Wisconsin Insurance Commissioner Ted Nickel, president of the National Assn. of Insurance Commissioners, talks with Innovator’s Edge CEO Wayne Allen about insurance innovation, the pace of change and the opportunity for regulators to be more engaged in these efforts.
When I was a kid growing up in Wisconsin, arm wrestling was a big deal. I’m not exactly certain why, but my guess is that it was because the winters in Wisconsin are really long and really cold. I think everyone ran out of things to do at the local tavern — so, arm wrestling it was!
In my career in the insurance industry, I have seen a lot of arm wrestling matches. Perhaps not functional arm wrestling, but arm wrestling in spirit.
One of the longest-standing reasons for an arm wrestling match has been over the topic of who owns the customer and the customer experience. In some instances, departments such as marketing and, more recently, e-commerce feel they own the customer experience — and they are going to protect that turf. I have witnessed situations where IT was vying for ownership of the customer experience because it could install software that would make the customer experience appealing and functional — in one way or another.
I have also seen a good number of departments madly running away from a customer experience ownership arm wrestling match. Customer experience can be a really scary topic, and having it weigh into your performance appraisal might be daunting for many.
Recently, a number of insurers have realized that ownership of customer experience isn’t a department issue; it’s a person issue. A person needs to be responsible. To make it a top priority — which it absolutely should be — the responsible person needs to be at the upper level of the organization, within the C-suite or at least directly reporting there.
Responsibility is a good thing, but that’s not the whole success factor.
To truly institutionalize customer experience, organizingaround it is imperative. A recent press release involving Farmers Insurance organizational changes brought the theme of this blog into clear focus. The reporter understood the issue; The title of the article was “Farmers shuffles execs to improve customer experience.” Now, there isn’t a magical formula for customer experience organizational structures. Farmers elected to place the responsibility for customer experience ownership with two people: the newly appointed personal lines chief product officer and the person assuming the role of head of service operations for the company, who reported to the COO. The whole point is that an insurer needs to have a vision and a strategic goal for customer experience and then enforce it through its organizational structure with an accountable person or persons.
While I don’t live in Wisconsin any more, I’m pretty sure arm wrestling is still a big deal. But when it comes to customer experience, insurers need absolute clarity on what the corporate direction is, not arm wrestling — and sound organizational structure around customer experience will make that happen.
Incremental reputational risk, if not managed correctly, can chip away at a company’s brand for years and eventually result in lower sales and lower retention of customers.
Most risk management initiatives we hear about are “outside-in” approaches. Managing the Three Bell Curves proposes an “inside-out” method that builds an organizational culture where reputational risk management is woven into the fabric of a company’s DNA. The only way this can be done is by including the customer’s voice in just about all decision making.
What Is Organizational Culture?
I Googled “organizational culture” and got more than 36,000,000 hits in .32 second. None of the definitions is wrong—but none is perfectly right, either. What people miss is that organizational culture is an emergence – an immeasurable state made up of two or more relatively simple ingredients, where 2+2=7.
Deal and Kennedy (1982) defined organizational culture as “the way things get done around here.” Of all the definitions I’ve read, this simple one resonates with me most. Deal and Kennedy’s definition, while not perfect, seems to be the most widely accepted.
“The Way Things Get Done Around Here”
While culture itself is extremely difficult, if not impossible, to measure and manage, the relatively simple ingredients of culture are not. Because they are manageable, it is possible to guide the organization’s culture without being able to manage it directly.
When we think about “the way things are done around here” from a high level, we see there are really only three key ingredients: employees, work and customers. That’s all. And managing all three well ensures customers get what they want, when they want it, at a quality level they expect (or better). Guiding culture through the proper management of employees, work and customers results in a maximization of customer retention, brand strengthening and even growth (through referrals).
The Three Bell Curves
The simple bell curve shows the normal distribution of things in many facets of business. We use them when gauging success, failure, mediocrity and everything in between. A bell curve can be assigned to each of the simple ingredients that make up your company’s culture.
Gallup estimates that 52% of American workers are not engaged and that a further 18% are actively disengaged. This means that only 30% are either engaged or actively engaged. Where does your company stand? There are several ways to find out.
The impact of employees on reputational risk is obvious. Or is it? When we think about the impact employees have, most of us think about the customer-facing employee – the ones customers actually communicate with. The fact of the matter is that, in many companies, most employees are back-office or noncustomer-facing. These workers as a whole have every bit as much of an impact on customer retention and growth as those who are customer-facing. This is because problems left unsolved in the back office always present themselves in some form or another on the front line. Similarly, the problem solving that occurs in the back office creates a smoother experience on the front lines, helping those customer-facing employees provide a better experience. This is even more the case in manufacturing, where a product does all the speaking for itself and there is no customer-facing employee to manage the experience.
