Tag Archives: claims

How COVID Alters Claims Patterns

Claims trends and risk exposures are likely to evolve in both the mid- and long-term as a result of the COVID-19 pandemic. With the reduction in economic activity during lockdown phases, traditional property and liability claims have been subdued, most notably in the aviation and cargo sector, but also in many other industries, with fewer accidents at work, on the roads and in public spaces, according to a new report COVID-19 – Changing Claims Patterns from Allianz Global Corporate & Specialty (AGCS).

Estimates vary, but the insurance industry is currently expected to pay claims related to the pandemic of as much as $110 billion in 2020, according to Lloyd’s. AGCS alone has reserved about €488 million ($571 million) for expected COVID-19 claims, especially for the cancellation of live events and the disruption of movie or film productions in the entertainment industry. 

Surged and subdued

We have seen claims in some lines of business, such as entertainment insurance, surge during COVID-19, while traditional property and liability claims have been subdued during lockdown periods. There is still the potential for claims to occur as factories and businesses restart after periods of hibernation, and given the longer development patterns for third-party claims in casualty lines.

Claims notifications from motor accidents, slips and falls or workplace injuries slowed as more people stayed at home, and with the temporary closure of many shops, airports and businesses during lockdowns across the world. AGCS also noticed a positive impact on U.S. claims settlement from the suspension of courts and trials. 

Some claimants and plaintiffs have been more open to negotiating settlements out of court rather than opting to wait a long time until their case is scheduled – a trend also highlighted in another recent AGCS publication on liability loss trends. In general, claims activity is likely to pick up again following resumption of economic activity.

Property/business interruption 

Property damage claims were not significantly affected by COVID-19, as loss drivers such as weather are not correlated. However, as production lines restart and ramp up, there is risk of machinery breakdown and damage and even fire and explosion. With fewer people potentially onsite, inspections and maintenance may be delayed or loss incidents such as a fire or escape of water may be noticed too late, increasing the severity of damage. 

COVID-19 has caused business closures and disruptions globally – which often may not be covered in the absence of physical damage as a trigger of coverage. However, the pandemic has affected the settlement of standard business interruption (BI) claims in different ways. On one hand, factories in hibernation will not produce large BI claims, as many manufacturers, their and suppliers either shut down or scale back production. When a U.S. automotive supplier was hit by a tornado in the spring, the resulting business interruption loss was lower than it would have been during normal operations. Conversely, containment measures during lockdowns can lead to longer and more costly disruptions as access restrictions prevent effective loss mitigation and prolong the reinstatement period, as a fire and explosion at a chemical plant in South Korea demonstrated. 

Liability and directors & officers (D&O) insurance

To date, AGCS has only seen a few liability claims that are related to COVID-19. However, liability claims are typically long-tail, with a lag in reporting, so general liability and workers’ compensation claims related to COVID-19 may yet materialize. A number of outbreaks of coronavirus have been linked to high-risk environments such as gyms, casinos, care homes, cruise ships or food/meat processing plants. 

A wave of insolvencies, as well as event-driven litigation, could be potential sources of D&O claims. To date, only a relatively small number of securities class action lawsuits related to COVID-19 have been filed in the U.S., including suits against cruise ship lines that suffered outbreaks. The pandemic could trigger further litigation against companies and their directors and officers, if it is perceived that boards failed to prepare adequately for a pandemic or prolonged periods of reduced income. 

Aviation

The aviation industry has seen few claims directly related to the pandemic to date. In a small number of liability notifications, passengers have sued airlines for cancellations or disruptions. Slip and fall accidents at airports – traditionally one of the most frequent causes of aviation claims – have declined along with the massive reduction in global air traffic, which fell by a record 94% year-on-year in April 2020. 

See also: COVID-19 Sparks Revolution in Claims

Although a large proportion of the world’s airline fleet has been grounded, loss exposures do not just disappear. Instead they change and can create new risk accumulations. For example, grounded aircraft might be exposed to damage from hurricanes, tornados or hailstorms. The risk of shunting or ground incidents also increases and can result in costly claims.

