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Carriers Not Limited to Entire Claims Admin Systems

Robert Regis Hyle | February 16, 2015

Claims departments don’t always feel the love when their company begins the process of core systems replacement. Claims leaders often believe they come in second behind underwriting, at best, and often are forced to wait months or even years before their legacy systems issues are embraced.

But that doesn’t mean claims leaders have to bide their time because there are smaller technology tools that can keep them competitive and address the issue most carriers list as a competitive differentiator: the customer service aspect of claims.

“The reality is claims organizations can do a great deal with technology outside the core systems,” says Karlyn Carnahan, research director for Celent. “A number of carriers have replaced, are in the process of replacement or are still planning core systems replacement, but there are other ways they can use technology to improve the claims process.”

Carnahan cited examples where insurance carriers use technology to assist in the assignment of claims to adjusters, which includes assigning experienced adjusters to more difficult risks. Another example that is outside the claims admin system, allows the carrier to send assignments directly to repair vendors.

“Insurers are delivering capabilities for claims departments besides core replacements,” she says. “There are a lot of solutions that take on specific aspects of a claim. You can find vendors working on reserving, forecasting, payment processing, subrogation management, litigation bill review, and matching bills with diagnosis and treatment plans. The claims department has specific systems. Underwriters, for the most part, do their work in the policy system. Claims is unique because there are so many components that can be assembled to help them do their jobs more efficiently.”

Karen Furtado, a partner with the consulting group SMA, maintains the conversation around claims management was always about being efficient to handle severity, and how to go about the job, but she also believes the focus has changed. She maintains new technology will transform the focus and shift more to prevention and the connected experience. New technology will evaluates assets within a property, which is more about pricing of the repairs.

“We’re talking about asset management and how it works in conjunction with underwriting,” says Furtado. “Some solutions make it easy to get an asset inventory. There are connected devices and when you get to the claims process you have a great inventory of the assets that could have been involved with any particular loss. Homeowners is where I'm seeing the most innovation right now. We hear so much about the connected experience; these things make a difference in the way a claim is handled.”

Working with IT

If there is one particular area that is leap-frogging other business functions because of the power of technology it is claims, explains Furtado. Still, she sees a split in how technology is selected and deployed.

Some claims organizations run with the banner of innovation and technology is going to assist in the way they do business, according to Furtado. These insurers are left to their own devices to experiment with technology and data sources. Once they find the solution they think will hold water, they bring it to IT.

“IT doesn't always have the bandwidth to do the experimentation or testing to determine which project will have the best return on investment,” says Furtado. “IT is respected when the business side brings the solution to them, but they aren't necessarily involved in the experimentation.”

Republic Group is replacing its claims administration system with the goal of diminishing the time demands of maintaining and working with legacy systems, explains Timothy R. Wiedmeyer, vice president and chief claims officer, for Republic Group. When he began his career in claims, none of the adjusters had personal computers; instead they used dumb terminals. As new technology was added, Wiedmeyer believes the art of adjusting was lost and an adjuster’s ability to use the system became more of a priority.

“As a result, just using the system became more time consuming and people's communication skills and analytical abilities diminished,” he says. “With the new project, the time and mental demands are going to decrease dramatically so we can spend more time on the issues that influence outcomes. The ability to evaluate a claim and communication skills with customers and the people we deal with on claims will allow us to work on the art of adjusting.”

With improved time and capacity, Wiedmeyer seeks to strengthen the customer experience. Claims will never be fun for consumers, but he believes Republic Group can make the process easier.

“Regional carriers with independent agents need to excel on service,” he says. “The more time we can spend on customer service, the better the results. That is one way we want to differentiate ourselves through the claims process.”

Republic Group is one of the exceptions to the rule that claims systems are second in line. The carrier purchased Guidewire’s InsuranceSuite, which eventually will fill the insurer’s policy, claims, billing, and data warehouse needs. Because claims trailed Republic Group’s other business units in terms of sophisticated technology, the ClaimCenter system will be installed first, according to Wiedmeyer. 

