Tag Archives: claims

How AI Can Stop Workers’ Comp Fraud

Wondering how AI can help detect medical provider scams? Wonder no more.

Artificial intelligence (AI) is redefining work in nearly every industry thanks to the increase in accuracy, efficiency and cost-effectiveness that AI-based applications offer. One of the latest industries to benefit is insurance, where applications are now being deployed to help detect and reduce provider fraud through advanced predictive tools. Claims payers identify fraudulent providers early in the life of a claim and root out bad actors while saving organizations millions of dollars.

The Fraud Problem

Fraud involves deliberately presenting false information to extract a benefit. The most common examples of provider fraud include “phantom billing” (billing for services not rendered), submitting bills for more services than are possible in a provider’s day, providing services unrelated to the injury, using unlicensed or non-credentialed individuals to provide medical services, getting paid kickbacks in exchange for sending patients to third parties and referring patients to entities (such as laboratories or testing facilities) in which the provider has an ownership interest.

While most providers do not engage in fraud, those that do are extremely costly. According to the National Insurance Crime Bureau (NICB), workers’ compensation medical fraud costs approximately $30 billion per year in the U.S. alone.

Fraudulent provider behavior is hard to detect and prove, particularly in workers’ compensation data systems. Advanced data analytics based on AI, however, offers opportunities to overcome the inherent weaknesses in these systems while developing methods to identify and curb provider fraud. Let’s take a look.

Fragmentation of Payers

One of the biggest issues in provider fraud is that no one organization has more than 5% of workers’ compensation market share, so none can see the entire picture of a provider’s claims. This can cause a whole host of issues. For example, if one company has identified a fraudulent provider, other companies may not have this information and continue payments. In states where fraud information is publicly available, providers simply begin practicing in other states, avoiding the state that sanctioned them.

Using AI tools, however, organizations can tap into multipayer pools of aggregate information to spot fraudulent patterns quickly and reliably without compromising payer, employer and employee information. It also makes it easier to flag and curb behavior across a multipayer database.

See also: Untapped Potential of Artificial Intelligence

Inaccurate Provider Identification

The constantly changing complexity of provider identification is another major challenge. Data is often tied to names. Fraudulent providers know this system weakness and frequently change their organization names and addresses as well as other identifiers.

Using AI, data scientists can now reliably link multiple bills from the same provider using a National Provider Identifier (NPI) developed by the Centers for Medicare and Medicaid Services (CMS). Almost all providers have an NPI, and some have more than one. When supplemented with taxpayer identification (FEIN) numbers and license numbers, NPIs can reliably identify 95% of medical providers. As a result, machines can overcome the name game, detecting the long-term, multiyear activities of almost all providers and provider organizations.

Long Lag Times

The interval between when an instance of fraud occurs and when it is detected is often several years. For example, a provider may submit a bill on day one for services unrelated to the injury; the bill will be submitted for review 30 days later and will likely be paid in another 30 days. This practice will be repeated dozens of times by the same provider on the same patient over the course of months. If fraud is detected, the provider will have already been paid, and financial recovery is difficult.

To combat this problem, AI can detect the entire course of treatment on the same claim from the first through subsequent billings over multiple years. Software tracks the diagnoses and the number of procedure codes billed by the same provider on the same claim — per day, per month and per year. As a result, claims staff receive real- time alerts and can intervene when a fraudulent provider initiates treatment on a claim.

Complex Provider Supply Chains

The entire fraud supply chain often includes attorneys, medical providers, outpatient and inpatient facilities, interpreters, testing facilities, medical device suppliers, pharmacies, copy services and transportation services. Unless data sets capture all or most of these moving parts, the chance of detecting fraudulent patterns is very difficult.

With AI, it’s getting a lot easier. Data scientists can use aggregated data to track sequences of out-referral and in-referral, exposing links between fraudulent individuals and entities. Sophisticated techniques isolate consistent and repeatable patterns of relationships between multiple providers and third parties. Data scientists then can graphically display suspicious network clustering patterns inherent in fraud networks.

And these are just a few examples of how AI tools can greatly increase the detection of fraud.

See also: Impact of COVID-19 on Workers’ Comp

Defining the Future of Claims

AI differs from more traditional research approaches because it can generate its own rules to detect fraud and look across large data sets nearly instantly. Via machine learning, databases are continually refreshed, becoming smarter and more effective all the time. By incorporating AI-based solutions, insurance payers can defeat fraud at a systemic level and realize significant financial benefits in return.

As first published in The CLM.

