Filed Under:Carrier Innovations, Technology Solutions

It's Not Just Technology

As profitability pressures on property/casualty insurance carriers continue to increase, innovative insurers are turning their focus inward with back-to-basics initiatives to improve efficiency in their core operations, with claims being of particular interest. Many have invested in replacing legacy claim systems with modern technologies, but simply replacing technology without looking at the whole picture of the claim adjusting value chain is unlikely to allow the new technologies to deliver full value to the claim adjusting operation.

In addition to new technology investments (and regardless of their current claim adjusting technology), insurers have a number of strategies available that can help them enhance their claim operations, improve efficiencies, and better control costs.

Triage and Segment

Good claim people are an increasingly scarce resource. In its October 2008 salary survey, Claims Magazine reported that 33 percent of current company adjusters are 55 or older, and 70 percent are 45 or older. Only four percent are under age 35. In fact, in its March 2006 report, "How Insurance Companies Can Beat the Talent Crisis," Deloitte Consulting predicts a shortage of 84,000 adjusters by 2014.

Round-robin claim assignment or a one-size-fits-all approach cannot be sustained in light of these developments. Highly experienced resources must be reserved for two places: For claims that truly require their expertise (or portions of claims, such as individual coverages), and for knowledge transfers to less experienced claim professionals. This transfer can come about through co-adjusting claims, conducting regularly scheduled claim reviews, or leading as a claim team's designated technical guru.

In addition, these experienced resources are invaluable if and when an insurer wishes to migrate to rules-based claim technologies or predictive analytic models. These systems must be "shown" what to look for and what to do. This logic and knowledge resides with an insurer's seasoned adjusters.

To be successful, the strategy must include a performance structure that does not penalize the experienced claim resources for handling fewer losses or force them into a managerial role where their skill sets may be diluted by a myriad of unrelated duties. Tapping into the expertise of willing but retired adjusters might also be considered in the training of the next generation of adjusters, claim file reviews, handling a diminished case load of claim files, or assisting in other knowledge transfer activities.


At many insurance companies, the adjuster still remains the hub of all claim handling activities, resulting in a lot of coordinative efforts like vendor scheduling that may not be the best use of the adjuster's unique skill set. Typically, these skills should be focused on activities such as coverage evaluation or settlement negotiation.

A set of preferred partner agreements and firmly adhered to service level agreements can provide much assistance to the adjuster who needs to coordinate every aspect of the claim file. For instance, enabling preferred body shops to self-approve supplements up to a specified value, and giving preferred rental agencies latitude to coordinate with preferred body shops for a one- or two-day extension of rental vehicles can increase efficiency.

However, for these off-loads to achieve the desired goals of being cost effective while freeing up adjuster time, they must be monitored via appropriate audit methods and service level agreements must be clear as to the guidelines, limits, and penalties for straying. To some extent, the insurer may wish to provide the insured with the ability to self-adjust their own simple losses via telephone or web-based quick claim options. In fact, many insurers have some degree of these capabilities already in place.

Single Source of Truth

In order to most efficiently use the specialized skill sets of everyone engaged in the handling of a claim, all parties must be utilizing the same and current information. Photocopying, mailing, or faxing paper is time-consuming and expensive, and the information is only as accurate as the most recent update. Out-of-date claim information can lead to poor claim decisions.

At a minimum, insurers should look to a consistently updated claim status overview that is electronically accessible by all parties involved with the claim. This overview can indicate whether there are any changes or issues related to coverage, liability assessment, damages, and recovery, along with the contact information of the individual responsible for the change.

"Single source" is an area where modern claim technology can add tremendous value. In its September 2006 report, "Technology Enabled Claims Performance Improvement," analyst firm Celent estimates that a four-to-six percent reduction in pure losses and a 10-12 percent reduction in loss adjustment expenses are feasible through the selection and application of appropriate modern claim technologies. This estimate represents a four-to-five point improvement in the insurer's combined ratio.

Share with Others

Receiving a claim from an insured gives the insurer the ideal opportunity to validate the type and quality of the risk and compare it to what is in the underwriting file. If the insured is listed as a florist and the workers' compensation claim is for a hot tar burn, this is important information. Likewise, a quick comparison of the mileage of a damaged insured vehicle from the claim file to the year of vehicle and estimated annual mileage from the underwriting file can point out potential discrepancies between the written risk and the actual risk. Thus, what is uncovered during the claim process should be shared with the underwriter to help them analyze and more effectively price their books of business, further mitigating the insurer's overall exposure.

The traditional method of communicating this type of information is paper-based, a slow and cumbersome process. This slow exchange can be exacerbated by an adjuster who is focused solely on resolving claims and does not recognize the importance of resolving underwriting inconsistencies. Many times, adjusters work on the assumption that underwriting will identify and resolve the issues. The underwriter may detect an inconsistency, but simply decide to handle it at renewal time. In the meantime, claims can continue to flow in and be paid while less-than-risk-appropriate premiums are collected. What is missing is the proactive exchange of information between the adjuster and underwriter.

At a minimum, both claims and underwriting need to have an open and respectful communication channel, with these types of communications viewed as part of the process. This interdepartmental information exchange is another area where the appropriate modern technology applications can offer value. This involves having the claim system and the underwriting system automatically "talk" to each other, via a series of business rules, and comparing the data elements of the claim against the risk. When appropriate, the system flags both underwriting and claim professionals.

Spread the Savings

Accident-free discounts that benefit the policyholder have been part of the underwriting pricing process for decades. Is there an opportunity to bring claim-saving rebates to the policyholder, as well?

For instance, insurers might consider making minor changes in claim handling criteria and/or policy language to create a lower cost claim resolution alternative. An example might be in a claimant loss-of-use situation. Say the claimant is unable to use their sport utility vehicle (SUV) due to an accident that is another insured's fault. Traditional claim logic and/or the demand of the claimant might be to rent them a like kind and quality SUV for the duration of the repair. Even with an insurance carrier discount, the cost could be upwards of $100 per day.

A second option might be to compel the claimant into a less expensive rental, using the argument, "We owe you a basic transportation vehicle." This approach would save some indemnity on the auto physical damage liability coverage, but might have a significant impact on the adjuster's ability to establish a good rapport with the claimant when it comes time to settle bodily injury liabilities.

Another option might be to take a hybrid approach by empathizing with the claimant that it is indeed awkward to be out of their SUV for the duration of its repair, but say, "We would be happy to provide a much less expensive mid-size rental vehicle and $15 per day" as a loss-of-full-use consideration.

These are just a few innovative options insurers can explore to help them better control their claim costs and enhance their operations. Implementing modern claim technologies will be necessary to fully enable insurers to achieve their ever increasing service and cost efficiency claim handling goals, but those technology changes alone are not the complete solution. Insurers can take forward thinking actions today and supplement those actions with appropriate technology changes when appropriate.

Mike Mahoney is a product marketing manager at Guidewire Software, a provider of core technology solutions to the property/casualty insurance market. He can be reached at,

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