Customer Experience

Rethinking the Claims Value Chain

Which creates an intriguing possibility to have an insurance company — an alternative choice to bricks and mortar and company cars and salaries, an online claims operation! Of course, you will find third-party administrators (TPAs) which are large and well-developed enough to offer complete, end-to-end claims management and fulfillment services for an insurance company with an outsourced arrangement. That might be the one-stop shopping solution: hiring a TPA to exchange your claims operation. But attempt to envision an end-to-end process in which you invite vendors/partners/service providers to compete to handle each component inside your claims value chain (including processing handoffs to each other.) You decide on the very best, negotiate attractive rates, secure service guarantees and manage the entire process by simply monitoring a performance dashboard that displays real-time data on effectiveness, efficiency, data quality, regulatory compliance and client satisfaction.

You would want a method to integrate the inputs in the different suppliers to give the dashboard, and you would also need to make certain the suppliers all worked together well enough to provide the best customer having a seamless, painless experience, but you are probably already doing some of that if you are using vendors. You'd still want to do quality and compliance and leakage audits, of course, but you could always hire a different vendor to do that for you or keep a small team to get it done yourself.

Your unallocated loss adjustment expenses (ULAE) would become variable, tied straight to claim volume, as well as your main operating challenge would be to manage your supply/value chain to create the most desirable cost and experience outcomes. Improved cycle time, efficiency, effectiveness, data accuracy and also the excellence of the customer experience could be your value propositions. You can even monitor the dashboard out of your beach house or boat — forget about staff meetings, performance reviews, training sessions — and intervene only when necessary for response to pre-defined operational exceptions.

Sounds just like a no-brainer. Insurance providers have been outsourcing portions of their value chain to vendors for a long time, why haven't they provided their claims operations virtual?

If you are running an insurance company claims operation, you probably know why. Many (probably most) claims executives be proud of and comfortable using their claims operations only the way they are. They feel they're performing their value chain processes better than anyone else could, or their processes are “core” (so critical or so closely associated with their value proposition they can't be performed by anyone else) and therefore sacrosanct, or they have already achieved an optimal balance between in-house and outsourced services so they don't have to push it any more. Others can't stand losing control related to outsourcing, or they don't want to consider disruptive change. Still others think it may be worth exploring, but they don't think they are able to create a successful business case for the investment in systems and change costs. Unfortunately, this may help explain why claims executives are often charged with being stubbornly change averse and overly confident with the status quo, but I think it is a little more complicated than that — it all starts with the figurative “goggles” we use to self-evaluate claims operations.

If you are managing a claims operation, you have an entire assortment of evaluation goggles — the greater claims experience you've, the bigger your collection. When you have your “experience” goggles on, you compare your operation to other people you have find out about, or observed in prior jobs, or at competitors, to make sure your activities and results benchmark well and that you are staying up-to-date with guidelines. At least one time a year, someone beyond claims probably demands that you simply place your “budget” goggles on o look for opportunities to reduce ULAE costs. or legal costs, or fines and penalties, or whatever. You most likely look through your “customer satisfaction” goggles a great deal, specially when complaints are up, or else you are becoming bad press because of your CAT response, or perhaps a satisfaction survey originates out and also you don't look great. Your “stakeholder” goggles help you assess how successful you have been at identifying anyone who has a vested interest in how well you perform, determining what it is they require of your stuff to achieve success, and delivering it. You utilize your “legal and regulatory compliance” goggles to identify problems before they become fines, bad publicity or litigation, much as you utilize your “no surprises” goggles to continually scan for operational breakdowns that may cause reputational or financial pain, putting the blame and second guessing. Then there are the goggles for “management” — litigation, disability, medical, vendor — and for “fraud mitigation” and “recovery” and “employee engagement.” Let's not forget the “efficiency” goggles, which help you assess unit costs and productivity, and the “effectiveness” and “quality control” goggles, that allow you to view whether your processes are producing intended and expected results. Not to mention your “loss cost management” goggles provide you with a good read on how good you are managing all three aspects of whatever is lost cost triangle, i.e., whether you are deploying and incurring the most effective combination of allocated and unallocated expenses to produce the best level of loss payments.

Are those goggles necessary? You bet. Claims management involves complex processes and inputs along with a convoluted web of variables and dependencies and contingencies. Most claims executives would probably agree it seems sensible to regularly evaluate a claims operation from many different angles to get a good read on what's working well , what isn't and where there's chance of improvement. The multiple perspectives provided by your goggles help you triangulate causes, understand dependencies and impacts and intelligently balance operations to create the best outcomes. So even though you may have a strong bias that the organization design is world-class, your people are the best and all processes and outcomes are optimal, the evaluation should give you lots of evidence-based information that to test that bias and identify enhancement opportunities — as long as you keep a balanced view.

No appear you need to do, however, there will always be others in your organization who enjoy evaluating your claims operation, and they usually aren't encumbered by this kind of extensive collection of goggles. They've already just one set that's tuned to budget, or customer experience, or compliance, or they may be intoxicated by consultants whose expensive goggles are tuned to detect opportunities for large-scale disruptive/destructive process innovation or transformation in your operation. Based on that narrow view, they simply might conclude that things need to change, that new operating models need to be explored. Whether you agree or disagree, your evidence-based information should be of some value in framing and joining the debate.

Will we have ever see virtual claims operations? Sure. There are many specialized claims providers operating in the marketplace at this time that may perform claims value chain processes faster, cheaper and better than many insurance companies are capable of doing them. The technology exists to integrate multiple provider data inputs and make up a performance dashboard. There are a few large insurance provider claims organizations pursuing this angle vigorously right now. I fully expect the businesses that rethink and retool their claims value chains to take full advantage of integration of logistics capabilities and begin to generate improved performance metrics and claim outcomes, ultimately creating competitive advantage for themselves. Does which means that it is time that you should rethink your claims value chain? I think the best way to discover is to put on your “innovation” goggles and have a look!