Automating P-C Claims Improves The Bottom Line

Property-casualty insurance companies are realizing how important an excellent claim handling process is to achieving bottom-line financial objectives.

Slow growth in overall premium, poor underwriting results, lower investment income and growing claim severity have all led to a focus on improving the effectiveness of claim handling. The reason for this is that loss costs and loss adjustment expenses make up more than 80 percent of every premium dollar.

Claim effectiveness is measured as a blend of controlled loss adjustment expense, carefully managed loss costs and good customer service. The constant balancing of these three factors is critical to the overall success of p-c companies.

World-class claim performance is dependent on three primary components:

Development of superb first-line claim-handling skills.

Application of objective quantitative and qualitative measurement systems.

Design of efficient processes that align claim characteristics and complexities to the skill sets of the staff.

In addition to these people and process issues, application of the appropriate technologies is also critical to the overall effectiveness of the claim function.

To achieve the goals of the claim function, many insurance companies are increasing investment in a wide range of technologies to support front-line claim representative activities. These technologies include:

Updated claim administration systems.

Auto and property damage estimating systems.

Imaging.

Workflow.

Medical bill auditing.

Word processing/spreadsheet applications.

Bodily injury negotiation and decision support tools,

Access to case law and medical databases.

Mobile/remote technologies for data, voice and images.

While these technologies can improve the productivity of claim representatives and the quality of claim adjustment, the sheer number of individual tools used can create problems for claim handlers, as well as those responsible for acquiring and maintaining the supporting technology.

Companies are finding difficulty in selecting a technology approach that incorporates the current technology and also easily integrates new tools as they become available. They are also experiencing difficulties with the integration of new tools into the claim representatives system view at the workstation level.

In addition, many technologies now being marketed are either partially developed or overlap with other applications. Finally, many technology solutions and systems do not adequately support the needs of both inside and field claim representatives.

A critical technology requirement is integration of the available tools into a claim desktop that provides claim representatives with an easy-to-use view of the various systems available to them.

Conceptually, the objective of claim representative technology should be to provide a workstation that offers the claim representative the applications he or she needs, but with a common look and feel that supports easy navigation, minimizes training on the systems, and maximizes utilization of the tools.

With this in mind, achieving an effective claim workstation requires careful planning and the selection of technologies that can change and grow over time. Basic workstation decisions such as whether the platform should be based on the claim administrative system, a workflow system, or some other choice are critical to good design of systems that will be fully utilized by the claim staff.

As an alternative to looking at claim technology tools and workstation issues as isolated topics, many companies are redesigning the claim function, starting with a careful examination of customer requirements. Processes can then be designed to meet these requirements, along with changes in job design and organization structure dictated by process changes.

Once these activities are completed, technology requirements can be best identified and defined to support and improve the overall performance of the process.

Taking this approach to claim automation ensures comprehensive analysis of the technology required to effectively handle claims, and retains a focus on the need to provide technology tools in a way that is easily assimilated into an effective claim process.

It avoids the mistake made by some insurance companies that have purchased individual tools, like imaging, and then looked throughout the organization for appropriate applications–a solution looking for a problem to solve. This typically results in wasted expense and effort in trying to apply the technology.

The key to excellence in claim handling is the effective application of people, process and technology. Once the people and process issues are understood, technology tools must be provided that support the performance of the process and that are integrated in a way that facilitates rather than complicates claim handling.

Taking a critical view of technology from the claim handlers' perspective will result in selecting and implementing technology tools that will translate to an improved bottom line.

Larry Wood is a senior consultant for the Robert E. Nolan Company, a management consulting firm based in Simsbury, Conn., that specializes in the insurance industry.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Automating P-C Claims Improves The Bottom Line

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