SANA'A UNIVERSITY - MBA

PROGRAM

Service Design
Immediate Response Claims Handling
An Approach Towards
Developing Motor Claims Dept.
In United Insurance Company

PREPARED BY:
203, 230 &
220/EMBA/07

In partial fulfillment of the requirement of the Management Accounting subject

1
 Table of Contents

1) Introduction ................................................................................................................3

2) The Problem................................................................................................................. 5

3) A View from the Literature........................................................................................10

4) Analysis and Discussion...........................................................................................11

5) Conclusions and Recommendations.......................................................................14

6) Bibliography...............................................................................................................16

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Motor Claims in UIC
 1) Introduction

Since the researcher worked for United Insurance Company (UIC) as MRQ & Motor Claims
Head, it will be informative just to have an idea about UIC & the motor claims nature of work to
better understand the assignment..
UIC is the leading insurance company in the Yemeni Insurance Market. Incorporated in 1981,
UIC is a subsidiary of Hayel Saeed Anam Group of Companies, which is one of the largest and
most respected private group of companies in the Middle East that has grown steadily and
consistently into multinational conglomerate with interests in manufacturing, trading,
agriculture, financial services and real states..
UIC provides all types of insurance services through its 6 branches that cover the largest cities in
Yemen and through its 130 qualified personnel. Among these services are: Fire Insurance, Loss
of Profit, Motor Insurance, Money Ins., Fidelity Guarantee Ins., Public Liability, Marine Cargo,
Marine Hull, Banker Blankets Bond, Engineering Ins., Oil & Gas Ins., Life/Takaful Ins., Medical
Ins., Personal Accident, Workmen's Compensation, Employers Liability, Yemeni Teacher's Ins.,
Travel Ins., .. Etc. UIC is the first Yemeni insurance company that obtained ISO 9001-2000
QMS certificate.
UIC has been established to provide insurance coverage & safety atmosphere to the Yemeni
community as well as supporting the Yemeni economy.
The nature of work in UIC can be divided into TWO types of procedures; the issuing of
insurance policies to the clients (that are Undertaking Departments) and compensating clients
when they claim against the risks that are insured (that are Claims Departments). Each type can
be divided into so many subdivisions in accordance to type of insurance service.
Most of the insurance problems are located in the claim departments, which is reflected in the
undertaking departments & the marketing of the insurance services.. That is because the claim
departments are final destination that the clients are looking for in case of risk & incidents
incurring.
Motor claim departments as will be elaborately discussed in the next part “the problem” are the
most controversial departments specially in Yemen for many reasons and causing headaches for
the insurance top managements & the clients as well specially that this type of insurance “non-
marine vehicle insurance” is not reinsured as other types of insurance coverages, where
regulations are more accurate. On the other hand, motor claims are reflecting on the other types

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Motor Claims in UIC
of insurance services, since the Yemeni clients link their other insurance requirements to this
type of insurance, so if they are satisfied here, they are going to insure there..
Solving the problems of this department will create value-added to the insurance services in
Yemen. It was found that the rule of 20/80 customer-introduced variability is applicable here,
since the 20% of insurance problems (related to motor claims) affecting 80% of the company
sales..
Therefore, we are going to define this problem and gather data through analyzing the service
process design (the flowcharts) in this department & how can we reengineer it for better service.
We are also going to use the bottleneck analysis and the decision tree in order to give a clear
picture to the top management for making decision in this regard.

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Motor Claims in UIC
 2) THE PROBLEM

GENERALLY, in Motor Claim Department, the company deals with client's motor claims. In a
very short briefing, the general procedures of this department are identified in the following flow
chart:
Forms Procedure Responsibility

Beginning

Accident Notification Receive accident notification from Section Head/ Co-worker

the client

Electronic System Make sure that the vehicle is

insured through the E-system Section Head/ Co-worker

Go to the accident site (if

necessary) to do your report & take
Accident Report/ Photos accident photos and open claim's Section Head/ Co-worker
file

Request three quotations from three

different workshops & mechanics
Three Quotations (if any) Section Head/ Co-worker

Evaluate the quotations and

approve the cheapest, and start the Section Head/ Co-worker
repair

After the repair is done make sure

that it meets the standards and the Section Head/ Co-worker
clients satisfaction

Release the repair car to the client

and get his discharge receipt after
Subrogation/ Discharge
paying the access & depreciation Section Head/ Co-worker
Receipt
for part in accordance to the policy

Pay the workshops & other parties

& close the claim file Section Head/ Co-worker

End

In the above chart the time for the processes, takes the following time-constraints:
o The notification takes between 5-60 minutes as per the accident & the circumstances
surrounding it.

