FAQs

Benefit Calculation Software - Workers' Compensation

We offer medical and indemnity wage replacement calculation software that enables the claims handler to dispense with outdated and time consuming traditional calculation tools. By going to only one source they can complete multiple calculations and save significant amounts of time.

QUESTION: What is the CIS Benefit Calculations Software?

ANSWER: Claim Innovative Solutions LLC has developed a revolutionary, state of the art, workers' compensation benefit calculation software product offering that replaces traditional benefit calculation tools. By replacing these outdated tools with the CIS Benefit Calculations Software, lost-time indemnity claim adjusters/examiners save significant amounts of time and their respective companies, which administer claims, save significant amounts of money, thereby reducing overhead and other costs, resulting in increased profitability.

QUESTION: What traditional tools does the CIS Benefit Calculations Software replace?

ANSWER: Currently those administering workers' compensation lost-time indemnity claims when required to calculate future benefits utilize manual tools and/or some automated tools to varying degrees. In our many years of consulting experience we have found a lack of uniformity of application not only between companies, but even within the same companies.

The vast majority of companies that administer workers' compensation claims, in our experience are tied to utilizing traditional, outdated manual tools. They might consist of:

• A Date Wheel (limited by a maximum of 365 days)
• A quasi-slide rule application to determine life expectancy
• A quasi-slide rule application to acquire a multiplier to then manually calculate present dollar value
• A ten-key calculator
• Paper, pen/pencil

Some companies have attempted to build some benefit calculators into their respective claims systems to help calculate PPD, PTD, TPD and/or TTD, while others might access some automated calculator tools from vendors or over the internet, yet still utilize manual tools as well. As such, the claims handler is required to go to several different sources, rather than just one, in order to calculate future benefits. We feel they should only have to go to one source.

QUESTION: How is CIS Benefit Calculations Software different, and why is it better?

ANSWER: First of all, the CIS Benefit Calculations Software is different because it is an all encompassing resource that enables the claims handler to fulfill all of his/her benefits calculation needs. It is superior to outdated traditional tools and/or a combination of traditional tools and some variety of automated tools, because the claims handler only has to access one source for his/her benefit calculation needs rather than a multiplicity of sources.

It is also better because it:

• Helps eliminate calculation errors
• Is forgiving. If errors are made, it is quite simple to override the mistake and re-calculate the correct result
• Meets all of the claim handler's benefit calculation needs
• Enables the user to export calculation results to Excel which can be printed or saved to claim file activity notes
• Is state specific
• Saves the claims handler significant amounts of time
• Saves companies significant amounts of money

QUESTION: What do you mean it is state specific?

ANSWER: Part of the identifying information screen that the claims handler utilizes when they begin a new claim, which includes the claim number, injured worker's name and date of injury, also permits the claims handler to select the state that they are adjusting the claim in.

Once selected, if they know the average wage they can enter it or, if not, they can utilize our average wage calculator. Either way, once the wage is entered, the appropriate percentages (e.g., 0.6667, etc.), for the applicable benefits to be calculated (i.e., PPD, PTD, TPD and TTD), will appear, and the software will calculate the appropriate benefit rate from the average wage. The claims handler then just clicks on Accept, and all calculators will be populated with the appropriate rate for the state and benefit selected.

QUESTION: How much time does it save?

ANSWER: Depending upon the lost-time indemnity claim handler's authority, depth of responsibilities, experience and capabilities, they will spend about 1/6th - 1/10th the time calculating benefits utilizing the CIS Benefit Calculations Software as they would otherwise have spent using traditional tools.

We believe that each claims handler can save anywhere between 100-400 hours per year, again depending upon the claim handler's authority, depth of responsibilities, experience and capabilities. We use 200 hours per year as an average for time saved per claims handler, based upon an eight hour day and a 240-day work year.

QUESTION: How does it save my company money?

ANSWER: We believe that time is money. Based upon a savings of an average of 200 hours per year, per claims handler, and a salary/benefit package of $45 per hour (70% salary & 30% benefits), that equates to an estimated savings of $9,000 per year, per claims handler.

In addition, additional savings are realized due to increased efficiencies, increased accuracy, reduced levied fines and penalties, reduced attorney utilization, and reduced claim loss and expense overpayments. These additional savings could easily match or exceed the hourly time savings per claims handler.

QUESTION: What calculations can my claims handlers perform utilizing the CIS Benefit Calculations Software?

