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?

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?

Claim Files Are Evaluated Using A Form Of Root Cause Analysis So Why Not Do The Same When Evaluating The Department?

Posted on March 5, 2013 by Marc Lanzkowsky

Assessing operational ills requires the same skill needed to evaluate a claim file

We have heard the mantra time and time again about how treating the symptom of a problem doesn’t do anything to cure the cause of the problem. As one of my favorite bloggers Seth Godin recently wrote in Signals vs. causes, “A fever might be the symptom of a disease, but artificially lowering the fever (ice bath, anyone?) isn’t going to do anything at all to change the illness.”

Assessing a claim file is like doing a Root Cause Analysis. Looking at the damages and paying the claim may move a file but it doesn’t tell you whether the claim should be paid in the first place. Analyzing a claim file is learning to know the what, why and how an event happened which is essentially what Root Cause Analysis is.

Root causes are specific problem or faults that create a breakdown in an operation or process. Claim files are a result of some event that causes a claim to arise (i.e. an accident, malpractice, property damage). It is the claims professionals primary job to assess these events and determine what happened and why prior to paying a claim. In general, root causes can be defined as an event that is:

Underlying to the problem
Reasonably identifiable
Within managements control to correct
When corrected will be effective in preventing recurrences

Despite Root Cause Analysis being a core skill in handling a claim file, claims management doesn’t always approach departmental issues with same type of evaluative assessment. Using the same techniques in assessing the root cause of a claim, management can assess operational problems.

Since the techniques are already in use for claims analysis why not use them for operational assessments?

Doing a Basic Root Cause Analysis: The 5 Whys

Similar to a claim file analysis, operational problems require an assessment as to what happened, how it happened, how could it have been prevented, who was at fault, what’s it going to cost to fix the claim and are there any lessons learned. For example, let’s say payments are being delayed resulting in fines being assessed against the department. If one looks at the fines as a claim one would want to determine what caused the fine? how did it happen? and how can it be corrected? An analysis of the “claim” needs to take place prior to making any decisions.

A great technique for getting to the root cause of a problem is to ask the question “Why” question five times. “By repeatedly asking the question “Why” (five is a good rule of thumb), you can peel away the layers of symptoms which can lead to the root cause of a problem. Very often the ostensible reason for a problem will lead you to another question. Although this technique is called “5 Whys,” you may find that you will need to ask the question fewer or more times than five before you find the issue related to a problem.” (Determine the Root Cause: 5 Whys – from www.isixsigma.com)

Going back to our example of a payment delays causing fines, and using the 5 “whys” technique, one could assess the problem this way:

Why are we being fined?
Because payments are being delayed by 5 days
Why are payments being delayed 5 days?
Because they were delayed in getting to finance
Why were they delayed in getting to finance?
Because they were not in the outgoing tray for approved payments
Why were the not in the outgoing tray?
Because they were sitting on a manager’s desk for signature and the manager was on vacation
Why was there no plan to have another manager cover the vacationing manager’s desk?
Because there was not procedure in place

The example above is simplified but it truly demonstrates that similar types of issues can be explored with a series of basic questions. Getting to the root cause is essential to moving a problem to a solution.

What are other techniques used for assessing a claim file can be used to assess the operation?

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!

7 Steps To Effective Problem Solving For Every Claims Professional

Posted on August 2, 2011 by Marc Lanzkowsky

Don’t Go In Circles To Solve Your Problems

Let’s face it solving problems in claims is a core reality to what we do. From the second a claim hits your desk until the minute it leaves it there are a series of problems that need to be solved. Should this claim even be accepted? Was there any liability? What experts should I hire? How much is it worth? What are my next steps? At every turn there is another problem that needs to be solved.

As you probably have experienced, some people are very good problem solvers and others are not. In claims, however, there is no escaping the need to solve a variety of issues on a daily basis. Don’t fret if you don’t consider yourself a good problem solver as it turns out there is help for you.

Problem Solving Can Be Learned

Business Insider War Room author Martin Zwilling wrote in Nine Steps to Effective Business Problem Solving that “managing any business is all about problem solving. Some people are good at it and some are not – independent of their IQ or their academic credentials (there may even be an inverse relationship here). Yet I’m convinced that problem solving is a learnable trait, rather than just a birthright.”

Zwilling, taking a page from Brian Tracy, in his book “The Power of Self-Discipline” suggested 9 ways to train yourself to be a better problem solver. I took 7 of these that I believe are applicable to the claims world.

