Why do so many of the world’s most successful and advanced claims operations rely on FINEOS for automated claims processing? Because they know that – no matter what their business focus, their customers, or their location – FINEOS Claims will provide the flexibility they need to adapt their business to constantly changing needs. They are confident in its ability to meet their unique requirements, whether for successful segmentation, competent governance, enhanced customer service; whatever their challenges, now and in the future.

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The Future of Claims ManagementChosen by Insurers around the World

CLAIMS TECHNOLOGY FOCUS

32Taking centre stage

The past few years have seen a shift in the amount of investment being made in insurance company claims departments. Better data capture and analysis along with use of technology is transforming a cost centre into a profit centre. Helen Yates reports

30System ready

It has been a long time coming, but the London Market has finally embraced ECF. Systems selection can make all the difference when it comes to differentiating you from the competition. Richard West explains

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Recent figures released by the London Market Group show that the percentage of new insurance claims being managed using

the Electronic Claims File system has reached 83 per cent within the Lloyd’s Market, a rise of eight per cent on this time last year. In the companies market the figures stand at 71 per cent of all new claims, a rise of 13 per cent year on year.

In broad terms, each month around 40,000 claims transactions are being created and completed using the ECF system. Transactions are also speeding up, the data reveals. According to the market’s ECF user group, 2011 saw a 15 per cent improvement in end-to-end transaction processing time.

The success of ECF is seen as a cornerstone of London’s process reform work and it is clear the aim is to increase the momentum.

“ECF2 is very nearly there now,” says Robert Gregg, chair of the ECF user group and senior claims executive at the Lloyd’s Market Association. “All elements of the system have been rolled out and we are now obtaining feedback from the market’s users with a view to fine-tuning the system and introducing change requests to enhance usability, functionality and process. The ECF user group has prioritised 14 changes that have now moved to an analysis phase. One of our major examples of this is to ensure the recognition and conversion of embedded documents within emails utilising the document file viewer.

“With 83 per cent of all Lloyd’s new claims being processed using the system we’ve made considerable advances but there is still a little way to go. An enhanced system solution will be required to achieve the 100 per cent target and discussions are under way to investigate potential suppliers.”

It is clear that there is now much more power behind the market’s determination to drive technology into the heart of its processes. There is now a clear recognition that a modern claims system can significantly reduce operational cost, reduce labour intensive tasks, reduce the potential for fraud and increase satisfaction for clients, claimants and claims staff.

Selecting a new claims system is therefore an important task for insurers and getting the selection right is obviously key.

claims technology

System readyIt has been a long time in coming, but the London Market has finally embraced ECF. Systems selection can make all the difference when it comes to differentiating you from the competition. Richard West explains

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Market reform, significant regulatory change in the shape of Solvency II, changing business demands with risks and claims coming in to the insurer from a variety of channels, the demand for better quality reporting and the general demand for smoother, more integrated claims processing is throwing the spotlight on the technology within claims departments. There is also a growing demand for transparency and the production of clear and timely data which has exposed the limitations of traditional spread sheets and manual methods.

A significant factor impacting on current claims performance is that many traditional administration systems have been found to be deficient in terms of the functionality required by claims staff to fully manage a claim through its life cycle, coupled with the ability to deliver comprehensive claims reporting.

This has seen some companies seeking to improve processing by implementing workflow solutions. While these have delivered some benefit, it has also resulted in a mix of systems and manual methods for claims staff.

In a time of rapid change, both in the risks and claims faced, coupled with the pressure from the market and the regulators such a situation is not conducive to easily integrating reform and regulatory change nor for that matter different channels of business. What has also become rapidly clear is selecting and implementing a new claim system is an important task and requires focus and commitment by the insurer. From the outset it requires the insurer recognising the London Market is not a commoditised market and as such there is no quick fix.

A good claims system will significantly reduce operational cost, labour intensive tasks, and reduce the potential for fraud and penalties, while increasing both client satisfaction and that of claims staff if they have been given the right tools for the job. Insurers need to spend the requisite time covering all elements of selection from evaluating the system’s functionality, flexibility and performance to final matters such as balance sheet strength. Senior management need to commit to a substantive project plan which must include a substantial amount of time allocated to the training of users.

Key elements of system selection System selection should be approached with the level of care that befits such an important investment. The supplier’s experience, product investment, research and development and financial strength all need to be assessed however functionality, the supplier’s market knowledge and commitment, are to some respects almost a given. An intuitive and responsive system is now a must given the changing landscape and the potential for new demands on data and performance from the market and the regulators.

