Cycle Time Performance Measure – Assignment 8, Week 10 adapted from an exam ques

Question

Cycle Time Performance Measure – Assignment 8, Week 10 adapted from an exam question by Marlon Dumas We consider the following process for handling claims for disability insurance at a insurance company called InsureIT. When a claim is received, a junior claims officer first enters the claim details into the insurance information system and performs a basic check. Data entry and the basic check usually take 10 minutes in total. It is rare for the claim to be rejected at this stage (it only happens in 2% of cases) and for the purpose of the questions below we can assume that claims are never rejected at this stage. Next, the claim is moved to a senior claims officer who performs an in-depth assessment of the reported disability and estimates the monthly benefit entitlement (i.e. how much monthly compensation is the claimant entitled to, and for what period of time).
In the case of short-term disability benefits, the senior claims handler can perform the benefit assessment without requiring further documentation. In these cases, the benefit assessment takes 20 minutes. This time includes the time needed to register the entitlement on the insurance information system (if applicable) and inform the customer of the outcome via e-mail or postal mail.
However, in the case of long-term disability claims (more than three months), the senior claims handler requires a full medical report in order to assess the benefit entitlements. The process for obtaining the medical report is explained below. Once the senior claims handler has received the medical report, they can assess the benefits in about one hour on average. The senior claims handler then sends a response letter to the customer (by e-mail and post) to notify the customer of their monthly entitlement and the conditions of this entitlement (e.g. when will the entitlement be stopped or when is it due for renewal). The entitlement is recorded in the insurance information system.
About 80% of claims give rise to an entitlement. In case a claim gives rise to an entitlement, a finance officer triggers the first entitlement payment manually and schedules the monthly entitlement for subsequent months. The finance officer takes on average 20 minutes to handle an entitlement. Finance officers handle payments in batches, once per working day.
When a medical report is required, a junior claims handler contacts the customer (by phone or e-mail) to notify them that their claim is being assessed, and to ask the customer to send a signed form authorizing InsureIT to request medical reports from their health provider (hospital or clinic). This step takes 10 minutes of work to a junior claims handler.
Once the authorization has been received, the junior claims handler sends (by post) a request for medical reports to the health provider together with the insurer's letter of authorization. The step of sending the request to the health provider takes about 10 minutes. Hospitals reply to InsureIT either by post or in some cases via e-mail. On average, it takes about 15 working days for InsureIT to obtain the medical reports from the health provider (including 4 working days required for the back-and-forth postal mail). This average however hides a lot of variance. Some health providers are very cooperative and respond within a couple of working days of receiving the request. Others however can take up to 30 working days to respond. As a result, the average time between a claim being lodged and a decision being made is 3 working days in the case of short-term disability claims, and 20 working days for long-term disability claims.
The insurance company receives 2000 disability claims per year, out of which 20% are for short-term disability and 80% for long-term disability.
1. What is the (average) cycle time of the above process (including waiting time)? Show the calculations for the work. A. 3 days B. 16.6 days C. 20 days D. 24.4 Days 2. Given the insurance claim scenario of the previous question, which of the following calculations corresponds to the theoretical cycle time? A. 10 + 0.8*20 + 0.2*(10+10+60) + 0.8*20 B. 10 + 0.2*20 + 0.8*(10+10+60) + 20 C. 10 + 0.2*20 + 0.8*(10+10+60) + 0.8*20 D. 10 + 0.2*20 + 0.8*(10+10+60 + 0.8*20) 3. In the context of the insurance claims scenario above, which of the following statements is not needed when calculating cycle time efficiency? A. For short-term disability insurance, it takes 3 working days disability claims to complete the process B. 20% of claims are for short-term disability C. 80% of claims for long-term disability D. There are 2000 disability claims per year Cycle Time Performance Measure – Assignment 8, Week 10 adapted from an exam question by Marlon Dumas We consider the following process for handling claims for disability insurance at a insurance company called InsureIT. When a claim is received, a junior claims officer first enters the claim details into the insurance information system and performs a basic check. Data entry and the basic check usually take 10 minutes in total. It is rare for the claim to be rejected at this stage (it only happens in 2% of cases) and for the purpose of the questions below we can assume that claims are never rejected at this stage. Next, the claim is moved to a senior claims officer who performs an in-depth assessment of the reported disability and estimates the monthly benefit entitlement (i.e. how much monthly compensation is the claimant entitled to, and for what period of time).
