Chief claim officers (CCOs) with leading property & casualty insurers concur that their companies are benefiting from metrics currently in place tied to best practice fundamentals for claim management. They also acknowledge that the systems and metrics could be further developed and better integrated into claim operations.
According to the new Property & Casualty Claim Officer Survey conducted by Towers Watson (NYSE, NASDAQ: TW), CCOs also report that while companies’ investments in technology are paying off, additional investments would provide even greater returns. The survey examines how insurers are modernizing claim best practice fundamentals and rebuilding performance metrics, and how improved technology and operational adjustments are helping carriers benefit from these changes.
“A more integrated approach to claim management can help insurers simultaneously improve customer service and financial results, increasing both policyholder and investor satisfaction,” said Brian Stoll, director, Property & Casualty practice, Towers Watson. “Technology investments in this area help insurers better identify and respond to trends culled from data-driven analytics, and make it easier to implement predictive models and best practice enhancements that carriers are developing to improve claim performance.”
Carriers clearly view best practices as living documents and indicate they should be updated frequently, according to survey participants. Fifty-six percent of the respondents have made major modifications to their claim best practices within the past year. Large insurers are most likely to rethink their best practices (67%), and small companies least likely, although nearly half (48%) implemented best practice claim management changes in the last year.
The key benefits of best practice execution varied, with smaller carriers citing operational improvements as most important, while larger companies cited bottom-line performance results. Small carriers said improved efficiency and cycle time (e.g., inventory management) is the top benefit, and improved customer service is the second. Midsize carriers listed the same top two benefits and also named more effective use of specialized/expert personnel. Large carriers were far more focused on financial results: Nearly two-thirds cited improved claim payout discipline (loss costs) as the number one benefit received from claim best practices.
“In a competitive market, smaller and midsize insurers likely place more emphasis on customer service because it is a significant way to differentiate themselves, particularly in personal lines,” said Stoll. “Larger carriers’ interest in bottom-line performance is probably due to the fact that they already have better operational metrics and place more emphasis on aligning benefits with the cost of initiatives.”
Nearly two-thirds of CCOs indicate that claim-handling workflow processes are most positively influenced by recent system technology improvements. They also say technology affects virtually every aspect of claim operations, and further investments are planned. “This appetite for technology may be fueled by the way recent investments have improved efficiency and cycle time, as well as customer service,” added Stoll.
The most likely proprietary investments for insurers will be in technology tools that promote operational effectiveness, such as workflow and process improvements (49%), and measuring internal performance (45%). Vendor applications are more likely for recovery identification (35%), litigation management (34%) or predictive analytics (32%).
Predictive models and other data-driven analytics are helping insurers measure performance and improve operational and bottom-line results. Sixty-three percent of respondents are at least starting to explore the use of predictive analytics in their claim operations (75% of large carriers, and 58% of small and midsize carriers). CCOs indicate that predictive analytics contribute to better fraud recognition and response, improved payout discipline and operational improvements.
“Predictive modeling applications are growing in claims, with fraud the initial focus, followed by triage. Carriers making the investments are increasingly recognizing benefits,” said Stoll.
Respondents are leveraging a wide variety of key performance indicators to track claim performance across loss cost discipline, expense management and operational efficiency, and customer service. CCOs also report that medical bill review, cycle-time analysis and litigation rate are the top indicators used in tracking claim performance for injury claims, and over a quarter say that new injury operational metrics have been introduced.
New operational metrics for property/auto physical damage have also been introduced by 20% of respondents and include benchmarking/oversight (42%), inventory management (29%) and triage/assessment mix management (29%). The long list of leading indicators for property/auto physical damage claims starts with cycle-time analysis (86%) and recoveries (71%).
About the Survey
This is the seventh installment of Towers Watson’s Property & Casualty Claim Officer Survey. Forty-one CCOs participated in the survey, which ran from June 5 through July 9, 2012. Respondents represent a cross section of small, midsize and large carriers, although there are slightly more small carriers by premium volume.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.