In preparation for an upcoming Insurance & Technology Executive Roundtable that I’ll be moderating in New York on July 15, I pondered why claims is emerging as a focus of technology spending. In some respects, carriers’ persistent interest in claims transformation is merely a continuation of the long march of the insurance industry toward customer orientation. However, the current economic situation has made claims transformation all the more urgent.

If there are two abiding themes in times of economic downturn they are the need to minimize negative growth and to improve operational efficiency. With regard to the former, any customer-facing technology is relevant, including new business-related applications, call center technology and billing systems. Operational efficiencies can usually be found anywhere, including in areas where efforts were formerly undertaken — both because initiatives never result in 100 percent success and because conditions change. The one area where both growth and efficiency objectives can be pursued to maximum effect is claims. The impact of claims overshadows that of any other customer interaction. Yes, consistently poor service will undermine customer retention, but the most important interaction between carrier and customer is the claim. Claims is also a tremendous cost center, in terms of what it takes to run a claims operation as well as the impact of claims leakage.

Seeking to flesh out my ideas a little, I caught up with Accenture’s Michael Costonis, who has published what I find to be among the most insightful commentary on claims transformation. Aware of his general ideas, I was interested in Costonis’s opinion on how the economy has affected the imperative to transform claims operations, and the consequences of that for technology investment.

Costonis confirms that current conditions place great pressure on carriers to achieve operational efficiency as the keystone to restoring profitability. “Accenture research continues to show a persistent issue of a challenge to achieve quality results and a refocusing on value-added activities,” he says. “In fact, our research indicates that this can cause a 3 to 5 point improvement in the combined ratio. Claims technology is a critical enabler to remove the non value-added time and refocus it on achieving better claims outcomes.”

Recent Accenture research showed that claims is second only to sales/distribution among carriers’ technology investment priorities. Within claims organizations, “replacing or improving claims technology” was the top priority, followed by “improving analytics” and “increasing once-and-done claims.”

Looked at from a higher level, the internal claims IT spending priorities reflect the goals of improving core claims systems, focusing on business insight across the claims lifecycle, and taking an overarching, holistic view of the carrier’s claims operating model. Insurers seeking to simultaneously carve out the greatest operational efficiency and drive compelling customer service seek, Costonis says, “to ensure that their people, processes and systems are designed, enabled and executed for success.”

That’s a brief way of summarizing the best efforts of many carriers, facing many challenges unique to their own businesses and IT organizations. One of the pleasures of I&T’s Executive Roundtables, is the opportunity to hear how the business and technology officers at the table are addressing their particular challenges. Unfortunately for most of our readers, these meetings are off-the-record, so the only way to take advantage of this industry intelligence is to be there! CIOs, CTOs and VPs are welcome to contact me personally at aodonnell@techweb.com about the possibility of attending.

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