In pursuit of the digital claims experience
With reputations and customer acceptance on the line, insurers strive to optimize their claims process.
What is an insurer’s biggest competitive differentiator? It often comes down to how it processes claims.
“When a policyholder files a claim,” explains Novarica’s senior vice president for research and consulting Martina Colon, “it’s often the first opportunity for the insurance company to directly engage with that customer. A bad claims experience is not only bad for customer retention, it is bad for the insurer’s reputation.”
When choosing a carrier, she adds, millennials in particular rely heavily on feedback from others—whether through social media or conversations with friends and family. So, optimizing the claims function by incorporating digital components, working through digital channels and automating the process, Conlon says, “is really important to meet their expectations.”
Digital claims systems tend to be the furthest along among large property & casualty insurers, closely followed by their midsize brethren, according to Novarica research. Among midsize carriers, paperless processing and access to third-party systems are the most widely deployed capabilities, while applications like mobile first-notice of loss and field adjuster reporting are spreading but still less common (see chart). The adoption of digital technologies also varies considerably by line of business. Per Novarica’s findings:
Personal line carriers tend to have well developed digital claims handling capabilities, as they look to improve the quality of the claims experience they provide to their policyholders. Numerous insurers are making use of sophisticated analytics techniques and working to apply them throughout the claims process. Customer self-service tools, including FNOL and claims status updates, are also a priority.
Commercial line carriers are prone to big variations in claims and can benefit from advanced analytics techniques to identify fraud and mine unstructured data. Insurers are also looking to add more specialized claims handling capabilities for niche markets such as product liability and medical case management.
Specialty line carriers require more flexibility than other insurers and need a claims process that can handle a wide variety of exceptions. They are adopting claims systems that can track and manage extremely complex claims submitted under custom policies that provide unique types of coverage.
Workers’ compensation carriers
are beginning to use data generated by sensors embedded in wearables, exoskeletons and other types of devices to adjudicate and manage claims. They are also turning to predictive analytics to help with cost containment, manage litigation and optimize workflows.
Among the technologies being deployed to redefine the claims process, predictive analytics used in tandem with artificial intelligence and the Internet of Things is currently the standout. Essentially, drones and IoT devices are used to gather real-time data that AI applications can interpret and feed to an advanced analytics system. Predictive models then parse the data and
Keith Raymond calculate probabilities for
different events like a claim
Consulting being filed, a large amount
Novarica of damages being incurred or a fraud being committed.
“Predictive analytics is becoming a key area of investment for insurers,” says
Keith Raymond, a vice president at industry researcher Novarica. “Analytics can be leveraged to increase claims handling efficiencies and the customer experience.”
Some of the most important predictive modeling applications include:
• Decision support for when to subrogate, when to litigate and when to settle a lawsuit early;
• Forecasting the medical costs that are likely to result from an accident;
• Reducing claims through risk factor identification and mitigation;
• Detecting hidden patterns that are indicative of fraudulent activity;
• Scoring claims for severity and loss potential, so that the most complicated claims with the potential to incur the greatest losses can be routed to the most experienced adjusters, and
• Auto-routing incoming claims based on their classification and priority, so workloads can be optimized and balanced across both internal and external adjusters.
• Other widespread digital applications that are being used in tandem with predictive modeling include paperless and straight-through processing and various types of customer self-service.
They are all part of the push for greater operational efficiencies, improved decision making and—most of all—a better customer experience. And since claims represent an insurer’s most important interaction with its customers, Raymond says recasting the process with an ever-broader assortment of digital technologies will remain high on the industry’s agenda.
To go after today’s digitally-savvy consumers, “Insurers will need the right mix of modern core systems, predictive analytics capabilities and emerging technologies in their claims processes,” says the Novarica researcher. “As they step into the digital future,” he adds, “reinforcing their claims function with these capabilities will be the crucial next step.”