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?

Part 2 on Leadership: Developing a Strategic Transformation Team

Posted on March 17, 2014 by Marc Lanzkowsky

Breaking the Linear Approach by Leading Strategic Transformation

In my last post, 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. Continuing with this theme, I will address what it means to break from existing management process to achieve effective strategic results.

Breaking from the linear approach to management is the key to leading Strategic Transformation. A standard organization will have a head of claims and then a variety of department heads to manage each line of business. Depending on the company there may be additional senior managers to handle various operational aspects of the group, which may include support staff, call center, technology and data analytics. Under this method, projects get initiated and managed within the same linear organizational framework. The result of this approach is a development process built in a silo that limits input and understanding of possible interdependencies that may exist outside the framework.

A Strategic Transformation Team, however, is formed with a center to lead change over multiple projects. Each project team consists of people from a variety of departments and levels. The teams are charged with creating objectives, setting priorities, securing buy-in, and executing on the vision. The teams are not formed within a linear framework and can draw upon different expertise to get the project completed. The Strategic Team in the center can drive all projects, manage interdependencies, and facilitate moving projects forward without distraction from the day-to-day management. Their focus is on the bigger picture and not limited within an individual project silo.

The Best Transformation Happens When Dedicated Transformation Teams Are Formed

To make effective change rapidly, it’s best to create a dedicated team to deal with change as their sole mission. This team will have the principal objective of producing outcomes and will be dedicated to adopting and improving the organization on an ongoing basis and not as part of some once every five year strategic plan. The independent team will also have multiple benefits which would include:

A central pressing vision to produce valuable effective change
Being focused on the big, as well as little pictures
Rapid deployment capability to get things moved to implementation
The ability to challenge the status quo to break conventional methods of project deployment
Expanded institutional knowledge about multi-disciplinary impacts to improve team efficiency on future projects

While building such a team internally is possible, there has to be an initial effort on getting commitment and focus from the staff to work in a new framework that is different from their existing work environment. For this reason, it is often best to bring in a third party to help facilitate the process.

How a Strategic Transformation Team Works

Getting from point A to point B requires a methodical approach to projects. The Strategic Transformation team will typically establish a Project Management Office (“PMO”) to help to successfully execute those projects identified “as needed to improve the operation.” The areas of responsibility under a PMO include:

Project identification and defining project purpose and requirements
Organization and management of work resources to execute projects and requirements
Assuring timely and useable deliverables
Coordinating multiple projects and dependencies
Reporting to key stakeholders and organizational communication

With a PMO established, projects can be outlined and staged appropriately to both manage costs and deal with interconnecting parts. Additionally a PMO can facilitate the gradual introduction of new processes and technologies which might otherwise disrupt the existing environment. This will allow an organization to phase in procedural changes in a manner to help gain cultural “acceptance” and “buy in” from employees.

The main team will go through a series of steps following established project management techniques to define, plan and execute on multiple strategic concerns simultaneously. The overall focus will be developed; and for each project, a similar multistep approach will be used and address the following.

Business champion/leadership assignment
Prioritization of project within scope of organizational needs, other projects and budget
Strong objectives established
Well defined project charters drafted and approved
Interdependencies/relationships explored and managed
Develop a risk analysis
Rapid and timely implementation
Buy-in and adaptation to change addressed with staff and stakeholders
Conclusion and re-explore

Achieving strategic transformation is possible with the right teams in place. Regardless, sometimes those efforts still hit road blocks. In my next post I will discuss how assistance from thrid parties with transformation experience can help to expedite the process or, at the very least, provide a second set of eyes to oversee the work being done.

How successful has your transformation team been?

Leadership: The Change Process In Claims Requires A Different Approach

Posted on March 10, 2014 by Marc Lanzkowsky

Meaningful and Successful Improvements to Claim Departments Require a Different Approach to the Management of the Change Process

Successful organizations are always changing and adopting to improve their operations, lower costs and increase efficiencies. Claims departments are no different and have been under pressure to transform their operations and live by the mantra of doing more with less. Good claims organizations continuously evolve and adapt to ensure they add value to the overall business. Regardless, changing to meet the challenges of the marketplace is often fraught with problems and difficulties. Many initiatives fail to get off the ground or fail in the implementation process. Change can be very successful and if managed and led correctly. To change effectively there must be a strategic approach and a change in how these initiatives are led.

Why is claims transformation so difficult?

One reason claims transformation is so difficult is that claims departments are generally linear organizations. The claims value chain, or the process of moving a claim from first notice to resolution, is always looked at in a straight line. A claim comes in, is evaluated, reserved, and then resolved. Of course there are many steps in between depending on the claim, but generally all claims follow a similar pattern from beginning to end. Claims departments are often structured in a linear pattern as well. From intake units, to claims handlers, adjusters, managers, and operations – the claim moves through the organization in a linear pattern. Claim managers know this pattern and manage it well. However successful transformation does not follow a linear path. As such, many claims managers fail to have the transformational leadership skills needed to move projects to a successful outcome.

Change Leadership is Different Than Management

Management of the claims process is not the same as providing leadership to change processes and the culture that has been entrenched to those processes. Leading change is very different than managing change. Management guru and Harvard Business School Professor Dr. John P. Kotter puts is best when he said that:

[m]anagement makes a system work. It helps you do what you know how to do. Leadership builds systems or transforms old ones. It takes you into territory that is new and less well known, or even completely unknown to you.

Although most claim managers are well suited to managing core business functions such as staffing, claim volumes, customer satisfaction, budgets, day-to-day process and other operational and technical aspects of running a claims department, they often lack the skills necessary for effectively managing strategic change initiatives. In order to successfully lead change, a strategic vision and a specific program for management of a series of transformational projects to support those visionary objectives needs to be developed. Taking short-term approaches to individual tactical solutions will not create the strategic outcome needed to transform the organization successfully. Achieving this type of Strategic Transformation requires a new paradigm and skillset to deal with managing multiple interconnecting projects.

Another reason transformation is so difficult is that in response to problems, claims executives will initiate a variety of complex transformation projects to improve operations based upon the same linear task based approach to their day-to-day management. Claims executives use this linear approach to identify problems, conceive and implement solutions, manage expectations and results all within an enterprise environment where multiple interdependencies and stakeholder interests may impact outcomes.

Transformation Requires a Different Appraoach

Despite good intentions to improve operations many initiatives become ad-hoc responses to an immediate problem rather than a holistic solution to operational ills. This reactive focus means that projects will often get initiated in a vacuum, not managed fully, delayed or simply never implemented. To transform organizations, and achieve Total Outcome Management, executives need to adopt a proactive holistic Strategic Transformation approach to changing the organization for the better.

How Should Organizations Approach Change?

Claims Challenge: It’s Time for a Change – Are You In?

Posted on January 14, 2014 by Marc Lanzkowsky

There are enough of us out there so let’s come up with some new ideas!

I have been in the claims industry in one way or another for the past 23 years. When I started as an insurance defense attorney only the secretary’s had computers and I was fighting with colleagues to hand over the case law book I needed to finish my research. Business applications were limited as were computer networks. Mobile phones were expensive and lap-tops were slow and bulky.

That was the world’s reality not long ago but since then technology has helped to innovate the fabric of our lives and transform our businesses. We have almost limitless information in the palm of our hand that 20 years ago would have required a library to access.

I for one revel every few years at how much we actually now take for granted was not even around ten years ago (both Facebook and LinkedIn are only 10 years old). Despite the innovation to the world around us, the claims industry has transformed very little in decades. There has been improvement in technology that helped to speed up claims processing and provided ways to prevent fraud and streamline the process. There has been more data to assess to help provide insight on what has come and what may come. And there has been more speicalization and focus on training and development. However with all of these changes, there has been little change to the core way claims are evaluated and paid. Claims have a process that they must go through that goes from intake – to investigation – to evaluation – to resolution – with a variety of detailed steps in between. This has been the case since the first claim was ever filed.

Claims as an assembly line

The claims process has evolved over time in a similar manner that manufacturing innovated at the turn of 20th Century. Claims have become like an assembly line. Claims follow a specific path and specialization for aspects of the process has helped to streamline the flow and increase productivity for claims resolution (i.e. property damage adjsuters seperate from bodily injury adjusters). This has been a good thing for the industry and has enabled claimants to receive fair compensation where appropriate much faster than in decades past.

