NU Online News Service, April 25, 2:55 p.m.EDT

Since claims are the single largest expenditure for a propertyand casualty insurance company, investing in claims managementoperational improvements is one of the most effective strategies todrive profitable growth, according to a report by Deloitte.

In its report, “Driving Operational Excellence In ClaimsManagement,” Deloitte notes that because up to 80 percent of eachearned premium dollar goes to claims—as pay-out and relatedexpenses—insurers that can reduce their claims costs by just onepercentage point are likely to achieve substantial savings.

To help achieve this objective, insurers should leverage data toprovide actionable information about what drives loss and expense,and then put in place the business processes and supportinginfrastructure needed to take advantage of these insights. The goalis to align the “right claim with the right resource at the righttime,” according to the report.

“An effective operational excellence strategy can lead to morestable and predictable loss costs,” Pil Chung, Deloitte's claimsmanagement leader says in a statement. “It can also positivelyimpact operating expenses, increase overall claim service ratingsand policyholder retention and improved regulatory compliance.”

To enhance operational excellence in claims, the reportsuggests:

• Leveraging advanced analytics—Since 20 percent of claimstypically drive about 80 percent of losses and expenses, it iscritical for insurers to quickly identify which claims are likelyto prove most complex. Predictive modeling can help provide thisinsight by applying data mining techniques and statisticalalgorithms to effectively forecast outcomes for individualclaimants.
• Supplier management—Improving management of spending onthird-party suppliers for claims is essential, Deloitte says,estimating that 40 to 50 percent of losses stem from payments tosuppliers of goods and services.
• Legal cost management—Data-driven analysis and traditional costmanagement combined with predictive modeling for litigationmanagement can help create a disciplined process that assigns casesto the most appropriate resources for the specifiedresolution.
• Technology enablement—Developing an overarching approach to howand where to invest in new capabilities can improve efficiency andincrease the likelihood that the technology infrastructureeffectively supports the organization's initiatives to enhanceoperations.
• Fraud detection—Insurers that adopt advanced fraud detectiontools and techniques that promptly identify claims with a highpropensity for fraud can reduce losses and may gain a reputation inthe industry of being hard on fraud.