Motorists Insurance Group found some help with debris removal-literally and figuratively. As a result, the Columbus, Ohio-based life, auto, property and casualty company has prevented the loss of millions of dollars in overpaid claims while creating a confident, upbeat crew of adjusters.It all began four years ago, when Motorists executives sat down for a presentation by Marshall & Swift/Boeckh (MSB), an MDA company with offices in New Berlin, Wis., and other North American cities. At the time, MSB had been providing Motorists with software for estimating property claims for about four years but was just launching an analytics consulting service to help carriers understand how claims are really paid.
In the presentation MSB parsed data from Motorists claim estimates and described how the insurer could achieve whopping savings, mainly by staunching leakage, says Teresa King, Motorists assistant vice president of claims. Impressed, the Motorists executives made a decision: "We said, 'We'd like you to study this a little more,'" says King.
So MSB reviewed data compiled from Motorists claims estimates and came up with ways of whittling down the bottom line by instituting best practices, says Anthony Hetchler, director of claims analytics for MSB Claims Analytics Group. Motorists picked three areas to concentrate on in the first year: debris removal, multiple minimum charges, and overhead and profit, says King.
"We picked the low hanging fruit-somewhere we could get our biggest bang for the buck," recalls King. Hanging lowest was debris removal. To sell the analytics adventure to top management, King, her people and MSB predicted they could cut debris removal costs alone by $1 million in the first two years.
Adjusters often use the category of debris removal as a catchall for added expenses on claims estimates, explains King. Before embarking upon the MSB analytics program, not many on the staff gave the category much thought. On a certain job, for example, they might allow for the rental cost of a 20-cubic-yard dumpster at $670 and just let it go at that.
Well, that job might not call for a rented dumpster, King says. If workers need to remove carpet, for example, they can put it by the curb in some municipalities and city workers haul it off for free.
Other times, a contractor can stash a job's small pile of refuse in the back of a pickup and drop it off at the landfill. Some of the smallest jobs hardly have any debris.
MSB informed Motorists that debris removal accounted for 8% of the money the company paid in property claims, says Hetchler. Until then, Motorists didn't have the staffing or technological sophistication to figure out a percentage like that. "When they said 8%, I was like, 'Wow,' " recalls King.
That's when Motorists set a two-fold goal for better estimates of debris removal costs. The company vowed to reduce the category to an average of 4% on claims of more than $2,000, while holding the total for debris removal to an average of no more than $80 per claim on estimates of less than $2,000.
"We thought that was an aggressive goal and that it might take us quite a while to get there," says King. "Well, it didn't. We exceeded that objective in the very first year and have continued to control costs and keep the total going down."
For 2006, Motorists paid an average of 3.4% for debris removal on claims of more than $2,000, and it paid an average of $67.71 on claims of less than $2,000. The reductions have helped the company maintain its competitive edge, says King. When Motorists was paying 8%, the industry paid an average of 10%. Now that Motorists is paying 3.4%, the industry has come down to 5.5%.
Motorists held down the estimates by making quarterly visits to every one of the seven company claims offices. MSB experts went along on the field trips to answer questions, celebrate successes, provide tips, show how Motorists was reaching its goals and note how Motorists compared with competitors.
"We had training sessions and taught our adjusters the size of dumpsters, the types of debris removal you should be paying for and what kinds of claims generate debris," King says of the monthly visits. "You can break it down and say, 'If you demolished a 2,000-square-foot house, it would fit into this many dumpsters of this size.' It brought some reality to what they had been overpaying in the past without really even knowing it."
So Motorists literally began getting help with debris removal. At the same time, the emphasis on best practices removed figurative debris from every claims estimate. For an example of metaphoric debris removal, consider the second hot topic in that first year of analytics: multiple minimum charges.
In defining multiple minimum charges, King recounts what can happen when adjusters regard one claim as a series of small jobs. Say a house needs drywall repair in two rooms that aren't adjacent. An adjuster could view the claim as two small repairs and award money for travel time for each, thus doubling the appropriate travel expense. It was a matter of paying someone twice to make a single trip.
"We were very inconsistent with that," before introducing analytics, King admits.
Motorists set the goal of avoiding multiple minimum charges in absolutely every claims estimate-in other words, the company wanted to sidestep that particular overpayment 100% of the time. MSB informed the carrier that the adjusters were managing to avoid the pitfall only 70% of the time when the program started. Now, Motorists prevents those payments in 98.9% of cases. "It's not a huge dollar savings, but it's an estimating practice that makes you better overall," says King.
King cites "overhead and profit" as the third first-year priority. That's what it's called when adjusters tack 20% onto an estimate to cover payment to a general contractor, who theoretically oversees and coordinates subcontractors who specialize in particular building trades. The fact is most jobs of less than $2,500 require workers from only one or two trades, so no general contractor is needed.
Motorists wanted to reduce that add-on to an average of 95% of jobs of less than $2,500. The 5% leeway was for people like the 80-year-old policyholder who might prefer to call a single larger company that would take care of the whole job, King says. Once again, the company exceeded the objective. It's now at 98.7%, compared with an industry average of 85%.
In subsequent years Motorists has continued to set annual goals for stopping leakage. "We've embraced it, we've trained on it and we've concentrated on it," King says of the analytics program.
Four years in, the company says it has plugged just about every hole in the claims estimating dike. King adds that she's proud that the company heads the list of MSB analytics clients in all categories of best practices.
"Still, each year we try to figure out some way to improve," says King. "It might be an estimating practice that might not be related to dollar savings, but it is related to being a better estimator and a consistent estimator."
This year, Motorists is focusing on service, trying to accelerate processes and thus reduce cycle time. The company is measuring the time that lapses between points along the continuum of the claims process. Points include the time when the claim comes in to when the company makes the first contact, makes the inspection and issues the check claim.
Service has become a product differentiator, says King. "Where four years ago we were growing in the double digits, growth is very difficult in the marketplace right now," she observes. "So we are focusing totally on how we can improve our customer service and maintain our policy holders and maintain that competitive edge in the industry."
Whatever the annual goal, MSB provides big picture data. The company can show, for example, when Motorists is paying too much for shingles in one region. Contractors can't get away with falsely claiming a windstorm has driven up the price of shingles because Motorists knows the price at the Home Depot around the corner.
Because MSB compares Motorists data with numbers from other MSB companies and the industry as a whole, the adjusters can rally around their collective successes, seeing their improvements on charts and noting that they score higher than competitors. All of that happens in the quarterly meetings.
"We're constantly giving these statistics out to the adjusters on a scorecard so they know where they're doing and how they match up with the company," says King. "On a quarterly basis we give the analysis out showing how we compare with the industry. So we're constantly showing our improvement and our upward progression."
At the same time, MSB can draw a narrow focus. At the narrowest, it can pinpoint a single adjuster who is making a single mistake. Motorists reacts to that last bit of information by providing individual training.
From the start, adjusters have taken to the system because Motorists uses the information to help employees perform better, not to punish them for underperforming, says King. Adjusters continue to sharpen their understanding of the software, building knowledge of why the company estimates the way it does. That can help them negotiate effectively with contractors.
The deeper understanding of claims also helps the company set individual goals for adjusters and tie performance to salary increases. Not one adjuster has failed to achieve his or her goals since the analytics program has been at work, King says.
What's more, the program helps adjusters teach others to work more effectively, says King. When adjusters see that a colleague is reaching a goal, they can no longer insist the objective is impossible, she says.
Even after achieving leakage goals and moving on to customer service, Motorists uses the program to maintain a watchful eye on the data from finished projects, always on guard against complacency, says King. As she puts it: "We don't want to go backwards."
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