CIA Quebec 11 Sept 2015 Presentation C Louis Final

DIGITALIZATION OF THE CLAIMS PROCESS

INCREASING THE EVIDENCE ACTUARY’S VALUE PROPOSITION IN THE

FACE OF CLAIMS PROCESS DIGITALIZATION

Strategic Insurance & Risk Solutions

Canadian Institute of Actuaries: Actuarial Evidence Seminar

Québec, Québec

September 11, 2015

https://images.search.yahoo.com/images/view;_ylt=A0LEVzEcwO9VEacA4e1XNyoA;_ylu=X3oDMTEyMGdtYzZpBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjA0OTJfMQRzZWMDc2M-?p=public+domain+skyscraper+photo&back=https://search.yahoo.com/search?p%3Dpublic%2Bdomain%2Bskyscraper%2Bphoto%26ei%3DUTF-8&no=1&fr=%26fr%3Dyfp-t-603&h=105&w=157&imgurl=www.publicdomainpictures.net/pictures/50000/nahled/ny-skyscraper.jpg&rurl=http://www.publicdomainpictures.net/view-image.php?image%3D41871%26picture%3D%26jazyk%3DJP&size=81KB&name=NY+Skyscraper+by+Art+String&tt=NY+Skyscraper+by+Art+String&sigr=12gd8ak5n&sigi=1247g067m&sigb=12920gkug&sign=10rvdagkc&sigt=10rvdagkc



INTRODUCTION

CLAIRE LOUIS

President

Strategic Insurance & Risk Solutions

Boston, Massachusetts

2



AGENDA

3

Strategic Insurance & Risk Solutions in collaboration with the Canadian Institute of ActuariesAll information contained in this presentation is proprietary to SIRS. Copyright © 2015 SIRS. All rights reserved.


The P&C Insurance Claims Operation

Digitalization: A Not-So Tranquille Claims Process Revolution

Key Digital Technologies Impacting Claims

How Digital Is Changing Claims Management & Loss Prevention

The Future of Claims Post-Digitalization

Evidence Actuaries: A Valued Claims Advisor

Compliance and Legal Risks

Evaluating and Reserving Liability Claims

THE P&C INSURANCE CLAIMS OPERATION

4

Fraud Investigation, Reinsurance Collection

CLAIMS PROCESS

CRMChannel Management

Customer Relationship Management

Pricing, Reserving, ERM

SUPPORT SERVICES

SUPPLY CHAIN MANAGEMENT

Management,

Monitoring,

Optimization

Selection and

Contract

Negotiation

Requirements and Solicitation

Investigate &Manage

Triage and Assign

FNOLThird-Party Recovery

PaymentEvaluate, Reserve, &Resolve

Claim Closing

ACTUARIAL ACTIVITIES

ANCILLARY ACTIVITIES

Analytics, Monitoring, Reporting

Organization & HR

IT

Finance & Accounting

CHANNEL MANAGEMENT

Regulatory Relationship Management

REGULATORY

COMPLIANCE &

RELATIONSHIP

MANAGEMENT




KEY COMPONENTS OF LIABILITY CLAIM EVALUATION

5


Apart from coverage, the two primary components of liability claim evaluation are (1) liability and (2) damages.

Liability is evaluated based on the law (statutes and case law) and the claim investigation (statements, official reports, ISO ClaimSearch, photos, diagrams, and expert opinions).

The liability analysis considers the comparative or contributory negligence laws of the jurisdiction at issue. Most states apply some form of comparative negligence: pure (1% to 100% fault allocation) or modified (no recovery if > 49% to 51%).

Damages may be “general” (loss of consortium, pain and suffering, disfigurement) or “special” (wage loss, medical and hospital bills, property damage). Evidence Actuaries provide opinions on special damages.

BECAUSE THEY ARE SUBJECTIVE, GENERAL DAMAGES COMPLICATE CLAIM EVALUATION.


