Are Your Claims Ready for Auto-adjudication? | Davies Group North America

24th September 2021

In today’s fast-paced world, companies must optimize their workflows and react quickly to stay competitive. One of the most common areas where this can happen is with claims processing. Automating your claims process will not only save you time but also help increase your bottom line by reducing errors and cutting down on paperwork. As the auto-adjudication movement continues to grow, insurance companies are under pressure to find new ways of streamlining their business.


Claims processing is one area where many companies have successfully achieved this. However, not all claims are ready for auto-adjudication, and it could be hurting your company’s bottom line. Read more about the benefits of auto-adjudication and how to automate your claims process successfully!


The Future of Claims Processing

Technology has advanced to the point where a certain percentage of high-frequency, low-severity claims can be accepted, paid, and closed without human intervention. Auto-adjudication is the future of insurance claims processing. Your company must be ready for it.


The rise in cybercrime and data breaches has also created a new era of data protection requirements for insurers, which regulators are driving. Auto-adjudication can help your organization comply with these regulations while improving customer experience through faster processing times and reduced costs.


What is Auto-adjudication?

Auto-adjudication is a technology that can help process insurance claims automatically. A computer can enter claims using auto-adjudication, review the policyholder’s information and prior claims to prevent fraud, and process the claim with little to no human interference.


Benefits of Auto-adjudication

There are multiple benefits of switching your claims to automatic processing surrounding costs, speed, accuracy, and fraud.


Operating Costs

Auto-adjudication has the potential to significantly lower operating costs. Operating costs to pay human employees to process claims are expensive. Auto-adjudication software is a much less costly solution. You will save money by needing to employ fewer to handle standard claim processes, and you will have the capability of quickly scaling up if needed.

An adjuster can typically carry 120-180 open liability claims at any point in time. The number will vary based on the complexity of the claims (i.e., litigated vs. fast track). This capacity cap limits the amount of business you can do per human adjuster and increases your operating costs. Using auto-adjudication software can significantly expand your claim handling capability and capacity.


Claim Processing Speed

Claims that can be automatically adjusted and paid by the insurance carrier will save you time. Claims requiring manual review take longer to process, which means money is tied up while a claim is while getting reviewed, approved, and processed.

With the correct parameters, auto-adjudication can process claims quicker and with more accuracy than ever before. Claimants will also be paid faster, which is a win for the customer’s experience.


Data Accuracy

Employees processing claims by hand are prone to making mistakes, and the process takes much longer. Mistakes can lead to rejected claims and dissatisfied customers, and this is one reason automating your claims process can be highly beneficial.


With auto-adjudication software, you will reduce the number of errors in your claim process. This means that more policies are accepted at their full value without complaint or other issues—meaning increased customer satisfaction for your organization while saving time and money through less laborious processes.


Fraud Prevention

Machine software is often better at catching errors and identifying fraudulent trends than its human counterpart. Rules can be set to review specific data points, request documentation from claimants, identify anomalies, and review claimants’ history who have submitted past claims.


Auto-adjudication can be especially effective in medical health insurance claims where the volume of data is high, and trends are difficult to identify. Auto-adjudication software can quickly review complex medical records for accuracy and identify potential areas of non-compliance with HIPAA Privacy. The software uses pre-defined rules that help to automatically screen for common errors such as duplicate billing, ineligible services or products (such as non-compliant supplies, incorrect site), and medical coding errors.


How to Prepare Your Claims for Auto-adjudications

There is quite a bit to do to get your system and processes ready, including verifying coverage,  setting fraud indicators, defining the claim profile, and defining the process.


  • Coverage verification. When reporting a claim, policy holders can enter the pertinent information online, requiring the elements necessary to determine if a valid policy is in force: First and Last name, policy number, date of loss, etc. They system can then query the policy database to determine if an incident is covered. This is the easiest and most important step. It is also the first step in preventing fraud.
  • Set fraud indicators. The nature of the industry and claims process requires a proactive approach to preventing fraudulent activity. A series of fraudulent claims can quickly spiral costs out of control. By setting up well-defined fraud indicators, you can reduce exposure by identifying potential cases early on. These indicators could be things like a delay in reporting a claim, the number of claims submitted per year, injury or damage patterns, claims associated with known fraud, and patterns that have historically high fraud rates. The system can scan the database to identify repeat claim filers, gather additional information, and forward the claim to the appropriate adjuster.
  • Define your claim profile parameters. Set automated rules about how the software will handle claims. One parameter could surround cost limiting. Any claim over a set monetary amount will go to an adjuster and not be eligible for automatic adjustment. Other parameters could encompass the risk rating of a particular claim, require specific data fields, the annual utilization percentage of the claimant, and even how it should handle claims based on location.
  • Define the claim process. You need to make sure that you have a clear, concise, and unambiguous claim process in place. This includes the required steps (i.e., who is involved), timing, documentation requirements, decision-making authority, and approvals necessary for each step of the claims process.
  • Review customer service implications. A close analysis of a claims program will help determine a target percentage of claims that can be auto-adjudicated. If the parameters are too tight, then the productivity gains will not be realized. Conversely, if the parameters are too loose, then fraudulent claims may get out of control. It is vital that you consider the policy holder when setting auto-adjudication parameters.


