Modern claims technology capabilities are being put to the test in response to Hurricane Sandy, but many insurers are likely to feel the effect of a deficit in their ability to respond to the event because they are yet to modernize their claims technology environment, an Accenture (New York) survey suggests. Claims executive respondents say they lack capabilities sufficiently flexible for today's needs, they have inadequate data analysis capabilities and struggle with future proofing their technology.
Among the findings of the survey of 50 U.S. P&C companies were that 54% say their core systems are more than five years old; 78% say they are on a path to upgrade their systems; 66% say their claims systems are not optimized to collect and analyze data; and 78% regard their capabilities inadequate to manage new forms and levels of risk, such as those presented by cybercrime, terrorism and increasingly frequent and severe natural catastrophes. The survey also found that U.S. insurers will spend an average of $17.5 million of new investment in claims systems over the next three years, with total expenditures reaching more than $2 billion.
On the headline question of whether their companies lack the flexibility and modernity needed to address consumers' evolving needs, 85% of respondents answered in the affirmative. That such a large majority admit these limitations says something about how insurers can handle challenges such as Hurricane Sandy, says Michael Costonis, managing director in Accenture's P&C insurance services.
"If you need to provide a prompt response to thousands of claimants but can't adequately anticipate that business event from a claims capabilities standpoint, then you've lost before you've even started," comments Costonis.
The survey results run counter to expectations of where American insurers stand with respect to claims modernization, in part owing to their difficulty in accepting upgrades to newer technology that they might have implemented, Costonis suggests.
"There is a distance between the hype and reality of upgrades of systems," he elaborates. "The majority of respondents said that they were aspirationally on the upgrade path but hadn't actually taken upgrades within two or three years."
Similarly, industry buzz would suggest significant advances in claims-related analytics relating to sources such as social media, telematics and geo-location technology, but over 75% of respondents say they still use offline data stored in Excel spreadsheets or Access databases.
Flexibility has been the byword of core systems modernization, but claims systems remain inflexible, requiring the intervention of IT, Costonis says.
Insurers should not lose faith in the promise of modern claims capabilities, which Costonis identifies as the following:
1. A flexible system to meet a carrier's current needs;
2. A suitable environment for data analytics, and
3. Future proofing through the ability to take regular technical upgrades.
Costonis suggests that carriers haven't made prudent decisions in some of their technology choices, including in the tendency to separate core systems from analytical capabilities. "Predictive models are only as good as the data that feeds them, so carriers should require a system that is able to let core capabilities and data analysis work hand-in-hand," he says.
Even since the fairly recent emergence of configurable systems, the bar has been raised with regard to what claims technology should deliver, Costonis says: "Systems need to provide more than just end-to-end functionality over the claim lifecycle; they need to be configurable and upgradeable, and they need to be able to support the data environment."
In that respect, the survey yielded a very encouraging finding in that nearly half (48%) of respondents have already started to migrate their claims systems to the cloud or on a Software as a Service (SaaS) model, or are planning to do so in the next two years, or are currently discussing this option. That trend is likely to continue, suggests Costonis.
"As insurance companies growing more comfortable with cloud, with things like Salesforce.com, they’re extending that to vertical [concerns] — why not look at it for claims?" Costonis notes. "I think it’s a natural evolution as these solutions spend time in the marketplace and deployment models are further proven in production, adoption rate will increase."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio