| Improving the Financial Performance of your Claims Organization
 An annual check-up (whether you think you need it or not) is a good discipline that usually ends up providing unexpected benefits. The same principle applies for the health of your organization, processes, and infrastructure. With investments yielding historically low interest rates, combined with increased costs, and dwindling reserve redundancy releases in the next few years, every dollar counts toward a carrier's bottom line. Every insurer must be disciplined about reviewing and improving claims operations, processes and technology to reduce costs and become more efficient.
While it may sound simplistic, the lure of new technologies and the overall pace of change in this industry can make it remarkably easy to lose sight of the fundamentals, and the downside impact can be significant. It is important (and it is a best practice) to periodically identify and assesses opportunities for improvement across the claims organization, particularly those areas which will favorably affect loss and expense costs, as well as customer service. Our experience has shown that an efficient and quality-driven claims operation can save 2% to 4% off an insurer's combined ratio, with a positive impact to loss costs and LAE.
We all understand the importance, and the challenge, of controlling loss and expense costs while maintaining a high level of service. This important balance can only be accomplished by thoughtfully managing resources, processes and technology. A comprehensive analysis of financial, operational and technology issues within the claims operation - not to be confused with a claims audit - will provide clarity and identify areas of opportunity. We recommend examining every aspect of the claims operation which directly or indirectly impacts financial results, technology, customer service and the quality of claims handling.
It is also vital to look behind the numbers so that improvement recommendations are relevant, practical, and sufficiently impactful. A few examples of improvement focus include:
- A comprehensive analysis of claims processes and workflow will typically yield significant improvement in claims cycle time, positively impacting both expenses and losses.
- Predictive analytics, modeling and textual mining can save millions with early identification of fraudulent claims.
- Mobile technology can improve adjuster productivity, enhance customer service, and strengthen competitive differentiation.
- A comprehensive claims financial loss cost and expense analysis, along with a reserve redundancy and deficiency analysis, can provide a foundation for improvement in financial results.
In our approach to claims operational assessment, we go through several phases which are tailored to the unique needs of each environment. We find these useful as a planning construct:
- Analysis and validation
- Recommendations
- Design
- Implementation planning
- Implementation
- Results assessment
A key element of the Nolan methodology provides Views of the claims organization, which allow for segmentation of the review process. Views are interrelated at the claims operational level. Core Views of the claims operations include: Resource Management; Process Workflow; Financial Analysis; Best Practices; Vendor Management; Customer Service; Technology; and Analytics. Our Best Practices View is tailored to each organization's needs and further segmented by line of business or by specific claims function such as Litigation Management, Recovery and Fraud Management.
Staff engagement is another critical element in achieving the necessary results. A collaborative team drives identification and development of the necessary inputs to design a realistic improvement plan that will go beyond the numbers and break down barriers. This approach also promotes acceptance and ownership on the part of managers, supervisors and front-line employees. Lastly, the use of process analysis techniques assures organizational alignment and confirms that business processes and technology needs are properly integrated.
Addressing these fundamentals is of strategic importance to every insurer and they require periodic renewal to stay current with industry trends and competitive pressures. A thorough evaluation of your claims operations can result in overall financial and operational improvement, bringing your results - and the health of your organization - to the next level. Let's share ideas on how to build industry-leading claims operations. Feel free to contact me at michael_murdock@renolan.com.
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