Look at many of the natural disasters of today versus those of only a few decades ago. While there are always the obligatory problems and issues, if one looks that claims processed for Sandy one would find “it took an average of almost nine days to get inspectors to a site after first receiving a claim, almost four days after that inspection to provide an estimate and almost six days from that estimate to issue payments.” (NY Companies Report In as Sandy Insurance Claim Numbers Climb, Online Auto Insurance News, 1/7/13) That is an impressive effort that could only happen with the factory like efficiency that now exists.

Certainly there is a place for factory like productivity and nothing is likely to change too dramatically for claims in the future. At the end of the day, that workflow of the claims value chain will endure. Regardless, what takes place within that workflow can and should certainly be innovated.

The challenge

So here is my challenge. We belong to a community of claims professionals which extends across this World Wide Web touching thousands of current and past experts in the field. Through avenues such as The Claims Spot, LinkedIn Groups and other resources we can connect and discuss what works and ways to change and innovate. So let’s bring the power of this community to bear on various problems that may face the industry to debate new ideas to improve what we are already getting better at.

Let me start: The collaborative claim file

Here is an idea I would like to see discussed and debated:

We now have the ability to gather and digitize tremendous amounts of information rapidly and efficiently making it available instantly anywhere you happen to be. Every claim brings with it new challenges yet it is rare that the facts and circumstance of a claim have not been seen in the past. Currently it is usually the responsibility of one individual to follow the claim assembly line and determine an outcome.

With the ability to share information what if it was the responsibility of a team of people to review and assess claims as information is coming in? What if multiple claims professionals could collectively work on a matter to bring shared knowledge and experience to a claim file to help ensure a proper investigation is undertaken and a consensus is reached as to an appropriate valuation and outcome? It would be like creating mini virtual claims committees on every file. Everyone could bring their experience and assist in moving the case to a quick and fair resolution. This would be a truly innovative way of looking at the claims value chain.

What do you think? How would this collective community of claims professionals adress truly innovate the industry?

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?

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?

2 Preventative Steps To Help Avoid Claims Crisis Before They Become Emergencies

Posted on June 11, 2012 by Marc Lanzkowsky

Want To Save Some Real Money? Don’t Have An Emergency Room Mentality In Claims

Seth Godin in his wonderful blog recently wrote about Emergency room doctors in organizations. These are the people that are really good at, and are rewarded, for stopping bleeding. Seth is questioning where is all the strategic thinking to prevent those emergencies in the first place? In claims we tend to hire and support that emergency room doctor mindset. As Seth states about these doctors, ”

It’s a mindset, not just a job.

You can pitch them as hard as you like about having them work to persuade their patients to give up smoking (after all, it saves lives in the long run), but I think you’ll find that they’re a lot more interested in stopping the bleeding.

Claims departments seem to be more interested in stopping bleeding than preventing it in the first place. We hire those specialists and reward those that can deal with the crisis as quickly as possible. Unfortunately we in claims don’t spend enough time trying to prevent the causes of the crises. Again, as Seth writes:

We need emergency room doctors, no doubt. I just wonder if we have too many of them in your organization. If all we do is reward fast first aid in what people do at work, is it any wonder we don’t have enough attention to the strategy and choices that would eliminate the need for all that running around in the first place?

So what can be done? How does one change the mindset? Well I will tell you so keep reading…

Prevention Is Not That Difficult If You Try

Prevention does require a base of knowledge and to “know how prevalent the emergency room culture is” within your organization. There are two simple ways to have your organization stay ahead of those emergencies and that is conducting an operational assessment and to develop an active internal review program.

1. Operational assessment: Take stock at where your organization is. When mired in the emergency room mentality it is easy to loose perspective. The operation seems to be getting along so what could possibly be improved. Or my favorite statement of “we’ve always done it that way and there is no time to change.” Is that really how you want your department to function?

Organizations change. Technology changes. Businesses are evolving. If you don’t assess your operation from time to time and look for possible areas to improve you are destined to continue the emergency room approach. At the very least, take a look at those repetitive tasks such as bill payment and taking in new losses to see if there there are opportunities to improve. Explore the technology offerings in the industry and see what if anything is available to enhance the ability of claims professionals to do what they are supposed to do – analyze files, set reserves, move cases to resolution and doing it all over again.

