Archive for November, 2012

Optimizing claims processing with the right mix of insourcing and outsourcing

Should I do it myself or pay someone else to do it?  From maintenance and manufacturing to technology and employee support services it is a question that business leaders often ponder.  As is so often the case, there simply isn’t a black or white answer.

From a claims perspective, the right solution can also blur the lines between insourcing, outsourcing or a hybrid approach.   Typically, there is no need to outsource if, and only if, an organization has the resources and infrastructure to do it better internally, at a higher quality and lower price point than can be accomplished elsewhere.  That is a pretty high hurdle in most organizations.

In the claims arena, there are a myriad of processes that can be handled in a multitude of ways.  With some insurers, the entire claims process is handled internally; sometimes with good outcomes, sometimes with tremendous opportunities.   With other insurers, large swaths of the end to end process are outsourced, again with wide variances in results.  Having seen a variety of approaches, it seems that the best results often occur when business leaders adopt an “all of the above” approach.

By leveraging both internal competencies with external niche expertise, insurers with the appetite for an innovative end to end claims handling workflow tend to see both the highest quality and best outcomes.   Today, we are going to focus on some of the benefits that can be gained from this type of multi-channel claims handling approach.

Reduced expenses

From a historical perspective, outsourcing often meant utilizing business partners overseas as a way for manufacturers to reduce costs while improving quality.  Today, much of the outsourcing industry is right here in America, especially as it pertains to the insurance claims sector!

Consider the insurer who gets five claims per month in Montana.  Does it make sense to staff a large geographic territory with low frequency?  Is it smarter to leverage a trusted independent adjuster in such terrorities while focusing internal staff in more compact geographic areas with higher claim counts?  By properly leveraging external processes, insurers can dramatically reduce overall expenses.

Expenses gains can be quantified in many aspects of the claims process.  Whether it is first notice of loss, direct repair networks, preferred provider networks or subrogation solutions, there are often economic gains to be made by focusing on bridging the knowledge gap for financial gain, improved customer service and better outcomes.

Efficiencies

We live in a day and age when it seems that everyone is doing more with less.  Claims personnel are busier than ever and disposition of inventory has fast become the metric to trump all other metrics.  While closing claims is critical, it should never be done at the expense of quality.   But let’s face it, adjusters have only so many hours in the day.   Do they really have time to scrutinize every medical bill for accuracy, or to review a CPT coding manual for upcoding or unbundling of services?  Of course not, which is why insurers with the most efficient processes leverage external business partners to review this key component to claims resolution.

Again, throughout the life of the claim there are efficiencies to be had.  A critical component to the long term success of any organization is to identify efficiencies, be they big or small.  There is a quantifiable correlation between time savings and productivity.  For every so many minutes reduced in the internal claims process, the adjusting staff is then able to effectively handle so many more claims per day.   This translates into tremendous bottom line savings.

Niche expertise

Finding skilled employees is one of the biggest challenges faced by companies today.  Perhaps nowhere is this challenge greater than the claims industry that has seen an aging workforce retiring faster than it is being replaced.  This is resulting in a brain drain, compounded by many organizations moving to business models that maximize productivity at the expense of fundamental claims competency.

While this can be a highly effective business model, there must be checks and balances to ensure the quality and accuracy of outcomes.   This can be effectively accomplished by outsourcing components of the claims process to those with expertise critical to quality while freeing insurers of having to hire, train and manage resources.   A prime example may be subrogation, an area in which claims organizations often struggle.  By leveraging external expertise, insurers can often increase recoveries while lowering expenses.

Core competencies

Within any organization lie certain core competencies.   In the claims organization that should be directly correlated to coverage and liability; the underpinnings of every claim.   The effectively establish both, there much be proficiency in claims investigation and evaluation and negotiation.   It is these basic blocking and tackling skills that are necessary for the highest quality and most accurate outcomes possible.   By reducing the internal focus on other aspects of claims such as first notice of loss, subrogation or salvage, internal resources are freed up to improve results in the core competencies.

Many organizations have struggled in mastering the core competencies.   As a result, critical areas such as accuracy have faltered.  Consider that in claims organizations a mere 3-5% of all claims are assessed with comparative negligence when optimal outcomes should be in the 30-35% range.  That is a huge disparity costing insurers, and ultimately consumers, millions of dollars annually!  Even in core competencies, it is important to recognize that solutions to improve outcomes can be leveraged to gain a competitive edge in the marketplace.

Technology

As discussed in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary, there are three key building blocks to success; people, processes and technology.   It is very important to not confuse them, and to not try to leverage technology as a sole solution to replace the others.   Far too often, technology is used as a crutch when it should be used as a catalyst to improve both people and processes.  Case in point; the basic claims investigation.  Technology can be utilized to assist adjusters in making decisions about coverage and liability.  Rather than adjusters paying 100% on a claim because they 1) don’t understand the concepts of liability 2) are taking the path of least resistance 3) don’t have negotiation fundaments, technology can assist in addressing such issues.

Productivity

By leveraging the right business partners, it is possible to increase productivity and efficiency.  With the internal focus solely on core competencies, business leaders will find that claims handling models can be more aggressive.   With a focus on fundamental blocking and tackling, the results will be more targeted, the results more accurate.   The outsourcing providers typically add the right expertise and experience that will streamline business processes while contributing to bottom line revenue improvement and expense reduction.

Improved management

Just as the optimal claims organization will have a laser focus on core competencies, so too should management.   By honing in the key skills necessary to drive claims results, management will have the tools necessary to execute on the fundamentals needed to succeed in the claims arena.  With less “noise” associated with ancillary processes and back office operations, they can focus in becoming cutting edge where it really matters.

Christopher Tidball is an executive claims consultant, industry speaker and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  He is a claims veteran with twenty plus years of adjusting, management and leadership experience.  To learn more, please e-mail chris@christidball.com or visit www.christidball.com.

 

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November 1, 2012 at 7:42 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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