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US property and casualty (P&C) insurers are at a critical juncture in terms of the modernity and flexibility of their claims management systems.
To gauge insurers’ attitudes toward investing in claims, Accenture conducted quantitative survey research with C-level claims executives in March and April 2012. As we had anticipated, we found that most insurers agree on the lack of modernity and flexibility of their claims management systems, especially in terms of allowing change in system behaviors and business processes and in addressing consumers’ evolving needs.
Claims executives said that improvement will be required in the claims organizations in order to be prepared and equipped to manage new forms and level of risk, and that consistency in claims handling can be optimized to improve loss costs.
Multiple factors challenge P&C 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. Insurers’ claims operations are trying to cope with these changes with workforces that have, in many cases, been cut in previous cost reduction efforts. In addition to these concerns, claims teams are 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.
Technology offers potential solutions to these problems, but poses its own challenges as insurers try to maintain maximum flexibility and adaptability in the face of tremendous uncertainty about the impact of innovative new technologies. In such an environment, making the right investments in claims systems and organizations will be critical for US property and casualty insurers.
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. . Currently, P&C insurers rely on multiple applications to process claims: Half have between two and four applications and one-third have more than five. A little over half (54 percent) of respondents said they have a core claims system that is more than five years old. Nearly eight in ten (78 percent) respondents said they were on an upgrade path for their core claims system; eight percent said such an upgrade was under discussion and only 12 percent said no such investment was planned.
Developing analytics capabilities. Despite the enormous potential of analytics for P&C insurers, two-thirds (66 percent) of insurers cannot take full advantage of the growing volume of data available for claims management due to their inability to collect and analyze data. A full 80 percent of insurers said they used offline data obtained from Excel spreadsheets and Access databases, and 74 percent said they used structured data commonly found in the core claims system in the claims process. Nearly two-thirds (62 percent) use unstructured data such as voice, text, pictures and video.
Investing in the workforce. The claims workforce was the target of extensive cost cutting 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 percent) of respondents are either actively hiring or planning to hire claims professionals. Recruitment of these individuals will take place among competitors (82 percent), at universities (70 percent) and among other industries outside of insurance (48 percent).
Insurers need to invest in their systems and processes with a “foot in today and a leap into tomorrow”. This means that they must meet the needs before them, in terms of modernity and flexibility, 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.
Insurers also expressed intent to expand their claims workforce. While there is no doubt that 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 the survey indicated, cloud-based SaaS models are rapidly emerging as viable options for insurers. All core systems upgrades, however, should be implemented with an eye to the future, allowing for maximum flexibility and for rapid changes in systems behavior and business processes, preferably without costly, time-consuming IT intervention.
These actions must be done in conjunction with a thoughtful view of the entire claims operating model, including technologies, processes and people, in order to truly unlock the value in claims.
October 2, 2012
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