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P&C Insurance North American Claims Investment Survey 2012


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US property and casualty (P&C) insurers are at a critical juncture in terms of the modernity and flexibility of their claims management systems.

To gauge insurers’ attitudes toward investing in claims, Accenture conducted quantitative survey research with C-level claims executives in March and April 2012. As we had anticipated, we found that most insurers agree on the lack of modernity and flexibility of their claims management systems, especially in terms of allowing change in system behaviors and business processes and in addressing consumers’ evolving needs.

Claims executives said that improvement will be required in the claims organizations in order to be prepared and equipped to manage new forms and level of risk, and that consistency in claims handling can be optimized to improve loss costs.

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P&C Insurance North American Claims Investment Survey 2012

  1. 1. North American ClaimsInvestment SurveyA Foot in Today, a Leap into Tomorrow forP&C Claims Functions
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  3. 3. U.S. property and casualty insurers are property and casualty insurers. To gaugeat a critical juncture in terms of the insurers’ attitudes toward investing inmodernity and flexibility of their claims claims, Accenture conducted quantitativemanagement systems. survey research with C-level claims executives in March and April 2012. AsMultiple factors challenge P&C we had anticipated, we found that mostinsurers as they search for profitable insurers agree on the lack of modernitygrowth, including changing consumer and flexibility of their claims managementexpectations, the explosion of structured systems, especially in terms of allowingand unstructured data, and continuing change in system behaviors and businessdemands from management and processes and in addressing consumers’shareholders to deliver better claims evolving needs.outcomes. Insurers’ claims operationsare trying to cope with these changes Claims executives said that improvementwith workforces that have, in many will be required in the claimscases, been cut in previous cost organizations in order to be prepared andreduction efforts. In addition to these equipped to manage new forms and levelconcerns, claims teams are dealing with of risk, and that consistency in claimschanging types of risk, from the growth handling can be optimized in order toof cybercrime and organized fraud improve loss the increase in the frequency andseverity of natural events. Technology Property and casualty insurers in the U.S.offers potential solutions to these expect to spend considerable amountsproblems, but poses its own challenges of money­ $17.5 million on average over —as insurers try to maintain maximum the next three years—to upgrade andflexibility and adaptability in the face modernize their claims functions, asof tremendous uncertainty about the seen in Figure 1. On the following pages,impact of innovative new technologies. we will examine insurers’ priorities and review what P&C insurers hope to obtainIn such an environment, making the from these significant investments.right investments in claims systems andorganizations will be critical for U.S.Figure 1. Insurers’ Planned Expenditures on Claims FunctionHow much does your organization plan to invest in its claims function over the next 3 years?Over $25 million 26% Average $17.5 millionBetween $25-10 million 10% On average, priority 1 and 2 insurers (NPW above $500 million) are planning to invest more: $20.2 million vs.Between $10-5 million 10% $14.8 million for priority 3 insurers (NPW below $500Between $5-1 million 24% million). This amounts to a total of approx. $2 billion to be spent on claims functions over the next 3 yearsBetween $1 million & $500,000 6% in the market.Below $500,000 12%No investments planned 12%Source: Accenture North American Claims Investment Survey, 2012 2
  4. 4. Modernity and Flexibility SoughtMost insurers agree that their claims Respondents saw their systems as More than three-quarters (78 percent) ofsystems lack the modernity and flexibility most prepared to integrate with other respondents see the need for investmentto allow change in systems’ behaviors internal and external systems, with to enable their claims organization toand business processes and to address 37 percent rating their systems as manage new forms and levels of riskthe evolving needs of consumers. For able to do so to a great extent and such as cybercrime, terrorism, and theexample, 40 percent of respondents 52 percent as able to do so to some increased frequency and severity ofanswered “not at all” when asked if their extent. Only 11 percent regarded natural catastrophes. An equally largeclaims management system was modern themselves as completely unprepared percentage of respondents said thatand flexible enough to allow change in for such integration initiatives. consistency in claims handling couldsystems behavior and business processes be improved in order to handle losswithout intervention from the IT These concerns were amplified for P&C costs. On average, insurers with netdepartment, and another 43 percent said insurers with older core claims systems. premiums written above $500 millionthe system was able to do so only to some As seen in Figure 2, insurers with core are planning to invest more—$20.2extent. Only 17 percent of respondents claims systems more than 5 years old million—versus $14.8 million for insurerssaid their systems could allow such (more than half of the survey sample) with net premiums written below $500change “to a great extent”. saw themselves as much less able to million, with a total of approximately deal with the problems of responding to $2 billion in planned spending on claimsSimilar concerns about preparedness changes in business processes, addressing functions over the next three years.appeared in regard to insurers’ ability to consumers’ evolving needs, integratingmeet consumers’ evolving needs. More with other systems and allowing changesthan one-fifth (21 percent) of insurers in systems behavior and businesssaid their systems were not at all prepared processes without IT