The Claims Modernization Opportunity

Claims organizations face the challenge of balancing their loss costs, expenses and the service they provide to customers. While the goal is to offer a fair settlement, paying the appropriate amount, carriers also need to minimize leakage and reduce fraud. Loss costs can be kept low when carriers subrogate wherever possible and take advantage of salvage opportunities.

But doing all of this in a cost-effective manner - keeping both internal operating costs and external loss costs, such as attorney fees or expert witness fees, low - can prove difficult without solid technology support. And when you add in the need to provide a high level of customer service as a differentiator to drive customer retention, the challenge becomes more taxing.

To address these challenges, carriers are examining, investigating and implementing upgrades to their core claims administration systems and other technology areas that impact claims. Currently, claims systems in place at many insurers are aging and expensive to maintain. The business rules are embedded in the code, making it very difficult to make changes to meet today's increasingly complex needs.

And the available resources for working on these systems are shrinking. Older systems were typically rooted in managing the financial side of claims, not in providing high levels of customer service, and often are decoupled from policy or customer service systems.

Broad Choice of Solutions

Today, carriers have a broad choice of claims solutions to meet their needs. Over the past few years, a number of modern systems have emerged with features such as integrated workflow management, task and process management, and correspondence and document management, and easily configurable business rules allowing greater degrees of flexibility.

Adjusters can use portals and dashboards to access their work. And typically they can enjoy dramatically improved user interfaces with easily navigable screens and easy-to-find contextual help. Adjuster portals, wizards to open new claims, and scripting and recursive questioning all allow carriers to create very intuitive processes and deliver service in a consistent manner.

Virtually all modern claims systems contain features such as reserve maintenance, vendor tracking and contract management, specialized modules for litigation management, salvage and subrogation, and even special investigation and fraud flags. Because most are built with service-oriented architecture and are web-based, mobile capabilities are fairly easy to find.

Also available but less common are functions such as agent portals, billing and bill review, estimation/evaluation, filings, fraud detection, medical case management, policyholder portals, and reinsurance management. In many cases, these functions are provided by specialized components rather than integrated elements of the core claims system.

Nearly as important as those rules or workflows that are already built within the system is the relative ease with which additional capabilities can be added. Look for easily configurable rules, workflows, roles, pages and forms. Some solutions have robust tools to allow massive configuration; some are simple enough to be configured by business users.

Modern systems typically are browser-based systems with service-oriented architectures. Configuration tools are often available for configuring workflows, pages, forms, tasks, roles and even integration points. And many have business intelligence tools built in.

Best-Practice Technologies

Along with upgrading claims administration systems, carriers are investing in a wide variety of other new technologies to improve claims operations or to improve customer service. Examples of best-practice claims technologies include analytics, fraud detection, geographic information systems (GIS), estimatics, mobile applications and technology, and the incorporation of Web 2.0 tools.

With these kinds of features, it's no wonder that we're seeing claims administration systems being replaced at an increasing pace in the insurance industry. In fact, more than 30 percent of respondents to a Novarica study in April 2010 cited claims systems as one of their top three priorities for 2010 - a 30 percent increase over 2009. While many carriers have already upgraded, and others are in the middle of a claims replacement project, the majority of carriers are in the planning phase for a core claims system replacement.

Karlyn Carnahan is a principal in Novarica's insurance practice with expertise and direct experience in distribution, claims, reinsurance, e-business and IT planning.