Classification of strategic claims differs from traditional claims management methods, promoting a more detailed, data-driven approach. Conventional segmentation considers only monetary value and data points as a cause of loss and exposure. Strategic classification takes into account the individual merits of each claim, ensuring a more accurate and efficient judgment, which is very important in today's environment characterized by rising costs of losses and costs. By taking a data-driven approach carriers can use a deeper understanding of 'claims like these' to enable faster decision-making and handling strategies to effectively influence the claim trajectory.
Carriers can use claims classification to shape strategy and business priorities, identify investment-ready focus areas for advanced capabilities, as a stand-alone initiative or as a precursor to any significant change.
A value proposition for the classification of strategic applications
Strategic differentiation can drive several benefits for claims organizations.
- First, as a quick win, it acts as a catalyst to control operating costs by allowing efficient allocation of resources and promoting a lean operating model.
- Second, it improves customer satisfaction by ensuring that claims are handled by the right claims handler, and that claims that do not require human contact as certain touch points can follow a dedicated route.
- Third, carriers using strategic segmentation can better manage their exposure to loss and payment accuracy, matching highly skilled claims managers with claims that have a tendency to develop poorly or are disputed.
Carriers that use this approach effectively can affect their loss ratio by 1-3 percentage points based on business mix and promote a strong response strategy through underwriting and actuarial risk assessment and pricing strategies.
Business discovery navigation and implementation
Applying a classification strategy method involves several steps. It begins with data acquisition, where risk and claims data are analyzed to understand the demographics of the book and the overall risk through an assessment of severity and complexity. Next, classification scenario models are developed by claims experts, and the assumptions are validated in the test environment to ensure that the carrier's risk appetite is successfully met. The main goal is to ensure that claims not only in FNOL, but also in the entire life cycle, can be divided and divided based on any possible development per claim or at the portfolio level.
Technology and data science play an important role in design and implementation. Many carriers have found success in combining third-party data sources with their own operational data to create sophisticated classification methods, although it is not a requirement to get started and depends on the quality of the carrier's internal data.
Building a cross-functional team is also important, encouraging collaboration and diverse perspectives that combine multiple skills and high-level insights from management and leading application experts. The continuous development and maintenance of the segmentation strategy is an important factor, which ensures that the strategies used are always effective and on a yearly or semi-annual basis to stay in line with market trends. The best carriers are developing AI technology instead of rule-based coding for implementation, which means the classification model learns over time and can be easily changed.
Common carrier experience
Carriers that struggle to implement often have limited capabilities, but note that differentiation represents the basis for improving other capabilities by making them more efficient. Issues such as data quality and resistance to change may arise. To address this, carriers can invest in improving their data infrastructure, clean up their business processes to focus on data quality, and communicate strategic benefits. Carriers that have invested in moving their data to the cloud have the advantage of allowing the business to use data at scale and deepen the quality of their classification and related information.
Measuring continuous success
Success in strategic claims differentiation can be measured using different key performance indicators, such as reduced claims costs, increased customer retention, and improved risk management. Continuous monitoring and adjustment is necessary to maintain the effectiveness of the strategy. Please contact Matthew Madsen if you would like to discuss further.
Disclaimer: This content is provided for general information purposes and is not intended to be used as a substitute for consulting our professional advisors. Copyright © 2024 Accenture. All rights reserved. Accenture and its logo are registered trademarks of Accenture.
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