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Looking Back On 2010 And Forward To 2011 In The World Of Claims

Pop The Cork And Say Goodbye To 2010 And Look For A Brighter Future Ahead

I for one am glad 2010 is coming to a close. It’s been a tough year and just when you thought things wouldn’t get worse they did anyway.  Regardless, there is much to be thankful for including joyous family events, health and happiness.

Thanks For A Great First Year

I am so very proud of, and thankful to, the readers of the Claims SPOT for making our inaugural year so successful. Since our inception in January of 2010, we have been read in all 50 states and in over 100 countries. Our over 13,000 visitors to the site have looked at nearly 24,000 pages of 81 posts over they past year. The Claims SPOT received national recognition as the featured blog for Claims Magazine and was voted one of the top insurance blogs by Lexis/Nexis.  Thanks again to all who commented on our posts and helped to keep the discussion lively. We very much look forward to providing information that can truly help the world of claims in the coming year.

The year began with continued economic concerns, a poor job market and no recovery in sight. It has come to a close with a booming stock market, improved job numbers and a better outlook for 2011 (for the top ten insurance stories of 2010 check out National Underwriter’s). Looking back on the year in claims and looking ahead to the future of claims is always a fun exercise this time of year so here we go!

Staffing Crunches, Cut Backs And “The” Oil Spill

Global Recession and Staff Reductions. As with many businesses, the insurance industry was not immune to the economic crisis that began in earnest at the end of 2008 and continued so strongly in 2010.  Many claims departments cut back on professional and support staff as yet another victim of the recession. The “we need to do more with less” mentality seemed to dominate the landscape leaving claim managers scrambling to keep up with the normal pressures in claims.  More work for claims professionals meant relying more heavily on adjusters and attorneys to take on additional work increasing claim expense costs.  Trying to improve operations and take on projects to enhance the claims department needed took a back seat to the realities of the day’s needs. All this with a looming claims staffing crisis and decreasing talent pool in the industry (McKinsey study).

Deepwater Horizon. Really not much more needs to be said about this one. The tragedy surrounding the largest oil spill in US history dominated the headlines for much of the year. As we reported in June, the impact on claims will be extensive and even to this day have yet to be fully realized. What struck me as the most concerning was the public outcry that claims were not being paid quickly enough. As big a tragedy as this was, public pressure cannot create an environment for poor claims handling. Fraud and overpayment of claims will only result in increased premiums over time and will do nothing to help the consumers and those in need of compensation. I applaud the statement made by Kenneth Feinberg, head of the government led claims fund,  about paying “legitimate” claims. We in the industry must be reminded in CAT loss situations how important it is to pay those fair claims promptly, but to not just pay for the sake of paying (Leader on BP claims blames fraud for slow payouts).

Interestingly, despite no major hurricane hitting landfall this year, 2010 proved to be an active year for CAT losses worldwide (see Worldwide Insured Cat Losses Nearly Double In 2010).

Enough Of The Past, It’s Time To Look Forward

With the hope and belief that things are looking up this coming 2011 (2010 Now On Target To Be A Profitable Year For P&C Insurers), it is time for the claims industry to get back to work on improving their overall operations. Here at the Claims SPOT we are never shy about giving our two cents so here is what we feel are three key issues to be addressed in 2011:

Compliance Audits: Let’s face it – one of the reasons that the economic meltdown occurred was due to a lack of internal controls and compliance. Whether it has already happened, or is being considered, further regulation of the insurance industry is a certainty.  As a result it will require further diligence on claims departments to ensure claims are being appropriately managed and reserve and settlements that are put forth are accurate reflections of losses. Having the controls in place will not be enough. While it may sound silly, it will be important to have controls over the controls. What this means is it will not be enough to just perform an audit from time to time. Guidelines as to when and how those audits are done will be necessary to demonstrate to governing bodies that procedures exist and are being followed.

Whether you are a reinsurance company reviewing Cedent’s claims, a claims department looking at best practices, an excess carrier reviewing a primary carrier’s losses or the paper behind a MGA managed program, having a proper audit program in place will be a key element going forward.

Next Generation of Claims Professionals: We hear it again and again that the industry will be in crisis if they do not begin to address talent being attracted to claims. As the industry has matured, specialization has resulted in cost savings and better claim results. The same specialization has also contributed to stagnating the profession.  As the older generation of talent begins to leave claims departments, the cross-disciplined experience in claims is disappearing. This will need to be addressed if the talent needed for the next decade will be ready to handle even more complex claims.

Technology and Claims:  Used correctly it can save an organization tremendous amounts of time and money, used incorrectly it will cost it more.  While there is still a long way to go, and it still amazes me to learn how far behind many major claims organizations are, the use of technology in claims has been improving. Unfortunately many groups fail to grasp what these systems can do. Either they spend too much money to buy a system not designed for their organization, or they fail to adopt their process to the new technology, failure becomes inevitable.

For 2011 adopting new technology that can help claim professionals be claim professionals and not just create more work will be the imperative. Using the mountains of data contained in the modern claims system to help make better decisions, and assist the rest of the organization to benefit from the claims data, will be the wave of the future. Regardless, it will be important to know what you are, know what you need, be selective, and implement correctly to get the benefits that new technology can bring to an organization.

Of course there are more trends from the past and future. Tell us what you think the future will bring!

Posted in Best Practices, Claims Technology, Commentary, My SPOT, SPOT on Issues, SPOT on Ops.

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2 Responses

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  1. Stephen Applebaum says

    Thank you for creating this specialized forum for us to learn and share opinion and information on the insurance claims industry in which we work. I particularly enjoy the wide range of perspectives and disciplines represented.

    From my perspective, I see the following challenges and opportunities in our industry for 2011 and beyond.

    Auto claim frequencies will remain historically low, even as the economy recovers, as a result of new and permanent economic and technological influences and the most successful carriers will begin to adapt by redesigning claims handling strategies and infrastructures accordingly.

    Innovation and improvement in claim outcome will accelerate, driven by deeper and wider supply chain integrations; increased adoption of of specialized, segmented outsourcing solutions; and the arrival of more specifically focused, easy-to-use, powerful and effectve Business Intelligence decisioning tools.

    Consolidation in the P&C space will resume as carriers with excess cash seek earnings growth in an anemic market and consolidation between claim service providers will continue as the highly fragmented, historically local vendor model succumbs to the efficiency-driven business demand for national (and international) solutions. Look for disintermedation within traditional claim service processes through consolidation and disruptive technologies starting in the higher dollar spend areas.

    Social media will create as many new challenges as opportunities for P&C carriers in all departments. Privacy, compliance, data security and authentication will require new technology solutions. Claim operations will begin to mine GPS and telematics technologies as well as personal information footprints in reviewing and defending claims. Look for smaller, more nimble, global technology vendors to make inroads in these areas.

    For sure, technology will continue to be the single biggest driver of change and improvement.

  2. Guy Hoffman says

    Congratulations on a terrific inaugural year. We will look for great opinions and insights from The Claims SPOT in the year ahead and for many years to come.

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