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White Paper—The Evolution of Claims Decision Support

—July 21, 2010
White Paper—The Evolution of Claims Decision Support

Achieving the Benefits of a Modern Solution



Who should read this document?

Property & Casualty insurance executives in key insurance operational positions (Chief Executive Officer, Chief Operations Officer, Chief Financial Officer, Chief Claims Officer, etc.) and claims management and claims adjusting professionals who are concerned about:

  1. Maintaining profitability in an ongoing soft market;
  2. Experienced personnel “brain drain” in their claims professional communities;
  3. Increasing the efficiency, productivity, cost effectiveness and service levels of their claims operations;
  4. Ensuring investigative completeness, evaluation, negotiation and settlement consistency in their liability claims handling;
  5. Incurring the high cost and long time to benefit of large do-it-yourself internal software development efforts, ERP projects or consulting firm-style custom development efforts, and;
  6. Obtaining the benefits that a leading, proven and modern claims decision support solution can bring to their organization.

This paper is designed to accomplish four major goals:

  1. Provide an educational update around the critical role that a property and casualty insurer’s claims organization plays in impacting an insurer’s operational profitability;
  2. Underscore that a solution now exists, which can positively impact the key areas of concern that insurers have as they look to their claims handling futures;
  3. Provide an overview of what a property and casualty insurer should look for in a modern claims decision support solution, and;
  4. Pique your interest in examining the capabilities of Mitchell ClaimIQ™ to meet these needs.

Key facts to keep in mind while reading this paper:

  1. Combined ratio results in the high 80s to low 90s are required to achieve Fortune 500 results;1
  2. Combined ratios remain high and the market is soft. Operational profitability pressures are—and will continue to—intensify; 2
  3. Estimates are that a 4% to 6% reduction in pure losses and a 10% to 12% reduction in loss adjustment expense are feasible through the appropriate selection and application of modern claims technologies. This estimate represents a 4- to 5-point improvement in the carrier’s combined ratio,3 and;
  4. Modern claim decision support solutions have been shown to bring tangible and sustainable benefits to those property and casualty insurers who have adopted them.4

Executive Summary

A Property & Casualty (P&C) insurer’s financial performance depends heavily on its claims organization. Even for best carriers, combined losses paid and loss adjustment expense routinely account for 60-70% of the cost side of their combined ratio equation. The opportunity for P&C claims improvement to impact insurer profitability is enormous in several key areas:

  • Claims Indemnity Leakage – Estimated at an annual rate between 6 to 10% of net written premium (NWP).5
  • Loss Adjustment Expense Leakage – Inefficient processes and inappropriate use of claims adjusting resources can add another 1 to 4% of NWP in leakage each year. 6
  • Claims Adjusting Efficiency – more than 40% of claims adjuster’s time is spent on activities that do not actively assist in bringing the claim to a prompt and reasonable conclusion. Inefficiencies lead to longer claim settlement times which can impact customer satisfaction, drive up litigation rates and negatively impact indemnity payments. Worse, these inefficiencies waste valuable adjuster time—an ever diminishing resource.7
  • Customer Satisfaction – Carriers achieving high levels of satisfaction retain customers and enjoy lower customer acquisition costs. Among customers who indicate high levels of satisfaction with their carrier overall, 94% renew their policy, 56% “will definitely recommend” and 46% indicate they “will not switch for any price.” Acquisition costs for these carriers average 4.1% points lower for these carriers than “low satisfaction carriers.” Low satisfaction carriers retain 81% of their customers with 31% “planning to shop” and only 27% in the “will definitely recommend” category.8 Satisfaction with claim handling drives 12.3% of overall satisfaction for policyholders, but this can dramatically increase around an actual claim event driving 44% of the overall insurer impression by customers who filed a recent auto claim.9

Maximize the Value of your Adjuster Workforce

Imagine if you could have your best adjusters handling each of your claims and that those adjusters were guaranteed to be with you for years to come. Each of the key concerns listed above would be greatly reduced, if not eliminated. Your best adjusters by definition are highly efficient, do not make inappropriate claim or expense payments and deliver the highest levels of customer satisfaction.

Unfortunately you can’t have your best adjusters assigned to every claim. And this situation is not going to improve any time soon. Not only are carriers losing their top talent each year due to the normal employee transitional flow of a free market society, but the majority of experienced adjusters are heading for retirement—70% are over the age of 45 and 33% are over the age of 55. To make this situation worse, few are joining the ranks of carrier’s claims departments—only 4% are under the age of 35.10 In fact, Deloitte Consulting predicts a shortage 84,000 claims adjusters in the United States by 2014.11

As well as preserving these highly experienced and talented claims handling resources for the claims (or pieces of the claim, such as individual coverages, suffixes or features) that require their extensive expertise, your best adjusters are critical for the knowledge transfer they can pass along to less experienced claims professionals. These experienced resources are also invaluable for an insurer to undertake and achieve success in migrating to a rules-based claims technologies or predictive analytics models as these systems must be shown the what-to-look-for and what-to-do logic that resides with an insurer’s seasoned adjusters.

