201306 tech decisions webinar: modernizing claims for better customer service
DESCRIPTION
Reviews the importance of the claims payment process and how that moment of truth can define the competitive advantage of an insurance company. Focus is on how understanding and improving the process of claims payment benefits market share and organic growth.TRANSCRIPT
§Modernizing Claims Will Result § in Better Customer Service
By: Steven M. Callahan, CMC®, FFSIPractice Director
The Nolan CompanyManagement Consultants
www.renolan.com40 Years Serving Insurance Carriers
1
Overview and Objectives
§ Context:– Customers are more impatient and demanding than ever before. – Being a market leader means making claims a priority. – Not possible without a modern claims system.– Claims technology needs often ignored in favor of other systems.– Insurers are now seeing the benefits of how claims can positively
impact the bottom line and improve customer satisfaction.
§ Outline:1. Review of the environmental pressures on claims.2. Overview of claims Best Practices.3. Quick dive into value of analytics in claims.4. Brief comments on remote capabilities5. Sneak preview of recent industry survey results specific to claims.
2
PC Claims Severity
1. Industry Faces Challenging Times
3
Investments
RegulationMarket Exits
Technological Advances
Competition
Life Insurance Ownership
Combined Ratios Don’t Deliver The Same ROE
Combined Ratio / ROE
Source: Insurance Information Institute from A.M. Best and ISO data.
97.5100.6 100.1 100.8
92.7
101.099.3
100.9 100.0
106.4
95.7
6.6%4.6%
7.6%7.4%4.4%
9.6%
15.9%14.3%
12.7% 10.9%
8.8%
80
85
90
95
100
105
110
1978 1979 2003 2005 2006 2007 2008 2009 2010 2011 2012:9M0%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Have to be Lower in Today’sInvestment Environment to Generate Same ROEs
A combined ratio of ~100 generated an ROE of ~
16% in 197910% in 2005
7.5% in 2009/20106.6% in 2012
4
Tough Economics + Cultural Shifts :Customers Are Increasing Their Expectations
Generational Differences
New Social Dynamics
Five Generations of Consumers, Large New Wave Coming(% of Total Population)
Ethnic Diversity
The Digital Generations- powerful consumers
5
5
6
Demographics And Diversity Drives Expectations
0
10
20
30
40
50
60
70
80
Milli
ons
GI Swing Boomer Gen X Gen Y
High TechLow Tech
Increasing Customers Demands• Immediacy / 24x7 access• Transparency• Personal service relationships• Language differences• Benchmarks within and outside the industry
Agent > Mail > Phone > Fax > Email > Website > Chat > Social (FB, Twitter)
7
Technology = Complexity
From:
To:Phone
Paper
Text
IVR
Internet
Service Delivery Process
Self-Service
ResolutionChat Video
Transfer Dialer
• Technology driven – beyond paper and phone• Main sequence process the same• Tailored service approaches• Challenging to manage
Process = Requestà Process à Resolution
Claims OperationsNew↑ & Old↓Technology
New
Service M
ethods
Pressure On Claims:Reduce Loss Costs / LAE – Improve Service
88
“… a modest increase in customer experience will increase customer loyalty
and boost revenues by approximately $298 million for a $10 billion insurance
provider.“Forrester Research, February 17, 2010
“Nationwide Insurance found that a 1% increase
in customer retention increased annual
premiums by $1 million”Insurance Tech. - CRM in Global Insurance, Datamonitor, 2008.
“Reducing customer attrition by 5-10% can
increase annual profits by as much as 75%,
according to a study by the Wharton School.“
Eight Strategies for First Rate Customer Service, Cisco Innovators, January 2008
Today’s Customer Has an International Megaphone
Tens of thousands of positive service touchpoints a day, and yet one bad interaction…
And suddenly your company is at the top of the tweets list telling thousands followed quickly by a Facebook “Unlike” Fan Page.
