Improving Litigation Management: A Data-Driven Approach

Posted on November 18, 2024 by Marc Lanzkowsky

Addressing the Challenges of Accurate Data

The integration of data analytics and predictive modeling into litigation management can revolutionize how insurers handle claims, especially considering some of the new technologies hitting the market. For years the focus has been on billing data to help manage counsel and litigation. This type of information provided some insight into counsel performance and compliance with billing guidelines but did not really translate to better litigation management. I would argue that some of this taken the effectiveness of litigation in the wrong direction but that is an article for another day.

The success of this data-driven approach relies heavily on the quality and consistency of the data itself. For many claims departments, the hurdles of poor data input, unstructured information, and inconsistent data formats remain significant challenges. In addition, busy adjusters are being asked to spend more and more time inputting data which is taking away from their primary function as claim professionals. Addressing these issues is essential to unlocking the full potential of analytics in reducing litigation costs and improving outcomes.

Challenges in Achieving Accurate Litigation Data

1. Inconsistent or Incomplete Data Input by Claims Professionals

Claims professionals often prioritize immediate claim resolution over data entry, which can lead to missing, incomplete, or inaccurate information. Key details about litigation—such as court timelines, case strategy, or witness information—may be overlooked during input, reducing the reliability of downstream analytics.

2. Unstructured Data in Litigation Reports and Court Documents

Much of the critical information for managing claims litigation resides in unstructured formats, such as adjuster notes, attorney reports, and scanned court documents. Extracting insights from this data requires significant manual effort or sophisticated technology, which can slow down processes or introduce errors.

3. Data Inconsistency Across Systems

Data from different sources—claims systems, legal databases, and external platforms—often lacks standardization. Disparate formats, conflicting terminology, and varying levels of detail make it difficult to integrate and analyze data effectively.

Strategies for Overcoming Data Challenges

1. Improving Data Input Quality

Simplify Data Entry Interfaces: Design claims systems with intuitive, user-friendly interfaces that guide adjusters to input essential information without overwhelming them.
Incentivize Accurate Data Collection: Recognize and reward claims professionals for thorough and accurate data entry as part of their performance metrics.
Automate Data Entry: Leverage technologies such as natural language processing (NLP) and AI to extract relevant information from adjuster notes and reports, reducing manual workload and errors.

2. Structured Data Extraction from Unstructured Sources

Implement Text Mining Tools: Deploy NLP and machine learning algorithms to scan unstructured data sources, such as litigation reports and court documents, for relevant information. These tools can identify key data points like settlement ranges, precedent cases, and critical deadlines.
Centralized Data Repositories: Consolidate unstructured and structured data into a centralized system, allowing claims teams to access and cross-reference information more effectively.
Invest in Document Digitization: Use optical character recognition (OCR) and AI-powered data extraction to digitize physical documents and integrate their contents into claims systems.

3. Standardizing and Validating Data Across Systems

Create a Unified Data Schema: Establish a standardized framework for entering and storing claims and litigation data to ensure consistency across all systems and teams.
Cross-System Integration: Use middleware or APIs to synchronize data from disparate systems, ensuring that all platforms are working with the same information.
Regular Data Audits: Conduct periodic reviews of data quality to identify and address inconsistencies, duplicate entries, or missing information.

Enhancing Litigation Management with Reliable Data

Once the challenges of data quality are addressed, the true potential of analytics in litigation management can be realized:

Early Identification of High-Risk Cases: With accurate data, predictive models can reliably flag cases likely to result in significant litigation costs, allowing early intervention.
Improved Resource Allocation: Better data consistency enables teams to allocate legal and claims resources more effectively, focusing efforts on high-priority cases.
Enhanced Outcome Prediction: Clean, standardized data improves the accuracy of predictive analytics, helping to forecast settlement ranges and litigation timelines.

Building a Culture of Data Excellence

To address these challenges, claims leaders must prioritize a cultural shift toward data excellence:

Training and Education: Provide regular training for claims professionals to emphasize the importance of accurate data entry and how it supports better litigation management.
Collaborative Tools: Use tools that facilitate collaboration between claims handlers, legal teams, and IT departments to ensure data flows smoothly across functions.
Continuous Improvement: Establish feedback loops to refine data entry processes and adjust technology solutions based on user experiences.

