A decade ago, I wrote an article titled “Claim Management… A Delicate Balance”. I wanted to make two points. First, in my opinion, the industry as a whole continued to operate the way it always had and continued to get the same results. Second, performance measurements for claims professionals needed balance between passing audits and reducing claim costs and improving the employer’s bottom line. Today, I see most claim operations are still subscribing to these same performance measurements and still getting the same results, or lack thereof.
While passing audits and audit elements – 24-hour contact, file documentation, action planning, reserving and completion of company and regulatory reports and forms – are important fundamentals in the claim management process, it doesn’t necessarily guarantee improved loss results and better outcomes for injured workers and clients. I call an audit culture one of processing claims rather than managing claims. It requires changing a company’s cultural attitude and creating a measuring system for claim professionals focused on balancing strong fundamentals with goal-oriented results for employers and carriers.
The questions remain the same after 10 years. How do corporations inspire a cultural attitude conducive to focusing on reducing claim costs? What needs to change with a measuring system to improve a client’s bottom line?
If the leaders of an organization do not live and breathe a goal-oriented service culture that focuses on contributing to the success of its clients, then how can we expect employees to understand the value of their contributions and shared purpose? There is nothing more empowering and satisfying to employees than to have clear expectations as to what the goals are and why those goals are important to them, their employer and their customers. Equally important is that they understand they are accountable to achieve those goals and are given consistent feedback to the impact they are making. When employees feel empowered, have a sense of accomplishment and know they can make a difference, they grow personally and professionally and make major contributions to the success of the organization and clients.
If you do not know where you have been, how can you determine where you need to go? Benchmarking past performance, whether it is by adjuster, team and/or client is critical to setting goals and objectives for future performance. Equally important is the ability to track and monitor future performance and provide the results on a daily, weekly or monthly basis to claims staff and clients. None of this is possible without a strong data analytics capability. One that can ingest historical data as well as data nightly from multiple operating systems, utilize data cleansing tools and deliver electronically, meaningful visual analytics daily to the desks of the stakeholders. This capability allows everyone involved to make faster and better decisions and deploy resources more effectively to mitigate potential losses.
So, what has changed in 10 years? Certainly, the buzz words are the same, “predictive analytics”, “data warehouse “and “big data”. And unfortunately, I believe too many stakeholders still use data to support the traditional cultural mindset. Not one that engages everyone towards achieving shared goals and results.
We are what we measure. Measuring changes behavior. Measuring provides the engine to engage, validate whether a strategy is working, collaborate, monitor progress towards goals and reward the stakeholders regularly and objectively. My favorite quote from W. Edwards Deming is, “Without data, you’re just another person with an opinion”. When the underlying fundamental key metrics are executed with purpose, a goal and a sense of urgency, a culture of accountability is created and improved results follow.
Average Cost Per Claim
As most claims professionals know, average cost per claim is one of the most widely used benchmarks in the industry and reflects the overall effectiveness of the execution of all the fundamentals of claim handling such as early reporting, appropriate medical care, 24-hour contact, return to work programs, etc. Most claims operations have their own statistics readily available, as well as national and state-specific data, to provide the benchmarks needed to gauge their effectiveness. What is missing is deploying this metric through analytics throughout the organization down to the adjuster level.
Everyone has heard that a litigated claim costs on average 40% more. So why is this metric given such little attention within a claims department? There are many reasons a claim becomes litigated but it usually results from a lack of communication by an adjuster, employer or both. It also can be the result of an audit culture where the claims staff pays more attention to checking the 24-hour contact box than having a meaningful conversation with the injured worker explaining benefits and to assist them with medical care and paying for lost wages. Measuring this metric at the adjuster and client level can go a long way to making sure that through improved and timely communications, litigation is avoided and results improved.
Lag Time Report
Immediate reporting of a claim by the employer to the TPA or carrier is critical because appropriate medical intervention and timely contact with the injured worker will set the stage for improving the outcome of a claim and lowering the average cost of claims. The longer it takes to report increases the cost of a claim. Control of the medical care is lost and an injured worker worries about their health and financial well-being which drives them unnecessarily to an attorney.
The adage of “the best claim is a closed claim” still holds true today. Without a doubt, it is the one constant in the claims world. Claims become more expensive the longer they stay open. This typically occurs in a processing culture rather than a goal-oriented claim management culture. The high closure rate benchmark is a strong indicator of a claim staff consistently acting, planning and executing a strategy to coordinate appropriate medical treatment and return to work at the earliest opportunity.
With the advent of technology that allows less complicated and expensive development of data management strategies, everyone should strongly consider evolving to a strategy that combines measuring the fundamentals and moving to a goal-oriented accountability culture that drives overall improved total loss costs. This cultural shift will both improve the outcomes for injured workers, lower employer loss costs and create a work environment for claim professionals that empowers and gives them a sense of accomplishment and value to their employer and clients.
Andy, this is definitely on point. The definition of insanity is doing the same thing but expecting a different result. From what I’ve heard Next Level seems to have broken that curse. Looking forward to having options for my clients to choose.