intervention. Nearlyto do so, while nearly two-thirds (64 half (48 percent) of insurers with corepercent) said their systems could meet claims systems more than 5 years old saidsuch needs only to some extent. Only their system was not at all able to allow15 percent of respondents rated their such changes without IT as ready to a great extent tomeet consumers’ evolving needs.Figure 2. P&C claims system flexibilityTo what extent is your claims management system modern and flexible enough to: 33% 8%Respond to changes in business processes (e.g. integrate sophisticated analytics 46% 70%capabilities, finely tuned workflow) 39% 67% 15% 0% 22% 18% 22% 11%Address consumers’ evolving needs (e.g. enable mobile initiatives, employ digital 63% 64% 67%customer segmentation quickly) 18% 11% 26% 15%Integrate with other internal and external systems (e.g. new policy system, third 73% 18% 56% 70%party service offerings) 44% 9% 0% 15% 25% 11% 15%Allow change in systems behavior and business processes without IT intervention 56% 37% 50% 25% 33% 48% 1-2 years old 3-5 years old over 5 years old Core claims system To a great extent To some extent Not at allSource: Accenture North American Claims Investment Survey, 20123
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  6. 6. Top Priorities forFuture InvestmentWhile the survey highlighted insurers’ concernsabout their claims systems’ modernity, flexibilityand ability to deal with consumers’ evolvingneeds, it also identified three broad prioritiesfor future investment: Core claims systemmodernization and replacement, analyticscapabilities, and workforce improvement.Priority #1 Core Claims SystemModernization and ReplacementCore claims system modernization is to three years. Smaller insurers (thoseP&C insurers’ first investment priority. with NPW less than $500 million) wereCurrently, P&C insurers rely on multiple as, or more, likely to be on an upgradeapplications to process claims: Half have path than their larger counterparts.between two and four applications andone-third have over five. A little over New options for core claims systemshalf (54 percent) of respondents said such as cloud computing and softwarethey have a core claims system which is as a service (SaaS) are rapidly gainingmore than five years old. Interestingly, a credibility. One in five (20 percent) ofhigher share (68 percent) of insurers with insurers plan to migrate claims to theNPW over $500 million has a core claims cloud or a SaaS model in the next twosystem that is more than five years old. years, and these options could be an alternative for another 26 percent ofNearly eight in ten (78 percent) insurers. An equal percentage of largerespondents said they were on an and small insurers are planning to migrateupgrade path for their core claims system; claims to cloud or SaaS models in theeight percent said such an upgrade was next two years, but a higher percentageunder discussion and only 12 percent of larger insurers are considering doingsaid no such investment was planned. so in the future – 36 percent of largerThis was a particularly high percentage insurers versus just 16 percent of smallergiven that 36 percent of respondents said insurers. A full 60 percent of smallerthat their last major core claims system insurers have no cloud or SaaS relatedupgrade took place in the last year, and projects in planning or under discussion.another 33 percent said that such anupgrade had taken place in the last two5
  7. 7. Priority #2 Developing Analytics CapabilitiesDespite the enormous potential of A full 80 percent of insurers said theyanalytics for P&C insurers, two-thirds used offline data obtained from Excel(66 percent) of insurers cannot take full spreadsheets and Access databases, andadvantage of the growing volume of data 74 percent said they used structuredavailable for claims management due to data commonly found in the core claimstheir inability to collect and analyze data. system in the claims process. Nearly two-Without the ability to collect and analyze thirds (62 percent) use unstructured datathe growing volume of data available— such as voice, text, pictures and video.including insights about consumers fromsocial media, usage data collected by As seen in Figure 3, substantial minoritiesmeans of telemetry and GPS, and asset of insurers currently use social media (40damage records collected by millions of percent), predictive models (34 percent)RFID devices—insurers are unable to take or location based data (34 percent) inadvantage of this information to refine the claims process but this share shouldand improve claims management. increase in the future based on the number of insurers who said they wouldThis problem is even more pronounced like to do so (20 percent, 32 percentamong smaller P&C insurers. While nearly and 20 percent, respectively). Predictiveone-third (32 percent) of larger insurers models are especially attractive toanswered “yes, definitely” to a question insurers who are planning to invest overabout their ability to collect and analyze $25 million in their claims function, withsuch data, only 16 percent of smaller 54 percent saying they would like to useinsurers gave the same answer. such models in the claims process.Figure 3. Use of Data in the Claims ProcessCurrently, which data do you most commonly use in the claims process and which ones you would like to use?Select all that apply. 80%Offline data (Excel spreadsheets, Access databases) 4% 74%Structured transaction data commonly found in the core claims system 8% 62%Unstructured data (voice, text, pictures, video) 12% 40%Social media (Twitter, Facebook, Linkedin) 20% A higher share of insurers who are planning to 34%Predictive models through tools like SaS, Business Objects invest over $25 million in their claims functions 32% would like to use predictive models (54%). 34%Location based data collected by means of telemetry and GPS 20% Currently use Would like to useSource: Accenture North American Claims Investment Survey, 2012 6
