Best Practices for Claims Program Management

ITA Group
ITA Group

piles of claims processing paperwork

Successful channel sales and distributor claims management is a journey of continuous improvement, rather than a final destination. Even small tweaks can make a big difference to your claims data collection. It’s all about making connections between systems, suppliers, people and strategies.

What Is a Claims Management Program?

A claims management program is the use of a submission process to confirm the purchase or sale of item(s), usually with an incentive or payout for doing so. This type of program is ideal for collecting sales data at a rep level if you don’t or can’t collect it using more sophisticated methods. The easier and simpler the claims program and forms, the better the results. It is also important to consider the proper level of incentive to encourage use of the data capture tool. Partners and their sales team need to feel it’s worth their time and effort to do it.

Why Channel Sales Claims?

Claims programs collect valuable sell-out data you don’t normally receive. When you distribute through multiple levels of a channel, it’s a great way to see what your independent dealers are selling. Plus, these additional benefits:

  • Understand who your best dealers are
  • Drill down on where you may need to focus to grow sales
  • Compare sell-out claim data with sell-in data to understand supply needs
  • Make product decisions based on sell-out volume
  • Monetize the data by targeting end users collected through the claims process
  • Use the program to grow the relationship between your field reps and the independent channel
  • Identify commonly sold together items

Do I Need Channel Sales Claims Data?

Do you have a direct source of data to track the key metric, behavior or transaction you intend to reward? If not, you will probably need to consider building a strategy that includes a process for individual participants to self-report their activity. 

How Does a Sales Claims Program & Invoice Validation Software Work?

There are many types of programs that leverage claims to capture the data needed to reward the participant. The most common types are:

  1. Channel partner sales to their customers
  2. Customer purchase rebates

Additional types of claim programs that are not sales or purchase based include:

  1. Customer referrals
  2. Proof of location brand standards such as signage or show rooms
  3. Product placements such as endcap displays

A claim program usually consists of two primary steps for the participant.

  1. Complete an online form or upload to report the eligible activity
  2. Submit a form of back-up as proof of the sale/purchase/activity eligible for the incentive program
    • This could be a receipt, invoice, proof of purchase

A sales claims process and invoice validation software is going to help you:

  • Take in claim submissions
  • Process submissions
  • Check for accuracy
  • Apply business rules
  • Validate claim eligibility
  • Process payment
  • Pay the participant

Updates to the way claims are processed and validated are making this type of software more affordable while also giving brands control over what levels of data they collect—all while making it easier for the channel to handle submissions.

Consider Best Practices for Claim Validation

Program integrity is important, both for stakeholders and participants. There should be a level of accountability for both without putting all the burden on either side. If you create a program without checks and balances, you risk exploitation by a few unscrupulous characters who may try to game the system. This could lead to financial risk of the program and payment to invalid activity thus putting risk on the entire program. But burdensome processes required for participants can be a barrier to participation and even potentially lower your overall engagement and keep the program from reaching its maximum potential—driving sales and collecting data.

Reviewing risk tolerance relative to administrative cost ratio (or, how much spending of a company's sales is on administrative costs) requires a fine balancing act. It’s important to ask yourself, “If there’s a moderate risk of a small percent of claims paid out in error based on mistaken user inputs, does this warrant the cost and payment delay caused by a process that requires 100% of claims be reviewed?”

But it doesn’t have to be all or nothing. There are some best practices to leverage technology to detect suspicious activity and monitor for potential fraud or even just human error.

How Can You Check Accuracy & Consistency of Invoices?

A common practice is the use of algorithms that “sniff out” anomalies and hold those transactions in queue for further review. Those techniques can look for patterns and deviations from established norms. Examples can be as simple as holding claims that have high dollar values for additional review to looking at individual’s track-record, and when claim volume reaches a defined “suspicious” threshold, the claim is audited.

chart illustrating claim audit considerations

Generally speaking, the less rigor you put into the claim validation and audit processes, the more risk you introduce to the program financials. On the flip side, less rigor usually means less time between claim and payment and lower costs to implement. There isn’t a right or wrong answer. But you should not ignore this important element of a claim program.

Here are some practical considerations for auditing in order from lower financial risk (higher cost to implement) to higher financial risk (lower cost to implement).

  • Compare all user submitted claim data to back-up documentation
  • Require an administrator to approve or deny all claims
  • Randomly select claims at pre-determined intervals for manual review
  • Use exception reporting to prompt manual audit review of back-up documentation

Designing the Right Claims Process

Each claim process requires a unique approach to develop the best user experience. Don’t settle for inflexible templated claim forms based on open fields of data input. Smart online forms or uploads should guide the participant through the claims process.

