The dig­i­tal econ­omy is rais­ing con­sumer ex­pec­ta­tions. Af­ter years of foot drag­ging, in­sur­ers are sud­denly em­brac­ing the ‘claims strat­egy of the fu­ture.’

Digital Insurance - - CLAIMS - By El­liot M. Kass

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.”


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.”


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.”

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