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Today, the ability of an insurance carrier, third-party administrator or reinsurer to respond quickly, accurately and fairly to reported claims is more important than ever. Outdated legacy claims systems are becoming more costly to operate and often have cumbersome integration features. Increasingly, claims are being processed using browser-based technology, in a real-time environment. By upgrading their core claims technology, insurers can gain efficiency in loss reporting, document management, reserving, subrogation and other business process management capabilities.

"Many carriers are in the process of deciding whether to replace their legacy claims systems with modern technology," says Donald Light, a senior analyst in the insurance group at Celent LLC, a Boston-based research and advisory firm serving the financial-services industry. "The good news for insurers is that there are a number of very good systems--with broad functionality, good connectivity and modern technology--from which to choose.

The choice of which technology to use is largely dependent upon what the claims organization is looking to achieve. Some of the major business drivers for core claims systems upgrades include: regulatory compliance, cost reduction, Web enablement, consolidation and integration of claims systems, business process flexibility and improvement, and product flexibility.

"Technology is only a tool that serves the business purpose," says Badri Narasimhan, vice president, claims strategy, at Insurity Inc., a ChoicePoint company based in Hartford, Conn. "The property/casualty industry has done a good job of investing in technology on the underwriting side of the house, and is just beginning to increase investments on the claims side. Losses have now risen to account for about 85 percent of the combined ratio, forcing more carriers to focus on loss ratios and the ability to impact both pure losses (claims paid) and loss-adjustment expenses."

The result, he says, is carriers are looking to replace their older legacy systems with more modern and efficient technology.

A majority of the claims applications offered by vendors run on modern platforms such as Java J2EE, or Java 2nd Enterprise Edition, or Microsoft .Net. These platforms work particularly well for the maintenance and customization required by insurance carriers, says Light. "As carriers migrate to .Net or the J2EE platform, they will typically include the workflow and rules functionality being sought within updated core claims systems," he notes.

"In the past five to six years, there has been a much stronger focus by insurance carriers on system architecture, largely focused on how the solution is designed to meet the business needs of the organization," says Phil Ehlen, chief technology officer at Computer Sciences Corp.'s Financial Services Group, based in Austin, Texas. "Technology is the facilitator of change and innovation in business, and newer claims systems provide carriers with the tools to manage claims, identify fraud and communicate with other third-parties engaged in the claims process."

ARCHITECTURE MOST IMPORTANT

While the platform a claims system is built upon is important--whether .Net or Java-based--it is far less important than the architecture of the system itself.

"Java-based and .Net platforms are the tools that enable certain architecture and design functions," says Eddie Jones, senior vice president, product management and marketing, at Fiserv Inc., a Brookfield, Wis.-based provider of information-management systems and services to the financial

and health-benefits industries. "The system architecture has to be flexible and adaptable and have the ability to evolve as business rules and processes change over time.

"The core solution is never going to be all things to all people," says Jones. "What's most important is the ability to right-size the platform infrastructure to your business."

For Dave Buttram, a senior project analyst at IMA Financial Group Inc., an insurance brokerage and TPA based in Wichita, Kan., the need for flexibility and customization was a key factor in choosing a new claims management system. IMA was using a 20-year-old policy management system that also provided claims-handling services for its agency clients, alongside of a DOS-based application for its TPA/self-insurance management services.

"We needed a dedicated claims management system that would give us the ability to share information between our two databases and communicate with our clients," says Buttram. "We chose a Web-based application called Riskmaster, provided by Computer Sciences Corp., that provides us with a multitude of tools to manipulate and manage our claims data. The system uses both Windows- and Web-based applications, which works well for our agency and self-insured clients.

"The key," says Buttram, "was to find a standard platform that would allow us to provide our customers with the information they need in a more timely fashion. The new system has allowed us to speed up the claims management process and provides greater reporting capabilities. Over the long term, we expect to greatly reduce the cost of claims and improve client retention as a result of the increased efficiencies the system provides."

Rather than focusing strictly on platform infrastructure, insurers are turning to a service-oriented architecture as a means of making the claims process more seamless and automatic. "With SOA, it doesn't matter what type of technology platform you're using," says Insurity's Narasimhan. "The SOA creates a 'super-nozzle' that enables communication across all business partners in the claims industry--including adjusters, attorneys, health-care providers, third-party administrators and insurers--and keeps the workflow moving seamlessly."

SOA eliminates the need for all programs to be written in the same language. "A service-oriented architecture can bridge various applications electronically, integrating multiple systems and providing a seamless user experience," says Steven Dorn, chief marketing officer at Visual Risk Solutions Inc., an RMIS and claims-administration technology company based in Dublin, Ohio, and a subsidiary of the Frank Gates Cos. "This technology can have a significant effect on claims outcomes, due to its ability to streamline the reporting process, detect fraud, accurately set reserves, and deny or pay claims faster."

The ability of claims systems to "talk" to one another, via the Web or other secure applications, will help to further streamline the claims management process.

"Browser-based platforms provide instantaneous access to information to help accelerate the claims reporting process," says Steve Schmutz, vice president of sales and marketing at MountainView Software, based in Kaysville, Utah. "Adjusters now have the ability to manage claims from the initial report to final resolution. And because many of the newer claims management platforms are Web-based, the tasks of installing software or making database updates are eliminated and IT managers are freed to work on other priorities within an organization."

In addition, so called "smart client applications" now give carriers and TPAs the ability to create their own Internet addresses for managing claims, reducing the need to pass sensitive claims information through the public Web.

"Smart client technology enhances the security of claims data by eliminating the need to move information over the Web," says Ray Comas, director of development at Visual Risk Solutions. "This technology gives carriers control over information that flows to the client, health-care providers, adjusters and attorneys. The key to a successful claims management system is the ability to integrate with other platform-based products, via a single user interface that provides the ability to obtain, share, measure, qualify and standardize data."

MINDY TORAN lives in Pennsylvania.

December 1, 2006

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