While it’s one thing to come up with metrics, it’s a whole other thing to execute strategies for change or improvement. Fortunately, much work has been done in the field of organizational psychology that has revealed the drivers of engagement. Sirota Survey Intelligence, out of New York, has been capturing data regarding employee attitudes since the early ‘70s. Their findings are really interesting. In terms of drivers of engagement, the three most important areas should be:
*Employee equity (sense of fairness)
Employee sense of achievement
By measuring and managing the workforce’s sense of equity, achievement and camaraderie, a company can make great strides toward reducing reputational risk.
Peter Drucker said, “There is nothing more useless than doing efficiently that which is not necessary.” Unnecessary work (waste) results in a couple of things. First, working with processes that aren’t necessary smacks an employee’s need for the sense of achievement in the gut – dead center. Second, the customer pays for everything your company does, even if the work is considered “waste.”
Necessary work is activities that are required (usually by law) that customers aren’t necessarily interested in paying for but must. Valuable work is work that customers would pay for.
The measure of value vs. waste comes during the process of problem solving. Problem solving done the right way eliminates waste. Done the wrong way, it adds complexity. Workarounds, for instance, add waste. Root-cause elimination removes waste and leaves more room for creating value.
Success on the” work” ingredient can be measured in terms of speed, cycle time and quality. It also presents itself in overall customer satisfaction. It helps employees to envision the work bell curve as they perform their everyday job duties. If everyone had an “eliminate waste, maximize value” mindset, think of the ideas employees would come up with! And once those ideas are acted upon, it leads to the employee’s sense of achievement and the removal of something customers didn’t want to have to pay for.
The Lean Enterprise Institute (Cambridge, MA) has a website that contains a plethora of useful information on working with the principles of lean inside and outside of manufacturing. Check out http://www.lean.org for more information on thinking and working lean.
Fred Reichheld, who founded Bain's loyalty practice, was determined to find out why some companies were so successful while others weren’t. In side by side comparisons, he and his research team found that customer advocacy was very strong among the successful companies while, at the mediocre or poor-performing companies, customer advocacy was weak. This all makes perfect sense. What didn’t (make sense) was that there was no calculation, no indicator, that could help a company understand where it stands and how to move the needle to the right on the bell curve.
By asking just one question, the team found, a company could develop a benchmark and use it to improve results. The one questions is: “On a scale of 0 through 10, how likely are you to recommend (company XYZ) to a family member, friend or colleague?” Having listened to answers to that question many times, researchers began to notice that customers who responded with a 9 or a 10 had actually promoted the organization or were going to in the future. Those who answered with a 7 or 8 were neither excited nor disappointed. Customers who scored between 0 and 6, the team found, were most likely to damage the reputation of the company by speaking about an experience in a negative light.
So how does a company calculate its Net Promoter Score?
A company’s Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters: %PROMOTERS – %DETRACTORS = Net Promoter Score. Yes, it’s that simple. NPS is a sign for everyone from the ground up to the corner office to see and work to improve. It’s the customer’s voice. It’s your company’s true north. Measure it. Improve it.
The big debate across the states over the expansion of Medicaid only deals with half of the equation.
The first half of the equation is political: who gets added to the entitlement rolls and who doesn’t. Wisconsin’s Gov. Walker, for example, decided to: turn down federal funds for expanding coverage; add 80,000 adults who are below the poverty line; and move some 70,000 residents who are above the line to the new federal exchange and subsidies.
But Wisconsin, like other states and the federal government, has ducked the rest of the issue: the staggering cost increases. Medicaid expenses, for which the states pay about 40% and the feds 60%, are crowding out funding for just about every other priority: K-12 education, the university system, environmental advances and economic development.
It’s the same story on health costs at the federal level. Medicaid, Medicare and the health bill for federal employees are the biggest driver of the crushing federal deficit. One recent secretary of defense said the department spends more on health costs than on weapons.
The void in the debate is the deafening silence on how to get the costs under control, with the exception of cutting people off the rolls.
It’s especially sad because there are solutions. Leading-edge employers in the private sector have put together a new business model for the delivery of health care that drastically lowers costs while improving health. Their best practices are applicable in the public sector, as some units of local government have discovered to great advantage.
Here are some proven, audited, beyond-debate cost-cutting moves that could be made with Medicaid plans:
Consumer-Driven Health Plans (CDHP) — Indiana has received a waiver from the Obama Administration to install Health Savings Accounts and to set higher deductibles for Medicaid recipients. Such CDHP plans cut costs by 20-30%. School districts and counties have deployed HSAs, as has Indiana for state employees and Purdue. Medicaid is rife with utilization abuse, because of an absence of such incentives and disincentives.
Reference Based Pricing (RBP) — CALPERS, the giant California pension fund that buys health care for 1.3 million members, has installed caps on procedures, such as $1,500 for colonoscopies and $30,000 for joint replacements. It’s easy to pay twice those maximums or more. But why do it? Why not RBPs for Medicaid? Note: A good number of providers have accepted the maximum prices.
