Executive SummaryFor nearly all lines of personal and commercial insurance, reducing the cost of claims processing is key to profitability. Reducing cycle time, the elapsed time from opening a claim to its settlement, is key to customer satisfaction. Moving to a fully automated process is a goal for claims processing of nearly all insurance executives. Companies are at various levels of automation and often do not have an appropriate strategy to achieve higher levels of automation. This white paper identifies seven levels of claims automation and provides a roadmap that can be followed to enhance claims processing. This straightforward approach can be used to increase the likelihood of successful automation.
Background
According to International Financial Services Research’s (www.ifsl.org.uk) December 2009 Insurance Report, global insurance premiums were $4.3 trillion in 2008, with the US, Japan, UK, France and Germany accounting for 63 percent of the market. Life insurance accounted for $2.5 trillion and
non-life insurance accounted for $1.8 trillion.
For life insurance, claims processing is fairly straightforward and costs are relatively low. However, claims processing costs are significant for other lines such as health, property & casualty, accident, automobile and workers compensation. Loss ratios, the percentage of premiums paid out in claims, are estimated to be between 60% and 110% of premiums for health insurance, and are typically lower for other forms of non-life insurance. Combined ratios, which include losses, underwriting and claims processing,
are higher and typically over 99% of premiums. It is estimated that claims processing costs range from about 3% to 12% of premiums. Health insurance, which typically has a large number of claims per dollar of premium, often has higher claims processing costs than other non-life insurance lines. Property and casualty claims typically have a longer cycle time than other non-life insurance lines.
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