Operational Excellence in Reinsurance through Right First Time (RFT)
Learn how the Right First Time (RFT) philosophy eliminates FNOL errors and prevents retrocession leakage, transforming claims management from a cost centre into a strategic engine for operational excellence and capital efficiency.
The Right First Time (RFT) principle supports the evolution of reinsurance claims management from an issue of quality control to a fundamental requirement for capital efficiency. You only have to look towards the likes of Lloyd’s of London, who recently elevated Claims Management to its fifth ‘Hurdle Principle’ for 2025/2026. We can see the industry is moving toward a quality at source philosophy.
I believe this is a great thing. RFT is the bridge between efficiency and effectiveness. According to industry research, nearly 4 in 10 insurance and reinsurance leaders (38%) admit they lack a comprehensive, unified view of their key business data across siloed systems. When nearly 40% of the landscape is obscured by fragmented data, Right First Time ceases to be a luxury and becomes a survival mechanism for protecting capital and reputation. But I think the principle deserves more than a few words to introduce its effectiveness. Let’s have a deeper look.
Defining the RFT Paradigm
Technically, the RFT principle originated in Total Quality Management (TQM) as a method to eliminate waste by ensuring activities are performed correctly at the initial point of entry. I like to translate the concept like this:
Efficiency is doing things right.
Effectiveness is doing the right things.
Right First Time is doing the right things right, the first time.
In reinsurance, I find it particularly useful to explain RFT through its hierarchy of implementation:
Effectiveness is the ‘What’, identifying the correct treaty, the correct loss date, and the correct regulatory requirements.
Efficiency is the ‘How’, processing that data through automated workflows without manual re-keying.
And RFT? That's the ‘Result’. A seamless flow where the digital twin of the claim requires zero correction throughout its lifecycle.
In reinsurance, an error at the point of First Notification of Loss (FNOL) does not stay small
Unfortunately, I’m sure many will be nodding in despair when I say that an error at the point of First Notification of Loss (FNOL) does not stay small. In fact, it can quite easily cascade through the whole ecosystem.
It is likely fairly obvious why this would be a problem, but here are the three major problem areas I’ve encountered whilst supporting clients:
It is a time-waster. Industry research indicates that technical analysts often spend 40% to 66% of their time on transforming data before any actual risk analysis occurs.
It causes a retrocession leakage. When claims data is entered incorrectly, it often fails to trigger automated retrocession recoveries. This leads to trapped capital, where the firm pays out a claim but cannot immediately bill its own reinsurers due to data inconsistencies. Thus, RFT ensures that cash-in matches cash-out timing.
It undermines underwriting integrity. Underwriters utilise claims data to build Loss Development Triangles. If 10% of claims are coded with the wrong underwriting year (a common RFT failure), the resulting actuarial models are fundamentally flawed.
What is the market saying about all this?
The regulatory environment has shifted to mandate RFT through ‘Principles-Based Oversight.’ Lloyd’s Hurdle Principle 5, as stated earlier, has elevated claims management to a ‘Hurdle’ status. This requires managing agents to prove that their infrastructure enables "effective servicing... underpinned by a strong claims culture."
Strategic recommendations
So, now that the importance and increasing emergence of RFT have been made apparent, let’s look at how leaders can begin to embed RFT as a core competency.
From my own knowledge and experience, the best places to start are with KPIs, data ingestion and culture.
KPIs? Replace them. Claims Volume targets should be replaced with a First-Pass Yield (FPY) metric, measuring the percentage of claims that require zero manual intervention.
Data ingestion? Move toward eNOL (Electronic Notification of Loss) using ADEPT messaging to ensure validation happens before the data hits the core ledger.
Culture? Encourage discipline. Implement Root Cause Analysis (RCA) on all rejections. Instead of just fixing the error, teams must identify why the error was possible and close that systemic loophole.
The Right First Time principle is a huge contender in companies managing the increasing complexity of modern reinsurance in a sustainable way. By focusing on doing the right things right the first time, the claims function can truly be transformed into a strategic dataset, something I’m sure many leaders would never have believed possible many years ago.
Don’t waste the opportunity!
As always, if you’re looking to seize the opportunities presented within modern reinsurance but aren’t sure what to do next, let’s have a chat about it. 👇
✉️ Email me at sven@buondrius.com
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