Navigating the Nuances of Digital Claim Files

While the essence of claims adjusting has stayed the same – investigation, evaluation, negotiation – the way a file is documented has changed significantly. Digital files have made paperless claims a reality, according to Kevin Quinley, founder and principal of Quinley Risk Associates.

Quinley explained how digital files have impacted claims handling in the latest Claims Insights podcast, “From Sticky Notes and Coffee Stains to Digital Claim Files.”

Document discovery during litigation is one area that has been significantly impacted by digital claim files. The more time and effort to retrieve these types of evidence or documentation heightens e-discovery costs.

“It’s made the so-called discovery process extremely expensive, which in turn has heightened transaction costs, which in turn intensify financial pressures for insurance companies and adjusters to settle rather than defend,” said Quinley.

In addition, there’s a technical challenge in salvaging and producing instant messages and text messages, he said.

Personal devices used for work can also muddy the discovery waters.

“The use of this media expands the potential for discovery by plaintiff attorneys in bad faith cases,” he said.

The trend toward paperless files has placed greater focus on the potential for bad faith claims and the duties of adjusters in documenting their process.

“Now, they [digital files] certainly haven’t diminished the responsibility to document claim files, if anything, they’ve raised the bar,” Quinley said, adding that the introduction of electronic claim files has depleted adjusters’ time.

“Generally, there may be some exceptions, but I think digital technology has changed what I would call the anatomy of a claim file. It’s expanded it. It’s certainly affected claim files qualitatively,” said Quinley.

A growing emphasis on data analytics and big data, said Quinley, means “more time spent by claims people on data capture which bleeds time away from the nuts and bolts of sound claim handling: investigating, evaluating and negotiating.”

The expectations related to response time has made adjusters more reactive than reflective.

“They got things coming at them all the time and their decisions are more reactive and reactive decisions are not always sound decisions,” said Quinley.

“It’s raised the bar while crimping the time,” he explained.

Claims files have expanded to include archived voicemails, emails, text messages and digital photos.

Email and texts have “created new traps and pitfalls that can ensnare adjusters and insurers with bad faith claims,” he said, noting digital communication tools have “created new and intrusive discovery avenues for bad faith attorneys.”

In the past, claims files were stored onsite in claims offices and in warehouses before being destroyed. Now, digital claims files can exist in perpetuity.

“Once a claim file entry is there in a digital format, it’s there for good,” Quinley said. “So, any intemperate or offhand comments are archived and memorialized for good, or in the case of bad faith litigation for bad, and once it’s there, you can’t unring the bell, you can’t put the toothpaste back in the tube.”

Quinley suggests the following documentation should be contained in any claim file: statements of the insured and witnesses, accident reports, loss documents, photos or diagrams of the loss or accident scene, and file notes.

He offers six takeaways:

• File documentation should contain only the facts.
• When documenting a position – whether denial or acceptance of coverage – document just the facts, not feelings or hunches.
• Claim files aren’t a transcript of every single thing that happens on a file.
• Harness technology to efficiently document the file.
• Understand the mantra of ‘if it’s not in the claim file it wasn’t done’, is really an aspirational standard to strive for, it’s not a literal yardstick.
• Use the New York Times test in pondering what to put into a digital claim file. “If you wouldn’t be comfortable seeing your claim file note or entry on the front page of tomorrow’s New York Times, don’t put it in the claim file, don’t memorialize it.”