Finding something to give insurance carriers a competitive edge in today's economy might be difficult, but for claims professionals, the choices are both varied and enabling. Indeed, the market is spurring vendors to sink some money into creating significant upgrades, according to one leading industry analyst.

"Vendors see a good deal of sales activity of insurance companies licensing and implementing claims systems," according to Donald Light, a senior analyst at Celent.

"One other factor is good, old-fashioned competition," he added. "What may have been middle-of-the-pack functionality along various dimensions three years ago is falling toward the rear of the pack today without a significant investment in upgrading. It's a bit of a self-reinforcing phenomenon, which works as long as insurance companies keep buying."

Along with the evolution of claims systems, Jim Kinzie, senior manager and co-leader of Deloitte's claims practice, believes there are tactical niche solutions available to insurers that are unlikely to be bundled into their claims solutions.

Never say never, Mr. Kinzie warned. "Four or five years ago, having consistency around integrated workflow management, task management and document management, and having an ability through a claims system to do business rules configuration were not [a given]," he said. "These days, looking at any of the leading solutions, all those capabilities are there."

Most of the leading vendors in the claims market have moved toward a more robust reporting capability, Mr. Kinzie pointed out. Some have done it through partnering in the marketplace, but others have added tools--such as adjuster portals and adjuster dashboards--as a way to bring escalation points or key metrics to a more visible form than in the past.

"In the old systems, it would have been a process of reaction or running critical reports," said Mr. Kinzie. "Today, those are part of the core claims solutions and front and center to the claims management team. Using the best and latest architecture is allowing a lot more capability in design."

Sedgwick Claims Management Services has seen an increase in functionality among claims systems and followed the example of many other insurers and third-party administrators by raising its investment.

"We've increased our [spending] every year in technology, not only from an overall technology standpoint but also for what we call strategic projects--large, new functionality," according to Patrick L. Funck, Sedgwick's executive vice president and chief information officer.

Sedgwick has expanded into different services over the years, such as disability coverage, family medical leave and, most recently, managed care--areas it used to outsource. "As we expanded into those service areas, we had to build a technology platform to support them," noted Mr. Funck.

Mr. Kinzie has noticed more movement by insurers to engage their business partners that provide claims services.

"The way those partners are being engaged by technology has advanced considerably," he said. "Insurance companies are putting these foundations in place with Web-based systems and service-oriented architecture. The architecture is more conducive to engaging business partners, communicating assignments and receiving work back."

He also sees movement toward tactical solutions. Damage estimates have been an electronic process for quite some time, but Mr. Kinzie cited changes in the way those estimates are checked and reviewed.

"Creative tools on the back end are being put in to enable the decision support," he said.

As an estimate comes to the insurer, rather than it being a stopping point while the adjuster receives an assignment, today's tools allow for an electronic assessment based on the carrier's business rules.

"The estimates are checked for compliance and other business criteria, and are either passed straight through or sent back based on some kind of rule set," according to Mr. Kinzie. "Technology is being put in at discreet points in the process--normally around business decisions--and being performed through business rules rather than by humans."

One of the most dramatic changes in claims systems is usability--primarily for the day-to-day users such as the adjuster according to Mr. Light of Celent.

Usability improvements have been achieved by having easily navigable screens--providing screens that are designed to put the most useful pages within easy eyesight and cursor reach of the user, building in easy-to-find contextual help, and building in tools to open a new claim.

"These changes are important because the claims system is the total work environment, where carriers want their adjusters spending 80 percent to 90 percent of their workday," noted Mr. Light.

A business rules engine is an important part of Sedgwick's claims system. The logic within the claims system is parameterized to allow for different types of rule processing, explained Mr. Funck. "We also have a new initiative we started last year called 'Smart Work' management--the next evolution of managing activity via rules," he added.

There always has been a good opportunity within the claims administration space to build functions around rules processing, according to Mr. Funck.

Claims systems normally focus on the rules processing of some type of business event that requires users to perform a certain activity--which, he explained, is viewed as a micro-workflow.

"Usually we don't have a lot of macro-workflows," he said. "At claim intake, you can control the specific order and build a macro-workflow around claim intake. That's a specific process within the life of a claim."

Different things can happen to a claim at different times and in different orders. "In the overall aspect of a claim, you drive into the micro-flows, and you end up building work rules within that," said Mr. Funck. "There's always been a heavier investment on the claims administration side of rules processing because it applies at both the micro- and macro-level."

Another major area of investment for claims system vendors involves business intelligence and analytics.

"Your ability to customize reports is enhanced with a better toolset," according to Mr. Light. He said increasing analytic capability is often the result of a partnership with other firms in terms of bringing in associated kinds of software that will enable a carrier's quantitatively-oriented actuaries to dig much deeper and use more sophisticated kinds of analysis.

Sedgwick typically doesn't look at unstructured data, but Mr. Funck said structured data is a completely different story. "We are in our third generation of data warehouse technology," he noted. "To be able to perform integrated reporting, we needed to aggregate all our data into one place where you can do analytics."

Sedgwick has invested a lot in data alerts, reported Mr. Funck, who said his company has built dashboards so clients can view what's going on with their accounts at a high level.

"From an integration standpoint, we build the functionality so you can go to a dashboard, drill down into the data, click on a particular claim, and get right into the viewing of that claim," he said. "The integration of the different types of data we manage and the functionality within the system are what a lot of our focus has been on."

Mr. Kinzie sees movement to use data more intelligently in claims management.

"There's been a lot of activity to better understand what claims data is telling people," he said. "There is an integrated effort to take the information and make better assignments at the outset of the claim."

Tools such as predictive models, business rules engines, and integrated task and workflow management mean there are more cohesive solutions in the market today, but beneath all the tools lies the claims data.

To run an effective claims operation, insurers must have an effective notification system for the first notice of loss, suggested Mr. Kinzie. "The way companies capture [the first notice] and use it is much more sophisticated today," he said. "The new systems allow for you to design and capture the information more intelligently and easier than in the past."

The thrust of how claims technology has been developing, especially in terms of rules, workflow, process management and real-time insight, has given carriers and their claims departments a set of tools that allow them to do good things for claimants, according to Mr. Light, citing benefits including faster cycle times, more accurate settlement offers and improved service.

"Having a set of tools that brings relevant information available quickly and in an accurate manner makes the claims service experience much better," he concluded.

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