Claims Education & Development at the Crossroads

January 30, 2008 Photo
According to the U.S. Social Security Administration, over the next two decades nearly 80 million Americans, more than 10,000 per day, will become eligible for Social Security benefits. In October 2007, the nation’s first baby boomer, born one second after midnight in January 1946, filed online for her Social Security retirement benefits, setting in motion an impending historic generational shift.

This transitional period will bring challenges as well as opportunities to the property-casualty industry as a whole as well as to those who provide educational services to the claims professional—from company training departments to organizations that offer claims designation and certificate programs and knowledge solutions.

Today’s multigenerational workforce consists of four distinct and broadly labeled cohorts, each shaped by very different social, cultural, political, economic and technological factors.

The current labor pool includes Traditionalists, Baby Boomers, Generation X and Generation Y. Claims organizations that develop strategies now to capitalize on the traits, strengths, skill sets and mindsets of each generational cohort may be better positioned to mitigate the effects of a future critical talent gap caused by a combination of large-scale retirements and a weak talent pipeline.

The Insurance Talent Crisis
While finding new hires has not been a top concern for the U.S. insurance industry historically, a combination of broader demographic dynamics and industry-specific issues could lead to critical shortages in the near future. At the same time, a shifting market landscape requires that companies recruit, engage and motivate new talent to remain relevant.
Generational talent management for insurers: Strategies to attract and engage Generation Y in the insurance industry.
Copyright 2006 Deloitte Development LLC (Item #7098)

Implications for Multigenerational Claims Organizations
A current concern shared by many senior management teams in claims is two-pronged: (1) how to stem a possible talent drain triggered by the impending retirement of highly experienced baby boomer claims handlers and adjusters, some of whom have been in the business for over two decades; and, (2) how to attract, sustain and manage a viable Generation Y talent pipeline. According to Kevin Toth, senior vice president-claims, Harleysville Insurance, “Companies need to view claim professionals as knowledge workers.

Process and technology are important tools, but they cannot and should not take the place of professional skill, experience and judgment. Companies that adopt only a process-oriented technology model are short-sighted. Strategically-oriented claims organizations will do both—they’ll give their people the tools to work smarter and faster while also giving them real-world experience to make better and more informed decisions.”

Central to the issue in claims is the need to capture and preserve the core strengths of retiring claims adjusters, which include invaluable institutional memory and technical knowledge, while developing strategies for innovative and relevant continuing professional development opportunities for new and younger hires.

The differing needs and expectations reflected in a multigenerational workforce will continue to drive claims education and training and development initiatives, especially as the generational balance transfers from one cohort to another.

Fortunately, with continued industry profitability, claims organizations should remain on track to budget needed funds toward educational initiatives and professional development opportunities. The positive indicators in 2007 for property-casualty claims include a combined ratio of 92.7 for the first half of the year, lower CAT activity and associated costs and encouraging frequency and severity trends.

Investing in Education
All insurers value the need for education to address employee and departmental needs. Many have formal internal training units and others have ventured into new territory by investing in large scale education/training facilities. As an investment in the skill development of its employees, Travelers opened their Claim University, a 108,000 square foot education facility that contains several different hands-on education spaces, including a heavy equipment lab, auto appraisal lab, fully stocked convenience store and model houses.

Similarly, Crawford and Company, one of the largest independent providers of claims management solutions, opened Crawford University. They offer classes in property, casualty and workers’ compensation at their facility in Atlanta, Georgia. They are also able to offer customized programs in various locations.

Gen Y sees education as a core benefit of employment and expects professional development to be integrated into their position descriptions. This is the knowledge generation. They expect onsite education programs, especially by online delivery, for skill development and job success, internal project-specific resources to quickly ramp up for new departmental initiatives, internal personal development opportunities for promotional opportunities and reimbursement for external education programs that build leadership as well as professional skills.

The Times They Are A-Changin’
The title of Bob Dylan’s hit song, a reflection of a perceived generation gap in 1964, is especially relevant in today’s insurance claims industry. At one time there were inside adjusters and field adjusters. Similarly, in the past, adjusters were expected to learn how to adjust claims from various lines of business.

The multi-line adjuster would handle personal and commercial lines property as well as personal and commercial lines liability. The specialists handled workers compensation. Over the past twenty years, more specialization has occurred. Adjusters either handle property or bodily injury. Specialists handle workers compensation and no-fault. Entire units are devoted to handling auto claims. Subrogation has become an adjusting specialty.

For the last five years, claims handling has continued to become even more specialized and job functions still subject to change. Two trends have contributed to this—claims frequency has diminished and investment in technology has increased.

Today, some insurers triage their claims in a central location. Some claims, such as windshield claims, will be processed straight through, without benefit of an adjuster. Others will be fast-tracked, requiring one or two phone calls before the claim is resolved. Others will be handled in the more traditional manner, requiring investigation, evaluation and negotiation by the adjuster. For these claims, technology will provide numerous investigative and decision-making tools to the adjuster.

However, some companies have a market focus that is on growth and not professionalism.

