While the motives for insurers to replace an aging claims system remain relatively universal (minimizing leakage, reducing cycle times, improving claimant experience) the means vary. Insurers can opt to extend the life of a legacy system in a variety of ways, or replace the system altogether. Those choosing the latter, have yet another choice to make.
On one end of the claims system spectrum are inclusive, expensive suites replete with broad functionality and, more often than not, tightly integrated with a vendor's other offerings. On the other end are pared-down, best-of-breed solutions that substitute breadth of functionality for advanced technology and flexibility.
Yet, this linear spectrum is something of an oversimplification. In his report "Core Claims Systems Vendors 2008," Donald Light, a senior analyst at Boston-based Celent, uses four factors to gauge the offering of 21 system providers in the marketplace: advanced technology, breadth of functionality, customer base and depth of customer service.
Light's report surveys a bustling marketplace, noting that more than 100 core claims systems have sold over the past two years, and that 50 are in the process of implementation. The vendor ecosystem also is churning in the wake of mergers such as MajescoMastek's acquisition of STG and Aon's purchase of Valley Oak, as well as Oracle's avowed push into the insurance vertical.
"It's the same players in different uniforms," says Light of the acquisitions. "Another factor in addition to the [merger] activity is that the vendors have been making significant upgrades and launching major new releases. So from an insurance company point of view, it's a very healthy market." Moreover, functionality once considered advanced, such as inclusion of rules, work-flow and content management, are now becoming standard. While there is no such thing as a typical claims implementation, the examples of two insurers may prove illustrative.
GOING BIG
The transformation of the claims environment at Columbus, Ohio-based Motorists Mutual Insurance Co. has been less a technical endeavor than a reworking of the claims process itself, says Karen Schwartz, the company's VP of claims.
The evolution began in earnest in 2003 when the company purchased a claims system from Siebel and paired it with IBM content manager for imaging (the company uses Siebel analytics for reporting). Now, using Siebel Insurance Claims 8.0, Motorists has steadily added functionality to the system and weathered Siebel's 2005 acquisition by Redwood City, Calif.-based Oracle Corp. "When Oracle bought Siebel, we were kind of concerned because we were on a DB2 database," says Valerie Line, business technologies account manager at Motorists. "But so far, everything is working out fine, and they have stated they are committed to continuing to support the other databases. It's a pretty inclusive solution."
According to Schwartz, one the primary drivers of the initiative to transform the claims process was a desire to have a totally paperless process. "We were very involved on the business side because we had to redo our work flows," she says. "We process things a lot differently now because we have gone to a paperless environment." Yet, this move to excise paper from the claims process did present challenges. Schwartz says imaging problems, especially with remote employees, took some effort to iron out.
A more daunting task was building interfaces to link with the new claims system. This included linkages to all five of the company's policy administration systems, which reside on mainframes. The claims data also needed to wend its way to back-end repositories to meet state reporting requirements and to interface with other internal functions, including SIU, salvage, subrogation and litigation. "We had to develop a mechanism to query for the appropriate policy based on the date of the loss, bring back policy data and import that back into our claims system," Line recalls.
The company also became adept at building external links to myriad entities, including glass vendors, ISO and workers compensation partners. "We heavily customized that," Line says. "Using Siebel services, we built an engine that has a GUI interface that allows us to import or export most data formats."
NEED FOR SPEED
In addition to the flexibility, another primary benefit of the updated claims system has been speed. Rules embedded in the system enable most claims to go from receipt to an adjuster without human interaction. To achieve this, the implementation team built categories for claims and determined assignment roles based primarily on geographic factors, such as zip codes. Now, when a customer service representative in a call center hits the "assign adjuster" button, claims get assigned within minutes, with the adjuster receiving a message via cell phone. "It's provided that speed of information that you could never get in the paper world," Schwartz says.
This newfound agility was put to the test in September 2008 when the remnants of Hurricane Ike cut a wide swath of damage to buildings and trees in parts of Kentucky, Indiana, Ohio and Pennsylvania. In the two weeks following the storm, Motorists was inundated with 12,000 claims, primarily due to tree damage. Schwartz says the company was able to take people from throughout the enterprise who knew nothing about the claims system and train them to take a first notice of loss. "That was a classic example of why insurers should invest in technology," she says. "It enabled us to do what we needed to do."