Claims Industry Set for Telecommuting

Insurance carriers and claim professionals deal with various catastrophes each year, so it was only fitting that when COVID-19 struck they were some of the first prepared to revert to “emergency work from home mode.”

With many other industries trying to determine how (and if) their workers can take on remote duties, the insurance world led the way with flexibility and (for the most part) ordered adjusters to telecommute so they would not miss a beat of their daily workload. 

This trillion-dollar industry is fairly secure in most crises (the popular mantra being that “everyone needs insurance.”) Understood are the IT capabilities needed in advance and the supervisor’s faith in employees, as they’ve been doing this sort of thing for years. It was as easy as a keystroke from insurance upper management to keep workers from driving to their respective claim centers with their laptops and instead plugging in at home and being ready to go. 

Some insurance companies were first to respond in the U.S. by canceling all in-person (unnecessary) meetings and going virtual. They left some of their fellow businesses they share office space with in the dust as those other companies continued to mull over their options (or until the point of being bound by local government orders). Carriers have, for the most part, been eager to protect their workers from risk (isn’t that what insurance is known for?) A possible hazard to staff meant a swift and immediate decision to work from home. 

Many carriers have realized the benefits of this arrangement, and even that many employees may put in more hours when working at home, saving themselves a tiresome commute (the average worker in the U.S. commutes over four hours a week, and some high-traffic areas require much more than that). 

See also: Moral Imperative for the Insurance Industry  

Most carriers also subscribe to the notion of in-office safety, encouraging those who are sick to work remotely, whereas some organizations may suggest workers come in or otherwise use a paid time off (PTO) day (few employees are pleased with that option as the average PTO days per year that Americans receive are quite low compared with other countries – another conversation, however!).

Many articles have been recently published with “work from home” tips; below are some of the more applicable to insurance industry professionals:

IF Insurance has penned a column called “How to work from home safely and efficiently?” It discusses an important topic in claims as it suggests that “Remote work provides several benefits, such as the possibility to focus deeply on specific tasks that require uninterrupted concentration.” For that large litigation claim file with extensive injuries, this makes much sense; fewer interruptions makes it easier to focus on complex claims. Some other useful tips of the article include letting family members know you need to work in peace and keeping an eye on ergonomics and the setup at home (is that monitor at the correct level?). Planning your breaks with a clear start and end time is also key. Remember to keep in touch with colleagues, and don’t isolate yourself completely!

Working From Home Can Mean You Never Stop Working” is a recent piece from Philadelphia Magazine that reminds us all to keep a better work-life balance while doing so and setting rituals for logging on and off while not falling victim to some of the various pitfalls. Remember to move around so as not sit in one spot all day. Have a list of your priorities for the day and use noise canceling headphones if needed to minimize distractions.

See also: Claims: Beyond the ‘Moment of Truth’  

Arch Daily’s website discusses tips for architects adjusting to the new experience of working from home. Largely, these professionals are used to collaborating with others in an office setting and now need to learn how to use digital technology to replicate those interactions. The article offers very useful information for experts in this field (and all others) to adapt to the times we face.

Will other industries learn from insurance and be well-equipped in the future? 

Or will the world change and move drastically to remote working after realizing some of its benefits? And is it really any surprise that insurance carriers are setting the example? 

After all, insurance and risk management by definition set out to identify, evaluate and prioritize risks and apply the use of resources to minimize the impact of unfortunate events (like right now).

How to Lead and Collaborate in Claims

Much has been written over the years about what sets great claims organizations apart from all others, but none of these analyses really apply anymore.

The new world in which insurance and claims now operate features totally different customer profiles, plus emerging, tech-enabled solutions that can solve challenges in the claims process that have existed for decades. Additionally, we have very different insurance products and coverage opportunities and a highly competitive business environment in which all participants are judged not just among their peers but against the most popular consumer brands across all industries globally.

Old marketing and advertising strategies are no longer relevant, as new forms of communication have emerged that influence consumer opinions and the way in which information is disseminated and consumed.

In short – the game and the rules have changed, materially and forever!

In today’s world, leadership, collaboration and partnerships have the greatest impact on the quality of the claims process and experience.

Leadership Impact

The greatest single influence over all of this is leadership, which can come from a variety of directions, but most effectively from the CEO or other C-suite leaders. This is where authority and power reside, and where company vision, mission and culture are created. It is the mission, not the perks, that attracts and motivates employees.

The most successful insurance companies are those with leaders who set and continuously articulate the corporate tone, support gender equality, diversity and inclusion, promote family culture, celebrate employee achievement and life milestones and aggressively encourage a healthy work-life balance.