According to Robert McHenry, claims specialist with Westfield Group, technology forces regulatory compliance, but compliance does not necessarily make for a good claim file. With the increased reliance on process, there’s more adherence to checklists, more reliance on technology for decision-making and more demand for the data entry of information.

New hires are first introduced to the fundamentals of claim processing and later to specialized knowledge in an entirely different way than previous generations, which to some extent might be limiting their growth potential and impacting work quality because these same adjusters with a limited skill set will become the supervisors and managers of the future.

Many new adjusters can review a claim or process a claim, but few can actually write a property damage estimate or even fully understand the estimates and reports obtained from independent adjusters. There is one story now circulating through claim circles about a new company adjuster who was assigned a water damage claim. The leak originated on the second floor and water seeped into the kitchen on the first floor.

Part of the estimate for the repairs to the kitchen was a line item to repair crown moulding damaged by the water intrusion. The company adjuster, obviously confused by the term crown moulding, called the independent and wanted to know why the estimate was including damage from mold when the policy did not cover mold damage.

Today’s new hires tend to be trained primarily through a checklist approach that slows down their ability to acquire practical skills, to sharpen judgment and decision making skills and to develop confidence. Kevin Toth indicates that the “checklist” or “template” approach, if overdone, results in adjusters knowing how to work within a given carrier’s claims system, but it does not enhance their real-world claim problem-solving or decision-making skills in a meaningful way. “We need to get beyond checklists and processes and reinforce the basics of evaluating facts and making decisions,” says Toth. “Those skills are—and will always be—at the core of the claim professional’s role.”

Claims organizations may consider taking new and innovative approaches to professional development to take advantage of Gen Y’s appetite for technology while at the same time providing experiential learning. This may take the form of online learning programs, Webcasts, audio podcasts and possibly video podcasts that can capture some of what the baby boomers learned “on the road.”

Capitalize on Generational Strengths and Expectations
Generation Y is the cohort that will begin to fill the gap left open by not only the steady stream of baby boomers who will be retiring over the next ten years but also the Gen Xers who will be moving into more senior positions within organizations.

Focus on What Matters—A New Way of Thinking
"As the competition for critical talent intensifies, insurance companies must rethink ways they engage their key people. To begin, they must identify segments of the workforce that drive their current and future growth. Then, rather than focus on metrics and outcomes (acquisition and retention), they must concentrate on the things employees care about most: being deployed in ways that engage their heads and hearts, developing (and stretching) their capabilities and connecting to the people who will help them achieve their objectives. By focusing on these three actions, attraction and retention largely take care of themselves."
How Insurance Companies Can Beat the Talent Crisis: Staying competitive through talent management
Copyright 2006 Deloitte Development LLC (Item #6043)

And how the industry educates and mentors this young generation of claims people will be central to building the skills needed to sustain an effective talent pipeline. Gen Y is techno savvy and certainly able to handle the new and beneficial claims technology in place for routine claims. It is the expertise the boomers have on complex losses that needs to be captured.

The next generation will bring new and different perspectives and competencies to the work environment and, within the next five years, as the balance shifts between the two groups more dramatically and become more apparent, claims organizations would be prudent to have programs already in place to meet Gen Y’s value structures, learning needs and career goals.

Fortunately, some of the best resources available to provide claims knowledge to Gen Y are already on the job. Confidence aside, Gen Y seeks out personal mentoring opportunities. And baby boomers are perfect mentor candidates. They are knowledge workers rather than processors and can complement formal, online training with real-life, practical experience.

A generational snapshot of baby boomers shows that, as claim professionals, they learned the business on the road. Because of constant exposure to real-life situations, they instinctively know how to get the job done and, over time and through a collection of diverse experiences, they have developed critical intuitive skills for seeing what their less experienced colleagues may miss—from unanticipated consequences to subtle omissions and ambiguities.

Additionally, other approaches to professional development for Gen Y might include training across the different lines of business, implementing individual professional development plans and providing increased internship opportunities.

Dual Benefits to Mentoring
Gen Y is attracted to organizations that provide meaning and purpose in the workplace. They seek engagement in learning experiences, want to build skills and gravitate toward knowledge sources. Baby boomers and senior managers are in perfect positions to give Gen Y claim professionals exactly what they seek—a strong, supportive relationship with an experienced claim professional willing to share wide-ranging, practical, real-life experiences and expertise.

Reverse mentoring is an added value of a baby boomer and Gen Y professional relationship. With the help of Gen Y, boomers can raise their comfort level using new claim technology with the help and guidance of their younger counterparts, Jack Welch, former chairman and CEO of General Electric, is credited with implementing a reverse mentoring program at GE.

In 1999, he ordered five hundred of his top managers to find employees who could teach them the fine points of surfing the Net, researching online and bookmarking Web sites. Today, reverse mentoring could take technology to a new level with activities that include blogging, virtual worlds and text messaging.

In a professional setting, either face-to-face or online, mentors can help the mentee navigate the company cultural and political landscape, support career growth, give feedback and provide access to other resources and networks. Claims mentors can share not only specific company information, such as claims-specific goals and strategies, but also personal details of unique and complicated claim handling experiences. Human resource generalists also link positive mentor relationships to organizational loyalty, increased job satisfaction and the ability to solve problems faster and with better results.

