Filed Under:Carrier Innovations, Technology Solutions

Driving Operational Efficiency Across the Claim Value Chain

In this economically challenging climate, it is critical that P&C insurers focus on any opportunities to drive tangible improvements to their claim process and operations. To be successful, insurers must think and act differently to get water from a stone that has been squeezed repeatedly over the past few decades. Success can be realized by improving the operational efficiency of their claim organizations, and building an operating model that can minimize claim costs as well as mitigate claim "leakage." In the competitive insurance market, it is critical that insurers achieve these gains while simultaneously maintaining or enhancing the claimant's service experience.

The "stop watch" exercise is a common practice for the adjusters, customer service personnel, and specialty resources staff in many claim units. There is a practical reason for this exercise--each process step in the claim management value chain costs money and adds directly to an insurer's adjudication expenses. In high-volume or high-complexity operations, inefficient or suboptimal process steps can be replicated, often with costly implications to insurers' bottom lines. When you consider the spectrum of global services that an insurer offers, missed opportunities on the micro level can quickly soar into millions of dollars in costs.

Back-office claim operations within a multi-line or global insurer often mirror the market segments that the insurer serves. Many insurers have distinct claim operations, personnel, and units that focus on the products they offer to individuals (auto, home, and life). The same could be said for insurance offered to businesses; distinct claim operations exist for general liability, commercial auto, business owners, and property lines of business. Insurers have maximized this segmented model to the best of their ability, as it affords an insurer some flexibility to respond more effectively to customers' needs.

However, this model often results in massive and siloed claim organizations with unique unit configurations, systems infrastructures, and processes for each market segment or line of business. While there are similarities in the claim processes used by these units, they are difficult to organize because the specialty knowledge or the line of business expertise required takes precedence. Consequently, insurers struggle to maintain control over these organizations and implement consistent models for managing claim operations.

Many insurers who desire a strong grasp of the people and processes within their claim functions feel as though their supporting technology infrastructure is holding them back. As a result, insurers pursuing claim transformation or improvement initiatives often start by looking at packaged solutions. However, supporting technology is really only one part of a total claim improvement initiative. Often overlooked are the people and process components of a more holistic improvement initiative--something that packaged solutions aren't necessarily positioned to address. Aligning all of these dimensions so that they are complementary and in sync will truly help insurers transform their claim processes.

So, what options should be considered to best drive claim transformation? Business process management (BPM) is an effective option for insurers looking to advance transformational or improvement initiatives. BPM technology goes deeper than a package solution by delivering improved claim processing technology that automatically aligns adjusters and resources under an optimized end-to-end claim process. BPM provides a strategic platform that enables more efficient claim operations and an enhanced claimant service experience.

Focus on Best Practices

Insurers large and small have proprietary claim processes that have been carefully tested and refined--perhaps several different ways--over time. These processes are the source of key competitive differentiation; however, they are often embedded deep within lines of business, segments, functional areas, or even in adjusters' minds. Insurers still have not solved how to make these best practices available for their entire organization to leverage and consume. Rules-driven BPM allows claim organizations to break down traditional product silos, and integrate support processes across geographies and lines of business.

There is a common misperception that all claim processes are unique. While final execution of the process may be highly customized, most process elements--first notice of loss (FNOL), segmentation and assignment, adjudication, investigation, subrogation, and so on--are actually very similar when you break down their core processes. With a BPM platform, insurers can reuse this commonality to quickly transform claim operations for competitive advantage. BPM technology provides insurers with the ability to leverage a core best practice claim process by storing those elements in a common repository of policy and procedures, which can be applied across products and/or lines of business, and to what extent the business deems fit. This foundation ensures the optimal claim process is available and can be invoked by any adjuster within any area of an organization. The foundation can be readily specialized and extended based on which markets or segments insurers serve.

The big uplift: these changes only need to be made to the deltas between core best practice and specialized process. Insurers can use BPM to add "specialized" layers of instruction to base-line processes and rules by specifying just what will be different in specific situations. Rather than having to build the process from scratch every time, insurers can focus on those deltas alone, thereby reducing expenses and dramatically improving time to market.

This approach greatly enhances agility. As insurers continue to carve out new opportunities or are confronted with continual changes in regulations, it is essential that they have the ability to change their business to match these market drivers. Insurers who leverage BPM to help create core claim processes can make changes quickly, and those changes can be applied dynamically to any area where the change applies. Compare this approach to a packaged solution model where manual fixes and workarounds are limitations of the system, and the better option quickly becomes apparent.

