The Insurance Commodity Battle

The better an organization is at managing expert services to committed coverage requirements, the more it can keep premium costs down, drive value into the distribution partnership, and acquire or retain the right underwriting profile.  Furthermore, the more an insurer can control premium costs and differentiate on claims service, the more flexibility it has to differentiate itself and fight the commoditization battle.

Knowing the size of the prize

Intuitively most insurers know that options for improvements in areas such as how they make referrals, handle cash, conduct recovery, and manage vendors, litigators, and potential fraud can lower costs.  Does your organization fall into this category? Consider these questions:

• Do you know which vendors are performing at an optimal level for you and if you have the most appropriate vendor terms?
• Are you getting the most from each category of your claim spending, including services and fulfillment?
• Do you provide institutional governance over decisions such as referrals, or is that up to the individual adjuster?
• Do your highest capability claims professionals spend time driving the highest effectiveness for external spend (or is their day consumed with processing claims)?
• Are you able to pursue potential fraud with the level of certainty and conviction that enables you to actively fight the fraud battle?
• Are you able to contribute claims insights to the decisions being made about product strategy, pricing, and distribution? 

If you were unable to answer "yes" to each question above, then it is likely you have hidden opportunity in claims expert services. So now the challenge is systematically going after these opportunities.

Making a game plan

Getting the greatest efficiency out of spending related to expert services involves a three-step process:

• Setting an efficient operational base (enabling the focus for value)
• Building and leveraging flexibility
• Creating the right market leading capabilities  

Setting the efficient operational base

The first step toward unlocking expert services best practice is investing in core claims processing.  By doing so, companies improve the efficiency of claims processing activities and thus create the resource capacity to focus on expert services.  Additionally, it is the alignment of business information and analytics from operations to expert services that will enable continuous improvement from an investment in core claim processing. Companies that are not thoughtful about their broader claims capabilities as part of core claims processing improvement will leave significant benefits uncaptured. 

Building the flexibility

To capitalize on expert services opportunities, companies must also enable the core claims process to effectively and efficiently interface to expert services not just once, or one way, but interactively across the full claim value chain.  For instance, because a carrier is able to provide more information to the claims professional (adjuster or intake expert) earlier in the process, the agent can assess the claim more accurately than in the past.  According to experiences of software firm Guidewire, this can increase SIU referrals by as much as 300 percent or increase subrogation referrals by as much as 200 percent.  Hence, building the flexibility and interfaces throughout the claims process is the second critical component to reaping expert services benefits.

Creating the capability

Most insurers need to rethink their organization, data management and decision-support strategies to generate greater value from expert services.  Workers specializing in expert services are typically much more "thought-based" workers than "process-based." This means that claims executives must re-think how work should be segmented and even how the claim organization should be designed.  This requires a focus on aligning the overall brand strategy to the target capabilities, job descriptions, recruiting strategies, retention, and reward programs to manage a mix of thought workers and process workers.

Insurers also need a breadth of analytics and decision-support capabilities to analyze spending, vendor performance, and other aspects of expert services that provide insights on how to most appropriately align spend to committed coverage. This may include claims-related predictive models for areas such as recoveries (including both subrogation and salvage); vendor management (such as scoring preferences for vendors best suited for services or fulfillment); claims forecasting (reserving and reinsurance); and litigation management (for instance predicting the likelihood of potential outcomes based on historical data or refined segmentation of referred effort). It may include new data management strategy, data storage, and data extraction capabilities to support the analytics and decision support needs described above. 

Bringing home the prize

Achieving efficiency in core claim processing will yield very important total cost of ownership (TCO) benefits and linear operational savings.  Considering the broader opportunities to drive total claim outcome drives exponential results and a greater ability for the claims organization to flex with the business as it evolves.  Claims executives need to generate improvements far beyond core adjuster efficiency.  This requires focus on expert services, indemnity management, and bottom line cash improvement, along with a consideration of organizational strategy and design to extract greatest return.