Long-term claims trends 

COVID-19 is accelerating many trends such as a growing reliance on technology and rising awareness of the vulnerabilities of complex global supply chains. Going forward, many businesses are expected to review and de-risk their supply chains and build in more resilience. This could involve some reshoring of critical production areas because of disruption caused by the pandemic. Such a move would likely affect frequency of claims and the costs of any future business interruptions.

Meanwhile, the growth of home working means that companies may have lower property assets and fewer employees onsite in the future, but there would be corresponding changes in workers’ compensation and cyber risks. During the pandemic, cyber risk exposures have heightened, with reports of the number of ransomware and business email compromise attacks increasing. However, to date, AGCS has only seen a small number of cyber claims that are related to COVID-19. 

For additional insights, please visit COVID-19: Changing Claims Patterns.

How ‘Explainable AI’ Changes the Game

Artificial intelligence (AI) drives a growing share of decisions that touch every aspect of our lives, from where to take a vacation to healthcare recommendations that could affect our life expectancy. As AI’s influence grows, market research firm IDC expects spending on it to reach $98 billion in 2023, up from $38 billion in 2019. But in most applications, AI performs its magic with very little explanation for how it reached its recommendations. It’s like a student who displays an answer to a school math problem, but, when asked to show the work, simply shrugs.

This “black box” approach is one thing on fifth-grade math homework but quite another when it comes to the high-impact world of commercial insurance claims, where adjusters are often making weighty decisions affecting millions of dollars in claims each year. The stakes involved make it critical for adjusters and the carriers they work for to see AI’s reasoning both before big decisions are made and afterward so they can audit their performance and optimize business operations.

Concerns over increasingly complex AI models have fired up interest in “explainable AI” (sometimes referred to as XAI,) a growing field of AI that asks for AI to show its work. There are a lot of definitions of explainable AI, and it’s a rapidly growing niche — and a frequent subject of conversation with our clients. 

At a basic level, explainable AI describes how the algorithm arrived at the recommendation, often in the form of a list of factors that it considered and percentages that describe the degree that each factor contributed to the decision. The user can then evaluate the inputs that drive the output and decide on the degree to which it trusts the output.

Transparency and Accountability

This “show your work” approach has three basic benefits. For starters, it creates accountability for those managing the model. Transparency encourages the model’s creators to consider how users will react to its recommendation, think more deeply about them and prepare for eventual feedback. The result is often a better model.

Greater Follow-Through

The second benefit is that the AI recommendation is acted on more often. Explained results tend to give the user confidence to follow through on the model’s recommendation. Greater follow-through drives higher impact, which can lead to increased investment in new models.

Encourages Human Input

The third positive outcome is that explainable AI welcomes human engagement. Operators who understand the factors leading to the recommendation can contribute their own expertise to the final decision — for example, upweighting a factor that their own experience indicates is critical in the particular case.

How Explainable AI Works in Workers’ Comp Claims

Now let’s take a look at how explainable AI can dramatically change the game in workers’ compensation claims.

Workers comp injuries and the resulting medical, legal and administrative expenses cost insurers over $70 billion each year and employers well over $100 billion — and affect the lives of millions of workers who file claims. Yet a dedicated crew of fewer than 40,000 adjusters across the industry is handling upward of 3 million workers’ comp claims in the U.S., often armed with surprisingly basic workflow software.

Enter AI, which can take the growing sea of data in workers’ comp claims and generate increasingly accurate predictions about things such as the likely cost of the claim, the effectiveness of providers treating the injury and the likelihood of litigation.

See also: Stop Being Scared of Artificial Intelligence

Critical to the application of AI to any claim is that the adjuster managing the claim see it, believe it and act on it — and do so early enough in the claim to have an impact on its trajectory.

Adjusters can now monitor claim dashboards that show them the projected cost and medical severity of a claim, and the weighted factors that drive those predictions, based on:

  • the attributes of the claimant,
  • the injury, and
  • the path of similar claims in the past

Adjusters can also see the likelihood of whether the claimant will engage an attorney — an event that can increase the cost of the claim by 4x or more in catastrophic claims.

Let’s say a claimant injured a knee but also suffers from rheumatoid arthritis, which merits a specific regimen of medication and physical therapy.

If adjusters viewed an overall cost estimate that took the arthritis into account but didn’t call it out specifically, they may think the score is too high and simply discount it or spend time generating their own estimates.

