Editor's Note: This article has been contributed byMichael Chochrek, insurance solutions principal consultant,Harte-Hanks Trillium Software.

Despite the massive expenditure of money, time and resources toimplement and maintain a claims management system (CMS), manyclaims professionals are not satisfied with the capabilities thatthey provide. In fact, a recent study by Accenture states that 78percent of claims executives surveyed are upgrading theirclaims management systems. Moreover, 66 percent of surveyrespondents believe their claims management systems are notoptimized to collect and analyze the growing volume of data toimprove overall claims management.

Given the challenging economic environment, most insurers donot have the money or the people-resources to “rip andreplace” their CMS. The good news, however, is that now insuranceorganizations have options to extend the life of their CMS byimproving the quality and breadth of data flowing into it and byadding more comprehensive capabilities for data analysis.

Analyze The “Other 50 Percent” of Data

Over the past 20 years, claims departments have seen the volumeof data that they collect increase exponentially. While muchof this information is electronic data stored in technologyapplications, the fact is that a majority of claims communications,including letters from attorneys, documentation of damages andinvestigative evidence are still communicated via paper.

As a result, systems are loaded with a confusing mix ofdata collected from drop down menus, unclear category codes, datain free form text fields such as claims adjuster notes, anddocuments in electronic formats such as PDFs. While today's CMS houses all of this information,it can fall short of the most important part, namely enablingclaims professionals to systematically access and analyze thiscontent which accounts for 50 percent or more of theinformation relevant to making a prudent claims decision.

Why is this information so important? Following are threeexamples that illustrate how a new approach can help solve some ofthe most complex claims challenges.

Cycle Times and Customer Relationships

Think of how many times each day your customers are wooed by thecompetition with low rates and other promotions when they areonline, watching TV or listening to the radio.

With such high stakes, each interaction, each time thepolicyholder is contacted by your company can either make or breakthat next renewal. Most P&C insurers measure theircycle time around claims with an eye towards shortening it—speedingresolution—whenever possible. While this is a start, measuring thequality of customer touch points within the life of theclaims cycle, as well as their time frames is equallyimportant.

Some claims management systems are able to provide acertain level of insight but cannot analyze the entireuniverse of information in your claims file. Acting on thisinformation will enable an insurance organization to not onlyincrease customer retention and profitability but also reduce losspayouts and improve the quality of claims investigations.

For example, while most systems can provide information asto how quickly an organization attempts to contact apolicyholder, they typically are unable to measure the successrate or the effectiveness of the contact. Were multiple messagesleft? Was the correct information gathered? Didthe person representing the insurer explain the claimprocess thoroughly to the claimant or policyholder? These areall critical questions that must be answered. When not addressedproperly, such interactions can leave a sour taste with yourcustomers.

Of course, most insurance professionals know that theinformation needed to measure these activities is available, but itis often hidden away in files or adjuster notes. If claimsexecutives had access to one dashboard of information that brokedown the cycle time of every claims activity by every line ofbusiness, office, team, and adjuster across the company, then theycould quickly reduce cycle times. This, by extension,would result in more satisfied customers and a higher level ofcustomer retention.

This approach also provides crucial information to help controlspending, providing full transparency into where money is beingspent wisely (and where it is wasted), based on objectiveinformation. Consider it a “premium protection plan” and a qualityassurance test on all of your claims files, not just a manualreview of a few random ones.

Some of our insurance customers have found that increasingcustomer retention rates by just 1 percent can equate tomillions of dollars directed at the bottom line when consideringincreased direct written premiums and lower acquisition costs. Byanalyzing all claims data that is not easily accessible from yourCMS and taking action based on this information, insurers canguarantee that interactions with policyholders fosterlong-term, profitable relationships instead ofcausing customer defection to a competitor.

Speeding Claims Segmentation

The faster an insurer is able to get the claim in thehands of the appropriate adjuster, the more time it will haveto take the necessary steps to manage the claim to anappropriate outcome.

While automated claims segmentations may exist in some claimsmanagement systems, they often miss critical data elements inadjuster notes and other unstructured data fields that can provideessential clues to help route the claim to the right adjuster atthe right time. As a result, even newer systems are vulnerable tomistakes and are thus unable to provide claims professionals with aholistic view of data for any given claim.

