Insurance claims processing is still categorized by some insurers as “if it’s not broken don’t fix it.” Some have taken steps to make incremental changes to their existing claims processes and systems by applying Lean process methods, and introducing data mining and predictive analytics. Although for the most part the results have been positive, these small enhancements led to small benefits.

Insurers need to remember what claims processing is about. It is about insurers fulfilling the promise made to policyholders to compensate them for their loss in return for a stream of premium payments. Because of the antiquated claims processes and legacy systems that insurance companies have been incrementally enhancing, the ability to fulfill the promise has become more complex. It has led to claims professionals being internally-focused, since they have to navigate through their internal systems and fragmented data bases, and has also led to treating the policyholder (the customer) with unintended neglect. Policyholders (whether they are individuals or organizations) remember when promises are not kept on time, or not kept at all.

Consider the key performance measures for insurance claims processing which include, Loss Adjustment Expense, Claims Paid as a Percentage of Premiums, Average Time to Settle Claims Overall and By Category, Claims Fraud and Fraud Reduction Rate, Reserving Accuracy, and Customer Satisfaction with the Claims process. Realistically speaking, how will a claims department meet their targets with dated processes and systems that are plagued with manual workarounds? It’s time for a transformational way of thinking. (For a good definition of transformational thinking vs. legacy thinking, see my first blog.)

Transformational Thinking

The initial steps in moving toward transformational thinking in insurance claims processing are as follows:

Reject these ideas:

Discard the idea that claims processing is an inwardly-facing activity. It is a customer-facing activity where operations excellence is ultimately judged by the customers’ satisfaction. Customers seek other insurers or brokers based on their negative claims experience. Claims supports marketing, just like Customer Service and other areas of the company. Claims is also an area where incremental enhancements may help, but they won’t make the significant changes that are needed. Tying predictive analytics on top of antiquated systems will not gain the organization significant results.

Accept these ideas:

Accept fact that the ability to process claims accurately and efficiently is fulfilling the promise to the policyholder, and will attract new customers as well as increase customer loyalty and retention. Just as we spoke about with underwriting, [link to underwriting blog], claims is an area where rules and data need to be extracted from existing systems as part of a claims processing transformation program that will not only automate the claims process and make it easier to use, but also prepare the organization for a new generation of tech-savvy claims professionals.

Lead with these ideas:

Begin a claims transformation initiative that will encompass process innovation starting with all customer touch points. Raise the level of information and data quality by leveraging new technology-based solutions including predictive and prescriptive analytics and mobile and social connectivity. In the process, you’ll be eliminating manual processing and creating an optimal environment for claims adjudication and claims reductions. Several major insurers have already moved to transformational thinking with respect to Claims processing and have embarked on their transformation journeys. Here are a few examples we have seen over the last year.

Cycle Time Reductions Globally

A leading global commercial insurance company engaged TCS on a claims transformation program. 57 claims systems across multiple geographies were replaced with one system. The solution achieved a 30% reduction in claims handling cycle time for higher frequency claims and improved the insurer’s combined ratio.

Reduction of Open and Late Claims

TCS developed a claims processing solution for a major insurer to handle open and late claims against legacy policies. The results included a reduction of the number of applications from 1502 to 329, 170 business processes digitized, 4.5 M claims archived and 50,000 active claims migrated. The annual savings were $100 M per year.

Paperless Claims Processing

For another major insurer, TCS helped implement a new paperless claims processing solution which resulted in savings of $4.6 M within the first year of implementation. The expense ratio reduced by 7 percentage points.

Multi-country Claims Transformation Across All Lines of Business

A major P&C insurer engaged TCS to help transform their claims processing which resulted in the implementation of one multi-country claims system for all lines of business in the insurer’s Scandinavian operation.

Automation of Field Assignments

A solution developed for an insurer’s Claims Adjudication included the automation of claims field assignments based on Business Rules, and resulted in improved claims flow, accurate claim segmentation and $1.8 M per year savings.


About the Author
Sam Medina is a global business transformation executive at TCS, who specializes in advising insurance and healthcare executives on transformational thinking and leadership.

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