Asinvestigational tools improve, adjusters will be able to gatherinformation more quickly and produce the reports needed to expeditepayments to insureds. (Photo: Shutterstock)

Many claims professionals are wondering about the future of theclaims investigation business and how it willaffect them. They want to know what is around the corner?

Three trends that will impact almost everyone include cloudcomputing, investigational tools and processes, and mergers andacquisitions.

Moving to the cloud

Cloud spending by businesses is six times the spending ontraditional IT services through this year, and 77% of organizationsnow have at least one application or a portion of their enterprise in thecloud. The most important benefits of going to the cloud areprocessing speed and connectivity.

As Tim the "Tool Man" Taylor used to say on "Home Improvement,"the popular '90s TV show, "more power!"  There is now anunlimited supply of processing power. The game-changer regardingconnectivity is connecting disparate systems together. This enablesmachine learning capabilities and the opportunity to automatepreviously manual, repetitive tasks.

A new toolbox

When it comes to investigational tools and processes, from2000-2010, technology was clunky. Remember Blackberry phones andemail servers crashing? Many adjusters and engineers carried aphone, camera, measuring tape, clipboard and a laptop. From2010-2020, there were massive advances in cell phones, tablets andthe applications that were developed. Now all of those toolspreviously carried separately are available within a singledevice.

There is the expectation that 2020-2030 will see incredibleleaps forward in how everyday claims investigation work is handled.Imagine arriving at a claim, using a tablet to record a videointerview with the policyholder, make a digital drawing, takepictures of the damage, label the digital drawing, use themeasuring app to show the extent of the damaged area, and have allthat data pre-populate a templated report that has codes and linksdirectly to the claims management system.

A draft claim report is immediately reviewed by an internalsupervisor and then a payment is processed via EFT, and a depositconfirmation via text message to the insured before the adjusterever leaves the home. How's that for a delightful customerexperience?

Private investment opportunities

On the insurance vendor side, you have seen a tremendous uptickin merger and acquisition activity in the last decade. Thesevendors are always looking for ways to improve speed and netprofit. However, it becomes very difficult to look at your ownbusiness objectively when you have been intimately involved inbuilding it for 20+ years. Management consultants use the phrase"being in the fire every day has limited their ability to see abigger picture." Here is what the private equity world saw when itlooked at the insurance vendor space:

• There are a few hundred small firms ($10 million to $100million in annual revenue).
• Many are "founder run" companies, meaning these firms haven'ttransitioned to secondary ownership yet or do not have a successionplan in place.
• As is typical with many smaller businesses, they have limitedresources and struggle with "core business management functions,"including:
  |
  1. Strategic planning
  2. Operating budgets/financial forecasting
  3. Marketing/business development
•  Significant upside opportunity, meaning the firmcould grow, serve more clients, and be more profitable within justa few tweaks.

Those four realities mean it has been a target-rich environmentfor outside investment. One benefit of private equity investmentinto this space is that with their investment comes help with thisbusiness side, including the items mentioned earlier. The downsideis that many private equity firms simply buy a number of firms toput under one umbrella but fail to execute successful integrationof those multiple firms into a single, unified organization.

The success of the consolidations over the last decade has yetto be determined. Will some stay the same size and capitalize onthe multi-discipline offerings available or will a number ofsmaller entities break off and choose to grow independently?

Many vendors lose sight of the three key drivers related toinsurance claims:  faster, better, cheaper. Insurers havea combined loss ratio that is the primary driver of their netprofitability. They simply cannot afford to increase costs withoutan equal reduction somewhere else. Insurers love to identifyopportunities to reduce their combined ratio by 2-5 percentagepoints because those net savings drop immediately to the bottomline. However, many vendors are unprepared to have this strategiccost offset conversation with their clients and many have not evendocumented their own results on past projects.

Emerging technology, both internally andexternally, as well as the 'larger, well-funded competition'reality, will continue to shape the claims investigation businessover the next 10 years. As in every business situation, some willsee a large challenge and be frustrated, while others will seeopportunity.  What do you see?

Tim Christ is an executive business coachand loves helping companies grow by defining/implementing strategy,creating scalability, and improving profitability. He is the authorof "Becoming a World-Class Expert:  The Business ofForensic Engineering." He can be reached at [email protected].

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