Hot Tools for Insurance Tech
From voice recognition software to cyber-settlements on the World Wide Web, technology is giving insurers remarkable capability and connectivity in servicing accounts and settling claims for customers.
The folks at Harleysville Insurance Co. love their tech tools. To create a loss control report at the Harleysville. Pa., property and casualty insurer, company loss control representatives need only dictate into a powerful Dell notebook computer equipped with the latest voice recognition software, Dragon’s Naturally Speaking. They also can snap photos with a Sony Mavica digital camera, imbed floor diagrams using CAD Zone’s Insurance Zone software application into a Microsoft Word document (along with the photos), and zip the data to an underwriter via the Internet. Voila!
“Requests are starting to come in for the technology from other areas of the company, especially claims,” says Scott Simons, senior corporate business analyst at Harleysville. “Voice recognition and the digital cameras are the hot items. At first, we wondered how well the loss control project would work. Now, we’ve got people jockeying for position to get the technology next. As project manager, that’s a nice position to be in.”
It’s also one of the ways today’s emerging technology tools–hardware, software and Web-based–are starting to have a real impact on the way insurers conduct business and are likely to conduct business in the future. From handheld devices (cell phones and personal digital assistants [PDAs], such as Palm Pilots) to digital writing pads, neural networks to the Internet, insurers are starting to move (some might say catch up) to a future that will take advantage of these tools. While laptop computers and cell phones are de rigueur, more powerful hardware components and software are expected to take mobile computing to a new level. And the imminent arrival of high-speed Internet access also promises some exciting things to come.
“New mobile computing platforms will lead to a lot of efficiencies for the insurance sales force, as well as for claim adjusters and other areas,” says Belgium-based Alexander Linden, senior analyst, advanced technologies and applications, for Gartner Group, the information technology consulting firm in Stamford, Conn. “The support PDAs provide will range from situation assessment to decision support. The back-office will largely be oriented toward helpdesk centers that help coordinate and answer inquiries from the mobile sales force and claim adjusters.”
Linden lists other emerging technologies such as data mining, help desk software, text mining for improved claim processing, enterprise application integration, and even potentially controversial programs that offer premium discounts to personal lines customers for using voice recognition to root out suspicious claims. “From a technology innovation standpoint, insurance companies have a diverse list of needs,” he adds.
As the Harleysville experience shows, one of those needs is streamlining the paper-intensive loss control process. According to Craig Campbell, Harleysville’s loss control services property coordinator, using the combination of notebook computer, speech recognition software, CAD software, digital camera, and the Internet, is proving a powerful one.
“The main advantage is to get away from the inspector-type checklist forms and to have more professional narrative reports,” says Campbell. “The technology also means an increase in service, so we can get information to policyholders faster.”
Campbell adds that the company waited until it acquired Dell’s more powerful notebook computers (Pentium II 400s with 128 megabytes of random access memory) last year before launching the project out of the pilot stage in October (expected completion is April). With the added PC power, Dragon’s voice recognition software was much easier to use.
“It’s made a huge difference,” he says. “When we first used the voice recognition software, our units were Pentium 266s with 64 MB of RAM, and that took a lot of voice ‘training’ time.”
Overall, Campbell says it takes about three days to train each Harleysville loss control field office–there are 15 field offices in all, and four have been completed so far.
“We are looking for ‘one-touch’ solutions,” says Simons. “With them, we get improved speed of communications with the policyholder. And it’s also a lot less expensive. The technology tools put the expertise in the field.”
Simons explains that aside from the improved loss control report turnaround time (45 days to 30 days), expense reduction component is also critical. In the past, Harleysville loss control reps had to dictate the information, which then had to be transcribed by a staff of 13, before the data was funneled to underwriters. “We had back and forth mailing and long transmission times. We also were using thirty-five millimeter film and Polaroid camera for photos, which have associated costs,” Simons says. “Going digital has really improved service there.”
By moving to the digital platform, Harleysville reduced mailing costs up to $50,000 a year, and eliminating film processing cut another $40,000 out of annual loss control expenses.