  • Use information you already know about the participant to autofill as much information as you can
  • Break down the collection into distinct pieces instead of one long form to complete
  • Use auto-complete fields for quick look-up of previously or commonly submitted information
  • Use separate hierarchal steps to select product categories, options and ultimately SKUs to limit the length of long drop- down lists
  • Leverage in-form logic to immediately provide the user feedback on information that is not valid or eligible for the promotion like product SKU, serial number formats or eligible dates of sale/purchase

Consider Best Practices for Claim Payment Process

Balance the Desire to Collect New Data With Disengaging Your Audience

Many organizations go through a lot of effort to use a claim process for gathering more intel on the sale than what is specifically needed to just pay the claim for the incentive program.

Collecting information such as, what other product types were sold with this transaction, what percent of the total sale the eligible incentive products represented and any information about the end customer. This can seem very strategic because no one can argue that data is gold. And it just may be worth it for your program. However, participant centricity and the ease of use to maximize engagement should always be balanced with the desire for data collection. Consider bonus opportunities for those who provide the extra information versus requiring the fields.

If you do collect the information, make sure that data is actionable and you have plans to use it.

Updating Channel Partner Claim Management

Imagine no claim forms for participants to complete and no manual interventions needed to verify validity of the claim, all while maintaining minimal financial risks.

A completely automated system that can take an invoice image and do everything from capture all of the data information from the image, through processing valid and eligible information from the image and on to storing other meta data from the invoice that could be used for further market-basket analysis.

Some of this is actually relatively easy to accomplish today. The largest hurdle however is consistency of the data layout in the images of the receipts submitted as proof of sale or proof of purchase. If your program will have limited variances in invoice or receipt layouts along with consistent product descriptions on eligible products, the use of image scanning technology can accomplish the task.

Invoice Validation Advancements

The challenge is that most claim programs are based on transactions through independent partners and retailers who use their own proprietary point-of-sale systems. And among those systems are potentially hundreds of variations in layouts and product descriptions often making it cost prohibitive to use these technologies for reliable data scans.

However, technology is improving rapidly. And advanced Machine Learning and AI techniques can be trained to look for key pieces of data across inconsistent unstructured receipt or invoice layouts. (We’ve tested this and are using it!) The most immediate application is to combine a claim form with an AI-based data scan of the back-up to validate the information submitted on the claim form, including information such as:

  • Distributor purchased from
  • Invoice number
  • Invoice date
  • Sold-to information
  • Products being claimed
  • Quantities
  • Volume

Moving Away From Manual Invoice Validation Processes

Confidence scoring can be added based on degree of matching. And thresholds can be set, based on your risk tolerance level, to trigger manual intervention. This is a large step in the right direction for lowering the burden of managing a claim-based program while simultaneously lowering the risk.

But the holy grail: Never require your participant to complete any “paperwork” to participate in the program. Look for opportunities to coordinate with the suppliers so that proof of purchase comes directly from the sources managing the participant transactions up channel.

Sometimes scale doesn’t allow for that efficiency to be gained. But that still shouldn’t stop a customer-oriented organization to search for a way to make it easy to do business with them.

A growing number of programs are lowering the barrier and burden of participation by allowing participants to submit their proof of purchase without any online claim form fields to complete. This type of user experience requires a higher level of back-end effort in order to turn those receipts in to actionable transactions—but the payoff can be solid. In some industries (particularly those with an audience type such as a contractor in the building trades), a claim form process can create such a barrier for participants (i.e., added time; effort) that requiring it can lower enrollment, engagement and participation by as much as 30% to 40% according to our clients’ experiences.

Revamping Your Claims Process With the Right Partner

In conclusion, you may not have the data you need at your fingertips in order to run an incentive for your target audience and garner the engagement you desire. This may require a claim process for participants to self-report their activities. And when you determine you’re in need of some assistance navigating the right plan for your organization, reach out.

We’d be happy to assist.


Real-World Example: Improving Channel Sales Data

Using Claims Data to Grow Specific Product Revenue

A manufacturing client needed to understand sales data and also balance how their product-mix was sold; but they had little sell-out data to know what was happening through their distributor and reseller network.

Before establishing a claims program, they were only able to see:

  • Inventory purchased at the dealer level
  • Price paid and any discounts or rebates offered by the dealer

ITA Group helped them identify which inputs would be most valuable to capture in order to make better decisions about product, incentives and future promotion. After launching their claims program using strong communications to help their partner network understand how to use the program and what was in it for them, the manufacturer saw a massive increase in sales data, including:

  • $1B+ claimed through their system in 2019 alone
  • Depicting sales points they wouldn’t have known otherwise, including:
    • Rep(s)
    • Customer type sold to and company name
    • Industry
    • Product and serial number
    • Additional applied and appended data based on product and dealer info
  • 22% lift in profit by using the claims data to target segments with product promotions
  • 24:1 ROI on their investment into the claims program

To discover the answers to a variety of channel strategy questions, download the white paper on partner sales data, partner identity data and end-customer data collection, with real-world examples to help you understand their value.