The Shrinking Pool

In coming years, the biggest claims crisis you will face may not be lack of tort reform, increased hurricane activity, or even climate change. If expert projections hold, you will need to deal with an exodus of your most experienced claims talent as more adjusters reach retirement age at the same time you find yourself competing to hire from a smaller pool of incoming adjusters. Deloitte Consulting crunched the numbers and uncovered 70 percent of the insurance claims work force now is over age 40, projecting a shortfall of 84,000 adjusters by 2014.

"The talent crisis is real," says Margaret Resce Milkint, partner at the insurance executive search and staffing firm The Jacobson Group. "Competition for claims talent already is more intense than I've ever seen, and I've been at this for 22 years. The big question for the insurance industry is where is the next generation of talent--who will be my successor?"

For their part, insurers have become keenly aware of the problem. For instance, in TowerGroup surveys for the past several years, carriers' top concern in claims had been leakage. This year, that changed. "The number-one concern now is the retiring baby boomers and their knowledge leaving the company," says Karen Pauli, senior analyst in TowerGroup's insurance practice.

In combating what is a classic supply-and-demand scenario, carriers are looking to attack both sides of the issue with technology, using modern systems to decrease their demand for staff and to increase the supply of willing recruits by becoming more attractive places to work. "The solution to staff retiring and taking with them their skills and methods of doing work and to meeting the needs of newer people coming in, who by definition don't have any adjusting skills from day one, lies in technology," asserts Donald Light, senior analyst at Celent.

Increasing efficiency--a polite way of saying doing more with fewer people--is not a new goal but will become more critical as the incoming worker pool dwindles. "There's a lot of tedious work in claims--asking for documentation and those sorts of things--and the degree to which carriers can automate that and free people to do more valuable, creative work is important" to address the staffing problem, Pauli notes.

Workers' compensation insurer New Mexico Mutual Group targeted greater staff efficiency in a recent initiative to replace its legacy DOS-based claims administration system. "[The DOS system] limited [adjusters'] effectiveness," explains Cecil Rudd, the carrier's claims director. "Only one adjuster could work on a file at a time, and each adjuster could work only on parts of the file because of the system design. It limited our supervisory or advisory potential until an adjuster got out of the file. Third parties also couldn't interact with us electronically in any fashion; they had to send us paper reports we had to enter manually into the file."

With a separate policy administration project just completed, the carrier began replacing the legacy claims system with Guidewire's Claim Center in 2005, deploying the new system in early 2006. Although Rudd focuses on data- and work-quality benefits of the project, the efficiency gains derived from automating the workflow and enabling simultaneous work on files by multiple staff are compelling. "Claims adjusters were handling around 100 claims [with the previous system]," Rudd says. "They can manage 160 files very effectively today."

New Mexico Mutual is far from the only carrier committing to a full-scale claims administration replacement. "The claims vendors are having a field day," Pauli indicates. "That was not the case a few years ago, when IT spending in claims was practically nothing and there was no business demand."

For instance, in recent years Ohio Casualty had been making IT investments primarily in tactical claims technologies. At the beginning of this year, however, the company began a three-year migration project to a new claims administration system. (Ohio Casualty is in the process of being acquired by Liberty Mutual.)

While all modern claims platforms are built with workflow automation capabilities that help carriers target staff-to-claim ratios, a wide range of technology capabilities exists among insurers. "Having a green screen [system] is not unusual, unfortunately," Light says. "A significant minority of companies does not [have modern systems]."

To what extent insurers are able to automate the claims workflow and approach the goal of straight-through processing also depends on how much paper is in the process. "There still is a lot of paper out there," comments Mark Cyphert, principal in the insurance practice at Deloitte. "Paper always will be coming in the door because insurers deal with different sources of content. We're still chipping away at the problem."

Ohio Casualty is tackling an enterprise imaging project in advance of its claims administration initiative. It plans to leverage its existing investment in IBM's Content Manager platform, which currently stores electronic documents the company already produces, by adding centralized scanning and routing of external documents the company receives. The carrier plans to complete the imaging project within 12 months.

"As we are developing and building out imaging workflows, we are looking at other companies that have gone through similar conversions," says Russ Kelly, vice president of home office claims at Ohio Casualty. "Those that have gone before us in an image environment often have suffered overbuilds--creating too many labels and categories [in the taxonomy] and too many different places to store information."

