Often seen as one of the necessary evils of insurance, policy checking is a critical task at any insurance agency. A Rough Notes study from 2009 estimated that 53% of policies issued by carriers contain an error and about 90% of those policies actually contain 2 or more errors. Retail brokers are the last line of defense in making sure the insured doesn’t receive a defective product. When facing the policy checking challenge, most agencies are either spending too much time and money or not doing it at all. I’ve compared policy checking to quicksand because some agencies are avoiding it while others wade into it only to discover that last year’s policy still hasn’t been checked or checked properly.
It has been my experience that agencies typically delegate policy checking to a customer service rep, account manager, or someone else who has multiple responsibilities. This person is often interrupted by phone calls from insureds with questions or producers who are looking for quotes. These constant interruptions cause the policy checker to lose their place and spend time finding it again when they can return to the task at hand. This leads to low productivity, additional mistakes, greater E&O risk and high cost per policy checked.
So, how can you escape the policy checking quicksand?
Policy checking is one of our most frequently requested client tasks and we perform policy checking for more than half of our 165 clients. We have seen the task performed a dozen different ways but our clients wanted to know, what is the best way to check a policy? We set out to answer that question.
Our Operations Excellence team (OPEX) conducted a benchmarking study around policy checking data. OPEX is made up of 10 fully dedicated process analysts. They apply LEAN and Six Sigma philosophies to their work and are responsible for innovation, analytics, and ReSource Pro’s Total Quality System.
OPEX observed and collected data from all of our policy checking clients, a total of 95. They compared:
- Amount of time it took to check each policy
- # of source documents required to check the policy
- # of fields on the policy that needed verification
- Any additional steps in the process such as
- Checking forms and if so, were forms attached
- Updating the system
- Creating invoices/ form letters.
OPEX found that monoline policy checking takes 25-106 minutes to check. Package policy checking takes a minimum of 60 minutes and at most 240 minutes! The number of fields checked ranged from 15 to 28 and policy checkers used between 1 and 8 source documents. After analyzing this data and comparing processes between the shortest and longest times, ReSource Pro came up with a game plan to avoid sinking in the policy checking quicksand.
Escape the Quicksand
This may seem like a no-brainer but it is crucial. To reduce discrepancies you must first understand why they exist. Common causes include incomplete submissions, missing information from the producer/insured, late system updates, poor data entry, inaccurate source documents. Then you can take the necessary steps to prevent them from happening.
Enter information in a timely fashion. Insist on accurate and complete submission documents: get a process in place. Control the quality of information you put into the system and you won’t spend as much time checking and correcting errors through rework and endorsements.
Standardization is the best tool for reducing discrepancies! Create a standard operating procedure (SOP) for policy checking. Your SOPs should be clear, concise, and user-focused. SOPs should not only include the steps to complete a task but why it needs to be done. Slice tasks into sub-tasks and in turn each sub-task should be broken down further into steps. Steps can be broken down to key points. The result is an SOP that acts as a checklist for your processor.
What should you standardize?
- Source documents: define what the policy should be checked against. What that looks like depends on your agency and it may change over time – especially if you are starting with low-quality data.
- Fields to be checked: Focus on critical fields. Does wording on templates need to be checked?
- Use a checklist: Make it visual. All team members should use the visible representation of the task. Checklists also allow for quality control. If the same discrepancy is occurring over and over you should be able to see where on the checklist it is happening and improve your SOP.
Treat large and small policies differently, they have different needs. You can’t devote the same amount of time to each, lest you run the risk of losing money on the smaller accounts. Really think through the complexity of the accounts, the quote process, and the characteristics of the policies. Create multiple levels of policy checking. Level 1 for small accounts, Level 2 for larger/more complex accounts, and so on. Make sure your SOPs highlight the differences.