16 Apr Using claims data to support corporate strategy
The power of claims data: How lack of measurement is stunting your corporate strategy
Claims that arise from fleet operations are a necessary cost of doing business. But unless they align with corporate strategy, even closely managed claims may be costing the company more than you realize.
That’s because the full cost of a claim isn’t limited to out-of-pocket expense. The way any particular claim is handled – whether first-party or third, and for both property damage and bodily injury – can have an outsized impact on a company’s core operations.
But the key to aligning with corporate strategy is having fingertip access to information that many companies struggle to collect. “In risk management and claims management, there’s a general acceptance of the value of the data,” notes Roger Cervenka, Director of Client Services at Fleet Response. “But there are a lot of companies where they simply don’t have the visibility – which frankly is why a lot of people choose to do business with us.”
As an industry leader in making data available to clients, Fleet Response has been involved in aligning claims management operations with corporate strategy.
The work typically follows this three-step process:
Step 1: Set departmental objectives
In any corporate cost center, reducing expense is an obvious goal. But that alone shouldn’t be your sole focus. And since the number and severity of claims is difficult to control, you should spend time creating actionable departmental goals that align with corporate priorities.
Example: A sales rep is involved in an at-fault accident that renders his or her car undrivable. Because the rep is responsible for retaining customers and bringing in new business, getting that person back on the road is the obvious corporate priority. Department objectives might be to assure the rep is back on the road within 24 hours, and subsequently working to minimizing the total cost for the rental and repairs.
Example: An accident takes a specialized vehicle out of service – a bucket truck or mobile workshop, perhaps. It can’t be replaced with a rental, and each day the vehicle itself is out of service results in lost revenue. In this case, minimizing the repair cost could delay the vehicle’s return to service, so the department objective might dictate expedited repairs, even if it costs more.
Risk managers face similar decisions.
Example: A fleet vehicle is involved in an accident that severely damages another vehicle, and results in a minor injury to the other driver. The departmental goal might be to expedite repairs or salvage of the third-party vehicle, because it can establish an atmosphere of cooperation that may have positive impact on the injury claim and influence the settlement outcome. Related article: A measured Approach to Managing Risk from Third-Party Bodily Injury Claims “Managing that kind of corporate risk delivers more value than any savings on the repair of one vehicle,” Cervenka says.
Operational goals tend to fall into three categories, Cervenka notes:
- – Quality and accuracy
- – Efficiency and timeliness
- – Customer service and client focus
Expediting repairs on vehicles that generate revenue is an efficiency decision. Making fast and satisfactory settlements on third-party property damage claims involves customer service and accuracy. In each example, the objectives provide clear direction within the department while aligning with the company’s strategic needs.
“The point,” Cervenka says, “is to avoid focusing too much in one area and instead focus on the totality of the accident and the potential impact that all components have on the organization: cost, speed, customer experience and overall outcome.
Step 2: Develop a dashboard Key Performance Indicators
Peter Drucker, the legendary business consultant, famously said, “What gets measured gets managed.” So the next step to aligning claims management with corporate priorities is to develop a dashboard of Key Performance Indicators (KPIs).
KPIs measure the activities that are most important to achieving the department’s objectives. There’s a wealth of advice available on how to set up meaningful KPIs, but most of it focuses around these five principles, as described by Phocas Software, a global provider of business intelligence solutions:
- – Simple: “Everyone involved in a goal should be able to recognize their role in enacting a KPI,” according to Phocas. “If a goal is clear, staff can make practical decisions that lead to achieving the desired outcome.”
- – Relevant: “It must also be relevant to a specific team within an organization.”
- – Aligned: “KPIs should always trickle down from the overall strategic goals of an organization…. They need to be aligned and not unintentionally undermine each other.”
- – Actionable: “Not only should they be easy to understand, but employees should also know how to achieve an effective outcome.”