But by looking at the score components, they can now see this complicating factor clearly, know to focus more time on this case and potentially engage a trained nurse to advise them. Adjusters can also use AI to help locate a specific healthcare provider with expertise in rheumatoid arthritis, where the claimant can get more targeted treatment for a condition.

The result is likely to be:

  • more effective care,
  • a faster recovery time, and
  • cost savings for the insurer, the claimant and the employer

Explainable AI can also show what might be missing from a prediction. One score may indicate that the risk of attorney involvement is low. Based on the listed factors, including location, age and injury type, this could be a reasonable conclusion.

But the adjuster might see something missing. They adjuster might have picked up a concern from the claimant that he may be let go at work. Knowing that fear of termination can lead to attorney engagement, the adjuster can know to invest more time with this particular claimant, allay some concerns and thus lower the risk the claimant will engage an attorney.

Driving Outcomes Across the Company

Beyond enhancing outcomes on a specific case, these examples show how explainable AI can help the organization optimize outcomes across all claims. Risk managers, for example, can evaluate how the team generally follows up on cases where risk of attorney engagement is high and put in place new practices and training to address the risk more effectively. Care network managers can ensure they bring in new providers that help address emerging trends in care.

By monitoring follow-up actions and enabling adjusters to provide feedback on specific scores and recommendations, companies can create a cycle of improvement that leads to better models, more feedback and still more fine-tuning — creating a conversation between AI and adjusters that ultimately transforms workers’ compensation.

See also: The Future Isn’t Just for Insurtech

Workers’ comp, though, is just one area poised to benefit from explainable AI. Models that show their work are being adopted across finance, health, technology sectors and beyond.

Explainable AI can be the next step that increases user confidence, accelerates adoption and helps turn the vision of AI into real breakthroughs for businesses, consumers and society.

As first published in Techopedia.

Six Things Newsletter | August 18, 2020

Are Sharknados Next?

Paul Carroll, Editor-in-Chief of ITL

Many years ago, when I watched “Biloxi Blues,” the Neil Simon play about a young draftee suffering through basic training in Biloxi, Mississippi, I laughed hard at the way actor Matthew Broderick whined the line, “Man, it’s hot. It’s like Africa hot. Tarzan couldn’t take this kind of hot.”

I’m not laughing now. I can’t swear that Tarzan couldn’t take the “kind of hot” we’re experiencing in California, but I’m certainly struggling. The high temperatures in the Central Valley have exceeded 110 for several days now and are expected to be between 100 and 110 for as far as the eye can see on weather forecasts. Even in the Lake Tahoe area, where I’ve spent many a pleasant summer, temperatures are so high and wood so dry that four fires have produced the Reno, Nev., weather station’s first report of fire tornados — they literally turned into tornados of flame and laid waste to tens of thousands of acres.

What’s next? Sharknados? And what, if anything, can we do?… continue reading >

Winning With Smart IoT in P&C

Brett Jurgens, CEO and co-founder

What if I told you that insurers could attract customers with smart home devices that generate interaction seven to 10 times A DAY?

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SIX THINGS

COVID: Chance to Rethink Work Comp
by Karlyn Carnahan

As insurers worry that the pandemic is depressing premiums, here is a way to rethink workers’ comp — and two entirely new product ideas.

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Why COVID-19 Must Accelerate Change
by Alex Zukerman

According to a survey, insurers are 50% behind consumer demand for service via online chat and 25% behind on service via website.

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COVID-19 Sparks Revolution in Claims
by David Lupinsky

The pandemic has pushed workers’ comp toward telehealth, which is revolutionizing the claims process in four key ways.

Read More

Sponsored

Optimizing Care with AI in Workers Comp Claims


In workers’ compensation, we’ve all seen seemingly basic claims morph into catastrophic claims.This free on-demand webinar, sponsored by CLARA analytics, lays out a tangible solution that realizes the promise of AI.

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5 Hurdles to Insurtech Success
by Bob Frady

Here are five things that stand between insurtechs and success — but, please note, your mileage may differ.

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Watch for This 1 Word on Customer Needs
by Jon Picoult

Use this simple technique to uncover customer needs, drive innovation in customer experience and keep your business ahead of the curve.

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An Inconvenient Sales Truth
by Kevin Trokey

It is no longer enough to show up with a fancy spreadsheet, promises of better service and a capabilities presentation.

