London Continues to Search for a Panacea to Allow Speedier, More Accurate Claims Handling. Richard West, FINEOS, outlines some of the most recent progress.
Article appeared in Insurance Day, December 2011
In the face of increased pressure to improve the speed of claims settlement, improve service and increase overall efficiency, managing agents are reviewing the structure of, and roles within, the claims department in a quest to establish optimal organisation and processes to best meet what many consider conflicting objectives.
Underlying all of this is the key question: how can claims be handled more quickly, accurately and fairly without processing costs escalating?
What has been seen in recent times is that whilst most claims directors and COOs would not consider themselves economics gurus, many are adopting Adam Smith’s Division of Labour principle to achieve just that. Smith’s pin factory example bears striking resemblance to a solution increasingly being adopted in the London Market, where simpler claims are diverted to less experienced or trainee adjusters whilst staff in newly established claims operations departments now perform a range of tasks designed to make the senior claims adjuster’s life easier. In both cases, the main objective is to allow senior adjusters to concentrate on the more complex claims where their skills and experience are needed most. But how can companies fundamentally change their claims organisation, adopt completely new processes, introduce new roles and alter the traditional “Do It All” role without creating chaos?
If we examine the issues there is no doubt that a significant proportion of claims activity is straightforward but in the “Do It All” approach, senior claims personnel perform these tasks as well as deal with those complex issues that justify and require their experience.
Furthermore, it must be recognised that those long-steeped in the claims profession and not necessarily the best people to be responsible for process analysis, extracting management information, liaising with IT and performing other non-core tasks and nor do many want to.
Claims Segmentation Techniques
It has to be a concern that while the London Market wrings its hands about the claims skills shortage, it continues to use those rare, sought-after staff to do work that does not need those skills. Surely there’s room here for getting more for less? Not only can simple claims be routine and need little expertise to process but many tasks within the most complex claim are straightforward. For example, why do you need a highly paid senior claims adjuster simply to gather all the detailed data necessary for complex claims before the claims assessment can proceed? Data enrichment is clearly something that can be delegated.
The problem itself is clear to see but what is needed is an efficient and flexible means by which routine claims and tasks can be safely and efficiently performed by more junior personnel without any risk to service and accuracy standards.
Some companies have used basic workflow software coupled with the diversion of simpler claims and routine tasks to more junior staff. Whilst this solution implements Adam Smith’s division of labour principle, it is really only a first step towards reaping the potential savings and service improvements that can be achieved by the new approach. What is really needed is specialist claims management software rather than the application of a generic technology solution.
To deliver the efficiencies so desired by the market, at the core of a claims case management system needs to be a highly flexible Rules Engine that allows claims processes to be designed according to whatever attributes apply to a particular claims case. This approach has to start the moment a claim notification arrives where the case is subject to a segmentation or triage process. All information received within the claim notification is then examined and, according to the nature of the claim, the appropriate process is automatically applied. In many cases claims will be diverted to junior staff to correct data or add missing data essential to the assessment of the claim. Only when a case is “clean”, (ie sufficient data is now available), will the case move on to the skilled adjuster. In other cases, routine, simple claims will be dealt with by junior staff themselves but there is the ability to refer cases to senior adjusters should an issue develop that requires their expertise.
Such an approach is conducive to the allocation of routine tasks and simpler cases between individuals and departments whilst still allowing all relevant claims personnel a dashboard view of every activity be it completed, current or yet to start.
Given the events of the year so far, such a system will also be highly beneficial in handling catastrophe claims where highly complex claims will incorporate a large number of routine tasks eg data gathering.
A relative newcomer to a number of managing agents is the Claims Operations Department. These teams have been established not only to make the claims adjuster’s life easier but to assess and monitor the efficiency of all claims activities. This means identifying and dealing with particular process issues and easing the implementation of new processes and IT solutions. In addition, claims operations are responsible for the production of management information and the use of KPI’s to aid performance, trend management and workload forecasting. Claims Operations staff will also ensure that processes are designed to ensure legal and compliance requirements are met. These are all essential tasks but do not fall in line with most claims adjusters’ core skills set.
Again, specialist claims management software is the key tool that claims operations staff can exploit. Such systems will already incorporate sophisticated, claims specific MI reports and dashboards that allow claims operations to keep a finger on the pulse of the whole operation and thus quickly identify issues, recognise trends and monitor adherence to service standards. Where a new situation is faced such as a new major cat, claims operations can quickly implement specialised reporting to ensure close monitoring of events and help forecast the timing and level of the increased workload. Without the need of IT skills, claims operations can also modify the rules engine and the system driven processes to deal with the new cat cases in the most efficient manner.
Solutions to the market’s problems are definitely out there but lessons need to be learnt from other markets where progress has already been make. Division of labour coupled with the establishment of specialist operations teams is a worthy aim but to be fully effective specialist claims management systems have to be in place.
Claims have never been under the spotlight as they are today. The Lloyd’s market is also making progress; however at a recent coverholder conference held in Lloyd’s the market was told it needed to aspire to steps taken in the US which appear to be ahead of those at Lime Street. One of the most telling comments came from one US coverholder. His message was clear and simple – “Lloyd’s needs to catch up”.