Twenty-five years ago, the words “Grand Canyon” could have been used to describe computer technology.
At one end of the divide, universities and the military used bulky devices with card input and tape storage. At the other end, home users could assemble kits that might provide them with a whopping 256K of memory.
The world has come a long way since then, and the insurance and reinsurance industries have been some of the key beneficiaries of the information revolution. This article will describe where technology is being used to underwrite and service excess medical reinsurance risks and will look at what the future may hold.
Technology has changed how reinsurers do business. After 256K became the size of a medium e-mail rather than the total amount of memory that a computer held, things speeded up.
Electronic commerce and Web technology are changing the way reinsurers underwrite and provide services.
Sales and marketing
Technology means that all sales and marketing materials are available online. The prospective client can perform due diligence on the reinsurer through the Website. Reinsurers can begin the sales process through written communication, followed by on-site visits with good prospects.
Technology allows the reinsurer to better understand client needs and develop consultative solutions. This proper, insightful analysis allows clients to be informed buyers of reinsurance. They can choose the right coverage within their budget. They are better able to determine what services they should reinsure, what deductible they should buy, and what internal limits and other terms and conditions are appropriate for their plan and risk tolerance level.
Pricing and underwriting
Since claim and request for proposal (RFP) information is sent to the reinsurance carrier electronically, the reinsurer underwriter is able to “slice and dice” the data to better understand the risk profile and develop the appropriate rate. Previously, the underwriter had to take hard copy information and manually create spreadsheets from such claim data. Reinsurers have a more accurate view of risk and clients are given a faster decision.
With technology, the reinsurer now has the ability for an underwriter to develop an electronic module that can generate a proposal automatically from the terms and conditions used to underwrite the risk. If the proposal is accepted, then a contract may automatically be issued consistent with the underwriting and proposal. In some situations for more simplified coverage, this is done electronically with no manual intervention.
The electronic model has two main advantages. First, it ensures consistency between the underwritten terms and the actual terms issued in the contract. Second, it eliminates what once was a considerable delay between an issuance of final treaty and a bound proposal. The longer the duration between the times that these final wordings are issued, the more possibility there is for misunderstanding between the reinsured and reinsurer regarding terms and conditions. Anything that can deliver timely and accurate reinsurance treaties to the reinsured is to be highly valued.
Premium, claim and other administration
Premium payments are submitted electronically from the reinsured’s bank account to the reinsurer. Claim reimbursement requests are submitted electronically by the reinsured, and claim reimbursements are returned electronically to the reinsured along with explanations of benefits (EOBs). The status of all premium and claim activity is also available via customized client reports and online customer service systems.
All forms, procedures and service manuals are sent to the client via the Web. This isn’t to say there shouldn’t be a personal touch throughout the duration of the contract. It’s still important to install accounts on site, and relationships count for as much as ever.
A Web-enabled case management referral system between the reinsured and various managed care vendors offers reduced cycle time with use of managed care vendors to control claim frequency and severity. For example, organ transplant patients, where time is of the essence, can be matched rapidly with appropriate networks. Neonatal case management forms can be submitted online. This type of system provides a 24/7/365 platform for managed care case status and utilization savings reporting between reinsured, reinsurer and vendors.
All information needed for the renewal (census changes, claims status coverage parameters) is sent to the reinsured electronically and returned electronically to the reinsurer.
In the future, the reinsurer may actually go online with a reinsured’s claim database and pull the information it needs to adjudicate a claim as opposed to having the client submit it to the reinsurer. The main benefits to the reinsured would be quicker recoveries with less work. In turn, the reinsurer will have more access to underlying claim information to better underwrite the case and service the claim.
Notwithstanding the expanded role of technology, insurance is still a relationship business. In a commoditized environment, low cost and customer service can be business drivers. Focus on the customer is facilitated by a focus on technology as a means to that end.