Property/casualty insurance carriers first need to examine their core claims systems if they want to receive a bigger return on any claims technology investments, but Don Light, senior analyst for Celent Communications, cautions it cant stop there. In his report, Property/Casualty Claims Technology Strategies, Light explores trends in this area and says carriers need more than a solid core. They also should be looking at what he calls the inner and outer rings around the core that can make a technology project pay off handsomely.
The inner ring, he says, consists of three toolsbusiness process management (BPM), enterprise process management (EPM), and business rules engines. Some of the most powerful tools for impacting a lot of steps in the claims process and taking some real bites out of severity and loss adjustment expense (LAE) come from those three tools in the inner ring, says Light.
Whether these tools are available on core claims systems depends on the system the carrier currently has in place and whether the carrier wants to go to the trouble of replacing the core if it lacks those tools. Integration tools, such as Web services, have made it easier for carriers to purchase these EPM or BPM tools as stand-alone solutions or components to the core system, according to Light. Our suggestion would be to start with EPM, he says. Get rid of the paper first. Its a quick return financially and makes your policyholders and your agents happier.
Carriers should follow this up with a BPM solution, he asserts. The strength behind BPM in the claims field is workflow, according to Light. It has some powerful capabilities, he adds, noting assignment functionality and the ability to monitor the claims process as two such capabilities.
A business rules engine is the third component of the inner ring. Best practice rules for adjusters can be planted within the system to allow insurers to better control decisions that have an important financial impact on the company. It is imbedding effective automated decisions within the process, says Light.
Outer-ring tools include estimators, contractor management, litigation management, analytics/fraud management, and portals, according to the Celent report. Outer-ring tools can be very effective, but Celents feeling is an insurance company is going to get where it wants to go more slowly if it starts in the outer ring, says Light, even though he doesnt downplay the value of such tools. Getting an accurate estimate is extremely important, not only in terms of being able to gauge the appropriateness of your final settlement, but also as soon as a claim comes in, a reserve is established, he says. If a carrier is not reserving accurately, thats going to have a big financial impact.
To build a business case for a claims technology solution, Light believes a carrier must establish business drivers. He lists three, any of which could be appropriate for pursuing a project: (1) Improving financials addresses claims severity and LAE. (2) Building a brand involves using claims management as a market differentiator. (3) Being a good corporate citizen involves avoiding regulatory problems that could embarrass the company as well as minimizing litigation. From these drivers come specific business process initiatives, says Light. Such initiatives allow a carrier to fast track certain claims or allow for straight-through processingprocedures that could lower medical or rehabilitation costs. There are a lot of initiatives you could identify that go to specific outcomes, he says.
It becomes a sequence of the overall mission of the claims department to look at 10, 15, or 20 kinds of [claims] activities to fulfill that mission, says Light. If we can drive costs out, speed up the processes, and improve quality within those processes, the business case becomes the quantitative financial impact of the project, which is real important in claims.
The goal of all this is to establish fair and accurate payment of claims to the policyholder. Says Light: That is going to knock down the average cost of a claim. ROBERT REGIS HYLE
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