Solid Investment

Multiple factors challenge property and casualty insurers as they search for profitable growth, including changing consumer expectations, the explosion of structured and unstructured data, and continuing demands from management and shareholders to deliver better claims outcomes.

Throughout North America, insurers’ claims operations are trying to cope with these changes using workforces that are, in many cases, smaller than they were before the 2008 financial crisis. Claims teams are also dealing with changing types of risk – from the growth of cybercrime and organized fraud to the increase in the frequency and severity of natural events.

While technology offers potential solutions to these problems, it poses its own challenges as insurers try to maintain maximum flexibility and adaptability. In such an environment, making the right investments in claims systems and organizations will be critical for property and casualty insurers.

To gauge insurers’ attitudes toward investing in claims, Accenture conducted quantitative survey research with 50 C-level claims executives in 2012. As the company had anticipated, most insurers agree on the lack of modernity and flexibility of their claims management systems, especially in terms of allowing change in system behaviours and business processes and in addressing consumers’ evolving needs. The p&c insurers surveyed expect to spend considerable amounts of money – $17.5 million on average over the next three years – to upgrade and modernize their claims functions.

CHANGE ADAPTABILITY

Most insurers agree that their claims systems lack the modernity and flexibility to allow change in systems’ behaviours and business processes, as well as to address the evolving needs of consumers. For example, 40% of respondents answered “not at all” when asked if their claims management system was modern and flexible enough to allow change in systems behaviour and business processes without intervention from the IT department, and another 43% said the system was able to do so only to some extent. Only 17% of respondents noted their systems could allow such change “to a great extent.”

Similar concerns about preparedness appeared in regard to insurers’ ability to meet consumers’ evolving needs. More than one-fifth (21%) of insurers reported that their systems were not at all prepared to do so, while almost two-thirds (64%) said their systems could meet such needs only to some extent. Only 15% of respondents rated their systems as ready to a great extent to meet consumers’ evolving needs.

These concerns were amplified for p&c insurers with older core claims systems. Insurers with core claims systems over five years old – more than half of the survey sample – saw themselves as much less able to deal with the problems of responding to changes in business processes, addressing consumers’ evolving needs, integrating with other systems and allowing changes in systems behaviour and business processes without IT intervention. Nearly half (48%) of insurers with core claims systems more than five years old said their system was not at all able to allow such changes without IT intervention.

TRENDING NOW

While the survey highlighted insurers’ concerns about their claims systems’ modernity, flexibility and ability to deal with consumers’ evolving needs, it also identified three broad priorities for future investment: core claims system modernization and replacement; analytics capabilities; and workforce improvement.

1. Core Claims System Modernization and Replacement

Core claims system modernization is p&c insurers’ first investment priority. Currently, these insurers rely on multiple applications to process claims: half have between two and four applications and one-third have over five. A little more than half (54%) of respondents said they have a core claims system that is more than five years old.

Nearly eight in 10 (78%) respondents reported that they were on an upgrade path for their core claims system; 8% said such an upgrade was under discussion; and 12% said no such investment was planned. This was a particularly high percentage given that 36% of respondents noted that their last major core claims system upgrade took place in the last year, and another 33% said that such an upgrade had taken place in the last two to three years.

New options for core claims systems, such as cloud computing and software as a service (SaaS), are rapidly gaining credibility. One in five (20%) insurers plan to migrate claims to the cloud or a SaaS model in the next two years, and these options could be an alternative for another 26% of insurers polled.

An equal percentage of larger (net premiums written above US$500 million) and smaller (net premiums written below US$500 million) insurers are planning to migrate claims to cloud or SaaS models in the next two years, but a higher percentage of larger insurers are considering doing so in the future (36% of larger insurers versus just 16% of smaller insurers) 

2. Analytics Capabilities

Despite the enormous potential of analytics for p&c insurers, two-thirds (66%) of respondents cannot take full advantage of the growing volume of data available for claims management due to their inability to collect and analyze data. Without the ability to collect and analyze the growing volume of data available – including insights about consumers from social media, usage data collected by means of telemetry and GPS, and asset damage records collected by millions of RFID devices – insurers are unable to take advantage of this information to refine and improve claims management.

A full 80% of insurers reported using offline data obtained from Excel spreadsheets and Access databases, and 74% said that they used structured data commonly found in the core claims system in the claims process. Nearly two-thirds (62%) use unstructured data such as voice, text, pictures and video. Substantial minorities of insurers currently use social media (40%), predictive models (34%) or location based-data (34%) in the claims process, but this share should increase in the future based on the number of insurers who said they would like to do so (20%, 32% and 20%, respectively).

3. Workforce Improvement

The claims workforce was the target of some of the extensive cost-cutting that took place in response to the financial crisis of 2008. While insurers were reducing their claims workforce, many of their most experienced claims professionals are also at, or near, retirement age. As a result, increasing the size as well as enhancing the skills of the claims workforce is a top priority for p&c insurers.

More than two-thirds (68%) of respondents are either actively hiring or planning to hire claims professionals. Recruitment of these individuals will take place among competitors (82%), at universities (70%) and among other industries outside of insurance (48%).

Among the companies actively hiring claims professionals, 26% are facing problems in hiring, with claims-handler positions being the most difficult to fill, followed by claims supervisors and customer service representatives.

More than half (59%) of the insurers surveyed see hiring or training customer service professionals as a top priority to address customer needs. Among other programs to improve customer service and satisfy customer needs, insurers cited creating or deploying mobile applications for customers (57%); building digital customer profiles available for claims professionals during claims-transaction handling (45%); and undertaking initiatives focused on improving net promoter scores (43%) and those focused on improving JD Power claims satisfaction scores (30%).

NEW FOUNDATION FOR ANALYTICS

While the insurers in Accenture’s survey expressed a willingness to invest in improving claims performance by improving technology, they must do so with a “foot in today and a leap into t omorrow.” They must meet current needs, but anticipate those of the future by preparing themselves for harnessing data and enabling customers.

Importantly, p&c insurers should be thinking about data collection and management as the foundation for advanced analytics. Analytics opens up a world of possibilities in claims, but only for those insurers able to collect and organize the vast quantities of data coming in from new sources, such as social media, telemetry and GPS.

While there is no doubt many claims functions are under-staffed, there is also a need to rethink the role of the claims professional. Claims professionals armed with ready access to relevant information can play a central part in meeting customers’ expectations for rapid resolution and a positive overall experience.

As survey results indicated, p&c insurers will invest considerable sums in upgrading or replacing core systems. Core systems upgrades, though, should be implemented with an eye to the future, allowing for maximum flexibility and for rapid changes in systems behaviour and business processes, preferably without costly, time-consuming IT intervention. These actions should be part of a rational approach to the entire claims-operating model – including technologies, processes and people – in order to fully unlock the value in claims.