The Strategic Impact of Claims Technologies

Insurers' ability to process claims effectively has never been more important to their financial results and customer experience. Look at most any carrier's website and you'll see lots of language touting their fast, fair and friendly claims-processing practices and customer-satisfaction statistics.

But claims is a function that relies heavily on the skills of individual claims adjusters and their demeanor with the claimant. And while the goal is to offer a fair settlement and pay the appropriate amount, carriers also need to minimize leakage and fraud. Delivering that balance in a cost-effective manner-keeping both external-loss costs, such as attorney and expert witness fees, and internal-operating expenses low-can prove difficult without solid technology support, as manual processes lead to increased errors, missed steps and cost much more to deliver than automated processes.

When asked to rate their own technology-enabled claims capabilities, many insurers are still sharply critical. Almost a quarter of CIOs surveyed in a recent Novarica study think their claims technology capability is poor or very poor. That doesn't mean that their claims delivery is poor, but it does mean that it is very costly for carriers to consistently deliver a high-quality experience. And when a high level of customer service is a necessary differentiator to drive customer retention, the challenge becomes even more taxing.

Over the last few years, a number of new claims systems have emerged, with features such as integrated workflow management, task and process management, correspondence and document management, and easily configurable business rules that enable greater degrees of flexibility. To take advantage of these features, many carriers are investigating and implementing upgrades to their core claims administration systems and other technologies that affect claims.

In a recent study conducted by Novarica, we found that 25 percent of insurers are either in the middle of a core claims administration system replacement or are planning one for 2013. Replacing a claims system is a project that all carriers will eventually need to do in order to maintain competitive parity. But it is a long-term, expensive project that not all carriers are ready to take on, and there are other strategies that carriers are leveraging to improve their claims management process.

Top trends in claims include:

* Predictive analytics is being used for predicting claims durations, personnel skills-based routing, forecasting of medical costs and fraud detection. Network link analysis is another sophisticated technique used to identify less-obvious connections between parties resulting in more frequent identification of organized crime rings.

* Location-based services and geographic data mapping enables carriers to provide claimant services, such as tow truck dispatch, at first notice of loss (FNOL). It also enables carriers to find patterns in locations, often leading to the identification of fraud rings, or early identification of new claim types.

* Social media analysis increasingly is used in fraud investigation to identify and resolve suspicious claims by obtaining publicly available information from a wide variety of social media channels.

* Collaboration tools increase the transparency of the process with the claimant. These tools include Facebook applications, collaborative content-evaluation tools, repair shop videos and contractor forums, to name a few.

* Mobile apps are untethering claims adjusters from their desks and allowing them to provide more immediate customer service at the point of need. Other enabling technologies include mapping tools to plan and schedule trips or find customers, mobile check-writing capabilities and e-signature solutions. The adjuster can come to the customer's location, estimate the claim, use a mobile solution to issue a check, printed on a plain-paper portable printer, and have the consumer sign the release electronically and automatically record the signature in the file. Mobile applications aren't limited to claims adjusters. Carriers are looking for ways to provide customers with mobile applications to direct, and thereby speed up the claimant through the claims process.

* SMS is growing in popularity as carriers are updating policyholders on the status of their claims or providing them with information during peak contact center hours via text messages. Twitter is another mobile communications channel carriers are taking advantage of, particularly in catastrophe situations.

Claims has a strategic impact on carriers, particularly as policyholders' technology expectations are changing. The variety of sophisticated technologies available for claims support is exploding. While not every technical advance is appropriate for every carrier, many of these advances are delivering rapid and sizeable paybacks for those carriers utilizing them today. Now more than ever, opportunities abound to not only improve operations but to deliver a service experience that stands out in the customer's mind and helps to secure a competitive advantage.

Karlyn Carnahan is a principal in the insurance practice at Novarica, a research and advisory firm focused on business and technology strategy. She can be reached directly at

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