Patrick Vice, Director of Marketing
Claims technology is moving from the back burner to the
front as insurers realize the value that appropriate investment can drive. And technology
suppliers are responding with innovative solutions to meet the new demands of claims professionals.
To put things into perspective, claims and claims expenses
take up 75% of the total expenses of p&c insurers. By themselves, loss adjustment
expenses (LAE) represent 11% of total insurer spending, and this is only from the
insurance companies perspective. If we assume that a portion of the commissions paid to
brokers compensates them for their role in the claims process, LAE approaches or exceeds
total distribution costs.
From a technology spending perspective, a recent report
from Forrester suggests that only 1% of insurers expenses are spent on claims technology.
This compares with an industry bench mark of 3%-5% spent on information technology as a
whole. This all points to a disconnect between the cost of claims and claims expenses
relative to investments in technology to reduce the costs.
The situation appears to be changing, however. To get a picture of the change,
a number of people are viewing the claims technology from an evolutionary perspective.
Since the introduction of technology, tools have been in
place to support back office processing of claims. These have been internal, primarily
accounting focused. They have enabled insurers to record claims as they are opened, track
payments, and provide management and regulatory reporting.
The first step in the technology evolution was the
introduction of Customer Relationship Management (CRM) tools. While these were initially
directed at acquisition and customer service, many insurers found uses for them in the
claims arena. One major CRM supplier notes that claims is now the second largest area of
its insurance practice.
CRM allows claims to be viewed from a variety of
perspectives, including adjustors, brokers, CSRs, and underwriters. As well, CRM
facilitates more flexible and directed management reporting.
The use of CRM and web technologies has also allowed
extension of information access and transaction processing capabilities to those outside
of the insurer. A number of insurers are allowing third party suppliers, independent
brokers and customers to now report and update claims and monitor the progress of the
claims as it progresses towards closing. Self service vehicles, supported by secure web
based technology, holds promise to reduce friction costs associated with multiple hand
offs, and to improve the accuracy of claims information available to make adjusting decisions.
This all is the precursor to a new set of tools, referred
to as ‘Hub Technology’. Several suppliers are introducing these as private
offerings. In addition, ACORD and RIMS are working on a joint venture to introduce
standards for internet claims data exchange. Several pilots are now being organized to
test these standards.
As the evolution continues, suppliers such as UniExchange
are offering methods to reduce paper based transactions, such as FAX. Our BlueRocket
product converts incoming FAXES to email, allowing adjustors to receive FAXES of first
reports regardless of their proximity to FAX machines and allows all of the participants
in the claims process to handle digital documents for filing and archiving in a paperless environment.