The U.S. property and casualty insurance industry — suffering from sagging investment returns and unprecedented claims from the September 11 terrorist attacks — could save US$30 billion annually through aggressive transformation of the way it processes insurance claims, according to global management consulting firm A.T. Kearney.

The study indicates insurance companies have the potential to emerge from the near-term fallout stronger, provided they embark on focused efforts to improve underwriting results and enhance operational performance.

“With sagging investment results, insurers need to improve their core underwriting competence through rigor and innovation in risk pricing, expertise in market segmentation and effective portfolio management,” said Tom Dente, the A.T. Kearney vice president who led the analysis.

“Improvement in underwriting alone, however, will not close the performance gap in an industry where return on equity has been very low over the past five years. Cost performance must be addressed, and our experience with P&C insurance clients shows that transforming the claims process, for instance, could generate cost efficiencies from 12% to 25%,” said Stefan Spohr, a principal with A.T. Kearney. “Extrapolating savings of 12% to the overall industry claims cost would shave 10 points off the U.S. P&C sector’s projected combined ratio of 120 in 2001.”