Efficient claims processing is crucial for insurance companies to provide excellent customer service and maintain a competitive edge. To achieve this, benchmarking key performance indicators (KPIs) is essential as they serve as a valuable metric to measure effectiveness.
As organizations become increasingly data-driven they are turning to key performance indicators (KPIs) to keep track of how individuals, departments, and the organization itself are performing.
In this article we will go over the ideal 5 performance indicators you should be tracking in claims management and why it’s important to benchmark results to significantly enhance your claims processing.
What does KPI mean?
KPI stands for “key performance indicators.” Data collected, analyzed, and summarized to help decision-making.
Benchmarking finds instances of superior performance so users can understand the underlying processes and practices driving performance. After determining factors are discovered, companies can improve their performance by incorporating these best practices into their operation.
Organizations can evaluate their performance and progress toward specific objectives with measurable metrics. By leveraging KPIs, insurance companies can identify areas of improvement, set performance benchmarks, and drive continuous enhancements in their claims processing operations.
What are KPIs in Insurance?
The insurance industry is no stranger to data and analytics. These have driven claims-related business decisions for decades. However, as it is a conservative industry it often lags other industries in using technologies and implementing new techniques. KPIs in insurance report benefits just like any other industry. That is why it is so important to implement the fundamentals.
KPIs: how can they be used to your advantage?
Benchmarking is important because the process is focused on using evidence and data to illuminate areas for continuous growth and improvement. It can also help you see that, as a business scales, needs will evolve as well. Here are six best practice steps you should take to ensure you get the most out of benchmarking:
- Define Clear Objectives: Before selecting KPIs, it’s crucial to define clear objectives for your claims processing operations. Clear objectives will guide your selection of relevant KPIs that align with your organizational goals.
- Select Meaningful KPIs: Choose KPIs that directly measure the aspects you want to improve. The selected KPIs should be specific, measurable, attainable, relevant, and time-bound (SMART).
- Set Benchmark Targets: Once you have identified the relevant KPIs, next set benchmark targets based on industry standards, internal historical data, or competitor performance. These targets will serve as performance benchmarks and help you evaluate your progress over time.
- Establish Data Collection and Analysis Processes: Implement systems and technologies that capture accurate and comprehensive data related to the selected KPIs.
- Monitor and Track Progress: Consistently monitor and track the selected KPIs to assess your progress towards benchmark targets. Use dashboards or reporting tools to visualize KPI data, making it easier to identify trends, patterns, and areas of improvement.
- Implement Process Improvements: Leverage the insights gained from analyzing KPI data to identify areas for process improvement.
5 KPIs to Benchmark for Better Claims Processing
Now that we know how to take advantage of KPIs, let’s delve into the specific KPIs that are vital for driving improvements in claims processing. Here are the five claims-specific insurance KPIs that will ensure claims processing is taken care of and in constant improvement:
1. Claims Ratio
The claims ratio KPI measures the number of claims against revenue. This is critical to benchmark because a higher-than-normal ratio could indicate fraud, while a lower ratio could indicate difficulty filing claims.
2. Average Payout Per Claim
Knowing the company’s average payout per claim helps predict future expenditures, which can lead to setting policy rates that ensure the company’s financial health. Remember to segment this KPI based on policy type for the most accurate overview.
3. Components of Claim
Payouts are only part of the picture. There are a lot of other costs involved in settling claims — for example, legal and administrative fees. Time to settle and report delays can also increase settlement costs. Knowing the costs of settling a claim can help highlight areas that can be streamlined to improve profits.
4. Average Time to Settle a Claim
This is the most critical indicator given that a high average settling time is often a reason for people to leave an insurance company.
5. Claims Processed Per Employee
This efficiency metric can provide insights into operational procedures and help drive faster settlement times to ensure client satisfaction. This information is useful to identify employees who might be causing bottlenecks, and offer them the necessary coaching and training.
Start taking advantage of Benchmarking today
As we can see, Key Performance Indicators (KPIs) serve as invaluable tools for insurance companies to monitor, measure, and improve their claims processing operations. By selecting meaningful KPIs, setting benchmark targets, and regularly analyzing the data, organizations can identify areas of improvement, optimize processes, and enhance customer satisfaction.
Benchmarking provides an analysis to objectively assess performance against peers and quantify opportunities for improvement. Within the insurance industry, benchmarking for claim management helps users obtain perspective on the efficacy of tools and efficiencies in processes.
Remember, the key to success is not continuously copying processes, but innovating solutions to create optimal conditions for success.
Terra is up to the challenge
When it comes to establishing KPIs and most importantly measuring success, Terra is up to the challenge. Its Benchmarking tool generates reports and dashboards for easy comprehension and fast improvement of bottleneck or lower preforming indicators.
See what Terra does for yourself by getting together with our team.