What If The Problem Isn’t The System

The Problem

The insurance industry has a big problem. For 30+ years, I’ve been walking into insurance companies and finding the same problem: people focused on their IT systems rather than their customers. In fact, I could count on one hand the companies I’ve encountered that felt good about their systems and weren’t pinning their future success on the efficiencies expected from “the new systemâ€.

How did this get so complicated? Insurance should be simple: issue a document that describes coverage for a risk and conditions, collect premium and then pay claims after they’re been adjudicated. For as long as I’ve known insurance – and as far as I can see it – there are two components to performing those simple tasks: technology and people.

A lot of time is spent exploring new technology systems, testing new technology, implementing new technology, training on new technology, fixing bugs on new technology, and then new technology becomes old technology when suddenly there is a new technology coming that is better. Sound familiar?

But what if the success of a carrier isn’t about the technology or the systems – the back-office systems as they’re frequently called. Maybe the problem is actually the people.

The People

The simple process of insuring risk becomes complicated for many reasons but there is one simple explanation: risk is hard to quantify, difficult to price and arduous to adjudicate and settle. These attributes of risk are constant without regard to the splendor or grotesqueness of the system being used to administer the insurance covering it.

The roles in a carrier most exposed to the challenges of working with the complexities of risk are underwriting, risk services and claims. People in each of those functions have two commonalities in their daily grind: they work with back-office systems and they work with external customers – insureds, claimants, vendors and service providers.

Regardless of the back-office system being used, managers in each of these critical areas follow a conventional process with their respective teams. They lay out ongoing expectations, define required tasks, and establish performance objectives. One of the expectations – in fact a regulatory requirement – is that all meaningful conversations and decisions will be documented.

The Sentence Data

Let’s call this documented information sentence data. The sentence data created every day in the industry is original content written by professionals to record actions, thoughts and decisions.

Managers typically have two broad measures by which they manage the performance of the team. First, they have long-standing measures such as the number of accounts handled, claims closed, average weeks to close a claim, and a variety of others. These measures are generally ineffective for distinguishing problems because they are too broad. Second, managers rely on audits or quality assurance testing to ensure specific actions are occurring. Such audits may occur monthly, quarterly or semi-annually.

Regardless of the frequency, audits will touch a very small percentage of the activity handled by the staff. However, the audits are the only tangible measurement of the interaction with the external customer.

The Opportunity

Herein exists the greatest opportunity the industry has seen in quite a long time.

Because of the complexities of risk, people make numerous judgments throughout the day about actions to take or withhold. It is difficult, if not impossible, to measure a person’s judgment – other than waiting to see the results they produce over an extended period of time.

However, judgments are documented and therein lies the opportunity.

The written documentation – i.e. sentence data – reflects events and activities of people and objects. Events and activities relate both to the facts and circumstances of an insured, a claim and the work of underwriters, risk services professionals and claim adjusters.

By transforming sentence data into measurements of events and activities that are happening, not happening or may happen, a carrier is now able to understand, react to and manage risk at a level that has to this point been impossible. For clarity and simplicity, let’s package these measurements into an Events & Activities Scorecard™.

The Events & Activities Scorecard

An Events & Activities Scorecard gives operational managers an unprecedented ability to identify gaps in operations for those areas that are most critical to their effective and efficient operation. For an underwriting manager, this could mean measuring each underwriter’s documented consideration of a specific drug testing risk management policy for commercial auto accounts. For a claims manager, it could mean measuring the gap between a claim adjuster’s average days to have first contact with a claimant and the target goal for that task.

Imagine an underwriting, risk services or claims department where the manager gets a daily Events & Activities Scorecard for targeted behaviors of the team. No longer is it necessary to wait months before getting audit results to find out if the staff have incorporated the behaviors asked of them.

If a carrier knew a risk perfectly, the ultimate system could be designed that people could use with flawless execution. As we all know, understanding risk at a high level is exceptionally difficult other than for the most benign risks, if there is such a thing. The result is that systems are very limiting.

The breakthrough opportunity comes in the fact that sentence data provides a great description of everything happening and the Events & Activities Scorecard provides the unprecedented access to that information.

The Conclusion

Are back-office systems important? Yes, they play an important role in a carrier’s operation but they never have and never will provide breakthrough success. Systems don’t create results. People do. Dramatically higher margins and remarkable customer success can be achieved through the Events & Activities Scorecard that give operational managers specific and tangible information about both customers and the people making judgment decisions all day every day that directly impact customers.

From this Events & Activities Scorecard, quick and efficient changes can be incorporated and opportunities seized that competitors may not find for several months. This leads to higher margins and happier customers.

About the Author

Rock Schindler is founder and CEO of SDRefinery AI, which is creating a new perspective into insurance operations using Sentence Data Refining driving improved margins and customer satisfaction. Previously, Rock has worked in the risk and insurance industry in a wide variety of functions, ranging from accounting and finance to reinsurance and operations. His visibility into the shortcomings of uses of technology and systems along with his love of the industry drove the desire and opportunity to dramatically improve the efficiency of operations by overcoming the limitations of conventional systems.

He can be reached at rschindler@sdrefinery.com.