Insurers Improve Claims Process Through IT Alliance
Predictive Analytics: A Helping Hand
One of the challenges in delivering a human touch, however, is that there are fewer humans with the required skills (in claims organizations and in others) owing to an aging insurance workforce, according to Karen Pauli, senior analyst, TowerGroup (Needham, Mass.). However, high-tech -- in the form of predictive analytics -- can relieve humans of work of lesser value to free them up for more value-added tasks, she notes.
Upon introduction, these technologies can result in pushback from staff unaccustomed to their use, Pauli cautions. But effective application of the technologies combined with a modest change-management effort should assuage concerns. "Once you get claims people to stop thinking, 'Oh, this is going to replace me!' and to start to think, 'Hey, this is going to help me do my job better by focusing on things with real benefit,' then you start to see them relax and think about the technology more rationally," she comments.
Among the ways to help focus scarce staff on more value-added work is to use predictive analytics to automatically settle simpler and more straightforward personal lines claims, according to Pauli. "You don't need a human being involved in towing and glass claims," she insists. "But what you do need, especially considering a retiring baby boomer workforce and a dearth of training programs, is decision support for complex processes."
Predictive analytics can assist junior adjusters in the proper setting of reserves or help carriers to identify the probability of the success of subrogation efforts by analyzing key attributes of claims, Pauli says. Analytical technology also can be helpful to carriers for the management of complex networks of third-party providers involved in the claims value chain, she adds. For example, analysis of bills may show vendors charging fees above market prices or including unnecessary expenses. "If you want to manage your vendors to ensure that they're providing services within the norm of their geographic territory and in keeping with generally accepted business practices, predictive analytics is the most effective way of doing it," Pauli asserts.
Perhaps most important, predictive analytics also are an indispensable aid to focusing special investigative units (SIUs) quickly on claims that have real potential for fraud. "Given the volume of claims that may be found suspect for one reason or another," Pauli elaborates, "that's where you need to triage and get humans involved with the most important things."
Fraud also offers an example of how enhanced reporting can open up a path of continuous improvement, comments Donald Light, a Palo Alto-based senior analyst with Celent. Claims executives often cite the "80/20" rule in connection with adjusters' referrals of potentially fraudulent claims to SIUs -- that is, 20 percent of the adjusters make 80 percent of the referrals. "There's no reason that the number of fraudulent claims would be distributed that way," Light declares. "Every adjuster should have roughly the same number of fraudulent claims coming across his or her desk."
Carriers should follow up the implementation of new core claims systems with efforts to mine such insights, Light advises. Modern claims systems have a range of features and functionality that are beyond the ability of a typical insurer to fully exploit during the initial deployment, he explains. At that point, "You focus on making sure the machine keeps running and probably do a limited amount of reengineering or process improvement," he adds. "But after six to 12 months, once things have settled down, that's the time to look at the system's capabilities for producing both canned and customized reports."
That's a good starting point for establishing a continuous improvement cycle, "because it's very hard to improve something unless you measure it, and measuring requires some kind of reporting that tracks it," Light says. "At the end of the day, any kind of technology is just a matter of using tools to achieve greater mastery in claims."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio
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