Take the time to define the problem clearly. Many executives like to jump into solution mode immediately, even before they understand the issue. In some cases, a small problem can become a big one with inappropriate actions. In all cases, real clarity will expedite the path ahead.
Pursue alternate paths on “facts of life” and opportunities. Remember, there are some things that you can do nothing about. They’re not problems; they are merely facts of life. Often, what appears to be a problem is actually an opportunity in disguise.
Challenge the definition from all angles. Beware of any problem for which there is only one definition. The more ways you can define a problem, the more likely it is that you will find the best solution. For example, “sales are too low” may mean strong competitors, ineffective advertising, or a poor sales process.
Iteratively question the cause of the problem. This is all about finding the root cause, rather than treating a symptom. If you don’t get to the root, the problem will likely recur, perhaps with different symptoms. Don’t waste time re-solving the same problem.
Identify multiple possible solutions. The more possible solutions you develop, the more likely you will come up with the right one. The quality of the solution seems to be in direct proportion to the quantity of solutions considered in problem solving.
Prioritize potential solutions. An acceptable solution, doable now, is usually superior to an excellent solution with higher complexity, longer timeframe, and higher cost. There is a rule that says that every large problem was once a small problem that could have been solved easily at that time.
Make a decision. Select a solution, any solution, and then decide on a course of action. The longer you put off deciding on what to do, the higher the cost, and the larger the impact. Your objective should be to deal with 80 percent of all problems immediately. At the very least, set a specific deadline for making a decision, and stick to it.

Make the decision is my personal favorite. So often claims professionals are waiting for the next great piece of information that will save the day. More often than not, that information doesn’t alter the outcome that much. Making the decision to change the reserve or settle a claim should be made after careful problem solving has been considered. But regardless, the claims professionals job is to make the decision.

What suggestions would you make to help solve problems?

Claims And The Investigative Journalist And Learning From All The President’s Men

Posted on November 9, 2010 by Marc Lanzkowsky

Digging for the accurate story is a claims person’s goal

The other day I was watching All The President’s Men, the story of Bob Woodward and Carl Bernstein, The Washington Post reporters who broke the Watergate scandal wide open. If you have not seen the film then please accept this as my “two thumbs up.”

What does this have to do with claims you may ask? Keep reading and you will see.

Woodward and Bernstein were investigative journalists. Their job was to uncover facts that would lead to other facts that would lead to a supported conclusion. There was a lot at stake for the Washington Post if the story was wrong, and even more at stake for the country if the story was right. The process was well laid out in the movie with the two journalists following one lead to another and researching and following up to support their eventual conclusion. Given what was at stake, the Publisher made it clear to the two reporters that there was no story if it was only supported by innuendos and accusations and no proof. Once the support was there, the story ran and the rest is history.

Sounds a lot like a claim file to me.

It is the claims professionals responsibility to figure out what happened and then come to a supported conclusion when evaluating and settling a claim. As there was for the Washington Post, there is a lot at stake for an insured, a claimant and a company if decisions are made in haste. Getting the conclusion right or wrong can have significant financial consequences for all parties involved. Prior to spending money on claims, good claims practices dictate that there is support for the decisions to settle and pay claims. Being a claim professional is a lot like being an investigative journalist. Figuring out what happened and why is critical to making the appropriate assessment.

Technology has really helped those investigations

Unlike Woodward and Bernstein back in the early 1970’s, claims professionals have a tremendous amount of technology available to them to help figure out claims problems. There are two great scenes in the movie that truly reflect how times have changed when it comes to conducting even basic investigations. Back in the day, even simple tasks, that we all take for granted today, would have taken hours and multiple resources to complete.

In the movies, the reporters found a name on a check and had no idea who the person was or how to contact them. Imagine that issue today – no big deal – go online, plug in the name to Google, and presto a list of information including addresses, phone numbers, job descriptions and maybe even photographs appears in seconds. Not back in 1973 where Bob Woodward (played by Robert Redford) is seen sitting in a room with phone books from all over the country looking for a name. Another staff person comes into the room and was able to find a photograph in what was called the “clip file.” I can only imagine how long that took and how many resources were needed to find the photograph alone.

In another iconic scene from the film, the two reporters needed to find out what books had been taken out by a White House staff member from the Library of Congress. The two were handed boxes and boxes of slips of paper used to document the check out of books from the library. In a great piece of film making, there is an overhead camera angle of the two reporters going through every slip of paper in what would have taken hours if not days. Of course, they never found what they were looking for. Today the same task would have taken seconds.

Think about the tasks you do as a claims professional and try and imagine not being able to use even basic technology to find a name or locate a witness.