ANSWER:

• Average Weekly Wage (State & Federal)
• Inflation Factors/Cost of Living Adjustments (COLA)
• Life and Work-Life Expectancy
• Medical Case Reserves
• Medical Set Aside
• Number of Days, Weeks, Months and Years Between Dates
• Present Dollar Values
• Permanent Partial Disability (PPD)
• Permanent Total Disability (PTD)
• Structured Settlements - Four Different Calculators
• Survivor Benefits - Three Different Calculators
• Temporary Partial Disability (TPD)
• Temporary Total Disability(TTD)
• Comprehensive Reserve Worksheet

 

Case Reserving Calculation Software - Casualty

We offer claims examiners, supervisors and litigation managers case reserving software tools enabling them to more efficiently evaluate the potential to pay loss, post appropriate case reserves, to enable fair but equitable claim settlement negotiations. These software tools are designed to help claim handlers accurately determine the appropriate claim payment.

QUESTION: What is CIS Casualty Software?

ANSWER: Claim Innovative Solutions LLC (CIS) is developing a casualty calculation software offering, consisting of multiple calculators, that will be available to the industry soon. These calculators will enable the large loss claim adjuster/examiner, litigation manager, excess carrier and reinsurer to calculate the potential to pay casualty losses more accurately, support their evaluation calculations, and enable them to negotiate better results.

QUESTION: What makes CIS think that the current case reserve methodology utilized by many companies and claim handling third-party administrators (TPA's) isn't already effective and accurate?

ANSWER: As independent claim management consultants, who have years of experience auditing insurers and TPA's, we find that, 1) many companies overpay claims as a result of inappropriate evaluations and case reserving, 2) there does not appear to be an industry standard for case evaluation and case reserving methodology, 3) automated case reserving systems (e.g., Colossus, etc.), will continue to permit companies to overpay claims, if they have a history of doing so, and 4) a more structured case reserving methodology will produce better and supportable results for those administering large losses.

QUESTION: What lines of business does the CIS Casualty Software address?

ANSWER: CIS Casualty Software is designed to assist those administering claims that might involve loss expenditures of $100,000 or more, the ability to more effectively arrive at the most appropriate dollar amount for disposing of a claim. Some lines of business that produce casualty bodily injury claims that can typically be volatile, can involve litigation and can result in claim settlements or jury awards exceeding $100,000 are personal and commercial lines automobile claims, general liability claims, product liability claims and hospital professional liability claims (medical malpractice).

QUESTION: What is the CIS approach to evaluating large losses irrespective of whether or not a company uses its software?

ANSWER: CIS promotes that all claims, whether likely to generate large losses or not, be evaluated first based upon 100% of potential damages or the amount a company would pay if it were, in fact, 100% liable, irrespective of its real or perceived liability. Once 100% of damages have been assessed, then CIS recommends that companies offset the 100% damage figure by their assessment of their degree of comparative negligence.

 

Casualty Claims Management and Auditing Services

We offer casualty claim management services that identify the potential of claim over payments and to what degree; inappropriate case reserves; ineffective claims handling methodologies and claim organizational structure.

By identifying deficiencies and providing recommendations, clients can initiate change resulting in improved policy holder, other client services and more effective claims management, ultimately reducing loss and expense.

QUESTION: What is Claims Leakage?

ANSWER: Leakage is evidence of claims loss and/or overpayments.

QUESTION: Is it a big problem?

ANSWER: Yes, it can be. Typically claim handling organizations (insurance companies, claims third party administrators are overpaying claims losses and expenses by 10%-12% per year on average.

This means that if your organization is paying $10,000,000 per year in loss and expense it is likely overpaying claims by $1,000,000 - $1,200,000 each and every year. If you are paying out more than that, then you are probably losing more than that every year through overpayments.
Incidentally, your company's opining actuary can't tell you if you are overpaying claims loss and expense.

QUESTION: What types of overpayments (leakage) are there and how are they assessed?

ANSWER: Hard-Cost Leakage is objective in nature, irrefutable, and is assessed at 100%. Soft-Cost Leakage is subjective in nature and, as such, is assessed at 25% rather than 100%. The majority of loss and expense overpayments fall into this category, so when our claims audit suggests that a company is overpaying its claims per branch office by as much as $5,000,000, that $5,000,000 only equates to 25% of the amounts paid out on those claims having been identified as having been potentially overpaid.

QUESTION: What type of claims actions, or inactions contribute to leakage?

ANSWER: With respect to Hard-Cost Leakage, it can result from paying claims that are not covered or compensable, from paying the same invoices more than once, from overpaying workers' compensation wage replacement benefits and failing to seek off-sets or reimbursement, and from failing to collect excess and/or reinsurance for loss and expense payments that exceed prescribed thresholds (e.g., self-insured retention limits).