In the case of short-term disability benefits, the senior claims handler can perform the benefit assessment without requiring further documentation. In these cases, the benefit assessment takes 20 minutes. This time includes the time needed to register the entitlement on the insurance information system (if applicable) and inform the customer of the outcome via e-mail or postal mail.
However, in the case of long-term disability claims (more than three months), the senior claims handler requires a full medical report in order to assess the benefit entitlements. The process for obtaining the medical report is explained below. Once the senior claims handler has received the medical report, they can assess the benefits in about one hour on average. The senior claims handler then sends a response letter to the customer (by e-mail and post) to notify the customer of their monthly entitlement and the conditions of this entitlement (e.g. when will the entitlement be stopped or when is it due for renewal). The entitlement is recorded in the insurance information system.
About 80% of claims give rise to an entitlement. In case a claim gives rise to an entitlement, a finance officer triggers the first entitlement payment manually and schedules the monthly entitlement for subsequent months. The finance officer takes on average 20 minutes to handle an entitlement. Finance officers handle payments in batches, once per working day.
When a medical report is required, a junior claims handler contacts the customer (by phone or e-mail) to notify them that their claim is being assessed, and to ask the customer to send a signed form authorizing InsureIT to request medical reports from their health provider (hospital or clinic). This step takes 10 minutes of work to a junior claims handler.
Once the authorization has been received, the junior claims handler sends (by post) a request for medical reports to the health provider together with the insurer's letter of authorization. The step of sending the request to the health provider takes about 10 minutes. Hospitals reply to InsureIT either by post or in some cases via e-mail. On average, it takes about 15 working days for InsureIT to obtain the medical reports from the health provider (including 4 working days required for the back-and-forth postal mail). This average however hides a lot of variance. Some health providers are very cooperative and respond within a couple of working days of receiving the request. Others however can take up to 30 working days to respond. As a result, the average time between a claim being lodged and a decision being made is 3 working days in the case of short-term disability claims, and 20 working days for long-term disability claims.
The insurance company receives 2000 disability claims per year, out of which 20% are for short-term disability and 80% for long-term disability.
1. What is the (average) cycle time of the above process (including waiting time)? Show the calculations for the work. A. 3 days B. 16.6 days C. 20 days D. 24.4 Days 2. Given the insurance claim scenario of the previous question, which of the following calculations corresponds to the theoretical cycle time? A. 10 + 0.8*20 + 0.2*(10+10+60) + 0.8*20 B. 10 + 0.2*20 + 0.8*(10+10+60) + 20 C. 10 + 0.2*20 + 0.8*(10+10+60) + 0.8*20 D. 10 + 0.2*20 + 0.8*(10+10+60 + 0.8*20) 3. In the context of the insurance claims scenario above, which of the following statements is not needed when calculating cycle time efficiency? A. For short-term disability insurance, it takes 3 working days disability claims to complete the process B. 20% of claims are for short-term disability C. 80% of claims for long-term disability D. There are 2000 disability claims per year Cycle Time Performance Measure – Assignment 8, Week 10 adapted from an exam question by Marlon Dumas We consider the following process for handling claims for disability insurance at a insurance company called InsureIT. When a claim is received, a junior claims officer first enters the claim details into the insurance information system and performs a basic check. Data entry and the basic check usually take 10 minutes in total. It is rare for the claim to be rejected at this stage (it only happens in 2% of cases) and for the purpose of the questions below we can assume that claims are never rejected at this stage. Next, the claim is moved to a senior claims officer who performs an in-depth assessment of the reported disability and estimates the monthly benefit entitlement (i.e. how much monthly compensation is the claimant entitled to, and for what period of time).