The staffing efficiency gained by companies that have migrated to workflow-enabled claims administration systems also has fueled carriers' interest in adding new business process management (BPM) functionality to orchestrate processes supported by existing claims administration system components. "BPM has not seen quite as much of an interest as new claims systems, but it definitely has been toward that end of the spectrum," Light observes.

And even carriers with newer workflow-enabled core systems have been making other investments with staffing objectives in mind. For instance, Unitrin Direct's claims platform has been automating significant portions of the claims life cycle from first notice through subrogation since the system was first deployed in 2001.

In the original straight-through claims process, staff entered loss information into Covansys' ClaimConnect, which automatically pulled policyholder information from Unitrin Direct's policy processing system from Decision Research Corporation. ClaimConnect assigned claims based on adjusters' skill sets and real-time workload data, set reserves, connected with a property damage management system to transmit claims details to appraisers and repair shops, and made rules-based referrals for suspected fraud or needed supervisory approval. Closed claims automatically generated a rules-based referral to Unitrin Direct's subrogation vendor, Trumbull Services.

Unitrin Direct has continued to build out the automated capabilities of the system, such as sending e-mail confirmation to claimants when assignments are made. In late 2006, the carrier replaced the original property damage system with ClaimHub from N'Site Solutions to add more robust workflow capabilities to the routing process. The company is piloting, as well, electronic funds transfer for claim payments. "Our ultimate goal is to interact electronically with all our suppliers so our adjusters don't have to issue and our policyholders never have to pick up a check," explains Brian Crumbaker, Unitrin Direct's senior vice president of operations and claims.

Both rules engines and predictive modeling are being used to support automation of processes such as claims assignment and triage, reserve setting, escalation of problem claims for supervisory review, and even decision-making on simpler claims. "This helps the talent issue by moving certain claims immediately to payment, so you can reduce what claims adjusters see and route other claims to adjusters based on the level of experience needed," says Clint Harris, analyst at Conning Research and Consulting.

In this way, insurers aim to make the adjusters' job more rewarding. For instance, routine personal injury protection claims at Unitrin Direct are sent automatically through a repricing system and Ingenix's fraud database, requiring adjusters only to confirm the claim before payment is made. "They work on exception claims--the ones that need a human set of eyes," Crumbaker says. "We want to automate everything that can be automated so they can focus on the critical thinking part of the job vs. being focused on the clerical or mundane tasks that can occur in claims."

For newly hired staff, rules also simplify the claims process and serve as guides, shortening training time for carriers and reducing demands on experienced staff to do mentoring and training. "Less experienced adjusters have more decisions made for them and more instruction. More experienced adjusters have fewer automatic rules but use rules to keep track of certain things they're accountable for," Rudd indicates.

There is a danger, however, in trying to oversimplify or add too much automation to the claims process. "The technology should be used for decision support," Harris contends, emphasizing the last word. "The trick is knowing how to use technology to draw on the intelligence of individuals and to develop them as professionals, not just paper pushers or 'bits and bytes' processors."

"We're not trying to dummy down the claims process with technology," Kelly asserts. "We're trying to automate parts of the claims process that don't involve judgment or decision-making. We think the value we bring to the market is putting people in front of people who make decisions, exercise discretion, and bring a human element to the claims process. Some carriers focus on building a claims process with so many rules and tasks that fire, they really bog down the adjuster."

Another staffing impact of new systems is their ability to give better management visibility into the claims process. "The decision-making is much more transparent today than in the past. We can see activities happening in real time, and we can address deficiencies and shortfalls," Rudd says, adding this visibility also has helped New Mexico Mutual evaluate staff. "It helps us see potential growth opportunities in some folks and limitations in others."

Insurers never have had the reputation of being an exciting place to work from a technology perspective. "Insurance, in general, isn't perceived as being sexy from the standpoint of people wanting to get a job. Compound that in claims, where the business pressures are very intense and workloads are unfathomable, even compared with the other disciplines in insurance," Pauli says.

Unfortunately, from a staff retention standpoint, expectations of the technology capabilities an employer should offer are increasing. "It's more important than ever to retain good people you have so they don't have a desire to look and see what else is out there, and technology plays a key role in that," Kelly maintains.

