Table of Contents
- Overview
- Executive Summary
- Third party injury, escape of water and flood claims are driving up the
claims bill
- Insurers are piloting several programs that aim to reduce medical and
repair claims costs
- Recycled parts allow insurers to be green and lower the claims bill
- Early rehabilitation lowers treatment costs and generates cost savings
for insurers
- Insurers have used supply chain management to curb the growth of claims
bills
- Procurement agreements have become standard mainly due to savings from
economies of scale
- Outsourcing has a number of advantages and disadvantages
- Outsourcing can allow an insurance provider to quickly adopt the
benefits of new technology without the cost
- Cost saving continues to dominate the debate over the use of
outsourcing, although attitudes are changing
- Fraud continues to cost insurers up to £1.6 billion a year
- While organized crime is behind some of the larger insurance fraud
cases, opportunistic fraud accounts for the majority of fraud cases
- Crash for cash schemes remain a significant source of fraudulent motor
claims committed by organized crime
- Opportunistic fraud remains difficult to detect, though widespread
- Insurance providers have a number of techniques at their disposal to
combat fraud
- Measures that detect fraudulent cases early on are key in keeping
fraud costs contained
- Claims management has been impacted by a great deal of changes to the
regulatory framework it operates in
- New fire regulations may increase the cost of property insurance claims
- New NHS Injury Costs Recovery Scheme regulations came into effect in
January 2007
- The DCA paper on damages has the potential to stoke claims inflation
for personal injury cases
- There may be changes to regulations surrounding third party capture
and periodic payments
- The FSA may move to regulate the use of third party capture by
insurers
- Periodic payments have failed to have the impact many feared, though
can lead to higher claims costs
- Table of Contents
- Table of figures
- Table of tables
- Chapter 1 Introduction
- What is this report about?
- Who is the target reader?
- Chapter 2 Claims Costs
- Introduction
- Third party injury, escape of water and flood claims are driving up the
claims bill
- Each line has similar claims cost drivers
- Third party injury remains the top driver behind claims costs
- Property insurers are seeing an increase in escape of water and flood
related claims
- Insurers are piloting several programs that aim to reduce medical and
repair claims costs
- Recycled parts allow insurers to be green and lower the claims bill
- Early rehabilitation lowers treatment costs and generates cost savings
for insurers
- Research indicates that rehabilitation can generate savings
- More insurers are moving to early and standard rehabilitation
- IT investments are key to realizing cost reductions and speeding up
claims handling
- The Lloyd' s market has set the target of December 2007 to have all
claims handled electronically
- Claims management software has proliferated with many specialized
applications but insurers must be careful to not simply add more systems
to the mix
- Insurers do not always have to make the investments in IT themselves
to benefit from improved claims management software
- Chapter 3 Supply Chain Management and Outsourcing
- Introduction
- Insurers have used supply chain management to curb the growth of claims
bills
- Procurement agreements have become standard mainly due to savings from
economies of scale
- Fraud can be reduced by the use of replacement-in-kind and store
vouchers, while reputation increases
- Supply agreements have their drawbacks as customer service can suffer
if the relationship is not carefully managed
- Outsourcing has a number of advantages and disadvantages
- Outsourcing can allow an insurance provider to quickly adopt the
benefits of new technology without the cost
- Cost saving continues to dominate the debate over the use of
outsourcing, although attitudes are changing
- Outsourcing in the insurance sector is not as prominent as in other
financial services markets, but is still a key part of many insurers'
strategies
- Lack of control over the claims process has kept some insurers from
outsourcing any claims handling
- The leaders in outsourced claims management have made strides in the
market
- Capita made a number of acquisitions and new business launches in
2006 and 2007
- Cunningham Lindsay
- Crawford and Company
- Chapter 4 Anti-Fraud Developments
- Fraud continues to cost insurers up to £1.6 billion a year
- While organized crime is behind some of the larger insurance fraud
cases, opportunistic fraud accounts for the majority of fraud cases
- Crash for cash schemes remain a significant source of fraudulent motor
claims committed by organized crime
- The IFB has been very active in the investigation of professional
fraud over the year it has been in operation
- Opportunistic fraud remains difficult to detect, though widespread
- Insurance providers have a number of techniques at their disposal to
combat fraud
- Measures that detect fraudulent cases early on are key in keeping
fraud costs contained
- Rapid medical assessment can deter suspect claims from proceeding,
as well as providing good customer service
- Fraud detection systems can provide real time validation of claims,
detecting the fraud early on
- Investments in IT are crucial in obtaining savings on claims costs and
can improve customer services
- Even simple IT solutions can benefit insurers in their bid to
contain fraud costs
- There are a number of providers of more sophisticated anti-fraud
measures operating in the market
- Publicity can significantly improve the effectiveness of anti-fraud
measures as well as provide its own deterrent
- Follow up on the initial claims can often uncover and deter fraud
claims
- Insurance providers are identifying and preventing more fraud,
suggesting anti-fraud efforts are producing dividends
- Chapter 5 Regulation and Law
- Introduction
- New fire regulations may increase the cost of property insurance claims
- New fire regulations came into effect in October 2006
- Total losses have increased, with insurers noticing more large fire
losses in 2006
- New NHS Injury Costs Recovery Scheme regulations came into effect in
January 2007
- The NHS expects to recover an additional £150 million a year through
the new cost recovery scheme
- Cost recovery limits have increased to £38,000
- Insurers fear current limits could be scrapped altogether within the
next five years, increasing claims inflation even more
- The DCA paper on damages has the potential to stoke claims inflation for
personal injury cases
- New Ogden tables and changes in the drivers of claims inflation could
cause significant increases in personal injury costs
- The DCA paper also recommended that the number of people eligible to
claim damage payments for care and dependency be increased
- There may be changes to regulations surrounding third party capture and
periodic payments
- The FSA may move to regulate the use of third party capture by insurers
- Periodic payments have failed to have the impact many feared, though
can lead to higher claims costs
- The Compensation Act proved to be a mixed bag for claims managers with
both benefits and drawbacks
- Joint and several liability for mesothelioma cases was established in
the Compensation Act of 2006, returning the status quo
- Rehabilitation may become more attractive as a means for controlling
costs because of the apology clause
- Claims management companies must now be registered and comply with the
new Compensation Act
- APPENDIX
- Further reading
- Future reading
- Ask the analyst
- General insurance research and analysis team
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Estimated regional breakdown of ' crash for cash' scams since
1999, 2007
- Table 2: Insurers contributing and subscribing to the CUE database,
2007
- List of Figures
- Figure 1: The Irish anti-fraud advertising campaign has been
successful at reducing the incidence of fraud
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