Today's insurance companies are leaving no stone unturned intheir quest to compete and grow profitably. They face myriadchallenges that include elevated customer service expectations,increased regulation, and rapid, unexpected market shifts. Morethan ever, performance and agility across an organization are keysto success. Many companies are giving their claim organizations newconsideration, acknowledging the fundamental role it plays indetermining financial performance and defining the customerexperience.

Historically, claim processing has focused on the mechanics:gathering information and determining how much to pay and when topay it. Today, insurers are beginning to move beyond thistraditional approach, and even beyond first-generation processautomation. They are looking to identify and leverage capabilitiesthat expand real-time interaction with service providers, enablebroad self-service options, and take advantage of services, such asautomated subrogation processing and litigation management.

In general, insurers are looking to their claim operations tohelp drive improvements across three fundamental areas:

1. To improve retention and reduce risk. Often aninsurer's first meaningful point of contact with a policyholder ora claimant is during a claim, a time when the claimant can bestressed and unsure of the process. This initial experience canmake or break the customer relationship. Customer-centric insurersstrive to make the claim process collaborative to improveretention, decrease the process and cycle time to close a claim,and reduce the chance of litigation. For example, if a claimant hasjust been in an auto accident, then he or she may call the insurerfrom the side of the road. The insurer can take the first notice ofloss or send a taxi to take the claimant to a rental office wherehe or she can pick up a replacement vehicle to use while repairsare in process. This level of service reinforces the customerrelationship and can reduce the chance of "claim inflation" or"buildup."

2. To increase service levels and reduce costs.In the past, insurers faced a tradeoff when attempting to increasecustomer satisfaction levels or service to the claimant/policyholder. This tradeoff required either increasing staff oroverpaying claims. Today, however, insurers can leverage servicesand systems to support the claim process in a manner that lowerstheir overall claim costs while improving customer service. Thegoal is a faster claim settlement process that translates toimproved overall customer service and a lower ultimatepayout.

3. To enable growth. During the development ofstrategic growth plans or product development, the claimorganization is traditionally viewed as a cost center and has thusbeen left out of growth plans. In addition, silos between businessareas have often resulted in new products being brought to marketwith only cursory consideration of how these products would impactthe claim organization. This strategy puts the insurer's plans atrisk if the organization does not put in place a mechanism toensure the effective and efficient settlement of claims in thesegrowth areas. Insurers are wise to mine the claim department forvaluable information -- such as geographic, demographic, andproduct-focused data -- and then analyze and correlate this datawhen considering strategic plans and new product development. It isalso

important to note that an unsatisfactory claim experience is atop reason that customers choose not to renew policies. As aresult, the potential for growth for insurers that provide poorclaim service will be severely limited.

Technology at the Core

To gain the agility and visibility required to improveretention, reduce costs, and promote growth, insurers requireadvanced claim processing strategies and systems. These systemsshould go beyond providing the basic elements of automation andelectronic file management. Instead, insurers must look beyondinternal business processing. They should instead focus on drivinga total claim service delivery chain to profitably meet consumers'expectations -- with the goal of restoring, repairing or replacinga claimant's property as quickly and seamlessly as possible.

We are starting to see insurers embrace this concept. Forexample, Columbus, Ohio-based Motorists Mutual Insurance Co. istransforming its claim process with an initiative that started withthe goal of achieving a paperless environment. It has sinceexpanded well beyond that aim to streamline relationships andtransactions with vendors, Insurance Services Office (ISO) andworkers' compensation partners. Motorists also has enabled mostclaims to go from receipt to an adjuster without any humanintervention.

A customer will contact the call center, where a representativecan simply press an "assign adjuster" button. From there, thecompany's claim management system alerts an adjuster to the newclaim within minutes via cell phone. The company's flexibilityhelped Motorists deliver rapid service to its customers inKentucky, Indiana, Ohio, and Pennsylvania in 2008 when stormsgenerated from Hurricane Ike brought widespread damage and morethan 12,000 claims in just a few weeks. Motorists was able to pullin staff from other areas of the claim organization. In less than aday, it trained them to take first notice of loss. This capabilityenabled Motorists to handle the increased volume of calls andresolve claims quickly. The company's customer satisfaction ratingincreased after this catastrophe as a result.

Information is Essential

To make an accurate decision in the claim process, insurers mustaccess information from multiple sources -- including policyadministration and customer relationship management (CRM) systems-- in real-time to understand the status of the client. Today'sinsurers are looking toward next-generation systems that integratemany different types of information from across the enterprise, aswell as facilitate customer-centricity.