“Claims was so much further behind so it is almost in crisis mode because of the deferred maintenance,” says Wiedmeyer. “The claims department is building a better value proposition when we talk about the expenses we save. Plus, we can add top-line growth with improved retention. I like to believe better claims handling brings new customers in the door.”

The implementation was scheduled to begin in January with a rollout in the middle of 2016. Because of the length of the project Wiedmeyer realizes a lot of his department’s capacity will be eaten up by subject-matter experts as they work on the new claims system.

“It will take up a lot of organizational capacity for change. We'll be able to keep moving, but maybe not as fast,” says Wiedmeyer. “Short term, that’s a small price to pay for the benefits we are going to receive.”

GIS Technology

GIS information is one area that claims can adopt quickly to integrate even with legacy systems, according to Furtado. She explains it is more of a workflow or internal process. Insurers use GIS to deploy adjusters to the closest loss to their location and make real-time adjustments in adjuster's schedules based on the length of time they spend at any particular risk.

A second aspect of GIS involves catastrophic incidents, such as tornados, hurricanes, or earthquakes, adds Furtado. When there is a question about where to distinguish the property lines, GIS gives precise information about exactly where the risk is. 

During a tornado event last year, Furtado reports an adjuster was working the scene of a loss. The carrier had all of its risks mapped out with GIS information and the adjuster happened to stop at other homes in the neighborhood that had not reported losses but were part of the risk portfolio.

“They were able to see if there was minor loss at that location,” she says. “The homeowner couldn't believe the adjuster stopped.”

Most carriers are concerned about all their customers, reports Furtado. In this case there was minimal damage and the insured was happy.

Another insurer had risk locations GIS-coded prior to a wildfire. Between aerial imaging, GIS info, and the information coming in about the wildfire, the insurer was able to pinpoint their risks and tell the fire department if a risk had been consumed by the fire or not.

“It’s not just GIS, but when you use technology together you can make a powerful statement and you'll have an insured for life if you can provide this level of information,” says Furtado.

Most of Grange Insurance’s mobile solutions involve laptops, Wi-Fi, and air cards. There are mobile apps that allow Grange to map out their policyholders in the affected area. The company then uses GPS-enabled dispatching. The adjusters carry smartphones with GPS functionality and cameras. One of Grange’s adjusting apps serves as a pitch gauge, which eliminates one more piece of equipment the adjusters previously had to carry around.

Ken Kozek, vice president, claims, for Grange, has two associates constantly evaluating current technology and areas that would improve the carrier’s operation.

“They are always conscious that the items add value, will make our associates more efficient, and allow us to service our policyholders more quickly,” he says. “It also makes it easier for the claims associates to do their jobs. The last thing I want is for technology to get in the way. As long as we look at it through that lens, we are doing our policyholders a service.”

Commodity or Differentiator

Carriers sometime worry that technology leads to commoditization of certain tasks, such as claims, even when the carrier believes claims is a differentiator with their customers. Technology has changed billing and underwriting greatly, allowing insurers to eliminate tasks and lower personnel costs. Claims is different, though, according to Carnahan.

“Every claim has to be touched. There are very few where you can find straight-through processing,” she says. “Technology usually benefits companies in three ways: They can make faster decisions; they get better data to make a better decision; and it can automate routing tasks. If you can automate basic correspondence and analysis, you can shrink routine tasks and adjusters can provide the customer better service and work the claim. There is value to a carrier with regards to streamlining the processes, but you can't take people out of the claim. You need to expand the capacity and customer aspects of the adjuster.”

Technology enablement that mimics high touch includes proactive outreach such as weather alerts. The consumer receives the alert, whether it's from their insurer or a call from their agent. It's doesn't have to be all technology or even delivered via a technology experience. It could be an outbound phone call to notify the insured of a weather event.

“Claims is the least transparent of all of the insurance areas,” says Furtado. “If you are an insurer you can download your dec page off the website and pay a bill. You might not be able to do everything else on a website, but you can pay a bill. Trying to get a status of a claim is still a challenge. That's the big nut that needs to be cracked. Service is a differentiator. Insurers say they are high touch, but some are concerned about technology getting in the way. They have to use technology to enable them to be high touch. I find many carriers still grapple with what that looks like. “

From a claims standpoint, the main issue for Grange is to reach their policyholders as quickly as possible, get them back to pre-loss condition, and provide them with the ultimate claims experience.

