Enterprising Developments

A Big Thumbs-Down on Existing Claims Management Systems

Joe McKendrick
Insurance Experts' Forum, November 28, 2012

Is the industry ripe for a boom in new claims management systems? A new survey indicates high levels of disenchantment with current legacy systems. INN's Chris McMahon provides an overview of Accenture's latest survey on the state of P&C claims management systems—that is, an abysmal state. It's worth taking a deeper dive into the data to see what's going on.

Perhaps the most astounding finding of the survey: the way data is handled in these organizations. Eighty percent rely on spreadsheets to manage data related to claims processing—even though only four percent say this is the preferred way to handle the information. The alternative is leaving the information as structured data within the legacy system silo, which 74 percent admit to doing. Only 8 percent see this as the best way to manage such data.

In other words, claims processing managers find it too cumbersome to try to get the data they need out of the existing systems, so they're crafting their own workarounds to help resolve customer accounts. This, of course, is asking for trouble, since there is no way to trace or verify the accuracy of individual spreadsheet calculations.

What P&C executives would like to be doing with the data is more predictive modeling. Social media and location-based data are also high on executives' wish-lists. However, getting this data through current systems can be problematic.

It isn't just touchy-feely customer engagements that P&C insurance executives feel they're missing out on. More than three-quarters, 78 percent, of respondents say they need more modern systems to manage new forms and levels of risk such as cybercrime, terrorism, and the increased frequency and severity of natural catastrophes.

Overall, 83 percent of the 50 C-level P&C executives in the survey express little confidence in the state of their claims management systems. Forty percent even answered “not at all” when asked if their claims management system was modern and flexible enough to allow change in systems behavior and business processes without intervention from the IT department. Many of these systems run on so-called “legacy” systems, most likely mainframes, and have been constantly improved and tweaked over years, if not decades. There is so much business logic and rules embedded into these systems that it's often difficult—if not risky—to attempt to move to another system.

But, we may be reaching the point in which the risk of staying on these systems is surpassing the risks of disruptions to operations that may occur in a system migration. For example, 85 percent of the insurance executives feel their claims management systems are not up to the task of meeting new customer needs.

A majority, 63 percent, also say there are limitations in integrating these systems with other internal and external systems.

Many are looking into new systems, and here's where it gets interesting: Will P&C executives decide to go with a cloud solution versus bringing in more on-premises software and hardware? One in five, in fact, say they intend to migrate claims to the cloud or a SaaS model in the next two years, Accenture finds. Another 26 percent are willing to consider cloud as an option. If so, this represents a huge departure for insurance companies, because they are starting to entrust core applications to the cloud. Up until now, it's been mainly generic business systems, such as email, collaboration, and to some extent, marketing and HR, that have been moving to the cloud. This is something to watch over the coming years.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (1)

As a claims person, I have worked on claims management systems that can be at best described as "input-output" systems. Unfortunately, these systems are basically accounting aligned systems with very little insurance aligned features. The net result is that a claims person is forced to work with work-arounds and perform a number of claims tasks outside the system. This is a sure recipe for disaster.
The so called new age systems also fall way short of the actual needs of the claims department of an insurer. The technology is new but the understanding of the process flow of claims leaves much to be desired.
The required claims management system has to be insurance needs aligned with providing necessary accounting data accurately.
The need of the hour is that the claims persons should define a comprehensive functional requirement document and then the desired system is developed. This is a task which needs in depth understanding of the claims and its dependence on the other systems of the insurers.
In short, it is doable but needs some concentrated work.

Posted by: Milind Joshi | December 5, 2012 11:33 PM

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