Although the recent hard market has helped insurers improve their underwriting ratios significantly, the pressure on claim organizations has by no means eased. Insurance carriers are decreasing their target combined ratios, just as price competition is creeping back into the industry and threatening to undermine underwriting profitability once again. In addition, under the cover of recent price increases, little has changed in the typical claim organization, where overworked adjusters struggle with heavy caseloads, often hindered by a variety of out-of-date claim systems and overflowing paper files.

Evidence from throughout the industry indicates that claim organizations still suffer from systematic and unnecessary overpayment of claims. Whether called leakage or improvement opportunity, the industry incurs excess claim costs and unnecessary loss adjusting expenses that are estimated by leading consulting firms at approximately 10 percent of premium revenues, or $35 billion for property and casualty lines in the United States. These losses are caused by the difficulty of enforcing best practices in claim handling throughout the claim operation, despite the fact that, at many leading insurers today, the primary goal of the claim organization is to control and reduce leakage.

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