Building Trust | Moving Away from Self-Administration

By: Greg McKenna

By: Greg McKenna

January 26, 2022 — Trust is the fundamental currency of leadership.

This is particularly true in the public sector, where elected officials, appointed commissioners, and public administrators are entrusted with the safety and well-being of their constituents. From neighborhood associations to city councils, county boards, state legislatures, and Washington, D.C., we are a land of many forms of government. But as different as they may be, their functions are the same — to protect the public trust.

Even as we enter a new year, two simultaneous crises of trust continue to affect the public sector. First, peer-reviewed research from several leading institutions point to a widening erosion of psychological trust in government. In a 2021 report issued by Deloitte, researchers found that a majority of citizens also say they are dissatisfied with how the federal government has handled the pandemic. Survey results further showed that citizen trust in state and local governments also significantly declined during the pandemic.

Second, and equally important, cities face generational disparities between constituents' needs for government services and the resources available to deliver on these promises. Made worse by the ongoing effects of the coronavirus pandemic, diminishing tax bases, and trailing civil-service job gains, today's public trusts are dangerously low. The National League of Cities surveyed more than 2,500 cities, towns, and villages, with nearly all communities greater than 50,000 in population reporting a revenue shortfall this year.

Faced with these dual perils, public administrations build trust through two primary solutions: (1) demonstrating a depth of developed, trustworthy processes to deliver on their promises with good intent and, (2) at the same time, public institutions must expertly fulfill their fiduciary duty to achieve superior financial outcomes. In short, protecting the public trust requires governmental entities to demonstrate high levels of character and expertise.

Throughout this Industry Insights series into the public sector, we will examine the mindsets and characteristics related to psychological trust and delve into the claims administration practices that build public funds. In this first edition of 2022, we'll take a closer look at the positive effects of transitioning away from self-administration of claims.

Governmental entities that handle their own Property & Casualty claims are often guided by historical experience, decisions made by previous administrations, and inertia. Moreover, two critical assumptions generally inform an entity's decision to self-administer: (1) It allows the organization to more diligently control both the claims function and its claims data, and (2) it better supports its internal and external stakeholders. However, each of these assumptions and adherences to the status quo tend to put public trust at risk. Let's take a closer look at how moving away from self-administration builds trust.

Outsourcing claims operations heightens transparency and vulnerability, which are leading signals for building public trust.

Deloitte's research indicates that transparency fosters trust. Governments that openly share information, motives, policy priorities, and program decisions in straightforward language signal trustworthiness. This is particularly true when it comes to public — private partnerships in claims administration.

We see instances where new mayoral administrations decide to outsource self-administered workers' compensation programs to improve services for injured workers and help prevent fraud, waste, and abuse in the administration of claims. Engaging an independent third-party administrator to manage casualty claims can not only improve claim handling and outcomes for claimants, but it can also introduce new controls and oversight to better serve employees. Recently, New York Mayor-Elect Eric Adams created the Mayor's Office of Risk Management and Compliance. In his press release, the mayor highlighted this position as, "central to his vision for delivering an accountable, efficient, and transparent government" and to "serve as watchdogs for [the] city and make sure taxpayer dollars are being spent appropriately." Fostering relationships with independent service providers exhibits municipal vulnerability and transparency — key markers of building public trust.

Transferring away from self-administration relieves a widening resource gap in public services.

According to research from The Pew Charitable Trusts, the greatest workforce reductions since the pandemic began have been in local governments. As of August 2021, local public payrolls were down 5.3% from pre-pandemic totals — more than 350,000 jobs, excluding education positions. State government employment has declined slowly every month this year, with the total down 2.1% from pre-pandemic levels, or about 57,000 jobs.

These labor conditions have set the stage for governmental entities to leverage public — private partnerships in order to optimize staff, including professional staff. We discussed these trends with a roundtable of state risk managers at a national conference. The common refrain in the conversation? Outsourcing recouped savings immediately by shedding benefits and overhead costs. Second, when the claims administration vendor provides a full suite of ancillary services, such as a Risk Management Information System, it allows risk management departments to sunset other procurements and contracts necessary to support self-administered claims handling. And, most importantly, the outsourced claims team allows risk managers and law departments to focus on the organization's proactive strategic initiatives, as opposed to the necessary file handling duties.

Things have changed

Now more than ever, governmental leaders are viewing public service through a customer experience lens. Last month at the World Economic Forum's Inaugural Urban Transformation Summit, global leaders underscored the need for increased public — private collaboration in order to capitalize on funding to tackle growing urban challenges. Here in the United States, the White House recently announced an executive order called "Transforming Federal Customer Experience and Service Delivery to Rebuild Trust in Government." The executive order contains more than 30 outsourcing projects to modernize customer experience in high-impact, constituent-facing agencies, such as Veterans Affairs and the Department of Health and Human Services.

This trend toward customer experience and real-time innovations to expedite the flow of information to internal and external stakeholders is most prevalent in claims administration. In truth, there are few transactions more personal to casualty claims administration, which literally involves the communication and human interaction necessary to help put someone's life back together. And we know the most critical pathway to engender trust among claimants is through rapid, complete communication.

But unlike planning for a digital transformation in other areas of public service, leading-edge web-based claims access, robust mobile applications, and accurately digitized claims files are already part of modern claims-administration service offerings. Public — private partnerships in the area of claims administration can immediately upgrade these critical communication and reporting tools in their governmental claims teams, allowing their administration to conserve capital for other critical constituent projects.

The touchstone principle of governmental administration is to protect the public trust, both in terms of psychological trustworthiness and in sound financial management of public funds. In this edition, we introduced some of the key considerations and advantages to transferring away from self-administration of casualty claims, including increased transparency, optimization of resources, and improved customer experience.

Throughout 2022, we're going to explore and share with you innovative ways that the public sector is leveraged in claims administration partnerships to build trust. Incidentally, one of the best virtues of trust is that it's reciprocal. We'd love to hear from you. How is your organization, whether in the public or private sector, working to build trust in your claims operations? Please connect with us and on our social media channels.