This article was produced in partnership with Gallagher Bassett.
Gallagher Bassett (GB) is North America’s leading provider of claims and risk management solutions for insurance carriers. GB is committed to helping people and companies prevent, manage, and overcome the impact of risk.
If the closure of Baltimore port is a boulder thrown into the North American supply chain pond, the impact of the disruption is being exacerbated by longer standing supply chain stresses affecting claims management processes that have perhaps passed under the radar until now.
A new survey by Gallagher Bassett, released as part of The Carrier Perspective: 2024 Claims Insights report, reveals that 62% of insurers worldwide reported challenges in 2023 around managing end-to-end claims resolution due to global supply chain problems. Across North America, 56% of carriers witnessed an impact on claims resolutions.
“[This highlights] the difficulties of successfully navigating supply chain challenges and resolving claims in a timely manner,” said Joe Berrios (pictured), managing director - carrier practice at Gallagher Bassett.
The observations were made before the Baltimore bridge disaster, suggesting that the scale of the challenge is likely even larger now. But carriers in North America lag global peers across a wide range of strategies to overcome supply chain issues.
This perhaps isn’t that surprising given the lesser reliance on global supply chains in places such as the US compared to other parts of the world. When supply chains falter due to drought in the Panama Canal or a bridge blocking a key harbor, local alternatives can often be more easily found than in many countries.
The relative lack of action in 2023 over the issue shows in the statistics. Carriers here were implementing digital claims processing at a rate of 47% versus 54% globally, for example. Likewise, just 31% of carriers in North America had moved to strengthen or repair supplier chain networks versus 34% globally. Indeed, for the nine surveyed strategies that can help ease supply chain disruption, North American carriers rated lower for all nine.
Gallagher Bassett sees the time as ripe for local carriers to up their game.
“This presents an opportunity for North American carriers to differentiate themselves by investing in digital claims processing capabilities [and other strategies] to achieve similar success as their international counterparts,” said Berrios.
A number of efficient and data-driven decision-support tools can help streamline and accelerate processes to cope when supply chains present challenges.
“Around the globe, we are seeing many carriers investing in technology solutions (57%) to improve claims resolution times in the face of supply chain challenges. There is also a strong emphasis on implementing cost-saving measures (53%), diversifying supplier bases (44%), and making changes in vendor management (30%),” said Joe Powell, Senior Vice President of Analytics at Gallagher Bassett.
North American carriers lagged in adopting all these solutions in the Gallagher Bassett survey, which also showed that the number of local respondents who had made no adaptations to mitigate the issue stood at 14% versus only 7% globally.
The cautious approach is remarkable given that global supply chains have recently been through an unprecedented period of difficultly during the pandemic. Aside from the direct benefits of securing goods in a reliable and timely manner, there are also inherent operational efficiencies.
Why the caution? North American firms are often early adapters of digitalization in other areas, so investing in technology to strengthen the supply chain seems like low-hanging fruit.
One explanation could be a lack of in-house expertise – and this is where Gallagher Bassett comes in.
“Collaborating with a proven claims and risk management partner recognized for its effective technology investments to expedite claims processing and manage supply chain difficulties may be beneficial. Additionally, entering a partnership could offer carriers the best digital infrastructure in the market, delivering actionable insights for an enhanced overall experience,” said Berrios.
With the Baltimore bridge disaster bringing many of these issues top-of-mind, the North American insurance industry in 2024 may be at a watershed moment as the importance of the supply chain-claims environment relationship is once again highlighted in the post-pandemic world.
“The industry is currently seeing heightened adoption and investment in technology solutions to combat the risk factors posed by unstable supply chains. The global economic environment remains uncertain, and there is an increase in catastrophic events,” said Berrios.
Moves by carriers towards digital solutions represent a strategic effort to mitigate the impacts of supply chain issues, aiming to streamline operations, boost operational flexibility and improve the accuracy and speed of claims resolutions.
“As the insurance sector continues to grow and transform, resilience, agility, and a forward-thinking mindset will be the keys to success in the coming year and beyond. The ability to adapt swiftly, anticipate market trends, and enhance digital capabilities will be more crucial than ever for carriers to position themselves as industry leaders in the years ahead.”
However, collapsing bridges are not the only challenge in the transition towards a more efficient and technologically driven claims process. A notable concern within the industry is the escalating cost of litigated claims.
The Gallagher Bassett survey shows that 41% of respondents in North America are observing litigated claims settling at increased costs.
“Several factors could contribute to this, including increased regulatory scrutiny and evolving legal landscapes that have prompted carriers to prioritize swift resolutions, as well as growing litigation costs.
“As carriers grapple with the challenges of managing litigated claims, they are turning to expert claims and risk management providers to assist with best practices in controlling costs within claims operations,” said Berrios.
In response to continued claims inflationary pressures, premium rate increases are largely inevitable across most classes of insurance. More broadly, a continued economic slowdown could bring higher claims cost pressures for many classes.
In the face of these challenges, the value of partnering with experienced claims management professionals cannot be understated.
A collaborative partnership is essential for navigating the intricacies of the claims environment, providing insurers with the expertise and strategic guidance needed to address the multifaceted nature of current challenges effectively.
“It is crucial for carriers to partner with experienced claims professionals and legal experts who can provide a comprehensive view of the upcoming hurdles and guide them in confidently overcoming them. At Gallagher Bassett, we don’t just manage claims; we create a seamless partnership, delivering unparalleled support,” said Berrios.
“By embracing digital transformation, carriers can increase efficiency and cost savings, benefiting both themselves and their policyholders.”
This perspective underscores the potential of technological innovation to redefine the claims environment, offering a pathway for insurers to navigate the complexities of the current landscape while delivering superior service to their clients.
A strategic emphasis on technology is part of a broader industry effort to enhance operational efficiency and improve the claims resolution experience for policyholders. Strategies that leverage external expertise, data-driven insights, and generative AI, among others, can help carriers stay ahead of issues and gain advantages in overcoming complex supply chain issues.
“Overall, 2024 presents both opportunities and challenges for insurance carriers. By staying proactive and adaptable, carriers can navigate these changes and position themselves for success in the evolving industry,” said Berrios.