Just remember, technology isn’t everything in claims

I have always been a big proponent of good systems to enhance a claims professional’s ability to get their job done. Regardless, claims technology should allow the claim handler to be a claim handler and free them to be more analytical and less ministerial. Unfortunately, technology has often brought more work with little relief. As more claims can be processed faster, there has been a greater emphasis on dotting I’s and crossing T’s and less on outcomes. While it is important to accept tremendous efficiencies technology has brought to the claims process, do not forget that the true art and skill of claims is in the ability of a claims professional to analyze the information and make an appropriate decision.

Tell us your investigative journalist claims story

Why Extending More Claims Authority Means Extending More Responsibility

Posted on September 10, 2010 by Marc Lanzkowsky

How much authority is too much authority?

Extending authority to claims personnel is always a difficult exercise. Deciding when, and how much authority to extend will always depend on the line of business, and experience of the claims professional. Giving more authority also means extending more responsibility to the junior claims professional to make greater financial decisions for the company.

Any small increase in authority can really add up. For example, if you extend an additional $10,000 in authority to a claims professional who gets 10 new claims a week you are giving them the responsibility over an additional $5.2 million per year. Do that for ten claims professionals, and that group can commit an additional $52 million per year to the company.

The inverse claim volume and value relationship

It is fairly well common in the industry that there is an inverse relationship between claim volume and the claim value. A common example would 80% of the total incurred is found in 20% of the claim volume. This would also mean the 80% of the claim volume is managing 20% of the incurred. Regardless of the exact split, this would mean that most of the claim volume is being handled by junior claims professionals.

In most companies the top valued matters are very well reviewed and examined. Those claims have to move up through the authority chain, and are seen by managers, specialists and executives, and in almost all occasions, are well worked up. The lower value claims, however, are usually assessed and moved quickly with less scrutiny and review by senior managers. Many claims of lesser value speak for themselves, and do no not require the work up or intense scrutiny that is needed in a multimillion dollar loss.

The lower level claims are the training ground for the industry and allow a claim professional to walk before they run with a more significant matter. Despite their individual value, the lower level claims add up. How much authority to extend is often an arbitrary matter determined by the level of the examiner. A junior examiner gets $10,000 and senior examiner $50,000 and so on. However, extending authority should be an exercise on how much responsibility the particular claims professional can handle.

The example above shows that even a moderate increase in authority can significantly affect the company’s financial outcome. When authorities are left too low, however, there is more pressure on management and a greater risk non-value added duplicative work. Claim professionals will have to prepare additional internal reports, consult more with attorneys and set up and attend meetings even to get a nominal increase. This creates an operational burden as well as higher costs.

So what is the big deal about extending more authority?

The authority goes up and so does the spending

Back in the day I was at a company that had a relatively new book of business that had not developed. Because of this, management made a decision to restrict the amount of authority extended to claim handlers and managers. As the book aged, as was expected, there was an increase in the number of larger claims. With authority levels relatively low, there was a delay in raising reserves and moving files. To alleviate any backlog, authority levels were increased for claim handlers as well as the threshold to present claims to senior management. The process worked and claim reserves were increasing when they needed to and files were moving to resolution. All seemed to be a success until a deeper look at the numbers told us a different story.

A close look at the numbers several months later revealed an interesting trend. Average payments made within manager’s higher authority level were no different when compared to the pre-authority increase. This was a good sign that, at that level, there was a consistency as to how claims were being resolved. Unfortunately, the results were not as consistent at the lower levels. With an increase in authority came an increase in the average claims being paid out. Lower level claim handlers were resolving more claims, and were doing it at higher level. While the study could have looked deeper at the total costs to see if this resulted in lower expenses due to quicker resolutions, what was clear was that with more authority came a willingness to spend more.

Where was the failure? Was it management extending too much authority? Was it the claim handler trying to resolve cases faster to move files off their pending? Did giving the ability to get a case resolved, without having to write up and present it, give too much responsibility to the claim handlers?

No matter the exact reason for the numbers, lessons could be learned and the one that stood out for me was don’t extend authority without extending responsibility.

What it means to extend authority with responsibility

Responsibility and authority are two different things and you cannot extend one without the other. With increased authority comes increased responsibility. In other words, as you extend more reserve or settlement authority to more junior employee it is important that they understand the increased responsibility that comes with it. They are becoming “keepers” of a larger part of the pie, and if they can manage that responsibility, then extending authority is appropriate. Blanket increases in reserve authority by a claims professional’s title, or years of experience, is not the best way to determine whether they will have the understanding of the responsibility behind that authority.