Leading insurance executives understand the tremendous advantages that a consistent, cost effective, streamlined, and efficient claims organization can deliver to their organizations. But for many the state and capabilities of claims technology has been a key road block. The lack of appropriate modern claims decision support solutions to imbed the knowledge, experience, talent and claims savvy of an insurer’s topnotch adjusters on their very best day continues to be a key reason that claims adjusting inefficiencies and inconsistencies, and their attendant costs remain large issues for P&C insurers.

This document will examine the history of knowledge transfer in P&C claims organizations, the evolution of technology in support of insurer’s desire for claims handling consistency, and introduce the capabilities that insurers should look for in an modern claims decision support solution as they continue their quest to improve timeliness, control, consistency and service delivery in their claims handling operations.

The Evolution of Claims Knowledge Transfer

Back-in-the-day claims adjusters were hired and, prior to handling any claims, sent to claims school where they learned the basics of coverage, investigation, evaluation, negotiation and settlement practices. Then the new adjuster was sent out to a field claims office to put in to practice the lessons that they learned on real live claims.

Generally the adjuster would find out how they were doing in the handling of their claims via a series of claim reviews or audits which would point out areas of satisfaction as well as areas where the adjuster needed improvement in the handling of the claim. This aspect of their on-the-job adjusting education was via the learn-from-your-mistakes school and often after the mistake, so frequently the individual claim noted as deficient was already paid and closed; thus the inappropriate claim handling decision, payment and/or claims service issue was already cemented.

Often carriers would set up buddy adjusters for those new to the adjusting world (or to assist the onboarding of experienced hires from other carriers…), standard supervisory diary time-frames, weekly roundtables or other creative methods of ensuring some prior-to-closing claim file review, but for the vast majority of claims, the adjuster handled them solo unless they asked for help or the individual claim was noted and placed on diary by supervisory personnel.

This is not to say that those after the fact evaluations of clams handling decisions were incorrect in their findings, but that those findings were noted generally far too late to impact the individual claim. And those findings—even if they became “embedded knowledge” for the individual adjuster would only benefit the future claims that this individual was involved with; not the book of claims as a whole.

This was not just the case for line adjusters. Claim supervisory personnel—and up the claim management chain—had the same situation as adjusters around their work with regards to “after the fact” education via claim audit results.

Carrier’s claims organizations realized that this situation—at best—led to inconsistencies in coverage The Evolution of Claims Decision Support 6 interpretation and claims investigation, evaluation, negotiation and settlement practices; and could significantly impact financial and service results.

Claims Knowledge Transfer: Manual Manuals

Carriers knew that they needed a way to bring consistency in their claims handling to all claims—every day— regardless of who was handling the individual claim file.

Carriers embarked on huge claim-handling guidelines projects that attempted to detail on paper their preferred claim handling methods covering everything from coverage interpretation to deductible assessment to recorded statements to accident scene investigation, liability evaluation, settlement value evaluation and recovery recognition and pursuit—just to name a few. And, of course, each of these manuals might have to be tuned for specific lines of business, coverages, coverage forms, as well as for specific jurisdictional items (such as variations in comparative or contributory negligence laws in liability cases or definition of employee; a key part of any workers’ compensation compensability decision).

What evolved were volumes of thick binder claims manuals that sat on each adjuster’s desk and rapidly became obsolete as the claims handling environment evolved. Adjusters thought they knew the nuances of the coverages and jurisdictions that they were handling (often an expanding set of both coverages and jurisdictions) and developed their own series of highlighted and annotated coverage sheets and other types of cheat sheets that they individually used to assist them in their claims handling decisions.

The reality is that not much really changed…

Claims Knowledge Transfer: Manuals and Forms

Many carriers also evolved a complex series of paper checklists and forms that the adjuster became responsible for completing to show that they had considered key parameters of the claims facts prior to making key claims handling decisions. For example, a coverage checklist to ensure that a personal lines automobile claim fit within loss date, non-excluded driver, not in course and scope of employment and appropriate comprehensive or collision deductible guidelines. When it became time for evaluation and negotiation, more forms were completed where the adjuster slogged through the claim file laboriously adding up the medical specials, set their negotiation plan, and determined any general damage award range.

