Insurance, along with banking, was among the first industries to adopt information technology, back in the 1970s and early 1980s. What was a bold move at the time, however, has burdened today's insurance industry with a legacy of inflexible, archaic, and unfriendly systems that are poorly suited to the demands of today's business.
The root of the problem stares every claim adjuster in the face when he logs onto the claim processing system each morning: a cryptic, text-based screen that can be navigated only by typing arcane key combinations into non-intuitive places on the screen. Twenty years after Apple commercialized the point-and-click interface, most adjusters still do their jobs without a mouse or, for that matter, a shift key, as their systems only use capital letters. More importantly, these aging systems have no impact on a claim's eventual outcome, serving simply as record-keeping devices.
Although well aware of the time warp in which claim adjusters (and most other people in the industry) live, the majority of claim and IT departments have only nibbled around the edges of the problem. Wary of replacing systems that few people in the company still have the skills to understand, companies have instead bolted new tools onto the peripheries of those systems, providing incremental benefits but leaving the core problem untouched.
Some of these new tools include imaging systems for electronic versions of correspondence and other documents, damage or liability estimation tools, medical bill review systems, and electronic networks for communicating with vendors. Although these can improve the lives of claim adjusters, they fail to address the critical flaws of today's core claim systems, the ones that adjusters spend most of their time on. Among these flaws are handling every claim the same way, an inability to adapt to business changes, a failure to provide data management needs, and productivity-destroying user interfaces.
Replacing a claim administration system, the system of record for basic claim data and financial transactions, can be a daunting prospect. It is one, however, that every company will have to address, sooner or later. With that in mind, here are our top six signs that your claim system is obsolete:
6. Your CIO calls you and says you have to get rid of it.
This can be for any number of reasons. There are legacy claim systems that, in 2004, cannot, and never will, run on Windows 2000, let alone Windows XP. There are claim systems that require outdated and insecure networking technologies. There are claim systems that no longer have the support of their vendors. Whatever the reason, your system has become a costly and potentially insecure burden to your company's technological infrastructure.
5. You have a brilliant new model for segmenting claims, but the system has no idea what a segment is.
Historically, most claim organizations handled all claims the same way, by giving them to adjusters and waiting for them to figure out how much to pay. Not surprisingly, most claim systems are simple record-keeping devices that allow adjusters to keep track of their work on each claim. Today, however, managing each claim according to its specific requirements is the key to improving claim outcomes while managing adjustment expenses. Any analysis of claim segments and outcomes will be worthless, however, if the claim system does not know what to do with it. If your system does not have the flexibility to manage claims correctly, it needs to go.
4. You have a 24-hour claimant contact standard, but no way to enforce it, or even remind people of it.
Leading claim organizations analyze their processes, determine the criteria that separate successful outcomes from unnecessary costs, and implement mechanisms to ensure that those criteria are being met. Contact standards are one example among many, including vehicle repair cycles and times to settlement offers. If "contact claimant" are just two words like any others, buried somewhere in a file note, your claim system cannot help improve performance. You need a claim system that knows what a deadline is, and can take action if it is not met.
3. Your friend at another insurance company says that his new system has reduced claimant contact time by half, and lets agents get detailed claim information online.
Competition is an inescapable part of the insurance business, and the companies that can best serve their customers and agents will take business away from those who cannot. For years, companies have said that the claim experience is the most important determinant of customer satisfaction, but some of them are putting their money where their mouths are by finally investing in the tools the claim department needs. New systems can help claim departments streamline loss reporting, reduce cycle times, improve information availability, and provide better service to their customers. In today's highly competitive market, you cannot afford to let your claim organization fall behind.
2. Your 13-year-old daughter cannot figure out how to use it.
Your 13-year-old-daughter may not be a claim adjuster, but she can pick up just about any piece of computer software in minutes, without a manual. Modern software applications have intuitive interfaces based on common standards shared by everything from Microsoft Word to Yahoo Mail. Chances are that your daughter has a more powerful and intuitive system to manage her MP3 collection than your adjusters have to manage claims. If she cannot figure out how to use your character-based, all-caps claim system, your next new adjuster won't, either.
1. Your data is trapped in free-text notes, electronic images, or paper files.
The foundation of an effective claim process is data. Adjusters need good data to make decisions, and managers need good data to draw inferences and refine the process. Traditionally, claim data was trapped on the pieces of paper in claim files; with imaging systems, it now is trapped inside the electronic images of those pieces of paper. You cannot figure out the average duration of a replacement rental vehicle if you do not have a field for it. You cannot figure out the average severity of a cell phone-related accident if your system does not know what a cell phone is. Your system needs the ability to provide the data you need, when you need it. Otherwise, you will be operating on the basis of best estimates and wild guesses.
More than Record Keeping
A modern claim system, one that runs on modern technology, can adapt to the requirements of individual claims, and enforces best practices, is critical to improving your claim organization. It goes beyond the traditional claim administration system, designed for data storage and financial transactions, to become a claim process management system, designed to control the way claims are handled. Freed from the limitations of paper files and scanned images, claims become fountains of information, the lifeblood of any successful insurance business.
Adjusters need information, not only about claims, but also about the claim-handling process itself, such as how long it takes each repair shop to repair a vehicle, or how long workers with different types of injuries take to return to work. If you can retrieve exactly the data that you need to retrieve, you have the information you need to refine your claim process. Analyzing historical claims can highlight what factors lead to litigation or excessive settlements, and which lead to rapidly and fairly closed claims. It can show which activities must be completed immediately for different types of claims, and which activities should be assigned to specialists, rather than left to field adjusters.
If your claim system can take this information and feed it back into the claim process, you have the power to influence the way that claims actually are managed. You can test the impact of process changes in the field and determine whether they have had a positive effect on claim outcomes. You can use automatic alerts to identify potentially problematic claims and act on them immediately. You can adapt your claim process to deal with new states, new lines of business, new regulatory environments, or new competitors.
No longer a constraint that your organization has to cope with, your claim system can give you the power to innovate and improve the claim process from first report of loss to final settlement.
Marcus Ryu is vice president of consulting services at Guidewire Software. He can be reached at email@example.com.