the obvious locations, it is necessary to preserve data found in
less obvious locations. For example, an obligation exists to retain relevant information contained in an employee’s PDA, cell phone or flash memory card to name a few potential information sources. A third issue is what information must be retained. Obviously, requiring a large company to retain all information could rapidly bring its operations to a halt. For this reason, the federal rules have procedures which require counsel for the parties to meet early in the litigation to resolve disputes regarding what information is discoverable, how it will be discovered, who will bear the costs, and any other issues that arise. A fourth issue is what steps should be taken in the pre-suit investigation to insure appropriate information is retained. The claims professional should consult with counsel, the insured, and if advised, an IT professional to determine where relevant information is stored and how to preserve that information. One consideration which might affect the duty to obtain electronic information is whether the claimant’s attorney has forwarded a
litigation hold letter. Receipt of such a letter heightens the duty of the insured to retain items specifically identified in the letter, and would signify that it is reasonably foreseeable that litigation will ensue. For that matter, the insured’s counsel should send a litigation hold letter to the plaintiff to the extent the plaintiff may have relevant electronic information. As part of the risk management process, many insurance professionals consult regularly with their insureds to identify and reduce various risks of loss. This is just one more. With these developments relative to discovery of electronically-stored information, consideration should be given to specific procedures, developed in advance, for the preservation of electronic data. By being proactive, the claims professional and insured will not have to rush to develop an appreciation of the applicable issues, and methods to deal with them, in conjunction with the handling of what may be a serious claim. Whether or not it is permissible to have an electronic information destruction policy is frequently a
consideration when examining litigation risk. Generally, such policies are permissible if they are routine programs. For example, a company might routinely purge the servers’ hard drives to maintain efficiency. Routine destruction policies should
not result in any adverse impact in litigation. Obviously, however, such policies should be suspended as soon as litigation becomes reasonably foreseeable. To highlight the importance of electronic discovery in today’s litigation environ-
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ment, it is necessary to consider only a few outcomes in federal court where a party has lost, destroyed or intentionally hidden electronic information. In one case, the defendant’s failure to produce electronic information resulted in an instruction from the judge that the missing material should be presumed to be harmful to the defendant. The ultimate result was a verdict approaching $30 million in favor of the plaintiff. In another case, the defendant failed to preserve information in the proper manner, greatly increasing the cost of conducting the discovery. In that case, the party was required to pay an IT professional several hundred thousand dollars to recover the missing information. As a final consideration, a well done pre-suit investigation that includes appro-
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priate handling of electronic data increases the value of the investigation process and the effectiveness of defense counsel. More evidence is preserved, allowing for a full analysis and evaluation. This makes a successful pre-suit settlement more likely, and if suit does come, saves litigation costs. It provides defense counsel, at the outset of the litigation, with more information about the insured’s electronic data systems. Defense counsel requires this knowledge and information in order to comply with the discovery process and to properly represent the insured. This article contains general information only and is not intended as legal advice. Robert M. Kelso, J.D., CPCU, and Eric D. Johnson, J.D., are attorneys in the Indianapolis, Indiana, Law Office of Kightlinger and Gray, LLP. They have over 15 years experience in the litigation of employment disputes, insurance defense, and complex litigation. They can be reached at rkelso@ k-glaw.com, and ejohnson@ k-glaw.com. More information is available at www. k-glaw.com.
CASE LAW: Post-Amendment Cases In decisions issued after the implementation of the rules, courts are requiring that the rules be followed. Columbia Pictures, Inc. v. Bunnell, 245 F.R.D. 443 (C.D.Cal. 2007) [As a matter of first impression, information held in a computer’s random access memory (RAM) constitutes “electronically stored information” and
thus is within the scope of discoverable information.] Best Buy Stores, L.P. v. Developers Diversified Realty Corp., 2007 WL 4230806 (D.Minn. 2007) [Reasonable accessibility of electronically stored information (ESI), for discovery purposes, is best understood in terms of whether the ESI is kept in an accessible or inaccessible format; distinction largely depends upon the media on which the ESI is stored.] Hubbard v. Potter, 247 F.R.D. 27 (D.D.C. 2008) [Theoretical possibility that other electronic documents might exist did not justify additional electronic discovery, in putative class action, absent any evidence that additional responsive documents existed.] Peskoff v. Faber, 244 F.R.D. 54 (D.D.C. 2007) [It was appropriate to ascertain cost of forensic testing of the general partner’s computers and server to see if it justified a forensic search for relevant e-mails.] Auto Club Family Ins. Co. v. Ahner, 2007 WL 2480322 (E.D.La. 2007) [Nonparties must produce electronic documents requested unless fulfilling the request would unreasonably exceed the ordinary kinds of expenses that subpoena recipients are typically expected to bear.] Disability Rights Council of Greater Washington v. Washington, 242 F.R.D. 139 (D.D.C. 2007) [A civil rule - providing that absent exceptional circumstances, the district court may not impose sanctions on a party for failing to provide electronically stored information lost as result of the routine, good-faith operation
of electronic information system - does not exempt a party who fails to stop the operation of system that is obliterating information that may be discoverable in litigation.] Balfour Beatty Rail, Inc. v. Vaccarello, 2007 WL 169628 (M.D.Fla. 2007) [Federal Rule of Civil Procedure 34 permits a party to request documents, but it does not give the requesting party the right to conduct the actual search; allowing a party direct access to another party’s databases may be warranted in certain situations, such as a showing of noncompliance with discovery rules.] Calyon v. Mizuho Securities USA Inc., 2007 WL 1468889 (S.D.N.Y.,2007) [The court denied Calyon’s request to compel defendants to produce
to Calyon’s forensic expert the “mirror image” of the hard drive of the defendants’ personal computers because the court was not yet faced with any failure by the defendants to conduct a thorough forensic search of their computers, or to produce any and all relevant documents, files, metadata, and even hidden data fragments that Calyon may request.]
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Memry Corp. v. Kentucky Oil Technology, N.V., 2007 WL 832937 (N.D.Cal. 2007) [The court denied the plaintiff’s motion to compel computers and storage media for forensic inspection by a third party consultant because the case did not involve “an extreme situation where data is likely to be destroyed or where computers have a special connection to the lawsuit.”] cA
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~ pulse ~
where is your company when it comes to technology? Is your company riding the edge
A Few Years Behind
Right on the Money
of the technology wave or lagging behind? This quarter’s Pulse Poll
shows there is a split opinion in the claims community. While 42%
considered their company either right
on the money or on the cutting edge, 58% feel their company is lagging in
their adoption of new technologies. To
attract new interest to the insurance
Is a Pencil Considered Technology?
industry, claims specifically, this trend will need to change.
Still Inventing the Wheel
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CLAIMS ADVISOR | SPRING 2008
Donâ€™t Touch that
by Scott Ellis
Fire, flood, earthquakes, landslides and other catastrophes often result in damaged computer equipment and loss of electronic data. For claims managers and adjusters, this data loss can manifest into an overwhelming amount of insurance claims, costing insurers millions of dollars each year. The improper handling of computers immediately following a catastrophic event is the leading cause of data loss, and once a hard drive has been improperly handled, the chances of data retrieval plummet. Adjusters may assume a complete loss when, in fact, there are methods to salvage data from even the most damaged computers. Data Salvage Methods One of the first steps toward salvaging computer data is to focus on the preservation of the hard drive. Hard drives are highly precise instruments, and drive components that are warped by even fractions of a millimeter will cause damage to occur in the first moments of booting up. During this time the drive head can shred the surface of the
platters, rendering the data unrecoverable. Hard drives are preserved in different ways depending on the damaging event. If the drive is submerged in a flood, it should be removed and re-submerged in clean, distilled water and shipped to an expert. It is important that this is done immediately. Hard drive platters that are allowed to corrode after being exposed to water, especially if the drive experienced seepage, will oxidize and data will be destroyed. A professional can completely disassemble the drive to ensure that all of its parts are dry, to determine what level of damage has already occurred, and then decide how to proceed with the recovery. Care must always be taken during removal from the site to prevent the drive from breaking open and being exposed to dust. Fire or Smoke Damage After a fire or flood, the hard drive should not be moved or powered up under any circumstances. A certified computer forensic expert with experience handling damaged
drives should be contacted immediately. Typically, these experts will be able to dismantle the drive and move it without causing further damage. Like triage, they assess the external damage and arrive at a decision for further steps to recovery. Fire-damaged drives should never be moved or handled by laymen. Shock Damage Shock damage can occur when someone drops a computer or it is damaged in an automobile accident. In more catastrophic scenarios, shock damage can result when servers fall through floors during a fire or from bulldozers during debris removal. This type of crushing damage often results in platters bending, and can be quite extensive. As in fire and flood circumstances, the drive should be isolated and power should not be applied. A drive that has been damaged by shock presents a unique challenge: from the outside, the computer may look fine. This is typical of many claims involving laptop computers damaged during an automobile collision.
If a computer consultant can verify that the drive was powered down at the time the accident occurred, most will be comfortable attempting to power up to begin the data capture process. At the first sign of a change in the dynamics of the drive, such as a head clicking or a drive spinning down, power should be cut off. Restoration would then continue in a clean room where the drive can be opened up and protected from harmful dust. The Importance of Offsite Computer Backup One of the best ways to maximize computer data recovery efforts is to have offsite computer backup. For adjusters arriving at the scene, this should be one of the first questions asked of the insured. An offsite backup can take many forms, and companies often employ the services of special data centers that constantly synchronize data. Prices for these services vary widely depending on how much data needs to be backed up and how often. For smaller companies, offsite backup may be as simple as removing a tape
ter! Data Recovery Following Fire, Flood or Storm
CLAIMS ADVISOR | SPRING 2008
of critical data from the site on a daily basis. Case Studies: Scenario 1 John, the insured, owns and operates a home-based IT business. After the insured’s home burned down, he submitted a $500,000 loss of business income claim and a $75,000 claim for damaged computer equipment. He also claimed $60,000 for the three months he spent recovering data from the drives. Because he only was able to recover 25 percent of the data, he presented an additional claim for the cost of reconstructing Web sites he hosted from his home. For the computer forensic consultant, this case raised several questions. As an IT professional, the insured should have known better than to touch the hard drive and attempt to recover any of the data himself. Also, when an insured intentionally or unintentionally inflicts damage to his or her own property after an event, who is responsible? After a thorough evaluation of the circumstances and intense
questioning of the insured, the claim was eventually reduced to a substantially smaller amount. Scenario 2 The insured, Sammie’s Flowers, has 113 retail outlets and one central headquarters where photography, custom software, catalog masters, etc, are kept. There is no offsite backup. Everything is either on CDs or on the hard drive of the server at the insured’s premises. One night lightning struck the headquarters building and it burned down. An IT professional who lacked the appropriate computer forensic skills evaluated the computer equipment after the fire. No attempts were made to recover data from the hard drives or to start the computers; because of their damaged physical condition, they were simply thrown into a dumpster. One year later, the insured filed a claim for $37 million for valuable papers and business personal property losses. The policy limit for valuable papers was small and easily reached. The
coverage limit for business personal property, on the other hand, was sufficient to cover the $37 million claim. While this case is still pending, the cost of resolving this claim could be significant. Had the insured contacted a computer data recovery expert, business data thought to have been lost potentially could have been recovered, therefore significantly reducing the insured’s claim. Scenario 3 The insured, a professional photographer, was in a car accident that damaged her laptop computer. Prior to the accident she had been using the laptop computer while parked at a rest stop. Later, she reported to the adjuster that when she booted it up after the event she heard “a strange clicking and clacking sound.” Unfortunately, that was the sound of data being destroyed. Under her business owner’s policy she submitted a $500,000 claim to her insurance company—a claim which included the cost of 2,000 lost images, equipment, and site, model and agency fees
for a one-day photography shoot. The laptop computer had a noticeable crack likely caused by the accident. Had the computer been professionally handled, chances are good that the data could have been recovered and sustained damages minimized. Computer equipment is always at risk of being damaged—whether by flood, fire, lightning or other catastrophic means. However, damage does not always necessarily result in data loss. Companies should be careful not to write off damaged storage media when, in fact, recovery may be possible. Insurers can minimize their exposure on an insured loss by taking immediate precautionary measures to protect the computers from touch and power, and by calling in professional computer forensic experts to assess the damage. cA Scott Ellis is a manager in the Forensic Technology Practice at RGL – Forensic Accountants & Consultants. He welcomes conversations about data recovery and computer handling safety, and can be reached at email@example.com.
CLAIMS ADVISOR | SPRING 2008
See the RMIS and Claims Management Systems in Your Organization
Forest and the Trees by Terry Preece
The difference between risk management information systems (RMIS) and claims management systems seems to be a gray area for many people. So what is the difference and how do you determine which system is best suited to fulfill your organization’s needs, or if your organization would benefit from employing both? The What and Why of RMIS A simple explanation to define the complex functionality of a RMIS is to use the analogy of not seeing the forest for the trees. With a claims management system the capabilities are focused on providing detailed information on one particular claim, or tree in the forest. In contrast, a RMIS provides the capability to look at a claims operation, or the forest, and analyze its characteristics and patterns as a whole. The primary function
of a RMIS is to help risk managers with the necessary information to best manage a company’s risk. It consolidates data from multiple sources, including historical claims and policy and exposure information, and it compiles the information into one system where reports and queries can be run on all the data at once. The benefit is that it provides the ability to analyze data from a conglomeration of claims, like looking at a forest that is made up of an assortment of trees to determine how it is growing or changing. For the claims operation, the RMIS identifies historical data that can help in forecasting trends. Having access to such trend data enables a risk manager to exercise influence and take action to modify or capitalize on the trend. The value comes primarily in the form of cost avoidance. If a trend is
identified where costs are out of line with expectations, the organization can identify what needs to be done to bring costs back in line and/ or improve expectations and avoid future claims costs. A RMIS system empowers risk managers by putting the answers to complex questions at their fingertips. For example, let’s look at the RMIS of a fictional nationwide convenience store chain. In some states, like Florida, claims are handled by a third party administrator (TPA). In others, the carrier adjusts claims. In the remaining states an in-house adjuster handles claims management. Data from all sources (including the Florida TPA) is combined into a corporate RMIS system. The risk manager runs several standard reports in the system, and notices higher claims and costs in the company’s Florida stores when compared to
Quick Look C
A RMIS gathers information from multiple sources so all data can be analyzed at once to identify trends that can be modified.
A claims management system handles claims as a single entity and manages all the information required to process the claim.
Depending on your organization’s needs, one of the systems or both may be required to accomplish your goals.
other states over the last few months. Claims occurring in Florida over the last four months are then queried using onscreen tools for instantly available results. It becomes immediately obvious on a bar graph-based report that the majority of the Florida claims are due to slip and falls. The risk manager then refines the query to filter only slip and falls, which are then displayed on a pie chart broken down by the day of the week. Remarkably, most of the incidents occurred
CLAIMS ADVISOR | SPRING 2008
on Tuesday. Further analysis reveals the time of most accidents to be early in the morning. Armed with this data the risk manager investigates further. A couple of phone calls to Florida locations uncover that delivery of refrigerated goods takes place late Monday night into early Tuesday morning. Condensation from the items drips onto the floors causing early bird customers to cross the drip path and slip. The risk manager corrects the problem by establishing proper procedures for employees to follow, e.g. post-delivery mopping. The framework of the RMIS query is saved and set to run automatically in the future. This is a simple example of how a RMIS presents the data quickly and efficiently so problems can be identified and corrective action taken. In our scenario, a claims management system would provide detailed information on a specific slip and fall claim, including claimant information, litigation details, notes and diaries, but might be limited in its ability to show reports comparing data from multiple sources. The Value The risk manager for insured and self-insured organizations would be the typical user of a RMIS. It is beneficial to the following lines of business: auto liability, auto physical damage, workersâ€™ compensation, products
liability and general liability. Though these are the typical lines that use a RMIS, they are not the only lines that could benefit from implementing one. In companies where a risk manager is not present, the RMIS can prove even more valuable. Executives who oversee claim costs and risk for their company can utilize the system to efficiently report on all data that is available. This risk data might spread across various TPAs, carriers and also internal systems used to manage certain claims. Â Without a RMIS system, this information could only be obtained separately from each individual source, then manually combined in order to provide some semblance of a company-wide risk profile. Combined information may not provide the most current and accurate information and is prone to errors. Claims Management Systems In contrast to a RMIS, a claims management system focuses on a single claim, or tree, rather than the whole forest. A claim is handled with great detail as a single entity. A claims management system is the workplace of the adjuster and is used to manage claims and all related tasks required to process them. This includes recording all the additional information about the claim and claimant that might be missing from the First Report of Injury, documenting all ongoing communication, making payments by producing checks, and providing correspondence to assist with communication to the claimant. Within the system is the intricate detail on litigation, medical providers,
payments, claim contacts (e.g. witnesses, attorneys, and vendors) and thousands of other data elements that are required in a claim file. Good claims management systems save adjusters time, thus saving the organization money. In addition to time savings, these systems can also significantly reduce costs by providing experienced adjusters with the tools they need to properly manage claims. A true claims management system (not MS Excel, Outlook, etc.) allows adjusters to focus on each claimant.
erences is always wise. Do they have experience in the industry? • Can they get the system up and running in a reasonable timeframe? • Are they flexible and willing to work with you to find a solution that fits your needs? • Do they offer the functionality you require? It may be helpful to make a functionality checklist before you start reviewing vendors. Some potential items to have on the list may include: • Data consolidation – a RMIS’ value is highly compromised if data from all sources isn’t included • Standard set of reports including graphs and charts • Ad-hoc query capabilities • Diary and note oversight functionality • Ability to aggregate and code the data correctly to a single standard • Basic claims lookup • Ability to export data in a variety of formats.
Who Uses Claims Management Systems Almost anyone tasked with the responsibility of managing claims should be using a claims management system. Claims management system users might be the adjuster at a self-insured company, or the adjuster at the company that handles all claims under a large deductible. Other users might be risk management personnel who have some claims oversight in addition to the claims management done by their carrier or TPA. Claims management systems are used in virtually all lines of business.
What System Do You Need? Check the following boxes that are similar to your organization’s needs: • Is your organization’s claim data divided among different locations (e.g. in-house claims, carrier, previous carrier, TPAs, previous TPAs, etc.)? • Do you need to consolidate data in order to report on claims? • Do you find your current claims management reporting capabilities inflexible?
Selecting RMIS and Claims Management System Vendors As every company has unique requirements, it is recommended that each establish a set of tailored criteria to use when evaluating potential RMIS or claims management system vendors. When developing criteria, a few universal qualifiers may include: • Do they have a good, solid reputation in the industry? Checking ref-
Does your organization manage claims or assist with managing claims? Do you need to make and record payments on claims? Do you need FROI, SROI, EDI, ISO, OSHA, bill review, document imaging, attachments or business rules?
If you checked the top three, your organization most likely needs a RMIS. If you checked the bottom three, a claims management system would be the best fit. If you checked a combination, you may need both systems in order to accomplish your goals. The More You Know, The Less You Guess By implementing a claims management system, accuracy and efficiency is improved. Combining that system with a RMIS ensures that the most accurate data is used to examine historical trends. It also helps ensure that risk is mitigated and planning for the company’s future is founded on fact. It would be impossible to know the details of a particular tree by studying the forest and vice versa. It is the same with RMIS and claims management systems; you cannot use one to accomplish the objectives of the other. Your organization needs to determine if it needs to analyze the forest or cA the tree, or both. Terry Preece is senior vice president and cofounder of MountainView Software, www.mvsc.com, a division of Gallagher-Bassett Services. Preece has been involved in the claims and risk industry for 14 years.
CLAIMS ADVISOR | SPRING 2008
Bad Bugs on the Rise?
by Meg Weist, J.D.
Recent food recalls and the likelihood of mor demand we know more to protect our clients
The topic of food contamination is a top news story these days. The consolidation of the food production system and the rapid distribution methods currently available have exposed our food supply to greater opportunities for potential contamination. In 2007, the news headlines were dominated by recalls of spinach, lettuce, peanut butter and pet food. It appears that the trend will continue in 2008. Recently, in what has been billed as the largest beef recall in the United States, the U.S. Department of Agriculture ordered the
recall of 143 million pounds of frozen beef. Publicized recalls have raised public awareness of food liability issues, and have increased the likelihood that a food contamination claim may cross your desk. While the process appears complicated and multi syllable terms seem ominous, the fundamentals of the claims investigation are easier if you know where to begin. Like any claims investigation, the earlier you start and the more prepared you are, the more manageable the claim handling can be.
The first two things to master in a food contamination inquiry are the myriad of acronyms involved as well as the roles of particular federal agencies. The federal agencies that are involved in food safety regulatory activities are: the Food and Drug Administration (FDA), which is part of the Department of Health and Human Services (DHHS); the Food Safety and Inspection Service (FSIS) of the U.S. Department of Agriculture (USDA); the Environmental Protection Agency (EPA); and the National Marine Fisheries Service (NMFS). Each of
these agencies has different resources, management controls and regulations. Each of the 50 states also has its own regulatory agencies whose guidelines should be reviewed since they have some autonomy and concurrent jurisdiction with federal agencies. The NMFS conducts voluntary, fee-for-service inspections of seafood safety and quality. The EPA regulates the use of pesticides and maximum allowable residue levels on food commodities and animal feed. The USDA, through FSIS, oversees the inspection of
re to come
CLAIMS ADVISOR | SPRING 2008
meat, poultry, and processed egg products, while the FDA is charged with ensuring the safety and purity of all other food products. The FDA also has regulatory oversight of animal feed and would be the lead agency in a recall. The FSIS is the public health agency in the USDA that is responsible for ensuring that its regulated products are safe, wholesome, and correctly labeled and packaged. Incredibly, under USDA regulations, companies may sell E. coli infected meat as long as it is labeled as “cook only,” based on the premise that thorough cooking to at least 160 degrees can destroy bacteria. This practice has been referred to by some commentators as E-coli Loophole.” The FDA and the USDA also have some overlapping oversight. For example, the inspection of a ready-toeat sandwich depends on how the sandwich is presented. The USDA inspects manufacturers of packaged open-face meat sandwiches (e.g., those with one slice of bread), and the FDA inspects manufacturers of packaged closed-face meat sandwiches (e.g., those with two slices of bread). The USDA inspects wholesale manufacturers of open-face sandwiches sold in interstate commerce on a daily basis, while the FDA inspects closed-face sandwiches about once every five years. (Government Accountability Office (GAO) High Risk Report 2007). Once you have a basic understanding of the federal agencies that might be involved, it is necessary to determine whether or not you are analyzing an illness caused by a food contaminant. Essentially, food borne illness is caused by eating or
drinking food that contains disease-causing agents. Contamination can come from a sick food handler, unhygienic equipment, or from an outside source such as tainted irrigation water or soil. Improper packaging, unsanitary transport or improper storage of food can also cause food borne illnesses. The contamination can be in the form of bacteria, virus, toxin or parasite. In order to confirm a claim of food borne illness, a causal connection must be established between the ingestion of the allegedly contaminated food and the illness claimed. The best proof, unquestionably, is a human specimen (a stool or blood sample) that matches
a contaminant found in a product. In order to assess whether or not a causal connection exists, you can start with the symptoms. Many different kinds of illnesses can cause diarrhea, fever or abdominal cramps. The incubation period is also an important factor to consider. Food borne illnesses from chemical contaminants or allergic reactions can occur within minutes, while other food borne infections may occur within a few hours to a few weeks after consumption of the contaminated food. The FDA Web site (www.usda.org) contains the Food Borne Pathogenic Microorganisms and Natural Toxins Handbook which is commonly known as the “Bad Bug
Book.” This is an excellent source for specific information on various illnesses, their incubation periods and potential sources of contamination. Common types of food borne illnesses are Salmonella, Campylobacter, E.coli, Shigella, Listeria, Norovirus, Hepatitis A and Staphylococcus. At one end of the spectrum symptoms can include nausea, vomiting, stomach pain, diarrhea or fever. At the other end of the range more severe disorders can be triggered by food borne illnesses. Hemolytic uremic syndrome (HUS) occurs when an E. coli toxin destroys large numbers of red blood cells, leading to kidney failure as blood platelets clog the organ.
Reactive arthritis can occur when salmonella poisoning leads to a painful, chronic and potentially debilitating condition that causes joint inflammation. Infections involving Campylobacter jejuni significantly increase the risk of Guillain-Barre syndrome (GB), a disease of the peripheral nerves. Any independent food contamination investigation requires the acquisition of health department reports. Each state health department reports food borne illnesses to the Centers for Disease Control (CDC). The CDC is one of the major operating components of the DHHS. The CDC utilizes Pulse Field Gel Electrophoresis (PFGE) to distinguish strains of or-
ganisms such as Escherichia coli 0157:H7, Salmonella, Shigella, Listeria or Campylobacter at the DNA level. This is called DNA fingerprinting. Any results of the fingerprinting are reported to PulseNet, a national network of public health laboratories coordinated by the CDC. The purpose of PulseNet is to detect food borne disease case clusters by utilizing PFGE. OutbreakNet can be credited with the discovery of many of the nationwide food recall cases. It is a network of public health epidemiologists at the local, state, and federal levels who investigate food borne and diarrheal disease outbreaks. A quality food contamination investigation is also
dependent upon finding the right specialists. A consultant who is an expert in the area of quality control issues as well as federal safety compliance issues is invaluable— for example, a local professor who has an expertise in food safety and can discuss pertinent regulations and industry practices. An epidemiologist will need to assess the causation evidence. An expert in infectious diseases may also be necessary. This could be a gastroenterologist who is able to review the medical records, conduct an independent medical examination identifying alternative explanations for asserted ailments, and address the plaintiffs’ claimed damages, including the likelihood of
CLAIMS ADVISOR | SPRING 2008
long-term complications. A consult with a microbiologist or bacteriologist who has an expertise in the food contamination at issue will be helpful to identify potential alternative sources of the particular contaminant. Finally, review all contracts and specifications to identify any potentially involved downstream or upstream vendors where the contamination may have occurred. Food borne illness investigations rarely pinpoint the actual point of origin of the contamination. Consequently, causation is usually established through circumstantial evidence, and many states allow causation to be inferred from circumstantial evidence. As such, the investigation will include records and documents for the entity from which the alleged contamination originated. This will include prior health department records showing results from previous inspections, quality control measures and steps utilized by the company from the purchase of raw ingredients through the mixing process, to testing, packaging and shipping. Quality control steps utilized by the company should be reviewed. Find out who is in charge of food safety. Are
there employee training programs? Believe it or not, you have to remind people to wash their hands before handling food. The Occupational Safety Health Act (OSHA) provides standards for the minimum requirements for hand washing facilities in food handling operations (29 CFR 1910). Finally, review all documentation for regulatory and code compliance. Most states have a food code modeled after the FDA model code. They usually contain two categories of regulations: critical regulations (priority items that are more likely to contribute to a food borne illness or injury, food contamination, or environmental health hazard if not under managerial control) and non-critical regulations (good retail practices). The key is not only to look for bad practices but good ones as well. cA Meg Weist, J.D. is a claim superintendent with EMC Insurance Companies in the Home Office Claims Department. She has responsibility for the oversight of casualty branch claims operations, and provides advice and counsel to EMC branches regarding claim handling. Ms. Weist may be reached at meg. firstname.lastname@example.org
Federal Agencies involved in Regulating Food Safety • FDA—Food and Drug Administration The FDA is charged with ensuring the safety and purity of all food products not covered by FSIS. The FDA also has regulatory oversight of animal feed and would be the lead agency in a recall. They inspect manufacturers of packaged, closed-face meat or poultry sandwiches once every five years. The FDA is accountable for the inspection of eggs still in their shells. • DHHS—Department of Health and
The agency under which the FDA and CDC operate.
• FSIS—Food Safety and Inspection Service The public health agency in the USDA responsible for ensuring its regulated products are safe, wholesome, and correctly labeled and packaged. • USDA —US Department of
Through FSIS, has oversight of inspection of meat, poultry, and processed egg products. They inspect manufacturers of packaged open-face meat or poultry sandwiches sold in interstate commerce daily. The USDA is accountable for the inspection of eggs once the shells are broken.
• EPA —Environmental Protection NEXT ISSUE: In the Summer 2008 issue of Claims Advisor, we’ll take a look at fraud from every angle. New stories, new authors and new feedback from readers make every issue a must for every adjuster. Don’t miss it! Be sure to fill out an online subscription to make sure you keep receiving Claims Advisor. go to www.claimsadvisor.com/subscribe
The EPA regulates the use of pesticides and maximum allowable residue levels on food commodities and animal feed.
• NMFS —National Marine Fisheries
The NMFS conducts voluntary, fee-forservice inspections of seafood safety and quality.
cool linx www.freecycle.org
The Freecycle Network™ is made up of 4,296 groups with 4,694,000 members across the globe. It’s a grassroots and entirely nonprofit movement of people who are giving (& getting) stuff for free in their own towns. It’s all about reuse and keeping good stuff out of landfills. Each local group is moderated by a local volunteer (them’s good people). Membership is free. To sign up, find your community by entering it into the search box or by clicking on “Browse Groups” above the search box. Have fun!