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COVID-19 Sparks Revolution in Claims

While coronavirus news is often bleak and sometimes downright depressing, there may be a silver lining for claims management. The global pandemic has pushed the importance of virtual care and claims management technology to the forefront. It has ignited a fire in the workers’ compensation industry, inspiring companies to find ways to quickly identify and safely treat cases, while minimizing the spread of the virus. 

COVID-19 has revealed the importance of a claims management process that is transparent, data-driven and accessible to all stakeholders. From expanded telehealth options to the newest technology in claims management, including integrated platforms and patient-focused tools, the workers’ compensation industry is evolving. 

The future of claims management and virtual care leverages innovative technologies and artificial intelligence, and it is catching fire across the industry. Here are some examples of the revolutionary trends in claims management:

#1. Telehealth is HOT

While telehealth was introduced for workers’ compensation cases about six years ago, the journey to adoption has been slow and bumpy as employers and injured workers were hesitant to make the virtual leap. Before the pandemic, only 8% of Americans had ever used telemedicine, but that changed almost overnight with some medical providers reporting up to 95% of post-COVID-19 patient visits now being conducted virtually.  

Telehealth allows injured workers to quickly connect to providers via telephonic evaluations and video visits. Injured workers can be seen much faster, especially those who may be remote, at a distance from existing medical facilities, or working during off hours. 

Since its introduction, telehealth has significantly improved workers’ compensation management and the care of injured workers. According to CorVel, a national provider of risk management solutions that was among the first to launch telehealth services in workers’ compensation, data measuring the impact of telehealth programs over a five-year period showed:

  • Treatment wait times have been reduced from an average of two hours to 10 minutes
  • Treatment costs have been reduced anywhere from $100 to $850 per visit, depending on the specialty, with improved quality of care
  • The number of unnecessary medication prescriptions has been reduced by nearly 50%
  • Patient satisfaction rates have improved from 3.65 to 4.8 on a scale of 1 to 5

See also: COVID: Agents’ Chance to Rethink Insurance

#2. As COVID-19 Rages, Telehealth Expands to Create End-to-End Solutions

As private insurers and public health programs, including Medicare and Medicaid, are now providing reimbursement for remote office visits, at-home patient monitoring and physician-to-physician consults, it is clear that telehealth is here to stay. However, COVID-19 has forced us to move past traditional telehealth to address the full episode of care—from beginning to end. 

Expanded virtual care solutions provide the ability to engage the injured worker, treat the injury or illness and manage care remotely, minimizing the risk for all parties involved. From initial injury or exposure to return to work, virtual services are playing a role to ease the process for claims management professionals, employees and payers and the injured worker:

  • From the first moment of an injury or exposure, communication is critical, especially in the midst of a pandemic. Virtual 24/7 nurse triage is being used more than ever to connect injured workers with a registered nurse for immediate medical evaluation and care direction. Companies have also implemented special hotlines for employers and employees who present with COVID-19 symptoms or who need additional information. 
  • After being screened by a triage nurse, telehealth connects injured workers with a provider through a virtual visit via a computer or smart device. The virtual visit facilitates more immediate care for remote workers or those who are required to shelter in place. Patients who need testing are directed to a provider who manages the process to minimize the potential for infection and the possible spread of the disease. Follow-up protocols are being put in place for infected patients, making sure they get support and education throughout the incubation period. Remote care and communication ease this process and keep employees and providers safe.
  • Injured workers’ with more complex care or continuing needs can also benefit from virtual services, including rehabilitation by telehealth, video medical visits, home delivery of prescriptions and durable medical equipment and coordination of any diagnostic testing to aid a rapid return to work and minimize exposure to the virus. 
  • When it’s time to return to work, virtual services help companies perform employee assessment screenings and provide education to promote a safe workspace based on CDC guidelines. 