Conclusion: A Foundation for Data-Driven Success

Accurate and consistent data is the foundation of a successful data-driven approach to litigation management. By addressing the root challenges—poor data input, unstructured information, and inconsistency—claims departments can unlock the full potential of predictive analytics and streamline litigation processes. While technology plays a vital role, building a culture that values data accuracy and consistency will ultimately ensure sustained improvements in litigation management.

How does your organization ensure data quality in litigation management? Share your strategies in the comments below, and let’s explore solutions to elevate our industry together.

3 Types Of Claims Metrics Every Department Should Be Looking At

Posted on February 12, 2016 by Marc Lanzkowsky

There is gold at the end of the rainbow!

Good news! – claims departments are now flooded with great data.

Seems like great news doesn’t it. It is great news, or can be, if you’re using the data to help improve the operations, lower cost or predict the future. However, many firms aren’t using the data they have to provide valuable information for the operation.

With the advent of more modern claim technology there has been a push to input more and more information about claims. Claims professionals are being asked to capture very specific fields of information presumably to be used by others within the organization. In addition, more sophisticated data models are combining claims data with underwriting and financial data that when used correctly can be a treasure trove of information.

With all that information available what is the best way to use the information?

At the very least data should be used to manage the operation, reveal trends, or be predictive.

Metrics to Manage the Operations

At the core, information coming out of the claims system should be used to manage the people handling files. Daily, weekly, monthly quarterly and yearly metrics around performance issues should be used to ensure claims professionals and support staff are performing at their best, responding to claims promptly and managing workloads and staffing levels. Typical metrics to manage the operation would center on matters coming and going out (i.e., open, closed, closing ratios); aging reports (i.e., throughput, time from receipt to setup, open to close); workloads (i.e., caseloads and closing ratios by adjuster); or financial in nature (i.e. reserve changes from one period over another, average reserves, total paid).

Metrics to Reveal Trends

There are trends in your data if you know where to look. Trends in loss frequency and severity, which may be caused by external factors, such as legislative, environmental and economic forces, are all developed from claims data. Trending claims data will help underwriters ensure pricing and terms are appropriate and allow problems to be addressed before they become disasters. There are numerous examples of companies that succeeded because they were able to review claims trends and adjust their business before it was too late. There are conversely many companies that failed because they did not have or use their claims data to spot deteriorating books of business in enough time to address it. Information from claims is the lifeblood of the organization and should be identified and regularly shared to help the organization make better decisions about loss reserves, risks, investments, and resources.

Captives and self-insured can benefit even more on using data to trend losses and lower costs to the bottom line. In an article in Business Insurance about how Captive Insurers Provide Owners With Key Risk Management Tools, the authors discuss how Direct TV used claims data to trend key issues that allowed them to significantly improve results in their Workers’ Comp program:

DirecTV Inc. used claims data from the past several years …to help it manage claims more aggressively for its installation crews…DirecTV used the claims data identified to implement changes to its safety programs, its training programs and its return-to-work strategy…. The claims data also showed opportunities to improve fleet risks. Over a three-year period, the safety changes resulted in a 43% reduction in calls on the Driver Alert phone line. The data also found delays in reporting claims and lengthy lost time due to worker injuries. As a result, the company implemented a formal return-to-work program, which resulted in a significant decrease in lost time, and used additional training on claims reporting to reach the point where 91% of claims now are reported within three days of an incident.

