Finally Breaking Through; Technology-Based Solutions for P&C Insurance Claims
While some incrementally better claim solutions have been adopted by the P&C Claims industry over the past 25 years, very few of these have had the kind of disruptive impact on this space that have transformed other market segments.
That is now changing – and quickly!
Historically, technology was seen as more of an anchor than an enabler for the $300B P&C claims industry segment, although other insurance business units, including Underwriting and Distribution, have taken better advantage. Claims was viewed by virtually every carrier as a “core competency” and the experienced claims adjuster was considered an irreplaceable asset. Insurance company loyalty to its employees has been an admirable and attractive draw for talent, but is becoming unsustainable.
New web-based insurance distribution models have emerged and are getting traction, a few older well established carriers have transformed their businesses into marketing juggernauts (Allstate, GEICO, Progressive) and still others have simply excelled at the art of claims customer service (Amica Mutual Insurance Company, USAA).
Now, in tandem with the improving economy and the renewed view of Claims competency as a customer service and retention imperative, that is changing rapidly. Information and communication technologies are advancing at warp speed and combining to create a powerful force for transformation. Innovative insurers are employing new business models to gain a competitive edge.
The visionaries in the Claims industry who have earned the active support of their C-level colleagues and who also understand the critical competitive importance of claims excellence (and doing it with less resources) are now embracing a wide range of technology-enabled Claim Solutions. The beneficiaries of this movement typically include the largest, best established consulting and service leaders in the space. However, some of the best new “disruptive” technology entrants are also benefiting and are either being funded by investment capital and/or acquired early on by more strategic established players.
Major investment firms participating in this space include Aurora Capital, Bain Capital, FirstMark Capital, Grey Mountain Partners, GTCR Golder Rauner, Hellman & Friedman, Investcorp, New Spring Capital and Stone Point Capital plus numerous other Private Equity, Venture Capital and Angel investors.
The major areas of the claim process to which these new, innovative and disruptive technology-enabled solutions are being applied include; outsourcing of claims, First Notice of Loss through complete claim resolution, supply chain management, telematics and accident management; vehicle and glass repair process management, real-time repair status transparency for carriers, agents and policyholders; real-time parts procurement integrated with estimating and repair shop management systems; vendor contract management; predictive analytics for fraud detection, exception flagging and subrogation; compliance; litigation management; workforce mobility and scheduling; claim self-service; salvage asset management and recovery and medical and injury management.
Some of the major beneficiaries of this uptake include larger public and private companies such as Microsoft, Oracle, IBM, SAP, TATA, Accenture, SAS, CGI, CSC, StoneRiver (Fiserv), AON eSolutions, Sungard, Guidewire, Crawford & Co., Cognizant, Verisk/ISO, Solera/Audatex, CCC Information Services, Mitchell International,, Ebix, Copart, KARS (IAAI), Cox/Manheim Auto Auctions, Reed Elsevier/LexisNexis, Wolters Kluwer, J.D Power, LKQ Corp., Enterprise Rent-A-Car, Hertz, Avis, Safelite, CSC, Vertafore (recently acquired by TPG Capital), Innovation Group, R.L. Polk/Carfax, and Symbility. Diverse, well established industry-owned non-profits and associations including Arbitration Forums, CIECA and I-CAR are heavily leveraging technology to expand their value to the insurance industry as well as all supply chain partners.
Other smaller and/or newer entrants gaining traction with their innovative technology driven solutions include AutoWatch. APU Solutions, Blue Wave, ClaimForce, Cross Country Insurance Group/ATX, CynCast, EagleView Technologies, Enservio, Harmon Solutions Group, HyperQuest, Injury Sciences, ClaimHub, iPipeline, Innovation Group, Summit Software, Trover, Trumbull, QCSA, OPSTrax plus hundreds more emerging and talented companies in various stages of development.
With an estimated $15B in process and service efficiency savings on the table, the only surprise is that it has taken this long.
