An insurance coverage claims apply professional despatched me a 2008 white paper this week, which prompted lots of private reflection price discussing. It was printed by Guidewire Software program and titled “Attaining Claims Excellence with Guidewire ClaimCenter.” It’s a polished, assured doc geared toward insurance coverage executives and claims managers. Its premise is easy: claims dealing with drives insurer profitability, claims leakage is a critical monetary downside, and fashionable claims expertise is the answer. Though written almost twenty years in the past, the concepts on this paper stay deeply related as a result of the expertise it promotes has since grow to be embedded within the on a regular basis equipment of insurance coverage claims dealing with.
The paper begins with the assertion that claims funds and loss adjustment bills account for roughly sixty-five to seventy-five % of an insurer’s outgoing money. From that start line, it frames claims operations as the first lever for bettering mixed ratios. It describes what it calls indemnity leakage, loss adjustment expense leakage, inefficiencies brought on by adjusters spending an excessive amount of time on non-value-added duties, and missed alternatives for fraud detection, salvage, and subrogation. The white paper argues that these points will not be primarily human failures however systemic ones, rooted in outdated legacy claims techniques that had been constructed for accounting somewhat than for guiding declare choices.
Guidewire positions fashionable claims techniques as basically completely different. As an alternative of passively recording declare exercise, the paper promotes a rules-driven, workflow-based platform that actively orchestrates the claims course of. Adjusters are guided by prescribed steps. Duties are assigned, escalated, and monitored. Protection points, fraud indicators, negotiation parameters, and settlement planning are flagged by guidelines engines. Managers and executives are given dashboards and real-time metrics to watch efficiency. Based on the paper, this mixture of automation, steerage, and visibility results in sooner cycle instances, extra constant outcomes, lowered leakage, and improved buyer satisfaction, all whereas reducing prices and bettering profitability.
On its face, the paper is logically constant and effectively sourced. It displays how insurance coverage claims executives take into consideration operational effectivity, value management, and threat administration. However studying it by the lens of a policyholder advocate, it raises questions for me that the paper by no means significantly confronts.
The primary difficulty is the framing of claims funds themselves. The paper treats leakage as a self-evident downside, assuming {that a} significant portion of what insurers pay is pointless or extreme. From a policyholder’s perspective, that assumption is much from impartial. Insurance coverage insurance policies are contracts of adhesion, drafted by insurers, typically ambiguous, and interpreted underneath well-established guidelines that favor protection. What insurers label as leakage typically seems, in litigation that we’re concerned in, to be advantages that had been owed all alongside. The paper by no means distinguishes between improper funds and bonafide declare funds that insurers merely want they didn’t should make. If all you search for is stopping overpayment, it’s simple to slide right into a tradition of by no means seeking to absolutely pay what’s owed.
Second, the notion that rules-driven automation improves equity deserves skepticism. Expertise doesn’t create values. As an alternative, it enforces them. A claims rule engine displays the priorities of its designers. If the embedded guidelines emphasize early escalation of protection denial points, conservative reserving, authority ceilings, and settlement self-discipline geared toward severity discount, the system will produce these outcomes constantly. Consistency, nevertheless, just isn’t the identical as equity. A constantly underpaid declare remains to be an underpaid declare.
Third, the paper repeatedly equates insurer profitability with buyer satisfaction. That’s a sexy narrative, however it’s incomplete. Quicker claims dealing with can profit policyholders, however pace with out thoroughness of full fee typically advantages insurers extra. Structured settlement planning and predefined negotiation limits can simply as simply harden insurer positions earlier than the complete scope of loss is known. When adjusters are guided to shut recordsdata effectively and inside prescribed parameters, the human discretion that typically results in fuller and fairer funds is narrowed, not expanded.
The emphasis on fraud detection is one other space the place the policyholder expertise is lacking from the evaluation. Fraud is actual, however fraud screening techniques inevitably generate false positives and a projection of distrust. When a declare is flagged by an algorithm, the result’s typically delay, intensified scrutiny, and a shift in tone that the insured instantly feels. The paper treats these techniques as unalloyed items with out addressing the fee imposed on trustworthy policyholders who’re swept into suspicion-driven workflows with little transparency or recourse.
Maybe most hanging is what the paper doesn’t ask. It by no means asks whether or not insurers’ attitudes towards claims have meaningfully modified. It by no means questions whether or not the tradition of claims dealing with has advanced away from viewing claims primarily as prices to be minimized. As an alternative, it assumes that higher instruments naturally produce higher outcomes. Historical past suggests in any other case. Expertise amplifies the tradition of value containment somewhat than fast and full fee of what’s owed.
That brings me to the query I believe the insurance coverage claims business needs to be prepared to reply, particularly now. Since 2008, is there any critical tutorial or empirical analysis demonstrating that insurers’ claims tradition has shifted in a manner that prioritizes policyholder equity on equal footing with value containment? Not advertising and marketing supplies. Not vendor white papers. Not consulting stories written to justify system implementations. Precise unbiased scholarship displaying that fashionable claims techniques have lowered underpayment, lowered wrongful denials, or meaningfully improved belief within the claims course of. Can good ole Steve Badger or anyone from the insurance coverage claims business present me something on this difficulty?
I’m not against expertise. I’m against pretending that expertise is impartial. Claims techniques just like the one described on this white paper are highly effective. They form habits, incentives, and outcomes. If the underlying mindset stays that claims excellence means paying much less, sooner, and with fewer questions requested by claims administration, then the system will ship precisely that, irrespective of how subtle the interface seems.
Insurance coverage exists to maintain guarantees. Any dialogue of claims excellence that begins and ends with mixed ratios and leakage misses that elementary reality. Till the insurance coverage business can level to credible proof that its claims tradition has advanced as a lot as its software program has, policyholders are proper to stay skeptical.
Thought For The Day
“Expertise is neither good nor unhealthy; neither is it impartial.”
— Melvin Kranzberg
