Billing and Revenue Management - A Case for Change

Transcription

1 Achieving High Performance in Insurance Billing SAP Americas Insurance Forum, November Accenture. All rights reserved.

2 Billing and Revenue Management has a dramatic effect on insurers, reinsurers, and agents High Performers balance the three forces that are impacted by billing and revenue management Potential to drive fee income balanced with an impact on investable funds Financial Performance Operational Efficiency Satisfaction Inefficiencies cost money, hinder growth, and create compliance problems Key driver of customer and channel satisfaction and dissatisfaction most common touchpoint with customers 2007 Accenture. All rights reserved. 2

3 The Case for Change: Billing currently only gets the appropriate attention when things go wrong High Bad debt writeoffs AR > 90 days High DPO High Collection Costs Financial Performance Operational Efficiency Satisfaction Exception-based/fragmented processes Tribal-knowledge-driven operations Systems/processes hindering change Focus on non-value-add activities High-Levels of billing-related customer calls service can t solve problems Agents driven to easier carriers Low customer retention 2007 Accenture. All rights reserved. 3

4 The Case for Change: Financial Performance Typical Problems Potential Opportunities It takes the larger P&C carriers an average of 85 days to turn premium into cash The average carrier loses.40% of premium to bad debt A 15% improvement would add over $15mm to the bottom line if invested at a marginal 3% A 15% improvement would net the larger carrier an average of $3mm per year Financial Performance Operational Efficiency Satisfaction 2007 Accenture. All rights reserved. 4

5 The Case for Change: Operational Efficiency Typical Problems Potential Opportunities Billing operations are typically poorly funded (~0.15 to.25% of premium) Limited operational and performance data available to make informed decisions Make the best use of the budget by industrializing low value-add activities and focusing on high value-adds Transition transactional and non-core processes to lower cost, focused providers (e.g., BPO, ASP, lockbox, cash application, collections) Create a reliable repository of data that provides timely and accurate information for management decision making Financial Performance Operational Efficiency Satisfaction Billing systems are old, undocumented, difficult to maintain, and don t support the changes in the business Carrier is beholden to scarce resources and/or specialized vendors Create systems and processes that the business can own and configure. IT and business should partner to have the technology and business processes constantly enable change in each other. Improved systems allow for expanded business options and improved time to market: products, targeted payment plans, bill formats, bill messaging, invoice delivery options Choose a solution that allows resource and vendor flexibility. Implement it as vanilla as possible and rely on the software s ability to support best practices Systems and processes either Drive out inefficiencies with systematic controls through require inefficient work-arounds or proactive workflows and/or reactive auditing don t even support major aspects of controls and compliance 2007 Accenture. All rights reserved. 5

6 The Case for Change: Satisfaction Typical Problems Potential Opportunities s are confused especially on the 1 st bill, renewals, or endorsements. The bills reflect upstream problems that are difficult to explain to the customer An average of 80% of the customer calls are related to billing however, most are really just upstream problems poorly reflected in the bill The bills can contain customized explanations and online self-help capabilities exist. The call is likely to go to the agent who must have the tools available to understand what is happening. Be careful with flexibility if it begets confusion. Track the root causes of billing issues and fix them. If a customer call is required, track how many contacts it takes to resolve it. Financial Performance Operational Efficiency Satisfaction Agents are disincented to work with difficult billers Insureds aren t comparing carriers against each other. They are comparing carriers against all of the other bills that come in the mail One size does not fit all, but current systems don t allow targeting and flexibility Reduce paperwork and make it easier for agents to solve problems through responsive service centers or self-help utilities Pick up best practices from other industries they are not that different. Bill designers and testers can help Targeted customer strategies on both the front end: payment plans, payment options, bill formats and the back end: collection strategies, late fees, etc. lead to more satisfied agents/insureds 2007 Accenture. All rights reserved. 6

7 Making the Change: Billing Should Be a Value-driver, Not Cost- Center Typical Carrier s Current Billing High Days Premium Outstanding /Agent Dissatisfaction High Reconciliation Costs Resource/Vendor Risks Lack of Controls and Transparency No Support for EFT, Credit Cards, etc. Disparate Billing Systems and Processes Poor Cash Management No Automated Workflow Cannot Support Shared Services High Performance Billing DPO Improvements Typically Provide Month Payback and Agent Self-Service Tools; Better Care Tools Automate Reconciliation and Optimize Business Processes Industry Standard Tools; Business Manages the Tools Bullet-Proof Compliance and Auditability Current Tools Continuously Updated With Best-Practices-Based Processes One Platform with Flexibility to Process Multiple Lines Tightly Integrate all Cash-Related Systems Workflow to Track and Speed Issue Resolution Standard Infrastructure and Processes Enable Shared Services 2007 Accenture. All rights reserved. 7

