Insurance companies have spent hundreds of millions of dollars in claims re-engineering projects without significantly reducing their operating costs. Despite re-engineering, the industry has needed to hire ever-more claims staff. This wave of activity has been great for the big consulting firms, but not so great for companies.
Re-engineering is defined as the radical redesign of an organization's processes, but in practice it's usually far less than that. It's usually meant moving from paper-based processes to computerized processes, without changing the fundamentals.
Besides greater efficiency, automation is expected to produce transparency so that any authorized person at any location can view a claim and see how it's being processed and adjusted. Transparency, while useful, doesn't transform the economics of the business. So while the exercise may be called "re-engineering," it's often just using modern technology to increase transparency and reduce paper-handling.
More serious attempts at re-engineering have a different but related failing. Insurers have often hired consultants or installed software that's supposed to show how the company can re-engineer processes for greater efficiency. But knowing what to do is different than doing it. Re-engineering often has been an academic exercise resulting in expensive studies and fat reports that gather dust.
The third problem goes to the core of the weakness in the re-engineering concept--truly a fundamental problem. By definition, process re-engineering focuses on process. But it hardly ever asks a more fundamental question: Should a company be engaged in this process at all? Re-engineering focuses on getting work to the right desk as efficiently as possible, and getting completed work off that desk as efficiently as possible. You might think that sounds great. But instead of getting work off the desk fast, true improvement prevents unneeded work from reaching the desk in the first place. Instead of just making sure the "work stream" flows smoothly and swiftly, fundamental change looks to reduce the "water" flowing through the stream.
Now you're talking about real cost reduction that produces a robust ROI.
How do we get there? Every customer survey shows that claimants feel they don't have control over the claims process and don't like that feeling. Multiple claims people ask them the same questions. They have to depend completely on what someone else tells them. They have no way of tracking or staying in front of the process.
Re-engineering gurus don't ask how we can give control back to claimants and let them do the initial work. Compared with banks and their ATMs and online banking, insurers are in the dark ages when it comes to self-service.
The claim is the one time when the insurer gets to deliver on the promise in the policy by providing prompt, accurate payment--neither undercompensating nor overcompensating customers. Re-engineering doesn't let you do that. People and systems do. So instead of focusing on process, true improvement focuses on people: claims employees and how they do their jobs. It recognizes that people are the foundation of any claims department. Instead of trying to force people into a re-engineered process, it starts with humans and organized processes around them.
The place to start is with the company's best employees--the ones who produce far more work, with much higher quality, than others. Today's flexible technology can capture the knowledge and skills that enable them to be so productive and ensure that all claims employees adopt those productivity-enhancing systems. By transforming "averages" into "bests," insurers can achieve quantum leaps in productivity and service.
That same technology can also automate most routine work, reducing the work stream dramatically and freeing employees to handle the tasks that take human judgment.
Finally, look to empower customers with online tools that let them do the initial data entry and give them control over their claims experience.
Re-engineering sounds great, but it has rarely delivered on its promises. For anyone considering it, the watchword is caveat emptor.
BRIAN S. COHEN
is president of Clear Technology, a software company in Westminster, Colo.
March 1, 2007
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