It's all about the adjusters

The right TPA can help lower the total cost of loss

By Dennis H. Pillsbury

When a claim occurs, it’s an opportunity for an agent to shine or to fall flat on his or her face. A mishandled claim can result in an angry client or former client if things go really badly, an upset carrier and an end to any opportunity for profit-sharing. On the other hand, quick response to claims can solidify a relationship with a client and keep the loss ratios from escalating to untenable levels.

“At the end of the day, it’s all about the adjusters,” says Pat Ryan, managing director with Public Risk Management, a broker based in Omaha, Nebraska, that specializes in self-insurance programs for public entities.

“You must have well-trained, competent adjusters with reasonable case loads. If you decide to work with a third-party administrator (TPA) for claims, you shouldn’t base your decision just on price. The way the TPA handles claims can have so much impact on the total cost. You want to keep that number down and the right TPA can be instrumental in helping you with that.”

Ryan continues: “The most important criterion is that the TPA follows instructions. You need to develop standards and have a TPA that will follow them. We usually involve the TPA from the very beginning when setting up a self-insured program. That way the TPA knows what is expected in terms of claims handling.

In workers comp, for example, it’s critical that one of the standards be early contact with the injured employee. You need a TPA that can work with the doctors, the medical case managers and the employee to achieve the best outcome. They also need to coordinate with whoever is responsible for the return-to-work program.

“One of the TPAs that we use quite often is Sedgwick Claims Management Services (CMS). Their Nebraska office is located right here in Omaha and is very good at working with us and our clients,” Ryan says.

Brian D. Shald, senior vice president and regional operations director—Central Region for Sedgwick CMS, says that one of the advantages a TPA offers is the ability to “customize the program for individual clients. Anyone in the business knows that carriers often have only one service model. The model can change over time, moving in a cycle between centralized service units and field offices, but the carrier controls the claims process and dictates the model. A TPA offers many more choices.”

Donald F. Sloan, executive vice president and director of national casualty operations for Sedgwick CMS, adds: “We handle the claims similar to an insurance company. We go through and gather the facts, fill out state forms, investigate and help set reserves, and manage litigation. What sets us apart, however, is that we work within the program design of the client, so there’s a real value-added.

“That’s why it’s very important for us to have a relationship with an agent or broker before we work with their clients,” Don continues. “It lets us know what services we will need to provide and also lets the agent or broker get to know and trust us. He or she gets a chance to learn about our strengths and weaknesses. Of course, we only have strengths,” he adds with a smile.

“We work with a wide range of agents and brokers in terms of claims handling sophistication,” Don notes. “Our involvement will depend on the agent’s or broker’s preferences. We’ve helped some with RFPs. We have templates they can use. Others don’t want that much involvement. They just want to introduce us to their client for the claims handling and then be kept aware if something significant is happening. Some have internal claims management people with whom we need to coordinate.”

The competitive edge

Brian interjects: “Another reason to start the relationship early is that it allows agents or brokers to have something different to offer to clients. When they approach a client that is a candidate for TPA services, they have that option in their arsenal. And because of our flexibility, they can offer almost any level of claims handling service the client wants. A lot of clients place a high value on having claims people on the premises. We will do that.”

Although virtually any type of client can be a candidate for TPA services, those with large workers comp and disability exposures are prime candidates. But if you have any client that is “large enough to retain some risk, you need to talk to a TPA about unbundled services,” says Frank Huffman, senior vice president and director of corporate communications for Sedgwick CMS.

“Workers comp is our largest service line,” Brian notes. “However, disability, especially short-term disability, has grown rapidly. We also provide liability claims services. For many clients, the ability to have one claims organization handling multiple lines involving multiple carriers is a huge service advantage. They can keep the same service team, yet have the option to change carriers and/or retentions as the market conditions change.”

“We’re also seeing a lot of activity in FMLA,” Don adds. “Many companies are outsourcing that to us. It’s a tricky area. In this new age of technology, there’s a lot more sharing of information and a lot more effort to protect information. It’s that dichotomy that convinces many companies to outsource FMLA and other compliance issues. We actually have programs that assist with OSHA logging. We are very careful in maneuvering between these dichotomies.”

Frank points out that Sedgwick CMS has a legal person who spends more than half her time working on state licensing and regulatory compliance issues.

Don points out that many claims can be open for decades. “Relying on the insurance company to continue to effectively manage these claims if a client moves business to another insurer is tricky at best. Having an independent claims management TPA allows agents to be more flexible when considering whether to move a piece of business from one carrier to another.”

The final piece is data analysis. “Information is king these days,” Don says. “We have a strong data warehouse capability that allows us to focus on areas where mitigation and prevention of losses will be most effective. We can provide that analysis or simply provide the data for companies or agents that want to do it themselves. We work closely with a lot of clients’ risk management groups to help them understand and use the data effectively.”

Public Risk Management’s Pat Ryan agrees with the importance of data. “You have to have a TPA with a good data reporting system. And you need to check what it will cost. With some TPAs, every report is additional. Sedgwick CMS has a very good system,” he concludes. *

For more information:
Sedgwick Claims Management Services, Inc.
Web site: www.sedgwickcms.com/