Optimizing Claims – A Win-Win for Insurers and Customers

Of all the processes inherent to insurance, it could be argued that none are more important than the claims process. The general consensus is that claims typically account for up to 80% of an insurance company’s costs. When it is stated like that, 80% does not seem like an exceptionally large number. But when you start to translate that percentage to premium revenue you realize that the claims operations in most insurance companies are huge. It is also important to consider that a relatively small improvement in claims can translate into a significant increase in operating margin.

Now this is not news to most insurers and over the past few years many have made a lot of enhancements in claims processes but there is still room for improvement and one answer is predictive analytics.

Predictive insurance claims processing, or claims analytics, is the process to analyze the structured and unstructured data at all stages in the claims cycle to make the right decision, at the right time, for the right party. Claims analytics can enhance the bottom line by:

  • Reducing settlement lags and claims payout.
  • Automatically assigning adjusters according to priority and skill set.
  • Reduce leakage in terms of both expense and indemnity.
  • Analyzing claim data to help with subrogation.
  • Reviewing claims for litigation propensity.
  • Fighting increasingly sophisticated fraud.

One customer that realized the benefits of predictive analytics in the claims process was Atlas Financial Holdings, Inc. (NASDAQ:  AFH). A commercial lines insurer who specializes in “light” commercial automobile sector including taxi cabs and limousines. Atlas’ rapid growth meant that it was experiencing significant increase in its claims inventory proportionate to the number of vehicles they insure. To ensure that the increased claims volume can be routed quickly and effectively to the most appropriate resource, Atlas used Guidewire Predictive Analytics for Claims to develop claims-specific predictive models. As result of measures Atlas are forecasting a potential 3 – 5 percentage point reduction in loss ratio. A meaningful return on investment that will have a powerful impact on Atlas’ business in both hard and soft markets. Atlas anticipates that this lift will help improve the bottom line and inform return on deployed capital maximizing pricing (which also incorporates predictive analytics).

For further information view this short video on using predictive analytics for claims.