3 Claims Department Musts That Will Let The CEO Sleep Soundly

Posted on March 23, 2015 by Marc Lanzkowsky

Let’s face it, running an insurance company is no easy task. Market pressures, changing cycles, balancing the right mix of products and ensuring an efficient operation will certainly keep a CEO up at night. Having a smoothly run claims department is essential to ensure costs are maintained and customers continue to return. No one likes claims, however they are the largest expense an insurance company will have and as such it is essential that they run efficiently.

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There are many elements to a well run claims department. As with many areas of business it comes down to people, process and technology. Good people will drive the success of any department and working with defined efficient processes, as well as technology tools that support the organization, are basic core requirements to any well run department.

3 “Must Haves”

Specifically what people, processes and technology make up a good claims department is a subject for another day. Regardless every claims department should be using metrics, performing audits and have a business continuity plan in place as a minimum.

Metrics – Today’s claims department should be filled to the brim with claims data. If your claim system doesn’t provide robust data then there are bigger issues to deal with. Data from the claims department should be actively used to address different needs from various internal stakeholders. Claims managers should have information about the efficient handling and disposition of claims. Underwriters should have information about client activity and trends. And actuaries should be able to develop claims data to ensure reserve are adequate and pricing is appropriate. Dashboards of claims information should be available to the CEO to help identify trends and allow for both a tactical and strategic view of the operations.

If you are not getting or using your claims data to provide valuable metrics then sleep is the least of your worries.

Auditing – File reviews are an essential tool for claims departments and should be part of the overall culture of the organization. Performing regular internal claim audits helps ensure that reserve practices remain consistent and appropriate and the operation is running efficiently. More specific audits can help target various operational issues to ensure quality and compliance and can include data audits, financial audits and customer service reviews. Auditing should be a regular part of the business landscape and be conducted in a formal way and on a regular basis (see my article A Claims Tale Of Three Little Managers And Their Review Programs).

If your’e a CEO and you don’t need sleep, then don’t worry if your claims department is auditing. However, if you like to rest easy – this one should be a no-brain solution. Make sure there is an audit plan and program in place and it is running regularly.

Business Continuity – Are you really ready for the next disruptive event that could derail the operation? The main question for your claims department is can they manage, restore and recover essential functions, processes and data during and after disruptions to operations? If there answer is – I don’t know – then you probably aren’t sleeping at night.

The claims department should develop an incident-agnostic functional recovery program that can establish a predictable recovery priority that maintains a “going concern” and can ensure that the claims “supply chain” continues to operate. Like the rest of the organization, there needs to be a proper Business Continuity Plan in place to ensure the company is ready to handle any disruption.

Ensuring a smooth running claims department is vital to a successful running organization. Even well run companies should take a look to make sure that three “must haves” are in place so the CEO can sleep better at night.

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What else is keeping you up at night?

4 Keys to Managing a Successful Outsourced Claims Operation

Posted on October 30, 2013 by Marc Lanzkowsky

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

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

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

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

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

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

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

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 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?

A Claims Tale Of Three Little Managers And Their Review Programs

Posted on June 20, 2012 by Marc Lanzkowsky

My Take On The Old Story Of The Three Little Pigs

Once upon a time there were three claims managers who were told by their CEO to go out and make sure they have the best organization possible. Since they all knew that the best way to a good organization was to develop process and procedures and make sure all who worked there understood them, that’s just what they did. Each built an oversight program to ensure all was well and to prevent being attacked by all those wolves out there.

The first manager built a review program out of straw, the second out of sticks and the third out of bricks…..

Please work with me here as I am trying to be metaphorical.

The Manager Review of Straw

The first manager was a proud manager. She knew she had a good group and they worked just fine. She had instructed them on her way of doing things and had provided sufficient training to let them know was expected. Her “straw” review program was to wait for something to happen and then if there was a problem to fix it. One day a huge claim showed up on her desk. She had never seen or heard of this claim, but it was big – the type of claim that could really cause her a problem. Well that claim, it turns out, had been in the office for over a year. Information had been received to provide sufficient warning for everyone to make sure the company was ready. If only she had known about it.

After dealing with “fixing” the problem a knock came on the door. It was the manager’s big reinsurance company. This reinsurer was large and seemed to come out of no where. The manager was shocked. This reinsurer said….”manager, manager, let me come in” the manager responded “not by the hair of my chinny chin chin!” The reinsurer responded, “then I will huff and I will puff and I will blow your department down.” And that’s exactly what the reinsurer did.

The manager lost his house of straw and somehow landed a new job at her manager friend who said come on over you will feel protected in my department of sticks.

The Manager Review of Sticks

The Manger of Straw’s friend, the Manager of Sticks, sat her down and told her how it was going to be. We here in the land of sticks are prepared for any possible problem. We have a wonderful review program made of sticks. This program is so good we can prevent all those problems that got you blown down in the house of straw. We also have procedures in place, the Manager of Sticks said, but we oversee it all with regular reviews. We spend time reviewing claim files and recoding all that information on these sheets of paper. We catch it all before a problem arises so he told the Manager of Straw that she will be fine here in the house of sticks.

The stick reviews went on every quarter. The sticks were filled with all this great information and captured all this detail about the claims and what was working and not working. The problem is the sticks piled up and once they were in that pile it was hard to understand what was working. Someone had to put the sticks in an order to really understand how many problem sticks there were. Low and behold a day came when a whole series of claims came in all seemingly insignificant. It turns out there was a trend and a real problem brewing with a particular type of claim. Individually they seemed fine, collectively they were significantly under reserved. Those sticks had the information but it was so spread out and disorganized that the information was lost. Without the information available, the company rewrote that book of business and was now going to face a very big problem to explain to the shareholders.

The Manager of Sticks was about to get a knock on the door!

Knock knock….”who is it” asked the Manager of Sticks? It’s the Chief Underwriting Officer, the Chief Financial Officer and the CEO. See it turns out that they had some explaining to do to the board about a reserve charge that seemed to have come out of no where. “Manager Manager please let us in” with the Manager of Straw next to him nodding her head thinking oh I know what’s next, the Manager of Sticks responded “not by the hair of my chinny chin chin.” Well those executives were not about to be shut out and said “then we will huff and we will puff and we will blow your house in!” and that is exactly what they did.

Amazingly, the Manager of Sticks and the Manager of Straw were able to find jobs again in their friend the Manager of Brick’s company.

The Manager Review of Bricks

Working for the Manager of Bricks was actually not as bad as people thought it would be. Yes he was a tough manager and expected a lot from his people, but in the end he wanted them and the organization to succeed. The Manager of Bricks was keenly aware that when procedures were working and followed there was less of a chance of surprise. He also knew that the way to avoid those surprises was to have a very specific audit and oversight program in place. Because the Manager of Bricks also knew that using technology in the right way was a benefit, he made sure he had an oversight tool in place to manage the review process and make sure he captured, and not wasted, all the hard work performed by his reviewers.

The Manger of Straw and the Manager of Sticks had never seen anything like it. All the reviews were coordinated in one place online (of course they used the Audit Portal). Issues were categorized and follow-ups documented. Trends just popped off various dashboards and made it so simple to proactively run the department.

Then one day there was a knock on the door. It was the big bad mean regulator trying to find a violation. “Manager, manager let me come in” the regulator yelled. The manager of Bricks responded….”sure come on in and look around.” The regulator had apparently wanted to see the offices the Managers of Straw and Sticks but there was nothing left there to see. The Manager of Bricks had nothing to fear. When the regulator asked for controls and a plan it was all ready to be shown. Issues that had been identified and corrective action plans were clearly in place and the regulator was pleasantly surprised. After giving the Manager of Bricks a clean bill oh health he left with no adverse claims findings.

Don’t you love a good story? Maybe if we were all like the Manager of Bricks things would be better!

At Lanzko we can help shore up operations to become more like the Manager of Bricks using our Audit Portal application. Give us a call to learn more.

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.

5 Business Basics Every Claims Person Should Live By

Posted on February 14, 2011 by Marc Lanzkowsky

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What are some other basics claims professionals should live by?

