06/2/20

Removing Root Causes of Cost Spikes in Insurance Operations

By: Eric Fairchild, Senior Principal

Optimizing and minimizing baseline and discretionary spending has long been a focus for companies – 2020 has taken the economy into uncharted territory, causing many organizations to enhance the usual mandate to maintain or cut spending levels, not just next year, but in the second half of this year as well.

To add to the degree of difficulty, the start of this year brings new complications that have driven up costs in the short to medium term, putting even more pressure on budgets. Some of these include:

– Increased cost to support remote workers while still maintaining (mostly empty) corporate offices

– Increased staffing costs to offset staffing supply chain disruption, e.g., BPO provider capacity decreases

– Increased staffing costs to support spikes in customer support needs

– Tactical enhancements put in place to shore up or expand digital channels

These changes needed to be put into place very rapidly, without a protracted planning and design cycle. Because people pivot more rapidly than process or technology, it was our people that became the immediate solution to our challenges – in some cases adding more people to staff, in others rapidly repurposing people and teams (e.g., shifting from auto claims to life/annuity contact center work).

Now is the time to do two things:

1) Understand how effectively and efficiently those tactical changes were implemented, as many of them will need to be operationally and financially sustainable going forward.

2) Identify areas to rapidly reduce spend in other discretionary and baseline areas to find funding to continue “2020 pivot” work.

Companies are doing this by:

– Reviewing large discretionary projects, especially those spun up rapidly this year, to minimize spend while ensuring value delivery

– Reviewing baseline and/or operations areas that have made rapid investments in people, to optimize ongoing spend and understand where process and technology changes can make new capabilities sustainable

– Review all baseline and/or operations areas of significant ongoing spend to identify cost leakage and savings opportunities

Companies need to approach this rapidly, but with a focus on fact-based analytics and building a concrete roadmap. The analytics will tell you which levers can be pulled to adjust staffing and cost levels, and the roadmap will tell you when and how those levers can be pulled, setting expectations and goals around financial milestones in the upcoming six to twelve months.

Take a closer look at how NEOS approaches cutting costs with our ValueRealizationTimeline

 

 

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