Archive for August, 2011

Using one key metric to drive accurate claims outcomes

How do you know if your claims organization is producing a quality product?  After all, there are numerous ways to identify quality, right?  While no two carriers or claims processes are alike, there are often similarities.    From FNOL abandonment rate and contact timeliness to cycle time and average indemnity, there seems to be no shortage of usable metrics.   But, is this the optimal way to gauge performance? 

During my years as a process and quality director for a large multinational insurer, we grappled with a myriad of metrics in our quest to find the ideal formula behind quality.   Much like a football team, the claims organization was measured on statistical data points that were supposed to be indicative of outcomes.   Just like a lot of points should win football games, prompt contact and inspections should win the claims race. 

But what happens when all those metrics are surpassed, yet there is a rise in blown coverage, errant liability decisions or litigation?   While I’m not minimizing the importance of statistical claims data points, I do like to put them into perspective.   Just like football, there is only one statistic that truly matters.   Your wins and losses are based upon accurate outcomes. 

When designing a quality assurance process, placing emphasis on ultimate outcomes takes into consideration all else.   Things such as timely contacts and inspections, accurate coverage and liability decisions, effective negotiations and recovery opportunities are all addressed under the broad heading of accuracy.    

In our situation, we moved from a multitude of metrics that seemingly encompassed every conceivable aspect of the claims process to one of overall file quality.   In the former model, so little emphasis was placed on any singular data point that very little was a priority.   For example, if subrogation identification is 2% of an annual evaluation, how much emphasis will be placed on identification and referral?  To the contrary, in a total quality model missed subrogation may result in a file not meeting expectations.   If the cumulative total quality score supplants the individual metrics, the paradigm of the organization will change from chasing numbers to chasing results.  

To emphasize accuracy, certain key milestones should be addressed during the evaluation process.   At a minimum this should include data compliance, coverage, liability, investigations, subrogation, salvage, timeliness and accuracy.   Within each milestone there should be a subset of data that is measured to determine if a file is worthy of replication, or reproduction.    When this occurs, a file may be deemed to meet expectations.    

It is also important to re-emphasize exactly what constitutes an acceptable work product and calibrate the organization so that everyone from the executives to the rank and file employees are on the same page.   Doing what should be done in a file, consistently, timely and accurately, is precisely what should be defined as meeting expectations.   Nothing more, nothing less.  

To exceed expectations, one must go above and beyond the call of duty.   Calling someone in seven hours versus the eight hour requirement hardly constitutes exceptional work.    Rather, a person must take the initiative to think outside the box, dig deeper and farther and turn up critical pieces of information that alter the outcome of what a standard claim investigation would have done.   It can be done; it is the exception.  

As I discuss in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary, using one key metric, that of total quality, can fundamentally transform any team.    It will move from reactive to proactive an entire workflow that will expose inefficiencies that can be remediated, resulting in continual process improvement which will give adherents a significant competitive edge in the marketplace.

Christopher Tidball is an executive claims consultant and the author of Re-Adjusted and Kicked to the Curb.   He is a twenty plus year veteran of the insurance industry, having served in various adjusting, management and leadership roles for multiple top ten P&C carriers.  To learn more, please visit www.christidball.com or e-mail chris@christidball.com

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August 23, 2011 at 8:56 am Leave a comment

Without quality people, blocking and tackling becomes an impossible task

There are three key drivers to any successful organization; people, processes and technology.    Each plays an integral role and none can act effectively without the others.   In each case, there are variables that define effectiveness and steps that can be taken for improvement.   Perhaps nowhere is this more evident than with the people performing critical job functions. 

In Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary there is much discussion about hiring for quality.   While this is true in any organization, it is particularly true in claims.   Having moved through the ranks from adjuster to leader and now consultant, it has become abundantly clear that the quality of people will have the single biggest impact on results. 

An organization can have the most effective processes or the latest in technology, but without the people to execute on basic blocking and tackling, success will be elusive.   This becomes increasingly evident when examining certain subsets of the business.

Consider the fact that 15% of all claims are closed with a missed subrogation opportunity.   Certainly processes can be put in place to flag these opportunities, or technology used to capture them, but what if the people actually responsible for handling the claim drop the ball? 

The same holds true on response side subrogation, where inbound demands are received from claimant carriers.  In many cases, these may have a low priority and are often rubber stamped or ignored, resulting in increased arbitration.   Even when processes for review are adopted, are the savings being realized?  Consider a common practice of sending inbound demands to a review team who will find savings, but when it goes back to the adjuster the savings are often for naught. 

The key to success is to utilize the right people in the right position.  This begins with first notice of loss and is a requirement at every stage in the life of a claim.   As discussed in Re-Adjusted, not everyone can be an adjuster, which requires a certain personality and the ability to concurrently negotiate, investigate, evaluate and resolve sometimes complex situations. 