See also: Future of Claims Intake for Insurance?  

And today’s most successful claims operations are those in insurance companies whose leadership understands the value of and promotes collaboration and partnerships. In the new world, nothing innovative or entrepreneurial really happens without mastering this collaboration.

Leadership Support

Obvious examples of support include financial investments, budget, staffing and upskilling initiatives. In larger insurance organizations, other assistance may include inter-departmental support from IT, finance and digital and innovation teams. Alignment with legal support is also essential, especially in light of regulatory and other potential exposures when making process and consumer changes.

Perhaps less obvious, but still critical, is the creation of an environment that encourages a culture of innovation that is future-focused, one that features tolerance for mistakes with safety nets in place. This is certainly challenging for leaders who are typically balancing risk and exposure and the demands of shareholders and directors with the recognized need to innovate at an unprecedented pace.

The most successful companies have developed teams and processes to identify, engage, evaluate and partner with the best insurtech startups, which promote “test and learn” and which are able to move rapidly from piloting to implementation. Also demonstrated by these leaders is a willingness to temporarily accept imperfection and iterate to accelerate progress, which is a departure from traditional methods of elongated pilots. Being a “fast follower” and waiting for peers to succeed or fail with pilots is only a recipe to fall further behind innovators. 

Positioning for Future Success

Perhaps most important of all for leaders is to provide resources to claims organizations to extensively assess the insurtech landscape for potential partners and to keep their knowledge current, because startups constantly improve their solutions. 

It is imperative that this effort be a team approach, where the broader organization is involved and such learning and information is socialized, as opposed to restricted to key individuals or select innovation teams. One such approach is to measure and monitor organizational return-on-learning. In other words, in much the same way as policy coverage expertise or damage evaluation are coveted skills for adjusters and claim leadership, organizations should assess the effectiveness of sharing knowledge around automation, technology and collaboration.

See also: Avoiding the Pitfalls in Catastrophe Claims  

These initiatives are neither easy nor inexpensive, and they undoubtedly require total leadership commitment, but they can turn average competitors into industry leaders and ensure longer-term success in what we all know is going to be a totally different marketplace and world.

At the Connected Claims USA conference (June 24-25, Chicago), insurance leaders and insurtech partners will be gathering to learn and form lasting partnerships that will change the game.

Breakthroughs Finally Appearing in Claims

According to the Grammarist.com, the phrase “caught between a rock and a hard place” came about in the early 1900s in Bisbee, AZ, where miners who were seeking better working conditions pushed the mine owners for improvements. The owners were totally against making any changes – leaving the miners with a very hard decision. Either work in deplorable conditions or be unemployed: a rock and a hard place.

So, what does this have to do with insurance? Over my insurance career, I have had several assignments in claims operations. A number of times, the “rock and a hard place” phrase has struck me as appropriate. I have met only a handful of claims people who lacked the fundamental desire to help people – it is usually part of the DNA of claims workers. Without it, claims is an almost impossible job to do! But, despite the desire to help, many claims folks have been stuck between the rocks and hard places of regulatory constraints, inflexible legacy systems, compliance requirements, and a seemingly perpetual cycle of reduced budgets. Until now.

Technology can soften up both the rock and the hard place. That is an easy sentence to write, but a hard one to implement. In a recently released SMA research report, AI and Customer Experience: New Lenses for Claims Transformation, one of the key takeaways is to flip the lens so that claims procedures and business outcomes are viewed, not discretely from the internal, operational perspective, but rather from the outside/in perspective, which is the customer view. Opportunities to reduce cycle time, create transparency and personalization, and generate a better over-all claims experience can then emerge.

Technology is here today that can be part of customer-driven claims transformation. Not only are there solutions in the market from incumbent technology providers, but some insurtechs have targeted claims processes to deliver AI-driven capabilities such as:

  • Automated damage assessment: These can be anything from photos and videos supplied by the claimant to images taken by drones. Applying AI then drives the assessment.
  • Claimant interactions: Utilizing chatbots, FNOL/FROI can speed along, and routine questions can be answered.
  • CAT planning and response: Aerial images, both pre- and post-catastrophe, can assist CAT teams with resource allocation and customer communications.
  • Fraud detection: On the surface, this may appear to be an internal response. But from a customer experience perspective, identifying potential fraudsters lets those not in that category go more quickly through the settlement process, perhaps even with straight through processing, while the “bad guys” get the special treatment.