"People who have come up through a myriad of software programs demand technology that's intuitive and easy to use and makes them more efficient and productive," he adds. "Today's adjusters also are very good at multitasking and keeping multiple application windows open. They're not willing to wait around for a slow processor in a PC that brings things to a halt."

In recruiting, particularly of experienced staff, expect candidates to be more versed in and have higher expectations of workflow systems. "It is a candidate-driven market, and technology is a front-and-center issue for top claims talent," Milkint says. "If you're a claims professional and you have six companies looking at you, you can choose an organization that's leading the way in technology."

Technology was a benefit Hastings Mutual emphasized in its recent search for a vice president of claims, including its recognition as a "Model Carrier Component" by Celent for its rules-driven claims workstation, document management, and workflow systems from Guidewire. Before Chris Ballantyne, who had been a regional vice president in claims at The Hartford, took the job in June, he specifically evaluated Hasting's claims platform and ancillary technologies to make sure they supported paperless claims handing, minimized data entry, and automated workflows.

"[Hastings] stood apart with where it was in technology and where its technology was going to go in the future," according to Ballantyne. "Its claims platform has the ability to morph wherever the company wanted to go in the future. That wasn't the case everywhere--some of the regional or even national competition was a mishmash of platforms for a variety of reasons," he says.

Claims staff members, and particularly field adjusters, also have definite expectations when it comes to the type of mobile technology that will be standard equipment, and those expectations continue to evolve. For instance, Ohio Casualty has had mobile wireless laptops for field staff since 2003. Today, the company is in the midst of a mobile upgrade, fitting adjusters' cars with printer stands, Bluetooth-enabled printers, and AC inverters to power a widening array of devices in addition to upgrading field laptops to tablet PCs.

"Try to balance a laptop with a screen on one arm, use a mouse, and run a property-estimating program when you're attempting to carry on a conversation with a customer," illustrates Kelly. "The tablet technology makes life much easier, and having a draft book and printer enables you to cut cycle time, ideally handling everything in one visit, which makes for a happier adjuster and policyholder." Ohio Casualty's mobile technology still is a differentiator in recruiting and retaining claims staff, he remarks, but it is difficult to maintain that advantage in the face of a rapidly changing technology environment.

Furthermore, being tech savvy is of particular importance when a carrier recruits from Generation Y. "The new generation is looking for flexibility. Things such as virtual work spaces, any-time connectivity, instant and text messaging, even interactive online learning are all becoming table stakes these days," says Rebecca C. Amoroso, vice chairman and national insurance leader at Deloitte Consulting.

The table stakes for technology a company must provide are set not just by the insurance industry but by other industries that are competing for the same worker pool. "Look at the leading companies out there--the Googles, the eBays, the GEs--they use technology to make processes easier and be more customer focused," Pauli says. "People coming out of college use their own experience as customers [in evaluating potential employers] and will gravitate naturally to work for companies where their experience has been good."

The unenviable task for insurers is, therefore, to provide technology tools that are attractive for the upcoming generation of workers yet do not frustrate and alienate the valuable aging work force. And of course, the systems a carrier deploys also must support its broader service strategy and business goals. It will be difficult, but it is critical insurers address the challenge to prepare for the looming staffing crisis.

"We don't have a lot of new people joining the industry," Milkint says. "The industry must do a better job of promoting itself, particularly where it does use advanced technology, in order to attract new grads and talent from other industries."

Featured Video

Most Recent Videos

Video Library ››

Top Story

Insurance industry education is more than just letters after your name

Continued education isn't just nice to have. For many insurance professionals it's a requirement for their jobs or licenses. Here are some national organizations to help you get those designations.

Top Story

Liberty Mutual to acquire Ironshore Inc. in $3B deal

Liberty Mutual Insurance announced Monday morning it will acquire global specialty lines company Ironshore Inc. from Fosun International Ltd. for approximately $3 billion.

More Resources

Comments

eNewsletter Sign Up

PropertyCasualty360 Daily eNews

Get P&C insurance news to stay ahead of the competition in one concise format - FREE. Sign Up Now!

Mobile Phone

Advertisement. Closing in 15 seconds.