Our own survey in late 2012 found that 55.6 percent ofclaims professionals believe that disagreements aboutinsurance claims decisions is a key customer issue, many of whichresult from issues within the claims process, along withless-than-optimal data utilization. For example, many claimsdepartments have dedicated total loss units that specialize inhandling, settling, and concluding auto claims in which the vehiclehas been deemed a total loss.

Total Loss Claims

There are many specialized tasks when handling a total lossclaim, such as getting the vehicle out of storage, determining theactual cash value, and completing the state-specific paperwork inorder to settle and pay the claim.

As these decisions and tasks are best suited for the total lossunit, segmenting these claims at the time of report is critical.While it is not always immediately evident that the car is a totalloss, there are clear indicators if the insurer cananalyze all of the information in a claims file, especially theadjuster notes. For instance, did the airbag deploy? Is there heavyfront end damage? How old is the vehicle? Is it drivable?

It is critical to uncover these indicators and route that fileto the proper unit and individual to handle that file from day one.In addition to this example for total loss auto claims,comprehensive data analysis can also support other types of claimsthat require immediate segmentation, including bodily injury (BI),special investigative unit (SIU) referrals, and homeowners' claimsthat involve fire, water infiltration, or mold specifically.

By adding better capabilities for data analysis to your currentCMS, you can ensure that that your adjusters receive the rightclaims at the right time, thereby resulting in better qualityinvestigations and speeding settlement forclaimants.

Automate Document Analysis

Claims departments receive a massive amount of mail on a dailybasis, despite efforts in recent years to go“paperless.” While insurers have streamlined and improved thescanning of these documents over the years, managing the volume ofcorrespondence and having an efficient process for analyzing all oftheir information remains one of the biggest challenges forinsurers.

Many insurers attach these scanned documents to the appropriateclaims file in a CMS, and then rely on individual adjusters to keeptrack of deadlines of when each item needs to be acted upon. Thetruth is, most of the CMS in use today provide little-to-noautomated capabilities for analyzing this information in anefficient and precise manner.

The most critical items that insurers must track, analyze andact upon are time-sensitive documents such as time limit demandsand letters than allege bad-faith handling. Ineffective approachesover the years have caused deadlines for responses to be missedtime and time again. The problem is that just one missed time limitdemand or bad faith allegation can result in a nightmare claimor expensive litigation that costs an insurer millions indamages and can destroy its reputation.

By transforming the contents of the scanned document intotextual data that can be logged, analyzed, recorded and reportedon, insurers can create a detailed look into whatcorrespondence they receive on a daily basis. Thistimely, accurate analysis of data will include the type ofdocument, the date it was received, the correct corresponding claimnumber, the claims handler, and a deadline for response.

This process can be set up based on type of correspondence, suchas time limit demand, bad faith letter, or even new suits that arereceived and need to be answered. Venue specific time frames can bebuilt into the solution to generate accurate due dates as well.Ignored time limit demands and unanswered suits resulting inpotential defaults will be a thing of the past.

In addition to using this information for tracking, aninsurer can also identify trends within a department fortraining initiatives and performance management issues. Forexample, is one specific unit experiencing issues in identifyingbad faith letters, or is one individual driving your defaultsituations? These instances can be identified by drilling down intothe data helping insurers can avoid these situations through earlydetection and identifying core problems to be corrected. Byproactively managing this process, the number of claims that areplaced in an adverse position due to an untimely response can beminimized and the performance of your claims personnel can bemaximized.

The amount of information contained in scanned documents isstaggering when you consider how much mail is received by insurancecompanies on a daily basis. By enhancing your CMS to automatethe analysis of this information, you can gain unprecedentedinsight while helping your company avoid situations that damagetheir bottom line and reputation.

Regardless of size or available resources, there is no need forclaims departments to work with a less-than-optimal CMS. In fact,adding capabilities to an existing system can deliver greatervalue—often in 90 days or less—without the expense and disruptionof implementing an entirely new system. By enabling insurers toleverage all the data at their fingertips, solutions for dataquality and analysis can help extend the life of a claimsmanagement system, eliminate the need for a multi-million dollarreplacement, and improve the overall claims process—driving resultsdirectly to the bottom line.