Core claims systems haven't quite caught up with the pace of sales for policy administration systems in the insurance market, but the move is on, thanks in part to vendors and insurers embracing new technology for the solutions. Donald Light, senior analyst in the insurance group at Celent and author of the research group's recent report, "Core Claims Systems Vendors 2006," believes an important trend in claims technology has been to migrate existing core claims applications to modern platforms, such as Java J2EE or Microsoft .NET. "While there still are some well-recognized vendors using older languages and platforms, they are becoming a distinct minority," he says. "Several of [the claims vendors] have indicated they have plans over the next few years to do that migration." He predicts over the next five to 10 years virtually all the development for vendors and most of the maintenance and customization for insurance carriers will be done in J2EE or .NET.
Another trend Light sees in the current claims market is to build rules or workflow functionality capabilities within the claims systems themselves. "An insurance company always can go out, buy a business rules engine or a BPM solution, and lay it on top of its own claims system or any other system it wants to interface with," he says. But he contends the proper direction is toward the design and control of workflow and the creation of rules within the claims packages. These upgraded packages bring advantages to insurance companies that wish to streamline their processes or automate certain steps within processes to speed those processes and make them more consistent, he notes.
As carriers migrate to .NET or the J2EE platform, typically they'll include the workflow and rules functionality, continues Light. "There is nothing inherent in being on a .NET platform that says you now must have a rules engine or workflow capabilities, but it is basically a market-driven demand," he points out. "A particular solution will be looked at as coming up short if it does not have those capabilities."
A third area of interest for insurance carriers involves content management. Claims departments have to deal with a variety of correspondence and images, communicate with claimants, and generate reports to state insurance departments or bureaus. Light observes content management is less common in terms of built-in capabilities but is valuable for creating interfaces with document management solutions used by relevant third parties. "Part of handling the claim is you have to receive, archive, and generate material, so the content management capabilities are important if you are going to go paperless, which is what people are moving toward," asserts Light. A content management system allows carriers to handle all their material efficiently and generate communication at a precise time. With regard to tools, along with rules and workflow, Light describes content management as "the third leg of the stool" for current claims systems.
Many of the vendors in the Celent study are experiencing a lot of RFP activity, Light reports. One advantage the claims vendors have over policy admin vendors, he suggests, is there is a significant market with noninsurance companies–large businesses that are self-insured, TPAs that handle claims, and entities such as state workers' compensation funds. "There is a broader, deeper marketplace for claims solutions that isn't there for underwriting or policy admin," he says. "From the vendors' point of view, that gives them more possible places to sell."
There are many good choices in the market for insurers, Light remarks, and plenty of good competition among the vendors. "It's not really a buyer's market," he says. "But because there is a lot of competition, it's not a seller's market, either."
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