Tag Archives: jim kaiser

5 Steps to Profitable Risk Taking

The really bad thing about risks is that they almost never lead to a loss. Why would that be bad? Because risk aversion is responsible for so much lost opportunity. Risk aversion allows us to shoot down ideas faster than we build them up. It is easier to cite a risk that a project or change effort will fail than to undertake it.

But getting ahead means change, and change means risk. Those who prosper in business, take risks. The list of leaders who wouldn’t take risks is a very short one.

The biggest risk is not taking any risk… In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks. – Mark Zuckerberg

In other blogs, we’ve written about the price you pay by not adapting. It’s not a question of whether you should take risks, but how to do it well. Nearly all great advances come through leaders’ appreciating an opportunity and understanding how to manage its risks. So often in our discussions with companies, we encounter leaders who acknowledge the opportunity we present, but who are stymied by perceived obstacles to acting on it. The focus turns too heavily to what lies in the way rather than the path. These obstacles become risks – “unknowns” – that inhibit desired transformation.

See also: 4 Steps to Integrate Risk Management  

Risks are an integral, essential part of improvement. They force us to think, to adapt, to learn. Companies that advance don’t do so by avoiding risk. They don’t do so in spite of risk. They do so in conjunction with risk. The question is not how to avoid risk, but how to embrace it. Leaders love risk as a thing to be conquered, not feared. Here’s how they do this.

Define your goals in detail before you define your risks.

It’s easy to get sidetracked by anxiety. The mention of a potential goal is more often met by caveats about it than by building out the path to the goal. Leaders focus first on the goal and the value of achieving it.

Act on risks constructively.

Draw up a list of risks that could materialize on your way to your goal. Define each risk (what it is), what impact the risk can have, the probability that it will occur and what should be done to manage it. Most often, the risk is much smaller than you imagine. For example, if we more aggressively negotiate medical cost reductions, we might generate more litigation. That might cost us $2,500 per case. This might happen on 10% of the cases.

Don’t stop there….compare your risks to your upside – Our plan will result in reductions of more than $1,800 on 80% of all cases…..The upside is positive. Keep moving forward.

Enlist people in problem solving…not problem identification.

When engaging with others on a project or change effort, dwelling on risks leads to managing against a fear of failure. Get people involved in answering this question: “How can we achieve [name the goal]?” – rather than “what do you think of [name the goal]?” For example, how might we successfully achieve medical-cost reductions without generating litigation?”

Plan for success and manage your way there.

Managing risk doesn’t mean playing defense against potential disaster. On the contrary, it means keeping a clear eye on what you want. When we implement with a client, we have a detailed list of action items to be accomplished by our customers and us. Tedious? Not really. Critical to success? Absolutely. We know the critical success factors and we plan for and execute on them.

Use risk to learn.

We all know that stuff happens. Recognize it. Learn from it. Move on. Peter Drucker, the famous management guru, said it best…..

“People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.”

See also: Are Portfolios Taking Too Much Risk?  

If you’re feeling hemmed in by risks, take a different approach. Embrace it. It’s the only way to master it.

A Blueprint for Casualty 2.0

Casualty 2.0 is a claims management blueprint for bringing together technology, data, skill development and process to control loss costs in measurable, strategic ways. It is also a path to building strategies for operating expert casualty organizations.

The property and casualty industry pays out more than an estimated $100 billion a year to resolve personal injury claims. Numerous factors affecting the investigation, evaluation and resolution of these claims have been changing, making them more complex and more expensive. These factors include inflation in medical costs driven by higher pricing, more services and complications in evaluating pain and suffering, driven by multiple injury diagnoses. New laws and legal doctrines create nuances for adjusters and managers to consider. Containing the cost of settlements is not getting easier.

In the midst of this rapidly evolving environment, leaders operate without effective reporting and measurement, with aging and disjointed technology, in the absence of formal training and proven practices. Casualty organizations are falling behind. Casualty 2.0 combines four disciplines that must work together for effective containment of settlement value. These disciplines are data and reporting, technology, process and adjusting skill.

