Insurers used to view differences in age and demographics as key determinants of consumer preferences, but we now see a new consumer emerging—a digital-savvy, mobile-enabled skeptic who questions conventional assumptions and insists on dealing with organizations on his or her terms. Across ages and genders, insurance customers have become more demanding, more critical of carriers' attempts to differentiate themselves, less trusting and loyal, and more open in their search to find products and services that better match their needs.

This change in attitudes is not “all about the money.” Our research indicates, in fact, that this new breed of customer is actually willing to pay more—11 percent more, on average—for the right products and services. There is a broad gap between what today customers regard as important and what they believe they are receiving from their insurers. Closing this gap will require claims executives to come to grips with some challenging new realities.

Dealing with the Data Deluge

Most claims professionals have come to appreciate the potential value of data and analytics in improving the speed, efficiency and transparency of the claims process. Data and analytics can also contribute to retention decisions, confirming the assumptions which support underwriting guidelines, and to meeting regulatory requirements. Until now, insurers have dealt with data within confines of existing legacy systems. These tend to capture transactional data with varying levels of detail and accuracy. Extracting data and developing predictive models introduces another level of cost and complexity.

While insurers have tried to address these issues, however, the world of data has changed around them. Massive amounts of structured and unstructured data are generated every minute. Insurers need to look at new sources and types of data that can be used to improve the accuracy and efficiency of claims operations.

Social media, for example, offer a wealth of insights about consumers—but only to those who can make sense of the 25 billion pieces of information that are shared every month. There are more and more commercial databases on the market, along with usage data collected by means of telemetry and global positioning systems (GPS) and asset damage records collected by the millions of radio frequency identity (RFID) devices now commonplace throughout the logistics supply chain.

When these and other forms of data are aggregated and analyzed, they create the platform for a whole new world of context-based services. Such services extend far beyond location-based services, adding rich layers of insight into who the customer is; his or her needs, intentions and attitudes; and what might spur them to act in a particular way at a particular time. This type of information represents a great opportunity for insurers to become smarter, quicker and more precise, offering products and services in a way, and at a time and place, when they are most likely to be accepted.

Improving Outcomes

Our ongoing, systematic study of insurance claims performance—dating back to the 1990s—has shown a mixed bag of successes amid clear signs that the industry continues to struggle to achieve durable performance achievements. Over 15 years of research, including more than 20,000 claims reviews, 4,500 interviews with claims professionals, and across companies operating in more than 14 countries, has confirmed that there is significant room for insurers to deliver improved outcomes in areas including loss cost management and expense efficiency.

Claims professionals still spend nearly half their day in activities that do not impact the outcome of the claim. In practice, this means that, for every claims professional an insurance company employs, half of that person's talent, energy, and effort are focused elsewhere—not on driving a superior claims result. In effect, the industry is operating with the pedal only halfway to the floor.

Claims outcomes overall remain quite mixed, with varying degrees of consistent top level performance. The financial impact of this underperformance is immense: In the U.S. property and casualty (P&C) industry, a mere two-percent improvement in loss costs would result in an $11 billion annual increase in the bottom line.

Addressing the People Imperative

At the heart of any high-performing claims organization that delivers superior financial and service results lies a highly motivated, well-trained, and properly organized workforce. The characteristics of such a workforce are a strong customer-oriented culture, collaboration among experts, and a desire to improve through innovation.

In the cost-cutting driven by the financial crisis, the claims workforce was an early target for downsizing for most insurance companies. There are simply fewer claims professionals today than in the past. In addition, the movement to outsource some claims-related functions has further complicated the workforce model. The desire of customers to be an active part of the claims process—a relatively new development—adds another twist.

Progress in the workforce is not a function of increasing pay, or of hiring away the best claims professionals from the competition. The problem is how to achieve the highest and best use of talent in the claims organization. The new claims workforce will operate in a highly distributed fashion, where claims professionals are connected through collaboration, and are focused on those activities where they can drive the best outcome. This type of workforce requires a new style of orchestration between parties, expanded to include customers, high-value vendors or suppliers, and distribution channels, in addition to the claims professionals themselves.

Innovating Through Technology

In the claims organization, technology is creating tremendous opportunities for innovation, efficiency, and effective decision-making—opportunities that early adapters have seized to gain competitive advantage. The “consumerization” of technology continues to place new pressures on carriers to become more open and flexible, regardless of the platform or channel through which the technology is being accessed.

As no one can be sure where these trends are leading, insurers need to design architectures that are agile and future-proof. Among the key attributes will be speed to respond to new developments, the ability to integrate with other systems, and a focus on configurability rather than hard-wiring to accommodate a fixed vision of the future.

Successful transformation of how claims services are delivered and how claims outcomes are managed will ultimately rely upon technology. This technology must capture data at a minute level of detail, interrogate that data in real time, use it to provide customer and outcome analytics, and then respond with new business processes, based on the customer and claims circumstances.

This technology must also be put in the hands of all parties who will benefit from it, across channels and devices, and personalized to the user. Developments such as cloud will enable rapid deployment in a software-as-a-service (SaaS) model.

Achieving and maintaining high performance in claims is a complex undertaking, and insurers cannot succeed by pursuing isolated, quick-fix system and process improvements at the periphery of their claims operations. They should take a holistic view of the claims operating model (claims personnel, processes and technologies) and how it supports the company's overall mission and objectives. They must adopt well-defined processes supported by meaningful metrics and enabled by effective tools and technologies. Insurers with an “end-to-end, top-to-bottom” vision will achieve substantial gains, and, most importantly, they will create a solid foundation for continuous improvement.