Too often, insurers prematurely embrace what they think is the right list of key performance indicators (KPIs) to measure performance over time. They spend a great deal of time and money extracting data, building a database and dashboards, only to realize the effort does not produce the expected results. Management should take the time to focus on what metrics to use and why. The key to creating a useful and productive dashboard is taking the time to understand a process thoroughly, appreciate why metrics are important to monitor, and to comprehend how this insight will contribute to continuous improvement efforts.
Management should answer the following four questions when building the list of KPIs:
What problems are we trying to solve?
First, and probably most important, ask what client experience we are looking to achieve. Managers may be able to identify common pain points, but they need to think from the outside in – client services delivered, outcomes achieved, etc. Take time to define all customer outcomes and pain points to determine root cause areas you may need to understand to see the big picture. A manager may identify that turnaround time for the submission-to-quote process is rising. To determine the root cause, the manager needs access to several metrics within various process points to determine root cause of the rise in turnaround, such as:
- What is being communicated to the customer (broker)?
- How are submissions received – What are the volumes of paper vs. electronic submissions?
- What are the volumes of submissions eligible for straight through processing vs. require manual intervention?
- What is the ratio of In Good Order (IGO) vs Not in Good Order (NIGO) applications? What were the most common NIGO reasons?
What is the critical path for running the business?
Next, look at your business-critical paths. Refine this thought process further by clarifying what information is critical to running your business successfully. Management should encourage this activity by brainstorming around more specific questions, such as “Is it more than just the financials or forecasting?” Taking the time to dig as deep as possible through this initiative is time well spent. Failing to align the critical path and the problem you have identified can result in inaccurate goals and time wasted. Insurers should consider thinking past just financials to consider the importance of customer experience metrics, such as customer preferences (i.e., distribution channels, methods of communication, etc.), customer retention rate, net promoter score, and customer effort score as critical path for success.
What are the drivers to continued success?
Organizations must understand business drivers for the continued success and growth of the company. Yet, while the question is simple, “What are the main drivers of your business?”, the answers are not as straightforward. Management may say that close ratios, net cash flow, revenues, turnover rate, and customer satisfaction are the primary drivers, but the key to understanding those examples is identifying what processes and data roll up into those drivers. Again, time spent analyzing these aspects up front means time and effort saved in the end. Insurers should consider data collection, quality, storage, and access as an essential piece of ensuring that you can effectively report on a KPI, and that the metric reported can be trusted.
What are our competitors measuring?
Lastly, competitive exploration can be helpful. What are your competitors measuring as best as you can gather? Further, what measures are critical to them and why? This data can guide companies to areas they might not have otherwise considered. Looking into competitors can also provide a benchmark for measuring success or areas of opportunity for improvement.
The next exercise in building the list of KPIs is to further analyze why these metrics are important and where the data will come from. For example, take the list of initial metrics and brainstorm and discuss why each metric is critical, why measuring it will contribute to achieving business goals, and why it will provide insight into what needs to be adjusted. After answering why, further investigate where the data will come from and how you will collect it to ensure quality and accuracy. Taking the time to answer the four questions above, and diving further into ensuring quality KPIs, will lead to valuable insights that can be used to determine areas where processes can be continuously improved.