Jersey City, N.J.--Reducing underwriting costs through technology is a key goal for insurance organizations in 2005, according to analysis undertaken by Jersey City, N.J.-based ISO.
ISO's Claims Leakage Audits on personal injury claims have identified six technology-enabled areas that can help reduce claims costs by up to 10 to 15 percent. A recent Forrester report, The Virtual Claim, estimated that loss and loss adjustment expenses account for 75 percent of most insurers' total costs.
Results from ISO's Claims Leakage Audits show more insurance organizations are considering the new systems that combine claims management best practices with continuous outcome measurements to help carriers reduce loss ratios, cut claims-handling costs and establish better claims-processing standards.
ISO's audits identified the following six critical areas:
1. Control & Direction - Standards and benchmarks for handling claims more efficiently and effectively
2. Investigation - Procedures to accurately identify liability exposures and ways to resolve them
3. Negotiation - Training for claims handlers on how best to use the information collected
4. Evaluation - Increased knowledge of medical issues, including effects of injuries, procedures and consequences, billing practices and negotiation expertise to lower claims and premium costs
5. Settlement - Timely and fair settlements for fewer open claims and better reserving
6. Compliance - Accurate assessment and reserving for more credible projections and achievable goals
"The U.S. property/casualty industry has had 25 consecutive years of underwriting losses. In 2003, this represented $424 billion in indemnity payouts and loss adjustment expenses, and of that, $40.7 billion was for injury claims," commented Lee Fogle, ISO vice president. "Insurers are focussed on underwriting cost containment as a key goal for 2005. Companies are increasingly undertaking claims leakage audits to help address these issues and define 'Measures of Excellence' as a way to reduce insurers' loss ratios.
"Identifying 'Measures of Excellence' helps companies focus on the most desirable aspects of claims-handling operations and improve overall quality of business," continued Fogle. "A claims leakage audit can help insurers identify such critical areas and combat the rising costs of personal injury claims. Customers that have implemented ISO's Measures of Excellence technology recommendations have already achieved significant improvements, realizing savings of up to almost 15 percent on key claim costs."
