Improving Insurance Claim Throughput and Quality with Lean Process Improvement

Amit Bhambi

As companies look for cost-cutting solutions in various service areas (e.g. banks, insurance, retail), current processes have been under great scrutiny. Process improvement efforts such as Lean deployment are being implemented globally. Many of these are carried over from Lean manufacturing and can be of great value to process improvement efforts in the service industry.

The following is an example of the use of Lean process improvement applied to an insurance payer. Insurance is a very tightly-regulated industry where large risk is assumed in incorrectly adjudicating a claim. The focus of the Lean process improvement effort was to improve throughput and quality in the claims handling process.

Looking at the Current State of Insurance Claims Handling

An insurance company’s claims center is responsible for examining a claim and determining whether a claim is to be paid out or not based on policy guidelines. A claim enters the center in a digital or manual format, where some claims are automatically processed (using computer systems), while others are sent through to a team, known as adjudicators, who will further evaluate the claims. From there a claim is sent through an auditing process based on the dollar amount where one or more auditors will check the claim and appropriately adjust the claim if needed. Even with all of these checks in place, a claim may be incorrectly paid out, paid in the wrong amount or denied when it should be approved.

There is a high variance in claim types and complexity, making it difficult to predict the time it takes to complete the work. In addition, claims are currently processed by the first available adjudicator taking on any incoming workload. This high variance makes it very difficult to understand throughput and the variance in quality.

Approach for Impact Using a Lean Process for Insurance Claims

To take an organized approach to understand the core issues, the first thing we must do is break the process improvement problem out. We must understand the current process, workload and performance so that we can identify opportunities to focus on for increased efficiency. Here are some helpful Lean process improvement steps to consider:
  • Lean Process Improvement Step 1: Create a value stream map. Begin by observing end-to-end process, setting aside time for interviews as needed. This will help us start with a high-level idea of the flow when we sit with both managers and frontline employees to get feedback and understand the process—from receiving a claim to paying out or denying a claim. Though managers have a better idea of external flows and reporting, the details of the day-to-day work is much more accurately captured by the folks doing the regular activities (it may be helpful to have these sessions separately so individuals can speak more candidly). The value stream map that we can create breaks out the work by functions, the flows of different types of work, exceptions, etc.
  • Lean Process Improvement Step 2: Analyze the workload. During this step we understand all of the different types of incoming work, the complexities posed by each type of claim and payout ranges. We also create a logical categorization of the claim types. This categorization helps us further identify claims with greater complexity that may need specialized groups to handle them and simple claims that may be candidates for automation going forward.
  • Lean Process Improvement Step 3: Learn from the leaders. Lastly we work with top performers to understand tips and tricks they may have to share with colleagues. We can create a process of continuous improvement by creating incentives to increase regular feedback, which helps us be progressive in our approach to the claims handling process by taking greater input from frontline workers. Many tools can also be developed based on this feedback to decrease wasteful approaches to various activities. Working closely with top performers allows us to understand the plausibility of achieving more aggressive targets and realigning our metrics to create a more productive work environment.
Lean Process Improvement Results

Many of our key findings from this Lean process improvement method lead us to understand our flow better. Changing the method for claim routing allowed the creation of specialized groups to more quickly turn around complex claims and auto-adjudicate claims resulting in 2 percent fewer incorrect payouts (based on a cost base in the billions [USD]). Further creation of standard operating procedures through the use of Lean process improvement allowed a uniform approach to claims handling and quick adjustment to best practice tools that we pulled from throughout the organization. In the end-to-end process flows we were able to identify unnecessary redundancy and down-time for the adjudication and auditing process, resulting in an increased throughput of 10 percent and decreased auditing times by about 15 percent.

Understanding an organization from end to end truly allows us to identify areas of particular importance that need to be scrutinized for process improvement. We must understand what the company is doing, how it is doing it and finally ask why these steps are taken. In breaking out the problem we can clearly identify areas to create solutions using Lean process improvement that help drive value.