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  9. 9. Priority #3 Investing in the WorkforceThe claims workforce was the target More than half (59 percent) of theof some of the extensive cost cutting insurers surveyed see hiring or trainingwhich took place in response to the customer service professionals as a topfinancial crisis of 2008. While insurers priority in order to address customerwere reducing their claims workforce, needs. Among other programs tomany of their most experienced claims improve customer service and satisfyprofessionals are also at, or near, customer needs, insurers cited creatingretirement age. As a result, increasing or deploying mobile applications forthe size as well as enhancing the skills customers (57 percent), building digitalof the claims workforce is a top customer profiles available for claimspriority for P&C insurers. professionals during claims transaction handling, (45 percent) initiatives focusedMore than two-thirds (68 percent) of on improving net promoter scoresrespondents are either actively hiring (43 percent) and initiatives focusing onor planning to hire claims professionals, improving JD Power claims satisfactionas seen in Figure 4. Recruitment of scores (30 percent). Larger insurers, asthese individuals will take place among well as those planning to spend overcompetitors (82 percent), at universities $25 million on their claims function,(70 percent) and among other industries are more likely to begin initiativesoutside of insurance (48 percent). Among focused on net promoter scores (57the companies that are actively hiring percent and 62 percent respectively).claims professionals, 26 percent arefacing problems in hiring, with claimshandlers being the most difficult positionto fill, followed by claims supervisors andcustomer service representatives.Figure 4. Insurers’ Plans to Hire Claims ProfessionalsAre you actively hiring claims professionals? Where are you recruiting or planning to recruit claims professionals? Select all that apply. Among competitors 82% Yes 62% At universities 70%No, but we are planning 6%to in the next 12 months No 32% Among other industries outside of insurance 48%Sample base: All (n = 50) Sample base: Companies actively hiring or planning to hire claims professionals (n = 34)Source: Accenture North American Claims Investment Survey, 2012 8
  10. 10. ConclusionU.S. property and casualty insurers have ahigh awareness of the importance of the Insurers also expressed intent to expand their claims workforce. While there is no Methodologyclaims function and its impact on market doubt that many claims functions are Findings were based on a quantitativeperception, customer loyalty, and overall under-staffed, there is also a need to re- survey of 50 U.S. property and casualtyprofitability. At the core for meeting this think the role of the claims professional. (P&C) insurers. Respondents werechallenge is the ability for technology to Claims professionals armed with ready C-level executives involved in the claimsallow changes in systems and behaviors access to relevant information can play function. Of the individuals surveyed, 18and to address changing consumer a central part in meeting customers’ (40 percent) were the head of claims orexpectations, manage new forms of risk, expectations for rapid resolution and a equivalent; 21 (47 percent) were the VP ofand optimize claims outcomes. While positive overall experience. Claims or equivalent; and 6 (13 percent)the awareness is shared, so too are were the claims supervisor or equivalent.their concerns about the modernity and As the survey indicated, cloud-basedflexibility of their own core claims systems. SaaS models are rapidly emerging as Interviews were conducted by telephone viable options for insurers. All core in March and April 2012.While the insurers in our survey expressed systems upgrades, however, should bea willingness to invest in improving claims implemented with an eye to the future, Among companies participating, 16 (32performance by improving technology, allowing for maximum flexibility and for percent) had net premiums written (NPW)they must do so with a “foot in today and rapid changes in systems behavior and above $1 billion; 9 (18 percent) had NPWa leap into tomorrow”. This means that business processes, preferably without of $500 million to $999 million; and 25they must meet the needs before them, costly, time-consuming IT intervention. (50 percent) had NPW of $100 million toin terms of modernity and flexibility, $499 million.but anticipate those of the future by These actions must be done inpreparing themselves for harnessing data conjunction with a thoughtful view of theand enabling customers. entire claims operating model, including technologies, processes and people, inImportantly, P&C insurers should be order to truly unlock the value in claims.thinking about data collection andmanagement as the foundation foradvanced analytics. Analytics opens upa world of possibilities in claims, butonly for those insurers able to collectand organize the vast quantities of datacoming in from new sources such associal media, telemetry and GPS.9
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  12. 12. About the Author DisclaimerMichael Costonis is a Managing Director in This document is produced by consultantsAccenture’s Insurance practice, overseeing at Accenture as general guidance. ItAccenture’s Global Claims Business is not intended to provide specificServices. In that role, he oversees claims advice on your circumstances. If youstrategies, assets, capabilities, and sales require advice or further details on anydevelopment. Costonis has nearly 20 matters referred to, please contactyears experience developing, managing your Accenture representative.and deploying large scale technologysystems, business processes, and strategiesfor some of the world’s leading insurers,including property & casualty, life, andmulti-line insurance companies. In hiscareer with Accenture, he has workedwith more than 50 leading insuranceclients in 14 countries around the world.About AccentureAccenture is a global managementconsulting, technology services andoutsourcing company, with more than249,000 people serving clients in morethan 120 countries. Combining unparalleledexperience, comprehensive capabilitiesacross all industries and business functions,and extensive research on the world’smost successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses andgovernments. The company generated netrevenues of US$25.5 billion for the fiscalyear ended Aug. 31, 2011. Its home page © 2012 AccentureAll rights reserved.Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture. 12-3051