Metrics to Be Predictive

Using data is not just about spotting trends but predicating outcomes. Using predictive analytics is not about deciding claim outcomes without the involvement of skilled claims professional, but rather it is about providing a tool to assist in the process. Predictive analytics can correlate multiple aspects of data and draw conclusions in an instant that claims professionals would not be able to do without hours of analysis. Predictive analytics tools are being successfully implemented to combat fraud and streamline the claims intake process as Gen Re noted in Predictive Modeling – An Overview of Analytics in Claims Management, some other uses of uses of predictive analytics include determining:

Outlier Claims
Reserve and Settlement Values
Defense Strategy
Litigation Expense Management
Subrogation Potential

The benefits, if used correctly, are limitless when robust data sets now common in the claims world are used. More and more companies are using analytics to improve operations. In fact, according to a Towers Watson study in 2012, 63% of Chief Claims Officer’s surveyed stated they were starting to use predictive analytics in in their claim’s operations (see study).

Predictive modeling has been limited in the past because systems were not as robust and the amount of data available to run data models was limited. Times, however, have changed and most carriers should have more than their share of data that could prove invaluable. Of course data integrity must be as clean and accurate as possible for these new models to be effective. Regardless, the possibility for significantly improving claims outcomes is compelling.

How are you using data and analytics?

3 Claims Department Musts That Will Let The CEO Sleep Soundly

Posted on March 23, 2015 by Marc Lanzkowsky

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.

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What else is keeping you up at night?

Part 3 on Leadership: Challenges and Assistance in Leading Change

Posted on March 25, 2014 by Marc Lanzkowsky

Collaborating Can Make The Successful Difference

In Leadership: The Change Process In Claims Requires A Different Approach, I put forth the position that changing a claims organization needs a new brand of leadership skill that does not usually exist in the traditional claims organization. In Part 2 on Leadership: Developing a Strategic Transformation Team, I addressed how to break from existing management process to achieve effective strategic results. In the final installment, I discuss how challenges around leading change make it beneficial to bring in strategic support to help achieve the desired success.

Additional Challenges in Leading Transformational Change

Oftentimes, managers are too close to individual problems to have the necessary perspective to see what needs to be done to benefit the whole organization. As a result, many fail to achieve true Strategic Transformation.

There are three main reasons why building Strategic Transformation can be such a challenge:

Lack of Independence – Management has political ties and history within an organization and are not always free to ask the sometimes difficult questions and make recommendations that are truly in the best interests of the organization.
No Objectivity – Often companies are attached to their existing organizational and procedural structure. Despite very good intentions, it is human nature for individuals to get emotionally connected to a particular method of doing things. Management can be entrenched with emotional or political agendas as to how things are being done. Change requires an objective, fresh viewpoint–without worrying about what people in the organization might think about the results and how they are achieved.
Limited Experience –Strategic Transformation requires a set of skills that combines project management with a strategic sense of determination. Managers have experience and skills on how to execute what has been done but lack the depth of knowledge to execute change that transforms their organization. Most claim managers come from a purely technical claims handling role and may lack experience addressing organizational problems, thus failing to grasp all the process concerns of their own operations.

Facilitated Strategic Transformation to Achieve Success

Bringing in an expert from outside the organization is one way to jump-start the Strategic Transformation process. Independent, objective experts can help facilitate the building of teams and focus the organization on successful, rapid implementations. In addition, the best facilitators will have specific capabilities in managing large scale project management, and insurance industry specific knowledge with proven methodologies in management. Such facilitators can:

Identify Problems – Sometimes employees are too close to a problem inside an organization to identify them. Facilitated sessions can help draw out what many in the company already know but could not see.
Supplement The Staff and Minimize Disruptions – Getting staff to focus on problems is difficult when the call of everyday business comes. Having a dedicated independent resource helps to balance those situations and ensure projects move forward on time and on budget. Delays can have disastrous effects down the chain and across other projects. Supplementing staff can help avoid these pit falls.
Objectivity Allows 3rd Parties to Act as a Catalyst- Most employees resist change. Regardless, change is needed, and an independent may be brought in to “get the ball rolling.” In other words, the facilitator can do things without worrying about the corporate culture, employee morale or other issues that get in the way when an organization is trying to institute change. They can also be there as the independent voice to validate how the change will help improve the organization.
Inject New Ideas – A fresh set of eyes can bring experiences from other transformation projects to inject new change ideas. At one time or another, most businesses need someone to administer “first aid” to get things rolling again.

