P+C Insurers – How to stay ahead in the face of Claims Inflation

P+C Insurers – How to stay ahead in the face of Claims Inflation

The last three years have seen a material impact on our industry. The latest of these external environmental factors is inflation which looks set to worsen for the foreseeable future. As a result, it is no surprise that property and casualty insurers across the globe are looking to review their strategies in the face of this re-emerging economy-wide de-stabiliser.

A recent McKinsey & Company report (McKinsey & Company report: What P&C insurers can do as claims inflation pressures results in Europe), points to this once in a generation impact of inflation and how P&C insurers can best position themselves to defend their profitability, whilst maintaining a competitive advantage.

The backdrop for this is an average increase of 7% in property claims between 2019-20 with labour costs, currently accounting for 45-50% of the total property claim, set to further increase. The report also points to a correlation between P&C claims and higher Motor and Indemnity claims. The report suggests that an increase in the numbers of vehicles and proliferating technology, has impacted the number of claims made, with this figure also looking set to increase. Furthermore, the post pandemic rebound in claims frequency and rise in indemnity per claim in motor and property across Europe poses a further problem for the P&C industry as motor and indemnity sector experiences an average of 9% increase in motor claims between 2019-20.

The article then points to three ways in which market leaders can look to deal with claims inflation.

Firstly, there is the need to be able to track claims at a granular data level. Only in this way is a clear picture of claims performance achievable through the use of analytics and BI tools. Actual claims performance also needs to be analysed in comparison to expected to determine the effectiveness of the claims strategy at that moment in time.

Secondly, the above data, analytics and comparisons will provide the best insight for tactical decision making to deliver the necessary response and impact. Tactical decision making can then be about either redressing claims performance variances and/or a more fundamental review of claims strategy.

Thirdly, a strategy review to counter the impact of long-term inflation effects. Given the quality of data available for analysis, strategic planning, can more accurately consider and mitigate potential variances given the agility of the tactical decision making. 

"We at Cenata believe we have the expertise, techniques and solutions to help insurers build and maintain profitability in the face of these inflation driven threats to your bottom line."

We at Cenata believe we have the expertise, techniques and solutions to help insurers build and maintain profitability in the face of these inflation driven threats to your bottom line.

With Outwards Reinsurance data touching every part of your business, Cenata SURE, our cloud based ORI solution is able to capture at a granular level all premiums and claims recoveries in real-time. All data within Cenata SURE is then available for tracking, analysis, reporting and integration into other claims solutions, including your data warehouse. API integration can also be used to import data from external sources to further supplement the quality of the analysis for tactical and strategic reviews.

Ensuring the availability of quality, real-time API supplemented data translates into more easily deployed and measurable tactics for immediate impact. Real-time data is key in that it supports agile decision making, which is integral to maintaining a competitive commercial advantage.

"Successful strategies are built on a foundation of an accurate, single version of the truth"

Finally, the article goes on to explaining the importance of strategic reviews as part of countering long-term inflation effects. Successful strategies are built on a foundation of an accurate, single version of the truth, irrespective of data flows and application integration. To achieve this, we lead our clients through a detailed discovery phase exercise to enable a better understanding of existing data, quality, flows and requirements from that data for decision making. The outcome from this exercise is clarity about how best to configure Cenata SURE within your claims management process, the goal being to deliver timely accurate data both to maximise premium and claims recoveries and to provide timely granular data and analytics that best support your strategic goals.

The external environmental factors that our industry faces currently are not likely to disappear anytime soon. Claims inflation is an integral part of these ‘once in a generation’ factors. In its assessment of these factors, McKinsey points to general steps that all insurers can take to mitigate their impact. The foundation for those steps is accurate, timely data on which to build both tactical decision making and strategic planning. If you would like some expert advice, assistance and support on where to start; how best to apply data and analytics to your strategies; and how to build and maintain a competitive commercial edge, come and talk to us.

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