Whacking Costs Out of the Claims Process

In 2004, the property/casualty insurance industry wrote more than $450 billion in premium. About 75 percent, $337.5 billion, was spent covering losses and loss adjustments. Four elements contributed significantly to these high costs:

-The legal system: Insurers can realize great savings by improving the ways in which they interact with law offices. Applying litigation management to the claims-management process can yield savings for carriers.

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-The health-care system: Medical bills frequently are entered more than once and often are inaccurate. Medical case managers spend time reviewing those bills, and every manual process contributes to cost. Automated medical bill review, integrated with the claims workflow, creates cost-saving efficiencies, facilitates return-to-work, decreases loss-adjustment expenses and improves loss ratios.

-Adjustment processes: 80 percent of claims handled by adjusters are routine. Expert systems--powered by rules engines and knowledge-based software--can process those automatically, leaving the adjuster free to review and more effectively manage the remaining 20 percent. Such automation--integrating information such as accident reports and background information--reduces cycle time and overall cost.

-Compliance management: Adjusters can spend up to 50 percent of their time satisfying compliance requirements. All of these processes can be automated--from selection and collation of mandatory and optional forms to identifying companion documents, from managing notice periods to identifying appropriate recipients, from state compliance to bureau submission.

MADONNA EDDY-BROWN and BADRI NARASIMHAN. Eddy-Brown is an executive with Insurity Inc., a property/casualty software company. Badri Narasimhan is vice president of Insurity's claims business unit.

December 1, 2005

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