The Time to Change is Now

In today’s market it is harder for insurance companies to distinguish themselves from competitors. For companies to gain an advantage, carriers must adapt to changing market conditions, embrace technology and further expand their use of data analytics. Moving rapidly to manage change requires new ways to manage multiple initiatives. Strategic Transformation is a method for meeting these challenges and ensuring that projects are rapidly deployed on time and on budget.

How Have You Tried to Move Your Organization Through the Change Proccess?

4 Keys to Managing a Successful Outsourced Claims Operation

Posted on October 30, 2013 by Marc Lanzkowsky

To be Successful One Must Have Strong Oversight and Controls From the Beginning

So you have decided to hire a Third Party Administrator to handle your claims and it seems like a reasonable decision at the time. You either have some new specialized business you are writing and don’t have the expertise in-house, or you don’t want to set up a new regional claim office or you are a new company and want to have an experienced claim department in place. Yes – the TPA is the answer to all your concerns.

All things being equal there are many fine TPAs in the market that will provide wonderful service to your insureds in a cost effective and comprehensive manner. Initially you think you have chosen a good one. However, as time goes on you realize you are not exactly getting what you expected from your TPA. So what happened?

It matters little what your reasons for outsourcing were. Bottom line is if you didn’t take certain steps to properly select and manage a TPA you are likely to end up with problems. The partnership you form with your TPA will be fruitful if you take these key steps to select and manage them in a way designed to foster long term success.

TPA Selection – Do your due diligence. If you are handling claims over to a Third Party Administrator remember they will be the face of your company to your customers. Take their selection seriously. Form a multidisciplinary selection team and engage IT, Finance and Operations in the selection process. Besides the basic questions, look at their staffing and turnover rates. Ask to speak to references and understand how they manage their accounts internally. Do they have dedicated claim units? How strong is their technology? How flexible are they in producing reports? When was the last time they had an independent audit? There are many more questions to be asked but this is not the time to be shy. Dig deep and understand who they are and what they can do.
Oversight – General Guidelines. Don’t rely on the TPA’s claims guidelines. You should develop, and expect the TPA to adhere to, a very specific set of best practices to suit your company’s requirements. Tell the TPA what you expect and hold them to it. When drafting guidelines pay attention to sections involving the retention of counsel, vendors and experts. Make sure they seek approval where appropriate and drive the selection to vendors that have been vetted by you or better make them use your own panel. Be specific about what claims you want to know about and when. Make sure you review these guidelines regularly and adjust them where appropriate. Remind the TPA will be using these guidelines to measure their compliance.
Strong Internal Formal Claims Program. Just because you have outsourced your claims management to a TPA does not mean you do not need to maintain a strong internal claims program. The successfully managed programs work with a combination of oversight and strong in-house claims account managers watching the TPA’s activities. It is important that internal claims staff be well versed in the expected handling practices and the ability to spot issues before they become problems. Internal claims professionals should have skills similar to a department manager that can handle trend analysis as well as being able to have difficult performance discussions with the TPA. No successful program works without skilled in-house claims resources.
Audit – Review and Re-review. Unless you are reviewing the TPA’s work for compliance through regular claim audits you are setting your program up to fail. Reacting to individual claim issues will not create a balanced efficient program and will cause the TPA to react to whatever the issue of the month is. Regular audits identify problems and force solutions to be addressed by the TPA. Some of the best run programs audit their TPA’s 3-4 times per year. In addition to regular best practice compliance reviews conducting specific targeted reviews can strengthen a program’s effectiveness (i.e. reserve review, vendor management or financial controls).

Working with TPAs can be a very rewarding and cost effective method for handling claims. Many are experts at what they do and have well run efficient operations. Regardless, the old adage about the squeaky wheel getting the grease is never truer than in the oversight of a TPA. Get squeaky!

What are other things needed when selecting and managing a TPA?

3 Things Good Claims Professionals Won’t Do

Posted on January 24, 2013 by Marc Lanzkowsky

Follow what good claims professionals don’t do and you will lead the pack!