In terms of functionality the system will require claim/claimant maintenance, payments and reserves, notepads, diaries, letter generation and reporting. Other key elements of functionality include flexible business rules and reports; bulk payments; document management; easy interface to policy administration systems; export data facility; payments and reserves in batch; user workload management; audit trail and integrated workflow.

Claims adjusters will spend most of their day working on the system, reviewing claims, entering data and notes, approving payments, creating letters and running reports, so the system needs

to be intuitive and simple to navigate. When evaluating system performance, systems need to be evaluated in a production environment with real data and user volumes. The key to performance is a relational database with a simple, efficient data model that enables users to create reports.

There are several factors to consider when evaluating the supplier – does their system meet the guidelines, do they focus on customers, investment in research and development, market knowledge and commitment and balance sheet strength.

When insurers get their claims handling and processing right they create a significant competitive advantage in a market where underwriters are judged by their ability to deliver on the promise to pay. Choosing a new system has taken on an ever greater importance as London looks to revolutionise its processes. It has to be right and insurers need to allocate the time and managerial resources to ensure that they are confident they have done all they can to ensure the right questions have been asked.

Richard West is sales director, EMEA at FINEOS

claims technology

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Since the height of the financial crisis in 2008 there has been an important shift in many insurers’ approach to claims management.

Claims inflation in UK personal lines and liability classes has seen payouts steadily increase in recent years. At the same time, poor investment returns and soft insurance premiums has seen income go down.

Faced with these dual pressures, there is a growing scrutiny on gaining claims efficiencies and cutting costs, with pressure from boards to understand how claims can contribute more to the financial objectives of the company.

“That’s where the money goes out of the organisation,” explains Graham Newman, product marketing manager EMEA at FINEOS. “And it doesn’t just go out of the organisation for valid claims, it goes out for invalid claims and it goes out on expenses and these – particularly legal expenses – can be high. So we’ve seen an increased attention being paid by insurers to what they’re spending their money on in the processing of their claims.”

Claims systems are becoming increasingly more sophisticated thanks to efforts to reduce error rates, better utilise supply chains and greater investment and use of technology to streamline the claims process.

With a more complete set of claims data, broader analytics is now possible and the ability to spot and prevent fraud has also improved.

“Claims was the Cinderella part of the business,” says Newman. “Expenditure in insurance has always been front-loaded – it has always gone on marketing, sales and underwriting. That is changing now, and because it is changing claims directors and processors are now turning their attention to better business intelligence and analytics.

“Claims professionals are questioning underlying assumptions, such as are customers with more than one policy always more profitable than people with single policies? Is it true across all brokers and classes of business? Then feeding that information back into their marketing and underwriting to make sure they’re selling more profitable business at the front end,” he explains.

There are now several software specialists in the field helping to automate claims handling. At Lloyd’s, standard claims now take half the time to

process as they once did thanks to the Electronic Claims File at a considerable cost saving. With the market paying out an average of £10bn a year in claims and processing 210,000 claims at any given time, this is a significant step.

And it is not just the insurers investing in claims software. Insureds themselves are investing more into risk management technologies to aid decision making, quickly identify and address trends and gain absolute confidence that their risk data is right.

“Risk managers and insurance professionals are also looking to automate frustrating manual processes, through risk management technologies to meet commercial, legal and other demands,” says,” says Steve Cloutman, managing director EMEA for Aon eSolutions.

“In the case of claims, firms are able to significantly reduce costs by spotting trends and quickly implement pre-emptive measures. This level of agility is something that would not have been possible using spreadsheets or disparate systems.”

Demonstrating to underwriters the measures that have been put in place to mitigate risk, as well presenting accurate data in terms of the volume and frequency of claims, all helps keep the cost of premiums down.

“Reporting incidents into one system that can automatically trigger notifications to insurer and stakeholders, reduces the lifecycle of a claim,” adds Cloutman. “That will ultimately yield cost savings, and protect brand equity.”

claims technology

Taking centre stageThe past few years have seen a shift in the amount of investment being made in insurance company claims departments. Better data capture and analysis along with use of technology is transforming a cost centre into a profit centre. Helen Yates reports

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Collaborating to combat fraudIn classes of business that have seen the biggest rise in claims during the economic downturn, there is pressure to evaluate the underlying trends in a bid to understand where the more costly claims are coming from. Much of the increased claims are linked to opportunistic or fraudulent claims in tandem with increased expenses.

In the UK, the number of personal injury claims grew by 72 per cent between 2002 and 2010, according to figures from the Association of British Insurers which estimates that insurance fraud adds an average of £44 to each household’s general insurance costs. The motor insurance industry has seen its claims soar as a result of fake whiplash claims and legal fees (with claimant lawyers taking 87 pence in compensation for every £1 paid out by insurers).