Some practical, powerful examples of these “breakthroughs” in Claim reporting and statusing:
• Self-service claim reporting on carrier websites which confirms coverage and links policyholders to service provider reservation systems for required services such as preferred repair shops and rental cars so that claims resolution begins immediately at any time of the day or night. By the time the lead adjuster is reviewing the claim, the insured may have already booked a repair appointment and a rental car
• Online repair status including images of vehicles in various stages of the repair process and the ability of the insured to chat online with the service manager and the claim adjuster.
• Text messaging to insureds advising them of status and when their repaired vehicles will be ready.
These services do a lot more than just improve customer satisfaction and post-claims retention (which in itself has great value). They also dramatically reduce carrier costs in labor and cycle time which in turn reduce loss adjusting expenses such as car rental. Further, they enable repair facilities to better manage their schedules and resources, bringing efficiencies that represent better operating margins.
Other valuable emerging “breakthroughs” that will encourage further adoption through solid business value propositions:
• Conditions now exist (technically and logistically) to enable appraisers (repairer, staff or independent) to automatically procure alternative repair parts while writing automated estimates in real-time. All existing, appropriate and conforming parts from credentialed suppliers can be shipped locally in one consolidated (aftermarket, salvage, remanufactured) delivery. Original OEM parts suppliers are likely to co-operate in this process as OE repair parts percentages erode further.
In a slightly further-off but still inevitable “Disruption”, I see the insurance Total Loss salvage disposal and recovery process leveraging currently available technology to “disintermediate” the current supply chain. Large, national parts companies are already rolling up the nation’s recyclers and acquiring large aftermarket and remanufactured parts suppliers and even doing deals with some leading OEMs to provide “one stop” procurement and rapid local delivery of repair parts. How much longer can it be until one of more carriers decides to pursue or at least test direct drop-ship procurement for its repair shop network providers?
Further, carriers will realize that the current salvage auction sale process of all of its Total Loss automobiles is unnecessarily costly and start selling at least some of their salvage direct to dismantlers. Finally, as SGI has been doing successfully in the Canadian province of Saskatchewan for many years, specific salvage parts could be “harvested” and set aside for the repair of the insurer’s future damaged vehicles – which is about as “green” as it gets in the former “junk yard” industry!
There are other, practical examples of innovation taking place right now in the insurance claims industry and this pace will continue, if for no other reason, than for participants to remain economically competitive. Not only can technology drive cost efficiencies and improve the all- important customer satisfaction and retention rates, but it enables smaller carriers to compete on a more level playing field. Competition will make the insurance industry and its thousands of supply chain partners healthier, whether they are Fortune 500 or family businesses – and make for a much enhanced claim experience for policyholders at that critical “moment of truth”.
About Insurance Claim Solutions (ICS)
Exclusively serving the insurance claims supply chain industries, ICS is a strategic advisory firm offering deep subject matter expertise and a unique blend of research, advisory and consulting services to insurance companies, service and solution providers. ICS advisory services are actionable, business-driven and research-based – an excellent resource for companies eager and ready to embrace change and achieve business success.
Additional information about ICS can be found at www.insuranceclaimsolutions.com.
SOURCE: Stephen Applebaum, Principal, Insurance Claim Solutions, Chicag
Peter Lynch to Head LexisNexis Insurance Exchange
Peter Lynch to Head LexisNexis Insurance Exchange
Lynch will lead new alliance formed through The Council for Insurance Agents and Brokers, MarketCore and LexisNexis to improve the efficiency and transparency of the intermediary distribution system.
By Katherine Burger/Claims Magazine
May 18, 2010
LexisNexis Risk Solutions (New York) has appointed Peter C. Lynch as head of the LexisNexis Insurance Exchange.
In his new role, Lynch is responsible for the executive leadership, strategic vision, and policies and procedures for the LexisNexis Insurance Exchange, a new business and remarketing placement system that enables the flow of data and documents between brokers and carriers. Currently in development, according to the company the exchange will combine both technology and information at each of the key workflow steps of the insurance transaction process to reduce redundant work and costs, as well as to enable agents and brokers to offer clients a broader choice of insurance products.
