Claims as a customer touch point opportunity

We hear on a daily basis that an increasing focus for our insurance clients is to improve their customer relationships through impactful, value add touch points.  The need to increase customer satisfaction and retention has become top of mind and organizations are looking for visibility into how to reach their customers throughout the lifecycle from pre-sales to policy administration through to claims processing. 

As one would anticipate, successful achievement of this objective is dependent upon a combination of two things:  (1) customer focused value added processing, and (2) efficient, integrated systems to support customer visibility.  While striving to support these goals, legacy policy administration systems face obstacles in providing easy access to relevant customer information, and more importantly, prevent rich customer interactions due to functional inefficiencies.  Organizations continue to work towards streamlining operations across their enterprise to provide accuracy and efficiency through integration. 

We’ll focus today on the frequently under-emphasized claims processing function – a functional area that offers significant customer perception opportunities if the supporting platform can hold up its end of the bargain.  As customers’ expectations are increasingly influenced by sophisticated web experiences providing “all in one” touch points, carriers’ focus on customer relationships need to incorporate visibility into policy, billing, and claim information.  Even further, customers should be able to perform key transaction activities, though legacy systems inherently struggle to support these demands. 

The catch is in your systems’ ability to position you for success.  The good news is that a number of current or emerging Policy Administration Systems are available who readily support this customer focused perspective to allow for visibility through the full customer lifecycle, across all polices / products they’re related to.  Some of these systems offer workflow capabilities to complete the new business underwriting process, even allowing for integration into back processing for customer support. 

Claims processing on these systems can inherently follow a similar new business underwriting workflow process, to route and facilitate processing of claims medical reviews, receipt of supporting documentation, aging alerts, and overflow capacity support.  (A residual benefit includes visibility on these claims for subsequent new business to automatically search on client record for pending or processed claims to be considered during the underwriting decisioning process.)   The critical consideration is the increasing importance of efficient claims processing through the policy lifecycle, to achieve both a more streamlined and “standardized” method of claims processing.  The AMA National Health Insurer Report Card noted that a one percent reduction in error rates would drive substantial cost savings to the industry.  Flexible workflow automation for claims processing inherently reduces potential error rates, and allows for support of the “unique” instances that surface in claims processing on a regular basis. 

What does this mean to carriers?  The “bar” has been set higher around the need for efficiency, integration, flexibility, and visibility into their claims process.  Carriers should be working towards all of the following improvements in claims processing:

  • Streamlining operations and gaining efficiencies by reducing manual operations
  • Improving the customer experience
  • Reducing errors
  • Leveraging a flexible workflow to achieve process agility

According to the recent AMA 2010 “National Health Insurer Report Card,” one in five medical claims is processed inaccurately by health insurers.  This is clearly not caused by a lack of effort on the part of carriers, but is a significant outcome of inconsistencies in claims processing.  (The report reemphasizes the need for standardized administrative processes and requirements throughout the industry.) 

At the end of the day, this increasing streamlined and integrated claims processing will be one of the key touch points that carriers can leverage to provide value added services to their customers.  According to a recent Gartner survey, “Gartner estimates that by the end of 2010, 1.2 billion people will carry handsets capable of rich, mobile commerce providing an ideal environment for the convergence of mobility and the Web.”  While the ability to support mobile applications may still be a future consideration for many carriers, we can guarantee that claims information will be one of the key elements that customers will demand to see.

Claims Outsourcing Strategy – Managing a Smooth and Seamless Transition

Part 3

The focus of this three part series is to provide insight into managing a smooth and seamless transition for outsourcing claims business processes.  Part 1 concentrates on the upfront gathering of current and future requirements, the Request For Information (“RFI”) and Request For Proposal (“RFP”) process, the selection of the “right” vendor,handshake and a brief on contract negotiation.  Part 2  focuses on  the development, testing, and conversion that takes place between both organizations, and some of the pitfalls to avoid.  Part 3 will focus on maintaining a productive,  long term partnership with your vendor.

One of the biggest pitfalls seen in an outsourcing arrangement is the absence of a true partnership between the client and the vendor.  In the absence of a partnership, the replacement is a customer-vendor relationship.  In this type of relationship the customer is looking for one deal while the vendor is looking for another.  This arrangement creates a lack of trust between both parties involved, that will eventually make the relationship sour because it becomes disconnected from the true business needs and requirements.

