For many years, carriers have directed the majority of theirclaim investments toward improving the procedural efficiency of theadjuster. All too often insurers struggle to advance their focusand investment beyond gaining such functional efficiencies andimproving the claim transaction experience. With the rapidlychanging market and the technologies available today, proceduralefficiency is simply a ticket to the dance.

With total claim costs accounting for up to 85 percent ofinsurers cost basis, reducing claim costsrepresents insurers' biggest opportunity to impact their overallperformance in today's soft market. Unlocking value from claiminvestments requires an extended focus on managing indemnityexpenditures, and leveraging claim data at the enterprise level todrive improved risk management throughout the enterprise (the factthat this will become more compulsory overtime due to regulation isfodder for another article).

In addition, when all is said and done, claims drive brandcommitment. Extending focus from the role of the adjuster withinthe claim organization, to the role of claims within the enterpriseprovides an opportunity to leverage the collective claim assets todrive an enhanced brand platform that results in greater customerretention and acquisition.

Source: CEA Statistics: The European Motor Insurance Market,2007

To elevate the promise of claim transformation, carriers mustextract and exploit value from claim information across threelevels:

? The claim adjuster level: First, using claiminformation to master the core claim process and enable adjustersto operate efficiently. The combination of governance rules andadjuster expertise, focused on indemnity expenditures, drivesgreater effectiveness.

The claim operation level: Second, using claiminformation to drive greater operational efficiency gains and totalindemnity expenditure management. This requires harnessingintelligence from a great deal of market volume information to makedecisions, as well as implementing changes more quickly in theclaim environment, including the extended claim supply chain. Byleveraging real-time data, carriers can make drastic improvementsin salvage/subrogation, litigation management, vendormanagement,and fraud management.They can also begin to unlock valuethrough sustainable and reliable optimization of indemnityexpenditures.

The enterprise level: Third, using claiminformation to facilitate improved front and mid-officecapabilities, and as a pervasive enterprise asset that supportspredictive analytics, operational decision-making, and enterprisefinancial reporting. This is undoubtedly the most difficult step toachieve.

As claim organizations pin down the operationalaspects of their business, they can spend moretime ensuring that they deliver on their customer commitment, aswell as better managing total indemnity expenditures. They can useclaim information to collaborate with the product, distribution,procurement, and various other teams across the organization whilethey position their products, services, and brand moredistinctively within an increasingly fluid and more demandingmarketplace. After all, one need only pay attention to the airwavesto see that claims are already being positioned as adifferentiating brand platform for many North American personallines carriers.

Delivering on the Endeavor

Understandably, some carriers are focused solely on thereplacement of claim technology necessitated by retiring support,untenable total cost of ownership, or reliability issues.Nonetheless, I contend that the software-only focused investmentleaves tremendous ROI on the table if it is not treated (at thevery least) as the creation of the engine to generate a moreevolution-based transformation.

As carriers endeavor to transform claim operations, there are ahost of technical components to consider. In addition, there are anumber of technologies that carriers should evaluate to help handlecore claim processing, enterprise integration (such as documentmanagement and data integration), business information management,and risk management.

However, while technology continues to be a major influence onclaim transformation, people, process, and financial management arecritical to business value realization.Rather than engaging in atechnology conversation, carriers must approach transformation as abusiness capability conversation designed to align technology,claim, and enterprise data with strategic intent. Thus, beforediving headfirst, carriers need to define exactly what they want toachieve over the course of their claim transformation.

In our experience, there are five critical success factors torealizing value from claim transformation:

1. Prioritization - By defining the target state forclaims, the enterprise can understand and prioritize the specificclaim capabilities that will further the strategic intent of theenterprise. Frankly speaking, this is an exercise in honesty. It isimpossible to be best in class in all capabilities; it is just tooexpensive and difficult to sustain. By targeting and prioritizingthose business capabilities that best support the organization'sintent, you will be able to lay out a reliable roadmap to achievevalue for the organization.

2. Predictability - Predictability is, in part,achieved by using methods that consider business capability as theprimary driver of program planning and management. It is alsoachieved by leveraging the most robust teams in the market toenable those capabilities throughout the claim transformationjourney. Experience is critical to success here.

3. Pace - The marketplace has proven that by fullyutilizing available tools, assets, methods, and global deliveryresources, carriers have accelerated the pace of their programimplementations. In addition, our experience shows that at criticalpoints in the transformation program, there are opportunities forlaser-focused efforts targeting indemnity expenditures that createearly payback and learning regarding the capabilities required towin.

4. Performance - Total cost of ownership is critical.Claim transformation must focus on the long term payback for theprogram. All too often carriers approach these efforts as softwareimplementations. This leaves two components of future flexibilityvastly unaccounted for: upgradability and agility. While pace isimportant, it is critical to establish a robust solution with anappropriate level of business understanding. A primary reason formaking these investments is the creation of a reliable, scalable,and flexible platform. If the architecture and underlying designfactors are not well understood, the ROI will be diluted byincreasing complexity over time. It is also critical that thesolution enables the extraction of information from which theorganization (within claims and across the enterprise) can makebetter decisions regarding the advancement of capabilities andoperations.

5. Payback - The critical measures for claimtransformation cannot be based on the turning of a technical screw.The effort must provide payback in the following areas:

? Increased net written premiums, achieved through retention andacquisition based on the brand platform.

? Reduced loss adjustment expense, achieved through operationalefficiency, flexibility over time, and improved workforcemanagement

? Reduced loss, achieved through an increased adjuster focus onappropriate indemnity expenditures, and an industrialized focus onexternal adjustment and replacement expenditures

? Improved enterprise risk management, achieved through a focuson fraud, risk control mechanics, product and pricing, brandpositioning, and compliance and regulatory issues

Claim transformation will continue to be a strong focus forcarriers over the next few years, and with good reason. By makingthis investment with a claim transformation mindset as opposed tosimply a claim technology mindset, carriers can unlock value byleveraging information to drive significant improvement at allpoints in the value chain.