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Claims Management System Buyer’s Guide

How to determine what technology is right for you

October 25, 2022 Photo

Modern property and casualty claims system capabilities have evolved from legacy technology that simply tracks financials, claim notes, and documents, to fully data-driven processing engines that can connect to an array of ecosystem partners. Insurers now have faster access to new features and functions as solution providers migrate to cloud/Software-as-a-Service (SaaS) solutions.

Since the beginning of the COVID-19 pandemic in 2020, activity for new claims platforms purchased on a standalone basis or as part of a suite has steadily increased. Insurers are seeking new ways to improve adjuster efficiency and manage increasing loss costs due to inflation. In modern systems, insurers can expect full integration with third-party solutions such as estimatics, bill review, predictive analytics, and payment platforms.

Deployment of digital processes from first notice of loss (FNOL) submission to claim payment are accelerated by new platforms. Fully integrated analytic-driven claims processes are being used for straight-through processing (STP) and are assisting adjusters with traditional adjudication. Analytics for assignment, severity identification, fraud, and subrogation potential are top claim system integration priorities.

The Market

The majority of solutions in today’s market cover basic claims transactions, workflow, tasks, diaries, and management functions; and they come with varying degrees of configuration capabilities. Most systems also include the ability to define business rules for routing claims and to escalate items that require review and approval.

The following trends are currently shaping the present and future of the claims management market:

Easy-to-use configuration tools to modify business rules, screens, workflows, and data continue to evolve. Insurers have individual approaches to the claims handling process to meet different customer and market demands. The ability to easily modify the data collected at FNOL or change assignment rules to support catastrophe processing quickly is critical. Solutions that enable carriers to perform these tasks easily are desirable for traditional commercial and personal lines carriers.

Breadth of claims ecosystem partner integration is a competitive differentiator. Third-party vendor solutions, including insurtech, are critical elements in the claims handling process for a variety of services, including estimatics, bill review, imagery analytics, digital payments, and predictive analytics. Solutions with a robust set of APIs that easily integrate with third parties enable carriers to reduce implementation costs and improve speed to market for new capabilities.

SaaS solutions are removing obstacles to release upgrades. Solution providers that have evolved or built their platforms to be true SaaS solutions offer carriers more frequent releases with less disruption due to upgrades. SaaS solutions are also enabling more robust DevSecOps self-service capabilities for carriers, although the maturity varies significantly by solution provider.

Data- and analytics-driven workflow automation are extending traditional business rule automation. In addition to traditional business-rule-driven workflow automation, implementation of data- and analytics-driven workflows can improve loss outcomes and reduce loss adjustment expense. Solutions that enable early identification of severity, fraud, and subrogation potential and the automated assignment to the right claim professionals enable carriers to have a competitive advantage.

Fully integrated omnichannel communication with file notes is an emerging capability.

Communication channels (e.g., text, chat, portal collaboration with claimants) are improving the overall claim experience. Automated collection of claimant interactions via these channels into file notes simplifies adjuster workflow while optimizing customer experience.

Embedded analytics improve adjuster efficiency and claim outcomes.

Predictive analytics that are fully integrated into the claim workflow eliminate the need for adjusters to go to other platforms to review AI or machine learning-generated insights. Different risk scores (e.g., fraud, subrogation, severity) embedded into adjuster screens encourage the use of analytic insights.

When selecting a core P&C claims management system, carriers and vendors look for highly configurable workflow automation that eliminates manual processes and supports STP of claims. They want easy-to-use configuration tools with low-code/no-code engines to modify workflows and business rules, screens, and data.

They want out-of-the-box product functionality that meets industry-standard requirements for transaction processing, regulatory reporting, and compliance. Most importantly, they want a vendor with a track record of successful implementations for carriers with similar scale and lines of business.

Key Components

Claims management systems must meet a set of minimum functional requirements to sustain the basic needs of insurers. Many vendors are focused on developing functionality that presents competitive differentiators to increase adoption and capture additional market share. Competitive differentiators might not be attractive to all insurers, but they are currently driving key client adoption and often could make the difference for insurers looking to address specific functionality needs.

A well-developed P&C claims system should integrate with policy administration and accounting systems to support coverage verification and disbursements. These systems should also include two-way integration accelerators to third-party services (e.g., glass claims). Key components of a well-developed system are:

Claims Submission/FNOL—Most systems have web-based claim intake capabilities, many of which can take streams of data from third-party applications, providing value-added services via APIs. Often, these solutions also include some background scoring (with real-time calls out to third-party data sources) that sends alerts if special handling is necessary due to claim complexity or potential fraud.