With respect to Soft-Cost Leakage, it can be as a result of delayed and/or poor investigations that fail to gather the appropriate information to appropriately evaluate the exposure to pay loss; failure to identify and pursue responsible third-parties; inappropriate evaluation; inappropriate case reserving; inappropriate decision making (e.g., to settle or to litigate); and ineffective claim settlement negotiations, to name a few.

QUESTION: If companies are overpaying loss and expense, why don't they know it?

ANSWER: The recipient of overpayments is unlikely to tell you that they have been overpaid, even if they know it and how many claimants are you aware of that feel they have been paid enough, let alone feel that they have been overpaid? Most companies, if they have a quality assurance program at all, and surprisingly many do not, tend to measure process rather than results and, as such, typically don't ask themselves if they are overpaying their respective claims.

QUESTION: OK - I now understand that companies overpay claims and perhaps my company is too, what do we do now?

ANSWER: Recognizing the potential that your company could be overpaying claims is a good first step. One of the homeowner insurance companies that we counseled that typically pays $100,000,000 per year in claims payments, decided to look into the matter and become more effective claims handlers. They now typically pay $85,000,000 per year, or a savings of $15,000,000.

Many companies fearing that they don't have the depth or experience, the staff resources, the time to dedicate or fully understand the methodology to analyze their own claim operations with respect to claims leakage, ask independent claim consulting firms to assist them. That is where we can be of service to you. A small workers' compensation company we reviewed recently was found to be overpaying 48 out of every 100 claims it handled. Obviously, it needed our help.

 

Case Reserving Appropriateness

QUESTION: What is case reserving?

ANSWER: Case reserving is a posting of a specified dollar amount in reserve (to be paid at a later date) relative to an individual claim file or individual loss. The specified dollar amount is determined through a process where the claims handler makes an assessment of just how much might be required to satisfy the ultimate payment with respect to a particular individual claim, based upon the information that has been acquired through the investigative process.

QUESTION: When someone is talking about reserves are they always referring to case reserves?

ANSWER: It depends on who is doing the talking. Reserves can be factor reserves, statistical reserves, bulk reserves, pure or developmental incurred but not reported (IBNR) reserves or supplemental reserves or case reserves.

QUESTION: What is the difference?

ANSWER:
-Factor Reserves: Some companies in order to initiate a claim into their claims system about which they have reservations may post generally small amounts ($1.00, $100, etc.) designating a position being taken (e.g., coverage determination, doubtful liability, etc.), until a more thorough investigation has been conducted.

-Statistical Reserves: Other companies, rather than posting an individual case reserve on a claim file may post a statistical reserve instead, that is not dependent upon the information developed during the investigative process, but rather on an average of paid or incurred losses relative to a particular type of loss. For example, a company might statistically reserve all automobile glass breakage claims for $100, or all medical only (MO) workers' compensation claims for $850.

-Bulk Reserves: Are annualized aggregate reserves and might reflect the total of all case reserves, all statistical reserves, a combination of factor, case and/or statistical reserves, or pure and/or developmental IBNR.

-Supplemental Reserves: Typically, IBNR reserves are supplemental reserves as they are separate and apart from those reserves posted in conjunction with individual claims. They are to account for claims that might have occurred, but have not yet been reported to the company as a claim and/or unforeseen development on claims that have already been reported and reserved for on an individual basis.

QUESTION: Is one type of reserving methodology preferred over another?

ANSWER: All companies post supplemental reserves because they take into account what is not known, whereas statistical and case reserves take into account only what is known on an individual basis or on an averaging basis. Most companies post case reserves rather than statistical reserves. Depending on what exposure is being reserved for, we might suggest statistical reserves for claims that are not generally volatile and likely to increase much in value, such as automobile glass breakage claims, but recommend case reserves for most exposures to pay loss that could have the potential to develop.

QUESTION: Can my case reserves in the aggregate appear to be appropriate, but on an individual basis suggest inattentiveness to appropriate case reserving methodology?

ANSWER: Yes. In the aggregate (total universe of open claims), reserves might fall within an acceptable margin of + or - 10%, but be so erratic that many are significantly overstated while others are significantly understated on an individual basis. As such, falling within the acceptable margin in the aggregate on any particular day is an anomaly and is not suggestive of appropriate case reserving methodology or practices. More companies than you would think fall into this pattern.

 

Independent Claim Audit Frequency

QUESTION: Why would my company want/need an independent claim audit?

ANSWER: Virtually every company we audit for claims leakage is overpaying claims. Many others are not posting appropriate individual case reserves that are reflective of the exposure to pay loss, and virtually all companies we review are in need of improvement with respect to claim handling practices. The best way to find out if your company is overpaying claims is to request an analysis of closed claims.

QUESTION: What type of audit should I ask for?