SETTING CASE RESERVES FOR LIABILITY CLAIMS

6


Case reserves may be based on one or a combination of the following:

Adjuster or management experience with similar claims

Claims committee discussion that may yield a consensual value based on group discussion

Defense counsel’s opinion of settlement value and jury verdict value (generally considered worst case)

A multiple of special damages (typically three or five times)

Case values generated by valuation software or other models; these should be considered as a benchmark only and should be vetted based on expert opinion, experience with similar claims, jurisdictional settlement values, and other factors.


SETTING CASE RESERVES FOR LIABILITY CLAIMS

7


Other factors affecting case value and case reserves:

Case venue (specific court where case is to be heard) and jurisdiction

(unique legal authority, e.g., state v. federal)

Applicable negligence laws

Plaintiff’s demeanor as a witness

Plaintiff and defense counsel’s abilities as litigators and trial attorneys

Egregiousness of claim facts

Risk of punitive damages

Jurisdictional verdicts

THE ACCURACY OF CASE RESERVES IMPACTS INSURER RATES, SURPLUS, AND PROFITABILITY.

Digitalization Drivers

Declining resistance to technology

among industry leaders

Low investment returns for prolonged

period

P&C industry consolidation

Customer-centricity

Regulatory uncertainty

Legacy systems that lack flexibility and

are costly to maintain and integrate

Pervasiveness of connectivity

Business Challenges & Opportunities

Efficiency in capital management

Claim operational redundancies

Velocity of brand relevance

Regulator emphasis on information

management as key to compliance and

enterprise risk management

Exponentially increasing amounts of

data and dearth of tools and processes

to leverage them

Competitive differentiation through

excellence in interaction across the

entire customer journey8

DIGITALIZATION: A NOT-SO “TRANQUILLE” REVOLUTION



9



Sources: Towers Watson, Celent, SMA, Marsh

TOTAL GLOBAL P&C INSURER IT SPEND IS EXPECTED TO REACH $177 BILLION BY 2016.

P&C INSURERS

ARE

INVESTING IN

TECHNOLOGY

Top 3 CRM investments by

P&C insurers in 2014:

• Web self-service – 62%• Agent/broker email/web –

53%

• Web/mobile app – 41%

In 2014, about 50% of P&C

insurers were in the

computing Cloud. The Cloud

allows insurers to store and

leverage massive amounts of

data.

68% of insurers have

function-based KPIs (BPM).

71% of insurers use

performance dashboards for

Claims and other functions

(BPM).

Insurers are using Predictive

Analytics to detect fraud

(28%) and segment claims

handling (19%) (PA/BPM).

In 2013, Claims ranked 5th in

terms of overall P&C insurer

technology spend.

DIGITAL TECHNOLOGIES UPENDING INSURANCE CLAIM OPERATIONS10



Omni-Channel Customer

ExperienceBusiness Process

Management (BPM)Predictive Analytics Internet of Things (IOT)

Internet of Things will be a

major disruptor, moving

insurers to a prevention and

loss control business model.

CISCO estimates that by

2020, the number of

connected things will reach

50 bn. Examples are auto

telematics, Fitbit, and

energy usage sensors. Some

claims will diminish, but

new claim types will emerge.

Predictive analytics capture

relationships among

variables to assess risk

associated with certain

conditions. Insurers use

predictive analytics to pre-

dict litigation, detect fraud,

and identify recovery poten-

tial. In 2014, Towers Watson

found that 43% to 61% of

commercial insurers used

predictive modeling.

BPM automates claims

management, optimizes

customer service, reduces

settlement timeframes.

and expands reporting

capabilities. BPM in Claims

allows an insurer to co-

evolve with a dynamic

business environment by

being able to make

routine app changes with

little, if any, IT involvement.

Insurers are shifting from a

policy-centric model to a

customer-focused one. CRM

solutions give insurers a 360-

degree customer view. They

see the products their cus-

tomers have, product fea-

tures, submitted claims,

and all their touch points

and interactions. This allows

them to more quickly

resolve claims.

