An ECM Primer for the Insurance Industry
by Dan Elam, eVisory
 

When imaging systems first began to hit the market in the early 1980s, insurance was the “killer app” that proved that the technology was ready for prime time. Early adopters such as USAA helped set the standard as insurance companies achieved a sort of technology “holy grail” - improved service and reduced costs. For health insurance, the technology is one reason why health cost increases have slowed and actually helped keep the nation’s inflation rate low.

Always progressive in the use of technology, insurance companies are looking at knowledge management products to find even new ways to gain a competitive edge. As non-profit organizations like Blue Shield/Blue Cross convert to for-profit status, competitive pressures are forcing insurance companies to find new ways to manage information.

Today, there are six major applications that insurance companies are considering.

Insurance companies are little more than paper and people. Most of the time the interaction with the customer is just sending in forms related to applications and claims. Workers process the paper information. When a customer calls, there is almost always a problem (such as a car crash or death). Today’s consumers are notoriously fickle: insurance companies know that a frustrated customer is likely to take their business somewhere else. To avoid frustration, customers need to have access to their questions while they are on the phone. Telling someone with a totaled car that you will have to call them back is not the answer.

The common knowledge management applications for insurance companies include:

• Imaging & workflow for applications/underwriting
• Imaging & workflow for claims processing
• Imaging for customer service
• COLD for reports
• Data Mining
• Knowledge Capture & Document Management

Imaging & workflow for applications/underwriting - This was the original application that most insurance companies first implemented. For these systems applications are submitted to the insurance company where they are routed for approval and underwriting. These systems speed the approval process and help make better decisions about how rates are established. Many of these systems have strong ROI paybacks and are justified in just two or three years. Early systems were based on proprietary technology and some of these systems are being updated with current generation systems.

Imaging & workflow for claims processing - The most labor intensive aspect of any insurance company is claims processing. Even small insurance companies spend millions of dollars to handle the vast amounts of time sensitive paper. Some companies send their paper or images off shore for key data entry, but the hottest part of the market today is in forms processing to OCR/ICR the information contained on the forms. In most cases, the images can be discarded once the claim has been paid, but a number of companies store the images for customer service, audit, and legal purposes. Senior management often hopes to avoid these expensive systems through the use of EDI, but electronic claims still represent a small percentage of the total claims volumes and EDI growth appears to be slowing. These systems can often be cost justified in one to two years.

Imaging for customer service - To avoid callbacks and improve customer service, some companies have looked to gain a competitive advantage by being able to retrieve applications and claims when a customer or service provider (hospital, doctor, dentist, etc.) calls with a question. These systems are usually added to underwriting and claims systems and are justified strategically and not through specific cost savings.

COLD - With today’s computing systems that manage every function of insurance operations, there are numerous computer-generated reports that cover everything from sales to investments to summaries of processed claims. COLD provides the ability to capture this information and permit users to find the information that they need without resorting to paper. COLD applications are often “no-brain” buys for insurance companies thanks to paybacks measured in months.

Data Mining - For insurance companies that already having imaging & COLD, data mining is fast becoming the new “killer app” since it allows them. Data mining allows insurance companies to store vast amounts of information and then search to discover “hidden” information used to adjust premiums or alter benefits to control costs. Since the information can be used to exclude certain people from coverage, new laws are being developed to prevent insurance companies from using data mining unfairly. Since premium and payment volumes are so high for most insurance companies, even a small percentage difference can mean serious money. Since it is impossible to predict what data mining will find, implementation is often a leap of faith on behalf of management. Some companies have seen cost justifications measured in days and weeks, so management is often eager to implement these systems when they understand the potential benefits.

Knowledge Capture and Document Management - As insurance companies implement systems to reduce operational costs, many are beginning to look at technology that allows them to make better decisions. There are many types of products that fit into this category. At the simplest level, insurance companies are using Document Management systems to capture proposal information, marketing information, and general industry information in order to help them make better decisions. More complex systems collect information about how auditors detect fraud and underwriters make complex decisions. This information is processed by new knowledge management technology in order to capitalize on the knowledge that makes the organization unique. Hard dollar savings for these types of systems are often in the three to five year range, although some systems can be justified much faster. Like Data Mining, hard dollar benefits are often difficult to quantify since some of the actual benefits can be hard to specifically predict.