By understanding the importance of the people to the processes, it becomes easier to hire more effectively.  This needs to begin at the top, with strong management who will hire the right people at all levels, creating organizational bench strength that will evolve into a cross generational competitive advantage. 

While there is no magic pill to ensure quality hiring, there are steps that can be taken that can increase the likelihood of success.

1)      Stop equating tenure with success.   Some of the best hires have no claims experience whatsoever.  They also have no bad habits, are highly trainable and can have a rabid enthusiasm for advancement.  

 2)      Look for proven success.  Just because someone has been in a certain role at a competitor doesn’t mean they were successful.   After all, why are they leaving?  While there may be a perfectly plausible explanation for their departure, it is critical to ask the deep, probing questions.

 3)      Don’t forget the 80/20 rule which in claims organizations often means that 80% of your problems are coming from 20% of your staff.   Effectively remediating or removing the poor performers will increase both results and morale as explained in the 20/60/20 rule.

 4)      20/60/20 Rule means that 20% of a typical organization is comprised of leaders.  These are the A performers; the people who truly want to improve the organization.   There are also 20% who are C players, as mentioned above.  These are the chronic complainers, the whiners, the blamers and those who carry the weight of the world on their shoulders.   Then there are the rest, the remaining 60% of the organization who will drift either up or down, which is determined by the strength of management. 

By following simple rules and designing an organization that can maximize productivity through hiring, training, development and retention of key contributors, both internal and external, results with thrive.   It is this type of total quality management focus on people that will drive results, irrespective of processes and technology. 

Christopher Tidball is an executive claims consultant and the author of the 20 Essential Rules series, including Kicked to the Curb and Re-Adjusted.   He is a twenty plus year insurance industry veteran who has served in a variety of quality, management and leadership roles for multiple Top 10 P&C insurers.  To learn more, please visit www.christidball.com or e-mail chris@christidball.com.

 

August 12, 2011 at 7:29 am Leave a comment

I Spy: Improving investigations is the key to driving proper claims outcomes

In response to my recent news article on insurance fraud I have had a number of inquiries as to steps that insurers can take to proactively identify staged accidents.   As discussed in Re-Adjusted: 20 Essential Steps To Take Your Organization From Ordinary To Extraordinary, an effective investigation is the single most important tool an insurer possesses. 

While that paints the answer with a fairly broad brush, it is imperative to understand just how important a well conducted investigation is to bottom line results.   Keep in mind that this not only pertains to fraud, but every aspect of the claim!  Be it a staged accident, inflated medical bills, pre-existing medical conditions or missed subrogation, billions of dollars are overlooked as the result of ineffective investigations. 

What could your organization do with a 5%, 10% or even 20% improvement in indemnity results, expense reduction and/or organizational improvement?  

The proper investigation begins on day one, with the first question asked at the time a claim is reported.  Each and every question posed should be well thought out, with a logical sequence and a staff trained on not following a script, but rather interjecting appropriate follow ups.   This becomes even more important when the claim lands on the adjuster’s desk or an appraiser writes an estimate. 

Key elements of a claim include the who, what, where, when, why and how.    The attention to detail in answering these questions is what will ultimately give an insurer a competitive edge in the marketplace.  Consider the “how” of the loss.   In many instances, it may be a simple statement such as “the insured made a left turn in front of the claimant.”  As a result of such a generic answer, more than 15% of all claims are closed with a missed subrogation opportunity at a cost to the industry of over $15 billion dollars annually!

In this scenario, consider a few questions that that should be answered:

1-      What was the direction of travel of both cars?  What lane were they in?  Were they indicating a change in their direction of travel?

2-      What was the weather like, including the position of the sun?

3-      Who had control of the intersection?  Who had the green light?  Was there a turn arrow?  Was it leading or lagging?

4-      Where was the point of impact?   

5-      What was the speed of travel prior to the impact?

6-      What were the drivers doing prior to impact (on the phone, texting, changing the radio, etc.)?

7-     What were the duties owed by each driver?  What were the duties breached?  What was the degree of breach? 

While these are just a few of the myriad of questions that should be asked, they set the stage for a more robust investigation.   From a staged accident perspective, perpetrators of fraud won’t be able to answer them as this level of detail isn’t in the script that the capper provided to them.   From a subrogation perspective, a claim that is far too often assessed as 100% liability, often becomes one of shared liability, opening up the opportunity of recovering a portion of dollars paid out.  

Often, there is a perception that delving into exhaustive investigations is time consuming and often won’t yield positive results.   The reality is that this level of detail results in a more effective adjusting staff that will yield improved results, lowering costs and providing an environment where customers get the benefit of improved service and lower premiums.  

