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?

Breaking Those Competing Commitments To Change

Posted on January 23, 2015 by Marc Lanzkowsky

Even the most supportive team member can derail organizational change

Change is always difficult in an organization. For a myriad of reasons people resist being taken out of their comfort zone and asked to take on new tasks or modify old ones. It is for this reason that “we’ve always done it that way” is such a comforting way of doing business (see my article 15 Excuses For Not Changing And 5 Reasons To Change The Way We Make Change). But good organizations need to change to keep up with new customer demands, competitive pressures or just to grow and remain efficient.

In life change happens and people adapt. In business change happens and people react. Those who are resistant to change are usually easy to spot and equally as easy to manage and therefore rarely derail a change initiative. However, it is the person that generally supports change and outwardly appears to be working for the implementation of a new initiative that can sometimes harbor a “competing commitment” that can have a more deleterious impact on the success of a new initiative.

The unknown hidden agenda

I know this comes as no surprise to all of you savvy managers, but yes there is a psychological reason that people don’t actually effectuate change despite good intentioned efforts.

Harvard Graduate School of Education lectures Robert Kegan and Lisa Lahey state in their article, The Real Reason People Won’t Change, that “even as they hold a sincere commitment to change, many people are unwittingly applying productive energy toward a hidden competing commitment” causing change initiatives to fail. In fact, they go on to state, “competing commitments cause valued employees to behave in ways that seem inexplicable and irremediable….” These valued employees aren’t deliberately trying to undermine change but rather there is an underlying hidden agenda that conflicts with their stated desire to support the initiative.

According to the authors, competing commitments stem from deep rooted beliefs or underlying assumptions that are formed early in life. Understanding those underlying beliefs and identifying the “big assumptions” will help to break down those hidden barriers.

I had a client, Joe, who was the head of claims for a large organization. Joe was one of the biggest supporters of a large change initiative to reorganize and modernize the operation. Joe’s management style was to take on work that should have been done by subordinates. He had a very difficult time delegating, and even when he did, he would often re-do the work to ensure it was being done correctly. Joe knew the organization had problems with technology, staffing and most importantly the ability to deliver consistent results. As initiatives in the project were designed, Joe was supportive and helpful in identifying problems and offering ways to change and improve the organization. However, as a particular project was being implemented suddenly Joe would be unavailable or would find a reason why the change he supported, and agreed to, wouldn’t work. Joe’s competing commitment was that the work couldn’t be done if he didn’t do it. His underlying big assumption was if he delegated the work and it was done wrong it would show that he truly didn’t have the management skills to warrant his position.

Joe was someone who started as a field adjuster and worked his way up through management. He worked with many around him that had formal training or advanced degrees and Joe felt the best way to succeed was to become the expert on certain issues and hold them close to ensure his value. This underlying belief system was subconsciously impacting his ability to make change.

Manager = Psychologist = Results

So how does one break the underlying big assumptions?

Whether you realize it or not, part of being a good manager is developing skills akin to a psychologist. You have to listen, be empathetic to the issues, and help to provide solutions and coping mechanisms to elicit results. Kegan and Lahey give three steps managers can take to help break through and employee’s resistance to change. This is not some quick hit magic pill and takes time and energy to achieve results. Each step is designed to help draw out what drives a person to be adverse to change.

Step 1 – Diagnose the competing commitment

Digging up a competing commitment will take a small commitment of its own and a few hours to to realize there is another voice countering an employees desire to make things work. The authors suggest these questions be worked through:

What would you like to see changed at work, so you could be more effective, or so work would be more satisfying?
What commitment does your complaint imply?
What are you doing, or not doing, to keep your commitment from being more fully realized?
Imagine doing the opposite of the undermining behavior. Do you feel any discomfort, worry or vague fear?
By engaging in the undermining behavior, what worrisome outcome are you committed to preventing?

Step 2 – Identify the big assumption

Big assumptions are the elephant in the room within your subconscious. It is fairly understood and can be identified but often hard to make the connection to the actions a person takes. “People often form big assumptions early in life and then seldom, if ever, examine them.” One way to understand the big assumption is to invert the competing commitment. Like Joe who couldn’t delegate because he felt the work wouldn’t get done would have a big assumption that would be that if he didn’t do the work it won’t be done right and people would discover he didn’t have the skills to manage.