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Motor Claims in UIC
 o The accident site inspection takes 15-45 minutes also as per the circumstances and the
nature of the accident and how severe it is.
o Opening the claim file takes 15-30 minutes electronically.
o Requesting the quotations of repair or denting takes between half to three days.
o The repair process takes between 5 to 14 days and sometimes more if the spare parts are
unavailable.
o Getting the client subrogation & discharge receipt takes between 1-3 days
Therefore, from a customer-focus point of view, the whole process takes at its minimum around
9395 minutes, which is 6.52 days; and at its maximum around 28935, which is 20.1 days. Then,
the whole process takes between 6.52 to 20.1 days, which seems to be very long and creates the
following financial & managerial problems:
o It causes costs for handling the claim, such as the clerkish & admin. costs.
o Time cost & managerial headaches.
o A cost of being not able to get the customer’s satisfaction on the handling and delay of
the claim file & process.
o A cost of being not able to get the customer’s satisfaction on the repair or the dental
work.
o A cost on the untrained of the employees who cannot deal with the different parties in
the accident site.
o The cost of training.
o The cost of time-delay for the customer and providing him with transportation for the
repair period if longer than usual.
Above are some costs associated with standard general claim procedure, yet, these general
procedures are divided into subdivision as per the nature of the accident as follows:
1. Car accident resulting in repair of the second or the third party and the company do the repair.
2. Car accident resulting in repair of the second or the third party and the client do the repair
himself.
3. Car accident resulting in injury of the second or the third party and the company do the
treatments of the injured.
4. Car accident resulting in total damage/loss & the company compensate a new car.
5. Car theft resulting in total loss & the company compensate a new car.

In the above 4 & 5 steps or sub-processes, the lead time or the handling time may take more than 6
months!!!

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Motor Claims in UIC
The questions that made us think of a literature search to solve them are:

o How can we redesign the motor claim process in order to develop it & eliminate the costs
& time associated to handling the claims?
o How can we delight the customer in motor claim department through easily handling the
claims, in order to have reflection in more issuing of policies in the non-marine
undertaking department? Specially that the company is ISO 9001-2000 certified and
focuses on the customer requirement as per the standards:

"Organizations depend on their customers and therefore should understand current and future
customer needs, should meet customer requirements and strive to exceed customer expectations.” 1

o What is the added value that we can make in this department?

o How can we develop the ISO-QMS of UIC through this department?

Since it will be very difficult to write and draw all the flowcharts/blueprints of all these sub-
processes due to the limitation in space of the assignment (10-15 pages) , these charts will not be
taken into consideration for the time being. Yet, we can only draw the sub-process # 2 for more
understanding the role of the client in doing the repair by himself, which is the entrance approach
that will be dealt with in this assignment as a solution.

1
ISO 9000-3:1997, Quality management and quality assurance standards — Part 3: Guidelines for the
application of ISO 9001:1994 to the development, supply, installation and maintenance of computer software.

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Motor Claims in UIC
 Forms Procedure Responsibility

Beginning
Car Accid. Notification
)Fax, Tel. Letter, Email(
Receive accident notification from
the client & take a copy of his
driving license

Make sure the car is insured

Vehicle Data Form through its engine #, chases # in
Or the system and make sure of the The claim in
The client file at NMU policy & type of insurance other Branch

No Yes
Inspection report Go to the accd. Site to inspect and
fill in the form
Open claim file & fill in
a form of requested data
Doc’s
Finalize the needed process in from other branch until
As per the requested the site (reconciliation, traffic the claim is settled there
doc’s form releasing & collect all docs & & the file sent
pics (if any)
Credit/Debt Note
Do the final settle-
ment & debit/credit
note Claim head \
Traffic report or reconciliation
Specialized
minute employee
Register the report, give it # in Give the notice to
the computer the client & close
Notif. Registry/ ‫م‬ the file
Branch Reg.

