When customers purchase an insurance policy they are seekingsome form of security from their insurance carrier. They are notpurchasing a piece of paper; they are purchasing a promise from theinsurer that if something happens, the insurer will do what it canto make things right. "[Customers] want to be returned to whole asquickly as possible, they want to understand the claims process,and they want to be taken care of throughout the process," saysPeter McMurtrie, chief claims officer for Grange Insurance.

Do those needs match those of the insurer? McMurtrie believesthey do. He claims Grange is focused on early intervention andtimely resolution, which he feels are the same things sought bycustomers. "What we've done is look at ways to do both equally," hesays. "[The goal is] to benefit both our overall claim accuracy inpaying the right amount owed while at the same time getting thecustomer to whole as quickly as possible."

Settlement time is a major issue for claims managers because, asMcMurtrie explains, the least amount the carrier is going to pay ona claim occurs at the moment the loss happens. "Through the passageof time the value of that claim goes up," he says. That increaseusually is caused by external factors, he adds, such ascontinuation of damages or influences such as attorneys or publicadjusters. "Those things can adversely affect the value of theclaim," he says. "Our focus is to intervene in the process asquickly as possible and [keep] our customer informed throughout theclaims process."

Whenever an insurer deals with a property/casualty claim, thereusually is a wronged or injured party, explains Kevin Turner,executive vice president of business development with CambridgeIntegrated Services, a claims management firm. In order to dealeffectively with those claimants, a company has to have top-notchcustomer service skills, he adds.

From a customer service standpoint, technology has beeneffective in improving Cambridge's intake model, where workers'compensation claimants go through an online routing system and fillout a customized script. "When losses occur, people log in and fillout the scripts and answer questions that are germane to thatparticular policy or that particular employer," says Turner. "Thathelps in the adjusting process. Once you receive the report, youcan assign an adjuster to verify the report and develop furtherinformation."

Steve Discher, senior vice president of Robert E. Nolan Co.,classifies today's major claims initiatives under three umbrellas."The first is speed, the second is customer empathy, and the thirdis customer convenience," he says.

Carriers are working with speed initiatives in the assignment ofadjusters to a claim with little to no human intervention. "You nolonger have managers or supervisors going through the morningroster of [adjusters]," Discher says. Instead, claims managers aremaking assignments based on the seniority of the adjusters, theseverity of the claim, and allowing the technology to make thosedecisions.

A key issue for insurers is to bring the right claim to theright resource, believes Jim Paugh, a Deloitte manager. "It's allabout finding the optimal case mix to get to the adjusters," hesays. "With predictive modeling, you can adjust so the most severecases at the time of first notice of loss (FNOL) can be applied tothe most senior adjusters, whereas the more basic cases can go toan entry-level adjuster." Paugh asserts this creates a betterresponse rate from adjusters and also addresses some of theburn-out issues with adjusters, "so they are not so focused on aworkload but on the quality of the work."

The key change in claims management in the last five years isthe focus on speed, in McMurtrie's view. "There's a disciplinearound how we handle claims and how we evaluate claims," he says."What has changed is taking that disciplined approach andaccelerating where it occurs in the claims process. It'srecognition that the earlier we get involved, make decisions, andresolve claims, the better the outcomes we're going to get from acustomer perspective as well as a company perspective."

Empathy has increased in importance, according to Discher,because insurers can interject technology and use scripting at thefront end of first notice of loss. "You really need to train yourFNOL personnel as well as your claims adjudicators to understandthe things customers are looking for," he says. "Do they have kids?Are we adequately taking care of them and their family needs tomake them feel better about the whole process? In the midst of allthat is going on around technology investments, you haveinvestments in making the field and home office personnel moreempathetic to the claimant and customer. That's helping peopledifferentiate insurers."

Many carriers advertise the convenience factor in their claimsservice, such as being able to drive your car to a claims centerand pick up a rental car, points out Discher. "They are advertisingthat as convenient, but if you stop and think about it, it'sprobably the most inconvenient thing for a customer," he says. "Iwouldn't call it false advertising, but there is a lot of promotionof advertising that says they are convenient, but actually theyaren't."

Discher contends one differentiator in handling claims relatesto stock companies vs. mutual carriers. "Stock companies have morepressure," he says, adding mutual carriers have an advantage indealing with claims from a service point of view. "If you look atthe list of strongest P&C companies, many of the mutualcompanies have incredible financial strength," he says. The idea ofdoing the right thing for the mutual holder pervades the culture ofmutual companies from top to bottom, he notes. "I don't think thereis the pressure to push off paying the claim or spending the extratime servicing the claim," he says.