8 Most of these problems, and potential benefits, are common to other industries so we can learn from them Goals of Effective Billing and Revenue Management Telecom, Utilities, etc. Convert sales to cash as quickly as possible Minimize service interruptions to customers Insurers/Reinsurers/Agents Convert sales premiums written to cash as quickly as possible Minimize service coverage interruptions to customers Billing has a Huge Impact on Any Company The bill is one of the few touchpoints all customers have with the company Upstream problems manifest themselves on the bill Most customer service contact is due to billing issues Benefits to Improving Billing and Revenue Management Higher Revenue: More satisfied s Cash Flow Improvements Cash can be invested, outstanding AR can t Fees can be a significant source of income Reduce bad debt Operating Costs Improvement: Lower the overall cost of the billing and revenue management function Improve the ability to support the business growth rather than hinder it 2007 Accenture. All rights reserved. 8

9 Some specific lessons from other industries translate well to insurers All levels in the organization must share the mindset that billing should be a value center rather than a cost center Find the right metrics that incent the right behavior Empower someone to be able to describe what is happening even if the cause is upstream Automate and industrialize as much as you. Outsource non-value-add activities Keep it simple balance clarity with flexibility Direct as many customers to self-service as possible Lessons Learned One size doesn t fit all different strategies are needed for personal/commercial, agent/insured, standard/nonstandard, etc. Provide the tools required to do, and measure, the job right Decrease check payments, increase electronic payments and credit cards/pin-less debit 2007 Accenture. All rights reserved. 9

10 How do we start the transformation? Transformational Step Achieve organizational acceptance that billing is a key driver of customer service and financial performance Integrate all billing-related activities into one, cohesive solution. Industrialize and centralize. Move towards one, integrated billing system Catch up on new services, then differentiate with your own Consider alternative delivery models (ASP, BPO, ITO, etc.) Important Considerations Solicit research and help quantifying the costs and benefits Ownership should be shared by the business, finance, customer care, and IT Share service across LOBs Present one face to the insured and agent Continuously improve processes to minimize costs and maximize returns Integrate with other systems don t knot together Enable the business to continuously tweak systems and processes for ongoing improvement and new business models Insured, agent, internal business self-service New settlement methods (credit cards, EBPP, direct bill) Consider the models at any point in your transition Rely on the experience of service providers Jealously guard control over insured and agent interaction 2007 Accenture. All rights reserved. 10

11 Keep an eye on key metrics to keep the three forces in the balance desired This triangle doesn t necessarily need to be equilateral. It is up to senior management to decide where the company wants to focus. But, it is up to the billing and revenue management team to ensure that all three forces are continuously considered Quantify and Watch Cash Flow Working Capital Fees Income and Expense Sample Metrics Days Premium Outstanding (DPO) Bad Debt % of Earned Premium AR Aging > 30 days as a % of all AR Financial Performance Operational Efficiency Satisfaction Quantify and Watch Retention Quantify and Watch Overall Billing Costs Sample Metrics Total Billing Dept Cost as a % of Revenue % of Invoices Mailed within 24 Hours Collection agency recovery ratio % of Payments Processed Electronically Sample Metrics % of Billing Related Service Calls % of First Call Billing Resolution Billing Statement Readability/Understanding 2007 Accenture. All rights reserved. 11

12 When designing a best-practices-based solution, break the functionality down into small parts and apply the three forces to every requirement Accenture s High Performance Insurance Billing Framework Agency Bill Direct Bill Organization Process Technology Billing Accounts Receivable Care Policy Systems Integration Cash Receipt Issue Resolution Invoicing Cash Application Dunning and Collections Payment Plan Commission and Refund Payment Self-Service Electronic Funds Transfer General Ledger Integration Correspondence Alternative Sourcing Mgmt & Analysis Controls and Compliance Reporting and Analytics Reconciliation Master Data Management Training, Deployment, and Knowledge Transfer Finance and Performance Management 2007 Accenture. All rights reserved. 12