Strategic segmentation goes deeper than typical segmentation techniques, which depend on superficial indicators like claim value, source of loss, or line of business. It takes into account a claim’s entire context and changing nature, including its seriousness, complexity, escalation risk, and even potential to help with better underwriting and pricing decisions.
In short, it is a change from asking, “How much is this claim worth?” to “What can we learn from this claim—and what does it need?”
Strategic Claims Segmentation: What Is It?
Conventional segmentation uses narrow criteria and functions similarly to a sorting hat. Comparable to a competent triage nurse, strategic segmentation assesses each case holistically, allocates resources carefully, and makes data-driven decisions that alter the outcome rather than merely record it.
By identifying trends and creating customized paths, it enables insurers to handle “claims like this” in a consistent, efficient manner. In an industry where early interventions can completely influence the claims trajectory, this aids carriers in making the shift from reactive to proactive.
Why This Is Important Right Now
Getting segmentation right can be a quick gain with long-term benefits in today’s market, as customer expectations, litigation threats, and claims inflation are all on the rise. Depending on their business mix, carriers who have successfully implemented this strategy have witnessed improvements in their loss rates of up to 1–3 points.
What else it can do is this:
Operational Efficiency: By allocating the appropriate claim to the appropriate handler—or, in certain situations, to no handler at all—strategic segmentation facilitates leaner operations. Automated channels can handle simple claims, freeing up specialists to handle more complex ones.
Customer Experience: It guarantees that clients are not placed in the incorrect line. Claims that require nuance and empathy are given a human touch. Simple assertions gain speed. Everyone benefits.
Risk and Cost Control: Carriers can better manage reserves and cut down on needless payouts by assigning their best personnel to high-risk claims that could result in litigation or unfavorable developments.
Strategic Feedback Loop: Underwriting and actuarial teams benefit from the information obtained from segmented claims. This eventually creates more sustainable portfolios, better risk selection, and more intelligent pricing.
How Carriers Are Making It Work: An Overview
Strategic segmentation implementation is a methodical process based on cooperation, data, and iteration; it is not as simple as flipping a switch.
Data discovery should come first.
This entails going above and above. To gain a deeper understanding of the risk landscape, examine past claims data in conjunction with severity indications, complexity ratings, and consumer behavior.
Models for Design Segmentation
Map out possible segmentation scenarios in collaboration with claims specialists. Make sure these theories fit the objectives and risk tolerance of your company by testing them in a controlled setting.
Consider the Whole Life, Not Just FNOL
Not merely at the initial notification of loss, claims should be reassessed at each significant touchpoint. As new information, warning signs, or opportunities appear, segmentation should be flexible.
Make Wise Use of Technology
Although third-party data can provide additional depth, several carriers are finding success with just using their own operational data, provided it is clear and easily available. This may be scaled with the aid of cloud-based infrastructure, which enables teams to handle and analyze data almost instantly.
Create a Multidisciplinary Team
Better model design and increased adoption result from combining actuarial knowledge with frontline claims managers’ real-world experience. Additionally, it guarantees that your segmentation plan takes into account both human nuance and hard data.
Change With AI, Not With Fixed Regulations
Segmentation in the modern era is not hardcoded. Leading carriers are implementing machine learning models that are capable of evolving with each claim they handle.
Typical Obstacles—and How to Get Past Them
The most frequent obstacles that carriers encounter have less to do with ambition and more to do with maturity.
Make it a priority to enhance data collection throughout the claim process.
Opposition to Change: Groups may be reluctant to embrace a new workflow or model. Early victories, pilot projects, and clear communication all contribute to momentum building.
Legacy Systems: Development is slowed by antiquated infrastructure. Even if it happens gradually, cloud migration opens up the scale and speed required to make segmentation effective.
Assessing What Is Important
Success is determined by the results, not just the model.
Seek out:
Shorter claim cycle periods
Reduced expenses for handling claims
Reduced conflicts and claim escalations
Higher customer retention and NPS
Improved underwriting insights
It is vital to continuously improve. In order to account for shifts in the market, the product mix, and new risk trends, carriers should review and improve their segmentation strategy on a regular basis, ideally once a year or once every six months.
The Bottom Line
Strategic claims segmentation is a mindset as much as a method.
It serves as a strong basis for updating your entire claims department as well.