#3. Connecting the Dots: Integrated Claims Management and Artificial Intelligence

While telehealth has made major strides during the pandemic, it is the combination of big data, artificial intelligence and telehealth that is now delivering new improvements in care and claims management. An integrated platform with the ability to manage the full episode of care through one system simplifies workflows, allowing claims professionals more time to focus on the injured worker, while delivering patient-centered engagement, and prompt, open communication for all stakeholders

The application of artificial intelligence combined with big data can catch potential flags and danger signals much faster than a busy claims professional reading reams of text and reports. Leveraging big data and artificial intelligence overcomes the hurdle of significant delays before relevant data is identified, analyzed and acted upon. By quickly analyzing multiple data streams to identify specific patterns and flag potential snags, AI-driven analytics can provide an early warning system that gives claims handlers, case managers, and medical providers actionable information to speed up and smooth out the claims resolution process and ensure that the patient gets the best care, reducing the likelihood of complications, friction and a costly and drawn-out claim.

Instead of spending hours reading through notes and documents to get a picture of the injured worker’s progress, a direct communication alerts stakeholders to a development in the injured workers’ condition that needs immediate attention. 

For case managers and claims adjusters, the ability to automatically identify problems that would have required hours of searching for in notes and files is a huge boon to their efficiency and job satisfaction. Now, they can focus on problem-solving for the injured worker versus being consumed by data and paperwork. 

  • One example of how prescriptive analytics is being used is to evaluate the morphine equivalency of a patient’s medications to detect emerging problems. When a certain threshold is reached, the claims professional receives an automated notice in real time, allowing for immediate intervention to find safer options for pain management. Pairing this will telehealth allows us to offer a biopsychosocial solution for care management versus just the bio-medical model.  

#4 Technology With Heart

To improve case management even further, companies are finding ways to put the thought process of nurses and claims experts at the center of technology. This unique case management codification is changing how claims are managed and improving the claims management process for nurses, claims management professionals, employers and the injured workers. 

Traditional case management reporting has been notorious for voluminous documentation outlining the status and activity of the case manager, requiring the reader to dedicate hours of reading only to try to decipher the significant details and navigate through the medical jargon and abbreviation contained within the report. The value of case management was measured more on words per page versus actual interventions and outcomes.

New codification, leveraging the nurses’ thought process, gives claims professionals the information needed to act quickly without the lengthy process of reading through extensive notes and documentation. It identifies risk and flags potential snags, providing an early warning system that provides actionable information to speed up and smooth out the claims resolution process and ensure that the patient gets the best care. Instead of spending hours reading through notes and documents to get a picture of the injured worker’s progress, claims managers can get direct communication alerting them to a development in the injured workers’ condition that needs immediate attention.

  • For example, codification can alert the claim administrator of pain that is preventing the injured employee from returning to work. The platform immediately notifies the claim administrator when an injured worker is expected to recover but is experiencing decreased function due to pain. Actions are recommended based on data entered by the nurse case manager. This allows the claims administrator to promptly address potential issues that may impede restoration of  the injured worker’s comfort and function. The prompt response can help the employee heal and get back to work as quickly as possible. 

This innovative technology reduces disability duration, improves return-to-work and stay-at-work outcomes and lowers claims costs like never before. In fact, cases referred less than 30 days from date of injury result in 30% higher savings on average, and litigation rates are decreased about 50% when cases are referred to case management within the first 7 to 30 days.

See also: The Case for Paying COVID BII Claims  

What’s Next?

COVID-19 is a reminder that behind every claim is an incredibly valuable worker who needs attention from the first moment an incident occurs. With innovative integrated technologies, we have the ability to keep workers safe and provide exceptional care by leveraging virtual tools and enabling end-to-end care. As telehealth has risen to the forefront during this crisis because of its ability to provide the best care possible at any time and from any location, it is also inspiring several other advancements that will enhance patient care, including:

  • Patient specificity, matching patients with the “right provider,” is on the rise and already being implemented to provide Spanish-speaking workers with a Spanish-speaking nurse and provider. At CorVel, this patient specificity matching is already happening for 85% of Spanish-speaking injured workers. In the future, telehealth will allow us to analyze the specific needs of a patient and then match that patient with the right provider for the case. 
  • Second opinions via telehealth allow us to confer with some of the top specialists in the country, who have no financial interest in the outcome, in order for the patient to make the best care decisions. Anyone who has been through a surgery has seen that the shared decision making on the risk-reward of the procedure is handed to you on a clip board as you are about to be wheeled into the OR. Having an expert second opinion will help guide treatment decisions and put the patient’s mind at ease.
  • As telehealth is expanding to specialists so are the peripheral devices designed to support care in this medium. A great example is the use of Tyto-care, which connects to a smart phone to allow pediatrics to see inside the patient’s ear or throat remotely. As demand for telehealth increases, we can expect to see more FDA-approved devices available to support virtual care.   

