Six Sigma Management: Improve Claims Processes and Maximize Efficiency

Tim CottonDirector, Claims System & Vendor Management – The Main Street America Group

Kevin HilyardVice President, Property & Casualty Claims – Nationwide Insurance

Mark J. Rose, Esq.Senior Associate Attorney – Roig Lawyers

So what is Six Sigma?

Okay, but what is Six Sigma?

It’s all about Quality Control

Multi-step process with statistical analysis to understand (and hopefully eliminate) variation.

“We’re not making widgets, beepers, or screws, so what does ‘parts per million’ mean to us?”

Key: It’s all about variation

4

The Insurance Company/Claims v. Manufacturing

U.S. Steel, Edgar Thomson Plant

The Insurance Company/Claims v. Manufacturing

Manufacture rolled steel for refrigerators, car doors, back of dishwashers, etc.

Utilizes a “dual-slab continuous strand caster”• i.e. a “Play-doh” extractor toy

where you pour 300 tons of molten metal into the extractor and it pushes out thinner and thinner steel at around 2,700°F

The Insurance Company/Claims v. Manufacturing

Straightforward process if everyone wants the same steel (or product)

Different customers want different types/grades of steel, even between orders

Imagine changing the color of the “Play-doh”

That mixed metal is worth far less and may even be outright waste.

It’s all about variation

The Insurance Company/Claims v. Manufacturing

Variation exists whether the product is steel, time for claim resolution, individual claim exposure, etc.

Just as with U.S. Steel, if you can reduce (or eliminate) variation, you can reduce costs and optimize revenue and good will.• Quality control: a bad batch of steel for car doors for Ford is tantamount to

unsatisfactorily resolved P&C claim that maybe resulted in 5 years of litigation

Was it a result of a “mean shift” or an isolated occurrence?

What is Six Sigma for claims?

Six Sigma is universal, across industries: manufacturing, accounting, finance, claims, etc.

The foundation for Six Sigma, 5-step process: DMAIC

Design Measure Analyze Improvement Control

DMAIC

Define• Defining the boundaries of the project• What is our starting point? • What is our goal?• What is the financial benefit we hope to obtain through the improvement of

this process and implementation of improved processes?

Keys: • “Garbage in, garbage out” system • Quantifiable metrics to evaluate successes

DMAIC

Measure• Identifying your input variables, often not just one thing• Identifying your output variables, often not just one thing• Understand the routine variability in the input/output relationship• Determine how much variability in the input/output relationship is

acceptable and what you will measure• Identify how you w