See also: Examining Potential of Peer-to-Peer Insurers  

Data and Reporting: Build data for measuring “what” and “why”

Most casualty organizations are confined to very limited and not-so-useful data. Measurement, when it is available, is confined to items like average payment, average cycle time and counts of new and closed claims. These measures are starting points but leave so much unanswered that they are poor guides for improving performance. For example, if average payments have gone down….is that an indication that accuracy has improved? Or that easier cases are settling, leaving the more difficult and expensive cases in inventory?

Peter Drucker, the famous management expert, put it succinctly when he said, “You can’t manage what you can’t measure.” Without measures, the management process is reduced to focus on one case at a time. Strategic insight cannot be developed from this level of information.

In Casualty 2.0, we examine the core data and measures that every company needs to lead.

Technology: Use technology to build and resolve a holistic, integrated case

Technology is the window into data and the mechanism for aligning process. It is also a means to developing skill. Casualty organizations are significantly challenged in using technology this way as they work in a fractured environment of point solutions. They use a combination of core claim systems, document management systems, Word documents or Excel files and other ancillary applications like ISO’s claims indexing. In some cases, medical bill review systems are also used. This mixture tends to generate activity about the parts of a claim without building a picture of the whole claim.

The result is claim information residing in many different applications. The sum of these parts doesn’t add up to the whole. It is not possible to systematically evaluate performance by looking at claims investigation, evaluation and negotiation holistically. For example, what do you pay in settlements for medical bills and why? Pain and suffering? How frequently does liability play a factor? How much variance is there? Which adjusters produce the best results and why?

Not only is it difficult to use the data your adjusters have spent so much time compiling, but the current approach also mandates “processing” activity over “adjusting decisions.” The use of “unstructured” data like claim notes not only harms data insight but also is not useful in managing process.

Casualty 2.0 moves technology from documentation and data collection exercises to supporting judgments in a single, integrated solution. Creating a holistic and integrated view of liability, pain and suffering, medical, etc. isn’t convenient, but it’s necessary to controlling the overall settlement value AND building adjusting expertise.

Process: Work from a core skill set

Casualty organizations look for adjusters who are experienced in casualty handling. Training is seen as beneficial, but most organizations lack the budget to build effective programs. The result is skills that are developed “on the job.”

The lack of structured training makes tenure attractive. But tenure is not a standard of skill. Tenure, in our experience, is far from a guarantee of a good result. Most claims leaders we speak with agree. With tenure comes a mix of adjusting approaches as well as knowledge of uncertain origin, not a consistently reliable claim outcome.

See also: One Foot In Healthcare: Property And Casualty Payer Integration  

Some standards for knowledge and skill are needed. For example, in an industry more and more driven by medical inflation, demonstrated knowledge of the process and guidelines for assessing and treating a patient are “must haves.” (Also see our blog on “Injury Evaluation Tips.”) We’ll be writing about the core casualty skill set and how to turn this knowledge into real cost containment.

Adjusting Skills: Implement practices with proven impact on controlling settlement costs

In the thick of multiple applications and demanding productivity expectations, adjusters end up “processing” claims rather than “adjusting” them. Procedures are developed that outline the tasks that should lead to a good solution. Each procedure makes sense in its own right, but they often don’t lead to effective decisions that contain settlement value.

Best practices are not just “logical,” they are practical and measurable. For example, checking ISO for prior
claims and challenging the legitimacy of an injury in low-impact cases are good practices. The practices that convert this information into measurable cost containment are the best practices.

Standards and practices that produce the best results are developed by addressing how judgment should be applied, capturing the use of this judgment and using it to demonstrate, through data, that it produces better results. Standards are not a matter of design, but of demonstration. Casualty 2.0 uses proven practices as best practices.