So the desired new workload became (at each stage of the claim):

  1. Pull guideline binder
  2. Look up next steps
  3. Follow next steps
  4. Fill out paper forms
  5. See step 1

Though on paper this workflow would appear to bring consistency to claims handling across the book of claims, most carrier’s reality was that the paper claim file became thicker while individual adjusters handled their cases in much the same manner as they always had—largely solo based upon their own skill-set, experience and knowledge (with perhaps a bit of “can you take a look at this?” input from peer group adjusters or supervisory staff).

Embedded Knowledge – Enter the Green Screen

With the advent of main-frame computer system, many insurers felt that they at last had a method to ensure claims handling consistency. However, the first claims systems—deployed in the 1970s and 1980s— were simply transaction screens—usually based on an expansion of an existing financial system and accessed through a text code-based, green screen graphical user interface (GUI).

To enable computer-supported claims handling decisioning required the carrier to build multiple screens of two-digit code fields that attempted to capture key claim handling decisions. In order to navigate these screens the adjuster was required to learn (or look up in yet another paper manual) numerous screen navigation codes as well as a long series of individual two-digit codes.

On the best of days, these systems did ask questions and collect claims knowledge at various points over the life of the claim, but this technology lacked any functionality to assist the adjuster towards formulating their next steps or assisting their claim handling decisions based upon any institutionalized expert knowledge. Thus, these systems rapidly became a burden and a brake upon effective use of claims adjuster’s time and many adjusters rapidly learned that most systems allowed a “00” (undetermined) for quite a few fields as well as that most systems would make red the must-enter fields on each screen if they hit the enter key prior to entering any data. Thus, a situation could easily present itself where a minimum collection of minimal value data was contained in the discrete data fields of the claim handling system.

And these systems were expensive, tough to build and extremely hard to modify—it was just not possible to efficiently, cost effectively and consistently modify them to capture all the nuances of constantly evolving claims handling decisioning.

Embedded Knowledge: System Evolution(?)

In the late 1980s and 1990s, systems solely designed and dedicated to property casualty claims handling started being developed. These systems largely brought platform change to the claims handling world. Systems were still primarily based on mainframes or minicomputers and some introduced more modern client/server architectures to the claims technology world. Despite the best efforts of manufacturers, the majority shared the same cryptic, short digit and text-based interfaces that required claims professionals to continue to navigate these systems by awkward, non-intuitive, mysterious, and numerous key stroke combinations.

Some of these claims systems made some attempt to include diary and notes features, allowing claim handlers and claims supervisory teams some (limited) control in planning and/or directing the adjustment of the individual claim and documenting the adjustment process. But these crude tools provided no systembased, consistent guidance for claims adjusting professionals nor the visibility and control that claims management requires to enable operational efficiency and timely and consistent claim handling across the entire book of claims.

There have been tremendous advances in claims software technology in the last 15 years. The GUI is much more user friendly and intuitive, two-digit codes have been largely replaced by pull-down menus and the green screen replaced by a veritable full palette of color options and many systems operate within a thinclient anytime/anywhere Web-based delivery model. Yet most available out-of-the-box claims systems still cling to this basic model of financial transactions, claims notes, and tasks and time-frames diary.

And these modern systems’ ability to ask questions and demand answers is now almost unlimited, which can force the claims professional to document answers to more and more questions, but provide no assistance in bringing the claim to prompt, accurate, across book of claims consistent, efficient, cost-effective and service sensitive conclusion.

Embedded Knowledge: Solution (R)Evolution

It is painfully clear that a key part of the data driven claims decision support equation is missing. Data collection by itself is not enough. Claims adjusters must have access to tools that help them analyze the claim information that they collect and document during their handling of their claim files and help them make better claims-handling decisions. These tools must bring forward “expert knowledge,” carrier-specific guidance around claim handling activities enabling any adjuster to think like the top expert at key points in the claim—based upon the best skills, thought processes and experience of a carrier’s best adjusters; on those adjuster’s very best days.

Let’s explore what some of the requirement parameters of such a claims decision support solution are.

Support Key Phases in Claims Lifecycle

The claims decision support solution cannot just focus on a snapshot of one part or process of the claim (e.g. First Notice of Loss), but must provide assistance across a variety of key steps across the life of the claim, such as coverage interpretation, compensability decisions, liability investigation, recovery recognition, damage evaluation and negotiation and settlement planning.