9
Today’s Customer
It is more than Reputation:Strong Service Delivers Revenue
10
Strong Customer Experience Management =
Improved Revenue
Red = Lost Revenue / Customer TurnoverYellow = Incremental Revenue, Existing CustomersDark Blue = New Customer RevenueLight Blue = Net Change in Revenue
AverageBest-In-Class LaggardsNet Up $273M Net Up $84M Net Down $43M
Leading Companies Taking Action:Service Differentiation = Competitive Advantage
Expanding Accessibility 100%Accelerating Service Delivery 96%Increasing Hours and Days of Service Availability 82%Creating Different Levels of Producer Service 82%
Consolidating Similar Functions Across Divisions 75%
Creating Different Levels of Customer Service 63%Aligning Operations with Customer Markets 63%Consolidation of Call Center Operations 57%
Aligning Operations with Distribution Channel 57%
Consolidating Physical Locations 50%
RespondentsArea of Focus
1111
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Changing Service Delivery Model:Blending Technology & Talent Management
One Size Fits All
§ Same service for all segments
§ Over invest in some, under invest in others
§ One model to manage
§ Differentiation created at company vs. segment levels
§ Easier to match capabilities
Evolving Model
§ Segmentation of needs and value
§ Service matched to segment needs
§ Appropriate service investment in each segment
§ More challenging model to manage but also …
§ Harder to replicate by the competition
§ Claims Processing Systems Built on Best Practices– Modular replacement if necessary; stepwise, wrap, LOB, or Bang– Integrated and adaptable business rules, distributable (n-tier)– Data adaptability, integrity/quality and accessibility
§ Ubiquitous Multi-faceted Analytics– Straddle claims + underwriting + pricing + servicing + external data– Integrated: FNOL, Adjusting, Subrogation, SIU, Recovery, Litigation– From workflow to predictive modeling, key to loss management
§ Empowered Remote Capabilities– Customer apps for point of claim FNOL data capture, mobile service– Adjuster toolsets: aerial imaging, photo capture, portable rules
base, client access, GPS routing & tagging, real-time connectivity
13
Three Immediate Priorities for Claims
2. Claims Best Practices: A Top Down View
• Resource Management• Process Workflow
• Financial Analysis• Operations and Service
• Vendor Management• Litigation Management
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§ Staffing Models§ Claim / SIU Staffing analysis § Claim Productivity Reporting§ Workforce Utilization Management§ Management & Supervisory Analysis§ Personnel Turnover Analysis§ Business Unit Silo Elimination§ Structured Change Management Methodology§ Formalized Communication Plans
Resource Management
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Claims Operations Best Practices
§ Claim service model design § Optimized organizational structure§ Process workflow analysis / automation tools§ Claim Unit process interdependence/Interaction maps§ Process alignment strategy between units § Claim cycle time minimization§ Documented & standardized technology work-arounds§ Inspection to-repairs-to-settlement cycle time§ Substitute rental vehicle cycle time & control
Process Workflow
16
Claims Operations Best Practices
§ LAE expense analysis & trending:– ALAE (DC&C)– ULAE (A&O)
§ Loss cost analysis & trending:– Averages / Trends– Paid claims, recoveries, leakage– Review of vehicle total loss process– Direct repair facility evaluation– Reinspection process and impact
§ Reserve management:– Averages / Trends– Redundancy / Deficiency– Methodology Review
Financial Analysis
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Claims Operations Best Practices
§ Litigation management view§ Recovery management view§ Auto liability claim view§ Physical damage and property damage claim view§ Liability, Property, Workers Comp claim views§ Internal quality control process§ Claim manuals / guidelines § Fraud impact / SIU effectiveness tracking
Operations and Service
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Claims Operations Best Practices
§ Legal Cost Management Process & Tools§ Independent Adjusters & Appraisers§ Medical Cost Containment Providers§ Medical Bill Review Vendors§ Damage Appraisal Software Vendors § Glass Vendors§ Direct Repair Facilities
Vendor Management
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Claims Operations Best Practices
§ Litigation claim file review (sampling)§ Litigation management program review and analysis§ Litigation unit staffing / productivity analysis§ Legal cost containment process review§ Suit Log process and effectiveness§ Review of House Counsel operations§ Analysis of suit volume vs. results§ Pre-suit avoidance techniques§ Utilization of Alternative Dispute Resolution (ADR)
Litigation Management
20
Claims Operations Best Practices
3. Analytics More Critical Than Ever
21
Analytics Starts With Workflow:Identification, Segmentation, Prioritization
Optimized Claims Adjudication process.§ Using data mining to cluster and group claims by loss characteristics
(such as loss type, location and time of loss, etc.).§ Claims scored, prioritized and assigned per experience and loss type.§ Higher quality, more consistent, and faster claims handling.