“LexisNexis Risk Solutions has committed to improving the efficiency and transparency of the insurance distribution system by investing in the LexisNexis Insurance Exchange through our people, resources and technology,” said Jeffrey Glazer, SVP of LexisNexis Insurance Solutions, in a press release. “With more than 20 years of insurance and technology expertise, Peter is a natural leader to execute the exchange development and launch, and to continue our alliance with The Council for Agents and Brokers in this important industry effort.”
Most recently, Lynch led strategic product and services for LexisNexis Insurance Solutions, overseeing both the development and marketing of the company’s portfolio of claims services. In addition, Lynch was responsible for exploring new international opportunities across the LexisNexis Insurance Solutions business. He joined ChoicePoint, now a part of LexisNexis, in 2005. Prior to ChoicePoint, Lynch served as SVP and general manager of AIG Technologies (AIGT). Previously, he was president of Cover-All Technologies.
The LexisNexis Insurance Exchange is the result of an alliance formed through The Council for Insurance Agents and Brokers, MarketCore and LexisNexis to improve the efficiency and transparency of the intermediary distribution system and ensure all types and sizes of industry participants can utilize its services. Pilot programs for commercial lines are scheduled to begin in the fall of 2010, with full production scheduled for early 2011.
M&A Activity Heating Up: Symantec to Buy VeriSign’s Security Business
Symantec to Buy VeriSign’s Security Business for $1.3B one week after SAP acquires SyBase for $5.8B
Symantec Corp agreed to buy VeriSign Inc’s widely used technology for securing payments over the Internet in a deal worth $1.28 billion, the companies said Wednesday.
By Reuters
May 20, 2010
* Symantec to pay $1.28 billion in cash
* VeriSign shares little changed
SAN FRANCISCO – Symantec Corp agreed to buy VeriSign Inc’s widely used technology for securing payments over the Internet in a deal worth $1.28 billion, the companies said Wednesday.
The acquisition gives Symantec, the world’s biggest maker of security software, VeriSign’s Internet security business including its crown jewel — the SSL technology for securing electronic payments and other Internet transactions by scrambling the data when it travels over the Web.
It comes less than a month after Symantec agreed to spend $373 million to buy two other makers of technology for encypting data: PGP Corp and GuardianEdge. Together the three acquisitions are part of a strategy by which Symantec is focusing on protecting content, rather than taking its traditional approach of securing the equipment where information resides.
“Devices are irrelevant,” Symantec Chief Executive Enrique Salem said in an interview. “An iPhone is cool today. But who knows what will be cool tomorrow.”
Salem said that he had approached VeriSign, whose headquarters is 200 yards from his office. As far as he knows there were no other bidders.
“They eat in our cafeteria,” Salem said. “We’ve been in discussions for a very long time.”
Sale of the security unit leaves VeriSign in one main business — managing more than 100 million Internet domain names, including those ending in .com and .net. Over the past three years, it has sold off or shut down nearly 20 business units to focus on its high-margin Internet domain business.
VeriSign’s security businesses accounted for about $410 million of its $1 billion in sales last year.
Symantec expects the deal to lower its non-GAAP earnings per share by 9 cents in fiscal year 2011, but to start adding to profit in the quarter that ends in September 2010.
VeriSign shares were little changed in extended trade on Wednesday, after they fell 0.85 percent on the Nasdaq to $27.99. They had climbed 5 percent Tuesday following media reports that VeriSign was poised to announce the deal.
VeriSign is well known for its secure socket layer, or SSL, technology that encrypts financial transactions over the Internet and authenticates the identity of that site to the user. Some 2.3 million websites use VeriSign’s SSL products, according to Symantec, which plans to cross sell its other products to those customers.
VeriSign also offers other identity verification services as well as one that ensures web sites are safe to browse, which account for just 15 percent of revenue. (Reporting by Jim Finkle. Editing by Robert MacMillan and Carol Bishopric)
Copyright 2010 by Reuters. All rights reserved.
