At an industry roundtable held earlier this year, KarlynCarnahan, CPCU, principal at Novarica, framed today's claimsmanagement situation this way: “People are stuck in a legacysystem, culture, and environment. They read about [innovation] andare interested, but their ability to execute is challenging. How doyou stay competitive in an industry where you have to keep up?”

In a more recent interview, Carnahan cited a Novarica reportissued in June on claims capability, and also noted some examplesof carriers that have been keeping up with the trends in this area,all in the name of both greater competitiveness and greaterresponsiveness to the consumer, who is accustomed to having so manymore ways of accessing information, as well as choosing from amonginsurers.

For example, Carnahan said Nationwide was the first insurer tooffer consumer mobile apps in personal lines beginning with an appfor the iPhone, and that Farmers has worked with a scheduling firmto do just-in-time claim scheduling, i.e., to schedule claims atthe last minute based on the best available adjustor for the typeof claim. “They'll say, 'Who's the guy who knows enough and who isclose enough?'” she said. “But obviously you have to have a largepolicy holder base [to make that work].”

At the same roundtable, another insurance industry expert saidthat innovation is no longer an unaffordable luxury or even a “niceto have” for the industry; as the insurance marketplace becomesincreasingly consumer oriented, it's mandatory. “People are nowtrained to expect that innovation. When you use that little mobiledevice, if it's not going to be there, I'm going to leave. Therules have changed from just being 'engaged' with my insurancecompany. Now I'm going to be an activist,” the expert said.

What's the common denominator? Carnahan said it's “thismegatrend we don't talk about a lot. It's collaboration. It'sbringing the consumer into every aspect of the business, becomingtheir own agent online, configuring their own products. How do youregulate the process?”

Insurers that don't respond quickly enough to theseconsumer-centered trends risk being left behind, as the Novaricareport suggests. Yet many carriers remain mired in legacypractices, such as manual claims processing with 30 percent ofcarriers still manually investigate claims, according to thereport. They also have been slow on the whole to innovate, for avariety of reasons. In addition, there naturally has to be abalance between responsiveness to consumer needs and newtechnologies, sensitivity to privacy concerns, and the need tomaintain operational efficiency.

“Not everybody is going to get 15 quotes, because they valuetheir time too much,” said Peter Settel, senior vice president andchief information officer for Homesite Insurance. “Consumer groupsare not totally rational. There are resistance points, and somehave a higher threshold for privacy than other folks. That maychange as they acquire more assets, or more family members, overtime. It's really complicated because of that; 'one size fits all'only works if your customer is homogenous. Maybe it used to looklike that, but that's no longer the case. As the consumer matures,it makes our job as insurance companies really complicated if wewant to be growing in those channels. A few companies will be theinnovators and have market share, and others will have to followthese brand leaders. [They will have a] time-to-market advantage oncontinuous innovation, [putting] a huge distance between[themselves] and the rest of the industry. You're seeing that playout,” he said.

The Novarica report also points out that while more and moreinsurance carriers either have replaced or are in the process ofreplacing their claims systems, those that have not done so arefinding that these aging legacy systems are increasingly expensiveto maintain, inflexible, decoupled from policy and customersystems, and rooted in financials and compliance and not customerservice. That would appear to spell doom to the insurer that can'textricate itself from legacy thinking and systems. The report,based on a survey of nearly 100 carriers, found that whileinnovation is certainly under way at many companies, 25 percent ofthose surveyed are merely maintaining their existing claimsprocessing systems, and 41 percent are making only “minorenhancements.”

In the category of first notice of loss alone, which is acritical touch point for consumers with their insurance company,the Novarica report found that while over a third of carriersresponding to the survey offer multiple channels for reportingclaims, only 40 percent are able to give claimants specific adviceat the time of claim. Further, only 45 percent of carriers provideinstant access to policy and detailed coverage information at timeof claim. The report further noted that larger carriers are muchmore likely to have multiple intake channels for claims, and thatthose companies whose claims processing systems are five years oldor less were “significantly more likely” to provide direct supportduring the FNOL process than those whose systems were older.

So it's no surprise that while innovation is definitelyhappening in some quarters, quite a bit more work remains to bedone. No doubt there will be some slipups along the way.

“To be an innovator, you have to break out of that [legacymindset] and take responsibility, but you're going to mess it up alot,” Settel said.