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P&C Claims Automation Solution A Competitive Advantage

Paragon Solutions, Inc. Mike Cloutier – Vice President Insurance Markets

ACORD Conference May 15-17, 2012

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THE COST OF CLAIMS PAYMENTS AND

EXPENSES IS THE SINGLE, LARGEST SPEND

FOR P&C INSURERS, ACCOUNTING FOR

75%-85% OF TOTAL ADMINISTRATIVE COST

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Top Claims Investment Drivers

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Costs An A.T. Kearney study found that the costs associated with reviewing and settling claims typically

account for up to 65 percent of an insurer’s revenue. Claim handling costs are high because of

process inefficiencies (including manual steps and re-keying) paper use, headcount for expense for

all claim parties and litigation expenses

Quality Many insurers have not re-engineered their claims processes; resulting in continued process gaps,

slow processes and poor customer service quality

Customer Satisfaction The insurance industry continues to score poorly in customer satisfaction surveys. In a recent

survey of companies conducted by Business Week, only two insurance companies were included in

the top 25 companies identified as “The Customer Service Elite” by the publication. [1]

Timing Studies have also shown that customers who receive prompt claims settlements are more likely to

renew with their existing carriers. [2]

[1] Jena McGregor with Frederick F. Jesperson, Megan Tucker and Dean Foust, “Customer Service Champs,” Business Week, 5 March 2007 [2] The American Customer Satisfaction Index, “Scores by Industry: Property & Casualty Insurance,” 2006

Challenges in Claims Processing

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Other Departments

Common pain points across claims are costing insurance carriers…

Claims Management Process

… Invest-igation

Determine Coverage

Initiate Claim

Third Party Providers

Financial Management

Consistent industry claims leakage of 8-12% of net premiums written

Limited visibility into trends as well as issues with the accuracy of information contributes to chronic industry reserve deficiencies

Loss Adjustment Expense (LAE) inefficiencies are rationalized as required for severity containment

1. When dealing with 3rd parties…

Inability to measure performance or value

Difficulty in selecting and implementing partnerships

2. When managing liability…

Failure to apply consistent processes to detect fraud and subrogation opportunities

Sub-optimal claim handling procedures drive inconsistencies

3. When processing claims…

Inefficient staffing, processes and organization structure

Wasted effort and time in claim handling

Poor customer service permeates process

4. When dealing with other departments…

Competing incentives from department to department

Poor integration between claims, underwriting, sales and agency

5. When managing financials…

Errors with bills and payments

Unenforced policy limits & deductibles

1

Industry Impact

2

5 4

*Source: CSFB P&C Primer, Feb 2006; Claims Magazine 20070

3

Business Challenges:

Claims’ Common Pain Points & Impacts

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Critical Success Factors in Claims

Superior customer Experience

Improve Customer Satisfaction (higher retention)

Customer driven state of mind

Customer access (ex. website)

Claim communication and facilitation

Quick claims process cycle time

Coverage Determination

Loss Adjustment Expenses

Reduce Operational Expenses Focus on increased throughput and reduced overhead

Performance based on claims throughput productivity

Reduce specialization to balance loads

Loss

Reduce loss costs

Indemnity payments

Eliminate fraud

Reduce claim leakage

Claim Resolution

Triage & Assignment

Investigation

Physical Damage Repair

Medical Management

Litigation Management

Claim Evaluation

Recovery FNOL

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Documentum

Speed to Value: Case-Based Solutions

Case-based Solution Examples

Customer Care Contracts

Management New Account

Opening Human

Resources Accounts Payable

Claims Management

Configurable User Interface

Rich Integration Capabilities

Model-driven Configuration

Process & Content Unification

Business Process Management

Compliance Monitoring & Reporting

Customer Communications Intelligent Capture

Content Management & Repository Services

Collaboration

Configurable Dashboards

Role-based Applications

Reference Applications

Case Management

Best Practices

Single platform to rapidly build case-based applications

Solutions up to 50% faster, substantially lower cost

Configuration vs. coding – less resources, complexity & risk

Greater application agility , lower TCO

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Digital Claims Processing Customer Example

8

Background

Insurance subsidiary of large US financial institution

Large writer of property and casualty insurance for business, home, and auto

2,800 employees in offices across 32 states

1,100 employees working from home offices

The Challenge

Reduce time, effort, and costs associated with documenting claims

– 18 to 30 days from notification of a loss until claim data completely entered into the system

Claims management system data types included: – 35mm and digital photos, voice depositions, video, claim

forms, police reports, official statements, etc.

Minimize impact on staff, retain data long-term, immediate data recovery

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Digital Claims Processing: An Example The Results

9

• With this solution, digital images are sent via the Internet

to headquarters, loaded into the EMC Documentum

repository (running with an EMC Centera content

addressed storage system), and then automatically

linked to the virtual claim file—all within 15 minutes

• $2.5 million annual savings

• Reduced claims processing costs by $250,000 in postal

fees alone for the documentation after a recent disaster

• Speeded workflow and provided better access to

information

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Paragon Solutions’ Profile

Paragon is an enterprise information management

solutions company that helps firms leverage information

assets to achieve better business results.

Corporate Facts • National Coverage • Global Clients • NJ Headquarters • Dual-shore Development • CAGR 20+% • Privately owned, 30-year

history

Market domain expertise focusing on client solutions

Solution competencies addressing process

optimization, information management and

information integration.

Advisory consulting and systems integration teams

delivering business value.

Industry-aligned accelerator assets providing rapid

time-to-value and lower total cost of ownership.

A proven delivery track record delivering high value

and return on investment.

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Contact Paragon for More Information

Joe Pennino, Solutions Sales Director phone: 516.610.7024; jpennino@consultparagon.com

Michael Cloutier, VP Insurance Solutions phone: 908.783.1903; mcloutier@consultparagon.com

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