Extending additional authority to a number of claim handlers can have a dramatic affect on the department’s total incurred. Make sure claim handlers understand the impact, both good and bad, to the company. Interview your claim professional before the increase is extended and see how much they truly understand about the responsibility more authority will bring. Ask them how they plan to protect the company assets while remaining compliant with fair claims practices. Reserves that need to go up, and claims that need to be settled, still need to happen, but it should happen when the claim professional understands what an increase in authority means. When this convergence of authority, understanding and responsibility occurs, then the increase in authority is warranted.

Spend the extra time ensuring there is an understanding of the responsibility of increased authority and you will create better claims professionals.

What steps do you take when extending authority?

3 Suggestions To Beat The Summer Slow Down In Claims (If You Do Slow Down)

Posted on August 3, 2010 by Marc Lanzkowsky

It’s nice to spend time on the beach, but use the summer slow down to make some improvements

Let’s face it – no matter how busy your organization is, come August often times things begin to slow down. It seems everyone is on vacation, and while there is less coming in, there is still much to do. Now is the perfect time to clean up messes and get set for the fall push.

1. Managers & Supervisors

The summer is a great time to work on performance and training issues with your claims staff. With courts slowing down, fewer crises to deal with and less phone calls to take, now is a good time to work with claims handlers to get stronger. Even if your performance reviews are not due for several months, spend some of the extra time you may have to look for learning opportunities. Help claims handlers clear some “dead wood”, and mentor them to reach new goals for the future. With the extra time there will be fewer interruptions and spending some of that extra time encouraging a handler to look for new ways to excel will benefit everyone.

2. Claims handlers

Wouldn’t it be nice to clear all those tasked items and clean your desk up. It’s been a busy year and things have been piling up. Emails, reports, bills, and closings are just a few of items that can so easily stack up on a desk that need to be dealt with. Pick a few items to clear from your long list of tasks and try and get to a clean slate. Here are a few more suggestions:

Clear the email folder and organize that in box so the email cascade can be more manageable
Look at your pending for older files that can use a little attention, or even better, be closed. Sometimes those older files just need a little push to get them to to the next level. Use any slow down time to reduce that file count.
Get through your snail mail. Yes people still send mail the old fashion way and if you spend a few hours a week cleaning and filing away that stack of papers on the the corner of the desk you will be better off before the next push.
Meet with your manager and look for opportunities to learn and improve your skills.

3. Claims Executives

Time to break out the strategic plan. When was the last time you looked into the future? Don’t wait for Lilly pads to take over the lake (see my posting You Can’t Wait Till The Last Minute To Improve You Operation – Planning Starts Now!) take a look at future issues now. Explore your technology needs and look for opportunities to improve your operation. Focus on some key areas to target for lowering costs such as in areas of subrogation and salvage. There are opportunities there to re-tool your operation and get it ready for future growth.

Tell us how you best use slower times to improve your operation!

Why Can’t We All Get Along? Making The Agent A Partner In The Claims Process

Posted on July 27, 2010 by Melissa Loew

Working together to create a strategic advantage through improved agent carrier relations

The relationship between claim adjusters and agents can be an adversarial one. Each side often finds itself correcting issues created by the other side. Agents may set the wrong coverage expectation for a customer, leaving the adjuster to deliver the bad news. Adjusters may get overloaded and not return phone calls in a timely manner, resulting in a complaint to the agent’s office. In the worst case scenario, adjusters and agents may badmouth each other to customers, putting customers in the middle.

Aligning incentives to help agents and adjuster work to the same goal

Adjusters and agents work for the same company and should have the same overall goals – right? Not always.

Some agents want to keep their customers (and commissions) at all costs, even if that means covering a claim that shouldn’t be covered or paying more than what is owed. Adjusters want to retain customers, too, because fewer customers means fewer claims and ultimately, fewer adjusters. However, losing a customer doesn’t result in an immediate reduction of income for an adjuster as it does for an agent. And, many companies place a stronger emphasis on claims process compliance – opening practices, estimating accuracy, etc., than on customer satisfaction. Too many inappropriately paid claims can result in an adjuster losing his or her job altogether.

Efforts can be made to better align goals and incentives such as incorporating a loss ratio component into agent bonuses and placing a stronger emphasis on customer satisfaction in adjuster measurement and compensation. These tactics help. But, due to their relative roles in the organization, some tension between adjusters and agents may be inevitable.

Use the customer’s expectation to work with agents to help the claim process

Therefore, should agents be involved in the claim process at all? Most customers understand the difference between agents and adjusters and don’t expect agents to handle their claim. But, as long as customers buy insurance through agents and pay them a commission, they will expect them to be involved, at a minimum, to explain their policy and to serve as their advocate if claim issues arise. Equipping agents to meet these expectations through training on policy coverage and access to claim status information can go a long way toward preventing or resolving potential issues. And, by meeting customer expectations, agents can help improve claim satisfaction.

