CHANGING THE CLAIMS GAME
The digital economy is raising consumer expectations. After years of foot dragging, insurers are suddenly embracing the ‘claims strategy of the future.’
For the past half-dozen years, getting insurers to adopt a modern claims system has been like flogging a donkey. Even as early adopters, technology vendors and industry consultants repeatedly demonstrated the advantages of a straightthrough claims and billing process supported by data and analytics, a sizable majority of insurers stubbornly clung to manual and DOS-based legacy systems.
But within the past year the tide has turned and today, according to market researcher Strategy Meets Action, nearly two-out-of-three insurers are investing heavily in digital technology.
“Customers are beginning to have different expectations,” says SMA partner Karen Furtado, “forcing insurers to rethink their process. Data and analytics have dramatically altered the way in which insurers can manage claims.”
That too is a big change. Even a few years ago, when it came to investing in new technology, customer expectations weren’t even on most insurance companies’ radar. Today, it is the number one reason, a 2017 SMA study finds.
Shifting expectations means that more insurers are feeling the heat, and 40 percent of the insurers surveyed by SMA also acknowledge that competitive pressures are driving their tech investments. “With the emergence of Insurtech,” Furtado says, “carriers feel intense pressure to up their game. They are having to rethink what is the claims process of the future.”
REVAMPING THE MODEL
Like the use of the term ‘Fintech’ by the financial services industry, the term ‘Insurtech’ refers to the ways that digital technology is revamping the insurance industry’s current business model. Such tech-based innovations and the startups that wield them often aim at improving the customer experience by speeding up the claims process and increasing the number of touchpoints with customers.
As recently as six months ago, says Karen Pauli, an SMA principal, whenever subjects like using telematics to improve the claims process came up at a conference, “attendees would just lean back in their seats, cross their arms and glare at the presenter. Now,” she says, “these same insurance execs are taking notes and asking questions. To me, this is a huge signal that we’ve gone from skepticism to receptivity.”
Companies like Westfield Insurance are taking the plunge; the Ohio-based P&C insurer recently launched a telematics initiative to speed its claims processing. “One of the things that we’re starting to do now in terms of competitive innovation is to experiment with drones,” explains Robert Bowers, Westfield’s national claims leader.
Westfield is using the drones to take photos of property damage and auto-estimate damages. The goal, says Bowers, is to shorten the insurer’s processing cycle and help customers settle their claims more quickly.
So far the results have been positive. “The [drone] picture quality and ease of use was much greater than we ever anticipated,” Bowers reports. “Getting adjusters up and ready to use the tool was relatively easy, and the speed of claims handling in many situations has increased.”
Carriers like Westfield are working to build out a straight-through digital claims process that begins with the first notice of loss and continues through adjudication, settlement, claims payment and billing. This would eliminate numerous manual operations, allowing an insurer to reduce staff and cut operating costs. But it also allows for many more customer touchpoints, paving the way for entirely new ways of interacting with customers.
Early adopters first started down this path four or five years ago, when they began adding digital capabilities like FNOL automation and e-payment services to their core claims systems. These features were welcomed by customers, but they only represented the first steps towards a true, end-to-end digital customer experience.
“The industry is just starting to learn how to create these digitally enhanced experiences,” says Furtado. “It’s just starting to understand that high-touch customer interactions are better supported by technology than by people.”
A SENSE OF URGENCY
What’s different now is that insurers are starting to realize that the Insurtechs are their gravest competitive threat. Says Furtado: “These tech-centric insurers can be extremely disruptive in terms of setting customer expectations.”
An oft cited example is Lemonade, a socalled ‘peer-to-peer’ provider of homeowners and renters insurance. Founded in late 2015, the New York-based insurer uses software called bots to deliver insurance that can be purchased close to instantly from any mobile device. Consumers also use the bots to file their claims, which according to the company are paid in three minutes or less.
“This is why Lemonade is so disruptive,” exclaims Furtado. They are actually paying claims without human intervention. That’s like, ‘Oh my gosh! What are we going to do about that?’”
The Insurtech model is rapidly catching fire. Last August, there 500 companies with Lemonade-like business models; today there are more than 850. Financially and in terms of market share their impact has been relatively small to date, but the established carriers see the writing on the wall and their sense of urgency to change has become immense.
“For the industry,” says SMA’s Pauli, “this is a work in progress. Insurers are working to understand where they can introduce a digital experience to meet individual consumers’ requirements.” At the same time, though, “They are also beginning to realize that consumers don’t want every claims process to be digital. In many instances, they still want to talk to a human being.”
Which is where established carriers like Westfield have an advantage. The company has been pursuing its claims transformation project starting as far back as 2010 (see sidebar), and at every major juncture it has gauged its progress with extensive customer
“Getting adjusters up and ready to use the tool was relatively easy, and the speed of claims handling in many situations has increased.”
surveys. That has allowed it to zero in on those technologies with the biggest potential impact on overall client satisfaction.
Its telematics initiative is a case in point. Deploying drones has made it possible to compress its claims cycle, a key concern for both its consumer and commercial customers.
The drones have also been a boon for the insurer’s adjusters. “From an employee safety perspective,” says Bowers, “we found that we were able to access areas that we previously would’ve been concerned about or would’ve taken more time to set up.”
And there has been at least one other advantage as well. “Our adjusters had a lot of fun with the drones,” laughs Westfield’s claims leader. “Integrating new tech into your operation creates excitement and that’s always a positive.”