11


PREDICTIVE ANALYTICS PROMOTE EARLY INTERVENTION &

RESOLUTION


ResolutionClaim TieringClaim ScoringData CleansingData SamplingData Analysis

Implement

validated business

logic

Collect and identify

target data sets

Apply data quality

checks

Implement

algorithms

Cleanse data

Analyze claims

based initially on

single variable,

then on multiple

variables

Claims are scored

as high, medium or

low

Claims with high

scores are moved to

resolution

Claims with low or

medium scores

require further

work

Validate business

logic &

requirements

Reserves are set or

validated

Claim is assigned a

settlement value

based on insurer

data and adjuster,

expert, attorney

evaluation

Claim is resolved

High

Medium

Low

12



INTELLIGENT BUSINESS PROCESS MANAGEMENT FOCUSES CLAIM

ACTIVITIES ON HIGH-RISK CLAIMS EARLY IN THE CLAIM CYCLE

13


OMNI-CHANNEL REDUCES CLAIM COSTS, SHORTENS THE CLAIM

CYCLE, AND INCREASES CUSTOMER SATISFACTION

Late one night, a water heater in Guy’s basement fails, causing water to discharge continuously. Your Insurer instantly spots that Guy’s water meter, which it can monitor remotely, is running unusually fast, indicating a potential problem.

Your Insurer calls Guy, alerting him to the problem. The insurer advises him that a specialist plumber is already en route to his home to deal with the situation and that a loss adjuster has been lined up to visit first thing in the morning.

Guy is delighted by the rapid response, but is in another city on business and cannot be home to let in the plumber and adjuster. So he provides the password to allow the Insurer to print off a set of keys with a 3D printer.

The next day the loss adjuster arrives first thing, having been instructed electronically and provided with full details of Guy’s property coverage. He captures all the relevant data, including photos and video, on an iPad and uploads it to Your Insurer’s claims portal.

1 2 3 4

Your Insurer’s claims handler, the loss adjuster, Guy, and Guy’s insurance agent are all in different locations. But they work collaboratively through the claims portal to settle the claim rapidly. The payment goes into Guy’s bank account real-time, and all the details are filed in Guy’s electronic document vault.

5


Source: Capgemini Consulting

14


IOT PREVENTS AND MITIGATES LOSS

“Smart Vest”

Insurance Journal, Sept. 3, 2015 Insurance Journal, Nov. 4, 2014

“Fleet Telematics”


15



LAWS AND REGULATIONS ARE EVOLVING WITH THE NEW DIGITAL REALITY

Bad Faith/Class Action

Litigation

Market Conduct/Unfair Trade Practices

Privacy DiscriminationCOMPLIANCE

RISK

TORT

LIABILITY

https://images.search.yahoo.com/images/view;_ylt=A0LEV004SPBV2roA1RhXNyoA;_ylu=X3oDMTEyMGdtYzZpBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjA0OTJfMQRzZWMDc2M-?p=scales+of+justice+public+domain+image&back=https://search.yahoo.com/search?p%3Dscales%2Bof%2Bjustice%2Bpublic%2Bdomain%2Bimage%26ei%3DUTF-8&no=1&fr=%26fr%3Dush-mailn_02&h=114&w=122&imgurl=res.publicdomainfiles.com/pdf_view/65/13548611416984.png&rurl=http://www.publicdomainfiles.com/show_file.php?id%3D13548611416984&size=31KB&name=Scales+of+justice&tt=Scales+of+justice&sigr=120g5kvu5&sigi=11odn7ssk&sigb=12gegr08i&sign=10hae19ck&sigt=10hae19ck




Good Faith

Insurer decision based on objective and

reliable information prepared by and

expert

Claim not covered under the policy

Insurer’s decision based on bona fide

coverage dispute

Bad Faith

Failing to thoroughly investigate claim

Exploiting financial vulnerability of

policyholder

Making unreasonable settlement

demands

Forcing policyholders to litigate

Failure to pay full claim value

Conditioning payment

16

INSURER GOOD FAITH IN CLAIMS HANDLING – TORT LAW



Enacted as law by most states

Some key provisions:

Failing within a reasonable time to:

