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Re-engineering offers great opportunities to improve performance in claims organizations because claims processes are so complex. Insurers receive policies from only a few kinds of organizations, such as internal agents, independent agents and brokers. The same is not true for a claims organization, which looks like a hydra in comparison. Claims services come in all sizes and shapes, such as repair shops, health-care providers, appraisers, car-rental agencies and carpet-restoration agencies, among others. The processes that support the underlying communication and information exchange with third parties, customers and employees are extremely complex and potentially inefficient.

Through re-engineering--mapping and redesigning key processes--claims organizations can reduce cycle times, cut costs and improve service.

Re-engineering, if done efficiently, does not have to be labor-intensive. In fact, re-engineering is often possible in just a few days. For example, jumbo-sized claims or certain types of coverages may trigger the involvement of specialized teams, such as the special investigations unit and the bodily injury unit. In most companies, such claims are mixed in with all other claims and have to be manually assigned to the correct team, resulting in a costly delay. Once an organization has committed, re-engineering can improve the triage process in just a few days. Using business rules and automatic assignment can virtually eliminate inefficiencies. This type of re-engineering costs little, but results in a large payoff.

If medical-bill analysis typically takes three days, the new goal, post-re-engineering, might be set at 60 minutes. To reach this new goal, the re-engineered organization may fast-track 80 percent of all medical bills and retain a five-hour process to review 20 percent of the bills. The result is an average review time of 60 minutes, and a successful re-engineering has taken place.

When the Connecticut Healthcare Workers' Compensation Trust wanted to re-engineer its claims processing, it started at the first-notice-of-loss stage. The organization instituted a seamless Internet FNOL process, brought its users to the new system and addressed efficiency issues around the incoming data by instituting an automated interview process.

Evaluating and fixing processes one by one is a major key to successful re-engineering. Knowing your organization's capacity for change--and adopting new processes at an acceptable pace--is the recipe for success.

For some, the path may be long, but the pros--whether they lead to speed-to-market, lower costs, higher revenues or just the ability to remain competitive in a fast-changing market--far outweigh the negatives.

Success stories abound. For example, the Intercontinental Hotel Group, a global chain of self-insured hotels in dozens of countries, needed to create a seamless process for loss prevention in the Americas. The company studied its existing processes and identified remote communication of loss surveys to the home office as a major problem. By focusing on this issue, it was able to devise processes that vastly improved its processing of claims. It started looking at the challenges that faced its loss adjusters and was quickly able to come up with a creative solution.

Whether it's a claims organization like the Connecticut Trust that turned its cost center into a profit center, or a global organization like Intercontinental Hotel Group, re-engineering has showered great rewards on those who have done it well.

Successful re-engineering starts, of course, with clearly identifying existing problems. If a diagnosis is faulty, the subsequent process won't succeed. Use available resources and delve into every dimension of the problem. Once it is understood completely, the right solution will become apparent.

The fear of the unknown has never kept the brave from reaping tremendous rewards. Improving an organization's capabilities through re-engineering is a business necessity.

BADRI NARASIMHAN is vice president of claims strategy and business development at Insurity Inc.

March 1, 2007

Copyright 2007© LRP Publications