Today's insurance companies are leaving no stone unturned in their quest to compete and grow profitably. They face myriad challenges that include elevated customer service expectations, increased regulation, and rapid, unexpected market shifts. More than ever, performance and agility across an organization are keys to success. Many companies are giving their claim organizations new consideration, acknowledging the fundamental role it plays in determining financial performance and defining the customer experience.

Historically, claim processing has focused on the mechanics: gathering information and determining how much to pay and when to pay it. Today, insurers are beginning to move beyond this traditional approach, and even beyond first-generation process automation. They are looking to identify and leverage capabilities that expand real-time interaction with service providers, enable broad self-service options, and take advantage of services, such as automated subrogation processing and litigation management.

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

1. To improve retention and reduce risk. Often an insurer's first meaningful point of contact with a policyholder or a claimant is during a claim, a time when the claimant can be stressed and unsure of the process. This initial experience can make or break the customer relationship. Customer-centric insurers strive to make the claim process collaborative to improve retention, decrease the process and cycle time to close a claim, and reduce the chance of litigation. For example, if a claimant has just been in an auto accident, then he or she may call the insurer from the side of the road. The insurer can take the first notice of loss or send a taxi to take the claimant to a rental office where he or she can pick up a replacement vehicle to use while repairs are in process. This level of service reinforces the customer relationship 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 increase customer satisfaction levels or service to the claimant/policy holder. This tradeoff required either increasing staff or overpaying claims. Today, however, insurers can leverage services and systems to support the claim process in a manner that lowers their overall claim costs while improving customer service. The goal is a faster claim settlement process that translates to improved overall customer service and a lower ultimate payout.

3. To enable growth. During the development of strategic growth plans or product development, the claim organization is traditionally viewed as a cost center and has thus been left out of growth plans. In addition, silos between business areas have often resulted in new products being brought to market with only cursory consideration of how these products would impact the claim organization. This strategy puts the insurer's plans at risk if the organization does not put in place a mechanism to ensure the effective and efficient settlement of claims in these growth areas. Insurers are wise to mine the claim department for valuable information -- such as geographic, demographic, and product-focused data -- and then analyze and correlate this data when considering strategic plans and new product development. It is also

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

Technology at the Core

To gain the agility and visibility required to improve retention, reduce costs, and promote growth, insurers require advanced claim processing strategies and systems. These systems should go beyond providing the basic elements of automation and electronic file management. Instead, insurers must look beyond internal business processing. They should instead focus on driving a total claim service delivery chain to profitably meet consumers' expectations -- with the goal of restoring, repairing or replacing a claimant's property as quickly and seamlessly as possible.

We are starting to see insurers embrace this concept. For example, Columbus, Ohio-based Motorists Mutual Insurance Co. is transforming its claim process with an initiative that started with the goal of achieving a paperless environment. It has since expanded well beyond that aim to streamline relationships and transactions with vendors, Insurance Services Office (ISO) and workers' compensation partners. Motorists also has enabled most claims to go from receipt to an adjuster without any human intervention.

A customer will contact the call center, where a representative can simply press an "assign adjuster" button. From there, the company's claim management system alerts an adjuster to the new claim within minutes via cell phone. The company's flexibility helped Motorists deliver rapid service to its customers in Kentucky, Indiana, Ohio, and Pennsylvania in 2008 when storms generated from Hurricane Ike brought widespread damage and more than 12,000 claims in just a few weeks. Motorists was able to pull in staff from other areas of the claim organization. In less than a day, it trained them to take first notice of loss. This capability enabled Motorists to handle the increased volume of calls and resolve claims quickly. The company's customer satisfaction rating increased after this catastrophe as a result.

Information is Essential

To make an accurate decision in the claim process, insurers must access information from multiple sources -- including policy administration and customer relationship management (CRM) systems -- in real-time to understand the status of the client. Today's insurers are looking toward next-generation systems that integrate many different types of information from across the enterprise, as well as facilitate customer-centricity.