These are but a few of the solution areas where claims organizations can utilize AI-powered technology to improve customer experience, as identified in the SMA claims research report. The important thing to recognize is that all of these applications also improve internal operations, not the least of which is taking routine tasks off claims personnel desks so they can focus on using their skills on complex claims, and situations where the customer wants – and needs – a human to help them.

See also: Future of Claims Intake for Insurance?  

Claims organizations are innovating and using technology to change business processes and outcomes. But keeping the dual lens of outside/in and inside/out in alignment is critical. For me, this conjures up an image of rocks of decreasing sizes, interlaced with paths and roadways that customers can intuitively travel. Even in Bisbee, AZ.

The Best Boost to Customer Experience

For policy holders, the claims process can be incredibly frustrating – and it is easy to see why. Having your claim approved is one thing, but then actually getting the money owed often proves to be another monster task in and of itself.

An Accenture study found that 83% of customers who felt dissatisfied with the way a claim was handled planned to switch or had already switched to a new provider. As consumers have become even more accustomed to an instant everything economy, these numbers have only continued to increase. When done right, the claims and payment process can prove to be a relationship saver for an insurer and its customer. This overall experience drives both customer satisfaction and retention, more than any other interaction between these two parties.

Improving the claims process is first…

Since first impressions are everything, many insurers have poured a significant amount of time and money into reimagining the claims process as a digital-first, customer-initiated effort. With most carriers, this reporting phase can take just minutes if executed properly. It has become an industry-wide standard for customers to be able to initiate a car or other damage claim using a mobile app to take photos, share details, and provide claims estimates as a result.

Still, once the claim is made, it can take days – even weeks – to receive the money owed. Nearly all insurers still pay policy holders the old fashioned way using ACH or paper checks. No one wants to – or should have to – wait that long when repairs to a home or car after catastrophic damage are needed ASAP. Particularly in today’s “now-economy,” this experience completely falls short of modern customer expectations, and can prove to be very damaging to an insurer’s reputation.

See also: It’s Groundhog Day for WC Claims Handling  

Improving the payout process is second… but insurers are often too wary.

Luckily, with exciting innovations in the payments and disbursements, many insurers have begun offering instant claims payments to allow customers to receive their money immediately and digitally. Historically, insurers are slow to adopt new technologies, and wary of how they will work and be received by customers. Carriers are extremely careful about how to introduce new technologies that will likely touch many internal systems and processes.

As a tried and tested system already used by lenders, banks, gig economy marketplaces, retailers and more, insurance carriers stand to reap a major benefit offering instant payments, as it is obviously eliminating friction and cutting down on the days to weeks it would ordinarily take to receive a paper check or ACH. The claims process is a critical moment in an insurer’s relationship with a customer, and with push payment technology eliminating the headache associated, insurers will benefit from the increased customer loyalty resulting from a great customer experience.

Satisfaction increases exponentially with the adoption of instant payments, and attracts new customers

Innovative insurers have already begun implementing instant payments as a way to earn both customer satisfaction and loyalty. As previously mentioned, although insurance carriers are typically hesitant to adopt new tech – particularly when it comes to payments – the customer and business advantages of instant payments are just far too great to be ignored. Not to mention, the installation costs for instant payments are relatively low, seeing as payments are the last part of the claims process and therefore do not require significant integration to numerous legacy systems.

When it comes down to it, customers are dissatisfied with the friction, time and effort required to cash a check (especially if it takes a long time to get to them in the first place) when they need the funds to overcome or repair an emergency or catastrophe to their home or car. Today, most insurers have a clear target on millennial customers, 33% of whom claimed that they won’t need a bank in five years, according to a First Data study. By exceeding customer expectations through instant payments and truly fulfilling the insurance promise with an instant payout to the account of a customer’s choice, carriers undoubtedly strengthen customer loyalty. At the same time, insurers can also significantly reduce operating expenses by cutting down on claims cycle times, lowering claims leakage and basically eliminating check costs. It is also important to note that instant payments not only help to retain customers but can also be a path to customer acquisition.

With a payments experience dominated by the likes of CashApp, Venmo, and Amazon, these customers have come to expect flexibility and instant payments in every aspect of their lives – including their insurance. Now, the paper check just will not cut it. According to a study by PYMNTS.com, paper checks had a dissatisfaction rate of 14.1 percent, the highest among all payment types.

See also: How to Use AI in Claims Management  

Today, there are only a few insurers using instant payments, but the opportunity remains wide open. In the end, the winners in the claims payment transformation race are going to be the insurers who can gain a competitive advantage through instant payments, improving satisfaction among current customers and increasing the likelihood of attracting new ones.