– March 23, 2015
Let’s face it, running an insurance company is no easy task. Market pressures, changing cycles, balancing the right mix of products and ensuring an efficient operation will certainly keep a CEO up at night. Having a smoothly run claims department is essential to ensure costs are maintained and customers continue to return. No one likes claims, however they are the largest expense an insurance company will have and as such it is essential that they run efficiently.
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There are many elements to a well run claims department. As with many areas of business it comes down to people, process and technology. Good people will drive the success of any department and working with defined efficient processes, as well as technology tools that support the organization, are basic core requirements to any well run department.
3 “Must Haves”
Specifically what people, processes and technology make up a good claims department is a subject for another day. Regardless every claims department should be using metrics, performing audits and have a business continuity plan in place as a minimum.
Metrics – Today’s claims department should be filled to the brim with claims data. If your claim system doesn’t provide robust data then there are bigger issues to deal with. Data from the claims department should be actively used to address different needs from various internal stakeholders. Claims managers should have information about the efficient handling and disposition of claims. Underwriters should have information about client activity and trends. And actuaries should be able to develop claims data to ensure reserve are adequate and pricing is appropriate. Dashboards of claims information should be available to the CEO to help identify trends and allow for both a tactical and strategic view of the operations.
If you are not getting or using your claims data to provide valuable metrics then sleep is the least of your worries.
Auditing – File reviews are an essential tool for claims departments and should be part of the overall culture of the organization. Performing regular internal claim audits helps ensure that reserve practices remain consistent and appropriate and the operation is running efficiently. More specific audits can help target various operational issues to ensure quality and compliance and can include data audits, financial audits and customer service reviews. Auditing should be a regular part of the business landscape and be conducted in a formal way and on a regular basis (see my article A Claims Tale Of Three Little Managers And Their Review Programs).
If your’e a CEO and you don’t need sleep, then don’t worry if your claims department is auditing. However, if you like to rest easy – this one should be a no-brain solution. Make sure there is an audit plan and program in place and it is running regularly.
Business Continuity – Are you really ready for the next disruptive event that could derail the operation? The main question for your claims department is can they manage, restore and recover essential functions, processes and data during and after disruptions to operations? If there answer is – I don’t know – then you probably aren’t sleeping at night.
The claims department should develop an incident-agnostic functional recovery program that can establish a predictable recovery priority that maintains a “going concern” and can ensure that the claims “supply chain” continues to operate. Like the rest of the organization, there needs to be a proper Business Continuity Plan in place to ensure the company is ready to handle any disruption.
Ensuring a smooth running claims department is vital to a successful running organization. Even well run companies should take a look to make sure that three “must haves” are in place so the CEO can sleep better at night.
What else is keeping you up at night?