Admit or deny coverage to a policyholder

Reserve rights

Misrepresenting to a claimant a material fact or policy provision related to

coverage at issue

Failing to attempt in good faith to effect a prompt, fair, equitable claim

settlement with respect to which the insurer’s liability has become reasonably

clear17

INSURER GOOD FAITH IN CLAIMS HANDLING – STATUTORY



NAIC Model Act – Unfair Claim Settlement Practices

Regulatory settlement related to auto personal injury claims (2010)

Insurer used software program as basis of valuation of settlement offers

Issues:

Inconsistent insurer management and oversight of program by underwriting region

Insurer did not properly consider medical bills, lost wages, job loss when evaluating individual claims

Insurer did not consider pain & suffering

Some key settlement provisions:

Insurer must ensure consistent claim handling across its organization

Insurer must advise claimants of basis of any settlement offer

18

INSURER GOOD FAITH IN CLAIMS HANDLING – REGULATORY



Market Conduct

Goal of trade practices laws and regulations in insurance is to protect the consumer.

Insurer use of social media is subject to state insurance laws governing unfair trade

practices

Discrimination concerns revolve around whether (1) insurer’s use of information

involves a protected class, e.g., gender and age, and (2) net effect of information use

is discriminatory, even if not intended

U.S. insurers are subject to various privacy laws, including Gramm-Leach-Bliley, the

Fair Credit and Reporting Act, and the Fair and Accurate Credit Transactions Act

Key privacy issues include whether (1) insurers take appropriate safeguards to protect

policyholder and claimant information and (2) the information is shared in violation of

privacy policies.19

INSURER GOOD FAITH IN CLAIMS HANDLING – STATUTORY



Unfair Trade Practices/Discrimination/Privacy

20



LARGER

SHORTER

NEW TYPES

LESS LITIGATION

FEWER

NEXT GEN

CLAIMS

PERFORMANCE METRICS

21



Claim Ass’n. Membership

Ins. Conf. Speaker

LinkedIn Claim

Groups, Thought

Leadership, Discussions

Internal Carrier

Workshops

Networking w/Sr. Mgmt.

and Next Gen Mgrs.

EVIDENCE ACTUARIES: ADDING VALUE TO CLAIM OUTCOMES

https://images.search.yahoo.com/images/view;_ylt=AwrBT7.YNPBVoLkACwhXNyoA;_ylu=X3oDMTEyMGdtYzZpBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjA0OTJfMQRzZWMDc2M-?p=public+domain+money+sign+photo&back=https://search.yahoo.com/search?p%3Dpublic%2Bdomain%2Bmoney%2Bsign%2Bphoto%26ei%3DUTF-8&no=1&fr=%26fr%3Dush-mailn_02&h=113&w=106&imgurl=www.clker.com/cliparts/m/A/y/p/S/h/money-signs-hi.png&rurl=http://www.clker.com/clipart-money-signs.html&size=32KB&name=Money+Signs+clip+art&tt=Money+Signs+clip+art&sigr=11do8uhb0&sigi=11l48n0m3&sigb=129e0o8o6&sign=10ke4h5js&sigt=10ke4h5js

https://images.search.yahoo.com/images/view;_ylt=AwrBT7.YNPBVoLkACwhXNyoA;_ylu=X3oDMTEyMGdtYzZpBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjA0OTJfMQRzZWMDc2M-?p=public+domain+money+sign+photo&back=https://search.yahoo.com/search?p%3Dpublic%2Bdomain%2Bmoney%2Bsign%2Bphoto%26ei%3DUTF-8&no=1&fr=%26fr%3Dush-mailn_02&h=113&w=106&imgurl=www.clker.com/cliparts/m/A/y/p/S/h/money-signs-hi.png&rurl=http://www.clker.com/clipart-money-signs.html&size=32KB&name=Money+Signs+clip+art&tt=Money+Signs+clip+art&sigr=11do8uhb0&sigi=11l48n0m3&sigb=129e0o8o6&sign=10ke4h5js&sigt=10ke4h5js

