Predictive Modeling Slow to Make Inroads; Core Claim Operations Investing First in Foundational Data and Management Information; Company Priorities May Dictate Technology Usage Increase
STAMFORD, CT, July 28, 2009 – The vast majority of claim officers (92%) for U.S. property & casualty insurers said they plan on making investments in technology over the next two years, and indicated the primary driver of these capital expenditures is ensuring their customers’ satisfaction, according to a survey conducted by global professional services firm Towers Perrin.
Findings from Towers Perrin’s third Property & Casualty Claim Officer Survey, “Claim Technology and Applications,” note that 74% of claim officers reported their main objective for making technology-related investments over the next 24 months will be to improve the customer experience, while 69% pointed to improving cycle times. Sixty-six percent said the capital influx will be primarily aimed at bettering management information system and reporting capabilities.
“Carriers have specific objectives for making technology investments over the next two years which, in turn, support broader low cost and expense reduction goals,” said Kathleen Cullen, Towers Perrin senior consultant and co-author of the survey report. “Based on the findings, it’s clear that carriers are making investments aimed at improving or replacing front-end and back-end claim systems – ultimately leading to improved bottom-line performance.”
The survey, concluded in May, covered P&C claim officers’ perspectives on how technology is being used to support core claim-handling operations and where investments are paying off.
Turning to predictive modeling – the technology-driven use of advanced statistical techniques to simultaneously evaluate many potential explanatory risk factors to achieve maximum amounts of knowledge from available data resources – this tool has not yet made significant inroads in the claims arena. Claims lag other areas such as pricing and underwriting, where predictive modeling is seen as critical. Only 14% of respondents reported reaping high returns related to use of predictive modeling in their core claim operations.
Brian Stoll, Towers Perrin senior consultant and report co-author, said many companies’ current systems and data are not sufficiently developed to support predictive modeling. The difficulty in linking internal and external databases, and limitations on capital expenditures, has slowed the growth of claim predictive modeling. But, he added, that could quickly change.
“As company investments in claim technology and data/MIS yield positive returns, carriers will then be in a position to recognize comparable benefits of predictive modeling in their claim operations,” said Mr. Stoll. “It is an extremely powerful tool in making claims-related business decisions, and supplementing judgment and intuition with objective facts. Computers now capture enormous amounts of information that allow for the development of models supporting claim triage, process efficiency and effectiveness, fraud detection, and recovery management.”
Still, there are potential obstacles to companies advancing technology expenditures. Competing intra-organizational priorities – including coping with the current economic crisis – are seen as among the biggest hurdles to increasing claim departments’ use of technology, according to the survey, as the primary obstacle cited by claim officers was other initiatives taking priority (70%).
“We see that, in light of the current financial picture for many firms throughout the industry, companies are more apt to enhance their current systems, rather than make large investments in a totally new infrastructure,” said Ms. Cullen. “But we’re also seeing that many firms are being challenged by platform limitations, business processes – even cultural issues – as hindrances to increasing the use of technology in their claim operations.”
Among other findings from the survey:
- Respondents reported that technology’s top value-added benefit for call centers is data capture (65%) and, for core claim operations, imaging (60%).
- Thirty-nine percent of respondents said their current claim technology platform is a centralized mainframe, while 30% said their firm’s platform is a distributed client/server.
About the Survey
Thirty-seven claim officers participated in the Web-based survey, and included a broad mix of claim officers from small firms, midsize companies and large companies.
About Towers Perrin
Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia, New Zealand and the Middle East. More information about Towers Perrin is available at www.towersperrin.com.
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