World Community Grid (WCG) is an effort to create the world’s largest public computing grid to tackle scientific research projects such as the human genome, HIV, muscular dystrophy, and cancer. After users install WCG software onto their computer, the idle time of the computer is used to perform research calculations. When a piece of work is completed, the software sends the results to WCG over the Internet and downloads another work unit. WCG has partnered with over 350 other companies and organizations, and has over 300,000 registered user accounts.
If you’d like an alternative to ESPN or FoxSports, RotoWorld has up-to-date sports and injury information. The baseball news section monitors all the major, and many minor, sports dailies. Many other sports are covered as well. If you are a sports junkie, whether or not you participate in fantasy sports leagues, you’ll find a lot worth checking out.
Project Playlist is similar to Web search engines, but is devoted entirely to the world of music. It can help you find music (legally) throughout the Web and create playlists you can share with others. You can browse the playlists of other users, or search through their playlists by song title or artist name. This is a great site for music fanatics.
Dozens of free Web-based games, well designed and relatively simple to play. These games are perfect for nongamers looking for a little distraction on a hectic day. Choices are presented as icons on the home page (no names, no explanations). Keep spiders off your cake, protect dragonflies from rhinoceros beetles, toss tiny umbrellas to baby birds as they fall out of their nest—all you need is your mouse and maybe your arrow keys to maneuver.
Zaba Search is a great place to do a free search for people or public information. You can search by name, phone number, area code and even IP address. Additionally, there is a white pages and message search. Search for file subjects, old friends or just check out what’s in cyberspace about you.
Zillow is an online real estate service dedicated to helping people get an edge in real estate. You can update your home details, upload pictures, market your home, check out your neighbor’s home, view local comps and get details on the local area.
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CLAIMS ADVISOR | SPRING 2008
Techno Rebels Advances in technology should serve to enhance customer service, not replace the human touch by Thomas McCloskey, CPCU, LIC
In 1970, Alvin Toffler published Future Shock, the first of a series of books predicting how technology would change our world in ways we could not imagine. Toffler and others warned that advances in technology would propel more changes and eventually reach Technological Singularity; a condition in which artificial intelligence would become just a bit smarter than its creator and capable of creating improved versions of itself—each version smarter than the last. Toffler and others warned of paradigm
shifts coming more rapidly, thus being more difficult to keep pace with and even comprehend. In short, his 1970 message was that change is coming; it’s time to start running. Toffler warned that the more high tech we became, the more we would need high touch with our customers to successfully conduct business. Back then, insurance claims were handled in what seems today a quaint manner. There were two echelons of adjusters—office and field adjusters—who were assigned
claims based on their complexity. The routine stolen bicycle or slip and fall were the province of office claims representatives, and a total loss or large fire claim would be assigned to a field claims adjuster. The assigned adjuster would retain responsibility for the claim until its conclusion. Resources used were basic, but they worked well. The adjuster would handle all issues arising in the claim, and there was high touch contact with the insured. In a large claim, adjusters would likely
become acquainted with the insured’s family. By the use of good people skills, a friendly atmosphere would be maintained—disagreements with insureds and others would occur, but were carefully negotiated. Conflict is inherent to our function; it’s how conflict is dealt with that differentiates the professionals. Back in 1970, technology was limited to a black and white Polaroid camera, the Mitchell Manual, a local price list, the National Construction Estimator, and pre-carboned forms. I re-
CLAIMS ADVISOR | SPRING 2008
member the introduction of the Polaroid being met with disbelief by the adjusters of that time. “Don’t they trust us?” It was the first step in file review and documentation. The phrase of the time was, “If it’s not in the file, it doesn’t exist.” Almost every new form of technology adopted since then has been used toward the goal of better file documentation. As all boats rise with the tide, most insurance companies have a similar experience with losses and investment incomes. It is the expense quotient where competition with another carrier’s price is waged. In 1970, the average field adjuster handled about four hundred claims each year. The expense associated with the field adjuster—salary, company car, benefits, support staff and offices—amounted to about eighty thousand dollars per year. That made the average cost per claim two hundred dollars—just to throw it on the desk. In contrast, office personnel handled many more claims and were less expensive. Best of all, insurance agencies using their agents’
Miss an Issue!
draft authority did claims for free. There is a cycle in the insurance claims business that requires five to ten years to complete. It begins when a manager notes the cost of staff adjusters and opines that perhaps a vendor honor system would be best. Longstanding relationships with body shops, contractors, etc. that have always treated the company fairly become an attractive option. Perhaps using them without an inspection would save expenses, with the control being a re-inspection of ten percent of the assigned losses. Capital idea, right? While this seems like a good idea on the surface, it’s a bit like throwing a fox into the hen house and expecting an honest count of the chickens. That is not to say that vendors are untrustworthy, but there is a laxness that can occur under less controlled conditions. When adjusters stopped by every day, labor rates and the scope of repairs remained at reasonable levels. Left unchecked, there is too great a temptation for the unscrupulous
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Newton’s Laws of And the Physics Motion of Fraud Is Less More? Protecting Medicare Interests
to begin to sell the carrier seven-hundred dollar storm doors. That’s when the average claim paid begins to rise and pro forma managers begin to speculate as to why. Frequency remains steady but severity is up—it’s a mystery. Expenses, however, are down. Eventually insurers come to the conclusion that there simply must be more oversight. But with no field adjusters, they must hire a few independents to spot check the claims, bringing severity into line. However, it’s costly to hire independents so, once again, expenses are up. Maybe the insurers should put some of their people in the field… and it starts over again. The point is that insurance companies are often driven to change due to economic pressures. We are a business that attempts to remain in formula. Claims should cost five-percent of the amount paid. The operation overall should use thirty-five to thirtynine percent of the paid premium. Combined ratios should be in the high nineties to the very low onehundreds. But with new technology, changes began to occur. In 1976, the first four-function calculator came into the office. It cost more than onehundred dollars and was not well received…no tape! In 1980, the first software program for building estimates arrived—Computer Assisted Structural Estimating (CASE). Field adjusters used check-off, or tic, sheets, data was transferred to the system by clerical staff, and a printed estimate would result. The feeling at that time was
that the information had to be correct since it came from the computer—after all, it was printed not hand scrawled. However, even when using the latest and greatest program, mistakes can still be made. For example, one adjuster, by simply duplicating rooms, estimated a furnace and water heater in every room. In 1984, as supervisor of the first computerized storm office in Collinsville, Illinois where we used both staff and independent adjusters, I experienced three hail storms one on top of the other. Things ran quite well as clerical folks entered claims data and agents sent in lists of policy numbers rather than loss reports. Everything was entered into the mainframe at the regional office that confirmed coverage with a three-part form. One part became the loss report, one the file sticker and one became the index card. We were looking for Captain Kirk to beam down and congratulate us. About two weeks and seven-thousand records later, we indexed the database and it confirmed one record. Panic ensued. Had we lost our complete set of records? Where was Spock when we needed him? It had to be correct because the computer said it was. We were overrun with home office managers and IT folks advising that we might need to start re-inputting all data. Thoughts of overtime, multiple shifts, and skyrocketing costs filled our minds. Then a thought came to mind from a recent conversation. When asked about computers in his school, my son
Ian, a second grader, offered the sage words, “Dad, computers are so stupid you have to tell them everything.” Reviewing the problem, we noted the insured’s name started with the letter “O” and that the zero was just above the “O.” The database gurus confirmed that the computer tracked records first by number, then by letter. The thought came to me to delete the one record and see what happened. Managers began running around as if their hair were on fire. Imagine some silly claims guy making this kind of suggestion—what next? Computers are never wrong, after all. The argument was simply made that if seven-thousand records were lost, one more wouldn’t make much difference. We watched eyes roll and the knowing smiles toward the simple minded. So when no one was looking, I reached over and hit “Delete.” The sun rose, the skies became clear and the birds began to sing as the all-wise computer blinked “SEVENTHOUSAND RECORDS IN THE DATA BASE.” All fell to their knees to thank the benevolent computer for sparing them from ignominious failure. I had to leave the room and giggle; Ian had been right. We have continued to move forward since then with the Internet and more computers than we know what to do with. Today, replacement costs for everything from a straight pin to a twenty-year old bottle of Scotch Whisky are available via software and the Web at lightning speed. We’ve
certainly come a long way, but we have much further to go. Recently, while getting some work done on my car, I ran into a client who had a claims beef to share with me. His diagnostic computer had been destroyed when the brakes failed on a car coming into the shop. His carrier looked online, received a price quote from a company located in Montana and offered the shop five thousand dollars to replace the device. The trouble was that the company did not have a unit to sell. For my friend, the continuation of business was the critical matter. “Five grand,” insisted the claims handler. “I have an online quote!” The fact that the company did not have one to sell was of little import to him. Now Ed, my friendly neighborhood auto repairman, is no dummy. He understands what it means when the check engine light flashes in my Suburban. The claims handler had poor Ed completely buffaloed and he needed help. So with my truck in the air on his hoist, and no way for me to escape, I became involved. My suggestion? Tell the claims person to have his irrefutable source ship the machine. A few days later Ed called to tell me how well his new diagnostic machine was working. The claims person had finally come to an understanding of the facts and how the contract was intended to respond. Toffler warned that high tech would require high touch. Technology is a tool, not a replacement for clear thinking and hu-
man compassion. As claims people, we are required to treat our clients with utmost fairness. While we may have an answer, there is no guarantee that it is the correct or even an acceptable answer. We cannot discount that our clients know their business much better than we do, and we would do well to listen to them. After a lifetime in the claims business, a few basic points remain once all of the soaring ideals have faded. • We do not know everything. Any day we do not learn at least one new thing is a day wasted. • We can learn something from everybody we speak to, and they are worthy of our respect. • We must take responsibility for our communications and our customer relations. • If you do not like people, you’re in the wrong business. • If you have two dustups in one day, check your attitude. • “Computers are so stupid Daddy. You have to tell them everything.” • Our clients are in trouble, confused, worried and lost. It is our function to cA help them. Thomas McCloskey, CPCU, LIC, an executive general adjuster, has over 39 years in the claims industry and is owner of Risk Associates Inc. in Boyne City, Mich. He may be reached at email@example.com
