Of necessity, insurers must continue to evolve in today’s competitive marketplace. Some are forced to improve systems and practices in order to keep pace. Others expand to enter untapped markets. All of this activity places great strain on their operational models, not only to expand their markets but to maintain existing customer bases. Setting goals, modifying them when necessary, and quickly looking for alternative ways to manage their efforts often demand that they outsource.
“This is especially true in secondary-level carriers,” says Marc Cecere, vice president and principal analyst for Forrester Research. “Their nimbleness and ‘Why not?’ attitude helps them enter new markets more quickly and find better ways to continue performing ‘leaner and meaner.’”
One such company is New York-based XL Insurance, a provider of property and casualty liability and specialty insurance to commercial and industrial sectors. It recognized an opportunity in the U.S. casualty marketplace beginning in the late 1990s. In January 2004, company executives decided to swiftly expand into the casualty risk management business through a new portfolio of risk-sensitive products. In theory, the offering made sense. But in practice, XL’s limited internal resources and a rigid time frame to implement this program threatened the venture while still in the crib.
“XL is a specialty lines player in the U.S. and insurance marketplace,” says Frank Smith, vice president, head-Primary Casualty and Programs Claims for XL. “At the time, there was demand from our customers to enter the U.S. primary casualty market. We needed a solution for our customers’ domestic insurance needs quickly and needed help getting there.”
Recognizing this opportunity, XL sought to integrate a number of existing outsourced technology solutions into its self-administered, outsourced, and vendor-related third-party analyst (TPA) network to expedite entry into this new market before its competitors.
“Insurance firms are displaying a growing interest in remote TPAs and other such support workers to reduce costs as opposed to an in-house model,” says Jim Ware, a principal of The Work Design Collaborative, an organization that monitors the changing work practices of American businesses.
Reshuffling the cards while adding some aces
Highest on XL’s priority list was a need for an experienced technology solutions provider to quickly implement a new data management system, complete with co-located redundancies, in a short time frame to meet the carrier’s pressing needs. Due to the complexity of XL’s existing claims and underwriting systems, which relied on data feeds from numerous internal and external sources, diligence in selection was key.
“Our biggest concern was the complexity that was involved in implementing and managing the system,” says Smith, who adds that speed to market for this new line was equally important.
So after a quick, but thorough search, XL chose Chicago-based CS STARS LLC, a provider of integrated software, IT support and hosting services for risk management, claims administration, compliance management, bill review, and data management.
“Its deep experience in developing new solutions quickly was the tipping point,” adds Smith.
One advantage to this new product line was that there was no cumbersome legacy data management system to replace. But there was a catch. This start-up solution required adherence to XL’s existing unbundled claims management model rather than the traditionally rigid internal solution to support its widely-dispersed outsourced TPAs who actually handled the claims.
“By doing it this way, we better utilize these remote third-party administrators to handle the claims on an outsourced basis,” Smith explains.
“But to succeed, together we had to come up with a solution to their data needs to get all this information from the TPAs; then on a monthly basis, feed it into the established XL claims system,” adds Stephen Fischer, chief technology officer for CS STARS.
New product line and support structure in six months
The first step was to consolidate XL’s entire database for all its businesses. The CS STARS solution automated a variety of routine tasks, expedited data availability, and ensured process consistency. The provider staff efforts greatly minimized XL’s existing IT staff.
Because XL outsourced its claims administration of often complex, custom casualty programs to its TPA network, developing a data transformation process to both support them and monitor their work was paramount.
The new processes’ initial reporting capabilities enabled managers and TPAs to build necessary reports to manage the insured’s risk. This in turn helped managers monitor XL’s pricing policies, making it easier to respond to statutory reporting requirements. And all this information was incorporated into dashboard reports that not only generated key reports for XL’s senior executives but also helped internal managers monitor the work of individual TPAs and the group as a whole.
“The growth of technology that links TPAs to the central office enables in-house managers to better monitor their distributed workers,” adds Ware. “This helps them lower cost margins and produces greater efficiencies while simultaneously improving service offerings and customer experiences.”
With such a large and dispersed network of TPAs to connect, XL’s solution had to fill a variety of less than symbiotic needs such as improving claims oversight, quantifying audit values, ensuring data quality, and maintaining the carrier’s already high level of customer satisfaction.
The CS STARS solution empowered XL to develop this new TPA interface in less than six months. In the three years since implementation, the network of TPAs has since grown by 18 and reduced new outsourced TPA inclusion time to less than six weeks from what was 12 or more.
This has produced a more efficient TPA network, typified by the fact that provisional claims suspense — or unresolved claims, has dropped to a negligible 3.3 percent, according to the carrier, while also enhancing claims oversight, a vital element to XL’s business growth.
Lessons from the Outsourcing Journal:
- Insurance carriers find when they introduce new lines of coverage, outsourcing providers offer much greater speed to market in developing the support infrastructure necessary for these new lines to quickly succeed.
- Solutions offered by data management outsourcing providers can help insurance carriers more effectively leverage the growing trend in the industry of using third-party claims analysts (TPAs), many of those also outsourced, who do not typically work at the insurance company’s centralized location.
- The XL-CS STARS data management engagement quickly produced a drop in unresolved claims to little more than three percent. Another benefit is that XL is now able to bring new TPAs into its claims network in only a few weeks, also a significant reduction.