Friday, April 22, 2016

Breaking the Logjam in Auto Insurance IT

Online, real time pricing and the “20% fraud” problem in Auto Insurance
Customers have been taught by the increased adoption of the internet for financial services to expect real time quoting and approval of financial products. But P&C Insurers lack the infrastructure to deliver instantaneous decisions that accurately reflect the true policy risk. So carriers have responded to the demand for instantaneous action by relying on agents and/or adapting legacy systems to the real time tempo using "Chewing gum and baling wire". But since an estimated 20% of auto premiums were already fraud and underwriting ‘leakage’, the risk of fraud is bound to rise. So carriers are racing to replace existing systems with new technology that can better support real time operations.

The IT Logjam
This has led to a massive logjam of core systems projects to deliver such laudable goals as “straight through processing”, “customer intimacy” and “lower transactions cost”. However, if you isolate the critical drivers of success, the core challenge is, as always: “price the risk right” with the added requirement of “do it right now”. Indeed, the two core challenges of any P&C insurer are right pricing the risk and paying only valid claims. Everything else, from policy administration, to billing, to CRM are important supporting capabilities but none of them drive the core economics of the business the way that risk pricing and claims decisions do.

Making the Right Decision, Right Now
So we asked the question: What would it take to enable carriers to focus directly on (1) Making better risk/pricing decisions and (2) Identifying customers at a high risk of claims fraud up front and continuously thereafter? idFusion was the result. In conjunction with a Top 5 Global Insurer we developed a solution that:

Delivers a valid risk/claims/profile of each customer
  • Directly accesses existing customer information in legacy systems
  • Fuses it with readily available external customer information 
  • Identifies excess claims 'hot spots' for further analysis and resolution
Screens customers in real time
  • IDs data errors and fraud to price the real risk
  • Flags applicants and customers at high risk of claims fraud 
  • Screens continuously for changes thereafter
Delivers results far faster, bypassing the Core Systems “logjam”
  • Not a system of record and therefore poses little execution risk
  • In 'The Cloud' with minimal impact on carrier infrastructure or IT resources
  • Deployed in months rather than years using existing data sources
  • Deployed as a service that can be turned on or off 
  • At a cost that is a small fraction of Core Systems implementation
Delivers 3 to 5 percent of premium savings within 18 months and offers an opportunity for much more thereafter by directly targeting the sources of mispricing.

It's created quite a stir at our lead customer, they're saying things like "we've never been able to see our data like this before" and "up until now it's been locked up in old systems".  If you're in the P&C Insurance space you should check us out.