M&A Wave Ahead
M&A Wave Ahead
Recovering equity markets may foretell consolidation in the insurance industry, a new report says.
Bill Kenealy
Insurance Networking News, April 27, 2010
A slowly recovering economy and a lingering soft market for insurers may portend an increased pace of consolidation in the insurance industry, a new report finds.
The report, “Insurance M&A: Overcoming the Challenges and Leveraging the Lessons Learned From the Financial Crisis,” was authored by Howard Mills, director & chief advisor of the Insurance Industry Group at New York-based Deloitte LLP, and by David Simmons, director and insurance M&A leader, Deloitte Tax LLP. The authors contend that after a prolonged lull in wake of the credit crisis, the environment is now favorable for mergers and acquisitions.
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“Equity markets are rising, interest rates are low, and there are a growing number of companies with significant cash positions,” the report states. “Meanwhile, insurance companies are looking for ways to grow premium in the current soft market and there is ample room for consolidation — all favorable signs for an upturn.”
Yet, the report says one difference moving forward is that acquirers will place an even greater emphasis on risk management during the evaluation stage of a merger or takeover. The authors suggest that insurers focus on risk during the due diligence process and extrapolate how the newly acquired entity will alter the acquiring organization’s risk profile. “A focus on understanding the risk profile of the acquired subsidiaries and integrating them into the corporate culture is critical in driving and sustaining value from the acquisition.”
Despite this new appreciation of M&A-related risk, the authors state the lure of acquisitive growth will be hard for insurers to resist. “As we see signs of recovery unfold in the marketplace, it is likely that insurers will leverage the increasing favorable conditions to improve deal-making and integration activities— all of which can lead to premium growth and strong competitive advantage onward.”
Telematics: The Game Changer/Reinventing Auto Insurance
Reinventing Auto Insurance
Allstate’s Exclusive with Copart; Game Changer or One-Off?
By Stephen Applebaum, Information Technology Solutions
….enabling P&C Supply Chain Partners
The announcement this week that Allstate has selected Copart (CPRT) as its exclusive national provider of vehicle sales and auction services in the U.S. and Canada may be more revealing than it is material to the earnings of either Copart or its arch-rival, Insurance Auto Auctions(division of KAR), both public companies.
What is really significant here is that the second largest U.S. auto insurer has entered into an “exclusive” arrangement with a national claim services provider. The fact that CPRT already had a defacto exclusive with Allstate and has sacrified some revenue to win the deal does not detract from the potential impact of the Allstate decision.
Historically, national carriers have intentionally spread their $300B claims services spend across multiple national and regional vendors to encourage competition, guarantee service quality and control costs. In doing so, they have also effectively “commoditized” the majority of these products and services. In fact, Allstate recently “opened” its Direct Repair Program to all major estimating systems, thus ending an 18 year virtual exclusive relationship with a longtime estimatics and claims technology partner.
Even in other large claim services segments, including insurance replacement car rental and auto glass, the dominant vendors sometimes enjoy preferred but not exclusive relationships. The carriers’ strategy of fostering competition also plays well in their highly regulated environment where pro-consumer legislators work to protect customers’ freedom of choice of vendors and discourages carriers from steering customers to their preferred vendor partners.
If the Allstate/Copart deal is a bellweather for changing carrier attitudes towards exclusives, there are a lot of second and third tier claim services vendors whose margins and revenues are at further risk. Diversification or consolidation by these companies will become competitive, if not survival, necessities.
Stephen Applebaum
Information Technology Solutions
….enabling P&C Supply Chain Partners
Toyota Recall and Modern Claims Systems
Toyota Recall and Modern Claims Systems
February 12th, 2010 by Karlyn Carnahan/Novarica Insurance Technology Consulting
Toyota has issued recalls for more than 8.5 million vehicles with faulty gas pedals and floor mats that trap the accelerator, and for its Prius hybrid models, which may require a software upgrade for the antilock brake system.
