P&C insurers face a myriad of challenges, including dwindling pricing power, erratic investment yields, and recent heightened catastrophe activity. Despite very strong top-line performance over the prior year, 2010 was the second consecutive year in which the industry suffered underwriting losses in the first half of the year. Overcapacity for traditional products and services, coupled with weak demand, are expected to continue to push down rates.

Since claims are the single largest spend for a P&C insurance company, investing in operational improvements in claims management is one of the most effective strategies to drive profitable growth. Typically, up to 80 percent of each earned premium dollar is “claimed by claims” as pay-out and related expenses. Insurers that can reduce their claims costs by just one percentage point will likely achieve substantial savings.

But claims management is highly challenging, with multiple processes and platforms. Complex, duplicative functions are performed, often with outdated technology. The answer to these challenges is a top-down commitment to operational excellence, which can provide a competitive advantage in a soft market. To help achieve this objective, insurers should leverage data to provide actionable information about what drives loss and expense, and then put in place the business processes and supporting infrastructure needed to take advantage of these insights.

The goal is to align the “right claim with the right resource at the right time.” The outcome is not just significant cost reductions, but also high-quality customer service and streamlined processes.