Finding something to give insurance carriers a competitive edgein today's economy might be difficult, but for claimsprofessionals, the choices are both varied and enabling. Indeed,the market is spurring vendors to sink some money into creatingsignificant upgrades, according to one leading industryanalyst.

"Vendors see a good deal of sales activity of insurancecompanies licensing and implementing claims systems," according toDonald Light, a senior analyst at Celent.

"One other factor is good, old-fashioned competition," he added."What may have been middle-of-the-pack functionality along variousdimensions three years ago is falling toward the rear of the packtoday without a significant investment in upgrading. It's a bit ofa self-reinforcing phenomenon, which works as long as insurancecompanies keep buying."

Along with the evolution of claims systems, Jim Kinzie, seniormanager and co-leader of Deloitte's claims practice, believes thereare tactical niche solutions available to insurers that areunlikely to be bundled into their claims solutions.

Never say never, Mr. Kinzie warned. "Four or five years ago,having consistency around integrated workflow management, taskmanagement and document management, and having an ability through aclaims system to do business rules configuration were not [agiven]," he said. "These days, looking at any of the leadingsolutions, all those capabilities are there."

Most of the leading vendors in the claims market have movedtoward a more robust reporting capability, Mr. Kinzie pointed out.Some have done it through partnering in the marketplace, but othershave added tools--such as adjuster portals and adjusterdashboards--as a way to bring escalation points or key metrics to amore visible form than in the past.

"In the old systems, it would have been a process of reaction orrunning critical reports," said Mr. Kinzie. "Today, those are partof the core claims solutions and front and center to the claimsmanagement team. Using the best and latest architecture is allowinga lot more capability in design."

Sedgwick Claims Management Services has seen an increase infunctionality among claims systems and followed the example of manyother insurers and third-party administrators by raising itsinvestment.

"We've increased our [spending] every year in technology, notonly from an overall technology standpoint but also for what wecall strategic projects--large, new functionality," according toPatrick L. Funck, Sedgwick's executive vice president and chiefinformation officer.

Sedgwick has expanded into different services over the years,such as disability coverage, family medical leave and, mostrecently, managed care--areas it used to outsource. "As we expandedinto those service areas, we had to build a technology platform tosupport them," noted Mr. Funck.

Mr. Kinzie has noticed more movement by insurers to engage theirbusiness partners that provide claims services.

"The way those partners are being engaged by technology hasadvanced considerably," he said. "Insurance companies are puttingthese foundations in place with Web-based systems andservice-oriented architecture. The architecture is more conduciveto engaging business partners, communicating assignments andreceiving work back."

He also sees movement toward tactical solutions. Damageestimates have been an electronic process for quite some time, butMr. Kinzie cited changes in the way those estimates are checked andreviewed.

"Creative tools on the back end are being put in to enable thedecision support," he said.

As an estimate comes to the insurer, rather than it being astopping point while the adjuster receives an assignment, today'stools allow for an electronic assessment based on the carrier'sbusiness rules.

"The estimates are checked for compliance and other businesscriteria, and are either passed straight through or sent back basedon some kind of rule set," according to Mr. Kinzie. "Technology isbeing put in at discreet points in the process--normally aroundbusiness decisions--and being performed through business rulesrather than by humans."

One of the most dramatic changes in claims systems isusability--primarily for the day-to-day users such as the adjusteraccording to Mr. Light of Celent.

Usability improvements have been achieved by having easilynavigable screens--providing screens that are designed to put themost useful pages within easy eyesight and cursor reach of theuser, building in easy-to-find contextual help, and building intools to open a new claim.

"These changes are important because the claims system is thetotal work environment, where carriers want their adjustersspending 80 percent to 90 percent of their workday," noted Mr.Light.

A business rules engine is an important part of Sedgwick'sclaims system. The logic within the claims system is parameterizedto allow for different types of rule processing, explained Mr.Funck. "We also have a new initiative we started last year called'Smart Work' management--the next evolution of managing activityvia rules," he added.

There always has been a good opportunity within the claimsadministration space to build functions around rules processing,according to Mr. Funck.

Claims systems normally focus on the rules processing of sometype of business event that requires users to perform a certainactivity--which, he explained, is viewed as a micro-workflow.

"Usually we don't have a lot of macro-workflows," he said. "Atclaim intake, you can control the specific order and build amacro-workflow around claim intake. That's a specific processwithin the life of a claim."

Different things can happen to a claim at different times and indifferent orders. "In the overall aspect of a claim, you drive intothe micro-flows, and you end up building work rules within that,"said Mr. Funck. "There's always been a heavier investment on theclaims administration side of rules processing because it appliesat both the micro- and macro-level."

Another major area of investment for claims system vendorsinvolves business intelligence and analytics.

"Your ability to customize reports is enhanced with a bettertoolset," according to Mr. Light. He said increasing analyticcapability is often the result of a partnership with other firms interms of bringing in associated kinds of software that will enablea carrier's quantitatively-oriented actuaries to dig much deeperand use more sophisticated kinds of analysis.

Sedgwick typically doesn't look at unstructured data, but Mr.Funck said structured data is a completely different story. "We arein our third generation of data warehouse technology," he noted."To be able to perform integrated reporting, we needed to aggregateall our data into one place where you can do analytics."

Sedgwick has invested a lot in data alerts, reported Mr. Funck,who said his company has built dashboards so clients can viewwhat's going on with their accounts at a high level.

"From an integration standpoint, we build the functionality soyou can go to a dashboard, drill down into the data, click on aparticular claim, and get right into the viewing of that claim," hesaid. "The integration of the different types of data we manage andthe functionality within the system are what a lot of our focus hasbeen on."

Mr. Kinzie sees movement to use data more intelligently inclaims management.

"There's been a lot of activity to better understand what claimsdata is telling people," he said. "There is an integrated effort totake the information and make better assignments at the outset ofthe claim."

Tools such as predictive models, business rules engines, andintegrated task and workflow management mean there are morecohesive solutions in the market today, but beneath all the toolslies the claims data.

To run an effective claims operation, insurers must have aneffective notification system for the first notice of loss,suggested Mr. Kinzie. "The way companies capture [the first notice]and use it is much more sophisticated today," he said. "The newsystems allow for you to design and capture the information moreintelligently and easier than in the past."

The thrust of how claims technology has been developing,especially in terms of rules, workflow, process management andreal-time insight, has given carriers and their claims departmentsa set of tools that allow them to do good things for claimants,according to Mr. Light, citing benefits including faster cycletimes, more accurate settlement offers and improved service.

"Having a set of tools that brings relevant informationavailable quickly and in an accurate manner makes the claimsservice experience much better," he concluded.