Recently I read an article about things doctors won’t do when it comes to treatment and procedures for themselves. It included things like not having their first child at home, getting a PSA screening test, or taking sleeping pills. Since it is highly unlikely they will sue themselves for malpractice, these are treatments they believe might be adding little value or could cause harm. While managing a claim file is certainly not like managing your health, it got me thinking (which is never a good thing) about what a good claims professional won’t do.

I have audited a lot of claim files over the years and consistently good claims professionals manage their claim files following best practices. And when looking at these well managed files there are certain patterns that develop. I found that there are three things that good claims professionals won’t do and they are:

Fail to document: The best claim files are concisely and appropriately documented regularly. When reading a file the claim should speak for itself and tell a story as to what the issues are, potential pitfalls, and an understanding of the plan to resolve the claims. Good documentation is concise, free from extraneous commentary and reflects an understanding of the issues. Recording the events surrounding the claim is part of a well managed file and a good claims professional would never fail to document their file.

Assume this file is the same as the last one: Claim file management requires an understanding of the liability to the company and exposure to the insured, value of the loss and a plan to resolve the matter. Good claims professionals won’t skip any of the key steps needed to evaluate their files. If there is one thing that is consistent across all claim files it is that every file is different with different facts and nuances. One cannot assume that because one case had a certain outcome or facts a similar case will follow the same pattern. No matter what the issues are the best claims professionals never assume things they don’t know and never assume the file was like the last one.

Stick with the basics: There are no short cuts to getting to the bottom line. Claims professionals are always growing and learning and tyring to improve their craft. Sticking with basics won’t help when a new claim throws in a curve ball. One has to work outside the box looking for new ways to understand a claim or resolve a difficult matter. Trying to go beyond the basics is one reason handling claims can be so interesting. Previously we posted about thinking outside the box about innovative ways claims can be managed. This post generated over 40 comments in the Linked-In Claims Management Group. The reason for all the comments is that good claims professionals don’t just stick with what they know and wanted others to learn from what they had done (and maybe one up one another with a better war story).

Good claims practice is about common sense. Like any business it is important to grow and learn and adopt to changing environments. Good claims professionals are always looking for new ways to make sure that they are providing prompt service to assist their clients to secure fair compensation where appropriate. Seek out the good ones and learn from them!

What are other things that good claims professionals don’t do?

How Would Albert Einstein Approach Claims

Posted on January 3, 2013 by Marc Lanzkowsky

Albert Einstein must have been a claims manager!

As we begin the New Year it is always a time to reflect and look forward to new beginnings. Recently an executive in my company sent along some words of wisdom from Albert Einstein. Einstein was an interesting character known not only for his scientific brilliance but also for his quick wit. He produced some wonderful quotes which I believe were directed to the claims industry.

OK maybe they weren’t written with the world of claims in mind, they are nonetheless applicable.

“Setting an example is not the main means of influencing others, it is the only means.”

Claims departments should be leading companies in how they run their business. Claims departments are the fruits of the product being sold and when an insured buys a policy it is claims that serves up the services paid for. One of the best ways to retain and grow new customers is by “setting an example” in claims. Ensuring customer service metrics are met and exceeded and developing new ways to assist the customer is not the “main means of influencing others, it’s the only means.”

“Any intelligent fool can make things bigger and more complex…it takes a touch of genius—and a lot of courage to move in the opposite direction.”

There is a trend for more systems, more technology and better information in claims departments. I am a big supporter and believe it’s about time the industry wakes up to the power more claims data can have in making departments more efficient and providing robust information to improve the business. Regardless, providing more complexity and bigger technology solutions is not the only answer. Be a “genius” and go smaller and less complex in building and implementing claims software. We have the technology it just needs to be used correctly.

“Not everything that can be counted counts and not everything that counts can be counted.”

