New Rules for the Claim Game

Pole-vaulting was the same sport for a long time. Even the advent of aluminum poles, which provided a bit more lift, didn't change it radically. But advanced technology, in the form of fiberglass poles, allowed pole-vaulters to change their technique and catapult past the previously unheard-of 20-foot mark. Baseball was transformed when Babe Ruth clobbered 54 homeruns in 1920, signaling the end of the dead-ball era. The telephone changed the communication “game.”

But the business of adjusting claims has remained the same old game, despite advances in technology and the advent of the Internet.

Claim handling remains a people-intensive business. Customer service surveys still resonate with complaints about multiple contacts by different claim staff personnel asking for the same information — or worse, providing different answers to the same question. Claim staff still do what they've always done, spending 50 percent or more of their time on repetitive clerical activities like making photocopies, shuffling papers, confirming coverage, and compiling information instead of what they're paid to do — make the right coverage decisions and provide excellent service.

Why Did This Happen?

Many insurers have retained high-paid consultants to re-engineer their existing claim processes and systems. Unfortunately, very few companies achieved significant benefits from their re-engineering efforts, and many poured money into a seemingly bottomless pit. Some have even re-reengineered failed re-engineering projects! In essence, these projects sought to improve the existing process or system, akin to trying to improve the aluminum pole instead of using fiberglass material.

How did it happen? The answer is simple: the underlying strategy was flawed. It presumed the existing processes could be re-engineered to obtain big improvements in efficiency and consistency.

Re-engineering takes a mechanistic approach, focusing on technology and systems, not people. Re-engineering consultants have never put people first. They haven't really considered what tasks people do minute by minute, hour by hour, and day by day. It's people who make a claim operation go. The consultants used for re-engineering focused on the process of adjusting a claim. They failed to interview the company's best employees — the ones who get more done faster, and with higher quality. They failed to capture the unique way a company's best employees work.

Re-engineering or business process management focuses on getting work to and from an individual. That sounds logical at first glance, but there's a hidden assumption that must be challenged. How much of this work really needs to be done at all? Could some existing tasks become completely automated? If you can reduce the actual work performed and guide employees through the remaining tasks and decisions, you could fundamentally change the way claims are handled.

That changes the game, instead of just making the existing one easier to play.

Processes Don't Work, People Do

When looking to change the claim game, insurers should not be constrained by their current staff and technology limits. If they could start fresh, what would they like the claim process to look like? Ask a claim professional to articulate the perfect claim process, and you will hear statements like “dramatically shorten cycle times, accurate reserving, straight-through processing except in exceptional cases, 'raving fan' customers, pay what is owed — nothing more nothing less on each claim.”

Understanding the ideal process doesn't require re-engineering. Insurance companies should take a more holistic view by looking at their best claim employees to find out how they do their jobs so well. What if they could take what their best employees do, replicate the process with technology, and apply it companywide? This would fundamentally change the claim game by making every employee the best employee.

Too many insurers make the mistake of examining technology and systems first, rather than initially looking at their employees, policyholders, and agents. Starting with an examination of what people do rather than basing decisions on the latest technology hype allows insurers to focus on the true objective of an efficient claim operation. Only after they have done that can they identify and apply the appropriate technologies to get the job done.

Implementing technology for technology's sake has proved time and again to fall short on delivering significant benefits. Technological improvement is essential, but it's easy to forget that machines are not the key. People are. They're the ones who get the work done. Technology is simply a tool that enables a company to provide services more efficiently and consistently.

Spend time on the front lines of any claim organization and you will quickly identify those employees who stand out. These “super-employees” have typically spent years honing their skills and developing a wealth of knowledge that enables them to perform their work with seeming ease and proficiency. They know how and where to find the right information while avoiding unnecessary, time-wasting tasks. These folks have actually designed and implemented the ideal process using technology as just another tool when and where it adds value.

What if technology could actually replicate and enforce these super-employee skills, shortcuts, and best practices?

Data Management Versus Decision Making

When it comes to changing the claim game, it also is essential to separate data management from decision making.

Claim adjusters spend much of their days collecting and managing data, searching for policy records, verifying coverages, and reviewing claimant statements. Many insurers have attempted to conquer the mountain of data they must handle by installing imaging and file management systems so they can go “paperless” for speedier, better document recovery. However, an imaging system alone doesn't change the game. The work has remained primarily unchanged, although claim employees are now manipulating screens instead of paper.