Telehealth will remain a critical tool for managing workers’ compensation cases even after COVID-19 because of its ability to reduce costs, improve satisfaction, and keep workers safe. This combination of virtual services to manage care remotely, patient-centered engagement and prompt, open communication for all stakeholders is changing the way claims are managed and is the future of claims management.

Claims and Effective Risk Management

The cost of claims has been at the heart of Total Cost of Risk (TCOR) since even before the inception of risk management as a separate function. The sheer magnitude of losses, insurable or not, defines so much of what risk managers focus on and tends to be what they report on most often, as well. The nature of mature and, by inference, effective risk management programs has claim management as a key focus. While risk maturity is directly correlated with risk effectiveness, this latter term encompasses a much broader perspective on things that matter. 

Not surprisingly, many components of risk management maturity have some connection to effective claim management. Accordingly, it is appropriate to understand what these components are and how they dovetail with a more comprehensive view into effective risk management. Admittedly, this perspective relates most to the traditional practice of risk management, focused on hazard risk, but failure in this realm will likely point to failure in other areas of risk management.

Components of Risk Discipline 

To instill risk discipline, and, by extension, maturity into claim management, one must set the tone for effectiveness across the spectrum of risk management activities and significantly feed overall risk management performance. This tone will influence the ability of risk leaders to act as “trusted advisers” to organizational decision makers. This should be a key goal for risk leaders, critical to long-term effectiveness and functional sustainability.

The starting point for this subject is two key things. First, how one defines “risk” and drives a consensus among key stakeholders about that definition. Claims are, of course, the outgrowth of risk and exposure. This direct relationship is the essence of why claims and effective claims management have a direct relationship to effective risk management. Whether this aspect of the discipline gets done by insurers (as part of the insurance contract), insureds (as a part of a self-administered claim operation) or through third parties (independent adjusters, third party administrators etc.) makes little difference. Effective claim management feeds effective risk management.

The second issue is both which risks are your focus and where on the loss curve they fall. This may sound simple, but the reality is that many risk leaders have responsibilities for only a portion of the risks that organizations face; often only the insurable risks. If that’s the case, the need to focus on claim management is clear; one leads to the other.

The Basics of Effective Risk Management Maturity

If you are a risk leader with broad accountability for risks, then the first question of “what is a risk to your firm?” requires total clarity. For the purposes of this article, a good definition of risk is “uncertainty” as it relates to the accomplishment of objectives. This simple definition captures the most central element of concern — uncertainty. However, the real challenge is determining the amount of uncertainty (such as frequency/likelihood), as well as the level of impact or severity. Each risk leader must make this choice and get it validated by his or her organization.

While many leaders focused on hazard risk look at risks at actuarially “expected” levels of loss, the challenge is how far out on the tail one should manage. While the possibility of loss becomes increasingly remote as you move out toward the tail of the curve, the impact of events becomes more destructive. Because the magnitude of loss in this realm can be catastrophic, the importance of both preventing and mitigating these events and their impact becomes critical. Central to after-loss mitigation is the claim management process. Related key questions that every risk leader must answer include:

  • What matters more to your organization: likelihood or impact, or are they equal?
  • What level of investigation should you apply to less likely risks?
  • How do we apply typically limited resources to remotely likely risks?
  • Do you have a consensus among key stakeholders as to what risks to focus on and how?
  • Do you have or need an emerging risk identification process?
  • Do you have a consensus on and clear understanding of how you define risk in your organization?
  • Have you educated your organization on the correlations between losses, claims and risk effectiveness?

