Outsourcing Joint Venture Streamlines Claims Processing, Avoids Disaster for New Orleans Insurer | Article

mardi gras maskSometimes, business relationships turn out better than planned.

In 2002, New Orleans-based Pan-American Mutual, which provides life and disability insurance in 42 states and Central and South America, introduced Worksite, a line of supplementary health, life, and disability insurance for workers. The insurer expected it had a few years to keep records for this new product line on paper and process claims by hand before it had to electronically archive it. The executives wanted this new line to be successful–but you have to be careful what you wish for. In a pleasant surprise that brought with it a less-than-pleasing challenge, Worksite’s sales far exceeded projections. In two years, the volume of those claims grew to 7,000 per week and processors struggled to keep up.

“You never want to complain about success,” says Deborah Tatro, Vice President for the Worksite and Special Risk lines, “but such rapid growth does present some unique obstacles.”

This heightened claim volume produced a major data bottleneck for Pan-American. The dramatic increase, coupled with the normal amount of other claims, put tremendous strain on the company’s Customer Relationship Management Center, forcing it to field more customer calls. It also had a negative ripple effect on sales.

Rapid action was necessary. “We knew we needed to better control that technology; we just hoped it would be later rather than sooner,” Tatro explains. It became clear that an outsourcing partner was key to rapidly automating these paper-based processes.

“Insurers have incredible amounts of paper to deal with, says John Mancini, president of the Association for Information and Image Management (AIIM).”In many ways, scanning is the on-ramp to process management. Until you implement it, you cannot automate processes because you’re tied to a piece of paper.”

A recent Tower Group Study reveals that new technology is simplifying systems and reducing the amount of manual document handling throughout insurance organizations, producing improved flexibility as these automated workflow systems impact all insurance lines.

“Can You Do It Yesterday?”

“From the outset, carriers need to capture data and create ‘segmentations’ for claims by distributing claims to the appropriate work group,” says Matt Foster, Chief Technical Architect for insurance at Accenture. “The key is getting data up front, applying business rules, and establishing the right processing steps.”

But Pan-American’s requirements were trebled by the need for speedy implementation. Usually such initiatives take months. In order to again retain efficient operation, Pan-American’s new image data solution had to be up and running in a few weeks. AIS’ President Lynn Smith clearly understood the insurer’s need and urgency. He felt he had an image solution partner in Kofax that had not only the product but the support and outsourcing culture he needed to meet the insurer’s dire need.

Pan-American’s life insurance line had already converted from microfiche storage to digital images through AIS and Kofax. “Their experience with both of us made this the logical first choice,” AIS’ Smith says.

In May 2004 both operations analyzed Pan-American’s needs and developed a strategy, relying on Pan-American’s own documents to demonstrate Kofax’s Ascent suite. Smith and Kofax wrote a proposal for enough document through-put to quickly erase the backlog and improve customer service dramatically.

Pan-American management approved the proposal’s concept and specifics, but made one stipulation: delivery in one month!

“They spent a week installing the scanning process,” recalls Mike Rowberry, Senior Project Implementation Manager at Pan-American. The management solution went in the next week, followed by two weeks of due diligence testing. The system was operational and began full production claims management within the one-month window. The paper mountain began to disappear in short order. “Even the on-going remote support works well,” Rowberry adds.

After Katrina forced Pan-American’s sudden move to Dallas, it took about a week to fully resume Worksite’s administration. Pan American’s claim payment process improved dramatically. “Even when a flood of claims would arrive on Monday, we’d be caught up by the end of Tuesday,” observes Rowberry. And when Hurricane Ivan forced them to evacuate staff for three days in 2004, “we were caught up by the end of the following week. It performs exactly as advertised. And we make all of our deadlines,, he adds.

Ivan was a precursor to the profound impact that Hurricane Katrina would have on this document management function.

Katrina Forces Rapid Move, Unprecedented Cooperation

After Hurricane Katrina forced Pan-American to abandon its New Orleans home office, executives made a quick decision: move all aspects of its entire data center 400 miles northwest and co-locate them at one of the insurer’s supplemental data centers as well as one of its long-time data outsourcing providers, CSC, both in Dallas, Texas.

“We thought we were only looking at a six-week outage, but it became pretty clear it would be longer,” says Patrick McGunagle, Executive Vice President of Pan-American.

Though there were logistical challenges that delayed some of these relocated processes’ resumption of service for several weeks, such was not the case with Worksite. Kofax quickly granted temporary licensing to CSC, enabling it to host the Ascent platform. Combined with the already proven efficiency of getting the platform up and running, it took about a week for Worksite’s administration to be fully operational in its new location.

A recent Tower Group Study reveals that new technology is simplifying systems and reducing the amount of manual document handling throughout insurance organizations, producing improved flexibility as these automated workflow systems impact all insurance lines.

“From the outset, carriers need to capture data and create ‘segmentations’ for claims by distributing claims to the appropriate work group,” says Matt Foster, Chief Technical Architect for insurance at Accenture. “The key is getting data up front, applying business rules, and establishing the right processing steps.”

An Outsourcing Supply Chain Every Step of the Way

Anthony Macciola, Vice President for Product Management at Kofax, feels his firm’s relationship with its reseller channel is key to such successes as the partnership between his firm, AIS, and Pan-American.

“Some of our resellers are strictly vendors,” he observes. But most of them are outsourcing providers because they feel it makes more sense. We place no restrictions on how they service our products, other than comply with sales volume levels, quality of service offered in maintaining their relationships, and consistent invoicing to agree with our protocols.”

But he notes that Kofax’s highest-producing resellers subscribe to the outsourcing model. “We’re seeing more service bureau-based service level agreements (SLAs). They understand that the larger, longer relationships are centered on outsourcing because the products they offer are a means to an end when it comes to providing service. This, in turn, gives them the inside track on fulfilling more services because the value proposition is not limited.”

Pan-American’s Chauvin reports that productivity has more than doubled since the initial Kofax/AIS implementation. Average document output per person has improved from nine to 21 per hour. Kofax’s Macciola isn’t surprised.

“In addition to the obvious benefit drivers, significantly lower labor costs delight clients. Though we suggest that reduction can be up to half, typically it’s higher, in some cases a two-thirds reduction in human capital expenditure.”

And another benefit awaits Pan-American, according to Susan Cournoyer, Research Vice President at Gartner. “If carriers become more efficient in their back-end operations, they can spend more on distribution channels, sales agents, offices, and technology that feeds leads back to the agents.”

Chauvin and her staff see other areas where capture automation offers major gains. “We want to grow our imaging, such as billing,” she notes.

Mauricio Le Sage, IT Director for Pan-American’s group systems, reveals “the next step is to use Ascent for health insurance for other group lines and branching into other form management areas such as dental. That will take a lot of customization, but we have the right horse to ride.”

Chauvin agrees with Le Sage’s thoughts. “This was one of the most successful projects we have ever done here. It was a very aggressive timeframe with successful results. Kofax and AIS bent over backwards to meet our deadlines. It’s a true partnership.”

Lessons From The Outsourcing Journal:

  • Larger, longer relationships are centered on outsourcing because products-only offerings are limited. On the other hand, outsource-based service providers have the inside track on fulfilling more buyer needs because the value proposition is not limited to products alone.
  • Outsourcing relationships produce greater service efficiencies and added benefits of lower human capital expenditures.
  • Outsourcing cost-effective back-office operations freesup money for more capital expenditures that improve the buyer’s value offering.
  • Digitization of documents enables quicker disaster recovery.


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