Property/casualty insurers are faced with difficult choices when dealing with aging claim systems, which can't provide the high level of service that customers expect from their insurance carriers today, according to Karlyn Carnahan, principal in the insurance practice at the research and consulting firm Novarica.
Carnahan was one of several speakers taking part in a web seminar on the outlook for claim technology in 2010. The event was sponsored by Tech Decisions and Claims magazines. The panel included Mike Anselmo, CIO of Narragansett Bay Insurance Company (NBIC); Bob Khosropur, chief claim officer for NBIC; and Riki Fujitani, president of BlueWave Technology. Eric Gilkey, editor in chief of Claims, served as moderator.
Keeping an older system in operation is a serious problem for insurers because many legacy systems have proven to be expensive to maintain, according to Carnahan. "You have old code and fewer people who know how to manage that code," she said.
Carnahan believes older claim systems are not coupled with a carrier's policy administration system, which makes it difficult to take claim data and run it against the policy data. "[Claim systems] tend to be rooted in finance and not service," she said. "Today's consumers demand a much higher level of service than before."
Carnahan pointed out that the technology offered in newer systems offers a serious upgrade for carriers in areas such as: analytics, global information systems, estimating, mobile applications, texting, telematics, fraud, and Web 2.0 capabilities.
NBIC is in the midst of a claim system upgrade that will be completed in 2010. According to Anselmo, the carrier looked for a web-based architecture that can help and service both customers and agents.
Security, availability, agility, and straight-through processing are all key issues for NBIC. "We have an extensive network of independent agents, but we do a lot of the work internally," said Anselmo. "We are looking to have very few touch points and focus on growing the business."
Anselmo explained that the carrier's implementation strategy includes: using specialized technical resources to implement; outsourcing where needed; hiring of in-house generalists for operations; breaking all projects into smaller measurable milestones in order to get early wins and reduce risk; and managing expectations.
Khosropur described NBIC as an "an old company with a completely new face, and a big part of that is the claim system."
Finding the money to pay for a new claim system is not easy in the current financial environment, which Carnahan reported is the worst in 70 years for insurers. But with business shrinking, keeping the current customers in place becomes even more of a focus. "The reality is retention becomes absolutely critical," she said. "Competition is really fierce, so finding ways of differentiating becomes a key strategic imperative for insurance carriers."
That provides opportunity for insurance software vendors, particularly those offering core systems. In a recent Novarica survey, Carnahan noted P&C carriers likely will increase spending in 2010 -- some significantly.
"What is impacting the IT budget is a desire to increase revenue -- growth strategies as well as operational effectiveness," she said. "The number-one reason insurers are increasing [IT} budgets is in order to grow."
The webinar will be accessible on Claims' web site within the next few days.
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