“Quality Assurance” or “QA” is a familiar concept in lots of industries (like manufacturing for example), and the insurance industry has widely implemented QA operations in their business as well. Insurance companies say they want their adjusters to handle policyholders’ claims in a “quality” fashion. To be sure adjusters are doing so, insurance companies use their QA departments to “audit” claim files handled by adjusters. In theory, these audits compare the way actual claims have been handled to the “best practices” the insurance companies have implemented for quality claim handling. In other words, the company sets forth “quality” guidelines for claim handling and then comes in behind adjusters after claims have been handled, audits the claim files and gives the adjusters quality “scores” or “grades.”
All of this sounds good. The whole “QA” concept is something the management of an insurance company can easily get behind. I mean, who’s against “quality,” right? Unfortunately, in my experience, this is not exactly how things go in the real world.
In practical terms, all too often, insurance companies use the “QA” system as the “stick” in the carrot-and-stick equation mentioned in my earlier post. While bonus compensation based on company profitability is the carrot, the results of a QA audit are often used to smack the adjuster who is paying too much on claims.
Put yourself in an adjuster’s shoes. You handle and settle tons of claims, then a QA “auditor” comes along to second-guess your work. Whether you score well on your QA audit or not will have an impact on your employee performance evaluation, including whether you get a raise or a promotion. So, it’s only natural that you want to score highly on the audit. If you want to score highly, you obviously want to know how the audit is being graded so you can handle claims in the way that scores the best.
My experience is that insurance companies often aggressively use their QA audits to discourage what auditors describe as “overpayments.” In other words, one of the things a QA auditor looks at is the amount of money paid out by an adjuster on a claim and judges whether that amount was too low, just right or too high. If the auditor concludes there have been “overpayments” that reflects poorly on the adjuster’s QA report and ultimately on the adjuster’s employee performance evaluation. Companies often track, tabulate, categorize and analyze “overpayments” and the reasons they believe such payments occur.
On the other hand, oftentimes, companies do not track, tabulate, categorize and analyze “underpayments” to policyholders and the reasons they occur. Instead, often, these “underpaid” claims are sent back to the adjuster to re-examine and pay if the adjuster deems it appropriate. In my experience, “underpayments” do not work against an adjuster in her employee performance evaluation nearly as much as “overpayments” do.
Insurance companies say their QA departments are simply a way to ensure claims are handled correctly. This is a worthy goal in theory. But, when insurance companies use QA audits as a “stick” to enforce a culture of trimming claim payments in a chase for profits, it’s not really a quality assurance system at all.