Secondary to the partnership but equally as important is the communication between parties.  Communication ensures business interests are aligned and understood. Lack of communication throughout the life of the relationship creates tensions that will definitely hinder future value creation.  Effective and continuous communication ensures both companies are responsive, deal with the facts and not assumptions, keep all stakeholders in the loop, and make decisions in the spirit of a partnership.  Successful outsourcing arrangements, those that last for years, put in place a joint planning process between the client and vendor.  Regularly scheduled joint planning meetings every six (6) to nine (9) months assure that both the client and vendor monitor the health of their relationship.  By continuously reviewing the strengths, weaknesses and opportunities of the relationship, agreeing upon recommendations and placing those recommendations into action continually improves the relationship.  

Most often seen in healthy outsourcing relationships is an effective governance methodology or framework.  Both parties must agree early on to operate in a collaborative environment, as noted above.  In the absence of a governance structure, the resulting implications could be devastating.  This could lead to unclear roles and responsibilities between the client and vendor, challenges encountered that are not overcome and linger, problems not resolved in a timely fashion, and unmet expectations . 


The worth of an outsourcing agreement is generated when both companies strike a mutual agreement that forms the foundation for a long term partnership.  When both parties buy into these steps as well as avoid the pitfalls noted, the framework and foundation has been set for a long term successful partnership.  By doing so, both parties have put in place the tools, design, contracts, and methodologies that will ensure success. Failure comes when anyone of the steps are short-changed, missed or are misunderstood by either or both parties involved.  When your company makes that strategic decision to outsource, make sure you make the same decision to be successful by employing these  best practices.

Claims Outsourcing Strategy – Managing a Smooth and Seamless Transition

Part 2

In Part 1, we focused on creating the core structural foundation of a Claims Outsourcing Strategy:

  • gathering the business and technical requirements
  • creating a detailed Request For Proposal (“RFP”)
  • selecting the correct claims outsourcing vendor
  • contract negotiations

In Part 2, we will concentrate on the development, testing and conversion that take place between both companies, identifying some of the pitfalls that can be avoided during this stage.  In Part 3, we will wrap up with a focus on maintaining a strong, healthy partnership.

Development Phase

 Prior to the development phase you should ask yourself as well as your staff the following question:

“What is the best strategic approach that both companies should utilize to obtain optimal success during the development phase?”

Without a key strategy agreed upon by you and your vendor, many unforeseen obstacles will soon be on your door step, obstacles that you’ll need to juggle and resolve. 

One pitfall many organizations fail to identify prior to the start of the development phase is the common “siloed development approach”. Your company works against a set of functional and process requirements specific to your own system to support the outsourcing project.  Your vendor works against another set of functional and process requirements specific to their system.  There is no known intersection of the functional or process requirements between the two companies. By no means is this ever considered the correct strategic approach to take.



By strategically working together prior to the development phase, both organizations will find the intersection or “Joint Functional and Process Requirements”, so all three pieces of the puzzle can come together and be managed accordingly.  If you skip these requirements, the puzzle is not complete and managing this process will become a nightmare.

Testing Phase

As with the development phase, a joint strategic approach for testing should be developed and agreed upon prior to testing beginning.  Many organizations fall into one of the biggest known pitfalls – unclear definition of the different phases of testing.  Ask your IT and Business staff as well as your vendor this question:

“What is considered unit testing, system testing, User Acceptance Testing (“UAT”) and Integration testing?”

I promise you this, you will not receive a unified answer from your staff or vendor as to what each phase represents.  Clearly identify in a Testing Strategy Plan what each phase’s primary purpose is, who is responsible for executing the phase within and between both companies, and what is the measurement of success for each phase.

Without a doubt you can utilize the integration concept from the development phase in the testing phase.  Developing test plans to support this process should include resources from both organizations.  Agreement on what is to be tested and who should test will lead to the optimal testing results.  This joint planning should take place early on so that both companies know what is expected of them during this joint testing effort, and have their resources allocated when it come time to start.

Conversion Planning/Execution

Conversion is one area we consistently see that both companies have not spent the quality of time or effort needed to succeed in their conversion efforts.  Conversion of data and files to and from both companies is equally as important as the development and testing efforts.  Yet most companies will spend less time understanding the data and files needed in order to make the transition and outsourcing arrangement successful.

Time and effort must be allocated to analyze and enhance the data to support the outsourcing initiative.  This includes putting a team in place to focus on:

  1. Identifying and measuring the data in your systems(s) today — determine the quality of the data or the lack thereof.
  2. Identifying a set of data quality rules and targets that must be met prior to the conversion of the data.
  3. Designing and implementing data quality improvements processes where needed, that make the data ready for the conversion.

If the correct analysis and time is not spent upfront to understand the data, files, and conversion planning, the project will come to a screeching halt. Prevent this by investing in a detailed Data and Data Quality Assessment.  Figure 1 below depicts at a high level the data process life cycle that companies must take in order to understand, scrub and enhance their data in preparation for a successful conversion to the vendor system(s).