Another major difference is derived from carriers that useindependent adjusting firms vs. those that use their own employeeadjusters. "There is nothing wrong with independent adjusters,"says Discher. "But a lot of times issues are tied to cost, and thatpushes carriers to use someone to handle claims who is not a partof the company. There is more pressure on the claims operation tofigure out how to get more productivity out of its claimsoperations yet still have the benefit of company-employed adjusterstalking to customers."

Mennonite Mutual IT manager Jennings Carpenter states one reasonfor his carrier's success in dealing with claimants is because theindependent agents who sell Mennonite's policies are directlyinvolved in working the claims. Carpenter concedes the carrier isin a daily competition for business with other insurance companiesthat have similar contracts to sell products through the sameindependent agents. "Our philosophy is the easier we make it onthose independent agents, the more likely they are to choose us tosell our products to their clients," he says. "We're not onlyservicing the insured, we're servicing the independent agent, aswell."

Mennonite Mutual is more than halfway through the process ofsetting up the agencies with a connection to the carrier's OnBasesoftware from Hyland Software. "[The agents] have access to claimsand underwriting documents in our system, so if a client contactsthem, they can see the same documents and information concerning aclaim or a policy we are seeing here," says Carpenter. "It allows[the agents] to service the insured with accurate and up-to-dateinformation." Recalling the axiom "the check is in the mail,"Carpenter points out as soon as Mennonite Mutual cuts a claimscheck, a copy of the check goes into OnBase and the agents can seethat. "It adds to their ability to service the insureds," hesays.

Cambridge has been working with Deloitte on predictive modeling.Deloitte has developed a process of scoring claims to aid theclaims administrator or the insurance company in administeringthose claims more effectively for both the insured or the injuredparty, such as with workers' comp claims, according to Turner.Cambridge is in a proof of concept mode right now after providingDeloitte with 50,000 claims records. "Those records have told us sofar we can project with a certain degree of accuracy when a claimcomes into our environment, with the right questions asked atintake, and matching those claims against information available inthe public domain," says Turner. "By looking at the results of theclaims we've provided, we can tell where there is going to be aproblem."

The models are used specifically for workers' comp claims,according to Frank Zizzamia, a Deloitte director. The outcomes ofclaims, such as a broken arm or a sprained lower back, varydramatically from claimant to claimant, he explains. "The goal atthe end of the day is to help the injured workers to get theappropriate resources they need as early as possible because youwant to help them get better as quickly as possible," he says.

Early on in the life cycle of the claim, the insurer has todetermine the severity of the injury, which Zizzamia indicates hasbeen a challenge for claims adjusters. Predictive modelingleverages the risk characteristics of the claim to identify thingssuch as the severity of the injury. With this information, theinsurer can determine the proper resources are available so theinjured party can get better as quickly as possible, according toZizzamia.

"Predictive modeling allows you to determine those triggeringevents upfront as opposed to waiting," Turner says. "That aids boththe injured worker in the situation of a WC claim as well as thosefolks paying the premiums."

Discher points out predictive analytics can look at the causesof claims, disease potential, and bodily injury, which requireinsurers to be proactive in helping people get better. Analyticsalso help carriers address a claim in a speedier fashion. "Startingwith the first notice of loss, the Q and A that occurs with [FNOL]sets off a set of analytics that focuses on the assignment ofadjusters, being able to tell the customer when the adjuster willbe calling and even whom the adjuster might be, and making theservice to the claimant that much more predictive," he says.

A lot of predictive analytics are based on managing a loss cost,but Discher contends more companies are using them to improveactivities such as a streamlined process of assigning a claim to anadjuster or even adjudicating a claim while the customer is online,especially if it is a simple claim such as glass repair.

Analytics are being enabled by investments companies are makingin the mobile claims arena, according to Discher. "Being able totake claims personnel out of the office and make them fieldpersonnel with all the tools is another part of the tool set beingdeployed," he says.

Carriers strive to create a balance between customer service andthe expense management and indemnity component, states McMurtrie."If you look at the customer satisfaction ratings produced bycompanies such as J.D. Power and cross reference them to A.M.Best's growth and profitability index, you find the carriers withthe highest service levels struggle with being able to growprofitably," he says. "The companies that end up at the low end ofthe service index actually tend to be more profitable and are ableto drive growth. It creates a perception in the industry that niceguys finish last, so to speak, that you can't do botheffectively."

Grange is not trying to create a balance between the two sides,asserts McMurtrie, but rather a duality. "You have to do both," hesays.

