Everyone agrees on the primary claims management issues. What are they doing about them?

Ask any P&C executive what the most pressing issues are for their organization, and you’re likely to get the same answer. In a recent survey of over one hundred P&C executives by The Nolan Company, over 90% of respondents agreed the primary management objectives of the claims operation, in today’s environment, are to reduce loss costs and loss adjustment expenses. The survey results also highlight objectives that fall into a secondary category. These include improving claim reserve management and overall claims customer service.

Reducing loss costs in today’s claims environment is tricky, considering factors such as steadily rising medical expenses and higher vehicle repair costs. However, loss adjustment expenses can be approached more directly by increasing the number of fast-tracked claims, optimizing recovery activities and improving litigation management.

Improved claim reserve management practices can also be addressed directly. Implementing up-to-date reserve management practices to mitigate core problems such as redundancy and deficiency will have a positive balance sheet impact.

Somewhat surprisingly, the survey revealed that improving customer claim service was considered a second-tier objective by most respondents. Most carriers clearly understand the impact of quality claim service on retaining customers – the competitive market tells that story. So valuing claims customer service as a lower priority is perplexing, and is a risky decision in terms of reputational risk and in-force deterioration.

How are claims executives addressing these objectives? Here are the survey respondents' top five initiatives:

New Claims Technology

Of the respondents, 28% said the implementation of new claims systems is a focus for them. They are moving from outdated systems to modern systems which can manage today’s complicated claims, legal and regulatory environment.

Outdated claims systems persist for reasons ranging from risk avoidance to perceived cost of new systems. Meanwhile those outdated systems adversely impact productivity, quality and overall results. None of the age-old reasons for maintaining the status quo are good enough. There are too many benefits to ignore, encompassing financial, service, capacity and process improvements. Updated technology, including a customer-focused mobile technology solution, will improve loss and LAE costs. It can be a painful step to take, but it must be done.

Other Technology Tools

Litigation management and claim analytics top the list of other technology tools, with 52% of those surveyed indicating they have programs addressing each underway. Litigation expenses continue to escalate due to increased legal costs.

The high demand for analytics tools was not a surprise given the tremendous opportunities predictive modeling brings to subrogation, recovery, litigation management and fraud. Many large and mid-tier carriers have applied analytics to improve claims decision making, adjuster performance, settlement outcomes and operational efficiency. Another benefit is early detection of adverse claims development with a forward-looking view of frequency, severity, claims duration and LAE.

Recognizing the large opportunity – and significant risk – represented by fraud, 40% of respondents indicated they were engaged in initiatives focused on SIU effectiveness and results. This corresponds to the monetary impact of fraud on the industry’s results.

Mobile technology platforms are becoming an important area of service differentiation as reported by 27% of respondents. The emergence of mobile claims technology creates an opportunity for differentiation between carriers at the critical touch point of a claim, as well as in the areas of preparedness education and overall goodwill.

Centralization

About 32% of the survey respondents listed the centralization of claims operations as a planned initiative. This is an interesting result as, in the past, centralizing claims functions was viewed as a cost reduction measure achieved by consolidating branch offices and shifting field adjusting to desk adjusting – adversely affecting customer service. These survey results indicate a shift in perception and the belief that centralization can now lead to improved customer service.

Today, advances in technology are mitigating the negative aspects of remote adjusting. These advances include the addition of mobile FNOL apps, portal access to claims information, personalized single points of contact throughout life of the claim and video communications. Given the advantages of economies of scale and lower overhead, centralizing in a manner that addresses customer expectations represents an opportunity to reduce operational expense while improving consistency, quality and transaction speed.

These are some of the claims-related highlights from the Nolan survey. To view other functional areas covered by the Nolan P&C Executive Survey summary report visit www.renolan.com/pcsurvey.