The Workforce Squeeze. Claim professionals require a high level of competence, but insurers are finding it increasingly difficult to attract and retain qualified personnel. Reflecting the demographic trends for the population as a whole, the insurance industry is finding that experienced workers are leaving much faster than they can be replaced. Looking ahead, the industry will be unable to fill professional roles at previous rates.

Insurers are also struggling to effectively recruit from the dwindling pool of young prospects, largely because entry-level claim salaries compare unfavorably to starting positions at most other industries.

Aging IT Infrastructure. A claim operation rests heavily on its information technology infrastructure — processes, applications, customer and policy databases, and all other electronic channels through which the operation is accessed. Yet, a recent Accenture survey of more than 100 global insurers found that less than half have integrated claim processing systems with first notice of loss systems. Shockingly, fully 25 percent still use claim systems that are primarily manual and paper based. Because of this, vast amounts of information end up in paper files, unavailable to transactional systems. Consequently, there is little predictability and less transparency for the various parties involved in the claim process.

Weakness in the claim process has even attracted the attention of Wall Street. Our recent survey of more than 100 insurance equity analysts in 14 of the world's largest insurance markets revealed that claim systems are considered to be the single most important area of technology investment for property and casualty carriers.

Meeting Wall Street's profit, growth, and capital allocation expectations depends in large part upon a modern IT infrastructure. Yet the majority of analysts surveyed rated insurers' current level of technology performance as "poor." Collectively, analysts rated IT modernization as the second greatest industry challenge for P&C insurers — after environmental issues like climate change. Moreover, the majority of analysts cited investments in core technologies, such as claim management systems, as "critical" to achieving higher ratings over the next three years.

The New Playbook

To develop a high-performance claim organization, insurers should take the following steps:

1. Tackle the whole, not the pieces. Insurers must rethink the claim operation from top to bottom, including the essential role of the claim professional himself. Insurers may be tempted to simply try to do a better job responding in the same ways they have in the past. For example, they may address today's talent crisis as a mere recruitment issue. But that would be a mistake. In short, the claim function must become an integral component of a growth- and future-oriented business model.

2. Reinvent the role of the claim professional. In most insurance companies today, the claim professional's job is 80 percent clerical and 20 percent professional. To attract new blood that can bring competitive advantage, that ratio must be reversed.

Claim professionals of the future should be at the center of a service offering channeled through customers' preferred means of interaction. Equipped with the best tools and supported by strong back-office capabilities, they can achieve better, faster resolutions for policyholders and insurers alike. To attract the new generation of workers, insurers must reinforce the fact that claim professionals address the needs of people who have suffered a loss and need help — thereby appealing to a generation that values social responsibility. Additionally, by integrating the latest technology into claim processes, insurers can better attract those for whom technology is integral to their lives.

The claim professional of the future must be a decision-maker, not just a data processor. Their focus must shift from the administrative to the advisory; from the rote clerical processing that can easily be automated to the skilled technical, medical, legal, and liability problem-solving that makes the claim profession interesting to talented candidates and valuable to their employers.

Quality candidates seek a job that is both meaningful and rewarding, not just in terms of compensation but also for career development and professional growth. Insurers need to cultivate those aspects of their culture that deliver those desired qualities in a manner consistent with the objectives of the business.

3. Foster an outcome-focused culture. Changes in the claim operating model and the roles of claim professionals demand a new set of metrics. Today's claim benchmarks, which focus primarily on file counts and closure rates, must give way to a balanced scorecard of measures that reflect each individual's impact on the claim outcome.

We envision a set of primary and secondary indicators that first recognize the result of a person's immediate work (primary) and the effect of that work downstream (secondary). This process requires a holistic look at roles and responsibilities, metrics that would govern success for those roles, the relationship between them, and the outcome being measured.

Consider a model in which the handling of auto material damage claims is distributed across a team in which one person has responsibility for timely scheduling of repairs and another has responsibility for managing rental car duration. Both would have a specific primary criterion — either the average time for scheduling a repair or the average number of days the policyholder should have a rental car. In addition to these metrics, each person would have a secondary measure more reflective of the overall team's work. In this example, it's total cycle time.

When determining individual performance, the primary indicators are given more weight in the analysis. However, the secondary metrics cannot be ignored, as they are used to reinforce the potential knock on effect (positive or negative) of the primary indicator.

4. Create a data-driven claim lifecycle. Speed, efficiency, and transparency in the claim process hinge on the insurer's ability to capitalize on rich claim information. This data constitutes a tremendous opportunity to improve the claim process as well as underwriting, pricing, risk selection, and reserving.

Most insurers, however, are unable to take advantage of this opportunity because of aging legacy systems that fail to integrate with core applications. As a model for improvement, insurers should look to technologically enabled micro-segmentation in underwriting. This approach makes it possible to write unique products to cover highly specialized risks, generating significant profit from previously underappreciated risks.

Claim organizations can take a similar tack with a highly granular approach to data throughout the entire claim cycle. Once this data-driven claim life cycle is embraced, an insurer can begin to draw relationships between similar claims and outcomes. By segmenting and examining data, an insurer can correlate highly differentiated actions to those outcomes, introducing a novel degree of process predictability and transparency.

In addition, this data-driven life cycle feeds the insurer's capability to make smarter retention decisions by testing the assumptions set by original underwriting guidelines. Finely segmented claim information can be used to provide decision support for claim professionals, providing a stream of vastly more accurate information for audits, compliance, product development, and marketing.

The prospect of reinventing the claim function may seem daunting given its critical role in profitability and the constantly evolving demands placed upon it. Done wisely, the rewards can far exceed the time and resources invested in transformation.

The key is to put the claim professional and the customer at the center of this change, embracing fully transparent processing independent of location, employing the right kind of technology, and supporting organizational structures. A more holistic vision of claim operations will help insurance companies build more durable competitive advantages and will ultimately help everyone — from customer service representatives to shareholders — achieve high performance.

Michael A. Costonis is a senior executive in Accenture's insurance practice and head of the firm's global claim services.

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