Improving Disability Claims Processing | Rapid Process Improvement, Kaizen Events, Lean Insurance

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Improving Disability Claims Processing

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Client: Canadian Insurer, Disability Claims Department
Industry: Insurance (Life, Retirement, and Investment)
Service: Rapid Process Improvement (Kaizen) Events

Challenge:

Claim decisions were taking too long and claimants were not fully aware of their progress within the process
Disability claims department lacked standard work for managing customer claims
File management process added wasteful administrative activities and non-value added movement of case files between functions

Solutions:

Bring together cross-functional groups of frontline employees and experts to generate and test solutions (a Kaizen approach)
Document process steps and waste
Eliminate non-value-add steps; develop standard work descriptions for value-add steps
Redesign office arrangement to create small cross-functional clusters (cells); each claim file now has a designated spot and is returned to that location after each use
Address file tracking system that was creating busywork without adding value to client

Results:

Total number of process steps dropped in half (from 280+ to just over 140)
The time from claim notification to decision dropped from 50+ days to 30 days
Contact with claimants within 48 hours rose from 58% to more than 95%

The disability claims department of a Canadian insurance company, that served primarily small to medium-sized businesses, was concerned about how long it took to process claims from notification to decision. Customers were unhappy and the company was putting its ability to purchase reinsurance at risk.

The company turned to Guidon to help them define and solve their claim processing problems. During an initial assessment period, the company realized that, for example, it could take anywhere from a few weeks to more than 200 days just to make a decision about a claim. Contributing problems were:

The lack of standard work. Even similar claims were seldom handled the exact same way.
Excess complexity. The process from notification of a claim through managing approved claims had more than 280 steps, including 45 handoffs and 25 decision points.
The company’s file tracking system was very complex and took a lot of associate time. “File administration” often took precedence over serving the customer.
The traditional arrangement of their offices (each function grouped together) meant files were in constant motion, traveling back and forth between offices. This made it hard for people to know where to locate a file, among other problems.
The department didn’t collect data on the progress of claims, so could neither confirm nor deny challenges to the timeliness or quality of its work.

To solve these problems, the company used rapid process improvement (Kaizen) events, bringing together cross-functional groups of frontline workers and other experts for an intense one-week session of brainstorming and solution testing. In two sessions, the groups were able to make a number of improvements in a matter of weeks, including:

Creating standard work descriptions, defining how key steps in the processes should be done
Eliminating excess administrative steps
Identifying and defining four specific tracks for handling approved claims (depending on the nature of the injury and expected outcome for the customer)
Turning their function-oriented workspaces into process-oriented “work cells” (each “cell” included representatives from the major functions)

As a result of these changes, the number of process steps has been cut in half. The time to make the initial decision fell from more than 50 days to 30 days. More than 95% of claimants are contacted by phone within 48 hours. And the company now has a collaborative workspace environment which has made them stronger, improved file management, and more consistent decisions are being made.