These questions are the starting point for ensuring risk management maturity. From your answers to these questions, you can chart your course for what this will mean to your firm. The answers will define the process elements of maturity that will be needed to achieve your desired state. But we need to define what risk maturity is to track progress toward this state and to ensure that stakeholders are aligned around the chosen components necessary to get there. Understanding the attributes of claims and risk maturity includes:

  • Managing exposures to specifically defined appetite and tolerances;
  • Management support for the defined risk culture that ties directly to the organizational culture;
  • Ensuring disciplined risk and claim processes aligned with other functional areas;
  • Creating a process for uncovering the unknown or poorly understood (aka emerging) risks;
  • Effective analysis and measurement of risk and claims both quantitatively and qualitatively; and,
  • A collaborative focus on a resilient and sustainable enterprise, which must include a robust risk and claim strategy.

See also: Future Is Already Here in Claims

Examples of Risk Management Maturity Models

One thoroughly developed risk management maturity model (RMM) comes from the Risk Management Society (RIMS). While it was developed some 10 years ago, it remains a simple, yet comprehensive view of the seven most important factors that inform risk maturity. When well implemented, these components should drive an effective approach to managing all risk within your purview. 

The components of the RIMS RMM model include:

  • Adopting an enterprise-wide approach that is supported by executive management and that is aligned well with other relevant functions;
  • The degree to which repeatable and scalable process is integrated in the business and culture;
  • The degree of accountability for managing risk to a detailed appetite and tolerance strategy;
  • The degree of discipline applied to using the elements of good root cause analysis;
  • The degree to which a robust emerging risk process is used to uncover uncertainties to goal achievement;
  • The degree to which the vision and strategy are executed considering risk and risk management; and,
  • The degree to which resiliency and sustainability are integrated between operational planning and risk process.

Like all risk management strategies, no two are exactly the same, and there is no one way to accomplish maturity. Importantly, every risk leader needs to do for his or her organization what the organization needs and will support. 

Of course, RIMS is not the only source of risk maturity measurement. Others, including Aon, offer other criteria. Aon’s model includes these components:

  • Ensuring the board understands and is committed to the risk strategy;
  • Effective risk communications;
  • Emphasis on the ties among culture, engagement and accountability;
  • Stakeholder participation in risk management activities;
  • The use of risk in/formation for decision making; and,
  • Demonstration of value.

This is not to say that the RIMS model ignores these issues, they simply take a different emphasis between the models. 

Another model worth considering is from Protiviti’s perspective on risk maturity as it relates to the board of director’s accountability for risk oversight. A few highlights of the perspective include:

  • An emphasis on the risks that matter most;
  • Alignment between policies and processes;
  • Effective education and use of people and their place in the organization;
  • Ensuring assumptions are supportable and understood;
  • The board’s knowledge of asking the right questions; and,
  • Understanding the relationship to capability maturity frameworks.

Certainly, good governance is critical to ultimate success, and the board’s role in that is the apex of that consideration. If the board is engaged and accountable for ensuring their risk oversight responsibility is effectively executed, the successful execution of the strategy is likely and, by inference, risk and related claims will have been effectively managed, as well.

Another critical aspect of the impact of risk and claims that should not be overlooked is their impact on productivity. If productivity is directly related to people’s availability to work, then we can quickly agree that risks produce losses that affect both people and property, oftentimes together. We can readily agree that impacts to productivity are a frequent result of losses and the claims they generate. Further, productivity impacts are not just limited to on-the-job injury. Every car accident, property loss or general liability loss that includes personal injury has implications for productivity, in either the workplace or outside of the workplace. As a result, it behooves all risk and claim leaders to execute their roles by aligning their interests and driving their focus.

Finally, a few fundamentals that are important to understand in execution of these goals include understanding that:

  • how you handle claims will directly affect not just your TCOR but your overall risk management capability and effectiveness; 
  • there is no one right approach to managing claims or risks; each organization must chart its own course aligned with its culture and priorities;
  • risk and the claims they can generate must be treated as an integral aspect of organizational strategy;
  • risk and claim management should be a focus on additive value; and,
  • risk and claim maturity have shown that better results are achieved as a result.

See also: How Risk Managers Must Adapt to COVID

In its simplest form, risk management is about preventing (or, on the upside, leveraging), financing and controlling risk and loss. Effective risk management is dependent on many elements, not least of which is effective claims management. And while claims are naturally focused on negative events that have already occurred, this activity is centrally critical to comprehensive, effective risk management.

How you prioritize claims and related activities will have significant effects on how you can contribute to organizational success. Doing both well will enable both risk and claim management effectiveness, demonstrated by measurable maturity.