There Is No Such Thing As A Pro Forma Signature On A Document – If You Sign It You Own It

Posted on October 6, 2010 by Marc Lanzkowsky

Don’t let doing something for the sake of doing something come back to bite you

I have written a number of articles on the importance of avoiding processes that have no added value to an operation. For example, I spoke of how making a “check” in the process is no assurance that things are being done right in the posting In Claims Don’t Let The Process “Thing” Get In The Way Of Doing The “Right” Thing. Making sure that a process is adding value is essential in claims to avoid the “we have to just say we did it” way of doing things. The putting a note in the file that adds nothing to the file just because it is part of the process does nothing to increase value to the claim process and should be scrutinized. In “What’s The Point” Claims Process And How To Avoid Them I raised the issues that to be truly successful in claims it is important to focus on what’s truly important.

Mortgage foreclosures all in doubt because of a process for the sake of process

Doing things for the sake of doing things can have significant adverse consequences for an organization. It is important to realize that one day you may have to answer for every action you take on a claim file. The concept of how doing a pro forma task can come back to bite you is being highlighted as a yet another fallout of the mortgage crisis. Thousands of foreclosures are in doubt because a mortgage bank executive did not verify the documents used to justify home seizures. Tens of thousands of foreclosures are being halted because of a process in place where an individual just signed hundreds of documents without ensuring the information contained on the documents were correct.

In one of those cases an executive at JP Morgan Chase & Co. testified that her review was more or less signing the documents unless it was questionable and someone else told her there was a problem. She was among 8 others who signed over 18,000 documents a month (see JPMorgan Based Foreclosures on Faulty Documents, Lawyers Claim, Bloomberg 9/27/2010). At another bank, Wells Fargo, it was reported in the New York Times that an executive only verified the dates on up to 150 foreclosure documents signed daily (see Bank Exec Checked Only Date on Foreclosure Docs, NYT 10/3/2010). The complete fallout from these events is still being sorted out, however it will certainly expose the banks, their attorneys and title companies to possible liability.

Claims organizations are often subjected to a variety of sign offs and controls that are instituted to prevent fraud and protect company assets. Given the volume in a typical claims organization, signatures for the sake of signatures are a possibility. Regardless, as seen in the mortgage situation, such a process can have significant implications.

Suggestion to avoid the process trap

Clearly, doing something for the sake of doing something can really have negative consequences for the organization. How many signatures do you put on documents in a given day? Do you really know why your signature is needed? Are you taking the appropriate steps to verify what you are signing? If you do not have an answer to these questions then you should be asking one more – what will happen if something goes wrong with the document that I just signed?

I believe strongly in supporting process and controls that are adding value. For example, it is clearly a good idea to have a second set of eyes prior to settling claims over a certain dollar amount to ensure company assets are being spent wisely. As a claim handler you would not want a settlement of a million dollars to go out the door without a manager’s approval and as a manager you would never want that check sent unless you were fully aware of the circumstances of the loss and the reasons for the settlement. It is this type of clear common sense that needs to be used on all processes where you are being asked to sign something.

Prior to signing a document make sure to ask yourself the following:

Why am I being asked to sign this and for what purpose?
Is my signature needed to control something, or am I just putting it down because there is a signature line?
Do I understand what went into preparing the documents that are asking for my signature?
What are the consequences if the document turns out to be faulty?
Do I tend to sign everything put in front of me without review?

It cannot be an excuse that “it’s just a process and it has always been done that way”. If you had to testify about signing the documents would saying you just “signed everything unless someone told you it was a problem” sound like a reasonable response? Don’t read me wrong, controls and signatures are required for good reasons on many documents. Nonetheless, if you are the one asked to sign – make sure there is a good reason for your signature and know what your signing before you put your name down. If not, stop and ask the questions and revisit the whole process.

Why Extending More Claims Authority Means Extending More Responsibility

Posted on September 10, 2010 by Marc Lanzkowsky

How much authority is too much authority?

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

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

The inverse claim volume and value relationship

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

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

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

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

So what is the big deal about extending more authority?

The authority goes up and so does the spending

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

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

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

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

What it means to extend authority with responsibility

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

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

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