The Future of Claims: Faster, Smarter, Better

To differentiate themselves, carriers will need to apply a host of mobile and data-intensive technologies to the claims process in the coming years.

Insurance Networking News, January 1, 2012

Bill Kenealy

Predicting the future can be a fool's game, but planning for it is an operational necessity for insurers.

Indeed, considering the nature of insurance, insurance companies and actuarial science and underwriting in particular, are inherently forward-looking. By contrast, the claims process is by nature reactive. Must it stay this way?

The question seems all the more germane in light of rapid advances in predictive analytics technologies. While claims departments may never resemble underwriting departments in temperament, they may be wise to leverage certain tools and processes. For example, no technical reasons exist that would prevent a claims organization from combining data from internal and external sources into advanced analytic tools to create algorithms to predict loss exposure from a variety of events.

The use of analytics is already widespread in some areas of claims, such as fraud (with good reason, as the Insurance Information Institute estimates property/casualty insurance fraud as a $30 billion-a-year problem).

Thus, the challenge is to pivot from using data retrospectively, as in fraud detection, to using it predicatively to drive down costs by lowering claim severities and improving claim service. One area in which predictive analytics can pay dividends in real time is claims triaging and adjuster assignment, says Randy Hanson, auto director, Allstate Insurance Co.

"Analytics allows us to become much more intelligent about how we triage and what we want our staff to look at," he says. "It puts you in a position where you know whether you need to have a person on the scene or in the shop, or if you can just pay it and move on."

Neil Harrison, group managing director of risk control, claims and engineering for Aon Global Risk Consulting, agrees that augmenting existing claims processes with data is the future. "Quicker, more accurate data leads to better decisions," he says. "If you go 3-4 years out, what you will see is a more efficient claims process with less cost incurred for processing the claim and lower overall cost of claims because of the use of data enabling intervention techniques earlier in the process."

Looking further ahead, Harrison says the use of predictive analytics in the claims process will afford insurers the opportunity to invest in solutions to prevent claims from occurring in the first place. "Data can become the tool for organizations to determine how much capital they want to put into risk control measures," he says. "The granularity around information also frees up the way an organization chooses to manage their claims process.

"Some organizations are now held captive to certain vendors that have all the information," Harrison adds. "Going forward, you are increasingly going to see component buying or unbundling of different service areas that impact the cost of claims, whether it is claims administration or choosing a different provider for managed care or pharmacy benefits."

The Beginning

So why is this data-augmented claims process largely relegated to the future and not the present? Kimberly Harris-Ferrante, VP and distinguished analyst for Gartner Research, says one reason is that claims-related data initiatives have not been a top investment priority. Rather, much of the investment in recent years has centered on implementation of modern claims systems. While modern claims management systems have offered carriers a variety of benefits, including increased visibility into the process throughout the claims lifecycle from first notice of loss to settlement, Harris-Ferrante says the data side now needs to be addressed. "If we want to make the claims processes more efficient, we have to circle back to the data," she says.

Harrison agrees that future improvements may revolve less around technology than figuring out novel uses for it. "The technology platforms are interesting, but the value is in the data itself," he says.

Despite the obvious transformational potential of predictive analytic technologies to impact the claims process in the years ahead, it will be just one of many technologies doing so. In lines of business such as personal auto, mobile and telematic technologies hold great potential to alter how claims are handled.

One early manifestation of this was the mobile claims centers employed by insurers in the wake of natural catastrophes. Harrison expects this 24/7 approach to become the norm going forward. "Technology being what it is now with tablet and handheld devices, there is no point in the day when the risk manager or claims manager can't be up to date with what is going on with a loss," he says. "You have the ability to direct the traffic around your claims from anywhere in the world."

For more information on related topics, visit the following channels:

• Claims