Strategic claims segmentation differs from traditional claims management, promoting a more detailed, data-driven approach. Traditional segmentation only considers monetary value and data points such as cause of loss and risk. Strategic segmentation considers the specific merits of each claim, ensuring more accurate and efficient adjudication, a key priority in today’s environment of increasing loss costs and expenses. By taking a data-driven approach, carriers can gain a deeper understanding of “claims like this,” enabling proactive decision-making and handling strategies that effectively influence the trajectory of a claim.
Operators can use claims segmentation to shape strategic direction and business priorities, identifying focus areas suitable for investment in advanced capabilities, either as stand-alone initiatives or as a precursor to any major transformation.
Value proposition for strategic claims segmentation
Strategic segmentation can provide a variety of benefits to claims organizations.
- First, as a quick win, it can control operating costs by allowing for more efficient resource allocation and promoting a leaner operating model.
- Secondly, it improves customer satisfaction by ensuring claims are managed by the correct claims handler, and claims do not require human touch (as certain touchpoints can follow dedicated routes).
- Third, carriers that employ strategic segmentation can better manage their loss exposure and payment accuracy, aligning highly skilled claims handlers with claims that are likely to go unfavorably or are contested.
Carriers that effectively leverage this approach can impact their loss ratios by 1-3 percentage points depending on the business mix and create stronger feedback mechanisms through underwriting and actuarial informing risk selection and pricing strategies.
Guide business adoption and implementation
Implementing a strategic segmentation approach involves several steps. It begins with data discovery, analyzing risk and claims data, to gain a more complete understanding of the book’s demographics and potential risks through severity and complexity assessments. Next, work with claims experts to develop segmented scenario models and validate assumptions in a test environment to ensure carrier risk appetite is successfully met. A key objective is to ensure that claims, not just at the FNOL but throughout their lifecycle, can be segmented and re-segmented based on any developments that may occur at the individual claim or portfolio level.
Technology and data science play a vital role in design and implementation. Many operators have successfully blended third-party data sources with their operational data to create more sophisticated segmentation methods, although this is not a requirement for entry and depends on the quality of the operator’s internal data.
It’s also important to build cross-functional teams that encourage collaboration and diverse insights, combining quantitative skills with qualitative insights from frontline managers and claims experts. Ongoing improvement and maintenance of segmentation strategies is a key component, ensuring that the strategies used remain effective and up-to-date on an annual or semi-annual basis to align with market trends. Leading operators deploy AI technology rather than rules-based coding, which means segmentation models can learn over time and be modified more easily.
Typical Handicap Operator Experience
Operators that struggle to implement often have less mature capabilities but recognize that segmentation is the basis for advancing other capabilities by making them more efficient. Issues such as data quality and resistance to change may arise. To address these issues, operators can invest in improving data infrastructure, clean up business processes to focus on data quality, and communicate the benefits of the strategy. Operators who invest in moving data to the cloud have an advantage in allowing businesses to use data at scale and deepen the quality of segmentation and related insights.
Measure ongoing success
The success of strategic claims segmentation can be measured using a variety of key performance indicators, such as reduced claims costs, increased customer retention and improved risk management. To maintain the effectiveness of your strategy, continuous monitoring and adjustments are required. If you would like to discuss further please contact Matthew Madsen.
