Leveraging the Claims Transaction for Competitive Advantage

As carriers continue to modernize their claims processes, the opportunity to leverage claims data for competitive advantage has grown accordingly, says Larry Wood, director, P&C practice, Robert E. Nolan Co.

Claims automation has been evolving and maturing for years. In the process, the efficiency and quality of claims transactions have been vastly improved. Administrative systems that capture data, manage the process and prompt activity have enhanced the opportunity for consistent claims handling based on company guidelines and industry best practices. Supporting technologies that focus on damage estimation, medical bill and procedural review, and fraud management have further improved and streamlined the claims process. In addition new technologies, particularly mobile technology, make information available to staff in the field on a real-time basis, boosting their productivity. The culmination of these advances is a more customer-centric approach to claims handling that is also valuable in terms of efficiency and effectiveness.

One of the most important by-products of these advances is the wealth of data that is now available concerning the internal workings of the claims process. Access to this information provides the opportunity to analyze the activities, performance and results of the work of claims representatives. It permits carriers to go beyond the traditional measures of claims representative performance, which for many companies is still limited to measuring claims assignments, pending counts and customer/claimant complaints. Indeed, proper analysis and use of the information provided by claims technology can point to significant, actionable changes that will improve the three key components of the claims process: efficiency as expressed in loss adjustment expense (LAE), loss costs and customer service.

The information available can be looked at in many ways. Possibilities include tracking key parts of the process, such as the time elapsed from the date of loss to the reporting of the claims and first contact with all key parties; reviewing history to understand the development of claims; and expense management to view how effectively outside resources are utilized. Carriers can also monitor trends to improve the claims process by looking at the results of each phase of the claim (initiation, investigation, evaluation, negotiation, resolution), analyzing data over time and comparing representatives, units, branches, etc.

A Deep Dive Into Data

Taking a deeper dive into the data, insurers can look at data elements in combination with other information. For example, time to close a claim is an important metric, but comparing it against the percentage of files reopened will give a clearer picture of claims representative behaviors and the actual results of the process. Similarly, looking at total average payments of reopened claims compared to payments of claims not reopened can provide valuable insight into claims representative actions and their impact on overall claims payments. This information, combined with a detailed file review, provides a comprehensive picture of the effectiveness of the process, the performance of the staff, and opportunities to refine and enforce procedures that lead to the best claims result.

To achieve these benefits, key metrics must be identified and scorecards/dashboards developed that highlight significant parts of the process. A methodology must be put into place to perform detailed file review. Once this methodology is in place, however, it can be used both by supervisors to monitor open files and by file auditors to review closed claims files.

Initially, reviewing a statistically significant sample of files can be time-consuming. Over time, however, as results stabilize and improvements are made, the number of files reviewed can be reduced. The good news here is that technology can also be applied to the review process, extracting information to expedite the process and produce standardized reports to consolidate the findings of the review.

The way claims are handled plays a significant role in retaining customers. Research shows that customers are looking for fast, fair and hassle-free claims service. You can use the broad range of information available from claims technologies to fine-tune your claims process through improved efficiency, effectiveness and customer service.

Larry Wood is P&C practice director for the Robert E. Nolan Company, a management consulting firm specializing in the insurance industry. Larry can be reached via e-mail at [email protected].