An insurance claims practice expert sent me a 2008 white paper this week, which prompted a lot of personal reflection worth discussing. It was published by Guidewire Software and titled “Achieving Claims Excellence with Guidewire ClaimCenter.” It is a polished, confident document aimed at insurance executives and claims managers. Its premise is straightforward: claims handling drives insurer profitability, claims leakage is a serious financial problem, and modern claims technology is the solution. Although written nearly two decades ago, the ideas in this paper remain deeply relevant because the technology it promotes has since become embedded in the everyday machinery of insurance claims handling.
The paper begins with the assertion that claims payments and loss adjustment expenses account for roughly sixty-five to seventy-five percent of an insurer’s outgoing cash. From that starting point, it frames claims operations as the primary lever for improving combined ratios. It describes what it calls indemnity leakage, loss adjustment expense leakage, inefficiencies caused by adjusters spending too much time on non-value-added tasks, and missed opportunities for fraud detection, salvage, and subrogation. The white paper argues that these issues are not primarily human failures but systemic ones, rooted in outdated legacy claims systems that were built for accounting rather than for guiding claim decisions.
Guidewire positions modern claims systems as fundamentally different. Instead of passively recording claim activity, the paper promotes a rules-driven, workflow-based platform that actively orchestrates the claims process. Adjusters are guided through prescribed steps. Tasks are assigned, escalated, and monitored. Coverage issues, fraud indicators, negotiation parameters, and settlement planning are flagged by rules engines. Managers and executives are given dashboards and real-time metrics to monitor performance. According to the paper, this combination of automation, guidance, and visibility leads to faster cycle times, more consistent outcomes, reduced leakage, and improved customer satisfaction, all while lowering costs and improving profitability.
On its face, the paper is logically consistent and well sourced. It reflects how insurance claims executives think about operational efficiency, cost control, and risk management. But reading it through the lens of a policyholder advocate, it raises questions for me that the paper never seriously confronts.
The first issue is the framing of claims payments themselves. The paper treats leakage as a self-evident problem, assuming that a meaningful portion of what insurers pay is unnecessary or excessive. From a policyholder’s perspective, that assumption is far from neutral. Insurance policies are contracts of adhesion, drafted by insurers, often ambiguous, and interpreted under well-established rules that favor coverage. What insurers label as leakage often turns out, in litigation that we are involved in, to be benefits that were owed all along. The paper never distinguishes between improper payments and legitimate claim payments that insurers simply wish they did not have to make. If all you look for is preventing overpayment, it is easy to slip into a culture of never looking to fully pay what is owed.
Second, the notion that rules-driven automation improves fairness deserves skepticism. Technology does not create values. Instead, it enforces them. A claims rule engine reflects the priorities of its designers. If the embedded rules emphasize early escalation of coverage denial issues, conservative reserving, authority ceilings, and settlement discipline aimed at severity reduction, the system will produce those outcomes consistently. Consistency, however, is not the same as fairness. A consistently underpaid claim is still an underpaid claim.
Third, the paper repeatedly equates insurer profitability with customer satisfaction. That is an attractive narrative, but it is incomplete. Faster claims handling can benefit policyholders, but speed without thoroughness of full payment often benefits insurers more. Structured settlement planning and predefined negotiation limits can just as easily harden insurer positions before the full scope of loss is understood. When adjusters are guided to close files efficiently and within prescribed parameters, the human discretion that sometimes leads to fuller and fairer payments is narrowed, not expanded.
The emphasis on fraud detection is another area where the policyholder experience is missing from the analysis. Fraud is real, but fraud screening systems inevitably generate false positives and a projection of mistrust. When a claim is flagged by an algorithm, the result is often delay, intensified scrutiny, and a shift in tone that the insured immediately feels. The paper treats these systems as unalloyed goods without addressing the cost imposed on honest policyholders who are swept into suspicion-driven workflows with little transparency or recourse.
Perhaps most striking is what the paper does not ask. It never asks whether insurers’ attitudes toward claims have meaningfully changed. It never questions whether the culture of claims handling has evolved away from viewing claims primarily as costs to be minimized. Instead, it assumes that better tools naturally produce better outcomes. History suggests otherwise. Technology amplifies the culture of cost containment rather than quick and full payment of what is owed.
That brings me to the question I think the insurance claims industry should be willing to answer, especially now. Since 2008, is there any serious academic or empirical research demonstrating that insurers’ claims culture has shifted in a way that prioritizes policyholder fairness on equal footing with cost containment? Not marketing materials. Not vendor white papers. Not consulting reports written to justify system implementations. Actual independent scholarship showing that modern claims systems have reduced underpayment, reduced wrongful denials, or meaningfully improved trust in the claims process. Can good ole Steve Badger or anybody from the insurance claims industry show me anything on this issue?
I am not opposed to technology. I am opposed to pretending that technology is neutral. Claims systems like the one described in this white paper are powerful. They shape behavior, incentives, and outcomes. If the underlying mindset remains that claims excellence means paying less, faster, and with fewer questions asked by claims management, then the system will deliver exactly that, no matter how sophisticated the interface appears.
Insurance exists to keep promises. Any discussion of claims excellence that begins and ends with combined ratios and leakage misses that fundamental truth. Until the insurance industry can point to credible evidence that its claims culture has evolved as much as its software has, policyholders are right to remain skeptical.
Thought For The Day
“Technology is neither good nor bad; nor is it neutral.”
— Melvin Kranzberg