2. Internal Review Program: An active audit program to review for best practices is one of the best tools available to learn about your organization and ensure claims departments don’t get mired in the that emergency room approach to management. A regular program sets out the expectations for a review and creates comparative benchmarks to measure for future reviews. This of course is enhanced when the process is clearly defined and the review is consistently executed. Conducting regular reviews is a sure way to ensure emergencies don’t happen.

You Are Not Alone – Help Is Available

At Lanzko we work with clients to perform these operational assessments. I strongly believe that having someone that is detached from your organization is the best way to identify issues that may be ripe for improvement.Sometimes employees are too close to a problem inside an organization to identify it. Bringing Lanzko in can also help move change along. Let’s face it. No one likes change, especially Corporate America. But sometimes change is needed, and we can help “get the ball rolling.”

From an audit and internal review perspective, Lanzko’s The Audit Portal is a tool designed to help manage those internal reviews, create consistency and create benchmarks to become a more strategic organization. With a tool in place, Audit data is not just lost to a spreadsheet or attached as an appendix to a report. There is great information being lost in the traditional audit. We change that and provide meaningful, actionable information to improve operations.

Insanity: Claim’s Departments Can’t Expect Different Results Without Changing Their Organizations

Posted on May 9, 2012 by Marc Lanzkowsky

Why do we keep traveling in circles?

Maybe I care too much about our industry or am just frustrated by the lack of attention to quality claims handling, but this is annoying. Why should claims make up half of the most frequent market conduct issues for the Property & Casualty industry as listed by Wolters Kluwer for the 5^th straight year? As part of their review they track and analyze the results from state market conduct examinations. As with their prior studies, claims issues continue to dominate the list of state concerns.

In the 2010 incarnation, claims departments are being exposed to market conduct fines for:

Failure to properly acknowledge, investigate, pay or deny claims within specified time frames
Failure to provide required disclosures in the claims process
Improper documentation of claim files
Failure to process total loss claims properly
Failure to pay the appropriate claim amount
Failure to respond to the department of insurance and/or produce records requested during the exam process

I went back over the last 5 years of this study and the same issues keep coming up. Figure 1 charts all the issues and how many times they showed up on the study. These findings can be prevented with some focus on identifying issues and working to correct the problems.

Figure 1 * Five Year Market Conduct Claims Issues

For the individual result, see years 2006, 2007, 2008 and 2009

It’s time to raise the game!

Why are the same things coming up as issues year after year? We are now in an era of useful technology that should give companies an advanced look into their operations. Through oversight and a quality review program, claims departments are truly in the best position to prevent many of the issues raised on the top ten list. So whys has nothing changed?

I am sure every company is different and there are a lot of reason, but I feel there has been less and less attention to internal claim reviews and audits. When times are tight operations are thinned and doing an internal claim review is considered a luxury. Claim departments need to get back to preventing issues before they occur as the consequences for not doing it will result in increased claim costs.

So how does a claims department put themselves back on track? Here are a few suggestions:

Create standards: I know people are reluctant to create claim manuals for a variety of reasons, but there have to be some best practices in place that can be measured. Best practice documents can be drafted appropriately to minimize the risks of them being take out of context in a law suit. (Also if you are concerned, see our prior post of 7 Consideration When Drafting Claims Guidelines). Setting the standards and having staff work to those standards is a good starting place to ensure consistent results.

Audit for compliance: You can’t just sit there and expect everything will be fine you must review the work and ensure compliance. Audits are sometimes looked at with disdain, but when managed correctly they are a wonderful tool for training and improving the operation. Don’t just audit the old way, but instead collect data with a tool like The Audit Portal and understand where the breakdowns are (see Claim Reviews Empower Better Decisions By Putting Critical Information In Hand). From there you can truly assess how to correct the problem.

Fix and track problems: Getting all the information collected nice and neatly is a good start but now you have to improve on what was learned. Gather the information and look for trends and attack the problems. Is there a systemic problem or was it isolated? Can it be fixed with training or is there a technology solution that needs to be addressed? Analyze the issue and then develop a game plan for correcting the problem. Then – re-audit.

As a claims community we can do better. Let’s start a quality campaign to get claims issues off this list! Send this along to others in the industry and let’s start a trend.