p&C industry Cost Summary
(billions of dollars)
Loss Adjustment Expense
Total Cost Base (Loss + Loss Adjustment Expense +
Operational Expense) = $337.7 billion
net Written premiums = $325.4 billion, net Earned
premiums = $316.6 billion
Loss Ratio = 77.9 percent, Loss Adjustment Expense
Ratio = 12. 1 percent
Source: Highline p/C aggregate quarterly data and Deloitte analysis
Claims Handling a Major influence
on producer Decisions
products and Coverage
Risk or Loss Control
0% 10% 20% 30% 40% 50% 60% 70% 80%
Source: Deloitte/national underwriter 2009 producer Satisfaction Survey
questionable losses spanning service channels. Claims financial leakage is commonplace.
The policyholder, however, doesn’t care about these challenges. Insurance customers are increasingly sophisticated
technologically, aware of new products, and better prepared
to make cost and service comparisons. When the moment of
truth arrives in claims, it’s vital to satisfy the customer (while
still minimizing handling costs and cycle time, controlling expenses, and maintaining a lean claims organization). According
to a recent Deloitte/National Underwriter producer satisfaction
survey, customers and producers see claims handling and claims
service as one of the top items influencing their decision to stay
with or move to a particular carrier (see Figure 2).
To gain a competitive advantage in a soft market, P/C insurers should create a top-down commitment to operational
excellence. We have worked with many U.S. and international
insurance claims departments in organizations that range from
smaller regional or monoline companies to large global insurers.
The most effective ones display the following three characteristics (see Figure 3):
■ ■ A strong track record of effectively executing the claims
business process and operational initiatives. These companies are focused on advancing their capabilities and actively
utilize performance management and governance to reduce
variation and to identify new opportunities.
■ ■ The ability to harness technology to drive claims process consistency and enhance customer experience. Automation is
leveraged across the organization, improving claims handling
costs and enabling the collection and maintenance of data.
■ ■ The use of data to identify ways to improve process and operations, to drive decisions and actions, and to understand
true performance relative to the company’s objectives.
To help move their claims departments toward this level of
effectiveness, insurers need to build an infrastructure that both
enables the business process and leverages data to provide information on what is driving losses and expenses. Developing
an overarching approach for how and when to invest in new
technological capabilities can lead to:
■ ■ More stable and predictable loss costs;
■ ■ More efficient and predictable operating expenses;
■ ■ Improved loss and expense costs;
■ ■ Higher overall claims service ratings;
■ ■ Higher policyholder retention;
■ ■ Improved employee productivity;
■ ■ More reserve stability;
■ ■ Improved regulatory compliance.
developing a Technology Strategy
The number of P/C insurers replacing core systems (in, for
instance, policy administration, claims, and billing) is on the
rise. And while budgets continue to be weighted to policy administration systems, we are seeing expanding investment in
claims administration and business intelligence and warehousing (see Figure 4).
This growth affects the entire claims value chain, including
core claims, technical claims handling, and support processes.
Technological developments with the greatest potential to enhance claims processes include:
■ ■ Improved core claims-management systems—
replacing costly and cumbersome legacy systems with more
■ ■ Advanced data analytics and performance management—
upgrading the capability to determine and track key
performance indicators and other metrics in dashboards.
Such enhancements can be linked to improve historical