Future Companies operating with outdated claims-management systems risk losing customer satisfaction and, ultimately, carrier profitability. As the claims department typically controls the largest expenditures for a P/C insurance company, investing in operational improvements in claims man- agement can be one of the most effective strategies to drive profitable growth. Up to 80 percent of each earned premium dollar typically is “claimed by claims” as payout and related expenses. As a result, there is a significant opportunity to improve bottom-line results by focusing on improving claims management effec- tiveness. Insurers that can reduce their claims costs by just one percentage point very likely will achieve substantial savings (see Figure 1). Claims departments, although unique across car- riers, face the same set of business objectives and challenges. Regardless of size, jurisdiction, or lines of business, claims departments must manage losses and control overall claims adjustment costs while satisfying customer needs, delivering on the com- pany’s promises, and maintaining a consistent level of discipline to reassure management about the com- pany’s long-term outlook.
events in recent years have not been kind to property and casualty (P/C) insurers. On top of dwindling pricing power and erratic investment yields, there has been heightened catastrophe activity. While the industry saw
positive premium growth in 2010 for the first time since 2006, underwriting
losses increased and the rate of return declined and continues to be subpar and
inadequate. Overcapacity for traditional products and services, coupled with
weak demand, are expected to continue to push down rates.
These objectives are challenging by themselves,
but complicating matters is a volatile environment
that puts pressures on the company and changes the
way management needs to react. The ebb and flow of
the insurance market cycle, for example, both heightens cost containment initiatives and makes customer
satisfaction more critical. In addition, the shrinking
talent base for claims adjusters requires claims departments to be creative not only in the recruitment
and retention of employees but also in their deployment within the organization.
Keep the customer Satisfied
Supporting claims management often involves multiple processes and platforms. Complex, duplicative
functions are performed, typically with multiple
handoffs and outdated technology. Organizational
misalignment is not uncommon along key elements
of the chain, causing inefficiencies and erratic service. Often, too much time is spent on claims-related
tasks. There is vulnerability to fraud, and there are