What about further refinements? “Actually, we’re pretty happy with what we have right now,” says Simons. “In three years or so, when we turn over our equipment, who knows what the technology will be?”
One person who has a good idea is Claude Greengard, manager of International Business Machines’ Global Financial Services Research Center in Armonk, N.Y. IBM has several pilot projects in the works with large insurers that offer a glimpse into the future.
Greengard says the use of handheld devices like the Palm Pilot for the insurance industry are expected to go beyond today’s primary uses as static data repositories (contact names, numbers and meeting schedules) or limited e-mail. “Handhelds will be used as part of the core business process,” he says.
For example, IBM has begun a pilot with insurance agents, wherein PDAs will be used in conjunction with laptops. “The PDAs will hold client information and product information, and all the little things agents used to have to keep as paper notes,” he says. “Now, with a few scratches on a Palm device, they’ll have notes on customers, tickler files, etc.”
Greengard is careful to explain that the key challenge with any hardware tool isn’t so much the applications on the device, but the integration with a company’s back-end. “PDAs already can do replication work. But what’s coming in the next few years is wireless, continual access,” he says. “Today, the work is in a discrete mode. You have what you have on the device. But with increased wireless communications, it’s going to be a world where you’ll have the capability to be continuously connected.”
He explains that for insurers and agents, the advantage of the latter is real-time data transmission, including up-to-the-minute information of all types.
In the claims area, Greengard says adjusters with laptops and cell phones on site is hardly new. But with increased wireless capabilities, there will be added opportunities.
“You’ll have a telephone with a little screen, a combination telephone and Web browser’ he says. “You’ll also have speech recognition built in, so you can use voice commands and capture data easily.”
Greengard says he also sees a trend of having more devices in the realm of pervasive computing. That means relatively cheap mobile computer devices in, for example, automobiles. In the next few years, that can mean sensors in automobiles that will be able to track who is driving, how they are driving and where they are driving.
Of course, that technology could open up new modes of underwriting for both personal and commercial auto insurance.
In the underwriting area, in fact, IBM has teamed with a large insurer in a successful pilot within personal lines auto where it is having a computer create very detailed risk models. “These are much more granular than an actuary can do without the computer,” he explains. “In increasingly competitive environments, a company must understand their risk groups and have a refined understanding of the market.”
On the commercial side, IBM is working on technology to enhance the underwriting process. As opposed to personal lines, the technology isn’t defining a specific risk group and resulting premium. Instead, its goal is to help insurers develop the capability to have the computer aid the decision on a much more sophisticated level than previously possible.
Another interesting technology, says Greengard, has no pilot yet, but the promise is there. The basic idea is if an underwriter or loss control rep goes out to survey a site or to give information to an underwriter, the rep can take a few digital pictures and embed text that is found via hyperlink within those pictures. “The user can post that all to a Web site internally where underwriters can see and use the data,” he says.
Another IBM pilot in the works is with property and casualty insurer Ace USA (formerly Cigna Property and Casualty), the Philadelphia subsidiary of Ace Ltd. This project uses a combination of Cross’s digital clipboard-like Cross Pad and IBM’s Ink Manager, a handwriting recognition software application. In the pilot, Ace has reduced its fine arts risk evaluation turnaround time by one-third. The combination tool allows Ace fine arts underwriters in the field to use a special pen that inputs data into the Cross Pad. The technology turns handwriting on a form, faxing to an underwriter, and having someone key in the information into a single step.
The Ace user merely uses a checklist on the Cross Pad or writes out the data the old-fashioned way on the pad. With the click of a button, the data is translated by IBM’s Ink Manager software, shipped to a database electronically, and, along the way, reformatted into a Microsoft Word document to be viewed by the underwriter.
Of course, not all of the insurance industry’s exciting tech tools are of the hardware variety. For instance, the World Wide Web is proving it can be used for more than selling policies or downloading claims information.
