Property and casualty insurers are faced with difficult choiceswhen dealing with aging claims systems, which can't provide thehigh level of service that customers expect from their carrierstoday, one leading consultant warns.

Keeping an older system in operation is a serious problem forinsurers because many legacy systems have proven to be expensive tomaintain, according to Karlyn Carnahan, principal in the insurancepractice at the research and consulting firm Novarica.

“You have old code and fewer people who know how to manage thatcode,” explained Ms. Carnahan, one of several speakers taking partin a recent webinar on the outlook for claims technology in 2010sponsored by Tech Decisions and Claimsmagazines–which, along with National Underwriter, are partof Summit Business Media's P&C Magazine Group.

Ms. Carnahan believes older claims systems are not coupled witha carrier's policy administration system, which makes it difficultto take claims data and run it against the policy data.

Claims systems “tend to be rooted in finance and not service,”she said during the webinar, which was moderated by Eric Gilkey,editor in chief of Claims. “Today's consumers demand amuch higher level of service than before.”

Ms. Carnahan pointed out that the technology offered in newersystems provides serious upgrade for carriers in areas such asanalytics, global information systems, estimating, mobileapplications, texting, telematics, fraud and Web 2.0capabilities.

Narragansett Bay Insurance Company is in the midst of a claimssystem upgrade that will be completed in 2010, according to BobKhosropur, chief claims officer for the Pawtucket, R.I.-basedcarrier. He said NBIC looked for a Web-based architecture that canhelp and service both customers and agents.

Security, availability, agility and straight-through processingare all key issues for NBIC, he noted.

“We have an extensive network of independent agents, but we do alot of the work internally,” said Mike Anselmo, chief informationofficer of NBIC. “We are looking to have very few touch points andfocus on growing the business.”

Mr. Anselmo explained that the carrier's implementation strategyincludes:

o Use of specialized technical resources in implementation.

o Outsourcing where needed.

o Hiring of in-house generalists for operations.

o Breaking all projects into smaller measurable milestones toget early wins and reduce risk, and to manage expectations.

Mr. Khosropur describes NBIC as an “an old company with acompletely new face, and a big part of that is the claimssystem.”

Finding the money to pay for a new claims system is not easy inthe current financial environment, which Ms. Carnahan called theworst in 70 years for insurers.

But with business shrinking, keeping current customers in placebecomes even more of a focus. “The reality is retention becomesabsolutely critical,” she added. “Competition is really fierce, sofinding ways of differentiating becomes a key strategic imperativefor insurance carriers.”

That provides an opportunity for insurance softwarevendors–particularly those offering core systems, according to Ms.Carnahan. She noted a recent Novarica survey that found p&ccarriers will likely increase information technology spending in2010–some significantly so.

“What is impacting the IT budget is a desire to increaserevenue-growth strategies as well as operational effectiveness,”she said. “The number-one reason insurers are increasing [IT]budgets is in order to grow.”

Robert Regis Hyle is associate editor atTech Decisions for Insurance, a member of Summit BusinessMedia's P&C Magazine Group, which includes NationalUnderwriter. He may be reached at [email protected].