If This Sounds Like Your Business, it Might Be Time for Auto-adjudication!

John Doe, the new Claims Manager of ABC Corporation, has inherited a relationship with a TPA they have had for ten years. Ongoing negotiations, system tweaks, and an experienced staff has steadily increased productivity over the years and reduced costs, but the Claims Manager senses that the claims team has plateaued. As the insurance program, and claims continue to grow, staffing will have to increase as well. But is the answer to his high-frequency, low-severity claims to continue to add to staff? Or would he benefit from automated adjusting technology?

John Doe is confident that it is a good time to review his high-frequency low-severity property claims to determine if an automated claims program makes sense. John knows he will need to complete careful analysis, take a slow, deliberate approach, and carefully monitor the claims to allow them to pay dividends when setting up a new auto-adjudication program. He feels ready to take the leap —personal lines insurers have been auto-adjudicating claims for many years now.



Auto-Adjudication FAQs (frequently asked questions)

How can I make the transition to auto-adjudication as smooth as possible for myself and my customers?

Prepare your claims for auto-adjudication with validation checks like member matching to avoid name mismatches, provider matching to ensure normalized data using billing identifiers, and applying detailed rules that will prevent claims from being sent to pending status.


Who can benefit from auto-adjudication claims management?

Auto-adjudication can benefit insurance carriers, law firms, and other claims handlers interested in improving the efficiency of their claim management process. Before auto-adjudication, insurers had to wait weeks or even months before they could start settling their claims. Claimants can also benefit from quicker turnaround times and payouts.


What claims can go through auto-adjudication?

Any type of claim can potentially be processed through auto-adjudication. These systems allow for specific rules and parameters to be set to decide which types of claims will be automatically processed and how they will be handled. It is crucial to set up the correct parameters to allow the machine to identify fraud, validate critical details, and make accurate calculations.


What are the drawbacks of auto-adjudication?

Even excellent auto-adjudication software has risks with fraud, security breaches, and miscalculations. Receiving data in a valid format to be correctly mapped may also be a problem that must be overcome.


How may auto-adjudication be used in the future?

In addition to taking over basic calculations, there is a possibility for this technology to take over more complicated procedures such as RBC reporting and carrier interactions with reinsurers and global markets.


Why Would Hospitals Want Claims to be Auto-Adjudicated?

Hospitals can benefit from auto-adjudication by speeding up the billing cycle and allowing them to get paid faster. This frees up cash flow and reduces operating pressures.


What are the Risks of Using Auto-Adjudication?

Auto-adjudicating claims can result in mistakes or errors, especially if staff is not properly trained on using the technology correctly. It may also fail to identify issues with a claim that would require human review and attention.


Which types of claims work best with auto-adjudication?

Claims that work best with auto-adjudication are ones that are straightforward and relatively low cost. These might involve property, auto claims, or general liability.


Which types of claims are more difficult to implement auto-adjudication?

Workers comp and medical claims can be more complex and often involve an investigation. These can involve multiple parties and need expertise beyond the parameters set in the software.


How do I know if my claims are ready for auto-adjudication?

Determine whether your claims are likely to benefit from the efficiency of an automated process or if they will require human review and attention. If they involve human review that set parameters can’t handle, auto-adjudication may not be the right solution.


How do I know if this solution will work for my business?

Review your claims, their workflow, and how they are currently managed to gauge the feasibility of auto-adjudication on a case-by-case basis. If you identify areas that could be automated and streamline, automation technology may be your ticket to greater efficiency.


How does auto-adjudication software benefit human adjusters?

Auto-adjudication software has some benefits for human adjusters, especially those dealing with a high volume of claims. The system frees up time on simple claims and allows them to spend their time reviewing more complex claims that need human expertise.


What type of data does auto-adjudication software have access to?

Auto-adjudication systems can pull from a company’s existing information assets, including claims and adjuster work histories, medical records, policy databases, and billing processors. In addition to this internal data, they also have access to external sources.


The benefits of auto-adjudication are clear, but how do you begin successfully automating your claims process? If you’re interested in learning more about our automated claims processing technology or would like to see if it can work for your organization, contact us today. We’ll be happy to walk through the steps with you and help ensure that this is a good fit before making any commitments!


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