Make a new path: the self-adjusted claim can lead to fewer employees, improved productivity and better customer service.

How many claims people does it take to replace a 100-watt light bulb? Four. One to take the inbound call and fill out the claim form, a second one to determine why the light bulb needs to be replaced, a third one to call back the customer and tell him the light bulb will be replaced but he needs to first analyze the socket and the light to verify the appropriate wattage, and a fourth to go out and actually screw in the light bulb.

So goes a joke that's been told several times by different insurance company executives. It always elicits guffaws. In fact, listeners usually chime in and go through their own iteration, doubling and even tripling the number.

No matter how much insurance companies spend to improve claims management, nothing seems to change. Customers still complain about the process, and claims costs as a percentage of overall premiums continue to rise. Moreover, the number of employees in claims departments has remained relatively the same in spite of millions and millions of dollars spent to rationalize and "improve the claims process."

Why?

It can be argued that established companies often suffer from their own success: Claims departments work and managers believe that only incremental or marginal gains can be achieved. They become wedded to existing products, technologies and procedures. As a result, claims departments are bloated and not nearly as efficient as they could be. Millions of dollars in savings could be realized by leveraging technology to better automate the work adjusters are doing now and unleash human potential. Paradoxically, the path to reduced headcounts and improved quality and service doesn't begin by looking at technology and systems. Instead, it starts by, considering, customers and employees.

Refocus the Process

More insurance executives realize that claims service is crucial. So more insurers tout their claims handling as providing a great customer experience. They brag they'll send a van to your door or accident scene to adjust your claim and give you a check on the spot. But the basic claims experience hasn't changed much. Just because an adjuster shows up at an accident doesn't necessarily lead to better customer care if the old focus remains. It does not resolve the competing issues of providing an excellent customer experience versus "paying only what we owe" efficiently. Companies strive to give customers the impression that they care, when actually they are just trying to be more efficient by reducing cycle times, lessen litigation and improve reserving--all worthy goals, but not the whole picture.

For insurers, the Holy Grail is to consistently deliver an excellent claims experience that will differentiate the company and add value. The challenge, then, is to put the customer at the center of service delivery.

While data from surveys show that customers like to have their loss adjusted promptly and their vehicle repaired quickly, the data also point to the underlying notion that the customer doesn't feel in control in the claims process. Even having polite, skilled claims reps on the phone doesn't offer control.

It's like dealing with an appointment with the telephone or cable TV company. The customer has to be available during a four-hour window or lose the appointment. Similarly, insurers don't give customers the power to control their claims experience.

It doesn't have to be that way. Other industries, from banking to airlines and hotels, are handing over decision-making control to customers. For instance, airlines installed electronic kiosks a few years ago. You just swipe your credit card and you have your ticket without standing in line. You feel in control. Then, the airlines took it a step further. Now, you can go online and print out a boarding pass before going to the airport. It involves a bit more work and you're paying for the ink and paper, but most people love this because it puts them in control, and they don't have to worry about standing in a long line and maybe missing their flight. Similarly, many manufacturers are no longer sending salespeople out to get orders. Instead they've created Web sites where customers can order directly and specify the delivery date.

The Self-Adjusted Claim

One of the most labor-consuming parts of the process is reporting the first notice of loss. The customer has to call and answer a lot of questions. And at the end, the customer still doesn't have all the answers about the claim.

Let's say the customer has a typical fender-bender--the kind of small claim that accounts for the vast majority of the millions of claims auto insurers adjust every year. What if, instead of having to call the company or an agent, the customer could get on the insurer's Web site and use a browser-based application that takes the customer through the claims process? It would confirm coverage, provide choices of where to get the car repaired and authorize a check.

Now the policyholders are driving the transactions and the solutions Instead of waiting hours for someone to show up. They are doing it in their time and pace. Their experience is better because they control it.

Besides a much better customer experience, the self-adjusted claim is extremely cost effective. It is the customers who are entering the first notice of claim, not armies of phone operators. And even though customers are doing a bit of extra work, most will really like it because they feel in control and are assured that their information will be entered accurately.

How many claims people should it take to change a light bulb? None! The customer can do it alone.

The Human Equation

Let's look at the employee side of the equation. Insurers have focused on improving internal processes to get claims files handled cheaper and faster. That's fine--to a point. The problem is that it overlooks the human element--the people who do the work. It doesn't unlock the real potential in claims organizations: how to leverage employees' skills better with automation and ensure consistency.

Traditional technology can bring efficiency to linear processes, but fails to do that when it comes to nonlinear work. And that's just the kind of work adjusters do. They know how to manage a file--a labor-intensive process that includes filing bills and images, reviewing policy coverages and obtaining information from databases.

By nature, each of us is different. At any insurer, most claims employees are reasonably productive and competent. At one end of the bell curve are the laggards, who produce little work, with low quality. They do just enough to avoid getting fired. At the other end are the rare superstars. They not only get far more done than the others, but the quality of their work is impeccable.

Humans are by nature inconsistent. Different employees handle the same claim differently. Inconsistency plagues insurers of all sizes and types.

The industry's most common solution is the assembly-line approach. Like manufacturers, they have tried to turn people into machines. Perhaps that worked in the Henry Ford era, but today's employees aren't keen about becoming robots in front of computer screens. Bored people don't perform well. Job satisfaction plummets and turnover rises.

What if there were another, entirely different way of looking at the problem? Instead of turning employees into machines, let's use machines to make employees better able to do their jobs. We can use technology to leverage the productivity and strengths of people, so humans can handle more complicated jobs that require judgment, while the vast bulk of routine work is automated. With most of the grunt work dispensed with, employees would be free to think, make decisions and serve customers.

Let's go back to the superworkers. What makes them so efficient and productive? They're not supernatural, and when you analyze it, there aren't any mysteries. These people follow certain procedures and take certain shortcuts that produce the best results faster. Today's technology can capture their expertise and encode it in software.

So, what if flexible technology could turn all of a company's employees into superstars?

If you could clone 100 of your best employees, the impact would be enormous. First, there would be more consistency. All routine claims would be handled identically because when human intervention is needed, the software would guide employees to make the right decisions and use best practices.

Second, the impact on productivity would be huge. Headcounts could be slashed dramatically.

Now let's circle back to the thesis about reducing a major insurer's inside claim staff. The self-adjusted claim is the first step. By letting customers enter their own first notice of loss on the Web, insurers could eliminate hundreds of phone operators.

Then, by implementing people-centric instead of process-centric technology, insurers could automate most of the nonlinear work that has previously resisted automation. That same technology would help employees handle the remaining work--the nonroutine, unusual claims that take extensive judgment--far more efficiently. Put the two together and insurers will reap a paradigm-breaking leap in productivity and vastly improved service and customer satisfaction--with far fewer employees.

Key Points

* Millions of dollars could be saved by leveraging technology to better automate adjusters' workloads and to unleash human potential.

* Insurers are making a mistake if they don't allow customers to control their claim experiences.

* By allowing customers to enter their first notice of loss via the Internet, insurers could eliminate the jobs of hundreds of phone operators.

Contributor Brian S. Cohen is president of Clear Technology, Westminster, Colo. He can be reached At [e-mail].