Step 3 – Test – and consider replacing the big assumption.

Sounds easier said than done. However the trick here is to get the employee to understand their big assumptions and test them as situations come up. From there, the employee can try and behave differently and try and replace those assumptions holding them back. Changing deep rooted behavior is obviously the goal but even getting an employee to understand and test these assumptions will have a positive impact on a projects success.

It’s worth the trip

Kegan & Lacey point out that “while primary commitments nearly always reflect noble goals that people would be happy to shout from the rooftops, competing commitments are very personal, reflecting vulnerabilities that people fear will undermine how they are regarded both by others and themselves.” Achieving success is no easy task but managers should not be deterred. Trying to understand and get to the bottom of such competing commitments and big assumptions will in and of itself provide management with additional insight that will undoubtedly help to move the project forward.

How do you deal with stalled projects and understanding people’s resistance to change?

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?

Kindergarten Management: Getting Back to the Basics

Posted on June 10, 2013 by Marc Lanzkowsky

Guess What – Good Management And Organizations Are Like a Smoothly Run Kindergarten

Everything we know in life started back in kindergarten. Kindergarten is where we learned to socialize in groups, lived by rules, played well with others, managed time, took turns asking questions and listened to authority. Success and creativity were rewarded and failures became further learning experiences. The more I thought about this recently the more I realized that kindergarten is a perfect example of a well-functioning organization and management.

We can lean a lot by going back to kindergarten. Bear with me and let’s take a look how this would apply in a claims department.

Relating to others

As in kindergarten, managing claim files effectively requires the ability to socialize well with others both inside and outside the organization. The good claim professional knows how to get along with his or her peers and relates well to claimants who are facing some kind painful loss. In addition, to be a successful claims professional it is important to be able to work well in teams and share and learn from the group. All quintessential lessons learned in kindergarten.

Time management

Time management is a key element in handling claims. Like kindergarten, everything needs to be done at a specific time. With large caseloads and ever increasing demands, the effective claims professional manages their time very well using diary reminders and focusing on the tasks at hand. A well-structured day allows the claims professional to address file demands in a consistent and timely manner.

Controlled creative thinking

Kindergarten encourages a controlled environment with guidelines that still allows for the expression of creativity. Think finger painting. Finger painting allowed one to be wildly creative but still had to be done on the specific paper, in a specific area under certain rules. Best practices are frameworks that good claims handlers follow to ensure they are managing files in a timely and fair manner. Regardless of the claims guidelines or best practices however, creativity in thinking and managing files is essential in achieving some of the best results. Out of the box approaches to challenging claims issues are welcome and these creative approaches make for very successful operations (see Improve bottom-line outcomes on claims by thinking outside-the-box!).

Rewarding success and learning from mistakes

Kindergarten is about establishing the framework for children to succeed in primary school and ultimately in life. Successes are actively and openly rewarded and shared with the group. Conversely, failures and mistakes are not punished but rather used as learning experiences to encourage and promote improvement. Good claims managers work the same way and openly praise success and work with mistakes to make people better and foster improvement. It is important to have both. While this is business and there are certainly instances where continued failures must have consequences, regardless, working to correct mistakes often creates a more cohesive high performing organization.

Let’s be clear, Kindergarten Management is not saying employees are children and needed to be treated that way. That is not the message here. Kindergarten Management is going back to the basics and working to foster a fun but controlled working environment that encourages the overall development of not only the individual but the group as a whole.

What other lessons from the past would be good examples of how management?

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.

What are some other leadership traits a good claim file will show?

Claims Predictive Modeling: Using The Numbers To Improve Operations And A Change Worth Exploring

Posted on August 22, 2012 by Marc Lanzkowsky

A recent article in Claims Magazine discusses the “Human Capital Impact of Using Predictive Models.” The article, written by the presented by consultants in the Actuarial, Risk & Analytics practice of Deloitte Consulting, discuss what it means to the claims professionals and suggests methods for implementing a Claims Predictive Model.

What Is Claims Predictive Modeling?

Claims Predictive Modeling (CPM) is one of the big buzz words in the industry. After a few decades of improving claims technology systems and creating vast databases of claims information, CPM is an attempt to use that information more effectively. It is an attempt, as the article infers, to provide better information to the claims handler to let them use their skills to make better decisions, apply resources more effectively and really allow claims departments to do more with less.

