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?

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?

15 Excuses For Not Changing And 5 Reasons To Change The Way We Make Change

Posted on April 1, 2014 by Marc Lanzkowsky

Going Along With How It’s Been Done Is Not The Best Way To Go Through Business

I have a client that is so entrenched in its way of doing things that a significant part of my job has been to manage change. Change is hard for everyone and how and when to change has been debated and discussed in companies since the first company was formed. What is never debated are some of the excuses used for not changing. People are resistant to change and despite the need to move forward people generally prefer to live with what they have. Fast Company put out a list of Reasons Why We Cannot Change and these are my favorite 15:

We’ve never done it before
We’ve been doing it this way for 25 years
It won’t work in our company
Why change — it’s working OK
It needs further investigation
It’s too much trouble to change
Our company is different
We don’t have the money
We don’t have the personnel
You can’t teach old dog new tricks
It’s too radical a change
I don’t like it
You’re right, but….
We’re not ready for it
We’re doing all right as it is

“Men Plan, God Laughs”

This list was originally complied in 1959!!! by E.F. Borish a product manager for a Milwaukee company. Amazingly these excuses are as true today as they were over 50 year ago. So we plan to make change and address the list of excuses to help achieve a positive result. Regardless, in addressing these excuses it is important to accept that change is difficult and also understand that great strategic plans may still not yield desired results. Management must acknowledge during any change process that “culture eats strategy for breakfast” (a quote attributed to management guru Peter Drucker).

5 Changes To The Way We Change

To help address the culture and achieve success, Harvard Business Review’s Bill Taylor suggests changing the way to approach change in his article The More Things Change, the More Our Objections to Change Stay the Same.

Mr. Taylor continues asks – “so what have we learned in the twenty years since Fast Company was created, or the 54 years since E.F. Borisch compiled his list?” He suggests 5 possible principles to consider to change the way we make change:

Originality – For leaders to see their organization and its problems as if they’ve never seen them before, and, with new eyes, they need to develop a distinctive point of view on how to solve them
Break from the past without disavowing it – The most effective leaders…don’t turn their back on the past. They reinterpret what’s come before to develop a line of sight into what comes next.
Encourage a sense of dissatisfaction with the status quo – persuade colleagues that business as usual is the ultimate risk, not a safe harbor from the storms of disruption
Requires a sense of “humbition” (humility and ambition) among leaders – enough ambition to address big problems, enough humility to know you don’t have the answers. When it comes to change, nobody alone is as smart as everybody together.
Be consistent in the approach – If, as a leader, you want to make deep-seated change, then your priorities and practices have to stay consistent in good times and bad times.

Change does not have to be a bad thing but managing the change process must be addressed. Strateigic plans must have an approach to dealing with change to achieve a measured success.

How Do You Address Cultural Issues During the Change Processs?

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?

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?

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 Things Good Claims Professionals Won’t Do

Posted on January 24, 2013 by Marc Lanzkowsky

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

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

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

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

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

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

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

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

How Would Albert Einstein Approach Claims

Posted on January 3, 2013 by Marc Lanzkowsky

Albert Einstein must have been a claims manager!

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

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

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

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

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

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

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

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

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

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