- – Measurable: “A KPI should be easy to measure. An effective KPI avoids generalized goals … and should be based on a solid, focused goal that can produce qualitative and quantitative measures.”
“KPIs are the results of the people who are doing the frontline work and driving business ahead,” Cervenka says. “The trick to developing the right metrics is understanding the work flow, and having a strong sense of the areas that have the most impact on the most important things.”
Example: When managing vehicle repairs, Fleet Response has identified a correlation between the speed with which an estimate is reviewed and outcome of repairs. “When we turn around estimates within four hours, we have more opportunity to work with the repair facility to make sure it’s accurate and complete. It reduces supplements and helps us maintain tight production schedules,” says Stuart Bruan, Adjuster and Maintenance Manager at Fleet Response. Related article: 6 Simple Keys to Ensuruing Your Vehicles are Repaired Correctly As a result, one of the KPIs for Fleet Response adjusters is the amount of time that passes between an estimate arriving and being reviewed.
Experts also point to a Goldilocks effect with KPIs: With too few, important insights can go unnoticed. With too many, the work tends to focus on the KPIs themselves rather the insight they provide.
The nature of KPIs will also vary depending on whether claims management processes are outsourced or handled in-house. “If you’re handling the processes yourself, a lot more detail may be needed,” Cervenka says. As a starting point, here are basic metrics that Cervenka recommends for any claims management dashboard:
- – Average total cost per claim, segmented for total losses and repairs
- – Average cycle time for total loss/salvage
- – Rental days per claim
- – Total subrogation dollars recovered
- – Percent of subrogation recovered
- – Average cycle time, broken down by major components:
- Date of loss to date reported
- Reported to estimate reviewed
- Estimate reviewed to repairs started
- Repairs started to repairs complete
- Repairs complete to subrogation started
- Subrogation started to subrogation closed
- – Average settlement amount when third party does not have legal representation
- – Average settlement amount when third party has legal representation
- – Average days to settle when third party does not have legal representation
- – Average days to settle when third party has legal representation
- – Attorney representation rate
These metrics are the essentials to evaluate whether your claims personnel or third-party administrators are maintaining or improving performance on an ongoing basis. The specifics of your fleet activities will have a lot to do with the numbers behind these KPIs, but you can also compare metrics against industry average with Fleet Response’s free Performance Benchmarks for Fleet & Risk Management.
If a company handles its claims management internally, or with multiple vendors, more granular KPIs may be needed to provide insight about important sub-processes. “It’s one of the reasons so many companies are now outsourcing this work,” Cervenka says. “Effective claims management is increasingly data-driven. If you’re still doing this work yourself, you need to get into the details of each process in your KPIs.”
Step 3: Monitor and manage
Incorporating strategic goals and KPIs into daily operations means getting the entire team involved. Experts suggest making sure team members understand how their work affects different KPIs, and setting team goals around important sub-processes that affect strategic outcomes. “Make the goals challenging but attainable,” Cervenka emphasizes. “It’s better to shoot small and incremental improvements than setting goals that encourage people to cut corners and game results.”
Results should be shared regularly with individuals and teams, and even outside the department. Individual efforts to achieve goals can be used for coaching purposes. But experts emphasize that the role of KPIs is to assess process performance, not people performance. “If people’s careers are dependent on reported metrics, there is a tendency to hide facts or report incorrect data. Individual performance is important, but the focus of an initiative should be on process performance,” writes Abhash Chandra, an IT program manager, in the online journal iSixSigma.
“Your KPIs are your guide – not your boss,” Cervenka adds. “The goal is to get everyone working on the right things to serve your game plan. The metrics let you know how you’re doing, but in and of themselves, they don’t drive value. You and your team drive value.” Finally, Cervenka emphasizes the need for balance. “Gains in one area may reduce metrics in others. When you focus too much on speed, you may take a hit on accuracy,” he says. “The dashboard helps you see the correlation, but it’s up to the people to figure out the right balance.”