Risk Managers Taking Back Control of Their Insurance Program

It’s no secret, the costs of commercial insurance is steadily on the rise, often bringing double-digit increases to many companies across the U.S. Everyone is feeling the pinch with commercial insurance as prices rose 15% in the third quarter of 2021, continuing the longest stretch of insurance price increases since 2012.

While every Risk Manager wants to reduce claim administration costs while improving outcomes, most are often caught in the junction of lowering costs, without sacrificing quality of service and claims expertise. These costs trends, coupled with the need to improve claims outcomes, has resulted in more organizations turning to unbundled claims management through a third party administrator (TPA).

What Is Unbundled Claims Handling

Unbundling claims, allows organizations to purchase insurance from an insurer while all claims management services are then provided from another vendor – typically an independent, professional TPA.

The selected vendor is responsible for handling all day-to-day claims management functions. The claims vendor is will handle paying your claims, and work with your insurance provider to ensure they have the data needed to fulfill any financial analysis, underwriting or compliance requirements.

In most cases, unbundling claims requires the company to assume the majority of the risk for covered claims, which is typically handled through a large-deductible policy. Also common in many captive models, this type of program is also known as ‘fronting’.

The primary goal of most organizations looking to unbundle claims is control – that the company will be able to closely manage claim outcomes to help lower insurance premiums, and ultimately their total cost of risk. To get the best results, here is what a Risk Manager should look for in claims management:

Control Over Your Settlements:

Employers should never be surprised to hear that a claim was settled. This means that, unless otherwise directed by you the client, your dedicated adjuster will partner with you directly on all matters related to settlements.

Control Over Your Reserves:

When calculating your insurance premium, underwriters consider both your prior claims history and the reserves for your outstanding claims. Many traditional insurers use pre-defined formulas to calculate adequate reserves, which often are set much higher than necessary. Unrealistic reserves can lead to all sorts of issues for organizations, but most importantly, unnecessarily higher premiums. A professional TPA, will have dedicated adjusters that use both facts and experience, and work with you to ensure claim reserves are posted timely and accurately.

Control Your Expenses:

One example of expense control is your Allocated Loss Adjustment Expenses (ALAE) metric. ALAE are costs attributed to the processing of a specific insurance claim and will show up as a separate line item on the reserves. Fees for appraisals, legal work, and other expenses all affect the ALAE. Risk Managers should look for a TPA that uses an aggressive approach to claims handling and help reduce these costs.

Companies shouldn’t have to surrender control to the insurance company – employers deserve, and should expect, to decide when and how spend their claims dollars are spent. A great TPA will treat every company dollar as if it were their own and will aggressively defend your company’s interests and protect your bottom line.

Choosing the Right TPA

While there are hundreds of claims vendors in the market, it’s critical, that if you want real control and real results, your company must thoroughly assess and align with a highly effective claims management partner. While most vendors will promise reduced costs, the lack of insight, expertise and dedicated client service is often missing.

CBCS is a nationally recognized property & casualty TPA, known for our strict guidelines and expectations of our team – to take care of our clients and protect their bottom line. We continue to raise the bar of claims handling and challenge conventional industry wisdom. If you’re interested in taking back control of your claims through unbundling, or you’re simply interested in learning more about our approach to claims management, Contact Us Here and qualified member of our team will be in touch shortly.


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