01/26/2021

By Sam Leflar, Consulting Senior Manager

Sam Leflar headshotInsurance claims. You know them, you love them… right?

Perhaps not, but the insurance industry is something that is very near and dear to my heart.

In my last blog, I shared a broad framework on how to plan a digital transformation tied to long-term strategy impacted by continued disruption.  Now, I’d like to dive a bit deeper into the insurance claims industry and discuss how KPIs should play a central role in shaping and driving digital strategy.

Success in Claims

I worked in several claims positions in Texas for 8 years before transitioning into a career in management consulting.

Claims was the formative experience in my career, and from experience, I can tell you—it’s a very challenging job to get right. The industry is incredibly fast-paced, requires the highest level of customer service in traumatic situations, and demands significant legal acumen and prudent decision-making skills as losses climb in complexity.

In my opinion there are two foundational practices to successfully handle claims as an individual adjuster:

  • A rigorous yet flexible approach — Daily workflows and tasks must be strictly disciplined in order to keep inventory levels in check, yet remain service-oriented and adaptable to meet the individual needs of policyholders and claimants.
  • Attention to detail — Small errors or omissions that go unnoticed when initially handling a claim can result in significant penalties and financial exposure for insurers down the line. The most successful adjusters are those who pay the utmost attention to investigative details upfront and throughout the claims handling process.

With the overwhelming need for claims personnel to be laser focused on investigative details and customer service, one additional key component will drive a firm’s prospect for success: a clear set of organizational KPIs.

KPIs act as the lighthouse for teams navigating the chaotic daily currents of claims.  An organization that unites in pursuit of impactful KPIs can certainly produce excellent outcomes, but one that also effectively leverages digital innovations to support this strategic focus on KPIs is simply unstoppable.

An organization that unites in pursuit of impactful KPIs can certainly produce excellent outcomes, but one that also effectively leverages digital innovations to support this strategic focus on KPIs is simply unstoppable.

Digital Transformation & Claims

I was still working in the insurance industry when my company replaced our antiquated legacy claims system with a new digital platform. The potential it unleashed for improved performance was awesome!  It was like learning to drive a high-powered sports car after having chugged along in an old beat up truck for years.

The updated platform provided immediate visibility into key performance data, enabling managers to monitor results using real time reports. The ability to track metrics across levels and lines of business provides the means to identify issues and trends, coach, and course correct around the clock providing immediate traction to improve organizational performance in a very short time. For the new technology to truly fulfill its potential, however, it was critical that leadership first lay the groundwork for success by clearly articulating straightforward and measurable KPIs, and then rallying teams around their pursuit.

Industry Evolution

The wave of core platform replacements over the past decade has enabled firms to remain competitive, automate essential processes, and create efficiencies, but the innovations and disruptions happening now are reimagining some of the fundamental assumptions that have anchored the industry for decades.

  • Insurtech firms born out of the digital revolution and Fintech, are upending traditional business models and gaining notable market share by bringing silicon-valley type innovations to the once static insurance market. Some are leveraging Robotic Process Automation and Artificial Intelligence to automate claims processes at lightning speeds. For example, the groundbreaking firm Lemonade can fully process a claim from intake to payment in under 3 seconds.
  • P2P (Peer-to-Peer) models enable consumers to self-organize into groups of covered policyholders through social networks rather than using a traditional carrier. Under this model, if a coverage period ends and there is a reserve surplus, then the collected premiums are repaid directly back to the insureds with little to no overhead. This is a great benefit to the consumer, and it is also an excellent deterrent to insurance fraud, which costs the industry and consumers over $40B a year.

These are just two specific examples of digital trends in the industry, but the broader reality is that the rapid pace of innovations and emerging digital trends are putting tremendous pressure on traditional firms to continue to transform and adapt technologically as never before.

Commitment to KPI’s

In the midst of the ongoing digital revolution, there is fortunately an unwavering constant around which you should center your digital claims strategy— the pursuit of your KPIs.

To get the most out of your claims IT investments and to guarantee bottom line return, you must be able to draw a straight line from technology programs and initiatives to the KPIs that drive organizational success.  Metrics such as severity levels, cycle time, early injury settlements, and same day contact percentage, are a few tangible examples.

Defining clear KPIs, communicating them to your people effectively, and prioritizing project work and operational improvement initiatives rigorously against KPI criteria can ensure that precious IT bandwidth and innovations are strategically aligned to business results.  This alignment will drive the fullest value directly back to the customer, organization, and marketplace.

Defining clear KPIs, communicating them to your people effectively, and prioritizing project work and operational improvement initiatives rigorously against KPI criteria can ensure that precious IT bandwidth and innovations are strategically aligned to business results.

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