Back in the 70’s when insurers had no, or very limited, options of commercial off the shelf (COTS) claims processing software they began to develop in-house systems. Over time, these systems have become outdated and are commonly referred to as legacy systems today. The downfall of these legacy systems was offset with workarounds built to supplement their business capability offering, resulting in an array of complicated core operating systems.
A recent Ovum survey revealed that 41% of carriers are operating using 11 or more core operation platforms, and 30% have a core operations environment composed mainly of in-house developed systems. These systems are costly and difficult to manage, let alone the difficulty involved with trying to keep up with market changes.
Firstly, as most of these systems were developed so long ago, the original IT team have moved on leaving behind a complicated core system that others find difficult to maintain. The IT department also spends so much time maintaining these systems that they don’t have time to focus on innovative technologies that could benefit the business. In fact, IT departments often spend 80% of their time maintaining existing technology platforms.
As we all know, organizations are primarily focused on improving efficiency and increasing profit margins, and fortunately, a claim system overhaul can help achieve this. Consider the role of data and analytics as drivers for making business decisions within the insurance industry. The integration of data reduces data silos, which are common in legacy frameworks, allowing insurers to run analytics to determine red flags for both high-risk and low-risk claims. A low-risk claim can be automatically processed with little input from a claims administrator while high-risk claims are prioritized. The identification of the risk of a particular claim is just one example of how integrated data can help improve business decisions.
As well as using integrated data to make business decisions, automating the claims process can reduce the time spent carrying out manual tasks, reduce data duplication, and minimize paperwork, which improves operational efficiency. Thus, the automation of the claim process saves the organization time, resources and money.
Unfortunately, the lack of flexibility offered by legacy systems makes it difficult to take advantage of newer technology platforms, in this fast-paced market. For a company to get to this stage, a strategic business decision needs to be made to invest in an improved core claims system. To move to newer technology can be a daunting decision for any organization to make, as everyone is comfortable doing what they know and what they have always done. The Ovum survey, previously mentioned, highlighted some drivers for core operation upgrades. These drivers include improving the customer experience and retention rates, improving the ability to respond to new market opportunities more rapidly, and reducing IT operational costs.
Over time, it has become a more viable option for insurers to invest in COTS systems to quickly and efficiently implement new service offerings, such as data analytics, mobile applications, and correspondence management platforms. It takes too much time for internal IT teams to design and implement these systems when these offerings are readily available from external vendors.
Following the outcomes of the global survey, Ovum determined that cloud technology platforms would allow insurers to implement an integrated platform to meet their needs quickly while minimizing the initial capital investment. Although only 6% of respondents currently use cloud technology in their core operations, carriers are looking to invest in cloud technology within the next 24 months.
To learn more about cloud-based claims processing download this whitepaper.