“That's where technology allows us to do that,” says Kozek. “Our independent agents consistently tell us claims is our differentiator and they sell our claims experience. In a CAT event especially, we mobilize quickly and get in and out before many other carriers even get in.”

Kozek believes claims departments need to be plugged in to whatever information is available. When storms are on the horizon, the Weather Channel is always nearby and not just for those in the home office, but with the property reps who are monitoring weather events days in advance.

“When a major event occurs, typically we already have people there,” says Kozek. “If it turns out to be a catastrophe, we are there; if it doesn't pan out, which often happens, no harm is done.”

Grange has what Kozek calls an expandable CAT unit. The insurer cross-trained many of its auto material damage representatives to learn the property side and some within the SIU unit are used to write estimates for hale and wind events.

“I won't say we don't use some independent adjusters, but in a CAT event we don't,” he says. “In a CAT event, our policyholders and agents have come to expect a Grange associate will be on site. In a majority of cases that's a one and done. They leave the site and the policyholders have a check in hand.”

Kozek believes Grange associates do a better job in claims adjusting because they know the Grange philosophy, the carrier’s processes, and they don't have the issue many carriers deal with in competing for independent adjusters.

“There are some very good independent adjuster firms out there, but I have a confidence level in our Grange associates that they are going to provide a positive experience for our customers,” he says.

The IT Connection

The claims department at Grange works closely with IT. There's an IT associate on Kozek’s leadership team.

“They have a seat at the table from the beginning which provides them an opportunity to weigh-in from the outset on new technologies,” he says. “From an efficiency standpoint, we work with our operational excellence group to eliminate inefficiencies and perform value-stream mapping in all our claims areas to streamline processes. Usually the result of that is we identify some low-hanging-fruit to make us more efficient. That allows us to provide our customers with the ultimate claims experience. As we embark on a transformation of our claims system, the partnership with IT and operational excellence becomes even more critical.”

Many carriers do have challenges with integration, which often means adjusters leap from application to application. Today’s systems are generally designed with open or service-oriented architecture, which makes it easier to pull in the data. With predictive analytics, insurers come up with great models, but struggle to find a way to actualize the data.

“Systems operationalize the services being provided by these snap-on vendors,” says Carnahan. “Integration sometimes takes the form of pulling in a data element and acting on it; sometimes it's more complicated if you are adding robust functionality, for example, around subrogation management. The IT organizations have to look at that.”

The relationship between claims and IT at Republic Group is steadily improving, according to Wiedmeyer.

“Communication isn't really an issue as far as understanding each other,” he says. “We both need to get better at explaining our needs from the process. The challenge is whether the right questions are getting asked. When we do that we can get good answers.”

Wiedmeyer has a fulltime liaison that works between IT and the claims operation. It's a position Wiedmeyer once held himself and he views it as incredibly valuable to find someone who can speak the language of both IT and business.

“That helps bridge the gap and bring us closer together,” he says. “Because of the experience they gain in this position, after three or four years they become very attractive to the IT operation and to outside firms. It's a great position for someone to start their career. I had four people move through it when I was with West Bend Mutual and they are all in the consulting business now; typically in project management. It is almost a revolving door by nature.”

The Future

“From my perspective, people come first,” says Kozek. “Our independent agents, our customers, and our associates are at the heart of everything we do. If you think of technology as an enabler and a support role, it eliminates commoditization. All things being equal, they choose Grange because of the service we provide.”

The future of claims handling is not cut and dried. Wearable technology and drones are two technology tools that are on the horizon for carriers. The FAA has allowed a couple of carriers to experiment with drones, explains Kozek, and Grange had a vendor demonstrate the benefits, especially in a Cat situation.  

“Those could revolutionize the industry,” he says. “There are issues that need to be worked out, but I could definitely see drone technology allow us to assess a CAT situation quickly especially in an area where authorities might not allow anyone to get close to the damage. Ten years ago none of us could have thought about drones, wearable technology or some other technologies.”



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