Medical Homes — Another 20-30% can be cut from medical costs by offering proactive primary care. Many companies have set up on-site clinics to provide holistic care and keep people out of expensive hospitals. Why not set up medical homes where there are concentrations of Medicaid patients? Primary care is a lot less expensive than specialty care, the main offering of large hospital corporations. It’s also less expensive by far than care from emergency rooms, to which Medicaid entitlees often default. Obamacare provides some funds for community health centers, so there is a start for such medical homes.
The biggest problem for introducing aggressive and innovative management into Medicaid dynamics is the joint ownership of the program by federal and state governments. Differing agendas produce stalemate in most states. And, in the void, the costs scream upward.
Gov. Walker turned down the new federal dollars for a larger Medicaid program because of skepticism about the long-term availability of federal dollars. The soaring, unsustainable cost increases give substance to his position.
But his worry should be redirected to the costs. His concerns could be mitigated if the overall charges were sharply reduced.
He would look presidential if he followed the lead of private sector payers. That, again sadly, is in the political arena, so he probably wouldn’t get a federal waiver from the Obama administration for innovations, even if Indiana did.
Who loses in the managerial paralysis, when leaders don’t lead? In the case of Medicaid, it’s the taxpayers and poor people.
Never Ignore the Statute of Limitations
The Wisconsin Court of Appeal was called upon to resolve a dispute over the application of a statute of limitations in a suit against American Family Mutual Insurance Company, Gage Creighbaum, Sherry Lagios, and Dimitrios Lagios (the “defendants”) who appealed an order denying their motion to dismiss. The trial court held that the defendants waived their statute of limitations defense by not raising it prior to filing their notice of appearance and serving their request for admissions in response to Maas’ amended complaint. In Justin M. Maas v. American Family Mutual Insurance Company, Gage M., No. 2011AP1661 (Wis.App. 08/01/2012) the Wisconsin Court of Appeal resolved the issue.
On August 20, 2007, Creighbaum crashed his vehicle into a vehicle operated by Maas, resulting in personal injury to Maas. On August 18, 2010, two days before the end of the three-year statute of limitations period, Maas filed a summons and complaint against the defendants related to his injuries. Maas failed to serve any of the defendants with the summons and complaint.
Maas filed an amended summons and complaint on February 15, 2011, which he served on the defendants. The amended summons and complaint contained the same cause of action and named the same defendants as the original summons and complaint. The defendants filed an answer to Maas’ amended summons and complaint alleging Maas failed to obtain proper service of process on Creighbaum and the Lagioses and the court therefore lacked personal jurisdiction over them and alleged that Maas’ claim was barred by the statute of limitations.
The trial court denied the motion, concluding that the defendants’ failure to raise their jurisdictional objection prior to filing the notice of appearance and serving the request for admissions constituted a waiver of their statute of limitations objection. The court further held that Maas’ action was properly commenced and that the amended complaint related back to the original complaint.
On appeal, the defendants argued that even though Maas filed his original summons and complaint two days prior to the running of the three-year statute of limitations period, his claim is barred because he failed to serve any of the defendants with the summons and complaint within ninety days of the filing as required by Wisconsin statutes.
The Wisconsin Court of Appeal concluded that the statutes are clear. An action to recover damages for personal injuries shall be commenced within 3 years or be barred. An action is commenced as to any defendant when a summons and a complaint naming the person as defendant are filed with the court, provided service of an authenticated copy of the summons and of the complaint is made upon the defendant within 90 days after filing. Thus, if service is not made within ninety days of the filing of the summons and complaint, the action is not commenced. If not commenced within the three-year statute of limitations period, the action is barred.
It was undisputed that Maas failed to serve any of the defendants with the original summons and complaint within ninety days of filing. Wisconsin procedure requires, therefore, that the court conclude his action was never commenced prior to the running of the limitation period and is therefore barred.
Maas’ failure to serve the defendants with the original summons and complaint within ninety days was a fundamental defect which deprived the trial court of personal jurisdiction over the defendants and rendered the original pleading a legal nullity. The trial court conclusion that the defendants waived their jurisdictional objection by failing to raise the objection when they filed their notice of appearance and served their requests for admissions in response to Maas’ amended pleading fails since there was nothing for the defendants to waive.
Maas’ failure to serve the defendants with the original summons and complaint within ninety days resulted in the three-year statute of limitations period expiring without an action having been commenced. The failure was a fundamental defect which rendered the pleading a legal nullity and could not be remedied by the subsequent filing of an amended pleading after the statute of limitations period expired.
Statutes of limitation were designed to protect people against stale claims because, if suit is not filed promptly, memories fade and witnesses can move away from the jurisdiction. Parties and lawyers that wait until the last moment to sue are taking a chance of losing those rights because of their sloth. Mr. Maas is not without a remedy, however, because his lawyer’s failure to serve the defendants within the 90 days allowed by statute might allow for a case against the lawyer for failing to act within the custom and practice of lawyers in his community.
Although the waiver argument was original and successful in the trial court it did not stand up to scrutiny since no one can waive a nullity nor can a cause of action be created by waiver.