Many business intelligence (BI) applications and efforts arefocused on policyholders. We know how to monitor and measure themyriad offers, discounts, and special programs we create for them.We know how many times policyholders and prospects are "touched" inour marketing and sales processes. We know the demographic profilesof policyholders and prospects, their buying behaviors, theirpreferred price points, and their appetites for risk.

But we seldom make the same efforts to provide metrics and BI toclaims adjusters, the very folks who interact with ourpolicyholders at the times in which they need us most—and in thecircumstances under which they're most likely to judge ourperformance as insurers. Setting aside the most obviousquestion—Why don't we focus BI on adjusters?—let's examine what weshould look at and why.

Be Wary of Workloads

The two metrics most typically used to measure adjusters'workloads are the number of claims being handled and theclosing ratios of those claims. The downside to these metrics isthey give adjusters incentives to handle more claims and to closethem as quickly as possible. The unintended consequences arefrequently dissatisfied policyholders and a loss of control overloss costs. More specifically, policyholders are dissatisfiedbecause they get the impression adjusters are more interested inclosing claims than in listening to them and performingcomprehensive investigations. Such haste also may result inlitigation and declining retention rates—rates that may becompounded by policyholders who complain to friends and/or posttheir complaints on social media.

Control over loss-costs is lost because measuring adjusters onclosing ratios often increases the number of reopened claims, aswell as the number and the amounts of after-closure payments. Bothrequire the release of reserves needed to cover known losses.Control is lost to an even greater extent if policyholders believethey're being rushed to close and turn to lawyers as recourse.

As an alternative, BI can help companies employ metrics such ascustomer retention after claims, the percent of first-partyclaimants who will recommend your company, numbers and amounts ofafter-closure payments, and the percent of claims that involveclaimant lawyers. Monitoring these kinds of metrics, along with thenumber of claims being handled and the closing ratios, can improvepolicyholder satisfaction, restore control over loss costs,increase policyholder retention, and improve loss ratios.

Timing is Everything

After numbers of claims and closing ratios, we also seem to loveseeing how long it takes adjusters to contact claimants, make firstpayments, and send coverage letters once the loss has beenreported. While it's important to make a positive first impression,what happens after those initial contacts? Claims processes can bevery long, deeply involved, and highly iterative—and can seemespecially so to the claimant.

Adjustment processes should be monitored and reviewed to ensuregood practices and conscientious performance throughout the life ofthe claim, not just during the first steps. Do adjusters follow upin a timely fashion? How do they interact with the claimantthereafter? Claims files should be reviewed and graded for what wasdone well and what could be improved. Adjusters should be monitoredfor compliance with the carriers' best practices beyond just timeto first contacts. As insurance companies monitor metrics such asthe number of times claimants were contacted, the longest periodswith no contact, and the number of payments made, they willformulate best practices that they can communicate with theiradjusters.

Defining the Terms of Success

Often, we judge the performance of adjusters on loss ratio. Butwhat loss ratio? There are many ways to calculate loss ratios.Calculations may or may not include ALAE, ULAE, reinsurancerecoveries, ceded premium, salvage, subrogation, other recoveries,and other factors. If adjusters are being measured on loss ratio,won't the best adjusters purposely avoid complex claims with thepotential for high losses? Aren't those precisely the kinds ofclaims you reserve for your best adjusters?  If a carrierdecides to enter a new market—and price policies low to attain afoothold—should adjusters be penalized for adjusting losses onthose policies when the rates were low by design?

Better to derive performance metrics and correspondingincentives for adjusters from the aspects of adjustment they canactually control, as well as from those aspects that contribute tothe betterment of the company and the satisfaction ofpolicyholders. So, we might look at BI that indicates thepercentage of total claim costs attributable to ALAE. We mightmonitor the numbers and the amounts of recoveries recognized. Or wemight evaluate the percentage of claim files that passed reviewagainst the total number of claims reviewed. These are all metricsthat the adjuster can directly influence and, to some extent,control.

Making BI Work

Regardless of the metrics or performance criteria we select, thevalue of BI is its precision. But that very precision means we haveto be equally precise. We have to know what we need to know for thebetterment of the business. We have to be clear about what we wantto know to fulfill the promise of our brands and its valuepropositions. We have to know what our adjusters can control andwhat they can't control. And we have to know how to query the dataresident in our systems to derive what we need and want toknow.

If our producers are on the front line of establishing business,acquiring policyholders, and bringing in revenue, our adjusters areon the front line of returning the premiums invested in us, ofsatisfying our policyholders, of retaining that business, and ofcontrolling costs. Let's be sure we're harnessing the real power ofBI to improve productivity—and profitability.