Claims Innovation 101: 4 Important Concepts

[Previously from Applebaum: Insurers Look to Claims Innovation to Survive]

Implementing innovation in the P&C claims environment is not nearly as challenging as it may seem and it need not mean a complete upheaval and overhaul of existing processes. It's like the old saying: "How do you eat an elephant? One bite at a time." Innovation can and should be achieved in small, practical, manageable steps.

Having observed and worked with hundreds of carriers in achieving innovation in claims, I would summarize the most successful programs as having employed some or all of the following concepts:

Do By Starting

This simply means that when a good opportunity to transform some aspect the claims process is identified – or presents itself – don't allow "analysis paralysis" to creep in and delay action. Certainly you must do some analyses and planning before beginning, but expect to make some mistakes along the way and understand that the path you think you will be following can and likely will change. Expect to have to make corrections as you move forward, but get started - the project will generate its own inertia as you make progress and see results.

Follow the Money

It takes roughly just as much effort to transform one claims process as it does another so why not start in an area where costs and potentially leakage is relatively high. For example, for carriers with large relative Personal Lines books of business, the collision repair process in Auto Physical Damage is a major spend area and still relatively inefficient, especially in the supply chain, and prone to significant leakage – and therefore opportunity for large rewards through innovation.

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Leverage Vendors

Claims operations are typically resource constrained but that does not have to inhibit innovation. The marketplace is rife with technology vendors – large and well established as well as younger, smaller entrepreneurial companies – who are currently providing innovation to carriers. Through collaboration with industry peers and by staying informed through research analysts who are subject matter experts, you can quickly identify those deserving your attention. Most vendors are willing to conduct Proofs of Concept programs in your operations at their own expense and some offer innovative pricing models including gain-sharing which make the carrier value proposition that much more compelling.

Create an Innovation Culture

Real innovation is best achieved by companies with innovation cultures and is typically influenced by innovation "evangelists"; individuals in a position of authority and leadership, such as a Claims Director, who promote, communicate and encourage innovative thinking and action at every opportunity. Small successes are celebrated and rewarded and failures are tolerated and even encouraged – as they say "you can't make an omelet without breaking a few eggs". Also, involve and consult with the "Millennials" in your claims department; they can be extremely helpful in explaining and employing emerging mobile and social media technologies within innovation projects.

In future articles we will share actual case studies which describe successful claims innovation projects, the obstacles encountered and the solutions applied as we continue to explore the fascinating and highly rewarding world of claims innovation, a USD $36 billion opportunity as documented in our report 10 Startups Transforming P&C Claims: A US$36 Billion Opportunity.

About the author: Stephen Applebaum is a senior research analyst at Aite Group, responsible for the firm's property and casualty insurance practice. His focus is particularly on the business, regulatory and technology issues, challenges and opportunities for the property and casualty insurance ecosystem, encompassing trading partners and supply chain participants in the United States and abroad. Prior to joining Aite Group, Stephen was the principal of Insurance Claim Solutions, a strategic consultancy practice serving claims information technology and service providers to the North American property and casualty insurance industry.