Claims Focus Shifts from Financial to Service Concerns: Conning

Claims technology upgrades since the mid-1990s have focused on building capabilities that improve the customer experience and improve policyholder retention, according to Hartford-based insurance consultancy Conning Research's latest study, Personal Lines Claims — Building to the Next Wave of Investment.

The company looked at claims organizations' strategies beginning in about 1995, to establish a baseline that predated the massive ramp-up in adoption of internet- and mobile-based technologies.

"Beginning in the mid-1990s, there have been tremendous opportunities for investment in claims," Conning analyst Alan Dobbins tells Insurance & Technology. "There were a lot of technologies developing at the time: Mobile and connectivity obviously, but also advances in managing data. Business rules became a big deal. We wanted to know how far companies took that."

Claims upgrades had traditionally focused on two areas: improving claims-handling efficiency to reduce loss adjustment expense, or improving claims-handling effectiveness to reduce indemnity costs, Conning asserts. Now, however, a third priority has emerged: improving customer service capabilities.

"Our view is that is the area to focus on," Dobbins says. "Beginning with that time period we talked about, there's been a back and forth between the effectiveness and efficiency issues, with less focus on the customer experience. The focus now is going to be much more on the customer service standpoint and building a model that's competitive with what people are building in other industries."

Customers now expect an experience when they deal with their insurance company that matches the immediacy of modern retail and e-commerce companies, Dobbins says. P&C insurers must keep up with their peers who can provide such an experience or risk being left behind.

"It's a very competitive business," Dobbins notes. "Customers want to know, 'Where's my car in the repair process?' There is a lot that insurance is up against now in terms of competing with customer experience in other industries."

Table stakes for today's claims organizations are top-of-the-line data warehousing and analytics capabilities, which provide the business insight required to streamline the claims process and create the best customer experience. During the time period studied by Conning, these principles bled over from other functions.

"There was a lot of focus in other areas, such as underwriting and marketing, on getting deeper analytics and insight into the business that is now going into the claims process," Dobbins says. "Insurers want to bring in the same sort of insight that's come into the underwriting function. There's a lot of ability to say, 'If we see X, that means Y,' getting another layer down in their understanding of what's going on in the claim."

However, legacy systems continue to be an impediment some companies face in implementing these functions, Conning finds.

"A lot of companies are building through acquisition, which brings different systems together. Also, a lot of the work that had gone on in earlier systems implementations makes it different to get data from one spot to the next," Dobbins says. "So, a lot of insurers are still depending on multiple systems, and that's a big source of investment for them. If they see access to data as the key element to what's going on in claims, you have to access that old data in a timely fashion."

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio