What keeps claims execs up at night? - Part 1

Insurance claims executives must deal with a multitude of issues on a daily basis such as managing large numbers of claims, balancing policy payments for losses against the company bottom line; helping adjusters apply policies to specific losses; and hiring and training the next generation of claims professionals. They are in a unique position to see trends in the claims industry, the impact of legislation on the insurance industry and identify new risks that are causing claims.

Claims magazine recently interviewed claims executives to get their assessment of the industry, what concerns them the most, how the industry can mitigate some of these risks, how they are addressing the talent gap and the opportunities they see in the future for insurers. Basically, we wanted to know what keeps them up at night or at the very least, creates some concerns for the future.

The executives represented carriers and organizations in allied industries that support the claims industry.

• Jennifer Peck, director, claims relationship management, Aon
• Bill Skapof, head of global corporate & commercial insurance, North America, Generali
• Constance Woods, Esq., vice president — legal, American Southern Insurance Company
• Kevin Hilyard, vice president, commercial & farmowner claims, Nationwide
• Jack Hipp, vice president, North America claims, Allianz Global Corporate & Specialty
• Stephen Perrella, executive vice president, chief claims officer, U.S., Aspen Insurance
• Bob Fisher, partner, Clyde & Co.
• Catherine Lyle, claims lead, Coalition
• Margaret Murphy, claims director, CFC Underwriting
• Rob Howard, chief claims officer, Farmers Insurance
• Angela MacPhee, partner, Baker Tilly

Identifying risk

We asked the executives to identify the top three risks currently facing claims executives and insurers. Among the risks they see impacting the industry are the talent gap, increasing cyber risks, storms escalating in number and severity, and the implementation of new technology.

Peck: The shortage of talent that our industry faces is significant. It is most evident in the challenges to fill highly technical or niche expertise roles such as marine general adjusters or property claims adjusters who can resolve large, complex losses. An investment in training and apprenticing new talent for these roles does not have an immediate return, making it difficult to justify despite it being a necessity.

Cyber risk and the impact it has on our industry are key concerns for claim executives, insurers as well as our insureds/clients. An event is often difficult to detect and can be catastrophic. Policy wording is not yet fully fit for purpose, and insurers are hesitant to set precedent.

In the U.S., as we have seen in other parts of the world, there is a degree of political uncertainty and unrest that will directly impact the insurance industry. This not only includes decisions regarding insurance propositions brought before the U.S. Congress, but also uncertainty in the market influencing investment strategies. As an industry, volatility of any sort creates challenges for us.

Woods: Finding and attracting claims talent and retaining claims talent. On BI liability claims, managing what seems to be the ever-increasing medical build-ups and pain “management” claims. For a small company like ours, improving technology within fiscal reasonableness.

Hilyard:  Balancing the need to create the lowest possible cost model while executing the best possible customer experience and loss-leakage mitigation strategies. This has many tentacles including developing great leaders, creating world-class employee engagement, and investing in cutting-edge technology, among other things.

The second involves executing a thoughtful strategy to respond to the growing complexity around risk and exposure, products, legal environments, regulatory compliance, and many other business challenges.

And third, building a significant data and analytics capability to ensure the clearest line of sight into customer needs, business trends, and performance metrics.

Murphy:  Without a doubt, talent acquisition is one of the biggest challenges facing insurance providers and claims teams today, particularly when it comes to cyber, one of the fastest growing lines of business insurance.

Another challenge facing claims executives, I believe, is keeping pace with technology and consumer expectations for immediate access to information. Insurance executives should be constantly thinking of ways to provide more timely and transparent information to their customers, and deliver it in a way that is familiar and easy for them to understand. We must invest in technology to help make the process of filing and tracking the progress of a claim easier for the consumer, while retaining the feeling of personal service and subject matter knowledge that only comes with experience.

The changing claims process

There is no shortage of issues to cause claims executives concern, but many executives are focused on the best ways in which to serve their policyholders while meeting or exceeding their expectations.

MacPhee:  What concerns us the most is matching the expectations of all stakeholders. Everyone needs to be able to do their job in a timely way and deliver results, and this is getting increasingly difficult. With the number of catastrophic events, the increasing prevalence of massive claims, and the need to deliver quickly, the pressure is on. All of these factors, combined with a shortage of resources, present unique challenges to the claims process for the insurer, the adjuster and the expert.

Howard:  Addressing changing consumer needs is the most challenging. In the age of quick service, companies must be easy to do business with, or suffer the consequence of creating opportunities for a competitor to win that consumer. The importance of customer interactions with claims cannot be overstated, as customers’ claims experiences are likely an important factor when it comes time to deciding whether to remain a customer. The significance of a claims experience that pleases the customer forces insurers to think differently about claims processes and tools. The key here is flexibility, agility and adaptability. Customer needs are unique and evolving, and the solutions should be, too; it cannot be a “one size fits all” strategy.

Fisher:  In the United States, the claims process suffers from a lack of trust and good faith on both sides. This often leads to an adversarial relationship between the policyholder and the insurer, and inhibits both parties from finding a business solution as well as a common understanding based on the terms of the policy and intended coverage.

Hipp:  I think there are two key risks, one old and one new. Fraud is an ever-present concern and technology is making fraud that much easier to perpetrate. Insurers must use technology in a very capable way to combat new forms of fraudulent claims. Automation and disruptive technologies are a second concern. The inability of insurers to maintain the pace of digitalization will face increasing costs and reputational risks that will adversely impact profitability.

Skapof:  Over the last few years, the claims process has become increasingly complex. Couple it with a reduced workforce and IT and technology gaps, and even those tasks that we once thought of as routine like retrieving full and accurate information or ensuring that a claims process is adhered to have become more difficult.

With that said, despite those concerns, we are constantly working to overcome these issues so that we can consistently deliver the expected level of services in alignment with our ultimate value proposition.

Lyle:  Proper use of claims data to better assist underwriting is one of the largest issues facing the insurance industry. Learning to use claims data to underwrite is vital as claims is driven by underwriting. Underwriting and claims need to work hand in hand. The problem that is occurring is that carriers are not currently able to successfully use data in such a way that it assists in the underwriting process and thereby limit claims. Sharing data generated from claims to underwriting so that underwriting can better determine risk and costing will only serve to limit risk in the future.

In the small and medium market, claims must move from the role of only coverage and paying a claim to customer service and assistance to the insured. This assistance should occur even prior to claim handling by identifying risk for the insured, where possible, and helping the insured to mitigate this risk. Furthermore, from the beginning of claim, carriers need to focus on saving money for the insured through proper claim handling. This ultimately enables the insured to get back to business faster.

Mitigating the risks

Preparing to address these challenges takes planning and education. Training and development will help to offset some of the issues, but open and transparent communication are critical to improving the claims handling process.

Perrella:  Pro-active training, effective mentoring, and robust escalation procedures are the most effective tools to hone the skills of early risk appreciation and threat of exposure. The general Best Practices and Fair Claims Practices training also are essential. In short, there is no substitute for more experienced claims personnel being assigned to help develop the skills and capabilities of less experienced members of the team.

Peck:  Appropriate authority in the field and setting key performance initiatives that can be measured internally to expedite the payment process are key. This is especially important for insureds with cross-border exposures where different currencies and regulations exist which could cause lengthy delays. The days of fast-tracking or express claims concepts being limited to small, attritional value claims should be over.

Skapof:  By placing a high priority on training and developing our workforce, we will be able to address many of the issues in our industry, especially with respect to technology and security. Through better or more timely education, we will be able to identify the best solutions as well as continually innovate to meet the ever-evolving needs of our clients.

Fisher:  Transparent communication up front by both the insured and industry professionals is the key to successfully evaluating a claim. A more trusting insurer relationship with the policyholder will engender a common desire to find amicable solutions without protracted litigation.

Tomorrow we will continue our conversation with these claims executives as we get their thoughts on addressing the talent gap and capturing critical institutional knowledge, the changes they see ahead for the claims industry and the opportunities all of these changes provide for enterprising carriers.

CONTINUED: What keeps claims execs up at night? Part 2

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