Notify Reinsurance If the amountEstimate

is the financial & physical
.Dept above the firmdamages to the parties (if any)
portfolio

Prepare & review the docs of the client &

specify the next procedures through the file (if
If there is any)
an
B injury

If there is damage

Ask for three quotations (mechanic, electricity,

Quotations
denting, etc)

Claim Settlement Form Analyze the quotations in the form

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Immediate Response Claims Handling: An Approach Towards Developing
Motor Claims in UIC
 A

The company/client do repair

UIC-QFC-NMC -05.3

Revise the file &

The client do The client determine to repair
the repair and repairs or let the client
submit the repair
invoices as per
The company
the approved
repairs Head section \
quotations and
Specialized
submit the employee
salvage (if
repaired in
unknown
workshop)
No Is the
client/third
party satisfied?
Take the client’s remarks and
inform the workshop to work
Right-reserva- Yes Specialized
accordingly (if the damage slight
tion form employee
give him a right-reservation)
/ internal audit/
finance

Revise the file to make sure of the financial & admin. processes

Do the final settlement with the client and get the

approval of the top management

Specialized
Discharge receipt Provide the client with discharge receipt for signature employee

Finalize the settlement & Get the signed discharge receipt from the
close the file and send it to client/third party for documentation.
the branch (if any)

Revise the file and make sure of the

Claim Settlement Form
financial & admin. processes and
document all in the computer

End

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Motor Claims in UIC
 3) LITERATURE REVIEW

Redesigning the service process for the customer has become a new approach now, since that the
customer satisfaction is the motivation of the service & product design due to quality standards as
mentioned earlier. Due to the fact that direct customer involvement in the service processes
introduces significant variability in the process in terms of both the time that it takes to serve a
customer and the level of knowledge required of the firm’s employees. 2 Insurance market is no
exception! The involvement of the customers in the insurance daily processes entails to redesign
the claims handling processes from a customer-focus point of view.
The textbook that has been studied in order to come with insights for handling the problem of
motor claims in UIC is Operation & Supply Management by F. Robert Jacobs as well as some
other internet studies & assignments mentioned in the bibliography. Jacobs’ book has given some
clues on how to handle such problems related to insurance claims handling specially in USA,
where the Progressive Mutual Insurance Company has initiated the Immediate Response Claim
Handling approach.3 This company aiming at offering lower prices and better service than its
rivals by simply taking their customers away, has done the following:
o Redesigned the procedures of the claim department from the normal handling of the claim
files into immediate response claim handling approach, where the claimant can reach the
company’s representative through phone 24/7.
o The representative schedule a time when the adjuster will inspect the vehicle.
o Instead of taking between 7-10 days for an adjuster to see the vehicle, the company’s
target has been reduced to 9 hours.
o The adjuster not only examines the vehicle, but also prepares an on-site estimate of the
damage and, if possible, writes a check on the spot.
o Additional to the benefits for the customers, the shortened cycle time has reduced the costs
dramatically.
o In addition to the above approach, the company has introduced a system that allows
customers to call an 800 number or visit its website and, by providing a small amount of
information, compare its rates with those of the competitors.
o The company also has devised even better ways to assess an applicant’s risk profile to
calculate the right rate to quote.

2
Operation & Supply Management, P 108
3
Ibid, P 5
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Motor Claims in UIC
Of course the American context is very different from the Yemeni context, in many different ways
such as the commitment of the American people to the insurance matters unlike the lack of
insurance awareness in Yemen, the linkage between the traffic police & the American insurance
companies and the horrible traffic situation in Yemen, the risk experience profiles of the drivers
there and the inability to track the drivers’ experiences here; and so on.. These differences makes
it very difficult to apply the immediate response claim handling approach the same way the
Progressive Insurance Company did in USA, yet, with some modifications this approach can be
applied and be of great help to the local insurance companies and their customers who will be very
happy & satisfied and we anticipate that it will also encourage those who do not insure to try it.

4) ANALYSIS AND DISCUSSION

It is clear through the previous analysis of the time-used in the process of the motor claim
department, which is focused on the clients, that the bottleneck in this procedures is the time spent
in the workshops as follows:

Q Min Max Bottleneck

Notification of Accident (Minute) 5 60 No
Inspection Process (Minute) 15 45 No
Opening Claim File (Minute) 15 30 No
Getting Quotations (Day) 0.5 3 Yes (less)
Doing the Repair (Day) 5 14 Yes (more)
Getting the Subrogation Receipt (Day) 1 3 No*
Total in Minutes 9,395 28,935
Total in Days 6.52 20.1
* (No) here because it does not affect the client time & can be easily reduced.

