One of the themes for March (which is fast approaching) at Insurance Edge is how we can streamline claims using tech. Patrick Hayward, Consultant in Altus’ General Insurance team, takes a look at how technology can still offer insurtechs the opportunity to build “proof of concept” products that work in the real world.
There’s a common refrain with claims – it’s the moment of truth for customers. The sentiment of this is right, but in reality this “moment” will in most cases span somewhere between a few days and a few months.
There are various reasons for this, including the practicalities of repairing a property, finding vehicle parts, and coordinating multiple third party contractors who are already in backlog before the insurer calls. The complexity of back-office processes, with different teams and systems involved for different steps from FNOL to settlement, will also contribute to the timescales involved.
From a customer perspective, a best-case scenario is a prompt and fair settlement of their claim, which either puts them back in the position they were in, or equips them to resolve their own problem (e.g. having the money to buy a replacement car) as quickly as possible. Where immediacy simply isn’t possible, due to constraints such as the time it takes to repair a property damaged by water, the next best thing is that the insurer proactively drives the process through to completion, whilst keeping the customer fully abreast of developments and making information available as and when this is required.
The last 5 years or so have seen a proliferation of technological solutions emerge in the claims space, where prior to this the world of “insurtechs” was (nearly) exclusively about distribution. This development reflects the accessibility of cloud-based technologies with clear applicability to claims processing, and a shift in terms of claims specialists starting and joining the wave of tech start-ups. Disruption may be an exaggeration, but another consequence of this has been that larger, enterprise-level software companies have developed innovation hubs and the ability to integrate with emerging solutions as part of their propositions.
Looking at motor, for example, there’s a multitude of tech vendors with solutions that can perform a range of tasks, from assessing liability (Xtract360, BAIL) and vehicle damage (Tractable, Verisk IVI), to decision engines aimed at automating end-to-end claims management, whether augmenting handlers or as part of straight-through-processing (SHIFT Claims, Sprout.AI).
These are solutions which can be combined with an existing core platform, to enable rapid decision-making in the majority of claims (the low complexity cases), which in turn would mean that customers could book in their repairs or purchase a new car in significantly shorter timescales. The work that Ageas has done with Tractable has been well documented, with the insurer moving through various stages of applying the solution – starting with application as a quality assurance tool for engineer assessments, through to total loss assessments and ultimately damage analysis for a much wider cross-section of its vehicle repair claims.
Whilst an insurer would most likely adjust its model for claims management, customers with more complex claims should also benefit from the increased capacity and focus of claims handling expertise on their cases. Across different levels of value and complexity, this means that technology can be used to alleviate the emotional burden of a protracted claims process, at a point of high stress for the customer.
Insurers that have started to introduce levels of automation into the claims process have seen significant benefits in terms of time required to conclude claims, but also in reducing claims leakage and tackling fraud. Some of the solutions above have clear use cases in identifying and managing fraud, and with the likes of SHIFT and FRISS, there are AI fraud solutions available in the market which have reached a level of maturity. As insurers move closer to fully automated claims, the need for intelligent fraud management becomes even more important, as there will be fewer “eyes” on a significant volume of claims running through the system.
There are some key challenges to implementing automated or augmented decision-making, in particular how to ensure that decisions made by a machine can be explained. There needs to be clarity in how and why an outcome has been reached on a particular claim, and decisions need to be auditable. There is also a risk of introducing new biases into claims processing, as a result of incorrect assumptions, and introducing technology which is not fully understood, when trying to implement STP.
Whilst the focus of the examples above is on the customer perspective, solutions which reduce time to settlement, and which make information readily available to customers, will also help insurers to reduce their cost base and loss ratios. This is particularly relevant as insurers have seen inflation of claims costs across lines of business and perils, which given the recent prolonged period of cold weather, is likely to continue into the near-term future. In my view, there is a combination of technology that should help insurers reduce their operational costs, and the overall costs of indemnifying claims, whilst improving their net promoter scores and customer retention.
Getting this combination right should enable more of these insurtechs to move beyond the “proof of concept” stage to becoming a key part of the claims operating model.
My prediction for 2023 – an acceptance from insurers looking to modernise claims that this cannot be delivered by a single technology platform. Alongside this, I would expect to see more claims technology companies building partnerships with likeminded organisations, to help insurers, TPAs and MGAs to reimagine the end-to-end experience (some vendors, such as Claim Technology, have made their out-of-the-box integrations with other point solutions part of their unique selling point). This requires a real shift in mindset, but if one or two key players take this step and can demonstrate the benefits, both to customers and shareholders alike, there could be a real lightbulb moment for the industry.