As the article notes:

“Leveraged effectively at first notice of injury or loss (FNOI/L) and throughout the lifetime of the claim, advanced analytics can have an impact on various aspects of the claims lifecycle: claims assignment, special investigative unit (SIU) referral, medical case management, litigation, subrogation, escalation and, ultimately, claims settlement and outcome.

No who wouldn’t want to have a positive impact on claims settlements and outcomes?

Change Can Be Good

Claims professionals are a rightfully proud group. We have always taken on the role of analyst and investigator and understand that there are nuisances in claims that a computer can’t possibly see. We live in the world that handling claims is a science and an art that requires a combination of elements and not just data on a spreadsheet. CPM and other tools are inherently perceived as a threat to the professional as another way to diminish our skilled judgment. We point to years of decreasing staff and being asked to do more with less as evidence of the erosion of our profession. Unfortunately, as the industry continues to struggle attracting new qualified staff, there may be some truth to these perceptions that the profession is under attack.

Regardless, we are an industry that needs to embrace and welcome new technology. CPM is not a means to further refine the profession to the point of not needing a true skilled professional. The tool is designed to highlight claims with greater risks and focus the claims handler’s attention to where it is best served. While the statistics vary slightly from company to company it is fairly well understood that 10-20% of claims volume make up 70-80% of a typical companies claim dollars. Ensuring that those claims are most effectively handled quickly is one of the best ways to manage loss and expense costs. And these same data analytics will also help to manage the high volume of matters that make up the remaining matters.

The authors point to several key elements to consider when implementing a CPM program as a way to improve the process with the claims professionals:

Communication
Making CPM Champions
Buy-in from early doubters
Closed claim reviews and comparative models

These issues are excellent suggestions no matter what type of change is being implemented. The bottom line is people need to be engaged when change is being implemented. When people perceive their jobs are being threatened they get defensive so it is important to help make the transition easier by being open. Regardless, times are changing and we as claims professionals need to adopt.

How Do You Think New Modeling Metrics Will Change Claims?

5 Business Basics Every Claims Person Should Live By

Posted on February 14, 2011 by Marc Lanzkowsky

Going back to the basics is a great way to manage the pressures of claims

I have often advocated here that business ideas can come from outside the insurance industry and adopted by claims very easily. It’s a matter of taking the time to look at what is out there. As we all know, claims folks have little time to look and that is where I hope the Claims SPOT can help. Sometimes claims organizations get so involved in the day-to-day that they have little time do the basics. Common sense practical business practices are easily forgotten when you just set up your 10th claim of the week and you have two other claims going to trial.

Donna Flagg, writing for the Huffington Post, recently posted an article, Five Things They Don’t Teach You in Business School. This wonderful list of common sense no no’s couldn’t be more applicable in claims organizations. I have followed Donna’s list below with comments on how they apply to our wonderful world of claims.

Don’t yell at people. Flying off the handle does little to affect the other person(s) in anything other than a negative way, but instead, it makes you look crazy and unable to handle pressure.

TCS: Claims can be a pressure packed world, and maintaining control is critical to success. Keeping your cool in a negotiation, or even when the paper work just keeps piling up, will help you achieve the best results. If you feel yourself loosing a little control, get up and take a walk or grab a drink of water. Diffuse the issue before it becomes an issue and reflect poorly on you.

Don’t lie in the presence of others. They will figure out that you either do not tell the truth, or selectively tell the truth when it suits you and they will doubt your authenticity as a result. You will end up with people who don’t take you seriously and keep you at arm’s length because you make them feel unsafe and uncomfortable.

TCS: Lying in claims is the surest way to an early exit in this industry. The claims department is responsible for paying out significant amounts of company assets and the utmost integrity and honesty is an absolute. Mistakes happen so come clean and don’t try and cover it up or bend the truth.

Don’t tell someone something “in confidence” that you swore to someone else you would keep under wraps. All it does is show firsthand that you can’t be trusted with confidential information, which is definitely not a promotable quality.

TCS: This is especially true in claims when much of the information contained in a claim file is provided in confidence. It may seem innocent to discuss the details of someone’s claim, but that information is confidential and must be maintained as private.

Ask yourself, if it was your claim and it involved personal information about your life, would you want it disclosed to others not involved in handling that matter?

