A sustainable solution for gaining competitive advantage in the claims area has long eluded carriers. Traditionally, in order to increase profitability in the claims space, a focus had been made either on processing costs of claims handling or loss costs. Although these approaches have shown positive results, they are generally only temporary.
"Unlocking the Value in Claims," a recent report from New York-based Accenture, has found that insurers can gain a sustainable competitive advantage in the claims area through the use of technology. Apart from helping to prevent contributors to lost economic opportunities such as inadequate access to information, technology can allow for greater efficiencyleaving an adjuster more time to focus on areas where lost costs can be reduced, the study says.
Automation of overhead functionswhich consume over 40 percent of time spent in the claims handling process and have little effect on its outcomecan reduce the time it takes to perform these functions by up to 50 percent, says the report. More attention can then be focused on investigation, evaluation and recoverysegments of the process that were foundto have the greatest lost-cost reduction potential. During these parts of the claims cycle, major decisions are made, explains Michael Costonis, senior manager, Accenture.
"We've found that almost half of an adjuster's day is spent on activities that don't affect the quality of a claims settlement," says Costonis. "Capturing administrative efficiency isn't enough. You have to focus time on activities that matter from a loss-cost standpoint."
Done manually, routine overhead functions contribute to what Costonis describes as a chaotic, interruption-driven business. "An adjuster might be working on 200 open claim files," Costonis explains. "The challenge is to effectively jump in and out of claims files and know the context."
The companies surveyed for the study were using claims information systems that were between 10 and 15 years old. According to Costonis, this sample is representative of the insurance industry as a whole. "The average carrier is working with a very old claims system whose primary function is financial," he says. "What we've seen working with clients is that they attempt to tack on new functionality around their claims system, creating some sort of hodge-podge solution that doesn't necessarily reinforce business practices that make sense."
The report found that insurance companies looking to gain a sustainable advantage in claims should seek a claims information system that does the following: precisely segments claims so that different characteristics can be recognized; encourages consistency within each claim segment; automates routine functions to eliminate tedious tasks; provides information for claims handlers on things like quality of vendors; integrates vendors and makes a seamless connection to information such as fraud detection and bodily injury information; and educates claims handlers on things like coverage issues or types of business interruption loss.