The Robert Plan, a Bethpage, N.Y., servicer and underwriter of automobile insurance, will use the Internet to help settle 15,000 claims in the upcoming year. Specifically, The Robert Plan, which serves as a claims manager/third-party administrator for more than 190 auto insurance companies, chose CyberSettle.com for its clients nationwide. The CyberSettle.com system allows Robert Plan agents to have 24-hour, 7-day a week access to real-time settlement opportunities. According to Robert Wallach, president and CEO, the Robert Plan expects that it will submit 30,000 to 60,000 claims by the end of 2003.
“For us, CyberSettle.com is taking Web technology, which is young and promising, and adapting it to what we call the street lawyer market,” Wallach says. “It can lower loss adjustment costs by 50 percent to 60 percent. And the way we’re adapting it, we’re not giving away any indemnity exposure in the process.”
The CyberSettle model is fairly simple. The system allows participants to submit three settlement offers or demands via the confidential Web site. If an offer and demand are within an agreed range, the claim is instantly settled for a median amount. Since the bidding takes place confidentially and the specific amounts are not revealed to either party, neither side’s position is weakened should they fail to reach an agreement. Since 1998, more than $20 million in settlements has been awarded via CyberSettle. But that’s just the beginning, says Charles Brofman, president of CyberSettle.
“We’ve been growing at a rapid pace, with more than 40 direct insurance companies and 400 claims offices using our system,” Brofman says. “We’re also adding a new line of business, including a workers’ compensation settlement product in California, Illinois and Florida, and a workers’ comp lien product against carriers.
“The problem in the insurance industry is that the volume claims handlers are seeing is rising,” he adds. In 1998 alone, the top 20 insurance carriers spent $34 billion on claims administration, with about $23 billion of that on unallocated loss adjustment expense.
“Insurance adjusters, lawyers, and consumers want to settle their cases in the most efficient way possible. CyberSettle is the means to that end,” says Brofman.
Finally, while neural networks have not made great inroads into the insurance industry to date, they are starting to get results. A combination of artificial intelligence and complex algorithm-based software, neural networks are the technology behind predictive software, which can root out fraud by analyzing claims data, especially in workers’ compensation insurance.
A predictive software provider, HNC Insurance Solutions, of Irvine, Calif., has taken neural networks another step in fraud detection with the release of VeriComp Employer, a new application that can detect workers’ compensation premium fraud.
VeriComp Employer is an addition to HNC’s successful VeriComp Claimant fraud and abuse detection system. The Workers’ Compensation Fund of Utah (WCF-Utah) was the first carrier to use VeriComp Employer.
“We went live with VeriComp Employer at the end of 1999, so there are not a lot of results yet, but we’ve had good success with VeriComp Claimant,” says Joel Campbell, assistant vice president and manager of WCF-Utah’s special investigations unit. “On a 0-100 percent scale, if a policy scores above 90 percent, then the premium audit department targets that as an account to look at.”
Computer Associates Inc. (CA), the Islandia, N.Y., mission-critical business software company, calls its neural network application Neugents, or “software that can think.”
According to CA’s David Johnson, Neugents can detect subtle changes and predict results. As a result, Neugents have the potential to help the insurance industry.
“Most insurers have rule-based systems,” Johnson says. “A Neugent can enable you to spot a pattern from a fuzzy logic approach.” For example, in traditional risk assessment, the underwriter sees in black and white. It’s either a yes or no case. But often, you can have a problem in borderline area. “Neugents can analyze all the historical information and can fine tune the decision making,” Johnson says.
Neugents also can help insurers and agents in the customer relationship management (CRM) arena. An agent, for example, can better visualize what are selling opportunities with various customers.
Johnson says CA currently is working with some large insurers on Neugent-based applications, but he can’t mention names yet.
“Neugent technology is independent of the underlying data, so it can easily be adapted for the insurance industry in a number of areas, including fraud and sales,” says Johnson. “As we move into the vertical business areas like insurance, we’re very focused. We want to make sure we have successes before we launch any products.”
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