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Bracing for the Claims Storm

The 2005 hurricane season served both as a test of P&C insurers' claims processing technologies and as motivation to continue to upgrade their claims systems.

For insurance companies, processing a claim often is referred to as the moment of truth. To ensure that they succeed at this critical task, many carriers have invested in new back-office and field technologies within the past year to enable more-efficient claims processing and provide better customer service. And, for many, it wasn't a moment too soon.

The severity of the 2005 hurricane season has created a formidable test for many property and casualty insurers. The destruction caused by Hurricanes Katrina, Rita and Wilma generated more than $50 billion in insured losses and 2.5 million claims, according to New York-based Insurance Information Institute (III). And Jersey City, N.J.-based insurance risk and catastrophe research firm ISO's Property Claim Services (PCS) unit estimates policyholders in Louisiana alone will file 900,000 claims.

The ability to respond quickly to claims is dependent upon the challenge of tying front-end technology to back-end claims systems, according to Jamie Bisker, global insurance industry leader for IBM (Armonk, N.Y.). "The way [insurers] respond to a claim is critical to marketing, and by updating to modern technology, a company allows customer service to be synchronized," he says. As the industry continues to move toward a more consumer-oriented operating model, maintaining technology to optimize consumer interactions will be more crucial than ever, he explains.

Over the past few years, IT budget priorities have focused on updating policy systems, and claims processing systems have seen under investment, contends Kimberly Harris-Ferrante, research vice president for Stamford, Conn.-based Gartner. "There was a trend to keep the status quo rather than trying to improve claims processing," she says. "But, in the last year, that started to slightly change because the insurance industry - and, in particular, P&C - has faced several catastrophes that have driven them to make claims a priority."

According to a recent Gartner study, 67 percent of U.S.-based P&C insurers with more than $100 million in net annual premiums are assessing new claims technologies both in the field and in the back office (see chart, page 42). While the study reports that 21 percent of companies are investing in wireless solutions and 25 percent in new technologies such as geographic information systems (GIS), which capture and analyze geographic information for risk management, a majority of companies are updating and replacing back-office technologies, such as claims administration systems and claims management solutions, Harris-Ferrante notes.

Adjusters, typically the first to respond to claims, are on the front lines of the battle to streamline claims processing. To enable a quick response on those front lines, many insurers are arming field professionals with new mobile claims technologies, including global positioning system devices, satellite communications, wireless aircards, digital imagery and video, and catastrophe modeling. "Having this technology provide the information to the field professionals allows them to do a better, more accurate job efficiently," says IBM's Bisker.

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