Figure 1

Claims Outsourcing Strategy – Managing a Smooth and Seamless Transition

Part 1

The focus of this three part series is for the reader to gain insight into and knowledge about managing a smooth and seamless transition for outsourcing claims business processes.  Part 1 concentrates on the upfront gathering of current and future requirements, the Request For Information (“RFI”) and Request For Proposal (“RFP”) process, the selection of the “right” vendor, and a brief on contract negotiation.  Part two will focus on  the development, testing, and conversion that takes place between both organizations, and some of the pitfalls to avoid.  Part three will focus on maintaining the long term partnership relationship with your vendor. 

Outsourcing  for many Insurance and Financial Services organizations is viewed as a strategic tool for bringing about a more productive, cost effective, and profitable business.  The key benefit to outsourcing a segment of a business or an entire business unit is to enable the organization to focus on their core competencies and deploy resources with regard to these core competencies. 

When the strategic decision to outsource has been made, there are plans and best practices organizations must follow in order to guarantee a successful, smooth and seamless transition.  Foregoing any of these steps could lead to a potential disaster and often times a long, drawn out process. 

Detailed Business, Functional, and Technical Requirement

All too often I’ve seen organizations fail at one of the most important steps in the process, creating a complete set of claims business and functional requirements, documenting well defined workflows, and detailing technical and infrastructure reviews and requirements.  Organizations need to allocate the right amount of time and resources upfront to gather and document these requirements and workflows.  Unwilling to do so or short-changing the process will lead to a long and expensive outsourcing transition.

You maybe asking yourself, “Why is this step so important?”

The answer — the detailed documentation sets a strong foundation for all activities and processes that follow, both within your organization and eventually with the outsourcing organization you select.   The goal here is to achieve a clear, detailed, and descriptive understanding of your claims business.  As daunting as this may be the benefits of having your claims processes and workflows clearly defined outweighs the many pitfalls you will encounter should you not execute this step.

Selection of the Outsourcing Organization That Fits Your Needs

Finding the right organization to administer your claims business is critical to the success of your outsourcing strategy.  But how does one find which organization is the “RIGHT” fit for their business?  By creating a high level Request For Information (“RFI”) followed by a detailed Request For Proposal (“RFP”).

If your organization takes  the time upfront to detail the business, functional and technical requirements, then your RFI and RFP are nearly complete. Generating the RFI and RFP is a matter of taking the information documented and formatting it apprpriately.  The RFI is then used to narrow your search from a long list of possible outsourcing organizations to a handful of potentially qualified options.  Once you have narrowed your search, the RFP becomes your driver.  It helps to further narrow the selection process to 2 or 3 organizations.  claims-outsourcing-image-11

Figure 1 — RFI / RFP Process

Contract Negotiations

Once the outsourcing organization is selected the contract negotiations begin.  The outcome of this step is to finalize a contract that both organizations can agree to.  The focus here is to define who is responsible for what, and when.  Items that are imperative to the contract are:

  • Service Level Agreements (“SLA”)
  • Vendor modifications and who pays for them
  • Escalation procedures for disputes and interpretation of the contract
  • Cost basis per transaction

Contract negotiations are difficult and time consuming.  If done right this will set the stage for a successful transition of business and for a long term arrangement between your company and the organization you selected to handle your business.


Figure 2 – Phase 1 Tactical Roadmap

Insurance litigation in the economic downturn

I heard a report on the news this morning that in a recent survey, lawyers have indicated that they expect a dramatic decrease in business in 2009 and do not anticipate earning income at the same levels they earned in 2008.  Really?

That may be true for mergers & acquisitions, and other similar purchase related transactions, but I do not believe the current economic downturn will have a similar affect on the insurance industry.  In fact, I believe it will have the opposite affect.

I think the upsurge in litigation stemming from the collapse of the credit markets and the mortgage industry could surpass levels ever seen before.  Litigation during these times could include some of the highest settlement amounts, parties sued, and parties suing.  Insurers are bound to get caught up, due not only to defending their interests, but also mainly due to their policy responsibility of defending insureds for litigation brought against them.

Some insurance carriers are gearing up for that increase in defense costs.  The Hartford is already battening down the hatches in preparation for a litigation hurricane.  As the insurer for The Peanut Company of America, they have gone to Federal court for clarification on the liability coverage in their policy, in preparation for the litigation defense costs and settlement payments for the over 1800 product recalls and related illnesses.