As far as Mennonite Mutual's policy-holder retention rate goes,Carpenter claims it's in the mid-90 percentile. "We think that is agreat number, especially in the soft market we are seeing," hesays. "A lot of companies we communicate with are just trying tohold on to what they've got."

Mennonite Mutual doesn't want to eliminate the agent in theclaims process, Carpenter explains, because the carrier looks atagents as their representative in the field. "That's always beenour first line of contact," he says. "They are our sales force andrepresent us."

Retaining customers also is important for Grange, and McMurtriebelieves what usually drives customers away from a carrier is a badclaims experience. That is why Grange is proud of its 95 percentsatisfaction rate from customers after going through a claimsexperience with Grange. "We feel there is a direct connectionbetween their claims experience and their desire to continue withGrange," McMurtrie says. "We've also found that same experience candrive new business production." When claimants find the experiencethey received from an insurer is better than what they receivedfrom their own carrier, they often turn to the one that providedbetter service when it comes time for renewal, he adds.

In addition, Grange's handling of catastrophes has attracted newbusiness. "By leveraging our use of technology, which allows us tobe on the scene ahead of other carriers and to resolve our claimsfaster, we have received feedback from our agents that people arecoming to them to find out how they can get insured by Grange sothey can receive that same type of service," says McMurtrie. "So[customer service] is not just a retention ploy, it's actually anew-business generator for us."

The role technology plays in claims handling allows Grange tomake faster decisions, according to McMurtrie. He cites the claimsknowledge and retention of that knowledge in the form of data alongwith the technology to aggregate that data as reasons for thecarrier's success in claims handling. "Over time we have learnedfrom that history so we can better predict what's going to happenon an individual claim and better determine what needs to happen onthat claim," he says.

That analysis can take the form of using fraud-scoring models toidentify claims with a higher potential to be fraudulent orutilizing mapping technology to understand where a storm impactedand what is the carrier's real-time exposure from a street level todeclare a cat response, according to McMurtrie.

Grange uses the Colossus software from CSC to examine its claimsresults, understand how adjusters are settling claims, and identifytraining opportunities for the claims staff. "It's really anaggregation of knowledge and the ability to make fast and informeddecisions," says McMurtrie. "Based on that, we have claims goingdown the appropriate paths."

Analytics are part of every aspect of the claims process,according to McMurtrie. "Knowledge is power," he says. "Carriersthat are able to leverage those analytics, not just from aresults-reporting basis but from a real-time operational aspect,know how the claim is being handled during the process. It's anintervention tool, not just a results tool."

To get the most from the data, McMurtrie notes a disciplinedprocess is necessary to dissect a claim. "The ability to have aconsistent, detailed, and disciplined process in dissecting filesallows us to get to an appropriate outcome," he says. "Having thosedata analytics to tell us what we've done historically helps usbetter understand how claims have been settled and helps theadjusters in their decision process in coming up with anappropriate value for the claim. The key is the consistency and theretention of our historical knowledge."

The workers' comp industry has been slow to develop newtechnology, according to Turner. "We've been doing the same intakeprocess as an industry--with periodic tweaks--for the last 20 or soyears," he says. "Predictive modeling is a new concept, and webelieve it will be embraced by the insurance community and ourclients because we are able to prove the results. So often it'sdifficult to introduce new technology because it's an unknown. Butthe process we've gone through in looking at our own data andseeing what those outcomes were and what the triggers were at thebeginning is proof enough for our clients to embrace this."

Steve Laudermilch, a senior manager with Deloitte, believesthere is a new way of thinking about claims. The old way of doingthings would be for the claim to come in and the insurer would relyon the human interpretation of an incomplete set of data. "Youwould look at FNOL and try to take a couple of indicators of whatthe exposure might be," he says. "It might be the age of the personor the type of injury sustained."

The new way of doing things, suggests Laudermilch, involvestaking a large set of data that previously was not accessible tothe people trying to make the decisions and give them an indicationof the likely severity and the types of resources that [injured]person might require to get better faster. "It allows a supervisorto make decisions on which adjuster is better suited for a claimand to better understand the characteristics of the claim--whatwill make the claim more difficult and what resources should beattached to it--and bring the best resolution to the situation,"says Laudermilch.

There has been a great deal of investment in claims technologyover the last decade, remarks Discher, in areas such as firstnotice of loss and imaging and workflow for claims administration,and even greater benefits can be derived from that spending. "Thosethat have made the investment are looking at leveraging othertechnology such as mobile computing or special niche tools such aslegal bill review, or they are investing in predictive analytics toutilize the data," he says. "Those that have made investments--andI'd say that's a large predominance of our clients--are looking totake [claims] to the next level of sophistication."