A NEW ORDER VALUE OR LOST OPPORTUNITY?

Coming years will see increased attention being brought to bear on the service performance of the claims management side of the insurance business, delegates who attended the recently held Canadian Insurance Claims Managers Association and Canadian Independent Adjusters Association joint conference were told. The motivation for higher claims management excellence lies in the online and wireless technology advancements having opened up through the explosive growth in the use of the Internet. This has created two main “business drivers” – increased competition and the need for companies to distinguish their relation with customers, and, as importantly, heightened expectations of a more “information savvy” consumer.

Aquotation attributed to Mark Twain, “I was seldom able to see an opportunity until it had ceased to be one”, was used in the opening remarks of Peter Thorn, director of claims at Canada Life Casualty. Thorn was one of six speakers comprising a panel debate on the impact of online technology on claims management at this year’s joint CICMA/CIAA conference.

There are enormous opportunities open to insurers and their business partners through online technology and e-commerce, says Thorn. The challenge, however, will be to grasp such opportunities before they are lost to time. For instance, he points out that e-mail is currently the most widely used Internet tool, but, from a business development perspective, “it’s no longer an opportunity, for companies now just getting into it, they’re just catching up”. Future opportunities lie with developments on the world-wide-web (www), Thorn predicts, which means that companies will have to pick up the pace of their participation if they plan on remaining a market contender. As such, Thorn believes that claims management, and in particular insurers’ claim strategies, will face increased scrutiny as companies look for market differentiation.

Strategies and dangers

The key objectives to implementing an online presence are “innovation”, ensuring “low cost production” and striving for “customer excellence”, Thorn says. Most importantly, however, companies need to ensure that their online strategy remains consistent with their business plan. “The failure to link up to the company’s strategy is the biggest and most common risk when implementing web initiatives.”

Insurers also need to consider how technology solutions can hurt the business, Thorn cautions. Notably, he adds, “reporting claims online is an example of how technology can slow down the process”. Thorn feels that tele-call centers are a more efficient channel to handle claims reporting as there is a human tendency to put off dealing with correspondence such as email immediately. And, with a wry comment, Thorn refers to a popular and apt quotation from Mitch Ratliffe, president of Internet Media Strategies Inc.: “A computer lets you make more mistakes faster than any invention in human history – with the possible exceptions of handguns and tequila.” Typical technology pitfalls include:

Failure to link with strategy;

Forgetting the customer;

Interrupting the flow of information;

Complexity; and

Fear.

Bearing the above mentioned factors in mind, Thorn points out that the prime advantage of technology is the ability to leverage information into knowledge. This requires greater intellectual input than simply building a technology solution. In order for the business to benefit fully, information has to be shared. “Maximize information use between different areas of the business – he who has the best information wins,” Thorn stresses. Furthermore, he notes that the “human capital” should not be forgotten in the solution equation. “Computers process, they cannot think and make decisions,” he reminds the conference’s audience, and thereby underlines the necessity to invest in the right people as well as the right technology.

In his closing comments, Thorn stresses the need to establish appropriate performance measurements when initiating a technology project. “What gets measured gets done,” he says, noting that the measurement of benefits should be broader than just financial return – namely customer satisfaction and retention. Above all, he adds, “build feedbacks and learning cycles, and make damn sure that your objectives are established upfront”.

Claims are king

Claims are the only real vehicle insurers have in order make an impression on their policyholders, comments Sam Malatesta, vice president of marketing & insurance relations at CARSTAR Automotive Canada. If this impression is properly executed, the result is not only the obvious benefit of customer retention, but also the “word of mouth” advertising support of the happy customer. “It is when a policyholder makes a claim that he sees the value in insurance…The committed customer becomes your advocate,” he states.

Online technology application is definitely going to become the single largest business driver in claims management, Malatesta affirms. Insurers also need to realize that the Internet has created transparency of transactions and heightened consumer expectations with regard to service. Malatesta refers to the popularity of “badservice.com” with the online audience as a classic example of a consumer Internet service which could cause significant damage to the reputation and marketing efforts of companies. “Badservice.com is an example of how online technology has enabled consumers to communicate poor service in a broad manner.”

Malatesta agrees with Thorn’s view that the basic foundation of a successful online strategy depends on the “human capital” invested in the initiative. However, just as importantly, success also requires picking the right strategic business partners and maximizing on the collaborative use of information. “Cooperation is the new solution.”

Furthermore, Malatesta believes that online technology is set to enter a new development phase of wireless communication. This holds significant value for insurers from marketing through to claims management. To support his premise of a “new order’ in online technology, Malatesta points to developments over recent years to build a “smart car”. Several years ago, Microsoft’s president and CEO Bill Gates was asked to speak at a seminar in Paris, France. Gates insisted that, due to time pressures, the conference organizers had to arrange to have a vehicle made available with full online, real-time capabilities. French auto manufacturer Citroen was brought in to build a prototype vehicle for the occasion. Subsequently, announcement has been made by the car manufacturer to launch a vehicle with similar online communication features into the general consumer market. Other car manufacturers such as General Motors with its online onboard “OnStar” support service are redesigning how consumers view the function of the automobile. “Some of the things we’re seeing are going to change how we see a car,” Malatesta says. And, he adds, the revolution occurring in wireless online technology does not stop at cars, developments are underway which will touch on nearly every product across the consumer spectrum.

John Kotsopoulos, a vice president at ADP Claims Solution Group, concurs that relationship building with customers is going to become paramount to the business process. As such, he too notes that the opportunities for interaction between the insurer and policyholder depends on two events: the signing of a policy and when a claim is made. Insurers are not maximizing on these opportunities, nor are looking for ways to deepen the relationship, he adds. “How many companies ask their customers for email addresses?”

Sheldon Smollan, national manager at broker network consolidator Hub International Ltd., is a strong supporter for the future of insurance “e-sales” via the Internet. “In an hour and a half, I can sell six policies over the Internet where I would have spent the same time going to see one customer.”

Information sharing needed

Keith Edwards, a director at international adjusting firm McLarens Toplis Canada, expects commercial clients such as insurers and risk managers will exert pressure on their service partners to deliver real-time information in a concise format. “The ‘e-enabled manager’ has expectations that go beyond the service standards of the past. We have to be able to respond with appropriate levels of service.”

Typically, Edwards says, online technology savvy clients want real-time access to data in a format that can be easily uploaded across systems. “All claim forms should be made emailable.” The biggest hurdle facing service providers lies in the fact that few insurers are Internet enabled, with even fewer government agencies making available online information. In order for the true benefits of online technology to flow through, all parties in the supply chain have to work together, he adds.

Terri MacLean, vice president of the Insurance Crime Prevention Bureau (ICPB), believes that most of the benefit of going online will result from business-to-business (B2B) transactions. Fraud detection is an area where insurers can make significant inroads to curtail losses through sharing information. To achieve this end, insurers will have to make greater efforts to ensure that accurate data is fed through in a timely manner to the ICPB. MacLean also announced that the ICPB will shortly issue all of its investigators with cellular phones and laptop computers to enable more accurate and time-responsive field reporting.