Agency staff and locations can give claims an advantage with customers

In addition to meeting basic customer expectations, are there ways for agents to actually help the claim department? In my recent blog post Increasing Claim Satisfaction Doesn’t Mean Increasing Staff, I mentioned the cost and customer satisfaction benefits of enabling agents to answer claim status inquiry calls, instead of referring them to the adjuster. There are other ways to leverage agents in the claim process. Agencies are often the first place customers go when they have a claim. Having the claim reporting application at the agent’s fingertips to take a complete report and get the claim started reduces hand-offs for the customer and saves time for claims. For small claims with clear coverage, there is an opportunity for agents to settle the claim, within specific guidelines.

There are particular customers and claim types where the agency role is more critical. When a customer speaks a foreign language, especially one other than Spanish, agency staff may have capabilities the claim department doesn’t. Customers will likely have a better experience speaking in their own language directly to an agent versus going through a translation service paid for by claims. The elderly customer who needs special assistance is another example of a customer type that may benefit from agency involvement in the claim process.

The agency relationship and proximity to the customer are also important for large, individual losses and catastrophe claims. In-person empathy and “hand-holding” can be highly valued in these situations. But the agent’s proximity to the customer provides another advantage. In the era of claim centralization, where offices are closing and more work is done over the phone, agencies provide a point of presence in the community. During hurricanes, when phone lines are down and people are scattered due to evacuations, agents can take claim reports and issue payments for temporary living expenses until adjusters arrive on site.

Clearly, agencies have a role to play in the claim process. Enabling agents and their staff to perform their role efficiently with empathy and professionalism can benefit customers, agents, and the claims department.

What has been your experience with agencies? What role do you think agencies should play in the claim process?

In Claims Don’t Let The Process “Thing” Get In The Way Of Doing The “Right” Thing

Posted on July 19, 2010 by Marc Lanzkowsky

Making a check in the process won’t ensure the matter is done right

Mark Suster, was the founder of Koral, a Palo Alto company which was sold to Sales Force. There he was VP of Product Management and then left to become a member of a venture capital firm. He is also author of a blog called Both Sides of the Table and recently wrote about Doing the Right Things is More Important than Doing Things Right. In this interesting article he discusses how sometimes companies get caught up in “things”, or process, without worrying about the outcome. Tasks become the driving force not the outcome.

“When you hire people in functional roles they want to show that they’re achieving results and results are easiest to measure by tasks accomplished. But many CEO’s and management teams fail to set clear guidelines on what the company objectives are and make sure that everybody is driving toward the same goal. It’s actually quite hard to lay out an annual company strategy that is articulate and underpinned by facts.

So many CEO’s just carry on being … CEO’s –> fund raise, get media attention, attend conferences, hire staff, “set direction”, whatever. But this leads to organizational drift because staff will continue to produce “work.”

Everybody should be able to answer the question, “why am I doing this?” Otherwise they’re likely to be doing things right, but not the right things.”

I have written, and am a big proponent of, the importance of good process as a way to ensure good results. Putting a proper process in place is a road-map to help move claims to a prompt fair resolution. Nonetheless, doing and focusing on the process without making sure the outcome is sound is doing things right without doing the right thing.

It’s so easy in claims to focus on the process and not use the process as a means to the end

In a recent audit of a hospital system’s claims department I saw an excellent example of what happens when focusing on the doing things right resulted in something not being done right. The claims staff had been instructed, like most claim departments, to place notes in the file on various issues such as coverage, damages and liability. They had previously been cited for poor documentation so a priority was placed on ensuring notes were in the files.

While every file now contained a note, there was absolutely no independent thought to the claims handler’s comments. Almost all the notes had been cut-and-paste word for word from counsel emails. They even went so far to include the salutations and signature lines. One note I found was a complete doctor’s CV that went on for over 30 pages. This type of note taking added little to the claim file and provided no insight into the thought process and evaluation of their claims staff. It was another example where doing things right was not doing the right thing.

Another client required the claims staff to create detailed damage time lines regardless of the nature of the claim. Claims adjusters would spend hours completing outlines, and sometimes even outsourcing the reviews to others, whether the case needed the assessment or not. There was no review as to whether these time lines were adding value to the claims process. Instead of using the process as a tool it was turned into a requirement for the sake of doing a requirement. Clearly the process was being done correctly it was just not the right thing to do all the time.

So the lesson learned is when focusing on process make sure the process is not the only thing that is being done.