As a practical matter, taking a good statement and conducting a thorough investigation ultimately can cost an insurer less on a per claim basis.   By employing improved investigation tools, insurers can leverage a bevy of technology that can assist them in rooting out fraud.  This includes both predictive modeling and link analysis.  

The net result is that carriers employing such tools can streamline the traditional claims process with a high level of certainty that claims meeting certain parameters have been redirected.    Carriers with this type of robust approach gain intangibles as well, such as a reputation that may drive organized insurance fraud rings elsewhere. 

Underlying the entire process is the quality of the claims investigation.  By utilizing the best possible candidates, who have a demonstrated proficiency in investigative skills, carriers gain an edge of the rest of the industry.   By tweaking processes to ensure that certain claim characteristics are redirected, increased productivity for the remainder of claims will ensure.   Finally, leveraging technology to serve as the engine will drive results to record levels.

Christopher Tidball is a claims consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  With more than twenty years of insurance claims experience, his innovative tools and techniques are guaranteed to improve workflow, internal processes and bottom line results.  To learn more, please visit www.christidball.com

 

August 4, 2011 at 8:16 am Leave a comment

He said, she said: who is really at fault for that accident

Funny Accident Picture : I Brake For Tailgaters Bumper StickerAs a society, we can be quick to jump to conclusions.   While on the surface the conclusions may seem to make sense, are they always proper?   Perhaps nowhere is this more evident than when it comes to comparative negligence and its application when resolving insurance claims. 

Consider the typical rear-end accident and the ubiquitous presumption that the person in the rear is always at fault.   But what if the person who got hit from behind had intentionally slammed on their brakes, had a defective brake lamp or was in the process of backing up?  Compounding matters, consider claim scenarios involving intersections, parking lots, slip and falls or liquor liability. 

When considering that Americans have been conditioned by a never ending barrage of attorney ads promising to find fault with someone other than the victim, even if they were at fault, it’s no wonder this has become such a contentious negotiation issue. 

The reality is that fault is a complex component of any claim.  Rarely are issues black and white; rather they are comprised of a myriad of minor details that all play a pivotal role in the proper outcome. 

Having managed claims organizations across the country and being responsible for claims process improvement initiatives, including software applications that promised to improve results, I will be the first to attest that driving the right outcomes is no simple process. 

It is estimated that 15% of all claims are closed with a missed subrogation opportunity due to adjusters making erroneous liability calls.   In multiple Six Sigma projects that I have managed, the results were actually much higher, often approaching 30%.   This is a tremendous financial burden that has been placed upon an industry already faced with increasingly tight margins.   

The reality is that far more accidents than most people realize have shared culpability.   According to Jury Verdict Research, a national organization that tracks such data, rear end auto accidents accounted for only 45% of auto cases adjudicated, with the remainder comprised of intersection collisions, lane changes, chain reaction and parking lot scenarios.  In other words, a lot of claims where there was a high probability of shared liability. 

As an insurer, you certainly shouldn’t expect to set a benchmark that high, as very few claims actually make it to trial.  But what you can do is bank on the fact that if fewer than 35% of your collision claims are closing without comparative fault money is being left on the table. 

But what can carriers do to drive these results?  Certainly there are plenty of software based solutions that will provide assistance to the extent that they are effectively executed by the adjusting corps.   There is also a far more effective approach that enforces simple blocking and tackling rules by instilling in the organization the most basic concepts of duties owed and duties breached, which should be spelled out by adjusters as part of their liability assessment that should occur in each and every file they handle.  

It is often said that the devil is in the details, and in many cases far too many details get overlooked for a variety of reasons ranging from staffing shortages to inadequate training or management/mentoring oversight.    By providing adjusters with the necessary tools to understand liability and the time to obtain the facts, inspect the damages, preserve property and utilize experts, carriers can leverage an accurate outcome that properly identifies and assigns fault.   

To optimize claims performance, carriers need to instill an ethic of investigate, evaluate and negotiate.    These form the foundation for quality claim files containing accurate settlements, yet are increasingly overlooked in a never ending quest to chase other metrics of dubious distinction.

Investigate…Evaluate…Negotiate

Investigate, investigate, investigate!  This can’t be said enough.    Are statements taken from all parties?    Has all damaged property been inspected, photographed and preserved?  Was there a scene investigation?  Were primary and secondary liability factors or mitigators considered?  What duties were owed, what ones were breached?  By taking the steps to complete a thorough investigation, not only will quality improve but so will results!

Evaluations are the critical by product of a thorough investigation.   If the latter is incomplete, how can evaluations be conducted at the level expected of a fiduciary?   From the time the claim is reported, it is incumbent upon all involved to secure the necessary documentation to enable a fair and accurate assessment of coverage, liability and damages which are all of equal importance.  