CLAIMS ADVISOR | SPRING 2008
Mitigation and Risk Strategies for Reduc Lightning Losses
by Kim Loehr
Natural disasters have plagued man since the dawn of time. The approach for many is to cross their fingers and hope for the best outcome. Others see prevention and mitigation as the best approach. Mounting losses in human casualties and property damage motivated the United Nations to declare the 1990s as the International Decade for Natural Disaster Reduction (IDNDR). The focused attention provided by the UN also meant promotion of actions to reduce the impact of such hazards. During this decade, disaster managers and other U.S. officials increased emphasis on mitigation relative to response and recovery, especially seen in programs of the Federal Emergency Management Agency. As the decade closed, the program recommended that continuing efforts be focused on improving risk assessments, implementing mitigation strategies, supporting warnings and response, and improving the basis for natural disaster insurance. Ranking among Mother Nature’s more awe-inspiring feats is lightning. As one of the more frequently occurring natural disasters, lightning strikes the earth roughly 1,800 times at any given moment. It is five times as hot as the sun in every one-inch
k Assessment cing
diameter bolt. In the United States, lightning kills more people than hurricanes and tornadoes combined. Only floods are more deadly. “Lightning is usually the most dangerous and frequently encountered weather hazard that people experience each year,” said John Jensenius, warning coordination meteorologist for the National Weather Service. “Too often people wait too long before seeking safe shelter from a thunderstorm and find themselves caught outside in a very dangerous and sometimes deadly situation.” Jensenius has tracked statistics over a 30-year period (ending in 2004) which revealed that lightning remains the second greatest storm-related killer in the U.S.—second only to flooding. In 2001, the National Oceanic and Atmospheric Administration (NOAA) and the National Weather Service launched an annual Lightning Safety Awareness campaign to increase public awareness of the dangers of lightning. Several members of NOAA’s Lightning Safety Awareness Team, including the Lightning Safety Alliance (LSA), the Lightning Protection Institute (LPI) and Struckbylightning.org have collaborated in educational efforts. The campaign most recently
CLAIMS ADVISOR | SPRING 2008
included a television public service announcement (PSA) to educate children about the dangers of lightning and promote the 2007 campaign slogan, “When Thunder Roars, Go Indoors.” The PSA introduced the mascot, “Leon the Lightning Lion,” a cartoon character designed to spread lightning safety and preparedness messages to the public. Other elements of the lightning safety awareness campaign include posters, safety stickers, teacher tools and a Web site kid’s page which features an interactive computer lightning safety game. These and other items about the nationwide Lightning Safety Awareness Week campaign can be found at www.lightningsafety.noaa.gov. “Because lightning is such an underrated killer, NOAA’s
Lightning Safety Awareness Team is constantly challenged to create new tools to help educate both children and adults about lightning and its dangers,” explained Jensenius, who was awarded the National Weather Association’s 2005 Public Education Award and, more recently, a Department of Commerce Silver Medal in 2006. In addition to the toll lightning takes on human life, thousands of properties are damaged or destroyed by lightning each year. According to Underwriters Laboratories (UL), lightning also accounts for more than one billion dollars annually in structural damage to buildings in the U.S. For property owners who don’t want to play the odds and take their chances, an investment in a lightning
A Lightning Consumer Alert A 2007 Class Action Lawsuit against four manufacturers of a relatively new type of fuel gas tubing identified the installation of lightning protection systems as a remedy for the fire risk associated with a flexible piping known as CSST (corrugated stainless steel tubing). CSST is commonly used in homes and buildings in the U.S. since it is thinner and less expensive than traditional, heavy-walled gas pipes; however, the thinness leaves it more susceptible to a high intensity electric charge. Lightning traveling on the CSST can burn holes in the tubing and allow gas leakage and fire. In worst case scenarios, such leaks have led to catastrophic gas explosions. CSST has been found to be susceptible to damage from direct and even nearby lightning strikes. CSST has been widely used in recent years because it is easy to install. According to the National Fire Protection Association (NFPA) however, no tests on the effects of lightning on CSST were conducted prior to its approval for use. One CSST manufacturer has acknowledged that the installation of a lightning protection system addresses the lightning hazard associated with CSST, yet homes with CSST are rarely equipped with lightning protection systems. Under the March 2007 Settlement guidelines, vouchers for lightning protection systems and/or bonding and grounding connections were provided to defray the cost of mitigating the CSST hazard. “Unfortunately, there hasn’t been enough publicity given to the lightning hazard associated with CSST and the deadline has now passed for property owners to take advantage of the vouchers,” said Bud VanSickle, executive director of the Lightning Protection Institute (LPI) in Maryville, MO. “Even though the voucher deadline closed in September of 2007, there are still millions of property owners out there with a serious fire risk that needs to be addressed.” ABC’s Good Morning America reported the dangers of CSST in connection with its susceptibility to lightning damage in a segment which aired on October 16, 2007. The report was titled, “Common Gas Pipes Pose Fire Hazard—CSST Pipe, Installed in Many Homes, Can Ignite if Struck by Lightning,” and cited that an estimated 2 million homes have a kind of pipe that can explode into flames during a lightning storm.
protection system makes good sense. When lightning’s electricity is confined to a properly designed conductive path, damage to a structure can be minimized or eliminated. There is much more to lightning protection than installing a rod on a rooftop. Since the key purpose of a lightning protection system is to dissipate the electrical current safely into the earth, it is only as good as its grounding. Systems and their associated grounding must comply with the requirements of national lightning protection safety standards. The authorities governing these standards are: • Lightning Protection Institute (LPI-175, Standard of Practice) • National Fire Protection Association (NFPA 780 Standard for the Installation of Lightning Protection Systems) • Underwriters Laboratories (UL 96A, Installation Requirements for Lightning Protection Systems) “Specifying compliance with UL or NFPA standards is key to safe and effective lightning system performance,” says Karl Keip, lightning protection service business manager for Underwriters Laboratories, Inc. (UL). “A lightning protection system that has received the UL Master Label Certificate indicates that the system has been inspected for conformance with these national standards for system installation.” While LPI, NFPA, and UL are all not-for-profit organizations publishing safety information and installation standards for lightning protection, LPI is the only organization which was founded specifical-
ly to study lightning protection. LPI started promoting lightning protection education, awareness and safety in 1955. LPI membership is comprised of manufacturers, contractors, scientists, engineers and safety directors, all of whom are interested in improving the science of lightning protection and promoting lightning safety. In addition to publishing the LPI Standard of Practice to help ensure the best possible quality in lightning protection materials and installation techniques, the institute offers certification and education programming. The LPI’s “Master Installer” program qualifies competence and quality control in the lightning
Typical Commercial Lightning Protection System Components: Adhesive Base/Adhesive Cable Fastener—Holds the air terminal assembly in place while connecting and fastening the cable conductor to the structure. UL Master Label—Signifies that the lightning protection system was inspected to comply with UL installation standards. (Note: UL automated its inspection services in 2003 and began issuing certificates via the Internet to replace the metal Master Labels. Effective 4/12/07, UL revised wording to the “UL Lightning Protection Inspection Certificate.”) Surge Arrester—A protective device for limiting surge voltages by discharging or bypassing surge current. Cable Connector—Fittings used for the bonding or connection of down conductors and/or grounding equipment. (Bimetallic connectors must be used for splicing or bonding of dissimilar metals.) Pipe Clamp—Used to connect underground metallic piping systems. Bolt Fitting—A parallel cable connector which ensures continuity. Side Mount Base—Adhesive cable fastener used to side mount air terminals for placement on a structure’s wall. Thru-Roof Assembly—Used to achieve a thru-roof connection to the grounded steel framework. Bolt Fitting & Ground Termination—Used for steel column grounding connections.
protection industry. LPI also collects and reviews statistical information and scientific data on the nature and behavior of lightning on a routine basis. The organization presents an “information warehouse” on the Web at www.lightning.org. Lightning Protection and Risk Assessment The issue of risk assessment in terms of lightning protection was reviewed by the General Accountability Office (GAO). In May of 2005, the GAO released results of a five month evaluation of the Federal Government’s approach to protecting its facilities from lightning strikes. The study focused on four Federal
agencies which, according to the GAO, represent over 80 percent of the government’s property. The agencies included in the study were the General Services Administration (GSA), the United States Postal Service (USPS), the Department of Defense (DoD) and the Veterans Health Administration (VHA). The GAO found that all of these agencies require installed lightning protection systems to conform to the requirements of the National Fire Protection Association (NFPA) Standard 780 and Underwriters Laboratories (UL) Standard UL96 and UL96A. The GAO also noted that the referenced standards not only provide material and installation guidelines, but also mandate the use of certified lightning protection installers. The GAO’s objectives in evaluating lightning protection systems for federal buildings focused on: 1. to what extent these selected federal agencies use applicable lightning protection standards to help protect buildings they own from lightning strikes 2. how these selected federal agencies assess the need for lightning protection systems on their buildings 3. what practices and lightning protection standards the GSA uses when leasing privately owned buildings 4. what data exists related to the financial impact of lightning protection and damage to the federal government. The GAO report also noted that while the Army and the Air Force do not cur-
rently follow NFPA-780’s risk assessment and decision-making methodology, these entities have identified related variables for assessing risk and making decisions to install lightning protection systems when designing new buildings or renovating existing ones. Additional Focus on Risk Assessment When considering lightning protection, federal agencies such as the Navy, VHA, GSA and USPS do typically use the NFPA’s Risk Assessment Methodology, found in the Annex L section of the NFPA’s 780 Standard for the Installation of Lightning Protection Systems, 2008 Edition. The Risk Assessment Methodology evaluates whether or not lightning protection should be installed for both new construction and renovation projects. The NFPA’s Risk Assessment Methodology is a guide that takes into account lightning and the following factors: • the building environment • type of construction • structure occupancy • structure contents • lightning strike consequences The risk index compares the expected direct strikes to the structure with the occupancy and contents to give an evaluation of whether lightning protection should be applied, or may be considered optional. The NFPA’s Risk Assessment Methodology traditionally has been used to assist the building owner or architect/engineer in determining the risk of damage due to lightning. Once the risk has been determined, deciding
on the need for protection measures is much easier. While the Risk Assessment Methodology is a good rule of thumb, sometimes the presence of a single risk factor is enough to render a structure a significant risk worth protecting. Historic buildings, healthcare facilities, industrial plants, schools and churches are often considered to be at high risk in terms of susceptibility to lightning losses. Often the cost of installing lightning protection is considered minimal as compared to the potential for risk.