These recalls have triggered some insurance carriers to begin reviewing closed claims for these recalled models to determine whether subrogation actions are warranted. If the mechanical difficulty was a key contributor in the claim, subrogation to the manufacturer may well be warranted, reducing the final value of the claim.
For many carriers with older systems in place, this type of review is virtually impossible. Older claims systems typically don’t capture the make or model of a vehicle as structured data. Certainly the information may be in the adjuster notes, but text mining is still not a common practice for most carriers. This places carriers with older systems at yet another disadvantage against those who have upgraded.
Modern claim systems usually do have fields for capturing the make and model of the vehicle. This allows carriers to do a quick run to identify those claims that may be worth a second look. And many have subrogation modules built in that allow a carrier to easily submit subrogation claims and track them to assure they don’t slip through the cracks.
This ability to easily perform ad hoc analyses can be used for other, less public events. Say a physician is identified as having a fraudulent pattern of billing. Newer systems make it easy to identify any claims where that physician has provided treatment for a closer examination.
When making a business case for a claims system replacement, it’s fairly easy to identify the operational improvement by modernizing workflows. But modern systems carry a lot of other benefits that can impact the actual loss dollars paid. Overall, the benefits of modernizing continue to add up.
Vendor Consolidation Gains Momentum
Mergers and acquisitions in the insurance vertical software solutions industry will accelerate, according to a November 2009 Novarica report. The researchers anticipate numerous deals in the $30 million to $75 million range but are reluctant to speculate about the potential of larger-scale deals involving larger vendors that have moved to acquire portfolios of insurance solutions. The report encourages insurers to be aware of the possibility that their solutions vendors could be acquired, based on a vendor’s status as one of three types of companies: Rising Star; Good Tech, Small Company; and Stagnant Product Provider. According to the report, “Acquisitions of a Rising Star or a Good Tech, Small Company provider are likely to result in increased investment in the product, while acquisitions of stagnating product providers are likely to result in forced conversions or migrations.” As a result, the report advises, “Insurers should protect themselves as much as possible through contractual means, including demanding base code escrow and service-level guarantees that survive change of control.” — Anthony O’Donnell/Information & Technology/12.21.09
Insurers Test Mobile Applications
If 2009 taught us anything, it’s that people were willing to forget the last bizarre and disturbing decade of Michael Jackson’s life. But more important, it also taught us that people enjoy a good mobile app. In April, before the site even reached its first birthday, more than 1 billion applications had been downloaded from Apple’s iPhone App Store. That number has since doubled. A very small but growing percentage of those downloads involved apps developed by insurance companies. With carriers such as USAA, Nationwide and AXA Equitable leading the way, the insurance industry is beginning to recognize the importance of not just the mobile channel as a whole, but the mobile application channel specifically. And it’s a good thing: The iPhone has shown no signs of losing popularity, while recent offerings based on Google’s Android mobile operating system promise to expand the mobile application development universe. As consumers become accustomed to mobile apps in their everyday lives, they’ll demand similar functionality from their insurance providers. — Nathan Conz/Information & Technology/12.15.09
Technology Innovation Morphs Into Strategy
Technology Innovation Morphs Into Strategy Insurance Networking News, December 1, 2009
INN Editorial Staff Insurance Networking News is proud to present the 2009 INNovator Awards, a formal recognition of superior performance in business and technology innovation. This year’s winners were determined by a panel of judges representing INN staff editors, two well-known and respected industry experts and INN’s prestigious editorial advisory board members.
INN would like to thank advisory board members Eric Bulis, SVP & CIO, SBLI USA Mutual Life Insurance Co., Ursuline Foley, SVP and CIO, XL Capital/XL Global Services/XL Reinsurance; Dennis Mehmen, CIO, VP, Business Information Services, Grinnell Mutual Reinsurance Co.; Mike Murray, VP, finance, OneBeacon Insurance Co.; Michael Romano, SVP, risk & administrative services, Highmark Inc., and Anthony Sisti, information systems director, Travelers Insurance, for bringing a superior, peer-based review to the process.
