6 Risks Presented by the Future of Work
Sure, insurtech sounds great – who doesn’t want to modernize labor-intensive and time-consuming insurance processes, from underwriting and distribution to claims and customer service? But the truth is, this naturally risk -averse industry will adopt changes only cautiously and strategically, and very few new technologies have been road-tested enough to demonstrate lasting impact.
And of course, regulators will have a significant say on what is permissible.
But while the trend unfolds, automation has been proven to cut inefficiencies and streamline workflows. The industry’s administrative functions are undeniably laden with overhead costs associated with paper-based processes that demand copious time, labor and materials.
Why not pick one essential process – reconciliation – where automation can make a significant impact on the bottom line and reduce the risk of compliance misses and mistakes.
“In the insurance industry, every fraction of a cent that can be saved in time, resources, processing and operations goes directly to the bottom line,” said Renata Sheyner, senior product manager of Frontier™ Reconciliation, the end-to-end reconciliation and certification solution offered by Fiserv.
“Additionally, the more data that insurers add to their business and analyze through relatively untested insurtech innovations, the greater the need for automated, reliable transaction-level operational and balance sheet reconciliation.”
Most companies currently reconcile their books with two tools — a highlighter and a spreadsheet.
“I have seen conference rooms filled with filing cabinets to be sorted through,” Sheyner said. “Sometimes I ask potential clients, ‘How many different colored highlighters are in your desk drawer?’ Because that’s how it’s done without automation – highlighting items on printed reports, or using Excel spreadsheets to keep track of everything.”
Without automation, reconciliation at the transaction level can be a time- and labor-intensive process that leaves more room for human error. And errors increase the risk of running afoul of regulations. Reducing the risk of error in the books can save companies thousands in non-compliance fines when it’s time for an audit.
“A lot of CFOs are now personally liable for misrepresentation of financial statements. There are some pretty significant implications of non-compliance and not having your books complete,” Sheyner said. “There’s a huge benefit in incorporating all of your documentation into a system with built-in internal and external audit controls.”
In an intensely regulated industry, the importance of accuracy and transparency can’t be overstated.
Integration of data and matching transactions using an automated solution can cut the risk of error by as much as 50 percent, while allowing a more holistic and transparent view into the financial close process. An automated system with built-in audit controls can also ensure that standards dictated by Dodd-Frank and Sarbanes-Oxley Act are met.
A centralized view of transactions and the overall reconciliation lifecycle also makes it easier to mitigate the risks of fraud and write-offs related to unexplained exceptions. End-to-end reconciliation automation, combined with data agnosticism, identifies and resolves more exceptions. This can lead to an overall 75 percent reduction in write-offs.
“Insurers need a data-agnostic tool that can pull in massive amounts of disparate data around claims, policyholder details, equity fund balances, payment and disbursement statuses and more, and funnel it through an automated matching system to pair the right data with the right transaction,” Sheyner said.
Frontier Reconciliation provides that very detailed transaction matching, and can match data fields on a one-to-one, one-to-many, or many-to-many basis. Transaction-level matching with multiple fields reduces the need for manual intervention, “which allows employees to spend their time on value-added tasks like managing or investigating exceptions,” Sheyner said.
Among Frontier Reconciliation users, reducing manual tasks and implementing automated reconciliation can experience a 60 – 80 percent gain in efficiency.
The cost savings are also hard to ignore. On average, financial companies using an automated reconciliation solution save 25 percent on audits by providing electronic access to accounts and required approvals.
Taking paper out of the equation also saves the costs of buying paper and printing materials, reduces the manpower and hours needed to process records, and can speed up financial close by two to four days, on average.
“We frequently help accounting and finance teams build a strong internal business case for automated reconciliation and certification to present to senior management,” Sheyner said.
In addition to mitigating risks from non-compliance, fraud, and write-offs, an automated reconciliation process can also head off reputation risk.
“The reputational risk from restatement may not be monetary initially, but over time can certainly hurt an organization pretty severely within the market among their policyholders, peers and regulators,” Sheyner said.
Several large multi-line insurers in the U.S. rely on Frontier Reconciliation, including a top 10 multi-line carrier with over $43 billion in direct premiums written (DPW) who has trusted Frontier Reconciliation for the past 10 years.
“When they implemented Frontier Reconciliation a decade ago, they had a team of 40 people working on 300 reconciliations a day using Excel worksheets. Since automating the process, they’ve been able to refocus the team to eight who now manage more than 3,000 reconciliations a day,” Sheyner said. “And those other employees have been able to focus on other valuable strategic projects – ones they were hired to manage.”