Lightning Protection Glossary of Terms (As defined by the Lightning Protection Institute Standard of Practice–LPI-175/2004 Edition)
Authority Having Jurisdiction—The organization, office, or individual responsible for approving equipment, materials, and installation or procedure. Bonding—The permanent joining of metallic parts to form an electrically conductive path that will ensure electrical continuity and the capacity to conduct safely any current likely to be imposed. Cable—A factory assembly combining multiple conductor strands. Conductors—Devices defined by the Standard as suitable to carry lightning current. These may include strike termination devices, cables, lightning protection fittings, ground terminals, or metallic structural members. Fastener—A component or set of components used to securely attach materials to the structure. A fastener may also be a mechanical device, such as a rivet, bolt, screw, or pin that is used to securely hold two or more components together.
In Florida, the so-called Lightning Capital of the U.S., state building codes already mandate the installation of lightning protection systems for hospitals, healthcare facilities and nursing homes. Educational facilities in Florida are required to do a risk assessment. Lightning protection is also routinely installed on correctional facilities, EMS buildings, schools, hotels and telecommunications structures in Florida. Lightning protection systems are critical in protecting our national infrastructure, and various governmental agencies rely heavily on nationally recognized specifications for lightning protection. For more information, visit the Lightning Protection Institute (LPI) at www.lightning. org or the Lightning Safety Alliance (LSA) at www.lightningsafetyalliance.org. cA
Ground Terminal—The portion of a lightning protection system, such as a ground rod, ground plate or ground conductor that is installed for the purpose of providing electrical contact with the earth. Labeled—Equipment or materials to which has been attached a label, symbol, or other identifying mark of an organization that is acceptable to the authority having jurisdiction and concerned with product evaluation, that maintains periodic inspection of production of labeled equipment or materials, and by whose labeling the manufacturer indicates compliance with appropriate standards or performance in a specified manner. Lightning Protection System—A complete system of strike termination devices, conductors, ground terminals, interconnecting conductors, surge suppression devices and other connectors or fittings required to complete the system. Listed—Equipment, materials or services included in a list published by an organization that is acceptable to the authority having jurisdiction and concerned with evaluation of products or services, that maintains periodic inspection of production of listed equipment or materials, or service meets appropriate designated standards or has been tested and found suitable for a specified purpose. Strike Termination Device (Air terminal) —A component of a lightning protection system that intercepts lightning flashes and connects them to a path to ground. Surge Protective Device (SPD) —A device composed of any combination of linear or nonlinear circuit elements intended for limiting surge voltages on equipment by diverting or limiting surge current. Transient Voltage Surge Suppressor (TVSS) —A surge protective device listed for connection on the load side of the main over current protection in circuits not exceeding 600 volts rms.
Kim Loehr, a communications consultant for LPI, is a member of the NOAA Lightning Safety Awareness Team and NFPA’s Building Fire Safety Systems Section. She can be contacted at LLpco@aol.com
Zone of Protection—The space adjacent to a lightning protection system that is substantially immune to direct lightning flashes.
CLAIMS ADVISOR | SPRING 2008
Keeping Clients Rolling
In an emergency, acces can be tricky. Know the serve clients and manag 68
Identify the special requirements of your clients in wheelchairs before they need your services.
Accessible vehicle rentals are often less costly than medical transportation services.
Consider all variables when recommending wheelchair accessible vehicle rental agencies.
Understand the economic advantages of buying a used accessible van.
by Dale Richardson
When was the last time you thought about accessible vehicle rentals? If youâ€™re like most insurance professionals, the answer is probably rarely or never. Itâ€™s time to take a second look because knowing how to serve wheelchair-bound clients can help you not only strengthen relationships but manage costs as well. The option of renting a vehicle for clients rather than using a medical transportation service can be beneficial to all parties involved. Medical transportation services often charge the same amount, or more,
ssible vehicle rentals ins and outs to best ge costs.
per trip than the daily cost of renting a wheelchair accessible van. For example, daily rental rates can cost $100$130 per day while medical transportation firms usually charge $100-$150 per trip. For wheelchair-bound or scooter-using clients who are involved in auto accidents, accessible van rentals are the only option available while their vehicles are repaired. By renting, they gain flexibility in their schedules, donâ€™t have to wait for a driver to arrive, and can make multiple trips and appointments on the same day, thereby saving money in
CLAIMS ADVISOR | SPRING 2008
Rental rates can cost $100-$130 per day while medical transportation firms usually charge $100-$150 per trip
claims payouts. In addition, having their own transportation, even a rental vehicle, gives back a sense of control over their lives. Many wheelchair and scooter users end up buying their own accessible vehicles. New models of modified minivans run $45,000-$60,000 and full sized modified vans about $55,000-$75,000. But for those who are temporarily wheelchair-bound, newly handicapped or simply can’t afford to purchase their own vehicles, accessible rentals are an excellent option. Finding a company that understands the unique needs of your clients can be challenging. Some work exclusively with people who depend on wheelchairs and scooters to get around. Others may have owners, staff or family members who use wheelchairs, which provides an extra understanding of the unique needs involved. Vehicle and Chair Type Your first consideration is to determine the type of vehicle
your client needs, which is largely based on his or her chair type. Here are a few questions to ask: Does your client use a manual chair, a motorized (power) chair or a scooter? There are two major types of manual chairs: temporary chairs and high performance sports chairs. Temporary chairs are those used by the elderly or ill, with a caretaker to push them. These chairs tend to fold for trunk or rack storage. Active individuals, however, use high performance sports chairs and are more likely to drive themselves. These chairs do not collapse. Keep in mind that only a fraction of manual chairs are collapsible for transport; high performance chairs, motorized wheelchairs and scooters do not collapse. Also, motorized chairs and scooters can weigh 300 pounds or more. Accessible vans have ramps and/or lowered floors to allow wheelchair/scooter users to roll right in. Is your client the primary driver or a passenger? Some accessible vans are modified so that the wheelchair user can be the driver; some are designed only for wheelchair-bound passengers. If a manual chair user needs help getting in and out of his/her chair, a van rather than a car modified with hand controls would be recommended. How many people need to be transported, and how many are in chairs? There are now accessible vans that can hold several wheelchair passengers plus a wheelchair-bound driver. If your client will typically
be the only one in a chair and will have an able-bodied driver, a smaller van with different modifications is a more affordable option. Know the Industry Like any other industry, there is a wide range of quality among different service providers. Make sure to ask plenty of questions and choose a service-focused, highly experienced rental agency that you’re comfortable recommending to your clients. Ask how long they’ve been in business, how much they understand the needs of wheelchair users, the age of their fleet and what kind of services they offer. Fleet size can vary from location to location. Unlike major national rental agencies, most accessible van rental firms have fewer than 10 vans. You’ll want to make sure equipment is available for your client when needed. Remember that during peak periods agencies may sell out. Christmas, Thanksgiving, Mother’s Day and Father’s Day, are often booked weeks in advance. Along with the obvious holidays and long weekends, make sure you ask about other peak periods as those dates vary for each area. Accessible vehicle rental firms come in all shapes and sizes. Some are small, serving only a limited geographic area, while others have multiple locations covering many states. Accessible vehicles are specialized and those who are part of a national system have a leg up in meeting your client’s needs. For example, if your client is involved in an accident while traveling out of state, a national agency will have connections in other
CLAIMS ADVISOR | SPRING 2008
states and quickly can determine where to rent a van. Just as the number of vehicles available can differ from agency to agency, so can their condition. Select a company with a young fleet, e.g. vans under five years old and with less than 60,000 miles. Typical accessible vans are full-size or minivans that have been modified with ramps to allow wheelchair and scooter access, as well as wheelchair restraint tracks and belts to secure chairs in the van. Ask for specific details—model names, years, seating capacity and interior space —so that you can look at photos online and ensure your clients’ comfort and safety. As with any rental car, one size does not fit all. Some agencies offer vans with lowered floors to accommodate taller individuals using wheelchairs or scooters. Since many customers have companion animals, it’s a good idea to ask about the agency’s policy regarding pets. Service animals can never be denied access (Americans with Disabilities Act protection), but the family dog may not always be welcome. Service is Everything As in any industry, the level of service that is offered by different accessible van rental agencies varies greatly. Here are some factors to consider: • Understand delivery policies. Similar to car rental agencies, some smaller accessible van rental companies simply leave a van in a parking lot after providing instructions about where to find the keys.