While legacy policy-centric systems revolve around the detailsof insurance policies, customer-centric systems provide insightinto client demographics, transaction history and behavior, all ofwhich yield actionable information for improving service as well asplanning future strategies and products. Customer-centric systemsenable insurers to identify their most valued customers and provideswift, superior service to this group while still reducing fraudand claim leakage overall.

Taking the relationship-centric approach one step further toachieve excellence in claim processing, insurers today need toimprove management of multiple relationships with policyholders,claimants, attorneys, adjusters, agents, and authorities. Advancedanalytics can help identify which claims offer good opportunitiesfor subrogation; which ones are good candidates for out-of-courtsettlement; and which claims will likely end up in litigation. Thisinformation, along with automated litigation managementcapabilities, can help streamline interactions with claimants,attorneys and third parties, improving relationships and movingtowards more rapid, less costly resolutions.

Reaping the Rewards

To enable a relationship-centric approach to claims, insurersshould consider the following strategies:

Use rules engines that drive best practice enforcementand compliance. Insurers have knowledge workers with skilland experience derived from decades on the job. They can harnessthis knowledge and experience using rules engines to capture it ina documented business process. Rules engines enable insurers tostore valuable knowledge from employees and make it accessible toother parties and processes.

In addition, rules engines can automate regulatory complianceand adherence to authority levels within the organization. Forexample, insurers must make payments within a prescribed time framefor workers' compensation claims to avoid penalties andinvestigation. Insurers can use rules engines to automate suchprocesses and build in agility for meeting a changing regulatorylandscape.

Rules engines also can enable automatic adjudication, whichsupports cost reduction and claim processing acceleration. Aninsurer can, for instance, direct its claim system to automaticallypay claims resulting from an auto collision in which damage totalsless than $1,500 and no one has been injured. Such automaticadjudication eliminates the involvement of an adjuster, freeing upresources for more complex cases, reducing costs, and acceleratingclaim resolution.

Leverage data mining tools with predictiveanalytics. Insurers can use data mining tools incombination with predictive analytics to give claim adjusters andinvestigators actionable, real-time insights, and to flagpotentially fraudulent behaviors. The more insurers understand andanalyze their customers, products, pricing, and loss experience,the better positioned they will be to develop and price productsfor different market segments and target new markets. Insurers havea wealth of information from the claim process to guide futuredecisions and strategy. For example, they can determine who has agood risk profile and identify medium-term trends and geographicareas that may be of interest to the organization. Similarly, datamining and analysis can guide insurers in defining parameters forautomatic adjudication.

Enable true self-service capabilities.Americans and residents of other developing nations areincreasingly adopting the Internet as the preferred channel forbusiness transactions. It gives consumers freedom to conductbusiness when and where it is most convenient for them. As such, anumber of large insurers are investing in technologies that enablecustomers to manage processes online, including paying bills andfiling claims. When insurers open up core processes to trueself-service capabilities, whether for agents and brokers or forthe insureds themselves, they increase service levels, reduce cycletimes, and cut administrative costs. A logical starting point forinsurers is delivering the ability to file claims and trackpayments online.

Integrate supply chain management into the claims valuechain. In Europe, insurers are increasingly integratingsupply chain management into the claims value chain, whether theyare health insurers partnering with medical service providers orauto insurers working closely with repair facilities. The goal isto expedite service and drive down costs. Some insurers are evenbeginning to integrate and partner with product manufacturers, sothey are in a position to provide customers with replacementproducts in short order and often at a discount. We can expect thistype of integration to begin to take root in the United Stateswithin the next few years.

Implement in-depth process management. Insurersmust have deep claim process management capabilities that encompasssubrogation as well as case, salvage, and litigation management.Superior case management capabilities ensure that, for instance, aninjured employee has a full plan defined for him -- from injurythrough treatment -- until he or she is back at work. Insurers witha sophisticated salvage management process system in place candramatically reduce losses incurred after major catastrophes byincreasing the amounts recovered through better management of thesalvage process. Effective subrogation and litigation processesalso enable insurers to pursue other culpable parties that may beinvolved in a loss.

As insurers seek to improve efficiency and drive higher levelsof customer service at lower costs, they are finding that theirclaim organizations are a crucial part of the equation.Information, and the technology that delivers it to the rightperson at the right time, are essential to enabling a new level ofcustomer-centricity that seeks to deliver faster and moreconvenient service, all while driving down costs. Organizationsthat carefully map technology requirements to their objectives fromthe start of the transformation process will build a solidfoundation to deliver the high levels of claim service vital tocustomer satisfaction and, ultimately, to a company's success.