01 Dec Are You Realizing the True Benefit of Auditing?
Today, probably more than ever before, auditing has become a key element in insurance agencies. There is solid acknowledgement that agencies can have the best procedures – but the primary basis for agencies auditing their staff is to determine how closely those procedures are being followed. In the world of E&O, consistency is the key buzz word. Auditing provides insight for agency management to verify the level of consistency in their firm. As business theorist Peter Drucker stated, “what gets measured gets managed.”
First, a comment on some important issues within the process. Let’s start with the question of who is performing the process. I believe that an independent, non-biased party is probably the best approach. Having someone in the agency that is primarily dedicated to auditing should lead to more consistency in the evaluation of the work product they are reviewing. For firms with P&C and benefits, it is best to have a separate person handling each due to the significant differences in these two products. While peer-to-peer auditing may have its place, I am not a big fan of it as objectivity may get lost in the process.
The E&O Plus program is heavily built on compliance with 22 key components and auditing templates that have been designed to measure performance on the issues within these components. Many agencies have found it greatly beneficial to share the audit questions with the applicable staff. The goal is for staff to realize that auditing is not only good, but also necessary. E&O Plus agencies have high standards and staff should take pride in this.
An extremely important part of an audit is what happens with the results. Very often the results are outstanding. This positive result is something to be celebrated. Acknowledgement by senior management of this accomplishment is important as it shows the support of agency management. In my days in corporate America, pizza and wings was always extremely popular with senior management invited (and encouraged) to partake.
If the results fall short of the expected compliance level (some agencies go with 80 percent, some 90 percent), that may be ok. A bad audit result is not necessarily a bad thing. The key is that the audit results are analyzed in-depth to better understand what drove the numbers. By identifying the issues on the files that did not get a passing grade, the agency will be able to develop the appropriate solutions. This could involve the need for further training on the expected way to handle a task. It could involve tasks being performed but the documentation for that task (such as an exposure analysis checklist) not being placed in the proper spot in the applicable system. Without this further analysis and action plans designed to address the issue, there is a good chance that the results will not change much.
It is best that the auditing be done on a quarterly basis as this provides greater insight into whether the action plans developed (when the results fell short) have resulted in improvement in subsequent quarters. There is no doubt that many agencies have seen their audit results improve dramatically after an analysis of the results and subsequent action plans were put in place. This is another time for a celebration.
One of the many goals of auditing is to create good habits. Look to get the full value from your auditing process.