Average P&C Insurer to Spend $17.5 Million on Claims Modernization

P&C casualty claims executives in the United States anticipate spending, on average, $17.5 million over the next three years to upgrade and modernize their claims functions, according to “North American Claims Investment Survey: A Foot in Today, a Leap into Tomorrow for P&C Claims Functions,” a survey of claims executives by Accenture.

Insurers face a raft of challenges in the search for profitable growth, including evolving consumer expectations, the exponential growth of structured and unstructured data, and persistent demands from management and shareholders to deliver better claims outcomes. However, most U.S. P&C claims executives said their claims systems lack the modernity to address consumers’ evolving needs and the flexibility to allow them to change the systems’ behavior and business rules without help from the IT departments.

“Today’s digital-savvy, mobile-enabled consumers expect seamless, real-time interaction with their service providers,” said Michael Costonis, a managing director in Accenture Property and Casualty Insurance Services. “For P&C insurers, that means reducing settlement times and enabling policyholders to interact with them about the progress of their claims when and where they want. A modern core claims system is essential to achieving all of these objectives.”

Survey highlights:

• More than half (54 percent) of respondents said their core claims systems are more than five years old and one-third (32 percent) rely on more than five different applications to process claims

• More than three-quarters (78 percent) said they are upgrading their claims systems; of those, almost one-third (31 percent) said more than three years had passed since the latest major upgrade

• Two-thirds (66 percent) of claims executives surveyed think their claims systems are not optimized to collect and analyze the growing volume of data available - such as insights about consumers from social media and usage data collected by means of telemetry and Global Positioning System – which would enable them to refine and improve claims management.

• More than three-quarters (78 percent) said their claims organization is not equipped to manage risks such as cybercrime, terrorism, and the increased frequency and of severity of natural catastrophes

“While 92 percent of the claims executives we surveyed said they could reduce loss costs by increasing consistency in claims handling, most of them are not in a position to do so because their core claims systems are either too old or not adapted,” Costonis said. “While insurers are on a path to upgrade claims systems, most companies have not done so for more than three years. This suggests difficulties with the upgrade process, which could be alleviated using cloud computing on a software-as-a-service basis.”

On average, insurers are planning to spend $17.5 million on claims systems over the next three years, and total expenditures are projected at more than $2 billion. The top three priorities for investment are core claims system modernization and replacement (cited by 72 percent of respondents), analytics capabilities (49 percent) and workforce (49 percent).

The survey also reveals that almost half (48 percent) of respondents have already started to migrate their claims systems to the cloud or on a software-as-a-service (SaaS) model, plan to in the next two years, or are currently discussing the option.

For insurers planning to invest more than $25 million in their claims function, 54 percent said they would like to use predictive models in the claims process.

More than half (59 percent) said hiring or training customer service professionals is required in order to address customer needs. Among other programs to improve customer service and satisfy customer needs, insurers said creating or deploying mobile applications for customers (57 percent), building digital customer profiles for use by claims professionals during claims transaction handling (45 percent), initiatives focused on improving net promoter scores (43 percent) and initiatives focusing on improving JD Power claims satisfaction scores (30 percent).

Additional findings:

• 80 percent said they use offline data from Excel spreadsheets or Access databases

• Recruitment of customer service professionals, training programs and the implementation of mobile claims applications for customers are among the most important initiatives claims executives taking on to better address customer needs

• More than two-thirds (68 percent) said they are hiring claims professionals, or plan to in the next twelve months; 26 percent face recruitment problems, particularly in hiring claims handlers

“Claims systems are central to P&C insurers’ performance but the industry continues to struggle in this area,” said John Del Santo, global managing director of Accenture's Insurance practice. “There is significant potential for improvements, particularly in the areas of loss cost management and expense efficiency. Doing so will require a highly coordinated approach to claims operating models, focusing on people, processes and technologies.”

Accenture Property & Casualty Insurance Services said it commissioned the survey to better understand the business challenges and investment priorities of U.S. claims executives, and the enhancements to core claims processes and systems that they believe are needed. The survey included 50 U.S. P&C insurers; respondents were C-level claims executives, including heads of claims, VPs of claims and claims supervisors. Interviews were conducted by telephone in the spring of 2012. Among participants, 16 had net premiums written (NPW) of more than $1 billion; 9 had NPW of $500 million to $999 million; and 25 had NPW of $100 million to $499 million.