Insurance brokers: Cost-saving options for claims processing

We looked at the options for improving the operations of insurance brokers, many of whom are faced with increasing competition. After constructing a causal map of the over industry we focused on the claims processing part of the industry. We built a small model of the claims processing system associated with the Lloyds market.

This model takes a constant level of claims and, based on the level of staff at different stages of the process (claims entry, research, checking, submission etc), how the brokers' cash flow builds up. Of particular importance was the fact that the time taken for the underwriters to approve a claim could be highly variable; this places great demands on the staffing at the brokers with it being very risky having too few staff and very expensive having too many.

Using the model to test improvements

We ran three different potential changes and modelled how they affected different parts of the system (using dummy data for demonstration purposes):

• Baseline (no change)
• 25% reduction in research staff
• 50% reduction in research staff
• 50% reduction in claims input staff

A key aspect of this model was the use of a statistical disribution to represent the variability of the time taken by the underwriters to approve a claim.

The following graphs show how the key stages of the process are affected by the different changes.