The importance of investment in claims management Peter Barrett – RGA Head of Claims

1. abcd The importance of investment in claims management Peter Barrett – RGAHead of Claims Healthcare Conference Warwick 26th April 2004

2. To protect against un-foreseen events To indemnify losses To pay claims Why do insurance companies exist?

3. A significant display in your shop window The chance to demonstrate brand qualities Dealing with vulnerable people, who need to claim on the policies they had the good sense to effect It is different to doing a fund switch or setting up a DD The consequences of mistakes are very significant for all parties Claims management – Why is it important?

4. An admin function Little need for specialist skills It’s easy! No need to invest Claims management – the traditional view

5. Claims has not been seen as a professional discipline Typically report to operation management Short term view on costs, not potential savings Lowly status within companies Claims management – the traditional view

6. Claims management – the traditional view

7. All you do is match the diagnosis with the definition The claimant’s doctor gives you the answer How difficult is that? Claims are easy – you don’t need specialists

8. Looked at a heart attack claim recently? What are characteristic ECG changes? Have you considered the FOS attitude to non-disclosure? Have you told a claimant they’re claim has been rejected? Are Critical Illness claims easy? Do you need specialist skills?

9. £100,000 at risk Admitted with history of chest pain ECG – demonstrated ST elevation Troponin T = 0.55 Treated as MI (delayed presentation) Is this a valid MI claim?

10. The death of a portion of heart muscle as a result of inadequate blood supply as evidenced by; ·an episode of typical chest pain, ·new electrocardiograph changes and ·by the elevation of cardiac enzymes The evidence must be consistent with the diagnosis of heart attack. 1999 ABI – definition of heart attack

11. £50,000 at risk Claimant satisfies 3 minor WHO criteria for multiple myeloma He is asymptomatic, no current treatment See him in 3 months for review Is this a valid cancer claim?

12. A malignant tumour characterised by the uncontrolled growth and spread of malignant cells and invasion of tissue. The term cancer includes leukaemia and Hodgkin’s disease but the following are excluded: All tumours which are histologically described as pre malignant, as non-invasive or as cancer in situ. All forms of lymphoma in the presence of Human Immunodeficiency Virus. Kaposi’s sarcoma in the presence of any Human Immunodeficiency Virus. Any skin cancer other than malignant melanoma. 1999 ABI – definition of Cancer

13. You need to identify and pay the valid claims You need to identify and reject the invalid claims Mistakes cost money and impact on brand Hardening attitude of reinsurers Why is claims management important?

14. Why is claims management important?

15. 3 month review 182 claims 13 major errors Value £844,382 The cost of not taking claims seriously – example 1

16. Annual saving achieved by RGA – claims in 2002 = £2.0m Annual saving achieved by RGA – claims in 2003 = £2.1m Of the 2002 claims, 85% remain saved in 2004 The cost of not taking claims seriously – example 2

17. Inexperience means you reject claims incorrectly. Do that and you might be on the telly! Damaging your brand & the industry – because you didn’t take claims seriously Claims is your shop window The consequences are not just financial

18. Lack of investment in staff by insurers Poor quality means less authority, so operational impact on the insurer… …and higher costs for the reinsurer. Ultimately leading to the insurer having higher rates and a poor reputation in the reinsurance market. Impact of high use of reinsurance

19. The right mix of experienced staff and trainees Well qualified staff Given the time to assess Recognised for the importance of the role It’s not brain surgery What makes a good team?

20. Recruited from admin No relevant qualifications Regarded as an administrator £30,000 pa Primarily assessed on productivity Underwriting, medical or legal CII qualifications at a minimum – Life & DI claims Diploma Regarded as a professional £45,000 pa Assessed on quality & productivity The ‘gap’ between average and the best

21. The right qualifications At least ACII standard Preferably Underwriting or Claims Diploma Legal or medical qualifications The ability to communicate clearly with people in difficult situations A methodical enquiring mind Understanding of medical & legal terminology The skills you need

22. Reinsurers have been cutting back for years Most companies do very little Contrast this with underwriting It’s not favourable Even when trained the Underwriters have a manual to give them the answer Training

23. Already proving a problem – there aren’t enough good assessors You don’t have to be an actuary to realise that given the sales of CI – there is going to be a claims tidal wave in the next 5 – 10 years Are you ready? Recruitment

24. The need for investment

25. CII’s – Life & Disability claims Diploma Is your team studying, if not why not? The L&G approach A claims academy Training – some positive news

26. Treat them as professionals Reward them accordingly At least on a par with underwriting Provide the right training Provide the right working environment Retaining staff

27. One Final Thought… An experienced, competent claims team can’t on it’s own make your CI business profitable… …BUT… …An inexperienced, claims team can make your business unprofitable even if you have got the pricing and underwriting right. (and damage your brand at the same time)