Clarity Affords Focus

I was young, new to the insurance industry and eager to advance my career when I first heard that the best way to get ahead in the business was to change employers every 5 years (3 years now.) Serial job-hopping might not have been an attractive or comfortable strategy for the timid or insecure, I was told, but for those willing to uproot and repeatedly challenge and prove themselves it promised a fast-track shot at superior compensation, more diverse and interesting job experiences and exceptional career growth. I went all in, and over the next 40 years I worked with eight different employers and more than a dozen different CEOs, all in the insurance claims business, and served as the Chief Claims Officer at 5 different companies. Some of my moves were regrettable, and I suffered through my share of intense, character-building experiences, but along the way I learned three things that helped make my overall career experience fascinating and gratifying:  

• How to think and plan strategically
• How to identify and manage stakeholder relationships
• How to design and implement performance measures to support achievement of organizational objectives

I also learned one other thing. In the property casualty insurance business, there is no generally accepted performance profile of claims management excellence, no standardized claims performance scorecard. As I changed jobs I was amazed at how variable (not to mention capricious, ill-considered, unfair or non-existent) the claims performance assessment process was from company to company. Even within a single company it was common for executives inside and outside of claims to evaluate performance of their claims operation differently, often by looking at “key performance indicators” of dubious reliability and value. And in the infrequent situation where everyone agreed on a slate of claims performance categories, they often ranked or weighted them differently. Or they ignored them and focused on some new indicator.

To have any chance at success, a Chief Claims Officer needs to clearly establish, with his/her CEO, exactly how the claims operation can contribute to achievement of the company’s strategic objectives, and how performance will be evaluated. Knowing and communicating those expectations is absolutely essential, since a claims leader who wants employees to perform at their best must do four things:

• Communicate performance expectations and confirm understanding
• Use measures of performance and success that are well-designed, explicit and understood
• Provide the resources and support they need to succeed
• Give appropriate guidance and feedback so they can produce the best results

Three of those four things demand clarity on key performance indicators, which is why an agreed set of performance indicators is the cornerstone of any claims strategy. I found that evaluation conversations with CEOs could be circular and unrewarding, so I developed a balanced set of claims performance categories and used them to frame those discussions and illustrate options. I also carried that framework with me to each new company, where I reviewed it with the CEO and adapted it as needed to fit the circumstances and strategy of the new company.
Recently I invited a small group (50) of insurance Chief Claims Officers, CEOs and COOs to provide me with some feedback on claims performance categories by asking them to do the following:

Please rank the following claims performance categories in terms of their importance to you when evaluating the effectiveness of your claims operation.

• Claim loss cost management (average paid, leakage ratio, etc.)
• Claims expense management (allocated and unallocated)
• Claims productivity and throughput (closing ratio, cycle time, reopening ratio, aged pending)
• Customer satisfaction (premium paying customer)
• Agent/Broker satisfaction
• Internal stakeholder satisfaction (business units, underwriters, actuaries, etc.)
• Loss reserve adequacy, accuracy and timeliness
• Regulatory compliance (avoidance of fines, penalties, negative publicity and other unwelcome surprises)
• Employee engagement/satisfaction
• Claims fraud detection and mitigation

The weighted average results showed strong ranking alignment between the two groups:

Performance Category	Combined Group Rank	CEO/COO Rank	Chief Claims Officer Rank
Loss Cost Management	1	2	1
Expense Management	5	6	4
Productivity	4	4	5
Customer Satisfaction	3	3	3
Agent/Broker Satisfaction	8	7	8
Internal Stakeholder Satisfaction	10	10	10
Loss Reserve Adequacy, Accuracy and Timeliness	2	1	2
Regulatory Compliance	7	5	7
Employee Engagement	6	8	6
Claims Fraud Detection and Mitigation	9	9	9

But the individual responses told a different story. Loss reserve adequacy was ranked as most important by the CEO/COO group as a whole, for example, yet 30% of the respondents didn’t even rank that category in the top three. Employee engagement was ranked 8th by the group, yet 20% of the respondents ranked it in the top 2. The Chief Claims Officer group ranked loss cost management as most important, yet 30% of them didn’t believe it belonged in the top 3. One Chief Claims Officer said the most important performance category was employee engagement, as did one CEO/COO—let’s hope they work together! The individual rankings were all over the place, even for the internal stakeholder satisfaction category, which both groups ranked as least important, although 15% of the Chief Claims Officers had it in the top 5 (no one in the CEO/COO group did.)