And it is not just personal lines insurance that has seen claims costs skyrocket. The average cost of insurance fraud (and error) currently runs at 5.7 per cent of an organisation’s expenditure, meaning in the UK it could cost as much as £10bn each year, according to new research by accountants PKF and the University of Portsmouth. “In commercial insurance we have seen an increase in fire claims,” says Newman. “Obviously some of them are fraudulent.”

With fraud on the rise, insurance companies are investing more and more in detection methods and technology. This is starting to pay off with a growing number of dishonest insurance claims uncovered – up to 2,000 each week by the end of 2009 – worth more than £16mn, according to the ABI.

The Insurance Fraud Bureau (IFB) was set up in 2006 to better identify the perpetrators of organised motor insurance crime. Working in partnership with police forces across the UK it shares intelligence with other counter-fraud groups and insurers. Through the IFB the industry consolidates its claims data, using sophisticated technology to spot suspicious patterns in the datasets.

“All personal injury claims have to be registered with the Department for Work and Pensions and the IDSL Claims Underwriting Exchange for Personal Injury Claims (CUE PI) is becoming more widely used by the industry, meaning more

central recording of claimants on this database,” explains John Fearn, client development manager at Broadspire, a Crawford company that deals with third-party motor claims. “This enables us to see a claims history on a particular person – so it is getting a lot better. But it does rely on everyone doing it because otherwise you are not getting the full scope of data.”

This assumes, of course, that the perpetrators of insurance fraud use the same name each time. “In third party claims, to avoid detection it’s a classic fraudster approach to change names around and to use different variations on names, addresses and mobile phone numbers,” says Fearn.

“Fraudsters are highly motivated and these tactics were previously challenging for the industry but over the last two to three years the industry has been catching up and we’re now collating a lot more data that will enable us to put matches, through data mining, on potential repeat claimants and ultimately potential fraud.

“Collating data that relates to your own claims is great, but fraudsters don’t make claims against the same insurers every time,” he adds. “There are different views on contributions – some people want to keep the market edge around competitiveness – I think the only winner there is going to be the fraudster so the more we can share the more success we will have in combating this.”

The telematics insurance companies have another data capture tool at their fingertips. While still in its infancy, the use of telematics boxes in cars and other vehicles will enable insurers to see the bigger picture when a claim is made.

As well as helping with important details such as the time and location of a crash, the boxes will show what speed a vehicle was travelling in at the point of impact. In theory, this could help insurers root out phantom whiplash claims made by third parties.

“That would be a huge advantage for telematics in that they can determine fairly accurately the speed of a vehicle at the point of impact and to a degree, the area of impact and how the impact occurred,” says Fearn. “However, in claims we have to adopt the ‘eggshell skull theory’. If it is possible for someone to be injured we may have to accept it, when backed up by medical evidence – it would need a change in legislation to do otherwise.”

Adding valueBy building up better datasets and investing more in analysis in a bid to combat fraud, claims managers are finding they are able to add value in other ways. “A really big issue is that highly-trained claims handlers are still spending too much of their time on low level claims and administrative work,” says Newman. “The knowledge built into the system should be able to do effective triage to prevent that from happening.”

Better data analysis allows better segmentation of claims. Similar to a triage nurse in an emergency room, this is a sophisticated way of diagnosing new claims to sort out those that can be processed quickly and efficiently from those that require further investigation.

“Motor claims would be simple if incidents were reported immediately, accurately and openly with regard to the accident circumstances” says Fearn. “If you had those elements in a motor claim it would help you identify more effectively the cases you should be looking at in more detail – the cases where there is potential third party organised or opportunist fraud.”

“Then we would expect that 80 per cent of cases would go through using a standard process and the insurer could offer hire, repair services and assist with injury through rehabilitation on fault cases to genuine, innocent third parties, at reasonable costs,” he adds. “But to get there you have to have that accurate, open and speedy reporting from your insured driver in the first place.”

By identifying what type of claim is coming in at inception, handlers are also better place to accurately estimate what it’s going to cost them to process, which helps to improve the accuracy of reserving. For more difficult claims staff can make quick decisions on where to allocate additional resources.

Drilling down further into the data can reveal which classes of business or types of client are more likely to claim.

By feeding this information back through the organisation it can help inform underwriting decisions so that ultimately, more profitable business is underwritten. This creates a stronger link between the business strategy and the organisation’s claims capability.

claims technology

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