Diary and Notes—Notes, diaries, reminders, and calendaring capabilities aid adjusters during the claims adjudication process. Automation of diaries is an important feature for claims systems, particularly when the system can mine claim notes for important insights via natural language semantic and sentiment analysis.

Adjudication/Case Management—The ability to manage claims at different levels of granularity—including incident, claimant, location, feature, and coverage—is a key element of claims solutions. Solutions with robust workers’ compensation tools generally include medical case management capabilities that allow for injury detail maintenance, such as tracking diagnoses, medical records, treatment plans, and links to ICD9/10 codes or jurisdictional data.

Reserving—Claims systems typically support multiple reserve types, ranging from individual case reserves to average or factor reserves, and insurers should look at the granularity that a claims solution provides to ensure it will support their tracking and reporting needs. Many solutions use business rules to create automatic reserve calculations based on claim characteristics. Workers’ compensation insurers should look for links to jurisdictional information for wage and rate calculations. Some claims systems do a particularly nice job of aggregate tracking to monitor the erosion of policy limits. Many also include deductible tracking for small deductibles and self-insured retentions.

Payments—Typical features include authority verification, confirmation against reserve limits, and integration to an external disbursements module to generate digital payments (ACH, debit cards, vCard) and print checks. Many solutions also support partial payments, split payments, and multi-claim payments, as well as recurring payments, multiple pay parties and garnishments, and offsets against Social Security for long-tail medical claims.

Fraud Scoring—Some claims systems have fraud scoring capabilities inherent within the software. These include automated alerts and red flags, advanced analytics, workflow processing to route claims to a special investigation unit, and other tools to identify fraud patterns. Other systems come pre-integrated to external solution providers for these functions. Most claims systems can integrate with third-party solutions to evaluate fraud, including external data sources via APIs.

Workflow/Rules—Some solutions provide workflow through screen flow; others have robust workflow capabilities that can generate and assign tasks manually or automatically via business rules. Typical features include notes, diaries, reminders, and calendaring capabilities. Automated adjuster assignment and claim and subclaim routing are usually based on authorities and service levels.

Configuration—The most frequent uses of configuration are creating business rules, setting up workflows, defining STP, establishing authority levels, and setting up automatic assignment of tasks and diaries. The ease and level of configuration (workflow, screens, rules) vary widely between solution providers. As more solution providers migrate to cloud- and SaaS-based functionality, additional rigor is being placed on configuration.

Other Common Capabilities

The relative ease of adding supplemental capabilities is nearly as important as prebuilt lines of business, rules, or workflows. These capabilities may include:

•    Catastrophe management

•    Contact management

•    Disability management

•    Documents

•    Litigation management

•    Omnichannel access

•    Recoveries/subrogation

•    Reporting and analytics

•    Vendor/provider management

Insurers should look for configurable rules, workflows, roles, pages, and forms. Some solutions have robust tools to allow massive configuration; some are simple enough for configuration by business users.

Tips for Carriers and Vendors

When selecting a new vendor partner, features, functionality, and costs should not be the only deciding factors. Client references and a proven track record of successful implementations are essential.

Additionally, claims professionals and IT executives should look beyond basic claims features and develop a list of critical requirements that are key differentiators to ensure the long-term viability of the solution. Other key deciding factors include a robust and forward-thinking roadmap, ongoing support for product updates, and extensive P&C insurance knowledge. Finally, insurers should spend time defining the vision for the organization and future-state workflow expectations prior to selecting a new vendor partner.

For vendors, integration, scalability, and access to updated functionality are essential for efficient implementations. When feasible, vendors should look into moving their applications to be cloud-native with continual evergreen product updates and enhancements.

Vendors should consider creating a comprehensive partnership/ecosystem program with software vendors and third-party data providers, and they should ensure that a non-IT/SME user can easily configure the solution via self-service configuration capabilities or a low-code/no-code engine. Carriers are expecting integrated predictive analytics and AI models to support claims automation, and vendors should consider an integrated dashboard and reporting tool with prebuilt claims reports and drill-down capabilities.

Overall, insurers want to partner with vendors that have a deep understanding of the complexity of project implementations and P&C claims executives’ unique requirements, challenges, and priorities.

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About The Authors
Deb Zawisza

Deb Zawisza is a senior principal at Aite-Novarica Group.  dzawisza@aite-novarica.com

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