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Using Integrated Technology Balance on the High Wire of Customer, Claims and Cost Expectations

New technologies are enabling your organization to improve the company's performance and to provide better levels of customer service around claims processing.

By Paul McDonnell, KPMG Consulting, Inc.

Productive claims processing is a delicate balancing act. You seek to provide your customers with a high-quality experience and fair payouts while efficiently managing your operating costs.

Today's personal-lines insurance companies enjoy new opportunities to increase margins and hold down rising claims costs by processing claims in a more prompt, effective and satisfactory manner, increasing operational efficiency as well as customer satisfaction.

Savvy customers expect nothing less than the highest-quality service from their insurance providers. Fortunately, new technologies are enabling your organization to improve the company's performance and to provide better levels of customer service around claims processing.

A finely tuned claims processing function can help you:

-- Significantly enhance customer experiences
-- Manage your expenses and processing efforts more efficiently
-- Better control your cash payouts

The improved ability to handle the claims of policyholders and third parties, and to negotiate costs through investigation, can differentiate your organization in the converging financial services marketplace and help you create a sustainable competitive advantage.


Rising customer expectations are redefining traditional claims services, driving insurers to find new ways to establish customer-centered claims operations that take advantage of leading-edge technologies. These expectations promise to grow with each technology advance, further heightening customer demand for "service value."

KPMG Consulting, Inc, (NASADAQ:KCIN), one of the world's largest consulting and business systems integration firms, suggests that personal-lines insurance carriers take the following actions to establish an optimal claims processing function:

-- Redefine your existing functions and value-added services
-- Manage your claims process as a key component of customer relationship management (CRM)

For example, insurance companies are business experts and can add significant value to a customer's experience by negotiating the fairest charges for auto repairs and medical services. Claims processing is an optimization process--insurance companies need to balance expenses, overall effort, customer relations, and payouts based on each situation.

Emerging technologies are making enterprise data integration easier. For example, servicing organizations can quickly and easily manage and analyze vast amounts of data through the Internet. In addition, administrative system architectures can integrate business processes horizontally, resulting in an open, multi-vendor, best-of-breed, directory-enabled, end-to-end structure.

Within this architecture approach, we offer solutions that bring real benefits to insurance providers, including straight-through-processing, single point-of-contact capability, supply chain optimization, and implementation of customer management best practices.


More than 1,500 companies in the United States sell some form of property and casualty (P&C) insurance. According to a research report by Deutsche Banc Alex Brown (Deutsche), in 1998, direct written premiums exceeded $280 billion and individuals submitted 116 million P&C claims. Of those submitted claims, approximately 72 percent were charged to personal-lines insurance policies, personal auto liability, auto physical damage, and home and farm owners. In addition, insurance carriers spent approximately $42 billion in loss and loss-adjustment expense supported by $180 million in actual settlement payouts. Finally, Deutsche reports, U.S. claims professionals distribute over $200 billion annually.

Those same statistics also show that the P&C claims industry spends approximately $23 billion in human capital annually, including an estimated 150,000 claims professionals and more than 300,000 support personnel. Furthermore, these claims professionals review and evaluate more than $180 billion in claims payments and analyze more than 116 million new claims, nearly 750 claims per claims professional annually. This is a remarkable number given the antiquated technology infrastructure that currently supports claims professionals. Organizations face a challenge not only of technology automation and employee efficiency, but also of differentiating their claims services from competition.

After the initial sale of the policy, the highest volume of customer interactions occurs during claims processing. However, the settlement of a claim may turn the customer and carrier into adversaries and jeopardize the opportunity for renewals, cross-selling, or profitable new business with the claimant.

Historically, claims systems focused on financial transactions, policy and coverage verifications, recovery processing, loss investigation, claims handling, and fraud detection. However, the shift to customer-centered practices, increased customer expectations, and advances in technology are forcing insurance companies to the Internet and online commerce solutions. This move enables organizations to include new functionality such as CRM, Web personalization, push-to-talk call centers and self-service offerings.

Most of the application development vendors, however, are only now addressing insurance services such as Internet-based loss reporting, procurement, and loss investigation.


Insurance companies have been slow to investigate enhancing claims services through technology.

Today, however, many claims operations increasingly are using their organization's information technology infrastructure to support its field force, as well as back-end processes such as fraud detection. This change requires leading-edge infrastructure components, including local and wide-area networks, data storage networks, Web servers, and other technology capabilities.

Technology can enable your organization's claims processing operation to better serve customers by providing up-to-date and accurate information to the claims representative, resulting in stronger decision support for both parties. When an insured motorist contacts your call center with an auto claim, your customer service specialist can rely on desktop technology to identify claimant and policy details, and have a full view of the customer's account history, all of which improves the customer's experience, speeds up the claims process, and helps resolve the issue.

Based on these new capabilities, insurance companies are beginning to understand the value of online commerce solution to their claims operations. Vendor applications have been successfully addressing some of the needs of insurance companies, but continue to be challenged with the following significant issues:

-- Workflow management
-- Insufficient functionality
-- Outdated technology architectures
-- Insufficient system flexibility/scalability
-- Integrated solutions that cannot be separated
-- Inability to integrate best-of-breed components from multiple vendors
-- Implementation timeframes and associated risks
-- Lack of customer-centered technology processing


There are very few commercially available claims systems that can address the emerging needs of insurance companies. Additionally, several failures in the customized claims system development area have made many organizations reluctant to address their claims systems internally. It is clear that most insurance companies will need to integrate applications or components in order to build the kind of processing environment that creates competitive advantage.

While point solutions do exist, other solutions provide components supporting required functionality, leaving you to address the challenging task of integration. Effective claims processing begins with a flexible, open platform that allows for rapid integration with other leading-edge components, letting insurance companies optimize claims processing and augment functionality and services quickly and easily.

Paul McDonnell is a managing director in the Financial Services business unit of KPMG Consulting, Inc. of McLean, Va. The views and opinions of this article are those of the author and do not necessarily represent the views and opinions of KPMG Consulting. All information provided is general educational information and is not intended as professional advice to address the circumstances of any particular individual or entity and should not be relied upon as such.

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