In order to share our readers’ expert best practices, we’ll present the top five INNovators’ case studies in future consecutive issues. In this issue, we present our winner’s story.
INN invited the two experts, Mark Gorman, principle with Mark Gorman & Assoc., and Matthew Josefowicz, director, insurance, at Novarica, to reflect on the INNovators’ ever evolving and distinctive approaches to innovation.
— Pat Speer Mark Gorman Where was innovation the most strategic for insurers in light of this year’s economic constraints?
Gorman: A good friend once told me that when times get tough, the best strategy is to focus on the basics of business success – increase revenue, decrease expenses and improve customer service. Of the five finalists, two are actively working to improve the customer experience, two are focusing on reducing expenses and improving productivity in customer-facing processes, and two are leveraging innovation to maintain their current book or increase revenue through market expansion.
The question is not what area to best apply innovative techniques, but what areas make sense for the organization to turn to first.
Josefowicz: It’s said that necessity is the mother of invention, and this was a year full of necessities. Insurers needed to run more efficiently, take advantage of market opportunities caused by wounded competitors, or re-invent their own product line and internal processes to meet the demands of a rapidly changing market. I’d say the most important attribute for INNovators this year has been the willingness to innovate and to invest in agility. If there was one thing that 2008-2009 proved to insurers, it’s that things can change quickly and that complacency is dangerous.
This is a time of change for the insurance industry: How can innovation best manage related challenges? Gorman: A recent study found that during times of significant change, the ability to innovate is directly related to not only the ability to survive, but to thrive. The study cited internal and external resources as primary sources of innovation. Two of the finalists this year took advantage of internal resources as a source of innovation by implementing technical tools and disciplined methodologies to support innovation initiatives. Their success in vetting and applying these ideas supported growth and profitability metrics, a marked contrast to a market faced with reductions in premium volume, combined ratios and profitability.
Josefowicz: Of course this depends on where an individual company is starting, but they must be willing to constantly re-examine business processes and product attributes. Insurers need to constantly ask themselves why they do things they way they do, and if there’s another way that’s more valuable for customers and profitable. Matt Josefowicz IT only provides the tools to execute insurance business plans.
What is the role process innovation plays in creating critical alignment between the business and IT in order to accomplish these objectives?
Gorman: The very demand for, and presence of, innovation, process or otherwise, creates a dialog between business and IT that is critical to business and IT alignment. The deployment of innovative applications demands process agility, information transparency, data quality and infrastructure flexibility. An increase in information made readily available and actionable, and technology supported and enabled processes for surfacing innovative ideas, all represent significant utilization of IT capabilities in support of non-traditional business initiatives. Some of this year’s finalists highlight the benefits of collaborative initiatives where vendor resources and capabilities can be leveraged for mutual benefit.
Josefowicz: I object to the “only” in the first sentence! Insurance is an information business, and information technology is absolutely critical to nearly every capability that insurers need to deploy. We’re seeing the percentage of IT groups that are regarded as strategic partners by the business skyrocket, we’re also starting to see a lot of cross-promotion or merging of roles between the CIO and COO.
How should insurers consider innovation as they engage the customer in new ways with new products?
Gorman: Focusing on the customer is becoming more central to the protection of market share and current book, let alone strategies for growth. As in the broad market, organizations that innovate in providing the customer and clients what they want, when they want it, where they want it and how they want it, fare well in establishing market position. This year’s finalists show the benefits to insurers of doing so as well.
Josefowicz: Customer expectations have probably changed more in the last 10 years than in the prior 50, and that has everything to do with the speed and accessibility of information. Insurers need to make sure they can deliver information to customers on demand through the channels they want to use. At the same time, there is more information about customers available to insurers than ever before, and this year’s INNovator candidates prove why it’s important to leverage that information in designing and marketing products that meet customer needs for both protection and comprehensibility.
(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.
