NU Online News Service, Jan. 31, 2:38 p.m.EST

As insurers deal with post-financial crisis challenges, such asdwindling reserve releases and a challenged investment environment,many companies are looking to enhance customers’ claims experiencesto retain and attract business, a recent report said.

However, the report, consulting firm Capgemini’s “WorldInsurance Report 2011,” noted that a number of inefficiencies, manyof them longstanding, stand in the way of insurers as they seekclaims transformation.

One obstacle remains aging claims technology. “Many insurerscontinue to run multiple disparate legacy platforms,” the reportsaid. “This impedes integration with both internal and third-partysystems, increasing claims settlement times and costs, and creatingcustomer dissatisfaction.”

Tied to aging technology, claims processing is becoming morecomplex, leading to the misallocation of resources. “As a result,”Capgemini said, “people and resources are poorly mapped toprocesses, and claims adjustors spend more time administeringclaims than adjudicating them.”

Higher claims costs, due to global increases in litigation and arising number of weather-related catastrophe losses in somecountries, presents another obstacle for insurers. “Demand forliability coverage, and payouts on that coverage, have both risen,”Capgemini noted. The rise in litigation, the report said, is due inpart to the economy.

Insurers must also contend with fraud, which Capgemini saidaccounts for 10-15 percent of insurers’ loss ratios. Additionally,the report said insurers are missing opportunities for salvage,subrogation and third-party recovery. “All of these issues stem atleast in part from the lack of integrated claims data,” Capgeminisaid. In some cases, data is unavailable; in others, there are gapsin reporting and analytics around the data.”

Combined, these factors are working to undermine insurers’reputations with customers, according to the report. “A bad claimsexperience drives clients to competitors, a dynamic that isespecially costly for insurers given that it costs seven times asmuch to acquire a new customer as it does to serve an existingone,” the report said.

It added that insurers recognize the importance of claimstransformation and overcoming customer service obstacles, fraud andinefficiencies. The challenge is identifying which specific actionsand investments will generate value.

Capgemini said its analysis showed investments in four key areasshowed benefits:

Efficiency and effectiveness in claims adjustment/processing.Improving both indvidual activities within the claims process, andintegrating the systems with third parties and other internalsystems can reduce cycle times and improve efficiency.

Risk management to reduce the impact of contingent liabilitieson indemnity costs. Insurers should monitor and manage liabilitiessuch as litigation, reserves and vendors. Insurers should alsomaximize recovery opportunities such as salvage andsubrogation.

Customer retention. Consistent standards, prompt settlements,and effective processes will help satisfy customers and keep themloyal.

Customer acquisition. Effective risk underwriting will helpprice risks accurately and competitively, and will help ensure thatcustomer acquisition strategies are profitable.