Any claims decision support solution cannot rely on a single—or small series of—data elements to recommend action. The dynamics of claims handling are such that a broad range of potential claim influencers must be part of the evaluation of key claim facts as the solution recommends next steps. Even a small change in a single claim fact can open up a large number of additional areas of investigation, negligence and/or compensability issues. For example, how would a personal lines automobile coverage decision be impacted by the insured being in course in scope of employment during the accident? How would that conclusion be reached in different jurisdictions? What thought processes would a top adjuster be undertaking and what actions?

Provide Logical and Supportable Guidance to the Adjuster

A claims decision support solution must be able to explain its recommendations. Merely pushing out an answer simply does not work. An adjuster has to be able to logically understand—and explain—the what’s and why’s of any aspect of their claims handling. Imagine an adjuster trying to argue liability with “my computer says so” vs. “I see your points counselor, but California law is quite specific requiring the use of a hands-free headset while using a mobile phone and your client was not which certainly added to their distraction as they approached the intersection.”

One Size Does Not Fit All

The last thing that we want is yet another system that demands answers to series after series of questions on each and every claim. The decision support solution must be designed to start with a top down approach that recognizes the specific dynamics of each claim. For instance, a well-designed automobile liability decision support solution might start with 4-way intersection, left hand turn or auto vs. bicycle, and then quickly cover both the basics and unique complexities of investigation and liability determination specific to those types of claim incidents.

Multi-line Flexible

Consistent and accurate claims handling is more than a single line of business need. Any claims decision support solution must be flexible to assist claims handling across multiple lines of business; without a need for long, complex and expensive “change the source code” projects. Any claim type or line of business specific needs should be able to be easily configured in to the system—above the source code layer—on a timely basis and within a reasonable cost.

Embed Graphical Capabilities

For certain claim scenarios, a picture is worth a thousand words. A claims decision support solution should embed draw-the-scenario capabilities and these capabilities should be intelligent to the specifics of the claims incident. For example, if the system knows that the intersection was controlled, it will ask what type of control (stop sign, traffic signal, etc.) should be placed in the diagram. Any graphical representations should be easily saved to the file and enabled for printing, fax and email transmission to ensure their ability to be used in claims liability and negotiation discussions.

Support the Need of the Claim

Sometimes a claim just presents as clear liability and it would be an ineffective and inefficient use of an adjuster’s time to work through a system-supported liability determination. Thus, the adjuster should be able to bypass certain aspects of the claims decision support solution with only a need to enter a simple reason code.

Enable Claim Handling “Insight” and Audit Capabilities

The use of a consistent—and consistently documented—framework of claim handling decisioning enables analysis and understanding across a wide breadth and depth of the claims book and can point to areas of additional potential claims handling efficiencies, cost reductions and service improvement opportunities.

And the data collected serves as powerful and valuable claim decision point audit trail information, not just when and how (and how much) reserves and payments were adjusted.


Any claims expert solution must focus on providing high value in a highly efficient manner and should be designed in such a way to accept and feed data to the claim systems of record as well as the potential myriad of claims expert point solutions that can surround the modern claims professional. Forcing an adjuster to enter (and re-enter) information that already exists in other systems is a tremendous waste of the adjuster’s professional skills and should be avoided at all costs.

Not Point to a Number

Over the years much attention has been given to data mining as a method of determining the final value of a claim—that is determining statistically significant factors from past claims (and what those claims settled for) to set a settlement value for a current open claim.

By itself, this method is flawed around several parameters.

  1. Does the adjuster gain any experience and insight to do their job any better?
  2. How does the adjuster negotiate with a solution that just provides a number?
  3. Is the past the best predictor of the future? Can we assume that past claim settlement values are appropriate in the current claims environment; and to an individual specific claim?
  4. Are medical specials the best predictor of general damages? It would be hard to imagine a bodily injury settlement value model not being heavily influenced by total medical specials. Medical inflation routinely runs well above the Consumer Price Index, so it is quite possible that general damage award amounts become artificially inflated solely due to rapidly increasing cost of medical care.
  5. Last—and most importantly—does this method fully comply with an insurer’s duty to defend and indemnify per the contractual language of the insurance contract? If the solution just provides a settlement number, how can the insured be satisfied that all aspects of investigation—in their defense (not only liability but from any rate impact of a claims payment)—have been satisfied?


There are only two levers available to drive operational profitability in the P&C insurance market. One lever is to increase profitable revenue; the other is to reduce costs. An insurer’s claims department serves a critical role in applying each of these levers.

The ongoing soft market condition has fueled insurers search for opportunities for operational cost reductions. With claims routinely accounting for the largest share of the cost side of an insurer’s combined ratio, carriers are insisting their claims departments increase their operational efficiencies and cost effectiveness. Carriers understand that outstanding claims service is a major key towards ensuring profitable retention.