Others will deliver the vans to a variety of locations depending on your client’s needs. There’s a world of difference between agencies whose employees park the van and leave the keys under the mat, and those whose staff will help with luggage and instruct companion drivers on using the ramp and securing the chair/scooter. You’ll want to find out what your clients can expect so there are no surprises. Know what kind of emergency services are offered so your clients know what kind of help they can expect. Accidents happen, whether it’s a fender-bender or a drained battery. Before your client needs help, find out if there is a 24/7 emergency number available and whether the agency will deliver another van.
Does it make more sense to buy? • There are times when buying an accessible van makes more economic sense than renting one, e.g. when physical therapy lasts two to three years after an accident. Often, insurance professionals are the first resource clients approach about where and what to buy. • To keep their fleet current, many rental agencies sell vans before 60,000 miles. These used vans are often a bargain for buyers or for insurance companies looking to replace “likefor-like” vans.
It’s a much safer bet to buy from a reputable national agency that regularly services its vans and has kept all service records, rather than looking in the newspaper classified ads or online. Buying a late model used van with low mileage (i.e. 15,000-39,000 miles) can cost $30,000-$38,000—a considerable savings. There is a lot to learn about the accessible vehicle rental industry and the needs of wheelchair and scooter users. Being knowledgeable about their concerns and necessities presents a great opportunity for you to help your clients gain mobility, freedom, and get to all their medical appointments as quickly as possible. Take
some time to get to know your local accessible vehicle rental agency. Find out what they offer and how they can work with you to help your business and your clients. A one-on-one conversation, a facility tour and even a ride in an accessible vehicle are all great ways to get answers before your clients cA need them. Dale Richardson is president of Wheelchair Getaways, a national franchise of rental wheelchair accessible vans, with 45 locations in 43 states. For more information, please visit www.wheelchairgetaways.com
CLAIMS ADVISOR | SPRING 2008
What makes you tick? Claims Adjusters have one of the most interesting and demanding jobs in the insurance industry. Here you get to tell us your story. What prompted you to become an insurance adjuster?
I was working in data entry at a non-standard auto insurance company and the job of an insurance adjuster sounded interesting. What type of adjuster are you? (e.g. inside or outside, auto, property, workers’ compensation, etc.)
Transportation claims. I started in the non-standard auto market in South Florida and I am now managing director of a Risk Retention Group and Director of Claims for the third party administrator. How long have you been in the business?
Over 20 years. What is the greatest challenge for you in dealing with the Insured?
I think the biggest challenge I face with our insured’s is to get them to understand their policy and what is covered. A very close second is to help them understand prompt reporting. How do you deal with the stress of the job?
I keep a positive attitude whenever possible. The tip that recommends smiling while you’re on the phone, I use it a lot. The thing that helps me the most is to try and always put myself in the place of the insured and/or claimant. What strategies have you employed to manage your e-mail?
I have given up hope!!! I receive over a hundred e-mails a day. I leave the e-mail in my inbox until I have dealt with it. Once the e-mail has been dealt with, I either put it in a folder or delete it (ideally). What type of training do you feel would help you perform more efficiently?
In my case, I think management training would be very helpful as well as technical training. I am very big on education for adjusters and all insurance personnel. We all need a refresher from time to time.
Do you see your company using fewer people and more decision making technology to handle claims?
No, we are a smaller company and the feeling of the company, and my own, is that people will always be more efficient at handling claims than the use of programs. I think technology is a good tool, but not a replacement for the human factor. Do you see your company adding more technology tools to help with the decisionmaking process?
Yes, I do. How has the nature of your work changed in the last 5-10 years and how do you foresee it changing in the future?
One of the biggest changes I have noticed is the use of computers, blackberries and teleconferencing. It has made it possible to do our job from outside the confines of our brick and mortar office. I see this aspect gaining more and more acceptance in the insurance adjusting industry. Where do you see the future pool of new adjusters coming from?
This is a great question and from a management perspective I can tell you that the availability of experienced adjusters is significantly waning. I think the future pool of new adjusters will be college graduates and the children of the baby boomers. What type of succession planning is your organization employing to ensure continuity as more of the “boomer” generation retires?
We try to train from within whenever possible. I like to give the newer adjusters a foot in the door. Do you work on Friday afternoon? What is your typical routine?
I wish I could say no, but I do work on Fridays. I have to admit, I don’t work as hard as I typically do Monday through Thursday. —Michelle C. , Transportation Claims Adjuster
Would you like to be the next “Interview”? Send an e-mail to firstname.lastname@example.org for more information. 74
by Gary Blake
Tips for Better Writing Although many people who work in the claims field spend more than 15 hours a week writing letters, memos and e-mail, many have never taken a writing seminar—or haven’t taken one since college. Here are responses to several of the most commonly asked questions I hear in my onsite seminar, Effective Writing for Claims Professionals. When is it OK to use “I” in business writing? Use “I” when you describe things you are doing or will do (e.g., “I am enclosing…”) as well as things you believe (e.g.,”I hope you have a great Christmas!”). What are five of the most old-fashioned words and phrases in correspondence? I think they must be “as per your request,” “enclosed please find,” “under separate cover,” “pursuant to our discussion” and “please do not hesitate to contact me.” Suggested substitutes: “At your request,” “enclosed is” [or “I’ve enclosed”], “separately,” “based on our discussion” and “please contact me.” Do I use a colon or a comma after a person’s name in the salutation? It depends. Use a colon when you address someone by a last name; use a comma if addressing your reader by his or her first name. Is there something wrong with closing a letter “Sincerely yours” or “Very truly yours”? Yes. You are not “sincerely theirs” or “very truly theirs”! These are old-fashioned closings. Just use “Sincerely” or “Regards” which are not old-fashioned. Should I tell the insured that I’m denying the claim at the beginning or the end of the letter? Perhaps both. Don’t be afraid to get to the point, even when the news is bad. At the beginning of the letter, you will summarize the news (e.g., We are denying your claims.”). At the end of the letter, you will show how the facts led to the bad news and, if you need to, you can elaborate on the decision. Is there something wrong with the phrase, “Thanking you in advance for your cooperation”? It is presumptuous. It is a poor way to persuade someone to do something for you. If someone has done something for you, by all means thank the person. But if you are trying to get someone to do something for you, thanking them in advance won’t persuade them. Use “please” for simple requests, but if you’re asking a mightier favor, it’s best to try to motivate the person to do it by reminding the reader “what’s in it for me?” To motivate a physician to do some paperwork involving an insurance claim, you might mention that their help will speed up resolution of the claim and, therefore, help the patient.
How do I know when I’m using jargon? It’s sometimes difficult to differentiate jargon (unnecessarily technical terms) from legitimate technical terms. Even if a term is legitimate (e.g., mitigate), it seems like jargon to an insured who may not be familiar with how the term applies to a claim. The same can be said for “subrogate.” And even acronyms that are used widely in health insurance (LTD, STD) or property/ casualty insurance (DOL, DOI) can seem like jargon. Therefore, spell out acronyms when you first use them (e.g., Date of Loss) and then, later on in the letter you can refer to the “DOL.” Is it OK to use contractions in business writing? Admittedly, teachers don’t always agree about this. I believe that contractions are fine, not colloquial, because they reflect the way we actually speak. We wouldn’t say “I cannot see you on Tuesday.” We’d say “I can’t see you on Tuesday.” Is it ok to start a sentence with a conjunction such as “and”? People differ about this. Those who say “no!” believe that by starting with a conjunction you are leading into a lengthy sentence fragment. While this, technically, is true, you are also reflecting the natural, breathy way that people actually speak. You will find sentences starting with “And” in many newspapers, magazines and books. While advertising and direct mail writers start sentences with conjunctions—and use sentence fragments—as a matter of course in their occupations, they have had influence on loosening up that language for the rest of us who were once taught that you “never start a sentence with a conjunction.” Is it OK to end a sentence on a preposition? Occasionally, yes, when the situation calls for it. Some sentences sound a lot better when they end in a preposition, but most sound awkward. For example, you wouldn’t write (or say): “Where is Johnny at?” or “Where are you going to?” But what would you do with this sentence: Which style and tone will the reader best respond to?” I hope you’ll agree that this sentence, when changed to avoid ending in a preposition (e.g. “To what style and tone will the reader best respond?”), sounds a good deal more awkward than the original sentence.
Gary Blake is director of The Communication Workshop. He is also an author and presents seminars on effective business writing for claims professionals. Blake may be contacted by visiting www.writingworkshop.com or e-mail at email@example.com.
CLAIMS ADVISOR | SPRING 2008
Property Loss Research Bureau / Liability Insurance Research Bureau
Claims Conference & Insurance Services Expo, Claims Conference Hotline, 630-724-2265, Sheraton Boston and Marriott Boston, Boston, MA, www.claimsconf.org 4/14-17
National Insurance Crime Bureau
NICB Mega Special Investigations Academy, Melitta Kewitz, firstname.lastname@example.org, 800-447-6282 (x7024), Belleview Biltmore Resort, Clearwater, FL, www.nicb.org 4/15
National Association of Mutual Insurance Companies
NAMIC Leadership Forum and Management School, NAMIC Member Services, 800-336-2642, The Renaissance Savery Hotel, Des Moines, IA, www.namic.org 4/15-16
National Insurance Crime Bureau
2008 National Cargo Security Summit, Tommy Bibb, tbibb@ marionso.com, 352-427-7772, Safety Harbor Resort & Spa, Safety Harbor, FL 4/16-18
Atlanta Claims Association Atlanta Claims Association Annual Convention, Roberta Williams, 404-851-3210, Gwinnett Center, Atlanta GA, www.atlantaclaims.com
Insurance Club of Pittsburgh I Day, Joyce Chezosky, insclubpgh@ comcast.net, 412-489-5626, Pittsburgh Hilton Downtown, Pittsburgh, PA,
2008 Disaster Restoration Contractor’s Conference and Trade Show, Information, darlene@DRCTradeShow.com, 905-820-5215, Seneca Niagara Casino and Resort, Niagara Falls, NY, www.drctradeshow.com
NYIA 2008 Annual Conference, Information, email@example.com, 518432-4227, Grand Island Resort, Grand Island, NY, www.nyia.org
Insurance Club of Pittsburgh
International Society of Appraisers
Annual Conference on Personal Property Appraising, ISA Office, firstname.lastname@example.org, 206-241-0359, The Tremont Grand, Baltimore, MD, www.isaappraisers.org
Workers’ Compensation Section of the Florida Bar & Workers’ Compensation Claim Professional
Florida Workers’ Compensation Forum, WCCP, contact@wccp. org, 800-642-7774, Walt Disney World Swan Resort, Lake Buena Vista, FL, www.wccp.org
National Truck & Heavy Equipment Claims Council
NTHECC Spring Meeting, Tom Fergus, email@example.com, 603-569-8910, Embassy Suites Outdoor World, Dallas, TX, www. nthecc.org
Risk and Insurance Management Society
Insurance Services Office, Inc.