While legacy policy-centric systems revolve around the details of insurance policies, customer-centric systems provide insight into client demographics, transaction history and behavior, all of which yield actionable information for improving service as well as planning future strategies and products. Customer-centric systems enable insurers to identify their most valued customers and provide swift, superior service to this group while still reducing fraud and claim leakage overall.

Taking the relationship-centric approach one step further to achieve excellence in claim processing, insurers today need to improve management of multiple relationships with policyholders, claimants, attorneys, adjusters, agents, and authorities. Advanced analytics can help identify which claims offer good opportunities for subrogation; which ones are good candidates for out-of-court settlement; and which claims will likely end up in litigation. This information, along with automated litigation management capabilities, can help streamline interactions with claimants, attorneys and third parties, improving relationships and moving towards more rapid, less costly resolutions.

Reaping the Rewards

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

Use rules engines that drive best practice enforcement and compliance. Insurers have knowledge workers with skill and experience derived from decades on the job. They can harness this knowledge and experience using rules engines to capture it in a documented business process. Rules engines enable insurers to store valuable knowledge from employees and make it accessible to other parties and processes.

In addition, rules engines can automate regulatory compliance and adherence to authority levels within the organization. For example, insurers must make payments within a prescribed time frame for workers' compensation claims to avoid penalties and investigation. Insurers can use rules engines to automate such processes and build in agility for meeting a changing regulatory landscape.

Rules engines also can enable automatic adjudication, which supports cost reduction and claim processing acceleration. An insurer can, for instance, direct its claim system to automatically pay claims resulting from an auto collision in which damage totals less than $1,500 and no one has been injured. Such automatic adjudication eliminates the involvement of an adjuster, freeing up resources for more complex cases, reducing costs, and accelerating claim resolution.

Leverage data mining tools with predictive analytics. Insurers can use data mining tools in combination with predictive analytics to give claim adjusters and investigators actionable, real-time insights, and to flag potentially fraudulent behaviors. The more insurers understand and analyze their customers, products, pricing, and loss experience, the better positioned they will be to develop and price products for different market segments and target new markets. Insurers have a wealth of information from the claim process to guide future decisions and strategy. For example, they can determine who has a good risk profile and identify medium-term trends and geographic areas that may be of interest to the organization. Similarly, data mining and analysis can guide insurers in defining parameters for automatic adjudication.

Enable true self-service capabilities. Americans and residents of other developing nations are increasingly adopting the Internet as the preferred channel for business transactions. It gives consumers freedom to conduct business when and where it is most convenient for them. As such, a number of large insurers are investing in technologies that enable customers to manage processes online, including paying bills and filing claims. When insurers open up core processes to true self-service capabilities, whether for agents and brokers or for the insureds themselves, they increase service levels, reduce cycle times, and cut administrative costs. A logical starting point for insurers is delivering the ability to file claims and track payments online.

Integrate supply chain management into the claims value chain. In Europe, insurers are increasingly integrating supply chain management into the claims value chain, whether they are health insurers partnering with medical service providers or auto insurers working closely with repair facilities. The goal is to expedite service and drive down costs. Some insurers are even beginning to integrate and partner with product manufacturers, so they are in a position to provide customers with replacement products in short order and often at a discount. We can expect this type of integration to begin to take root in the United States within the next few years.

Implement in-depth process management. Insurers must have deep claim process management capabilities that encompass subrogation as well as case, salvage, and litigation management. Superior case management capabilities ensure that, for instance, an injured employee has a full plan defined for him -- from injury through treatment -- until he or she is back at work. Insurers with a sophisticated salvage management process system in place can dramatically reduce losses incurred after major catastrophes by increasing the amounts recovered through better management of the salvage process. Effective subrogation and litigation processes also enable insurers to pursue other culpable parties that may be involved in a loss.

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

Special Reports /

Keep on Growing: Leveraging Claims to Ensure Success

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