There are several key attributes for a successful QM system:

• A leader with both the right skills and organizational position manages the effort.
• A well-defined standard is the basis for measurement.
• The observation system is adaptable to different needs.
• The system's design balances ease of use with sufficient detail.
• The focus is the ability to understand real causes of problems, not merely symptoms.

Of course, quality management is not a substitute for an internal audit department. Auditors focus on statutory compliance and financial outcomes, not causes. The claim operations department must know both what happened and why it happened to remedy problems. This calls for a different approach to measurement.

For the claim representative, quality measurement usually combines with productivity and customer satisfaction as the pillars of evaluation. This applies to leaders for whom aggregating quality in the organization is an essential milepost, but QM is also a lens to allow them to see the effectiveness of the organization's strategy. It gives managers guidance to revamp systems, change processes, address behavioral issues, and update training programs to alleviate problems.

Despite the importance of QM in people management, don't let its influence stop at the adjuster's performance evaluation. Capitalize on your significant investment by taking the next steps to move to a true quality management system.

Managing the Process

The success of the QM system can depend on who coordinates it. Having a process leader with a hearty grasp of the overall business will pay big dividends. The sidebar on the next page includes an overview of the typical duties for which a process leader is responsible.

The quality process leader might be the claim manager or executive responsible for a department, or someone devoted solely to the task. Regardless of the leader's title, when that person understands the key components of the system, then he or she will able to help ensure that it will be more effective.

The QM plan includes deciding on the standard you'll test against, how the quality observations will be organized, how the files will be selected, and how root-cause analysis will occur.

Know Your Standards

Most QM systems assign a score as the key performance indicator of a claim outcome. Much like a football game, the entire process comes down to the score. Statistics like total rushing yards or third down conversions are useful to a coach as they lead their team, but the number of actual wins determines who makes the playoffs.

A well-communicated standard is the basis for ensuring that scores are accurate and consistent. Simple standards are better. It's easy in football: score more points than your opponent to win. It's harder in a complex system such as claims. An example of a standard might be that an “acceptable” file is one that has “an overall outcome with minimal financial variance and would be perceived by the customer as a positive experience” or a “standard” file contains a “combination of outcomes that would be acceptable in future similar situations.” Any reasonable standard works, but it must be published and repeated often so it's understood.

Organizing Your Quality Observations

The holistic review of a closed claim file for feedback to an individual adjuster is the most common type of assessment. This traditional approach is essential to the overall quality assessment system but is not the only component. It offers the advantage of assessing the entire system and can bring to light problems that would not become apparent through key performance measures. However, an error on a closed claim has already done the damage and thorough holistic reviews take a lot of time.

Adding other types of reviews makes the overall system more efficient and gives new dimensions in the insight the process brings. Intervention (assessment of open claims) can stop errors before they actually cause harm and tighten the feedback loop from reviewer to adjuster. These interventions are a natural activity for claim supervisors and managers, as they complete quality assessments as part of their routine daily activities. Intervention can have a strong impact on morale when the feedback is positive and closer in time to the action.

Targeted reviews focus on a specific area that is suspected as a performance problem either from analysis of holistic reviews or from reporting metrics. Targeted reviews can be completed on open or closed claims, but try to focus more tightly on the suspected issue. Because of the narrower area of attention, the review may be completed more quickly.

A discussion of statistical sampling confidence would go on for longer than most of you would be willing to endure. Thankfully it needn't be complicated. You can create a sample for your QM system by selecting from a closed claim file list that includes all claim exposures in a given case, paid severity, loss adjustment expenses (LAE), and exposure pending times. Don't be afraid to introduce some “bias” by getting away from purely random choices and selecting claims that reflect some risk. It is important to see some of the majority of claims that are simple, but they are not usually problematic. You'll learn more and fix more problems from higher profile claims.

In open claims, avoid “sampling” claims submitted for authority. Open claims expected to settle just below the adjuster's authority might tell you more about the work. Claims that have been pending for a long time are another place to look. Reps may not be clear on what steps should be taken next. A supervisory review can lead to coaching that moves the claim to resolution.

Doing fewer holistic assessments by adding targeted and monthly review types can increase the number of observations created with a given amount of effort, increasing confidence in the findings. For reps handling claims of an average level of complexity and performing a reasonable level of quality, a total of 20 observations in a year can provide adequate confidence.

Calibrate Your Team

In most claim organizations, the frontline supervisor or manager does the majority of reviews. The frontline team is a good choice for reviews, as they understand the environment and are able to get feedback directly to adjusters. A specialized review team or the audit department often backs up the effort. The advantage of a specialized team is that they may be more impartial.

Be sure to get all reviewers well calibrated This calibration can include any number of exercises designed to ensure that similar observations give the same score. Second-level reviews of quality assessments, a scoring matrix, intra-review team discussions about exceptions during engagements and process leader involvement are all ways to calibrate the QM system. Second-level reviews are particularly useful for calibration, as they present excellent coaching opportunities for leaders and validate the results of the entire QM system.

Calibration is improved when responses for individual QM questions are consistent. Careful design of question wording and a detailed help document can clarify common situations. Use of dropdown lists for answers can help, but choices must be clear and unambiguous. Limiting questions to the minimum number necessary can reduce reviewer fatigue.

Root Cause Analysis Maximizes ROI

The design of the QM system should anticipate relationships to root causes of problems, making them much easier to spot. The simplest way is to focus on outcomes rather than strict compliance. Instead of addressing symptoms, such as reps who delay customer contact, focus on the causes, such as lack of skill in statement taking.

Get a head start on cause analysis by asking what happened as a result of actions in addition to what the action was. The skills or behaviors of adjusters are usually the cause of claim issues. Less frequently, process, system, or environmental issues are the cause of problems, so some questions should focus on those areas as well.

The analysis of QM results is just the first step in getting a clear picture of the root cause. Quality management assessments can't account for many other organizational issues. Rapid growth, new markets, changing objectives systems, employee turnover, and many other things may influence results. A QM process leader with the right position in the organization can help see those varied relationships. When many reps, departments, or regions start to report similar outcome issues, the corrective effort can be organization-wide rather than one adjuster at a time.

Too few companies use quality information as a way to assess progress against the claims department strategy. The process leader can build that analysis and supplement key measures reporting to provide a better picture of the state of claims. The measurement can be made in real time to get an earlier indication of change.

The data and decision-rich nature of the claim business builds in unique challenges to assessing the work. These challenges, however, can be managed. Giving the process sufficient organizational importance by having a process leader is a start. Choosing the right combination of review types, along with the right mix of reviewers blends the advantages of each into a complete system. Using the assessment data for as many purposes as possible reduces the cost at each level. Having a system specifically designed for the task of understanding root causes makes turning data into action easier. So look at your system as a management process to maximize your returns and maybe make life a little easier.

Jim Kaiser is the former leader of commercial claims at Progressive and is the current president of Casentric, LLC. He may be reached at 216-644-1352.

David Young is president of ClaimsVision, a firm providing a range of claim services, including QM solutions to the P&C industry. Young may be reached at 970-231-7668, [email protected], www.ClaimsVision.com.