Claims: Excellence Is Fundamental

Claims management is one element of an insurance operation in which excellence is fundamental. Claims fulfill the promise of service as defined in the claimant's policy in the event of a covered loss. A claim is the major event that characterizes client perception and often is a defining moment in the policyholder-insurance company relationship. Consumers may be sensitive to the cost of insurance premiums but it is the quality of claims servicing that customers remember most.

The insurance industry is unique when it comes to claims. Few industries connect so many people, such as adjusters, appraisers, claimants, attorneys, and service providers, in myriad ways to resolve a single event. The process is multifarious and the requirements substantial from first notice of loss to appraisal, interview and negotiation. Given the complexity, it is difficult for insurers to handle claims quickly, accurately and efficiently with a degree of stability. It is paramount, however, for insurers to pursue current opportunities to improve this core operation.

It is easy to discern that content is a major influence in claims handling because it is still high-touch and paper-laden. Involved are a complex set of content tasks such as gathering forms, photographs and documents and routing them to different internal and external personnel. Inefficiency is typically the result of time wasted finding and retrieving relevant documents and moving them from one step to the next, as an insurer receives and verifies supporting documents and data. Insurers must turn this archetype into a usable and manageable environment that moves from paper-based to electronic formats.

Establishing consistent business, process, content and data flow to the appropriate steps and personnel in the claims workflow process is essential to improving claims productivity and financial measures. Further, demands are to organize all information digitally into a single-claim package, or virtual file, and expose that information electronically to all involved parties. It is no small undertaking for insurers to revamp from manual to automated claims processing but insurers have several options.

Insurance companies are scrutinizing core claims systems that are limiting their abilities to respond quickly to market conditions or customer expectations. There are new demands for connectivity between internal and external parties, auditing standards, and operational transparency. Aged claims management systems and outdated processes cannot handle the advanced requirements. Insurers recognize that perpetuating older systems with infrastructure upgrades and add-ons is not the prescribed course of action.

Fundamentally, insurers must determine whether a holistic, stand-alone claims system is preferred. Comprehensive claims solutions are certainly available and offer functional breadth and flexibility for end-to-end processing to include content management, workflow, reserving, payments and subrogation. However, a carefully selected point solution can provide similar functionality, in a flexible format, to achieve comparable goals. It is important for an insurance company to weigh the differences and choose which approach is most appropriate for their long-term IT architecture strategy. Both methods present best fit and best approach, so the unique needs and culture of an insurance company often drives its direction.

Claims management is core business and should be one of the most efficient and accurate functions of the insurance operation. A majority of insurance companies express very similar business drivers for claims processing improvements: Pay the right amount in a timely manner; eliminate costly processing deficiencies; minimize leakage; and handle claims with fairness, accuracy, and consistency. Little separates one insurance company from another when one compares their business goals, and nothing prevents an insurance company from having efficient and accurate claims management. You draw the distinction between leaders and laggards when dreams become reality. Claims are the moment of truth, make it a differentiator.

Cynthia Saccocia is a senior analyst in the insurance practice at Needham, Mass.-based TowerGroup, an advisory research and consulting firm focused on the global financial services industry.