The impact of globalization on the insurance industry and economy became clear during the current financial crisis, as governments rescued large, multinational insurers such as AIG and Fortis to mitigate the fallout that would have been felt worldwide if those carriers had shut down. Linkages among insurers, reinsurers and claims administrators reach across multiple geographic borders; when one fails, the chain breaks and others are jeopardized. Insurance has truly become part of the DNA of global commerce.

The state of the international economy has many implications for the insurance industry, and global insurers and their providers need to be ever more innovative in their quest for profitability. In such an interconnected world, the United States, as the world’s largest non-life insurance market, will travel with them on that quest. The domestic insurance industry will both feel the impact of global insurers as they search for ways to grow their businesses and draw lessons from others, particularly the London market, to improve its own operations and performance. Developments in the U.S. include:

Claims Hubs
As more insurers and reinsurers from across the globe move into the U.S. market, claims hubs will play an increasingly important role. Many of today’s articles and studies focus on the globalization of emerging insurance markets in such regions as Latin America, central and eastern Europe, and Asia and tend to ignore or minimize global issues in the U.S. market. It’s true that recession, soft market conditions, and efforts to disallow tax deductions for reinsurance premiums might slow down the advance of global insurers and reinsurers into the U.S. But given the value of the U.S. market, current business conditions will only dampen, not extinguish, their appetite.

One of the many considerations when insurers enter the U.S. (or any other) market is determining how they will administer claims. Complying with complicated and evolving regulations and creating a client experience that promotes acquisition and retention are two of their chief concerns. For insurers reaching into markets that are new to them, compliance and customer service issues present potential problems, and building an effective claims structure specific to a state or country takes time, money and local expertise. As a result, more and more global insurers will be looking to partner with U.S. companies that understand regulatory issues and can provide full business-process outsourcing solutions in claims hubs.

Claims hubs provide a comprehensive suite of local claims services to brokers, insurers and policyholders. Services are tailored to different accounts and can include policy information, claims notification, desktop handling and claims adjusting. Employees of both the insurer and the claims administrator typically are present in a hub to assist in management and ensure that key decisions are made quickly and effectively. Providing a local service backed by a global platform can improve all aspects of the claims process, reducing processing times, creating a more efficient payment system and giving better access to more accurate management information and data.