Don’t be negative and lower yourself to childish, irrelevant, gossipy games. Rise above it and stay focused on the business, not the bulls**t.

TCS: I hate to say this, but I have seen this so often in claims. Most claims offices have staff seated in cubicles and tight spaces. It’s very easy to know what is going on in the cube next to you and loose focus on what is truly important.

As a manager I had a claims person come up to me and complain that “so and so” leaves the office early. I informed her that the person actually gets to the office earlier, stays focused on her work only, and was extremely productive. The one complaining, as is usually the case, was one of the least productive professionals in the office. Had she spent as much time worrying about getting her own work done instead of worrying about other then she might have excelled. Trust me, your managers know who plays the games and who does the work.

We all know this person so don’t become one.

Don’t ignore people who need a response. It’s like playing a game of catch; if you don’t throw the ball back to the person who threw it, everyone just stands around waiting. Not a good business model. Not a good reputation builder. Not a good choice.

TCS: One of the biggest customer complaints against claims departments is failing to timely respond to inquiries. I have also heard this from attorney’s who complain that they can never get the claims professional to call them back. I know I hate it when I am waiting on a response, which is one of the most common things I have to deal with as a consultant. For someone trying to grow a business it is tough enough, in claims it is almost always going to result in higher costs.

Counsel looking to make decisions, customers who feel neglected, or a claimant who decides to hire an attorney because they can’t get a call back are all real examples where costs will increase because of a failure to respond. The bottom line is make time to call people back within 24 hours of a call. It’s sometimes a hard goal to achieve, but will save you aggravation, money and time in the long run.

There are plenty more business basics where these came from, but I liked this list.

Common sense is sometimes hard to achieve when the pressures of mounting claim files take over your working life. Like in sports, focusing on the fundamentals will always be a good path to success.

What are some other basics claims professionals should live by?

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?

Promote Creative Thinking To Get The Most Out Of Your Claims Staff

Posted on August 16, 2010 by Marc Lanzkowsky

So how do you train the next leaders in claims? How about challenging their creativity!

If you do not know about TED, I strongly recommend you take a look. To quote them directly:

TED is a small nonprofit devoted to Ideas Worth Spreading. It started out (in 1984) as a conference bringing together people from three worlds: Technology, Entertainment, Design. Since then its scope has become ever broader.

I recently watched the clip below from the TED archives and was so fascinated by the concepts I just had to relate them to claims. Good workers are sometimes all that claims departments look for and, given the nature of claims these days, it is not a bad thing. There is so much to do and so little time to do it and good workers, however you define them, are great to have. But how often are creative thinkers found and rewarded?

I am a big proponent of new ways of looking at claims and trying to get people to think out of the box (see Change Hats With Someone And Free Your Mind To Make Your Claims Operation Better and Is your claims department becoming a bus company?). With increases in technology, more claims specialization and the constant pressures on staffing, the ability to freely think, analyze and resolve claims creatively is being challenged.

Sir Ken Robinson is considered a “Creativity Expert” and led the British government’s 1998 advisory committee on creative and cultural education, a massive inquiry into the significance of creativity in the educational system and the economy, and was knighted in 2003 for his achievements. He has most recently published a book, The Element: How Finding Your Passion Changes Everything, which is a deep look at human creativity and education.

Good workers but not creative thinkers

Take a look at the video below with Sir Ken. He is truly and a dynamic speaker and the will engage you quickly. In this clip, Sir Ken asks why don’t we get the best out of people? He argues that it’s because we’ve been educated to become good workers, rather than creative thinkers. Do you recognize that employee in your organization?

Two suggestions to help promote creativity

So how do you promote creativity? How do you get the claims staff to try new ideas? It is difficult to encourage creativity when claims have to be regimented and everything is being monitored and standardized. Regardless, there are ways to attack the creative mind to open up new ways to manage claims.

Challenge staff to be more creative when looking at problems. When facing a difficult situation try and put together an old fashioned brain-storming session to allow free flowing ideas no matter how crazy. The idea here is to promote creativity and come up with new ways to solve problems.
Another way to try and teach creativity is to tell war stories. Have a war story lunch and see who has resolved a claim in the most creative way. I am sure you will be surprised at how creative people are and retelling those stories will help stir the imaginations of others.

How do you think creativity plays a role in claims? What have you done to encourage free thinking?

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.