The State of Claims Systems

Mired in a prolonged soft market exacerbated by a sputtering economy, insurers have more incentive than ever to reduce their cost base.

With claims costs making up a bulk of an insurer’s spending, rationalizing the process has become a top priority, notes Novarica in its Market Navigator: U.S. Property/Casualty Claims Solutions 2011. “P/C carriers are looking for ways to drive growth and improve operational effectiveness, and claims is one of the areas they are investing in,” the report states, noting that an estoimated 30-40 claims systems new sales were completed in the last year. “In fact, over 30% of carriers surveyed by Novarica say that claims is one of the top three projects they are focusing on for 2011. Claims play a critical strategic role in the overall success of a carrier. Close to 70% of their revenue is spent on claims – and about 20% of that is spent managing the claims process.”

The report says one of the benefits carriers will accrue by investing in modern claims technology is to make the process less labor-intensive. “Claims administration systems are aging. For many carriers, these solutions were installed twenty years ago or more. Older systems are quite expensive to maintain. The available resources to handle maintenance are shrinking as employees with skills in older code bases retire.”

Moreover, Novarica notes that older systems older systems were usually rooted in managing the financial side of claims rather than service, a potential albatross in an age of evolving customer expectations. “The quality of a carrier’s claims service heavily impacts the customers’ view of the carrier because other than the bill, claims are typically the only contact a customer has with a carrier – and a bad claim experience is one of the top reasons for non-renewal,” the reports states. “In today’s competitive environment, where retention is a critical imperative for carriers, claims handling is a major source of competitive advantage for property/casualty companies.”

The report lists the vendors that are active in the claims space and advises insurers what to look for when shopping for a modern claims system. “A well-developed claims system should integrate with policy administration and accounting systems to support coverage verification and disbursements. Additionally, if the system does not include robust modules to handle contact management, document management, and reinsurance, it should easily integrate to modules with that functionality. Tools providing easy access and navigation to the traditional functions handled by an adjuster are standard.

 

 

 

For reprint and licensing requests for this article, click here.
Core systems Policy adminstration Customer experience Claims
MORE FROM DIGITAL INSURANCE