Nine out of 10 property/casualty claim officers said increased competition, consolidation, and convergence are among the leading challenges facing their industry in 2008, according to a recent Towers Perrin survey conducted by the firm's claim management practice.

The claim officer survey also reported on key trends that are reshaping the industry, citing the rapidly growing importance of data analysis and technology, as well as recruitment and retention of top talent as key determinants of meeting business goals. In fact, attracting and retaining top talent is cited as the top priority for 82 percent of the companies surveyed.

"Claim officers are all too familiar with the challenges of competitive pressures," said Kathleen Cullen, Towers Perrin's claim management practice leader. "Our survey looks beyond traditional competition and provides excellent insight into the emerging issues that are transforming the industry. The way the industry traditionally looked at itself has shifted from budgets and operational controls to a need for more sophisticated approaches regarding managing claim performance and results."

In all, 62 claim officers from property/casualty insurance companies of various sizes were surveyed in late 2007: 37 percent from companies with less than $200 million in written premiums, 31 percent from companies with written premiums of between $200 million and $750 million, and 32 percent from firms with more than $750 million in written premiums.

Both commercial and personal lines companies participated:

• About half write a significant amount of business in commercial lines, with approximately half of those describing multi-peril as their primary line of business.
• Within personal lines, about half of those participants write predominantly auto coverage.

Expense and cost management remains a top concern for all carriers, although better technology solutions and more sophisticated analytics are getting more emphasis as competition tightens.

Secondary challenges vary by respondent demographics, with larger carriers citing distribution and product management while smaller carriers and carriers that write smaller accounts cited regulatory issues.

Regarding priorities, 52 percent of claim officers pointed to the effective use of data and analytics as a main driver to meeting business objectives, ranking it second to attracting talent. This was closely followed by an interest in better ways to use technology in general (50 percent).

Focusing on the emerging trends and issues bringing change to the claims industry, nearly two-thirds (65 percent) of respondents chose sophisticated analytics, trumping the more traditional issue of escalating claim severity, which was identified by half of respondents. Increasing technology needs and reliance on software ranked as the number three emerging issue.

Interestingly, less than one-third of respondents cited increased business acumen needs as an emerging issue — a notable finding given that 68 percent identified technical skills and training as an approach to meet industry challenges.

"Claim leaders are looking for technical solutions to meet their increasingly complex business needs," Cullen explained. "It is clear that investment in people and broader-based skill development are critical for sustaining and improving claim-handling fundamentals."

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Source: Towers Perrin

© Copyright 2007, National Association of Mutual Insurance Companies (NAMIC).