Even the most well-prepared businesses can face unexpected crises. An accident could happen despite robust safety procedures, an unexpected union strike can cause your revenue to plummet, a change in the government can cause market issues, or even something simple like a power cut can cause your operations to come to a standstill for a few hours.
While there are ways to mitigate some of these risks, no risk management program is foolproof. This is what business insurance coverage is for. Purchasing insurance appropriate to your business and knowing how to process an insurance claim can be the difference between financial ruin and coming out of a crisis relatively unscathed.
To handle claims quickly and efficiently, you need an effective claims management system. You should also know how to manage the administrative aspects of the insurance claims process. And finally, you need to know how to file the claim with the relevant insurance company.
And because insurance typically deals with large amounts of money and compliance with regulations (especially in the case of workers’ compensation), there are a lot of steps and tons of paperwork involved. So it’s easy to make mistakes during claims processing.
In this article, we’ll outline the steps involved with claims processing, and then walk you through common claims processing mistakes and how to avoid them.
Insurance Claims Processing Step-by-Step
Claims processing involves five steps, some of which are in your hands and some that the insurance provider carries out.
Here are the standard steps.
1. Contact Your Insurance Broker
The first step is to contact your insurance broker once you know you have claims to make with one or more insurance companies, have pinpointed which policies you will need, and have collected information about your issue. The evidence would typically be presented by filling in a claims form. They will take the information and supporting evidence and contact a claims adjuster to start investigating the claim.
2. Claims Adjuster Investigates the Claim
This step is mainly carried out by the payer (the insurance company). The claims adjuster looks into the incident and evaluates the damage. They also identify liable parties, if any, and assess the coverage your policy would provide. Here, your responsibility is to cooperate with the claims adjuster and provide the evidence they ask for. You can also bring in witnesses and provide additional evidence to support your claim.
3. Policy Review
Alongside the investigation, your insurance plan also gets reviewed. The claims adjuster would typically provide an explanation of benefits (EOB) detailing what is covered by your insurance. They will also take you through what the policy doesn’t cover and any deductibles you’ll have to pay.
4. Professional Assessment of Damage
If assessing the damage requires expert knowledge, the claims adjuster may hire professionals such as engineers, contractors, or appraisers to examine the extent of the damage and how much it would cost to fix things (in the case of property damage).
In the case of work injuries of employees with Medicare, the medical claims processing that follows is slightly different from those related to property damage. The insurance company with whom you’re making the health insurance claim would contact the health care provider to evaluate costs in this step.
5. Processing of Claims Payments
After a thorough assessment of the damage and a claims adjudication process to decide your eligibility to receive the payment as well as the financial liability of the insurance company, the adjuster processes your claim, or in case of a denied claim, they would explain the reasoning behind the denial.
This step involves the repair or replacement of damaged items and either reimbursement to you or a direct payment to the professionals fixing the damage.
6 Claims Processing Pitfalls to Avoid
The steps outlined above may seem short, but they could get complicated depending on the severity of the incident. Also, you may need to make claims submissions to different providers depending on the policies covering your business. This makes the claims process prone to mistakes.
Here are some of the most common mistakes made during claims processing, and how to avoid each of them.
1. Being Unprepared for Accidents
Although this is not exactly a part of claims processing, it definitely plays a role. If you’re not prepared for crises, you’re not only likely to have more claims in the first place, but the claims process may not yield satisfactory results for you either. If you have effective risk mitigation strategies, you’re less likely to face an incident involving a claim. And if you document your strategies carefully, it shows insurance companies that the incident requiring the claim has occurred despite your best efforts, thus strengthening your claim.
2. Non-Compliance With Regulations
Usually, if you take all the measures possible to mitigate risks and hazards, you’re likely to be in compliance with federal and state laws applicable to your company. But it’s always good to check, just in case. This is vital because if the conclusion is that an incident happened due to non-compliance on your end, the insurance claim will not go in your favor and you’ll face hefty penalties as well. So make sure you’re complying with any regulations applicable to you, be it federal, state, or local.
3. Delaying Communication With Stakeholders
When an incident occurs, you may be so occupied with putting out fires that informing stakeholders such as insurance companies and regulatory bodies (e.g., OSHA) takes a backseat. But this could lead to grave consequences. For example, if you don’t inform OSHA of a severe injury within 24 hours or a worker fatality within 8 hours, you may face major penalties. And if you don’t inform the insurance company about the incident as quickly as possible, this may delay your claim.
The best way to avoid this mistake is to make it an integral part of your emergency response process. In addition to first aid and other important steps, assign someone on your team to contact the stakeholders immediately.
4. Being Dishonest With the Insurance Company
After an incident, a part of your financial future is likely to depend on the insurance company, especially if you’re a small business. And as the insurance company carries out an investigation and assesses the issue, it’s easy to see them as an adversary. It may also be tempting to hide information from the claims adjuster if it reflects badly on you.
But such secrecy may backfire on you. So it’s always a good idea to cooperate fully with the insurance adjuster and be transparent about any issues that arise during the claims process.
5. Letting the Claims Adjuster Do Everything
It is the job of the claims adjuster to investigate your insurance claim, which usually involves a thorough look at your documentation, a review of the insurance policy, and an assessment of the damages. It also often involves an investigation into the incident itself to evaluate any liability on part of employees or you as an employer.
Since they are looking into the incident anyway, you may think it’s unnecessary to conduct your own investigation. But you need to remember that you and your employees will definitely know the company and its operations better than an external professional, so your investigation may flag things that the claims adjuster has missed, and this might strengthen your claim.
Besides, you need to investigate the incident for your own benefit as well, as you may find gaps in your safety procedures that can be improved on. So, it’s always important to conduct an incident investigation as soon as possible, independently from the claims adjuster.
6. Allowing More Damage After the Incident
Damage occurring during an incident is not necessarily the only problem. For example, if a pipeline leak caused equipment damage and injuries, it does not end in that instance. The leaked fluid could lead to slips and falls, and the fluids could damage more equipment if the area is not isolated and the equipment is not moved.
If such damage occurs after the incident and you can’t provide reasoning as to why you didn’t prevent it, the insurance company may only pay for damage that happened during the incident. To prevent this, you need to protect your assets by:
- Isolating or clearly marking the area of the incident so that workers are careful
- Moving equipment that could be damaged
- If equipment cannot be moved, documenting why it’s not possible
Avoid These Pitfalls With Automation
Most of the issues outlined above are directly or indirectly caused if you handle your claims process manually. With manual claims processing using spreadsheets, paper claims forms, and email communications with stakeholders, it can be hard to keep track of what you need to do. This may result in vital steps being missed, such as informing OSHA or the insurance company of the incident.
Using automation in the form of an online claims processing system such as Pulpstream can help you avoid all possible pitfalls and streamline your claims process. With such software, you can:
- Store all your documentation including insurance policies, workers’ medical records, incident reports, claims forms, and more in one place
- Automate checking for regulatory compliance
- Send regular notifications to stakeholders including your insurance broker
- Run claims analytics to find patterns
- Track your expenses and payments
- Generate detailed reports for all purposes
- Manage all workflows from a single, intuitive dashboard
So what are you waiting for? Up your insurance claims game today with Pulpstream. Book a free demo now!