By focusing on opportunities to optimize and reuse best practice business processes, insurers can break the manual or exception claim processing that they have grown accustomed to supporting. Insurers that do this successfully create competitive advantages. They benefit from increased customer satisfaction and higher market share by enforcing best-practice processes that help insurers reduce loss adjustment expense and claim leakage.

Automated Case Management

Claim best practices look fantastic when they're mapped on whiteboards, but often fall short when insurers don't have the ability to execute them. An efficient claim process begins and ends with strong case management. The right rules-driven BPM solution can provide insurers with the case management features they need to manage optimized claim processes across operations.

First and foremost, insurers should eliminate paper-intensive, inefficient, and error-prone file processes. Adjusters need intuitive business tools that can automatically take action based on claim information. A BPM-enabled case management approach supports an optimized claim process by providing a work engine that can organize and manage complex pieces of work across operational silos. It also provides end-to-end visibility into a claim event or a claim operation--something all claim managers love, but are often forced to do without.

The right case management solution can parse claims into an infinite number of sub-claim units, each of which is able to be routed, managed. and monitored individually, while still providing insight and control. Adjusters and managers can leverage real-time analytics to get comprehensive views of claim operations anytime. They have the ability to view and reroute work as needed, enabling a dynamic response to complex claims or shifts in work volume. Insurers can use this insight to drill down into specific tasks to understand which processes are working well, and which are not.

Insurers can apply these concepts to track, measure, and report on an infinite number of subunits under the primary claim event. This further drives best practice processes and can be extended to other lines of business; it also gives insurers the flexibility to systemically integrate claim processes that are historically segregated or require manual intervention--a must for insurers trying to contain overall claim costs or bundle new product offerings.

In addition, a strong case management platform allows insurers to begin automating subsets or entire portions of end-to-end claim processes. To contain costs insurers need to automate work that is of little value to the organization, and let an intelligent system manage the claim process steps that require little or no human intervention. Insurers can realize efficiency, expense, and productivity gains by using work automation to manage simple claims.

If you ask insurance executives about their strategic objectives, then you'll likely learn that three-year business plans often include provisions for replacing or improving one or more legacy systems. The reason is simple: insurers spend an inordinate amount of time developing workaround processes to cover functional deficiencies of these systems. A strong case management platform helps insurers integrate legacy improvement assets into claim improvement strategies.

Insurers can use BPM technology to unlock these static tools and achieve functionality that previously was not possible. BPM technology helps an insurance carrier optimize the business process that manages their legacy claim systems--a stark change for carriers accustomed to legacy assets being the driver of business processes. BPM technology does this by helping insurers incorporate legacy systems into the development of new business processes, and accelerating the development of new business tools.

Grow Through The Customer Experience

P&C insurers rely heavily on claim organizations to maintain high customer satisfaction, minimize risk and loss exposure, and deliver strong operating results. These are no small tasks, especially when one considers the unique challenge that a claim organization faces: when customers need its services the organization has only one chance to deliver. One negative experience reaches well beyond the neighborhood barbecue nowadays. An insurer can now face scrutiny from an entire social network.

Increasingly, insurers are striving to achieve better operational efficiencies while simultaneously maintaining or improving claimants' experience. While this tenet holds true for most insurers, back-office claim units are not necessarily equipped with systems they need to ensure satisfaction. Claim management functions have a direct impact on an insurer's loss adjustment expense (LAE) and combined ratio; they must balance costs against service carefully and still deliver every time. More and more, the strategy to attract and retain customers includes tactical plans for tailoring the claimant's experience.

An effective BPM platform allows claim operations to control and manage customer interactions and better align customer service with business objectives. This is where the application of best practices transitions from theory to a catalyst that insurers can use to differentiate themselves from the competition. Insurers can eliminate misinterpretation and manual workarounds by using intent-driven service experience that dynamically applies best practices at each interaction. Insurers can leverage this approach to anticipate a policyholder's needs, while addressing concerns raised via web, phone, or email.

Insurers can even expedite claim processes to the satisfaction of their policyholders. Imagine the power of being able to anticipate and respond to a claimant's needs before they ask the question (or to dynamically assign work to a glass vendor when they provide notice of loss.) By eliminating and automating low-value work activities, adjusters can focus on claim activities that they know will help deliver a better service experience. Insurers are then able to take a more holistic approach and focus on high-touch items to differentiate themselves from the competition.

By combining best practices and managing the process with a case management platform, insurers can create a new model for servicing policyholders. Better managing this experience can directly correlate with key performance indicators, which will undoubtedly impact operating results. It is not an overstatement to say that organizations leveraging BPM have saved millions of dollars. In fact, one major U.S. insurer has streamlined a 14-day process down to 14 minutes. Regardless of the result, they've implemented claim solutions across their whole business at a quicker pace than ever before.

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