A number of insurance organizations support in-house mentor programs. According to William McCullough, staff assistant, State Farm Mutual Insurance Company, State Farm’s property-casualty auto and fire claims division has had a voluntary, but formal, mentorship program in place for the last four to six years. The purpose of the program is to broaden an employee’s opportunity to develop specialized skills and knowledge in a particular area of professional interest. Through their Intranet, State Farm employees may request a specific mentor up or down the corporate ladder, either in the same division or across all department lines.

True to the Gen Y profile, many of the State Farm younger claims handlers are especially interested in mentorships with those who have deep claims knowledge and are in leadership positions. The current program includes mentors at all levels of the State Farm claims organization, including at the vice presidential level. State Farm gives formal annual recognition to participants. Informal mentor programs also exist within State Farm and are arranged privately.

One of the key elements to a successful mentoring program is selecting the right mentors. According to Jim Franz, unit claims coordinator for Farm Bureau Insurance in Ft. Wayne, Indiana, it’s important to look for someone with a strong work ethic, a good technical skill set, strong communications skills and a number of years experience. An additional criterion is someone who has the company’s best interests at heart. Jim also believes it is important to recognize these mentors with monetary incentives and decreased caseloads.

Cross Training Opportunities
Corporate reliance on line of business specialization (property, auto and liability) in claims rather than on multi-line adjusting is today’s norm. Although improving profitability, claims handlers may become pigeonholed in a particular area and are not exposed to broad-based knowledge in a number of functional disciplines.

This model reduces lateral job opportunities within the organization for claims handlers, which is especially problematic during a time when the vertical promotion ladder is becoming shorter because of restructuring efforts at the top. As an added negative, companies then need to buy expertise on the outside for specific lines rather than promoting from within, which lowers morale.

For Gen Y, this paradigm is particularly difficult to work around because of job expectations that include stretching talents and driving creativity through multiple experiences encountered through their organizational roles. Nearly from birth, Gen Y has been over scheduled and exposed to multiple structured activities. They thrive on teamwork, strategic thinking and idea exchange and expect collaboration and innovation. For the company, introducing cross training opportunities broadens knowledge and skills and increases familiarity with the organization.

Cross training also can become part of an organization’s succession planning efforts, which identifies and develops key people for leadership positions and organization-wide professional development initiatives.

Target Career Development
To engage Gen Y as future leaders of the industry, organizations should emphasize the importance of ongoing professional development and career progression plans. The importance of individualized development plans for Gen Y can not be overstated. They like structure and they crave options. Using an organized approach to training and development for individual employees helps them leverage strengths, identify skill gaps and improvement areas, further career goals and achieve high performance levels.

Some organizations are now integrating competency-based assessment models into employee development programs for identifying skills, knowledge, learning behaviors and motivation quotients. For the claims professional, this approach can positively impact self-image, enhance skills and knowledge, increase promotional opportunities and provide an outline for ongoing professional development.

Internship Opportunities
According to Job Outlook 2008, a report published by the National Association of Colleges and Employers (NACE), employers vying for new college graduates are facing intense competition, especially in areas where supply does not meet demand. For a claims organization, internships create a viable talent pool and, for the student, they provide access to gaining experience, knowledge and a possible job offer. The key to success is to tailor the program around the student’s objectives and strengths and to expose them to real-life work assignments.

Looking Ahead
According to Deloitte Consulting in Generational talent management for insurers, numbers reported by the Bureau of Labor Statistics show that up to 2012 growth in available workers aged 16 to 44 will lag that of workers aged 45 and older across all U.S. industries. Combined with more and more experienced baby boomers leaving the job market over the same period, the workforce could experience a pronounced talent shortage.

Recruiting knowledgeable workers will be a challenge for the insurance industry as a whole. And with 70% of claims adjusters now over the age of 40, the claims arena will be scrambling for replacements. Increasing claims education and training budgets is an important step to take to mitigate the effects of baby boomers retiring and a shortened talent pipeline.

As the balance of today’s multigenerational workforce begins to shift toward Generation Y, to offset an impending talent drain claims organizations need to explore ways to successfully connect this group to the property and casualty workplace.

Donna J. Popow, JD, CPCU, AIC, is Sr. Director of Knowledge Resources at the American Institute for CPCU and Insurance Institute of America (the Institutes) in Malvern, PA. The Institutes, independent, not-for-profit organizations, offer educational programs, professional certification and research to people who practice or have an interest in risk management and/or property-casualty insurance. She has direct responsibility for the Associate in Claims (AIC) designation program and the Introduction to Claims certificate program, which are among the Institutes’ numerous educational offerings.

About The Authors
Donna J. Popow

Donna J. Popow, JD, CPCU, AIC, is president of Donna J. Popow LLC, and has more than 25 years of experience in the property and casualty insurance industry. She has been a CLM Fellow since 2007 and can be reached at (215) 630-0829.

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