Industry analysts and reporters have placed considerable emphasis on increased policy admin project activity over the past several months, but claims system modernization has been an even more active area, emphasized David Connolly, a partner with Ernst & Young in a conversation yesterday at the ACORD LOMA Insurance Systems Forum in Las Vegas.With claims leakage trending at about 13 to 15 percent, the business case for claims transformation almost makes itself, Connolly says, and it is certainly easier to make than that for policy administration or billing transformation initiatives. Connolly asserts that Ernst & Young can help companies make improvements of 5 to 8 percent in their leakage numbers, noting that, "even a 5 percent reduction in leakage is enough to justify the replacement costs for software and services."

The state of technology today also helps to make the case for claims transformation, Connolly adds. Among the advantages of available technology are that they are relatively inexpensive to implement considering the high cost of maintaining existing systems. Also, insurance carriers face continuing attrition in their IT organizations with regard to people trained in now obsolescent technologies, and replacing people with the necessary qualifications is getting harder. The claims packages on the market today also bring new efficiencies, Connolly notes.

Increasingly, claims transformation projects are seen to be less risky than before, Connolly reports. "The confidence level of carriers considering such projects continues to rise," he says."Even a 5 percent reduction in leakage is enough to justify the replacement costs for software and services," comments David Connolly, Ernst & Young.