In fact, in 1992, the city had 10,495 new action starts (claims that progressed to a lawsuit), a level that hit 12,769 in 1995. “We were beset with an ever-increasing caseload, higher payouts, and rising long-term claim liability projections,” says Hevesi. “Yet we were bogged down by inefficient procedures and systems that lagged decades behind insurance industry best practices.”
The result, says Newman, was complete chaos: “On average, each employee was assigned more than 1,500 claims. We had a backlog of 60,000 claims that was projected to reach 100,000 by 2007. And 20 percent of the time, [when a claim was requested,] the staff couldn’t even find the caseload.”
To rectify matters, Hevesi began by earmarking $1 million for renovation of the workspace, which was crowded, hazardous, and downright antediluvian. “We’re no longer in a bullpen setting,” says Newman, “but in traditional, modern cubicles. We can now treat claimants and their attorneys professionally.”
Hevesi then brought in Price Waterhouse (now PricewaterhouseCoopers) to do a comparative best practices study at a cost of approximately $1 million, funded jointly by the Comptroller’s office and Mayor Rudolph Giuliani’s office. The firm had little difficulty finding the trouble spots. “The biggest impediment was New York’s bifurcated system for handling claim cases,” explains David Horne, a PricewaterhouseCoopers director. “Unlike [in] other cities, the Comptroller in New York does not control the claims process end to end. While claims originate and are investigated by the Comptroller, the city’s law department [which reports to the separately elected Mayor] handles the city’s legal defense.”
The divisional approach, which could not be changed because it was legislated by city charter, made settling a claim a time-consuming process. “Claims handling was resident in two different parts of the city, with documents flowing back and forth ad nauseam,” says Horne.
The only recourse, then, was to identify ways in which both agencies could work together to have an impact on claim frequency and costs. The Pricewaterhouse study, for example, noted that the city settled claims only after litigation had commenced, which caused outcomes to be more costly and was in sharp contrast to insurance industry practices. In response, Hevesi funded a pilot study that offered prelitigation settlements immediately after statutory hearings of a case, which are held very early in the claims process. And by April 1999, 924 claims in the pilot study had been settled at half the average cost of claims that, historically, were settled early in litigation–a savings of some $5.7 million.
The study also pointed to the dismal state of technology in the claims process, something the office was already improving. Claims-processing software was purchased for $7 million from Integic Inc., in Chantilly, Virginia, to manage claims for both the law department and the Comptroller’s office. An optical imaging system that replaced paper claims with electronic ones was introduced, allowing staff at the Comptroller’s office and at the law department to track claims together. “Now if I get a call from a claimant, I can immediately call [the claim] up and see where it is in the process,” says Aaronson.