Adjuster Effectiveness Measurement.§ Adjusters typically evaluated based on an open/closed claims ratio.§ Analytics for key performance indicator (KPI) reports of customer
satisfaction, overridden settlements and other relevant metrics.
Claims involving attorneys = 2X settlement and expenses. § Analytics to determine which claims are likely to result in litigation.§ Assign to senior adjusters to settle sooner and for lower amounts.
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Analytics help shorten the claims cycle times. § Claims cost 40% more if FNOL is delayed by 4 days. § Auto accidents take average of 16.2 days to repair and return.§ Significant expense savings on rental cars, etc. for auto repairs.
Duration and Customer Satisfaction are directly correlated.
Analytics drive higher Customer Satisfaction and Lower Costs
Faster Processing: Lower Costs + Happier Customers
JD Power, 2007
27%36%
37%
772
854828
Over 2 wks.8-14 days1 wk. or less
% o
f Cl
aim
ants
Ove
rall
CSI I
ndex
JD Power, 2007
Satisfaction going downCSI of 854 to 828 to 772
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Identifying Claims Fraud:A Tremendous Opportunity for Analytics
SAS Institute
About 10% of all insurance claims are fraudulent.Annual fraud losses for P&C industry total $30B in US alone§ Need to detect unknown patterns of financial fraud.§ Keep track of new fraud schemes.§ Unsure exactly what to look for.
Rules: Captures fraud on known patterns previously usedEx: Two claims in different time zones within short window
Anomaly Detection: Detect unknown patterns (ind & aggr)Ex: Statistics (mean, std. dev., uni/multivariate, regression)
Advanced Analytics: Detect complex patternsEx: Knowledge discovery, data mining, predictive assessment
Social Network Analytics: Determine associative linksEx: Knowledge discovery via associative link analysis (entity map)
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Automated Fraud Detection:Analytics Escalates High Risks at all Points
FNOL EvaluateClaim
CloseClaim
Negotiate ServicesPredict duration
Forecast loss reservesOptimize fast track claimsPrioritize resourcesFraudulent scoringLitigation propensity
Prioritized investigationFocus on organized fraudMinimize claim paddingReduce false positives
Identify salvage and subrogation opportunitiesIndicate deviations from similar claimsReports on claims overrides
InitiateSettlement
SIU
Update Claim
Fraud Referrals
Re-estimate durationReassess loss reservingPrioritize resourcesFraudulent rescoringReview litigation propensity
Cross-sell options for satisfied customerCustomer retention program
Assign Claim
Fast Track Claim
Fraud Referrals
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Common Barriers to Using Analytics
9%
4%
19%
20%
12%
23%
34%
35%
37%
20%
34%
26%
31%
39%
35%
34%
24%
32%
21%
20%
9%
26%
28%
17%
5%
2%
2%
2%
0% 20% 40% 60% 80% 100%
Fragmented Data
Inadequate Tech Resources
Lack of Business Expertise
Lack of Exec Sponsorship
Perceived Costs > Expected Benefits
Cultural Barriers to Data Sharing
Not at all Some Typical/Common Almost Always Exclusively
26
Guidelines to Implementing Analytics
All-executive panel agreed on three guiding principles:1. Have an executive sponsored roadmap that clearly outlines.§ What resources will be needed for how long, § Where and when predictive analytics will be used, § Which tools will be used, and § How will success be measured.
2. Use data that is comprehensive, accurate, and current. § Not necessarily 100%, some have used only 70%. Must be representative.