What’s the takeaway? Thomas J. Leonard probably put it best: “Clarity affords focus.” If you are a Chief Claims Officer, have a conversation with your CEO/COO and make certain you are aligned on what success looks like and how it is measured in your claims operation. Use the performance category framework in the survey for your discussion, or develop your own, but don’t fall into the trap of assuming that all performance categories are equally important. They may all be important, but they are not equally important, so your job is to identify and deliver on those that matter the most to your organization. Get clarity, and then focus. After all, if your company’s strategy relies upon the claims customer experience as a competitive differentiator, your claims strategy should be designed and your resources deployed to deliver that first and foremost.

The claims performance category survey will be open through the middle of June, 2015. If you would like to participate in the survey, you can do so here.

Dean K. Harring, CPCU, CIC is a retired insurance executive who now enjoys his time as an advisor, board member, educator and animal portrait artist.  He can be reached at dean.harring@gmail.com or through LinkedIn or Twitter or Harring Watercolors.

The Consultants Your Boss Hired Are Here to See You...

If you are running an insurance claims operation, and your boss or the board brings in outside consulting experts to evaluate it, chances are you have a problem. Not just the problem the consultants are being called in to examine, but a pricklier, more personal problem--a perception problem. Someone with some clout in your organization apparently doesn't believe you are capable of doing whatever it is the consultants are going to be doing.

That puts you in a tricky situation, one that demands thoughtful action. First of all, don't try to convince your boss or the board that you are an expert and that you don't need outside assistance to handle the situation. Don't waste time arguing that your training and years of experience managing claims qualify you for the challenge. Do understand that the decision has already gone the other way, and any attempt you make to reverse it looks like resistance, concealment, perhaps even cluelessness.

Think about it. If you argue that there is no problem, or the problem is outside of claims, or that every claims operation has the same problem, you risk being classified as stubborn, change averse, and overly comfortable with the status quo. If you protest that you have already diagnosed the problem and designed a solution, realize that others don't see it that way. They want another opinion, another perspective. Maybe they don't like your plan, or perhaps it conflicts with some other course of action they want to pursue. It could be they don't quite know what the problem is, but there's something troublesome in the loss numbers, and they want to understand why it is happening and what to do about it. Or, worst case for you, they might just be looking for evidence and justification for overhauling your organization and/or escorting you out the door.

The reason really doesn't matter, but your response does. As activist and author Jerry Rubin once said: "The power to define the situation is the ultimate power." You have the power to assist in framing the inquiry and shaping the outcome by being visible and playing an active, cooperative role with the experts during the engagement. Take advantage of that power.

First, welcome the consultants and make arrangements to provide them with whatever help and information they need. Brief them fully on your organization, your strategy, and your operating procedures. Impress them with the dashboards and controls you use to manage risks and results. Talk to them about process efficiency, effectiveness, and loss cost management techniques. Show them how you establish and monitor key performance indicators and how you interact and communicate with your stakeholders. Demonstrate how you identify and incorporate best practices in your claims handling processes. If some of the consultants lack industry knowledge and have no background in claims--don't be dismayed. Instead, patiently take the time to make sure they fully grasp how your company functions and how your operation contributes to results. In other words, do whatever you can to provide the experts with plenty of evidence supporting the proposition that when it comes to running an insurance claims operation: 1) you know what to do, 2) you know how to do it, and 3) you are doing it, quite well.

The consultants' job is to identify performance gaps and root causes, and propose actions to close those gaps. Your objective should be to provide them with the information, the insights and the support they need to do that job well. People who hire consultants usually believe the consultants will bring very high levels of knowledge, objectivity, credibility and perceptiveness to the engagement. While that belief might not always be accurate, the reality is that consultants' findings are accepted as authoritative in most cases. That means their recommendations will impact you and your organization, so it makes sense for you to invest your time and effort into framing the inquiry and shaping the outcome. Give it your best shot--you might even learn something in the process.

The downside is that in tricky, prickly situations like this there is no guarantee things will turn out well even if you do everything right. Sometimes there are hidden operating agendas, foregone conclusions and predetermined outcomes underlying the consulting engagement, and unless you know about those factors going in, there's not much you can do to manage their impact.

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on property casualty insurance claims and operations. He can be reached at dean.harring@theclm.org or through LinkedIn