For too long, claims departments have been driving performance by looking in the rearview mirror, discerning important problems only after a claim has deteriorated. Managers continue to identify problems only after claims have been escalated or have entered litigation, and company management still evaluates the overall health of its claims operation only after claim files are closed. Limited functionality of claims technology doesn’t help matters.
The culture needs to be changed. Good claims departments anticipate problems and prevent them. The best ones take this a step further, optimizing their operations to reduce leakage, differentiate their claims service in the marketplace, and boost their bottom lines.
One of the impediments to achieving that high-caliber operational culture is the flood of information that yields only a trickle of knowledge. Solutions that have promised business intelligence and decision-support capabilities have instead produced stacks of reports that languish on managers’ desks or sit in binders and offer little in the way of useful, actionable business insight and intelligence. The information that could make a difference is hard to draw out and ends up being disseminated ever so slowly to adjusters and other line staff charged with the day-to-day handling of claims. It’s often too theoretical or too data-heavy and, when it finally gets to the end users, they are resistant to modifying their processes based on commentary and charts that have little perceived meaning to their daily tasks.
The trick is encapsulating research findings into meaningful, actionable and digestible reports that target practitioners.
Technology Is No Longer the Obstacle
Many claims operations are still grappling with the decision to replace their out-of-date claims legacy systems with new technologies. Others are in the throes of the replacement implementation effort. That said, there are a growing number of organizations that have successfully put these efforts behind them and are now enjoying the benefits of new technologies and all the flexibility, speed and rich functionality that comes with them. These new systems should offer more than just a way to get the claims house in order; they should also offer the opportunity for continuous improvement.
Management and claims professionals at high-performing organizations are always searching for tools that can provide them with more insight into the operation, the process and, ideally, even the individual claim. These forward-thinking professionals want to fully understand their claim quality and processing cycle time in order to continuously drive productivity and cost improvements. They want to dissect and analyze indemnity costs and loss-adjustment expenses, and they want to improve customer service by measuring, tracking and understanding the metrics that strongly influence the customer experience.
Legacy systems prevented easy capture and access to sufficient, high-quality claims data, but new systems have overcome this. Once the task of legacy platform replacement has been accomplished, claims organizations have the opportunity to continually monitor and refine their operation through the use of claim-performance monitoring tools. Some claims organizations have utilized business intelligence tools, but these tools are often complex, disconnected from the core claims system, and available primarily to the management staff rather than the customer-facing claims professionals. They tend to measure transactions in past tense versus real time when change can actually impact outcomes.
In order to be truly effective, claim-performance monitoring tools should provide capabilities native to the claims administration platform and be accessible to all the insurer stakeholders in the claim process.
The Goals of Claim-Performance Monitoring
When insurers strive for continuous improvement in their claims operations, they specifically target the critical areas of controlling costs, improving productivity and enhancing service.
Controlling costs. The best time to manage claim payments is before they are made. An effective performance monitoring tool should enable managers to dissect and analyze indemnity costs and loss-adjustment expenses. It should enable both management and adjusters to track important metrics, such as if the amount paid on a claim is in line with similar claims, if reserve changes indicate a claim is developing poorly, or if adjudication costs are escalating disproportionately to the claim’s value.
Increasing productivity. When a claims system puts performance information at the fingertips of adjusters and delivers it within the context of their desktop platform, those staff better understand their individual performance and how to improve it. Benchmarks and metrics are no longer abstract concepts. Alerts, claim-health reports, and predictive analytics also provide decision support to adjusters, and can improve individual claim outcomes and increase productivity. Additionally, managers can monitor performance and productivity from the departmental level to the individual adjuster in real time.
Improving service. The longer a claim remains open, the more it costs, and the lower customer satisfaction tends to be. Claims are often the only touchpoint an insurer has with its customers, and in a commoditized market, claims handling is a key factor in customer retention. Ongoing claim-performance monitoring enables insurers to measure, track and understand all the metrics that strongly influence customer experience.
Affect the Future Instead of Reflect on the Past
Traditional management reporting is retrospective. Insurers dissect reports from the data warehouse, identify and implement changes, and hope that the next set of reports indicates that those changes had an impact.
In contrast, the power of effective claims-performance monitoring comes from the ability to better anticipate outcomes and prevent problems. In order to create a high-performance claims operation, insurers need to generate and leverage information that can be used immediately to improve the handling of individual claims going forward. This information must be current, relevant and clear.
Current. Rather than rely on batch-loaded data from the warehouse, claim-performance tools should provide accurate and current information for comparison to insurer-specific benchmarks and targets. Having such real-time information requires seamless integration with the claims administration system and native claim-performance monitoring functionality.
Actionable and relevant. For line staff, traditional approaches to business intelligence are one-off activities. Information is delivered in one place—a meeting, a hardcopy report or a different desktop system—while adjusters perform their daily duties in a core claims system. This disconnect limits the ability for non-native business intelligence tools to help effectively change behavior.
In contrast, effective performance monitoring is relevant to all staff. Metrics and real-time indicators enable adjusters to make a quick diagnosis as to whether a claim is being processed efficiently or is in need of additional consideration.
For claims management, aggregate reports reflecting real-time statistics allow supervisors to monitor the overall health of the claims organization, intervene on claims that need to be escalated, ensure customer service standards are being maintained, and manage costs.
Clear. A performance monitoring tool should deliver information to decision makers in business terms and in a format that is easy to understand. Instead of requiring users to sift through stacks of reports or have the technical expertise to undertake time-consuming data analysis, the system must automatically track key metrics within each individual claim and flag performance data that are outside expected parameters. By being a native function of the claims administration platform, an effective monitoring function also provides context around claim performance, tying adjusters’ actions to individual claims and letting them see clearly how those actions affect claim outcomes.
Traditional approaches to reporting put the analysis in one place (the report) and individual claim details in another (the claims system). Native performance monitoring consolidates this information for clarity and ease of use.
Visual clarity is also important. Ideally, the claim system should incorporate visualization tools, such as configurable dashboards, icons and effective use of color, to make the analysis intuitive and increase usage of the system. For instance, the status of a claim can visually change from green to yellow to red to present an unambiguous indicator of deteriorating performance.
Committing to High Performance
By delivering forward-looking and actionable information, high-performance claims monitoring tools provide adjusters and managers with a picture of the road ahead rather than limiting their perspective to the rearview mirror. By leveraging performance monitoring capabilities that deliver actionable information, staff can improve handling of open claim files—reducing cycle times, lowering claim-related expenses, and increasing customer satisfaction.
For the best results, the claims administration platform should include performance monitoring as a native capability. Only this seamless integration will eliminate the disconnect between users, benchmarks, metrics and performance that occurs with traditional management reporting.
Regardless of where an insurer is in the legacy replacement effort, it should look at claims system enhancement or modernization as more than simply a way to automate processes. If it is early in the replacement process, capabilities beyond traditional claim processing—including performance monitoring capabilities—should be part of the evaluation and selection criteria. If the implementation of a new system is underway or completed, managers should be asking themselves what performance monitoring tools can be integrated and how they can fully leverage the new technical and data capabilities to create a high-performing claims operation focused on continuous improvement.
Neil Weiss is product marketing manager for claims at
Guidewire Software, a leading provider of flexible core systems to the property/casualty insurance market. Neil can be reached at
nweiss@guidewire.com.