Data gathering is an ideal candidate for automation. Today, adjusters often need to first gain access to the policy administration system to make sure the policy is in force, then check limits and deductibles before they can start doing any real work toward adjusting the claim. Multiply this by hundreds or thousands of times every workday, and it adds up to a huge drain of time and money.

It's no longer a far-fetched concept to employ technology to automate or eliminate much of the required data gathering, and summarize and display required information in a usable format. It's not just about automating or eliminating tasks, though. Many of the tasks performed by claim personnel can't be automated, but they can be performed more consistently. Technology also can play a large role in bringing consistency to the claim decision-making process.

Once again, it requires a people-first approach. People have a tendency to complete their tasks in different ways. Their biases, strengths, and weaknesses influence how they do their jobs. This breeds inconsistency. Technology can fix this by guiding employees through their tasks.

It's no different than what a car navigation system does. Once you put in the address, a navigation system guides you to your destination in the most efficient way. It even adjusts your route if there is a traffic accident or detour. All you need to know is how to drive. The same concept can be applied to changing the game in claims. Technology exists today that will allow companies to create self-adjusting “navigation” systems that effectively bring a company's procedure manual to life by embedding it in the core processes.

Taking it a step further, the system could become an automated adjuster, allowing claimants to input their claim information directly via the Internet. With an automated adjustment process, the adjuster's role changes to be an exception handler, strategist, and evaluator — tasks that require their experience, expertise, and know-how.

By eliminating much of the administration and improving adjuster productivity, insurance companies can reallocate their staff to the most high-value functions and tasks. Goals that were once thought impossible would now become reality. Cycle times on simple claims would plummet, claim-handling consistency would rise to close to 100 percent no matter where or who was handling a particular claim, and customer satisfaction would skyrocket as the claim experience would become predictable and noninvasive.

Quality Without Compromise

It's important to ensure that quality is not the victim in the quest to improve productivity. Any process or technology designed to speed things up and streamline the claim process needs to deliver consistent and high-quality results.

While a slow claim process may severely impact customer satisfaction results, it's the risk of a bad claim decision that keeps insurance executives from getting a good night's sleep. In today's environment, give two adjusters the same claim with the same set of information and chances are you'll end up with two different results, no matter how many re-engineering projects a company has implemented. While the claim information represents the common denominator, it's the skill and knowledge of the adjuster that makes the difference. This inconsistency in claim handling is more the norm among insurers than the exception.

By turning to technology to not only replicate but also enforce best practices, insurers can prevent outright mistakes, guide adjusters through complex tasks, and keep everyone on a common path to resolution. This brings much-needed consistency to the process.

Keeping the Customer Satisfied

It is not uncommon for claimants to talk to multiple insurance personnel to report even the simplest claim. They report their losses to call centers or agents. A few days later, they often need to repeat their stories to an adjuster and are left wondering why they've gone through the same song-and-dance routine. If it's an automobile accident with an injury, the customer will often need to speak to separate physical-damage and bodily-injury adjusters, only adding unnecessary stress to their already stressful situation.

Too often, insurers fall into the trap of believing that if they upgrade their core claim systems, they will be able to improve their processes. Unfortunately, it's a trap because it doesn't focus on what claim professionals do. By using technology to automate and coordinate what people do, the claim process can be radically improved. When a policyholder has a single contact who has immediate access to complete and updated information, this not only makes the customer happy, it boosts staff productivity and decreases everyone's frustrations.

Leading-edge insurers are already recognizing that they need to radically change how they handle claims. They know they need a fiberglass pole and they are aggressively searching for it. The next couple of years should be fascinating as more and more insurance companies start breaking through claim-handling barriers that have plagued the industry for decades. Who will smash through the barriers first? Leaders who recognize that the game has changed and that they have to change with it. While technology will continue to serve as an enabler, the winning strategy in the claim game starts with people. They're the key to changing and winning the claim game.

Brian S. Cohen was a former insurance company senior executive and now serves as president and CEO of Clear Technology, Inc., a global software company based in Denver, Colo. He can be reached at brian.cohen@clear-technology.com.