Outstanding claims service means:

  • Appropriate payment to the appropriate party
  • At the right time
  • For the right reasons
  • Fairly and consistently

Insurers can struggle around achieving this goal for several reasons including:

  • Diminishing adjuster work force and experience base
  • High adjuster caseloads across more jurisdictional boundaries
  • Pressure to handle more claims within streamlined fast track units
  • Missed or unrecognized investigative steps
  • Inappropriate settlement evaluation frame-work
  • Missed negotiation points
  • Pressure to close claims
  • Incomplete, ineffective, non-integrated claims adjusting support technologies

This paper has discussed only a few of the many ways in which a modern claims decision support solution can assist insurance carriers improve claims performance. A properly designed and implemented claims decision support solution enables insurer’s adjusters to think and act like their top claims experts around that insurers preferred claims investigative, evaluation and negotiation practices—as part of the normal day-to-day handling of the claim and across key claim decision points on individual claims and the insurer’s entire book of claims.

About Mitchell Auto Casualty Solutions

Mitchell Auto Casualty Solutions (ACS) provides technology, database and service solutions that enable customers to achieve claims operational excellence while handling 1st and 3rd party liability and medical claims in a more timely, efficient, cost-effective, accurate, consistent and fair manner.

For more than 20 years ACS has delivered high-quality products and services to property casualty claim insurers, service providers and TPA customers assisting them to better analyze and adjudicate 1st and 3rd party medical bills and execute complete, comprehensive and consistent liability and injury evaluations and claim settlement strategies and deliver superior claims service.

Mitchell DecisionPoint® suite reviews over 12 million medical bills each year representing more than $6.3b in medical provider billed charges. DecisionPoint is in use by more than 40 top US property casualty insurers including 8 of the 10 largest automobile insurers representing more than 60% of direct written premium in the personal auto lines market.

Mitchell ClaimIQ™ – provides investigative and damage evaluation consistency and negotiation, including settlement support to more than 5 million automobile and general liability claims per year.

About Mitchell

Mitchell International ( is a leading provider of information and workflow solutions to the Property & Casualty claims and Automotive Collision Repair industries. The company’s comprehensive solution portfolio streamlines the entire auto physical damage, bodily injury and workers’ compensation claims processes. Mitchell enables millions of electronic transactions between more than 30,000 business partners each month to enhance partner productivity, profitability, and customer satisfaction.

For More Information

To learn more about Mitchell International, call 1-800-238-9111 or 858-368-7000 (US and Canada), or visit


  • 1 ISO, Insurance Information Institute.
  • 2 Dr. Robert P. Hartwig, President and Economist, Insurance Information Institute, Top Trends and Challenges in Auto & Home Insurance Markets, Earlybird Forecast 2008, April 26, 2010.
  • 3 Celent, Technology Enabled Claims Performance Improvement, September 6, 2006.
  • 4 Between 2003 and 2009 Mitchell ClaimIQ customers have achieved up to a 13% increase on “no liability on insured” assessments and a 14% reduction in “100% liability on insured” assessments reduction.
  • 5 Estimates by consulting firms including Accenture, McKinsey & Co., and PricewaterhouseCoopers (now IBM) and leading industry publications put leakage and excess loss adjustment expense at 10-15% of NWP.
  • 6 Ibid.
  • 7 Estimates by consulting firms and industry analysts including Accenture, Celent and Tata.
  • 8 J.D. Power and Associates, Preparing for the Hard Market in Personal Auto Insurance, August, 2009.
  • 9 J.D. Power and Associates press release, Providing High Levels of Customer Satisfaction Has Clear Implications for Auto Insurers, August 29, 2006.
  • 10 Claims Magazine, Checks and Balances—Survey Suggests Salaries, Workloads Still Off-Kilter, October, 2008.
  • 11 Deloitte, How Insurance Companies Can Beat the Talent Crises, July, 2006.

Copyright © 2011 Mitchell International, Inc. All rights reserved.

The information contained in this document represents the current view of Mitchell on the issue discussed as of the date of publication. Because Mitchell must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Mitchell, and Mitchell cannot guarantee the accuracy of any information presented after the date of publication.

This white paper is for information purposes only. MITCHELL MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS DOCUMENT.

Mitchell may have patents, patent applications, trademark, copyright or other intellectual property rights covering the subject matter of this document. Except as expressly provided in any written license agreement from Mitchell, the furnishing of this document does not give you any license to these patents, trademarks, copyrights or other intellectual property.

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San Diego, CA 92122

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