Will the Retirement Surge Cripple Your Claims Process Effectiveness?

In claims administration, either faulty data or human error can contaminate the claims process and jeopardize profitability. That’s always a problem, but the risk is getting bigger due to some worrying trends.

In the coming years, P&C claims administrators will be walking on a razor’s edge as they grapple with historically unprecedented levels of unpredictable claims caused by natural catastrophes and economic uncertainty, exacerbated by inflation and replacement costs. Swiss RE, one of the world’s largest reinsurers, predicts that industry combined ratio for the next year will be 98%, translating to anemic profit margins of just 2%. 

With the margin for error in claims administration and other vital areas today about the thinnest it has ever been, insurers need to operate at peak effectiveness. This means having access to all of the information available upon which to base decisions, and putting that information into the hands of experts, such as seasoned claims administration specialists, who can use all of that information to make optimal decisions, or write the rules for automated systems that can do it even faster.

P&C carriers need to rely heavily on their best and brightest claims administration experts like never before. Unfortunately, these experts are retiring in unprecedented numbers.

Demographics show that the insurance industry worldwide is facing the largest outflux of seasoned claims workers in its history, and without intervention, its impact has the potential to be devastating.

The Retirement Cliff Looms for Insurance Knowledge Workers

Experts at Accenture studying insurance industry employment trends compiled by the U.S. Bureau of Labor Statistics (BLS) within the insurance industry see two demographic trains barreling towards one another on the same track:

1. First, over the past 10 years, the number of insurance knowledge workers aged 55+ in knowledge-intensive areas like claims administration increased by nearly 75%, and now constitute the majority of insurance knowledge workers. A quarter of them will imminently retire, and 50% of those remaining will do so over the next 10-15 years.
    
2. At the same time, less than 25% of the industry’s knowledge workers in specialties like claims administration are under the age of 35, due to insurance firms’ struggle to recruit millennials into the industry. This means that a projected 400,000 positions vacated by experienced retirees will go unfilled.

According to studies by The Risk Institute, Fisher College of Business, at The Ohio State University, 95% of insurers are concerned about adverse consequences because of mass retirement of baby boomers, with 60% saying it will have a high-to-moderate impact.

Claims administration professionals are a critical part of P&L and combined ratio: processing policies, resolving claims and expediting their profitable resolution. They serve as the last line of defense on all outgoing claims payments, ensuring that payments are fair, fast, and financially justifiable. 

Over the span of their careers, experienced claims experts amass capacious amounts of insights, develop a keen eye for the intricate details and subtle nuances of claims data to make an informed decision, as well as a nose for anything amiss.  The time to capture this expertise is now.

Get Ready Now for the Insurance “Claims Brain Drain”

To be ready for the upcoming “Claims Brain Drain,” insurers should move quickly to codify the knowledge of their most experienced claims and other employees before they lose access to their know-how. This is where an organized approach to decision management can help.

Some 87% of respondents in a recent survey conducted by Forrester Research among hundreds of insurance executives said that they believed that the best path to achieving optimal data-driven decisions is to empower knowledge workers like claims experts, capture their know-how in automated systems, and synergize it with that of other experts in a common enterprise software platform. This will enable them to make faster, smarter, more profitable claims decisions, as well as in underwriting, and other facets of the business. 

The benefits of the platform approach are several-fold, but all predicated on the premise that more and better data from every possible vantage point, as well as the effective use of that data in intelligent automated strategies, will yield optimal claims administration and policyholder decisions throughout the lifecycle, by enabling insurers to:

1. Codify and memorialize the experiential knowledge of their claims and other experts to permanently capture and animate their valuable domain expertise, as in this case study from Mercury Insurance.
2. Unify and mobilize all policyholder-facing operations – business and technical alike – to optimize, automate and monetize the value of claims and other personnel, data and analytics.
3. Optimize and maximize all reusable knowledge assets for claims and everything claims touch throughout the organization and policyholder lifecycle.
4. Simulate and optimize claims, underwriting, and other strategies before they are put into production to ensure that programs will perform as desired when launched.
5. Nurture and manage personalized policyholder relationships to ensure automated, seamless, tailored customer experiences beginning with claims, throughout the policyholder lifecycle.

The knowledge and experience of your best claims experts is irreplaceable, but it is not irreplicable. Following the guidelines above, insurers around the world are not only retaining the best expertise of their most talented claims professionals, they are redeploying it as applied intelligence to every corner of their companies, to ensure smarter, faster, more profitable decisions whenever and wherever they are needed to ensure optimal business outcomes.

How FICO Can Help Insurers Automate and Improve Claims Decisions

• Download our report on Empowering Insurers to Transform Customer Information into a Formidable Competitive Advantage  
• Read the report Digital Insurance Special Report: Hastening the Speed of Change
• Read the industry report FICO Enterprise Intelligence Network for Insurance. 
• Explore the power of FICO Platform