Frontier Reconciliation also helps this leading Fortune 100 carrier match policyholders with premium payment data —like what type of payment was received, who received it and in what form (check, ACH, direct debit) — and track other information like claims data, coverage and payout limits, and outstanding disbursements.
“They can see in real time exactly how many outstanding payments there are and how many disbursements have been made. They can check on aging claims, which is important because the longer the claim sits open, typically the more expensive it gets,” Sheyner said. “If something is outstanding for 30 days, they can ensure processes are in place to bring those files to a close.”
Stronger compliance, reduced costs, and potentially faster claims closing … these are the insurtech promises that an automated reconciliation solution can bring to the industry today.
To learn more, visit: Frontier Reconciliation for Insurers.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Fiserv. The editorial staff of Risk & Insurance had no role in its preparation.
Employee engagement, employee advocacy, employee participation — these are common threads running through the programs we honor this year in the 2017 Theodore Roosevelt Workers’ Compensation and Disability Management Awards, sponsored by PMA Companies.
A panel of judges — including workers’ comp executives who actively engage their own employees — selected this year’s winners on the basis of performance, sustainability, innovation and teamwork. The winners hail from different industries and regions, but all make people part of the solution to unique challenges.
Valley Health System is all-too keenly aware of the risk of violence in health care settings, running the gamut from disruptive patients to grieving, overwrought family members to mentally unstable active shooters.
Valley Health employs a proactive and comprehensive plan to respond to violent scenarios, involving its Code Atlas Team — 50 members of the clinical staff and security departments who undergo specialized training. Valley Health drills regularly, including intense annual active shooter drills that involve participation from local law enforcement.
The drills are unnerving for many, but the program is making a difference — the health system cut its workplace violence injuries in half in the course of just one year.
“We’re looking at patient safety and employee safety like never before,” said Barbara Schultz, director of employee health and wellness.
At Rochester Regional Health’s five hospitals and six long-term care facilities, a key loss driver was slips and falls. The system’s mandatory safety shoe program saw only moderate take-up, but the reason wasn’t clear.
Rather than force managers to write up non-compliant employees, senior manager of workers’ compensation and employee safety Monica Manske got proactive, using a survey as well as one-on-one communication to suss out the obstacles. After making changes based on the feedback, shoe compliance shot up from 35 percent to 85 percent, contributing to a 42 percent reduction in lost-time claims and a 46 percent reduction in injuries.
For the shoe program, as well as every RRH safety initiative, Manske’s team takes the same approach: engaging employees to teach and encourage safe behaviors rather than punishing them for lapses.
For some of this year’s Teddy winners, success was born of the company’s willingness to make dramatic program changes.
Delta Air Lines made two ambitious program changes since 2013. First it adopted an employee advocacy model for its disability and leave of absence programs. After tasting success, the company transitioned all lines including workers’ compensation to an integrated absence management program bundled under a single TPA.
While skeptics assume “employee advocacy” means more claims and higher costs, Delta answers with a reality that’s quite the opposite. A year after the transition, Delta reduced open claims from 3,479 to 1,367, with its total incurred amount decreased by $50.1 million — head and shoulders above its projected goals.
For the Massachusetts Port Authority, change meant ending the era of having a self-administered program and partnering with a TPA. It also meant switching from a guaranteed cost program to a self-insured program for a significant segment of its workforce.
Massport’s results make a great argument for embracing change: The organization saved $21 million over the past six years. Freeing up resources allowed Massport to increase focus on safety as well as medical management and chopped its medical costs per claim in half — even while allowing employees to choose their own health care providers.
Risk & Insurance® congratulates the 2017 Teddy Award winners and holds them in high esteem for their tireless commitment to a safe workforce that’s fully engaged in its own care. &
More coverage of the 2017 Teddy Award Winners and Honorable Mentions:
Advocacy Takes Off: At Delta Air Lines, putting employees first is the right thing to do, for employees and employer alike.
Proactive Approach to Employee Safety: The Valley Health System shifted its philosophy on workers’ compensation, putting employee and patient safety at the forefront.
Getting It Right: Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.
Carrots: Not Sticks: At Rochester Regional Health, the workers’ comp and safety team champion employee engagement and positive reinforcement.
Fit for Duty: Recognizing parallels between athletes and public safety officials, the city of Denver made tailored fitness training part of its safety plan.
Triage, Transparency and Teamwork: When the City of Surprise, Ariz. got proactive about reining in its claims, it also took steps to get employees engaged in making things better for everyone.
A Lesson in Leadership: Shared responsibility, data analysis and a commitment to employees are the hallmarks of Benco Dental’s workers’ comp program.