3. Staff with talented and engaged people. § Completely understand business problem and are proficient with analytics. § Every person does not have to meet both qualifications; a team can be used
with some experts on the business and others experts on analytics.
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4. Enhanced Remote Capabilities
§ Cloud based web tools allow remote collaboration– Cat and FNOL are proving areas facilitated by cloud based apps– SharePoint, Office365 and Lync Online enable real-time interaction– Integrating GPS, Google Earth and similar apps with local
presence has enhanced claim reporting and reduced cost of detail data
– Direct connection to Home Office staff and systems puts full power of office systems in the field
§ Two-pronged strategy: first empowered clients – Leverage mobile technology to create local presence reporting– Add ability to request nearest contracted tow service & line up a rental
car, result delivers service excellence and operational efficiency – The cost and effort required to put this type of app in
place is less than imagined. – Numerous examples of FNOL Apps exist today for clients
who can choose to build one, like Allstate & AIG – or buyone, like Accenture & Guidewire.
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Adjuster Toolkits: Accelerating Critical Service
§ Adjusters (and inspectors for UW) benefit from remote toolsets connected to the cloud and home office– GPS mapping, aerial inspections when needed, real-time photo of
accident scene, video for teleconference, preloaded rules for assessment– On client, street level views, coverage history, claims data, financial info,
loss details, incident histories, red flag indicators, contact info– Collection, submission, video review and determination possible on the
spot, even payout depending on available equipment (mobile deposits)– Accelerates FNOL, improves accuracy and timeliness, reduces field
adjustment burden, reduces data entry, collection and indexing– Add ability to request nearest contracted tow service
and line up a rental car, and the result delivers on both the service excellence and operational efficiencygoals set out at the beginning.
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A Day in the Life of an Adjuster
§ Adjuster receives claim notification via email and an alert including contact information. – Direct to field process enables impressive, quick response to claims.
§ A call is made, appointment set, maps accessed and the GPS navigator engaged. – Upon arrival, accident scene and damage photos are taken, key
party info all fed directly back to the home office claims system. – One of several estimating tools is accessed
» Diagramming automated using laser measurements and square foot calculators» Depreciation allowances, location mapping and statements of loss created.
– Aerial imaging incorporates birds eye view into the claim data» Same aerial images available from home or regional claims centers to confirm
collected information or determine any need for manual refinements. » Historical pre-damage views might also be available for comparative purpose
§ These services are available today on bulkier laptops; pad or phone apps moves to more convenient level.
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Apps Starting to Proliferate:More Lines of Insurance with a Field App
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Construction estimating app Workers Compensation app
USAA Auto insurance app
Home inspectors app
Property inspection app
Two Other Examples in a Field of Possibilities
§ Award winning equine insurance app for racehorses– assists in determining coverage applicability and levels – submits FNOL information when a covered race horse is injured– includes the ability to search out the nearest qualified vet – provides contact information and a map from current location – only cost the carrier $25,000 to develop
§ Newly released HailSpot to capture immediate hail data– enter location and DOL, get up to 10 years of hail size and duration– geo-locates exact address mapped to weather history for spot– helps prevent paying for pre-existing damage based on exact dates– combined with rules base, recommends replace, repair or deny
32
Mobility Strategies:Have A Framework for Mobile Solutions
Audience:Who will use the mobile
device capabilities?
Devices:Target devices and device
ownership?
Data Security:What data will they have
access to?
• Drives Design Alternatives• Drives Deployment options
• Employees, Business Partners, Providers, Customers, general public
• Technical features may vary by audience (Email, device wipe, device profile ,MDM software)
Each different user group will require different security controls and access
• Drives Security Requirements• Drives Deployment options
• Company provided
• End user provided – devices specified by company
• End user provided – device independence
BYO – Bring your own – requires significantly more robust availability
• Drives Security Requirements• Drives Architectural Solutions
• Current application data? Historic Data?
