Data capture, metrics and analytics rank among the top challenges cited by claim officers as they seek to optimize the claim-paying process, our new Property & Casualty (P&C) Claim Officer Survey found (Figure 1). In fact, the concern is pervasive throughout the survey and relates to other identified challenges including expense management and talent attraction/retention — the top-identified claim department challenge.

Figure 1. Key challenges facing the claim industry

Figure 1. Key challenges facing the claim industry

As analytics and new technologies become more central to effective claim operations, traditional talent needs will broaden to reflect new priorities. Claim supervisors and staff that understand how to leverage analytics and utilize consumer-friendly technologies will bring value to claim departments. This need for new skills could exacerbate another top challenge: attracting and retaining top talent. Insurance companies that are able to get a handle on both technology and talent will be better equipped to manage claim adjudication.

The Challenge and Opportunity of Technology

Our survey polled P&C claim officers on four important aspects of technology: metrics, data, analytics and applications ranging from predictive modeling to effective use of new technologies in order to facilitate claim adjudication.

Metrics: The measurement of results and creation of standard internal benchmarks is an initial fundamental step to effectively capture and leverage data. Our survey finds that, by far, claim officers rank the capture and employment of metrics/analytics (83%) as the top approach to meet claim department challenges in the industry. In fact, it even outpaces the need for a renewed focus on proactive claim handling and effective supervision (69%), an action that was identified as critical in our previous survey.

In part, this awareness of the power of metrics and analytics may emanate from the expense and loss cost management opportunities envisioned by claim officers. Improved leverage of metrics and analytics was the top-ranked opportunity (79%), outpacing better management of litigation allocated loss adjustment expenses (ALAE) (69%). Interestingly, improved use of metrics and analytics can help identify claims that pose the risk of higher ALAE. Used properly, metrics and analytics can be connected to both loss cost and ALAE, and leveraged as a risk management tool.

Data: Claim data compiled and compared against company and industry metrics create a valuable pool of information facilitating claim management. However, effective implementation of data capture, along with metrics and analytics, is not easy to achieve. Survey participants ranked it the second-greatest challenge (72%) after attracting and retaining top talent (76%). This might in part be explained because capturing reliable claim data ranks relatively low (seventh of nine responsibilities, with a 38% response) among high-impact claim responsibilities in participants' organizations, which may be short sighted.

However, survey participants also are aware that claim data capture and technology infrastructure are significant ways to achieve better claim outcomes and customer service. Our survey found that 44% ranked the two areas the first- and second-most important means to achieve these outcomes, making it the number two choice out of five selections. Only claim handling processes (which are evolving to better leverage technology) ranked higher (59%) (Figure 2).

Figure 2. Future enhancements to claim organizations to achieve better claim outcomes and customer service, ranked most significant (1) to least significant (5)

Figure 2. Future enhancements to claim organizations to achieve better claim outcomes and customer service, ranked most significant (1) to least significant (5)

Analytics: Informing future outcomes through a logical analysis of claim data is essential in helping companies remain competitive. Claim officers participating in our survey understand the importance of more sophisticated analytics, with 59% responding that it was an emerging claim issue or trend that would change the landscape of claim operations internally. Only expense management ranked higher (66%).

Claim officers believe there are opportunities to enhance analytics and predictive models to benefit claim departments. Nearly 70% responded that the most significant opportunity was leveraging models to project ultimate loss potential at the individual claim level for case reserving and actuarial analyses. Participants also identified opportunity in providing management information on leading indicators of claim outcomes to better prioritize and measure the impact of claim initiatives (55%). There is also optimism (52%) about the possibility of leveraging claim analytics to provide more objective and consistent guidance at key decision points, such as whether to pursue litigation or settle a claim. Only enabling proactive claim handling scored better (62%) when respondents were asked about the most significant opportunities to enhance claim processes and procedures.

Although claim officers acknowledge that claim analytics offers significant opportunity, participants ranked it the least significant (31% ranked it first or second) of five choices when considering future enhancements to claim organizations to achieve better claim outcomes and customer service (Figure 2). This noticeable discrepancy of understanding between the importance and opportunity that analytics provide and the willingness to incorporate it into future enhancements needs to change if P&C insurers are truly committed to more precise claim settlement processes.

Applications: The most effective use of analytics depends on the precision of predictive and other models, and the best use of new technology such as vendor software or consumer-friendly ways to digitally communicate with policyholders. In fact, 69% of respondents identify leveraging models to project ultimate loss potential at the individual claim level for case reserving and actuarial analyses as the best way to enhance claim analytics to benefit claim organizations. Claim officer respondents cited the better use of electronic media (75%) and mobile technologies (75%), along with big data and advanced analytics (64%) as the opportunities with the most potential to produce significant breakthroughs in claim adjudication over the next five years (Figure 3). In fact, personal lines carriers place even greater emphasis on mobile technology, the elimination of file ownership and use of GPS technology for auto claims as opportunities.

Figure 3. Potential opportunities to produce significant breakthroughs in claim adjudication over the next five years

Figure 3. Potential opportunities to produce significant breakthroughs in claim adjudication over the next five years

The Next Five Years

Claim officer participants are confident that the currently available technology could produce significant breakthroughs in claim adjudication quickly and over the next five years. In particular, they see promise in better use of electronic media to communicate with policyholders and claimants, and the use of mobile technologies to convey pictures of damages and damage estimates to claim adjusters quickly and efficiently (Figure 3). Better communication with policyholders and claimants is an important outcome, as evidenced by participants' responses: improved electronic access to claim-related information for policyholders and claimants was ranked as the second-most significant opportunity (55%) to enhance customer service.

Other potential technological bright spots include the potential for new insights to better inform claim adjudication that big data and advanced claim analytics could provide (64%) and, to a lesser extent, GPS technology for auto claims (14%). Big data will likely become more important in claim operations over time as companies learn to translate the wealth of claim information they already capture into actionable analytics.

A New Direction

Clearly, claim officers anticipate that technology will play a major role in modernizing their companies' claim operations and making them more customer-driven and profitable. They readily acknowledge the benefits of technological proficiency, but need to more strongly commit to talent attraction/retention and data collection efforts that could help sustain their quest to recognize those benefits. Throughout our survey, talent and data often fell in the middle to lower range of responses for future initiatives. For instance, only 35% of participants identified recruiting and retaining better talent as an approach to meeting challenges faced by claim departments. Data-related performance indicators ranked among the bottom three choices to determine effective claim function performance. More focus is needed on the value of talent that can build technologically advanced claim departments and data that provides the compass to direct claim officers in the right direction. This will help P&C insurers modernize their operations to deliver more targeted claim settlement, business focus, expense management and, ultimately, profitability.

Participant Profile

Twenty-nine of 73 program members, a 40% response rate, participated in Towers Watson's 10th P&C Claim Officer Survey, open to participants from March 31 to May 6, 2015. Small, medium and large carriers are roughly equally represented.

Figure 4. Annual direct written premium best describes your company's 2014 business production for all P&C lines of business

Figure 4. Annual direct written premium best describes your company's 2014 business production for all P&C lines of business

Figure 5. Approximate business split between personal and commercial lines of business, based on direct written premium

Figure 5. Approximate business split between personal and commercial lines of business, based on direct written premium

For more information about survey results, contact:

Frank Ramsay at +1 860 843 7027
frank.ramsay@towerswatson.com

Brian Stoll at +1 860 843 7129 or
brian.stoll@towerswatson.com