Among P&C insurers, claims systems and process capabilities vary widely, potentially affecting loss results, according to the “Novarica Claims Capabilities Maturity Model,” which is based on a survey of more than 90 P&C insurers.
Personal lines insurers likely are using more sophisticated techniques to manage claims processes, closely followed by workers’ compensation carriers, Novarica said. Those results also are highly correlated with improved loss ratios, attributable to the high level of homogeneity across claims. In terms of technical capabilities, commercial and specialty lines carriers are lagging, except in workflow and document creation, but are not apparently experiencing inflated loss ratios, attributable to higher levels of automation in claim handling processes.
The survey defines legacy, mainstream and leading practices across 20 claims sub-processes and enables insurers to assess their maturity levels in each area, create benchmarks compared to industry norms and can help them prioritize future investments. In assessing their claims maturity stages, insurers also can determine what processes are most highly associated with better loss ratios.
“The claims process is not standardized across the industry—it varies by a number of factors, such as carrier size, industry sector, and technical capability,” said Karlyn Carnahan, author of the report and a principal at Novarica. “In addition, few insurers have leading or legacy capabilities across all 20 sub-processes – the average insurer in our study utilizes legacy capabilities in six areas, mainstream capabilities in nine areas, and leading capabilities in five areas, reflecting differing priorities and patterns of previous investment. Correlating capability levels to loss ratio is an inexact science,” Carnahan said. “But it is clear within the sample that leading capabilities in workflow, document creation, use of software to support investigations, and multiple channels for FNOL are all associated with lower loss ratios—and significantly so in some cases.”
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