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The Impact of Modern Technology on Workers' Compensation Claims

 

By Sandy Leyva eBusiness Development Leader Montana State Fund

Workers' compensation insurance is a critical element in establishing a positive climate for business while protecting the rights of workers and providing a funding mechanism to cover injuries that do occur on the job. A well-functioning workers' compensation system allows insurance carriers, state insurance funds, and self-insured entities to efficiently manage the core processes of underwriting workers' compensation policies and investigating and processing claims. Historically, these entities have faced a number of challenges in carrying out these functions, particularly in claims.

As compared to other lines of business, workers' compensation presents a number of unique challenges for the claims organization. These include requirements for filing forms and reporting data, heavily regulated benefit calculations involving minimum and maximum amounts that depend on the accident year (among other things), sometimes vague regulatory changes, and so on. Unfortunately, the legacy claims systems that most companies and organizations use today are poorly equipped to deal with these challenges. Their text-based user interfaces and limited process control make it difficult to perform even routine tasks, such as calculating benefit amounts or processing streams of recurring indemnity payments.

In the decade since most of these systems were designed, however, advances in software technology have made it possible to build and deploy better claims solutions that are tailored to meet the specific requirements of workers' compensation insurance. Some of the key software improvements have been:

  • Standards-based software platforms such as J2EE (Java 2, Enterprise Edition) make it possible to build scalable, reliable applications that run on relatively inexpensive hardware
  • Web-based technology, including the development of flexible browser technology, make it possible to build much richer and more intuitive user interfaces without deploying software on the desktop
  • Business rule engines, which replace traditionally hard-coded "business logic," determine how claims should be assigned to examiners - with visual or scripted rules that can be quickly modified by business analysts
  • Web services standards, which are making it increasingly possible for mission-critical integration points to be implemented by exchanging XML messages over standard Internet protocols
  • New methodologies for software development and implementation, such as eXtreme Programming, which can reduce the risk involved in major software projects

On this foundation, it is now possible to deploy a claims application that is easy to use for novice or experienced examiners, streamline traditional hassles such as calculating benefit amounts or setting up recurring payments, enforce state-mandated deadlines and rules, generate required correspondence automatically, or even tailor the claims handling process to the requirements of specific market segments or accounts.

While software technology has made possible a new generation of core insurance applications, most insurance carriers and state funds have yet to take advantage of these new capabilities, for a variety of reasons. Many insurance systems on the market are still mainframe or client/server applications at heart; most companies lack the bandwidth and skills to build these large and complex systems themselves; and organizations in the insurance industry tend to be notoriously risk-averse.

At Montana State Fund, we decided that overhauling our core systems and improving our claims handling capabilities were critical initiatives for better-serving our customers: the businesses and workers of our state. In mid-2004, we began the process of looking for a new claims solution, and today we are nearing the production rollout of a comprehensive system built entirely on a J2EE architecture and closely tailored to the requirements of Montana workers' compensation.

The new claims system, Guidewire ClaimCenter, was developed by Guidewire Software. Before selecting ClaimCenter via an RFP process, we ensured that it was being used for workers' compensation claims at live production sites, and that its users were satisfied with the application and with the software vendor - steps that any organization should take when making a choice of this magnitude. Over the past year, a small team of people from Montana State Fund, Guidewire, and HCL Technologies have worked together to adapt the system to our needs and to integrate it into our systems environment. Because of the use of modern architecture, this work did not require source code modification to the ClaimCenter software package.

With live deployment only a couple of months away, our claims people are looking forward to taking advantage of a modern claims solution, which will streamline their day-to-day work while helping them achieve better claim service for our customers. The insurance industry as a whole is moving toward better core processing systems that take advantage of modern software technology, which will bring benefits not only to carriers, state funds, and self-insured entities, but more importantly to the many people who depend on us every day.

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