Insurance Leakage

The challenges facing insurers are serious and many fold especially with the emergence of new technically advanced direct writers and the onerous regulations being introduced into the insurance sector.

Increased competition, reduced investment returns and increased and sometime out of control costs have put unprecedented pressure on insurers’ operating ratios and underwriting results directly affecting their bottom line profitability.

The claims function is such a key component in this equation but at the same time is a great opportunity to increase or at least cement market share profitably through increased customer loyalty.

The full costs of claims typically amounts to 80% of insurers revenues and it is therefore clear that the claims event for a customer plays a vital role in delivering customer value.

Before we can even consider how we may help companies address the operational or technical issues to reduce claims leakage, we must understand some key components that are essential elements that must be understood and included within any technical solution for claims processing.

    < Customer Intelligence : Producing and delivering customer intelligence into the claims handling process in order to apply the correct claims treatment to individual customers based upon their value, expectations, claims history, claims behavior, propensities to inflate claims values and delivering the right level of customer satisfaction.

    < Access to Data and Information:  Access to claims and customer data across legacy systems, held on paper files and trapped in the heads of people such as claims handlers, loss adjusters and motor engineers. The ability to draw upon this information in a timely and relevant manner and for this to be updated on a regular basis.

    < People: Getting the best performance from the likes of claims handlers utilising customer intelligence to make more well informed decisions as part of the claims handling process and ongoing claims campaigns.

    < The Network: Having effective networks of partners such as repairers, loss adjusters, solicitors, white and brown goods suppliers with whom you can share customer data and intelligence but, at the same time, being able to measure their performance on an ongoing and regular basis.

But what are companies endeavoring to deliver once they have established that an outstanding claims performance can play a major role in improving business performance and reducing operating ratios?

    < Reduce Lost Costs:  Settling claims at a cost that is no more or no less than what is covered.

    < Customer Service: Delivering a claims service that reflects the customers’ value to the company and offering differentiation by way of fast tracking etc which aids customer loyalty.

    < Operational Cost Control: Minimising the costs of the claims handling process both internally and externally.

These are great objectives to achieve and for some they are ideals that are unobtainable.  Although insurers do appreciate the immense value that is inherent in delivering a second-to-none claims service, very few companies have actually achieved this.  Why is this?

    < Failing Claims Initiatives:  Many claims initiatives fail to even start due to organizational issues, silo mentality and ownership of data.  In other words, turf wars break out.  Also claims initiatives have tended to get superseded by the priority for new business, mergers and acquisitions and operational cost cutting. Finally analysis paralysis can derail an initiative and a great deal of money can be spent on claims reviews which provide little or no impetus for implementing new claims initiatives.

    < Failing Technology: This has proved to be the weak link so many times yet technology has a critical role to play in delivering the Claims Brand Promise.  Problems with software packages, bespoke solutions and poor integration with legacy systems lead to exceeding budgets and schedules which results in a lack of confidence within the organization and a failure of sponsorship at the highest levels.

    < Failing Management:  Any kind of major initiative involves changes in technology, processes, people and organizations. As such initiatives can become large and very complex and the teams that are asked to deliver these initiatives are lacking in some skills, the tools to deliver the job and the techniques required to deliver the project.

    < Lack of Intelligence: Analysis of the claims problem, its customers, the supply chain and its delivery capability always seem to be the last thing that is done when implementing a new claims initiative, if it’s done at all.  Why are we implementing this kind of process?  Which customers do we want to offer an above average claims service to? What are the costs of delivering our Claims Brand promise?  These are some of the questions which fail to be raised before initiating an expensive claims project yet are the first questions to be asked if a project fails.  And not many companies have the answers.

The challenges facing claims are indeed immense but can be overcome.  The claims event is the “moment of truth” for both customer and insurer and there needs to be a combination of good decision making capability which impacts the bottom line and a highly personal service at a time of stress.

The challenges consist of:

    < A diversity of tasks and procedures that have to be handled by many functions both internally and externally.  Claims is, by its very nature, a very fragmented approach involving customers, internal staff, supply chain and third parties.  It is hard to take single ownership of the whole claims experience.

    < A very complex environment to effect change which is burdened with old legacy systems, infrastructure and external organizations.

    < High Financial Risk as claims directly affects the bottom line and a company’s operating ratio.  Yet companies find it so difficult to identify and measure which areas of the claims process is contributing towards a negative bottom line. There is also the concern that unexpected external factors such as catastrophe, economic downturns, inflation and changes in the profile of the book of business may cause an unexpected change in company performance.

    < A list of failed small claims initiatives which have been implemented locally and without co-ordination and which have not realised the business benefits.  Because of the scale and complexity of many claims initiatives, small and less visible initiatives have been implemented which ultimately have had no effect upon delivering a marked and sustainable improvement in the claims handling process.

    < The lack of clear and measurable objectives which contribute to an overall claims strategy aligned with the overall business strategy and Brand promise. Change Programs of this nature and importance require clear and cohesive objectives and plans to ensure success and the required high level business sponsorship to ensure completion to the end.

    < The cyclical nature of underwriting determines the level of interest and importance of any claims initiative.  When prices are soft, the Board looks to claims for cost reduction.  When prices harden, the focus is on increasing new business and claims is forgotten.

    < Claims has historically focused on the financial reporting and transactional side of this function and have provided only limited support for activities within the claims process and intelligence gathering.

Please contact us to discuss your requirements.

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