Traditional to Customer-Centric

Claims Organization

Ayhan Dayoglu03.10.2013

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The cost of claims payments and expenses is the largest spending category

• In order to maintain “Profitable and Sustainable Growth”, Business As Usual Gaps with Budgeted Targets should be closed through improved claims operations and organization

SUSTAINABLE GROWTH

INCREASING THE PROFIT

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Almost 80 percent of each earned premium amount is “claimed by claims” as pay-out and related

expenses

Claim Process: Moment of truth

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Company Strategic Approach Vision

A Direct Focus, Retention is key to success

Differentiate by claims service and focus on customer satisfaction

B Focus on Agency; service the agent

Provide claims service that meets industry standard

C Speed up settlement Focus on efficiency and accelerate handling time

D Low cost provider Focus on efficiency and effective cost ingredents

Source: Deloitte

Claims management is highly challenging

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Multiple processes

and platforms.

Complex, duplicative functions

Often with outdated

technology

top-down commitment to operational excellence

right claim with the right resource at the right time

• More stable and predictable loss costs

• More efficient and predictable operating expenses

• Improved loss and expense costs

• Higher overall claim service ratings

• Higher policyholder retention• Improved employee

productivity• More reserve stability• Improved regulatory

compliance

• Leveraging advanced analytics

• Supplier management

• Legal cost management

• Technology enablement

• Fraud detection

Alarming Situation

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Claim SystemsManuel

& Paper Based

25%

25%Resolve at the First Contact

14%

Resolve

Non-Core Activities56% of an average claims professionals’ day is focused on non-core activities

Source: Accenture Research

New channels are changing the game

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use of mobile devices for first notice of loss

proliferation of the use of social media

Today’s problems for insurance companies

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Pressure to reduce costs

Stretch targetsBacklogs

IT issues

Increased workloads

Disengaged employees

High customer expectations

Today’s problems for insurance companies

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Delivering a resonant customer experience proposition

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• How do customers perceive the quality of insurance interactions, taking into account the customer’s specific values and standards ?

• How do I track a customer’s journey along entirely the her lifecycle (from an initial quote to a claim), across product categories, and across channels ?

Factors influencing customers’ decision to choose and leave an insurer (%)

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Source: Cap Gemini

There is a gap between what customers expect of insurers and what they believe they receive

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Source : Accenture

Most insurerer struggle to achieve the differentiation which is crucial to growth

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Source : Accenture

The job of management : manage people and budgets

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Henry Ford’s mass production system

Board

Managers

Workers

Top-Down Approach

Seperating decisions from work

What is Fordism (Taylorism)

Work lacks intellectual content Mechanization Routinization & simplification of tasks Fragmentation Specializations Coercion outweighs consent Work speeds up Liberation of brain to think other things:

this led industrialists to form educational institutes for workers

Americanism & Fordism

The consequences of a top-down fear culture : unhappy customers & higher costs;

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command and control design spoils the delivery of service to customers.

Breaking work down into low-cost functional operations fragments the flow of work.

Customers experience difficulty in getting through to someone who can solve their problem,

They find they have to repeat their problem, call back again and it takes time to get problems solved.

Many customers give up. Bad service is not only bad for customers; it also costs more

Mass production demoralises workers

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WHENEVER THERE IS A PROBLEM

85% OF THE TIME IT WILL BE IN THE

SYSTEM 15% OF THE TIME

IT WILL BE THE WORKER

The job of manager has changed

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THE JOB OF THE MANAGER IS TO WORK ON THE SYSTEM TO IMPROVE IT, WITH THEIR HELP.

Thinking

System

Performance

To change performance, we need to change the system. To change the system we need to change our thinking.

There are two steps to changing management thinking: * understanding what is wrong with the current assumptions – the harder part – and * learning to operate with different assumptions.

If you want people to do a good job, design a good job to do

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To design a good job to do, change the system. To change the system, change the way you think

If you design a system where the people who do the work, have control of the work, people change

Traditional Assumptions Systems Thinking View

All incoming work is treated as “work to be done’’

Identify & eliminate non-value / failure demand work

Functional specialization reduces unit costs Functional specialization increases end to end costs

Targets work Targets make performance Worse

Process standardization reduces costs andimproves service

Standardization of processes increases end toend costs and makes service worse

Outsourcing saves money Outsourcing failure / waste is not a sensible way to

Change based on knowledge

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Check

PlanDo

Understand current performance –“what and why”

Use front line staff to study the work

Identify levers for changeExperiment to get to perfect

Implement thechanges

Change in the approach

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FROM

Functional teams

Targets / Rules

Competition

What’s in it for me ?

Managers behind desk

TO

Multi-skilled teams trained to resolve high frequency customer demands

Purpose, Principles, Measures

Collaboration

What matters to the customer ?

Leaders “in the work”

Culture change is free

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When you change the system, your people become your asset

What about suppliers

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Work Providers(Insurers)

Battlefield

Supplier Resistance

Clients/Customers

CommonInterests

Supplier Desire

Understanding & meeting real needs

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Insurance Company • Fulfil liabilities – policy & compliance• Cost reduction• Retention/satisfaction• Competitive advantage

Policyholder • Restoration• Satisfaction• Perceived value

Supplier Provide solutions to physical, emotional, liability and management needs for all parties

Cost reduction causes customer dissatisfaction

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Source : Insurance Association of Turkey / Accenture

Basic standards are needed to structure system thinking

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Source : Insurance Assosiation of Turkey / Accenture

Summary

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Organizations are complex systems – a change in one part of the system can have unplanned and unintended consequences on another part of the system

Management thinking is still rooted in 19th Century factories

A new way of management thinking is required if businesses are to succeed in the 21st Century

Start by understanding why your customers are displeased

THANK YOU

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