ANSWER: It depends on what your focus, issues and concerns might be. If your interest relates to whether or not your current outstanding case reserves are appropriate, we would recommend a case reserve analysis of pending/open claims. If however, your interest relates to overall claim handling practices inclusive of reserving practices, we would recommend a claim handling effectiveness study of closed claims.

QUESTION: How often should my company be audited?

ANSWER: We will answer your question with some questions. When were you last audited by an independent claims management consulting firm? When was the last time your company underwent organizational, operational and/or procedural changes?

If your company has not been involved in organizational, operational and/or procedural changes recently, but it has not been audited in the last three years, it is time to have an audit conducted to establish a new baseline of where you are, so that future audits can reflect how far you have come. We recommend audits every three years at a minimum, but some of our clients request annual audits, although the audits might address different lines of business, or might differ in nature (e.g., open, closed, case reserving practices, claims handling practices, etc.).

If your company has undergone organizational, operational and/or procedural changes, we suggest that approximately nine months after the changes have been implemented that an audit be conducted to establish a new baseline.

 

Risk and Insurance Management Services

We offer an array of risk identification, prevention, control, retention and sharing vehicles to enable our clients to select a risk and insurance management program that is specifically structured to serve their unique needs.

"Risk Management" can have many different interpretations. In this context we are using it to describe the most effective ways to manage "risk or threats to the ongoing viability of your company".

QUESTION: I don't have, or my Risk Manager just resigned. How can you help me?

ANSWER: CIS can provide you with interim risk management services, inclusive of interviewing and assisting you in finding a Risk Manager. Alternatively, we might conclude that you do not require a full time Risk Manager. CIS, on a contract basis, can provide you with only those services that you do require.

QUESTION: How does a corporation effectively manage risk?

ANSWER: Different companies, small and large, have different types of risks. The first step is to understand your company. Part of that first step is to analyze your risks by dividing them into the following four categories, operational, hazard, financial and strategic.

QUESTION: What process do we develop after we have identified the risks?

ANSWER: Risks can be financially inconsequential or can destroy a company. The next step is to evaluate the impact on your company from a financial/future growth perspective, and the probability of the risk occurring.

QUESTION: Once the threat profile has been developed what is the next step?

ANSWER: Develop an "Action Plan" for each risk identifying accountabilities, responsibilities and dates for completion. The following are possible actions that can be taken to manage the risk:

• Avoid the risk
• Reduce the possibility of the risk occurring
• Mitigate the risk impact
• Transfer the risk, by using insurance for example
• Accept/Assume some or all of the risk, and then be prepared for the financial impact

 

QUESTION: Are there any additional steps in this process?

ANSWER: Upon completion of the Action Plan the outcomes need to be monitored in order to determine if the objectives have been achieved. This is an ongoing process as a company grows and new exposures to risks develop.

QUESTION: Do I need a Captive?

ANSWER: One method to mitigate the cost of risks is to create a Captive Insurance Company to insure the risks of the parent company. CIS is experienced in all areas of Captives from the feasibility phase to the management phase, both on and off-shore. We can assist you in determining if a Captive is beneficial to your program. Additionally, CIS can help you develop your existing Captive to maximize the benefits to your company.

QUESTION: What about loss control and safety?

ANSWER: CIS will review your existing programs and provide recommendations for improvement. Also known as a Pre-Loss Control, the objective is to lower the frequency of losses through what we call targeted loss control. Remember that the best claim is the one that doesn't occur.

QUESTION: How can you help me with respect to claims?

ANSWER: CIS recognizes that in retail operations, claims can be as much as 80% of the total cost of risk. We have some of the most experienced claim management consultants in the industry that will help you to mitigate the severity of your claims in the most efficient and effective way possible. Click on the Claims Consulting tab under Products / Services for more information.

QUESTION: What is enterprise risk management (ERM), and how does it differ from "risk management"?

ANSWER: ERM goes beyond the traditional risk management by providing processes to mitigate risk across the whole company. Typically, it consolidates the major four functions of a company (i.e., Strategic, Operational, Legal/Compliance and Financial Risks). Understand that although most risks are insurable, some might not be. CIS will assist your company in developing and establishing the ERM processes based on the Commission of Sponsoring Organizations (COSO) model.

QUESTION: What other services can you assist me with?

ANSWER: CIS, either directly or indirectly through its relationships can provide you with:
-Actuarial Services
-Benchmarking Services
-Benefit Calculation Software (Workers' Compensation). Click on the Software tab under Products Services for more information.
-Drug Screening (15-minutes)
-Health Insurance Consulting Service
-Claims Systems and Imaging Consulting Services
-Insurance Brokers and Captive Insurance Company Managers
-Surveillance and Background Checks