It’s true that there are costs related to the admin. work the employees & the adjusters are doing &
the their calls to follow-up the progress of the repair.. etc, yet, the most important cost is the
customer’s satisfaction associated cost. That is dissatisfied customer, means a cost of losing him
& the revenue comes from his insurance/s.
Therefore in order to overcome these problems and the huge & efforts paid by the company’s
employees & adjusters to follow-up the mountains of papers and innumerous calls of the clients
following-up their repairs, UIC can implement the Immediate Response Claim Handling or what
is known as “Mobile-field Service”. Below is the suggested claim process blueprint:

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Motor Claims in UIC
 Forms Procedure Responsibility

Beginning
Car Accid. Notification
)Fax, Tel. Letter, Email(
Receive accident notification from
the client & take a copy of his
driving license

Make sure the car is insured

Vehicle Data Form through its engine #, chases # in
Or the system and make sure of the The claim in
The client file at NMU policy & type of insurance other Branch

Doc’s No Yes
Go to the accd. Site to inspect and
As per the requested fill in the report form, estimate the
doc’s form repair costs (Visit two workshops Open claim file & fill in
if applicable), take pics, make a a form of requested data
reconciliation minute or traffic from other branch until
Get the top report, give the client/third party the claim is settled there
management .cheque, get his discharge recipt & the file sent
approval

Finalize the needed process in the site

(collect all docs) get the top
Claim head \
management’s approval on the estimate
or revert if higher than your ceiling. Do the final Specialized
settlement & employee\
adjusters
debit/credit note
Notif. Registry/
Branch Reg.
Register the claim, give it # in
the computer & finish the Give the notice to
If the amount is
financial settlement
Notify Reinsurance above the firm the client & close
.Dept portfolio the file

Revise the file and make sure of the

financial & admin. processes and
Claim Settlement Form
document all in the computer

En
d

O PROCESS’ CONTROL:
Above blueprint can be done in Yemen after making the following prerequisites control steps:
1. In each branch we have to hire ONE professional car mechanic & ONE professional
denting officer, who are going to be the adjusters of the company & be trained in the
insurance system & negotiation skills.

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Motor Claims in UIC
 2. Contracting with at least five high-class workshops & 15 spare part shops, taking into
consideration to take the mobile phones of those in-charges in these shops, in order to call
them whenever needed for estimation.
3. Specifying a ceiling for the adjusters for each claim such as YR 200,000/- per accident, in
a condition that both the employee & the adjuster sign the cheque. (Here it is worth
mentioning that 85% of the motor claims are under YR 200,000/-).
4. Every accident should contain a reconciliation minute signed by the three parties, the
third party, the insured & the company representative, having the addresses & phones of
all parties and approved by the police.
5. The subrogation/discharge receipt should also be done on-site, and also the pics of the
accident.
6. The cash or cheques with the adjusters should be insured also through “money in transit
policy”.
7. In some cases, the company could give a hard-cash of YR 200,000/- to the claim head
section as advance payment that can be replenished daily to be used for the third parties
accidents.
ABOVE ARE SOME REGULATIONS TO BE TAKEN INTO CONSIDERATION, AND WE EXPECT THE

FOLLOWING SCENARIOS TO TAKE PLACE:

1) BEST CASE:
The best case is if the top management & the boards approve applying this approach, which has
the following advantages:
 Increasing of the total technical-claims’ costs 20%.
 Increasing the costs of developing some technologies YR 5,000,000/-.
 Reducing of the claim operational costs 50%, since the company will need less
employees (4 at each branch).
 Increasing the sales & revenue 20% in total in addition to the 10% normal yearly
growth.
2) WORST CASE:
The worst case is when the top management & the boards approve applying this approach, which
may create the following disadvantages.
 Increasing of the total technical-claims’ costs 20%.
 Increasing the costs of developing some technologies YR 5,000,000/-.

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Motor Claims in UIC
  Reducing of the claim operational costs 50%, since the company will need less
employees (4 at each branch).
 The sales & revenue are not affected & 10% growth will incur normally.

3) MOST LIKELY CASE:

The most likely case is when the top management & the boards disapprove applying this
approach, and everything will go the same way it is now.

