Staying in the driver’s seat
Investing in greater control over claims can be an expensive business, and may meet considerable resistance from service providers anxious to preserve their margins. The alternative for insurers is to remain at the mercy of repairers, builders, and clinicians who have no real incentive to seek low-priced supplies, and who provide little transparency in costs.
The use of more aggressive approaches such as auctions can lower costs dramatically, but may also upset service providers and can even lead to boycotts. A preferred supplier list may be received more favorably, however, because it gives repairers and builders more assurance over work volumes.
To maintain a win-win relationship with service providers and intermediaries, insurers need to understand and work with these partners’ business models, and reward good performance. This may take the form of additional work and higher agreed-upon margins. A further approach is to create groups of providers specialized in a narrow range of activities, increasing efficiency and lowering costs.
In taking control of the customer experience, insurance companies should consider the claims model that’s appropriate to their market position. Moving from a position of low to high control is costly and adds to complexity, so may work only for those with a large market share.
The industry is awash with data, but it isn’t always used to best effect. A more systematic use of benchmarking can help insurers spot good and bad cost performance and react accordingly. And data-mining techniques can help predict the risks and costs of new claims, enabling the insurer to segment high and low risk exposures, devoting more resources to the former.
To make these gains, the claims function needs to step out of the shadows of the back office, to be viewed as an important strategic activity with the capacity to add real value to the business. Claims are the heartbeat of an insurance business and can deliver huge value both in reducing costs, which can be passed to customers in lower premium prices, and in being the “moment of truth” in the customer value proposition and experience.