Proper use of technology could save 15% of loss costs and loss adjustment expense

The insurance industry is poised to see high performance claims transformation if it takes steps to turn routinely overlooked data into actionable information and knowledge, suggests a report published last week by Aite Group.

Aite Group research finds that approximately 15% of loss costs and loss adjustment expense could be saved with the proper use of technology, notes a statement from the company, an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.

The potential savings from the better use of technology are significant, Aite Group reports. Using the 15% figure, the innovation opportunity could be more than US$110 million for a carrier with US$750 million in premium.

More than tweaks to existing processes are needed to claims-handling proficiency, which Aite Group defines as keeping the promise to compensate policyholders for covered losses quickly and efficiently. The performance of those processes can be increased by making better use of what they operate on – data – which is found in underwriting, policy and claims systems, as well as external data sources, the statement adds.

Time savings are among the benefits of leveraging data to a fuller extent, the company suggests. 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, the statement adds.

“Carriers that pursue high performance claims will reduce claims leakage, improve workflows and help policyholder retention, as well as the retention of claims professionals,” argues Jamie Bisker, Aite Group’s senior analyst in insurance. “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,” Bisker adds.

The report, Data: The Foundation of High Performance Claims Handling, is based in part on a 2013 study of new entrants to the United States property and casualty insurance claims-handling market. It explores how new technologies have the potential to change key processes from which most policyholders derive their views of any carrier.

The 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.