Standardizing Claims Handling, Fraud Mitigation
tify a number of areas for improvement
in this domain, including:
1 Faster, simpler claims resolution.
2 Fraud reduction.
3 Strategic, data-driven insights.
4 Improved decision making.
Currently, three fast-moving developments are fostering opportunities for predictive analytics to finally make a big play in the world of claims opera- tions. Following the Great Recession and ongoing economic strain, insur- ers are adapting their business models to a “new normal” era of intense
market share competition, rising loss costs, and a complex regulatory environment.
The ultimate goal
So will predictive analytics be the
next “killer app” for claims handling?
Insurers have already integrated a
range of workflow and automation
tools. Because these solutions have
paid off by cultivating improved performance and a streamlined claims
handling process, insurers are now looking for higher-order optimization opportunities
to increase both internal efficiencies and customer satisfaction.
Optimization means minimizing the cost of adjudicating claims while maximizing
all stakeholders’ satisfaction with the resolution of each claim. Most insurers can iden-
Risk management is
all about applying a
proactive strategy to both
pricing and rates.
A Proactive Strategy
Perhaps the greatest opportunity for
predictive analytics to positively impact
profit lies in its capacity to assist organizations in moving from a reactive to a
proactive stance in identifying and managing key risk factors without disrupting
a whole book of business. Predictive scoring models, for example, can provide a
for ward-looking view of frequency, severity, loss adjustment expense (LAE) recovery opportunities, and claims duration.
Risk management is all about applying a
proactive strategy to pricing and rates. By
evaluating past policyholders’ characteristics against their outcomes, the underwriter can then predict the performance
or behavior of a new policyholder. The
claims team, on the other hand, is just beginning to embrace the idea of proactive
thinking. However, the potential gains
are quite significant for claims organizations, including the ability to anticipate
of a claim’s severity, the likelihood it will
require litigation, the most favorable negotiated settlement for the claim, and
perhaps most importantly, a better view
of the nature and extent of possible fraud.
Predictive analytics is the key driving
force behind a successful, proactive claims
strategy. Integrating this technique into
the claims process can improve operating efficiencies, increase strategic insight,
and help reduce many kinds of risk. In a
typical situation, a numeric score representing risk level is seamlessly incorporated into a bill review or claims handling
system to drive business rules associated
with routing and resource assignment.
A proactive analytics strategy can also
impact automation as well as the adjuster