curate assessment of the claims handling
quality. This will enable the auditor to
provide a more accurate roadmap for the
future and to set a goal for controlled or
reduced claims costs and allocated loss
The claims auditor must also analyze
the handling of complete claims, con-
nected features, and related processes.
The claims administrator must remem-
ber that poor handling of a property
damage feature will likely result in a less
favorable resolution to a bodily injury
feature arising out of the same incident.
Therefore any split duties must be han-
dled well to ensure a seamless process
for the claimant that is clear, consistent,
In the previous two parts of this claims
auditing series, we provided a list of
claims management components the
claims auditor should evaluate. Many of
the components are the same regardless
of the claim type. There are, however,
some liability claim characteristics that
obviously do not apply to workers’ compensation or property losses. Although
the claims auditor will evaluate many
more claims management steps and activities during a given liability claims audit, the following list contains some of the
I urge you to revisit the September
2013 Claims article, “A Springboard to
Claims Cost Reduction,” in which I outlined auditing principles for workers’
compensation claims. The same tenets
hold true for liability claims. An effective auditor should periodically examine claims management practices of the
claims administrator, whether it is an insurer, a third-party administrator (TPA),
or a self-administered program.
These periodic examinations are absolutely crucial to confirm that claims are
being managed in a timely, consistent,
and assertive manner to achieve the
most favorable outcomes under the circumstances. Such audits can also identify processes, practices, and other issues
that should be addressed to ultimately
save the insurance carrier both loss costs
Gary Jennings, CPCU,
ARM, ALCM, AIC, ARe,
SCLA, is the principal
consultant at Strategic
Claims Direction LLC.
He may be reached at
■ Were potential recovery opportunities identified investigated (e.g.,
subrogation, contribution, reinsurance/excess)?
■ Was the investigation done promptly to obtain needed information?
■ Were tort feasors promptly placed on notice?
■ Was the recovery actively pursued?
Fraud / Referral
■ Were red flags identified during the investigation that led to the need for
a deeper investigation?
■ Was the claim promptly referred to the Special Investigation Unit (SIU) if
■ Were findings used in negotiations and compromise settlements?
■ Was a proposed settlement range calculated based on the facts of the
case and case law, and did the range appear to be realistic?
■ Were proposed settlements approved by supervisors or managers with
the appropriate authority?
■ If the claimant was represented, did the adjuster continue to negotiate
with the claimant’s attorney to try to resolve the case, even after suit was
■ Were the required payments made promptly and accurately?
■ Were the appropriate signed releases received prior to payment
■ Was litigation avoided when possible through assertive claims
■ If litigation could not be avoided, did the adjuster and approved defense
attorney work as a team to reduce legal expenses while reaching the
■ Did the adjuster assign claims or features to vendors only if they could
provide useful and value-added services? Some of the vendors include:
■ Appraisers for property damage claims
■ Independent adjusters for field investigations
■ Defense counsel for litigated claims (only if the adjuster cannot
resolve the claim or feature)
■ Structured settlement firms
■ Surveillance specialists
■ Engineers for expert examinations
■ Independent Medical Evaluations (IMEs)
■ Were necessary vendors managed so that they provided prompt and
■ Were the claims or features actively moved toward resolution at all
times, based on documentation in the claim file?
■ Were claims or features closed promptly when the case was resolved to
reduce outstanding reserves to zero?