This is one of the biggest claims dilemmas. We are being overwhelmed with data and that can be a good thing. Regardless, the fact that it can be measured doesn’t mean it is actually adding value to the process. Take a look at your metrics and really explore if what is being counted “counts.” On the other side, there are things in claims that unfortunately can’t be counted perfectly. Given how climate, legal issues and other external factors change rapidly, comparing claim metrics from period to period is sometimes a difficult exercise. Regardless, striving to “count” what “counts” is what the industry needs to continue to do.

“If you can’t explain it to a six-year old, you didn’t understand it yourself.”

Wouldn’t it be great if we could all work like this? Let’s be realistic, if you can’t explain your claim to management, opposing counsel, the claimant, in an easy simplified way then you probably don’t understand it yourself and will never get to the desired outcome. Like his quote on being a genius by making things smaller and less complex I say get to the point. It is still important to get all the facts and make sure all the “i’s” are dotted and the “t’s” are crossed, but do it in a way that will allow you to truly understand the claim and be able to explain it.

“Nothing happens until someone does something.” So go make it happen!

4 Areas Of Concern From The Latest Insurance Executive Conference

Posted on December 12, 2012 by Marc Lanzkowsky

Gaze into your crystal ball and predict the issues of the past year to be addressed in the coming one!

It’s that time of year. The top 10 lists, the reflections, the can I possibly attend another holiday party and survive through to New Years? Well I will not give you a top ten list but I will list out 4 key issues that seemed to highlight the sentiments of the speakers at the 23rd annual Executive Conference recently held in New York.

The title of the conference was “Driving Growth in the Life and Property-Casualty Insurance Markets.” The annual event brought together several key executives in both the Life, Health and Property & Casualty Insurance arena. This year the audience heard from the likes of Starr Insurance, Endurance Specialty, Aspen Insurance, Lincoln Financial, ING, and Zurich Global Life among others.

Nothing too shocking with these 4 issues to address

While the topics of discussion varied from panel to panel, a set of themes emerged from the various discussions. When looking back over the last year, and forward into the future, it seems that there were consistently 4 areas that these business leaders seemed to be concerned about. Each issue impacted each company differently, however, the the themes permeated throughout the program.

Technology and the use of data. A somewhat mixed statement about technology seemed to emanate from the various speakers. On the one hand it was acknowledged that the industry lags behind in adopting and using technology. Many companies still are working off antiquated systems that could use an overhaul. On the other hand it was noted thatthe industry is filled with valuable data that needs to be analyzed and used to improve outcomes. Companies that can use their data more effectively will have a critical differentiator in the future. Predictive analytics and modeling will be the key to increasing underwriting profit needed in these times of continued low interest rates.
Climate change and catastrophes. With the conference so close to the events and location of Sandy, the talk of underwriting and managing CAT losses was on the mind of many. There is a clear belief that climate change has affected weather patterns and will continue to create larger storms for the foreseeable future. The importance of getting the appropriate rate for risks, being better prepared from a continuity perspective, and looking to opportunities to underwrite new risk and innovative risks were just some of the topics discussed. Some of the issues around CAT management also related to governmental intervention that effectively re-wrtie contracts making it more challenging to underwrite.
Increased regulations. Solvency II, the fiscal cliff, the impacts of Dodd-Frank legislation, Systemic Risk (systemically important financial institution (SIFI) designation), the Federal Insurance Office’s (FIO), unclaimed property, tax compliance with SSAP 101 and FATCA are just some of the many potential compliance issues that could increase costs and expose companies to additional fines for non-compliance. While the general feeling was increased regulation was not going to change the industry for the better, the need to deal with changing regulations was going to have a real impact.
Social media as in customer relations as well distribution. Social media is here to stay and many have begun to address how to use this medium in both dealing with customer complaints or improving customer relations. There was a clear acknowledgement that social media can be the genesis of grass roots negative campaigns unless managed correctly. A few panel members spoke of how they have created new ways to communicate with customers and create more positive images around their products and services.

Looking ahead to 2013

I think the themes expressed by the insurance leadership at the conference need to be dealt with in the foreseeable future. Addressing technology and using data analytics will be the key to building productive, profitable and efficient organizations. That is all well and good, but the industry must also work to improve its image. For some reason the message gets lost that during castrophe’s the industry rapidly pays out billions of dollars in a relatively short period of time without any complaints. Adopting social media and engaging customers will help.