People are losing their jobs and can’t make their payments on their Lexus because they over extended in the boom of ’07.  So those vehicles end up on eBay, on fire, or in a chop shop.  Insurance SIU departments see a swell in claim counts.  The number of injuries in car accidents goes up.  These are times when an insurer’s Corporate Performance Management (CPM) and the ability to analyze their own data against their goals, along with incorporating automated processes can really pay off and keep expenses down.  The identification of fraud also becomes key to insurer’s weathering the storm.  Lawyers send people to the same doctors and vice versa.  I remember a case of fraud where a doctor was reported to be treating 1600 people in one day.  So, who gets involved in all these areas – lawyers.  Both on the claimant and on the carrier side.

Traditionally economic downturns are the biggest catalyst for increases in insurance claims and insurance fraud – people need money.  The decrease in policies written, coupled with the increase in policies cancelled for non-payment of premium, is not as dramatic a cost change as the increase in claims.  People still recognize the need for insurance and recognize the importance of maintaining that policy.  However, insureds, and claimants, feel they’ve been paying the premiums on their policies and now they need to get some money back.

I can’t see insurance lawyers experience that much, if any, drop in revenue during this recession.

The Benefits to Insurance Carriers of Automated Workflow Processing

mailcartDo you still distribute paper files and mail the old fashioned way?  I see this all the time.  Even Underwriting departments have people that distribute paper policy files to Underwriters for review of applications, renewals, MVR and CLUE reports.

Why do so many insurance organizations still use a manual distribution method for workflow – especially in the Claims arena which has transactions that are so heavily paper based? There are so many problems created by paper files and mail being stacked on adjusters’ desks for handling without regard to priority.  An insurance organization takes on too much risk:

  • Increased Error Rates
  • Increased Operation Costs
  • Reduced Service Response Time
  • Extending the Lifecycle
  • Raising Adjuster “Burn Out” Rate and Increasing Employee Turnover and Training 

When I was a claims adjuster, every day was the same — about 10:30, after the morning mail was opened (which I had to go to the post office and retrieve because I was a “field adjuster”), a stack about 3 inches tall, wrapped in a rubber band, would be dropped on my desk like a ton of bricks.  At least the claim file numbers were written on them which the administrative staff would spend about 90 minutes researching.  Then I would have to take that stack of mail, and start retrieving all the paper files from cabinets associated with that mail – PIP applications, damage appraisals, attorney correspondence, medical bills, etc.  How was I supposed to go out in the field when I had all those paper files back in the office?  You couldn’t take them with you because they weren’t allowed to leave the office IN CASE THEY GOT LOST.

Granted, this was a long time ago, and I had to consider myself lucky that at least I had a mainframe system into which I could enter my reserves, payments, notes and confirm coverage.  But these days, not storing files electronically and making them accessible remotely is almost inexcusable.  All that wasted time and productivity.  I probably could’ve handled twice the case load and closed files twice as fast if I could have been out in the field all the time.

Like so many of their policy brethren, many modern claim systems include automated workflow and straight-through processing features that insurance organizations with legacy systems can not, or do not, utilize.  But these legacy systems don’t necessarily have to be replaced in order to implement these types of functions.  Many independent automated workflow systems can work right along side existing legacy systems and push work forward.  I know carriers that implement a simple document management system with high speed scanners that scan and distribute 10,000 – yes, ten thousand – pieces of mail every day.

There are those claim managers that are considering making a change to their claim administration system, and may want to increase the priority of the automated workflow function in their search criteria.  By introducing an automated workflow, many insurance organizations have improved productivity by as much as 100%, recognizing savings to the hundreds of thousands of dollars, and supported a 20% increase in business with existing staffing levels.  The additional benefits to an Insurance organization of a workflow utility are that it can:

  • Implement continuity in processing,
  • Decrease processing costs, and
  • Increase efficiencies to improve Service-level Agreements (SLAs) with customers, agents, and company departments. 

Insurance organizations can also benefit by increasing the collaboration of resources using a document repository. A single repository would enable organizations to reduce resource costs associated with searching for non-existent data or recreating data that is unable to be found, such as loss control guidelines, rating specifications, or even just the office fire procedures.  Call center and other service-related expenses can also be reduced by providing customers with access to their documents via the Web for policy documentation and/or claims forms.  In addition, field workers would be more efficient by being able to review and transfer documents remotely, reducing claim processing times and expenses, and allowing for claim payments to be issued more promptly to customers; spending more face time with insureds, claimants, and agents.  Face time is always good for business.

One final note, Enterprise Content Management (ECM) and Workflow can also be utilized as a knowledge broker between the many systems and departments within an Insurance company, and can become an important source for Business Intelligence (BI). It can provide consistent searchable metadata for proper document retrieval that can be used to support Dashboards and other BI reporting tools for executive management, resulting in improved productivity even at those levels. 

But that’s all right.  You keep paying rent on that office space for file cabinets and maintaining resources to pass paper around.  I’m sure you’re not losing market share or unnecessarily increasing your expense ratios.