How to Reduce Claims Processing Costs: Part One
This is the first article in a series that highlights how insurers can streamline their claims processing activities while containing costs and helping to ensure continuous process improvement. In this first installment, I will mainly focus on clarifying your current claims processing costs. Once you have this benchmark, you are in a better position to leverage the strategies I will provide in future columns for improving your claims processing.
Let’s begin with the fact that claims processing continues to be a time consuming, complex and costly process. A claims examiner’s time locating missing documents, contacting departments to address incomplete information or sending emails with paperwork back to customers for a signature can be better utilized. Keeping your knowledge workers focused on high value activities rather than low complexity tasks is only part of the problem. Processing a single claim can cost insurers hundreds of dollars; even the simplest claims can sometimes generate surprisingly high unit processing costs. Successful long term claims cost management and reduction are possible, however, by implementing a structured approach that includes assessment, transition, management and continuous improvement.
A good first step is to assess what it costs to process a claim in your organization and where the main expenses are occurring. To do this you can begin with an overview of your current claims process. The figure below outlines what an initial assessment might look like, putting some key claims processing steps into in a format to help structure a cost analysis:
Claims Processing: Structuring a Cost Analysis
By gathering the processing costs for each key activity of the claims process, you can get a clear view into the estimated total spend as the most costly individual steps within your current process.
A simple calculation can be performed by dividing the total cost of your claims processing per year by the total number of claims processed in one year. This will provide your current unit processing cost per claim. You now have a base line to begin improvements. You know the current cost to process a claim and also where to initially focus efforts to evaluate the current process and understand if efficiency gains are possible.
Now you have a benchmark that indicates which areas to focus on as you plan an approach to streamline your claims processing operation. My next article will highlight an important tool, which I refer to as a “maturity model.” It can enable you to compare your current level of operational efficiency and help determine the next steps your organization can take to reduce operational costs and advance your claims operations.
In the meantime, feel free to visit the Insurance Services page of our website for more valuable information in the form of case histories, white papers, research reports and more.
By James Allen, Director, BPO, Canon Business Process Services
Insurance Industry Insights
January 18, 2017