The future seems bright to me and I am looking forward to another year.

What do you think are the key industry issues from 2012 and what needs to be focused on for 2013?

3 Ideas To Prepare For The Completely Unexpected: The “Sandy Contingency”

Posted on November 28, 2012 by Marc Lanzkowsky

Time to revisit those disaster plans!

As much as one can prepare the reality is you never believe the worst will happen until it actually happens. The tragedy of 9-11 was my first hands-on experience in dealing with initiating a disaster recovery plan. Despite being with a well established multinational insurance company with plenty of documented protocols for dealing with disasters, there were still lessons learned.

Unfortunately it seems that we have to suffer a disaster before we take the steps necessary to truly prepare for them. The Sandy “Super Storm” has been the latest disaster to expose weaknesses in existing plans – assuming of course you had a plan to begin with.

The “Sandy Contingency”

I have termed having to prepare for the completely unexpected event such as Sandy as preparing for a “Sandy Contingency.”

Back in February 2010 I wrote in Blizzard Warning in the East! Can your claims department keep running if the office closes? about preparing your office in case of disaster. Clearly the recent events of “Super-storm Sandy” made me revisit the subject. Unlike other events, the Sandy storm really brought the worst possible scenarios together in one event. Buildings flooded, transportation went down, gas shortages grew, and several areas suffered extended power outages that lasted for weeks. While coastline areas are still dealing with the storm, and will be for months and years, many of the business areas are finally getting back to normal.

The insurance industry, like many, faced challenges from a business operations perspective. While companies instituted there well managed disaster recovery plans, the widespread nature to a major metropolitan area exposed weaknesses in these plans. Insurance companies extensively prepared to manage an influx of claims, knowing how to deploy resources to disaster areas and trained to initiate those plans.

Large insurance companies with multiple claims office locations across the country could deal with local offices that were impacted. However, smaller carriers with local operations may have prepared well on how deploy adjusters to the disaster areas, but they likely did not expect to have problems with their claims offices 20 miles from the coast.

Other entities that one would have expected would have been prepared for a large storm also found how unprepared they actually were when faced with the Sandy Contingency. A major hospital in New York lack of preparedness forced mass evacuations of critically ill patients and created a ripple affect to surrounding medical facilities forced to take in an influx of patients. (see Sandy Exposed Hospitals’ Lack of Disaster Preparedness).

So what was learned? Sandy exposed the unexpected

The Sandy Contingency will dictate the need for a new approach to disaster planning. Often times the disaster plan deals with a single event that causes a disruption in an area for a relatively short period of time or one location for a long period of time. Sandy showed us a disruption in a large area for a long period of time. This was further complicated by the fact that almost no one dealt with a 1 in a 500 year scenario in an place such as the New York Metropolitan area.

The three things that stood out to me the most that I would never have thought were going to happen were:

Extensive power outages lasting more than a week. It took almost a week to restore power to half of Manhattan and even longer to areas within a 100 miles of the city. This widespread power outage meant that business with back up locations within that area were still unable to get running. The “we have great technology and our employees can work from home” plan proved to be useless in many instances as there was no ability to work from home without power or Internet connections.
Transportation disruptions went beyond some minor inconvenience. Public transit disruptions and gas shortages lasted weeks and made it extremely difficult to get employees back into the office or to remote locations. The impact on such a wide area exposed holes in many contingency plans. The restoration of power and services alleviated some of these issues and allowed people to work from home, however, the difference wasn’t felt for at least a 10 days. Did businesses really expect to have a complete office down for 3 days? 5 days? 10 days?
Flooding in places that you would never expect. I am not sure many business in lower Manhattan expected extensive flooding to inundate basement facilities and significantly damage electrical service at the building. Some buildings lost not only electrical equipment but their entire HVAC plant. Some of those office are still closed and will be for months. And while lower Manhattan should have expected the possibility of basement flooding, I don’t think anyone thought how extensive it would be.

So how can we improve our planning?