HANGING LOOSE
The search for flexibility and speed also are part of the impetus behind the efforts of Jeff Fabry, CIO of Honolulu-based Island Insurance Co., to remake the way his company handles claims. Island is jettisoning a claims system that was a holdover from a combined policy administration, billing and claims suite, and installing a browser-based system, PipelineClaims, from Honolulu-based BlueWave Technology.
Fabry says the claims implementation is the latest of several initiatives tied together in a loose configuration methodology. "My overall strategy, which started three years ago and is now coming to fruition, is to work with vendors to find best-of-breed solutions for each task and tie them together with a service-oriented architecture," he says.
According to Fabry, a big challenge when implementing a best-of-breed architecture is vendor management. "You move from an in-house development and implementation crew that you have complete control over to relying on the goodwill and capabilities of the vendors," he says. "What I tell people that go to a best-of-breed vendor solution is that you have to spend a lot of time, not just listening to the sales guy, who will have a great demo. It's also important to network, get to the trade shows and read the magazines. You'll want to talk to customers of those vendors that they didn't give you. Find the two or three [implementations] that didn't go well. All vendors have them, so it is not necessarily a problem. If you know what the problems there were, you can mitigate against them going forward."
Problems not withstanding, Fabry says claims is fertile ground for improvements. "Our claims department is a primary place to realize efficiencies, especially in these difficult times," he says. "There are a lot of process improvements we can put into place."
One such improvement is a portal for Island's agents that will allow them to self-service things such as loss runs. Another is tighter integration between the company's claims system and its underwriting system. Fabry also is enthusiastic about the synergies he will realize by pairing the system with an existing document management workflow solution from Conyers, Ga.-based ImageRight Inc.
Going forward, Fabry hopes to further leverage the claims system with wireless technologies aimed at improving the efficiency of field representatives, by enabling adjusters in the field to submit first notices of loss, and possibly even issue drafts. He also expects the system to pay dividends in areas such as e-discovery.
"It took a few years to get here," Fabry says of the efforts. "It's just execution at this point - rolling out to new lines of business and bringing new departments into the structure. The foundation is done, now it's building the rest of the house."
HUMAN INFRASTRUCTURE
Part of Fabry's rationale for this mix-and-match approach is geographical. The relatively limited technical resources available on the island leave him more reliant on vendors for certain types of expertise. "We rely on outside vendors a lot but, that being said, I don't like being held hostage," he says. "So with a loose configuration, if we need to replace, say, a billing system, it has little impact on our overall architecture."
Indeed, Celent's Light says carriers must make sure they have ample human resources to carry out envisioned redesign and process improvements. "The limiting factor isn't so much technology infrastructure as human infrastructure," Light says. "Do you have enough people in the claims organization - on both the business and IT sides - with the right skill sets? Also, do you have management committed to improving operational efficiency through use of these tools?"
Motorists' Schwartz agrees. "It's great to see technology work," she says. "But if you can't apply that to something in the business, all you have done is spent a lot of money."
(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.
Considering Claims Analytics
One technology beginning to impact claims is predictive analytics, which insurers can employ to help combat fraud, fine-tune the assignment of adjusters, and aid in the of setting reserves.
Yet, Donald Light, senior analyst at Celent, says the use of predictive analytics in claims is still nascent. "Right now, it's more talked about than done," he says.
Karen Schwartz, VP of claims for Motorists Mutual Insurance Co., says the company is considering an expanded role for analytics. "Right now we use analytics strictly for reporting, but at some point and time, as the company begins to adapt more server technologies, we will have a greater opportunity to use claim data," she says.
In addition to helping hone processes within the claims department itself, predictive analytics can help establish a feedback loop between an insurer's claims and underwriting departments, Light says.
"We collect more information than anyone in the company, so we have a tremendous repository of data," adds Schwartz.
(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.