RIMS 2008 Annual Conference & Exhibition, Registration Desk, 212-286-9292, San Diego Convention Center, San Diego, CA, www.rims.org
PCS Catastrophe Conference, Information, firstname.lastname@example.org, 800-888-4476, Hyatt Regency Savannah, Savannah, GA, www. iso.com
I.A.A.I. 59th ATC & General Meeting, Office Staff, 410-4513473, Denver Marriott Tech Center, Denver, CO, www.firearson.com
IASIU Annual Seminar, Tina Bowen, tina.bowen@vafb. com, 804-290-1162, Holiday Inn, Koger South Conference Center, Richmond, VA, www.iasiu.org
2008 Iowa-Nebraska IASIU Annual Training Seminar & Meeting, David Sullivan, david.sullivan.siu@ libertymutual.com, 888-497-0266, Baymont Inn and Suites, Des Moines, IA, www.iasiu.org
71st Annual NAIIA Conference, Brenda Reisinger, bareisinger@ comcast.net, 800-638-5066, Westin Resort, Hilton Head, SC, www.naiia.com
International Association of Arson Investigators
International Association of Special Investigation Units
IASIU, VA Chapter
National Association of Independent Insurance Adjusters
LLC,5th Annual National Property Subrogation Strategies ExecuSummit, Registration, email@example.com, 800-905-9357, Borgata Hotel Casino & Spa, Atlantic City, NJ, www.summit-02.com
Emerging Trends in Fraud Investigation and Prevention, Adam Featherling, afeatherling@ safeauto.com, 614-231-0200, Hyatt Regency, Columbus, OH, www.auditor.state.oh.us
State of Ohio
National Insurance Crime Bureau & Illinois Insurance Association
Illinois Insurance Fraud Summit, Mary Bons, mbons@nicb. org, 847-544-7086, Marriott Schaumburg, Schaumburg, IL
New York Insurance Association, Inc.
Public Risk Management Association
PRIMA 2008 Annual Conference, Information, info@primacentral. org, 703-528-7701, Hilton Anaheim/Anaheim Convention Center, Anaheim, CA, www. primacentral.org 6/2-5
National Fire Protection Association
NFPA World Safety Conference & Exposition, Registration Desk, 888-397-6209, Mandalay Bay Convention Center, Las Vegas, NV, www.nfpa.org 6/3-4
Property Loss Research Bureau / Liability Insurance Research Bureau
2008 Eastern Regional Adjusters Conference, Claims Conference Hotline, firstname.lastname@example.org, 630-724-2200, Tampa Convention Center, Tampa, FL, www.plrblirbregionals.com 6/4-7
Florida Defense Lawyers Association
12th Annual Florida Liability Claims Conference, Linda Jude, ljude@ fdla.org, 813-885-9888, Disney’s Contemporary Resort, Lake Buena Vista, FL, www.fdla.org 6/4-8
National Association of Insurance Women
NAIW (International) 67th Annual Convention, Information, email@example.com, 800-7666249, Westin Kierland Resort & Spa, Scottsdale, AZ, www.naiw. org
ALE Solutions, Inc.
Alternative Claims Services, Inc.
Arter Insurance Adjusters, Ltd
Campos & Stratis
Central Adjustment Company, Inc.
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Weather Decision Technology/Nimbus
inside back cover 24
Assoc of Workers’ Compensation Claims Professionals & Assoc of Property & Casualty Claims Professionals
17th Annual Claims Management Conference & Leadership Retreat, Association Headquarters, email@example.com, 800-6427774, Marco Island Marriott, Marco Island, FL, www.wccp.org 6/8-10
Western Claims Conference
24th Annual Western Claims Conference, Katie Cruz, kcruzus@ yahoo.com, Renaissance Esmeralda Resort, Indian Wells, CA, www. westernclaimconference.com
National Underwriter & Claims Magazine
12th Annual ACE America’s Claims Event, Laura Knox, firstname.lastname@example.org, 859-6922157, Renaissance Orlando Resort at SeaWorld, Orlando, FL, http:// cms.nationalunderwriter.com 6/19-20
Independent Automotive Damage Appraisers Association
43rd Annual Vehicle Repair Conference, John Williams IADA Executive VP, email@example.com, 800-369-IADA, Harrah’s, Las Vegas, NV, www.iada.org
17th Annual National Expert Witness Conference, Mail@seak. com, 508-548-7023, The Resort and Conference Center at Hyannis, Hyannis, MA, www.seak.com 6/22-25
National Association of Mutual Insurance Companies
NAMIC Management Conference, NAMIC Member Services, 800-336-2642, The Grove Park Inn Resort & Spa, Asheville, NC, www.namic.org
Society of Insurance Trainers and Educators
Annual SITE Conference 2008, Information, ed@insurancetrainers. org, 623-547-6401, Hyatt Regency Savannah, Savannah, GA, www. insurancetrainers.org 7/13-18
Association of Certified Fraud Examiners
19th Annual ACFE Fraud Conference and Exhibition, info@ ACFE.com, 800-245-3321, Hynes Convention Center, Boston, MA, https://eweb.acfe.com
CLAIMS ADVISOR | SPRING 2008
Claims Adjusters Have a Million Stories. What’s Yours? No Claim Zone?
For several years my territory included a small Mennonite community in the middle of the Kansas prairie. I found the Mennonites to be very hard working, salt of the earth-type people who enjoy modern conveniences but in a very toned down and modest way. In other words, the cars they drove and our company insured were basic transportation and never the color red. I was writing up an estimate on a Ford LTD (dark gray, of course) for a young Mennonite lady who had struck a deer. There was no doubt the damage was consistent with striking deer and some hair and dried blood remained as evidence. During the inspection I tried to make casual conversation by asking questions such as “How big was the deer?” “Was it a buck?” “Where did the accident happen?” etc. Suddenly the young lady burst into tears and said “OK, OK, I won’t lie. There was a yellow Deer Crossing sign! I know this shouldn’t be covered by my insurance.” She thought the claim would be denied because the deer was struck in a deer crossing zone and my casual conversation was meant to flush out the real truth about the accident. I quickly assured the sweet lady that her claim was indeed covered and I wasn’t trying to deny the claim because the deer was struck at the location of a Deer Crossing sign. Oh, by the way, I waived the $100 comprehensive deductible. —D. Mark, Commercial Lines Manager
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Newton’s Laws of And the Physics Motion of Fraud Is Less More? Protecting Medicare Interests
Unsure Motorist Coverage
A legal clinic in East Los Angeles sent us an inquiry about our insured’s unsure motorist coverage. I guess there are a lot of those in that area! —Chuck H., Claims Manager The Flu and a broken window
An elderly gentleman boarded one of our paratransit vans and was strapped in by the driver. The man claimed the driver told him he had the flu, but the driver said his allergies were just really bad that day. They continued on their route without any difficulties. A week later, the elderly man made a claim with the transit system stating that he caught the flu from the driver that fateful day and he was extremely sick at home. Shortly after, he fell to the floor and asked his wife to call 911 for help. For some reason the medics could not get into the home through the front door and entered by breaking a window. The man was treated and saved by the medics. Sometime that day he had his window replaced. His claim to the transit system? Repay him for the cost of the window! His claim was denied for a multitude of reasons. —Denise E., Claims Specialist mom worried about stoner’s priorities
Several years ago, I handled a house fire claim in a working class neighborhood for a family in Michigan. The fire was caused by a teenaged boy who had unwisely consumed some marijuana and became fixated on finding his cat, whom he thought was hiding from him. In his search, he lit a disposable cigarette lighter to illuminate the area under the bed since it was the middle of the night and too dark to see his black cat. Well, the thin lining under the box spring took no time at all to ignite and the fire damage to the house and contents was significant. The cat turned out to have been put outside earlier by another family member so he wasn’t even in the house at the time. I was astonished that the boy told me the entire truth about the cause of the fire. His mother later told me she made him tell me as part of making him live up to his responsibilities. She had no real concerns with his using drugs, but she was seriously mad about his lack of common sense in using a lighter under the bed. I don’t know about you, but I haven’t known many stoned teenagers to think clearly. I had to shake my head in wonder at her priorities. —Barbara H., Claims Adjuster Do you have an interesting or funny claims story? Tell us all about it! Send an e-mail to “Story” at firstname.lastname@example.org. Your tale may be the next story featured in Claims Advisor.
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They loved him like any other member of the family, Phew! As you might imagine, when it comes to challenging housing requests, weâ€™ve heard them all. Everyday we work with adjusters to find creative solutions to their toughest housing problems. So, the next time youâ€™re facing an unimaginable situation, think of ALE Solutions, your resident experts in temporary housing.
Published on Apr 7, 2008
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