Property/casualty insurers are faced with difficult choices whendealing with aging claims systems, which can't provide the highlevel of service customers expect from their insurance carriertoday, according to Karlyn Carnahan, principal in the insurancepractice at the research and consulting firm Novarica.

Carnahan was one of several speakers taking part in a Webseminar on the outlook for claims technology in 2010 sponsored byTech Decisions and Claims magazines. The panelincluded Mike Anselmo, CIO of Narragansett Bay Insurance Company(NBIC); Bob Khosropur, chief claims officer for NBIC; and RikiFujitani, president of BlueWave Technology. Eric Gilkey, editor inchief of Claims, served as moderator.

Keeping an older system in operation is a serious problem forinsurers because many legacy systems have proven to be expensive tomaintain, according to Carnahan. "You have old code and fewerpeople who know how to manage that code," she said.

Carnahan believes older claims systems are not coupled with acarrier's policy administration system, which makes it difficult totake claims data and run it against the policy data. "[Claimssystems] tend to be rooted in finance and not service," she said."Today's consumers demand a much higher level of service thanbefore."

Carnahan pointed out the technology offered in newer systemsoffers a serious upgrade for carriers in areas such as: analytics,global information systems, estimating, mobile applications,texting, telematics, fraud, and Web 2.0 capabilities.

NBIC is in the midst of a claims system upgrade that will becompleted in 2010. According to Anselmo, the carrier looked for aWeb-based architecture that can help and service both customers andagents.

Security, availability, agility, and straight-through processingare all key issues for NBIC. "We have an extensive network ofindependent agents, but we do a lot of the work internally," saidAnselmo. "We are looking to have very few touch points and focus ongrowing the business."

Anselmo explained the carrier's implementation strategyincludes: use of specialized technical resources to implement;outsource where needed; hiring of in-house generalists foroperations; break all projects into smaller measurable milestonesin order to get early wins and reduce risk; and managingexpectations.

Khosropur described NBIC as an "an old company with a completelynew face, and a big part of that is the claims system."

Finding the money to pay for a new claims system is not easy inthe current financial environment, which Carnahan reported is theworst in 70 years for insurers. But with business shrinking,keeping the current customers in place becomes even more of afocus. "The reality is retention becomes absolutely critical," shesaid. "Competition is really fierce, so finding ways ofdifferentiating becomes a key strategic imperative for insurancecarriers."

That provides opportunity for insurance software vendors,particularly those offering core systems. In a recent Novaricasurvey, Carnahan noted P&C carriers likely will increasespending in 2010--some significantly.

"What is impacting the IT budget is a desire to increaserevenue--growth strategies as well as operational effectiveness,"she said. "The number-one reason insurers are increasing [IT}budgets is in order to grow."

The Webinar can be found in the archive section of the TechDecisions Web site (www.tech-decisions.com)and on the Claims Web site (www.claimsmag.com).