Here are 3 suggestions to consider when preparing for the Sandy Contingency

Think about crazy possibilities. It’s time to put away the “that won’t happen here” mentality and figure all bets are off the table. Assume tornadoes in a non-tornado prone area, earthquakes in a non-seismic area, and flooding in places you never thought of. If Sandy showed me anything it was that holding to ideas that it can’t happen here is a dangerous way to plan. I know some of the planning around the doomsday event may seem silly, but it’s worth having the discussion and some form of plan. Does that mean we plan for alien’s attacking the Earth? Maybe not, but using some of the crazy Hollywood movie plots may not be an absurd way to think of possible scenarios.
Is your back up area really far enough away? 100 miles was not going to help get your business up and running in short order if your office was in Lower Manhattan and your back up office was across the river. When you factor in the regional power outages neither was the “work at home” a viable solution. Redundancy plans have to consider the possibility of moving people greater distances in the short term. That may mean factoring in office space and lodging for a few key team members in a location in excess of 100 miles.
Practice. Practice does make perfect. Practice also will allow you to test even crazier events to see what problems might come up. A few years back I participated in a Government test regarding preparedness to handle a pandemic virus. Each day we received a new set of events (i.e. transportation shut down, martial law imposed, hospitals shutting down) that we were asked to deal with and discuss how we were to handle our operation. Even with a well honed plan we were found some weaknesses and areas to improve. Mock disasters are a great way to perfect your plans and expose your weaknesses.

I am not naive to think we will never have to deal with a another Sandy Contingency again. Whether you believe in climate change or not, we seem to be suffering from 100 year events every 5-10 years. We have to break from the
that can’t happen here” thinking and prepare for a wider set of potential circumstance. The more we prepare for the unexpected the better chance we have of limiting the effects.

What lessons did you learn from Sandy?

The 5 Core Leadership Traits Of A Well Managed Claim File

Posted on October 8, 2012 by Marc Lanzkowsky

Claims Files Aren’t Born They Are Made

Leadership is a topic that we tend to think about as it relates to an individual leading a group. In claims we are always faced with leaders that manage us and help, hopefully, to get the best out of us. But leadership does not mean that you have to have a group of people that follow.

Leadership is a trait that extends to what you do every day. As a claims professional there are always opportunities to lead. Claim files need to be led to a place that provides fair compensation in the quickest way possible.

I was reading an article about the leadership and the presidential election as it always a . The article, 5 Traits of True Leaders by Samuel Bacharach was recently published in Inc. magazine. As he wrote:

“It’s not rocket science. Whether you’re chatting on a barstool, conducting academic research, or leading a company, there are five core traits that we look for in leaders:”

Clarity
Consistency
Follow-through
Authenticity
Passion

It got me thinking that many of these traits could be adapted to the handling of a claim file.

Clarity: Claim files must speak for themselves and as such a good file will clearly outline the nature of coverage, liability, damages and have a clear plan of action.

Consistency: The key to a good claims organization is consistent claim handling. Reserves must be consistently set over a book of business to help ensure the rest of organization can function correctly. Actuaries need consistent reserve to help set IBNR and pricing, Management needs consistency to ensure the financial stability of the company and Underwriting needs to ensure claims are consistently handled from both a pricing and customer service perspective.

Follow-Through: Early evaluations will lead to early resolutions. It is easy to put a claims plan in place, but failing to follow through on those plans will send messages that the organization has no direction. Along with clarity and consistency, a claims organization must follow through in its decisions

Authenticity: I equate authenticity in a claim file to ensuring the information is accurate and that the claimant is approached with empathy and claims are handled with the utmost good faith. A claim file should be real and should demonstrate a fair assessment and appropriate compensation was made where appropriate.

Passion: I do not know any successful claims person that doesn’t passionately approach what they do. Claims people are advocated for the defense and, within the realm of good faith claims handling, must passionately speak for the issues of the case to provide the best resolution.

I am sure we could all think of more traits that make up a well managed file, however, I think looking at a claim file as leading is another way to enure good claims practices.