Our client was quoted a premium increase $800,000 on their Work Injury Compensation Claims insurance. It certainly raised a few eyebrows. We took a deep dive into the claims data from the last few years, using proprietary analytical techniques to find ways to save.  

Deep dive key findings
 

Unusually slow reporting of claims  

This leads to insurers believing that there is an unseen pipeline of claims, so they assess the new premium based on the expectation of the worst case scenario.

The technical name is “Incurred but not reported factor.”

A high IBNR factor leads insurers to assume that claims are generally worse than the existing known claims data and apply a loading on the claims to arrive at the projected claims experience.  
 

Large claims reserve

The insurer was needing to operate with a large claims reserve, over a million dollars a year.

A claims reserve is money earmarked to pay incurred claims, effectively a balance sheet liability for the insurer, claims reserve is sometimes called the balance sheet reserve.   

We knew if we could get this amount down, the benefit would be reflected in the premium.
 

High admin costs of claims

The client’s claims administration submission and validation approach involves a number of their HR team.

A knock on effect of this was adding to insurer admin costs, thus making the account less attractive.  

Howden step-by-step approach

Clean up claims process

Identifying issues with the communication process, we stepped in to clean up the outstanding claims.

After a two month review, we reduced the incurred claims to their real amount, saving around half a million a year against the projected.

• 2012 - reduced from $2m to $1.6m, and
• 2013 – reduced from $1.2m to $750k
   

Convince insurance market of clients' improvements

Working to save half a million dollars in annual claims, you need demonstrable improvements to showcase to insurers.

In this case, we worked with the client to introduce:

• Bringing claims reporting into supervisors’ KPIs to create a sense of individual accountability
• Making divisional heads responsible for monitoring outstanding claims
• Root cause investigations
• Protocol to improve defensibility of future claims
• We also redesigned the claims workflow to reduce number of touchpoints in claims admin.
   

Taking the risk to market

We presented the risk to the insurance markets, highlighting the client's commitment to the improvements, which of course, meant soothing insurers’ concerns on this matter.  

Results

Continuous year-on-year claims reductions

With all these improvements in place, we were able to make significant improvements on the previous years premiums.

Added to that, the improved claims experience has meant year on year insurance premium reductions.

The client was also able to cut two headcount.

The client, who wishes to remain unnamed, said: 

Besides being very professional, Howden have been proactive in providing solutions to meet our needs. Their detailed analysis of our program, coupled with proposed claims mitigation solutions, have enabled us to achieve substantial savings during this renewal exercise. They have also acted swiftly to manage the transition of our program seamlessly with no disruption in services.