• Policy / Claim History Information
• Data Sensitivity : payment and health information (PHI,HIPAA), PCI)
Must have the capability to secure and remove data in case of device loss
The organization’s mobile computing strategies must be developed for:
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DeliverableFrameworktailored to opportunity
DeliverableHigh Level Architectural Framework
DeliverableVision & Scope
STEP IIIEvaluate Functional Fit
• Evaluate form factor (smart phone or tablet)
• Identify security or functional requirements that are non-standard
• Evaluate deployment model for usability (e.g. mobile web, resident app)
STEP IVBuild Plan
Mobile Policies &Standards
Mobile Application
Deployment &Support Model
Device TestingNeeds
SecurityReview
• Mobile Specific build, deploy, and support needs for the finalized schema
STEP IISTEP IBusiness Case
Additional Considerations to address as part of the business case are:
• Audience Served (user)• Device Ownership• Supported Devices• Information Security
(where is the data stored)
• Project is submitted via the IT prioritization process
• CBAs validate• Business case is made to
deploy via mobile devices• Project is approved,
prioritized & scheduled
Select from Library of Usage Patterns
• Schemas are standard patterns used to guide mobile development choices based on the business case
Consumer 3rd Party/PartnerAssociate
SupportLevel
Company-Owned 3rd Party or Personally -Owned
1 OS/ 1 App2 OS/ 2 App2 OS/ 3 App
Smart Phone Tablet
iPhone/iPad Mobile BrowserAndroid
Push PullAndroid iStore WebCitrix*
No PCI/PHI Multiple PCI/PHIMy PCI/PHI
Application Device
Mobile App Mobile Web Desktop Web Virtual App
Public Store Internal Store Non-Resident
Idea forMobile App
Client SDLC
DeliverablesClient Standard SDLC Artifacts
ProductionMobile App
Low Level Reqmts
High Level Reqmts
Mobility Management:Use the Framework to Control Execution
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5. Property Casualty Industry Survey Results
Nolan Recently Concluded A Survey of Over 100 Property Casualty Insurance Senior Executives
Findings Are Being Reviewed and Compiled
The Following Claims Specific Findings Extracted
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Underwriting Findings Consistent with Profit / Service Focus
36
4.09
3.87
3.31
1.44
0 1 2 3 4 5
Customer satisfaction
Expense ratios
Renewal retention
Increase profitability
4.3%
22.6%
47.3%
60.2%
78.5%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Policy services outsourcing
Usage Based Insurance (UBI)
Mobile Technology platform
New policy management system
Analytics program
2013UnderwritingObjectives(low #=top priority)
2013UnderwritingInitiatives(high #=top priority)
?
Claims Findings Consistent withLoss Management and Analytics
37
3.01
2.93
2.18
1.88
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50
Improve customer service
Improve claim reserves
Reduce LAE
Reduce loss costs
27.4%
28.6%
40.5%
52.4%
52.4%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Mobile Technology
New Claims System
SIU Effectiveness
Litigation Mgmnt
Claim Analytics
2013ClaimsObjectives(low #=top priority)
2013ClaimsInitiatives(high #=top priority)
Claims Focus Mixed
38
6.67
4.58
3.75
3.50
2.47
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00
Increase SIU resources
Improved litigation mgmnt
Effective claim audits
New technology (all types)
Process / workflow 2013ClaimsMost Improved By(low #=top priority)
5.33
4.42
3.45
2.99
2.04
1.79
0.00 1.00 2.00 3.00 4.00 5.00 6.00
Mobile technology
Facsimile to company
Email to company
Company web portal
Agency operations
Claim contact center 2013Claims FNOLReporting Method(low #=most used)
?
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32.5%
33.7%
65.1%
72.3%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%
Increase web claim reporting
Replace legacy claims system
Replace legacy policy system
Data warehouses & reporting
24.0%
33.3%
37.3%
0.0% 10.0% 20.0% 30.0% 40.0%
Underwriting
Claims
Distribution
2013 KeyTechnologyInitiatives
2013Mobile Initiatives by Function
?
THANK YOUThe Nolan Company
Management Consultantswww.renolan.com
Steven M. Callahan, CMC®, FFSI Practice Director
[email protected]/in/stevenmcallahan
@stevencallahan
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