DECISION TREE ANALYSIS

The following decision tree can show us how the above three scenarios interact:
o There is 75% chance for the company to success and 25% to fail.
o Launching this new service will incur YR 75 Millions per year claim cost increase & 600
Million increases per year in revenue.
o There is 300 Million normal yearly revenue increase.
o If the company launched the service and failed then 75 Millions per year claim cost
increase will incur and there is no increase in revenue.

Q Min Max
Lunching the service & succeed (600-75)*5 + 300*5 4,125
Lunching the service & Fail 300*5-(75*5) 1,125
Decision Tree Analysis (In Millions)
Do nothing & Succeed 300*5 1500
Do nothing & Fail 300*5 1500
EV= YR 3,375.00 YR 4,125.00 Success
0.75

YR 1,125.00 Fail
Lunch 0.25

EV= YR 1,500.00 YR 1,500.00 Success

0.75

Do nothing YR 1,500.00 Fail

0.25

Therefore, as we can see that lunching the Immediate Response Claim Handling, whether meet
with success or fail will incur huge revenue EV= YR 3,375/- (in Millions).

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Motor Claims in UIC
5) CONCLUSIONS AND RECOMMENDATIONS
Since that all insurance companies are concentrating more on reducing the claim’s payments for
damage & injuries and some of theme on the operation costs, but very-very few are those who
take care of the claims & related claims expenses, which is 34% of the TOTAL claim expenses as
per the American Insurance Information Institute:-

Dollar Cost Breakdown in the Insurance Industry

Reducing these costs allowed Progressive Insurance Company to increase its revenue from 1.3
Billion in 1991 to 14.5 Billions in 2006. That’s simply because of the reflection of auto insurance
motor claims on the sales of other types of insurance.. We had an experience with UIC in
2005/2006, where the very good situation of motor claim department made Sabafon Company
insure other types of insurances with UIC, despite the fact that they have their own insurance
company, which is the Islamic Insurance Company.
On the other hand, the company could also introduce the Autograph program or the Black-box
tracking system, introduced first to UIC on 2005, which would cost around YR 5 Million and
allow the company through the GRP wireless telecommunication to study the history of the
insured cars in order to have competitive & better risk-estimation in the undertaking department.
This hopefully will allow UIC to be able to quote for the motor policy through its website, and
launch the E-commerce as a first & great Yemeni insurance company.
Applying the “Immediate Response Claim Handling” approach also is expected to give UIC the
following tangible & intangible benefits:-
o Reducing the costs of the calls, since the operation cycle & the through-put time will be
very short.

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Motor Claims in UIC
 o Reducing the cost of claim training programs since the number of employees will be less.
o Increasing the customer satisfaction through better handling their claims and shortening
time of process.
o Other rival companies to follow UIC in this regard as being the leader in the industry.
o Increasing the awareness of insurance and supporting the traffic police and the economy
of the country.
We, finally, recommend UIC to launch this approach at least for the third parties, who will be very
happy to settle their claims on the street and as per our experience will be welling to reduce their
demand between 10-25% in receiving cash immediately, which in one hand will save a lot on
money for the company. On the other hand, it will make the clients very happy to get rid of the
headaches caused by the third parties normally of following-up their payments, exaggerating their
losses, the police fees, etc..

6) BIBLIOGRAPHY

1- Carter McNamara, Basic Guidelines to Problem Solving and Decision Making, Soft
Copy.
2- Decision: The Essential Steps between Problems and Solutions
3- Gerald M. Myers, Cost Behaviors
http://www.plu.edu/~mgtacctg/index.htm Decision.manyworlds.com
4- Horngren, Sundem, Stratton., Management Accounting, Pearson Prentice Hall, New
Jersy, Thirteen Edition, 2005
5- ISO 9000-3:1997, Quality Management And Quality Assurance Standards — Part 3:
Guidelines for the application of ISO 9001:1994 to the development, supply,
installation and maintenance of computer software
6- Jacobs, F. Robert, Operation & Supply Management, McGraw Hill, New York,
Twelfth Edition, 2008
7- Progressive Insurance: Creating Value Via Mobile Field Service:
http://www.progressive.com/progressive-insurance/history.aspx
8- Progressive Mutual Insurance Company: Official Site
http://www.ebstrategy.com/downloads/case_studies/Progressive.pdf

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