Industry Overview: New Challenges
The P&C insurance industry is facing several major challenges, including a $6.3 billion net operating loss during the first half of 2022. According to A.M. Best, U.S. P&C net income was $31.4 billion, down 18% compared with the first six months of 2021. Climate-related risks, loss trends, staffing shortages, inflationary medical costs, fraud containment and social inflation trends are top claims challenges in 2022, making for a complex and turbulent time. Medical cost inflation is over 5% on average in 2022, on top of decades-long cost increases, especially for emergency services, medications, diagnostics and surgical procedures.
Insurers are experiencing pressures from all sides, including labor shortages, in which claims are one of the most highly affected areas. Meanwhile, efforts to automate claims for efficiency and cost reduction are growing across the industry as insurtech innovations fueled by venture and private capital shift attention toward claims. Claims organizations are facing high turnover rates while losing seasoned and experienced talent as the workforce ages. This talent drain has a disproportionate impact on more complex claims, such as injury cases involving attorneys. Insurers are focusing on meaningful loss-cost containment to offset these major headwinds.
Claims and Meaningful Loss-Cost Containment
With much of the insurtech attention on virtual inspection of physical damage and automation of process, injury-related claims are often overshadowed.
Claims investigation and evaluation phases for injury losses are critical steps when it comes to final resolution. The stakes are high in terms of attorney involvement, lawsuits and unpredictable trials, which contribute to higher payouts. Mitigation is crucial for insurance carriers, and this is where having the right information is pivotal for sizing up applicable coverage. Medical records and expert examinations help unravel diagnosis and prognosis. Add in claimant behavior observed on social media, and the combination begins to paint a picture around recovery progress and outlook, instrumental in developing both special and general damages. Out-of-pocket costs such as medical and wage loss, as well as a projection for pain and suffering or aligning to workers compensation models, hinges on information that adjusters develop during investigation and evaluation phases. Claim adjusters rely on their own experience, venue knowledge and a network of vendors to help gather such information and insights in a way that may be explained as gathering puzzle pieces to ultimately visualize the whole picture.
See also: Outsourcing to the Sixth Century
Vendor Partner Selection
Selecting and managing vendors has always been an important decision for any carrier. Today, vendors are often viewed as partners, especially when it comes to security and privacy management or developing road maps. It’s no longer a buy-and-supply relationship for many providers and carriers alike. Forging partnerships has become a critically important strategy in business in general and specifically in effective cost containment, making partner selection more critical than ever. Injury claims services, including medical, record and clinical management and investigations, are leading areas of opportunities for outsourcing.
During our research for this article, we spoke to a number of top-tier carriers that outsource one or more of these services, and the one vendor partner name that was most frequently mentioned with high satisfaction rates was Insight Services Group (ISG). Most importantly, ISG thinks and operates as an integrated business partner, not a vendor, as it removes inefficiencies in processes. Another key differentiator: mitigation of risk and program costs by leveraging integration with multiple claims platform and solutions integrators, including Guidewire, Duck Creek, CCC and Shift, which provides time savings and efficiency gains. Mobile texting with injured parties also helps compress cycle time of claims. ISG lets clients choose from multiple services while remaining in their own claim environment.
New Approaches to Claims Management
Today’s claim management is changing quickly. Technology, integrations, partnerships and vendor marketplaces are popping up everywhere. Incumbent vendors are becoming more sophisticated and capable while new entrants are applying analytics, artificial intelligence, new data and other technologies to help modernize the claim process. Many of the larger carriers have gone through or are going through core policy and claims administration platform transformations to replace long outdated legacy systems while positioning themselves to automate, integrate and accelerate claims modernization agendas. Meanwhile, carriers are outsourcing and leaning on vendor partners to an even higher degree today.
See also: Despite COVID, Tech Investment Continues
Changing Vendor Partner Marketplace
The vendor space is changing, as well. Venture capital-backed consolidation, advances in technology investments and growth due to carrier outsourcing are most pronounced. Within the injury claim investigation and evaluation space, there is consolidation among records management, investigation firms and medical management companies while many remain regional and state specific. Meanwhile, carriers are increasing their appetite to outsource, automate and provide more tools to adjusters. This coincides with the aforementioned claim adjuster talent war and acceleration of retirements during the Great Resignation. However, insurers demand efficiency without sacrifice to claims management quality, namely the ability to manage loss costs effectively. Offering national or multi-regional coverage is a must when competing for carrier’s attendant geographic claim footprint. Procurement experts are focused on partnering with firms that match these priorities.
With advances in technology comes the need for tighter controls, security and privacy. Vendors manage an array of private, personally identifiable information and sensitive data when it comes to legal, medical and claim investigation materials. The vendor of today, must meet stringent statement of coverage (SOC) compliance, cyber risk protection and business recovery requirements to compete. When working with new vendors, this stage of compliance can take months to review and satisfy.
Claims investigation and evaluation are no longer overlooked areas for technology and outsourcing as the industry modernizes. Partnerships with fully integrated national providers with deep expertise in medical, record and investigation management bolstered by powerful new technologies will be the hallmark of the insurance market leaders of the future.
A longer version of this article is available here.