https://images.search.yahoo.com/images/view;_ylt=AwrBT7.YNPBVoLkACQhXNyoA;_ylu=X3oDMTEyMGdtYzZpBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjA0OTJfMQRzZWMDc2M-?p=public+domain+money+sign+photo&back=https://search.yahoo.com/search?p%3Dpublic%2Bdomain%2Bmoney%2Bsign%2Bphoto%26ei%3DUTF-8&no=1&fr=%26fr%3Dush-mailn_02&h=113&w=113&imgurl=claycrucible.com/wp-content/uploads/2014/03/Money-Public-Domain.png&rurl=http://www.gopixpic.com/287/money-bag-icon-png-black-sign-/http:%7C%7Cinterestmax*com%7Cwp-content%7Cuploads%7C2011%7C09%7Cmoney-icon*png/&size=31KB&name=You+need+to+enable+Javascript.&tt=You+need+to+enable+Javascript.&sigr=14afph7db&sigi=123l0amhr&sigb=129e0o8o6&sign=10uqf122r&sigt=10uqf122r

https://images.search.yahoo.com/images/view;_ylt=AwrBT7.YNPBVoLkACQhXNyoA;_ylu=X3oDMTEyMGdtYzZpBGNvbG8DYmYxBHBvcwMxBHZ0aWQDQjA0OTJfMQRzZWMDc2M-?p=public+domain+money+sign+photo&back=https://search.yahoo.com/search?p%3Dpublic%2Bdomain%2Bmoney%2Bsign%2Bphoto%26ei%3DUTF-8&no=1&fr=%26fr%3Dush-mailn_02&h=113&w=113&imgurl=claycrucible.com/wp-content/uploads/2014/03/Money-Public-Domain.png&rurl=http://www.gopixpic.com/287/money-bag-icon-png-black-sign-/http:%7C%7Cinterestmax*com%7Cwp-content%7Cuploads%7C2011%7C09%7Cmoney-icon*png/&size=31KB&name=You+need+to+enable+Javascript.&tt=You+need+to+enable+Javascript.&sigr=14afph7db&sigi=123l0amhr&sigb=129e0o8o6&sign=10uqf122r&sigt=10uqf122r


KEY TAKE-AWAYS

• Claims digitalization is on the march: while it presents significant

opportunities for insurers to reduce claim costs—administrative,

indemnity, and expenses, it raises a number of compliance and

bad faith concerns.

• As carriers change their Claims operating models, so might

Evidence Actuaries (EAs) wish to reimagine their business model.

• Future business opportunities for EAs lie as much with non-

litigated claims (which are increasing) as litigated claims.

22





KEY TAKE-AWAYS

• Insurers are not accustomed to working with EAs on non-litigated

claims.

• Because we are at the outset of the shift toward fewer litigated

claims, insurers may be more open to inviting EAs to partner with

them on non-litigated claims. This is even more likely to occur if

the EAs have built strong direct relationships with insurers.

23





KEY TAKE-AWAYS

• EAs may wish to consider stepping up their direct marketing

efforts and relationship-building with insurers to become valued

claim advisors.

• In this way, EAs may increase the likelihood of their commercial

success as claim operations become more and more digitalized.

24




QUESTIONS AND ANSWERS

25

BIO – CLAIRE LOUIS

• President, Strategic Insurance & Risk Solutions

• 25+ years of executive management and advisory experience with PwC,

Capgemini Consulting, and others for global and North American insurers,

reinsurers, self-insured organizations, regulators

• Clients: Zurich, AIG, Fairfax, RSA, ACE, XL, GE, Bank of America

• Services:

• Leading practices-based assessment of insurer and claim administrator

claim practices

• Claim operations alignment with enterprise strategy

• Claim valuation

• Claim advocacy, litigation support, expert witness testimony

• Claim program design & oversight

26



THANK YOU!

27


CIA Quebec 11 Sept 2015 Presentation C Louis Final

Documents

Transcript of CIA Quebec 11 Sept 2015 Presentation C Louis Final