In the case of short-term disability benefits, the senior claims handler can perform the benefit assessment without requiring further documentation. In these cases, the benefit assessment takes 20 minutes. This time includes the time needed to register the entitlement on the insurance information system (if applicable) and inform the customer of the outcome via e-mail or postal mail.
However, in the case of long-term disability claims (more than three months), the senior claims handler requires a full medical report in order to assess the benefit entitlements. The process for obtaining the medical report is explained below. Once the senior claims handler has received the medical report, they can assess the benefits in about one hour on average. The senior claims handler then sends a response letter to the customer (by e-mail and post) to notify the customer of their monthly entitlement and the conditions of this entitlement (e.g. when will the entitlement be stopped or when is it due for renewal). The entitlement is recorded in the insurance information system.
About 80% of claims give rise to an entitlement. In case a claim gives rise to an entitlement, a finance officer triggers the first entitlement payment manually and schedules the monthly entitlement for subsequent months. The finance officer takes on average 20 minutes to handle an entitlement. Finance officers handle payments in batches, once per working day.
When a medical report is required, a junior claims handler contacts the customer (by phone or e-mail) to notify them that their claim is being assessed, and to ask the customer to send a signed form authorizing InsureIT to request medical reports from their health provider (hospital or clinic). This step takes 10 minutes of work to a junior claims handler.
Once the authorization has been received, the junior claims handler sends (by post) a request for medical reports to the health provider together with the insurer's letter of authorization. The step of sending the request to the health provider takes about 10 minutes. Hospitals reply to InsureIT either by post or in some cases via e-mail. On average, it takes about 15 working days for InsureIT to obtain the medical reports from the health provider (including 4 working days required for the back-and-forth postal mail). This average however hides a lot of variance. Some health providers are very cooperative and respond within a couple of working days of receiving the request. Others however can take up to 30 working days to respond. As a result, the average time between a claim being lodged and a decision being made is 3 working days in the case of short-term disability claims, and 20 working days for long-term disability claims.
The insurance company receives 2000 disability claims per year, out of which 20% are for short-term disability and 80% for long-term disability.
1. What is the (average) cycle time of the above process (including waiting time)? Show the calculations for the work. A. 3 days B. 16.6 days C. 20 days D. 24.4 Days 2. Given the insurance claim scenario of the previous question, which of the following calculations corresponds to the theoretical cycle time? A. 10 + 0.8*20 + 0.2*(10+10+60) + 0.8*20 B. 10 + 0.2*20 + 0.8*(10+10+60) + 20 C. 10 + 0.2*20 + 0.8*(10+10+60) + 0.8*20 D. 10 + 0.2*20 + 0.8*(10+10+60 + 0.8*20) 3. In the context of the insurance claims scenario above, which of the following statements is not needed when calculating cycle time efficiency? A. For short-term disability insurance, it takes 3 working days disability claims to complete the process B. 20% of claims are for short-term disability C. 80% of claims for long-term disability D. There are 2000 disability claims per year

Explanation / Answer

1Ans: The answer is option 'B'.

Given

Shortterm disability claims = 20%

Longterm disability claims = 80%

Average time taking for shortterm disability = 3 days

Average time taking for longterm disability = 20 days

Therefore average cycle time can be = 20/100 * 3 + 80/100 * 20

= 0.2*3 + 0.8*20

= 0.6 + 16

= 16.6

2Ans: The answer is option 'C'.

calculation:

Time for basic initial checking = 10 minutes

Time for 20% of cases = 20 minutes

Time for 80% of cases = 60 minutes

Time spent to schedule payment for most of 80% cases = 20 minutes.

By all these the theoretical cycle time can be = 10 + (20/100 * 20) + (0.8*(10+10+60)) + (80/100 * 20)

= 10 + 0.2*20 + 0.8(10+10+60) + 0.8*20 //// option (c)

3Ans: The answer is option 'D'.

Explanation:

By the calculations above in "1Ans"

we used short term disability claim time process which is 3 days (option A).

  we used shortterm disablity claims which are 20% (option B).

we used longterm disabilty claims which are 80% (option C).

we use all these options (A, B, C) to calulate average cycle time except the option D ( there are 2000 disability claims per year).

/////// Please comment if you have any doubt.

////// Thank You //////

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