There is no question that evaluations take time; a necessity if one is to achieve accuracy.   A detailed evaluation necessitates not only looking at all of the facts presented to date, but thinking outside the box.  If an injury doesn’t seem plausibly related, then perhaps running background checks, hospital searches, index reviews or simply knocking on a neighbor or ex-spouses door will provide missing pieces to the puzzle.  

Arguably the aspect of the claims process that many adjusters struggle with is negotiations.   There is no question that this can be a contentious and adversarial part of the process.   Complicating matters is a struggling economy that has resulted in an uptick of insurance opportunism.  Whether a claim is legitimate, inflated or an outright fraud, it seems that everyone is trying to haggle for as much as they possibly can.  

This makes the job even more challenging, necessitating that carriers take steps to ensure that they have not only the best and brightest in their ranks, but provide them with the negotiation tools and strategies that have been proven to work.  

Far too often people will take the path of least resistance, failing to negotiate the shared liability or pre-existing conditions.   This not only costs the carrier, but violates the fiduciary duties between the insurer and the insured.  

Calibrating your organization

During my tenure as Quality Assurance Director for a large multi-national carrier, our team was tasked with providing the necessary feedback to enable the organization to improve the entire claims process.  From loss intake and investigation to evaluation, settlement and recoveries, a myriad of opportunities existed.  

Perhaps one of the greatest challenges faced across the insurance industry is consistency, as is evident with improper liability assessments.    While consistency in any process is a challenge, it becomes even more so when there is an element of subjectivity.   After all, who’s to say if the accident was 50/50 or 60/40? 

Here in lies the challenge, as a ten percent differential in liability assessments is not necessarily the concern, but having clearly comparative losses settled as absolute fault is.   When reviewing internal data, it is critical to not only identify the frequency by which comparative is assessed, but to conduct calibration exercises to ensure that staff understands and uniformly applies the proper application of jurisdictional laws and general duties owed.

Calibration is defined as a set of gradations to show positions or values.  It brings into alignment what previously was out of sync.   In the world of insurance claims, it accomplishes the ever elusive goal of organizational consistency. 

This process can be used to benchmark both current results and internal knowledge.  Once this has been established, internal processes can be designed so as to achieve a variety of metrics to gauge results.  

While many aspects of the claims process should be calibrated, liability is often a key issue that can serve as a foundation upon which organizational improvement can be based.   Proper liability assessment will ultimately lead to improved negotiations, more accurate settlements, better recovery identification and ultimately an improved bottom line. 

In the end, it isn’t the bells and whistles that will improve results, but rather a keen focus on blocking and tackling the very basic elements of insurance claims.   While there are certainly claims in which one person bears sole responsibility, they do not comprise the majority.

To the contrary, there are many more opportunities where shared liability exists.   From product defects and dram shop claims to homeowner’s, commercial and auto insurance, there are often multiple parties that share culpability.  

From points of impact to statement inconsistencies, it is incumbent upon the investigating claims team to identify those opportunities.  But beyond the identification, comes the effective negotiation.   It is one thing to determine shared fault, but completely another to effectively educate a person as to why they bear some of the responsibility.  

To truly take advantage of the opportunities that exist, it is critical to evaluate current results, both internally and against the industry.   But even then, if 15% of all claims across the industry are closed with a missed subrogation opportunity, is that benchmarking enough?   

Driving Results

A good solution is a three pronged program that begins with the recognition that opportunities exist, and certainly can serve as a foundation from which to gain a competitive edge.   By recognizing that money is being left on the table there should be a tremendous cross functional incentive to collaborate on effective solutions that have been proven to work.   

Next, identifying organizational gaps can serve as an invaluable exercise to identify glaring openings like a football coach reviewing game day film.    Simply asking process related questions isn’t enough.  Rather, sit down and plot out every single action taken from the inception of a claim through its final disposition.   For carriers with multiple physical locations, or even multiple teams, this can prove to be an eye opening experience. 

Lastly, calibrating the audience to ensure consistency of purpose is the only way to fundamentally create an exceptional organization.   As Vince Lombardi once said, “perfection isn’t attainable, but if we chase perfection we can catch excellence”, which should be everyone’s ultimate goal. 

 ____

 Christopher Tidball is an insurance consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  His claims background includes more than twenty years in adjusting, management, quality and leadership roles with multiple top 10 P&C carriers.   To learn more, please visit www.christidball.com or e-mail chris@christidball.com

August 2, 2011 at 8:09 am Leave a comment


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Chris Tidball is a claims and revenue management consultant and author of the "20 Essential Rules" series of self and organizational improvement books. You can ask him a question at chris@christidball.com

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