A new report highlights the increasing role that cognitive computing will have as its ability to process knowledge catches up with the insurance industry’s ability to process data in the race towards high performance claims handling.
The new report, published by Aite Group, Data: The Foundation of High Performance Claims Handling, is based in part on a 2013 study of new entrants to the U.S. P&C insurance claims handling market and looks at how new technologies have the potential to change key processes from which most policyholders derive their views of any carrier.
Claims-handling proficiency—keeping the promise to compensate policyholders for covered losses quickly and efficiently—can’t continue to come from tweaks to existing processes, says Aite Group, but from increasing the performance of those processes by making better use of what they operate on—data. This data is found in underwriting, policy, and claims systems as well as external data sources. Aite Group research finds that approximately 15 percent of loss costs and loss adjustment expense (LAE) could be saved with the proper use of technology. The potential savings from the better use of technology are significant: using the 15 percent figure, for a carrier with $750 million in premium, the innovation opportunity could be over $110 million.
The report notes that one of the biggest challenges that remains is the problem of ” incomplete, incorrect, or corrupted data entry of claims information.” The cause ranges from policyholders using handheld devices to report claims to data influx from mergers and acquisitions and even as a result of modifications to old systems.
At any given time, 40 to 60 percent of an insurer’s data is stored as unstructured data and likely underutilized as a result. The report cites an example of the first notice of loss process where vague and insufficient information may be obtained but never updated, setting the efficiency for the entire claim.
Another challenge is the vast number of in-house and third party adjusters which the report says undoubtedly assures a lack of conformity in the way information is recorded. Additional areas that could be improved included claim cycle times and high severity claims.
In addition, one aspect of leveraging data to a fuller extent is in the amount of time savings that high performance claims handling could provide to supervisory management. Having data and information that better informs both automatic and manual claims decision-making via continual analysis will have claims managers working on the files that matter the most, according to Aite Group.
“Carriers that pursue high performance claims will reduce claims leakage, improve workflows, and help policyholder retention as well as the retention of claims professionals,” says Jamie Bisker, senior analyst in Insurance at Aite Group. “Engaging claims professionals with new technology and not confronting them with it will help assure faster utilization and the positive results that come with it.”
Source: Aite Group.